Author: DRC

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://fvdrc.com/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.

Q: We received a load of mixed vegetables from one shipper and only a portion of the load was showing freezing damage. The rest of the product pulped adequate temperatures and had no indication of freezing damage.  How is it possible that the pulp temperatures can vary so much within the trailer?

A: To understand how this could have happened, we begin by reminding you that trailers are responsible for maintaining temperatures during transit. They are not meant to cool down or warm up the product. Three main reasons come to our mind that could cause freezing damage to only a portion of a load: a) Product loaded warmer than the reefer unit set temperature; b) bad loading pattern blocking the airflow or blocking the air chute; or, c) poor trailer insulation or extreme weather conditions.

a) Product loaded warmer than the set temperature

The BOL indicates temperatures are to be maintained at 33^oF. The product at loading is pulping 38^oF; the freezing point is 30.5^oF. The reefer is set at 34^oF degrees on continues mode. When this occurs, the return air sensor is going to start picking up the temperature of the product (38^oF) and the message to the reefer unit would be that it needs to lower the discharged temperature immediately to lower the temperature in the trailer. Therefore, the product exposed directly to the discharge air from the chute may exhibit freeze damage because the discharged air temperature could be lower than the freezing point of the product.

b) Bad loading pattern blocking the airflow or blocking the air chute

A loading pattern that does not allow the air to circulate properly may result in the return air sensor reading temperatures above the reefer unit set point, therefore sending the message that cooler air needs to be discharged. Normally a blocked air chute will result in warmer pulp temperatures at the front of the truck and cooler pulped temperatures at the back of the truck.  This is because as the front of the truck begins to warm up, the reefer unit believes it needs to expel colder air, and thus the product nearest to the end of the chute gets chilled.

c) Poor trailer insulation or Extreme Weather conditions

Product loaded too close to the walls on a trailer with poor insulation may create freezing damage to pallets nearest to the sides of the trailer. This could be the result of harsh temperatures during the winter or hot outside temperatures during the summer. Similar to the previous example, to compensate the reefer unit will usually discharge cooler temperatures or warmer temperatures than the set point in order to correct the problem.  For instance, if a truck travels through the northern US or Canada during the winter and it is not properly insulated, there is a strong likelihood that the pallets closest to the exterior walls could experience some freezing damage. Conversely, despite proper trailer insulation, sometimes extreme weather conditions such as severe cold or intense heat may influence the temperatures inside the trailer.

Q, We bought a load of watermelons under FOB DRC Good Arrival terms. The load was received on a Thursday evening and on Friday morning we contacted the shipper to let him know that we were requesting a CFIA inspection. The CFIA inspection was performed on Monday. The results of the inspection show the product failed to meet DRC Good Arrival by 1% and we have already sold a portion of the product. After several discussions with the shipper, they are only willing to offer a small price adjustment. What would be DRC’s advice on this matter?

A.Jaime Bustamante: First of all, you took the correct actions by informing the shipper and requesting the inspection in a timely manner and proceeded in accordance with DRC Trading Standards. While we understand that you are not in control of how long it takes to get the product inspected, as a FOB buyer, this time delay falls under the buyer’s responsibility. Unfortunately, you have three elements against you in trying to claim damages against the shipper:

1. Timely Inspection – The inspection was performed four days after arrival.
2. DRC Good Arrival Guidelines- The inspection report indicates the product failed only by 1% which could mean that if inspected upon arrival, the product could have met DRC Good Arrival tolerances.
3. Representative Sample – Because a portion of the product was not available for inspection, it needs to be determined if the amount of product inspected is considered a representative sample. The rule of thumb for product inspected to be considered a representative sample is: “more than 75% of the load needs to be available for the inspection”.

As a side note, by receiving product and selling a portion of it prior to getting it inspected, you have lost the right to reject that product. You can offer the shipper to move the product out but, they will be under no obligation to accept it. Unloading the product for any other purpose than an inspection is an act of acceptance.

We would also like to point out that, in our experience, a lot which fails DRC Good Arrival Guidelines by 1% four days after arrival would almost surely have made good arrival if inspected the day it arrived.

The common definition of a broker is “an agent who negotiates a contract of purchase and sale”. According to DRC Trading Standards, a broker who fails to perform any specification or duty in connection with a transaction may be held liable for damages happening as a result thereof. What are those specifications or duties?

• Fully inform the parties involved in the transaction of all the terms and conditions proposed.
• Submit to the seller and buyer a proper Memorandum of Sale or Confirmation of Sale, including all of the essential details of the agreement such as the INCOTERM, product description, price, brokerage fees or commission, payment terms, and any other detail.
• The Memorandum of Sale or Confirmation of Sale must identify the party who engaged the broker. If not identified, it would be assumed the broker was engaged by the buyer.
• The broker will be entitled to payment of brokerage fees by the party who engaged them to act as a broker.
• A broker may not be entitled to brokerage fees if there has been a failure to perform its duties.
• A broker does not guarantee the performance of the contracting parties but is entitled to receive prompt payment of brokerage fees when a valid and binding contract is negotiated.
• Unless specifically agreed, the broker is not responsible for payment to the seller by the buyer.
• A broker who acts in a dual capacity, either as a true broker or as a buying broker, must clearly disclose this status prior to completion of the contract.
• A broker has no authority to file a claim with a carrier. However, if the broker comes into possession of valuable information related to a carrier claim, the seller/buyer should be advised promptly of the information.

It is important to understand that this definition is not meant to cover the rights and responsibilities of a transportation broker.  However, there are some similarities and for those in logistics or who are transportation intermediaries, we suggest a review of Section 3 of DRC’s Transportation Standards.

Recently DRC had the pleasure of exhibiting at the CPMA’s 94th Annual Convention and Trade Show in Montréal, Québec from April 2-4, and the 5^th annual Viva Fresh Expo which took place in San Antonio from April 25-27.

Thank you to everyone who came by the DRC booth at these events or who took time to speak with us on the trade show floor. It was great to see many familiar faces, catch up with DRC members and meet new contacts. As always, we appreciate the many questions posed by both members and non-members. A common theme among the many discussions was the Canadian regulatory changes that came into force in January 2019.

Both shows offered great educational opportunities. CPMA’s Learning Lounge and business sessions were informative and thought provoking and the Educational Sessions at Viva Fresh generated numerous discussions on issues affecting the produce industry. It is always insightful to hear firsthand different perspectives and concerns based on an individual’s real-life experiences and position in the produce supply chain. Such opportunities inspire us to continue to grow, make improvements and enhance the manner in which we assist members.

As we continue to attend events we look forward to hearing from our members and potential members as we work to enrich and add further value to the range of services DRC provides to industry.