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December 8, 2021

Protecting Shipper’s PACA Trust Rights When Invoicing by EDI

Some retail and food service customers may require Electronic Data Interchange (EDI) invoicing and reconciliations of settlements to automate the purchase order process.  EDI is simply a standard electronic format that replaces paper-based documents such as purchase orders or invoices. When invoicing via EDI, it is critical that you have the PACA Trust language on your transmission to preserve PACA Trust protection. 

Sellers may unwittingly forfeit PACA Trust protection by leaving the below verbiage off each EDI transmission. If sales agents omit the verbiage in the transmission, PACA Trust protection can be preserved by physically mailing a hard copy of your invoice or statement, in a timely manner, to your customer, with the PACA Trust verbiage printed on the hard copy.

PACA Trust Language:

The perishable agricultural commodities listed on this invoice are sold subject to the statutory trust authorized by section 5(c) of the Perishable Agricultural Commodities Act, 1930 (7 U.S.C. 499e(c). The seller of these commodities retains a trust claim over these commodities, all inventories of food or other products derived from these commodities, and any receivables or proceeds from the sale of these commodities until full payment is received. 

Some major retailers have attempted to place the verbiage in the written contract or agreement they have with the shipper, as well as hold harmless agreements, insurance requirements and other items. However, the statute clearly requires the PACA verbiage to be on the seller’s invoice or other billing statement whether in documentary or electronic form, to preserve trust benefits. Therefore, just having an agreement on file stating that the shipper is PACA Trust protected without having the PACA verbiage on the EDI transmission WILL NOT provide protection under the PACA Trust.

It is also important to have clearly defined payment terms, i.e., PACA Prompt, NET 10, etc. on the EDI transmission. If those respective terms differ from prompt payment, make sure you have a dually signed written agreement to your payment terms and the payment term listed on your EDI transmission.

If your firm sends out an EDI transmission for invoicing purposes, I recommend checking to make sure electronic transmissions contain all the necessary language that your paper invoices do, including the PACA Trust language verbatim referenced above.

Shippers are encouraged to contact Bryan Nickerson at 949-885-2392 or [email protected] to make certain that they are properly maximizing rights and remedies under PACA.