The U.S. Department of Agriculture has compiled a list of FAQs for the Perishable Agriculture Commodities Act as customers ask suppliers about extending payment terms.
The spread of COVID-19 cases is causing uncertainty for the industry, and the USDA’s Agricultural Marketing Service, which oversees the PACA branch, is advising companies on how they can be flexible in payment schedules while maintaining their rights through PACA.
Here’s the list of FAQs:
Q: I have been contacted by several customers that purchased produce from me requesting extensions to our payment terms or to make partial payments as a result of the economic turmoil relating to the COVID-19 emergency. I understand the predicament my customers are facing and am willing to try and help, but I am afraid I could jeopardize my trust rights under PACA. Is there a way I can be flexible in receiving payment but not undermine my PACA trust rights?
A: The PACA does allow for flexibility in the way a seller and buyer can work together to resolve payment issues. However, sellers need to ensure that they don’t unintentionally forfeit their status as a trust beneficiary when trying to work with a buyer who is unable to make full payment in accordance with the original contract terms.
For example, a seller who agrees to sell a load of produce and enters into an agreement for payment beyond the 30 days established in the regulations would automatically lose their PACA trust rights. But the PACA regulations do allow a seller who has properly preserved their trust rights for a transaction that was eligible for the trust, and where the buyer does not pay within the agreed upon terms, to accept a partial payment or agree to a payment schedule after the buyer has defaulted. So, after a buyer defaults on the original payment terms, the seller can set up new terms and still maintain their trust rights. Please refer to the “PACA Trust” section on PACA’s website for further guidance on preserving trust rights.
Q: I operate a business that sells primarily to restaurants, bars and cafes in a major city. Due to the COVID-19 emergency those customers have been ordered to close. Many may go out of business without paying me, thus making it difficult for me to pay my suppliers. Is PACA able to help me in any way?
A: In the worst-case scenario in which your customer goes out of business or files for bankruptcy, your best opportunity for recovery of at least a portion of the money you’re owed will be through your rights under PACA as a trust beneficiary. The PACA trust provisions put sellers of fresh and frozen fruits and vegetables in a priority status in the event their buyers become insolvent or file for bankruptcy protection. PACA licensees may preserve their trust rights by giving notice to the debtor on the invoice. Notification must be given within 30 days from the day payment was due, or from receiving notification that a timely submitted payment was dishonored. To qualify for trust protections, terms for payment cannot exceed 30 days from the date of acceptance of the product. Please refer to the “PACA Trust” section on PACA’s website for further guidance on preserving trust rights.
Q: Have any of the PACA filing deadlines, such as the timing for filing a reparation complaint been extended due to the COVID-19 emergency?
A: Many of the filing deadlines that apply to actions under PACA are set by statute and regulation and cannot be waived. The regulations provide for extensions of deadlines for certain actions in the administrative process, such as the filing of a response in a reparation complaint. Please contact your PACA Division regional office to discuss your specific situation.
Q: Is the PACA Division operating during the current COVID-19 emergency?
A: Yes, the PACA Division is operating during the COVID-19 emergency. PACA staff are available to respond to phone and e-mail inquiries.
The PACA Division encourages industry members to apply for a PACA license, renew their existing PACA licenses, and submit informal complaints through the ePACA portal. Using the ePACA portal will ensure uninterrupted service in the event that mail and delivery services are interrupted. The PACA Division will continue to serve the industry during any office closures through the ePACA portal. For information on using the portal, refer to the “Online PACA Services” section on the PACA website.
Q: How do I contact the PACA Division?
A: PACA Division staff can be reached by phone or e-mail directly through its online directory.
You can also apply for a PACA license, renew a PACA license, or file a PACA complaint online through the ePACA portal.
Q: Is the PACA Customer Service line still taking calls?
A: Yes, the PACA Customer Service Line, (800) 495-PACA, is working as usual.
Q: Is the PACA Division’s National License Center (NLC) processing applications and renewals as normal?
A: Yes, the NLC is sending out renewal notices and processing license applications as normal. While USDA offices remain open, the PACA Division can receive and process all license-related submissions. Going forward, the PACA Division encourages industry members to apply for a PACA license, renew their existing PACA licenses, and submit reparation complaints through the ePACA portal. Using the ePACA portal will ensure uninterrupted service in the event that mail and delivery services are interrupted. The PACA Division will continue to serve the industry during any office closures through the portal. For information on using the portal, refer to the “Online PACA Services” section on the PACA website.