What are the advantages of sending your product to a wholesaler on a price after sale basis (PAS) vs. a consignment? First of all, let’s define what the two sales terms actually mean.
Price after Sale is not defined under the Perishable Agricultural Commodities Act, but is similar to Open. This term is generally interpreted to mean that the parties will agree on a price after the buyer completes the sale of the product.
- Buyer has all normal sales warranties
- Buyer may accept/reject
- If parties cannot agree upon price, the PACA will request the buyer’s account of sale or if there is no account of sale, the USDA Market News Reports will be utilized to determine a reasonable market value.
- Consignment is not a sale. It creates an agency relationship between the consignor (shipper) and the consignee (receiver), where the produce continues to belong to the consignor until the consignee sells it on the consignor’s behalf. After such sale, the proceeds of the sale belong to the consignor, with the consignee allowed only to deduct expenses and commission from the gross sales.
Remember, unlike a price after sale, a consignment is not a sale. A consignment creates an agency relationship between the shipper and the receiver. As the shipper, you remain the beneficial owner until the receiver sells the produce. Following completion of the sale, the receiver is only permitted to deduct usual and customary expenses directly connected to the sale, along with any commission.
In dealing with a consignment, the receiver must provide you with a detailed and accurate account of sale. With regards to a PAS, if you are unable to agree on a price, the receiver may chose to submit a detailed account of sales (but is not required to do so) in an effort to demonstrate the value when negotiating the appropriate return with the shipper. Unlike a PAS, with a consignment transaction that requires an accounting, if you question the validity of the accounting, you have a remedy to request the PACA audit those records to determine the accuracy of the accounting. Again, in a PAS, the shipper does not have the right to an accounting because you are not the beneficial owner. Your only option in such a case would be to file a complaint with the PACA based on the failure of buyer and seller to have a meeting of the minds on the finalization of the PAS. While the complaint will not result in an audit, the PACA will look at the proposed settlement in comparison to USDA market news prices.
If you find yourself in a situation like this and wish to explore your options on negotiating either a PAS or consignment, please feel free to contact me to discuss your best course of action at 949-885-2269 or firstname.lastname@example.org.