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Preserving Trust Rights

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A seller or grower must preserve its trust rights to take advantage of the trust remedy, as explained below. There are two (2) methods to preserve trust rights: the invoice method and the trust notice method.

The Invoice Method – Paper and Electronic

Paper Invoicing

If a seller or grower is licensed under PACA, all it must do to preserve its trust rights is provide the buyer or agent with an invoice, billing statement or ticket, with the following 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.

Once the invoice, billing statement or ticket is sent to the buyer or agent with the trust wording, trust rights are preserved until there is payment.

The invoice, billing statement or ticket should be sent before payment is due. In transactions with an open price term, like Price After Sale (PAS), or a consignment, an invoice should be sent with the words PAS or consignment, or an estimated price, in the same way as if the sale was a fixed price. If an invoice is sent 40 or more days from when the produce was received by the buyer, there likely will be a loss of trust rights.

To increase the chance of collecting attorney fees, costs and interest, the following wording can be added on the face of the invoice:

Interest on unpaid balance shall accrue at higher of 18% per year or maximum statutory rate. Buyer agrees to pay interest, costs and any attorneys’ fees necessary to collect any balance due hereunder. All interest, costs and attorneys’ fees due seller shall be considered sums owing in connection with this transaction under the PACA trust.

Electronic Invoicing

If there is electronic billing, the trust wording must be included on the electronic invoice. The buyer or agent must provide sufficient space in the electronic bill to include the trust wording. The seller or grower only has to be able to verify the e-invoice was transmitted to the buyer or agent to preserve its trust rights.  The interest and attorney fee language should also appear on the electronic invoice.  

 


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