USDA reminds produce buyers and sellers of PACA trust rights in electronic invoicing

The USDA Agricultural Marketing Service has issued a reminder to buyers and sellers of fresh and frozen fruits and vegetables subject to the Perishable Agricultural Commodities Act of the actions that must be taken for a seller to preserve their PACA trust rights in Electronic Data Interchange (EDI) or electronic invoicing or EDI systems.

Buyers of commodities subject to the PACA must provide a means for sellers to preserve their PACA trust rights for transactions made in EDI systems, according to the USDA.

When a supplier sells produce to a buyer, the supplier becomes eligible to participate in the PACA trust. The PACA trust provisions require that buyers maintain a statutory trust on fruits and vegetables received but not yet paid for. The PACA trust automatically goes into effect when a buyer receives the produce, but a seller must take action to preserve their trust rights by timely notifying the buyer of their intent to preserve their trust rights.

“These 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. Because of this, suppliers that file for trust protection have a far greater chance of recovering money owed them when a buyer goes out of business,” the USDA explained.

PACA regulations provide that a PACA licensee can preserve its trust rights in EDI transactions by transmitting the required statutory language through an electronic transmission that can be verified.

PACA regulations also prescribe the actions that a produce buyer must take to ensure that the seller can preserve its trust rights in EDI transactions. Specifically, the regulations require the buyer or its third-party electronic vendor to allow sufficient space for the seller to include the required trust statement of intent to preserve trust benefits in the buyer’s electronic invoices or other billing statement forms. The buyer also is required to accept a seller’s electronic notice of intent to preserve its trust rights. A produce buyer who fails to comply with these requirements may be in violation of the PACA.

Affected sellers should report concerns to PACA for further investigation by emailing PACAinvestigations@usda.gov.

Sellers not licensed under the PACA, or those licensees that do not want to include the statutory wording on their invoices or billing documents, must provide the buyer with a written statement of “notice of intent to preserve trust benefits” to preserve their statutory trust rights, said the USDA.

Buyers or sellers wishing to learn more may visit with PACA representatives at the upcoming IFPA Global Produce & Floral Show, Oct. 27-29, in Orlando, Fla., at the USDA AMS booth number 873.  Alternatively, they may contact Travis Hubbs, deputy director, PACA Division, at Travis.Hubbs@usda.gov.