In today's uncertain economy, fresh produce suppliers face not only tighter margins but also a rise in fraudulent buyers looking to exploit industry pressures. Now more than ever, it's critical to take proactive steps to keep the bad apples out and protect your business from costly scams.
Fortunately, there are proactive steps suppliers can take to minimize their risk. Here are five essential strategies:
1. Sell to Buyers with a Valid PACA License
The first and most critical safeguard is confirming that your buyer holds a valid license under the Perishable Agricultural Commodities Act (PACA) with the U.S.D.A. PACA licensing protects the produce industry by requiring licensees to adhere to a code of conduct and providing access to federal dispute resolution mechanisms.
Before shipping product or extending credit:
- Verify the buyer's PACA license through the USDA's online database, found here: https://apps.mrp.usda.gov/public_search
- Ensure that the license is active, and check that the company name and contact details match the buyer's representations.
- Review any pending informal or formal reparation complaints against the buyer.
2. Require a Written Credit Application and Trade References
Before extending credit to any new buyer:
- Require a complete credit application with business information, trade references, and bank references.
- Contact references yourself to verify payment history and reputation.
- Watch for red flags, such as incomplete applications, unverifiable references, or reluctance to provide business details.
- Confirm that the entity is in existence and in good standing with that state's Secretary of State or corporations division.
- Check the buyer's credit worthiness and claims history with the Bluebook Services. https://www.bluebookservices.com/
- Request a personal guaranty from the principal/owner.
A legitimate buyer will not hesitate to provide the necessary information.
3. Independently Verify Websites, Email Addresses, Phone Numbers, and Addresses
Fraudsters often create convincing fake websites, spoofed email addresses, and false contact information that appear legitimate at first glance. Protect yourself by:
- Comparing the buyer's provided website against public records and the official company website.
- Double-checking domain names for subtle misspellings or extra characters (e.g., "joe@commpany.com" instead of "joe@company.com").
- Verifying phone numbers using independent sources — and calling back through a publicly listed number, not the number provided in the email.
- Verifying the delivery address whether it's your new buyer's address or your buyer's customer's address.
If anything seems unusual or inconsistent, investigate before proceeding.
4. Use Cautious Payment Terms for New Buyers
Protect yourself when working with new or untested buyers:
- Require prepayment for the first order.
- Start with small, manageable orders before extending larger lines of credit.
- Maintain tight control over credit terms until the buyer has proven reliable over time.
- Require PACA Prompt (10 days) payment terms for all purchases.
- WARNING: Never agree to payment terms beyond 30 days from receipt and acceptance or else you waive your trust rights under PACA. If you do have payment terms beyond 10 days, but not more than 30 days, have a pre-transaction writing agreeing to those terms. Make sure your invoice and all billing documents accurately reflect the correct agreed to payment term.
Disciplined payment terms at the start of a relationship can prevent major losses later.
5. Stay Alert to Unusual Order Patterns
One of the clearest warning signs of a potential scam is unusual ordering behavior. Be on guard for:
- Large first-time orders that are disproportionate to normal market activity.
- Orders shipped to addresses that differ from the buyer's standard business location.
- Rush requests, especially those placed outside normal business hours.
- Buyers pressing for expedited shipments while delaying discussion of payment terms.
If something about the order feels off, trust your instincts and pause to verify. If it's too good to be true, then it's too good to be true. Scammers often rely on creating urgency to bypass standard verification procedures.
Conclusion:
The best way to fight back against produce buyer scams is through vigilance, verification, and disciplined sales procedures. By selling only to licensed PACA buyers, vetting contact information, requiring complete credit documentation, insisting on secure payment terms, and monitoring order behavior, produce suppliers can dramatically reduce their risk — and safeguard their hard-earned business.
In short, don't let one rotten deal spoil the bunch — stay sharp, stay skeptical, and keep the bad apples out.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
