The Perishable Agricultural Commodities Act (PACA): Click HERE for the PACA Webguide
Growers who market their own produce, and only their own produce, may not need to obtain a PACA license in order to enjoy some of PACA’s protections. However there are benefits to being licensed anyway. For example, PACA licensed growers may efficiently preserve their trust rights by giving notice to their buyers on their invoice.
Be warned, this is “magic language” and PACA licensed grower must use the exact wording below on the face of the invoice:
The perishable agricultural commodities listed on this invoice are sold subject to the 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.
If you are a grower who sells more than $100,000 per year of fresh produce, we strongly recommend that you invest in a PACA license and put the “magic language” above in every single invoice you send out. If you would like our firm to work with you to get your farm licensed, just call our office and we will either walk you through the process, or prepare the PACA application on your behalf.
However, we know margins are thin. Therefore, Growers who choose not to be licensed under PACA, or those licensees that do not want to include the statutory wording on their invoices may use the following method, or may engage our firm to provide individual PACA notices for a flat fee of $300 per notice. If you only have one significant non-payment issue each year, this may be a more cost effective option.
Each written notice must include a statement that it is a “notice of intent to preserve trust benefits,” and must include the following, at a minimum, so please be prepared to submit all of the following:
1) the names and addresses of the seller, commission merchant, or agent, and the debtor;
2) the date of the transaction, commodity, invoice price, payment terms, and the amount past due and unpaid.
3) Notification must be given within 30 days from the day payment was due (i.e., payment must be made within 30 days from the due date of payment), or from receiving notification that a timely submitted payment was dishonored (i.e., bounced check or declined credit card).
4) To qualify for trust protections, terms for payment cannot exceed 30 days from the date of acceptance of the product.
5) Payment terms other than PACA prompt payment terms (usually 10 days) must be agreed upon by the parties to the transaction in writing before entering into the transaction.
After a grower preserves their rights under PACA trust provisions, a notified buyer should (and we emphasize should) hold the proceeds from the resale of that product ‘in trust.’ If you do not receive voluntary payment, we will negotiate on your behalf to encourage payment, without jeopardizing your PACA protections. Though we always work for a negotiated settlement, we will always demand “PIF” or payment in full for PACA claims. If full payment is not received, we will always associate with a litigation firm to file an action in U.S. District Court, seek a temporary restraining order, freeze bank accounts of the debtor, and do the necessary to increase your chances of being paid in full. ADR advises our grower clients that consistent enforcement of your PACA rights sends the right message to your buyers, and avoids future non-payment. If your contract with the buyer provides for recovery of your attorney’s fees (which all of your contracts should), we will demand that the buyer pay reasonable attorney fees, so that you do not incur a substantial loss in the rare event when litigation becomes necessary.
Finally, laws frequently change, and you should always consult an attorney licensed in your state. Nothing contained on this website shall be considered by you to be legal advice from Alternative Dispute Resolution, APC. If you would like to engage our services for a crop dispute, we require you to sign a written limited representation agreement specifying the precise scope of our representation. This ensures that there are no misunderstandings, and allows us to keep you covered by the professional insurance that our law firm purchases to protect your business, and ours.
