Author: DRC

We are continuing with our series of articles summarizing past DRC arbitration decisions. This will help members understand how the DRC Dispute Rules and Standards (R&S) apply in a dispute. R&S states that all DRC arbitrations are private and confidential. As such, the names of all parties, including arbitrators and companies, are not included. A reminder that DRC’s sole role is as administrator of the arbitration process; DRC does not participate in any hearings. Therefore, this summary is based solely on the arbitrator’s written decision and may not reflect important information shared with the arbitrator through written briefs or verbal testimony.

Case: DRC File #13145 – Parties Domiciled – United States and Canada

Facts:

• On or about March 8^th, 2003, the Claimant sold and shipped to the Respondent a load of 1,344 boxes of red peppers, which included X brand (medium and large), Y brand (medium and large), and Z brand (medium).
• According to the invoice, the Claimant sold their red peppers FOB at USD$12.95 per case plus USD$23.50 for a temperature recorder for a total invoice price of USD$17,428.50.
• On March 13^th, 2003, the product arrived at its final destination, and a Canadian Food Inspection Agency (CFIA) inspection was requested and performed the same day, showing the following results:

448 Cartons – Medium, X Brand
1% Scars, 7% Bruises, 1% Decay of Edible Portion, 9% Soft and/or Shrivelled.
224 Cartons – Large, X Brand
8% Bruises, 1% Decay of Edible Portion, 8% Soft and/or Shrivelled.
280 Cartons – Medium, Z Brand
17% Bruises, 4% Soft and/or Shrivelled.
98 Cartons – Medium, Y Brand
1% Scars, 4% Bruises, 2% Decay of the Stem, 2% Decay of Edible Portion, 8% Soft and/or Shrivelled, 2% Sunken Discolored Areas.
294 Cartons – Large, Y Brand
1% Scars, 6% Bruises, 1% Decay of the Stem, 3% Decay of Edible Portion, 7% Soft and/or Shrivelled.

• On March 21st, 2003, the Respondent provided an account of sales to the Claimant showing a total of USD$12,248.09 and CAD$19,229.50, deducting a total amount of USD$4,792.92 in expenses (handling, freight, inspection fees and entry fees) for a total return to the Claimant of USD$7,455.17.
• The Respondent paid the Claimant the amount shown as a return amount on their account of sales. The Claimant disagreed with the returned amount arguing that the returned amount was unreasonably low.

Issues: Deciphering whether the Respondent’s return was reasonable.

Arbitrator’s Analysis/Reasoning
The arbitrator found no dispute between the parties concerning the original contract terms, nor did the Claimant question that the inspection results revealed a breach of the warranty of suitable shipping condition by the Claimant. The Claimant argued, however, that the resale prices reported by the Respondent are too low, considering the state of the peppers and general market conditions. Both parties addressed whether the contract terms were changed by mutual agreement; therefore, the arbitrator concluded that the original contract terms remained the same. Therefore, the arbitrator decided it was appropriate to determine the amount of damages the Claimant was entitled to recover from the Respondent for breach of contract.

The usual formula for determining the amount of damages is to determine what the receiver of goods failing to meet contract terms would have gotten for the goods at the time of delivery (generally based on government market news reports), less what the receiver realized from a prompt and proper resale of the damaged goods. In this instance, the Arbitrator used as the most reliable source of market price quotes The International Report Fresh Fruit, Vegetable and Ornamental Crops [2]; Volume XII – Number 21, which showed prices for Large Red Peppers on the Montreal market on March 14th, 2003, ranging from US$22.50 to US$27.66. The Claimant refers to reports purportedly issued by the “International Office of Market News” but does not provide copies of those quotes or any information about that company. The Arbitrator utilized the quotes from March 14th, as the inspection was completed at 1:10 PM on the 13th, after most sales would have been made for that day. The Respondent’s accounting of sales shows that sales of the peppers began on March 14th; hence this date most closely meets the definition of “at the time of delivery.”

The Claimant describes the peppers at issue as “choppers.” Such peppers are not generally considered to be of particularly high quality and do not normally bring prices to the top of the market. In addition, the market quotes are for large peppers, and 826 cartons of the peppers at issue were medium-sized. For the above reasons, the Arbitrator utilized USD$22.50 as the measure of the value that conforming goods would have had at the time of delivery. This gives a value of USD$30,240.00 for the 1,344 cartons of peppers.

The best measure of the actual value of the peppers at issue is the result of a prompt and proper resale. Respondent’s accounting shows that sales began promptly on March 14 and continued daily until March 20th. The prices realized ranged between CAD$17.50 and CAD$12.00. While these prices are equivalent to US$11.15 and USD$7.64, the Arbitrator found no evidence of mishandling, given that the product failed to meet the suitable shipping warranty. Typical evidence of mishandling would be delays in initiating sales, large quantity sales at extremely low prices or extremely long sales periods. None of these conditions appear here. Therefore, the Arbitrator found that the value of the peppers at issue was the gross proceeds reported by Respondent, USD$12,248.09.

The Respondent’s basic damages from the Claimant’s breach of contract are the value of conforming goods (USD$30,240.00) less the actual value of the goods at issue (USD$12,248.09), or $17,991.91. In addition to this amount, the cost of the inspection (USD$132.99) is incurred as a consequence of the breach of contract. The total amount of damages is then valued at US$18,124.90. As its damages exceed the original amount of the invoice, the Arbitrator found no amount due to the Claimant from the Respondent.

As a side note, even if the Arbitrator had used the International Office of Market News quotes from March 10th – 14th, 2003, as urged by the Claimant, the Arbitrator would have arrived at the same result. Utilizing the lower quote of USD$16.66, there would be even less reason to question the Respondent’s sales results, and its damages would total USD$10,275.94. This amount, deducted from the invoice total of USD$17,404.80, would leave an amount due of USD$7,128.86. The Respondent has already paid the Claimant USD$7,404.80.

Arbitrator’s Decision
The Arbitrator found that the Claimant failed to uphold the burden of establishing that the Respondent’s returns were unreasonably low. Therefore, the Arbitrator decided to dismiss the claim.

DRC Comments
It is not uncommon to find cases where there is no disagreement between the parties regarding the deteriorated condition of the product upon arrival, provided a timely government inspection was performed confirming a breach of contract. The disagreement is normally linked to the return offered by the buyer, which may or may not include an account of sales showing how the product was handled.

This arbitration decision highlights the importance of a buyer/receiver submitting an account of sales showing the date, price and amount sold for each lot and the expenses associated with the breach of contract, which would be the freight, brokerage, inspection cost and any other expense agreed upon.

Without an account of sales or a proper account of sales, an arbitrator may have to use a different method to determine what a fair return could be.

The arbitrator concluded that based on the timely inspection showing a breach of contract, an itemized account of sales, and available market prices, the return presented by the respondent was reasonable.

For more information regarding the sections of DRC Trading Standards applied to this dispute, refer to the following sections:

DRC Trading Standards:
• Receiver Duties – (Fruit and Vegetable Dispute Resolution Corporation Trading Standards s.10 (2)(b)(ii))
• Back to basics: Account of Sales – (https://fvdrc.com/solutions/back-basics-account-sales/)

Welcome New Members

 

From March 15 until April 15, 2023, DRC welcomed the following new members:

 

1383408 B.C. Ltd.	BC	Canada
14301366 CANADA INC.	BC	Canada
CAPPADOCIA IMPORT TURKISH FOOD INC.	AB	Canada
CHIYUE FOOD PROCESSING INC.	ON	Canada
ELISUR ORGANIC S.A.C.	Chanchamayo	Peru
FERME LISE CHARBONNEAU INC.	QC	Canada
FREITAS BROS. FARMS, LLC	CA	United States
FRESHBOUND TRANSPORTATION & LOGISTICS INC.	ON	Canada
FRUTOS LA AGUADA S. A. (Also d/b/a La Aguada)	Osorno	Chile
HARVESTDANCE INTERNATIONAL INC.	ON	Canada
KOMERA INC.	MB	Canada
LE GROUPE D’AFFAIRES LR INC.	ON	Canada
MAYA FRESH HARVEST, LLC	TX	United States
PACIFICO FOOD DISTRIBUTORS LTD.	BC	Canada
PRIME TROPICALS OF AMERICA LLC.	TX	United States
RALPH’S PRODUCE & JUICE LTD.	BC	Canada
SEALINE TRADING LIMITED	BC	Canada
SHAHG TRADERS INC. (Also d/b/a ShahG Traders)	ON	Canada
SK ORGANICS FRUITS S.A.C. (También haciendo negocios como SKO Fruits)	Callao	Peru

 

DRC Membership: change in status

 

As of April 15, 2023, the following organizations no longer hold a DRC membership:

 

12322145 CANADA CORPORATION. (Also d/b/a Importation Tropicale KJ)	QC	Canada
9369-8827 QUEBEC INC. (Faisant également affaire sous Méditerrannéene de Négoce)	QC	Canada
ANTELOPE DISTRIBUTING, INC.	CA	United States
BARLIN ENTERPRISE CANADA LTD.	BC	Canada
BELLE MÉDITERRANÉE (A d/b/a of 8381895 Canada Inc.)	QC	Canada
BHANDARI FOOD TRADING INC.	ON	Canada
CURATION FOODS, INC.	CA	United States
D FARM (Faisant également affaire sous 9197-8577 QUEBEC INC.	QC	Canada
EXCEPTIONAL FUTURE LLC. (Also d/b/a Exceptional Future)	CA	United States
FRUTERA EUROAMERICA II SPA	Región Metropolitana	Chile
INIAGRIH INC.	QC	Canada
J. FRANCO BUSINESS S.L. (También haciendo negocios como El Papa Pepe / Broadway / Enfado)	Spain	Spain
JOE RUBENSTEIN LIMITED	ON	Canada
KALESA DE MANILA INCORPORATED	ON	Canada
KNIGHT’S APPLEDEN FRUIT LTD.	ON	Canada
LASANI ONTARIO INC.	ON	Canada
LES ALIMENTS DU MAGHREB INC.	QC	Canada
M & N IMPEX (A d/b/a of 9366-9810 Quebec Inc.)	QC	Canada
MAHDI ET SALAH IMPORT (Faisant également affaire sous 9433-6013 Quebec Inc.)	QC	Canada
MARCHÉ CASTEL (Faisant également affaire sous 9246-1144 Québec Inc.)	QC	Canada
NATURE’S WAY FARMS, L.L.C.	TX	United States
OPERADORA COMERCIAL DATI S DE RL DE CV (También haciendo negocios como Mexafruits)	Queretaro	Mexico
PAISANO CAPITAL SAPI DE CV (También haciendo negocios como Productos Paisano)	Ciudad de Mexico	Mexico
PRODUCTOS SELECTOS MARROKO S.A. de C.V.	Nuevo Leon	Mexico
RALPH’S PRODUCE LTD.	BC	Canada
SHUBHAM SUPERMARKET LTD.	AB	Canada
STANLEY MARKET LTD.	BC	Canada
SUN BEST FRUIT (A d/b/a of  1054741 Alberta Ltd.)	AB	Canada
UNEARTHED PRODUCE (A d/b/a of Christopher Hunt)	PE	Canada
WORLD-VIEW AMERICA COMPANY (A d/b/a of Young Suck Choi)	ON	Canada

 

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 16 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 $105 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.

 

Continuing with our series of articles summarizing past DRC arbitration decisions. We believe this will help members to better understand how the DRC Dispute Rules and Standards (R&S) apply in the event of a dispute. DRC Dispute R&S state that all DRC arbitrations are private and confidential. As such, the names of all parties, including arbitrators and companies are not included. A reminder that DRC’s sole role is as administrator of the arbitration process; DRC does not participate in any hearings. Therefore, this summary is based solely on the arbitrator’s written decision and may not reflect important information shared with the arbitrator through written briefs or verbal testimony.

 

Case: DRC File #20316 – Parties Domiciled – Canada

 

Facts

• The Claimant shipped nine (9) loads of its 2018 potatoes to the Respondent between August 11, 2018, to September 19, 2018, for a total invoice price of $234,700.29 on the nine (9) loads.
• There was no formal contract between the parties for the 2018 season. However, the parties had a course of dealing during the transactions in 2017. Under this course of dealing in 2017, the Claimant invoiced the Respondent between August 3, 2017, and September 5, 2017.
• The Claimant shipped its 2018 crop to the Respondent FOB, from August 11, 2018, to September 19, 2018.
• An in-house quality control was performed on the arrival on each load.
• Between September and November 2018, the Claimant received four (4) partial payments totaling CAD$75,699.94.
• Communications between the parties shows that the Respondent agreed to pay CAD$100,640.54 to the Claimant based on the percentage the Respondent was able to use on the nine (9) loads.
• The Claimant is seeking the payment of CAD$145,371.95

Issues

• Whether there was an agreement between the parties to use an in-house quality control inspection.
• Whether the receiver is entitled to claim damages in all the 9(nine) loads.

 

Arbitrator’s Analysis/Reasoning

This case involves the sale and shipment of nine (9) truckloads of the 2018 potato crop, grown by Claimant in Ontario, and sold to the Respondent, located in Prince Edward Island (“PEI”), from August 11, 2018, to September 18, 2018. In the 2018 season, the Respondent began purchasing the potatoes from the Claimant, starting in August 2018. In the beginning of the season in July 2018, the Claimant appeared to have had good quality potatoes; and the Respondent began receiving potatoes from the Claimant in August 2018, which included yellow, red and white potatoes. 

The Respondent provided the trucks that picked up the potatoes from the Claimant and shipped the loads to the Respondent’s facility in PEI. The Respondent packed out the potatoes on each of the nine (9) loads and provided multiple in-house QC inspections on each load.

The Claimant was to ensure the potatoes were in “suitable shipping condition” when loaded on the trucks.  However, according to the Claimant, “There were no third-party reviews, and the Claimant has an in-house quality control, and everything was looked at and made sure that it was number one before shipping to the Respondent.” However, in response to the Arbitrator’s request for documents from the Claimant at the hearing to confirm the quality control of the loads of potatoes, the Claimant advised they did not have them. Since there were no Claimant’s documents showing suitable shipping condition inspections regarding the Claimant’s loads, the only QC documentation regarding the Claimant’s loads are provided by the Respondent, showing six (6) or seven (7) in-house detailed QC Inspection Reports for each load.    

The Respondent states there were actually two (2) deals with the nine (9) loads. “There was one deal for shipping dirty, unwashed, ungraded potatoes that were loads three and four. And there was another deal entirely, still on a pack-out basis, but for clean, washed, and graded potatoes, which were loads one, two and five through nine.” 

Invoicing and Payment

The Claimant invoiced the Respondent CAD$234,700.29 for nine (9) loads of potatoes. The Respondent agreed to pay CAD$100,640.54 to the Claimant based on the percentage the Respondent was able to use. 

The Respondent is required to pay CAD$5,399.80, for trucking and dumping for Load four (4). (There were text messages regarding temperature control issues on this load.) The Respondent is not entitled to deduct CAD$4,040.40 from the invoice of Load three (3). (Respondent’s spreadsheet indicated that the amount of CAD$4,040.40 was used to calculate the 36.69% he claimed was usable product from Load three (3).)

The Claimant received the following CAD payments from the Respondent:

09/04/18 – $20,000.

09/11/18 – $15,000.

10/23/18 – $20,000.

11/18/18 – $20,699.94, which totals $75,699.94

 

The Respondent also claims an additional payment of $13,628.40 on 1/19/2019, which brings the total paid to the Claimant to CAD$89,327.40. The Respondent claims that the amount still owed to the Claimant is CAD$1,872.94.

Finally, the Arbitrator concluded that the Respondent failed to adhere to DRC rules, especially as to CFIA inspections, or any other neutral third-party inspections. It is always the responsibility of the buyer to request inspections to show damages. The Arbitrator finds that a previous course of dealing, and communication exchanges between the parties, make it reasonable to conclude that the pack-out documentation provided by the Respondent indicates the parties established a course of dealing regarding the Claimant’s acceptance of the Respondent’s in house quality control.

Arbitrator’s Decision

The Claimant is entitled to the full invoice price CAD$31,155.75 for Load four (4) as there was evidence of temperature control issues during transit.  It is well established a buyer in an FOB sale must establish time and temperature were normal before making a claim to the seller. This coupled with no neutral third-party inspection of this load overrides other considerations given to a previous course of dealing on other shipments. The Respondent must also pay CAD$5,399.80 for trucking and dumping of Load four (4), and CAD$4,040.40 from the original calculation of Load three (3). The total owed to the Claimant by the Respondent is CAD$131,796.29 for the product. CAD$89,327.40 has been paid, leaving a balance of CAD$42,468.89 due to the Claimant. 

Lastly, each party shall pay 50% of the arbitrator’s fees of CAD$20,047.38, in the amount of CAD$10,023.69 each. The Claimant has paid CAD$17,747.38 to date. The Respondent has paid CAD$2300.00 to date. Therefore, the Respondent is to pay CAD$7,723.69 in arbitrator’s fees to the Claimant. 

Consequently, the Respondent is to pay the Claimant CAD$50,192.58 within 30 days from the date of this decision.

DRC Comments

When claiming damages FOB receivers/buyers have the burden to prove time and temperature while in transit are acceptable, since in a FOB transaction the risk of loss would transfer from the shipper to the buyer once the shipper loaded the product into the truck. In this case, there was evidence of temperature control issues during the transit of load four (4). Therefore, the arbitrator considered that the claimant was entitled to be paid in full for this load. Since there is evidence that there was a problem during transit, the receiver/buyer would have to claim against the transportation company.

 

Another important point in this decision that DRC members must take into consideration when receiving product in deteriorated condition is that in the US and Canada, a federal inspection must be requested, unless otherwise agreed. A party claiming an agreement to use an alternate service was established has the burden of proving such an agreement was reached. In this case, the arbitrator concluded that the previous course of dealing, and communication exchanges between the parties, were enough evidence that indicates the parties established a course of dealing regarding the Claimant’s acceptance of the Respondent’s in-house quality control.

 

For more information regarding the sections of DRC Trading Standards applied to this dispute, refer to the following sections:

 

DRC Trading Standards:

• DRC Good Inspection Guidelines (https://t8t979.p3cdn2.secureserver.net/wp-content/uploads/2016/10/good_inspection_guidelines.pdf )
• Receiver Duties (Fruit and Vegetable Dispute Resolution Corporation Trading Standards s.10 (2)(b)(ii))
• When is valid to request a private inspection? (https://fvdrc.com/solutions/valid- request-private-survey/)

 

Welcome New Members

 

From February 15 until March 15, 2023, DRC welcomed the following new members:

 

FRACTAL FLEX INC.	QC	Canada
FRUVEX TRADING S DE RL DE CV (Also d/b/a Fruvex)	San Luis Potosi	Mexico
INTERNATIONAL GOODS TRADING (A d/b/a of 14393562 Canada Inc.)	ON	Canada
JA CANADA (A d/b/a of Jaime A. Aparicio)	ON	Canada
KJ FRUITS IMPORTS (A d/b/a of 9424-2179 Quebec Inc.)	QC	Canada
LES ALIMENTS PALERMO LE ROI DES FRUITS (A d/b/a of 9466-3358 Quebec Inc.)	QC	Canada
TAJ INDIAN FOODS (A d/b/a of 1194383 B.C. Ltd.)	BC	Canada
TC DISTRIBUTOR INC.	ON	Canada
VICTORIA’S CHOICE LLC. (También haciendo negocios como Victorias Choice)	TX	United States

 

DRC Membership: change in status

 

As of March 15, 2023, the following organizations no longer hold a DRC membership:

 

BARKET SALAH INC.	ON	Canada
CALIFORNIA SPECIALTY FARMS (A d/b/a of Calalu, LLC)	CA	United States
COLUMBINE VINEYARDS (A d/b/a of ACMII California 6, LLC)	CA	United States
FOOD LOVERS INC.	NS	Canada
FRUITS EXOTIQUES PUERTO MARTINEZ (Faisant également affaire	QC	Canada
G D TRADING LTD.	AB	Canada
JAMES BEZANSON PRODUCE 1983  LTD.	NS	Canada
JTJ ENTERPRISES INC. (Also d/b/a Ocean Code Enterprises)	BC	Canada
LES JARDINS DU SAGUENAY (Faisant également affaire sous 9051-2500 Québec Inc.)	QC	Canada
SIA UNISEL CO	Kurzemes	Latvia
WHATA MELON INC.	SK	Canada

 

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 16 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 $105 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.

As we review questions from our members, we find they often forget the published grade standards have multiple uses that serve to minimize misunderstandings.  Whether you specify a grade (US#1, Canada#1, etc.) or not the standards establish a lexicon, or recognized language, for describing fruit and vegetable commodities and associated defects. This common lexicon is necessary for buyers, vendors, government inspectors, private inspection firms and others to communicate in a common language in the same way we all know an inch, a foot, a centimeter, or a meter is always the same.  Fruit and Vegetable Standards ensure terms like bruising, injury, damage, discoloration, watery scales have that same universal meaning.

The terms and definitions in the standards can be used to verbally define parameters for shipping and arrival expectations.  This is important as fresh fruit and vegetables are generally purchased unseen from distant shipping point.  The defined terms provide clarity to the contract specifications and in turn are the basis for establishing a failure to meet those agreed specifications (FOB Good Arrival as an example.)

When the Commodity Standard is used along with a specific grade (US#1, Canada#1, as examples) the agreement then is based on the defect limits of that published specified grade.  The grade standards represent an overview of the quality, condition, generally appearance of the item, including the presence of defects (damage, insects, disease), size, shape, and colour. The standards also include the maximum tolerance of defects allowed to meet that specific standard. 

While parties may create their own contract specifications outside of the established grades, they must ensure their agreement complies with any applicable minimum grade and condition standards that have been established by the importing or exporter country.  Many commodities are traded based on “no grade good delivery” terms.  Such contracts are still subject to individual country requirements for such things as maximum permanent defects, and sugar (soluble solids) content. 

Our members and trading partners are very often surprised to find out the impact of grade standards when we are contacted to help resolve a problem transaction.  What happens when one of the parties in a produce transaction believes that a commodity was purchased with a specific grade standard (US#1, CAD#1, CAT 1, etc.), but there is no written evidence that shows that this was discussed, understood, and agreed upon by both of the Parties?

Verbal communications are contractually binding if both parties agree on and understand the terms discussed. However, when there is a disagreement, or there is no meeting of the minds as to what was discussed verbally, the documents and written communications related to the transaction will determine the contract between the parties.

Where no specific grade requirement can be documented, the calculation of defects to support a breach of contract changes.  Condition defects (those which change over time like decay and bruising) will be counted toward any breach of contract.  Permanent defects (those such as  scarring and off size) will not be counted toward any alleged problems on arrival.  

In the absence of an agreement, the calculation of conformance to the contract will default to the DRC Good Arrival Guidelines .  Remember, without an agreement only the condition defects may be counted to establish a breach of contract.

Hence, when you are establishing the terms of the transaction and you are buying or selling based on a grade standard, making sure a grade standard is agreed, preferably in writing, is highly important.

Depending on a company’s knowledge of importing or exporting goods, having an in-house expert or outsourcing service for clearing goods across borders is essential. A customs broker provides assurance that the goods to be imported or exported will comply with the necessary documentation and customs declarations. Whether you are just starting your import/export business or don’t have a logistics department, it is a good practice to have a customs broker assist with navigating the complexities of your business’s trade.

 

Over the years, customs brokers have become more than facilitators when getting commodities across borders. Depending on the level of service required, customs brokers will assist in; collecting, reviewing, and assessing documentation; determining taxes, duties, classifications, and the valuation; submitting declarations and documentation on behalf of the importer; and leveraging their experience to help you grow your business.

 

Additionally, customs brokers provide educational services that inform importers and exporters how to import into Canada or the USA. These educational services include information on INCOTERMS, CFIA and FDA-regulated goods, the classification of products, and Non-Resident Importers. Pacific Customs Brokers is an example of this and have created an informative learning center with valuable trade resources for businesses, importers, and exporters for this purpose alone; https://learningcenter.pcb.ca/.

 

Customs brokers stay up-to-date with policy and regulatory changes. They are equipped with advanced technology, professional expertise, and customized trade solutions to ensure that every shipment’s managed and declared with compliant practices to minimize the risk of loss or penalties when helping to secure passage through Customs.

 

In today’s global trade environment, there are a lot of changing and moving pieces that are often too complicated to manage, let alone understand, without the proper tools. However, a Customs Broker’s role is to facilitate cross-border processes and movements efficiently and compliantly to provide businesses with the convenience and freedom to do the things they do best.

 

Regardless of the industry or trade, customs brokers hold the key to ensuring your easy entry through Customs. Hiring a customs broker makes excellent business sense and will prepare you for the unexpected and provide you with the peace of mind that your business is always protected.

DRC Trading Assistance staff continue to see the use of private inspections to demonstrate that a commodity fails to meet contract terms or DRC Good Arrival Guidelines. There is nothing wrong with sellers and buyers agreeing to have a private survey performed, but we would like to remind DRC members that, in the US and Canada, a federal inspection must be requested, unless otherwise agreed. DRC Good Inspection Guidelines specify that these federal inspection services are to be used unless they are not available, or CFIA/USDA cannot perform the service.

 

If a private inspection is requested and the applicant fails to prove that it was discussed, understood, and agreed to, the private survey report may be of no value.  

 

DRC Trading Standards require that receivers request an inspection within eight (8) hours after the product arrives by land and within 24 working hours after the receiver is given notice of arrival by boat and rail. Even when the product arrives on a weekend or a holiday, buyers/receivers can proceed to request a federal inspection.

 

The inspections that carry the most weight are those performed by the CFIA (Canadian Food Inspection Agency) and the USDA (United States Department of Agriculture) government inspection agencies.

 

The DRC will accept inspections performed by independent private commercial inspection services or individuals if these services were agreed upon. Nevertheless, these services can be challenged if the private inspection report fails to conform with DRC Inspection Standards and Elements. The burden of proving that the private inspections report meets DRC Inspection Standards and Elements rests with the party requesting the private inspection.

 

Unless otherwise agreed to, we cannot stress enough the importance of requesting a federal inspection if you have received product in deteriorated condition. Contrary to private inspection services, the DRC will accept inspection certificates issued by the USDA and the CFIA at face value and a true image of the condition of the product upon arrival.

Welcome New Members

 

From January 15 until February 15, 2023, DRC welcomed the following new members:

 

ALGCAN IMPORT INC.	QC	Canada
BEST FRESH PRODUCE INC.	BC	Canada
CALGARY WHOLESALE CASH AND CARRY INC.	AB	Canada
CAMPAÑA  AGRICULTORES S. DE R.L. DE C.V. (También haciendo negocios como Agricola Campaña)	Sinaloa	Mexico
DALEY FARM FRESH PRODUCE INC. (Also d/b/a Daley’s Trucking)	ON	Canada
G. VISSER & SONS INC. (Also d/b/a G.W.R. Visser Farms)	PE	Canada
HOUSE OF AVOCADO INC.	ON	Canada
LADY B	Rabat	Morocco
LANGE LOGISTICS INC.	MO	United States
LASSER PRODUCE LTD.	BC	Canada
LOTUS TRADE INC. / COMMERCE TRADE INC.	QC	Canada
PHENIX MV INC. (Also d/b/a JOVI Fresh Inc.)	TX	United States
SUN FRESH CITRUS LLC	CA	United States
ZAD PLANET INTERNATIONAL TRADE INC.	ON	Canada

 

DRC Membership: change in status

 

As of February 15, 2023, the following organizations no longer hold a DRC membership:

 

9311-3652 QUEBEC INC.	QC	Canada
ALIMENTS TALA INC.	QC	Canada
BEZANSON AND CHASE CRANBERRY COMPANY INC.	NS	Canada
BIOFRUITS (Faisant également affaire sous 9386-4536 Québec Inc.)	QC	Canada
BIO-SAVEUR INC.	QC	Canada
COASTAL PRODUCE INTERNATIONAL LTD. (Also d/b/a Coastal Fruit Company)	BC	Canada
COLOMBIAN FRUITS AND VEGETABLES (A d/b/a of Paulo Cesar Gaviria)	MB	Canada
CONNIE’S AFRICAN CARIBBEAN GROCERY (A d/b/a of 9970991 Canada Inc.)	ON	Canada
CONTINENT AFRICAIN INC.	QC	Canada
DAVID OPPENHEIMER AND ASSOCIATES GENERAL PARTNERSHIP	AB	Canada
DAVID OPPENHEIMER AND ASSOCIATES GENERAL PARTNERSHIP	ON	Canada
EXOTICA FRUITS & VEGETABLES (A d/b/a of 9329-1680 Quebec Inc.)	QC	Canada
FRUTA DE AUTOR SL	Valencia	Spain
G.S.P.M. DISTRIBUTION INC.	QC	Canada
GERRIT VISSER & SONS 1991 INC.	PE	Canada
GROWERS EXPRESS, LLC	CA	United States
HELLOFRESH CANADA / CHEFS PLATE (A d/b/a of GDE Grocery Delivery E-Services Canada Inc.)	ON	Canada
JEFFRIES BROS. VEGETABLE GROWERS INC.	MB	Canada
JJD PRODUCE, LLC	CA	United States
LA POMME ROUGE (A d/b/a of  9427-9734 Quebec Inc.)	QC	Canada
LINKLETTER FARMS LTD.	PE	Canada
MODE AURORA INC.	QC	Canada
PACIFIC TOMATO GROWERS, LTD.	FL	United States
RAMIREZ DISTRIBUTION LTD.	BC	Canada
RJM ENTERPRISE (A d/b/a/ of Rajeshkumar Mistry)	ON	Canada
ROUTE D’ENVOI CANADIENNE INC. / CANADIAN SEND ROUTE INC.	QC	Canada
SAM’S IMPORTING & DISTRIBUTING CO., LTD.	ON	Canada
SHENG FENG TRADING (A d/b/a of 2382365 Ontario Inc.)	ON	Canada
SUREXPORT LEVANTE SLU (También haciendo negocios como Surexport)	Valencia	Spain
VANCO FARMS LTD.	PE	Canada

 

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 16 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 $105 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.

 

Most disputes between members are resolved with the help of DRC Trading Assistance Staff during the informal mediation process. Some disputes, however, end up in the arbitration, where an arbitrator is appointed to make a final and binding decision.

 

An arbitrator reaches a determination based on the information presented to them by the parties. The decision summarizes the arbitrator’s review of the statements and evidence provided by the parties. The arbitrator’s award deals with payment of the claim/counterclaim, or dismissal of the claim/counterclaim.   

 

90% of DRC arbitration awards are paid without any conflicts but, there are circumstances where the losing party refuses to pay. The importance of paying an arbitration award is critical. Failure to pay an arbitration award could lead to disciplinary actions against the DRC member in default as well as court enforcement. This could have important implications on your business.

 

When a binding decision is rendered, the DRC monitors for compliance. If the losing party fails to pay the arbitration award within the provided time, their DRC membership will be automatically terminated, and all DRC members are informed of this event.

Under the Safe Food for Canadians Regulations (SFCR), when the DRC membership of a Canadian corporation is terminated, the company no longer has the authority to buy, sell, import, or export fresh fruits and vegetables inter-provincially and internationally unless otherwise exempted from the regulations. For companies outside Canada, this means that their transactions no longer are covered by DRC.

 

For a party who has an arbitration award in their favor, if DRC disciplinary measures are not enough to make the loosing party pay the award, this does not mean that there is no further recourse. The next step is to have the arbitration decision and award enforced in the appropriate court of law.

 

Although DRC will assist the winning party of an arbitration award to gather the necessary information and documents to proceed to enforce the arbitration decision and award, the services of a lawyer are needed to start this process in court. DRC can also provide a list of attorneys that can help with this process.

We recently came across an article from attorney Dylan S. Fisher at Pallett Valo LLP, who has experience dealing with enforcing of arbitration awards in Ontario:

https://link.edgepilot.com/s/1cd14d5d/fjcIfp0cJE_wJk01ZknujQ?u=https://www.pallettvalo.com/whats-trending/you-have-just-won-an-arbitration-now-what-a-brief-guide-to-arbitration-enforcement-in-ontario/

We thought that this article may help to better understand the process of enforcing an arbitration award in court.

The Canadian Food Inspection Agency has (CFIA) updated the Automated Shipment Inspection Status Search Tool (ASSIST) with an enhanced tool called the CFIA Shipment Tracker for Food, Plant and Animal products.

Starting December 15, 2022, this tool will allow importers to check the status of any food, plant or animal import declared electronically in real-time. The CFIA has completed additional testing on the tool since it was first announced in the spring of 2022, including consultation with industry stakeholders.

What’s New?

The CFIA Shipment Tracker for Food, Plant and Animal products means that importers will no longer have to call into the National Import Service Centre (NISC) to request the status of their shipment. They can simply visit the webpage anytime and anywhere, to quickly receive a status update.

The CFIA strives to be agile and flexible to respond and adapt to an ever changing environment. We are constantly working to equip and enable both employees and stakeholders with improved access to information sharing and self-service through digital tools so stakeholders can make informed choices and comply with regulatory requirements.

The CFIA continues to expand the services it offers digitally so that businesses can remain competitive at home and abroad.

How does it work?

The CFIA Shipment tracker will share the status of any electronically declared import transaction received by the Agency. To check the status of their import, importers require their Canada Border Services Agency (CBSA) 14 digit transaction number. For meat shipments, importers can continue to use an Official Meat Inspection Certificate number, as well as their 14 digit transaction number.

The United States, Australia and New Zealand, can also use the tool to determine the inspection and transaction status for meat shipments. They can use their Official Meat Inspection Certificate number to verify the inspection status once they have received a Release Notification System (RNS) notice advising them that CBSA has reviewed and released the shipment. Other countries will need to have a CBSA 14 digit transaction number to verify the status of their import using the tool.

More Information

For more information, or if the CFIA Shipment Tracker for Food, Plant and Animal products is unavailable, contact the NISC at [email protected].