Fair Trade Practices Program Fair Trade Practices Program PACA Training Workbook PACA Training Workbook 

February 2020 

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AGRICULTURAL MARKETING SERVICE 

(AMS) 

FAIR TRADE PRACTICES PROGRAM 

PERISHABLE AGRICULTURAL 

COMMODITIES ACT 

(PACA) DIVISION 

FRUIT & VEGETABLE 

INDUSTRY PACA TRAINING 

WORKBOOK 

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The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs 

and activities on the basis of race, color, national origin, age, disability, and where 

applicable, sex, marital status, familial status, parental status, religion, sexual orientation, 

genetic information, political beliefs, reprisal, or because all or part of an individual's 

income is derived from any public assistance program. (Not all prohibited bases apply to 

all programs.) Persons with disabilities who require alternative means for communication 

of program information (i.e., Braille, large print, audiotape, etc.) should contact USDA’s 

TARGET Center at (202) 720-2600 (voice and TDD). 

To file a complaint of discrimination, write: USDA, Director, Office of Civil Rights, 1400 

Independence Avenue, SW, Room 3521-S, Stop 0206, Washington, DC 20250 or call 

(800) 795-3272 or (202) 690-3640.USDA is an equal opportunity provider and employer. 
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INTRODUCTION ....................................................................................................................................................... 4 

A PROFILE OF THE PERISHABLE AGRICULTURAL COMMODITIES ACT DIVISION..........................5 

F A Q.............................................................................................................................................................................8 

LICENSING...............................................................................................................................................................12 

The PACA license application ...................................................................................................................16 

TRADE TERM DEFINITIONS...............................................................................................................................20 

RIGHTS AND RESPONSIBILITIES......................................................................................................................23 

RECORDKEEPING REQUIREMENTS................................................................................................................28 

PAYMENT REQUIREMENTS ...............................................................................................................................30 

RESOLVING COMMERCIAL DISPUTES ...........................................................................................................31 

ESTABLISHING DAMAGES FOR A BREACH OF WARRANTY ...................................................................32 

The Informal Complaint Worksheet.........................................................................................................33 

MEDIATION OF A CLAIM ....................................................................................................................................35 

Steps for Filing a Formal Complaint ........................................................................................................36 

DOCUMENTARY PROCEDURE — A BRIEF OVERVIEW .............................................................................40 

ORAL HEARING PROCEDURE — A BRIEF OVERVIEW ..............................................................................41 

MORE ON PACA’S MEDIATION SERVICES.....................................................................................................43 

HOW THE PACA TRUST WORKS.......................................................................................................................44 

DISCIPLINARY PROCEDURES AND CONSEQUENCES ................................................................................46 

FOB GOOD ARRIVAL GUIDELINES ..................................................................................................................48 

Free on board (FOB) good arrival guidelines table .................................................................................49 

USDA INSPECTION SERVICES............................................................................................................................54 

Examples of USDA Inspection Certificates ..............................................................................................57 

Example of USDA Grade Standard ..........................................................................................................62 

GOOD DELIVERY AND SUITABLE SHIPPING CONDITION........................................................................67 

ACCEPTANCE AND REJECTION........................................................................................................................70 

MISBRANDING AND MISREPRESENTATION .................................................................................................78 

Three Primary Rules ..................................................................................................................................79 

PACA DIRECTORY.................................................................................................................................................80 

PACA Office Map.................................................................................................................................82 
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Introduction 

This Perishable Agricultural Commodities Act (PACA) training workbook was developed to 

assist members of the produce industry, Agricultural Marketing Service (AMS) employees, and 

anyone interested in having a better understanding of the PACA. 

Some basic questions about the PACA spring immediately to mind: What is the PACA? How 

does it work? How does an inspection certificate relate to a produce contract? What does it 

prove? What are appeal inspections? What do they mean? What constitutes acceptance or 

rejection? 

All of these questions, along with a few more, will be addressed in this workbook. 

This workbook is composed of six lessons: 

 1. What is the PACA? 

 2. How does the PACA work? 

 3. How do USDA inspections figure in? 

 4. When have I accepted and how can I reject? 

 5. Misbranding and Misrepresentation 

 6. How to stay out of trouble. 

This workbook may be used in conjunction with lectures or by itself. When you are finished with 

this workbook, you will have an overall understanding of the PACA Division and should be able 

to: 

 State how to preserve and enforce PACA Trust rights. 

 Explain how the terms of purchase and sale affect whether an inspection 

establishes a breach of contract. 

 Interpret a USDA inspection certificate. 

 Apply inspection results to USDA Grade Standards. 

 Explain what constitutes a proper rejection of produce and state the 

consequences of acceptance. 

 Define misbranding and explain how to correct misbranding. 
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A Profile of the 

Perishable Agricultural Commodities Act Division 

DIVISION OBJECTIVE 

The Perishable Agricultural Commodities Act (PACA) establishes a code of fair trade practices 

covering the marketing of fresh and frozen fruits and vegetables in interstate and foreign 

commerce. The PACA protects growers, shippers, distributors, and retailers dealing in those 

commodities by prohibiting unfair and fraudulent trade practices. In this way, the law fosters an 

efficient nationwide distribution system for fresh and frozen fruits and vegetables, benefiting the 

whole marketing chain from farmer to consumer. 

LEGISLATIVE AUTHORITY 

This division is authorized by the Perishable Agricultural Commodities Act, 1930 (7 U.S.C. 499a 

-499t) (Act). The law authorizes the Department of Agriculture to resolve contract disputes and 

penalize those who violate the law. 

DIVISION STRUCTURE 

The PACA Division is headed by a division director who is assisted by a deputy director. Along 

with the director and deputy director, the division is administered by (1) the Dispute Resolution 

Branch, which is headed by a branch chief who oversees the processing and resolving of contract 

disputes; (2) the Investigative Enforcement Branch, which is headed by a branch chief who 

oversees the preparation and filing of administrative and court actions involving unfair trade 

practices, misbranding violations, and the statutory trust provisions of the Act; (3) the National 

License Center, which is headed by a chief who oversees the review and evaluation of license 

applications; and (4) three regional offices, each headed by a regional director, which deal 

directly with the industry with regard to contract disputes, licensing, trust and disciplinary 

matters. 

The regional offices are located in Fort Worth, Texas; Fredericksburg, Virginia; and Tucson, 

Arizona. The Office of the Director, the Investigative Enforcement and Dispute Resolution 

Branches, and The National License Center are located in Washington, D.C. 

DIVISION OPERATIONS 

Firms and individuals operating subject to license under the Act must be licensed by USDA. 

AMS administers the licensing of these firms and individuals, and the license fees collected are 

used to fund the division. For most licensees, the annual license fee is $995, plus $600 for each 

branch or additional business facility. The maximum aggregate fee is $8,000 annually. A $100 

fee for filing an informal complaint and a $500 fee for filing a formal complaint were 

implemented in June of 2008. 

The PACA Division works proactively with the industry to promote the fair trade practices of 

fresh and frozen fruits and vegetables in interstate and foreign commerce through dispute 

resolution, licensing, and outreach programs. PACA Division personnel work with industry 

members to resolve their contract disputes informally, and if those negotiations fail, the parties 

can request a formal determination of liability. The PACA also mandates full and prompt 

payment, removes unscrupulous individuals from the trade when needed, and provides expert 
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advice on trust protection. 

PACA Division personnel review oral and written evidence and consult with the parties to settle 

contract disputes. When efforts at informal settlement are not successful, the parties can have 

the matter decided through a formal proceeding. These proceedings will either result in a 

reparation order requiring payment to the injured party or dismissal of the claim. If the order 

requires payment, and such payment is not made on or before the date fixed in the order, the 

liable firm’s PACA license will automatically be suspended for non-payment, resulting in 

employment and licensing restrictions on responsible individuals in the firm. 

PACA Division personnel also enforce the misbranding, unfair conduct and prompt payment 

provisions of the Act. The Act prohibits the misrepresentation or misbranding of fruits and 

vegetables. While the law does not require specific descriptive terms on packages containing 

fresh or frozen fruits and vegetables, it does require that any markings that do appear on the 

packages accurately represent the contents of the container. Violators of the misbranding 

provisions may settle their liability by paying a penalty. Repeated and flagrant violators may 

have their PACA license suspended. The misbranding program gives the industry and the 

consumer assurance that the descriptive terms used on labels accurately describe the product. 

The Act’s statutory trust provision requires traders to have sufficient assets on hand to meet 

their obligations to fruit and vegetable suppliers. Sellers of fruits and vegetables who have not 

been paid and who file proper notice have a priority claim on their produce buyers’ producerelated assets. This is a valuable right if a buyer becomes insolvent. 

BENEFITS TO SERVICE RECIPIENTS 

The Perishable Agricultural Commodities Act (PACA) and the Produce Agency Act (7 U.S.C. 491 et 

seq.) are designed to protect producers, shippers, distributors, and retailers from loss due to unfair and 

fraudulent practices in the marketing of perishable agricultural commodities, and to prevent the 

unwarranted destruction or dumping of farm products. 

The PACA establishes a dispute resolution mechanism, identifies unfair trade practices, and reduces 

civil actions imposed on an already overburdened court system. In addition, the PACA protects the 

industry from persons whose unwise business practices or unscrupulous actions would expose all 

segments of the industry to a great risk of financial loss, which would result in higher prices charged 

to the ultimate consumer. 

PACA also imposes a statutory trust that attaches to perishable agricultural commodities received by 

regulated entities, products derived from the commodities, and any receivables or proceeds from the 

sale of the commodities. The trust helps ensure that produce suppliers, sellers, and agents will be paid 

in full for produce sold to individuals or firms licensed or subject to license under the PACA. 

HISTORY OF THE PACA 

Before the law was enacted in 1930, responsible industry members were too often victims of unfair, 

disruptive trade practices. Some dealers, for example, refused to pay for purchases or arbitrarily 

rejected shipments when the market declined. Some growers and shippers refused to honor their 

contracts when the market advanced. Finding it difficult to operate under such circumstances, 

reputable business persons took action by organizing industry trade associations. 
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These trade associations first sought to develop an industry-operated mechanism for resolving 

disputes over marketing contracts among industry members. This effort lasted several years, but 

failed. Industry leaders then sought legislation authorizing the USDA to enforce fair trading 

practices. 

The result of these efforts was the enactment of the Perishable Agricultural Commodities Act, 

which establishes a federally mandated licensing system for the produce industry. 

Since its inception, the PACA has fostered an efficient nationwide market for perishable 

agricultural commodities by promoting fair trading practices for those who buy and sell fresh and 

frozen fruits and vegetables. Today’s produce industry and commerce are far different than in 

1930, but the primary reasons for having a PACA remain. Fruits and vegetables are highly 

perishable products. Sellers have to move the product quickly and, in most cases, are unable to 

recover their property in case of a contract dispute. For this reason, the PACA remains a 

valuable asset to the produce industry. 

The same areas of concern that prompted industry members in 1930 to ask the USDA to step in 

after their private efforts at self-policing failed still exist today. These concerns include: 

 Failure of the seller to deliver the product sold or contracted to be sold. 

 Rejection of the product by the buyer without reasonable cause. 

 Failure of the buyer to pay the agreed-upon price in a prompt manner. 

 Using false and misleading statements for fraudulent purposes. 

 Refusing or failing to account correctly and in a timely manner for product 

that is handled on a consignment basis. 

 Misrepresentation of the grade, quality, quantity, weight, kind, size, or origin of 

the commodities. 

Amendments have kept the law up to date with changing marketing practices since 1930, but its 

basic purpose never changes—to protect the rights of those who deal within the produce 

industry. PACA protects growers as well as retailers, wholesalers, distributors, brokers, 

commission merchants, and shippers. It protects the smallest grower as well as the largest 

marketing firm. 
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F A Q 

What is the Perishable Agricultural Commodities Act? 

The Perishable Agricultural Commodities Act establishes a code of fair trading practices 

covering the marketing of fresh and frozen fruits and vegetables in interstate and foreign 

commerce. It protects growers, shippers, distributors, and retailers dealing in those commodities 

by prohibiting unfair and fraudulent trading practices. 

Why do members of the fruit and vegetable industry need more protection than members 

of other industries? 

The fruit and vegetable industry is unique. Dealers handle a product that is very perishable. A 1-

or 2-day delay in marketing can mean the difference between profit and loss. By spelling out the 

responsibilities of all parties, the PACA enables the product to be marketed promptly while still 

protecting the buyers’ and sellers’ rights in the event that a contract dispute arises. 

How is the PACA enforced? 

The law requires that anyone buying or selling commercial quantities of fresh or frozen fruits 

and vegetables in interstate or foreign commerce must maintain a valid PACA license. The 

license is the key to enforcement. A party found to have committed unfair trade practices may 

face a civil penalty, license suspension, or, in the most serious cases, license revocation. 

How is a PACA license obtained? 

Anyone with license questions or needing assistance in applying for a license may call PACA’s 

toll-free number, 1-800-495-7222 or visit the official website at https://www.ams.usda.gov/rulesregulations/paca (subject to change without notice) 

Is anyone exempt from the licensing requirements? 

Yes, growers are exempt as long as they sell only products that they have grown. Retailers and 

frozen food brokers representing sellers are exempt until they purchase or negotiate the sales of 

$230,000 or more worth of fruits and vegetables in a calendar year. Truckers who are contract 

carriers only do not need a license. 

How is the PACA division financed? 

PACA license and complaint filing fees finance the administration of the division. Congress 

provides no regular funding to the PACA division. 

What responsibilities do I have as a PACA licensee? 

The law requires that produce traders comply with the terms of their contracts. Sellers must ship 

the quantity and quality of produce specified. Buyers must accept shipments that meet contract 

specifications and pay promptly after acceptance. Prompt payment means payment within 10 

days unless the buyer and seller, prior to the sale, agree in writing to extend the payment time. 

What can I do if I have a dispute with a supplier or purchaser over a business transaction? 

The PACA Division offers informal and formal dispute resolution services to members of the 

produce industry. A trader can file a claim for damages with the PACA against a licensee that 

has failed to abide by the law. A written complaint, accompanied by a $100 filing fee, must be 
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filed within 9 months from the date payment was due or when damages were suffered. 

As part of the informal dispute resolution process, the PACA Division offers mediation services 

to help traders reach mutually agreeable settlements. Mediation is an effective way to resolve 

disputes, since it places the resolution of the dispute directly in the hands of the interested parties 

by providing a forum where both parties can air their differences in a neutral atmosphere. 

If the parties are unable to reach an informal resolution, the complainant may file a formal 

complaint. The formal complaint is handled under an administrative procedure, and a Judicial 

Officer for the Secretary of Agriculture can issue an award plus interest based on the evidence in 

the case. The case is handled similar to how a lawsuit is handled in a court of law. Although 

there is a $500 filing fee for a formal complaint, the complainant can recover the filing fee if an 

order is issued in its favor. 

If a licensee fails to satisfy a PACA award, the USDA will suspend the firm’s license and restrict 

it from operating in the industry for up to 2 years. 

What are some unfair trade practices that usually result in claims being filed? 

 Rejecting without reasonable cause produce bought or contracted to be handled on 

consignment. 

 Failure to pay promptly the agreed price for produce that complies with the contractterms. 

 Discarding, dumping, or destroying without reasonable cause any product received for 

sale on behalf of another firm. 

 Failure to deliver the contracted produce in a timely manner and at the price and quality 

level specified in the purchase agreement. 

 Failure or refusal to account truly and correctly or to make full payment promptly for 

produce shipped on consignment or on joint account. 

Can I recover money from a firm that has gone out of business or has filed for bankruptcy 

protection? 

Yes. Under the PACA trust provisions, a buyer’s produce-related assets are to be held for the 

benefit of unpaid produce suppliers that have preserved their trust rights. Produce- related assets 

are defined as any produce inventory, products derived from that produce, as well as cash or 

accounts receivable generated from the resale of produce. 

What must a seller do to preserve their trust rights? 

Although the trust automatically goes into effect at the time the buyer receives the goods, sellers 

must properly preserve their rights by meeting the notification requirements. 

What are the notification requirements? 

There is no set form. However, the trust notice given to the debtor must be in writing and state 

that it has “The intent to preserve trust benefits under the PACA.” The notice must contain 

sufficient detail to allow the debtor to identify the transaction subject to the trust and must be 

given to the debtor within 30 days from the date payment was past due or the date the seller 

received notice that payment was dishonored. For more information about the PACA Trust, see 

the “How the PACA Trust Works” section of this workbook. 

PACA licensees also have an alternative method to preserve their trust rights. This alternative 

method allows licensees to include on their invoices or other billing document the following 
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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. 

How long are a seller’s rights preserved? 

Trust claimants who preserve their trust rights by providing proper notice remain beneficiaries 

until paid. 

How is payment from trust assets enforced? 

The trust is a self-help tool. Beneficiaries may file in the U.S. District Court to enforce payment 

from the trust immediately following a buyer’s failure to pay promptly. In cases where the debtor 

is bankrupt, trust beneficiaries should file their claims for payment with the bankruptcy court. 

Can you make other terms for payment under the trust? 

If payment is to be made at a time other than that specified in PACA prompt payment regulations 

(usually 10 days from the date of acceptance), the agreed payment terms cannot exceed 30 days 

from the date of acceptance to qualify for trust protection. The agreement must be in writing, 

entered into prior to the transaction, and the terms must be reflected on the invoice and all other 

billing documents. 

What is a disciplinary action under the PACA? 

The USDA may penalize a licensee who repeatedly and flagrantly violates the Act. A 

disciplinary action may result in a suspension or revocation of the firm’s PACA license and 

publication of the facts. In lieu of suspension or revocation, the Secretary of Agriculture may 

assess a civil penalty of up to $2,000 for each violation or for each day the violation continues. 

Companies that operate without a valid PACA license are subject to fines of up to $1,200 for 

each offense and $350 for each day the offense continues. Court injunctions can be issued 

against those who persist in operating without a license. 

How does the USDA decide if a PACA license should be suspended or revoked as the result 

of a disciplinary proceeding? 

The USDA considers the seriousness and nature of the violation(s) along with the number of 

violations by the firm and the number of times the firm has been warned about such violations. 

Revocation of the license is the most severe penalty that can be imposed. 

How does a PACA license suspension or revocation restrict a firm and/or its principals? 

Following the suspension or revocation of a firm’s PACA license, the firm and its responsibly 

connected individuals are automatically subject to licensing and employment restrictions that 

prohibit those individuals and firms from working or operating in the produce industry for a 

certain period of time. A person is considered to be responsibly connected if he/she is a partner 

in a partnership, a member or manager in a limited liability company, or an officer, director, or 

holder of more than 10 percent of the stock of a corporation or association involved in marketing 

produce. 
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During a license suspension, the firm cannot conduct business in the produce industry. 

Furthermore, none of the persons responsibly connected with the firm can engage in business 

under any other PACA license or be employed by another licensee for two years unless the 

employing firm posts a bond and obtains USDA approval. The term “employment” means any 

affiliation with the business operations of a licensee, with or without compensation, including 

ownership or self-employment. 

In the case of repeated and flagrant violations of the PACA, a license may be revoked and the 

firm’s responsibly connected persons must stop operating subject to the PACA for 1 year. After 

1 year, the principals may be employed by another PACA licensee with the USDA’s approval. 

After 2 years, the firm may apply for a new license by furnishing a surety bond in an amount 

considered satisfactory by the USDA to assure that the firm’s business will be conducted 

according to the Act. The responsibly connected persons may at this time be employed by 

another PACA licensee without furnishing a surety bond. 

What are some of the common PACA violations that prompt the USDA to take a 

disciplinary action? 

 Failure to pay for shipments of produce purchased

 Slow payment. 

 Failure to render accurate accountings and pay promptly the net proceeds due for 

produce handled for or on behalf of shippers or growers. 

 Flagrant misbranding or misrepresentation of produce shipped in interstate or foreign 

commerce. 

 Making false or misleading statements for a fraudulent purpose, including altering or 

otherwise falsifying official USDA inspection certificates. 

 Refusing to produce for examination by an agent of the USDA records in connection 

with a complaint alleging a violation of the PACA. 

 Employing a restricted person after receiving notice from the USDA that such 

employment is prohibited. 

This law puts strict regulations on the produce industry. Does the PACA receive resistance 

from the industry? 

The industry developed and sponsored this law, and the majority of industry members continue 

to support the PACA. The Act has been amended several times over the years to keep pace with 

changing trade practices. The most recent revisions occurred in 1995. Each time, the law has 

been strengthened. 

Where can I get more information about the PACA Division? 

You can visit our website at http://www.ams.usda.gov/paca for more information about the 

PACA Division. 

You can find information about licensing, resolving commercial disputes, mediation, PACA 

publications, a digest of recent disciplinary decisions, an office directory, and a free internet 

training program. The training program covers the basic information you need to know to 

operate within the PACA. After reviewing each lesson, you will take an online test. The tests are 

scored automatically, so you will get immediate feedback. 
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Licensing 

To maintain a valid PACA license, members of the fruit and vegetable industry must abide by 

the fair trading practices established by the PACA. A trader’s license may be suspended or 

revoked for failing to comply with the law. Therefore, the license is the key to ensuring that 

traders meet their contractual obligations and exhibit fair trading practices. 

Who needs a license? 

In general, a person who buys or sells more than 2,000 pounds of fresh or frozen fruits and 

vegetables in any given day must be licensed under the PACA. Jobbers, distributors, and other 

wholesalers fit into this category. In addition: 

 A person or firm who negotiates the sale of fruits and vegetables on behalf of another 

person is required to be licensed on the first transaction. Individuals or firms who 

operate in this capacity include commission merchants, brokers, and growers’ agents. 

However, a broker who handles only frozen fruits and vegetables is not subject to PACA 

licensing requirements until the invoice value of the total negotiated sales exceeds 

$230,000 in a calendar year. 

 A person or firm selling at retail is required to have a PACA license once the invoice 

cost of fresh and frozen fruit and vegetable purchases exceeds $230,000 in a calendar 

year. 

Is licensing mandatory? 

Yes, if operating subject to the PACA. 

Who is exempt from having a license? 

 Growers if they sell only products of their own raising. 

 Retailers buying fresh or frozen fruits and vegetables solely for sale at retail whose 

purchases do not exceed $230,000 in any calendar year. 

 Processors who buy fruits and vegetables (other than potatoes) for canning and/or 

processing within the same State where grown, whether or not the canned or processed 

product is to be shipped in interstate or foreign commerce, unless the product is frozenor 

packed in ice, or consists of cherries in brine. 

What are the benefits of having a license? 

First, if operating subject to PACA, you are abiding by the law; and second, the license provides 

some assurance to those with whom you do business that you will adhere to the fair trading 

practices set forth in the PACA. 

What are the penalties for operating without a license? 

Not more than $1,200 for each offense and not more than $350 per day for each day the offense 

continues. However, any person or firm violating this provision may, upon a showing 

satisfactory to the USDA that such 

violation was not willful but was due to inadvertence, be permitted to settle its liability by paying 

the fees due for the period of violation, and an additional sum not in excess of $250. 

How can I obtain a license application? 
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Telephone 1-800-495-7222 or download an application from the PACA website. 

How much are the license fees? 

Currently, the license fee is $995 per year, plus $600 for each branch or additional business 

facility. However, the license fees paid by an applicant or existing licensee cannot exceed $8,000 

annually. Retailers and grocery wholesalers making an initial application for licensing must pay 

a one-time administrative fee of $100, but are not required to pay any fee for renewal of that 

license in subsequent years. 

Who is “responsibly connected” to a licensee? 

Any person affiliated as an individual owner, partner in a partnership, or officer, director or 

holder of more than 10 percent of the outstanding stock of a corporation or association is 

responsibly connected to a license. In addition, any member of a limited liability company (LLC) 

and/or any other person authorized by the members to conduct business on behalf of the LLC 

may be considered responsibly connected with the LLC. 

Individuals may be deemed not responsibly connected if they demonstrate that they were not 

actively involved in the conduct that resulted in a violation of the Act and that they were only 

nominally a partner, officer, director, or shareholder of a violating licensee or other entity subject 

to license. 

Are there any restrictions or special requirements for obtaining a PACA license? 

Possibly, if anyone employed by the applicant has been responsibly connected with any firm 

 Whose license has been revoked, or is currently under suspension; 

 Who has been found after notice and opportunity for hearing to have committed any flagrant 

and repeated violation of the PACA; or 

 Against whom there is an unpaid reparation award which has been issued within the past 2 

years, subject to the right to appeal. 

If any of the above conditions exist, the applicant should furnish the full legal name of the 

person, the name of the firm involved, and the details of such connection, including the dates 

thereof. 

The applicant’s ability to obtain a PACA license may also be restricted if anyone responsibly 

connected to the applicant has: 

 Been responsibly connected with any firm whose license has been suspended or revoked, or 

a firm that was found to have committed repeated and flagrant violations of the PACA; 

 Been responsibly connected with any firm against which there is an unpaid reparation award 

under the Act; 

 Within 3 years of application been adjudicated or discharged as bankrupt or was responsibly 

connected with a firm adjudicated or discharged as bankrupt; or 

 Been convicted of one or more felonies in any State or Federal court. 

If any of the above conditions exist, the applicant should furnish the full legal name of the 

person, the name of the firm involved, and the details of such connection, including the dates 

thereof. In the case of a bankruptcy, the applicant should also furnish (1) a copy of the petition in 

bankruptcy, including the schedule of creditors, the date of adjudication and certificate of 
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discharge; and (2) the estimated value of produce that will be handled by the new business during 

an average operating month, percentage of business that will be handled on consignment or joint 

account, and amount of credit that will be incurred during an average operating month. 

In the case of a felony conviction, the applicant should furnish (1) the name and date of birth of 

the party convicted; (2) alias, if any; (3) location of court and date convicted; (4) nature of felony; 

(5) sentence imposed; (6) where and length of time served; and (7) if paroled, date parole 

terminated. 

What are the conditions under which a license may be denied? 

The Secretary may refuse to issue a license to an applicant if he or she finds that the applicant (i.e., 

owner in an individual ownership, general partner in a partnership, officer or holder of more than 10 

percent of stock in a corporation) has: 

 Within 3 years prior to the date of the application been adjudicated or discharged as 

bankrupt; or 

 Was a general partner of a partnership or officer or holder of more than 10 percent of the 

stock of a corporation adjudicated or discharged as bankrupt; and 

 The Secretary finds that the circumstances of the bankruptcy warrant the refusal. 

The Secretary may, however, issue a license in this circumstance if the applicant furnishes a 

bond in an amount satisfactory to assure that the business of the applicant will be conducted in 

accordance with the PACA. 

An application for license may also be withheld for up to 30 days to allow for an investigation to 

determine: 

 Whether anyone responsibly connected with the applicant has engaged in any practice of the 

character prohibited by PACA or was convicted of a felony in any State or Federal court, or 

 Whether the application contains any materially false or misleading statements or involves 

any misrepresentation, concealment, or withholding of facts with respect to any violation of 

the Act by anyone responsibly connected with the applicant. 

What are the effects of a suspension and/or revocation? 

A firm whose license has been suspended or revoked may not conduct business subject to license 

under the PACA, and any individual responsibly connected to the firm is restricted from obtaining 

a PACA license and from employment in the produce industry with another PACA licensee for a 

certain period of time. 

What are employment restrictions? 

Except with the approval of the USDA, no licensee shall employ any person, or any person who has 

been responsibly connected with any individual, partnership, corporation, or association: 

 Whose license has been revoked or is currently suspended; or 

 Who has been found to have committed any flagrant or repeated violation of Section 2 of the 

PACA; or 

 Against whom there is an unpaid reparation award issued within 2 years, subject to the right 

of appeal. 
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The term “employment” means any affiliation of any person with the business operations of a 

licensee, with or without compensation, including ownership or self-employment. 

NOTE: An additional year may be added to the employment restriction period if it is determined 

that a responsibly connected individual was unlawfully employed. 

How does bankruptcy affect licensing? 

If an individual or company files bankruptcy, or if a partner in a partnership files a bankruptcy 

action, the PACA license will terminate upon the issuance of an order by the court reorganizing 

or discharging the debt. If operations subject to PACA are to continue, a new license application 

must be submitted and a surety bond may be required. 

What are bonding requirements? 

While all commission merchants, dealers, and brokers are not required to be bonded under the 

PACA, there are special circumstances where bonds are required for licensing and for employment 

of particular individuals. Bonds are required under the following circumstances: 

 A firm that employs a person responsibly connected to a licensee who failed to pay a 

reparation order issued against it within the past 2 years is required to furnish a bond in an 

amount set by the USDA and held by the USDA for 4 years. 

 A person whose license has been revoked for repeated or flagrant violations cannot be 

employed by, or affiliated in any way with, any other licensee for a period of 1 year 

following the revocation. After 1 year, and prior to the end of the second year, another 

licensee may employ the person if the employer furnishes a 4-year bond in an amount set by 

USDA. No bond is required for employment after 2 years. 

 After a 2-year period, a person or firm that had its license suspended or revoked may only 

obtain a license by furnishing a bond. After 3 years, a license may be obtained without a 

bond. 

 When a person or firm applies for a license within 3 years following a bankruptcy adjudication or 

discharge, a satisfactory surety bond may be required. 

What license information is public? 

The information appearing on a license application or certificate is public with the exception of 

the Social Security numbers, home addresses, and percentages of stock held by the people whose 

names appear on the application or certificate. That information is protected under the Privacy 

Act and is exempted from the Freedom of Information Act. 

How does a PACA license relate to Trust protection? 

Anyone licensed or subject to license under the PACA is subject to the provisions of the law, 

including the maintenance of trust assets and collection under the trust. Also, licensees need not 

file a separate notice to preserve trust benefits if they include a prescribed statement on their 

invoice. 

NOTE: You can find out if an individual or firm is currently licensed on the PACA Division’s 

website at http://apps.ams.usda.gov/pacasearch/ 
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The PACA License Application 
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Trade Term Definitions 

Different and often conflicting interpretations of trade terms play a significant role in the 

commercial disputes that come before the PACA Division. Making sure that all the parties to a 

transaction are using the same terms, and that all the parties have a clear understanding of what 

those terms imply, is the best insurance against finding yourself involved in a commercial dispute. 

In this regard, some of the most commonly used terms and their definitions are set forth below: 

“FOB” means that the commodity is placed “free on board” the carrier at shipping point in 

suitable shipping condition, and that the buyer assumes all risk of damage and delay in transit not 

caused by the seller. This means, for example, that if a load is wrecked or stolen in transit, the 

buyer must pay the invoice price to the seller and file a claim with the carrier to recover damages. 

Under FOB terms, the seller guarantees that the product, when loaded onto the carrier, is in 

“suitable shipping condition.” 

“Suitable Shipping Condition,” or what is commonly referred to as the warranty of suitable 

shipping condition, is applicable only in FOB sales, and means that produce, at the time of 

shipment, is in a condition which, if handled under normal transportation conditions, will assure 

delivery at the contract destination without abnormal deterioration. 

The underlined words in the above definition imply that since fruits and vegetables are perishable, 

some amount of deterioration is normal and can be expected. This means that it is possible that a 

product which grades U.S. No. 1 at shipping point could arrive at destination with total defects 

exceeding the limits established in the U.S. Grade Standards and still meet the terms of the FOB 

contract; for example, suppose a load of bell peppers shows 4 percent scars and 4 percent turning 

red at shipping point, for a total of 8 percent defects. The peppers would grade U.S. No. 1 at that 

time, since the U.S. Grade Standards allow 10 percent defects. After a normal 4- to 5-day trip 

across the country, an inspection at destination shows 4 percent scars, 6 percent turning red, and 1 

percent decay. The peppers now have 11 percent defects and do not meet U.S. No. 1 standards. 

However, 11 percent defects would not show that the peppers were abnormally deteriorated, since 

there are only 3 percent additional condition defects since shipment. 

The italicized words in the above definition imply that when transportation conditions are not 

normal, the warranty of suitable shipping condition is not applicable. For example, suppose a load 

arrives late and a USDA inspection made at destination shows considerable condition problems in 

the product, along with high temperatures. Following the standard that abnormal transportation 

voids the warranty of suitable shipping condition, the buyer would pay the shipper in full and take 

up the matter of damages with the carrier. 

There are, however, three instances in which a buyer may claim damages for a breach of warranty 

by the seller despite the existence of abnormal transportation conditions. They are: 

 When a seller loads product on a carrier with obviously faulty or inadequate equipment, or 

misloads the product in such a way as to block air flow; 

 When the nature of the damage found at destination is such as could not have been caused 

by or aggravated by the faulty transportation service;or 

 When the defects appearing at destination are so extensive and/or advanced that they would 

have been present even if transportation conditions had been normal. Example: A load of 
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Cantaloupes arrives 1 day late, but with good temperatures and showing 35 percent 

decay. The decay is too extensive to have been caused by the late delivery. 

“Good Delivery” is the term used in FOB sales to describe the arrival of goods at the contract 

destination without abnormal deterioration, i.e., goods that are shipped in suitable shipping 

condition will make good 

delivery at the contract destination. For all commodities other than lettuce (for which specific 

good delivery standards exist) what is “normal” or abnormal deterioration is determined on a caseby-case basis. 

“Delivered” means that the produce is to be delivered at the market specified in the contract, free 

of any transportation charges. In this case, the seller assumes all risks of loss and damage in transit 

not caused by the buyer. It also means that if potatoes, for example, are sold “U.S. No. 1 delivered 

Chicago,” the potatoes, upon delivery in Chicago, must meet all quality and condition 

requirements of the U.S. No. 1 grade, with no allowance for normal deterioration. 

“Open” describes a sale, like any other sale, except that the price has not been settled. An open 

sale is either FOB or delivered, depending upon the agreement of the parties. The purchaser of 

produce on an 

open basis has all the benefits of the normal sales warranties, and may accept, or reject and claim 

damages if the seller breaches the contract. If the parties fail to agree upon a price, the purchaser 

of product on an open basis is liable to the seller for a reasonable price. 

“Price After Sale” is not defined in either the Act or the Uniform Commercial Code (UCC); 

however, it has been interpreted as meaning that the parties will agree upon a price after the buyer 

completes its re- sales at destination. 

NOTE: The PACA regulations do not place a duty to account upon a buyer who purchases on an 

“open” or “price after sale” basis. However, in cases where the parties fail to agree upon a price 

and a reasonable price must be determined, a properly prepared accounting showing timely resales of the product may be the best evidence of the reasonable value of the product. In the 

absence of a detailed accounting, USDA Market News prices generally determine what is 

“reasonable.” 

“Consignment” is NOT a sale. It creates an agency relationship between the consignor and the 

consignee, where the produce continues to belong to the consignor until the consignee sells it on 

the consignor’s behalf. After such sale, the proceeds of the sale belong to the consignor, with the 

consignee allowed only to retain expenses of the resale and commission. 

There is no FOB suitable condition warranty, no warranty of merchantability, nor any other “sale” 

warranty applicable to consigned goods. Consequently, a consignee cannot normally reject 

consigned goods. When a consignee receives goods that it does not believe can be sold, the 

consignee should 

consult with the owner of the goods to determine what the owner wants done with them. The same 

advice applies if the goods are salable, but in poor condition. In both cases, the consignee would be 

well advised to secure a Federal inspection in case any dispute arises in the future over how the 

goods were handled. 

In the case of a consignment, the shippers choose the agent, and absent a showing of fraud or other 

hard evidence of violations of the PACA, the shipper must bear the risk of his agent not having 

done a good job selling the product.
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Other Trade Terms 

“FOB Acceptance” means that the buyer accepts the product at shipping point and has no right to 

reject the product. The buyer has recourse against the seller if the product is not in suitable 

shipping condition or for a material breach of contract. The term “material breach” generally 

means a breach of contract that is related to factors other than quality and condition, such as size, 

variety, label, etc. 

“FOB Acceptance Final” has the same meaning as FOB acceptance except that suitable shipping 

condition is inapplicable and the buyer’s only recourse is for a material breach of contract. Use of 

this term must be clearly established given the harshness of the conditions it imposes. 

“Purchase After Inspection” means a purchase of produce after inspection or opportunity for 

inspection by the buyer or his agent. Under this term, the buyer has no right of rejection and 

waives all warranties as 

to quality and condition, except warranties expressly made by the seller. NOTE: If this term is to 

apply, both parties must expressly agree to it. 

“Shipping Point Inspection Final” means that the seller is required to obtain a Federal or FederalState inspection, or a private inspection as has been mutually agreed upon, to show that product 

meets contract specifications, and the buyer has no recourse against the seller on account of quality, 

condition, and grade. 

“Protection” is not defined under the PACA; however, the term is often used throughout the 

industry in two main contexts: 

(1) “Market Protection” or “Price Protection” is understood as meaning that the buyer is 

protected against any market decline that might occur between the date of sale and the date the 

product is received. It should be noted that the shipper and receiver must clarify, prior to shipment, 

whether the decline is to be based on the shipping point market or the destination market. 

(2) “Protection,” “Full Protection,” and “Protection Against Loss” usually have the 

same meaning, and should be distinguished from “market protection” or “price protection.” A 

protection agreement is a modification of the original sale contract that leaves the original sale 

price as the base line price for determining whether the buyer makes a profit, or is entitled to 

protection. The potential for profit remains after the conclusion of the protection agreement, and 

this potential can only be realized in the same manner as it is realized in any sale contract, namely 

by the buyer reselling at prices above the original price plus expenses. Therefore, when a buyer 

with protection fails to re-sell at such favorable prices and experiences a loss, the protection should 

only compensate the loss, and should not include a profit in the form of a commission or handling fee. 

Since a protection agreement is intended to protect a buyer against any loss, a buyer who has paid 

freight must be credited with the freight paid. If the gross proceeds of the buyer’s resale exceed the 

FOB contract price plus freight, then the buyer gets to keep the excess as profit. On the other 

hand, if the gross proceeds of the resale are less than the buyer’s costs (FOB price plus freight), 

then the buyer deducts the freight expense from the gross proceeds and remits the balance, thus 

suffering no loss. If the gross proceeds are not enough to cover freight, then the seller who grants 

full protection must chip in and pay 

the remainder of the freight costs. 
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Rights and Responsibilities 

Generally, the PACA requires that firms and individuals operating in the fruit and vegetable 

industry live up to the terms of their agreements. In order to do so, you should be familiar with 

the rights and responsibilities set forth below. The first part of this section describes rights and 

responsibilities generally applicable to all traders of fruits and vegetables. The second part of this 

section describes rights and responsibilities specific to individuals and firms operating in various 

capacities. 

General Discussion of Express Versus Implied Warranties 

Express Warranties are created when: 

 The seller makes an affirmation of fact or promise that relates to goods, which then 

becomes part of the bargain. 

 The seller provides a description of goods that is made part of the bargain. 

 The seller provides a sample of goods that is made part of the bargain. 

In each case, the seller’s promise, description or sample creates a warranty that the goods will 

conform to the promise, description or sample. 

NOTE: It is not necessary to the creation of an express warranty that the seller use formal words 

such as “warrant” or “guarantee” or that the seller have a specific intention to make a warranty; 

however, an affirmation merely of the value of the goods or a statement purporting to be merely 

the seller’s opinion of the goods does not create a warranty. 

Implied Warranties may be present in a contract without any express agreement between the parties. For 

example, when a potato shipper sells a truckload of potatoes, a warranty that the potatoes will be 

merchantable is implied in the contract. This is called the “warranty of merchantability.” For goods to be 

merchantable, they must at least: 

 Pass without objection in the trade under the contract description; 

 Be of fair quality within the description; 

 Be fit for the ordinary purposes for which such goods are used; 

 Be adequately contained, packaged, and labeled as the agreement may require; and 

 Conform to the promise or affirmations of fact made on the container or label if any. 

Unless excluded or modified, implied warranties may also arise from a “course of dealing” or 

“usage of trade.” 

 A “course of dealing” is a sequence of previous conduct between the parties to a particular 

transaction that establishes a common basis of understanding for interpreting their 

expressions and other conduct. 

 A “usage of trade” is any practice or method of dealing done so regularly as to justifyan 

expectation that it will be observed with respect to the transaction in question. 

NOTE: To prove a course of dealing or usage of trade in a PACA complaint, the party claiming 

the existence of either must provide multiple examples showing actual instances where the 

claimed procedure was used. 
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Disclaimer or Modification of Warranties 

To exclude or modify the implied warranty of merchantability or any part of it, the language 

must mention merchantability and, if it is in writing, must be conspicuous. 

To exclude or modify any implied warranty of fitness, the exclusion must be in writing and be 

conspicuous. Language to exclude all implied warranties of fitness is sufficient if it states, for 

example, that “there are no warranties that extend beyond the description on the face hereof.” 

Unless the circumstances indicate otherwise, all implied warranties are excluded by expressions 

like “as is,” “with all faults” or other language that calls the buyer’s attention to the exclusion of 

warranties and makes plain that there is no implied warranty. 

When the buyer, before entering into the contract, has examined the goods, there is no implied 

warranty with respect to any defects that should have been revealed by the examination, e.g., 

size, shape, scars, 

mechanical damage. 

An implied warranty can also be excluded or modified by a “course of dealing” or “usage of 

trade” as defined above. 

NOTE: In free on board (FOB) sales, the warranty of suitable shipping condition is considered 

an express warranty. 

Rights and Responsibilities of Specific Produce Traders 

Growers’ Agents 

 Written Contract: PACA requires, first and foremost, that the growers’ agent have a 

written contract with its growers. The contract should clearly define the duties and 

responsibilities of both parties, and the range of authority granted to the agent in the 

marketing of the growers’ product. If a contract with each grower is not practicable, the 

agent is required to describe its marketing policies in a written statement that must be 

mailed or delivered to the grower before or upon receipt of the first lot of produce to be 

handled for the grower. 

 Accounts and Records: Once the terms are settled and the deal begins, the agent is 

obligated to prepare complete records to cover the disposition of the produce and the 

expenses incurred. Each grower’s product must be identified from the time it is harvested or 

delivered to the agent, through the steps of packing, shipping, and selling. Lot numbers are 

necessary to distinguish each grower’s product. 

 Pooling: The agent and grower can agree that the grower’s product will be pooled with that 

of others for the purpose of selling it, with the returns to be based on the average return for 

the total pool. This provision must be specified in the written contract 

 Expenses: Some record requirements can be waived by special agreement, especially those 

having to do with expenses. Usually this takes the form of a flat per-package or per-weight 

fee to cover harvesting, packing and selling charges. Once again, this agreement should be 
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reduced to writing so that both parties have a clear understanding. In the absence of such an 

agreement, the agent must detail its expenses in the accounting it issues to the grower, and 

its records must support those expenses. 

 Use of Other Sales Agents: The grower’s agent is not entitled to use the services of other 

agents, brokers, commission merchants or auction companies to sell the grower’s product, 

without specific prior approval from the grower. 

 Price Adjustments: Any price adjustments that the agent grants his customers must be 

supported with documentation (such as destination inspection certificates). 

 Agent’s Liability: The grower’s agent can be held liable for any losses the grower suffers 

that are directly caused by the agent’s negligence or failure to perform its duties. However, 

the agent is not responsible for non-payment by its customers unless it has guaranteed 

payment or been clearly negligent in extending credit. 

 Trust Protection: The agent is required to preserve the grower’s right to trust protection by 

filing a timely notice of intent to preserve trust benefits with its customers. 

NOTE: The grower must also file a timely notice of intent to preserve trust benefits with its agent. 

Commission Merchants/Consignees 

 Assigning Lot Numbers: A commission merchant/consignee must be able to account for 

every package received on consignment. This is accomplished by assigning lot numbers to 

the consigned lot, and also to every other lot of similar product on hand during the sales 

period of the consigned lot. The lot numbers and consigned terms must be entered into the 

receiver’s receiving records and onto the sales tickets issued on the sales of each lot. The 

use of brands, shippers’ names or size identification does not satisfy this requirement. 

 Adjustments/Credits: If the commission merchant/consignee finds it necessary to give a 

price adjustment or take back product refused by a customer, a credit memorandum must be 

prepared showing the lot number, the original sales ticket number and the reason for the 

adjustment or refusal. 

 Use of Other Sales Agents: A commission merchant/consignee may not employ another 

person or firm, including auction companies, to dispose of the consigned produce without 

the specific prior authority of the consignor. 

 Prohibition of Sales Outside the Consignee’s Market Area: A commission 

merchant/consignee may not sell consigned produce outside the market area where it is 

located without obtaining the permission of the consignor. 

 Pooling: Averaging or pooling of sales is not permissible unless the receiver obtains the 

specific written permission of the consignor prior to rendering the accounting. 

 Recordkeeping: Complete and detailed records must be prepared and maintained showing 

the produce received, sales, quantities lost, dates and cost of repacking or reconditioning, 

unloading, handling, freight, demurrage or auction charges, and any other expenses that are 

deducted on the accounting. 

 Accounting: The accounting rendered should consist of an accurate and itemized report of 

the sales, including the dates of sale and the quantities sold at each price, and the expenses 

charged against the shipment. 
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 Commission Fees/Other Charges: Before accepting produce on consignment, the parties 

should reach a definite agreement on the amount of commission or other charges that will 

be assessed by the commission merchant/consignee. In the absence of such an agreement, 

only the usual and customary commission and other charges are permissible. 

 Purchases by Consignees: A commission merchant/consignee may not purchase produce 

received on consignment or sell the produce to any firm it has control over or is controlled 

by without the specific prior approval of the consignor. However, the commission 

merchant/consignee may clean up remnants of the shipment by purchasing them at the 

market price. 

 Carrier Claims: Without prior consent of the owner of the produce, a commission 

merchant/consignee has no authority to file claims with carriers in its own name or any 

other name. 

Brokers 

 General: The function of a broker is to facilitate good faith negotiations between parties that 

lead to valid and binding contracts. It is the duty of the broker to fully inform the parties 

concerning all terms and conditions of the proposed contract. 

 Confirmation of Sale: After the parties agree to the terms and the contract is affected, the 

broker should prepare in writing and deliver promptly to all parties, a confirmation or 

memorandum of sale setting forth truly and correctly all of the essential details of the 

agreement between the parties. The confirmation or memorandum of sale should also 

identify the party who engaged the broker to act in the negotiations. A copy of the 

confirmation or memorandum of sale should be retained by the broker as a part of its accounts 

and records. All parties should have the broker’s confirmation in their hands before the product 

arrives at destination. 

 Broker’s Liability for Payment: Unless otherwise specifically agreed, the broker does not 

guarantee the performance of the contracting parties and is entitled to receive prompt 

payment of the brokerage fee whenever a valid and binding contract isnegotiated. 

 Brokerage Fees: Brokerage fees may be charged to only one of the parties unless there is a 

prior agreement between the parties to split the brokerage fee. 

 Use of Other Brokers: A broker may not employ another broker or selling agent to 

negotiate the sale of the produce without the approval of itsprincipal. 

 Collect and Remit Brokers: A broker authorized to sell, invoice the buyer, collect and 

remit to its principal should render an itemized accounting to the principal promptly on 

receipt of payment, showing the true gross selling price, all brokerage fees deducted, and 

any other expenses incurred in connection with the sale of the shipment. Agreement to 

collect from the buyer and remit to the seller is not, however, a guarantee by the broker that 

the buyer will pay for the produce purchased. Such brokers must show their authorization 

on their confirmations. A collect and remit broker cannot pursue a PACA claim in its own 

name unless it first obtains an assignment of interest from its principal, the seller. 

 Buying Brokers: A buying broker who negotiates a purchase in his own name under an 

agreement with his principal is responsible for payment of the purchase price to theseller. 

 Allowances: A broker has no authority to grant allowances or adjust the seller’s invoice 
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price to the buyer without the specific prior approval of its principal. 

 Brokers Who Also Act as Dealers: Licensees who operate both as dealers and as brokers 

must disclose their status in each transaction to the parties with whom they are dealing. 

When licensees purchase or sell produce as dealers, they may not request or receive a 

brokerage fee. 

 Broker’s Relationship to Contracting Parties: Brokers should not negotiate transactions 

where they are controlled by or have control over any of the parties to the transaction other 

than their principal. 

Shippers 

 General: The responsibilities of shippers vary with their contracts with growers to purchase 

produce or handle produce on joint account, and their responsibilities to their customers 

depend on their contracts to sell, consign, or joint account produce with dealers on terminal 

markets. 

 Receiving Records: Each shipper should prepare and maintain a record of all produce 

handled, including its own production. The record should be in the form of a book with 

numbered pages, showing the following for each lot: 

 Date Received 

 Whether purchased or received on joint account 

 Quantity 

 Quality 

 Kind of purchase 

 Purchase price or joint account cost 

 Name and address of the supplier 

Receipts should be issued to growers and others for all produce received. 

 Disposition Records: When shippers purchase produce from growers or others, their 

records should also show the following: 

 The disposition of the produce, i.e., whether sold or consigned 

 Date of shipment 

 Car number or truck license number 

 Name and address of carrier 

 Name and address of buyer, commission merchant, or auction 

 Other pertinent details of the transaction, e.g., sale terms, selling price, date of 

payment, etc. 

 Joint Account Transactions: When shippers enter into joint account agreements with 

growers or receivers, the agreement between the parties should be reduced to a written 

contract clearly defining the terms of the agreement. The shipper should prepare and 

maintain records that show in detail the expenses that may properly be charged to the joint 

venture. At the conclusion of the transaction, a detailed and accurate accounting should be 

furnished promptly to the joint account partner. 
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Recordkeeping Requirements 

Proper recordkeeping is an insurance policy against trouble. Basically, all PACA licensees are 

required to prepare and maintain for 2 years, the accounts, records and memoranda that fully and 

correctly disclose all transactions involved in their business. Most are records that any prudent 

merchant would normally prepare and maintain, such as invoices and/or sales tickets, credit 

memos, memoranda of sale, freight bills, and inspection certificates. 

Failure to maintain adequate records may be costly in two ways. First, any licensee who fails to 

prepare and maintain such records is subject to penalties under the PACA, including license 

suspension. Second, a licensee may suffer financially if a dispute arises and it cannot offer 

records to support its position. 

Both outcomes can be avoided by becoming familiar with the specific recordkeeping 

requirements set forth below. 

Maintaining a Receiving Book. The PACA requires all licensees to keep a detailed receiving 

record that contains complete information about each shipment, including the name and address 

of the shipper, date received, carrier identification, contract terms, and lot numbers for shipments 

handled on a consignment basis. 

Lot Numbers. A lot number should be assigned to: 

 Each shipment of produce to be sold on consignment or joint account or for the 

account of another person or firm. 

 Any purchased shipment in dispute between contracting parties to assist in proving 

damages. 

 Each purchased shipment of similar produce on hand at the time a consigned, joint 

account, or disputed lot is being sold. 

 Each purchased shipment that is reconditioned if the seller is to be charged with the 

shrinkage or loss. 

The lot number should be entered into the receiving record and on all sales tickets identifying and 

segregating the sales from the various shipments on hand. The salesperson should enter the lot number on 

the sales tickets at the time of sale or by the produce dispatcher, not by bookkeepers or others after the 

sales have been made. No lot number should be repeated for 30 days after the last sale from the lot to 

which that number was previously assigned. 

Sales Tickets. Sales tickets should bear printed serial numbers running consecutively and should 

be used in numerical order so far as practicable. No serial number should be repeated within a 

90-day period. 

Each sales ticket should show, in a legible manner, the date of sale, the purchaser’s name (so far 

as practicable), and the kind, quantity, unit price, and total selling price of the produce. Lot 

numbers for produce being handled on consignment or on joint account should also appear on 

the sales ticket. In addition, sales tickets for all other lots of the same commodity on hand at the 

same time should also show a lot number. The original or a legible carbon copy of each sales 
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ticket, including those voided or unused, should be accounted for and filed or stored either by 

date of sale or in order by serial number for a period of 2 years. 

Accounting for Dumped Produce. A clear and complete record should be maintained showing 

justification for dumping of produce received on joint account, on consignment, or handled for or 

on behalf of another person if any portion of the produce cannot be sold due to poor condition or 

is lost through resorting or reconditioning. If 5 percent or more of a shipment of produce 

received on joint account, on consignment, or handled for or on behalf of another person is 

dumped, a Federal inspection certificate, or other adequate evidence, should be obtained to prove 

that the produce was without 

commercial value, unless there is a specific agreement to the contrary between the parties. The 

certificate should be forwarded to the consignor or joint account partner with the accounting, and 

a copy should be retained in the receiver’s records. 

Rebates and/or Promotional Allowances. Licensees participating in promotional allowance 

and/or rebate programs must maintain records showing that the details of the program were 

disclosed on all paperwork prepared in connection with the applicable transactions, including 

invoices to customers, and accountings issued to growers. 

Ownership. All PACA licensees must prepare and maintain records that fully and correctly 

disclose the true ownership and management of the business during the preceding 4 years. The 

records should include the number and location of all branches or additional business facilities 

operated by or for the licensee. In addition, corporate records should contain the corporate 

charter, record of stock subscription and stock issued, the amounts paid in stock and minutes of 

stockholders’ and directors’ meetings showing the election of directors and officers. Partnership 

records should contain a copy of the partnership agreement showing the type of partnership, the 

full names and addresses of all of the partners, including general, special or limited partners, the 

partnership interest of each individual, and any other pertinent records of the partnership. 

Access to Records. While investigating a complaint under the PACA, a USDA representative 

may visit a licensee and ask that certain records be made available for examination. If the 

licensee will not produce the records, the firm’s license may be suspended until the records are 

made available. 

Consequences of Failing to Maintain Records. In most cases, when it is discovered that a 

PACA licensee is failing to prepare and/or maintain the required accounts, records, and 

memoranda, the licensee is notified in writing of the apparent violations and is given the 

opportunity to correct the identified deficiencies. If, after the licensee has been given sufficient 

opportunity to achieve compliance, the USDA finds that the licensee’s records are still deficient, 

the USDA may publish the facts and circumstances and/or suspend the license of the offender for 

a period not to exceed 90 days. 
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Payment Requirements 

Prompt payment is a very essential requirement of the PACA. It is an unfair trade practice to fail 

to make timely payment for fresh and frozen fruits and vegetables purchased in interstate and/or 

foreign commerce. It is one of the few Federal statutes that have a prompt pay requirement. 

Prompt Pay Defined 

“Full payment promptly,” for the purpose of determining violations of the PACA, means: 

 Payment for produce purchased by buyers within 10 days from the date the produce was 

accepted; 

 Payment of the net proceeds for produce received on consignment, or the pro-rata share of 

the net profit for produce received on joint account, within 10 days from the date of the final 

sale for each shipment, or within 20 days from the date the produce was received at destination, 

whichever comes first; 

 Payment to brokers (buying brokers) within 10 days after the date the broker’s invoice is 

received by the principal (buyer); 

 Payment by agents or brokers authorized to collect and remit within 5 days after the agentor 

broker receives payment from the buyer or receiver; 

 Payment by growers’ agents within 30 days after receipt of the produce or within 5 days after 

the agent receives payment for the produce, whichever comes first (When the agent is handling 

an entire crop, subsequent payments should be made in 10-day intervals or within 5 days after 

the agent receives payment for the produce, whichever comes first, with the final payment to 

be made within 30 days from the date the last shipment of the season is received.); 

 Payment by growers, growers’ agents, or shippers of deficits on consignments or joint 

account transactions, within 10 days after the day the accounting is received; 

 Payment of proceeds received from a carrier claim, within 10 days after the proceeds are 

received; and 

 Payment to the supplier-seller within 20 days from the date of acceptance for contracts based 

on terms other than those described herein. 

Written Payment Agreements – Implications. Traders may agree to payment terms other than 

those set forth above; however, in order to be valid, the agreement must be reduced to writing 

prior to the transaction. 

Penalties for Failure to Pay Promptly. When it is determined that a licensee has violated the Act 

by failing to make full payment promptly, the USDA may publish the facts and circumstances of 

the violation and/or, by order, suspend the license of the offender for a period not to exceed 90 

days, unless the violation is repeated or flagrant, in which case the license may be revoked. In 

“failure to pay” cases, or what is loosely termed “no pay,” a civil penalty may be assessed in lieu 

of a license suspension if the licensee establishes that the indebtedness has been fully satisfied 

prior to the opening of the hearing, or if no hearing is held, by the time the answer is due. 

NOTE: The substitution of one indebtedness for another, such as a promissory note, does not 

constitute payment in accordance with the PACA. In determining the amount of the civil penalty, 

due consideration will be given to the size of the business, the number of employees, and the 

seriousness, nature, and amount of the violation. 
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Resolving Commercial Disputes 

How to File a Reparation Complaint 

If you have a problem getting payment from a buyer or believe that you have suffered damages 

resulting from unfair trading practices, you should call a PACA office to discuss the matter. 

PACA representatives provide unbiased assistance—whether this involves interpreting a contract 

term, analyzing an inspection result, or providing general advice regarding your rights and 

responsibilities. Frequently, timely guidance such as this is sufficient to avoid any further action 

on your part. There are instances, however, when disputes are not so easily settled. In those 

cases, you will need to file an informal complaint with a PACA office. 

How to File an Informal Complaint. To ensure that your claim will be handled as quickly as 

possible you should ensure that your complaint meets the Statutory Requirements: 

 The complaint must be filed within 9 months of the date on which payment became due, 

or on which the other party breached its contract with you. 

 The contract and/or the shipment of product involved in your claim must have been made 

in the course of interstate or foreign commerce. 

 The product involved must be a perishable agricultural commodity: a fresh or frozen fruit 

or vegetable. 

 The party against which you are making a claim either must be licensed by the PACA 

Division or must be operating a business subject to the licensing provisions of thePACA. 

Copies of the documents that establish the dollar amount of your claim, such as invoices, bills of 

ladings, manifests, broker’s memorandum or confirmation of sale, accounts of sales, or contract 

must be included with your letter of complaint. 

Payment of the $100 filing fee, which is required by law, must be received by the PACA 

Division before a claim can be opened. The filing fee may be paid by check, money order, or 

credit card. NOTE: If the filing fee is not provided, the complaint documents will be 

returned with a request for the claim to be resubmitted with the $100 fee before the case 

will be opened. Checks or money orders should be made payable to “USDA-AMS.” 
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Establishing Damages for a Breach of Warranty 

Buyer’s Damages Where Goods Are Accepted. 

There are circumstances when a receiver will not want to reject damaged merchandise. The 

buyer who receives damaged product has the choice to reject it, or to accept it and handle it to 

establish its damages from the seller’s breach of contract. The buyer cannot be required to return 

the product to the seller. The general measure of damages for a breach of warranty as to accepted 

goods is the difference at the time and place of acceptance between the value of the goods 

accepted and the value they would have had if they had been as warranted, unless special 

circumstances show damages of a different amount. The value of accepted goods is best shown 

by the gross proceeds of a prompt and proper resale as evidenced by a proper accounting 

prepared by the ultimate consignee. A proper accounting should show a breakdown of sales of 

individual lots of produce with the number of containers sold at each price and the date on which 

sales of each lot took place. 

The first and best method of ascertaining the value the goods would have had if they had been as 

warranted is to use the average price as shown by USDA Market News Service Reports. If 

applicable market prices are not available, the delivered (FOB plus freight) value of the goods 

may be used as a measure of the value as warranted. 

Buyer’s Damages Where Goods Are Rightfully Rejected. 

Where a buyer rightfully rejects goods, the buyer may either “cover” or recover damages for 

non-delivery. “Cover” refers to the buyer’s purchase of goods in substitution for that due from 

the seller. When such purchase is made in good faith and without unreasonable delay, the buyer 

may recover the difference between the cost of the cover purchase and the contract price 
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The Informal Complaint Worksheet 
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Mediation of a Claim 

The PACA Division offers mediation services to anyone wishing to file a complaint. Mediation 

is an effective way to resolve disputes, since it places the resolution of the dispute directly in the 

hands of the interested parties. It provides an outlet for settling differences outside of the legal 

system, strengthens business relationships, and provides a forum where both parties can air their 

differences in a neutral atmosphere. Mediation sessions can be held face to face or over the 

telephone. All PACA personnel who handle disputes are trained in mediation and can mediate 

your dispute upon request provided both parties are agreeable. There is no additional cost to 

mediate a dispute beyond the initial $100 filing fee. 

Steps in Handling Informal Claims 

Upon receipt of the required documentation, a PACA representative will review the claim to 

determine whether there is proper basis for a claim and whether the dispute seems appropriate 

for mediation. 

Once the claim is opened, the other party is contacted either regarding its willingness to mediate 

a resolution, or for its version of the dispute and supporting documentation. (If the complaint 

involves questions concerning the accuracy of an accounting, the matter may be scheduled for 

audit by a PACA representative without contacting the other party.) 

If mediation is refused or deemed inappropriate, given the specifics of the claim, both parties 

will be given the opportunity to explain their position and respond to the other party’s arguments. 

A PACA representative will then provide an analysis of the claim based on the statements and 

evidence submitted by the parties and the legal authority relevant to the subject matter. 

Using the informal analysis as a basis, the PACA representative will again attempt to negotiate 

an informal settlement with the parties. 

If an informal settlement cannot be reached, the complaining party (“complainant”) is given the 

opportunity to file a formal claim. PACA representatives are available to mediate the claim at all 

stages up to the time the complete formal claim file is referred to the headquarters office. 

Steps for Filing a Formal Complaint 

The formal claim must be submitted in an original and two copies, along with the $500 

processing fee. The formal claim is then served upon the opposing party (“respondent”), who is 

given 20 days from the date of receipt of the claim to file an answer. Any report of investigation 

prepared by the USDA is also served upon the parties at this time. A bond in double the amount 

of the claim must accompany a formal claim filed by nonresidents of the United States. 
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Formal Complaint Sample 

S A M P L E (SEE INSTRUCTIONS ON BACK) 

UNITED STATES OF 

AMERICA BEFORE THE 

SECRETARY OF AGRICULTURE 

P.A.C.A. DOCKET NO. (Fill in the PACA file number) 

(Correct Trade Name) ) Complainant ) 

) 

v. ) COMPLAINT 

) 

(Correct Trade Name) ) Respondent ) 

Complainant above-named respectfully alleges: 

1. That complainant is (use one of a-d): 

(a) an individual 

(b) an individual, (name), doing businessas 

(c) a partnership, composed of (give names of partners), doing business as 

(d) a corporation 

whose post office address is _ . 

2. That complainant is informed and believes that respondent is (use one of a-d): 

(a) an individual 

(b) an individual, (name), doing businessas 

(c) a partnership, composed of (give names of partners), doing business as 

(d) a corporation 

whose post office address is _ . 

3. That respondent, at the time of the transaction(s) involved herein, was licensed, or was subject to license, 

under the Perishable Agricultural Commodities Act of 1930, as a dealer, commission merchant, and/or 

broker. 

4. That on or about the day of , 20 , in the course of interstate (or foreign) commerce, complainant, by 

oral (or written) contract sold to the respondent truckload(s) (or 

carload(s)) of (kind of commodity), being a perishable agricultural commodity, at the 

agreed price of $ (if interest is noted on your invoices and you wish to pursue it, please report the 

interest rate noted on the invoice. Example: “at the agreed priceof 

$ plus xx % interest per annum.”) 

5. That said (kind of commodity) was inspected at point of shipment on or about the day of , 20 , 

the report on which inspection is set forth in certificate attached hereto asExhibit No. . (This 

paragraph may be omitted if no inspection was performed at shipping point.) 

6. That said contract was negotiated by , a broker, located at , who 

acted in negotiating such sale as agent for both complainant and respondent. (This language should be 

modified, if necessary, to conform to the facts in each individual case, or omitted entirely if no broker is 

involved.) 

7. That complainant shipped on (date(s)), from loading point(s) in the State (or Country) of , 

in interstate (or foreign) commerce, to respondent (or state the name of the consignee if other than respondent), at 
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in the State of , the kind, quality, grade, and size of commodity called for insaid 

contractof sale and in the manner agreed upon. (Modify this language, if necessary, to conform to thefacts.) 

8. That respondent accepted the (kind of commodity) upon arrival at the contract destination. (If respondent 

accepted the commodity at an intermediate location, this may also be indicated here.) 

9. That respondent has failed, neglected, and refused to pay complainant the agreed purchase price of the (kind of 

commodity) (or has paid complainant only $ , leaving a balance due of $ , which it has since 

failed, neglected, and refused to pay.) (Modify to fit the nature of the contract, if other than a purchase andsale.) 

10. That the matters and actions set forth herein constitute a violation by respondent of section 2 of the Perishable 

Agricultural Commodities Act. 

11. That there is now due and owing complainant from respondent the sumof $ (if 

applicable, “...plus XX% interest”), no part of which has been paid. 

12. Complainant’s exhibits, numbered 1 to , inclusive, are original, or true copies of original papers 

relating tothe matters involved herein and are attached hereto as part of this complaint. 

WHEREFORE, complainant prays that a copy of this complaint be served upon the above-named respondent and that 

he (it) be required to answer the charges herein stated in writing with such time as the Secretary may require; that, 

upon the record made, either with or without formal hearing, as provided in the Act or in the regulations, and by 

appropriate order, the complainant be awarded such amount of damages as he (it) may be entitled to receive according 

to the facts established, and that the Secretary also make such other and further orders and take such disciplinary 

action contemplated by Section 8 of the Act as may be deemed fit and proper in the premises. 

Dated this day of , 20 . ( Correct Trade Name ) 

Complainant 

( Signature ) 

Title: (Owner), (Partner), (President), etc. 

(Name of person signing complaint), being first duly sworn, says that he (she) has read the foregoing complaint and 

knows the contents thereof and that the same is true, except as to matters therein stated on information and belief, and 

as to such matters he (she) believes it to be true, and that he (she) is duly authorized to sign the complaint on behalf of 

the complainant. 

(Signature of Person Signing Complaint) 

Subscribed and sworn to before me this day of , 20 . (Signature of Notary Public) 

(Notary Stamp or Seal) 
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SUGGESTIONS FOR PREPARING FORMAL COMPLAINTS UNDER THE PACA 

INVOLVING FAILURE TO MAKE PAYMENT 

1. THE SAMPLE OUTLINE SHOULD NOT BE FILLED IN. It is intended merely as a guide. 

Choose only the wording that applies to your particular case. Paragraphs 3 and 10 may be copied 

as they appear on the outline. You do not need to use Paragraphs 5 and 6 unless a broker or 

shipping point inspection was involved, respectively. For reference, number each paragraph of 

your formal complaint. 

2. An original and 2 copies of the formal complaint are needed. If more than one respondent is 

involved, an extra copy of the complaint must be submitted for each additional respondent. 

3. The caption or heading of the complaint must show the correct trade name of both complainant 

and respondent. 

4. Paragraphs 1 and 2 of the complaint must accurately describe your and respondent’s legal 

makeup. For example, if a partnership, the name of each partner must be shown. Theinformation 

on respondent appears in the accompanying letter from the USDA (Department). Copy this 

information into the heading and paragraph 2 of the complaint. 

5. The complaint must contain the following basic allegations: 

a. That the commodity in question is a fresh or frozen fruit or vegetable within the 

jurisdiction ofthe PACA (see outline, paragraph 4) as a perishable agricultural commodity. 

b. That the transaction(s) involved interstate or foreign commerce (see outline, paragraph 4). 

c. That you complied with the contract requirements (see outline, paragraph 7). 

d. That respondent has violated Section 2 of the Act by failing to live up to its responsibilities 

(see outline, paragraph 10). 

e. That this is the amount of damages you claim and how you computed this amount (see 

outline, paragraphs 9 and 11). 

6. You can show interstate commerce by listing the point of shipment and the intended or contract 

destination. You can show foreign commerce by establishing the country of origin of the product. 

It must be shown that the goods were either received or shipped in interstate and/or foreign 

commerce or that the contract was made with the understanding that the shipment would 

move in interstate or foreign commerce. 

7. Original or true copies of pertinent papers relating to the transaction should accompany the 

complaint as exhibits. Attach a COMPLETE SET OF NUMBERED EXHIBITS TO EACH 

COPY of the formal complaint. 

8. Exhibits must be numbered and referred to, either individually or together, in a separate 

paragraph (see outline, paragraph 12). 

9. The original and all copies of the formal complaint should be signed by a principal of the 

complaining firm, preferably the owner, a partner, or an officer. Persons other than those 

mentioned above may sign the complaint if they are duly authorized by the complainant to act on 

its behalf. However, the person signing the complaint should have firsthand knowledge of the 

transactions involved. 
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10. The original of the complaint should be signed and sworn to before a notary public. The name 

of the person who signed the complaint should appear in the verification statement. The notary’s 

signature, seal (in those States requiring a seal), and commission expiration date should appear on 

ALL copies of the complaint. 

11. In complaints involving $30,000 or less, the Hearing Officer will consider the contentions 

submitted by complainant and respondent in the complaint and answer, sworn statements of fact 

and any report of investigation prepared by the USDA. Consequently, it is important that all papers 

relating to the transaction(s) be made part of the file, either by attachment to sworn statements and 

depositions or as separate exhibits. 

12. Complaints involving more than $30,000 will be decided without oral hearing unless requested 

by one of the parties. 

13. Each party to the dispute is responsible for proving facts it claims to be true but which are in dispute. 

14. Any payment received from respondent while the complaint is pending, or after decision by 

the Secretary, should be reported at once in writing. 

15. If you wish to pursue accrued interest at the rate stated on your invoice(s), this declaration must 

be made in your formal complaint to be awarded. Please state the total amount owed for your 

invoices, and add a statement such as, “plus 18 percent annum.” (Paragraph 11.) Do not calculate 

the actual amount of the interest, since interest accrues until the decision and order have been issued. 

16. The Sample Outline is only a guide. DO NOT FILL IT IN! 

Default. Failure to file an answer within the time prescribed constitutes a waiver of hearing and an 

admission of the facts alleged in the claim and will result in the issuance of a default order 

requiring the respondent to pay the amount claimed in the formal claim. 

Filing an Answer. The answer should be filed in triplicate and should include either: 

 A precise statement of the facts that constitute the grounds of defense, including any set-off 

or counterclaim, and a specific admission, denial, or explanation of each of the allegations 

of the complaint, unless the respondent is without knowledge, in which case the answer 

should so state; or 

 A statement that the respondent admits all of the allegations of the complaint; or 

 A statement containing an admission of liability in an amount less than that alleged in the 

formal complaint, and a denial of liability for the remainder. 

NOTE: If the answer includes a counterclaim, a $500 handling fee is also required. 

Admission of Liability. If the contents of the answer include an admission of liability for an 

amount less than the amount of the complaint, the USDA may issue an order requiring the 

respondent to pay the undisputed amount. 

Oral Hearings Versus Documentary Procedure. When the amount of damages claimed, either 

in the complaint or counterclaim, exceeds $30,000, either party may request an oral hearing. If an 

oral hearing is not requested, or when the amount of damages claimed is less than $30,000, the 

matter will proceed pursuant to the documentary procedure provided in the Rules of Practice under 

the PACA. See 7 C.F.R. § 47.20. 
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Documentary Procedure — A Brief Overview 

Under the documentary procedure, the pleadings of the parties, if verified (see following page), 

and any report of investigation prepared by the USDA are considered evidence in the 

proceeding. In addition, the parties are given the opportunity to file the following: 

Complainant’s Opening Statement. Within 20 days after service of respondent’s answer, 

complainant may file a verified opening statement accompanied by any pertinent documents, 

which must be identified in the statement. If the answer is verified, complainant’s evidence 

concerning the allegations of the answer should be included in the opening statement. 

Respondent’s Answering Statement. Within 20 days after service of complainant’s opening 

statement, or service of notice by USDA that complainant has not filed an opening statement, 

respondent may file a verified answering statement accompanied by any pertinent documents, 

which must be identified in the statement. 

Complainant’s Statement in Reply. If the respondent files an answering statement, 

complainant may, within 20 days after service thereof upon complainant, file a verified statement 

in reply, accompanied by any pertinent documents, which must be identified in the statement. 

Briefs. After the conclusion of the presentation of evidence, USDA will notify the parties that 

they may file briefs within 20 days after the receipt of such notice. The brief is for the purpose of 

discussing the evidence previously provided and to give the presiding officer guidance 

concerning the legal issues. The brief, even if sworn to, is not considered evidence under the 

documentary procedure, and new evidence may not be offered in the brief. 

NOTE: When you make a claim or respond to a claim, your complaint, answer and statements 

should be sworn to and notarized if it is to carry any evidentiary weight. 

Verification. Verification should be made under oath of any facts set forth in a pleading or 

statement by the person who signs the pleading or statement. Certification by a notary public 

alone, without a sworn affirmation from the individual attesting to the facts stated, is not 

sufficient. The form of verification used should be essentially as follows: 

, being first duly sworn, says that he/she has read the foregoing 

document and knows the contents thereof and that the facts set forth therein are true, 

except as to matters therein stated on information and belief, and as to such matters he/she 

believes them to be true, and that he/she is authorized to sign the document. Subscribed 

and sworn to before me this day of . 

(Notary Public) 

After the time for filing briefs has expired, the examiner prepares a report in the form of a 

final order either awarding damages to the claimant or dismissing the complaint, as the 

circumstances may warrant. 
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Oral Hearing Procedure — A Brief Overview 

Prior to scheduling the hearing, the parties are given the opportunity to file deposition and/or 

subpoena applications. 

After the time for filing applications has expired and the depositions have been taken and/or the 

subpoenas have been served, the examiner will set a time and place for the hearing. 

NOTE: Hearings are typically held near the place of business of the respondent. 

Prior to the close of the hearing, or within 20 days thereafter, each party may file a claim for fees 

and expenses incurred in connection with the oral hearing. 

A transcript of the testimony at the hearing is prepared and submitted, with exhibits attached, to 

the examiner for the preparation of a report. 

The examiner prepares a report in the form of a final order either awarding damages to the 

claimant or dismissing the complaint, as the circumstances may warrant. 

What Happens After an Order Is Issued 

Reconsideration of Orders. A petition to reconsider an order must be filed with the hearing 

clerk within 20 days from the date of service of the order. The petition must state specifically the 

matters claimed to have been erroneously decided and the alleged errors. The filing of a petition 

automatically sets aside the order pending final action on the petition. 

Right of Appeal. Either party adversely affected by a reparation order may, within 30 days from 

the date of the order, file an appeal in the U.S. District Court for the district where the hearing 

was held, if applicable, or, if the complaint was handled under the documentary procedure, the 

district where the respondent is located. Filing the following with the district court clerk perfects 

the appeal: 

 A notice of appeal; 

 A petition in duplicate citing the prior proceedings before the USDA and the grounds 

upon which the petitioner is relying to defeat the right of the opposing party to recoverthe 

damages claimed; 

 Proof of service of the petition upon the opposing party; and 

 A bond in double the amount of the reparation award conditioned upon the payment of the 

judgment entered by the court, plus interest and costs, including a reasonable attorney’s 

fee for the appellee, should the appellee prevail. 

Unpaid Orders/Sanctions/License Suspension. Licensees are given 30 days from the date of 

the order to either make payment in full as required by the Order, or to file an appeal. Unless a 

licensee shows to the satisfaction of the USDA within 5 days from the expiration of the period 

allowed for compliance with the order, that it has either paid the award or filed an appeal, its 
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license will automatically be suspended. The suspension will remain in effect until the award is 

paid. (In the case of an appeal, if the appellee prevails or the appeal is dismissed, the automatic 

license suspension becomes effective 30 days from the date of judgment on appeal.) 

Enforcement of Reparation Awards and Sanctions. If an Order (Award) goes unpaid and has 

not been appealed or petitioned within 30 days of the date of the Order, it becomes final. At the 

expiration of an additional 5 working days, the PACA license of the offending firm is 

automatically suspended, and the PACA Division publishes a press release to that effect. If the 

firm is not licensed under the PACA, it can 

neither obtain a license nor legally continue to operate in the produce industry. In either case, the 

responsibly connected individuals, owners, partners, limited liability company members, 

corporate officers, and holders of more than 10 percent of the stock become subject to 

employment sanctions. Another PACA licensee may employ a responsibly connected individual 

under sanction only after posting a satisfactory bond. 

The winner of the award may, within 3 years of the date of the order, file in the nearest U.S. 

District Court to have the award reduced to a court judgment requiring payment. If the judgment 

is not satisfied, the offending firm will then be subject to the penalties available to that court, 

which can include attachment of assets (lien). 

The PACA Division monitors and investigates the activities of such firms and individuals to 

assure that they abide by their sanctions. This is accomplished by contacting trade-members and 

conducting onsite investigations as warranted. If the PACA Division finds that firms or 

individuals are operating in violation of their sanctions, it will prepare a case for prosecution in 

the U.S. District Court to seek injunctive relief and monetary penalties. The PACA Division can 

also extend the sanction period against individuals who seek employment in the industry in 

violation of their sanctions. The PACA Division greatly appreciates and relies heavily on 

information provided by law-abiding trade members to assure compliance with sanctions. 
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More on PACA’s Mediation Services 

What is mediation? Mediation is a voluntary, confidential process in which a trained, impartial 

person helps people examine their disagreement, identify and consider options and carefully 

consider possible resolutions. A mediator has no decision making authority. Unlike a judge or an 

arbitrator, a mediator does not decide what is “right” or force a decision on either party. 

What happens in mediation? The mediation process focuses on the problem, not the people or their 

positions. It provides a neutral setting with a trained PACA mediator who helps the parties work out 

a solution that meets the interests of both sides. Each party is given the opportunity to explain his/her 

point of view, what the dispute is about, what the issues are, and how he/she would like to see the 

situation resolved. After each side has presented information, the mediator clarifies the issues in 

neutral language that focuses on the issues, not the people involved. The process promotes calm and 

rational discussion in order to identify goals and construct a plan that will benefit all parties. 

What are the benefits of mediation? The mediation process provides a non-threatening, informal 

procedure as an initial step in resolving conflicts. Mediation provides the following benefits: 

 Participants control the outcome.

 Mediation is forward-looking.

 Mediation can preserve and strengthen business relationships.

 Mediation is creative.

 Mediation is confidential.

 Mediation can be fast.

 Mediation is likely to be successful.

Where are mediations held? Mediations can be conducted through a telephone conference call or 

in a face-to-face meeting held in a location acceptable to both parties. 

How long does mediation take? Because mediation is a flexible process, it resolves disputes 

quickly and efficiently. Most mediation sessions are conducted within a few hours, but some may 

require several sessions, depending upon the complexity of the issues to be resolved. 

What is the outcome of mediation? Participation in mediation is voluntary, and no one is forced to 

reach an agreement or to accept specific settlement terms. Mediators help the parties develop and 

agree upon a realistic, workable solution to their problem based on their needs and interests. If 

parties come to an agreement that is mutually acceptable, the agreement is written down in clear, 

specific language and all parties sign the agreement. However, if no agreement is reached, the parties 

“agree to disagree” and mediation is closed and all administrative and other remedies remain in 

place. The mediation process and discussion are confidential and may not be used for other purposes 

as defined by the courts. 

How much does mediation cost? Other than the initial informal complaint filing fee ($100), 

mediation is a free service provided by the PACA Division. There may be costs associated with 

mediation sessions, such as when outside experts are used by the mediating parties, or when other 

services are required to resolve a dispute, but generally there is no cost for the mediation service 

itself. 

How do I request mediation? You may request mediation when you file a complaint under the 

PACA, or when you receive notice that a claim has been filed against you, or at any time thereafter, 

up to the time a formal complaint has been referred to the PACA Headquarters Office for a formal 

ruling. 
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How the PACA Trust Works 

The PACA Division’s dispute resolution and mediation services are important tools that produce 

businesses can utilize to resolve disputes that sometimes occur between trading partners. But 

what can a produce business do when it is owed money by a customer who has suddenly gone 

out of business or filed for bankruptcy protection? 

When a supplier sells produce to a buyer, the supplier automatically becomes eligible to 

participate in the trust. The PACA trust provisions require that dealers maintain sufficient trust 

assets to satisfy their obligations to sellers of perishable agricultural commodities. In the case of 

a business failure, the debtor’s trust assets are not available for general distribution to other 

creditors until all valid trust claims have been satisfied. Because of this, suppliers that file for 

trust protection have a far greater chance of recovering money owed them when a buyer goes out 

of business. 

How to Preserve Trust Benefits. Two methods are available to PACA licensees for preserving 

their right to trust benefits: 

 By a separate mailing of the trust notice to the buyer; or 

 By giving notice to the debtor on the invoice. If the licensee uses this method, the 

following wording, exactly as shown, must appear on the face of the invoice: 

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. 

Unlicensed growers and small produce suppliers who want to preserve their trust right to trust 

benefits must provide a separate trust notice to the buyer or agent. A trust notice must be in 

writing, must include the statement that it is a notice of intent to preserve trust benefits and must 

include information that establishes for each shipment: 

 The names and addresses of the trust beneficiary, seller-supplier, commission merchant, 

or agent and the debtor, as applicable. 

 The date of the transaction, commodity, invoice price, and terms of payment. 

 The date of receipt of notice that a payment instrument has been dishonored (if 

appropriate). 

 The amount past due and unpaid. 

Any licensee, or person subject to license, who has a fiduciary duty to collect funds resulting 

from the sale or consignment of produce, and remit such funds to its principal, e.g., a grower’s 

agent or a collect and remit broker, also has the duty to preserve its principal’s right to trust 

benefits by filing a timely notice of intent to preserve trust benefits with the purchaser of the 
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produce. NOTE: The principal must also preserve its own right to trust benefits by filing a timely 

notice of intent to preserve trust benefits with its agent. 

Time Restrictions on Filing. Notification, either on the invoice or by separate mailing of the 

trust notice, must be given within 30 days from the date payment was due, or from receiving 

notification that a timely submitted payment was dishonored. 

Payment Terms. Terms for payment cannot exceed 30 days from the date of acceptance to qualify 

for trust protection. Payment terms other than the PACA prompt payment terms (usually 10 days) 

must be agreed upon by the parties, in writing, before entering into the transaction. 

Trust Assets Include: 

 Perishable agricultural commodities received in all transactions. 

 All inventories of food or other products derived from such perishable agricultural 

commodities. 

 All receivables or proceeds from the sale of such commodities and food or products 

derived therefrom. 

Enforcing the Trust. If a seller has preserved its right to trust benefits under the PACA trust 

provisions, the buyer should be holding the proceeds from the resale of the seller’s produce “in 

trust.” If the buyer fails to remit timely payment to the seller, the seller can file an action in U.S. 

District Court seeking to enforce payment under the trust. 

It is common for a trust enforcement action to seek a temporary restraining order freezing the 

bank accounts of a buyer until the trust creditor is paid. Many produce sellers have found this as 

a very effective tool to recover payment for produce. Attorneys that specialize in agricultural 

law, such as the PACA, advertise in produce industry publications. Sellers may also seek 

attorney referral through industry trade groups as well as their local bar association. 

If a seller is notified that one of its customers has filed for bankruptcy protection, and the seller 

has properly preserved its right to trust benefits, the seller should give notice to the bankruptcy 

court that it is a priority creditor under the PACA trust provisions (7 U.S.C.499e(c)). Priority 

creditor status should be indicated on the “Proof of Claim” submitted to the clerk of the 

bankruptcy court. Under bankruptcy law provisions, trust creditors will have priority to be paid 

first from the PACA trust assets. Trust assets include any produce inventory, products derived 

from that produce, as well as cash or accounts receivable generated from the resale of produce. 
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Disciplinary Procedures and Consequences 

USDA may penalize a licensee who repeatedly and flagrantly violates the Act. A disciplinary 

action may result in a suspension or revocation of the firm's PACA license. In lieu of suspension 

or revocation, the Secretary of Agriculture may assess a civil penalty of up to $2,000 for each 

violation or for each day the violation continues. In addition, those who operate without a valid 

PACA license are subject to fines of up to $1,200 for each offense and $350 each day the offense 

continues. Court injunctions can be issued against those who persist in operating without a 

license. 

Unfair Conduct. Some examples of unfair conduct include, but are not limited to, the following: 

 Rejecting without reasonable cause produce bought or contracted to be handled on 

consignment. 

 Failure to pay promptly the agreed purchase price of produce that complies with the 

contract terms. 

 Discarding, dumping, or destroying without reasonable cause any produce received to be 

sold on behalf of another firm. 

 Failure or refusal to account truly and correctly or to make full payment promptly for 

produce shipped on consignment or on joint account. 

 Misbranding or misrepresentation of grade, quality, quantity, weight, state, or country of 

origin of fruits and vegetables. 

 Alteration or forgery of an official USDA inspection certificate. 

 Submitting an application for license containing false or misleading information. 

 Failure to provide records upon demand to a duly authorized representative of the USDA. 

 Employing any restricted individual without obtaining USDA approval and/or posting a 

bond. 

Reporting Unfair Trade Practices. Any interested person, other than an employee of an agency 

of the USDA administering PACA, may file a written notification of any violation of the PACA 

by any commission merchant, dealer, or broker. Official certificates of the United States 

Government or States or Territories of the United States and trust notices may also constitute 

written notification for the purpose of conducting an investigation. 

The identity of any person filing a written notification is confidential information. The 

identity of such person and any portion of the notification to the extent that it would indicate the 

identity of such person are specifically exempt from disclosure by the PACA Division under the 

Freedom of Information Act. 

Investigation. If the USDA determines that there are sufficient grounds to initiate an investigation 

of a complaint made through written notification, the subject of the investigation will be given 

notice of the investigation and of the nature of the alleged violation(s) of the Act. 
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The law requires that not later than 180 days after providing the initial notification, the USDA 

will provide the subject of the investigation with notice of the status of the investigation, 

including whether USDA intends to issue a complaint, terminate the investigation, or continue or 

expand the investigation. 

USDA will provide additional status reports at the request of the subject being investigated and 

will promptly notify the subject whenever the investigation is terminated. 

Hearings. If an investigation substantiates the existence of violations of the PACA, USDA may 

choose to file a disciplinary complaint against the alleged violator firm. The firm will be served 

with the complaint and afforded the opportunity to request a hearing before a USDA 

administrative law judge. 

Hearings are usually held near the alleged violator firm’s place of business. 

Sanctions. In determining the appropriate sanction, USDA considers the seriousness and the 

nature of the violation(s) along with the number of violations by the firm and the number of 

times that the firm has been warned about such violations. Revocation of the license is the most 

severe penalty that can be imposed. In this instance, the responsibly connected individuals are 

totally barred from doing business or being employed by PACA licensees for a 1-year period. 

Effects of Sanctions on Responsibly Connected Individuals. When a firm has had its PACA 

license suspended or revoked, or has been found to have committed repeated and flagrant 

violations, the responsibly connected persons are automatically subject to employment and 

relicensing restrictions in the 

fruit and vegetable industry. The restrictions are mandated by law, and there is no authority to 

waive the relicensing and employment restrictions or to exempt any person from them. 

A responsibly connected determination may be challenged by requesting a review by the PACA 

Division Director. The Director’s determination can be appealed to an administrative law judge, 

and then to the judicial officer, who issues the agency’s final order on the issue. USDA’s final 

order can be challenged in the U.S. Court of Appeals. 
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FOB Good Arrival Guidelines 

PACA marketing specialists use the following guidelines in the FOB Good Arrival Guidelines 

Table to interpret the tolerances allowable for various fresh fruits and vegetables trucked to 

locations that are 1 to 5 days away from the shipping point. The tolerances shown in the tableare 

based on the U.S. Grade Standards for those commodities that have standards, and additionally, 

are based on judicial interpretations of the terms “FOB” and “suitable shipping condition” as 

defined in the PACA regulations. “Suitable Shipping Condition” means that the product meets 

contract terms at shipping point and will not deteriorate abnormally given normal transit time 

and conditions. The information in the table can be used by receivers at destination to determine 

whether the product was loaded in suitable shipping condition. 

USING THE TABLE 

The numbers listed in the “U.S. Grade Standards” and “Maximum % of Defects Allowed” 

columns of the table represent the maximum total percentage of damage (defects) allowable for 

the commodity to meet the terms of a free on board (FOB) sale at destination, the maximum 

percentage of serious damage allowable, and the maximum percentage of decay or very serious 

damage allowable. 

Example: The series 15-8-3 means 15% total damage, including not more than 8% serious 

damage, including not more than 3% decay. 

For those commodities showing only two numbers, like artichokes, there is no separate tolerance 

for defects causing serious damage. If the product is sold without a specified grade, the numbers 

represent the maximum percentage of condition defects allowable. 

Where an asterisk (*) appears next to the commodity name, the U.S. Grade Standards specify 

special tolerances and types of defects, and should be consulted before making a judgment 

regarding whether the inspection results show a breach of contract. There are also several 

abbreviations used in the table: “stds” 

= U.S. Grade Standards, “vsd” = very serious damage, “int.” = internal, “ext.” = external and 

“sda” = sunken discolored areas. 

As previously stated, the guidelines below primarily apply to truck shipments; however, produce 

shipped by rail, where transit periods are substantially longer than 5 days, will be subject to the 

same maximums allowed for truck shipments, as will international ocean shipments, unless 

precedent has established, or adequate proof is presented, that foreign markets have come to 

expect and tolerate a higher percentage of defects. 

Although the table below provides guidance concerning whether an FOB contract has been 

breached, many factors enter into the determination of whether a load of produce meets the terms 

of a particular contract. For example, if product is sold FOB acceptance final rather than merely 

FOB, an inspection showing a breach in one instance may not show a breach in the other. Some 

other considerations may be the timing of the inspection, air temperatures maintained by the 

carrier, whether or not transit time was normal, the location of the product when it was inspected, 

and how much of the load was inspected. 
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Free on Board (FOB) Good Arrival Guidelines Table 

Please note that the information contained in the FOB Good Arrival Guidelines Table does not have the 

force of law and is subject to judicial review at any given time. 
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FOB Good Arrival Guidelines Table 
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FOB Good Arrival Guidelines Table 
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FOB Good Arrival Guidelines Table 
 

 

 

 

 

 

 

 

 

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FOB Good Arrival Guidelines Table 

FOB Good Arrival Guidelines Table 

Turnips* 10-5-1 15-8-3 32 

W 

Watermelon* 10-5-2 15-8-4 50-60 

* = Additional Tolerances Apply! = Additional Tolerances Apply!

† = Unless otherwise noted, all temperature data cited is from USDA’s Agriculture Handbook

Number 669, "Protecting Perishable Foods During Transport by Truck" (September 1995).

‡ = University of California – Davis, Produce Information, "Properties and Recommended

Conditions for Storage of Fresh Fruits and Vegetables" - http://postharvest.ucdavis.edu.

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USDA Inspection Services 

The official USDA inspection certificate is a cornerstone of fair trading practices in the 

marketing of fruits and vegetables. This document certifies the quality and condition of goods 

shipped, supports breach of warranty claims, and substantiates (or disproves) the markings on 

consumer and commercial packages. It reflects the results of an inspection by an unbiased, 

professional third party and, as such, it is prima facie evidence (presumption of fact) in 

administrative and civil proceedings. 

Who May Request an Inspection? An application for inspection may be made by any 

financially interested person or authorized agent. This includes dealers, commission merchants, 

common carriers, and brokers. Those who are merely negotiating for a purchase are not yet 

“financially interested.” A broker is financially interested only to the extent of the brokerage and 

expenses incident to the sale. 

Value of Shipping Point vs. Receiving Point Inspections 

Shipping point inspections: 

 Prevent misbranding in the marketplace by ensuring that products meet the descriptions 

on the packaging; and 

 Provide the shipper with a reliable means of monitoring the quality of the productsbeing 

shipped. 

Receiving point inspections: 

 Serve as proof of the damages claimed by receivers; 

 Can be good evidence to support a carrier claim; 

 Can also be used on consignment shipments to show poor condition on arrival to justify 

possible slow or low sales of produce; and 

 May be used to establish that produce dumped had no commercial value. 

All sellers and buyers should understand the terms “appeal inspection,” “restricted inspection,” 

and “unrestricted inspection.” 

 If a buyer or seller is dissatisfied with the results of the first inspection, it may requestan 

“appeal inspection,” which is usually performed by two inspectors who examine twice 

the customary number of samples. 

 A “restricted inspection” is typically performed while the commodity is still loaded on 

the car or truck, in which case, samples are taken from that part of the load accessible to 

the inspector. 

 In an “unrestricted inspection,” samples are taken from the entire load. As such, 

unrestricted inspections are better evidence of the condition of a load than restricted 

inspections. 

NOTE: A buyer relying on a restricted inspection to justify a rejection should realize that the 

seller has the option of later getting an unrestricted inspection which might prove that it did 

comply with the contract, in which case, the seller could hold the buyer responsible for any 

losses suffered. 
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Appeal Procedure. Any financially interested party or the PACA Division may request an 

appeal inspection when the results of the original inspection are in question. An appeal 

inspection will be performed when: 

 The lot is positively identified as the lot previously certified by means of trailerlicense, 

car or van number, or approved Federal or Federal-State Positive Lot Identification; 

 The lot is misbranded and is positively identified; 

 The complaint concerns a permanent factor (such as quality, grade, size, or weight) that 

would not have changed since the previous inspection; 

 The complaint concerns a condition factor that may change, but the time lapse, 

temperatures, perishability of product and degree and type of deterioration makesit 

apparent that the condition was present at the time of the previous inspection; or 

 Under certain circumstances, where it is obvious that procedures have not been followed, 

improper sampling was obvious, or there seems to be a lapse of grader judgment, and 

there are no complaints, the Fresh Products Branch may request that an appeal be 

performed. 

A request for an appeal inspection will be denied when: 

 The complaint concerns a factor which may have undergone a change of condition since 

the original (previous) inspection; 

 The shipping point inspection was restricted to “samples taken,” submitted samples or 

other portions of the load that are not identifiable; 

 A large number of containers from the original (previous) manifest are not accessiblefor 

sampling or have been disposed of; 

 A lot is not positively identified and misbranding is not involved; 

 The shipping point certificate was a warehouse/platform inspection, or the only identity 

of the lot is through a manifest certificate issued by a person other than a USDA 

inspector; or 

 An appeal inspection has already been made on the lot. 

Note Sheet Versus Certificate. Each certificate is based on notes made at the time of the 

inspection. The inspector’s note sheet becomes a part of the permanent record of the inspection. 

The information shown on the note sheet is not publicly available, but it can be disclosed to any 

financially interested party upon written request. Requests for copies of note sheets should be 

forwarded in writing to the Federal Supervisor or their State Program counterpart. 

Interpreting a Certificate. The results of an inspection cannot necessarily be taken at face 

value, and must instead be interpreted in connection with the terms of the applicable contract. 

For example, in the bell pepper example used in our discussion of suitable shipping condition, 

where an inspection of the peppers at destination disclosed a total of 11 percent defects, 

including 4 percent scars, 6 percent turning red, and 1 percent decay, we stated that the bell 

peppers were sold with no grade specified. This means that only the condition (non-permanent) 

factors, or 7 percent of the defects, would count against the contract. That level of defects clearly 

would not be sufficient to establish a breach of warranty. Nevertheless, the grade 

statement on the inspection certificate would read: “Fails to grade U.S. No. 1 account condition 

defects.” 

In contracts that specify a grade (U.S. No. 1, U.S. Extra Fancy, etc.), the percentage of quality 
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(permanent) defects may not exceed the percentages specified in the U.S. Grade Standard. In this 

instance, a certificate stating that the produce fails to grade account quality defects would establish 

a breach of contract by the seller. 

Temperatures. A buyer’s ability to hold a shipper responsible for the deteriorated condition of a 

product at destination will often depend upon the buyer’s ability to show that the product was 

held at proper temperatures pending the inspection. Therefore, the inclusion of pulp temperatures 

on an inspection certificate is essential if the certificate is intended for use as evidence in a 

contract dispute. 

For example, a destination inspection on strawberries sold FOB showing temperatures in excess 

of 40°F would typically be viewed as evidence of improper handling sufficient to void the 

warranty of suitable shipping condition. Likewise, a foreign survey that is otherwise sufficient, 

i.e. percentages of specific defects are given, sufficient samples taken, etc., may be viewed as 

inadequate evidence of a breach of warranty if there was a delay between arrival and inspection 

and the surveyor fails to note the pulp temperature on the survey. 

Interpreting Foreign Inspections or Survey Reports. Often, when product is shipped outside 

the United States, the receiver does not have access to a Government inspection service that uses 

Workbook standard procedures and terminology. This presents problems in interpretation. The receiver 

can still obtain useful inspection results, however, by specifying to the foreign inspection service or 

surveyor certain criteria: 

 An adequate number of samples should be chosen at random. 

 Pulp temperatures should be reported. 

 Defects should be carefully described and reported in average percentage terms. 

 The product should be accurately described, e.g., brand markings, type of container, etc. 

 The product, if inspected out of the container, should be properly identified with the 

transport service and container. 

Using Altered or Forged Certificates. The alteration or forgery of any certificate of inspection 

issued under the authority of the USDA is considered a false and misleading statement under 

PACA provisions and is subject to the penalties as severe as license revocation. 

Section 14.11 (b) of the PACA states “Whoever shall falsely make, issue, alter, forge, or 

counterfeit, or cause or procure to be falsely made, issued, altered, forged, or counterfeited, or 

willingly aid, cause, procure or assist in, or be a party to the false making, issuing, altering, 

forging, or counterfeiting of any certificate of inspection issued under authority of this Act, the 

Produce Agency Act of March 3, 1927 (7 U.S.C., sec. 491-497), or any Act making 

appropriations for the Department of Agriculture; or shall utter or publish as true or cause to be 

uttered or published as true any such false, forged, altered, or counterfeited certificate, for a 

fraudulent purpose, shall be guilty of a misdemeanor and upon conviction shall be punished by a 

fine of not more than $500 or by imprisonment for a period of not more than one year, or both, at 

the discretion of the court.” See 7 U.S.C. 499n. 
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Examples of USDA Inspection Certificates 

Signature: 0117-JONES, STEVE S. Oltt: 
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' 
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Example of USDA Grade Standard 
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Good Delivery and Suitable Shipping Condition 

The concept was derived from the FOB term in the PACA Regulations. 

As defined in the Regulations at 7 C.F.R. §46.43(i), FOB means that the produce quoted or sold 

is to be placed free on board the carrier at shipping point, in “suitable shipping condition” 

(discussed in detail below). The buyer assumes all risk of damage and delay in transit not caused 

by the seller, irrespective of how the shipment is billed. The buyer has the right of inspection at 

destination to determine if the produce shipped complied with the suitable shipping condition 

warranty at the time of shipment. 

Where produce is sold FOB, any grade description associated with the produce applies only at 

shipping point, and the seller warrants that the produce is in suitable shipping condition (SSC) to 

reach the agreed contract destination without abnormal deterioration. 

Since fresh produce is inherently perishable, it cannot remain in the same condition forever. 

Therefore, the application of the SSC concept allows for a “normal” amount of deterioration while 

the commodities are in transit. 

The SSC warranty applies to both condition and quality defects combined in a grade specified 

contact, for example U.S. No.1, etc. 

The SSC warranty applies to condition defects only in a “No-Grade” contract. 

The SSC warranty is applicable only when the ultimate destination has been agreed to. 

The SSC warranty may be voided if the transportation is abnormal. 

Suitable Shipping Condition 

Under PACA Regulation 7 C.F.R. §46.43(j), suitable shipping condition (commonly referred to 

as the warranty of suitable shipping condition) applies only in FOB sales, and means that the 

produce, at the time of shipment, is in a condition which, if handled under normal transportation 

conditions, will assure delivery at the contract destination without abnormal deterioration. 

The suitable shipping condition rule is a requirement that cuts in two directions. For instance, it 

is not enough that a commodity sold FOB, U.S. No. 1 actually be U.S. No. 1 at time of shipment. 

It also must be in such condition at the time of shipment that it will make good delivery. It is 

entirely possible that a commodity grading U.S. No. 1 at the time of shipment, and delivered 

under normal transportation conditions, will not make good delivery at destination. By the same 

token, the inherently perishable nature of commodities subject to the Act dictates that a 

commodity cannot remain forever in the same condition. Thus, a “normal” amount of 

deterioration is allowed. For all commodities other than lettuce, what is “normal” or “abnormal” 

deterioration is judicially determined. The USDA has, however, published good arrival 

guidelines for most fruits and vegetables, which reflect the additional condition defect 

allowances for a 5-day cross country trip. 

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Where the issue of abnormality of transportation service and conditions is not raised either by 

evidence on the face of the record or by a party, the transportation is assumed to be normal; but 

where the issue is raised, a buyer who accepts a commodity has the burden of proving that the 

transportation service and condition were normal. However, where an effective rejection is 

made of a commodity, the seller has the burden of proving that the transportation service or 

conditions were abnormal so as to void the suitable shipping condition warranty. If a temperature 

recorder was placed in the conveyance vehicle at shipping point, a negative inference as to 

conditions in transit may be drawn where the buyer, who bears the risk of damage in transit, is 

unable to locate the temperature recorder at destination. 

Good Delivery Standards 

“Good delivery” is a term used in connection with FOB contracts for the purchase and sale of 

perishable agricultural commodities and means that the commodities meet the contract 

requirements at the time of loading and, if the shipment is handled under normal transportation 

and conditions, will arrive at the contract destination without abnormal deterioration. Whether 

the commodities make “good delivery” at the contract destination is determined on a case-by- case 

basis for all commodities other than lettuce, which has a specific good delivery standard. See 7 

C.F.R. §46.44. 

If the contract of sale calls for a specific U.S. Grade (e.g., “U.S. No. 1,” “U.S. No. 2,” or “U.S. 

Extra Fancy”), published U.S. Grade Standards will determine whether the commodity meets the 

quality requirements of the specified grade, and the total quality and condition defects may not 

exceed the allowances provided in the good arrival guidelines. 

Many receivers have the produce inspected at destination based on the U.S. No. 1 Grade, 

regardless of whether a U.S. Grade was specified in the contract of sale. If the contract of sale 

does not specify a U.S. Grade, only the condition defects disclosed by a USDA inspection will 

be used to determine whether the commodity meets good arrival guidelines. 

Depending upon the grade specified under the contract, timely destination inspections will 

disclose whether the shipment either met or failed to meet the contracted for requirements (i.e., 

whether seller fulfilled its warranty of suitable shipping condition), or whether a transportation 

problem is indicated. 

Foreign Survey Results Important in Breach of Contract Claims Involving 

Exported Produce 

As U.S. exports of fresh and frozen fruits and vegetables have increased over time, we have seen 

a corresponding increase in the number of claims filed under the PACA involving contract 

disputes of exported produce. These disputes generally involve produce that shows abnormal 

deterioration following arrival at the contract destination. The foreign receiver then seeks to 

recover damages, which it claims resulted from the seller’s failure to ship produce that was in 

suitable shipping condition. When the exporter withholds payment from its supplier, the supplier 

files a PACA complaint. Since government inspections cannot be obtained in most foreign 

countries, the outcome of the claim is often dependent upon the results of an inspection made by 

a foreign surveyor. These reports are often incomplete and poorly drafted, causing major losses 

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to firms that might otherwise successfully establish a claim. Survey reports should contain the 

following information in order to have an influence on the outcome of a PACA claim: 

 The date when the shipment arrived at destination and when it was made accessiblefor 

survey must be stated in the report. 

 The date the survey was performed must be in the report, and must be distinguished from 

the date the report was prepared. 

 The number of packages present and available for survey should be recorded. 

 All label information and markings on the packages (such as Lot Numbers) should be 

recorded. 

 The pulp temperature of the produce should be taken in random places, and the report 

should indicate where temperatures were taken. The report should also note the ranges of 

the temperatures recorded. 

 Sampling procedures should be described. The report must reflect that sampleswere 

randomly selected and consisted of 1 percent or more of the shipment. 

 Each defect found must be described in order to give a verbal picture of the defect. For 

example, instead of describing a commodity as affected by rot or decay, the survey 

should describe it as “...affected by decay, in the form of .25 to .50 inch black spots with 

mold sometimes in the middle of the spots.” Or, instead of using the term “poor quality,” 

the survey should state “...affected by shallow scars ranging from .25 to .75 inch in 

length.” 

 The percentage of the fruit or vegetables affected by each defect must be stated. For 

example, “6 to 14 percent, average 9 percent, of [commodity] in each container are 

affected by decay in the form .25 to .75 inch blue-green to black irregular shaped spots,” 

or “3 to 9 percent, average 6 percent of the fruit in each container are affected by deep 

scaring and the scars range from .50 to .75 inch in length.” 

 The surveyor should secure temperature-recording devices, and a clear, legible, and 

complete copy of the chart should be attached to the report. If this is not possible, the 

survey should recount efforts to secure the charts, and state why the charts were not 

obtained. 

The omission of any one of these items may cause the survey to be unusable. Fruit and vegetable 

exporters may wish to supply their foreign customers with this list of elements so that they can 

ensure that the surveyors understand the specific information needed to support a claim under the 

PACA. 

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Acceptance and Rejection 

Acts of Acceptance 

A receiver who does not communicate an effective rejection is generally deemed to have 

accepted the commodity in question. Acceptance also occurs when the receiver: 

 Diverts the load to a destination other than that called for in the original contract; or 

 Unloads the commodity from the transport vehicle. 

A single shipment of one or more perishable agricultural commodities tendered for delivery on a 

single contract is considered a “commercial unit,” which, according to section § 46.43 (ii) of the 

PACA regulations, must be accepted or rejected in its entirety. This means that if a receiver 

wishes to reject a load that it sold to multiple customers, it will be necessary for it to do so when 

the product arrives at the first customer’s place of business. This is because under the contract 

terms between the shipper and the receiver, the load would be considered one commercial unit, 

so if the first lot tendered for delivery is accepted, that acceptance functions as acceptance of the 

whole load under the contract terms between the receiver and the shipper. Any subsequent 

rejection of a portion of the load by any of the receiver’s customers could conceivably be 

effective as between said customers and the receiver, but would not be effective as a rejection 

between the receiver and the original shipper. 

Again, in order for a receiver with multiple customers to correctly reject a commercial unit, it 

would be necessary for it to have the entire load inspected at the first drop, and then reject or 

accept the whole load based upon the results of the inspection. 

Exception: If the lots sold by the receiver to its customers are manifested and billed individually 

by the shipper to the receiver, precedent cases have established that the receiver can reject the 

non-conforming lot, provided the rejection is effective. 

In situations where a receiver diverts a load from its original destination, the diversion would 

generally constitute acceptance. As such, a rejection of the commodity by the receiver could not 

be effective. Rather, any rejections under such circumstances would generally be illegal. 

Likewise, a receiver that offloads a commodity (or commodities) constituting a commercial unit 

for anything other than making it accessible for the purpose of obtaining an inspection is deemed 

to have accepted the commodity. As such, any subsequent rejection would be ineffective. As set 

forth in § 46.2(bb) of the PACA Regulations, any rejection following an act of acceptance would 

be a rejection “without reasonable cause.” 

General Legal Consequences of Acceptance of Goods. Uniform Commercial Code (UCC) 

§ 2-607 provides the following legal consequences of a receiver’s acceptance: 

 The buyer must pay the contracted price for the accepted goods. 

 The buyer loses the right to reject. 

 Time starts to pass within which the buyer must complain of a breach or be barred from 

any remedy. 

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 The burden shifts to the receiver to establish a breach of contract. 

Revocation of Acceptance 

A revocation of acceptance is a combination of the buyer’s refusal to keep the delivered goods 

and its notification to the seller that the buyer will not keep them. Said refusal comes after the 

buyer has accepted by allowing the time for rejection to pass (J. White & R. Summers, 

Handbook of Law Under the Uniform Commercial Code, Second Edition (St. Paul, 

Minnesota: West Publishing Co., 1980) 8:293). 

UCC section 2-608 places the following conditions upon the receiver’s ability to revoke its 

acceptance: 

 Revocation must occur within a “reasonable” amount of time after the buyer discovers (or 

should have discovered) the grounds for it and before any substantial change in the 

condition of the goods which is not caused by their own defects. 

 Acceptance must have been based on (1) the difficulty of discovering the non- conformity 

prior to acceptance; (2) the seller’s assurances that the produce conformed to the contract 

specifications; or (3) the buyer’s assumption that the seller would fix the problem in a timely 

manner. 

A buyer who properly revokes acceptance has the same rights and duties with regard to the 

goods as if it had rejected them. 

Procedurally Effective Versus Ineffective Rejections 

Regardless of whether or not the shipper (seller) has breached the contract of sale, the shipper 

has a positive duty to take back the rejected goods where there has been an effective (prompt and 

clear) rejection by the receiver (buyer). If the rejection is later found to be wrongful, the receiver 

(buyer) could be held liable to the seller for the original contract price and incidental expenses, 

less any resale proceeds received by the shipper (seller). 

A procedurally effective rejection is established when the following elements are met: 

 The receiver rejects within a “reasonable time,” i.e., for trucklot shipments – 8 hours after 

the receiver (or a responsible representative) is given notice of arrival and produce is 

made accessible for inspection; for boat shipments – not to exceed 24 hours after the 

produce is unloaded and made accessible for inspection and the receiver is given notice 

thereof; and for rail shipments – not to exceed 24 hours after notice of arrival and the car 

has been placed in a location where the produce is made accessible for inspection. 

 In accordance with section 46.2(cc)(4) of the PACA regulations, if a shipment arrives on a 

non-work day or after the close of regular business hours on work days when a 

representative of the receiver who has the authority to reject a shipment is not present, 

non-working hours preceding the start of regular business hours on the next working day 

are not to be included in calculating the 8- or 24-hour “rejection window.” 

 In situations where the commodity is made available for inspection immediately following 

arrival, but an inspector is not available, the 8-hour time period to reject is extended until 

the Federal inspection is made, plus 2 hours after the report is made available to thereceiver. 

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 Again, however, the receiver must inform the shipper during the initial 8- or 24-hour time 

period after arrival of the commodity that (a) the load arrived with problems; (b) an inspection 

has been requested; and (c) it intends to reject the shipment as soon as an inspection can be 

made, depending on the inspection results. 

 In the event a receiver does not notify the shipper of any problems regarding a load of 

produce which it has purchased until after the inspection is completed, and following the 

expiration of the initial 8- or 24-hour applicable time period, any subsequent rejection by the 

receiver would be rendered procedurally ineffective. Consequently, the receiver is deemed 

to have accepted the commodity. 

“Rightful” Versus “Wrongful” Rejections 

In a “best-case” scenario, a receiver who effectively rejects a load meets the following criteria: 

 The receiver gives notice of the rejection to the shipper within a reasonable time, 8 hours 

if by truck and 24 hours if by boat or rail. 

 Terms of said rejection are communicated to the shipper in clear and unmistakable terms. 

But, is an effective rejection essentially a rightful rejection? 

Not necessarily. While there is a positive duty on a shipper to take back rejected goods if an 

effective (prompt and clear) rejection is made, it is possible that the receiver rejecting the 

commodity may not be able to subsequently establish that a breach of contract has occurred. 

Example -

(1) The receiver communicates a rejection to the shipper and obtains an inspection that does not 

indicate a breach of contract; or 

(2) The receiver fails to obtain an inspection of the commodity to support the rejection. 

In short, a seller cannot “refuse to accept” an effective rejection. 

However, if a receiver effectively rejects a commodity, but fails to obtain an inspection or some 

form of evidence to establish a breach of contract, said rejection would in most cases be 

considered to have been substantively wrongful, for which the shipper would be entitled to 

provable damages. 

Responsibilities After Rejection 

Assuming that a receiver (buyer) makes an effective and rightful rejection, and the shipper 

(seller) refuses to take possession of the rejected goods, the receiver should dispose of such 

goods for the account of the shipper, and would only be held to “good faith” standards in making 

the resale in accordance with UCC § 2-603. 

Under the following circumstances, however, the receiver would have an obligation to do more 

than hold the rejected goods for a sufficient amount of time for the shipper to remove them 

(NOTE: Each of the following conditions must be met): 

 The shipper has no agent or place of business at the market of rejection; 

 The receiver is a merchant; and 

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 The goods are in the receiver’s possession or control. 

In the event that each of the above conditions is met, the receiver is responsible for following 

reasonable instructions issued by the shipper, and in the absence of such instructions, selling the 

goods for the shipper’s account (UCC § 2-602 and § 2-603). 

A shipper (seller) does not, however, have to take back goods which are ineffectively rejected. 

An ineffective rejection has the same legal consequence as acceptance. Consequently, legal title 

is not revested in the seller. 

There have been situations, however, where a shipper may offer to conditionally accept a 

receiver’s ineffective rejection; that is, the shipper agrees to accept the receiver’s rejection with 

strings attached. If the receiver agrees to the shipper’s conditional acceptance of the rejection, a 

positive duty would then be imposed upon the shipper to retake possession and dispose of the 

rejected commodity, and the receiver would be absolved of any subsequent liability. 

In the event that a receiver (buyer) refuses to sell the commodity that it is ineffectively rejecting, 

the shipper (seller) would want to handle the goods for the receiver’s account in order to mitigate 

its damages. A shipper (seller) who does so, however, should exercise care to make clear that by 

disposing of the goods, it is not accepting the receiver’s (buyer’s) ineffective rejection. 

Frequently Cited Sections of the Uniform Commercial Code (UCC) 

§ 2-602. Manner and Effect of Rightful Rejection 

(1) Rejection of goods must be within a reasonable time after their delivery or 

tender. It is ineffective unless the buyer seasonably notifies theseller. 

(2) Subject to the provisions of the two following sections on rejected goods (Sections 2-

603 and 2-604), 

(a) After rejection any exercise of ownership by the buyer with respect to any 

commercial unit is wrongful as against the seller; and 

(b) If the buyer has before rejection taken physical possession of goods in which 

he does not have a security interest under the provisions of this Article (subsection 

(3) of Section 2-711), he is under a duty after rejection to hold them with 

reasonable care at the seller’s disposition for a time sufficient to permit the seller 

to remove them; but 

(c) The buyer has no further obligations with regard to goods rightfully rejected. 

(3) The seller's rights with respect to goods wrongfully rejected are governed by the 

provisions of this Article on seller's remedies in general (Section 2-703). 

§ 2-603. Merchant Buyer’s Duties as to Rightfully Rejected Goods 

(1) Subject to any security interest in the buyer (subsection (3) of Section 2-711), when 

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the seller has no agent or place of business at the market of rejection a merchant buyer is 

under a duty after rejection of goods in his possession or control to follow any reasonable 

instructions received from the seller with respect to the goods and in the absence of such 

instructions to make reasonable efforts to sell them for the seller's account if they are 

perishable or threaten to decline in value speedily. Instructions are not reasonable if on 

demand indemnity for expenses is not forthcoming. 

(2) When the buyer sells goods under subsection (1), he is entitled to reimbursement 

from the seller or out of the proceeds for reasonable expenses of caring for and selling 

them, and if the expenses include no selling commission then to such commission as is 

usual in the trade or if there is none to a reasonable sum not exceeding ten percent on 

the gross proceeds. 

(3) In complying with this section the buyer is held only to good faith and good faith 

conduct hereunder is neither acceptance nor conversion nor the basis of an action for 

damages. 

§ 2-604. Buyer’s Options as to Salvage of Rightfully Rejected Goods 

Subject to the provisions of the immediately preceding section on perishables if the seller 

gives no instructions within a reasonable time after notification of rejection the buyer 

may store the rejected goods for the seller’s account or reship them to him or resell them 

for the seller’s account with reimbursement as provided in the preceding section. Such 

action is not acceptance or conversion. 

§ 2-606. What Constitutes Acceptance of Goods 

(1) Acceptance of goods occurs when the buyer 

(a) After a reasonable opportunity to inspect the goods signifies to the seller that 

the goods are conforming or that he will take or retain them in spite of their nonconformity; or 

(b) Fails to make an effective rejection (subsection (1) of Section 2-602), but 

such acceptance does not occur until the buyer has had a reasonable 

opportunity to inspect them; or 

(c) Does any act inconsistent with the seller's ownership; but if such act is 

wrongful as against the seller it is an acceptance only if ratified byhim. 

(2) Acceptance of a part of any commercial unit is acceptance of that entire unit. 

§ 2-607. Effect of Acceptance; Notice of Breach; Burden of Establishing 

Breach After Acceptance; Notice of Claim or Litigation to Person 

Answerable Over 

(1) The buyer must pay at the contract rate for any goods accepted. 

(2) Acceptance of goods by the buyer precludes rejection of the goods accepted and if 

made with knowledge of a non-conformity cannot be revoked because of it unless the 

acceptance was on the reasonable assumption that the non-conformity would be 

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seasonably cured but acceptance does not of itself impair any other remedy provided by 

this Article for non-conformity. 

(3) Where a tender has been accepted 

(a) The buyer must within a reasonable time after he discovers or should have 

discovered any breach notify the seller of breach or be barred from any remedy; 

and 

(b) If the claim is one for infringement or the like (subsection (3) of Section 2-

312) and the buyer is sued as a result of such a breach he must so notify the 

seller within a reasonable time after he receives notice of the litigation or be 

barred from any remedy over for liability established by the litigation. 

(4) The burden is on the buyer to establish any breach with respect to the goods accepted. 

(5) Where the buyer is sued for breach of a warranty or other obligation for which his 

seller is answerable over 

(a) He may give his seller written notice of the litigation. If the notice states that 

the seller may come in and defend and that if the seller does not do so he will be 

bound in any action against him by his buyer by any determination of fact 

common to the two litigations, then unless the seller after seasonable receipt of 

the notice does come in and defend he is so bound. 

(b) If the claim is one for infringement or the like (subsection (3) of Section 2-

312) the original seller may demand in writing that his buyer turn over to him 

control of the litigation including settlement or else be barred from any remedy 

over and if he also agrees to bear all expense and to satisfy any adverse judgment, 

then unless the buyer after seasonable receipt of the demand does turn over control 

the buyer is so barred. 

(6) The provisions of subsections (3), (4) and (5) apply to any obligation of a buyer to 

hold the seller harmless against infringement or the like (subsection (3) of Section 2-

312). 

§ 2-608. Revocation of Acceptance in Whole or in Part 

(1) The buyer may revoke his acceptance of a lot or commercial unit whose nonconformity substantially impairs its value to him if he has accepted it 

(a) On the reasonable assumption that its non-conformity would be cured and it 

has not been seasonably cured; or 

(b) Without discovery of such non-conformity if his acceptance was reasonably 

induced either by the difficulty of discovery before acceptance or by the seller’s 

assurances. 

(2) Revocation of acceptance must occur within a reasonable time after the buyer 

discovers or should have discovered the ground for it and before any substantial 

change in condition of the goods which is not caused by their own defects. It is not 

effective until the buyer notifies the seller of it. 

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(3) A buyer who so revokes has the same rights and duties with regard to the goods 

involved as if he had rejected them. 

(4) If a buyer uses the goods after a rightful rejection or justifiable revocation of 

acceptance, the following rules apply: 

(a) Any use by the buyer that is unreasonable under the circumstances is 

wrongful as against the seller and is an acceptance only if ratified by the 

seller. 

(b) Any use of the goods that is reasonable under the circumstances is not 

wrongful as against the seller and is not an acceptance, but in an appropriate 

case the buyer is obligated to the seller for the value of the use to the buyer. 

Frequently Cited Sections of the PACA Regulations 

46.2(bb) Reject without reasonable cause means in connection with purchases, 

consignments, or joint account transactions: 

 Refusing or failing without legal justification to accept produce within a 

reasonable time. 

 Advising the seller, shipper, or his agent that produce, complying with 

contract, will not be accepted. 

 Indicating an intention not to accept produce through an act or 

failure to act inconsistent with the contract; or 

 Any rejection following an act of acceptance. 

46.2(cc) Reasonable Time, as used in paragraph (bb) of this section, means: 

 For frozen fruits and vegetables with respect to rail shipments, 48 hours after 

notice of arrival and the produce is made accessible for inspection, and with 

respect to truck shipments, not to exceed 12 hours after the receiver or a 

responsible representative is given notice of arrival and the produce is made 

accessible for inspection; 

 For fresh fruits and vegetables with respect to rail shipments, not to exceed 

24 hours after notice of arrival and the car has been placed in a location 

where the produce is made accessible for inspection; and with respect to 

truck shipments, not to exceed 8 hours after the receiver or a responsible 

representative is given notice of arrival and the produce is made accessible 

for inspection; and, with respect to boat shipments, not to exceed 24 hours 

after the produce is unloaded and made accessible for inspection and the 

receiver is given notice thereof; 

 If, within the applicable period, the receiver cannot make a thorough 

inspection due to adverse weather condition or applies for but cannotobtain 

Federal inspection before the end of this period, and so notifies the 

consignor within the applicable period, the period shall be extended until 

weather conditions permit inspection or until Federal inspection is made, as 

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the case may be, plus two hours after either an oral or written report of the 

results of such inspection is made available to the receiver; and 

 In computing the time periods specified above, (i) for shipments arriving on 

non- work days or after the close of regular business hours on work days when 

a representative of the receiver having authority to reject shipments is not 

present, non- working hours preceding the start of regular business hours on 

the next working day shall not be included; and (ii) for shipments arriving 

during regular business hours when a representative of the receiver having 

authority to reject shipments customarily is present, the period shall run 

without interruption except that, for shipments arriving less than two hours 

before the close of regular business hours, the unexpired balance of the time 

period shall be extended and run from the start of regular business hours on 

the next working day. 

46.2(dd) Acceptance means: 

 Any act by the consignee signifying acceptance of the shipment, including 

diversion or unloading; 

 Any act by the consignee which is inconsistent with the consignor’s 

ownership, but if such act is wrongful against the consignor it is acceptance 

only if ratified by him; or 

 Failure of the consignee to give notice of rejection to the consignor 

within a reasonable time as defined in paragraph (cc) of thissection: 

Provided, That 

acceptance shall not affect any claim for damages because of failure of the 

produce to meet the terms of the contract. 

46.43(ii) Commercial Unit means: 

 A single shipment of one or more perishable agricultural commodities 

tendered for delivery on a single contract, such commercial unit must be 

accepted or rejected in its entirety. Acceptance of a commercial unit doesnot 

modify the parties’ existing contractual rights and responsibilities 

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Misbranding & Misrepresentation 

What is Misbranding? 

Labeling Requirements. Perishable agricultural commodities are not required to be labeled 

under the PACA; however, the PACA does require that any labeling that is used be accurate. 

Responsible growers and shippers have always been deeply concerned with instances of 

misbranding produce. Much of this concern has centered on the misuse of the U.S. grade 

designations and/or the misrepresentation of the state, country or region of origin of the produce. 

Unlike most other agricultural products, fresh fruits and vegetables may be labeled with U.S. 

Grades without official inspection and certification. Those who buy and sell fresh fruits and 

vegetables throughout the marketing chain do so, for the most part, on a good faith basis. 

Persons who knowingly misbrand or misrepresent fruits and vegetables pose a serious threat to 

responsible businesses. The ethical trader is placed at a price disadvantage when competing with 

misrepresented produce and the disadvantage carries all the way through to the ultimate 

consumer who pays for something that he/she does not get. 

What constitutes misbranding? Misrepresentation by word, act, mark, stencil, label, statement, 

or deed, of the character, kind, grade, quality, quantity, size, pack, weight, condition, degree, or 

maturity, or State, country, or region of origin of any perishable agricultural commodity 

received, shipped, sold, or offered to be sold in interstate or foreign commerce constitutes 

misbranding. PACA officials have the authority to examine the records of any licensee to 

determine the ownership, control, packer, or State, country or region of origin, of any perishable 

agricultural commodity that is suspected of being misbranded. 

What happens when it is determined that a lot is misbranded? The responsible firm must 

make arrangements to correct the markings on the container prior to resale. An unintentional and 

inadvertent misbranding will typically be settled informally either with a written warning or a 

monetary penalty. The penalty is based on the circumstances surrounding the violation and a 

firm’s misbranding or misrepresentation history. 

Schedule of Warnings and Penalties 

Warning Letters. When informal settlement of liability is appropriate, violators are given two 

written warnings and an opportunity to take preventative action. Warning letters include an 

explanation of the requirements of the Act and recommendations of actions that the violator can 

take to avoid future violations. 

Informal Sanctions. Violations subsequent to the sending of the warning letters referred to 

above, other than flagrant violations, may be settled informally. The informal procedure permits 

the violator to resolve the matter in lieu of a formal proceeding by paying a monetary penalty 

pursuant to a schedule set forth in section 46.45(c)(1) of the Regulations under the PACA. 

Formal Sanctions. In cases involving repeated or flagrant violations of the Act, formal 

proceedings seeking the suspension or revocation of the violator's license may be instituted. 

The best way to safeguard against misbranding violations is to make sure that all descriptive 

factors (i.e., grade, size, origin, weight, count, etc.) are covered by a USDA Positive Lot 

Identification (PLI) inspection on all commodities prior to shipment. Securing this type of 

inspection provides the shipper with evidence of compliance. It also provides assurance to 

the buyer that the lot is properly marked. 

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Three Primary Rules 

Traders who adhere to the following rules are less likely to run afoul of the PACA or be 

involved in disputes with other traders: 

1. Say What You Mean. Use trading terms (e.g., FOB, Delivered, Consigned) 

that are defined by the PACA or have been discussed and understood by all the 

parties involved in the transaction. 

2. Mean What You Say. Exercise good faith and honesty in your dealings with 

trading partners. 

3. Confirm It! Use the means available to you to reduce the terms of your 

contract to writing (e-mail, fax, overnight mail, etc.). 

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(Nov. - March); Pacific Standard Time (April - Oct.) 

Regional Director, Patrick P. Romero 

Email: Patrick.Romero@usda.gov 

Assistant Regional Director, Brian D. Wright 

Email: BrianD.Wright@usda.gov 

U.S. Department of Agriculture 

AMS, Fair Trade Practices Program, PACA Division 

Tucson Federal Building, Room 7 T 

300 West Congress Street 

Tucson, AZ 85701-1319 

Telephone: 800-495-7222 (toll free) Ext. #5 

520-879-4361 (local) 

Fax: 520-670-4798 

Office Email: PACAWest@usda.gov 

States and territories served by the Tucson, Arizona office: 

 Arizona 

 Alaska 

 California 

 Colorado 

 Hawaii 

 Idaho 

 Iowa 

 Kansas 

 Minnesota 

 Missouri 

 Montana 

 Nebraska 

 Nevada 

 New Mexico 

 North Dakota 

 Oregon 

 South Dakota 

 Utah 

 Washington 

 Wyoming 

PACA Directory 

NATIONAL HEADQUARTERS 

Business Hours: 8 a.m.- 4:30 p.m. Eastern Standard Time 

Director, Judith Rudman 

Email: Judith.Rudman@usda.gov 

Deputy Director, Travis Hubbs 

Email: Travis.Hubbs@usda.gov 

U.S. Department of Agriculture AMS, 

Fair Trade Practices Program, 

PACA Division 1400 Independence Avenue, SW 

Room 1510-S 

Washington, DC 20250-0242 

Telephone: 800-495-7222 (toll free) 

202-720-4180 

Fax: 202-690-4413 

Dispute Resolution Branch 

Chief, John Koller 

Email: PACADispute@usda.gov 

Telephone: 202-720-2890 

Investigative Enforcement Branch 

Chief, Travis Hubbs 

Email: Travis.Hubbs@usda.gov 

National License Center 

Business Hours: 7 a.m. - 5 p.m. Eastern Standard Time 

Chief, Mary Mitchell 

Email: MaryJ.Mitchell@usda.gov 

U.S. Department of Agriculture 

AMS, Fair Trade Practices Program, 

PACA Division National License Center 

1400 Independence Avenue, SW Room 1510-S 

Washington, DC 20250-0242 

Telephone: 800-495-7222, Ext. 1 (toll free) 

Fax: 202-260-8575 

Office Email: PACALicense@usda.gov 

WESTERN REGIONAL OFFICE 

Business Hours: 8 a.m.- 4:30 p.m. Mountain Standard Time 
Fair Trade Practices Program PACA Training Workbook 

81 

CENTRAL REGIONAL OFFICE 

Business Hours: 8 a.m. - 4:30 p.m. Central Standard 

Time 

Regional Director, Jeffrey R. Spradlin 

Email: Jeffrey.Spradlin@usda.gov 

Assistant Regional Director, Dean K. Johnson 

Email: Dean.Johnson2@usda.gov 

U.S. Department of Agriculture 

AMS, Fair Trade Practices Program, PACA 

Division 819 Taylor Street Suite 8B02 

Fort Worth, Texas 76102-9727 

Telephone: 800-495-7222 (toll free) Ext. #4 

817- 978-0777 (local) 

Fax: 817- 978-0786 

Office Email: PACACentral@usda.gov 

States and territories served by the Fort Worth, Texas 

office: 

 Alabama 

 Arkansas 

 Florida 

 Illinois 

 Indiana 

 Kentucky 

 Louisiana 

 Michigan 

 Mississippi 

 Oklahoma 

 Tennessee 

 Texas 

 Wisconsin 

EASTERN REGIONAL OFFICE 

Business Hours: 8 a.m. - 4:30 p.m. Eastern Standard Time 

Regional Director, Basil W. Coale 

Email: Basil.Coale@usda.gov 

Assistant Regional Director, Vacant 

Email: 

U.S. Department of Agriculture 

AMS, Fair Trade Practices Program, PACA Division 

100 Riverside Parkway, Suite 101 

Fredericksburg, VA 22406 

Telephone: 800-495-7222 (toll free) Ext. #3 

540-376-6022 (local) 

Fax: 540-373-2690 

Office Email: PACAEast@usda.gov 

States and territories served by the Fredericksburg, Virginia office: 

 Connecticut 

 Delaware 

 District of Columbia 

 Georgia 

 Guam 

 Maine 

 Maryland 

 Massachusetts 

 New Hampshire 

 New Jersey 

 New York 

 North Carolina 

 Ohio 

 Pennsylvania 

 Puerto Rico 

 Rhode Island 

 South Carolina 

 U.S. Virgin Islands 

 Virginia 

 Vermont 

 West Virginia 
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Trade Practices Program 
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For questions or comments about this publication, please contact: 

PACA Division 

1400 Independence Ave. SW, Room 1510 

Washington, D.C. 20250-0242 

1-800-495-PACA (1-800-495-2272)

Last updated: February, 2020