Year: 2019

For the fresh fruit and vegetable industry, Section 10 (Dealer Duties) of the DRC Trading Standards is considered the default practice for making a timely and proper claim. It is important to recognize that these are the guidelines which must be followed when the shippers/sellers and receivers/buyers have not established their own specifications for such actions.  Numbers 1 – 3 of Section 10 outline the procedures a receiver must follow when a load is received in deteriorated condition while 4 -7 state a shipper’s responsibilities prior to and while loading the shipment.

Numbers 1 – 3

A receiver who wants to reject a load received in deteriorated condition must request a government inspection (unless there is an agreement for a private survey) within 8 working hours, exclusive of Sundays and holidays. Within 3 hours of receipt of the inspection report, the receiver must share the results of the inspection report and advise the shipper/seller that they reject the product.

If the intention is to keep the product, the inspection results must be shared within 24 hours and every reasonable effort to market that product as soon as is practicable under the circumstances must be undertaken.

Once a receiver has secured evidence of a breach of contract or that the load failed to meet DRC Good Arrival Guidelines, the receiver has the right to claim damages. Unless the shipper/seller and the receiver/buyer renegotiate a new way to handle the product (such as consignment or repacking), a receiver who is in possession of a damaged load is only entitled to claim damages. This section also requires the receiver to secure a dump certificate if more than 5% of the load is going to be dumped. This differs from Section 9 which requires an inspection showing that the product has no commercial value when dumping more than 5% of the load. What these two sections indicate is that both of these documents (ie: dump certificate and inspection demonstrating no commercial value) are needed to back up a receiver’s claim.

Numbers 4 – 7

The shipper must load the product in such a way that it will meet contract terms or DRC Good Arrival Guidelines under normal transit time and temperature at the named destination. Some of these procedures include properly securing the load, ensuring appropriate air circulation and temperature compatibility when there are multiple commodities within a single shipment. DRC Transportation Standards cover in detail the responsibilities of the shipper and the carrier at point of loading.

Between 1995 and 1999, NAFTA provided the table to discuss a unified set of rules and regulations as well as a private dispute resolution mechanism for the fresh fruits and vegetables sector. In 2000 the DRC was born from a vision shared by produce industry leaders and government in Canada, the United States and Mexico that included:

• a unified system for fruit and vegetable trade that would avoid trade irritants and facilitate effective trade dispute resolution,
• a strengthened North American trading block for fresh fruits and vegetables, and
• each country having a dispute resolution system, a licensing and inspection regime and backed by an insolvency tool.

While a dispute resolution system existed in the US under the PACA, the pre-NAFTA regulatory system that prevailed in Canada, through the Canada Agricultural Products Act (CAP Act), proved to be ineffective in resolving most disputes and included no provision to address payment in situations of insolvency. Mexico did not have licencing requirements and government quality destination inspections like the ones existing in the US and Canada.

When DRC opened for business, members were located primarily in NAFTA countries until a membership option was opened for those trading partners dealing with NAFTA countries. Fast forward nearly twenty years and today members are found in 17 countries with South America and Europe mainly representing those countries. For Canadians a DRC membership is more than good business, it is the law. For those outside of Canada, DRC membership offers enhanced financial protection, education and a proven alternative dispute resolution mechanism that works. As DRC looks to the future, efforts to grow membership beyond continental North America will continue to expand by participating in trade shows and other initiatives outside of North America.

NAFTA provided the foundation for DRC and now we have a global presence where NAFTA no longer limits DRC’s outreach. Members represent the entire supply chain, with buyers accounting for 58%, suppliers 32% and all other segments representing the remaining 10%.

Following our two previous articles (February and March) where we began analyzing DRC Trading Standards, this time we will examine Section 8: Returns, Rejections, or Credit Memorandums on Sales, and Section 9: Accounting for Discarded Produce.

Section 8: Returns, Rejections, or Credit Memorandums on Sales

This section does not refer to the action of returning, rejecting, or issuing a credit memorandum on sales. This section does outline the required information each of these documents must have, such as the buyer’s name, sales ticket number, lot number, date the allowance was granted, and amount of the credit or adjustment, including the reason or reasons these documents were issued. A notation must be made on the original sales ticket referring to the adjustment and showing where the credit memorandum is filed.

It is essential that these documents are approved by a duly authorized person. A duly authorized person does not have to be an owner or director of the company. Anyone within the company with the capacity to bind the organization, such as buyers or sellers, could be considered a duly authorized person.

Section 9: Accounting for Discarded Produce

There are several key elements to take away from this section. Such elements are:

• determining if the product has any commercial value,
• what you need to do when dumping more than 5% of the load,
• who can provide a certificate regarding the disposition of the discarded produce and,
• understanding the difference between witnessing the dumping of product versus getting a condition inspection confirming the product has no commercial value.

We recommend that you read this section of the Trading Standards carefully when you have an opportunity.

DRC is preparing to lead an industry initiative to review Canada’s grade standards for the fruits and vegetables covered by the (CFIA) Canadian Grade Compendium Volume 2 – Fresh Fruit or Vegetables.

As is the case with all grade standards documents, the Compendium is the lexicon, or recognized language for describing fruit and vegetable commodities and associated defects.

A common lexicon is necessary in order for federal inspectors, buyers, sellers and others to communicate in a common language when they are separated by geographic distances.

DRC will work with industry stakeholders such as the Canadian Horticultural Council, the CPMA and others throughout the 18-month project to ensure fulsome and inclusive discussions as recommendations for change are developed. Review teams will also consider the corresponding US grade standards as part of the review. The Canadian and US fruit and vegetable grade standards are foundational to the DRC’s Good Arrival Guidelines and Trading Standards, which serve to establish liability in a mediation and arbitration process.

The overall objective is that in due course, DRC will take on responsibility for hosting the Compendium and coordinating future updates through a service agreement with the CFIA.

The provision of Incorporation by Reference (IR) within the new Safe Food for Canadians Regulations gives rise to the opportunity for the initiative.

Q. We are having a friendly discussion with our strawberry customer about a load which arrived in Toronto, ON with marginal problems.   We both agreed the berries were sold FOB Good Delivery, and we further agreed the berries would not have more than 1% decay. The berries arrived at the destination pulping warm with 2% decay, but within the DRC Good Arrival Guidelines published on your website. We agree the berries did not meet our agreement and this is a transportation claim based on the warm temps.  The carrier has taken the position that while temperatures were a bit warm, the product made good arrival and he will not accept any claim. What is DRC’s position on this matter?

A.Jaime Bustamante. DRC’s Rules and Regulations are the default rules when the contract between buyers and sellers is silent regarding some of the terms and conditions. In this case, there was an agreement between the parties to modify the strawberry tolerances, specifically the decay part, from 3% total decay to 1% decay. Therefore, there is no question the product failed to meet contract terms upon arrival. In addition, it appears all the parties, including the carrier, agree there is a breach of contract due to the product being subject to warmer than desirable temperatures during transit. Technically, for a receiver to make a successful claim against the shipper, the receiver needs to prove that transit time and temperatures were satisfactory. It is possible that the warm temperatures during transit contributed to the deterioration of the berries, and thus made it fail to meet contract terms. Therefore, because transit temperatures were not satisfactory, this would not be a shipper’s claim.

The carrier’s argument that the product met DRC Good Arrival Guidelines is valid only when the tolerances indicated in the buy and sell contract are not modified. If the product had met the 1% decay tolerance, the carrier would not be at fault because the product would have met the buyer’s and seller’s modified Good Arrival terms even when exposed to warmer than desired temperatures.

The DRC is happy to welcome Tammy McDowall to our team as Manager, Communications and Membership. Tammy brings over 15 years of management experience. This includes spending a decade working in the Canadian healthcare administration and management field, comprising eight years working for Canada’s largest practice management company.  Some of her experiences include internal policy and international project development. Through all these experiences, Tammy has learned to engage others and excel in her ability to build relationships and rapport with individuals at all levels of an organization.

Despite her success in the healthcare field, Tammy has always had an interest in agriculture as she spent many of her childhood summers in the Caribbean with her grandmother learning to tend to a wide variety of fruit trees and animals on the family property.

Tammy went to the University of Ottawa and studied Criminology and Philosophy.  She has a wide range of interest, and in her spare time, she also enjoys going to the different museums and galleries around Ottawa, hiking in nature and cheering on her favourite sports teams.

The produce world is constantly changing and to fulfil our mandate, DRC changes with it.  Many of you have been members since we opened our doors for membership in 1999.   Much has changed since those early days.

The most current By Laws and Operating Rules printed February 8, 2019 are found on the DRC website.   We urge you to review those regularly as the current By Laws and Operating Manual found on our website are the ones which govern your membership rights and obligations.

Your DRC membership is more than the contract, by laws, and operating rules in force when you first joined the DRC.   Changes are done with complete transparency, including proper notice, approval by the Board of Directors and by the membership.

Minor changes are discussed and when appropriate approved by the Board.   More significant potential changes are brought to your attention via a Notice of Motion in advance of the Annual Meeting of members and are voted on at the Annual Meeting.  The procedures for these changes are set forth in the Corporation’s By-Laws which are approved by Corporations Canada.

Some of these changes have been to modernize and clarify, such as the recent Dispute Resolution Rules. Some have been in response to regulation, such as the Canada Not-for-profit Corporations Act, which triggered for example changes to our former membership categories.   Others have been in response to member requests and consultations, such as the change to the definition of fresh fruits and vegetables in 2008.

Our monthly newsletter “Solutions” also highlights changes and potential impact of changes approved by the Board of Directors and the membership.

Further to our previous article in which we discussed the Section 1, General Rules of Conduct and informed that we will be summarizing DRC’s Trading Standards, this time we will address Section 3, General Records, Section 4, Documents to be Preserved, Section 5, Receiving Record, Section 6, Sales Tickets/Invoices. And Section 7, Lot numbers.

All these sections specify what documents must be preserved and for how long period of time.

Section 3, General Records indicates that all the documents pertaining to a transaction must be kept for a minimum period of two years and must be available if required. It is a DRC member’s responsibility to maintain records that will disclose essential facts regarding the transactions.

Section 4, Documents to be Preserved lists all the general documents that must be preserved such as Bills of Lading, Purchasing Orders, Invoices, Manifests, Receipts, Confirmation of Sales, Memorandums of Credit, Account of Sales, to name a just a few.

Section 5, Receiving Record states that all receivers shall keep in order of receipt a record of all produce received and must clearly show arrival dates and the carrier’s, seller’s or consignor’s information.

Section 6, Sales Tickets/Invoices specifically mentions what information Sales Tickets/Invoices must contain: serial numbers, date of sale, purchaser’s information, seller’s information, description and price of the commodity, lot numbers, etc. In addition, this section states that DRC has the right to request a copy of the sales ticket(s) in case of a dispute.

Section 7, Lot Numbers. An identifying lot number shall be assigned to each load. The lot number is an excellent method to preserve the identity of a load.

In our experience, having all these documents well organized and easily available for a period of two years, can save you time and money in the event of a dispute. Remember that a Notice of Dispute can be filed 9 months from the date the dispute arose and not having some of these documents may result in losing a claim.

With the coming into force of the Safe Food for Canadians Regulations (SFCR), from a regulatory perspective, the COS document has become obsolete. This form has been extremely useful to CFIA for inputting information, such as DRC membership number, for those companies still doing paper customs clearances instead of electronic clearances.

The Integrated Import Declaration has been updated to reflect the new SFCR changes and CFIA is asking that importers to use electronic systems for customs clearances.

For those of you still performing paper-based clearances, DRC is working with CFIA to update any required forms, but it is taking some time. We will give you more information as it becomes available. In the meantime, you may want to visit the CFIA website (www.inspection.gc.ca) and learn more about electronic customs clearances to save you time and effort.

Q. After an unsuccessful informal mediation process, our company is moving to arbitration for the first time. Could you give us some guidance on how to present our case so that we don’t feel the need to hire an attorney or someone else to represent us?

A. Jaime Bustamante. First, let me begin by saying that depending on the complexity of the case, it may not be a bad idea to hire someone with experience such an attorney, to represent you. However, you should be aware that with arbitration, as with any litigation before the courts, attorney fees are not necessarily awarded as part of the settlement. And if they are awarded to the prevailing party, it may not be the full amount.

At the beginning of the formal process, the DRC will provide you with a Statement of Claim (SOC) template which includes detailed instructions on how to present your case. Clarification will be provided by staff as required. Here’s a brief description of the information required in the Statement of Claim:

1. A demand that the dispute be referred to arbitration. This demand is already included in the SOC template mentioned above.
2. The names, addresses, telephone number, and email of the parties. Make sure to include in your SOC the name of a responsibly connected person to the company such as the owner, shareholder, director, etc. Most of the times a sales person is not a responsibly connected person.
3. A description of the claim and an indication of the facts supporting it. In order to have a better understanding of your claim, supporting documents (exhibits) such as invoices, B.L., correspondence, inspections and other documents, should be label as ”Exhibit A”, “Exhibit B”, etc. By labelling the exhibits, it becomes easier for the reader to understand the claim. In an Expedite Arbitration there is no hearing, therefore, it is very important the arbitrator can understand and follow the exhibits to be presented.
4. The relief or remedy sought and the amount claimed. Don’t forget to include the arbitration fees, interest, and attorney fees as part of your remedy.
5. The Statement of Claim must be delivered by fax/email and mail to the DRC and the Respondent. DRC’s Dispute Resolutions Rules required you to send two (2) copies of your SOC.

Once the informal mediation process ends, the documents exchanged during that stage are sealed and remained confidential. Not even the arbitrator will have access to the informal file. However, this does not mean that you can’t summarize the information gathered during the informal procedure and include it in your SOC.

Finally, be reminded that the information you provide in support of your case will have an impact on the arbitrator’s decision and award.