U.S. supermarket chain Kroger has dropped its controversial 90-day standardized payment policy for produce suppliers following a backlash from the industry.

The fruit and vegetable sector said the "Net 90” plan announced in mid-June would automatically force suppliers to waive their Perishable Agricultural Commodities Act (PACA) rights and protections.  

The legislation ensures that produce suppliers are first in line to receive payment for their produce in the event of the buyer’s bankruptcy, but becomes void if suppliers agree to payment terms in excess of 30 days.

PACA director Judith Wey Rudman had sent a letter to Kroger on June 25 questioning the new policy, and in its July 9 reply, Kroger’s senior manager of enterprise sourcing finance Matt Hodge said the produce sector need not worry.

“Our produce suppliers received a letter outlining our recently-modernized payment terms and supply chain finance opportunity. We’ve shared with individual produce suppliers that we will respect existing contractual and legal mandates including PACA. We never intended for PACA-eligible produce suppliers to waive their PACA Trust rights,” Hodge wrote in the letter.

“At the same time, we’ve welcomed and listened to feedback from our produce suppliers and other important stakeholders—including yours. I’d like to take this opportunity to clearly state that produce suppliers protected under PACA are not required to participate in Net 90 payment terms.

“We’ve shared with individual produce suppliers that we will respect existing contractual and legal mandates including PACA. We never intended for PACA-eligible produce suppliers to waive their PACA Trust rights."

There was no indication in the retailer's original letter to suppliers announcing the policy that it would not apply to produce suppliers.

California Fresh Fruit Association president George Radanovich welcomed the news, saying the "Net 90" payment plan didn't work for the produce industry.

"We stand by our position that Kroger’s original push to implement its plan was wrong and illegal. To force suppliers to forfeit their rights under the Perishable Agricultural Commodities Act (PACA), an act created specifically to protect the perishable fresh fruit industry was unconscionable and should never have been proposed," he said.

"We would like to commend the fresh produce industry for coming together as a unified voice for our industry. Today we held the line on an important issue.

"As I’ve stated before, the fresh produce industry has been a good partner to Kroger, we appreciate that Kroger remembered that partnership and fixed the mess it created."

www.freshfruitportal.com