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[Federal Register: June 8, 2010 (Volume 75, Number 109)]
[Proposed Rules]               
[Page 32306-32309]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08jn10-27]                         

========================================================================
Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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[[Page 32306]]

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

[Document Number AMS-FV-09-0047]

7 CFR Part 46

 
Perishable Agricultural Commodities Act: Impact of Post-Default 
Agreements on Trust Protection Eligibility

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: The Department of Agriculture (USDA) is proposing to amend the 
regulations under the Perishable Agricultural Commodities Act (PACA) in 
response to concerns raised by the industry that sellers may lose their 
status as trust creditors when they agree orally or in writing, after 
default on payment, to accept payments over time from financially 
troubled buyers. The amendment's purpose is to provide greater 
direction to the industry on maintaining trust protection after a buyer 
has made or is attempting to make partial payments.
    Specifically, if there is a default in payment as defined in the 
reguations, the amendment would allow a seller, supplier, or agent who 
has met the eligibility requirements to enter into a written scheduled 
payment agreement for payment of the past due amount while maintaining 
its trust eligibility. The length of such an agreement for payment of 
the past due amount, while still maintaining eligibility for trust 
protection, could not extend beyond 180 days from the default date. In 
addition, the unpaid seller, supplier, or agent would be required to 
cease all collection of past due amounts under a written scheduled 
payment agreement if the buyer enters into bankruptcy or if the buyer 
is the respondent in a civil trust action. Any remaining unpaid amounts 
subject to the scheduled payment agreement would continue to qualify 
for trust protection.

DATES: Written or electronic comments received by August 9, 2010 will 
be considered prior to issuance of a final rule.
Additional Information or Comments: You may submit written or 
electronic comments to PACA Trust Post-Default Comments, AMS, F&V 
Programs, PACA Branch, 1400 Independence Avenue SW., Room 2095-S, Stop 
0242, Washington, DC 20250-0242; fax: 202-720-8868; or Internet: http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Phyllis L. Hall or Josephine E. 
Jenkins, Trade Practices Section, 202-720-6873.

SUPPLEMENTARY INFORMATION: 

Background of PACA and Trust Provisions

    The Perishable Agricultural Commodities Act (PACA) was enacted in 
1930 to promote fair trading in 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 trade practices. The 
PACA also provides a forum to adjudicate or mediate commercial 
disputes. Licensees who violate the PACA may have their license 
suspended or revoked, and individuals determined to be responsibly 
connected to such licensees are restricted from employment or operating 
in the produce industry for a period of time.
    Growing, harvesting, packing, and shipping perishables involve 
risk: Costs are high, capital is tied up in farmland and machinery, and 
returns are delayed until the crop is sold. Because of the highly 
perishable nature of the commodities and distance from selling markets, 
produce trading is fast moving and often informal. Transactions are 
consummated in a matter of minutes, frequently while the commodities 
are en route to their destination. Under such conditions, it is often 
difficult to check the credit rating of the buyer.
    Congress examined the sufficiency of the PACA provisions fifty 
years after its inception and determined that prevalent financing 
practices in the perishable agricultural commodities industry were 
placing the industry in jeopardy. Particularly, Congress focused on the 
increase in the number of buyers who failed to pay, or were slow in 
paying their suppliers and the impact of such payment practices on 
small suppliers who could not withstand a significant loss or delay in 
receipt of monies owed. Congress was also troubled by the common 
practice of produce buyers granting liens on their inventories to their 
lenders, which covered all proceeds and receivables from the sales of 
perishable agricultural commodities, while the produce suppliers 
remained unpaid. This practice elevated the lenders to a secured 
creditor position in the case of the buyer's insolvency, while the 
sellers of perishable agricultural commodities remained unsecured 
creditors with little or no legal protection or means of recovery in a 
suit for damages.
    Deeming this situation a ``burden on commerce,'' Congress amended 
the PACA in 1984 to include a statutory trust provision, which provides 
increased credit security in the absence of prompt payment for 
perishable agricultural commodities. The 1984 amendment to the PACA 
states in relevant part:

    It is hereby found that a burden on commerce in perishable 
agricultural commodities is caused by financing arrangements under 
which commission merchants, dealers, or brokers, who have not made 
payment for perishable agricultural commodities purchased, 
contracted to be purchased, or otherwise handled by them on behalf 
of another person, encumber or give lenders a security interest in 
such commodities, or on inventories of food or other products 
derived from such commodities, and any receivables or proceeds from 
the sale of such commodities or products, and that such arrangements 
are contrary to the public interest. This subsection is intended to 
remedy such burden on commerce in perishable agricultural 
commodities and to protect the public interest.

(7 U.S.C. 499e(c)(1)).
    Under the 1984 amendment, perishable agricultural commodities, 
inventories of food or other derivative products, and any receivables 
or proceeds from the sale of such commodities or products, are to be 
held in a non-segregated floating trust for the benefit of unpaid 
sellers. This trust is created by operation of law upon the purchase of 
such goods, and the produce buyer is the statutory trustee for the 
benefit of the produce seller. To preserve its trust benefits, the 
unpaid supplier, seller or agent must give the buyer written notice of 
intent to preserve its rights under the trust within

[[Page 32307]]

30 calendar days after payment was due. Alternatively, as provided in 
the 1995 amendments to the PACA, a PACA licensee may provide notice of 
intent to preserve its trust rights by including specific language as 
part of its ordinary and usual billing or invoice statements.
    The trust is a non-segregated ``floating trust'' made up of all of 
a buyer's commodity-related assets, under which there may be a 
commingling of trust assets. There is no need to identify specific 
trust assets through each step of the accrual and disposal process. 
Since commingling is contemplated, all trust assets would be subject to 
the claims of unpaid sellers, suppliers and agents to the extent of the 
amount owed them. As each supplier gives ownership, possession, or 
control of perishable agricultural commodities to a buyer, and 
preserves its trust rights, that supplier becomes a participant in the 
trust. Section 5(c)(2) of the PACA states in relevant part:

    Perishable agricultural commodities received by a commission 
merchant, dealer, or broker in all transactions, and all inventories 
of food or other products derived from perishable agricultural 
commodities, and any receivables or proceeds from the sale of such 
commodities or products, shall be held by such commission merchant, 
dealer, or broker in trust for the benefit of all unpaid suppliers 
or sellers of such commodities or agents involved in the 
transaction, until full payment of the sums owing in connection with 
such transactions has been received by such unpaid suppliers, 
sellers, or agents.

(7 U.S.C. 499e(c)(2)). Thus, trust participants remain trust 
beneficiaries until they have been paid in full.
    Under the statute, the District Courts of the United States are 
vested with jurisdiction to entertain actions by trust beneficiaries to 
enforce payment from the trust. Thus, in the event of business failure, 
produce creditors may enforce their rights by suing the buyer in 
federal district court. It is common in this type of trust enforcement 
action for unpaid sellers to seek a temporary restraining order (TRO) 
that freezes the bank accounts of a buyer until the trust creditors are 
paid. Many unpaid sellers have found this a very effective tool to 
recover payment for produce. Often, a trust enforcement action with a 
TRO will be the defining moment for the future of a debtor firm. As the 
TRO freezes the bank accounts of the debtor, the debtor must either pay 
the trust creditors or attempt to operate a business without access to 
its bank accounts. This aggressive course of action by unpaid sellers 
is generally pursued when the sellers are concerned that trust assets 
are being dissipated.
    In the event of a bankruptcy by a produce buyer, that is, the 
produce ``debtor,'' the debtor's trust assets are not property of the 
bankruptcy estate and are not available for distribution to secured 
lenders and other creditors until all valid PACA trust claims have been 
satisfied. The trust creditors can petition the court for the turnover 
of the debtor's trust-related assets or alternatively request that the 
court oversee the liquidation of the inventory and collection of the 
receivables and disburse the trust proceeds to qualified PACA trust 
creditors.
    Because of the statutory trust provision, produce creditors, 
including sellers outside the United States, have a far greater chance 
of recovering money owed them when a buyer goes out of business. 
However, because attorney's fees are incurred in these kinds of suits 
it is not always practical to pursue small claims that remain unpaid. 
Nonetheless, as a result of the PACA trust provisions, unpaid sellers, 
including those outside the United States, have recovered hundreds of 
millions of dollars that most likely would not otherwise have been 
collected.
    The PACA trust provisions protect not only growers, but also other 
firms trading in fruits and vegetables since each buyer in the 
marketing chain becomes a seller in its own turn and can preserve its 
own trust assets accordingly. Because each creditor that buys produce 
can preserve trust assets for the benefit of its own suppliers, any 
money recovered from a buyer that goes out of business are passed back 
through preceding sellers until ultimately the grower also realizes the 
financial benefits of the trust provisions. This is particularly 
important in the produce industry due to the highly perishable nature 
of the commodities as well as the many hands such commodities 
customarily pass through to the end customer.
    To gain trust protection under the PACA, the law offers two 
approaches to unpaid sellers. One option allows PACA licensees to 
declare at the time of sale that the produce being sold is subject to 
the PACA trust, providing protection in the event that payment is late 
or the payment instrument is not honored. This option allows PACA 
licensees to protect their trust rights by including the following 
language on invoices or other billing statements:

    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.

(7 U.S.C. 499(c)(4)).
    The second option for a PACA licensee to preserve its trust rights, 
and the sole method for all non-licensed sellers, requires the seller 
to provide a separate, independent notice to the buyer of its intent to 
preserve its trust benefits. The notice must include sufficient details 
to indentify each transaction and be received by the buyer within 30 
days after payment becomes due. Since the 1995 amendment to the PACA, 
the notice is not required to be filed with USDA.
    Under current 7 CFR 46.46(e)(2), only transactions with payment 
terms of 30 days from receipt and acceptance, or less, are eligible for 
trust protection. Section 46.46(e)(1) of the regulations (7 CFR 
46.46(e)(1)) requires that any payment terms beyond ``prompt'' payment 
as defined by the regulations, usually 10 days after receipt and 
acceptance in a customary purchase and sale transaction, must be 
expressly agreed to before entering into the transaction and reduced to 
writing. A copy of the agreement must be retained in the files of each 
party and the payment due date must be disclosed on the invoice or 
billing statement.
    Over the past few years, several federal courts have invalidated 
the trust rights of unpaid creditors because these creditors agreed in 
writing, and in some cases, by oral agreement, after default on 
payment, to accept payments over time from financially troubled buyers. 
In general, these courts have invalidated the seller's previously 
perfected trust rights because the agreements were deemed to extend 
payment terms beyond 30 days.\1\
---------------------------------------------------------------------------

    \1\ See, Paris Foods Corp. v. Foresite Foods, Inc., No. 1:05-cv-
610-WSD, 2007 WL 568841 (N.D. Ga. Feb. 20, 2007); Bocchi Americas 
Assoc. v. Commerce Fresh Mktg., Inc., No. Civ. A. H0402411, 2005 WL 
3164240 (S.D. Tex. Nov. 28, 2005); American Banana Co. v. Republic 
Nat. Bank of N.Y., 362 F.3d 33 (2nd Cir. 2004); Patterson Frozen 
Foods, Inc. v. Crown Foods, Int'l, 307 F.3d 666, 667 (7th Cir. 
2002); Greg Orchards Produce, Inc. v. P. Roncone J., 180 F.3d 888, 
892 (7th Cir. 1999); Idahoan Fresh v. Advantage Produce, Inc., 157 
F.3d 197, 205 (3d Cir. 1998); In re Lombardo Fruit and Produce Co., 
12 F.3d 806, 809 (8th Cir. 1993); and Hull v. Hauser's Foods, Inc., 
924 F.2d 777, 781-82 (8th Cir. 1991).
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    Many within the industry and the USDA Fruit and Vegetable Industry 
Advisory Committee have urged the Secretary to amend the PACA 
regulations to address the impact of post-default agreements on 
eligibility for trust protection. They have voiced concern that the 
uncertainty created by court decisions and the silence of the

[[Page 32308]]

PACA regulations on this matter introduce risk, cost, and unnecessary 
litigation to the marketing chain.
    The court decisions at issue have held that any post-default 
agreement, whether oral or written, that extends the buyer's obligation 
to pay the seller's invoices beyond 30 days after receipt and 
acceptance of the produce abrogates the produce seller's PACA trust 
rights. These decisions have held that (1) when a seller enters into 
the post-default agreement, the agreement modifies any valid payment 
agreement entered into prior to the transaction and therefore voids the 
trust protection,\2\ and (2) post-default agreements that allow for 
installment payments exceeding 30 days from receipt of produce violate 
the PACA prompt-pay provisions.\3\
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    \2\ See American Banana Co., 362 F.3d at 33; Patterson Frozen 
Foods, 307 F.3d at 669.
    \3\ American Banana Co., 362 F.3d at 46.
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    It is our interpretation of the statute and regulations that post-
default agreements are not an extension of the 30-day maximum time 
period for pre-transaction agreements that would result in a waiver of 
the seller's trust rights; post-default payment agreements are an 
attempt to collect a debt. The Secretary has long recognized a 
significant difference between the relative positions of buyers and 
sellers before a transaction, versus their positions after a buyer 
defaults on payment. The Secretary has observed that ``produce sellers 
are not in an equal bargaining position with produce purchasers who are 
in possession of the produce seller's perishable agricultural 
commodities.'' \4\ After a buyer has defaulted on payment, the seller 
is at the buyer's mercy. Any agreement reached after default is not an 
arm's length transaction. The trust is intended to provide protection 
to the unpaid seller whose bargaining position has changed for the 
worse after delivering its produce to a buyer. We do not believe that a 
seller's perfected trust rights should be lost because the seller 
enters into a payment arrangement, in an attempt to collect a debt, 
after the buyer has violated the PACA's prompt payment requirement.
---------------------------------------------------------------------------

    \4\ See In re: Scamcorp, Inc., 57 Agric. Dec. 527, 563 (1998).
---------------------------------------------------------------------------

    When a buyer defaults on payment for produce, it has committed a 
violation of section 2(4) of the PACA (7 U.S.C. 499b(4)). The 
defaulting buyer's license is then subject to suspension or revocation, 
or the buyer may be assessed a civil penalty for its violations of the 
PACA. Allowing a seller who has perfected its trust rights to enter 
into a post-default payment agreement with the defaulting buyer does 
not negate the buyer's violations of the Act. The trust is a means to 
protect the seller's right to payment for produce, not to enforce the 
prompt payment provisions of the Act. The Secretary can still initiate 
an enforcement action against the buyer to seek the appropriate 
sanction for violation of the Act without regard to any post-default 
agreement entered into between the unpaid seller and the buyer in 
default.
    Many of the court decisions at issue have been based on an 
interpretation of Sec.  46.46(e) of the regulations (7 CFR 46.46(e)). 
Section 46.46(e)(1) (7 CFR 46.46(e)(1)) requires that parties who elect 
to use different times for payment must reduce their agreement to 
writing before entering into the transaction. Current Sec.  46.46(e)(2) 
(7 CFR 46.46(e)(2)) states that the maximum time for payment for a 
shipment to which a seller can agree and still qualify for coverage 
under the trust is 30 days after receipt and acceptance of the 
commodities. It is our interpretation that Sec.  46.46(e)(2), like 
(e)(1) of the regulations (7 CFR 46.46(e)(1) and(e)(2)), addresses pre-
transaction agreements only.
    This interpretation of our regulations is consistent with the 
Secretary's unwillingness to impute a waiver of trust rights as 
illustrated in the policies established by the Secretary and upheld by 
the courts in the context of the trust provisions of the Packers and 
Stockyards Act (7 U.S.C. 181 et seq.), after which the PACA trust 
provisions are largely modeled.\5\ In the context of the PACA trust, 
the right to make a claim against the trust are vested in the seller, 
supplier, or agent who has met the eligibility requirements of 
paragraphs (e)(1) and (2) of Sec.  46.46 (7 CFR 46.46(e)(1) and (2)). 
The seller, supplier, or agent remains a beneficiary of the PACA trust 
until the debt owed is paid in full. An agreement to pay the antecedent 
debt in installments is not considered payment in full. Thus, we do not 
believe that a post-default payment agreement should constitute a 
waiver of a seller's previously perfected trust rights.
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    \5\ See, e.g., In re Gotham Provision Co., Inc., 669 F.2d 1000, 
1007 (5th Cir. 1982).
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    Post-default agreements are often the result of a reasonable effort 
by an unpaid seller, supplier, or agent to recover at least some of the 
debt owed to it without incurring the risks and expense of protracted 
litigation. Such agreements should be viewed as a useful tool for 
recovery of unpaid debts, allowing for cure of a temporary payment 
delay as can occur in the produce industry due to the perishable nature 
of the product being bought and sold as well as the often fast-paced 
and short-term fluctuations in market price due to weather, pests, 
transportation, and seasonality of supply and demand.
    While the potential benefits of post-default agreements are real, 
we believe such agreements should be subject to regulatory 
requirements. To ensure that the post-default payment arrangement does 
not extend beyond a reasonable period, the maximum length of an 
agreement to accept scheduled payments on the past due amount and 
maintain eligibility for trust protection could not extend beyond 180 
days from the default date. We believe that one hundred eighty days is 
a reasonable time period during which a firm experiencing minor 
financial troubles can work out delinquent accounts with its suppliers. 
Such an arrangement lessens the financial problems that often beset an 
unpaid produce seller whose market, by its nature, precludes taking the 
normal steps to secure credit sales. If a seller who has met the 
requirements of paragraphs (e)(1) and (2) of Sec.  46.46 (7 CFR 
46.46)(e)(1) and (2)), is not allowed to enter into a post-default 
agreement and still maintain its trust protection, the seller is 
penalized. In such circumstances, the produce debtor is permitted to 
use the seller for financing and at the same time avoid the impact of 
the statutory trust. Post-default agreements that allow payments to be 
made within 180 days following the default on the original payment due 
date pose no significant risk to the produce industry, but they may 
allow buyers and sellers more flexibility. Post-default payment 
agreements can be a practical approach to getting outstanding debts 
paid without jeopardizing the seller's trust rights, thereby serving to 
protect the interests of the supplier, buyer, and the fruit and 
vegetable industry.
    In order to maintain trust eligibility, the post-default payment 
agreement should be in writing. A written agreement, rather than a 
verbal agreement or course of dealing claim, would constitute a valid 
post-default agreement. Parties to a written agreement would have 
material evidence to prove the actual terms of the agreement should 
litigation become necessary.
    When a produce debtor files bankruptcy or if a trust action is 
filed against the produce debtor, all unpaid sellers of produce should 
be treated equally. Therefore, an unpaid seller who has entered into a 
post-default payment agreement must stop accepting payments from the 
debtor once a

[[Page 32309]]

bankruptcy or trust action is filed. Any amount still due under the 
payment agreement would be subject to the trust.
    Section 46.46(e)(1) and (2) of the regulations (7 CFR 46.46(e)(1) 
and (2)) speak only to the effect of a pre-transaction agreement on the 
ability of a seller, supplier, or agent to qualify for trust 
protection. Neither the statute nor current regulation address post-
default agreements, nor do they specify any maximum payment terms for 
post-default agreements. The issuance of a regulation clarifying that 
post-default agreements do not waive trust rights is within the 
Secretary's delegated authority (7 U.S.C. 499o), and would be 
consistent with PACA's purpose and legislative history. Failure to do 
so may harm interstate commerce in produce that the PACA was enacted to 
protect. Therefore, we propose to amend PACA regulations as described 
below.
    We propose to amend 7 CFR 46.46(e)(2) by adding the words ``prior 
to the transaction''. This change would clarify that the 30-day maximum 
time period for payment for a shipment to which a seller can agree and 
still qualify for coverage under the trust relates back to paragraph 
(e)(1) which refers to pre-transaction agreements.
    We also propose to add a new paragraph (e)(3) to 7 CFR 46.46. The 
new paragraph would provide that in circumstances of a default in 
payment as defined in Sec.  46.46(a)(3), a seller, supplier, or agent 
who has met the eligibility requirements of Sec.  46.46 paragraphs 
(e)(1) and (2) could agree in writing to a schedule for payment of the 
past due amount and still remain eligible under the trust. The post-
default payment agreement could not extend beyond 180 days from the 
default date. New paragraph (e)(3) would require a seller, supplier or 
agent who enters into a post-default payment agreement to stop 
accepting payments under the agreement if the buyer declares bankruptcy 
or if a temporary restraining order is issued by a district court in a 
trust action. The remaining outstanding debt would qualify for trust 
protection. Current 7 CFR 46.46(e)(3) and (4) would be redesignated as 
(e)(4) and (5).

Executive Orders 12866 and 12988

    This proposed rule has been determined to be not significant for 
the purposes of Executive Order 12866, and therefore, has not been 
reviewed by the Office of Management and Budget. This proposed rule has 
been reviewed under Executive Order 12988, Civil Justice Reform, and is 
not intended to have retroactive effect. This proposed rule will not 
preempt any State or local laws, regulations, or policies, unless they 
present an irreconcilable conflict with this rule. There are no 
administrative procedures that must be exhausted prior to any judicial 
challenge to the provisions of this proposed rule.

Effects on Small Businesses

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA) (5 U.S.C. 601 et seq.), USDA has considered the economic 
impact of this proposed rule on small entities. The purpose of the RFA 
is to fit regulatory actions to the scale of businesses subject to such 
actions in order that small businesses will not be unduly or 
disproportionately burdened. The Small Business Administration (SBA) 
has defined small agricultural service firms (13 CFR 121.601) as those 
whose annual receipts are less than $7,000,000. There are approximately 
14,400 firms licensed under the PACA, a majority of which could be 
classified as small entities.
    The proposed regulations would clarify that a trust beneficiary who 
has perfected its trust rights does not forfeit those rights by 
entering into a post-default agreement to accept partial or installment 
payments on the amount due. This language would provide companies of 
all sizes with clear regulatory guidance on this matter, thereby 
reducing the time and expense associated with litigating matters 
involving post-default agreements and trust right preservation under 
the PACA. Therefore, we believe that this proposed rule will not have a 
significant economic impact on a substantial number of small entities.

Paperwork Reduction Act

    In accordance with OMB regulations (5 CFR part 1320) that implement 
the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the 
information collection and recordkeeping requirements that are covered 
by this proposed rule are currently approved under OMB number 0581-
0031.

E-Government Act Compliance

    AMS is committed to complying with the E-Government Act, which 
requires Government agencies in general to provide the public the 
option of submitting information or transacting business electronically 
to the maximum extent possible. Forms are available on our PACA Web 
site at http://www.ams.usda.gov/paca and can be printed, completed, and 
faxed. Currently, forms are transmitted by fax machine and postal 
delivery.

List of Subjects in 7 CFR Part 46

    Definitions, Accounts and records, Duties of licensees, Statutory 
trust.
    For the reasons set forth in the preamble, AMS proposes to amend 7 
CFR part 46 as follows:

PART 46--[AMENDED]

    1. The authority citation for part 46 continues to read as follows:

    Authority:  7 U.S.C. 499a-499t.

    2. In Sec.  46.46, paragraph (e)(2) is revised, paragraphs (e)(3) 
and (4) are redesignated as paragraphs (e)(4) and (5), and a new 
paragraph (e)(3) is added as follows:

Sec.  46.46  Statutory trust

* * * * *
    (e) * * *
    (2) The maximum time for payment for a shipment to which a seller, 
supplier, or agent can agree, prior to the transaction, and still be 
eligible for benefits under the trust is 30 days after receipt and 
acceptance of the commodities as defined in Sec.  46.2(dd) and 
paragraph (a)(1) of this section.
    (3) If there is a default in payment as defined in Sec.  
46.46(a)(3), the seller, supplier, or agent who has met the eligibility 
requirements of paragraphs (e)(1) and (2) of this section will not 
forfeit eligibility under the trust by agreeing in writing to a 
schedule for payment of the past due amount. The maximum time for 
payment of a past due amount to which a seller, supplier, or agent can 
agree, after a default, and still be eligible for benefits under the 
trust is 180 days from the default date, that is, the original payment 
due date of the transaction. The seller, supplier, or agent must cease 
all collections of past due amounts under a scheduled payment agreement 
if the buyer enters into bankruptcy or if the buyer is ordered to hold 
its inventory, accounts receivable, and proceeds intact until a 
determination of trust interest in a civil action. The remaining unpaid 
amount under the scheduled payment agreement will continue to qualify 
for trust protection.
* * * * *

    Dated: June 2, 2010.
David R. Shipman,
Acting Administrator, Agricultural Marketing.
[FR Doc. 2010-13634 Filed 6-7-10; 8:45 am]
BILLING CODE P
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