The Perishable Agricultural Commodities Act protects businesses dealing in fresh and frozen fruits and vegetables by establishing and enforcing a code of fair business practices. Denetra M. McPherson explains how PACA may apply to you.
Guest Post by Denetra M. McPherson, Legal Instrument Examiner with the USDA
Are you new to the produce industry? Do you grow produce or work for someone who buys and/or sells it? Maybe you handle sales transactions on behalf of other companies?
If you answered yes to any of the above questions, you may be in need of a PACA license.
What is PACA?
PACA stands for The Perishable Agricultural Commodities Act, 1930. It authorizes the buying and selling of fresh and frozen fruits and vegetables. This produce must be perishable, meaning it has a limited shelf life if it’s not refrigerated. The produce can have minimal processing done to it, as long as it does not change the perishable nature. Minimal processing can be peeling, washing, cutting, adding a light coating, etc.
Who needs a license? PACA states that, either “interstate or foreign commerce” is how the produce travels. This means if you buy or sell produce which crosses state lines or comes in from another country. This information can usually be found on the invoice/bill of lading. If you are a retailer or grocery wholesaler, you need a license once you have $230,000 worth of sales of produce per calendar year. Everyone else will need a license if at any time throughout the year they buy or sell 2,000 lbs of produce in any given day makes you subject. There is an exception to this rule, Brokers must be licensed at the time of the very first produce transaction.
What are the types of businesses needing a PACA License? If you determine that you may be subject to a license, here are the businesses categories; Retailer or Grocery Wholesaler, and what will be referred to as everyone else: Broker, Commission Merchant, Food Service, Grower, Grower’s Agent, Processor, Shipper, Trucker, Wholesaler,
What about Growers/Farmers? PACA was created to protect growers and farmers in 1930, so they do not need to have a license. However, many choose to have this license for added protection.
Where does PACA cover? The business must have a physical address in the United States. You can import from other countries, but to obtain a license you must have an operating office or hub in the United States where an individual transacts produce business.
How long is the license good for? Retailers and Grocery Wholesalers must renew every three years, everyone else must renew each year. A renewal invoice will be sent to the mailing address we have on file, six weeks before your anniversary date. This is why it is very important to update us at the time you move or change any contact information.
How much does it cost? The fee is $995 to obtain a license, and must renew each year at $995. However, there is a $100 one-time administrative fee for retailers and grocery wholesalers with no other fees required as long as the license is renewed every three years prior to the anniversary date. All licensees will be charged a late fee of $50 if the license is not paid by the anniversary date. Note that If you have more than one business location, this is considered a branch and there is a $600 fee for every branch plus the license fee for your primary business location.
How can PACA Help? If you have a PACA License and experience any issues receiving payment or receive a bad shipment, PACA can help settle these disputes.
What do I need to apply for a license? A physical and mailing address in the United States, type of business, legal business structure (meaning Corporation, LLC, sole proprietor, partnership, etc.), owner/principal/officer information, fees due, a signature, and the application. Also note, you do not need to be a United States Citizen to apply for the license. If you need a license application, or you are still not sure if you fit into the categories mentioned above, you can visit our website @ www.ams.usda.gov/paca or call our toll free number 1-800-495-7222 Option 1 to speak to a representative