Perishable Agricultural Commodities Act (PACA): Guidance on Growers' Trust Protection Eligibility and Clarification of “Written Notification”, 5175-5179 [2018-02066]

Download as PDF 5175 Rules and Regulations Federal Register Vol. 83, No. 25 Tuesday, February 6, 2018 This section of the FEDERAL REGISTER contains regulatory documents having general applicability and legal effect, most of which are keyed to and codified in the Code of Federal Regulations, which is published under 50 titles pursuant to 44 U.S.C. 1510. The Code of Federal Regulations is sold by the Superintendent of Documents. DEPARTMENT OF AGRICULTURE Agricultural Marketing Service 7 CFR Part 46 [Document Number AMS–FV–15–0045] RIN 0581–AD50 Perishable Agricultural Commodities Act (PACA): Guidance on Growers’ Trust Protection Eligibility and Clarification of ‘‘Written Notification’’ Agricultural Marketing Service, USDA. ACTION: Final rule. AGENCY: The U.S. Department of Agriculture (USDA), Agricultural Marketing Service (AMS), is amending the regulations under the Perishable Agricultural Commodities Act (PACA or Act) to enhance clarity and improve the administration and enforcement of the PACA. The revisions will provide greater direction to the industry as to how growers and other principals that employ selling agents may preserve their PACA trust rights. The revisions will also clarify the definition of ‘‘written notification’’ as the term is used in 6(b) of the PACA, and the jurisdiction of USDA to investigate alleged PACA violations. DATES: Effective Date: March 8, 2018. FOR FURTHER INFORMATION CONTACT: Travis Hubbs, Chief, Investigative Enforcement Branch, 202–720–6873, or PACAinvestigations@ams.usda.gov. SUPPLEMENTARY INFORMATION: SUMMARY: daltland on DSKBBV9HB2PROD with RULES Background of Growers’ Trust Protection Congress examined the sufficiency of the PACA 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 VerDate Sep<11>2014 17:43 Feb 05, 2018 Jkt 244001 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 concerned 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 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 (Pub. L. 98–273) to include a statutory trust provision, which provides increased credit security in the absence of prompt payment for perishable agricultural commodities. Pursuant to this 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. 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. Consequently, trust participants remain trust beneficiaries until they have been paid in full. Since 1984, the District Courts of the United States have had jurisdiction to entertain actions by trust beneficiaries to enforce payment from the trust (7 U.S.C. 499e(c)(5)). Therefore, in the PO 00000 Frm 00001 Fmt 4700 Sfmt 4700 event of a business failure, produce creditors may enforce their trust rights by filing a trust action against the buyer in federal district court. 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. Because 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 eligibility accordingly. Because each creditor that buys produce can preserve trust rights for the benefit of its own suppliers, any money recovered from a buyer that goes out of business is 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. In 1995, Congress amended the PACA (Pub. L. 104–48), changing several requirements of the PACA trust. Changes included no longer requiring sellers or suppliers to file notices of intent to preserve trust benefits with USDA, and allowing PACA licensees to have their invoices or other billing documents serve as the trust notice. The PACA offers two approaches to unpaid sellers, suppliers, and agents to preserve trust protection. One option allows PACA licensees to declare at the time of sale that the produce is sold 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 specified language on their invoices or other billing statements (7 U.S.C. 499e(c)(4)). The second option for PACA licensees to preserve their trust rights, and the sole method for all non-licensed sellers, requires the seller to provide a separate, independent notice to the E:\FR\FM\06FER1.SGM 06FER1 5176 Federal Register / Vol. 83, No. 25 / Tuesday, February 6, 2018 / Rules and Regulations daltland on DSKBBV9HB2PROD with RULES buyer of its intent to preserve its trust benefits. The notice must include sufficient details to identify each transaction covered by the trust (7 U.S.C. 499e(c)(3)). Recent court decisions have invalidated the trust claims of unpaid growers against their growers’ agent because the growers did not file a trust notice directly with the growers’ agent. Growers’ agents sell and distribute produce for or on behalf of growers and may provide such services as financing, planting, harvesting, grading, packing, labor, seed, and containers. The growers have argued that it is not necessary to file a trust notice with their growers’ agent because growers’ agents are required to preserve the growers’ rights as a trust beneficiary against the buyer (7 CFR 46.46(d)(2)). Some courts have ruled that while the growers’ agent is required to preserve the growers’ trust benefits with the buyer of the produce, the grower has the responsibility to preserve its trust benefits with the growers’ agent. This action provides guidance to growers to clarify their responsibilities in preserving their trust rights. ‘‘Written Notification’’ Background The 1995 amendments to the PACA require written notification to USDA as a precursor to investigations of alleged violations of the PACA. In recent years, produce entities have challenged the USDA’s jurisdiction to conduct investigations based on their narrow reading of the definition of ‘‘written notification’’ stated in § 46.49 of the regulations (7 CFR 46.49). The amendment of § 46.49 (7 CFR 46.49) makes it clear that public filings such as bankruptcy petitions, civil trust actions, and judgments constitute written notification. Moreover, AMS clarifies that the filing of a written notification with USDA may be accomplished by a myriad of means including, but not limited to, delivery by regular or commercial mail service, hand delivery, or electronic means such as email, text, or facsimile message. Furthermore, a written notification published in any public forum including, but not limited to, a newspaper or internet website, will be considered filed with USDA upon its visual inspection by any office or official of USDA responsible for administering the Act. Clarification of the meaning of ‘‘written notification’’ ensures that PACA licensees and entities operating subject to the PACA understand the breadth of documentation that could trigger USDA’s authority to initiate an investigation of alleged PACA violations. VerDate Sep<11>2014 17:43 Feb 05, 2018 Jkt 244001 Notice of Proposed Rulemaking and Final Rule In order to enhance clarity and improve the administration and enforcement of the PACA, a proposed rule to amend PACA regulations was published in the Federal Register on December 14, 2016 [81 FR 90255]. The comment period initially closed on February 13, 2017. However, the comment period was extended an additional 30 days. The reopening of the comment period was published in the Federal Register on February 17, 2017. The second comment period closed on March 15, 2017. This final rule amends 7 CFR 46.46 by revising paragraphs (d) and (f)(1)(vi) to clarify that growers or other types of principals who employ agents to sell perishable agricultural commodities on their behalf are among the class of ‘‘suppliers or sellers’’ referenced in section 5(c) of the PACA (7 U.S.C. 499e(c)) and, as such, must preserve their trust benefits against their agents. The revision of paragraph (f)(1)(iv) will identify additional types of documents that can be used in a notice of intent to preserve trust benefits. This final rule also amends 7 CFR 46.49 by revising it to clarify the meaning of ‘‘written notification’’ as the term is used in section 6(b) of the PACA (7 U.S.C. 499f(b)). Additionally, to reflect current industry practices and advancements in electronic communication, AMS revises § 46.49(d) (7 CFR 46.49(d)) to allow the Secretary to serve a notice or response, as it relates to paragraph (d), by any electronic means, such as registered email, that provides proof of receipt to the electronic mail address or phone number of the subject of the investigation. Comments AMS received timely filed comments from three parties. One commenter did not address the proposed amendments to the regulations. The second commenter, a California agricultural trade association, strongly supported the revision to § 46.49 (7 CFR 46.49) stating, that ‘‘[t]his clarification now will insure that the industry . . . will understand the breadth of documentation that could trigger USDA’s authority to initiate an investigation of alleged PACA violations.’’ This commenter generally supported the proposed amendment to § 46.46 (7 CFR 46.46) and recommended that ‘‘a mechanism for non-licensed growers be instituted to allow for a simplified method and clear pathway which allows growers to preserve their PO 00000 Frm 00002 Fmt 4700 Sfmt 4700 PACA Trust rights.’’ This commenter also suggested the possibility of ‘‘a reduced license fee for growers based on their volume,’’ allowing them to obtain a PACA license ‘‘at a reduced rate that permits them to utilize the automatic method of preserving Trust rights by applying the necessary PACA language to their billing documents.’’ We do not adopt the suggestion for a reduced fee for growers based on the grower’s volume because it raises significant concerns with respect to implementation on the part of the agency. Adopting a PACA license fee structure based on a grower’s ‘‘volume’’ as the commenter suggested would require that growers disclose sales and financial information currently not requested or required of growers to obtain a PACA license, thereby placing an additional burden on the growers to supply confidential information. Similarly, it would subject growers to regular monitoring and verification of the growers’ sales information. As the commenter recognizes, the PACA stipulates that only PACA licensees can preserve their trust rights by including trust language on their invoices or other billing documents. Growers are currently not required to obtain a PACA license, but may choose to do so at the established fee, thus enabling them to include the statutory trust language on their billing documents. The statute currently does not provide for the creation of a separate fee structure for growers or a simplified method that allows unlicensed growers to preserve their trust rights as proposed by the commenter. The third commenter, an attorney, did not comment on the proposed amendment of § 46.46 (7CFR 46.46) but strongly objected to the proposed revisions to § 46.49 (7 CFR 46.49), alleging that they unlawfully expand USDA’s authority, contrary to the PACA. The commenter raised four primary concerns with the revision, contending that: 1. The revision circumvents the clear statutory language of PACA. The commenter states that, with respect to initiating an investigation, ‘‘instead of merely acknowledging new types of triggering media, the proposed rule goes too far by removing the necessary middle man (i.e., an ‘‘interested person’’) required by Congress.’’ The commenter contends that the proposed revision circumvents the requirement that an interested person must file written notice with the USDA or with an employee of the USDA administering the Act. 2. The proposed revision renders portions of PACA meaningless, E:\FR\FM\06FER1.SGM 06FER1 daltland on DSKBBV9HB2PROD with RULES Federal Register / Vol. 83, No. 25 / Tuesday, February 6, 2018 / Rules and Regulations bypassing jurisdictional requirements. The commenter contends that the proposed revision circumvents the filing requirement, claiming, for instance, that, ‘‘[i]f an employee of the USDA administering PACA can merely look at a document and the same will be deemed filed, the meaning of the term ‘‘filing’’ is lost. Further, there would be no ‘‘interested person’’ making the filing subject to penalty for falsity,’’ and there would be no filing of a notice, no delivery to USDA, and no ‘‘written notification’’ to inform USDA of an alleged violation of the PACA. 3. The proposed revision frustrates PACA’s election of remedies provision under 7 U.S.C. 499e(5). The commenter reasons that ‘‘[t]he proposed amendment frustrates this election of remedies, in that it would allow the filing of a complaint or other similar legal document in a court of competent jurisdiction (e.g., U.S. District Court or U.S. Bankruptcy Court) to be deemed a filed written notification sufficient to initiate an investigation by the USDA as well.’’ 4. The proposed revision frustrates the purpose and practical application of 7 CFR 46.46(e)(3). The commenter asserts that the proposed revision would allow the USDA to ignore parties’ decision not to notify or involve USDA in a private dispute and ‘‘to exceed its jurisdictional grant and insert itself into the private contractual affairs of businesses in the industry.’’ We disagree with the commenter’s assertion that the revision unlawfully expands USDA’s authority, contrary to the PACA. Congress established the PACA in 1930 to protect buyers and sellers of fresh and frozen fruits and vegetables, and the statute and the accompanying regulations have been amended over time to remain relevant to the industry that the PACA serves. The proposed revisions to § 46.49 (7 CFR 46.49) recognize the current realities of the information age that were not readily available when Congress last amended the PACA in 1995. The USDA cannot ignore public information that is relevant to the implementation of the PACA simply because Congress did not anticipate the expanding availability of digital information. Currently, information is much more likely to be generated, stored, and disseminated in electronic or digital format. The USDA has an obligation to properly enforce the PACA as Congress intended, protecting the buyers and sellers of perishable agricultural commodities. When electronic information is readily available to USDA, its hands should not be tied and the information ignored, when those it is tasked to protect could VerDate Sep<11>2014 17:43 Feb 05, 2018 Jkt 244001 be negatively affected by that lack of action. The 1995 amendments to the PACA require written notification as a precursor to the investigation of alleged violations of the PACA. The amendments were designed to protect against arbitrary or capricious investigations of licensees and unwarranted prosecutions; the amendments ensured that a source outside the agency of the Department of Agriculture that administers the Act, including but not limited to ‘‘any other interested person who has knowledge of or information regarding a possible violation’’, provided the impetus for investigation. The proposed revisions to § 46.49 (7 CFR 46.49) do not alter that proposition or erode those protections. As stated, the proposed revisions are intended to address societal advances in information transmittal and communication, and technological evolution of the industry that the PACA serves. They in no way circumvent the requirement that a written notification be made by an ‘‘interested party’’ that is impartial, insofar as that party is not charged with administering the Act. Nor do they in any way reduce the reliability of the written notification; the submitters of a written notification, prior to the revisions, were not subject to penalty for unreliability or falsity (as is suggested by the third commenter), nor are they post-revisions. It has always been the purview of the USDA to determine the reliability of any written notice and to decide whether an investigation based on that notice is reasonable and warranted. Section 6(c) of the PACA (7 U.S.C. 499e(c)) concerns investigations of complaints and notifications listed in both paragraphs (a) and (b) of section 6 of the Act. This section states that: ‘‘[i]f there appears to be, in the opinion of the Secretary, reasonable grounds for investigating a complaint made under subsection (a) or a written notification made under subsection (b), the Secretary shall investigate such complaint or notification.’’ USDA will evaluate the information it receives and determine if an investigation is warranted. If the information is meaningless, meritless or unverifiable, USDA will not initiate an investigation. Written allegations from an outside source (outside the PACA Division), are merely precursors to a possible investigation under the PACA. It is USDA’s responsibility to determine if violations against the PACA were committed, regardless of whether USDA receives an allegation directly from an interested party or from a competent source (e.g., State government PO 00000 Frm 00003 Fmt 4700 Sfmt 4700 5177 documents, court filings, official bankruptcy records). When USDA receives notice of an allegation, the allegation must necessarily be examined, processed, and deliberated upon to assess whether reasonable grounds exist to investigate. There are intervening steps between the receipt of a written notice and an investigation. The proposed amendment adds an alternative manner in which written notifications may be filed with USDA. The original method of filing contained in the regulations remains unchanged. Public records (court filings, news articles, etc.) that allege a violation of the PACA constitute written notification, and upon review by USDA, are deemed ‘‘filed’’ and may be sufficient to warrant the initiation of an investigation. The complaining party has to file or submit its complaint to some entity that has the authority to make its complaint public in order for USDA to be able to view it. An alleged violator of the PACA should not be able to avoid a possible administrative enforcement investigation simply because its accuser did not provide its written notification directly to USDA. The third commenter states that the proposed revisions frustrate the PACA’s election of remedies provision (7 U.S.C. 499e(5)) and the purpose and practical application of 7 CFR 46.46(e)(3). Those sections of the Act and regulations outline the remedies available to any private person or persons seeking to recover monetary damages resulting from any PACA violation(s), and eligibility of that person or persons to claim trust benefits under the Act. The proposed revisions to § 46.49 (7 CFR 46.49) pertain only to the authority of USDA to investigate alleged PACA violation(s) for administrative enforcement purposes pursuant to section 6(b) of the Act. The proposed regulatory amendments neither implicate nor frustrate the intent or application of the election of remedies or trust provisions of the Act and regulations referenced by the commenter. For the reasons outlined above, the proposed revisions to §§ 46.46 and 46.49 (7 CFR 46.46 and 46.49) remain unchanged in the final rule. Executive Orders 12866, 13563, and 13771 This final rule has been reviewed under Executive Order 12866 supplemented by Executive Order 13563 and it has been determined that this final rule is not considered a significant regulatory action under section 3(f) of Executive Order 12866 and, therefore, it was not reviewed by E:\FR\FM\06FER1.SGM 06FER1 5178 Federal Register / Vol. 83, No. 25 / Tuesday, February 6, 2018 / Rules and Regulations the Office of Management and Budget. This rule is not an Executive Order 13771 regulatory action because this rule is not significant under Executive Order 12866. Executive Order 12988 This final rule has been reviewed under Executive Order 12988, Civil Justice Reform, and is not intended to have retroactive effect. This final 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 final rule. daltland on DSKBBV9HB2PROD with RULES Executive Order 13175 This final rule has been reviewed in accordance with the requirements of Executive Order 13175, consultation and Coordination with Indian Tribal governments. The review reveals that this regulation will not have substantial and direct effects on Tribal governments and will not have significant Tribal implications. Final Regulatory Flexibility Act 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 final 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. Accordingly, Agricultural Marketing Service (AMS) has prepared this final regulatory flexibility analysis. Small agricultural service firms are defined by the Small Business Administration as those having annual receipts of less than $7,500,000, and small agricultural producers are defined as those having annual receipts of less than $750,000 (13 CFR 121.201). There are approximately 14,500 firms licensed under the PACA, a majority of which could be classified as small entities. Historically, the produce industry has been an entry-level job market. There is a constant turnover involving the closing and opening of businesses. Produce firms generally start as small business entities. AMS believes that these amendments to the PACA regulations will help all growers, sellers, and suppliers of produce, small or large, to protect their rights under the PACA trust, resulting in the potential recovery of millions of dollars in unpaid produce debt. Moreover, AMS believes that these regulatory amendments more accurately reflect the intent of Congress when it VerDate Sep<11>2014 17:43 Feb 05, 2018 Jkt 244001 amended the PACA to require written notification as a precursor to investigations by the Secretary of Agriculture. AMS believes this final rule increases the clarity of the PACA regulations and improves AMS’s enforcement of the PACA. AMS has determined that this rule will have no 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 final rule are currently approved under OMB number 0581–0031. No changes to those requirements are necessary as a result of this action. Should any changes become necessary, they will be submitted to OMB for approval. E-Government Act Compliance USDA 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 the PACA website at http:// www.ams.usda.gov/rules-regulations/ paca and can be printed, completed, and submitted by email, facsimile, or postal delivery. List of Subjects in 7 CFR Part 46 Agricultural commodities, Brokers, Penalties, Reporting and recordkeeping requirements. For the reasons set forth in the preamble, 7 CFR part 46 is amended 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. Amend § 46.46 by revising paragraphs (d) and (f)(1)(iv) to read as follows: ■ § 46.46 Statutory trust. * * * * * (d) Trust maintenance. (1) Licensees and persons subject to license are required to maintain trust assets in a manner so that the trust assets are freely available to satisfy outstanding obligations to sellers of perishable agricultural commodities. Any act or omission which is inconsistent with this responsibility, including dissipation of trust assets, is unlawful and in violation of section 2 of the Act (7 U.S.C. 499b). PO 00000 Frm 00004 Fmt 4700 Sfmt 4700 Growers, licensees, and persons subject to license may file trust actions against licensees and persons operating subject to license. Licensees and persons subject to license are bound by the trust provisions of the Act (7 U.S.C. 499(e)). (2) Principals, including growers, who employ agents to sell perishable agricultural commodities on their behalf are ‘‘suppliers’’ and/or ‘‘sellers’’ as those words are used in section 5(c)(2) and (3) of the Act (7 U.S.C. 499e(c)(2) and (3)), and therefore must preserve their trust rights against their agents by filing a notice of intent to preserve trust rights with their agents as set forth in paragraph (f) of this section. (3) Agents who sell perishable agricultural commodities on behalf of their principals must preserve their principals’ trust benefits against the buyers by filing a notice of intent to preserve trust rights with the buyers. Any act or omission which is inconsistent with this responsibility, including failure to give timely notice of intent to preserve trust benefits, is unlawful and in violation of section 2 of the Act (7 U.S.C. 499b). * * * * * (f) * * * (1) * * * (iv) The amount past due and unpaid; except that if a supplier, seller or agent engages a commission merchant or growers’ agent to sell or market their produce, the supplier, seller or agent that has not received a final accounting from the commission merchant or growers’ agent shall only be required to provide information in sufficient detail to identify the transaction subject to the trust. * * * * * ■ 3. Section 46.49 is revised to read as follows: § 46.49 Written notifications and complaints. (a) Written notification, as used in section 6(b) of the Act (7 U.S.C. 499f (b)), means: (1) Any written statement reporting or complaining of a violation of the Act made by any officer or agency of any State or Territory having jurisdiction over licensees or persons subject to license, or a person filing a complaint under section 6(a), or any other interested person who has knowledge of or information regarding a possible violation of the Act, other than an employee of an agency of USDA administering the Act; (2) Any written notice of intent to preserve the benefits of, or any claim for payment from, the trust established under section 5 of the Act (7 U.S.C. 499e); E:\FR\FM\06FER1.SGM 06FER1 daltland on DSKBBV9HB2PROD with RULES Federal Register / Vol. 83, No. 25 / Tuesday, February 6, 2018 / Rules and Regulations (3) Any official certificate(s) of the United States Government or States or Territories of the United States; or (4) Any public legal filing or other published document describing or alleging a violation of the Act. (b) Any written notification may be filed by delivering the written notification to any office of USDA or any official of USDA responsible for administering the Act. Any written notification published in any public forum, including, but not limited to, a newspaper or an internet website shall be deemed filed upon visual inspection by any office of USDA or any official of USDA responsible for administering the Act. A written notification which is so filed, or any expansion of an investigation resulting from any indication of additional violations of the Act found as a consequence of an investigation based on written notification or complaint, also shall be deemed to constitute a complaint under section 13(a) of the Act (7 U.S.C. 499m(a)). (c) Upon becoming aware of a complaint under section 6(a) or written notification under 6(b) of the Act (7 U.S.C. 499f (a) or (b)) by means described in paragraph (a) and (b) of this section, the Secretary will determine if reasonable grounds exist to conduct an investigation of such complaint or written notification for disciplinary action. If the investigation substantiates the existence of violations of the Act, a formal disciplinary complaint may be issued by the Secretary as described in section 6(c)(2) of the Act (7 U.S.C. 499f(c)(2)). (d) Whenever an investigation, initiated as described in section 6(c) of the Act (7 U.S.C. 499f(c)(2)), is commenced, or expanded to include new violations of the Act, notice shall be given by the Secretary to the subject of the investigation within thirty (30) days of the commencement or expansion of the investigation. Within one hundred and eighty (180) days after giving initial notice, the Secretary shall provide the subject of the investigation with notice of the status of the investigation, including whether the Secretary intends to issue a complaint under section 6(c)(2) of the Act (7 U.S.C. 499f(e)(2)), terminate the investigation, or continue or expand the investigation. Thereafter, the subject of the investigation may request in writing, no more frequently than every ninety (90) days, a status report from the Director of the PACA Division who shall respond to the written request within fourteen (14) days of receiving the request. When an investigation is terminated, the Secretary shall, within fourteen (14) VerDate Sep<11>2014 17:43 Feb 05, 2018 Jkt 244001 days, notify the subject of the termination of the investigation. In every case in which notice or response is required under this paragraph (d), such notice or response shall be accomplished by personal service; or by posting the notice or response by certified or registered mail, or commercial or private delivery service to the last known address of the subject of the investigation; or by sending the notice or response by any electronic means such as registered email, that provides proof of receipt to the electronic mail address or phone number of the subject of the investigation. Dated: January 29, 2018. Bruce Summers, Acting Administrator, Agricultural Marketing Service. [FR Doc. 2018–02066 Filed 2–5–18; 8:45 am] BILLING CODE 3410–02–P DEPARTMENT OF AGRICULTURE Animal and Plant Health Inspection Service 7 CFR Part 319 Supplemental Requirements for Importation of Fresh Citrus From Colombia Into the United States Animal and Plant Health Inspection Service, USDA. ACTION: Notification of supplemental requirements; request for comments. AGENCY: We are notifying the public of our decision to supplement our requirements governing the importation of fresh sweet orange, grapefruit, mandarin, clementine, and tangerine fruit from Colombia into the United States and are requesting public comment on these changes. We have determined that, in order to mitigate the current pest risks posed by the importation of these commodities from Colombia into the United States, it is necessary to supplement the phytosanitary requirements now in place with additional requirements. This action will help to protect the United States against plant pests while allowing the resumption of imports of fresh sweet orange, grapefruit, mandarin, clementine, and tangerine fruit from Colombia, which were suspended in 2016 due to the discovery of new plant pests in South America. DATES: These requirements will be authorized for use on fresh sweet orange, grapefruit, mandarin, PO 00000 Frm 00005 Fmt 4700 Sfmt 4700 clementine, and tangerine fruit from Colombia beginning February 6, 2018. We will consider all comments that we receive on or before April 9, 2018. You may submit comments by either of the following methods: • Federal eRulemaking Portal: Go to http://www.regulations.gov/#!docket Detail;D=APHIS-2017-0074. • Postal Mail/Commercial Delivery: Send your comment to Docket No. APHIS–2017–0074, Regulatory Analysis and Development, PPD, APHIS, Station 3A–03.8, 4700 River Road Unit 118, Riverdale, MD 20737–1238. Supporting documents and any comments we receive on this docket may be viewed at http:// www.regulations.gov/#!docketDetail;D= APHIS-2017-0074 or in our reading room, which is located in room 1141 of the USDA South Building, 14th Street and Independence Avenue SW, Washington, DC. Normal reading room hours are 8 a.m. to 4:30 p.m., Monday through Friday, except holidays. To be sure someone is there to help you, please call (202) 799–7039 before coming. ADDRESSES: Ms. Claudia Ferguson, Senior Regulatory Policy Specialist, Regulatory Coordination and Compliance, PPQ, APHIS, 4700 River Road Unit 133, Riverdale, MD 20737–1236; (301) 851– 2352. FOR FURTHER INFORMATION CONTACT: [Docket No. APHIS–2017–0074] SUMMARY: 5179 SUPPLEMENTARY INFORMATION: Under the regulations in ‘‘Subpart– Fruits and Vegetables’’ (7 CFR 319.56– 1 through 319.56–81, referred to below as the regulations), the Animal and Plant Health Inspection Service (APHIS) of the United States Department of Agriculture (USDA) prohibits or restricts the importation of fruits and vegetables into the United States from certain parts of the world in an effort to prevent plant pests from being introduced into and spread within the United States. Section 319.56–3, which includes general import requirements for fruits and vegetables, authorizes the importation of fresh sweet orange (Citrus sinensis (L.), grapefruit (Citrus paradisi MacFad), mandarin (Citrus reticulata Blanco), clementine (Citrus clementina Hort. Ex Tanaka), and tangerine (Citrus tangerine Tanaka) fruit from Colombia into the United States. The general import requirements include an import permit issued by APHIS and inspection of the fruit by APHIS officials at the port of first arrival. Additionally, as a condition of E:\FR\FM\06FER1.SGM 06FER1

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[Federal Register Volume 83, Number 25 (Tuesday, February 6, 2018)]
[Rules and Regulations]
[Pages 5175-5179]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-02066]



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Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 

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Federal Register / Vol. 83, No. 25 / Tuesday, February 6, 2018 / 
Rules and Regulations

[[Page 5175]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 46

[Document Number AMS-FV-15-0045]
RIN 0581-AD50


Perishable Agricultural Commodities Act (PACA): Guidance on 
Growers' Trust Protection Eligibility and Clarification of ``Written 
Notification''

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: The U.S. Department of Agriculture (USDA), Agricultural 
Marketing Service (AMS), is amending the regulations under the 
Perishable Agricultural Commodities Act (PACA or Act) to enhance 
clarity and improve the administration and enforcement of the PACA. The 
revisions will provide greater direction to the industry as to how 
growers and other principals that employ selling agents may preserve 
their PACA trust rights. The revisions will also clarify the definition 
of ``written notification'' as the term is used in 6(b) of the PACA, 
and the jurisdiction of USDA to investigate alleged PACA violations.

DATES: Effective Date: March 8, 2018.

FOR FURTHER INFORMATION CONTACT: Travis Hubbs, Chief, Investigative 
Enforcement Branch, 202-720-6873, or [email protected].

SUPPLEMENTARY INFORMATION: 

Background of Growers' Trust Protection

    Congress examined the sufficiency of the PACA 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 concerned 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 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 (Pub. L. 98-273) to include a statutory trust 
provision, which provides increased credit security in the absence of 
prompt payment for perishable agricultural commodities.
    Pursuant to this 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.
    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. Consequently, trust participants remain trust beneficiaries 
until they have been paid in full.
    Since 1984, the District Courts of the United States have had 
jurisdiction to entertain actions by trust beneficiaries to enforce 
payment from the trust (7 U.S.C. 499e(c)(5)). Therefore, in the event 
of a business failure, produce creditors may enforce their trust rights 
by filing a trust action against the buyer in federal district court. 
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.
    Because 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 
eligibility accordingly. Because each creditor that buys produce can 
preserve trust rights for the benefit of its own suppliers, any money 
recovered from a buyer that goes out of business is 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.
    In 1995, Congress amended the PACA (Pub. L. 104-48), changing 
several requirements of the PACA trust. Changes included no longer 
requiring sellers or suppliers to file notices of intent to preserve 
trust benefits with USDA, and allowing PACA licensees to have their 
invoices or other billing documents serve as the trust notice. The PACA 
offers two approaches to unpaid sellers, suppliers, and agents to 
preserve trust protection. One option allows PACA licensees to declare 
at the time of sale that the produce is sold 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 specified language on their invoices or 
other billing statements (7 U.S.C. 499e(c)(4)). The second option for 
PACA licensees to preserve their trust rights, and the sole method for 
all non-licensed sellers, requires the seller to provide a separate, 
independent notice to the

[[Page 5176]]

buyer of its intent to preserve its trust benefits. The notice must 
include sufficient details to identify each transaction covered by the 
trust (7 U.S.C. 499e(c)(3)).
    Recent court decisions have invalidated the trust claims of unpaid 
growers against their growers' agent because the growers did not file a 
trust notice directly with the growers' agent. Growers' agents sell and 
distribute produce for or on behalf of growers and may provide such 
services as financing, planting, harvesting, grading, packing, labor, 
seed, and containers. The growers have argued that it is not necessary 
to file a trust notice with their growers' agent because growers' 
agents are required to preserve the growers' rights as a trust 
beneficiary against the buyer (7 CFR 46.46(d)(2)). Some courts have 
ruled that while the growers' agent is required to preserve the 
growers' trust benefits with the buyer of the produce, the grower has 
the responsibility to preserve its trust benefits with the growers' 
agent. This action provides guidance to growers to clarify their 
responsibilities in preserving their trust rights.

``Written Notification'' Background

    The 1995 amendments to the PACA require written notification to 
USDA as a precursor to investigations of alleged violations of the 
PACA. In recent years, produce entities have challenged the USDA's 
jurisdiction to conduct investigations based on their narrow reading of 
the definition of ``written notification'' stated in Sec.  46.49 of the 
regulations (7 CFR 46.49). The amendment of Sec.  46.49 (7 CFR 46.49) 
makes it clear that public filings such as bankruptcy petitions, civil 
trust actions, and judgments constitute written notification. Moreover, 
AMS clarifies that the filing of a written notification with USDA may 
be accomplished by a myriad of means including, but not limited to, 
delivery by regular or commercial mail service, hand delivery, or 
electronic means such as email, text, or facsimile message. 
Furthermore, a written notification published in any public forum 
including, but not limited to, a newspaper or internet website, will be 
considered filed with USDA upon its visual inspection by any office or 
official of USDA responsible for administering the Act. Clarification 
of the meaning of ``written notification'' ensures that PACA licensees 
and entities operating subject to the PACA understand the breadth of 
documentation that could trigger USDA's authority to initiate an 
investigation of alleged PACA violations.

Notice of Proposed Rulemaking and Final Rule

    In order to enhance clarity and improve the administration and 
enforcement of the PACA, a proposed rule to amend PACA regulations was 
published in the Federal Register on December 14, 2016 [81 FR 90255]. 
The comment period initially closed on February 13, 2017. However, the 
comment period was extended an additional 30 days. The reopening of the 
comment period was published in the Federal Register on February 17, 
2017. The second comment period closed on March 15, 2017.
    This final rule amends 7 CFR 46.46 by revising paragraphs (d) and 
(f)(1)(vi) to clarify that growers or other types of principals who 
employ agents to sell perishable agricultural commodities on their 
behalf are among the class of ``suppliers or sellers'' referenced in 
section 5(c) of the PACA (7 U.S.C. 499e(c)) and, as such, must preserve 
their trust benefits against their agents. The revision of paragraph 
(f)(1)(iv) will identify additional types of documents that can be used 
in a notice of intent to preserve trust benefits.
    This final rule also amends 7 CFR 46.49 by revising it to clarify 
the meaning of ``written notification'' as the term is used in section 
6(b) of the PACA (7 U.S.C. 499f(b)). Additionally, to reflect current 
industry practices and advancements in electronic communication, AMS 
revises Sec.  46.49(d) (7 CFR 46.49(d)) to allow the Secretary to serve 
a notice or response, as it relates to paragraph (d), by any electronic 
means, such as registered email, that provides proof of receipt to the 
electronic mail address or phone number of the subject of the 
investigation.

Comments

    AMS received timely filed comments from three parties. One 
commenter did not address the proposed amendments to the regulations.
    The second commenter, a California agricultural trade association, 
strongly supported the revision to Sec.  46.49 (7 CFR 46.49) stating, 
that ``[t]his clarification now will insure that the industry . . . 
will understand the breadth of documentation that could trigger USDA's 
authority to initiate an investigation of alleged PACA violations.'' 
This commenter generally supported the proposed amendment to Sec.  
46.46 (7 CFR 46.46) and recommended that ``a mechanism for non-licensed 
growers be instituted to allow for a simplified method and clear 
pathway which allows growers to preserve their PACA Trust rights.'' 
This commenter also suggested the possibility of ``a reduced license 
fee for growers based on their volume,'' allowing them to obtain a PACA 
license ``at a reduced rate that permits them to utilize the automatic 
method of preserving Trust rights by applying the necessary PACA 
language to their billing documents.''
    We do not adopt the suggestion for a reduced fee for growers based 
on the grower's volume because it raises significant concerns with 
respect to implementation on the part of the agency. Adopting a PACA 
license fee structure based on a grower's ``volume'' as the commenter 
suggested would require that growers disclose sales and financial 
information currently not requested or required of growers to obtain a 
PACA license, thereby placing an additional burden on the growers to 
supply confidential information. Similarly, it would subject growers to 
regular monitoring and verification of the growers' sales information. 
As the commenter recognizes, the PACA stipulates that only PACA 
licensees can preserve their trust rights by including trust language 
on their invoices or other billing documents. Growers are currently not 
required to obtain a PACA license, but may choose to do so at the 
established fee, thus enabling them to include the statutory trust 
language on their billing documents. The statute currently does not 
provide for the creation of a separate fee structure for growers or a 
simplified method that allows unlicensed growers to preserve their 
trust rights as proposed by the commenter.
    The third commenter, an attorney, did not comment on the proposed 
amendment of Sec.  46.46 (7CFR 46.46) but strongly objected to the 
proposed revisions to Sec.  46.49 (7 CFR 46.49), alleging that they 
unlawfully expand USDA's authority, contrary to the PACA. The commenter 
raised four primary concerns with the revision, contending that:
    1. The revision circumvents the clear statutory language of PACA. 
The commenter states that, with respect to initiating an investigation, 
``instead of merely acknowledging new types of triggering media, the 
proposed rule goes too far by removing the necessary middle man (i.e., 
an ``interested person'') required by Congress.'' The commenter 
contends that the proposed revision circumvents the requirement that an 
interested person must file written notice with the USDA or with an 
employee of the USDA administering the Act.
    2. The proposed revision renders portions of PACA meaningless,

[[Page 5177]]

bypassing jurisdictional requirements. The commenter contends that the 
proposed revision circumvents the filing requirement, claiming, for 
instance, that, ``[i]f an employee of the USDA administering PACA can 
merely look at a document and the same will be deemed filed, the 
meaning of the term ``filing'' is lost. Further, there would be no 
``interested person'' making the filing subject to penalty for 
falsity,'' and there would be no filing of a notice, no delivery to 
USDA, and no ``written notification'' to inform USDA of an alleged 
violation of the PACA.
    3. The proposed revision frustrates PACA's election of remedies 
provision under 7 U.S.C. 499e(5). The commenter reasons that ``[t]he 
proposed amendment frustrates this election of remedies, in that it 
would allow the filing of a complaint or other similar legal document 
in a court of competent jurisdiction (e.g., U.S. District Court or U.S. 
Bankruptcy Court) to be deemed a filed written notification sufficient 
to initiate an investigation by the USDA as well.''
    4. The proposed revision frustrates the purpose and practical 
application of 7 CFR 46.46(e)(3). The commenter asserts that the 
proposed revision would allow the USDA to ignore parties' decision not 
to notify or involve USDA in a private dispute and ``to exceed its 
jurisdictional grant and insert itself into the private contractual 
affairs of businesses in the industry.''
    We disagree with the commenter's assertion that the revision 
unlawfully expands USDA's authority, contrary to the PACA. Congress 
established the PACA in 1930 to protect buyers and sellers of fresh and 
frozen fruits and vegetables, and the statute and the accompanying 
regulations have been amended over time to remain relevant to the 
industry that the PACA serves. The proposed revisions to Sec.  46.49 (7 
CFR 46.49) recognize the current realities of the information age that 
were not readily available when Congress last amended the PACA in 1995. 
The USDA cannot ignore public information that is relevant to the 
implementation of the PACA simply because Congress did not anticipate 
the expanding availability of digital information. Currently, 
information is much more likely to be generated, stored, and 
disseminated in electronic or digital format. The USDA has an 
obligation to properly enforce the PACA as Congress intended, 
protecting the buyers and sellers of perishable agricultural 
commodities. When electronic information is readily available to USDA, 
its hands should not be tied and the information ignored, when those it 
is tasked to protect could be negatively affected by that lack of 
action.
    The 1995 amendments to the PACA require written notification as a 
precursor to the investigation of alleged violations of the PACA. The 
amendments were designed to protect against arbitrary or capricious 
investigations of licensees and unwarranted prosecutions; the 
amendments ensured that a source outside the agency of the Department 
of Agriculture that administers the Act, including but not limited to 
``any other interested person who has knowledge of or information 
regarding a possible violation'', provided the impetus for 
investigation. The proposed revisions to Sec.  46.49 (7 CFR 46.49) do 
not alter that proposition or erode those protections.
    As stated, the proposed revisions are intended to address societal 
advances in information transmittal and communication, and 
technological evolution of the industry that the PACA serves. They in 
no way circumvent the requirement that a written notification be made 
by an ``interested party'' that is impartial, insofar as that party is 
not charged with administering the Act. Nor do they in any way reduce 
the reliability of the written notification; the submitters of a 
written notification, prior to the revisions, were not subject to 
penalty for unreliability or falsity (as is suggested by the third 
commenter), nor are they post-revisions.
    It has always been the purview of the USDA to determine the 
reliability of any written notice and to decide whether an 
investigation based on that notice is reasonable and warranted.
    Section 6(c) of the PACA (7 U.S.C. 499e(c)) concerns investigations 
of complaints and notifications listed in both paragraphs (a) and (b) 
of section 6 of the Act. This section states that: ``[i]f there appears 
to be, in the opinion of the Secretary, reasonable grounds for 
investigating a complaint made under subsection (a) or a written 
notification made under subsection (b), the Secretary shall investigate 
such complaint or notification.'' USDA will evaluate the information it 
receives and determine if an investigation is warranted. If the 
information is meaningless, meritless or unverifiable, USDA will not 
initiate an investigation.
    Written allegations from an outside source (outside the PACA 
Division), are merely precursors to a possible investigation under the 
PACA. It is USDA's responsibility to determine if violations against 
the PACA were committed, regardless of whether USDA receives an 
allegation directly from an interested party or from a competent source 
(e.g., State government documents, court filings, official bankruptcy 
records). When USDA receives notice of an allegation, the allegation 
must necessarily be examined, processed, and deliberated upon to assess 
whether reasonable grounds exist to investigate. There are intervening 
steps between the receipt of a written notice and an investigation.
    The proposed amendment adds an alternative manner in which written 
notifications may be filed with USDA. The original method of filing 
contained in the regulations remains unchanged. Public records (court 
filings, news articles, etc.) that allege a violation of the PACA 
constitute written notification, and upon review by USDA, are deemed 
``filed'' and may be sufficient to warrant the initiation of an 
investigation. The complaining party has to file or submit its 
complaint to some entity that has the authority to make its complaint 
public in order for USDA to be able to view it. An alleged violator of 
the PACA should not be able to avoid a possible administrative 
enforcement investigation simply because its accuser did not provide 
its written notification directly to USDA.
    The third commenter states that the proposed revisions frustrate 
the PACA's election of remedies provision (7 U.S.C. 499e(5)) and the 
purpose and practical application of 7 CFR 46.46(e)(3). Those sections 
of the Act and regulations outline the remedies available to any 
private person or persons seeking to recover monetary damages resulting 
from any PACA violation(s), and eligibility of that person or persons 
to claim trust benefits under the Act. The proposed revisions to Sec.  
46.49 (7 CFR 46.49) pertain only to the authority of USDA to 
investigate alleged PACA violation(s) for administrative enforcement 
purposes pursuant to section 6(b) of the Act. The proposed regulatory 
amendments neither implicate nor frustrate the intent or application of 
the election of remedies or trust provisions of the Act and regulations 
referenced by the commenter.
    For the reasons outlined above, the proposed revisions to 
Sec. Sec.  46.46 and 46.49 (7 CFR 46.46 and 46.49) remain unchanged in 
the final rule.

Executive Orders 12866, 13563, and 13771

    This final rule has been reviewed under Executive Order 12866 
supplemented by Executive Order 13563 and it has been determined that 
this final rule is not considered a significant regulatory action under 
section 3(f) of Executive Order 12866 and, therefore, it was not 
reviewed by

[[Page 5178]]

the Office of Management and Budget. This rule is not an Executive 
Order 13771 regulatory action because this rule is not significant 
under Executive Order 12866.

Executive Order 12988

    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform, and is not intended to have retroactive effect. 
This final 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 final rule.

Executive Order 13175

    This final rule has been reviewed in accordance with the 
requirements of Executive Order 13175, consultation and Coordination 
with Indian Tribal governments. The review reveals that this regulation 
will not have substantial and direct effects on Tribal governments and 
will not have significant Tribal implications.

Final Regulatory Flexibility Act

    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 final 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. Accordingly, Agricultural Marketing 
Service (AMS) has prepared this final regulatory flexibility analysis.
    Small agricultural service firms are defined by the Small Business 
Administration as those having annual receipts of less than $7,500,000, 
and small agricultural producers are defined as those having annual 
receipts of less than $750,000 (13 CFR 121.201). There are 
approximately 14,500 firms licensed under the PACA, a majority of which 
could be classified as small entities. Historically, the produce 
industry has been an entry-level job market. There is a constant 
turnover involving the closing and opening of businesses. Produce firms 
generally start as small business entities.
    AMS believes that these amendments to the PACA regulations will 
help all growers, sellers, and suppliers of produce, small or large, to 
protect their rights under the PACA trust, resulting in the potential 
recovery of millions of dollars in unpaid produce debt. Moreover, AMS 
believes that these regulatory amendments more accurately reflect the 
intent of Congress when it amended the PACA to require written 
notification as a precursor to investigations by the Secretary of 
Agriculture.
    AMS believes this final rule increases the clarity of the PACA 
regulations and improves AMS's enforcement of the PACA. AMS has 
determined that this rule will have no 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 final rule are currently approved under OMB number 0581-0031. 
No changes to those requirements are necessary as a result of this 
action. Should any changes become necessary, they will be submitted to 
OMB for approval.

E-Government Act Compliance

    USDA 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 the PACA website 
at http://www.ams.usda.gov/rules-regulations/paca and can be printed, 
completed, and submitted by email, facsimile, or postal delivery.

List of Subjects in 7 CFR Part 46

    Agricultural commodities, Brokers, Penalties, Reporting and 
recordkeeping requirements. For the reasons set forth in the preamble, 
7 CFR part 46 is amended as follows:

PART 46--[AMENDED]

0
 1. The authority citation for part 46 continues to read as follows:

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


0
2. Amend Sec.  46.46 by revising paragraphs (d) and (f)(1)(iv) to read 
as follows:


Sec.  46.46  Statutory trust.

* * * * *
    (d) Trust maintenance. (1) Licensees and persons subject to license 
are required to maintain trust assets in a manner so that the trust 
assets are freely available to satisfy outstanding obligations to 
sellers of perishable agricultural commodities. Any act or omission 
which is inconsistent with this responsibility, including dissipation 
of trust assets, is unlawful and in violation of section 2 of the Act 
(7 U.S.C. 499b). Growers, licensees, and persons subject to license may 
file trust actions against licensees and persons operating subject to 
license. Licensees and persons subject to license are bound by the 
trust provisions of the Act (7 U.S.C. 499(e)).
    (2) Principals, including growers, who employ agents to sell 
perishable agricultural commodities on their behalf are ``suppliers'' 
and/or ``sellers'' as those words are used in section 5(c)(2) and (3) 
of the Act (7 U.S.C. 499e(c)(2) and (3)), and therefore must preserve 
their trust rights against their agents by filing a notice of intent to 
preserve trust rights with their agents as set forth in paragraph (f) 
of this section.
    (3) Agents who sell perishable agricultural commodities on behalf 
of their principals must preserve their principals' trust benefits 
against the buyers by filing a notice of intent to preserve trust 
rights with the buyers. Any act or omission which is inconsistent with 
this responsibility, including failure to give timely notice of intent 
to preserve trust benefits, is unlawful and in violation of section 2 
of the Act (7 U.S.C. 499b).
* * * * *
    (f) * * *
    (1) * * *
    (iv) The amount past due and unpaid; except that if a supplier, 
seller or agent engages a commission merchant or growers' agent to sell 
or market their produce, the supplier, seller or agent that has not 
received a final accounting from the commission merchant or growers' 
agent shall only be required to provide information in sufficient 
detail to identify the transaction subject to the trust.
* * * * *

0
 3. Section 46.49 is revised to read as follows:


Sec.  46.49  Written notifications and complaints.

    (a) Written notification, as used in section 6(b) of the Act (7 
U.S.C. 499f (b)), means:
    (1) Any written statement reporting or complaining of a violation 
of the Act made by any officer or agency of any State or Territory 
having jurisdiction over licensees or persons subject to license, or a 
person filing a complaint under section 6(a), or any other interested 
person who has knowledge of or information regarding a possible 
violation of the Act, other than an employee of an agency of USDA 
administering the Act;
    (2) Any written notice of intent to preserve the benefits of, or 
any claim for payment from, the trust established under section 5 of 
the Act (7 U.S.C. 499e);

[[Page 5179]]

    (3) Any official certificate(s) of the United States Government or 
States or Territories of the United States; or
    (4) Any public legal filing or other published document describing 
or alleging a violation of the Act.
    (b) Any written notification may be filed by delivering the written 
notification to any office of USDA or any official of USDA responsible 
for administering the Act. Any written notification published in any 
public forum, including, but not limited to, a newspaper or an internet 
website shall be deemed filed upon visual inspection by any office of 
USDA or any official of USDA responsible for administering the Act. A 
written notification which is so filed, or any expansion of an 
investigation resulting from any indication of additional violations of 
the Act found as a consequence of an investigation based on written 
notification or complaint, also shall be deemed to constitute a 
complaint under section 13(a) of the Act (7 U.S.C. 499m(a)).
    (c) Upon becoming aware of a complaint under section 6(a) or 
written notification under 6(b) of the Act (7 U.S.C. 499f (a) or (b)) 
by means described in paragraph (a) and (b) of this section, the 
Secretary will determine if reasonable grounds exist to conduct an 
investigation of such complaint or written notification for 
disciplinary action. If the investigation substantiates the existence 
of violations of the Act, a formal disciplinary complaint may be issued 
by the Secretary as described in section 6(c)(2) of the Act (7 U.S.C. 
499f(c)(2)).
    (d) Whenever an investigation, initiated as described in section 
6(c) of the Act (7 U.S.C. 499f(c)(2)), is commenced, or expanded to 
include new violations of the Act, notice shall be given by the 
Secretary to the subject of the investigation within thirty (30) days 
of the commencement or expansion of the investigation. Within one 
hundred and eighty (180) days after giving initial notice, the 
Secretary shall provide the subject of the investigation with notice of 
the status of the investigation, including whether the Secretary 
intends to issue a complaint under section 6(c)(2) of the Act (7 U.S.C. 
499f(e)(2)), terminate the investigation, or continue or expand the 
investigation. Thereafter, the subject of the investigation may request 
in writing, no more frequently than every ninety (90) days, a status 
report from the Director of the PACA Division who shall respond to the 
written request within fourteen (14) days of receiving the request. 
When an investigation is terminated, the Secretary shall, within 
fourteen (14) days, notify the subject of the termination of the 
investigation. In every case in which notice or response is required 
under this paragraph (d), such notice or response shall be accomplished 
by personal service; or by posting the notice or response by certified 
or registered mail, or commercial or private delivery service to the 
last known address of the subject of the investigation; or by sending 
the notice or response by any electronic means such as registered 
email, that provides proof of receipt to the electronic mail address or 
phone number of the subject of the investigation.

    Dated: January 29, 2018.
Bruce Summers,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 2018-02066 Filed 2-5-18; 8:45 am]
 BILLING CODE 3410-02-P