perishable agricultural commodities act

By Ellen Essman, Sr. Research Associate

On September 25, 2018, USDA found a Cleveland, Ohio company to be in violation of the Perishable Agricultural Commodities Act, or PACA.  USDA initiated the complaint against Forest City Weingart Produce (Forest City) in November 2017.  Forest City’s failure to pay $716,689, collectively, to numerous produce sellers is considered “unfair conduct” under PACA.  The complaint was determined to be valid, and consequently, Forest City is not permitted to “operate in the produce industry” for a time.  Because USDA found Forest City’s violations to be “repeated and flagrant,” under PACA, the Secretary of Agriculture had the authority to revoke the company’s license.  According to USDA’s press release, Forest City will be able to reapply for a PACA license on September 21, 2020.  The principal officers of the company are also banned from being “employed by or affiliated with any PACA licensee” through September 21, 2019.  Since Forest City has been found to have violated PACA by participating in unfair conduct, the law states that the company is liable to those they took advantage of “for the full amount of damages,” which in this case, would be the aforementioned $716,689. 

What is PACA?

PACA was passed in 1930.  The Act’s purpose is to promote “fair business practices” when buying and selling “perishable agricultural commodit[ies].”  A perishable agricultural commodity is defined in the law as “fresh fruits and fresh vegetables of every kind and character,” which can also be “frozen or packed in ice,” including “cherries in brine.” 

PACA contains a list of what the law considers to be “unfair conduct.”  Such unfair conduct is unlawful for commission merchants, dealers, or brokers, who are essentially the middle-men of the perishable agricultural commodities industry, to engage in.  The following actions are deemed to be “unfair” under the law, and therefore illegal when the transaction is in interstate or foreign commerce:

• Using any unfair, unreasonable, discriminatory, or deceptive practice when weighing, counting, or determining the quantity of a perishable agricultural commodity;
• Rejecting or failing to deliver perishable agricultural commodities under the terms of the contract, if there is no reasonable cause for the failure;
• Discarding, dumping, or destroying any perishable agricultural commodity received without reasonable cause;
• Making a false or misleading statement, for a fraudulent purpose, in connection with any transaction involving a perishable agricultural commodity; failing or refusing to make full, prompt, payment in such a transaction; or failing to perform any specification or duty in such a transaction without reasonable cause;
• Misrepresenting by word, act, mark, stencil, label, statement, or deed, the character, kind, grade, quality, quantity, size, pack, weight, condition, degree of maturity, or State, country, or region of origin of any perishable agricultural commodity;
• Removing, altering, or tampering with any card, stencil, stamp, tag, or other notice upon any container or railroad car containing any perishable agricultural commodity, if such notice contains a certificate or statement under the authority or law or regulation of the federal or state government concerning the grade, quality, or origin of the commodity;
• Making any change by way of substitution or otherwise in the contents of a load or lot of any perishable agricultural commodity after it has been officially inspected for grading and certification. 

PACA also makes it mandatory for commission merchants, dealers, and brokers to be licensed.  In order to obtain a license, both an application and fee are required.  If all the requirements are met, the Secretary of Agriculture may issue the license.  Licenses can be annual or cover multiple years, depending on the type of entity licensed.  The Secretary may also suspend or revoke a license. 

Violations, Complaints, and Liability

PACA specifically states that when any commission merchant, dealer, or broker is found to have participated in unfair conduct (discussed above), they are “liable” to those injured by their conduct “for the full amount of the damages sustained in consequence of such violation.”  Liability can be enforced through the complaint process or through the courts.  Complaints of unfair conduct can be sent to the Secretary of Agriculture up to nine months after the unfair conduct occurs.  Notifications of violations by merchants, dealers, or brokers can also be sent to the Secretary by officers of state agencies.  The Secretary is then able to investigate complaints and notifications.  If the investigation shows violations occurred, then the Secretary can “have the complaint served” on the violator.   If the alleged damages are more than $30,000, the Secretary must provide the violator with the opportunity for a hearing.  After a hearing, the Secretary can “determine whether or not the commission merchant, dealer, or broker has violated” any part of the law regarding “unfair conduct.”

Those interested in background information on PACA, fees, licensing, etc. can find it at the USDA’s website, here.  The federal regulations that accompany PACA are here.