Electronic data interchange transactions being scrutinized by PACA
Electronic data interchange transactions being scrutinized by PACA
A produce seller using electronic data interchange when invoicing for product may not be protecting its PACA Trust rights because of a potentially inherent flaw in that system. The U.S. Department of Agriculture has issued an advance notice of a proposed rule-making in response to these concerns raised by Western Growers Association and other industry members.
Tom Oliveri, WGA's director of marketing services and trade practices, said that the association has warned its members of the potential problem and proposed solutions. Mr. Oliveri said that regulations governing trust protection under the Perishable Agricultural Commodities Act allow shippers to preserve their trust rights by putting specific language on their invoice to buyers. However, some EDI systems do not allow that language to be transmitted from shipper to receiver.
"There are EDI systems out there where the PACA trust language is delivered, but there are other systems that have no field to include the language. And some buyers, who pay for EDI invoicing by the number of characters transmitted, have told shippers to omit that language," Mr. Oliveri said. "Until this issue is cleared up, we are advising our members to consider going back to the old system of filing trust notices with the buyer when the invoice approaches past-due status."
When the PACA Trust was first established, shippers had to protect their rights by filing trust notices with both the receiver and the PACA if the invoice was not paid within about 40 days - the 10 days prescribed by law plus a 30-day grace period. Because this resulted in mountains of paperwork, the regulations were changed so just the receiver had to be notified and shippers could do so preemptively by including the appropriate language on the invoice. Mr. Oliveri said that the current regulations would allow for sufficient protection of trust rights if a shipper faxed the receiver a trust notice at the 40-day mark.
Mr. Oliveri added that the Western Growers Association has spelled out to the PACA five specific areas where it has concerns with EDI transmissions:
o The buyer either willingly or through oversight does not receive the entire electronic transmission of the EDI invoice.
o The buyer does not download the trust information.
o The buyer does not opt to receive the information.
o The buyer does not buy the data field that allows the inclusion of the trust language.
o The EDI service provider does not translate the field that contains the trust language.
Mr. Oliveri said that attorneys familiar with the PACA Trust language have indicated that the act of a seller transmitting the language in good faith via EDI might be sufficient to preserve the trust rights, but it is possible that a bankruptcy judge may see it differently without clarifying language from the USDA. WGA is encouraging its members to respond to the USDA advanced notice and asking the agency to modify the PACA regulations to deal with this issue and "protect shippers when electronically invoicing for fresh fruits and vegetables, and allow coverage under the statutory trust on all EDI transmissions so that it is mandatory and not discretionary for the buyer to accept the notice to preserve trust benefits."
The notice was published Jan. 30 in the Federal Register and allowed a 45-day comment period.
Tom Oliveri, WGA's director of marketing services and trade practices, said that the association has warned its members of the potential problem and proposed solutions. Mr. Oliveri said that regulations governing trust protection under the Perishable Agricultural Commodities Act allow shippers to preserve their trust rights by putting specific language on their invoice to buyers. However, some EDI systems do not allow that language to be transmitted from shipper to receiver.
"There are EDI systems out there where the PACA trust language is delivered, but there are other systems that have no field to include the language. And some buyers, who pay for EDI invoicing by the number of characters transmitted, have told shippers to omit that language," Mr. Oliveri said. "Until this issue is cleared up, we are advising our members to consider going back to the old system of filing trust notices with the buyer when the invoice approaches past-due status."
When the PACA Trust was first established, shippers had to protect their rights by filing trust notices with both the receiver and the PACA if the invoice was not paid within about 40 days - the 10 days prescribed by law plus a 30-day grace period. Because this resulted in mountains of paperwork, the regulations were changed so just the receiver had to be notified and shippers could do so preemptively by including the appropriate language on the invoice. Mr. Oliveri said that the current regulations would allow for sufficient protection of trust rights if a shipper faxed the receiver a trust notice at the 40-day mark.
Mr. Oliveri added that the Western Growers Association has spelled out to the PACA five specific areas where it has concerns with EDI transmissions:
o The buyer either willingly or through oversight does not receive the entire electronic transmission of the EDI invoice.
o The buyer does not download the trust information.
o The buyer does not opt to receive the information.
o The buyer does not buy the data field that allows the inclusion of the trust language.
o The EDI service provider does not translate the field that contains the trust language.
Mr. Oliveri said that attorneys familiar with the PACA Trust language have indicated that the act of a seller transmitting the language in good faith via EDI might be sufficient to preserve the trust rights, but it is possible that a bankruptcy judge may see it differently without clarifying language from the USDA. WGA is encouraging its members to respond to the USDA advanced notice and asking the agency to modify the PACA regulations to deal with this issue and "protect shippers when electronically invoicing for fresh fruits and vegetables, and allow coverage under the statutory trust on all EDI transmissions so that it is mandatory and not discretionary for the buyer to accept the notice to preserve trust benefits."
The notice was published Jan. 30 in the Federal Register and allowed a 45-day comment period.
