Author: DRC

In this dispute, the arbitrator concluded that the product was deemed to have been accepted by the Respondent since the Respondent decided to unload and divert it. The arbitrator also found no evidence of a breach of contract by the Claimant. Although the Respondent promptly informed the Claimant regarding the product arriving at high temperatures, all documentation indicated that the product was loaded at the appropriate temperatures at the shipping point and that the product was exposed to undesired temperatures during transit. Furthermore, the Respondent failed to request a federal inspection to prove the product arrived in deteriorated condition or with high temperatures.

The Fruit and Vegetable Dispute Resolution Corporation (DRC) has developed a series of articles summarizing past arbitration decisions. These articles will help members understand how the DRC Rules and Standards apply in a dispute.

The DRC Dispute Resolution Rules state that all DRC arbitrations are private and confidential. As such, the names of all parties, including arbitrators and companies, are not included. A reminder that the DRC’s sole role is as administrator of the arbitration process; the DRC does not participate in any hearings. Therefore, this summary is based solely on the arbitrator’s written decision and may not reflect important information shared with the arbitrator through written briefs or verbal testimony.

ABSTRACT

The arbitration decision relates to a dispute between parties from the United States and Canada regarding the timely and proper rejection of a product by the Respondent, as well as whether the Claimant breached the contract.

Based on the findings and DRC Rules, the arbitrator determined that the Respondent’s diversion of the product indicated acceptance. Furthermore, the Respondent failed to demonstrate that the Claimant breached the contract by shipping cauliflower that was not in proper condition.

This summary provides an essential overview of the arbitration decision and its implications for international commercial disputes.

CASE: DRC File #19139 – Parties Domiciled – United States and Canada

SUMMARY OF FACTS:

On March 1, 2013, the Claimant sold a truckload of cauliflower to the Respondent under four different purchase order numbers (PO#2000008664, PO#611312, PO#611311, and PO#611314). The total invoice amount for the purchase was USD$17,273.60.

Each of the four pickup tickets, the four bills of lading, and the loading sheets were signed by the driver. All documents suggested that the product was pulped at 36°F at the time of loading. Additionally, four temperature recorders were placed on the truck.

The load was delivered on March 6 and was rejected due to high temperatures upon arrival. After the Respondent’s quality control team reviewed the information and temperature recorders, it was deemed a carrier claim.

The refrigerated unit was set to Cycle-Sentry mode, contrary to Respondent’s specifications, which indicate that the refrigerator must be set to Continuous mode. Temperature recorder readings confirmed that the product was exposed to higher than desired temperatures during transit.

A CFIA inspection was requested and performed on March 11, 2013 (four days after the product arrived). The inspection certificate showed that the product was affected by 43% brown discoloration.

The Claimant reported proceeds of USD$8,736.00 from the sale of the cauliflower. When this amount was applied to the original invoice price, the unpaid balance was reduced to USD$8,537.60. Additionally, the Claimant deducted $873.60 from an unrelated purchase, bringing the total claim to USD$9,411.20.

SUMMARY OF ARBITRATOR’S ANALYSIS AND REASONING:

In order for the arbitrator to determine what liability, if any, lies with the Respondent for the truckload of cauliflower it purchased from the Claimant, there are essentially two questions that must be answered:

1. Did the Respondent reject the cauliflower delivered by the Claimant?
2. Was there a breach of contract by the Claimant?

In answer to the first question, the Respondent agrees that it unloaded the cauliflower after it arrived. According to Section 19 of the DRC Trading Standards, “acceptance” means any action by the consignee that shows they accept the shipment, including unloading or diverting it, unless it’s for inspection by a recognized inspector.

The Respondent’s “FOB Rejection Form” shows that its Quality Assurance (QA) Specialist pulped the cauliflower after it was unloaded. This does not count as an inspection by a recognized inspector (see Section 19 of the DRC Trading Standards). The documents from both parties show that the Respondent also reloaded and diverted the cauliflower. The Claimant states that it didn’t decide to divert the cargo, and the Respondent did not respond to this point. Therefore, it seems the Respondent accepted the cauliflower when it diverted the cargo.

For the above-noted reasons, the arbitrator concluded that the Respondent accepted the cauliflower. Rejecting it after acceptance is seen as an unreasonable rejection under Section 19 of the DRC Trading Standards and is also unfair according to Section 1, General Rules of Conduct, of the same rules. Additionally, Article 2-607 of the Uniform Commercial Code (UCC) states that a buyer who has accepted goods must pay the agreed price minus any penalties for a breach of contract by the seller.

Was there a breach of contract by the Claimant?

The cauliflower was sold on FOB terms, meaning the seller is responsible for delivering the product on board the transport in suitable condition, while the buyer assumes risks after shipment.

The Respondent claimed the cauliflower arrived with elevated pulp temperatures and later asserted it was a carrier-related issue. The Respondent’s Quality Control Specialist reported these higher temperatures, arguing the cauliflower was not pre-chilled properly.

The Claimant countered that the cauliflower was at 36°F upon shipment, supported by the carrier’s signature on the bills of lading. The Respondent claimed this temperature was pre-printed, suggesting it wasn’t verified, but there was no carrier declaration indicating otherwise. Additional documents supported that the cauliflower was indeed pre-cooled properly.

The Claimant argued that elevated temperatures during transit were due to abnormal conditions, specifically related to the refrigeration unit operating in “Cycle-Sentry” mode instead of the recommended Continuous mode for fresh produce.

Thermo King’s download shows that the unit operated in Cycle-Sentry mode, rather than Continuous mode, during the four-day period that the cauliflower was in transit. The carrier’s failure to transport the cauliflower in accordance with Respondent’s instructions establishes that the conditions of transport were not normal. Since the transport conditions deviated from normal, the warranty of proper shipping conditions was void. Thus, the Respondent failed to prove that the Claimant had breached the contract by shipping cauliflower that was not in proper condition. Even if the warranty was applicable, the Respondent did not provide evidence of the cauliflower’s quality at arrival to demonstrate a breach.

ARBITRATOR’S SUMMARY DECISION:

The Respondent was ordered to pay the Claimant the sum of US$8,537.60, plus the US$600.00 filing fee, within 30 days from this Decision and Award date.

DRC COMMENTS:

As a Free on Board (FOB) buyer or receiver, it is essential to know the steps to take if you receive a product that does not meet the contract terms or DRC’s Good Arrival Guidelines. In an FOB transaction, once the carrier picks up the product, the buyer or receiver assumes ownership of the load and bears all risk in transit, including the carrier failing to set the reefer accordingly.

If you notice during unloading that the product does not comply with the contract terms or DRC’s Good Arrival Guidelines, you have the right to reject the load. To maintain this right, you must immediately re-load the product back into the truck and request a government inspection or, if agreed upon, a private inspection. If the inspection report confirms that the product does not meet DRC’s Good Arrival Guidelines or the contract terms, you have three options: you can reject the product and return it to the shipper, renegotiate the contract terms, or claim damages if a renegotiation cannot be agreed upon and rejecting the load is not an option.

We want to remind you that to properly reject a load, you must follow the procedures outlined in DRC’s Trading Standards – Section 10:

• Do not divert a shipment by sending your product to a location other than that indicated in the bill of lading (BoL).
• Do not unload the shipment except for the purpose of inspection.
• Provide your notice of rejection within a reasonable timeframe.

Shippers are responsible for meeting contract terms or ensuring good delivery to the named destination. If you divert the load, you have unilaterally deviated from the original contract and automatically foregone your rejection rights. While you can still claim damages, you will bear the burden of proof showing that any damages to the product would have been the same or similar had it been delivered to the original destination. Once a load is accepted—either through unloading or diversion—the buyer bears this burden of proof. Be aware that any deviation from the original destination, for any reason, constitutes acceptance of the load.

In this case, if it was noted during unloading that the product had arrived with high pulp temperatures, the Respondent should have proceeded to load the product back into the truck and called for a temperature and condition inspection. The next step should have been to advise all parties involved of possible temperature and condition problems, as well as their intention to reject the load. Once the inspection was performed and had corroborated the product arrived with undesirable pulp temperatures and in deteriorated condition, they could have then proceeded to reject the load.

A rejection to the shipper can only be given, provided the transit times and temperatures are normal. A rejection to the carrier must be noted in the Bill of Lading and the transit problems must be described. In this file, the Respondent chose to unload the product and decided to divert it, which meant that the product was considered accepted. Additionally, since the Respondent did not request an inspection in a timely manner, they failed to provide evidence of the bad condition of the load and therefore could not claim proper damages.

ADDITIONAL RESOURCES:

To access the full redacted arbitration decision, click here.

Receiver Duties: 

• Fruit and Vegetable Dispute Resolution Corporation Trading Standards s.10 (2)(b)(ii)

DRC Operating Rules:

• Part 6 – Dispute Resolution Rules

Articles:

• Dealing with a Bad Load? Your Options as a Buyer/Receiver Revealed
• Best Practices to Mitigate Risk Transporting Produce
• Accept or Rejected
• Diversion of Load
• Timely Notice of a Problem

Welcome new members!

We are delighted to welcome the following members who joined us in February 2025. 

ADEF IMPORT EXPORT (Faisant également affaire sous 9431-1289 Quebec Inc.), QC, Canada
ARRCA LLC (Also d/b/a Arrca), TX, United States
AVOCATS M. AGUSTIN INC., QC, Canada
DIANA DISTRIBUTION CENTRE LTD., ON, Canada
DUNE NORDIQUE IMPORT INC., QC, Canada
GLOBAL ORCHARDS STACK LTD. (Also d/b/a Global Orchards), BC, Canada
GOLDEN 8 TRADING INC., BC, Canada
GROWERS TO THE WORLD ENTERPRISES INC. (Also d/b/a Growers), BC, Canada
HM&M INTERNATIONAL FOR TRADING INC., ON, Canada
MANNA INTERNATIONAL TRADING LTD., BC, Canada
MZ.IT INC., QC, Canada
RAMSUN CANADA INC. (Also d/b/a Ramsun), ON, Canada
UNITED GROWERS ORGANIZATION INTL INC. (Also d/b/a UGO), ON, Canada
UNITED PRODUCE LTD., ON, Canada
UP VERTICAL FARMS LTD., BC, Canada

To view a complete list of active members, click here.

DRC Membership: change in status

As of February 28, 2025, the following organizations no longer hold a DRC membership:

9481-1676 QUEBEC INC., QC, Canada
ASIANA MARKET LTD. (Also d/b/a Asia Market), BC, Canada
EMPIRE TRADERS INC., AB, Canada
FRANK & ROBERT GRAPES (A d/b/a of 2271647 Ontario Inc.), ON, Canada
FRESH FOOD MARKETING INC., ON, Canada
FRUITS EXPRESS (A d/b/a of 8139938 Canada Corporation), ON, Canada
HAUSBECK PICKLE COMPANY (Also d/b/a Hausbeck Pickles and Peppers), MI, United States
MOHAMED AHMED MEGAHED MOUSA INSTITUTION, Dakahlia, Egypt
OCEAN HARVEST SEAFOODS INC., BC, Canada
ONLY THE REALEST SERVICES INC., ON, Canada
ROCK SALT CANADA INC., ON, Canada
SRI INTERNATIONAL INC., QC, Canada
TRANSHING INVESTMENT INC., QC, Canada

For details regarding a change in status, please contact the office.

Click here to view a complete list of inactive members. This list includes members who resigned, were expelled, or were terminated in the last nine months.

For details regarding a change in status, please contact the office.

Important note: Following membership termination, the former member remains liable for claims arising prior to their termination if the claim is submitted to DRC by way of a Notice of Dispute within nine (9) months from when the claim arose or within nine (9) months from when the claimant ought reasonably to have known of its existence.

About the DRC

The DRC is a non-profit membership-based organization whose core work is business-to-business commercial dispute resolution for produce. The DRC is a referee between parties when a purchase and sale do not go according to plan. Members adhere to a common set of trading standards and member responsibilities that promote fair and ethical trading for produce entering the North American marketplace. In Canada, membership in the DRC is a regulatory requirement to trade fresh fruits and vegetables (i.e., buy, sell, import, export) unless accepted by the regulations. Today, the DRC has members in 16 countries outside North America, and membership continues to grow annually. Anyone exporting fresh fruits and vegetables to Canada must sell to a DRC member.

In addition to its Operating Rules and Trading Standards, the DRC offers a comprehensive, tailored suite of tools to build members’ knowledge and capacity to avoid or resolve disputes. The DRC provides education, mediation, and arbitration services and can impose sanctions and disciplinary actions on members who do not conduct business in accordance with the terms of their membership agreement.

The DRC has resolved claims worth more than $105 million to date. Although arbitration is available, 80% of these claims have been settled in an average of 26 days through our informal consultation/mediation services. Arbitration awards are court-enforceable in countries that are signatories to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards or subsequent conventions.

For more information about memberships, click here or contact our Helpdesk.

After the publication of our article, “DRC’s Jurisdiction Expansion,” several members and industry stakeholders raised questions about the potential impact of these changes on disputes involving parties outside of North America (Mexico, the United States, or Canada). Specifically, many are curious about how the new rules affect the seat of arbitration, the location of hearings, and the selection of arbitrators. These are important considerations for those not familiar with DRC Dispute Resolution Rules.

Before addressing these questions, we would like to remind everyone that DRC’s trading standards, transportation standards, guidelines, and Dispute Resolution Rules serve as the default provisions in any transaction between members unless otherwise agreed.

1. How is the seat of arbitration and location of hearings affected now that the dispute does not involve commerce with North American companies?

The DRC’s Dispute Resolution Rules designate Ontario, Canada, as the seat of arbitration. Ontario is recognized as one of the most favourable jurisdictions for arbitration globally. As outlined in the earlier section of this article, our rules and regulations serve as the default unless a contract specifies otherwise. Therefore, DRC members and any non-members choosing DRC arbitration can mutually agree to designate a different seat of arbitration, provided it suits their needs.¹

It’s important to distinguish between the seat of arbitration and the location of hearings. While the seat of arbitration is legally the jurisdiction in which the arbitration process is based, the location of hearings can differ. If the contract does not specify a hearing location, DRC’s Dispute Resolution Rules stipulate that the hearings will be held in Ottawa, Ontario, or at a location determined by the arbitrator. This could be a virtual or in-person hearing, which does not impact the seat of arbitration.

2. What if parties wish to select an arbitrator who is not from DRC’s Roster of Neutrals?

The DRC’s Dispute Resolution Rules allow parties to appoint an arbitrator of their choosing, even if the arbitrator is not listed on the DRC’s Roster of Neutrals. However, DRC strongly recommends selecting an arbitrator from our roster for several reasons. Of course, all arbitrators must remain independent and impartial, regardless of how they are selected.

Our roster of neutrals consists of arbitrators who are highly experienced in disputes related to the produce trade. More importantly, they are thoroughly familiar with DRC’s operating rules, including trading standards, transportation standards, and our specific dispute resolution procedures. DRC arbitrators are trained to interpret the contractual terms agreed by the parties, and if the contract is silent on an issue, they prioritize DRC’s standards and guidelines over other laws, such as the United Nations Convention on Contracts for the International Sale of Goods (CISG).

Although most of our neutrals were originally from North America, they do possess international experience. Nevertheless, the DRC has expanded its roster to include arbitrators from South America and Europe. These neutrals have completed DRC’s educational process, ensuring they understand our services, rules, and the expectations placed on DRC arbitrators.

It’s also worth noting that in cases where the parties cannot agree on an arbitrator, DRC reserves the right to appoint an arbitrator from its roster.

¹ By agreeing to arbitrate under the DRC and its Rules, the parties have expressly agreed that the subject matter of the arbitration agreement relates to more than one country, in accordance with Ontario’s International Arbitration Act, 2017, SO 2017, c 2, Sch 5, Schedule 2, Article 1(3)(c). Thus, if you choose another seat, it is beneficial if the seat’s arbitration law also permits this, should your dispute not be international.

RESOURCES:

DRC’s Dispute Resolution Rules

Article: DRC’s Jurisdiction Expansion

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If you have any questions about the article and would like to learn more, our team at the DRC is here to assist you. We value your inquiries and are eager to provide support. Click here to proceed.

Welcome new members!

We are delighted to welcome the following members who joined us in January 2025. 

AGRICOLLIBIO SRL (Also d/b/a Agricollibio), Italy
BOLA DE ORO FRESH SPR DE RL DE CV (También haciendo negocios como Bola de Oro), Oaxaca, Mexico
DOMÉNICK IMPORT INC., QC, Canada
JB AND SONS FARM LTD., BC, Canada
KEMET PRODUCE INC. (Also d/b/a Kemet Produce), ON, Canada
MILLGROVE FARMS SALES INC., ON, Canada
NATTURALE Y CIA SCA, Cundinamarc,a Colombia
NEXATECH INC., ON, Canada
RACCOONADA NUTS AND DRIED FRUITS TRADING INC., ON, Canada
RUMA MEXI-CAN FOOD AND BEVERAGE INC., BC, Canada
THE FRUITY WORLD INC., ON, Canada

To view a complete list of active members, click here.

DRC Membership Change in Status

As of January 31st, 2025, the following organizations no longer hold a DRC membership:

9461-1886 QUÉBEC INC., QC, Canada
A.S.T. DISTRIBUTION (Faisant également affaire sous 9400-1237 Quebec Inc.), QC, Canada
ADEF IMPORT EXPORT (Faisant également affaire sous 9431-1289 Quebec Inc.), QC, Canada
AGRI-FRESH INC., MB, Canada
ALQUIMIA FRUITS S.L., Catalonia, Spain
BARNSTON ISLAND HERB CORPORATION, BC, Canada
BC HOT HOUSE FOODS ( A Division of Star Produce Ltd.), BC, Canada
CFP CONSOLIDATED FRUIT PACKERS (A Division of Star Produce Ltd.), BC, Canada
COLINAS PRODUCTS, LLC. (Also d/b/a Colinas Foods), TX, United States
COMPTON BROS. INC., PE, Canada
DIMARE HOMESTEAD, INC., FL, United States
GESTION C BOURGEOIS INC., QC, Canada
HANIF PRODUCE, ON, Canada
LES SERRES ROYALES INC., QC, Canada
MEXAVO PRODUCE INC., QC, Canada
MMK GROUP INC., ON, Canada
MZ.IT INC., QC, Canada
PACIFIC GLOBAL ENTERPRISES, INC., BC, Canada
RED CROWN VENTURES LTD. (Also d/b/a Red Crown Pomegranate Juice), BC, Canada
SANLLO CANADA INC. (Also d/b/a Sanllo), ON, Canada
SANLLO EXPORT, S. L. (Also d/b/a Sanllo), Valencia, Spain
STAR PRODUCE LTD., BC, Canada
STAR PRODUCE LTD., AB, Canada
TOOTTI FROOTTI (A d/b/a of On-A-Bun Franchising Inc.), ON, Canada
UVA ENTERPRISE CORP., BC, Canada
WHOLE LEAF LTD., AB, Canada
WORLD FRESH PRODUCE CANADA INC., QC, Canada

Click here to view a complete list of inactive members. This list includes members who resigned, were expelled, or were terminated in the last nine months.

For details regarding a change in status, please contact the office.

Important note: Following membership termination, the former member remains liable for claims arising prior to their termination if the claim is submitted to DRC by way of a Notice of Dispute within nine (9) months from when the claim arose or within nine (9) months from when the claimant ought reasonably to have known of its existence.

About the DRC

The DRC is a non-profit membership-based organization whose core work is business-to-business commercial dispute resolution for produce. The DRC is a referee between parties when a purchase and sale do not go according to plan. Members adhere to a common set of trading standards and member responsibilities that promote fair and ethical trading for produce entering the North American marketplace. In Canada, membership in the DRC is a regulatory requirement to trade fresh fruits and vegetables (i.e., buy, sell, import, export) unless accepted by the regulations. Today, the DRC has members in 16 countries outside North America, and membership continues to grow annually. Anyone exporting fresh fruits and vegetables to Canada must sell to a DRC member.

In addition to its Operating Rules and Trading Standards, the DRC offers a comprehensive, tailored suite of tools to build members’ knowledge and capacity to avoid or resolve disputes. The DRC provides education, mediation, and arbitration services and can impose sanctions and disciplinary actions on members who do not conduct business in accordance with the terms of their membership agreement.

The DRC has resolved claims worth more than $105 million to date. Although arbitration is available, 80% of these claims have been settled in an average of 26 days through our informal consultation/mediation services. Arbitration awards are court-enforceable in countries that are signatories to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards or subsequent conventions.

For more information about memberships, click here or contact our Helpdesk.

The DRC Story

The Fruit and Vegetable Dispute Resolution Corporation (DRC) is excited to share that 2025 marks our 25th anniversary, a milestone in our journey that underscores our long-standing commitment to the fresh produce industry.

In the late 1990s, a process was initiated to establish the DRC. This process took time to develop. The need for the DRC arose after observing a significant growth in private commercial disputes following the implementation of the North American Free Trade Agreement (NAFTA). While a dispute resolution system existed in the United States under the Perishable Agricultural Commodities Act (PACA), Canada’s existing regulatory system proved ineffective in resolving most disputes, and cases were rising. In addition, Mexico had no international dispute settlement mechanism in place.

With a focus on minimizing and preventing trade irritants within North America, the DRC, a non-profit, membership-based organization serving the produce trade, was born in February 2000. Patterned mainly after the PACA system, the DRC evolved into a Tri-National Alternative Dispute Resolution Model that included fresh produce industry representatives and government officials from Canada, Mexico, and the US.

You may recall DRC’s iconic triangle-shaped logo. This design symbolized the collaborative spirit fostering a commitment towards a harmonious trade environment within the three nations and their commercial partners.

Since the creation of the DRC, we have successfully helped prevent and resolve millions of dollars in disputes. This evolution showcased our adaptability and unwavering commitment to improving legislation, establishing industry standards, and creating a fair and ethical environment for all participants.

In 2020, it felt time to refresh our brand. Inspired by organic shapes derived from fruits and vegetables, our new logo symbolizes the coming together of different parts of our industry. The shapes represent growth and progress, while the fresh and vibrant colour palette indicates the fruit and vegetable world. The green, orange and red hues represent the traditional ripening process of many of our crops. Our tagline, “Trade with Confidence,” captures our goal to equip you with the necessary information and tools you need BEFORE entering a new commercial transaction, introducing a sense of assurance in your trading decisions.

On January 6th, 2024, we amended our Operating Rules to expand DRC’s jurisdiction, underscoring our commitment to fairness in worldwide trade. The expansion allows the DRC’s Dispute Resolution Rules (specifically informal mediation, formal mediation, and arbitration services) to operate with a broader geographical spectrum, provided that both parties are members of the DRC at the time of the dispute, regardless of their location or where the product was traded.

As we celebrate our 25th anniversary, we look forward to continuing our mission to bring the necessary guidelines, education and services for successful commerce and trading partnerships. Thank you for joining us on this journey, and here’s to many more successful years of collaboration and growth. Let’s #tradewithconfidence!

RESOURCES: 

DRC By-Laws and Operating Rules

New York Convention