Perishable Agricultural Commodities Act: Impact of Post-Default Agreements on Trust Protection Eligibility, 32306-32309 [2010-13634]

Agencies

• Agricultural Marketing Service
• DEPARTMENT OF AGRICULTURE

[Federal Register Volume 75, Number 109 (Tuesday, June 8, 2010)]
[Proposed Rules]
[Pages 32306-32309]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-13634]



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Proposed Rules

                                                Federal Register

________________________________________________________________________



This section of the FEDERAL REGISTER contains notices to the public of 

the proposed issuance of rules and regulations. The purpose of these 

notices is to give interested persons an opportunity to participate in 

the rule making prior to the adoption of the final rules.



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Federal Register / Vol. 75, No. 109 / Tuesday, June 8, 2010 / 

Proposed Rules



[[Page 32306]]







DEPARTMENT OF AGRICULTURE



Agricultural Marketing Service



[Document Number AMS-FV-09-0047]



7 CFR Part 46




Perishable Agricultural Commodities Act: Impact of Post-Default 

Agreements on Trust Protection Eligibility



AGENCY: Agricultural Marketing Service, USDA.



ACTION: Proposed rule.



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SUMMARY: The Department of Agriculture (USDA) is proposing to amend the 

regulations under the Perishable Agricultural Commodities Act (PACA) in 

response to concerns raised by the industry that sellers may lose their 

status as trust creditors when they agree orally or in writing, after 

default on payment, to accept payments over time from financially 

troubled buyers. The amendment's purpose is to provide greater 

direction to the industry on maintaining trust protection after a buyer 

has made or is attempting to make partial payments.

    Specifically, if there is a default in payment as defined in the 

reguations, the amendment would allow a seller, supplier, or agent who 

has met the eligibility requirements to enter into a written scheduled 

payment agreement for payment of the past due amount while maintaining 

its trust eligibility. The length of such an agreement for payment of 

the past due amount, while still maintaining eligibility for trust 

protection, could not extend beyond 180 days from the default date. In 

addition, the unpaid seller, supplier, or agent would be required to 

cease all collection of past due amounts under a written scheduled 

payment agreement if the buyer enters into bankruptcy or if the buyer 

is the respondent in a civil trust action. Any remaining unpaid amounts 

subject to the scheduled payment agreement would continue to qualify 

for trust protection.



DATES: Written or electronic comments received by August 9, 2010 will 

be considered prior to issuance of a final rule.

Additional Information or Comments: You may submit written or 

electronic comments to PACA Trust Post-Default Comments, AMS, F&V 

Programs, PACA Branch, 1400 Independence Avenue SW., Room 2095-S, Stop 

0242, Washington, DC 20250-0242; fax: 202-720-8868; or Internet: https://www.regulations.gov.



FOR FURTHER INFORMATION CONTACT: Phyllis L. Hall or Josephine E. 

Jenkins, Trade Practices Section, 202-720-6873.



SUPPLEMENTARY INFORMATION: 



Background of PACA and Trust Provisions



    The Perishable Agricultural Commodities Act (PACA) was enacted in 

1930 to promote fair trading in 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. The 

PACA also provides a forum to adjudicate or mediate commercial 

disputes. Licensees who violate the PACA may have their license 

suspended or revoked, and individuals determined to be responsibly 

connected to such licensees are restricted from employment or operating 

in the produce industry for a period of time.

    Growing, harvesting, packing, and shipping perishables involve 

risk: Costs are high, capital is tied up in farmland and machinery, and 

returns are delayed until the crop is sold. Because of the highly 

perishable nature of the commodities and distance from selling markets, 

produce trading is fast moving and often informal. Transactions are 

consummated in a matter of minutes, frequently while the commodities 

are en route to their destination. Under such conditions, it is often 

difficult to check the credit rating of the buyer.

    Congress examined the sufficiency of the PACA provisions fifty 

years after its inception and determined that prevalent financing 

practices in the perishable agricultural commodities industry were 

placing the industry in jeopardy. Particularly, Congress focused on the 

increase in the number of buyers who failed to pay, or were slow in 

paying their suppliers and the impact of such payment practices on 

small suppliers who could not withstand a significant loss or delay in 

receipt of monies owed. Congress was also troubled by the common 

practice of produce buyers granting liens on their inventories to their 

lenders, which covered all proceeds and receivables from the sales of 

perishable agricultural commodities, while the produce suppliers 

remained unpaid. This practice elevated the lenders to a secured 

creditor position in the case of the buyer's insolvency, while the 

sellers of perishable agricultural commodities remained unsecured 

creditors with little or no legal protection or means of recovery in a 

suit for damages.

    Deeming this situation a ``burden on commerce,'' Congress amended 

the PACA in 1984 to include a statutory trust provision, which provides 

increased credit security in the absence of prompt payment for 

perishable agricultural commodities. The 1984 amendment to the PACA 

states in relevant part:



    It is hereby found that a burden on commerce in perishable 

agricultural commodities is caused by financing arrangements under 

which commission merchants, dealers, or brokers, who have not made 

payment for perishable agricultural commodities purchased, 

contracted to be purchased, or otherwise handled by them on behalf 

of another person, encumber or give lenders a security interest in 

such commodities, or on inventories of food or other products 

derived from such commodities, and any receivables or proceeds from 

the sale of such commodities or products, and that such arrangements 

are contrary to the public interest. This subsection is intended to 

remedy such burden on commerce in perishable agricultural 

commodities and to protect the public interest.



(7 U.S.C. 499e(c)(1)).

    Under the 1984 amendment, perishable agricultural commodities, 

inventories of food or other derivative products, and any receivables 

or proceeds from the sale of such commodities or products, are to be 

held in a non-segregated floating trust for the benefit of unpaid 

sellers. This trust is created by operation of law upon the purchase of 

such goods, and the produce buyer is the statutory trustee for the 

benefit of the produce seller. To preserve its trust benefits, the 

unpaid supplier, seller or agent must give the buyer written notice of 

intent to preserve its rights under the trust within



[[Page 32307]]



30 calendar days after payment was due. Alternatively, as provided in 

the 1995 amendments to the PACA, a PACA licensee may provide notice of 

intent to preserve its trust rights by including specific language as 

part of its ordinary and usual billing or invoice statements.

    The trust is a non-segregated ``floating trust'' made up of all of 

a buyer's commodity-related assets, under which there may be a 

commingling of trust assets. There is no need to identify specific 

trust assets through each step of the accrual and disposal process. 

Since commingling is contemplated, all trust assets would be subject to 

the claims of unpaid sellers, suppliers and agents to the extent of the 

amount owed them. As each supplier gives ownership, possession, or 

control of perishable agricultural commodities to a buyer, and 

preserves its trust rights, that supplier becomes a participant in the 

trust. Section 5(c)(2) of the PACA states in relevant part:



    Perishable agricultural commodities received by a commission 

merchant, dealer, or broker in all transactions, and all inventories 

of food or other products derived from perishable agricultural 

commodities, and any receivables or proceeds from the sale of such 

commodities or products, shall be held by such commission merchant, 

dealer, or broker in trust for the benefit of all unpaid suppliers 

or sellers of such commodities or agents involved in the 

transaction, until full payment of the sums owing in connection with 

such transactions has been received by such unpaid suppliers, 

sellers, or agents.



(7 U.S.C. 499e(c)(2)). Thus, trust participants remain trust 

beneficiaries until they have been paid in full.

    Under the statute, the District Courts of the United States are 

vested with jurisdiction to entertain actions by trust beneficiaries to 

enforce payment from the trust. Thus, in the event of business failure, 

produce creditors may enforce their rights by suing the buyer in 

federal district court. It is common in this type of trust enforcement 

action for unpaid sellers to seek a temporary restraining order (TRO) 

that freezes the bank accounts of a buyer until the trust creditors are 

paid. Many unpaid sellers have found this a very effective tool to 

recover payment for produce. Often, a trust enforcement action with a 

TRO will be the defining moment for the future of a debtor firm. As the 

TRO freezes the bank accounts of the debtor, the debtor must either pay 

the trust creditors or attempt to operate a business without access to 

its bank accounts. This aggressive course of action by unpaid sellers 

is generally pursued when the sellers are concerned that trust assets 

are being dissipated.

    In the event of a bankruptcy by a produce buyer, that is, the 

produce ``debtor,'' the debtor's trust assets are not property of the 

bankruptcy estate and are not available for distribution to secured 

lenders and other creditors until all valid PACA trust claims have been 

satisfied. The trust creditors can petition the court for the turnover 

of the debtor's trust-related assets or alternatively request that the 

court oversee the liquidation of the inventory and collection of the 

receivables and disburse the trust proceeds to qualified PACA trust 

creditors.

    Because of the statutory trust provision, produce creditors, 

including sellers outside the United States, have a far greater chance 

of recovering money owed them when a buyer goes out of business. 

However, because attorney's fees are incurred in these kinds of suits 

it is not always practical to pursue small claims that remain unpaid. 

Nonetheless, as a result of the PACA trust provisions, unpaid sellers, 

including those outside the United States, have recovered hundreds of 

millions of dollars that most likely would not otherwise have been 

collected.

    The PACA trust provisions protect not only growers, but also other 

firms trading in fruits and vegetables since each buyer in the 

marketing chain becomes a seller in its own turn and can preserve its 

own trust assets accordingly. Because each creditor that buys produce 

can preserve trust assets for the benefit of its own suppliers, any 

money recovered from a buyer that goes out of business are passed back 

through preceding sellers until ultimately the grower also realizes the 

financial benefits of the trust provisions. This is particularly 

important in the produce industry due to the highly perishable nature 

of the commodities as well as the many hands such commodities 

customarily pass through to the end customer.

    To gain trust protection under the PACA, the law offers two 

approaches to unpaid sellers. One option allows PACA licensees to 

declare at the time of sale that the produce being sold is subject to 

the PACA trust, providing protection in the event that payment is late 

or the payment instrument is not honored. This option allows PACA 

licensees to protect their trust rights by including the following 

language on invoices or other billing statements:



    The perishable agricultural commodities listed on this invoice 

are sold subject to the statutory trust authorized by section 5(c) 

of the Perishable Agricultural Commodities Act, 1930 (7 U.S.C. 

499e(c)). The seller of these commodities retains a trust claim over 

these commodities, all inventories of food or other products derived 

from these commodities, and any receivables or proceeds from the 

sale of these commodities until full payment is received.



(7 U.S.C. 499(c)(4)).

    The second option for a PACA licensee to preserve its trust rights, 

and the sole method for all non-licensed sellers, requires the seller 

to provide a separate, independent notice to the buyer of its intent to 

preserve its trust benefits. The notice must include sufficient details 

to indentify each transaction and be received by the buyer within 30 

days after payment becomes due. Since the 1995 amendment to the PACA, 

the notice is not required to be filed with USDA.

    Under current 7 CFR 46.46(e)(2), only transactions with payment 

terms of 30 days from receipt and acceptance, or less, are eligible for 

trust protection. Section 46.46(e)(1) of the regulations (7 CFR 

46.46(e)(1)) requires that any payment terms beyond ``prompt'' payment 

as defined by the regulations, usually 10 days after receipt and 

acceptance in a customary purchase and sale transaction, must be 

expressly agreed to before entering into the transaction and reduced to 

writing. A copy of the agreement must be retained in the files of each 

party and the payment due date must be disclosed on the invoice or 

billing statement.

    Over the past few years, several federal courts have invalidated 

the trust rights of unpaid creditors because these creditors agreed in 

writing, and in some cases, by oral agreement, after default on 

payment, to accept payments over time from financially troubled buyers. 

In general, these courts have invalidated the seller's previously 

perfected trust rights because the agreements were deemed to extend 

payment terms beyond 30 days.\1\

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    \1\ See, Paris Foods Corp. v. Foresite Foods, Inc., No. 1:05-cv-

610-WSD, 2007 WL 568841 (N.D. Ga. Feb. 20, 2007); Bocchi Americas 

Assoc. v. Commerce Fresh Mktg., Inc., No. Civ. A. H0402411, 2005 WL 

3164240 (S.D. Tex. Nov. 28, 2005); American Banana Co. v. Republic 

Nat. Bank of N.Y., 362 F.3d 33 (2nd Cir. 2004); Patterson Frozen 

Foods, Inc. v. Crown Foods, Int'l, 307 F.3d 666, 667 (7th Cir. 

2002); Greg Orchards Produce, Inc. v. P. Roncone J., 180 F.3d 888, 

892 (7th Cir. 1999); Idahoan Fresh v. Advantage Produce, Inc., 157 

F.3d 197, 205 (3d Cir. 1998); In re Lombardo Fruit and Produce Co., 

12 F.3d 806, 809 (8th Cir. 1993); and Hull v. Hauser's Foods, Inc., 

924 F.2d 777, 781-82 (8th Cir. 1991).

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    Many within the industry and the USDA Fruit and Vegetable Industry 

Advisory Committee have urged the Secretary to amend the PACA 

regulations to address the impact of post-default agreements on 

eligibility for trust protection. They have voiced concern that the 

uncertainty created by court decisions and the silence of the



[[Page 32308]]



PACA regulations on this matter introduce risk, cost, and unnecessary 

litigation to the marketing chain.

    The court decisions at issue have held that any post-default 

agreement, whether oral or written, that extends the buyer's obligation 

to pay the seller's invoices beyond 30 days after receipt and 

acceptance of the produce abrogates the produce seller's PACA trust 

rights. These decisions have held that (1) when a seller enters into 

the post-default agreement, the agreement modifies any valid payment 

agreement entered into prior to the transaction and therefore voids the 

trust protection,\2\ and (2) post-default agreements that allow for 

installment payments exceeding 30 days from receipt of produce violate 

the PACA prompt-pay provisions.\3\

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    \2\ See American Banana Co., 362 F.3d at 33; Patterson Frozen 

Foods, 307 F.3d at 669.

    \3\ American Banana Co., 362 F.3d at 46.

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    It is our interpretation of the statute and regulations that post-

default agreements are not an extension of the 30-day maximum time 

period for pre-transaction agreements that would result in a waiver of 

the seller's trust rights; post-default payment agreements are an 

attempt to collect a debt. The Secretary has long recognized a 

significant difference between the relative positions of buyers and 

sellers before a transaction, versus their positions after a buyer 

defaults on payment. The Secretary has observed that ``produce sellers 

are not in an equal bargaining position with produce purchasers who are 

in possession of the produce seller's perishable agricultural 

commodities.'' \4\ After a buyer has defaulted on payment, the seller 

is at the buyer's mercy. Any agreement reached after default is not an 

arm's length transaction. The trust is intended to provide protection 

to the unpaid seller whose bargaining position has changed for the 

worse after delivering its produce to a buyer. We do not believe that a 

seller's perfected trust rights should be lost because the seller 

enters into a payment arrangement, in an attempt to collect a debt, 

after the buyer has violated the PACA's prompt payment requirement.

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    \4\ See In re: Scamcorp, Inc., 57 Agric. Dec. 527, 563 (1998).

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    When a buyer defaults on payment for produce, it has committed a 

violation of section 2(4) of the PACA (7 U.S.C. 499b(4)). The 

defaulting buyer's license is then subject to suspension or revocation, 

or the buyer may be assessed a civil penalty for its violations of the 

PACA. Allowing a seller who has perfected its trust rights to enter 

into a post-default payment agreement with the defaulting buyer does 

not negate the buyer's violations of the Act. The trust is a means to 

protect the seller's right to payment for produce, not to enforce the 

prompt payment provisions of the Act. The Secretary can still initiate 

an enforcement action against the buyer to seek the appropriate 

sanction for violation of the Act without regard to any post-default 

agreement entered into between the unpaid seller and the buyer in 

default.

    Many of the court decisions at issue have been based on an 

interpretation of Sec.  46.46(e) of the regulations (7 CFR 46.46(e)). 

Section 46.46(e)(1) (7 CFR 46.46(e)(1)) requires that parties who elect 

to use different times for payment must reduce their agreement to 

writing before entering into the transaction. Current Sec.  46.46(e)(2) 

(7 CFR 46.46(e)(2)) states that the maximum time for payment for a 

shipment to which a seller can agree and still qualify for coverage 

under the trust is 30 days after receipt and acceptance of the 

commodities. It is our interpretation that Sec.  46.46(e)(2), like 

(e)(1) of the regulations (7 CFR 46.46(e)(1) and(e)(2)), addresses pre-

transaction agreements only.

    This interpretation of our regulations is consistent with the 

Secretary's unwillingness to impute a waiver of trust rights as 

illustrated in the policies established by the Secretary and upheld by 

the courts in the context of the trust provisions of the Packers and 

Stockyards Act (7 U.S.C. 181 et seq.), after which the PACA trust 

provisions are largely modeled.\5\ In the context of the PACA trust, 

the right to make a claim against the trust are vested in the seller, 

supplier, or agent who has met the eligibility requirements of 

paragraphs (e)(1) and (2) of Sec.  46.46 (7 CFR 46.46(e)(1) and (2)). 

The seller, supplier, or agent remains a beneficiary of the PACA trust 

until the debt owed is paid in full. An agreement to pay the antecedent 

debt in installments is not considered payment in full. Thus, we do not 

believe that a post-default payment agreement should constitute a 

waiver of a seller's previously perfected trust rights.

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    \5\ See, e.g., In re Gotham Provision Co., Inc., 669 F.2d 1000, 

1007 (5th Cir. 1982).

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    Post-default agreements are often the result of a reasonable effort 

by an unpaid seller, supplier, or agent to recover at least some of the 

debt owed to it without incurring the risks and expense of protracted 

litigation. Such agreements should be viewed as a useful tool for 

recovery of unpaid debts, allowing for cure of a temporary payment 

delay as can occur in the produce industry due to the perishable nature 

of the product being bought and sold as well as the often fast-paced 

and short-term fluctuations in market price due to weather, pests, 

transportation, and seasonality of supply and demand.

    While the potential benefits of post-default agreements are real, 

we believe such agreements should be subject to regulatory 

requirements. To ensure that the post-default payment arrangement does 

not extend beyond a reasonable period, the maximum length of an 

agreement to accept scheduled payments on the past due amount and 

maintain eligibility for trust protection could not extend beyond 180 

days from the default date. We believe that one hundred eighty days is 

a reasonable time period during which a firm experiencing minor 

financial troubles can work out delinquent accounts with its suppliers. 

Such an arrangement lessens the financial problems that often beset an 

unpaid produce seller whose market, by its nature, precludes taking the 

normal steps to secure credit sales. If a seller who has met the 

requirements of paragraphs (e)(1) and (2) of Sec.  46.46 (7 CFR 

46.46)(e)(1) and (2)), is not allowed to enter into a post-default 

agreement and still maintain its trust protection, the seller is 

penalized. In such circumstances, the produce debtor is permitted to 

use the seller for financing and at the same time avoid the impact of 

the statutory trust. Post-default agreements that allow payments to be 

made within 180 days following the default on the original payment due 

date pose no significant risk to the produce industry, but they may 

allow buyers and sellers more flexibility. Post-default payment 

agreements can be a practical approach to getting outstanding debts 

paid without jeopardizing the seller's trust rights, thereby serving to 

protect the interests of the supplier, buyer, and the fruit and 

vegetable industry.

    In order to maintain trust eligibility, the post-default payment 

agreement should be in writing. A written agreement, rather than a 

verbal agreement or course of dealing claim, would constitute a valid 

post-default agreement. Parties to a written agreement would have 

material evidence to prove the actual terms of the agreement should 

litigation become necessary.

    When a produce debtor files bankruptcy or if a trust action is 

filed against the produce debtor, all unpaid sellers of produce should 

be treated equally. Therefore, an unpaid seller who has entered into a 

post-default payment agreement must stop accepting payments from the 

debtor once a



[[Page 32309]]



bankruptcy or trust action is filed. Any amount still due under the 

payment agreement would be subject to the trust.

    Section 46.46(e)(1) and (2) of the regulations (7 CFR 46.46(e)(1) 

and (2)) speak only to the effect of a pre-transaction agreement on the 

ability of a seller, supplier, or agent to qualify for trust 

protection. Neither the statute nor current regulation address post-

default agreements, nor do they specify any maximum payment terms for 

post-default agreements. The issuance of a regulation clarifying that 

post-default agreements do not waive trust rights is within the 

Secretary's delegated authority (7 U.S.C. 499o), and would be 

consistent with PACA's purpose and legislative history. Failure to do 

so may harm interstate commerce in produce that the PACA was enacted to 

protect. Therefore, we propose to amend PACA regulations as described 

below.

    We propose to amend 7 CFR 46.46(e)(2) by adding the words ``prior 

to the transaction''. This change would clarify that the 30-day maximum 

time period for payment for a shipment to which a seller can agree and 

still qualify for coverage under the trust relates back to paragraph 

(e)(1) which refers to pre-transaction agreements.

    We also propose to add a new paragraph (e)(3) to 7 CFR 46.46. The 

new paragraph would provide that in circumstances of a default in 

payment as defined in Sec.  46.46(a)(3), a seller, supplier, or agent 

who has met the eligibility requirements of Sec.  46.46 paragraphs 

(e)(1) and (2) could agree in writing to a schedule for payment of the 

past due amount and still remain eligible under the trust. The post-

default payment agreement could not extend beyond 180 days from the 

default date. New paragraph (e)(3) would require a seller, supplier or 

agent who enters into a post-default payment agreement to stop 

accepting payments under the agreement if the buyer declares bankruptcy 

or if a temporary restraining order is issued by a district court in a 

trust action. The remaining outstanding debt would qualify for trust 

protection. Current 7 CFR 46.46(e)(3) and (4) would be redesignated as 

(e)(4) and (5).



Executive Orders 12866 and 12988



    This proposed rule has been determined to be not significant for 

the purposes of Executive Order 12866, and therefore, has not been 

reviewed by the Office of Management and Budget. This proposed rule has 

been reviewed under Executive Order 12988, Civil Justice Reform, and is 

not intended to have retroactive effect. This proposed 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 that must be exhausted prior to any judicial 

challenge to the provisions of this proposed 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 proposed 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. The Small Business Administration (SBA) 

has defined small agricultural service firms (13 CFR 121.601) as those 

whose annual receipts are less than $7,000,000. There are approximately 

14,400 firms licensed under the PACA, a majority of which could be 

classified as small entities.

    The proposed regulations would clarify that a trust beneficiary who 

has perfected its trust rights does not forfeit those rights by 

entering into a post-default agreement to accept partial or installment 

payments on the amount due. This language would provide companies of 

all sizes with clear regulatory guidance on this matter, thereby 

reducing the time and expense associated with litigating matters 

involving post-default agreements and trust right preservation under 

the PACA. Therefore, we believe that this proposed rule will not have a 

significant economic impact on a substantial number of small entities.



Paperwork Reduction Act



    In accordance with OMB regulations (5 CFR part 1320) that implement 

the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the 

information collection and recordkeeping requirements that are covered 

by this proposed rule are currently approved under OMB number 0581-

0031.



E-Government Act Compliance



    AMS is committed to complying with the E-Government Act, which 

requires Government agencies in general to provide the public the 

option of submitting information or transacting business electronically 

to the maximum extent possible. Forms are available on our PACA Web 

site at https://www.ams.usda.gov/paca and can be printed, completed, and 

faxed. Currently, forms are transmitted by fax machine and postal 

delivery.



List of Subjects in 7 CFR Part 46



    Definitions, Accounts and records, Duties of licensees, Statutory 

trust.

    For the reasons set forth in the preamble, AMS proposes to amend 7 

CFR part 46 as follows:



PART 46--[AMENDED]



    1. The authority citation for part 46 continues to read as follows:



    Authority:  7 U.S.C. 499a-499t.



    2. In Sec.  46.46, paragraph (e)(2) is revised, paragraphs (e)(3) 

and (4) are redesignated as paragraphs (e)(4) and (5), and a new 

paragraph (e)(3) is added as follows:





Sec.  46.46  Statutory trust



* * * * *

    (e) * * *

    (2) The maximum time for payment for a shipment to which a seller, 

supplier, or agent can agree, prior to the transaction, and still be 

eligible for benefits under the trust is 30 days after receipt and 

acceptance of the commodities as defined in Sec.  46.2(dd) and 

paragraph (a)(1) of this section.

    (3) If there is a default in payment as defined in Sec.  

46.46(a)(3), the seller, supplier, or agent who has met the eligibility 

requirements of paragraphs (e)(1) and (2) of this section will not 

forfeit eligibility under the trust by agreeing in writing to a 

schedule for payment of the past due amount. The maximum time for 

payment of a past due amount to which a seller, supplier, or agent can 

agree, after a default, and still be eligible for benefits under the 

trust is 180 days from the default date, that is, the original payment 

due date of the transaction. The seller, supplier, or agent must cease 

all collections of past due amounts under a scheduled payment agreement 

if the buyer enters into bankruptcy or if the buyer is ordered to hold 

its inventory, accounts receivable, and proceeds intact until a 

determination of trust interest in a civil action. The remaining unpaid 

amount under the scheduled payment agreement will continue to qualify 

for trust protection.

* * * * *



    Dated: June 2, 2010.

David R. Shipman,

Acting Administrator, Agricultural Marketing.

[FR Doc. 2010-13634 Filed 6-7-10; 8:45 am]

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