USDA ASKS PACA REFORM, NOT REPEAL

JOYCE BARRETT

WASHINGTON (FNS) -- The U.S. Department of Agriculture opposes eliminating the Perishable Agricultural Commodities Act, but favors changing the license structure to relieve the financial burden on retailers, Lon Hatamiya, administrator of the Agricultural Marketing Service, told a House panel March 16.

In testimony before the House Subcommittee on Risk Management and Specialty Crops, Hatamiya said the administration is "strongly opposed" to a repeal program introduced by Rep. John Boehner, R-Ohio. He said USDA was still evaluating a PACA reform compromise plan sponsored by Rep. Richard Pombo, R-Calif.

"By stripping away critically needed safeguards on business practices, repeal of PACA would severely burden fruit and vegetable buyers and sellers, especially the smaller ones, by dismantling their dispute resolution forum," Hatamiya said. "We believe there is room to look at lessening the burden on retailers, and maybe creating a more proportional base."

Hatamiya also said he favored revising the late fees and penalties levied under PACA.

The 65-year-old program, passed to provide for dispute resolution outside the civil court system to enforce contracts between buyers and sellers of fresh fruits and vegetables, is under attack by retail grocers. The opposition is led by the National-American Wholesale Grocers' Association, the National Grocers Association and the Food Marketing Institute.

On the other side of the debate is the United Fresh Fruit and Vegetable Association, the American Frozen Food Institute and the Produce Marketing Association,

which all back PACA but acknowledge it needs reform. All the groups testified at the hearing.

At the hearing, Boehner said he would support reform instead of repeal, but added he offered his measure because he was "tired of complaints about PACA. It seems people don't really want to reform it." He warned the industry that it must "be willing to negotiate in good faith. I'm willing to listen if people are serious."

At least one member of the panel, Rep. Karen Thurmon, D-Fla., questioned the purpose of the debate, asking, "Why are we looking at a $7.5 million program that doesn't cost the government anything and seems to be working?"

Working or not, the program is expected to run a deficit by 1998, testified Robert Robinson, associate director of food and agriculture issues for the General Accounting Office. PACA is funded by license fees paid by 15,000 buyers and sellers, including dealers, retailers, brokers, commission merchants, food-service firms, processors and truckers.

Robinson said PACA is expected to begin drawing on its $1.8 million reserve fund to help cover costs in fiscal 1996. He blamed the deficiency on the legislative ceiling on license fees and the costs to administer the program. The entire program could run a deficit by 1998, he said.

Industry groups used the venue to reiterate their stands on PACA.

John R. Block, NAWGA president, testified that he backed repeal, complaining that PACA intrudes on commerce in the perishables industry. Block also criticized USDA for not updating PACA as the industry has modernized. "USDA not only seeks to maintain this bureaucracy, but to enlarge it despite the plain facts about what is not in need of protection," he said.

Charles Butson, immediate past chairman of the NGA board of directors and president of Butson's Supermarkets, Woodsville, N.H., testified that PACA places increased economic and administrative burdens on business. "It is a hidden tax on the cost of our food products," he said, adding that the reform proposal would make the system even worse.

Harry Sullivan, senior vice president and general counsel of FMI, said the industry has evolved beyond the current PACA program. "The vast majority of retailers purchase produce from the same wholesale grocer who supplies them with their other products in their stores," Sullivan said. "PACA has absolutely no connection with these transactions."

However, Jeffrey Gargiulo, PMA chairman of the board, said the industry still relies on PACA, and restated the conclusions of PMA's PACA task force that the program should be changed to shift more of the financial responsibility "to those who use it most."

He said PMA supported some of the recommendations of the Pombo bill, but "would vigorously oppose any move that seeks to expand the scope of PACA, whether that be the inclusion of floral products or broad investigation of industry practices that have nothing to do with PACA currently."

Alan Siger, president of Consumers Produce Co., Pittsburgh, testifying for the United Fresh Fruit and Vegetable Association, said he was frustrated by the apparent inability of the industry to reach a compromise on reforming PACA.

Siger said he favored Pombo's bill and characterized retailers' responses to it as "very disappointing." He acknowledged that PACA's funding formula should be reformed.