Year: 2017

One of the most confusing things about PACA is the acronym itself. PACA is the acronym for the Perishable Agricultural Commodities Act of 1930. The Act and its regulations are enforced by a branch of the United States Department of Agriculture (USDA), Ag Marketing Service (AMS).

The PACA Division is the name given to the part of the USDA-AMS charged with implementing and enforcing the licensing, dispute resolution, and disciplinary provisions of the Act.

Many also refer to the portion of the Perishable Agricultural Commodities Act of 1930 which created the statutory deemed trust as PACA. This is particularly confusing as the Act contains the deemed trust provisions, but the PACA Division personnel are not involved with filing claims or enforcement of the deemed trust. Filing under the trust provision is done by claimants and enforced through the US District Courts.

How can you use PACA as part of your operations?

1. Make sure the party you are doing business with in the US has a valid PACA License. If they do not, they are likely not operating legally, and you should ask them why they are not licensed.
2. If you encounter a problem, call the appropriate regional PACA office (https://www.ams.usda.gov/rules-regulations/paca/contacts) and ask for help. They can help with many questions including contract, inspection, and trading rights and responsibilities. They will not contact your trading partner unless you ask them to.
3. If you cannot resolve the issue following your initial call to PACA Office contact them again and ask for instructions on filing an informal complaint. The initial complaint will cost $100. As a member of the DRC, you can also contact our help desk and we can assist you with the process.
4. If the initial informal complaint does not resolve the issue, PACA will advise you on filing a formal complaint which will result in a binding decision and award. It will cost $500 to file a formal complaint and you will be asked to post security equal to twice the amount of your claim (a $20,000 complaint would require a $40,000 security). Contact PACA if you need bonding service provider information for foreign nationals. The security is in place to cover a potential counter complaint by the US buyer. The security will be returned to you if there is no successful counter complaint.
5. If the buyer becomes insolvent you can participate in the PACA (Perishable Agricultural Commodities Act) deemed trust. Unless you are a PACA licensee you may NOT use the statutory wording on invoices and billing statements. All others must send their customer a specific notice referred to as “Intent to Preserve Trust Benefits” within 30 days of when payment was due. Failure to take this step means you will have no rights under the trust provisions of the Act.  See this link (https://www.ams.usda.gov/rules-regulations/paca/paca-trust) for more information about preserving your trust privileges.

Questions? PACA Division personnel can help and your DRC Trading Assistance Team is available to help navigate through PACA, no matter which part of PACA you have questions about.

In this three-part series, we will look at the importance of destination inspection services with guest interviews with Tom Oliveri, Director of Trade Practices & Commodity Services at Western Growers, Jim Gordon, Operations Manager at Ippolito Produce as well as Fred Webber, President and CEO of DRC.

Part one of the series focuses on a U.S. perspective with Tom Oliveri. In the interview, Mr. Oliveri touched on key points: the importance of getting a federal inspection when one is available; challenges of a private survey; and proper inspection criteria.

It is up to the buyer to prove a breach of contract with the shipper and the best way to do that is with an inspection. A non-biased, third-party federal inspection is the route Mr. Oliveri recommends, citing consistency in training of inspectors, rotation of inspection personnel, and credibility of evidence collected in recommending a federal inspection over a private survey.  An impartial and thorough inspection report is key to the resolution of disputes over produce quality between shippers and receivers. “Inspectors are the eyes for the shipper who may very well be some 3000 miles away,” stated Mr. Oliveri. “They are the eyes to tell us what the problem is, what the product looks like.”

“We prefer to see a non-biased, third-party federal inspection. With a federal inspection, you know that there is a consistency in training of the inspectors as well as accountability to meet standards of quality, for example how to take an accurate picture – proper angles and lighting,” continued Mr. Oliveri. “We know federal inspectors are properly trained to collect the best possible evidence and that they will provide a legitimate inspection.”

In the case of private surveys, inspectors are often in one location only, working for the receiver and dependent on the receiver for repeat business, opening the door to call into question the validity of the report as non-biased. “Private inspectors don’t necessarily rotate, in other words they may be in one location all the time, and they work for the receiver and depend on the receivers to hire them to do the inspection and for repeat business. We don’t feel they are as unbiased as a federal inspector would be,” stated Mr. Oliveri.

Shippers have a responsibility to send products in suitable shipping condition and in normal circumstances, for the product to arrive in good shape. Mr. Oliveri wants the inspector at arrival to take a look at the shipment, know what they are looking at and to be 100% accountable. In the case of a dispute, the validity of a private survey may be called into question: what was the sample size, what are the criteria for inspection, how experienced is the inspector, what is the inspector’s depth of knowledge and area of expertise? These are just some of the questions that may call into question a private survey.

“With private surveys, we don’t know if the inspectors are thoroughly trained nor do we know that they are unbiased because they are working solely for the wholesaler. If you truly believe there is a breach of contract, the shipper will be paying for the inspection, so why wouldn’t you get a federal inspection,” asked Mr. Oliveri.

If a shipper or a buyer questions the results of an inspection and they believe that the product is better or worse than the inspection reports, and that possibly the inspector may have made a mistake, they can request an appeal inspection on a federal inspection. During an appeal inspection, a secondary inspector, oftentimes a supervisor is brought in to conduct a follow-up inspection with additional samples being tested. Results may validate the original inspection or overrule the initial results but the second inspection results are considered the true results. “How do we ask for an appeal inspection on a private survey,” asked Mr. Oliveri.

Private surveys have a place in countries that don’t offer federal inspections but both Canada and the U.S. have federal inspection services. Mr. Oliveri cites concerns with private surveys including accountability, sample sizes, level and depth of expertise, and bias in the favor of the wholesaler. “Private survey companies may not have the depth of staff to have experience on all the differences between commodities or the sheer number of commodities we deal with” said Mr. Oliveri.

In conclusion, he stressed the importance in supporting the Canadian Food Inspection Agency (CFIA) and how private inspections can take dollars away from the program. “They [CFIA] don’t have a big budget and are on a cost recovery model. We need a strong CFIA inspection program that we can depend on,” continued Mr. Oliveri. Inspections can be requested via an online from the CFIA website inspection.gc.ca.

Did you know that diverting a load from its original contracted destination is considered an act of acceptance and you can no longer reject the load? It is now yours. Shippers are responsible to meet contract terms or making good delivery to the named destination. If you divert the load, you have deviated from the original contract unilaterally and implicitly left without the rejection recourse.  This does not mean you cannot claim damages but you now bear the burden of proof that any damages to the product would have been the same or similar if delivered to the original destination. The buyer bears the burden of proof once a load is accepted either by unloading or by diversion. Be aware that any deviation in destination for whatever reason constitutes acceptance of the load.

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

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

In the produce industry, things move quickly and change occurs frequently. Businesses open, close, amalgamate, change ownership, move, rebrand, or simply (or not so simply) change names. Is your company in the midst of a change? How does this impact your DRC membership? Can you transfer your DRC membership?

In a nutshell, each legal entity requires its own membership and membership is continual until terminated or expelled in accordance with the DRC by-laws and operating rules.  A membership is not transferable from one legal entity to another, however there are some variations and DRC can assist you in determining your unique situation.  In order to ensure your rights and responsibilities remain intact, if you have made, or are going to make, any changes to your business legal or operating status, you have an obligation to contact DRC.

Please remember that it is the DRC members’ obligation to report any changes to the legal and operating status of the business as per DRC by-law No. 1, Section 3.03 Communications and Information. This includes (but is not limited to) dissolutions, bankruptcies and receiverships, as well as any changes to the corporate record including company name, responsibly connected individuals, address, phone, fax and email.

“Updating your record of information is straightforward and does not require much time.  Please call us and we will be happy to walk you through it” stated Dawn Hughes, Member Service Administrator.

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

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

When you receive a load and there is a problem, let the shipper know right away about the problem and make a decision within a reasonable timeframe as to whether you are going to accept or reject the load.

According to DRC trading standards, a receiver must advise the shipper in writing that the load is rejected. Within 8 working hours (excludes Sundays and Holidays) after receipt of notice of arrival of the shipment the receiver must apply for inspection and, within 3 hours after receiving a written or oral report of the result of the inspection, advise the shipper in writing that the load is being rejected.

Reasonable time for fresh fruits and vegetables can vary depending on the mode of transportation. According to DRC trading standards, reasonable time means:

Rail shipments: not to exceed 24 hours after notice of arrival and the car has been placed in a location where the produce is made accessible for inspection.

Truck shipments: not to exceed 8 hours after the receiver or a responsible representative is given notice of arrival and the produce is made accessible for inspection.

Boat shipments: not to exceed 24 hours after the receiver or a responsible representative is given notice of arrival and the produce is unloaded and made accessible for inspection.

It is important to note that unloading the truck for any purpose other than making the product accessible for an inspection is deemed acceptance and rejection is no longer an option.

Providing written notice in a reasonable time is critical. All too often a party will do the right thing but fail to recover damages because they failed to notify their trading partner of their intention.

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

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

It’s getting hot out there! Summer is here and we thought a friendly reminder to double-check transport temperatures and unit modes is in order. Shippers and carriers have a shared responsibility for what happens at shipping point, during loading and releasing the truck.

The hiring party should ensure clear instructions are provided to run units on continuous mode and not stop/start (also called cycle entry). Not only should proper temperature be specified, but be sure to instruct that the reefer remain on continuous mode in order to avoid condensation or heat building up on many high respiration products.

Shippers need to make sure that the product is loaded in such a manner that it would make good arrival or meet contract terms at destination. Depending on the terms of the contract it is the shipper’s or receiver’s responsibility to verify the truck is in proper condition and the reefer is set at the right temperature and mode.

The carrier is responsible for ensuring the truck is in sound condition and for following transport instructions given by the hiring party or following the instructions on the Bill of Lading. If conflicting information exists between the transport instructions and the BOL, or there is missing information, it is the carrier’s responsibility to contact the party who hired them and request instructions. That said, be proactive and ensure temperature and mode are specified.

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

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

Once two parties have agreed to do business and the load is shipped there are trading standards that apply. When a sale occurs and delivery is attempted there could be two options for the receiver: accept or reject the load. Accept means the buyer takes control of the load, while reject means the buyer refuses to take delivery or exercise any control over the load. These terms have clear definitions and dictate specific rights and responsibilities for each party. Many actions are taken after the initial decision, but this decision determines who is in control, and what action needs to follow.

Acceptance:
When the load arrives at destination and is not rejected there are three possible scenarios to complete the transaction:

1. Accept the product and pay as invoiced
2. Accept the product and request for a federal inspection if there is an issue with the condition of the product.
3. Agree on a new contract (i.e. consignment, repack, replace, credit)

All three of these options leave the buyer in control of the product and responsible for payment in line with the agreement or applicable DRC rules.

Rejection:
When a firm rejects a load with a valid reason they are returning title of the product to the seller. They are in effect saying that it needs to be removed as they do not want it and will not accept it.  The responsibility is then on the seller to move the product and mitigate the loss on the product be it a rejection with, or without, reasonable cause.

If a buyer rejects the product without reasonable cause, the seller may not agree and will advise the buyer that they are rejecting without reasonable cause. The seller can notify the buyer of its intention and will then bill for the difference between the original invoice and the resale of the product to a new consignee.

It is important to note that unloading the truck for any purpose other than making the product accessible for an inspection is deemed acceptance and rejection is no longer an option.

It is also important to note that buyers and sellers have a responsibility to mitigate any loss if the other party fails to act. In other words, you cannot just let the product sit and spoil.

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

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

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.