RENEWAL FEES ON FIRST-TIME LICENSES STIR PACA DEBATE

WASHINGTON (FNS) -- Controversy is resurfacing over the phasing out of retail and wholesale licensing fees under the Perishable Agricultural Commodities Act, despite a deal struck two years ago in Congress between produce shippers and their supermarket and wholesale customers.The feud this time involves the U.S. Department of Agriculture's implementation of PACA's three-year phaseout, which is already

WASHINGTON (FNS) -- Controversy is resurfacing over the phasing out of retail and wholesale licensing fees under the Perishable Agricultural Commodities Act, despite a deal struck two years ago in Congress between produce shippers and their supermarket and wholesale customers.

The feud this time involves the U.S. Department of Agriculture's implementation of PACA's three-year phaseout, which is already half way through. The controversy is specifically centered on proposed license renewal fees to be charged retailers and wholesalers who apply for a PACA license for the first time during the transition period -- fees which opponents say are illegal given the latest PACA reforms.

PACA was created as a Depression-era program to oversee the produce business in order to ensure suppliers are promptly paid. Retailers and wholesalers fought for changes to PACA, arguing the law has become obsolete and provides no benefits to them with the advent of modern-day innovations in food distribution and retailing.

Last month the USDA released its final regulations governing the new PACA rules, but left one section of the regulations governing new PACA participants open for further public comment.

That piece calls for the USDA to collect annual license renewal fees from retailers and wholesalers that sign up for PACA after Nov. 15, 1996. The renewal fees would be collected during the remaining time left in the phaseout. The USDA estimates the fees would amount to $750,000.

Although the USDA is still deciding what to do with this provision, the agency plans to continue collecting these renewal fees, but officials said they would refund the money with interest should they change their minds.

Retailers and wholesalers argue that, as specifically mentioned in Congress' PACA reform legislation, companies entering the produce program for the first time are required only to pay an initial fee but no renewal fee. In a nod to this point, the USDA, in a Federal Register announcement, did note the food industry's argument against renewal fees "appears to be plausible."

In a letter to PACA officials, Thomas Wenning, senior vice president and general counsel of the National Grocers Association, Reston, Va., called the USDA's regulations regarding renewal of new licenses a serious breach of Congress' marching orders. "NGA finds that USDA is illegally collecting renewal fees and USDA must cease doing so immediately," Wenning wrote.

Tim Hammonds, president and chief executive officer of the Food Marketing Institute, Washington, protested in a letter to the USDA that Congress' PACA legislation couldn't have been more clear in spelling out fees to be collected from new participants.

"It leaves no room for interpretation," Hammonds wrote. "FMI demands that [the Agricultural Marketing Service] obey the law and issue final regulations immediately stating that retailers and wholesalers entering PACA during the three-year period beginning on Nov. 15, 1995 shall not pay any renewal fees."

The association representing produce shippers, the United Fresh Fruit and Vegetable Association, Alexandria, Va., which had been at odds with retailers and wholesalers during the PACA reform debate, issued this statement from its president, Tom Stenzel:

"We support USDA's proposed rule implementing the 1995 amendments, but remain confident that the important benefits provided to retailers and suppliers of produce under PACA will remain unaffected by any short-term disagreement regarding implementation."

Not in dispute is the core of the PACA reform regulations, which stipulate the amount of money contributed by current retail and wholesale participants.

These companies will pay $400 for a PACA license renewal for the first store in a chain and $200 for each additional outlet, with a $4,000 cap, starting in 1995. License fees in the subsequent two years of the phaseout are pegged at 75% and 50%, respectively, of the amount paid on the first anniversary date.