One of the most important regulations supporting the fresh produce trade is the Perishable Agricultural Commodities Act, and especially the PACA Trust. The PACA trust enables produce sellers to have first priority for repayment of debts in the event of a customer’s bankruptcy. Produce sellers actually have higher priority than banks, tax payments or any other debts in the event of a dissolution of assets to debtors.
The United Fresh Produce Association released the following statement to members:
"We strongly advise you to be careful to not inadvertently waive your rights under the PACA trust. In discussions with the USDA PACA branch today, we have confirmed the following:
"All produce sellers — whether growers, shippers, wholesalers, or others should NOT enter into extended payment terms beyond 30 days, before the initial 30-day payment period is past. We know that many companies want to cooperate with one another, but extending terms before the end of the 30-day period waives your PACA trust rights and the ability to have preferential trust rights in the event of your customer’s bankruptcy.
"However, regulations DO ALLOW a seller and buyer to agree to a partial payment plan or enter into a payment schedule AFTER the 30-day period without losing your PACA trust rights."
The specific regulatory language provided from the USDA PACA branch is as follows:
Section 46.46.(e)3
If there is a default payment as defined in 46.46(a)(3), the seller, supplier, or agent who has met the eligibility requirements of paragraphs (e)1 and (2) of this section will not forfeit eligibility under they trust by agreeing in any manner to a schedule for payment of the past due amount or by accepting a partial payment.
The United Fresh Produce Association recommended if you have any questions, to consult with your own counsel for specific advice.
"We are working diligently on support for the sector and those that are facing financial devastation, but you should all be keeping detailed financial records and this is one step that you should be sure to follow in any case," United Fresh said in the statement.
