Ironically, the effort to go paperless with invoicing has created situations where sellers must fax hard-copy PACA Trust notices to preserve their priority rights under the law.

Bruce Summers, chief of the Perishable Agricultural Commodities Act branch of the U.S. Department of Agriculture, recently explained the growing issue to the Fruit & Vegetable Industry Advisory Board and reiterated the quandary in a recent interview with The Produce News.

In 1995, the PACA Trust provisions of the act were amended to allow for the preservation of rights by simply including the correct phraseology on an invoice. No longer did sellers have to go through the often-cumbersome exercise of tracking each payment and sending out PACA Trust notifications when a past-due bill approached the trigger date  typically 40 days after billing.

Two years later, the PACA Trust provision of the act was once again amended to include electronic invoicing as an acceptable method of PACA Trust notification.

This system has worked very well over the past decade, allowing sellers to preserve their rights without the mountains of paperwork that were inundating sellers, buyers and the PACA before the 1995 amendments. But the world of electronic data interchange has continued to evolve and created a situation not covered under current PACA Trust law.

The 1997 amendment concerning EDI assumed that shippers were creating invoices electronically and sending them to retailers. It was a relatively simple task for a shipper to make sure each of those invoices included the self-protecting language that invoked the all-important PACA Trust, which puts sellers of fresh produce in a priority position in the event of a bankruptcy by the receiver of their product.

Today, EDI invoicing has taken on different shapes and sizes. Third-party platforms are used as well as buyer-controlled web sites, where the seller merely enters the invoicing information on a pre-existing form. Mr. Summers told The Produce News that some of these electronic invoicing systems do not include the approved PACA Trust language, or any mention of the PACA Trust at all.

"Lately, we have been fielding numerous calls [from sellers] asking, 'How do we preserve our Trust rights in these situations,' " he said.

The simple answer, according to the PACA branch chief, is that sellers must revert back to the pre-1995 way of doing business.

Tom Oliveri, director of trade practices and commodity services and the PACA expert for Western Growers Association, agreed. I just gave a seminar last week and I told shippers that [in these cases] they had to either send hard-copy invoices or go back to sending PACA Trust notices.

Under the law and absent PACA Trust notification on the invoice, Mr. Oliveri explained that the seller must send the buyer a Trust notice before the bill becomes more than 30 days past due. Unless the buyer and seller have a written and signed agreement stating terms (which must be 30 days or less), the default terms of agreement are 10 days after receipt of product. That basically means that Trust notices must be faxed to the buyer within 40 days of receipt of product.

A seller has to keep close track of these past-due accounts and make sure that notice is faxed in a timely manner, Mr. Oliveri said.

The mailing or faxing of a hard copy invoice to these buyers might be an alternative, but the WGA executive said that this does open a can of worms that could leave the seller vulnerable.

Under the 1995 amendment, the invoice with the proper language is accepted as notification if it is the sellers customary way of doing business. If a buyer has gone to an EDI system, a bankruptcy lawyer might argue that the hard-copy invoice is no longer the customary way of doing business, and a judge could agree with that argument.

Mr. Oliveri said that to be completely safe, sellers involved with an incomplete electronic invoice should revert to the faxing of Trust notices. But help is on the way.

Mr. Summers presented the issue to the Fruit & Vegetable Industry Advisory Board as the first step in a rule-making process to address this issue. He said that PACA is currently working with the USDA legal staff to draft appropriate language to publish in the Federal Register. The notice will inform the industry that PACA is looking at this issues and is in the fact-gathering mode.

We are proposing an advanced notice of proposed rule-making, he said.

At that point, the produce industry public will have 45 days to submit comments about the scope of the problem and possible remedies. Mr. Summers said specifically that PACA would like to explore the impact of a regulation requiring the correct wording on an electronic invoice. Does the [current] software provide for that? Are there technical barriers? he asked.

Besides hearing from sellers and buyers, he said that PACA hopes to hear from third-party companies involved in invoicing and computer programming. After gathering the information, PACA will analyze it and determine if a new regulation is required. If so, the rule-making procedure will begin with the posting of the regulation in the Federal Register, and another comment period will follow. Mr. Summers estimated that the entire process will take close to a year.

In the meantime, sellers who havent already done so should dust off their old PACA Trust notice manuals and make sure they are protecting their rights. I know the larger companies with sophisticated systems are already doing this, said Mr. Oliveri, but I am sure some people arent doing everything they should.