Summary
This regulation implements the Perishable Agricultural Commodities Act (PACA) by defining key terms and establishing licensing, bonding, and fee requirements for commission merchants, dealers, and brokers dealing in perishable agricultural commodities. It specifies who must be licensed, application procedures, bond requirements ($10,000 minimum), and substantial annual fees ($995 + $600 per branch, capped at $8,000). The rule also defines 'prompt payment' timelines, accounting requirements, and what constitutes 'good faith' in transactions.
Reason
This regulation imposes significant barriers to entry through licensing requirements, bonding mandates, and high fees that disproportionately harm small businesses and new market entrants while protecting incumbent dealers. The $10,000 bond and nearly $1,000 annual fee (plus $600 per location) are substantial costs that exclude small farmers, family operations, and entrepreneurially-minded traders from participating in interstate produce commerce. Purely private contractual relationships between producers, dealers, and brokers should be governed by state contract law and market forces—not federal licensing regimes that originated in 1930. The 'prompt payment' and accounting provisions displace efficient, flexible commercial arrangements with rigid one-size-fits-all mandates. Federal micromanagement of payment timing in agricultural transactions represents an unconstitutional overreach under the Commerce Clause when applied to purely local activities. State consumer protection laws and tort remedies are sufficient to address any fraud or bad faith without creating a federal regulatory bureaucracy. The unseen costs include reduced competition, higher consumer prices, and suppressed agricultural entrepreneurship that would otherwise flourish in a free market.