PACA Trust: Payment Terms, Invoice Language, and Deadlines

1. Introduction

A produce customer stops paying, and accounts receivable discovers that the credit agreement, invoice terms, and delivery records do not match. The balance may be real, but the seller's PACA trust position can become harder to establish.

For wholesalers, distributors, importers, and other produce sellers, preserving trust rights requires coordination before a collection problem develops. Sales establishes the terms, operations supplies shipment dates, and billing delivers the required notice. This guide explains how to connect those responsibilities, calculate the relevant deadlines, and retain evidence that the preservation process actually worked.

2. How Do You Preserve PACA Trust Rights?

You preserve PACA trust rights by doing two things: selling on payment terms that stay inside the eligible credit period, and giving the debtor the required notice on time — the statutory statement on your invoice if you hold a PACA license, or a separate written notice if you do not. Both have to hold. Eligible terms without timely notice, or a timely notice on terms that exceed the ceiling, leaves the claim exposed. The two 30-day rules below are where most of that goes wrong.

For qualifying transactions, the PACA trust covers produce, inventories derived from it, and related receivables or proceeds until full payment. Valid trust claims take priority over general distribution of those assets to other creditors when a buyer fails. Eligibility alone, however, does not replace the seller's obligation to preserve rights. USDA PACA Trust guidance (opens in a new tab).

Keep these two rules separate:

The notice window does not extend the buyer's payment terms. Conversely, a customer paying late does not, by itself, mean the seller agreed to ineligible credit terms. These distinctions follow 7 C.F.R. § 46.46 (opens in a new tab).

3. What Do You Actually Need?

Build a retrievable file for each shipment. The following is an operational record set, not a prescribed USDA form.

Assign responsibility for maintaining this file to a specific person in credit or accounts receivable, with sales and operations supplying their supporting records.

4. Step-by-Step Guide

1. Step 1 Identify the payment rule and available notice method

   Confirm the transaction type before assigning a due date. For an ordinary purchase of produce by a buyer, the default rule is payment within 10 days after the day of acceptance. Consignments, growers' agent arrangements, and brokerage transactions can follow different schedules under 7 C.F.R. § 46.2(aa) (opens in a new tab).

   Also confirm the selling entity's PACA license status. A licensee may use the statutory invoice method or a separate written notice. An eligible seller without a PACA license, such as an unlicensed grower, must use the separate-notice route. Record the selected method so billing staff know which process applies.

2. Step 2 Document alternate credit terms before the transaction

   If the parties choose payment terms different from the applicable regulatory period, they must agree in writing before entering into the transaction, keep copies, and disclose those terms on invoices, accountings, and other transaction documents. To retain trust eligibility, the agreed period cannot exceed 30 days after receipt and acceptance. 7 C.F.R. § 46.46(e) (opens in a new tab).

   Have sales and credit check that the customer account, sales confirmation, and invoice reflect the same agreement. Define the event that starts the payment period; a generic “Net 30” setting measured from a delayed invoice can permit payment beyond the eligibility ceiling. Configure the due-date calculation to match the actual agreement.

   Important

   Correct trust language cannot cure a pre-transaction agreement allowing more than 30 days after receipt and acceptance. Resolve the credit terms before the sale.

3. Step 3 Capture acceptance and calculate the notice deadline

   Obtain receipt and acceptance evidence from the shipment records. Acceptance can include unloading or diversion and may precede invoice creation; do not substitute the invoice date without checking the facts. See the definition in 7 C.F.R. § 46.2(dd) (opens in a new tab).

   For separate notices, calculate 30 calendar days after the applicable payment period expires. If a promptly presented payment instrument is dishonored, record when the seller receives that notification; the regulation also provides a 30-calendar-day window from that event.

   Count weekends and holidays. If the thirtieth day falls on a Saturday, Sunday, or holiday, the regulation extends the final day to the next day with postal delivery service. Set an earlier internal reminder so the notice can be provided before the deadline. These timing rules appear in 7 C.F.R. § 46.46(a)(4) and (f)(2) (opens in a new tab).

4. Step 4 Prepare the correct invoice or written notice

   For the licensee invoice method, place the complete statutory statement on the face of the ordinary invoice or billing statement. Include alternate payment terms where required. USDA specifies this wording exactly:

   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.

   Keep the text unchanged in the billing template and compare it with the official USDA wording (opens in a new tab) when templates change. Send invoices promptly through normal billing; do not wait for collections to address notice.

   For a separate written notice, state that it is a “notice of intent to preserve trust benefits.” For each shipment, include:

   • Names and addresses of the relevant beneficiary, seller, commission merchant, or agent, and debtor.
   • Transaction date, commodity, invoice price, and payment terms where applicable.
   • Amount past due and unpaid.
   • Date the seller received notification of dishonor, if applicable.

   Give the notice to the debtor within the applicable deadline. These content requirements come from 7 C.F.R. § 46.46(f)(1) (opens in a new tab).

5. Step 5 Verify the actual transmission

   Save the document or electronic data actually sent, its destination, and evidence of transmission. For electronic invoice preservation, the required statement must be transmitted to the buyer or its designated electronic transaction vendor, and that transmission must be verifiable.

   The buyer's failure to download or accept the trust statement does not defeat an otherwise qualifying, verifiable electronic transmission. Buyers and their designated vendors must also provide sufficient space for the required statement. 7 C.F.R. § 46.46(f)(4)–(5) (opens in a new tab).

   Common mistake

   For EDI, inspect the outbound data instead of relying solely on the invoice preview. A PDF in your accounting system does not establish that its trust language traveled through the buyer's interface. USDA addresses these responsibilities in its electronic invoicing guidance (opens in a new tab).

6. Step 6 Review overdue balances without losing the evidence

   When payment becomes overdue, verify preservation status alongside the balance. Under the current regulation, a seller that met the eligibility requirements does not forfeit eligibility merely by accepting partial payment or agreeing to a payment schedule after default. This does not excuse a missed preservation notice. 7 C.F.R. § 46.46(e)(3) (opens in a new tab).

   Keep the overdue invoices and repayment arrangement identifiable, and evaluate new shipments under their own terms. Before marking a file complete, confirm:

   Checklist

   • The supporting agreement and shipment records justify the due date.
   • The correct preservation method was used, with the necessary content and timing.
   • The sent notice and transmission or delivery evidence can be retrieved together.
   • Credits and partial payments reconcile to the amount still unpaid.

5. Practical Example

Illustrative scenario: A wholesaler sells 400 cartons of peppers in an ordinary purchase transaction, with no alternate payment agreement. The seller uses a separate written notice rather than relying on invoice language.

The transaction remained payable on June 15. July 15 was the preservation deadline, not additional credit for the buyer. The file now connects the payment basis, shipment, notice, and proof of delivery.