Background:
The Perishable Agricultural Commodities Act of 1930, (7 U.S.C. 499(a)-(t)), ("PACA"), was enacted to protect primarily growers, producers, and suppliers of fresh and frozen fruits and vegetables from fraudulent and unfair practices of buyers. The Act requires "dealers" and other statutorily defined groups to obtain licenses if they buy or sell more than 2,000 pounds of fresh or frozen fruits and vegetables in any given day. In addition, groups defined as "retail sellers" of fresh or frozen fruit and vegetables must purchase a license if their purchases of these commodities exceed $230,000 per year. Historically, groups required to obtain licenses have been wholesalers, processors, truckers, grocery wholesalers, and food service firms.

PACA is largely intended to protect growers/suppliers of perishable agricultural commodities in the event a buyer goes bankrupt and cannot pay the grower. The Act establishes a statutory trust and creates a security interest in favor of suppliers, which elevates their status as secured creditors in the event of non-payment. The U.S. Department of Agriculture ("USDA") administers the PACA program and collects licensure fees, which cost $550 for an individual license, plus $200 for each branch or additional business facility operated by the applicant in excess of nine facilities, subject to an annual limit of $4000. In addition, failure to obtain a required license can result in penalties of $1000 for each offense, plus $250 for each day the offense continues.

The Issue:
The USDA has never required restaurants to obtain PACA licenses. Recent circuit court decisions, however, have raised questions as to why restaurants are not considered "dealers" under the Act. As a result, the USDA is reconsidering its long-held position that restaurants are not dealers. The USDA's Agricultural Marketing Service, which administers the PACA program, recently informed NCCR that it plans to issue notice in the Federal Register soon of its intention to treat restaurants as dealers under the Act.

Status:
NCCR has met with representatives of the USDA regarding their intended policy change to urge them to reconsider their position. As of this writing, notice in the Federal Register has not yet been issued.

Contact: NCCR at 202-626.8185