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The Perishable Agricultural Commodities Act (PACA)
Agricultural Policy Resources,
What is PACA?
The Perishable Agricultural Commodities Act (PACA) of 1930 was enacted in 1930 to promote fair trading practices in the fruit and vegetable industry. Sellers must ship the quantity and quality of produce specified in their contracts, and buyers must accept shipments that meet contract specifications. PACA protections benefit not only growers who are generally sellers , but also a range of parties who are both buyers and sellers, including truckers, packers, processors, wholesalers, brokers, grocery wholesalers, and food service firms. It is generally agreed that fruit and vegetable traders in the produce industry need more protection than traders in other industries because the product is very perishable, and a one or two-day delay in marketing can mean the difference between profit and loss.1 PACA also provides procedures for resolving disputes outside the civil court system, and establishes a trust consisting of a buyer's produce-related assets. If a buyer becomes bankrupt, produce suppliers that have preserved their trust rights can recover money owed to them before trust assets are made available to general creditors.
The law requires most buyers and sellers to have a PACA license in order to trade in fruits and vegetables. 2 A PACA license, which costs $550 a year, provides a means of enforcement because it can be suspended or revoked if a buyer or seller is found to commit unfair trading practices. Such practices may include:
PACA was last amended in 1995 (Perishable Agricultural Commodities Act Amendments of 1995, P.L. 104-48) when the new law phased out annual license fees for retailers and full-line grocery wholesalers, increased annual fees for other licensees, and allowed licensees to protect their trust rights by giving notice to debtors on their invoices as an alternative to the traditional notification by mailing a trust notice to the buyer. Both kinds of notification must state that the seller intends to preserve trust benefits under the PACA. Because of the increased trade among the United States, Canada, and Mexico resulting from the North American Free Trade Agreement (NAFTA), a new dispute resolution system for the produce trade is being discussed by these countries. The system is to be based on PACA and will be called the Fruit and Vegetable Dispute Resolution Corporation. Because the corporation is private no U.S. legislation is needed before it can be established. It will offer protections similar to PACA's provisions, membership will be voluntary, and it will cost individual companies a fee of $500 annually. U.S. companies will pay this fee in addition to a PACA fee because the corporation covers trade disputes between the countries, while PACA will continue to address fair trade among U.S. companies only. The corporation is expected to be functional and ready to handle disputes by February 1,2000. Discussions on details were ongoing at the end of September 1999.
2 Growers are exempt from the license requirement as long as they sell only products that are of their own production. Retailers and frozen food brokers representing sellers are exempt until they purchase or negotiate sales worth $230,000 or more of fruits and vegetables in a calendar year. Truckers and most restaurants are not required to be licensed. USDA/AMS, Fruit and Vegetable Division, PACA Fact Finder: 1.
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