Month: July 2017

Is something fishy going on? A load has just arrived and there is a strange odour when the doors are opened. What do you do now?

In the case of a foul odour, the load is likely compromised and for food safety concerns, it would be very difficult for a buyer to move the product to regular market channels. When a strange odour is present at the time the doors on a load are opened, you need to know what that odour is. The issue for a buyer is the perception that it could affect the product and create food safety concerns. Ask the following questions: what was on the truck prior to this shipment? Did the shipper or the driver notice any odours in the truck prior to loading? Is there any evidence that the truck was properly cleaned? We’re not talking about normal smells associated with produce maturing or decay but foul smells such as fish, meat or strong chemical smells. Immediately close the doors and call for a government inspection. If the inspection confirms an issue with foul odour, you may have valid reasons to reject the load.

A reminder that cherry season is in full swing and it is important to remind industry to be informed and aware of expectations for Washington cherries. Washington cherries can be treated as a separate State grade and they have a standard that is a little more lenient than other cherry standards in order to allow for some production issues that Washington cherries have typically faced. During the 2016 DRC Board and Annual General Meetings, changes were made to the By-Laws and Operating Rules notably making the introduction to DRC Good Arrival simpler and easier to understand. Small changes were also made in the US #1 column to more accurately reflect ONLY USDA Grade Standards. Users will note the line for Washington Sweet Cherries has been removed. Nothing has changed for firms who agree to purchase and sell Washington #1 sweet cherries. The reference has simply been removed as the table is meant to reflect the default guidelines when no grade or other specification has been agreed upon. There are many grade standards on many different commodities which parties may reference and agree to contract for. Like the Washington #1 standard, it must be agreed to or the default Good Arrival Guidelines apply.

DRC Good Arrival Guidelines are compiled from PACA Good Arrival Guidelines, USDA Grade Standards and Canadian Grade Standards. The grade for Washington #1 Cherries was created by Washington State to account for production issues faced by Washington growers. The Washington guideline allows for 30% defects versus 15% defects for USDA good delivery.

When industry buyers purchase or think they are purchasing Washington cherries and the seller includes wording Washington #1 Sweet Cherries, there may be some confusion. The seller may be referring to standard expectations and not the product itself.

Always be sure to take a close look at documents you are receiving and double-check that the documents include the agreed upon grade standards. In the case of a dispute, the burden is on the shipper to prove that the terms were discussed, understood and agreed upon (DUA). If you are buying cherries from Washington you should be aware of the standard and double-check all documentation. The practice of verifying your documentation to ensure grade standards are as agreed should not be exclusive to the cherry category.

A lot of questions have been cropping up about consignment and price after sale. There seems to continue to be some confusion around these two terms and we thought it best to underline the differences and importance that they not be interchanged. During a consignment transaction, the receiver does not take title to the product whereas in a price after sale transaction, the receiver does take title to the product. In the case of a dispute, there are different requirements and burdens of proof for both transaction types.

Consignment:

The first thing to note about consignment is that the consignee does not own the product. It is owned by the consignor until it is sold at which point ownership is transferred from the consignor to the buyer. The consignee’s role is to sell the product at the best possible price available in the market less any expenses that have been agreed upon. It is the responsibility of the consignee to submit an itemized account of sales. The account of sales should indicate price, amount and date sold for each product in their care less-usual and customary expenses such as freight, warehousing fees, a commission and any other agreed upon fees or expenses for which the consignee has paid. A consignee is always entitled to commission on consignment which typically falls in the 8% to 15% range but it should be established in writing.

When a load is on consignment, there is no requirement for the consignee to request a federal inspection to prove the product is in good or bad condition. The only time a consignee is obligated to request a federal inspection is when more than 5% of the load is dumped. The inspection required in this case is a condition inspection to prove that the product being disposed of has no commercial value. This does not mean a dump certificate where the inspector witnesses the dumping of the product, the dump certificate is not sufficient to demonstrate the product had no commercial value.

The consignment transaction is based on trust between the consignor and the consignee. The consignor is limited to claim against the consignee based on the itemized account of sales, not on the condition or quality of the product unless more than 5% of the load is dumped.

The consignee is not obligated to sell the product at market prices, only obligated to do their best to sell at the best possible price. Market News or InfoHort are NOT a point of reference for sales in the case of a consignment transaction unless the parties indicated in writing a minimum guaranteed price or specific reference Market News or InfoHort in their written agreement.

On a consignment transaction, as a consignee, you are obligated to move the product quickly and sell at the best price possible in a proper and timely manner. On consignment you must give priority to that product. It is important to note that when you agree to sell on consignment, you cannot resell on consignment. Unless agreed to in writing, a consignee also may not sell to a sister company or companies that are linked to the consignee.

Price after sale:

Price After Sale (PAS) is a sale where no price has been agreed upon and is also sometimes referred to as open price sale or open sale. In the case of PAS, the buyer, after the product has been sold offers a return to the seller. If the seller does not agree with the return submitted, the buyer has the burden to show why they are giving this return at that price. An account of sales showing a prompt and proper resale is normally the most common method to show how the buyer reached the return offered. However, an account of sales is not required. If the return does not at least yield market prices, it is the responsibility of the buyer to show why they were not able to sell the product at market prices.  If an account of sales is submitted, it needs to include the same elements of an itemized account of sales as indicated in a consignment transaction, except a commission is usually not allowed unless agreed upon.  If there is no damage to the product, and the product was received in sound condition, the expectation is that the product will sell close to or at prevailing market prices. During a PAS transaction, when the buyer receives product and there is damage, the buyer is obligated to request a federal inspection to prove that the load fails or meets the DRC Good Arrival Guidelines.

Correcting interchanged terms on an invoice:

Consignment and PAS are two separate terms that should not be interchanged. If you receive an invoice that mistakenly interchanges the two terms, be sure to contact the other party to have it corrected. In the case of a consignment transaction, should there be an issue regarding this term, you have to show that this term was discussed, understood and agreed upon (preferably in writing). DRC Good Arrival Guidelines indicate that in the absence of an agreement on the terms of the transaction, the default would be FOB No Grade Good Arrival Guidelines. In addition, if there is no price agreed upon, the price defaults to market price.

DRC’s Board and Annual General Meeting was held June 7-9, 2017 in Ottawa, Ontario. DRC reported to members and the Board on key DRC priorities including DRC’s role under the Safe Food for Canadians Act, Membership, Marketing, and Trading Assistance. The Board also reviewed and approved financial statements and previous meeting minutes. The DRC Board was pleased to welcome allied associations, Members of Parliament, Embassy representatives and industry members during the various events and meetings.

The Board met with Members of Parliament to continue to discuss and facilitate the introduction of a trust or an obligation imposed by agreement or by law similar to the U.S. deemed trust provisions included under the Perishable Agricultural Commodities Act (PACA). DRC Board interest on establishing a trust in Canada extends beyond trade and reciprocity with the U.S. A deemed trust would help ensure monies flow down the chain and stop the “domino effect” that often occurs when insolvency strikes anywhere in the marketing chain.

Members of the DRC Board met with the Honourable Lawrence MacAulay, Minister of Agriculture and Agri-Food and members of his team. While it was a positive meeting, the Board members were told that progress on the trust would have to include the involvement of the Honourable Navdeep Singh Bains, Minister of Innovation, Science and Economic Development and his team. Canadian industry is pushing for a deemed trust, a resolution to the reciprocity dispute with the U.S. and stronger payment tools and will likely be disappointed that a Canadian trust has encountered another obstacle to overcome. While this new development is surprising, it does not change the priority of the file and the work that will continue to move it forward.

The meeting also confirmed that single entity licensing is moving forward. Membership in DRC will be the requirement under the proposed Safe Food for Canadians Regulations (SFCR), replacing the former option of either a DRC membership or a License under the Canadian Food Inspection Agency (CFIA). A DRC membership and abiding by DRC business and trading standards will be a requirement going forward.

For more information please call or email the DRC Help Desk at:

DRC Help Desk | 613-234-0982 | [email protected]