PACA 101 Sales Training: Understanding Your Rights and Remedies
INTRODUCTION -PACA
What is PACA? • Federal law established in 1930; Perishable Agricultural Commodities Act administered by United States Department of Agriculture – 93 years • Code of Conduct/Rules of Fair Trade For Produce Industry How and why was PACA enacted? • Fair and ethical trading. Ensure orderly trading through supply chain. • All shippers, produce dealers, brokers, wholesalers, retailers and wholesaler grocers.
DISPUTE RESOLUTION
Selecting the Appropriate Forum • PACA Administrative Reparation Actions • Arbitration − Domestic − International • Mediation • Dispute Resolution Corporation (“DRC”) − Tri-national association handling contract issues in Canada/Mexico/United States
PACA TRUST “PACA Trust is not Self - Enforcing”
Federal District Court • Injunctive relief • Ordinary civil actions
Bankruptcy Proceedings • PACA Claims procedure • Group representation • Trust assets not considered part of bankruptcy estate
SAMPLE INVOICE
INDUSTRY-PROVEN BLUE BOOK RATINGS
Blue Book Rating • Credit Worth Rating summarizes the company’s financial strength • Trade Practices “X” Rating summarizes how others report the company’s trading practices • Pay Rating summarizes the company’s pay practices Blue Book Score • Predictive risk model assessing likelihood the company will become delinquent • Industry-specific, empirically derived, statistically valid
COMMON TRADE TERMS
F.O.B.
• “Free on Board” • “Suitable shipping condition”(Good Delivery) will assure delivery at contract destination without abnormal deterioration • Buyer assumes all risk in transit not caused by seller • Unless negotiated as part of the contract, there is no requirement to meet a specific grade at destination, i.e.“U.S . No. 1” • At time of sale, any exclusion must be disclosed and agreed upon & must be documented on the invoice and passing i.e. “All sales no grade contract”
COMMON TRADE TERMS continued
Delivered Sale
• Seller (Shipper) assumes risk of damage during transit • Seller (Shipper) responsible for any & all claims connected to the sale regarding carrier • Invoice price includes freight - invoice may reflect loaded price, (produce plus freight cost). The invoice may also have individual line items reflecting costs • Suitable shipping condition (Good Delivery) will apply, but must be negotiated at time of sale • Exclusions must be disclosed and documented on invoice and passing: i.e. “All sales no grade contract”
COMMON TRADE TERMS continued
Suitable Shipping Condition/Good Delivery
• Warranty of suitable shipping condition • At time of shipment, if handled under normal transportation conditions, assures delivery at the contract destination without abnormal deterioration • Suitable Shipping Condition can also be interchanged with Good Delivery calculations for contract compliance. To calculate allowable condition defects, the PACA utilizes a formula of time and distance to contract destination
COMMON TRADE TERMS continued
Open – Not a Defined Term by PACA!
• FOB or Delivered sale with price yet to be determined • If parties cannot agree on price PACA looks to buyer’s account of sales or if no accounting to Market News Report for reasonable price
• Price After Sale (PAS) – Not a Defined Term by PACA! • Interpreted as an Open Sale
COMMON TRADE TERMS continued
“Protection” is not defined under the PACA; however, the term is often used throughout the industry in two main contexts:
1. “Market Protection” or “Price Protection” is understood as meaning that the buyer is protected against any market decline that might occur between the date of sale and the date the product is received. It should be noted that the shipper and receiver must clarify, before shipment, whether the decline is to be based on the shipping point market or the destination market. 2. “Protection,” “Full Protection,” and “Protection Against Loss” usually have the same meaning and should be distinguished from “market protection” or “price protection.” A protection agreement is a modification of the original sale contract that leaves the original sale price as the baseline price for determining whether the buyer makes a profit or is entitled to protection. The potential for profit remains after the conclusion of the protection agreement, and this potential can only be realized in the same manner as it is realized in any sale contract, namely by the buyer reselling at prices above the original price plus expenses. Therefore, when a buyer with protection fails to re-sell at such favorable prices and experiences a loss, the protection should only compensate the loss, and should not include a profit in the form of a commission or handling fee.
RESPONSIBILITIES HANDLING A REJECTION
Receiver responsibilities • Effective (prompt & clear) vs Ineffective rejection • must inform shipper within a “reasonable time” 8 -10hrs a. The load arrived with problems b. An inspection has been requested c. Intends to reject depending on inspection results • Not counting non-workdays or holidays
Frequently Cited Sections of the PACA Regulations
46.2(bb) Reject without reasonable cause means in connection with purchases, consignments, or joint account transactions:
• Refusing or failing without legal justification to accept produce within a reasonable time.
• Advising the seller, shipper, or his agent that produce, complying with contract, will not be accepted.
• Indicating an intention not to accept produce through an act or failure to act inconsistent with the contract; or
• Any rejection following an act of acceptance.
COMMON TRADE TERMS continued
Consignment / Handle for my account – PACA TERMS
• Not a sale, it establishes an agency relationship • Consignor (Shipper) retains title to produce and receives proceeds of sales • Consignee (Receiver) sells produce on consignor’s (Shippers) behalf and retains commission • Consignee (Receiver) must provide a detailed accounting reflecting sale prices of each carton plus itemized expenses
SAMPLE
Letterhead of Agent Selling Product for Shippers Account
SALES (XYZ Produce Shipper) Iceberg Lettuce-XYZ Label-900 Cartons Date Received: 10/10/2016 Lot Number: 0987
150
@
14.00
10/10/16
$ 2,100.00
90
@
12.75
10/11/16
1,147.50
80
@
10.50
10/11/16
840.00
500
@
8.25
10/12/16
4,125.00
50
@
6.00
10/13/16
300.00
20
@
5.00
10/14/16
100.00
10
@
-
10/17/16
Dumped
900
$ 8,612.50
Total Gross Proceeds
Freight
6,300.00
Inspection
120.00
Commission 18%
1,550.25
$7,970.25
Total Expenses
$642.25
Amount due Shipper (Proceeds Less Expenses) =
WHERE DO I FIND…
Carrier Identification Shows trailer license plate number, railcar number, or other carrier or lot identification numbers. Location of Load Indicates whether load was unloaded, partly unloaded or loaded. Name of Applicant and Shipper Applicant is the financially interested party that requested the inspection. Time and Date of Inspection Date and local time inspector began inspection Temperatures Shows lowest to highest pulp temperatures recorded for each lot.
Product Identification For each lot inspected. This area lists product name, container brands or markings, slate or country of origin, and the number of containers in the lot.
1
6
1
3
2
4
2
Frequency of Defect Occurrence
7
Percentages show the extent to which each lot was affected by the indicated defect. Checksum line is present to deter alternation of defect percentages. Identification of Defects Briefly identifies, line by line, each defect found in lot, with sample ranges in parenthesis if average of defect exceeds 5%.
3
5
6
8
4
7
8
5
Grade Statement Shows whether each lot
9
9
inspected for grade and condition satisfied the requirements of the specified grade.
Signature of Inspector Name of Inspector that performed the inspection.
10
10
LEVELS OF INSPECTIONS
Restricted • Typically performed while goods are still loaded on car/truck
Unrestricted • Samples taken from entire load • Better evidence of condition of load
Appeal inspection • PACA Branch or interested party may request • Usually performed by two inspectors, supervisors or another new inspector
ASSESSING RESPONSIBILITY FOR CLAIM PURPOSES
I should review.. • USDA inspection • Temperature during transit (i.e. TRU downloads, temp charts) • Shipping instructions/pre-load check list • Time of delivery at destination vs. time of inspection
COMMUNICATIONS & TRANSPARENCY
• Inaction is not a business strategy • Outreach or respond (verbal and email) to all parties upon knowledge or notice of claim • Always stay engaged to minimize loss of product • Upon notice of claim, if warranted, consider settlement negotiations at time of arrival • Finalize with clear and precise language and document settlement
SAMPLE PRE LOAD AND LOADING CHECK LIST
SAMPLE MOTOR CARRIER BILL OF LADING
SAMPLE NOTICE OF COMPLIANT FORM
USDA AGRICULTURAL MARKETING SERVICE PACA OFFICE DIRECTORY
Dispute Resolution Section, Washington D.C.
•
John Koller, Director
•
(202) 720-2890
Tucson, Arizona Regional Office
GOOD DELIVERY HOT LINE
• Patrick Romero, Regional Director
•
(800) 495-7222 (toll free) Ext. #5
(800) 495-7222 Ext. #2
Fort Worth, Texas Regional Office
4:30 a.m. PST – 4:00 p.m. PST
• Jeffrey Spradlin, Regional Director
•
(800) 495-7222 (toll free) Ext. #4
Fredericksburg, Virginia Regional Office
•
Basil W. Coale, Regional Director
•
(800) 495-7222 (toll free) Ext. #3
Any Questions?
BRYAN NICKERSON Commodity & Supply Chain Services Director
Office: 949.885.4808 | Cell: 760.601.2134 | Email: bnickerson@wga.com
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