The PACA trust is a
remedy for produce sellers and growers to obtain payment on undisputed
amounts owed for produce sales in or to the U.S. The PACA trust does
not cover sales to Canada or other countries. If there is a legitimate
dispute resulting in non-payment, then dispute
resolution proceedings are used rather than the PACA trust.
The trust consists of a
buyer's or agent's produce-related assets, such as inventory and
The trust allows a
seller or grower, which has preserved its trust rights, to have its
file a case in court and obtain a freeze on the trust assets
of a non-paying buyer by showing there is no dispute the money is owed,
and the trust assets are being dissipated.
Under the trust, produce
suppliers are paid from the proceeds of their produce before any other
creditor. This means produce sellers or growers, who preserve their
have priority over all other creditors, including banks with security
interests on produce-related assets.
The law does not require
the produce-related assets be held in a separate account by the buyer.
Rather, the trust floats over all the produce-related assets of the
buyer until all qualified produce suppliers are paid in full.
In the winter of 2017,
PACA issued new regulations for growers and their agents.
These regulations require growers to provide trust notices to
their agents to assure payment to growers. Growers who do not
have a PACA license can preserve their trust rights by sending a
"Notice of Intent to Preserve Trust Benefits" to the agent.
Alternatively, a grower
who becomes a PACA licensee can send the agent invoices which contain
the PACA trust wording on the face of the invoice: "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." The grower can also add a clause for
interest and attorneys' fees under the trust.