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Unit 3: Licensing  

To maintain a valid PACA license, members of the fruit and vegetable industry must abide by the fair trading practices established by the PACA. A trader’s license may be suspended or revoked for failing to comply with the law. Therefore, the license is the key to ensuring that traders meet their contractual obligations and exhibit fair trading practices.

Who needs a license?

In general, a person who buys or sells more than 2,000 pounds of fresh or frozen fruits and vegetables in any given day must be licensed under the PACA. Wholesalers, processors, truckers, grocery wholesalers, and food service firms fit into this category.

A person who negotiates the sale of fruits and vegetables on behalf of another person is required to be licensed on the first transaction. A person operating in this capacity may be considered to be a commission merchant, broker, or a growers’ agent. However, a broker handling only frozen fruits and vegetables is not subject to PACA licensing requirements until the invoice value of the total negotiated sales exceeds $230,000 in a calendar year.

A person selling at retail is subject to a PACA license once the invoice costs of fresh and frozen fruit and vegetable purchases exceed $230,000 in a calendar year.

Is licensing mandatory?

Yes, if operating subject to the PACA.

Who is exempt from having a license?

Growers are exempt from licensing if they sell only products of their own raising.

Retailers buying fresh or frozen fruits and vegetables solely for sale at retail until the invoice cost of all purchases exceed $230,000 in any calendar year.

Processors that buy fruits and vegetables other than potatoes for canning and/or processing within the same state where grown whether or not the canned or processed product is to be shipped in interstate or foreign commerce, unless the product is frozen or packed in ice, or consists of cherries in brine.

What are the benefits of having a license?

First, if operating subject, you are abiding by the law.

Second, the license provides some assurance to those with whom you do business that you will adhere to the fair trading practices set forth in the PACA.

What are the penalties for operating without a license?

Not more than $1,200.00 for each such offense and not more than $350.00 for each day it continues. However, any person violating this provision may, upon a showing satisfactory to the USDA that such violation was not willful but was due to inadvertence, be permitted to settle his liability by paying the fees due for the period of violation, and an additional sum not in excess of $250.00.

How can I obtain a license application?

Telephone 1-800-495-7222 (PACA) or download an application from the PACA website.

How much are the license fees?

Currently, the license fee is $995.00 per year, plus $600.00 for each branch or additional business facility operated by the applicant, subject to an annual limit of $8,000.00 per licensee. Retailers and grocery wholesalers making an initial application for licensing must pay a onetime administrative fee of $100.00, but are not required to pay any fee for renewal of the license in subsequent years.

Who is "responsibly connected" to a licensee?

Any person affiliated as an individual owner, partner in a partnership, or officer, director or holder of more than 10 percent of the outstanding stock of a corporation or association. In addition, any member of a limited liability company (LLC) and/or any other person authorized by the members to conduct business on behalf of the LLC, may be considered responsibly connected with the LLC.

However, individuals may be deemed not responsibly connected if they can demonstrate that they were not actively involved in the conduct that resulted in a violation of the Act and that they were only nominally a partner, officer, director, or shareholder of a violating licensee or other entity subject to license which was the alter ego of its owners.

Are there any restrictions or special requirements for obtaining a PACA license?

Possibly, if anyone employed by the applicant has:

Been responsibly connected with any firm whose license has been revoked, or is currently under suspension, or who has been found after notice and opportunity for hearing to have committed any flagrant or repeated violation of the PACA, or against whom there is an unpaid reparation award which has been issued within the past two years, subject to the right to appeal. If so, the applicant should furnish the full legal name of the person, the name of the firm involved, and the details of such connection, including the dates thereof.

Or, if anyone responsibly connected to the applicant has:

Been responsibly connected with any firm whose license has been suspended or revoked, or a firm that was found to have committed repeated and flagrant violations of the PACA. If so, the applicant should furnish the name and address of the firm and the details of the connection, including dates.

Been responsibly connected with any firm against which there is an unpaid reparation award under the Act. If so, the applicant should furnish the name and address of the firm and the details of the connection, including dates.

Within 3 years of application been adjudicated or discharged as bankrupt or was responsibly connected with a firm adjudicated or discharged as bankrupt. If so, the applicant should furnish a copy of the petition in bankruptcy, including the schedule of creditors, the date of adjudication and certificate of discharge. The applicant should also furnish the estimated value of produce that will be handled by the new business during an average operating month, percentage of business that will be handled on consignment or joint account, and amount of credit that will be incurred during an average operating month.

Been convicted of one or more felonies in any State or Federal court. If so, the applicant should furnish the name and date of birth of the party convicted; alias, if any; name; location of court and date convicted; nature of felony; sentence imposed; where and length of time served; if paroled, date parole terminated.

What are the conditions under which a license may be denied?

An applicant may be refused a license if it is found that the applicant, or any person responsibly connected with the applicant, is prohibited from employment with a licensee or is a person who, or is or was responsibly connected with a person who:

Has had his license revoked within two years prior to the date of the application or whose license is currently under suspension;

Within two years prior to the date of the application has been found after notice and opportunity for hearing to have committed any flagrant or repeated violation of Section 2.

Within two years prior to the date of the application has been found guilty in a Federal court of having violated the provisions of the Act of March 3, 1927 (7 U.S.C. 491-497) relating to the prevention of destruction and dumping of farm produce; or

Has failed, except in the case of a bankruptcy and subject to the right of appeal, to pay any reparation order issued within two years of the date of the application.

An application for license may also be withheld for up to thirty days to allow for an investigation to determine:

Whether anyone responsibly connected with the applicant has engaged in any practice of the character prohibited by PACA; or

Whether the application contains any materially false or misleading statement, or involves any misrepresentation, concealment, or withholding of facts with respect to any violation of the Act by anyone responsibly connected with the applicant.

A PACA license can terminate, be suspended or revoked.

  • A PACA license will automatically terminate if it is not renewed by its anniversary date.
  • Traders who violate any of the provisions of section 2 of the PACA, or who are found guilty in Federal court of having altered inspection certificates in violation of section 14(b) of the PACA, may have their license suspended for a period not to exceed ninety days, except if the violation is flagrant or repeated, in which case the license may be revoked.
  • Failure to satisfy a reparation order will result in automatic suspension of a license, and the suspension will remain in effect until the order is satisfied.

What are the effects of a suspension and/or revocation?

A firm whose license has been suspended or revoked may not conduct business subject to license under the PACA, and any individual responsibly connected to the firm is restricted from obtaining a PACA license and from employment in the produce industry with another PACA licensee for a certain period of time.

What are employment restrictions?

Except with the approval of the USDA, no licensee shall employ any person, or any person who has been responsibly connected with any person:

  • Whose license has been revoked or is currently suspended
  • Who has been found to have committed any flagrant or repeated violation of Section 2 of the PACA
  • Against whom there is an unpaid reparation award issued within two years, subject to the right of appeal.

The terms "employ" and "employment" mean any affiliation of any person with the business operations of a licensee, with or without compensation, including ownership or self-employment.

Note: An additional year may be added to the employment restriction period if it is determined that a responsibly connected individual was unlawfully employed.

How does bankruptcy affect licensing?

If an individual or company files bankruptcy, or if a partner in a partnership files a bankruptcy action, the PACA license will terminate upon the issuance of an order by the court reorganizing or discharging the debt. If operations are to continue that require a PACA license, then a new license application must be submitted, and a surety bond may also be required.

What are bonding requirements?

While all commission merchants, dealers, and brokers are not required to be bonded under the PACA, there are special circumstances where bonds are required for licensing and for employment of particular individuals. Bonds are required under the following circumstances:

Firms that employ persons responsibly connected to licensees who failed to pay a reparation order issued against them within the past two years are required to furnish a bond;

A person whose license has been revoked for repeated or flagrant violations cannot be employed by, or affiliated in any way with, any other licensee for a period of one-year following the revocation. After one year, and prior to the end of the second year, another licensee may employ the person if the employer furnishes a four-year bond in an amount set by USDA. No bond is required for employment after two years has expired;

After a two-year period, a person or firm which had its license suspended or revoked may only obtain a license by furnishing a bond. After three years, a license may be obtained without a bond;

When a person or firm applies for a license within three years following a bankruptcy adjudication or discharge, a satisfactory surety bond may be required.

What license information is public?

The information appearing on a license application or certificate is public with the exception of the Social Security numbers, home addresses, and percentages of stock held by the people appearing on the application or certificate. That information is protected under the Privacy Act and is exempted from the Freedom of Information Act.

How does a PACA license relate to trust protection?

Anyone licensed or subject to license under the PACA is subject to the provisions of the law, including the maintenance of trust assets and collection under the trust. Also, licensees need not file a separate notice to preserve trust benefits if they include a prescribed statement on their invoice. (See Unit 8 for details).

If you have any questions regarding this course material, please direct them to Jane Servais, Head of the PACA Branch's National License Center, Manassas, VA at 703-331-4570, or via email at


  Last Modified Date: 02/26/2013