[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  

[[Page 33574]]


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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

[[Page 33575]]

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