Author: DRC

DRC is preparing to lead an industry initiative to review Canada’s grade standards for the fruits and vegetables covered by the (CFIA) Canadian Grade Compendium Volume 2 – Fresh Fruit or Vegetables.

As is the case with all grade standards documents, the Compendium is the lexicon, or recognized language for describing fruit and vegetable commodities and associated defects.

A common lexicon is necessary in order for federal inspectors, buyers, sellers and others to communicate in a common language when they are separated by geographic distances.

DRC will work with industry stakeholders such as the Canadian Horticultural Council, the CPMA and others throughout the 18-month project to ensure fulsome and inclusive discussions as recommendations for change are developed. Review teams will also consider the corresponding US grade standards as part of the review. The Canadian and US fruit and vegetable grade standards are foundational to the DRC’s Good Arrival Guidelines and Trading Standards, which serve to establish liability in a mediation and arbitration process.

The overall objective is that in due course, DRC will take on responsibility for hosting the Compendium and coordinating future updates through a service agreement with the CFIA.

The provision of Incorporation by Reference (IR) within the new Safe Food for Canadians Regulations gives rise to the opportunity for the initiative.

Q. We are having a friendly discussion with our strawberry customer about a load which arrived in Toronto, ON with marginal problems.   We both agreed the berries were sold FOB Good Delivery, and we further agreed the berries would not have more than 1% decay. The berries arrived at the destination pulping warm with 2% decay, but within the DRC Good Arrival Guidelines published on your website. We agree the berries did not meet our agreement and this is a transportation claim based on the warm temps.  The carrier has taken the position that while temperatures were a bit warm, the product made good arrival and he will not accept any claim. What is DRC’s position on this matter?

A.Jaime Bustamante. DRC’s Rules and Regulations are the default rules when the contract between buyers and sellers is silent regarding some of the terms and conditions. In this case, there was an agreement between the parties to modify the strawberry tolerances, specifically the decay part, from 3% total decay to 1% decay. Therefore, there is no question the product failed to meet contract terms upon arrival. In addition, it appears all the parties, including the carrier, agree there is a breach of contract due to the product being subject to warmer than desirable temperatures during transit. Technically, for a receiver to make a successful claim against the shipper, the receiver needs to prove that transit time and temperatures were satisfactory. It is possible that the warm temperatures during transit contributed to the deterioration of the berries, and thus made it fail to meet contract terms. Therefore, because transit temperatures were not satisfactory, this would not be a shipper’s claim.

The carrier’s argument that the product met DRC Good Arrival Guidelines is valid only when the tolerances indicated in the buy and sell contract are not modified. If the product had met the 1% decay tolerance, the carrier would not be at fault because the product would have met the buyer’s and seller’s modified Good Arrival terms even when exposed to warmer than desired temperatures.

The DRC is happy to welcome Tammy McDowall to our team as Manager, Communications and Membership. Tammy brings over 15 years of management experience. This includes spending a decade working in the Canadian healthcare administration and management field, comprising eight years working for Canada’s largest practice management company.  Some of her experiences include internal policy and international project development. Through all these experiences, Tammy has learned to engage others and excel in her ability to build relationships and rapport with individuals at all levels of an organization.

Despite her success in the healthcare field, Tammy has always had an interest in agriculture as she spent many of her childhood summers in the Caribbean with her grandmother learning to tend to a wide variety of fruit trees and animals on the family property.

Tammy went to the University of Ottawa and studied Criminology and Philosophy.  She has a wide range of interest, and in her spare time, she also enjoys going to the different museums and galleries around Ottawa, hiking in nature and cheering on her favourite sports teams.

The produce world is constantly changing and to fulfil our mandate, DRC changes with it.  Many of you have been members since we opened our doors for membership in 1999.   Much has changed since those early days.

The most current By Laws and Operating Rules printed February 8, 2019 are found on the DRC website.   We urge you to review those regularly as the current By Laws and Operating Manual found on our website are the ones which govern your membership rights and obligations.

Your DRC membership is more than the contract, by laws, and operating rules in force when you first joined the DRC.   Changes are done with complete transparency, including proper notice, approval by the Board of Directors and by the membership.

Minor changes are discussed and when appropriate approved by the Board.   More significant potential changes are brought to your attention via a Notice of Motion in advance of the Annual Meeting of members and are voted on at the Annual Meeting.  The procedures for these changes are set forth in the Corporation’s By-Laws which are approved by Corporations Canada.

Some of these changes have been to modernize and clarify, such as the recent Dispute Resolution Rules. Some have been in response to regulation, such as the Canada Not-for-profit Corporations Act, which triggered for example changes to our former membership categories.   Others have been in response to member requests and consultations, such as the change to the definition of fresh fruits and vegetables in 2008.

Our monthly newsletter “Solutions” also highlights changes and potential impact of changes approved by the Board of Directors and the membership.

Further to our previous article in which we discussed the Section 1, General Rules of Conduct and informed that we will be summarizing DRC’s Trading Standards, this time we will address Section 3, General Records, Section 4, Documents to be Preserved, Section 5, Receiving Record, Section 6, Sales Tickets/Invoices. And Section 7, Lot numbers.

All these sections specify what documents must be preserved and for how long period of time.

Section 3, General Records indicates that all the documents pertaining to a transaction must be kept for a minimum period of two years and must be available if required. It is a DRC member’s responsibility to maintain records that will disclose essential facts regarding the transactions.

Section 4, Documents to be Preserved lists all the general documents that must be preserved such as Bills of Lading, Purchasing Orders, Invoices, Manifests, Receipts, Confirmation of Sales, Memorandums of Credit, Account of Sales, to name a just a few.

Section 5, Receiving Record states that all receivers shall keep in order of receipt a record of all produce received and must clearly show arrival dates and the carrier’s, seller’s or consignor’s information.

Section 6, Sales Tickets/Invoices specifically mentions what information Sales Tickets/Invoices must contain: serial numbers, date of sale, purchaser’s information, seller’s information, description and price of the commodity, lot numbers, etc. In addition, this section states that DRC has the right to request a copy of the sales ticket(s) in case of a dispute.

Section 7, Lot Numbers. An identifying lot number shall be assigned to each load. The lot number is an excellent method to preserve the identity of a load.

In our experience, having all these documents well organized and easily available for a period of two years, can save you time and money in the event of a dispute. Remember that a Notice of Dispute can be filed 9 months from the date the dispute arose and not having some of these documents may result in losing a claim.

With the coming into force of the Safe Food for Canadians Regulations (SFCR), from a regulatory perspective, the COS document has become obsolete. This form has been extremely useful to CFIA for inputting information, such as DRC membership number, for those companies still doing paper customs clearances instead of electronic clearances.

The Integrated Import Declaration has been updated to reflect the new SFCR changes and CFIA is asking that importers to use electronic systems for customs clearances.

For those of you still performing paper-based clearances, DRC is working with CFIA to update any required forms, but it is taking some time. We will give you more information as it becomes available. In the meantime, you may want to visit the CFIA website (www.inspection.gc.ca) and learn more about electronic customs clearances to save you time and effort.

Q. After an unsuccessful informal mediation process, our company is moving to arbitration for the first time. Could you give us some guidance on how to present our case so that we don’t feel the need to hire an attorney or someone else to represent us?

A. Jaime Bustamante. First, let me begin by saying that depending on the complexity of the case, it may not be a bad idea to hire someone with experience such an attorney, to represent you. However, you should be aware that with arbitration, as with any litigation before the courts, attorney fees are not necessarily awarded as part of the settlement. And if they are awarded to the prevailing party, it may not be the full amount.

At the beginning of the formal process, the DRC will provide you with a Statement of Claim (SOC) template which includes detailed instructions on how to present your case. Clarification will be provided by staff as required. Here’s a brief description of the information required in the Statement of Claim:

1. A demand that the dispute be referred to arbitration. This demand is already included in the SOC template mentioned above.
2. The names, addresses, telephone number, and email of the parties. Make sure to include in your SOC the name of a responsibly connected person to the company such as the owner, shareholder, director, etc. Most of the times a sales person is not a responsibly connected person.
3. A description of the claim and an indication of the facts supporting it. In order to have a better understanding of your claim, supporting documents (exhibits) such as invoices, B.L., correspondence, inspections and other documents, should be label as ”Exhibit A”, “Exhibit B”, etc. By labelling the exhibits, it becomes easier for the reader to understand the claim. In an Expedite Arbitration there is no hearing, therefore, it is very important the arbitrator can understand and follow the exhibits to be presented.
4. The relief or remedy sought and the amount claimed. Don’t forget to include the arbitration fees, interest, and attorney fees as part of your remedy.
5. The Statement of Claim must be delivered by fax/email and mail to the DRC and the Respondent. DRC’s Dispute Resolutions Rules required you to send two (2) copies of your SOC.

Once the informal mediation process ends, the documents exchanged during that stage are sealed and remained confidential. Not even the arbitrator will have access to the informal file. However, this does not mean that you can’t summarize the information gathered during the informal procedure and include it in your SOC.

Finally, be reminded that the information you provide in support of your case will have an impact on the arbitrator’s decision and award.

The recent coming into force of Canada’s Safe Food for Canadians Regulations (SFCR) by CFIA has generated some calls and confusion about the need for a CFIA Food Licence if you have or are getting a DRC membership. Under the Safe Food for Canadians Act (SFCA) and Safe Food for Canadians Regulations (SFCR), many food businesses require a food licence to carry out activities with respect to food.

The SFCR specifies whether you need a licence based on the activities you conduct, and not based on the type of business.

Canada’s new SFCR has two components: Food Safety & Traceability, and Trade & Commerce.

A DRC Membership is required for buying, selling, conveying produce from one province to another or importing/exporting into/from Canada. This covers the Trade & Commerce components of the SFCR.

So, even if you have a DRC membership you may still need a CFIA Food Licence to cover the Food Safety & Traceability component. We are not experts on who needs a Food Licence and who does not. My CFIA can help you with that. However, as a minimum we can tell you that if you are importing fresh fruits and vegetables into Canada you will need a Food Licence. The CFIA has excellent tools to help you determine if you need a food licence.

If you need any help figuring things out or who to contact, call us at DRC. If we don’t have the answer, we can point you in the right direction.

An inspection report provides key information in establishing details in a dispute. The timeliness of the inspection is also key.

Q: We received a load of avocados and noticed some quality problems upon arrival. We called for a federal inspection and we were advised that no one was available to conduct the inspection either that day or the following day. We immediately advised the shipper of the situation and  asked  if a private inspection would be acceptable due to the circumstances. This was not acceptable to the shipper. We waited for the federal inspection, but we saw an opportunity to sell 30% of the product in the meantime. The results of the federal inspection indicated that the product failed to meet DRC Good Arrival Guidelines. We offered the shipper payment in full for the product not inspected and provided an account of sales for the product that failed to meet Good Arrival. The shipper is requesting payment in full for all product because the inspection was not performed in a timely manner. We don’t think we should be held responsible for failing to get a federal inspection performed in a timely manner when the federal inspection was requested in a timely manner.

A: Jaime Bustamante. This is a situation that commonly happens when product arrives early in the weekend (e.g. Friday evening or Saturday morning). There is no reason not to request a federal inspection over the weekend. Don’t wait until the next available working day to request the inspection. According to DRC’s Trading Standards, when receiving product in deteriorated condition, the receiver’s obligation is to request the inspection within 8 hours when the product arrives by truck or 24 hours when it arrives by rail or sea. However, DRC’s Trading Standards are silent regarding when the inspection must be performed because that is outside the control of the applicant. You were correct in calling the shipper to inquire if they would consent to a private inspection as provided in the DRC Good Inspection Guidelines when a federal inspection is not available. Even when the shipper refuses to agree to a private inspection, we recommend that you call for that private inspection to protect yourself. If the results of the private inspection are similar to the results of the federal inspection taken later, you will have more evidence in your favor when you talk with your client to amicably resolve the matter. It is important to remember that all parties have a responsibility to minimize losses. It is not in anyone’s best interest to leave the entire load unsold for an extended period of time while waiting for a federal inspection. Your offer to pay full price for 30% of the uninspected product is reasonable under these circumstances.

We understand the frustration of sometimes not getting a federal inspection performed within 24 hours, but you should also understand that the shipper cannot be held responsible for this situation either. On an FOB sale, the receiver is responsible for everything that happens to the product after the truck leaves the shipper’s dock, including not having an inspection performed in a timely manner.

Another important factor to determine liability, is the results of the inspection. Product inspected two or three days after arrival that barely fails to meet DRC Good Arrival Guidelines could have met Good Arrival if inspected two or three days earlier upon arrival.

We know how tedious it can be to read rules or industry guidelines. Sometimes, a company finds out about a certain rule or change of rule once they have failed to comply with a specific rule or requirement. Over the coming months we will summarize DRC’s Trading Standards through a series of articles based on the Table of Contents – from start to finish. But first, be reminded that DRC’s Trading Standards are the default rules when the terms of a transaction are not agreed upon.

DRC Trading Standards Section 1: General Rules of Conduct. This section establishes the expected behavior from DRC members in connection with any transaction whether your client or supplier is a member or not. This is a summary of the actions prohibited in connection to any transaction:

• Unfair, unreasonable, discriminatory or deceptive practices are not allowed.
• Reject or fail to deliver product without reasonable cause.
• Failure of any carrier or transportation intermediary to pick-up or deliver in accordance with the terms of the contract without reasonable cause.
• Discard, dump, or destroy product without reasonable cause.
• Fraud or misleading statements in connection with any transaction. In addition, failing or refusing to truly and correctly account for product or, make full payment promptly.
• Misrepresentation by any player in the industry regarding grade, quality, quantity, labeling, etc., of any commodity.
• To issue any payment instrument without sufficient funds to allow that instrument to clear normal banking channels.

The DRC has created a Compliance Desk to attend to any of the above-noted behaviours. Members need to be aware that any one or more of these prohibited and unfair acts may also lead to membership disciplinary actions.

Stay tuned for upcoming Solutions Blog articles where we will be summarizing additional sections of the DRC Trading Standards.