Author: DRC

This continues with our series of articles summarizing past DRC arbitration decisions. We believe these articles will help members to better understand how the DRC Dispute Rules and Regulations (R&R) apply in the event of a dispute.

The 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 #20579 – Parties Domiciled – United States and Canada

Facts

• On March 3, 2020, Claimant sold to Respondent one truckload of limes comprised of 60 cartons of 175-count limes (Product of Mexico) at US$21 per carton, (US$1,260), and 300 cartons of 200-count limes (Product of Mexico), at US$22 per carton, (US$6,660) for a total of US$7,860. According to the invoice, the product was sold F.O.B.
• The product was shipped on March 3, 2020, from McAllen, Texas to Respondent, in Toronto, Ontario, where the shipment arrived on March 8, 2020.
• On March 9, 2020, Respondent requested a CFIA inspection of 300 cartons of 200 count limes received from Claimant. The inspection, performed at 10 am the same day, disclosed 43% average defects, including 17% permanent defects (12% blanching, 2% oil spots, 3% scars) and 25% condition defects (4%decay, 17% yellow color, 4% skin breakdown). Pulp temperatures at the time of the inspection ranged from 10.8 to 11C (approx. 51F). The inspector also noted that nearly all the decay was accompanied by mold.
• Respondent reported reselling 50 cartons of the 200 count limes at CD$21 per carton and 250 of the 200 count limes at CD$22 per carton.
• Respondent issued a cheque dated March 26, 2020 made payable to Claimant in the amount of US$3,705. This amount included payment of US$21 per carton for the 60 cartons of 175-count limes as invoiced and payment of US$8.15 per carton for the 300 cartons of 200-count limes. Claimant did not accept this cheque and returned it to Respondent.
• Claimant issued a revised invoice billing Respondent for the 60 cartons of 175-count limes, at US$21 per carton, (US$1,260), and for the 300 cartons of 200-count limes, at US$18 per carton, (US$5,400) for a total F.O.B. invoice price of US$6,660.

Issue

Whether the CFIA inspection certificate showed the correct product identity

Arbitrator’s Analysis/Reasoning

The Arbitrator’s analysis focused on determining whether the CFIA inspection, in light of the product identity issues raised by the Claimant, established that the 200-count limes in the subject shipment did not comply with the contract requirements, thereby entitling Respondent to damages. 

Claimant stated that when the load of limes in question arrived at Respondent’s warehouse on Sunday, March 8, 2020, Respondent advised that the limes were in poor condition and sent photos of the limes to Claimant.  The photos, according to Claimant, showed limes from a previous order that was shipped to Respondent on February 20, 2020.  When questioned about the photos, the Claimant states Respondent insisted the photos were of the limes that just arrived even though the date tags showed otherwise. In order to resolve the issue, the Claimant states Respondent was asked to secure a CFIA inspection of the subject load of limes.

Respondent agrees that following arrival of the shipment and its discovery that the limes were in poor condition, photos of the limes were sent to Claimant per Claimant’s request.  Respondent states a single photo of 175-count limes was sent to Claimant as a result of a technological error, which was immediately rectified by contacting Claimant by email and telephone. Respondent states Claimant acknowledged the new pictures but continued to deny their validity.

Respondent submitted a copy of the photo of the 175-count limes, which bears a label with the handwritten date “02-20-20.” The file contains a number of other photos, some of which are the digital photos taken by the CFIA inspector, and some are the photos taken by Respondent.  There are photos showing just the limes inside the cartons, as well as photos showing the outside of the cartons and photos showing two pallets with dozens of cartons stacked upon each. 

Photos included in the file showed labels and QR codes associated with different purchase order and invoice number for the limes at issue in this dispute. This would appear to support the Claimant’s contention that some of the cartons made available to the CFIA inspector for inspection were from a different shipment of limes.

The CFIA inspection certificate shows defect percentages ranging from 0 to 10 percent for decay, 0 to 8 percent for skin breakdown, and 2 to 34 percent for yellow color.  The presence of sample cartons showing little, or no presence of a defect combined with those showing a significant percentage of the same defect may also be indicative of a non-homogenous load.

Based on the items just noted, it would appear that the integrity of the load was compromised prior to the CFIA inspection, such that it is impossible to ascertain with reasonable certainty that all 300 cartons of 200-count limes covered by the inspection were from the March 3, 2020 shipment herein in dispute.

Consequently, the inspection cannot be used to determine whether the 300 cartons of 200-count limes in question complied with the contract requirements. 

Arbitrator’s Decision

Respondent was ordered to pay Claimant the sum of US$6,660.00, plus the US$600.00 filing fee, within 30 days from the date of the Decision and Award.

DRC Comments

Unless proven otherwise, a government inspection such as a CFIA Inspection or USDA inspection, is considered prima facia evidence. In other words, it is considered a correct description of the condition of the product as well as the information contained on the cartons and other markings on the product, at the time the inspection is performed.

In this case, the markings on the cartons and the photos of the load, created reasonable doubt that the integrity of the load inspected was compromised.

As a receiver who requests an inspection to prove the condition of the product upon arrival, it is very important to request and make sure the inspector writes in his report all the information included in the cartons and can report Lot ID. The inspector can also refer to the invoice # connected to the load. This normally avoids any possible lot identity issues.

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

DRC Trading Standards and References:

• DRC Good Inspection Guidelines (https://fvdrc.com/wp-content/uploads/2016/10/good_inspection_guidelines.pdf )
• Receiver Duties (Fruit and Vegetable Dispute Resolution Corporation Trading Standards s.10 (2)(b)(ii))
• Reading inspection certificates – Part 1
• Reading inspection certificates – Part 3

Representatives from DRC will be at Fruit Attraction in Madrid, Spain on October 5-7. This will be DRC’s third visit to Fruit Attraction.

With members located in 17 countries¹, DRC is gaining increasing recognition as a global solutions provider when it comes to private, commercial business-to-business dispute resolution and trading assistance for produce entering the North American market.

Expanding international outreach through events such as Fruit Attraction, is a strategic initiative intended to expand membership and assist trading partners with a range of matters such as:

• quality and condition problems at destination
• contract of sale and issues related to breach of contract by either party
• transportation
• slow pay, partial pay and no pay disputes
• trade terms (INCOTERMS vs North American Terms)

DRC’s Trading Assistance staff have achieved a high level of dispute resolution expertise over the past 20 years and are also able to assist exporters with understanding and navigating various import requirements. A comprehensive Frequently Asked Questions guideline has been developed specifically for companies located outside of Canada and is available HERE.

Most of DRC staff (Luc Mougeot, Jaime Bustamante, Dafne Palomino and Iryna Romanenko) will be participating at Fruit Attraction. If you or your trading partners would like to meet at this event, please reach out to confirm your interest and schedule a time to meet ([email protected]; [email protected]; [email protected])

 

¹ Source: DRC Membership statistics July 1, 2021

Welcome New Members

From August 15 until September 15, 2021 DRC welcomed the following new members

2777501 ONTARIO INC.	ON	Canada
CANCAREX FOODS LIMITED	ON	Canada
FUYU FRESH TRADE (Also d/b/a 2661555 Ontario Inc.)	ON	Canada
HOLA PRODUCE INC.	BC	Canada
IGLOO COLD STORAGE INC.	ON	Canada
LONGFE INTERNATIONAL TRADE COMPANY OF CANADA LIMITED	ON	Canada
OUTCAST FOODS INC.	NS	Canada
PIERRE DAGENAIS & FILS INC.	QC	Canada
SUTHA IMPORTS & EXPORTS LTD.	ON	Canada
T.I.H. TRADING CORP.	ON	Canada
VALLEY PRIDE SALES, LLC	WA	United States

DRC Membership: change in status

As of September 15, 2021, the following organizations no longer hold a DRC membership:

1127360 B.C. LTD.	BC	Canada
1127360 B.C. LTD.	ON	Canada
9405-0044 QUEBEC INC.	QC	Canada
ALIMSUR (Faisant également affaire sous Oliver Cuadros Velarde / Jesus Zamudio Juarez)	QC	Canada
INDIAN FROOTLAND (A d/b/a of 2407475 Ontario Inc.)	ON	Canada
JACOB REDEKOP TEICHROEB (Also d/b/a Abarrotes y Refacciones Teichroeb)	ON	Canada
LE FRUIT LATIN S. E. N. C. (Faisant également affaire sous Le Fruit Latin)	QC	Canada
PEOPLE EXPRESS TRANSPORT LTD.	AB	Canada
PRODUCE BROTHERS (A d/b/a of 2480263 ONTARIO INC.)	ON	Canada
ROYAL CANADIAN SUPPLY CHAIN INC.	ON	Canada
VALLEY FRESH FRUIT (A d/b/a of 1833228 Ontario Limited)	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 14 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 $83 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 #19868 – Parties Domiciled – Spain and Canada

Facts

• The Claimant sold to the Respondent a container of 2,400 boxes of Argentinian Grapes; according to the invoice, product was sold FCA at $16.00USD/box. The container arrived on February 2^nd.

• According to correspondence between the Respondent and the Claimant dated September 21st, 2016, there is no indication of any grade standard being agreed to. Only grapes of “Quality 1” are mentioned.
• Respondent requested a Private Survey and a CFIA inspection. The Private Survey was performed on February 2^nd indicating that the grapes did not meet US#1. A CFIA inspection was performed on February 3^rd and revealed 3% decay, 4% discoloration, 3% shatter, and 2% waterberry. 
• According to the parties, the Respondent paid in advance $19,680USD of the total invoice value ($38,400 USD) for the first container.

The Respondent supplied an account of sale and remitted the proceeds of $7,472.70USD after a deduction of $13,123.80USD from the original invoice value of $20,596.50USD.  

Issues

• Whether there was an agreement between the parties on the terms of sale.
• Whether there was an agreement between the parties to use an independent private commercial inspection service.

Arbitrator’s Analysis/Reasoning

There was no evidence that a Purchase Order was ever issued providing the agreed upon specifications for the shipment. A Purchase Order that was never discussed, understood, and agreed upon cannot be considered a contract.

In addition, neither the invoice nor the bill of lading indicates US # 1, and the INCOTERM used for this transaction was FCA, which would mean that even if there was an agreement for US # 1, it would have meant that US # 1 at the shipping point and not upon arrival.

The statement of purchase orders entitled “XXXX CANADA SPECIFICATION” is not an agreement between the Claimant and the Respondent for the Claimant to provide grapes meeting U.S. No. 1. According to DRC Trading Standards and Related Guidelines, in the absence of an agreement on grade, the transaction defaults to its Good Arrival Guidelines. The grapes, therefore, were to meet the DRC Good Arrival Guidelines upon arrival at destination.

Based on the grower’s explanation of the procedure used in loading freshly harvested grapes into a container, the Arbitrator couldn’t find evidence to indicate that the grapes were not properly pre-cooled.

Based on the CFIA inspection certificate dated February 3, 2017, the condition of the grapes met the DRC’s Good Arrival Guidelines of 15% total defects, no more than 15% of the same single condition defect, and no more than 3% decay for European Type grapes. 

According to the DRC’s Good Inspection Guidelines, “Independent private commercial inspection services mutually agreed upon by both parties; and who meet DRC Inspection Standards and Inspection Elements” can be used in the event of a dispute. 

However, there was no agreement between the parties that the inspection results of an independent inspection service would be used to attest to the condition of the grapes upon arrival.

In addition, the Arbitrator finds that the results and statements made on the independent inspection certificate go beyond the responsibilities of a fruit and vegetable inspector.  An inspector is to observe and report on the condition of the product, and they are not to provide their interpretation of what may have caused the condition. 

In the Arbitrator’s opinion, if the Respondent believed the results of the CFIA inspection were not accurate and the private surveyor reflected a more accurate picture of the condition of the product, they should have requested an appeal of the CFIA inspection immediately upon receiving the results of that inspection.

A further inspection such as this could have affirmed or reversed the fact that the grapes met DRC Good Arrival Guidelines and may have helped in determining the extent of any progressive nature of the condition of the grapes.

Based on the statements and evidence provided by the parties, the Arbitrator found the Claimant succeeded in establishing their claim.

The Respondent has failed to establish damages due to failing to secure an agreement for US # 1 and the CFIA inspection report indicating the product met DRC Good Arrival Guidelines.

 

Arbitrator’s Decision

Regarding the Claimant’s remedy sought, the Respondent is hereby ordered to pay the Claimant the remaining one-half of the invoice price of $19,200USD, plus $700USD as the non-refundable administrative filing fee and $1,500USD for estimated arbitration fees for a total of $21,400USD.

 

DRC Comments

As a receiver/buyer, if you have received produce in deteriorated condition, you must request a federal inspection unless otherwise agreed. When a receiver/shipper is not convinced that the results of a CFIA inspection reflect the condition of a load, they have the right to request an appeal inspection immediately after they are provided with the inspection report. To request an appeal inspection, the following criteria must be met:

“Any person who has a financial interest in the produce and it is not satisfied with the initial inspection may apply for an appeal inspection. To perform an appeal inspection, the produce must be accessible for inspection, the load must be identifiable by the original inspection certificate and 75 percent of the lot is available for inspection.”

In this decision, and like previous analysed DRC arbitration decisions, we see again the importance of properly discussing, understanding and agreeing to a Grade Standard. In this case, there was no evidence showing the parties agreed to any specific grade standard. As a result, the Arbitrator had to rule that the transaction defaulted to DRC Good Arrival Guidelines.  

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

DRC Trading Standards:

• Incoterms (https://fvdrc.com/solutions/drc-good-arrival-guidelines-incoterms/)
• Trade Terms (DRC Trading Standards s. 20)
• 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 )

To initiate a formal claim through DRC’s Dispute Resolution Process, members must submit a Notice of Dispute (NOD).

A NOD is your opportunity to explain: Who you are; who you are claiming against? What happened that led to the dispute?  What remedy you are seeking?

Keep in mind that to present a successful NOD, DRC’s Dispute Resolution rules requires members to submit their claim within nine (9) months of when the claim arose or when the claimant ought reasonably to have known of its existence.

The following guide explains each element of a Notice of Dispute template that DRC provides to members who wish to file their claim:

INSTRUCTIONS
Company Letterhead	Submit your NOD on Corporate letterhead. The letterhead usually consists of a name, address, and a logo or corporate design, and sometimes a background pattern.
GENERAL
Date DRC File#   TO	Date on which you are submitting your Notice of Dispute. Include the DRC File# provided by staff. If it has not been provided to you, please contact us. 1. DRC Contact Person, included in the template. 2. Counterpart/Respondent’s contact information (Contact Person and title)
PARTIES’ INFORMATION
Claimant Information	Include Company Name, DRC #, Contact Person and Title, Mailing Address, Telephone, Fax, Email.
Claimant’s Representative Information	If the Claimant has a representative, include the representative’s Name, Mailing Address, Telephone, Email Address (if any).
Respondent Information	Include Company Name, DRC #, Contact Person & Title, Mailing Address, Telephone, Fax, Email.
Respondent’s Representative Information	If the Respondent has a representative, include the Representative’s Name, Mailing Address, Telephone, Email Address (if any). If Claimant is unaware of a representative, leave it blank.
MATTER IN DISPUTE
How to explain my case	Clearly describe and outline the events and reasons you think you are entitled to a remedy. The better you explain and detail your claim, the easier it is to address the main issues. Often a good way to organize your presentation is to order the events chronologically, including:   ·       Terms of sale (e.g., FOB, CFR, FCA, etc.), ·       When and from where was shipped, ·       When and where arrived, ·       Pulp Temperature/s at shipping point and/or on arrival (if any), ·       Inspection Results (if any). ·       Any other information that helps understand the issue.

 

 

REMEDY SOUGHT
Remedy	The total amount plus any other relief, such as interest and legal fees.
SIGNATURE
Signature, Name & Title	The person who acts as the authorized contact person for the claimant must be the one who signs and must include their name and title.
EXHIBITS
Exhibits	If you are relying on any documents, you should attach copies of these documents: ·       Bill of lading (BOL), ·       Invoice, ·       Purchase Order (PO), ·       Inspection, ·       Account of Sales, and/or ·       Any other document that is related with the matter.

I am pleased to have been selected as the new Vice-President of Operations for the Fruit and Vegetable Dispute Resolution Corporation. I have big shoes to fill moving into the position as Fred Webber takes his retirement and Luc Mougeot becomes President and CEO. The warm welcomes received so far are much appreciated!

Prior to joining the DRC, I occupied various positions with the Canadian Food Inspection Agency (CFIA). Prior to joining the CFIA I worked in the private sector within the meat, dairy, and confectionary industries.

The CFIA is a regulator with a broad mandate. Within the food business line, the CFIA mandate includes food safety, consumer protection, and trade and commerce. While I was originally heavily involved with food safety, my career path at CFIA increasingly steered me towards consumer protection and trade and commerce.

I was fortunate to have worked with the DRC as the CFIA liaison officer to the DRC Board of Directors. I had become familiar with the culture of DRC and found it to be extremely open and professional with a profound passion for contributing to the wellbeing of the fruit and vegetable sector. It is an organization that I grew to admire and respect.

Changing jobs and organizations means joining a new team and learning about the business in detail. Upon joining the DRC, I was impressed with the scope of activities that the DRC undertakes with the fresh fruit and vegetable sector. While the core business of the DRC is dispute resolution, questions are also received on a variety of other subjects including food safety, tariffs, and products stuck at the border. The DRC works closely with members, allied associations, and governments to provide its expertise to benefit the industry. All of this makes a DRC membership a valuable investment. The DRC takes its mission seriously and I quickly became involved in compliance related activities to ensure that our bylaws and operating rules remain respected. At the DRC I found a dedicated respectful environment that values the contributions of everyone.

I will continue to work collaboratively building on my past experiences. The DRC will continue to work on a variety of issues including grade requirements, Destination Inspection Service, and on standards with the international community. We are embarking on the development of a renewed strategic plan and I am excited about developing new opportunities for the DRC.

As the pandemic runs its course, and face-to-face opportunities increase, I will be engaging to learn more about the fruit and vegetable industry to best serve our membership, and accelerate our growth as a respected international dispute resolution body.

I am proud to be a member of the DRC and look forward to serving the fruit and vegetable industry and meeting many of you.

Welcome New Members

From July 15 until August 18, 2021 DRC welcomed the following new members:

2777501 ONTARIO INC.	ON	Canada
51NORTH FRESH INC.	ON	Canada
58690 MANITOBA LTD. (Also d/b/a A.M. Foodfare #18)	MB	Canada
9964894 CANADA INC.	QC	Canada
BBN TRANSPORT LTD.	AB	Canada
BRAGA FRESH FAMILY FARMS, INC.	CA	United States
COLIMAN PACIFIC CORP. (Also d/b/a Coliman)	AZ	United States
CROWN ORCHARD COMPANY, LLC	VA	United States
DAILY FRESH PRODUCE (A d/b/a of Sunridge Farmers Market Ltd.	AB	Canada
DOSNER ORGANIC FARMS / DOSNER SPECIALTY PRODUCE (A d/b/a of Brodasi Inc.)	CA	United States
FRESHWAY PRODUCE INC.	FL	United States
FRUTOS GUADALAJARA S. DE R.L. DE C.V.	Jalisco	Mexico
FUKUYA FOODS INC. (Also d/b/a Fukuya Japanese Food)	BC	Canada
GOURMET SAVORIES INC.	BC	Canada
HIGHLAND FRUIT PACKERS LTD.	BC	Canada
LA COMPAGNIE DE TISSUS DECORATIFS ARCO LTEE / ARCO DECORATIV	QC	Canada
NORTHERN TRADING INC. (Faisant également affaire sous Négoce du Nord)	QC	Canada
POMO FRUIT IMPORTS (A d/b/a of Rhuturaje Yadav)	BC	Canada
READY PAC PRODUCE, INC.	CA	United States
TAYLOR FRESH CANADA FOODS ULC (Also d/b/a Taylor Fresh Canada / Taylor Farms Canada)	ON	Canada
WELL JUICERY CANADA LTD.	ON	Canada

 

DRC Membership: change in status

As of August 18, 2021, the following organizations no longer hold a DRC membership:

AGRICOLA FN SPR DE RL DE CV (También haciendo negocios como Agricola FN)	Jalisco	Mexico
CANADA FRESH PRODUCE (A d/b/a of 5021657 Ontario Inc.)	ON	Canada
CAN-ON IMPORTERS INC.	ON	Canada
GDIK TRADING (A d/b/a of Mehmet Gedik)	ON	Canada
GOLDEN TRADING B.C. LTD.	BC	Canada
LE FRUIT LATIN S. E. N. C. (Faisant également affaire sous Le Fruit Latin)	QC	Canada
PEOPLE EXPRESS TRANSPORT LTD.	AB	Canada
RE FRESH, LLC	CA	United States
SINOCAN GLOBAL LOGISTICS 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 14 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 $83 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 Standards (R&S) apply in the event of a dispute. DRC Dispute R&S 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 #20395 – Both Parties Domiciled in Canada

Facts

• The Claimant shipped a load of 18 pallets (1967 cases) of French kiwi to the Respondent on March 8, 2019. However, 9 cases were forgotten at the Claimant Warehouse and later delivered to Respondent on March 13, 2019.
• According to the invoice, the product was sold at a fixed price of $ 15 per carton for a total invoice price of $ 29,505, which was emailed to Respondent on March 11, 2019.
• On April 11, 2019, more than one month later, Respondent advised Claimant that they did still have 10 pallets left and asked Claimant to decrease the price to $5 per case. The Claimant agreed to reduce the price for those pallets.
• On May 2, 2019, the Claimant received a payment of $9,845 for the 1967 cases, which means Respondent paid $5.00 per case.
• Claimant requested a sales report to the Respondent. However, Respondent did not provide it.

Issue

• Whether there was an agreement between the parties on the terms of sale.
• Whether the Claimant agreed on a price adjustment. If so, the price adjustment applies to all the load or just to 10 pallets.

 

Arbitrator’s Analysis/Reasoning

Did the claimant and respondent agree to a fixed price for Invoice #18-3156?

Yes. The arbitrator believed the parties agreed to a firm price for the following reasons:

2019. a) An invoice was sent to the respondent on March 08, 2019. This invoice was not contested. Although the previous transactions have little bearing on invoice 18-3156, it is noteworthy that when the kiwis were sold open price, the invoice was sent after the product was sold. In this instance, the invoice was sent at the time of shipment suggesting the claimant treated this as a fixed price contract.
2020. b) The claimant continues to assert this is a fixed price contract during an e-mail exchange on April 11, 2019. Following an e-mail from the Respondent in which they asked for an adjustment by saying, “maybe I can sell at $5?” Claimant responds, “We never agreed on consignment…you bought fixed price at 15$….” This e-mail never appears to be rebutted. Additionally, the question mark used in Respondent’s e-mail suggests he was seeking approval for a price adjustment.

 

1. c) Finally, and perhaps most importantly, if the respondent thought this was an open price, they did not act in accordance with an open price contract. Per DRC’s Trading Standards, in the absence of an agreement on price, if a buyer remits a report of their sales, and a price cannot be settled, the buyer has the burden of proving that his reported sales were true and accurate.

As a result of the above, if the respondent thought this was an open price transaction, they should have contested the invoice, rebutted the claims in the e-mail transaction, and conducted themselves as though this was open price. Given the complete lack of an account of sales, there is little proof the respondent believed this was open price.

 

Was there an agreement to adjust the price from $15 to $5?  If yes, for the entire 18 pallets, or was the price only reduced for the 10 pallets?

Firstly, yes, it appears the respondent offered $5 in the April 11 e-mail exchange and the claimant agreed to this reduction to $5.  The question remains, was the $5 adjustment for the entire load or merely for the 10 remaining unsold pallets?  In the e-mail exchange Respondent writes, “Slow people don’t want this fruit, Approx. 10 pallets in stock, Maybe I can sell at 5$? you decide, or I can send it to someone else?” This e-mail implies that the respondent is seeking a price adjustment on the 10 pallets remaining and not on the 8 pallets previously sold. Furthermore, if the claimant did opt to send the remaining 10 pallets to someone else, it would have been reasonable for the claimant to accept payment in full for the 8 pallets that were sold. For these reasons, the arbitrator agreed with the claimant that the adjustment pertained only to the remaining 10 pallets and not to the entire load.

As stated in the DRC by-laws and Operating Rules, under General Records Section 3, “Members shall keep records which are adapted to the particular business that the member is conducting and in each case such records shall fully disclose all transactions in the business in sufficient detail to be readily understood.”

Also, “The responsibility is placed on every member to maintain records which will disclose all essential facts regarding the transactions in his business”

Note: Although the product was received under protest, the arbitrator did not believe this, or that the quality report provided by Respondent had any direct impact on the outcome or decision regarding this dispute.

 

Arbitrator’s Decision

Award in favor of Claimant, in the amount of $8,670.00 plus $826.18 for arbitration filing fees. A total of $9,496.18 must be paid by Respondent to Claimant.

 

DRC Comments

We cannot stress enough the importance of documenting in writing every part of the transaction. From the negotiating process to the final payment or settlement, following up with an email or fax, of what was discussed over the phone, is paramount and helps avoiding misunderstandings. We understand the fast pace of our industry but taking the time to write an email or a fax can save you some headaches.

Currently, more and more text messages are used to try to demonstrate what was negotiated or agreed in a transaction. However, text messages tend to be short, are not properly linked to a transaction, and are not specific enough about the conditions of the sale or settlement. While text messages can be used as evidence in a DRC procedure, it is your responsibility to make sure that those communications can be linked to the transaction and clearly convey the intended information.

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

DRC Trading Standards:

• Accuracy of Transaction Documents (https://fvdrc.com/solutions/accuracy-transaction-documents/)
• Trade Terms (DRC Trading Standards s. 20)
• Receiver Duties (Fruit and Vegetable Dispute Resolution Corporation Trading Standards s.10 (2)(b)(ii))
• Documents to be preserved (DRC Trading Standards s. 4)

The DRC’s Board of Directors and Annual General Meeting (AGM) was held virtually from June 2-4 2021. DRC staff reported on the audited financial statements and key DRC priorities including Membership, Marketing, and Trading Assistance. The Board also received updates from the Canadian Food Inspection Agency on Destination Inspection Services, implementation of the Safe Food for Canadians Regulations and the DRC grade standards project.

 

During the AGM the members elected Frank Spagnuolo (Canada), Tony Martin (Canada), Robert Guenther (USA), George Pitsikoulis (Canada), Gerardo Mena Prieto (Mexico) and Felipe Silva (Chile) as Directors.

DRC’s Dispute Resolution Rules define a counterclaim and a counterclaim with setoff as follow:

“Counterclaim” means a claim by a Respondent arising out of the transaction or occurrence that is the subject matter of the Claim and that is in excess of the amount being claimed by the claimant.  Subject to Article 4, a Counterclaim is to be brought by way of a Counterclaim provided that the Respondent previously gave notice of the Counterclaim during the informal consultation process.  Claims by a Respondent arising out of the transaction or occurrence that is the subject matter of the Claim that are less than the amount being claimed by the claimant are to be asserted as a defense only in the Statement of Defence. Claims by a Respondent arising out of the transaction or occurrence that is the subject matter of the Claim that are out of time pursuant to Article 4 may be asserted as a defense to the Claim in the Statement of Defence but no amounts in excess of the Claim shall be recoverable;

“Counterclaim with setoff” means a claim by a Respondent arising out of a transaction extrinsic to the Claim.  Subject to Article 4, a Counterclaim with setoff may only be brought by way of a Counterclaim with setoff provided that the Respondent previously gave notice of the Counterclaim with setoff during the informal consultation process.  A Counterclaim with setoff is not allowed to be asserted as a defence to the Claim;

Both definitions require that a counterclaim or a counterclaim with setoff are raised during the informal consultation/mediation process and in accordance with Article 4 of DRC’s Dispute Resolution Rules, which provides a time limitation to file a claim, a counterclaim, or a counterclaim with setoff.

The main difference between a counterclaim and a counterclaim with setoff is that all the elements of a counterclaim are directly connected to the transactions claimed by the claimant. For example, Company “A” sells one load of apples for a $15,000 total invoice price to company “B”. When company “B” receives the load, an inspection is requested, and the results of the inspection show 60% condition defects. Company B decides to claim damages and their sales, less expenses connected to the transaction, indicate a loss of $1,000 above and beyond the original invoiced price. In other words, company “B” has a negative return on the load. Company “B” has the right to initiate a claim against company “A” or, company “B” can wait for company “A” to file a Statement of Claim if unsatisfied with the negative return, and then company “B” can counterclaim to have company “A” pay the $1,000.

The elements of a counterclaim with setoff are not connected to the claim initiated by the claimant. Let’s take the same scenario presented before, but with the following twist. Company “B” decides to deduct the $1,000 loss from a prior transaction done with company “A”. Now company “A”, instead of having one disputed invoice, has now two disputed invoices. One invoice is directly connected to the above scenario and the other one is not. Company “B” is offsetting $1,000 from an unrelated invoice.  While the companies are the same, the transactions involved are different.

When a Claimant files a Statement of Claim, a counterclaim or a counterclaim with setoff can be included in a Statement of Defence as a defence. However, if the Respondent wishes to collect their losses, a separate counterclaim or counterclaim with setoff must be filed, along with the appropriate arbitration fees, concurrently with their Statement of Defence.

DRC Operating Rules require that DRC members fulfill their financial obligations. Therefore, offsets are only allowed if the parties have agreed to this type of practice.