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The PACA Trust

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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 receivables.

The trust allows a seller or grower, which has preserved its trust rights, to have its lawyer  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 trust rights, 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.