(July 8) A produce seller’s trust rights under the Perishable Agricultural Commodities Act could be compromised by the third-party billing requirement recently instituted by Columbia, Md.-based U.S. Foodservice, according to a late June USDA memorandum.

Bruce Summers, acting chief of the U.S. Department of Agriculture’s PACA branch, said in a memo to the Newport Beach, Calif.-based Western Growers Association that “we believe that your member companies are correct to be concerned about the impact of their trust rights under PACA.”

APPEAL TO PACA BRANCH

WGA members began questioning the new billing practice in May after U.S. Foodservice sent out letters to its produce suppliers telling them to begin invoicing an independent, third-party billing service. WGA appealed to the PACA branch for clarification on the matter, and the branch issued its memo and contacted U.S. Foodservice.

Summers noted that most produce suppliers are preserving their trust rights by placing the trust language on their invoices or billing statements. Under the new billing practice, separate trust notification would have to be sent.

But the invoices still would not show U.S. Foodservice as the true buyer, and Summers said that raises another issue. If all the paperwork shows the billing company as the buyer, he said, then suppliers may be precluded from successfully enforcing their trust rights against U.S. Foodservice.

’MUCH MORE COMPLICATED’

“In general, if a seller wishes to pursue an action to recover funds under any provision of PACA, it will be much more complicated to pursue a party different from that shown as the buyer on the billing documents,” Summers said.

The invoices also could run afoul of PACA’s requirement that all licensees keep records that fully disclose all transactions.

“If sellers prepare invoices that they know do not accurately reflect the details of the transactions, such as listing the incorrect buyer, the sellers could be determined to have violated the PACA,” Summers said.

Matt McInerney, WGA’s executive vice president, said some of the association’s members have indicated they are taking the PACA branch’s initial statements on the matter and are discussing it directly with the foodservice company, the identity of which he did not name but was disclosed elsewhere as U.S. Foodservice.

“At the end of the day, it’s a business-to-business decision” as to how suppliers to U.S. Foodservice should proceed, McInerney said. “I don’t see any reason why this can’t have an amicable resolution.”