Date: Feb 02, 2014
Magazine:
February 2014: The PACA Is Here to Help

Tom Oliveri, who has been helping Western Growers members with disputes involving the disposition of their produce shipments for more than 30 years, said the biggest problem with the PACA is that it isn’t used often enough.

As director of trade practices and commodity services for Western Growers, Oliveri is constantly handling calls from growers and shippers that are involved in some type of disagreement with the buyer of their products.  It might be an arrival problem where the quality is in dispute, a slow pay situation or one involving a bankruptcy.  In any of these events, and many others, the Perishable Agricultural Commodities Act has defined regulations and a mountain of precedent to address almost any situation.

“I tell our members that having a disagreement between the buyer and seller is not that unusual.  If you are in this business long enough, it’s going to happen.  That’s why we have the PACA.”

Oliveri said some grower-shippers are reluctant to call on this federal dispute resolution agency for fear of losing a customer which he totally appreciates.  However when enough is enough, it’s time to tell your customer let’s get an opinion from the PACA.  “They are there to help solve these disputes.  Use them,” he said.

Besides a built-in reluctance that rears its head more often than it should, Oliveri said many people growing and selling produce don’t have a complete understanding of the PACA and how it can help.

Operating under the guise of the U.S. Department of Agriculture, the PACA is administered through the USDA’s Agricultural Marketing Service (AMS).  Buyers and sellers who move fresh produce through interstate commerce are required to have a PACA license and are governed by the act’s regulations.  A licensing exception has been granted to growers who only market their own product.  They are still covered by the regulations and can still use the full force of the law but they don’t need a license.  All others who are involved in interstate produce trade must be licensed.  And the PACA Branch will handle — formally or informally — any dispute that materializes between two licensees or two parties that should be licensed.

Oliveri said it has been Western Growers’ viewpoint — backed by precedent — that virtually all produce shipments are subject to PACA intervention as long as that produce is shipped inside, outside, or imported into the United States.  For example, a load originating in Mexico that is shipped into Nogales, Arizona, and then sent on to a wholesaler in the Midwest is covered.  So is a load that originates in Salinas, sent to a broker in Los Angeles and shipped overseas to a buyer in Hong Kong.

In the first instance, the Mexican grower or the Nogales distributor can initiate the action against the wholesaler if there is an issue.  The one caveat in this case is that the PACA will not take the complaint to the “formal” stage if it’s initiated by a non-licensee (the Mexican grower) unless that person provides a bond worth twice the amount they are claiming in their complaint.  This rule is apparently designed to eliminate or greatly reduce frivolous complaints.

In the second case, the Salinas grower would file a complaint against the Los Angeles broker if there was a dispute with regard to arrival in Hong Kong that materially affected what he received for his output.

One of the areas of the law that is not completely understood is the PACA’s involvement in intrastate commerce.  Because it only regulates interstate commerce, it might seem a shipment between Salinas and a Los Angeles wholesaler would not be covered.  In fact, in most instances it would be covered.

Oliveri said case law exists that it is the “intention” of interstate commerce that triggers PACA jurisdiction as much as the act of physically moving the product from one state to another.  For example, case law has shown that California grower-shippers produce their products with every intention that they will end up in interstate commerce and most products do.  It is that expectation that triggers PACA to get involved in a dispute.

The WG executive said virtually all growers, shippers, brokers, wholesalers and retailers deal with product from many different states so the expectation when a product is grown and sold is that interstate commerce may be involved.  Hence PACA takes jurisdiction.  Buyers who have argued against jurisdiction have typically lost.

In fact in a 1996 case involving jurisdiction, PACA ruled that a seller merely has to show that the commodity in question is one that regularly moves in interstate commerce and that the buyer does a substantial portion of its business in interstate commerce for the agency to claim jurisdiction.

Oliveri said in the fresh produce industry that scenario represents the facts involved in the overwhelming majority of transactions.  “It has been our position — and it is even the position of the California Market Enforcement Branch — that virtually all fresh produce shipments are covered by PACA,” he said.

So again, Oliveri reiterated that the issue is not typically with the regulations themselves but with the reluctance to use this tool by a too high percentage of the fresh produce industry.  “The act is here for your benefit,” he said.  “Use it!”

Tom Oliveri and Western Growers Trade Practices and Commodity Services department can help any member with a shipment dispute.  You can reach him at TOliveri@wga.com.

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