May 13, 2015

PACA Formal Decisions Establish Precedent and Provide Guidance for the Interpretation of the Regulations

By: Tom Oliveri

From time to time, when handling a disputed transaction on behalf of a WG member, I am asked to provide the written justification for our position from a referenced section in the PACA regulation. My response to such a request is that, although the PACA regulations delineate the definitions of terms and other aspects of responsibility throughout the supply chain, not every disputed situation is black and white and therefore cannot be fully detailed by just a reference to the PACA regulations. In essence while the vast majority of the regulations were established many decades ago, the interpretation of the regulations is always evolving. That is why PACA Formal Decisions are so important, as it sets precedent and then provides the day to day administration and guidance of PACA. As an example, here is a PACA Decision focusing on two separate shipments of romaine hearts between the same seller and buyer, with each shipment helping to establish that PACA precedent, which provides that new day to day guidance that the PACA and we provide to members under similar or identical situations.

The first shipment covers 1120 cartons of romaine hearts sold under FOB terms, originating in California and shipped to Pennsylvania. In this Decision it was ruled that the shipper was not advised of the fact that the shipment of romaine hearts was going to be transported by rail (intermodal) rather than by truck. Because of this fact, the shippers’ responsibility to warrant the suitable shipping condition of the romaine to destination without abnormal deterioration was waived when it was concluded that the shipper was not made aware of the chosen mode of transit, which resulted in a longer transit compared to traditional truck transit. Therefore, the buyer of the romaine hearts claims that the shipper breached the suitable shipping condition warranty failed, and the buyer was required to pay the shipper for the full agreed upon purchase price of the romaine hearts.

The second shipment covered in this same Decision covers romaine hearts which were again shipped from California to Pennsylvania. There is no dispute that the romaine hearts were sold on an FOB basis with good arrival standards applying. The dispute between the parties was with the exclusionary language connected to bruising and/or discoloration following bruising. The Decision concluded that the exclusion of this condition factor has been commonly accepted in the produce trade on lettuce sales for many years and the exclusion was clearly printed and disclosed on the shipper’s invoice. It was ruled that because the buyer never objected to exclusion, the terms that were memorialized on the invoice were considered strong evidence of the agreement between the parties. The buyer was therefore required to pay the shipper in full as the remaining condition factors on the USDA inspection did not exceed the good delivery standards.

So, we as an industry look to the USDA Decisions that are continually evolving the interpretation of the PACA Regulations because of that “precedent” which then serves as a roadmap as to how the PACA offers guidance to the trade. In the future when notable decisions are issued I will share those decisions in upcoming blogs for your consideration.

If you have any questions, please contact me directly at or 949-885-2269.