Fresno, California – Fresh produce shippers are stunned by the recent announcement from Kroger to suppliers of their new ‘net 90-day’ payment terms to take effect on August 1.
Datatech has learned from industry analysts that this could be essentially a PACA busting effort on Kroger’s part and they say it may be the beginning of a troubling trend by other produce buyers to get out from under the Perishable Agricultural Commodities Act established in 1984. PACA gives federal trust protection to produce sellers which essentially gives the industry the protection from buyers that in the event of a buyer’s bankruptcy their debt to the produce seller cannot be discharged.
Several associations are coming out against the Kroger policy in recent statements. Western Growers Association’s Sr. Executive Vice President Matt McInerney, says that agreeing to any terms beyond 30 days waives a produce sellers rights under PACA, “Under PACA, to be eligible for trust benefits, you must use prompt payment, which means payment terms of “PACA Prompt” or “Net 10 days”. Sellers can only extend those terms to a maximum of 30 days. Anything beyond the 30 days will automatically invalidate your protection and rights to the trust provisions. When Congress enacted the trust provisions, it recognized the uniqueness of the produce industry and the importance of protecting sellers of fresh produce.”
Western Growers has posted the letter from Kroger to their suppliers that you can see here.
WGA has been working to create a coalition of produce shippers to get Kroger to rescind this new policy says McInerney, “Although Kroger has since indicated “flexibility” for produce suppliers, it is in our best interest to urge Kroger to make an official announcement rescinding the policy with specific clarification stating the policy does not apply to fresh produce. Kroger plans to talk with suppliers about payment options, however, the only acceptable option is coverage under PACA Trust terms and payment consistent with those terms.”
Produce industry analysts say PACA was an amazing legislative achievement for the produce industry and should be fought for. Stay tuned on this story.