A 90 Day Payment Period for Produce Suppliers!?
Recently, the Kroger Company sent a letter advising its suppliers, including produce suppliers, of what appears to be a non-negotiable unilateral change in payment terms to net 90 days, i.e. three (3) months.
This payment term would be highly detrimental to produce suppliers. In addition, such a payment term violates the PACA statute and regulations.
The PACA statute requires Buyers to make full payment promptly for produce. See 7 U.S.C. 499b(4). The PACA regulations further clarify that full payment promptly means: “Payment for produce purchased by a buyer, within 10 days after the day on which the produce is accepted.” 7 C.F.R 46.2 (aa)(5).
The reason for the prompt payment regulations is based on the perishability of the produce, and the fact that growers and suppliers must be paid promptly to assure they can continue to operate.
In addition, after August 1, 2018, if a seller, who has received the letter from Kroger regarding 90 day payment terms, and then supplies produce to Kroger, may be deemed to have accepted the 90 day payment term, which would negate the supplier’s trust rights.
The Kroger letter states that a payment extension of 90 days, i.e. 3 months, is a modest extension. But payment in 3 months is not viable for suppliers of produce.
In addition, the option of a “discount” for earlier payment will not save suppliers money. Instead, suppliers will not be paid promptly, or in full, as required under PACA.
These proposed payment terms violate PACA, and they are not reasonable for the sale and delivery of perishable commodities.
Hopefully, the major produce associations can get together in Chicago at the United Convention in June to resolve this issue, so produce suppliers and Kroger can continue to work together under PACA for the benefit of produce suppliers, Kroger, and its customers.