Author: DRC

The grower and the grower’s agent duties and responsibilities should be stipulated in a written contract. In the absence of a contract, a grower needs to know that if an agent provides a written statement describing the terms and conditions (email, fax or mail) prior to the agent receiving the first lot, the grower is considered to have agreed to the terms stipulated in the written statement if the grower ships his produce to the agent after receiving a written statement to this effect.

An agent who does not have on file either a written contract or a written statement he has failed to prepare and maintain full and complete records.  An agent who fails to perform any specified task or duty, express or implied, may be held liable for any damages resulting therefrom.

Agents must be able to provide the grower with an accurate and detailed accounting covering all aspects of their handling of the produce and maintain records of all produce received and sold.

If the contract, or written statement, allows the agent to repack or regrade the product, the agent shall provide detailed results of all packing and grading operations, including the quantity lost through packing and grading and the quantity and quality packed out.

Pooling is not allowed unless a specific agreement with all growers in the pool is reached. If pooling is agreed upon, the accounting to each of the growers shall itemize the actual expenses incurred for the various operations conducted by the agent. This includes complete details of the disposition of the produce received from each grower including all sales, adjustments, rejections, details of consigned or jointed shipments and status of all claims filed with or collected from the carriers.

The agent shall prepare and maintain full and complete records of all details of the distribution as supporting evidence of a full accounting.  If an agent is working under a pool agreement with growers, the accounting shall show how the pool cost and pool sales prices were calculated. If the agent and the growers have agreed on a fixed charge to cover the various operations conducted by the agent, actual expenses incurred for stated services are not required to be shown in the accounting.

A grower’s agent may be held liable for any loss or damage resulting to growers due to his negligence or failure to perform any specified task or duty, express or implied, related to the transaction.

Aaron Tiger, LL.L, LL.B Attorney

Commercial Law, Litigation and Insolvency

Montréal, Canada

The views and opinions expressed here are those of the author, Aaron Tiger, of Tiger Banon Inc. attorneys, of Montreal, Canada, and do not necessarily reflect the views and opinions of the DRC. 

We are often asked, in our practice how to avoid becoming involved in a transaction where the produce buyer is a person who is not in good faith and who has no intention to pay for the produce. In the situation where the buyer intends to act in bad faith, it is the seller who must protect itself against the bad faith buyer.

Some recommendations to protect yourself against getting involved in one of these situations would be the following:

1. Do a proper credit search and/or report. While the various credit rating agencies, such as the Blue Book, do their best, it might be a good idea to also contact a local credit research agency in the buyer’s jurisdiction, in order to determine the creditworthiness of the buyer. Key questions to ask include:

• How long has the company been in business?
• Who is the real person behind the company and what is known about that person?
• Does the company have a real credit history going back a reasonable time in the industry?
• Did the seller investigate the credit references? There have been cases where the credit references were also persons also being taken advantage of; however, the seller never contacted the credit references.

Also call the DRC before you ship. They are knowledgeable regarding the persons involved in the industry.

2. Set a credit limit. It is preferable to lose money for only one (1) load rather than multiple loads. Until an actual payment is received from a relatively unknown buyer, a credit limit should be set. Remember some bad faith buyers may pay for a load or two in order to establish a relationship and then obtain further loads which will not be paid for. A cheque is not a payment until it has cleared your bank. A cheque from a foreign buyer’s bank to a US Seller may require 30 days to clear the buyers bank account.

If you have any doubts, ask for a bank draft and confirm the authenticity of the draft with the issuing bank, or, wait until the cheque has been confirmed by your bank to have been honored before sending another shipment. There are other forms of payment such a bank transfer which will assure that the funds are in the seller’s account. If the buyer advises you that a cheque has been sent, or sends you a copy a of cheque, or says they do not understand why you did not receive the cheque, consider putting a hold on any further shipments until a real payment confirmation is received. Establish a credit limit to minimize losses.

3. The PACA trust may not apply in Canada. In most jurisdictions in Canada, a trust or lien or movable security (in Quebec a ‘hypothec’) must be registered prior to the shipments being made. This security is certainly not as strong as the PACA, but it may result in some limited protection. It is advisable to contact an attorney in the jurisdiction where the buyer carries on business in order to determine what security could be placed on the assets of the buyer to protect your future claim.
4. If you feel you have been the victim of a bad faith buyer, contact your trade association, the credit rating companies or an attorney in the jurisdiction where the buyer carries on business as soon as possible. The longer one waits, the less chance there is of recovery. Furthermore, the bad faith buyer will continue to prey on more victims.
5. Purchase Insurance.

If you are shipping to a foreign jurisdiction, there are companies who insure payment, if the issue is non-payment and not an issue with the produce. The DRC can advise as to companies which provide this coverage.

IF YOU HAVE BEEN A VICTIM OF A TRANSACTION OF THIS TYPE, THERE ARE CERTAIN ACTIONS YOU MAY WISH TO TAKE;

1. If the supplier is a DRC member, they can contact DRC to file a claim. DRC can provide resolution for that claim through their arbitration process if the buyer is also a DRC member.

Should an arbitration occur and the buyer fail to comply with the arbitration decision and award, the next step is to contact an attorney in Canada to verify if enforcing the arbitration award in court is an option. Unfortunately, in many cases, by the time the DRC award is granted the buyer is no longer in business and is nowhere to be found.

2. Contact your local law enforcement and the FBI.

The authorities may not be able to do much in these cases for many reasons, due to overlapping jurisdictions, and the fact that the courts have often been reluctant to intervene in a business transaction. The courts may in many cases consider that in circumstances where a supplier sold merchandise and was not paid, the failure to pay may be deemed to be a civil matter between the parties and not a matter for the criminal justice system. It is still important to file a claim which may prevent a reoccurrence of the situation to another victim.

3. Seek advise from a local attorney in the buyer’s jurisdiction.

If the buyer is still operating, local legal counsel may be able to take a civil action to recover something, but the seller must act as quickly as possible once it knows of what had transpired.

We hope the above is helpful to you. The most important takeaway from this is you must remember to protect yourself and your own interests. Be aware of who you are dealing with and limit your losses with a strict credit policy.

Aaron Tiger has practiced law since 1978. In addition to holding a law degree from the Université de Montréal he also earned a second law degree from the University of Ottawa where he graduated Magna Cum Laude in 1992. Aaron has completed the Canadian Institute of Arbitrator arbitrator’s course as well as the DRC’s 2004 Mediation & Arbitration Training Seminar. He is fluent in both English and French.

The present is not meant to constitute a legal opinion on any matter. Please contact your attorney in order to obtain advice regarding a specific legal situation

The DRC welcomes members of the trade to submit articles for consideration for future editions of Solutions.

Representatives from DRC will be at Fruit Attraction in Madrid, Spain on October 22-24. This will be DRC’s second visit to the event and as Trading Assistance Manager, Jaime Bustamante, notes: “Our 2018 presence generated good interest in DRC and our services as well as a number of member leads”.

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, and others, is a strategic initiative intended to expand membership and assist trading partners with a range of matters such as:

• quality and condition problems
• 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 professionals 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.

A presence at Fruit Attraction will extend exposure to DRC and its customized trading standards, member responsibilities and dispute resolution services to expand international membership.

Jaime Bustamante and Iryna Romanenko will be at Fruit Attraction and if you or your trading partners would like to meet with either of them, please reach out to confirm your interest and schedule a time to meet. ([email protected]; [email protected])

Fruit Attraction is organised by IFEMA and FEPEX, and this year will mark its 11^th edition and expects to host 1,800 exhibitors and 90,000 visitors from 135 countries.

 

¹ Source: DRC Membership statistics July 1, 2019

 

Continuing with our review of DRC Trading Standards’ articles series, we will now summarize the responsibilities of shippers with growers. Shipper’s responsibilities to their customers depend upon their contracts to sell, consign or joint account produce with dealers on terminal markets.  Shippers shall pay promptly for produce purchased and any deficits incurred on consigned shipments. A shipper who fails to perform any express or implied duty may be held liable for any damages resulting therefrom.  The shipper shall prepare and maintain records which fully and correctly disclose the details of their transactions in accordance with sections 3, 4, 5, 6 and 7 of DRC Trading Standards. These sections have been previously addressed in DRC’s Solutions Blog.

When a shipper enters into a joint account transaction with growers or others, the agreement between the parties should be reduced to a written contract clearly defining the duties and responsibilities of both parties and the extent of the shipper’s authority in distributing the produce.  If a shipper is at the same time handling similar produce not involved in the joint account transaction, a lot number or other positive means of identification shall be assigned to each lot of produce received in order to segregate and identify the various lots of produce.  If a shipper consigns all or part of the produce or employs the services of intermediaries such as brokers, his records shall show the results of these transactions, including the expenses involved and the names and addresses of these intermediaries. The shipper shall render a detailed and accurate accounting and pay promptly the net proceeds due to the joint partner.  The accounting shall disclose the status of all claims collected or filed with the carriers.

From the President

In February, DRC issued a report entitled Benefits to Canadians of Establishing a PACA-like Deemed Trust. That report was sponsored by DRC with collaboration from Agriculture and Agri-food Canada (AAFC), Innovation Science and Economic Development (ISED) and Canada’s fresh produce industry.  The paper was compiled and researched by an Ottawa economic research firm, RIAS Inc.

Collaborators committed to reviewing and editing information regarding a PACA-like trust for the Canadian marketplace. While much good work was done, the group also found instances of factual misinformation and miscommunication which were addressed. In most cases, data was reconciled and resolved. Unfortunately, though, resolving facts and data, and moving a file forward are not the same thing. On the positive side, there is general agreement that we have, in fact, tabled a “made in Canada” version of the PACA Trust that could be implemented in Canada which is compliant with Canada’s Federal-Provincial-Territorial (FPT) division of power.

What remains to be done is to convince government that the challenges and risks faced by our industry warrant protections not available to other unpaid suppliers of insolvent firms. Making that decision will not be done by the public service, it is a political decision to be made by elected officials.

DRC’s role is to advise, research and develop technical guidance demonstrating a compelling rationale with respect to adopting and implementing a financial protection solution. We are working closely with your trade associations to complement efforts through their lobbying activities.

In 2018, DRC implemented a Compliance Desk to ensure a single, standard operating procedure when unfavourable information pertaining to a member is brought to our attention.

The Compliance Desk focuses on issues relating to potential violations of DRC By-laws or DRC’s Trading Standards and Rules of Conduct. This may include slow payment, nonpayment, failure to pay an arbitration award or a member’s general unfair behaviour and conduct.

Some complaints brought to DRC, or even generated through its own investigative process as a result of external triggers, result in a Compliance Desk notification to the member advising that DRC has been made aware of a potential violation of their membership agreement with a request to respond within a 10 days period outlining their position regarding the matter at hand and, if appropriate, submitting supporting documentation. Once the member has either replied or failed to communicate, a recommendation regarding membership status is presented to the President for a decision. This may result in termination, expulsion, a requirement to post a bond or the matter may be determined to be resolved. Overall, Compliance Desk activities form a very small, but highly effective, part of DRC daily work and ensure that when issues occur, a positive, timely and remedial approach is taken.

The Compliance Desk process is based on fairness and transparency and ensures that members conduct their business in a way that does not contravene their member obligations or negatively impact other members and the broader trade.

CanadaGAP® is a program developed in Canada to promote Good Agricultural Practices (GAPs) for fruit and vegetable suppliers.

CFIA has recognized CanadaGAP as a model system for food safety preventative controls for the horticulture sector. Based on a complete CFIA-conducted comparison of CanadaGAP with the Safe Food for Canadians Regulations (SFCR), CFIA has determined that the food safety elements of the SFCR are addressed 100% by CanadaGAP program requirements. In other words, there are no food safety preventative controls contained in the SFCR that are not already covered by CanadaGAP program requirements.

CanadaGAP has also achieved international recognition and is officially benchmarked to the Global Food Safety Initiative (GFSI) for certification options B, C, and D (for repacking and wholesaling). GFSI is an international benchmarking scheme that evaluates food safety programs against a set of requirements agreed on by retailers, manufacturers and other stakeholders. https://link.spamstopshere.net/u/49159f5a/DsOmr72d6RGx-HsJh3soMg?u=http%3A%2F%2Fwww.mygfsi.com%2F

GFSI recognition of CanadaGAP was first granted in 2010, renewed in 2013 and re-benchmarking to the latest version of GFSI requirements (Version 7.1) was completed in June 2018.

Launched in 2008, the program has grown to include over 3,100 participating companies from across the Canadian and U.S. fresh produce industry. Audit services are available from two certification bodies operating across Canada and in the U.S. One certification body is also approved to offer CanadaGAP audits in Latin America.

CanadaGAP has maintained an updated a series of resources first published in 2017 on the CanadaGAP website. The purpose of these materials is to help CanadaGAP-certified companies with training employees, interpreting the technical requirements of the program, and understanding how certification can help them to meet regulatory requirements whether in Canada or the U.S. Among the resources available is “Information for Canadian exporters to the United States about the Foreign Supplier Verification Program (FSVP)”, which can be found at  www.canadagap.ca under Tools / “Food Safety Links”.

Today, many farm markets are open for business 12 months of the year but there is little question as we head into early summer and fall that these are the peak months for farm market operators and consumers alike.

As part of DRC’s outreach initiative and preparedness for the Safe Food for Canadians Regulations (SFCR), a series of self-assessments  was developed to assist persons in determining their need for a DRC membership to ensure compliance with the SFCR regulatory requirement. The SFCR requires that persons who buy, sell, import or export fresh fruit or vegetables be a member in good standing of the DRC, unless excepted by the regulation.

One of the business categories in the series is Farm Market Vendors & Other Direct to Consumers. When considering this category, it is important to begin with an established definition:

Farm Market Vendor: a grower or other person who conducts sales at a farm market, market stall or roadside stand directly to consumers.

In some instances, a farm or production unit may have a separate legal entity for marketing purposes. Depending on the nature of the transactions and the product’s final destination, a DRC membership may be required for the marketing entity, which could be a farm market.

The self-assessment includes a number of Q&A scenarios, including:

• I supplement my production and/or vendor sales with produce purchased from other producers located in a province other than my place of business or farm market/stall location. (DRC membership required)
• I supplement my production and/or vendor sales with produce purchased from other producers located within my province for sales in a province other than that of my place of business or farm market/stall location. (DRC membership required)
• I pack, ship and sell only fresh fruits or vegetables that I have grown myself as a single business entity at a farm market or roadside stand, as well as to another province and/or internationally. (DRC membership not required)

There are numerous business and marketing frameworks for farm markets or marketing entities. To access the self-assessment to determine if your farm market or marketing entity requires a DRC membership, visit https://t8t979.p3cdn2.secureserver.net/wp-content/uploads/2017/11/4_SFCR-DRC-Farm-Market-Direct-to-Consumers-Self-Assessment.pdf

If you want to know about the rights and responsibilities of product handled on consignment, this section of DRC’s Trading Standards can be used as your guide. These are the most important elements to take into consideration when members accept produce for sale on consignment:

• Reasonable care, diligence in disposing of the produce, and prompt sales of the product in a fair and reasonable manner are required
• The consignee may not employ other persons or companies to dispose of all or part of the product without authorization from the consignor
• A consignee is not authorized to sell product on consignment without the consignor’s consent
• Averaging or pooling of sales is not permissible unless written consent from the consignor is given
• An itemized account of sale must be submitted by the consignee. An accurate report of sales and expenses must be provided
• Expenses or charges must be supported by proper receipts or invoices
• A consignee is entitled to a commission which the percentage should have been previously discussed
• A consignee is not allowed to sell all or part of the product to a person or firm over which they have either direct or indirect control

Another important issue to consider is that, unless otherwise agreed to by the parties, the consignee is not required to request an inspection to demonstrate the condition of the product upon arrival. The only time the consignee is required to request an inspection is when disposing of more than 5% of a load in order to demonstrate that the product has no commercial value.

DRC Board of Directors and Annual General Meeting (AGM) was held May 23-24, 2019 in Québec City, Canada. DRC reported to members and the Board on key DRC priorities including DRC’s role under the Safe Food for Canadians Act, Membership, Marketing, and Trading Assistance. The Board also received updates from the Canadian Food Inspection Agency on Destination Inspection services and implementation of the new Safe Food for Canadians Regulations. During the AGM, the members elected Frank Pagliaro (Canada), Mike Stuart (USA), Bret Erikson (USA) and Gonzalo Aguilar (Mexico) as Directors.

The Board and Staff were also hosted by Patates Dolbec Inc. to a tour of their ultra-modern facilities. Patates Dolbec Inc. is a family business that, over the last 50 years, has earned itself an enviable reputation in the agri-food sector through hard work, a tireless passion for agriculture, and a dynamic team that brings experience and innovation to potato farming. The board was especially impressed by their Factory 4.0 which includes a robotic train and other cutting edge technology. On behalf of the Board a big thank you to Stéphan and Josée for an amazing tour.