USDA Proposes Revisions to the Perishable Agricultural Commodities Act (PACA) Regulations to Clarify Growers’ Trust Protection Eligibility and Define “Written Notifications”

Date
December 16, 2016

The U.S. Department of Agriculture (USDA) is inviting comments on a proposed rule that would provide greater direction to growers employing growers’ agents on how to preserve their trust rights under the PACA.  The PACA provides growers and other fruit and vegetable sellers the ability to claim priority status in the case of a business failure by a produce buyer.  This is called the “PACA Trust.”  The PACA Trust protects the sellers of fresh and frozen fruits and vegetables in the event that the buyers become insolvent or file for bankruptcy protection.  In the case of a business failure or bankruptcy, other creditors cannot be paid from the indebted buyer’s trust assets until all valid PACA Trust claims have been satisfied.

Recent court decisions have invalidated the trust claims of unpaid growers against their growers’ agent because the growers did not file a trust notice directly with the growers’ agent. Growers have asked USDA to intercede in civil and bankruptcy proceedings when they forfeited their trust rights because they did not know they needed to file trust notices with their growers’ agent.

The proposed revisions would also clarify the definition of “written notification” and USDA’s jurisdiction to investigate alleged violations under the PACA.  The proposed clarification would ensure that sellers and buyers of produce understand USDA’s authority to initiate an investigation of alleged PACA violations.  In recent years, members of the produce industry have challenged USDA’s jurisdiction to conduct investigations based on their misunderstanding of the term “written notification.”  The 1995 Amendments to the PACA added the requirement that USDA receive written notification before investigating alleged violations of the PACA.  The revised regulations would clarify the meaning of this term and eliminate litigation between the parties regarding USDA’s authority to perform investigations.

The proposed rule for this action was published in the Federal Register on December 14, 2016. Written comments must be received by February 13, 2017.  Mail written comments to:

PACA Regulatory Enhancements
PACA Division,
AMS, Specialty Crops Program
Room 1510-S, Stop 0242
1400 Independence Avenue S.W.
Washington, D.C. 20250-0242;

or fax comments to (202) 690-4413; or make comments online at www.regulations.gov.

All comments submitted in response to this proposed rule will be included in the record and will be made available to the public.