[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]
[[Page 60998]]
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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
[[Page 60999]]
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
