How PACA Enforces Fair Trade In Produce
Last week, the USDA’s Agricultural Marketing Service (AMS) hosted a webinar delineating better business practices in produce. The U.S. Department of Agriculture ensures fair trade practices in the marketing of fresh and frozen produce using PACA, the Perishable Agricultural Commodities Act.
The federal law enforces legal buying and selling of bulk fruits and vegetables in interstate and foreign commerce.
“While the produce business has come a long way since the 1930s, buyers and sellers still face a host of hurdles,” says John Koller, chief of the dispute resolution branch at AMS.
Hurdles include a product that offers no collateral if the deal goes bad; a failure to pay on time or at all; product misbranding and misrepresentation; a failure to ship the product; vague contract terms; and unscrupulous dealers.
PACA licenses must be maintained by brokers, grower’s agents, shippers, wholesale dealers, retailers, processors, and commissioned merchants.
“Essentially, knowing that a firm has a license and a good history with PACA is one tool in your toolbox to reduce the likelihood of filing a complaint,” Koller says.
Meanwhile, Koller says PACA’s informal and formal complaint mediation service helps businesses avoid getting tied up in courts.
Common reasons for filing a complaint with PACA include failure to pay, failure to ship or deliver, ineffective or wrongful rejection, misunderstood contract terms, and disagreement with inspection results.
PACA offers a three-step complaint process. The first step is a telephone call to PACA to determine whether a complaint is valid or to get advice. The second step is to file an informal complaint–how most PACA complaints are dealt with–and step three is filing a formal complaint.
During the informal process, a PACA investigator gathers and analyzes case facts, shares a conclusion with parties and attempts a settlement, and offers options to pursue a formal complaint, if necessary.
“Keep in mind, we successfully resolve 90 percent of disputed complaints within four months,” Koller says, noting the $100 complaint-filing fee is much less than legal expenses would cost.
Most inquires on the customer service line, according to Koller, arise from unpaid invoices, good delivery, rejections, and acceptance.
With good delivery, “the most common error in the industry is that an inspection is not called for on the day of arrival and that you notify your supplier as soon as you are aware of problems,” Koller says. “If you don’t notify your supplier promptly, regardless of how bad a shipment is, you may still have to pay for the load at full price.”
To determine whether a load has made good delivery, PACA’s guidelines allow for 5 percent decay, 8 percent serious damage, and 15 percent of total damage. Anything exceeding these damages fails good delivery.
A unit must be accepted or rejected in its entirety, Koller says. Acceptance includes diversion, unloading the product from the truck, and failing to notify the seller of a rejection.
In an effective rejection, the buyer must give timely notice to the seller of the refusal. The rejection should be warranted, as in the case of a breach of contract.
An investigator reviews the case and presents an analysis to both parties to encourage informal settlement.
PACA also offers a mediation service, a voluntary and confidential process in which a trained, unbiased specialist helps each party examine mutual interests and consider possible solutions. Mediation can take from one hour to several sessions, depending on the complexity of the issues, Koller explains, but incurs no additional cost beyond the $100 filing fee.
In the event mediation is not the best option, filing a formal complaint may be the next step. A formal complaint is a legal process whose procedure is covered under rules of practices under PACA.
According to Koller, it can take from six months to a year for a final decision to be issued on a disputed case involved in the PACA formal complaint process.
“PACA promotes a level playing field and builds confidence between a buyer and a seller,” Koller explains. “In the normal course of business, hopefully you won’t need to use PACA’s services; product is delivered, accepted, and paid for as agreed.”
For more information on PACA, licenses, and the complaint processes, visit the PACA website.
By Sonya Chudgar