Managing credit risk in the produce industry is vitally important. The value of shipments can be very large, so even one bad debt could be a catastrophe for some growers. Protecting against this risk is one reason many growers obtain a PACA license. The Perishable Agricultural Commodities Act (PACA) passed in 1930 offers a number of benefits to growers, distributors and others who deal in fresh and frozen fruits and vegetables, including provisions designed to help licensed growers manage their credit risk. These benefits are available when a grower complies with the requirements necessary for a shipment to be made under the PACA trust.


In addition to pursuing the benefits available under the PACA trust, growers should review the credit worthiness of potential customers by checking bank and trade references, and credit ratings available from credit rating agencies such as Dun & Bradstreet. Information on a firm’s PACA license status and complaint history should also be checked by visiting


Sometimes collection problems happen for any number of reasons. When a collection problem does occur, PACA benefits which help with collection problems include an informal dispute resolution process, a formal dispute resolution process and priority in a bankruptcy proceeding.


PACA provides a forum for settling commercial disputes, including nonpayment of invoices, outside the civil court system. A mediation service is offered as a means of finding a resolution to a dispute. If a resolution cannot be reached informally, the creditor can choose to escalate the complaint within PACA.


A formal complaint can be filed with PACA as a means of resolving a dispute. In the formal process the Secretary of Agriculture decides the resolution of the complaint, and can issue an award plus interest. If the terms of the ruling are not satisfied, the USDA can assess a fine or other sanctions, suspend the debtor’s PACA license and ultimately revoke the debtor’s license.

There are fees for the informal and formal complaint processes, and procedures to be followed. These requirements can be reviewed at


If a buyer files bankruptcy, the debtor must hold produce related assets for the benefit of unpaid produce suppliers who have PACA trust rights. The debtor’s trust assets are not available for general distribution to other creditors until all valid PACA claims have been satisfied. This provides growers, who have filed for trust protection, with a greater likelihood of recovering the unpaid debt.


As with all matters of a legal nature, it is important to seek the advice of legal counsel regarding the requirements of and compliance with the terms of PACA.


Managing credit risk is a lot easier when a grower has an automated accounts receivable software, like the package offered by Lockstep Collect. Functionality should include the ability to group PACA accounts and flag PACA invoices. Invoicing should indicate a PACA account and include the PACA notice statement, and language on recovering attorneys’ fees in a collection action and interest on past due balances, if desired. PACA invoices should also have a clearly marked due date, which agrees with PACA payment terms or a written payment terms agreement.

Good credit procedures and the benefits available under the PACA trust are resources you need for your agricultural business. A good automated accounts receivable software can help you utilize these resources efficiently.