In the volatile world of agriculture, unfortunate scenarios occasionally unfold where shippers, freezers, or marketing agents go out of business, leaving growers with unpaid debts. To safeguard their interests, growers can turn to the protections offered by the PACA Trust. “However, to fully benefit from this trust, it is imperative for growers to adhere to specific filing procedures within a defined timeframe,” says Bryan Nickerson of Western Growers.
There are two avenues for filing PACA Trust notices:
1. For unlicensed growers: As a grower, there’s no mandatory requirement to be licensed under PACA. However, unlicensed growers must file a “Notice of Intent” to preserve benefits under the Trust. This written notice must include critical information establishing the contract for the delivery of fresh or frozen produce. This encompasses details such as names and addresses of involved parties, transaction date, commodity, invoice price, payment terms, dishonored payment notice (if applicable), and the outstanding amount.
Timely filing involves notifying the debtor within 30 calendar days following a failure to adhere to the payment terms stipulated in the agreement.
2. For licensees: Licensed growers have the advantage of using a streamlined method. They can integrate a specific statement on their invoices or billing statements that explicitly outlines the statutory trust under section 5(c) of the Perishable Agricultural Commodities Act, 1930. This statement preserves the trust claim until full payment is received and must be written verbatim:
“The perishable agricultural commodities listed on this invoice are sold subject to the statutory trust authorized by section 5(c) of the Perishable Agricultural Commodities Act,1930 (7 U.S.C. 499e(c)). The seller of these commodities retains a trust claim over these commodities, all inventories of food or other products derived from these commodities, and any receivables or proceeds from the sale of these commodities until full payment is received.”
By holding a PACA license, growers can automate the Trust notice and its corresponding protection. The prescribed statement is pre-printed on their invoices, eliminating the need for manual filings and the complexities associated with determining precise filing dates post-payment default.
Having a PACA license entails an annual cost of $995. While this might be viewed as an expense, it serves as a prudent investment and a built-in safety net in scenarios of bankruptcy or insolvency. It is strongly recommended to consult legal counsel to explore this option and establish best practices for routine and timely notice execution.
In instances where a business has ceased operations or filed for bankruptcy, delays in filing a PACA Trust notice can be costly. Hence, it is crucial to file notices accurately and promptly. The most effective approach is to become a PACA licensee and incorporate the correct PACA language on invoices.
Ensuring compliance and timely action can make a significant difference in protecting growers’ interests in the unpredictable landscape of agricultural transactions.