Author: DRC

We are almost at the end of our review of all sections of DRC’s Trading Standards. In this issue, we address the last three terms in section 19 which includes “Reject without reasonable cause”, “Suitable shipping condition” and “Truly and correctly account”. We will end the series with a summary of section 20 – Trade Terms and section 21 – Interpretation.

Reject without reasonable cause

The word rejection in our industry is sometimes used loosely. We sometimes hear of receivers referring to rejecting the product but while still in possession of the load. When this occurs they have unknowingly committed an act of acceptance (see our November Solutions Blog which included the concept of acts of acceptance). In order to make a rejection in a proper and timely manner, a receiver must make sure that: a) there is legal justification to refuse produce within reasonable time, b) not refuse produce that complies with the contract and c) has not committed an act of acceptance. As a receiver, if you have received produce in deteriorated condition or that has failed to meet contract terms, but you have committed an act of acceptance, you can offer the product back to the shipper or seller. However, if the shipper or seller does not accept the load back, your only recourse left is to claim damages or secure an agreement in writing to change the terms of the contract.

Suitable Shipping Condition

This term only applies to FOB transactions where the seller assures that, under normal transit conditions, the product will meet the agreed quality and condition requirements when the product is shipped. This implies that some degree of deterioration will normally occur even under the best transit conditions due to the perishable nature of the commodities in our industry. This term is also known as Good Delivery or Good Arrival where percentage of tolerances of defects are increased in comparison with the tolerances established by the grade standard where applicable.

Truly and correctly account

Consignment and Joint Account Transactions require that an itemized account of sale is submitted per transaction. An itemized account of sales must include the date of receipt and date of final sale, the quantities sold at each price, or other disposition of the produce, and the proper, usual or specifically agreed upon selling charges, expenses properly incurred and any other expense agreed upon. While these are the only terms that require an itemized accounting, when a receiver decides to claim damages and uses an account of sales to prove their damages, they must be prepared to meet the requirements of an itemized account of sales. Additionally, sales and expenses must be supported by their respective sales tickets, receipts, or invoices if required. In addition, regrading or repacking require its own accounting method which allows a deduction from the invoice price based on the labour and shrink (the amount of discarded product) costs, the portion of the freight of the lost product, the cost of the inspection (if applicable) and other costs as a result of having the product repacked or regraded.

On January 15, 2020, most businesses in the fresh fruits or vegetables (FFV) sector will become subject to new requirements under the Safe Food for Canadians Regulations (SFCR). These include: preventive controls, preventive control plans and traceability.

In addition, importers who require an SFC licence and who do not have a valid licence as of that date may experience delays or rejection of their shipment at the border and may be subject to other SFCR enforcement actions.

New requirements for lot code labelling of consumer-prepackaged fresh fruits or vegetables will also come into force at that time. However, businesses will have until January 15, 2021 to use up existing packaging.

Prepare now

FFV businesses should begin now to learn about and prepare for the new requirements. New and updated guidance documents are available on the CFIA website:

• Fact sheet: Fresh fruits and vegetables businesses
• SFCR timelines – Fresh fruit or vegetables
• Definition of lot code – Safe Food for Canadians Regulations: Glossary of key terms

Businesses should also review the following for information on lot-code labelling:

• Traceability-specific labelling requirements for fresh fruit or vegetables

Inspection frequency

The number of times that CFIA inspects a food business depends on several factors, with risk to food safety being one of them. Using their My CFIA account, SFC-licensed businesses can provide operational and risk information that may help lower their establishment’s risk result and lower the frequency or scope of inspections.

Licence holders that do not complete this information could be inspected at the same rate as an establishment that has been assigned the highest risk result for that commodity.

Watch the FFV recorded presentation

Businesses can watch a recorded presentation to learn more about the new SFCR requirements. The presentation discusses the implications and benefits of the SFCR for the FFV sector, and is tailored to the interests of growers, harvesters, importers and exporters.

For more information about the SFCR, visit inspection.gc.ca/SafeFood.

On January 15, 2020, most businesses in the fresh fruits or vegetables (FFV) sector will become subject to new requirements under the Safe Food for Canadians Regulations (SFCR).

Requirements that will come into force as of this date include: preventive controls, preventive control plans and traceability, including lot code labelling of consumer-prepackaged fresh fruits or vegetables. Growers and harvesters will, however, have until January 15, 2021 to use up existing packaging.

Importer licensing and DRC Membership

As of January 15, 2019, importers of fresh fruits or vegetables were required to obtain a Safe Food for Canadians (SFC) licence from CFIA and a DRC membership (www.fvdrc.com).

Importers who require a SFC licence and who do not hold a valid food licence or a valid DRC membership by January 15, 2020, may experience delays or refusal of entry of their shipment at the border, and may be subject to other SFCR enforcement actions.

Prepare now

FFV businesses should begin now to learn about and prepare for the new requirements. New and updated guidance documents are available on the CFIA website:

• On the Food-specific requirements for import page, now find:
  Overview – Importing fresh fruit or vegetables
  Import requirements for leafy green vegetables from the United States’ California and Arizona

Inspection frequency

The number of times that CFIA inspects a food business depends on several factors, with risk to food safety being one of them. Using their My CFIA account, SFC-licensed businesses can provide operational and risk information that may help lower their establishment’s risk result and lower the frequency or scope of inspections.

Businesses are encouraged to log into My CFIA and add the additional establishment information to their profile. Licence holders that do not complete this information could be inspected at the same rate as an establishment that has been assigned the highest risk result for that commodity.

Visit the My CFIA webpage for more information.

Exporters soon subject to new EU requirements

If you export to the European Union (EU), watch for a separate listserv and notice to industry on new EU phytosanitary requirements for fresh fruit as well as some plants, seeds and other material. The new EU requirements come into effect December 14, 2019. Please contact your local CFIA office before exporting any plant material to the EU.

Ask the experts

In November and December 2019, CFIA will be hosting question-and-answer sessions in which industry representatives can ask SFCR experts about the new requirements coming into force for the FFV sector on January 15, 2020. Visit the CFIA website to learn more.

For more information about the SFCR, visit inspection.gc.ca/SafeFood.

As mentioned in our previous Trading Standards article, in this issue we will review the following definitions included in Section 19: “full payment promptly” and “reasonable time”. In the next edition we will analyse “Reject without reasonable cause”, “suitable shipping condition” and “truly and correctly account”.

“Full payment promptly”

It is important to remember that DRC respects the payment terms established by the parties. Most of the time, a grower’s or shipper’s invoice will include payment terms or include payment terms in accordance with either PACA or DRC rules. However, in the absence of an agreement on payment terms, such as parties failing to state their payment terms in writing, DRC Trading Standards become the default rules. This concept includes default prompt payment terms to growers, shippers, brokers, agents and transportation companies:

• Payment to growers, shippers, and sellers on fixed price transactions must be made within 10 days from the day the produce is accepted.
• Payment on consignments or joint account transactions must be made within 10 days from the date of the final sale with respect to each shipment, or within 20 days from the date the goods are accepted at destination, whichever comes first.
• Broker’s invoices must be paid within 10 days after receiving the broker’s invoice.
• Payment to growers, growers’ agents, or shippers by terminal market agents or brokers, who are selling for the account of a grower, growers’ agent, or shipper and are authorized to collect from the buyer or receiver, within 5 days after the agent or broker receives payment from the buyer or receiver
• Payment to the principal, within 10 days after receipt, of net proceeds realized from a carrier claim in connection with a consignment transaction or, in connection with a joint account transaction, payment to the joint account partners of their share of the joint account net proceeds realized from a carrier claim;
• Where growers’ agents are pooling product, within 30 days after receipt of the goods from the principal for sale or within 5 days after the date the agent receives payment for the goods, whichever comes first.
• When contracts are based on terms other than those described herein, payment is due to the supplier-seller within 20 days from the date of acceptance of the shipment under the terms of the contract.

“Reasonable time”

A reasonable amount of time to provide notice of a problem or to request an inspection when product is received in deteriorated condition must not exceed 24 hours with respect to rail, air shipments and boat shipments. However, for shipments received by truck, is only 8 hours.

However, if adverse weather conditions prevent inspection of a load, the period shall be extended until weather conditions permit inspection. It is the responsibility of the receiver to ensure the seller is informed of these events.

Additionally, for shipments arriving on non-working days or after the close of regular business hours on work days when a representative of the receiver having authority to reject shipments is not present,non-working hours preceding the start of regular business hours on the next working day shall not be included. However, for those shipments arriving during regular business hours when a representative of the receiver having authority to reject shipments is customarily present, the period shall run without interruption except that, for shipments arriving less than two hours before the close of regular business hours, the remaining balance of the time period shall be extended and run from the start of regular business hours on the next working day.

Q.We are a USA shipper and have a DRC membership. We shipped an FOB load from Nogales to Montreal and it took 6 days to arrive at destination. The receiver requested a CFIA inspection upon arrival and it was performed same day. The inspection results show 16% total defects. The product was sold under PACA Good Delivery allowing 15% total defects but, in our opinion, because it took six days to reach Montreal, the product should be allowed additional tolerances for defects. Therefore, our product would meet Good Delivery. What is DRC’s opinion on this matter?

A. Jaime Bustamante. We understand that when using PACA’s 5 Day Good Delivery, the tolerance of defects may vary depending on transit time. While PACA may reduce the tolerances of defects on less than 5-day trips, adequate proof needs to be presented as to why an increase of the tolerances of defects on more than 5-day trips. So far, we are not aware of any PACA precedent that has extended the maximum 5-day tolerances. Additionally, this is an international transaction where product left the USA and entered another countries jurisdiction. Therefore, DRC Good Arrival Guidelines apply to the transaction. DRC Good Arrival Guidelines are a combination of PACA 5 Day Good Delivery and Canadian Destination Tolerances and Suitable Shipping Condition. However, DRC Good Arrival only takes into consideration the tolerances of defects based on a 5-day trip regardless of whether the trip takes less or more than 5 days. A case to use lower tolerances can be made for one- or two-day trips to lower the tolerances of defects but, other factors need to be considered for this to apply such as the commodity or mode of transportation.

Part of DRC’s rationale for only considering the 5-day tolerance of defects is based on the fact that we cover international transactions with members located all over the world, where product may take much longer than 5 days to arrive at destination and it would not be fair to extend the tolerance of defects creating a problem for a receiver to market product with far more defects.

While we do not have all of the details for the transaction described in the above-noted question and assuming normal transit time and temperatures occurred, based only on the information provided, the product would have failed to meet DRC Good Arrival by 1%.

In October, DRC attended Fruit Attraction in Madrid, Spain and The Grocery Innovations Trade Show and Conference at the Toronto Congress Centre. This was the second consecutive year that DRC attended Fruit Attraction and the 2019 3-day event drew in excess of 89,000 visitors from 127 countries. DRC was able to meet with several Spanish and South American companies who export to Canada and the United States as well as connect with some current European members. We were impressed by the number of Canadian DRC members we met during the show and had only good things to say about it.

The Grocery Innovations Trade Show and Conference is a two-day event that focuses on independent grocers and all aspects of their business operations. In addition to a focus on local product there was an international flair to the show, as it included Spanish, Korean and Sri Lankan pavilions.  As the DRC walked the trade show floor, it was apparent that many independent grocers are not familiar with all the changes related to the Safe Food for Canadian Regulations, and how they impact their business.  DRC will look to upcoming opportunities to ensure that independent grocers understand their SFCR-related obligations, particularly the regulatory requirement for a DRC membership.

Welcome New Members

In November, DRC welcomed the following new members:

• 9407-6007 QUEBEC INC.
• AV PRODUCE LTD.
• AVO AZTECA SA DE CV
• BIG H FOODS INC. (Also d/b/a Big H)
• DAILY VEGGIES (A d/b/a of 9900390 Canada inc.)
• FRUTICOLA VILLAMANGOS, SPR de RL (Chris&Co)
• JEAR LOGISTICS, LLC
• MOBCHER CANADA INC.
• MUCHO GUSTO MEXICO (A d/b/a of Distribuidor de Colores y Sabores Naturales M, INC.)
• NATIONAL PRODUCE TRADING COMPANY LLC
• OCEAN HARVEST SEAFOODS INC.
• SPADINA HOLDING GROUP
• SUPREME BERRY FARMS, LLC
• XFRESH PRODUCE LTD.

DRC Membership: change in status

As of November 30, the following organizations no longer hold a DRC membership:

• 3J PRODUCE LTD.
• 9265-7816 QUEBEC INC.
• AGROINCA PPX (También haciendo negocios como Agroinca Produc
• ANGEL SEAFOODS LTD.
• GREAT GIANT FOODS CANADA INC.
• HEARTLAND RESOURCES INC.
• KERN RIDGE GROWERS LLC
• KNOTEK BROS INC. (Also, d/b/a Geo Produce)
• MED-ALG IMPORT & EXPORT (A d/b/a of Mohamed Tahar Mallem)
• NEW LIFE LAND INC.
• YASHICA INTERNATIONAL INC.

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.

For those who export and import commodities to and from a number of countries or even interstate or interprovincial boundaries, INCOTERMS (International Commercial Terms) are used on a daily basis and, at a minimum, it is important to have a basic knowledge of the terms and their implication. Every ten years the INCOTERMS listing is revamped and published to reflect consideration of the latest adjustments and practices from the trade. “Incoterms®” is a trademark of the International Chamber of Commerce and includes the transportation rights and responsibilities of the parties involved in a transaction.

In our Solutions Blog we have published previous articles about the INCOTERMS or that reference them: “DRC Good Arrival Guidelines and INCOTERMS” and “North American Terms vs. INCOTERMS”.

INCOTERMS help to determine how costs and risks are allocated to buyers and sellers. In our industry, they are normally included in a Bill of Lading.

It is important to know that on January 1, 2020, the new INCOTERMS 2020 will come into effect and will contain the International Chamber of Commerce (ICC) rules for use of the 11 Incoterms® trade terms.

The new INCOTERMS 2020 edition is available online and can be purchased on the following website:

https://2go.iccwbo.org/incoterms-2020-eng-config+book_version-Book/

In the mean time, INCOTERMS 2010 remain in effect and are available on the ICC website.

If you have any questions regarding how the INCOTERMS impact your transactions, contact DRC’s Help Desk at 613-234-0982.

We are approaching our analysis of the final sections of DRC Trading Standards. Section 19 includes 25 definitions, some of which have already been addressed in previous sections of DRC Trading Standards. Therefore, we will concentrate on those that have not been previously mentioned and have a bigger impact on your day to day operations.  This article will focus on the definitions of “acts of acceptance” and “account promptly”. Two follow-up articles pertaining to Section 19 will be included in the December and January Solutions Blog and will cover: “full payment promptly”, “reasonable time”, “reject without reasonable cause”, “suitable shipping condition” and “truly and correctly account”.

“Acceptance”

There are certain actions that a buyer/receiver could perform that automatically indicate that they have accepted a load and will prevent them from properly rejecting a load. These include:

• Diverting a load without prior agreement with the seller/shipper. The shipper/seller should know the destination of the product and/or any other delivery stops the carrier is making prior to delivering the load to its destination. This includes, cross docking a load.
• Unloading product from the truck except for the purpose of getting an inspection performed on the load.
• Failure to provide timely and proper notice of a rejection, provided that an act of acceptance has not taken place and properly documenting the breach of contract or damages associated with the quality or condition of the product.
• In the case of a consignment transaction, any act by the consignee which is inconsistent with the consignor’s ownership it is considered an act of acceptance only if ratified by the consignor.

“Account Promptly”

Unless specifically agreed to by the parties, submitting a true and prompt account of sales or liquidation report means:

• In connection with a consignment or joint account transactions, within 10 days after the date of final sale with respect to each shipment, or within 20 days from the date the goods are accepted at destination, whichever comes first
• Provided, that whenever a grower’s agent or shipper distributes individual lots of produce for or on behalf of others, accounting to the principal shall be made within 30 days after receipt of the shipment from the principal for sale or within 5 days after the date the agent receives payment for the goods, whichever comes first.
• Whenever a grower’s agent or shipper harvests, packs, or distributes entire crops or multiple lots therefrom, for or on behalf of others, an accounting of the initial shipment shall be rendered within 30 days after receipt of the goods for sale.
• Accountings for subsequent shipments shall be made at 10-day intervals from the date of the accounting for the initial shipment and a final accounting for the season shall be made to each principal within 30 days from the date the agent receives the last shipment for the season from that principal. Provided further, that whenever the marketing agreement between a principal and an agent includes a provision for storage of goods prior to sale, the agent shall render accountings of inventory and expenses incurred to date at 30-day intervals from the date the goods are received by the agent until sales from storage begin.

DRC’s Luc Mougeot attended the 21^st Session of the Codex Committee on Fresh Fruits and Vegetables (CCFFV) in Monterrey, Mexico as a member of the Canadian delegation. The CCFFV approved final versions of the grade standards for garlic, ware potatoes and kiwifruit. The Committee also worked on draft standards for yam, onion and shallots, berry fruit and fresh dates.

Similar to how US Grade Standards and Canadian Standards are used in transactions in North America to determine the quality of the commodity and to resolve disputes, the Codex Alimentarius is a collection of internationally adopted food standards and related texts presented in a uniform manner. These food standards and related texts aim at protecting consumers’ health, ensuring fair practices in the food trade, and resolve disputes. For additional information or to receive Codex updates, please contact Luc at 613-234-0982 or [email protected]

The Codex grade standards for fresh fruit and vegetables may be viewed here.