PACA requires bonds to be posted by a licensee where the firm or one of its principals has been involved in bankruptcy or when a PACA licensee employs an individual who is under PACA employment restrictions. The purpose of the bond is to provide assurance that the licensee’s business will be conducted in accordance with the PACA and that it will pay any reparation order issued against the firm. If a reparation order involving transactions that occurred during the bonding period are not paid by the licensee, the USDA, on behalf of the unpaid reparation holder will make claim on the bond and have the funds distributed to the unpaid complainant in the reparation complaint.
The EMPLOYMENT BOND TABLE lists those firms who have posted a bond in order to employ an individual that is currently under employment restrictions. Individuals listed here are restricted from employment with another PACA licensee. Licensed firms interested in employing a restricted individual must first obtain USDA approval and post a surety bond. These bonds are held for 4 years plus 9 months.
The LICENSE BOND TABLE lists firms have posted a surety bond in order to obtain a PACA license. These firms or principals of the firms were involved with a bankruptcy within the past 3 years. These bonds are held for 3 years plus 9 months.
PACA imposes licensing and employment restrictions on a person who has been found to be responsibly connected with a firm that has had its license suspended, revoked, has failed to pay a reparation award, or has been found to have committed repeated and flagrant violations of the PACA. You should contact the PACA regional office that covers your geographic location for more specific information on licensing and employment restrictions and related bonding requirements.
Learn the bond requirements for reparation complaints during dispute resolution.
Under section 4(b), a person found to be responsibly connected with a violator firm is prohibited from obtaining a PACA license within a 2-year period following the effective date of the sanction. After the end of the 2-year period, the person can apply for a license, but will be required to post a surety bond or an equivalent cash surety under section 4(c) of the PACA in an amount satisfactory to the Secretary of Agriculture as a prerequisite to the issuance of the license.
Under section 8(b), a person found to be responsibly connected with a firm whose license has been suspended or who has failed to pay a reparation award may be employed by another PACA licensee immediately following the effective date of the sanction if the employing firm posts a surety bond. A person found to be responsibly connected with a firm whose license has been revoked or who has been found to have committed any flagrant or repeated violation of section 2 of the PACA may be employed by another PACA licensee after 1 year following the effective date of the sanction. As a prerequisite to a restricted person's employment, the employing firm must post a surety bond or an equivalent cash surety in an amount satisfactory to the Secretary as an assurance that applicant's business will be conducted in accordance with the PACA. Employment restrictions and resulting bond requirements also apply in situations where a restricted person is affiliated with other PACA licensees as owner, partner, officer, director, stockholder, etc.
Under section 4(a), a firm's PACA license automatically terminates when the firm's Plan of Reorganization (Plan) is confirmed by the bankruptcy court. If the firm continues to operate subject to the PACA after the Plan's confirmation, it must be re-licensed. As a prerequisite to the issuance of that license, the firm may also be required to post a surety bond under section 4(e) of the PACA.
Under section 4(e), the Secretary may refuse to issue a license to an applicant if he finds that the applicant has been involved in bankruptcy proceedings within 3 years prior to the date of application. The Secretary, however, may issue a license if the applicant furnishes a surety bond or an equivalent cash surety in an amount satisfactory to the Secretary as an assurance that applicant's business will be conducted in accordance with the PACA.
If you choose to post a bond, the surety must be a company holding a Certificate of Authority from the Secretary of the Treasury to issue surety bonds (6 U.S.C. Section 6-13). The surety listing can be found at: https://www.fiscal.treasury.gov/fsreports/ref/suretyBnd/surety_home.htm.