The Perishable Agricultural Commodities Act (PACA) was enacted by Congress in 1930 to protect growers, distributors and others who deal in fresh and frozen fruits and vegetables, from unfair and fraudulent practices including nonpayment of invoices. In order to participate in the protection offered under PACA, a grower must have a valid PACA license from the U.S. Department of Agriculture (USDA) and comply with the provisions of the Act. When the provisions of PACA are properly complied with, a grower sells under the protection available from a trust administered by the USDA.
Your invoice is one of the key documents in the PACA compliance process. It acts as notice to your buyer that you are selling your produce under the auspices of the PACA trust. In order to take advantage of the benefits of the PACA trust you must be sure that your invoice satisfies the requirements of the Act in several areas.
INVOICE PAYMENT TERMS
A key requirement of PACA is the invoice payment terms. PACA specifies prompt payment, which is defined as payment within 10 days. A seller and buyer may agree to payment terms of more than 10 days, but the terms may not exceed 30 days. Whatever payment terms are agreed to, must be evidenced by a written agreement. The payment terms on the invoice must match the terms on the payment terms agreement. Payment terms must also be clearly displayed on the face of the invoice.
In order to give notice to the buyer that you intend to pursue the benefits available under the PACA trust, your invoice must include the following statement:
“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.”
NOTICE OF LATE PAYMENT
If the buyer does not make payment according to the terms of the invoice, you must send an invoice to the buyer within 30 days after the payment due date or the date of the notice from the seller’s bank that the buyer’s check will not will not clear the bank.
ATTORNEY’S FEES AND COSTS
PACA does not provide for payment of attorneys’ fees and costs in the event a collection action becomes necessary. However, including a statement concerning attorneys’ fees and costs on the face of the invoice may help you to recover these fees and costs in a collection action.
INTEREST ON PAST-DUE BALANCES
It may also be beneficial to you to include a statement that interest will accrue on any past-due balances on the face of your invoice.
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.
ACCOUNTS RECEIVABLE SOFTWARE FOR PACA
Having an automated accounts receivable software, like the package offered by Lockstep Collect, to support the invoicing and collection of PACA accounts receivables is essential to the successful implementation and use of the protection available under the PACA trust. Software functionality should include the ability to indicate a PACA account and group PACA accounts together. It should also include the PACA notice statement and statements concerning attorneys’ fees and costs and interest on past-due balances, and have a clearly displayed due date which agrees with PACA payment terms or a written payment terms agreement.
If you are a produce grower, you should look into the benefits available to you under PACA, and have an automated accounts receivable software like Lockstep Collect to support it.
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