A question that I often receive from our shipper members is, how long do they need to retain records before they can be destroyed? The California Department of Food and Agriculture (CDFA), Market Enforcement Branch and the Perishable Agricultural Commodities Act (PACA) both require specific record keeping requirements under their respective regulations.
The PACA require documents to be maintained for a period of two years for all accounts, records and memoranda that fully and correctly disclose all transactions involved in their business, including true ownership. Most all records that any prudent shipper would normally prepare and maintain, such as invoices and or sales tickets, credit memos, memoranda of sale, freight bills and inspection certificates must be maintained for a period of two years. As you know, retention of records for other State or Federal Agencies (such as the IRS) require a longer period of time and you should consult with your own accounting or audit firm to confirm.
Failure to maintain proper PACA records can become costly in two different ways:
Any PACA licensee who fails to prepare and maintain such records is subject to penalties under the Perishable Agricultural Commodities Act, including license suspension.
A PACA licensee may suffer financially if a dispute arises, and it cannot offer records to support its position.
The following regulation section applies to every commission merchant, dealer, and broker covered by the Perishable Agricultural Commodities Act as it relates to record keeping:
Accounts and Records (General)
§46.14 General. Every commission merchant, dealer, and broker shall prepare and preserve for a period of two years from the closing date of the transaction the accounts, records, and memoranda required by the Act, which shall fully and correctly disclose all transactions involved in his business. Licensees shall keep records which are adapted to the particular business that the licensee is conducting and in each case such records shall fully disclose all transactions in the business in sufficient detail as to be readily understood and audited. It is impracticable to specify in detail every class of records which may be found essential since many different types of business are conducted in the produce industry and many different types of contracts are made covering a wide range of services by agents and others. The responsibility is placed on every licensee to maintain records which will disclose all essential facts regarding the transactions in his business.
(b) Every commission merchant, dealer, and broker shall prepare and preserve records and memoranda required by the Act which shall fully and correctly disclose the true ownership and management of such business during the preceding four years. Such records shall include the number and location of all branches or additional business facilities operated by or for the commission merchant, dealer or broker. In the case of a corporation, such records shall include the corporate charter, record of stock subscription and stock issued, the amounts paid in for stock and minutes of stockholders' and directors' meetings showing the election of directors and officers, resignations and other pertinent corporate actions. In the case of a partnership, the records shall contain a copy of the partnership agreement showing the type of partnership, the full names and addresses of all partners including general, special or limited partners, the partnership interest of each individual and any other pertinent records of the partnership.
For those companies domiciled in California and that require a Market Enforcement Branch for a Commission Merchants, Dealers or Brokers license the following regulation applies, including retention of pertinent records for four years:
56255. (a) Every licensee shall prepare and preserve the accounts, records, and memoranda required by this chapter which shall fully and correctly disclose all transactions involved in his business. Licensees shall keep records which are adapted to the particular business that the licensee is conducting and in each case such records shall fully disclose all transactions in the business in sufficient detail as to be readily understood and audited. Minimum records required under this chapter are:
1. A record of cash received.
2. A record of cash disbursed.
3. A general ledger or its equivalent.
4. A record of amounts due California producers.
5. A record of amounts due others.
(b) Every licensee shall prepare and preserve records and memoranda required by this chapter which shall fully and correctly disclose the true ownership and management of such business.
(c) All records required to be kept under this chapter shall be kept for a period of four years.
(Added by Stats.1976, Ch.632.)
To reiterate, the Market Enforcement Branch records must be kept for a period of four years.
For shipper companies domiciled in Arizona, there are no specific State requirements under the Arizona Department of Agriculture for shippers or commission merchants to retain certain records, therefore the PACA regulations would apply in such matters, which would be a two year retention of records.
In summary, record keeping for the PACA is two years; California Department of Food and Agriculture is four years relating to record retention and Arizona would default to the PACA requirement of two years.
For further information on properly maintaining records, or for any other questions Western Growers members might have pertaining to either the California Market Enforcement Branch or the Perishable Agricultural Commodities Act, please feel free to contact me at 949 885-2269 or email me at TommyO@wga.com.