What is this thing P.A.C.A. you keep talking about?

What is this thing P.A.C.A. you keep talking about?

P.A.C.A. is the acronym for Perishable Agricultural Commodities Act. PACA is a federal act passed in 1930 to help prevent fraudulent in the course of selling perishable commodities, such as fruits and vegetables. This act enables the U.S.D.A. (United States Department of Agriculture) to enforce and regulate these laws to ensure perishable commodities are marketed in interstate and foreign commerce in a proper and lawful manner.

PACA requires all commission merchants, dealers, and brokers who engage in commerce of wholesale quantities of perishable fruits and vegetables, (frozen or not frozen) to obtain a PACA license from the USDA. The act details the conduct which PACA licensees must abide to ensure unfair, unreasonable, discriminatory, or deceptive practices do not occur in the weighing, counting, handling, shipping and sale of these commodities.

During a sale between licensees, a "statutory trust" is created; it is sometimes called a "floating trust". This trust is created by operation of law during the sale to benefit unpaid sellers. This is not a trust with written documents, such as one would draft for estate planning purposes. Rather, just by participating in the commerce of fruits and vegetables, the brokers and dealers are holding proceeds and inventories "in trust". These inventories and proceeds of sales make up the principal of the trust and are held "in trust" until all unpaid debts and claims associated with the sale are paid.

Each invoice must contain the following statutory language in order to meet PACA trust law requirements:

"The perishable agricultural commodities listed on this invoice are sold subject to the statutory trust authorized by Section 5c 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."

Invoices should also have readily identifiable basic information clearly and plainly printed on each invoice, such as names and addresses of the seller and the debtor, date of the sale, items sold, contract terms such as F.O.B., invoice price, payment due date and amount owed.