What is the purpose of the PACA?
The Perishable Agricultural Commodities Act (PACA) facilitates fair trading practices in the marketing of fresh and frozen fruits and vegetables in interstate and foreign commerce. A major objective of the PACA program is to help ensure that dealers of fresh and frozen fruits and vegetables get what they pay for and get paid for what they sell, including when their customers go out of business, declare bankruptcy, or simply refuse to pay for the fruits and vegetables received.
How do I obtain a PACA license?
Since my new business has the same ownership as the old one, do I need a new license?
A new license is required if the new business is a separate legal entity conducting business subject to the PACA. Some examples that would require a new license are changing the firm’s legal status from an individual owner to a partnership or to a corporation, changing the number of general partners in a partnership, or re-incorporating in a different state. The addition of a branch facility or an additional trade name does not require that you obtain a new license. If you have questions about your need for an additional license, call us at 800-495-7222 and we will be glad to help you.
I am a broker, but don’t “handle” any produce, do I need a license?
A broker negotiating contracts involving fresh and frozen fruits and vegetables between a buyer and a seller must be licensed under the PACA. A broker negotiating only sales of frozen produce on behalf of the vendor, however, is not required to be licensed until the value of the contracts exceeds $230,000 in any calendar year.
I am a grower selling produce that I grow. Can I obtain a PACA license?
Yes, any person may apply for a PACA license. Many growers obtain licenses to take advantage of the alternative method for filing for PACA Trust Preservation.
How do I file a PACA Reperation complaint?
If you have a problem receiving payment from a buyer or believe that you suffered damages resulting from unfair trading practices, you may submit an informal complaint to the PACA Division either through the ePACA Portal or by email, overnight delivery or mail to a Regional Office. The complaint must be in writing (Download an informal complaint worksheet) and filed within 9 months of the date payment was due or the time that performance under the contract was required. The dispute must involve a contract for fresh or frozen fruits and/or vegetables as defined by the PACA, which occurred in interstate and/or foreign commerce. The party against which you are making a claim must either be licensed by the PACA Division or must be operating a business subject to the licensing provisions of the PACA. The complaining party must submit documentary evidence to establish that it suffered a monetary loss as a result of an action by the other party that violates the PACA. Evidence may include invoices, contracts, bills of lading, broker’s memoranda of sale, manifests, accountings, or any other evidence showing the nature of the contract. The complaining party must submit a required $100 filing fee with the claim, before it will be opened. The filing fee may be paid online by credit card or by check or money order made payable to “USDA-AMS.
If you have questions or need further guidance, call our customer service line at 1-800-495-7222 (PACA).
I have a prospective new customer. How can I get information about the firm’s PACA complaint history?
Call us toll-free at 800-495-7222 and we will be happy to provide you with general information about your prospective customer’s PACA complaint and license history.
I have an unpaid order, and it has not been paid. What is the PACA doing to get the order paid?
When a PACA-licensed firm fails to pay an award, the Department of Agriculture (USDA) automatically suspends its license and the firm is prohibited from operating in the produce industry until the award is paid to your satisfaction. While the firm’s license is suspended, the firm’s officers are also restricted and cannot be employed or affiliated with any other PACA licensee without the consent of the Secretary of Agriculture. We monitor the activities of these firms and individuals, and may pursue further civil court actions if they operate in violation of the PACA restrictions.
You may also pursue the matter further and file a civil action in U.S. District Court to have the USDA award reduced to a court judgment. If the judgment is not satisfied, the Court may further penalize the firm, which could include an attachment of assets.
Is there a government regulatory office that covers freight issues?
How do I preserve my rights under the trust provisions of the PACA?
You must notify the buyer (the debtor) within 30 days of the date that payment was due or notification was received that a customer’s check bounced. There are two ways to preserve your trust rights.
- A PACA licensee can fulfill this notification requirement by adding the following exact wording to its usual invoice or billing statement: The perishable agricultural commodities listed on this invoice are sold subject to statutory trust authorized by section 5(c) of the Perishable Agricultural Commodities Act, 1930 (7 U.S.C. 499e(c)). The seller of these commodities retains a trust claim over these commodities, all inventories of food or other products derived from these commodities, and any receivables or proceeds from the sale of these commodities until full payment is received.
- Other produce sellers, like unlicensed growers, must provide the debtor with a written notice of their intent to preserve trust benefits under the PACA within 30 days from the date that payment was past due or notification was received that a payment instrument was dishonored.
I have preserved my trust rights but am getting nothing but excuses from the buyer. How can the PACA trust help me get paid?
After preserve your rights under the PACA trust provisions, the buyer should be holding the proceeds from the resale of that product 'in trust.' You can file an action in U.S. District Court seeking to enforce payment under the trust.
It is common for a trust enforcement action to seek a temporary restraining order freezing the bank accounts of a buyer until the trust creditor is paid. Many produce sellers have found this a very effective tool to recover payment for produce. Attorneys that specialize in agricultural law, such as the PACA, advertise in produce industry publications. Sellers may also seek attorney referral through industry trade groups as well as their local bar association.
I just heard that a buyer who owes me for several shipments of produce has filed for bankruptcy. Can the trust provisions of PACA help me?
Having first preserved your PACA trust rights, you should notify the bankruptcy court that you are a priority creditor under the PACA trust provisions (7 U.S.C.499e(c)). Priority creditor status should be indicated on the "Proof of Claim" submitted to the clerk of the bankruptcy court. Under bankruptcy law provisions, trust creditors will have priority to be paid first from the PACA trust assets. Trust assets include any produce inventory, products derived from that produce, as well as cash or accounts receivable generated from the resale of produce.
My attorney says that he has never heard of the PACA trust. Do you have anything that can help to educate him?
The PACA is an industry-specific law and if your attorney does not have experience working with the produce industry, some helpful references follow.
The PACA is found in 7 U.S.C. §499 et seq. The trust provisions of the PACA are set out in 7 U.S.C. §499e(c). The related regulations are found in 7 C.F.R. § 46.46. You may also request pamphlet copies from any of the PACA Branch field offices or by calling toll free 877-622-4716.
The following is a basic list of PACA trust related cases that may be useful to review:
- Greg Orchards & Produce, Inc. v. Roncone, 180 F.3rd 888, 890-91 (7th Cir.1999).
- C.H. Robinson Co. v. Trust Bank NA., 952 F.2d 1311,1315 (11th Cir. 1992).
- Golman-Hayden Co. v. Fresh Source Produce, Inc. 217 F.3d 348,351 (5th Cir. 2000).
- In re Magic Rests., Inc., 205 F 3d 108,111 (3d Cir. 2000).
- In re Lombardo Fruit & Produce Co., 12 F. 3d 806,809 (8th Cir. 1993).
- Idahoan Fresh v. Advantage Produce, Inc., 157 F.3d 197,205 (3d Cir. 1998).
- Hull Co. v. Hauser's Foods, Inc. 924 F.2d 777,781-82 (8th Cir. 1991).
- Stowe Potato Sales, Inc. v. Terry's Inc., 224 B.R. 329,333 (W.D. Va. 1998). A&J Produce Corp. v. CITGroup/ Factoring, Inc., 829 F. Supp.651, 655 (S.D.N.Y.1993).
- Israel v. Merrill, 812 So. 2d 347,352 (Ala. Civ. App. 2001).
- In re Richmond Produce Co., 112 B.R. 364,373 (Bankr. N.D. Cal. 1990).