[Federal Register Volume 62, Number 119 (Friday, June 20, 1997)]
[Proposed Rules]
[Pages 33574-33575]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-16196]
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Proposed Rules
Federal Register
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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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Federal Register / Vol. 62, No. 119 / Friday, June 20, 1997 /
Proposed Rules
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 46
[Docket Number FV97-355]
Proposed Revision to Part 46, Regulations Under the Perishable
Agricultural Commodities Act (PACA)
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Proposed rule.
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SUMMARY: The Department of Agriculture (USDA) invites comments on
proposed revisions to the PACA Regulations to establish that electronic
transmissions will be considered ``ordinary and usual billing or
invoice statements'' within the meaning of the PACA.
DATES: Comments must be received by July 21, 1997.
ADDRESSES: Interested persons are invited to submit written comments
concerning this proposal. Comments must be sent to Charles W. Parrott,
Assistant Chief, PACA Branch, Fruit and Vegetable Division, AMS, USDA,
Room 2095-So. Bldg., P.O. Box 96456, Washington, DC. 20090-6456. All
comments should reference the docket number and the date and page
number of this issue in the Federal Register and will be made available
for public inspection in the PACA Branch during regular business hours.
FOR FURTHER INFORMATION CONTACT: Charles W. Parrott, Assistant Chief,
PACA Branch, Room 2095-So. Bldg., Fruit and Vegetable Division, AMS,
USDA, Washington, D.C. 20250, Phone (202) 720-4180.
SUPPLEMENTARY INFORMATION: This proposal is issued under authority of
section 15 of the PACA (7 U.S.C. 499o).
Background
The Perishable Agricultural Commodities Act (PACA or Act)
establishes a code of fair trading practices covering 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. With this regulatory scheme, the law
fosters an efficient nationwide distribution system for fresh and
frozen fruits and vegetables, benefitting the whole marketing chain
from farmer to consumer. The Act provides for a forum to adjudicate
private disputes, which awards damages against a licensee who fails to
meet contractual obligations in violation of the PACA. The Act also
imposes a statutory trust on perishable agricultural commodities
received but not yet paid for, products derived from those commodities,
and any receivables or proceeds due from the sale of those commodities
or products thereof for the benefit of unpaid suppliers or sellers.
USDA's Agricultural Marketing Service (AMS) administers and enforces
the PACA.
The 1995 PACA amendments, among other things, eliminated the
requirement for unpaid produce suppliers to file trust notices with
USDA in order to preserve their trust rights under the statutory trust
provision of the Act. Additionally, the amendments to the PACA allow
unpaid sellers of fresh and frozen fruits and vegetables to preserve
trust benefits by augmenting existing invoice and billing documentation
to advise the buyer of the creditor's intention to preserve trust
benefits. This addition to billing or invoicing eliminates the need for
a trust creditor to provide any additional notice to the debtor of the
creditor's intention to preserve trust benefits. However, the PACA does
not indicate that information transmitted in the course of electronic
transactions constitute ``ordinary and usual billing or invoice
statements'' that could fulfill the Act's requirements for creditors to
provide prior notice that a sale may be subject to the trust
provisions.
Electronic commerce is becoming increasingly common as companies
communicate with each other via remote computers over ordinary
telephone lines. The data exchanged in an electronic transaction may
include the buyer's purchase order, followed by a shipping order and an
invoice from the seller, and a remittance advice and payment from the
buyer. Prior to engaging in an electronic transaction, both parties to
a transaction must agree to the format of the information to be
transmitted and received to assure that all necessary and appropriate
terms of sale are included and are readily understandable.
The purchase and sale of goods by electronic means has grown
steadily in the United States over the past decade. Nearly one quarter
of businesses surveyed in 1993 anticipated the use of electronic
transactions within 2 years and 20 percent were already conducting
business electronically. By 1993, electronic transmission was the
second most common means of exchanging business documents in the United
States. The use of paper remains number one, but has fallen by 50
percent since 1988.1
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\1\ This data was included in the January 15, 1997 petition for
rulemaking submitted by the United Fresh Fruit and Vegetable
Association.
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The federal government and many state governments have recognized
and accepted the reliability and usefulness of Electronic Data
Interchange (EDI). Some jurisdictions currently use EDI for tax and
Uniform Commercial Code filing systems. President Clinton, by Executive
Order, has mandated the use of EDI systems in federal
procurement.2
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\2\ Executive Order 12873, 58 Fed.Reg. 54,911 (October 22,
1993).
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Representatives of the fruit and vegetable industry have requested
that USDA clarify whether the exchange of commercial date in electronic
transactions will be considered ``ordinary and usual billing or invoice
statements'' within the meaning of the 1995 PACA legislation.
On January 15, 1997, the United Fresh Fruit and Vegetable
Association (UFFVA), a produce industry trade association based in
Alexandria, Virginia, petitioned AMS to promulgate regulations under
PACA to recognize the use of EDI. Ten other produce industry
organizations joined the UFFVA on the petition. The petitioners sought
clarification as to whether EDI transactions are considered by AMS to
be ``ordinary and usual billing or invoice statements'' within the
meaning of the 1995 PACA amendments.
USDA agrees with petitioners that a revision to the regulations
would eliminate any uncertainty in this regard and ensure that
licensees can use reasonable technological advances
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while still receiving appropriate trust protection under the PACA. To
achieve this effect, a definition for the term ``ordinary and usual
billing or invoice statements'' would be added in section 46.46(b), as
follows:
``Ordinary and usual billing or invoice statements' as used in
section 5(c)(4) of the Act and ``invoice or other billing
statement'' as used in section 46.46(f)(3) mean communications
customarily used between parties to a transaction in perishable
agricultural commodities in whatever form, documentary or
electronic, for billing or invoicing purposes.
This definition would specify that ``ordinary and usual billing or
invoice statements'' as used in the PACA and ``invoice or other billing
statement'' as used in section 46.46(f)(3) include both paper
documentation and electronic transmissions customarily used between a
seller and a buyer for billing or invoicing purposes. This proposed
change to the regulations is similar to the change suggested in the
UFFVA petition. The petitioners also suggested a change to section
46.46(f)(3) of the regulations. However, the Department has determined
that the proposed definition set out above makes the suggested change
unnecessary.
Executive Orders 12866 and 12988
This rule, issued under the Perishable Agricultural Commodities Act
(7 U.S.C. 499 et seq.), as amended, has been determined to be not
significant for the purposes of Executive Order 12866.
This proposed rule has been reviewed under Executive Order 12988,
Civil Justice Reform. This proposed rule 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 which must be exhausted prior to any judicial challenge to
the provisions of this rule.
Effects on Small Businesses
Pursuant to requirements set forth in the Regulatory Flexibility
Act (RFA) (5 U.S.C. 601 et seq.), USDA has considered the economic
impact of 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 (13 CFR 121.601) as those
whose annual receipts are less than $5,000,000. The PACA requires all
businesses that operate subject to its provisions maintain a license
issued by USDA. There are approximately 15,700 PACA licensees, many of
which may be classified as small entities.
The proposed regulations would establish that the electronic
transmissions used in perishable agricultural commodity transactions
are, in fact, ``ordinary and usual billing or invoice statements.'' The
use of electronic transactions would be voluntary, and would
specifically provide companies an electronic alternative to paper
documentation to give notice of intent to preserve trust rights.
Accordingly, based on the information in the above discussion, AMS
has determined that the provisions of this rule would not have a
significant economic impact on a substantial number of small entities.
Paperwork Reduction Act
In compliance with Office of Management and Budget (OMB)
regulations (5 CFR part 1320) which implement the Paperwork Reduction
Act of 1995 (Pub. L. 104-13), the information collection and
recordkeeping requirements covered by this proposed rule were approved
by OMB on October 31, 1996, and expire on October 31, 1999.
List of Subjects in 7 CFR Part 46
Agricultural commodities, Brokers, Penalties, Reporting and
recordkeeping requirements.
For the reasons set forth in the preamble, 7 CFR part 46 is
proposed to be amended as follows:
PART 46--[AMENDED]
1. The authority citation for part 46 continues to read as follows:
Authority: Sec. 15, 46 Stat. 537; 7 U.S.C. 499o
2. In Sec. 46.46, paragraph (b)(5) would be added, as follows:
Sec. 46.46 Statutory trust.
* * * * *
(b) * * *
* * * * *
(5) Ordinary and usual billing or invoice statements as used in
section 5(c)(4) of the Act, and invoice or other billing statement as
used in Sec. 46.46(f)(3), mean communications customarily used between
parties to a transaction in perishable agricultural commodities in
whatever form, documentary or electronic, for billing or invoicing
purposes.
Dated: June 17, 1997
Robert C. Keeney,
Director, Fruit and Vegetable Division.
[FR Doc. 97-16196 Filed 6-19-97; 8:45 am]
BILLING CODE 3410-02-P