Under the Perishable Agricultural Commodities Act (“PACA”) there are very specific protections for growers and sellers of produce. In particular, PACA specifies the need for prompt payment terms which means payment in full within 10 days of the buyer’s acceptance of the produce. See, 7 C.F.R. §46.2(aa). The payment terms between the parties can never exceed 30 days. Payments terms beyond 30 days voids your PACA trust protection.
What can growers and sellers do if a buyer regularly asks for extensions on payment terms or stops answering your calls once late with payment? Time is critical in this situation. Growers and sellers should consider acting quickly since their claims may take priority over other creditors who are also pursuing the buyer. There are various methods and tactics which are only available to growers and sellers if the claim is brought quickly.
What if a buyer makes claims that they will be forced into bankruptcy? A perfected PACA trust creditor has priority over almost all other creditors in a bankruptcy and are typically the first to be paid. The bankruptcy court necessitates that all paperwork be in proper order including invoice language and payment terms.
PACA issues can be complex, and we encourage you to reach out with any questions or concerns about your specific circumstances.
This article appears in the Spring 2023 issue of the Ohio Produce Growers & Marketers Association newsletter.