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Is it possible for a receiver/buyer to reject a portion of a distressed shipment?

Although a receiver/buyer decides whether to accept or reject a load that allegedly fails to comply with the sales agreement, buyers should be forewarned against accepting some portions of a shipment while rejecting others unless the parties agree otherwise specifically in writing.

The Perishable Agricultural Commodities Act (PACA) gives straightforward guidance and defines ‘Commercial Unit’ as “a single shipment of one or more perishable agricultural commodities for delivery on a single contract, such commercial unit must be accepted or rejected in its entirety”.

The items or commodities listed in a Bill of Lading are considered one commercial unit.

While PACA does not govern transactions outside of the US, it is referenced in the DRC rules as supportive.   We also note other choices of law such as the CISG have specific parameters regarding a buyers duties when non conforming goods are received.   In our experience partial rejections should only be done by agreement. 

When considering rejecting a load, the receiver/buyer must remember that the entire “commercial unit” must be rejected. Receivers/buyers may not unilaterally accept some pallets and reject others since accepting any portion of a lot constitutes acceptance of the entire lot.

It is possible to reject a portion of the load if a receiver/buyer has two transactions transported in one truck. In other words, where there are two contracts of sale or two Bills of Lading in the same truck, the items or commodities included in one of the Bills of Lading can be rejected provided an act of acceptance has not been committed and proper procedures to reject a load are followed.

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Membership Updates for September 15, 2022

Welcome New Members

 

From August 15 until September 15, 2022, DRC welcomed the following new members:

 

ALEXINGREDIENTS INC.

QC

Canada

AVOCAST S.P.R. DE R.L.

Nayarit

Mexico

F.A. INTERNATIONAL INC.

ON

Canada

FOROS FRESH PRODUCE CORP.

FL

United States

FRESH PRODUCE WHOLESALE (A d/b/a of 12038366 Canada Inc.)

ON

Canada

GD PRODUCE (A d/b/a of 2424871 Alberta Ltd.)

AB

Canada

GHARZAI GLOBAL IMPORT EXPORT INC.

ON

Canada

GLEN ECHO FRESH PRODUCE (A d/b/a of ASL Global Supply Chain Solutions Inc.)

ON

Canada

LIDL WHOLESALE LTD.

BC

Canada

PATATES DANIEL BLAIN LTÉE

QC

Canada

SICAR FARMS LTD. CO. (Also d/b/a Limex Sicar Ltd. Co.)

TX

United States

SUNNY SWEET IMPORTERS LTD.

BC

Canada

TAIBAH GROUP INC. (Also d/b/a Chakula Tamu)

ON

Canada

TEMAK INC. (Also d/b/a Temak Trading)

ON

Canada

TRIPLE K DISTRIBUTOR LTD.

SK

Canada

 

DRC Membership: change in status

 

As of September 15, 2022, the following organizations no longer hold a DRC membership:

 

CROWN ORCHARD COMPANY, LLC

VA

United States

HENNY PENNY’S FARM MARKET (A d/b/a of 3278669 Nova Scotia Limited)

NS

Canada

INTEGRADORA DE PRODUCTORES DEL VALLE DE APATZINGAN S.A.P.I.

Mlchoacan de Ocampo

Mexico

MECA – MARCHAND ETHNIQUE CANADIEN INC.

QC

Canada

MIRZA TRADING INTERNATIONAL (A d/b/a of 12218674 Canada Inc.)

ON

Canada

NAVEED AHMED

AB

Canada

PRODUCTORA AGRICOLA YAREXI SPR DE RL

Nayarit

Mexico

T.I.H. TRADING CORP.

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.

 

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Conditions for Maintaining DRC Membership

The DRC by-laws and operating rules contribute to confidence in the fresh fruit and vegetable trading environment. DRC members subscribe to a common set of trading and transportation standards, and membership responsibilities that promote fair and ethical trading of produce.

There are certain requirements that DRC members must meet to maintain membership in the DRC. These conditions for the maintaining of membership are found in the DRC by-laws and operating rules. The DRC works with its members where difficulties are encountered.

To ensure the viability of the DRC, members must pay their membership fees within sixty (60) days of their due date.

In some cases, members must post or provide financial security to maintain their membership. Failing to provide financial security when required to do so could lead to the termination of that member.

A member must not have become bankrupt, suspended the payment of debts generally, been declared insolvent, or made an arrangement under the Companies Creditors Arrangement Act or made a proposal under the Bankruptcy and Insolvency Act. Members must not have made similar arrangements or proposals or sought similar protection under any equivalent statute in the United States, Mexico or another country, province or state.

Suspending the operations of the business without fully meeting its financial obligations or failing to comply with a mediation agreement or arbitration award could also result in termination of membership.

While the DRC works closely with its members to help them trade with confidence, the DRC Board of Directors has the authority to expel any member from the corporation for various reasons. These reasons include violating any provisions of the articles, by-laws, policies or operating rules, carrying out any conduct detrimental to the corporation, neglecting or refusing to submit to mediation and/or arbitration, being convicted of a criminal act for which a pardon has not been granted, or being named in an outstanding court order. Responsibly connected persons and members failing to meet membership qualifications may also be expelled. Members who make false or misleading statements or providing false and misleading information risk expulsion.

These conditions for maintaining membership contributes towards fair trade and confidence in your trading relationships with other DRC members. DRC members encountering any type of difficulties are encouraged to contact the DRC.

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Membership Updates for August 15, 2022

Welcome New Members

 

From July 15 until August 15, 2022, DRC welcomed the following new members:

 

2735795 ONTARIO INC.

ON

Canada

DAILY SEAFOOD INC.

ON

Canada

DANEX FOODS (A d/b/a of 10117374 Canada Inc.)

QC

Canada

F.A. INTERNATIONAL INC.

ON

Canada

FRESH & CLASSY PRODUCTS INC.

ON

Canada

GREEN MEADOW ACRES INC.

PE

Canada

HARRIS’ ISLAND GROWERS COMPANY/ ISLAND GROWERS CO (A d/b/a of Jennifer Harris)

PE

Canada

HEALTHY CHOICE WHOLESALE FOODS INC.

BC

Canada

KIM GROUPE IMPORT/EXPORT INC.

QC

Canada

MANDEEP GREWAL, HARDEV GREWAL

BC

Canada

MEGA PRODUCE, LLC

TX

United States

MUSANGKING TRADE COMPANY LIMITED

ON

Canada

NORTH KEE TRADING (A d/b/a of 2713406 Ontario Limited)

ON

Canada

QUALICIOUS FOODS INC.

BC

Canada

RAVINE MUSHROOM FARM LIMITED

ON

Canada

THIS AND THAT HOLDINGS CORPORATION

BC

Canada

WORLD FRESH PRODUCE CANADA INC.

QC

Canada

 

DRC Membership: change in status

 

As of August July 15, 2022, the following organizations no longer hold a DRC membership:

 

DESIGNITY EXPRESS INC. (Also d/b/a South Asian Food Essential (S.A.F.E) Supplies)

ON

Canada

INTEGRADORA DE PRODUCTORES DEL VALLE DE APATZINGAN S.A.P.I.

Mlchoacan de Ocampo

Mexico

JSMT INTERNATIONAL TRADE GROUP INC. (Also d/b/a JSMT International Trade Group Inc. Fresh Produce Division)

ON

Canada

LINKGLOBAL FOOD INC.

ON

Canada

POMO FRUIT IMPORTS (A d/b/a of Rhuturaje Yadav)

BC

Canada

PROMART IMPORT, INC. (Also d/b/a Promart Import)

AB

Canada

RAVINE MUSHROOM FARMS INC.

ON

Canada

READY PAC PRODUCE, INC.

CA

United States

SEZZON PRODUCE INC.

ON

Canada

SOCRITIQUE TECHNOLOGIES INC.

ON

Canada

SUNNY FRESH NORTH AMERICA TRADING COMPANY (A d/b/a of 1999201 Ontario Corp.)

ON

Canada

TERRAFRESH ORGANICS, LLC

CA

United States

WORLD FRESH SEAFOOD LTD.

BC

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.

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DRC Help Desk: your go to resource

DRC’s Help Desk, with services in English, French and Spanish, is your “go to” resource for timely and informed assistance on a wide range of produce trade-related matters.

The most frequent and common inquiries pertain to:

  • Government Inspections (CFIA or USDA)
  • DRC Good Arrival Guidelines Tolerances
  • Does product meet or fail grade?
  • Non-payment
  • Disagreement over an account of sales or liquidation reports
  • Clarification over trade terms
  • DRC Member Standing (i.e.: Member, Member in Good Standing, etc.)
  • Transportation-related issues

Your membership includes access to the Help Desk, one-on-one professional and confidential consultation, customized seminars, webinars, printable checklists for staff, DRC publications, and much more.

Our website includes a number of tips, including an FAQ document outlining a number of questions and answers that provide information on a variety of subjects related to education, mediation, arbitration and networking for the fresh fruit and vegetable industry. Topics include fair and ethical trade for the produce and transportation industries, import and export of produce, steps to resolve disputes, government guidelines and more (helpful https://fvdrc.com/about/faqs/).

For personal assistance contact us at (+1) 613 234 0982 (ext. 224) between 8:30 am – 5:00 pm (EST) or by email at [email protected].

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Membership Updates for July 15, 2022

Welcome New Members

 

From June 15 until July 15, 2022, DRC welcomed the following new members:

 

 

2398769 ONTARIO INC.

ON

Canada

B.C. HARVEST FOODS INC. (Also d/b/a BC Harvest Foods)

BC

Canada

F&G TRANSPORTATION AND TRADING INC.

BC

Canada

HOMMAN ORGANIC INC.

BC

Canada

KIKAPO TROPICAL FOODS INC.

AB

Canada

LORD TRADING INC.

ON

Canada

MNH TRADERS INC.

ON

Canada

RED WAGON GROVES, INC. (Also d/b/a Red Wagon Groves)

TX

United States

 

DRC Membership: change in status

 

As of July 15, 2022, the following organizations no longer hold a DRC membership:

 

AGROINDUSTRIAL SAN GERMAN SPA (También haciendo negocios como San German SPA)

Elqui

Chile

BOUCHERIE EL IHCÈNE

QC

Canada

COLOMBIAEXOTIC (A d/b/a of Carolina Velez)

ON

Canada

MAFHH CONSULTANCY INC.

ON

Canada

REAL TRANSPORT (A d/b/a of 3235149 Canada Inc.)

QC

Canada

STELLAR IMPEX INC.

QC

Canada

YIJIE HOLDINGS INC.

BC

Canada

ZYTHAS DYNAMIC INC.

AB

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.

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DRC Board of Directors and 2022 Annual General Meeting

The DRC’s Board of Directors and Annual General Meeting (AGM) was held in Boston, USA, from June 1-3, 2022. There was also the option to attend the AGM virtually. DRC staff reported to the Board on the audited financial statements and key DRC activities including: Membership, Marketing, Compliance, and Trading Assistance. The Board also received updates from the USDA, AMS.

The DRC Board of Directors had approved resolutions on December 2, 2021 to amend the DRC’s Trading Standards and Dispute Resolution Rules to provide clarity and updates to certain terms or concepts. These resolutions were approved by the membership during the AGM.

During the AGM the members elected as Directors Patrice Marchand of Metro Richelieu Inc., and incumbents Gonzalo Aguilar Guizar of Grupo Empaque Roquin S.A. DE C.V., Bret Erickson of J&D Produce Inc., and Mike Stuart representing the Florida Fruit & Vegetable Association.

 

We welcome Patrice as a new board member and look forward to his participation.

 

The DRC welcomes members to participate in the 2023 Annual General Meeting likely to be held in early June 2023.

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An inspection is requested in a timely manner, but not performed in a timely manner

DRC’s Trading Assistance Staff recently handled a consultation from a receiver regarding an FOB transaction where a government inspection was requested on the same day the load arrived. The load arrived on a Friday afternoon, and the inspector arrived on Monday morning to perform the inspection. The inspection results indicated the product failed to meet DRC Good Arrival Guidelines by 1%. The receiver sent a copy of the inspection to the shipper and advised that they will be claiming damages.  

 

The shipper replied to the receiver indicating that they would not accept a claim given that the inspection was performed 3 days after the product arrived.

 

We advised the receiver that by calling the federal inspection the same day the load arrived, they have followed DRC Trading Standards which requires that receivers request an inspection within 8 hours after the product arrives by land. However, the shipper was right by claiming that the inspection was not performed in a timely manner. An inspection performed two or more days after the product arrives may no longer provide an accurate picture of the quality or condition of the product upon arrival.

 

In the consultation that we received, the product failed DRC Good Arrival by only1%. It is likely that if the product had been inspected on Saturday rather than on Monday, the product would have met DRC Good Arrival Guidelines.

 

We understand the receiver’s frustration on the delayed federal inspection; however, 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 getting things done in a timely manner even if these things are not under the receiver’s control.

 

So, what to do in a situation where a receiver becomes aware that an inspection is not going to be performed in a timely manner?

 

  1. Verify if it is possible to have a government inspector work overtime to arrive within 24 hours. While this may result in additional fees, or they may not be available, it is worth trying.
  2. Contact the shipper. Let them know what is happening and suggest getting a private inspection performed. Even if the shipper refuses to agree to a private inspection, we recommend that you call for that private inspection to protect yourself. Don’t cancel the government inspection. If the private inspection is similar to the results of the Federal Inspection taken later, you will have more evidence in your favor when you talk with your supplier to amicably resolve this matter.
  3. It is important to remember that all parties have a responsibility to minimize losses. If you must sell a portion of the load prior to getting it inspected, talk to the shipper about it. It is not in anyone’s best interest to leave the entire load unsold for an extended period awaiting a Federal Inspection.

 

Good communication between a receiver and a shipper can help avoid a dispute scenario like the one we were consulted on.  

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Top Ten Mistakes Parties Make During the Arbitration Process

Whether you are the claimant or the respondent, no one likes to lose.  But when a DRC member loses a case simply because they didn’t properly explain and document their position it can be a frustrating experience.

 

In an effort to help DRC members prepare for mediation or arbitration, we have compiled the following list of things that companies frequently overlook or simply do not think are important. We have seen cases that could have gone in a different direction if the parties would have paid more attention and taken the time to explain and document their case better to the arbitrator. Here is our list of top ten mistakes to avoid when preparing or defending your case:

 

  • Not including what you’ve learned during the informal mediation process (informal claim) prior to the Arbitration process. Important points are often uncovered during the informal exchange of information.  The arbitrator does not have access to the arguments or submissions from the informal mediation. It is your job to explain every detail of the transaction so that the arbitrator does not have to fill any gaps. 
  • Not including a statement or submission from the buyer or salesperson involved in the transaction regarding the events that transpired. If you do not have firsthand information, your comments may be taken as hearsay and not as   firsthand knowledge. 
  • Not clarifying or denying the other party’s comments or statements.  You must deny and/or rebut any position you disagree with.  If you are in doubt as to the weight of your evidence (fax, email, etc.) as a response to the other party’s presentation, provide a sworn statement along with it. 
  • Not submitting the evidence which supports your allegations. When parties disagree, it is the evidence the arbitrator must look at to reach a decision.
  • Not providing legible documents and not labeling exhibits consecutively for easy reference by the arbitrator.  
  • Not providing evidence that a document or an agreement was faxed or emailed, such as a fax confirmation, email confirmation, or the reply to it by the other party.
  • Not providing an account of sales when product was handled for someone’s account.  We have seen cases where the respondent clearly provided evidence of the breach of contract but failed to provide any basis upon which the remittance was made. 
  • Not providing an itemized account of sales. An account of sales must include the date, amount, and price sold for each lot (referencing the invoice or receipt of the sale is a bonus). Failing to provide the bills for the expenses such as freight bill, inspection invoice, warehousing invoice, customs fees, and any other expense agreed upon.
  • Not requesting a hearing when you believe you should be heard by an arbitrator.  If you do not believe you can present your case adequately in writing, you have the right to request a hearing on claims over US$15,000.
  • Not being willing to pay the undisputed amount before the file goes to arbitration.  This will result in increased filing fees, interest if awarded, and in some cases may influence the arbitrator’s apportionment of fees and interest if he views the amount being withheld as abusive. 

 

Prior to initiating the arbitration process, DRC staff can help with what you need to present or defend your case. Once in arbitration, DRC staff can only provide guidance on procedural questions. On the other hand, in an expedited arbitration (claims less than US$50,000), the arbitrator generally will base his/her decision on the parties’ submissions and rarely will contact the parties for clarification or additional information. However, in Formal Arbitration or when a hearing has been requested, the Arbitrator will give you every opportunity to make a clear and concise case.  If you do not feel you can present or defend your case properly, we highly recommend that you seek legal assistance, or settle the case before it goes to arbitration. 

DRC Bonding Procedure

A previous DRC solutions article described the types of financial security that may need to be posted to become a member or maintain membership in the DRC. In this article we will review the procedure to post financial security with the DRC.

Applicants for DRC membership, Members, Responsibly Connected Individuals and Employees must meet certain conditions in order for the company to become a member and maintain membership in DRC.  When those conditions are not met, applicants and members may be required to post financial security.  Financial security is a sum of money given to DRC (for a defined period of time) by a member as a promise to conduct business in accordance with our rules. 

 

DRC requires financial security from certain members as assurance to our members that the entity posting the security will conduct business in accordance with our rules.  The reasons for requesting bonds may include employing an individual who has previously been insolvent; been named in a court order; failed to pay an arbitration award, failed to prove that financial obligations can be met, been expelled from DRC within the last five years, etc.  Additionally, a member who would normally be expelled from DRC membership may avoid expulsion by posting financial security.

 

Once it is determined that financial security must be posted, the person must provide the DRC with a non-refundable commencement fee of $1,000.00 plus tax, if applicable. Upon receipt, the DRC will provide information regarding the size of the bond that would need to be posted. The bond may be in the form of a surety bond, cash or certified check or an irrevocable letter of credit payable to the DRC from a financial institution.

 

The period to post a bond is 30 days and it begins when the non-refundable commencement fee is received.

 

Any bond provided to the DRC must be accompanied by the DRC security agreement. The bond will be posted for three years and nine months from the date of issuance. The period may be extended for failure to meet certain conditions of membership.

 

If the member violates a provision of the DRC by-laws and Operating Rules, such as failure to pay an arbitration award, DRC may distribute the funds, as provided in the Security Agreement in place between the member and DRC.

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