Author: DRC

Our continuing series of articles summarizing past DRC arbitration decisions is intended to help members to better understand how the DRC Dispute Rules and Regulations (R&R) apply in the event of a dispute. DRC Dispute R&R 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 DRC’s sole role is as administrator of the arbitration process; 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.

Case: DRC File #20820 – Parties Domiciled – Spain v. Canada

Facts

On February 12, 2021, the Claimant sold the Respondent a container of 1,480 boxes of sizes 90, 100 and 120 lemons from Spain. The invoice shows that the product was sold at USD$19.75/box with a total invoice amount of $29,230.

The container was shipped from Spain on February 22, 2021, arriving at the Montreal Terminal on March 10, 2021, discharged from the vessel on March 11, 2021, and was railed to Toronto on March 18, 2021.

A CFIA Inspection was requested and performed on March 20, 2021 and revealed the following:

• 360 boxes of 90s 7% decay, 5% contact spot, 11% skin breakdown, 1% peteca
• 416 boxes of 100’s 6% decay, 4% contact spot, 17% skin breakdown, 2% peteca
• 704 boxes of 120s 9% decay, 4% contact spots, 17% break down and 1% peteca

On March 22, 2021, the Respondent informed the Claimant of the results of the CFIA inspection. The Claimant requested the Respondent not to move the load until the shipping line surveyor could inspect the load. The Claimant removed the hold on the product on March 23, 2021, although a surveyor had not been on-site. On March 25, 2021, the Respondent proceeded to clean, repack and sell the product.

On March 29, 2021, the Claimant requested an update on the sales. The Respondent replied that the product was selling slowly and that they would try bagging some of the fruit.

On April 5, 2021, 15 days after arrival, the Respondent warned the Claimant of a potential dump of the remining inventory of 1,263 boxes which represented 85% of the total load. The Claimant replied that if a dump was necessary, a CFIA dump certificate and a CFIA inspection showing that the product has no commercial value would be needed.

On April 14, 2021, the Respondent supplied to Claimant an account of sale for the 1,480 boxes at five separate price tiers: 70 boxes at USD$36, 73 boxes at USD$27.50, 35 boxes at USD$25, 195 boxes at USD$16.50, 159 at USD$4 and 948 boxes dumped, resulting in an aggregated sale proceeds of USD$9,256.00. After deducting sorting and cleaning, bagging, freight, inspection, dump certificate and customs clearance expenses totalling USD$9,441.35, Respondent declared that the total expenses exceeded the sale proceeds in the amount of USD$185.35.

Issues

• Whether there was an agreement between the parties on how the product would be handled after arriving in a deteriorated condition.
• Whether the Respondent fulfilled his duties according to the DRC Rules after receiving a product in a deteriorated condition.

Arbitrator’s Analysis/Reasoning

Why did the two parties involved not consent to a mutually agreeable new contract since the Claimant breached the original contract?

When there is a breach of contract, what is equally important after getting an inspection to substantiate that, is a mutually agreeable plan of action going forward. Regrettably, this did not happen.

Why did the Respondent not obtain a “No Commercial Value” inspection as per the Claimant’s request?

DRC Trading Standards, Section 9, indicate the following regarding commercial value:

“The term “commercial value” means any value that a commodity may have for any purpose that can be ascertained by the exercise of due diligence without unreasonable expense or loss of time. 

When produce is being handled for or on behalf of another person, proof as to the quantities of produce destroyed or discarded in excess of five percent of the shipment shall be provided by procuring an official certificate…”

 The Respondent stated they did not have customers now or 15 days ago when the product arrived. If this was the case, why did the Respondent not outrightly reject the product since they state they had no customers for the product?

The arbitrator did not accept the Respondent’s account of sale as submitted. The Respondent charged CAD$4,260.00 for “Sorting and Cleaning” but it provides an account of sale with values ranging from CAD$36.00 to CAD$4.00.

When a commodity is sorted and cleaned, that effort is to remove the distressed product resulting in the remaining product being of the original grade of the contract. Product is not sorted and cleaned to be sold on a consignment basis. if the product was sorted and cleaned, what was the point of sorting and cleaning if the salvage was not going to bring better sales given the efforts and costs?

Given the lack of sales and the excessive amount of product dumped, the arbitrator did not believe the Respondent did the best they could to salvage these goods. If both parties had agreed to cleaning, sorting, and bagging in advance, the Respondent could have stated they would take these actions to have a fire sale on the product since it is continuing to deteriorate.

The arbitrator did not accept the Claimant’s proposed settlement of offering a 31% total invoice credit. In the arbitrator’s opinion, this fruit arrived in good time and presumably good temperature with a significant amount of problems as substantiated by the CFIA Inspection. This product would only further deteriorate as time went on.

The Claimant demanded USD$20,168.70 plus DRC fees of USD$2,800.00 and two other incidental amounts. Because this was a CIF transaction and there was a breach of contract by the Claimant, the Respondent would be entitled to deduct the inland and customs clearance expenses indicated in their account of sales.

Both parties share in the responsibility in this matter. The Claimant shares responsibility for breaching the contract with some very distressed product, and the Respondent for so little salvage given all the efforts they claim to have undertaken to yearn results and the significant amount of product dumped.

Arbitrator’s Decision

Given that the arbitrator did not find the Claimant’s remedy reasonable, and that the Respondent has failed to properly salvage the load, the arbitrator awarded the Claimant USD$11,484.35. This award represents 50% of the USD$20,168.70 claimed by the Claimant plus USD$1,400.00, which is half of the DRC arbitration fees.

DRC Comments

There are a few points in this decision that DRC members must take into consideration in their transactions:   

• Once a receiver has secured evidence of a breach of contract after receiving a product in a deteriorated condition, unless the parties renegotiate a new way to handle the product (such as consignment, price after sale, or repacking), a receiver who is in possession of a damaged load is only entitled to claim damages.
• When more than 5% of the load needs to be disposed of or destroyed, a receiver would require a dump certificate and a governmental inspection demonstrating that product has no commercial value to support the claim.
• An account of sales must be properly supported by sales tickets, invoices or any other material corroborating the sales and expenses incurred.

For more information regarding the sections of DRC Trading Standards applied to this dispute, refer to the following sections:

DRC Trading Standards:

• Accept / Reject Product (Accept or Reject)
• Receiver Duties (Fruit and Vegetable Dispute Resolution Corporation Trading Standards s.10 (2)(b)(ii))
• Truly and Correctly Account (Fruit and Vegetable Dispute Resolution Corporation Trading Standards s.19.25)
• DRC Good Inspection Guidelines (https://fvdrc.com/wp-content/uploads/2016/10/good_inspection_guidelines.pdf )
• Dumping product (Before dumping the product, make sure you follow these steps)

One issue that continues to appear in disputed transactions handled by DRC Trading Assistance Staff is if the seller and buyer agreed on a commodity grade standard.

Each country, region, or economic union, has grade standards for commodities grown and traded in these territories. In the United States and Canada, US Grade Standards and Canadian Grade Standards are the grade standards buyers and sellers are most familiar with. However, there are other commodity grade standards such as the FAO’s CODEX Alimentarius and the United Nations Economic Commission for Europe (UNECE) Standards for Fresh Fruit and Vegetables.

While there are some similarities among the grade standards for specific commodities from the above-mentioned jurisdictions, there are significant differences which make each grade standard stand “its own”.

Therefore, for DRC members, it is a good trade practice to, when discussing the terms of a transaction, agree on a specific, defined grade standard if that is the intention. This is particularly important because for DRC members who fail to demonstrate that a specific grade standard was agreed upon, the transaction defaults to No Grade, DRC Good Arrival Guidelines.

DRC Good Arrival Guidelines is a combination of PACA 5 Day FOB Good Delivery Guidelines, CFIA Canadian Destination Tolerances and Suitable Shipping Condition Guidelines which establish the maximum percentage of defects allowed at destination for FOB shipping point transactions. Suitable Shipping Condition is defined as sellers assuring that the product will meet the agreed quality and condition requirements when the product is shipped. The seller also assures that the product will not deteriorate abnormally if proper transit time and temperatures are maintained during shipment. This implies that some degree of deterioration will normally occur over time, even under the best of transit conditions

Section 20, Trade Terms of the DRC Trading Standards states that INCOTERMS such as CPT, CIP, CFR, and CIF are all deemed to be the same as FOB except that the seller assumes the costs associated with the named INCOTERM. However, the risk of transit remains with the buyer.

Unless there is an agreement on a specific and defined grade standard, such as US #1, Canada #1, Codex Class I, or UNECE Class I (also known as CAT I in the Spanish and French versions of the CODEX Standards or UNECE Standards), all transactions between DRC members will default to FOB No Grade Good Arrival.

Finally, another important matter to consider when negotiating the terms of the transaction, when a grade standard is agreed upon, all defects scored in a quality/condition inspection report count towards the total percentage of defects allowed. However, when no grade standard is identified as part of the terms of the transaction or the transaction defaults to DRC Good Arrival Guidelines, only condition defects count towards the maximum percentage of defects allowed. Permanent or quality defects are those that do not change with time such as scars or hollow stems. Condition defects are those that change with time such as decay, bruising, soft to name a few.

Welcome New Members

From February 15 until March 15, 2022, DRC welcomed the following new members:

ACTUAL TIME LOGISTIC GROUP (A d/b/a of 2449915 Ontario Limited)	ON	Canada
CDMG BUSINESS LTD.	BC	Canada
FRUITS ET LÉGUMES ALIOUNE INC.	QC	Canada
GMSY CANADA LTD.	ON	Canada
HUA GUANG INTERNATIONAL INC.	ON	Canada
KK BEE LTD.	ON	Canada
NATURE’S EMPORIUM LIMITED PARTNERSHIP (Also d/b/a Nature’s Emporium)	ON	Canada
OCEAN KING PRODUCE INC.	CA	Canada
TAYLORS CONTINENTAL FOODS	ON	Canada
UNISEL CO. SIA	Latvia	Latvia

 

DRC Membership: change in status

As of March 15, 2022, the following organizations no longer hold a DRC membership:

12618109 CANADA INC. AB Canada 9421-0986 QUEBEC INC. QC Canada AGRITRADE FARMS, LLC FL United States ATLANTIC TROPICAL TRADING (A d/b/a of  Rajendra Sukul) ON Canada CHADI IMPORT-EXPORT INC. (Faisant également affaire sous Cha QC Canada CHAUHAN FRUITS ET LÉGUMES (A d/b/a of 9277-1625 Québec Inc.) QC Canada CHIYUE FOOD PROCESSING INC. ON Canada EPICUREAN PRODUCE (A d/b/a of Endri Demeti) ON Canada FRUTICOLA VILLAMANGOS, SPR de RL (Chis&Co) Chiapas Mexico LE PALMIER D’OR / MARCHÉ ARDIS (Faisant également affaire so QC Canada MACNAB GRAPE COMPANY LIMITED ON Canada MODES ENTERPRISE LTD. (Also d/b/a Naruto Seafruit Market) BC Canada RAAZFOOD (A d/b/a of 5004405 Ontario Inc.) ON Canada SABATINO TRUFFLES CANADA INC. QC Canada SKYFRUIT INTERNATIONAL INC. AB Canada TENDER HOPE WINERY (A d/b/a of Tender Hope Holdings Ltd.) BC Canada TOP SHELF SPECIALTY CA United States VELJAON SPECIALIZED IMPORTS INC. ON Canada WEN HO OF CANADA LTD. (Also d/b/a Wen Ho) ON Canada

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 DRC

DRC is a non-profit membership-based organization whose core work is business-to-business commercial dispute resolution for produce. 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 excepted from the regulations. Today, DRC has members in 16 countries outside of 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 the DRC’s Operating Rules and Trading Standards, DRC offers a comprehensive, tailored suite of tools to build the knowledge and capacity of members to avoid or resolve disputes, including education, mediation and arbitration. DRC has ability to impose sanctions and disciplinary actions towards members who do not conduct business in accordance with the terms of their membership agreement.

To date, DRC has resolved claims in excess of $105 million dollars. 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.

To learn more, reach out to our Help Desk at [email protected] or (+1) 613-234-0982 or visit us at www.fvdrc.com.

 

During the December 2021 DRC Board of Directors meeting, the Board approved changes to DRC’s Trading Standards and Dispute Resolution Rules. These changes provide clarity and updates to certain terms or concepts.

The following sections from DRC’s Trading Standards and articles from DRC’s Dispute Resolution Rules that have been upgraded and the subject of the amendment:

DRC Trading Standards

• Section 19.7 – Proper reference to DRC Good Arrival Guidelines
• Section 20.1 – INCOTERMS 2020 updated
• Section 21 – The United Nations Convention on Contracts for the International Sale of Goods (CISG) and United States Uniform Commercial Code (UCC)

DRC Dispute Resolution Rules

• Article 1.b.vii – Counterclaim definition updated
• Article 1.b.viii – Counterclaim with setoff definition updated
• Article 2.3 – Arbitration Awards enforceable in the courts
• Article 3 – Arbitration Awards enforceable in the courts
• Article 33.2 – Counterclaim or Counterclaim with setoff submission
• Article 33.3 – Counterclaim or Counterclaim with setoff submission
• Article 53 – Virtual Hearings
• Article 62 – Arbitration Awards enforceable in the courts

These amendments came into in force on February 15, 2022.

If you have any questions about these changes, please contact Jaime Bustamante, Director of Trading Assistance at 613-234-0982 ext. 224

Welcome New Members

From January 15 until February 15, 2022, DRC welcomed the following new members:

COMARCA FRESH LLC		TX	United States
FRONTERRA GROUP INC. (También haciendo negocios como Fronterra)		FL	United States
GEM-PACK BERRIES, LLC. (Also d/b/a Gem Pack Berries)		CA	United States
GLOBAL LIONS CONSULTING COMPANY LTD.		BC	Canada
MCCONNELL TRANSPORT LIMITED		NB	Canada
OPERADORA COMERCIAL DATI S DE RL DE CV (También haciendo negocios como Mexafruits)		Queretaro	Mexico
PATEL SWEETS & SNACKS LTD. (Also d/b/a Patel Supermarket)		BC	Canada
RAINFOREST PRODUCE IMPORTS INC.		ON	Canada
ROUTE D’ENVOI CANADIENNE INC. / CANADIAN SEND ROUTE INC.		QC	Canada
ROYALHALO PRODUCE LTD. (Also d/b/a Royalhalo)		BC	Canada
TASTYFRUTTI INTERNATIONAL, LLC		PA	United States

DRC Membership: change in status

As of February 15, 2022, the following organizations no longer hold a DRC membership:

AGRUMES ED-REC / ED-REC CITRUS (A d/b/a of 9365-3822 Quebec Inc) QC Canada ASLCHEM INTERNATIONAL INC. BC Canada CADI EXPRESS INC. ON Canada FRESCO PRODUCE, LLC TX United States LATCANAM LTD. (Also d/b/a LatCan, Uniberries) AB Canada M & S PRODUCE INC. (A d/b/a of 9120-9064 Quebec Inc.) QC Canada METAGRO NATURELLES RESSOURCES INC. QC Canada MO-NA FOOD DIST. LTD. (Also d/b/a Mona Food) AB Canada SHORE FRESH PACKERS LTD. ON Canada SUNGIVEN FOODS CANADA INC. (Also d/b/a Sungiven Foods Canada) BC Canada TERRA RIKKA ORGANICS INC. (Also d/b/a Terra Rikka) BC Canada TERROIR CANADA (Faisant également affaire sous Kamel Bairi) QC Canada TOP NORTH AMERICA LTD. ON Canada TUTTIFRUTTI INTERNATIONAL INC. PA United States WORLD DIRECT TRADING INC. BC Canada

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 DRC

DRC is a non-profit membership-based organization whose core work is business-to-business commercial dispute resolution for produce. 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 excepted from the regulations. Today, DRC has members in 16 countries outside of 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 the DRC’s Operating Rules and Trading Standards, DRC offers a comprehensive, tailored suite of tools to build the knowledge and capacity of members to avoid or resolve disputes, including education, mediation and arbitration. DRC has ability to impose sanctions and disciplinary actions towards members who do not conduct business in accordance with the terms of their membership agreement.

To date, DRC has resolved claims in excess of $105 million dollars. 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.

To learn more, reach out to our Help Desk at [email protected] or (+1) 613-234-0982 or visit us at www.fvdrc.com.

Continuing with our series of articles summarizing past DRC arbitration decisions. We believe this will help members to better understand how the DRC Dispute Rules and Regulations (R&R) apply in the event of a dispute. DRC Dispute R&R 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 DRC’s sole role is as administrator of the arbitration process; 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.

Case: DRC File #19418 – Parties Domiciled – Ontario, Canada vs Richmond, BC

Facts

Respondent hired Claimant to transport five loads of fresh produce (mixed vegetables) from Houston, TX., to Surrey, BC., between January 23, 2015, and March 11, 2015. The invoices show a desired temperature of 35F for all shipments and a USD $28,500 freight amount for all invoices.

Respondent claimed damages on one of the loads (BoL#17294).

BoL#17294 shows 15 different varieties of vegetables on the load. A CFIA inspection was performed just on four of the 15 commodities, showing the following results:

• Gai Lan – Pulp Temperature of 5F
• Discoloration 7% (Water-soaked discolouration affecting more than 20% of the                                                      plant)

• Wilting 85% (Affecting more than 20% of the plant; limp and pliable)
• Baby Bok Choy – pulp Temperatures of 34F-35F
• Decay 0%
• Bruising 11% (More than 2 leaves are materially bruised)
• Wilting 8% (Affecting more than 2 leaves per plant)
• Yu Choy Sum – Pulp Temperature of 37.2F
• Decay 0%
• Wilting 69% (Affecting more than 20% of the plant; limp and pliable)
• Yu Choy Mieu – Pulp Temperatures of 37.2F-39.5F.
• Decay    0%
• Wilting             61% (Affecting more than 20% of the plant; limp and pliable)

In an email dated June 10, 2015, the Claimant offered a final settlement of $4,000 (no currency specified) adjustment to their invoices to resolve the matter.

The Claimant sought a total of USD$30,700, which included USD$2,200 Arbitration fees.

Issue

Whether there was a breach of the contract and did Respondent suffer damages

Arbitrator’s Analysis/Reasoning

Supporting documentation submitted by Respondent clearly references BoL# 17771, which was signed completely clean and free of protest on arrival.

The BoLs do not specify a desired temperature while in transit, but Claimant’s invoices state “maintain 35F”.

The BoL with the “Hi” temperature notation was for a shipment in February 2015, BoL# 17294.

Therefore, it appears that Respondent is claiming losses on a properly delivered shipment (BoL# 17771) and not on the shipment that arrived with high temperatures (BoL# 17294).

BoL# 17294 had 15 different items on the load. There are four CFIA Inspection certificates submitted by Respondent for only four of those items. Two certificates show normal pulp temperatures (Gai Lan 34.5F, Baby Bok Choy 34F-35F). One certificate for Yu Choy Sum shows 37.2F. Recommended temperatures for this product must be assumed to be as stated on Claimant’s invoices as 35F. Given that it is only warmer by 2F, one would not expect damages, if any, to be too severe. The certificate for Yu Choy Mieu shows 37.2F-39.5F, which might be considered a little on the warmer side.

Three of the certificates show large percentages of “limp and pliable” and the 4^th certificate shows “bruising and wilting”. There are 4 varieties of vegetables highlighted as the damaged goods in question on the invoice from Respondent’s supplier in Texas. The other 11 items have not been highlighted nor inspected as per the submitted documents.

The extent of the damages cited by CFIA on these 4 items could possibly be attributed to poor shipping condition at the time of shipment. In addition, the temperatures during shipment did not affect 11 items or 73% of the load.

Respondent is claiming on a load that was received without objections. That is, Respondent did not claim on the load that was protested for “Hi” temperatures. Respondent’s documents include a temperature recording tape. However, the  temperature recording device with a serial number or tape number is not documented or identified to verify which shipment it belongs to. Further to that, the tape submitted reflects the in-transit temperatures of 32F-33F.

There is, however, an email that Respondent submitted where it appears there had to have been some discussions about temperature and losses.

Claimant submitted an email dated June 10, 2015, suggesting splitting $22,136.00 loss three ways. There is no indication if this loss was USD$ or CAD$.

Furthermore, Claimant offered only a credit of $3,000.00 (no currency specified) and then finally raised the offer to $4,000.00 with immediate payment of the balance due.

In the arbitrator’s opinion, the e-mail where the Claimant offers a credit to the Respondent, does not present itself as admission by Claimant to causing any damage, more so it represents a token of trying to resolve a problem and move forward.

Regardless of any of the commentary provided herein, Respondent is claiming on a shipment that was signed free and clear on arrival.

Respondent has not submitted any claim or documentation to substantiate claim, on the only shipment that had a notation as to “Hi” temperatures. Therefore, the arbitrator concluded there were no objections or consequences from that shipment arriving with “Hi” temperatures.

Arbitrator’s Decision

The Respondent was required to remit to Claimant the amount of USD$30,700 payable within 30 days of the date of this decision.

DRC Comments

When making a claim against a transportation company, receivers must be able to link the transit temperatures or transit delays to the damage or deterioration presented on the product upon arrival.

In this case, the receiver only inspected a small portion of the load, that is four of the fifteen commodities included in the BoL and invoice, and the results of the inspections show acceptable temperatures. While it is possible that a truck can damage only a portion of a load, when transit temperatures are close to the desired transit temperature, it would be difficult for a truck to damage only a portion of a load.

Settlement offers exchanged by emails during a negotiation to try to close a file between parties, does not necessarily mean an agreement has been reached. In the arbitrator’s analysis, emails exchanged between parties, which show Claimant’s offer of a $4,000 credit to settle the dispute, did not mean the carrier was accepting liability. Sometimes, these types of offers are made to prevent matters from escalating and to continue the business relationship.

A friendly reminder that annual membership fees are due. Per the By-laws of the Corporation, failure to pay membership fee may result in termination of your membership, and leave you unprotected in future sales. You can pay your membership renewal fees by credit card through our Members Only Portal.

You can access Members Only Portal from our website at https://fvdrc.com/membership/member-login/ by clicking “Login Now” button. For first login only primary contacts get access to the portal. To create your password, enter your email address in Forgot Password section and click on “Send Password Reset Link”. You will instantly receive an email with a link to reset your password. You will only have to do this once.

If you have any questions regarding your outstanding annual membership fees, please contact us asap at DRC Help Desk | +1-613-234-0982 | [email protected]

Continuing with our series of articles summarizing past DRC arbitration decisions. We believe this will help members to better understand how the DRC Dispute Rules and Regulations (R&R) apply in the event of a dispute. DRC Dispute R&R 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 DRC’s sole role is as administrator of the arbitration process; 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.

Case: DRC File #19404 – Parties Domiciled – United States and Canada

Facts

• Claimant sold to Respondent 880 cartons of seedless watermelon from Guatemala. According to the invoice, the product was sold FOB at $10.75USD/carton. 
• Respondent received the load in Montreal on the morning of March 16th, 2015. A federal inspection was requested and performed the same day. The inspection report revealed 0% decay, 2% scars and 25% overripe, which is considered serious damage.  
• On April 19th, 2015, Respondent supplied to Claimant an account of sale for the 880 cartons at three separate price tiers: 275 cartons at USD$13.11, 220 cartons at USD$11.48, and 385 cartons at $9.02, resulting in an aggregate sale proceed of USD$9,602.46. After deducting freight, inspection and commission charges, totalling USD$5,295.24, Respondent declared that the remitted proceed due to Claimant was USD$4,307.22, which Respondent proposed to round up to USD$4,400.00. 

 

Issues

Whether Respondent performed his duties according to the DRC rules after receiving a commodity in a deteriorated condition.

Arbitrator’s Analysis/Reasoning

This dispute centers around the following question: Did Respondent perform as per the terms of the rules of the Fruit & Vegetable Dispute Resolution Corporation in its handling of the sale of the watermelons it received from Claimant on March 16, 2015? There are several components to this question:

• Were DRC rules regarding inspection/rejection followed by Respondent?
• Did Respondent “make every reasonable effort to market the produce as soon as is practicable in the circumstances”?
• Did Respondent provide a true and correct account of the sales of this product, including the “proper, usual or specifically agreed upon selling charges and expenses properly incurred or agreed to in the handling thereof”?

The Arbitrator answered each of these questions in same sequence:

1. As to whether DRC rules regarding inspection/rejection were followed by Respondent, it would appear that the call for inspection was made on a timely basis, the quantity of cartons made available to the CFIA inspector was appropriate, and the outcome of the inspection was determinative. The 25% overripe determination materially exceeded the 15% maximum tolerance for condition problems under DRC rules and constituted Shipper’s clear breach of contract in its contract with Respondent. Once this breach of contract had been established, Respondent was then within its rights, with or without the agreement of Claimant, to proceed with the sale of the shipment so as to recover its incurred costs, remitting the balance of the proceeds to Claimant.

 

2. As to whether Respondent made “every reasonable effort to market the produce as soon as is practicable in the circumstances,” the only timeline evidence in the submittals by both parties is the March 25^th email from Respondent to Claimant indicating that only 200 cases remained at that date. Moving 680 cases of deteriorated cargo over the space of 7 working days would appear to fall within a fair interpretation of “every reasonable effort to market the produce as soon as is practicable”.

 

3. As to whether Respondent provided a true and correct account of the sales of this product, including the “proper, usual or specifically agreed upon selling charges and expenses properly incurred or agreed to in the handling thereof,” there are four principal elements to this question: a) average selling price; b) freight cost; c) inspections; and d) commission. Since there was no specific reference to inspection fees or commissions in the statement of claim or subsequent documents submitted by the parties to this dispute, the Arbitrator limited his consideration to sales results and transportation costs.

 

18. As to sales proceeds, there were no reports for personal watermelon from the InfoHort website for the Montreal market covering this period. On the Toronto market, for the month of March 2015, there were no InfoHort data points related to Guatemala product. Mexican mini watermelons for the month were reported to have traded in a range from CND$18.00 to CND$23.00 (USD$14.75-$18.85). Respondent reported an average weighted sales price of CND$13.31 for the 880 cases covered by this shipment. The sales price realized by Respondent is thus 74% of the lower end of the normal range reported on the Toronto market. Objectively, this result can only be classified as successful, in light of the high percentage of condition defects identified during the CFIA inspection of this product. The Claimant questioned the accuracy of the three price ranges reported by Respondent and called for a detailed sale-by-sale recapitulation of the individual sales involved in this shipment. By DRC rules, Respondent is under no obligation to provide this level of detail on the sale of a shipment which resulted in a breach of contract by Claimant. While Respondent should have provided the last date of sale in its account of sale, the Arbitrator considered this as a minor flaw. In all other elements, the Arbitrator found that Respondent complied with its responsibilities under the DRC as regards the sale of this distressed merchandise.

 

600. As to transportation costs, Claimant appeared to believe that the USD $4,600.00 cost from Florida to Montreal was excessive and had called for a copy of the actual bills between Respondent, its transportation provider, and its customs broker. Once again, this request exceeds the requirements under DRC rules, which stipulate only “the proper, usual or specifically agreed upon selling charges and expenses properly incurred or agreed to in the handling thereof.” Given the fact that Respondent was claiming damages rather than a consignment or joint account transaction, there is no requirement under DRC (or PACA) rules that Respondent should seek or obtain Claimant’s agreement to any of these cost elements. With the aforementioned exception of the date of final sale, Respondent provided all such required information. Had Claimant any evidence to support its contention that this transportation cost was excessive, it could have presented such evidence in its filing documents; in fact, no such evidence was presented. For argument’s sake, the Arbitrator consulted with the USDA Fruit and Vegetable Truck Rate Report for the week ending Tuesday, March 17, 2015. Since rates are not provided for Canadian destinations, the Arbitrator settled on the melon rate from South Florida to Boston and found the rates for the week in question ranged from USD$3,450.00 to USD$3,800.00. Adjusting this upper range by the additional 148 miles separating the Chelsea market from Respondent’s location (an increase of 10.1% for the entire journey), the Arbitrator arrived at an extrapolation of USD$4,183.37 for the transit from Florida to the Montreal market. Considering further the customs brokerage and transit charges incurred in crossing the international border, the Arbitrator sees nothing to indicate that the cost stipulated in Respondent’s account of sale is either unreasonable or excessive. While the Arbitrator would have entertained any evidence in support of a different conclusion on this matter, no such evidence was provided.

 

Arbitrator’s Decision

The handling of this transaction by Respondent — from the CFIA inspection, to the expeditious sale of the product, to the preparation of the final account of sale — was handled in conformity with the rules of the DRC. The remittance of USD$4,400.00, as outlined in its account of sale dated April 19, 2015, represents the full extent of Respondent’s liability regarding this dispute. Respondent should remit a check to Claimant in the amount of USD$4,400.00 as full and final settlement of its obligations to Claimant under this transaction. Claimant’s claim for an additional payment in the amount of USD$3,303.81 is therefore denied.

 

DRC Comments

We cannot stress enough the importance of following proper procedures to support claiming damages when a load arrives in deteriorated condition or fails to meet contract terms. The respondent followed DRC Trading Standards by giving timely notice of a problem upon arrival, requested a CFIA inspection in a timely manner, claimed damages by providing Claimant an acceptable account of sales showing reasonable sales and deducting the costs incurred as a result of the breach of contract.

The chances of having a successful defence increase significantly when DRC Trading Standards are followed.

For more information regarding the sections of DRC Trading Standards applied to this dispute, refer to the following sections:

 

DRC Trading Standards:

• Receiver Duties (Fruit and Vegetable Dispute Resolution Corporation Trading Standards s.10 (2)(b)(ii))
• DRC Good Inspection Guidelines (https://fvdrc.com/wp-content/uploads/2016/10/good_inspection_guidelines.pdf )
• Reasonable Time (Fruit and Vegetable Dispute Resolution Corporation Trading Standards s.19 ss. 18)

 

Welcome New Members

From December 15, 2021 until January 15, 2022 DRC welcomed the following new members:

BELLI FOODS / BELLI DISTRIBUTION (A d/b/a of 9194-3340 Quebec Inc.)	QC	Canada
CARAVAN TRADERS INC.	ON	Canada
HAUSBECK PICKLE COMPANY (Also d/b/a Hausbeck Pickles and Peppers)	MI	United States
INTIFRESH DEL SUR SAC (También haciendo negocios como Intifresh)	Peru	Peru
KALESA DE MANILA INCORPORATED	ON	Canada
SHUBHAM SUPERMARKET LTD.	AB	Canada
SUNTRUST ENTERPRISE INC.	BC	Canada
SWEET SEASONS LLC. (Also d/b/a Sweet Seasons)	TX	United States
THE FRESH SPECIALISTS LLC.	FL	United States
TOP STAR INTERNATIONAL TRADING (A d/b/a of 10612952 Canada Limited)	ON	Canada
TRIDGE CO., LTD.	Seoul	South Korea
TROPPY FOODS LTD.	BC	Canada
VILLAMEX FARMS, LLC	TX	United States

 

DRC Membership: change in status

As of January 15, 2022, the following organizations no longer hold a DRC membership:

1974090 ONTARIO LIMITED		ON	Canada
9294-7936 QUEBEC INC. (Faisant également affaire sous Group		QC	Canada
AGORAV INC.		ON	Canada
AKIRA IMPORTS AND DISTRIBUTORS LTD. (Also d/b/a Akira Imports & Distributors)		ON	Canada
ALIMENTATION SIAM FOOD INC. (Also d/b/a Siam Food)		QC	Canada
APC FRUIT SPECIALTY CORPORATION		ON	Canada
AUSABLE PRODUCE CO. LTD.		ON	Canada
BONDUELLE CANADA INC.		ON	Canada
BOYD MACDONALD PRODUCE LTD.		PE	Canada
DFI MARKETING INC.		CA	United States
EMPACADORA GAB, INC.		TX	United States
ENDEAVOUR ENTERPRISES (A d/b/a of 902857 Ontario Inc.)		ON	Canada
FINCA AHUEHUETES S.A. DE C.V. (También haciendo negocios como Finca)		Queretaro	Mexico
FreshPoint Toronto (A Division of FreshPoint Vancouver, Ltd.)		ON	Canada
G.R. PRODUCE, INC.		TX	United States
IBEXCOMM IMPORT AND EXPORT INC.		QC	Canada
J.B.M. LOGISTICS (A d/b/a of 615315 Saskatchewan Ltd.)		SK	Canada
JASPO INC.		WA	United States
JFC INTERNATIONAL (CANADA) INC.		ON	Canada
KING LEAF CANADA (A d/b/a of 11908421 Canada Inc.)		ON	Canada
KWONG FUNG FOOD PROCESSING FACTORY LTD		BC	Canada
LES PRODUITS ET SAVEURS MÉDITERRANÉENNES (Faisant également affaire sous 9390-4688 Québec Inc.)		QC	Canada
LUENBONG TRADING (A d/b/a of 1804068 Ontario Inc.)		ON	Canada
MARK CRAIG INC.		PE	Canada
OPOKU DISTRIBUTION (A d/b/a of Patience Opoku)		QC	Canada
ORGANIC TRADE COMPANY CANADA INC.		ON	Canada
POMMES ENDERLE APPLES INC.		QC	Canada
REAL POTATOES LTD.		PE	Canada
RED BLOSSOM SALES INC.		CA	United States
SANMONT PRODUCE (A d/b/a of Sanmont Produce LLC)		TX	United States
SRI INTERNATIONAL INC.		QC	Canada
UCC INTERNATIONAL ENTERPRISE INC.		ON	Canada

 

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 DRC

DRC is a non-profit membership-based organization whose core work is business-to-business commercial dispute resolution for produce. 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 excepted from the regulations. Today, DRC has members in 16 countries outside of 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 the DRC’s Operating Rules and Trading Standards, DRC offers a comprehensive, tailored suite of tools to build the knowledge and capacity of members to avoid or resolve disputes, including education, mediation and arbitration. DRC has ability to impose sanctions and disciplinary actions towards members who do not conduct business in accordance with the terms of their membership agreement.

To date, DRC has resolved claims in excess of $105 million dollars. 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.

To learn more, reach out to our Help Desk at [email protected] or (+1) 613-234-0982 or visit us at www.fvdrc.com.

The Canadian Food Inspection Agency (CFIA) recently launched Phase 2 of public consultations on proposed changes to fresh fruit and vegetables (FFV) grade standards.

This is the second of five phases, with each focusing on a specific group of FFV commodities.

Phase 2 proposes changes to grades and requirements for Asparagus, Apples, Apricots, Grapes, Peaches, Pears, Plums and Prunes as well as a new standard for Nectarines. The deadline for comments is February 11, 2022. Check out the following links to view the respective proposed changes and submit comments:

Overview: https://inspection.canada.ca/about-cfia/transparency/consultations-and-engagement/ffv/eng/1635177704225/1635177997772

Direct links to named commodities: https://inspection.canada.ca/about-cfia/transparency/consultations-and-engagement/ffv/phase-2/eng/1638986038379/1638986039223

For additional information on this DRC-led initiative, contact Anne Fowlie ([email protected]).