Author: DRC

The DRC participated in a speakers panel at a recent CPMA Convention and Trade Show called “Produce Transportation—Elements of Success.” This topic raised many questions about how to avoid disputes. In light of these questions, the DRC has prepared some tips that can help you prevent disputes from happening and what to do if they do.

FREE ON BOARD (FOB) AND LESS THAN A TRUCKLOAD (LTL)

• In a FOB transaction, if the receiver’s instructions regarding the reefer unit’s temperature setting differ from those on the Bill of Lading, the driver is responsible for contacting the receiver for clarification. The same procedure applies to an LTL shipment, where the Bills of Lading could also show conflicting instructions for the reefer’s temperature settings.
• Temperature and commodity compatibility are very important when transporting more than one commodity, especially on LTLs, where there are multiple Bills of Lading and sometimes the commodities included are not fresh produce.

REEFER UNITS

• Reefer units are there to maintain temperatures, not to bring commodities’ temperatures down or up.
• The reefer unit must be set to “continuous mode” when transporting temperature sensitive loads such as fresh fruits and vegetables.
• Proper pre-cooling of the truck is a must to ensure the temperature is compatible with the commodity that is about to be loaded. The shipper must also ensure the truck has reached the recommended pre-cooling temperature prior to loading.
• Make sure your produce is loaded at a temperature very close to the indicated reefer set temperature. This will prevent the reefer unit from discharging undesirable temperatures as it tries to regulate the temperature inside the truck.
• A proper loading pattern is important to ensure a consistent flow of air at the required temperature throughout the trailer. Avoid loading pallets sideways, too high, or too close to the walls of the reefer, as doing so may prevent proper air circulation inside the trailer.

TEMPERATURE RECORDERS

• Both a temperature recorder and a reefer unit are temperature reporting instruments that help determine if there was a temperature issue during transit. What determines which recording reflects a more accurate picture of what transpired temperature-wise inside the trailer during transit can be decided by considering various factors such as the product pulp temperatures at the shipping point, loading pattern, number of pallets, air-chute condition, outside weather conditions, location of the temperature recorder, pulp temperatures upon arrival, and the product’s condition upon arrival.
• Temperature recorders must be secured properly and in a location within the truck to ensure the reading is accurate which is normally suggested to be placed on the back right pallet facing the doors. Do not secure them on the wall of the trailer. Make sure they are documented in the Bill of Lading; that they are recovered at the destination and document the location where it is during unloading. You can avoid certain issues by using a real time temperature recorder, which transmits data during transit and would not require to be found upon arrival.
• Finally, one of the most important things to consider is good communication. With many channels involved in the transportation of produce such as the carrier, transportation intermediary, shipper, and receiver, keeping an open line of communication can be a key factor in preventing problems.

Check out our article on the importance of Documentation and Communication. The most effective strategies to prevent disputes are often the simplest.

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If you have any questions about the article and would like to learn more, our team at the DRC is here to assist you. We value your inquiries and are eager to provide support. Click here to proceed.

Many questions crop up about consignment and price-after-sale (PAS) in the produce industry. Given the potential for confusion, we’ve outlined their distinct features and significance to ensure a clear understanding and prevent misinterpretation.

In a dispute, the requirements and burdens of proof for both transaction types are different, which means that the parties’ responsibilities and legal obligations may vary depending on the type of transaction.

Below, we explain the two types of transactions in further detail. But first, here are some of their similarities:

• They have no fixed price or return;
• Both tend to be used when trust in the commercial relationship has been established or when the produce fails to meet contract terms upon arrival.
• Lastly, certain default expenses may be deducted from the gross proceeds realized from the sale of the produce.

Let’s start by defining a consignment. It is an arrangement in which goods are left in the possession of another party to sell.

The consignor is the supplier and owner of the goods left on consignment. The consignee is the seller or agent who acts on behalf of the consignor to market the goods. The consignor continues to own the goods until the consignee sells them and the consignor receives money from the sale. The consignor and the consignee must discuss what expenses the consignor can subtract from the sales of the goods. Once the consignee receives the goods, they sell it at the best price possible on the consignor’s behalf and earn a commission from the sales.

The consignee is free to sell the product at a price that maximizes its value and is encouraged to strive for the best price possible. It is also advisable to prioritize the product and move it quickly. In a consignment transaction, Market News or Infohort may be used as a point of reference for sales or a minimum guaranteed price in their written agreement.

Once the goods are sold, the consignee is responsible for providing an itemized account of sales. This liquidation report must outline the price, amount, and date of each product sold, along with any agreed-upon expenses such as freight, warehousing fees, inspection fees, and commission. The consignee’s commission typically falls within the 8% to 15% range, sometimes more. However, this would have been established in a written agreement to prevent any misunderstandings.

Because of the trust factor between the consignor and the consignee, an inspection of the goods upon arrival is not necessary unless otherwise agreed. This trust is built on the understanding that the consignee will accurately report the sales and deduct the agreed-upon expenses, and the consignor receives the rightful payment for their products.
Consignment transactions come with certain restrictions for the consignee, unless otherwise agreed. The consignee cannot re-consign or sell the product on open price terms, and because of the conflict of interest, the consignee cannot sell the product to a sister company or a company with similar ownership.

PRICE-AFTER-SALE (PAS):

PAS is a type of sale where no price has been agreed upon, but instead, anticipate agreeing on a price after the buyer sells the product. If the seller disagrees with the price offered by the buyer, the buyer must be able to support the reason for their offer. If negotiations on a price are not successful, even though it is not required, an account of sales is the most common method to show how the product was handled. This usually involves showing a prompt and proper sale less expenses to demonstrate how the buyer arrived at the return offered. If the return does not at least yield market prices, it becomes the buyer’s responsibility to show why they could not sell the product at market prices.

Submitting an account of sales must contain the same elements as an itemized account of sales in a consignment transaction, except for a commission, which is only permissible if agreed upon. If there is no damage to the product, the expectation is that the product will sell close to or at prevailing market prices.

If, during a PAS transaction, the buyer receives damaged goods, the buyer must request a federal inspection to prove that the load was received in deteriorated condition providing support for sales below market prices. In addition, the results of the federal inspection report must show that the goods failed to meet contract terms or DRC Good Arrival Guidelines.

When Is a Federal Inspection Necessary?

A federal inspection showing the product has failed to meet contract terms or DRC Good Arrival Guidelines is necessary for consignment and price-after-sale transactions to show why the sales of the goods were below market prices. However, a federal inspection is mandatory when 5% or more of the produce received has no commercial value and requires dumping or donating. It’s important to note that a dump certificate is not the same as a condition inspection report showing the product’s lack of commercial value.

CORRECTING INTERCHANGED TERMS ON AN INVOICE:

Please remember that consignment and PAS are different trade terms and should not be used interchangeably. If you receive an invoice that swaps the two terms, contact the sender to have it corrected. In consignment transactions, ensure that the terms were discussed, understood, and agreed upon, preferably in writing. DRC’s Good Arrival Guidelines indicate that in the absence of an agreement on the terms of the transaction, the default would be FOB No Grade Good Arrival Guidelines. Lastly, if no price is agreed upon, the price defaults to market price.

If you have any questions about the article and would like to learn more, our team at the DRC is here to assist you. We value your inquiries and are eager to provide support. Click here to proceed.

DRC’s Trading Assistance Staff has contacted Thermo King to understand better how a reefer unit operates and to learn what they recommend as best practices for transporting fresh fruits and vegetables. Here’s a list containing valuable insights you can use when preparing your next load:

PRE-LOADING

✔ Pre-cool and store cargo at a desired temperature to remove heat.

• Confirm the product is at the desired temperature before loading.
• Refrigeration units are designed to maintain temperature, not to change it.

✔ Run Reefer Unit 20 Minutes in “High Speed Cool”.

• To remove residual trailer/body heat.
• Perform Automatic “Pre-Trip” to confirm proper unit operation.
• Unit: MUST” pass test.
• If Auto Pre-Trip fails, follow your company’s prescribed procedures, or contact your local dealer for assistance.

✔ Set unit controller to the desired temperature.

• Verify the settings after changing it to confirm that it is correct.

✔ Select Mode of Operation.

• “Continuous Run” or “Cycle Sentry”. For fresh fruits and vegetables, always run the unit on the “Continuous Run” mode.

✔ Pre-cool trainer and truck body.

• To desired temperature to remove residual heat.

LOADING

✔ Turn the unit “OFF” while loading.

• To minimize heat and humidity entering trailer / truck body.
• Verify product is at proper temperature.

✔ Load Product quickly and efficiently.

• Provide adequate air circulation around and through the entire load.

✔ Close doors and start unit.

• Re-confirm Continuous Run operating mode and set point temperature.

✔ Strip curtains.

• Always recommended in distribution.
• Keep conditioned air in and outside air out.

✔ Door openings.

• Minimize the number door openings and their duration.
• Ambient air migrates in, and trailer / body air migrates out.

TRANSPORTING

✔ Proper airflow is CRITICAL.

• Poor air distribution causes product deterioration, even with adequate unit capacity.
• Obstructions cause poor air flow and product hot spots.
• Proper air circulation: Unobstructed paths on all 6 sides of load.

✔ Good airflow has 4 Key Factors:

• Use three-way block pallets to help provide adequate air flow.
  • Do not obstruct floor under cargo. It prevents air from returning to the unit.
• Slip sheets and hand stacking are not optimal for temperature management.
  • Inside of trailer / body must be clean to prevent contamination:
  • T-Floor must be free of obstruction.
  • Debris can block air circulation.
  • Debris can be pulled into unit, resulting in insufficient cooling.
  • Use loading patterns that provide adequate air pace.
• Exercise Caution!
  • Provide adequate air space between top of the cargo and ceiling.
  • Products should be loaded evenly to avoid air flow restrictions.
• Do not block unit evaporator air inlet (return air). It restricts air flow.
  • Do not load product tight against unit, walls, or doors.
  • Do not load product to ceiling. It causes air to short cycle.

VERIFICATION AND FURTHER RECOMMENDATIONS

✔ Verify Pre-cooling.

• Pre-cooling product and trailer / body to desired temperature prior loading.
• Position trailer / body tight against dock seals when delivering. Supervise opening and closing of doors.

✔ Do not operate unit with doors open.

• Until will blow conditioned air out and draw outside air in.

✔ Keep doors closed whenever possible.

• Keep door openings few and fast. Cold stays in, heat out.
• Turn unit “off” before opening doors.
• Box temperature recovery time is significantly increased by the entry of outside air.
• The greater the difference between set-point temperature and actual box temperature, the longer it will take to recover back to set-point.

✔ Use strip curtains.

• Strip curtains reduce internal and external air exchange. This helps to limit interior temperature changes.

✔ Non-refrigerated docks:

• Turn refrigeration unit “off”. Minimize product exposure to ‘improper temperature areas.’
• Maintain an effective seal between trailer / body and dock.

✔ Refrigerated docks and refrigerated cross docks:

• Back trailer / body tightly against docks seals before opening doors.
• Minimize door openings.

✔ Cross docks distribution:

• Move product quickly. Minimize the time it will be exposed to ‘improper temperature areas.’

✔ Ground delivery for:

• Supermarkets
• Convenience stores
• Restaurants
• Direct Store Delivery

✔ Turn refrigeration unit ‘off.’

✔ Minimize door openings.

✔ Use strip curtains.

The information in this article was provided by Randy Green of Thermo King Eastern Canada, Ontario Division.

Contact: Randy Green at [email protected]

Thermo King, founded in 1938, is the world leader in manufacturing transport temperature control systems for a variety of mobile applications including trailers, truck bodies, buses, shipboard containers, and railway cars. Thermo King products are backed by a nationwide dealer network which provides expert factory-trained service and a complete line of genuine and competitive parts.

While the DRC has helped resolve disputes worth millions, we are equally committed to counselling and educating our members on sound business practices to prevent conflicts. Our dispute resolution model mitigates risk and fosters trade among our members. We provide a variety of easily accessible resources for dispute prevention, such as confidential consultations, the DRC Help Desk, seminars, guest speaking opportunities, fact sheets, the Solutions Newsletter, and more.

Did you know the most effective strategies to prevent disputes are often the simplest? They are so straightforward that they can be summed up in two words: COMMUNICATE and DOCUMENT. These two actions, when consistently practiced, can have a profound impact on your business operations. They enhance clarity, prevent potential conflicts, and pave the way for smoother transactions.

Recognizing the importance of communication and documentation is one thing, but putting it into practice is another. The DRC has developed a practical example – a Contract of Sale to support you. This tool is designed to help you apply these best practices in your own transactions, ensuring clarity and transparency and laying a strong foundation for dispute prevention.

If you have any questions and would like to learn more, our team at the DRC is here to assist you. We value your inquiries and are eager to provide support. Click here to proceed.