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March 30, 2022

Deciphering the Boundary Lines: PACA Jurisdiction

Most shippers understand that goods must be sold in or in contemplation of interstate commerce for PACA to have jurisdiction. However, a common misconception is that fresh or frozen produce must cross state lines to qualify as being sold in or in contemplation of interstate commerce. That is not always the case. 

In Steve Almquist Sales & Brokerage v. Mountain High Potatoes & Onion, Inc. (65 Agric. Dec. 1418), Oregon based buyer, Mountain High, sourced onions from Almquist, a Brawley, CA based shipper that were destined for the buyer’s customer in Bakersfield, CA.  After the onions were accepted by Mountain High, a dispute arose wherein the buyer alleged that Almquist had agreed to accept a reduced price based on the Buyer agreeing to purchase additional loads, which Almquist denied.  Mountain High paid the invoice based on the reduced price; Almquist filed a reparation action claiming the difference. As an affirmative defense, Mountain High alleged that PACA lacked jurisdiction because the onions never crossed state lines.  

In analyzing the issue, the Department found that there are a number of elements that would cause this shipment to come under PACA jurisdiction. First, Mountain High is a PACA licensee that regularly conducts business in interstate commerce. The transaction in this case was arranged between offices in California and Oregon.  Additionally, the parties were later involved in a shipment from California to Canada. And the commodity, onions, is one that regularly moves in interstate commerce. Finally, the Department noted that Mountain View had business locations in three different states.  

“These factors…reasonably indicates that the Respondent does a significant part of its business in interstate commerce. Under the D.C. Circuit court’s decision in The Produce Place vs. United States Department of Agriculture, 319 U.S. App. D.C. 369 (1996), to establish jurisdiction over a transaction, the Department need only show that the commodity was of the type that regularly moves in interstate commerce and was shipped to or from a dealer that does a substantial portion of its business in interstate commerce. The transaction between Complainant and Respondent satisfies both of these jurisdictional elements and thus, properly falls within the Department’s jurisdiction under the Act…. 

As noted above, in The Produce Place, the U.S. Court of Appeals for the D.C. Circuit made it quite clear that actual movement between states is not required for PACA jurisdiction to exist.” 65 Agric. Dec. 1418-19. 

As this Decision and Order highlights, produce does not have to physically cross a state line for the PACA to have jurisdiction. While there are some exceptions, PACA has jurisdictions in most produce contract disputes involving our members based on the premise that the sales transaction was in contemplation of interstate commerce. 

As always, every transaction has its own nuance and special circumstances, and if you are wondering whether or not your transaction falls under the jurisdiction of the PACA and wish to explore your options, please contact me to discuss your remedies at 949.885.2392 or [email protected].