Prompt payment is at the very heart of the PACA. It is an unfair trade practice to fail to make timely payment for fresh and frozen fruits and vegetables purchased. It is one of the few federal statutes that have a prompt pay requirement.
Prompt Pay Defined:
"Full payment promptly," for the purpose of determining violations of the PACA, means:
Payment for produce purchased by buyers within 10 days from the date the produce was accepted;
Payment of the net proceeds for produce received on consignment, or the pro-rata share of the net profit for produce received on joint account, within 10 days from the date of the final sale for each shipment, or within 20 days from the date the produce was received at destination, whichever comes first;
Payment to brokers (buying brokers) within 10 days after the date the broker’s invoice is received by the principal (buyer);
Payment by agents or brokers authorized to collect and remit within 5 days after the agent or broker receives payment from the buyer or receiver;
Payment by growers’ agents within 30 days after receipt of the produce or within 5 days after the agent receives payment for the produce, whichever comes first. When the agent is handling an entire crop, subsequent payments should be made in 10 day intervals or within 5 days after the agent receives payment for the produce, whichever comes first, with the final payment to be made within 30 days from the date the last shipment of the season is received;
Payment by growers, growers’ agents, or shippers of deficits on consignments or joint account transactions, within 10 days after the day the accounting is received;
Payment of proceeds received from a carrier claim, within 10 days after the proceeds are received;
Payment to the supplier-seller within 20 days from the date of acceptance for contracts based on terms other than those described herein.
Written Payment Agreements – Implications
Traders may agree to payment terms other than those set forth above, however in order to be valid, the agreement must be reduced to writing prior to the transaction.
Penalties for Failure to Pay Promptly
When it is determined that a licensee has violated the Act by failing to make full payment promptly, the USDA may publish the facts and circumstances of the violation and/or, by order, suspend the license of the offender for a period not to exceed ninety days, unless the violation is repeated or flagrant, in which case the license may be revoked.
In "failure to pay" cases, or what is loosely termed "no pay", a civil penalty may be assessed in lieu of a license suspension if the licensee establishes that the indebtedness has been fully satisfied prior to the opening of the hearing, or if no hearing is to held, by the time the answer is due. (Note: the substitution of one indebtedness -- indebtedness for produce -- with another indebtedness -- such as a promissory note -- does not constitute payment in accordance with the PACA). In determining the amount of the civil penalty, due consideration will be given to the size of the business, the number of employees, and the seriousness, nature, and amount of the violation.
If you have any questions regarding this course material, please direct them to Karla Whalen, Head of the PACA Branch's Trade Practices Section, Washington DC at 202-720-6873, or via email at firstname.lastname@example.org