May 31, 2023

Navigating Disputed Contracts for Fresh and Frozen Produce: The Significance of PACA Formal Decisions

In the realm of disputed contracts for fresh and frozen produce, the WG Trade Practices department plays a crucial role in representing shipper members. Frequently called upon to provide written justifications for suppliers based on specific sections of the PACA regulation, it is important to recognize that while these regulations define terms and outline responsibilities within the supply chain, not all situations can be easily resolved by referencing statutory language alone. Given that the PACA regulations were established almost a century ago, their interpretation continues to evolve. Consequently, PACA Formal Decisions have emerged as essential tools, establishing precedents and offering ongoing PACA guidance for future disputes and trade practices.

Exploring a PACA Formal Decision: One notable PACA Formal Decision focuses on two separate shipments of romaine hearts involving the same seller and buyer. This decision serves as a significant precedent in PACA-related matters. Let’s delve into the details of this decision to better understand its impact.

The First Shipment: The initial shipment involved 1120 cartons of romaine hearts, sold under FOB terms, originating from California and destined for Pennsylvania. In this particular case, it was ruled that the shipper was not informed that the transportation method for the romaine hearts would be intermodal (rail) rather than traditional trucking. As a result, the shipper’s responsibility to guarantee the romaine hearts’ suitable shipping condition, ensuring they reach the destination without abnormal deterioration, was waived. Given that the shipper was unaware of the chosen mode of transit, resulting in an extended transit time, the buyer’s claim of the shipper breaching the suitable shipping condition warranty was dismissed. Consequently, the buyer was obligated to pay the full agreed-upon purchase price to the shipper.

The Second Shipment: In the same PACA Formal Decision, the second shipment of romaine hearts, also transported from California to Pennsylvania, was examined. This shipment, like the first, was sold on a FOB basis, with good arrival standards applying. The dispute, in this case, revolved around the exclusionary language concerning “bruising and/or discoloration following bruising.” The Decision concluded that the exclusion of this condition factor had become widely accepted in the produce trade when it comes to lettuce sales. Furthermore, it was established that the exclusionary language was clearly stated and disclosed on the shipper’s invoice. As the buyer did not raise any objection to this exclusion, the terms documented on the invoice were considered strong evidence of the agreement between the parties. Thus, the buyer was obliged to pay the shipper in full, as the remaining condition factors specified in the USDA inspection did not exceed the threshold of good delivery standards.

The Significance of PACA Formal Decisions: As an industry, we collectively rely on USDA Formal Decisions, as they set precedents and offer evolving interpretations of the PACA regulations. They serve as invaluable roadmaps, guiding sellers and buyers of fresh and frozen produce through complex disputes and trade practices.

In conclusion, the role of PACA Formal Decisions cannot be overstated. These decisions establish precedents, interpret regulations, and provide ongoing guidance for the industry. By understanding and leveraging these precedents, both suppliers and buyers can navigate disputed contracts with greater clarity and confidence in the fresh and frozen produce trade.

If you have any questions or concerns, please reach out to me directly at or 949.885.4808.