The Intersection of PACA and Transportation Claims

The Perishable Agricultural Commodities Act (PACA, or the Act) gives the U.S. Department of Agriculture (USDA) jurisdiction over produce vendors and their agents who buy or sell fruits and vegetables in wholesale quantities in foreign or interstate commerce.

The PACA, including its regulations and reparation decisions issued under the Act, is fundamental to produce transactions in the United States, providing various services carried out by the staff of its branch office of the USDA, including licensing and restricting violators, interpreting USDA inspection certificates, setting “good arrival” guidelines, and issuing reparation decisions. Additionally, the Act provides a statutory trust for the benefit of produce suppliers which may be enforced against delinquent buyers in U.S. federal court.

But for all the good PACA does for the industry, the Act does not give the USDA jurisdiction over transportation firms or any mechanism for resolving disputes between produce vendors and transportation firms. Yet, PACA is often referenced in transportation claims involving fresh produce. Sometimes these references are misplaced, but sometimes they are relevant or even pivotal in resolving transportation claims. Consequently, it is helpful to have a solid understanding of PACA when assessing carrier claims involving fresh fruits and vegetables. In this article we examine some of the key intersections between PACA and transportation claims.

RECEIVED IN GOOD ORDER vs. GOOD ARRIVAL
As a starting point, it’s important to understand that the warranty of suitable shipping condition, or the requirement that produce make “good arrival” at the contract destination, is a warranty made by produce sellers, not carriers. Sellers are responsible, under PACA regulations, for loading product that will hold up during normal transportation conditions. Carriers, on the other hand, are responsible for providing normal transportation conditions (more on this later).

Specifically, PACA regulations provide that “produce quoted or sold is to be placed…at shipping point, in suitable shipping condition” (7 CFR 46.43(i)). Regulations define suitable shipping condition as follows—

Suitable shipping condition … means that the commodity [at time of shipment] is in a condition which, if the shipment is handled under (1) normal transportation… conditions, will assure delivery (2) without abnormal deterioration at the (3) contract destination agreed upon between the parties…. (7 CFR 46.43(j))

So, by definition, only produce sellers can breach the warranty of suitable shipping condition. Despite the clarity of the regulations on this point, produce vendors will sometimes rely on a clause in the bill of lading that produce “was received [by the carrier at shipping point] in apparent good order” as support for the misguided idea that the driver’s signature somehow certifies the product was loaded in suitable shipping condition, and therefore the carrier must be responsible for the failure of the product to make good arrival at destination.