Importance of PACA protections escalates in pandemic

Fresh produce industry groups are alerting growers and other Perishable Agricultural Commodities Act licensees about the importance of maintaining the protections afforded by the law as the spread of coronavirus COVID-19 continues.

Most importantly, produce sellers should adhere to a 30-day payment period.

“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,” according to a United Fresh Produce Association e-mail to members on March 20.

Sellers can agree to a partial payment plan after the initial 30-day period, according to the association, and still maintain PACA trust rights.

“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,” according to the member alert.

Western Growers President and CEO Dave Puglia on March 25 sent a letter to Agriculture Secretary Sonny Perdue stressing a dire situation for the fresh produce industry. The USDA oversees the PACA through its Agricultural Marketing Service.

“In this crisis , an issue that is of growing concern is that given the extremely volatile environment currently in the food supply chain, the likelihood of delayed payments or non-payments and the drain on cash flow will be much greater than could have ever been forecasted,” Puglia wrote. “Indeed, many of our members are already facing repeated requests from their buyers for payment extensions beyond the standard 30 days.”

Western Growers is calling on the USDA to guarantee the payment of all legitimate PACA trust claims. An overhaul of the system is not necessary, according to Puglia, but if a claim has not been satisfied after going through the PACA process, “USDA would shore up any shortfall” to pay the remaining amount of qualified receivables.

The USDA issued a “frequently asked questions” document to inform PACA licensees on the 30-day rule and other issues.