The PACA trust is a remedy for produce sellers to obtain payment on undisputed amounts owed for produce sales in or to the U.S. The PACA trust does not cover sales to Canada or other countries. If there is a legitimate dispute resulting in non-payment, then dispute resolution proceedings are used rather than the PACA trust.
The trust consists of a buyer’s produce-related assets, such as inventory and receivables.
The trust allows a seller, which has preserved its trust rights, to have its lawyer file a case in court and obtain a freeze on the trust assets of a non-paying buyer by showing there is no dispute the money is owed, and the trust assets are being dissipated.
Under the trust, produce suppliers are paid from the proceeds of their produce before any other creditor. This means produce sellers, who preserve their trust rights, have priority over all other creditors, including banks with security interests on produce-related assets.
The law does not require the produce-related assets be held in a separate account by the buyer. Rather, the trust floats over all the produce-related assets of the buyer until all qualified produce suppliers are paid in full.