[Federal Register Volume 62, Number 220 (Friday, November 14, 1997)]
[Rules and Regulations]
[Pages 60998-60999]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-29926]



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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 46

[Docket Number FV97-355]


Revision to Part 46, Regulations Under the Perishable 
Agricultural Commodities Act (PACA)

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: The Department of Agriculture (USDA) is revising the 
regulations (other than Rules of Practice) Under the Perishable 
Agricultural Commodities Act (PACA or Act) to establish that electronic 
transmissions are ``ordinary and usual billing or invoice statements'' 
within the meaning of the PACA.

EFFECTIVE DATE: December 15, 1997.

FOR FURTHER INFORMATION CONTACT: Charles W. Parrott, Assistant Chief, 
PACA Branch, Room 2095-So. Bldg., Fruit and Vegetable Division, AMS, 
USDA, 1400 Independence Avenue, S.W.,Washington, D.C. 20250, Phone 
(202) 720-4180.

SUPPLEMENTARY INFORMATION: This regulation is issued under authority of 
section 15 of the PACA (7 U.S.C. 499o).

Background

    The PACA establishes a code of fair trading practices covering the 
marketing of fresh and frozen fruits and vegetables in interstate and 
foreign commerce. It protects growers, shippers, distributors, and 
retailers dealing in those commodities by prohibiting unfair and 
fraudulent trade practices. Thus, 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 PACA provides for a forum to adjudicate commercial 
disputes in which USDA may award damages against a licensee who fails 
to meet contractual obligations in violation of the Act. The law 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 PACA Amendments of 1995, 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 adding language to ``ordinary and usual billing or 
invoice statements'' that advises the buyer of the creditor's intention 
to preserve trust benefits. This addition of language indicating the 
intent to preserve trust benefits to bills or invoices 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 Act does not explicitly declare that information transmitted in the 
course of electronic transactions would constitute ``ordinary and usual 
billing or invoice statements''.
    On January 15, 1997, the United Fresh Fruit and Vegetable 
Association (UFFVA), a produce industry trade association based in 
Alexandria, Virginia, petitioned AMS to adopt regulations under the 
PACA to recognize the use of Electronic Data Interchange. 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 
agreed with petitioners that a revision to the regulations would 
eliminate any uncertainty in this regard and would ensure that 
licensees can use reasonable technological advances while still 
receiving appropriate trust protection under the PACA.
    Therefore, USDA proposed a change in the PACA regulations to 
achieve this end. The proposal was published in the Federal Register on 
June 20, 1997 (62 FR 33574). The proposal contained a definition for 
the term ``ordinary and usual billing or invoice statements'' to be 
added in section 46.46(a) 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.

    The proposed definition specifies 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 change to 
the regulations is very similar to the change suggested in the UFFVA 
petition. The 30-day comment period on the proposed rule closed on July 
21, 1997.

Comments

    USDA received comments on the proposed rule from the American 
Frozen Food Institute (AFFI), McLean, Virginia; Western Growers 
Association, Newport Beach, California; Driscoll's Strawberry 
Associates, Inc., Watsonville, California; and The Nunes Company, Inc., 
Salinas, California. All of the commentors supported USDA's proposal to 
amend the regulations to establish that electronic transmissions are 
``ordinary and usual billing or invoice statements'' within the meaning 
of the PACA.
    In its favorable comment, AFFI suggested that in order to clarify 
and strengthen the proposal, USDA should confirm in the final rule that 
including a statement on an electronic invoice or other billing 
document that the sale is subject to the provisions of the PACA 
statutory trust will satisfy the notice requirements under the statute. 
AFFI is concerned that the statement preserving trust benefits may not 
be recognized as a standard data field on an electronic document, and 
therefore may not be received or read by the party to which the 
information is being disclosed. However, as we stated in the preamble 
to the proposed rule, both parties to an electronic transaction must 
agree to the format of the information to be transmitted and received 
in an electronic transmission. USDA believes that this agreement is the 
proper forum for ensuring that the buyer receives notice of trust 
preservation from the seller in the electronic transmission. The PACA 
requires that the seller give notice to the buyer in order to preserve 
its trust benefits. Therefore, a seller engaged in electronic 
transactions must ensure in the agreement with its buyer that the buyer 
is receiving the trust statement as part of the electronic 
transmission. Otherwise, the seller is responsible for finding other 
means of giving notice to the buyer in order to qualify for PACA trust 
protection. Under these circumstances, USDA is making no change to the 
final rule based on this comment.

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 final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. This rule is not intended

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to have retroactive effect. This final 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 final 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 revised regulations 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 is voluntary, and the revised regulations 
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 rule were approved by OMB on 
October 31, 1996, and expires on October 31, 1999.

List of Subjects in 7 CFR Part 46

    Agricultural commodities, Brokers, Penalties, Reporting and record 
keeping requirements.
    For the reasons set forth in the preamble, 7 CFR part 46 is 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, a new paragraph (a)(5) is added to read as 
follows:


Sec. 46.46  Statutory trust.

* * * * *
    (a) * * *
    (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: November 7, 1997.
Robert C. Keeney,
Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 97-29926 Filed 11-13-97; 8:45 am]
BILLING CODE 3410-02-P