[Federal Register: January 30, 2006 (Volume 71, Number 19)]
[Proposed Rules]
[Page 4831-4832]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30ja06-13]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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[[Page 4831]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 46
[Docket No. FV05-373]
Regulations Under the Perishable Agricultural Commodities Act
(PACA)
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Advance notice of proposed rulemaking.
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SUMMARY: The Agricultural Marketing Service (AMS) is issuing this
advance notice of proposed rulemaking in response to concerns raised by
the industry that sellers may lose their status as trust creditors when
using electronic data interchange (EDI) for invoicing. Comments are
being sought from the public, but in particular, buyers and sellers of
fruit and vegetables and vendors/software developers of EDI systems, as
to whether to issue new or amended regulations and if so, the substance
of such regulations.
DATES: Submit written or electronic comments on or before March 16,
2006.
ADDRESSES: You may submit written comments to:
(1) EDI Comments, AMS, F&V, PACA BRANCH, 1400 Independence Avenue
SW., Room 2095-S, Washington, DC 20250-0242.
(2) Fax: 202-720-8868.
(3) E-mail comments to Dexter.Thomas@usda.gov.
(4) Internet: http://www.regulations.gov.
Instructions: All comments will become a matter of public record
and should be identified as EDI Comments. Comments will be available
for public inspection from the Agricultural Marketing Service at the
above address or over the Agency's Web site at: http://www.ams.usda.gov/fv/paca.htm.
Web site questions can be addressed to the PACA Webmaster, Dexter.Thomas@usda.gov..
FOR FURTHER INFORMATION CONTACT: Karla Whalen, Section Head, Trade
Practice Section, or Phyllis Hall, Senior Marketing Specialist, Trade
Practice Section, 202-720-6873.
SUPPLEMENTARY INFORMATION:
Background
The Perishable Agricultural Commodities Act (PACA) establishes a
code of fair trading practices in the marketing of fresh and frozen
fruits and vegetables in interstate and foreign commerce. The PACA
protects growers, shippers, distributors, and retailers dealing in
those commodities by prohibiting unfair and fraudulent trade practices.
The PACA also provides a forum to adjudicate private disputes, with
awards against a licensee who fails to meet contractual obligations in
violation of the PACA. Additionally, the law imposes a statutory trust
on perishable agricultural commodities received and accepted but not
yet paid for, products derived from those commodities, and any
receivables or proceeds due from the sale of those commodities or
products for the benefit of unpaid suppliers or sellers.
In the case of a business failure or bankruptcy of an entity
subject to PACA, the debtor's inventory and receivables (PACA trust
assets) are not property of the estate and are not available for
general distribution to creditors other than PACA creditors who have
preserved their trust rights until all valid PACA trust claims have
been satisfied. Because of the statutory trust provision, PACA trust
creditors who have preserved their trust rights, including sellers
outside of the United States, have a far greater chance of recovering
the money owed them when an entity subject to PACA goes out of
business. The PACA trust provisions protect producers and all other
firms trading in fruits and vegetables as each buyer of perishable
agricultural commodities in the marketing chain becomes a seller in its
own turn.
In 1995, the PACA was amended to provide that licensed sellers of
fresh and frozen fruits and vegetables may provide notice to buyers of
their intention to preserve trust benefits by including specific
language on invoice and billing documentation. The required language
reads: ``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.'' (7 U.S.C.
499e(c)(4)).
The PACA regulations were amended in 1997 to state that electronic
transmissions are considered ``ordinary and usual billing and invoicing
statements'' within the meaning of section 5(c)(4) of the PACA. (7 CFR
46.46(5)). Under current regulations, PACA licensed unpaid sellers or
suppliers of fresh and frozen fruits and vegetables may provide notice
to buyers of their intention to preserve their trust rights by
including the specified language contained in section 5(c)(4) of the
PACA on their billing or invoicing statements, whether paper
documentation or electronic transmissions (including electronic data
interchange or EDI). Alternatively, as provided in the PACA and
regulations, sellers (licensed or non-licensed) may satisfy the notice
requirement by sending the buyer a separate detailed notice by mail of
their intent to preserve trust benefits within thirty (30) days of
payment default. Whichever method of notice is used, in order to
preserve trust benefits, payment terms may not exceed 30 days.
Since the amendment to the regulations, a number of produce sellers
have voiced concern that their PACA trust rights may not be preserved
if: (1) The buyer/buyer's agent either willfully or through oversight
does not receive the entire electronic transmission (i.e., EDI
invoice); (2) the buyer/buyer's agent does not download the trust
information; (3) the buyer/buyer's agent does not opt to receive the
information; (4) the buyer/buyer's agent does not buy the data field
that allows the inclusion of the trust language; or (5) the EDI service
provider does not translate the field that contains the trust language.
Additional concerns have been expressed that the alternate method of
trust notice (i.e., separate trust notice letter) is not being accepted
by some buyers who require EDI invoicing. These are of grave concern
since a seller may not know if the required trust
[[Page 4832]]
notice has been transmitted or received through EDI. Others in the
industry have expressed concern about being charged a fee by the buyer
to accept the notice to preserve their trust benefits through EDI or,
about being charged a fee if they send a paper invoice or separate
trust notice.
Agency Request for Information
AMS is soliciting comments on PACA trust rights in connection with
EDI invoicing so that the Agency will be able to provide greater
direction to the industry of how PACA trust rights can be preserved
when invoicing electronically. In particular, AMS invites comments and
information regarding how the Agency may best provide regulatory
clarification or direction. Comments are specifically invited on: (1)
The types of problems that may need to be addressed by new regulatory
language; (2) any technological barriers and solutions; (3) any
additional costs likely to be associated with appropriate regulations,
and opinions regarding who should bear such costs; (4) whether the
Agency should by regulation define EDI methods that must be made
available by licensed buyers, (i.e., creating a separate field for
trust notice in EDI); (5) should buyers be required to accept separate
notices (i.e., electronic or paper PACA trust) without restriction or
charge; and (6) other related issues and suggestions.
This notice provides a 45-day comment period for interested parties
to comment on the need for amending the regulations. Should AMS
conclude, based on the comments received, that the purposes of the PACA
would be advanced through new or revised regulations, the Agency will
develop a notice of proposed rulemaking that will be published in the
Federal Register with a request for comments in accordance with 5
U.S.C. 553.
Executive Orders 12866 and 12988
This advance notice of proposed rulemaking has been determined to
be not significant for the purposes of Executive Order 12866, and
therefore, has not been reviewed by the Office of Management and
Budget. This advance notice of proposed rulemaking has been reviewed
under Executive Order 12988, Civil Justice Reform, and is not intended
to have retroactive effect. This proposed rule will not preempt any
State or local laws, regulations, or policies, unless they present an
irreconcilable conflict with this rule. There are no administrative
procedures that must be exhausted prior to any judicial challenge to
the provisions of this advance notice of proposed rulemaking.
Effects on Small Business
Pursuant to requirements set forth in the Regulatory Flexibility
Act (RFA) (5 U.S.C. 601 et seq.), AMS has considered the economic
impact on this proposed rule on small entities. The purpose of the RFA
is to fit regulatory actions to the scale of businesses subject to such
actions in order that small businesses will not be unduly or
disproportionately burdened. Small agricultural service firms have been
defined by the Small Business Administration (SBA) (13 CFR 121.601) as
those whose annual receipts are less than $5,000,000. There are
approximately 15,000 firms licensed under the PACA, many of which could
be classified as small entities.
The proposed regulations, if found to be necessary, would clarify
how to preserve the trust benefit when using EDI. The use of EDI would
provide companies an electronic alternative to paper documentation to
give notice of intent to preserve trust rights, thereby reducing the
time and expense associated with preserving trust rights under the
PACA.
Authority: 7 U.S.C. 499o.
Dated: January 24, 2006.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
[FR Doc. E6-1090 Filed 1-27-06; 8:45 am]
BILLING CODE 3410-02-P