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Q. We are a Canadian company who recently started to import citrus from Spain and South Africa. We’ve asked our suppliers to ship the goods on delivered basis because we don’t want to be responsible for any transportation issues. Looking at the terms of sale printed on the different Bills of Lading from various suppliers, we’ve seen CFR or CIF. How does this affect us in the event of a transportation claim?

A. (Answer provided by Trading Assistance Staff) 

You may have heard about or seen International Commercial Terms or INCOTERMS such as FOB, EXW, CFR, CIF. While you may be familiar with some of them, it is important to understand what they mean. The INCOTERMS were developed to avoid costly misunderstandings by clarifying the tasks, costs and risks in the International delivery of goods from sellers to buyers. According to the latest publication from the International Chamber of Commerce (ICC), these three-letter trade terms include:

Rules for any mode of transport:

EXW: Ex Works – Risk of transit is on the buyer when product is at the disposal of the buyer.

FCA: Free Carrier – Risk of transit is on the buyer when the product has been delivered to the carrier.

CPT: Carriage Paid To – Risk of transit is on the buyer when the product has been delivered to the carrier.

CIP: Carriage and Insurance Paid to – Risk of transit is on the buyer when product has been delivered to the carrier.

DAT: Delivered at Terminal – Risk of transit is on the seller when product is placed at the disposal of the buyer at the place of named destination.

DAP: Delivered at Place – Risk of transit is on the seller when product is placed at the disposal of the buyer at the place of named destination.

DDP: Delivered Duty Paid – Risk of transit is on the seller when product is placed at the disposal of the buyer at the place of named destination but also has to pay any duty for both export and import and customs.

Rules for sea and inland waterway transport:

FAS: Free Alongside Ship – Risk of transit is on the buyer when the product is delivered to the named port of shipment.

FOB: Free on Board – Risk of transit is on the buyer when the product is (delivered to the named port of shipment.)

CFR: Cost and Freight – Risk of transit is on the buyer when the product has been delivered to the carrier but the seller is responsible to arrange and pay for costs and freight to the named port of destination.

CIF: Cost, Insurance & Freight – Risk of transit is on the buyer when the product has been delivered to the carrier but the seller is responsible to arrange and pay for costs, insurance and freight to the named port of destination.

The INCOTERMS are used in international commercial transactions to move product from point “A” to point “B”. They are not however consistently used in the produce business within North America. Instead, “F.O.B.” and the term “Delivered” and some variances of these terms have been adopted as the terms most commonly used for inland transportation within North America. These North American variations of the trade terms can be found in Section 20 of DRC’s Trading Standards found at www.fvdrc.com should you wish to compare terms used in North America to the INCOTERMS found at iccwbo.org.

To answer your question, in the absence of an agreement on the terms of the transaction, the official documents of the transaction and DRC’s default rules will be used to establish the contract. In the event of a transportation problem, the information on the Bill of Lading is considered the contract between the transportation company and whoever is responsible for the risk in transit. In your case, CFR (Cost and Freight) and CIF (Cost, Insurance and Freight) indicate the risk of transit is on the buyer. Technically, if you continue using these terms, in the event of a transportation dispute, you would be responsible for paying the shipper/seller in full and filing the claim with the transportation firm. We strongly suggest that when dealing with product shipped by maritime transportation that you make sure that you and your supplier are in agreement regarding the risk of transit. Successfully resolving any claim requires that everyone work together. Transparency and agreement are essential in establishing rights and responsibilities of all parties. Lack of agreement and confusion over terms may not only cost you money, but valuable trading partners as well.

DRC will once again be participating in this year’s CPMA Convention & Trade Show to be held in Toronto May 9^th-11^th.  The DRC team will be on hand at their booth 1209 on the trade show floor to meet with members and potential members.

“The CPMA trade show is a great opportunity to continue the education process on the proposed changes to the Safe Food for Canadians Regulations impacting industry and how they will impact DRC members,” said Fred Webber. “It’s a wonderful event that allows us to interact directly with members and potential members and provide education on preventing disputes as well as to provide information on issues that matter to our members.”

The team will be present at the booth throughout the trade show and is available for meetings.  Should you have a trade partner who is not currently a member, please encourage them to stop by the booth to discuss the benefits of membership.

For more information please call or email the DRC Help Desk at:

DRC Help Desk | 613-234-0982 | [email protected]

Be sure to mark your calendar for DRC’s Board and Annual Meeting that is being held June 7-9, 2017 in Ottawa, Ontario. DRC members will be receiving invitations in the coming weeks to participate in the upcoming meetings. DRC staff will be reporting to the Board on key DRC priorities including DRC’s role under the Safe Food for Canadians Act, Membership, and Trading Assistance.  The Board will also review financial statements and previous meeting minutes.

For more information please call or email the DRC Help Desk at:

DRC Help Desk | 613-234-0982 | [email protected]

DRC Trading Assistance Manager, Jaime Bustamante, was one of the guest speakers for a web-based training seminar series titled: Strengthening your capabilities to successfully export to Canada. The well-attended webinars were organized by PROMEXICO, the Department of Global Affairs Canada and the Trade Facilitation Office of Canada.

The web-based training seminars were held on February 21^st and 24^th and March 8^th, 2017 with an audience that included government representatives, growers, shippers and students. The seminar was designed for attendees to garner detailed information on access requirements and competitive advantages that help make a product successful in the Canadian market.

Topics covered included an overview of the Canadian market for fresh fruit and vegetables, distribution channels, practical advice and tips, financing tools, food safety and certification requirements. Another interesting topic broached was: Understanding social responsibility and the role of women.  Jaime was on hand to represent DRC and provide an overview of the corporation’s role in the industry and services it offers.

If you are interested in DRC representation at an event or speaking engagement, or would like to discuss a possible webinar, please reach out to the DRC Help Desk at:

DRC Help Desk | 613-234-0982 | [email protected]

DRC Trading Assistance Manager, Jaime Bustamante, was on hand to represent DRC at the Fresh Produce Association of the Americas’ (FPAA) two-day Spring Policy Summit. Held at the Tubac Golf Resort and Spa in Tubac, Arizona February 28-March 1^st, the event drew attendees from the U.S., Mexico and Canada. Attendees from the fresh produce industry were on hand to discuss issues impacting the import operations of fruit and vegetable distributors. Topics discussed included food safety regulations, harmonization of food safety laws and regulations, efficiencies at borders and incorporation of new cold storage inspection areas at port of entry. Guest speakers included representatives from the U.S. Food and Drug Administration and their counterparts from Mexico and Canada, U.S. Customs and Border Protection, Mexican Customs and more. Takeaways from the event were focused on efficiency, relationship building and collaboration.

 

The Canadian Food Inspection Agency’s (CFIA) public consultation for proposed Safe Food for Canadians Regulations is coming to a close. The opportunity to share your comments on the draft regulations posted in the Canada Gazette, Part I, closes on April 21^st, 2017. CFIA has hosted in-person and web-based information sessions across the country in February and March 2017. The sessions provided an overview on background information and key facts about the proposed regulations; a review of what the regulations would mean to consumers, food importers, and businesses that prepare food for export or trade across provinces; question and answers sessions; and finally, instructions on how to participate and provide your comments during the consultation.

The draft regulations, draft guidance documents and instructions for submitting comments can be viewed at the following link: http://inspection.gc.ca/about-the-cfia/acts-and-regulations/regulatory-initiatives/sfca/consultation/have-your-say/eng/1482239403639/1482239479767.

Please ensure your comments are submitted by April 21^st, 2017.

Under the current regulatory landscape in Canada, companies that are importing fresh produce from another country or buying from another province (with a few exemptions) must be a DRC member in good standing or have a CFIA license. While impending changes to the Safe Food for Canadians Regulations have been outlined in a previous Solutions Article, one thing remains the same – consequences of loss of good standing:

Once a DRC membership is terminated, there is no protection on future sales or potential claims.

Termination of DRC membership often has other business consequences as well. Many buyers, chains, wholesalers, distributors and large shippers will only do business with DRC members. Don’t let your membership lapse and risk severing business relationships if your firm is no longer an active DRC member.  You must be a member in advance of a dispute in order to take advantage of the assistance we offer including the DRC dispute resolution model. The model is designed to reduce risk and facilitate fair and ethical trade between members.

We encourage our members to ask their buying partners to become DRC members if they are not already. Given the complexity and perishability of produce, we help DRC members resolve disputes in a fast and fair manner. While some firms will be required to be members under the impending new legislation, anyone buying or selling produce can be a member with the same rights and responsibilities.

DRC Membership is an excellent risk management tool that allows members to focus on their business while we help them resolve their disputes. For less than the cost of most loads, you have year round peace of mind. Anyone who grows, buys, sells, brokers or provides transportation services for produce should be a DRC member in order to protect their business. DRC members are obligated to follow DRC Rules and participate in the dispute resolution process. Any member who fails to comply will be disciplined which can include termination, and in some cases loss of the ability to import products.

To find out more about becoming a DRC member or ensuring your membership is up to date and in good standing, please visit FVDRC.com or contact the DRC.

Remember, you must be a member in advance of a dispute in order to take advantage of the assistance we offer.

For more information please call or email the DRC Help Desk at:

DRC Help Desk | 613-234-0982 | [email protected]

A friendly reminder that a few of you have DRC membership fees that are past due. Failure to pay your annual membership dues may result in termination of your membership in accordance with the By-laws of the Corporation.

In order to stay in good standing, if you have yet to pay your yearly membership fees, please contact us asap at: DRC Help Desk | 613-234-0982 | [email protected]

This March, the Ontario Produce Marketing Association (OPMA) will be offering a three-day seminar to help participants become familiar with the most efficient way to receive and check a load of produce on arrival to determine quality. OPMA’s Director of Inspection Services, Jeff Honey, will be covering topics including determining if an inspection is warranted, reviewing requirements of inspection programs, how to interpret Canadian and U.S. grade standards, and more. An up-to-date receiver who has been properly trained will save time and money for their organization. Coming out of this seminar, participants will know when and how to request inspections that will be of maximum use when negotiating a claim with a shipper.

OPMA have provided custom seminars on single commodities as well as custom sessions specific to what the attendees grow and pack or what they may store for others. OPMA is happy to work with companies to provide a session suitable to your specific needs. Over twenty fruits and vegetables are covered over the three-day course and either Canadian or US grade standards and inspection instructions are distributed and discussed. Participants are asked to bring in samples for discussion and grading. Jeff also has hundreds of photos of defective produce that he has taken over the years, or that have been sent to him for defect identification.

Receivers must act quickly when loads arrive with suspected quality issues. In the event of a dispute, inspections of damaged or deteriorated produce are a vital part of settling produce claims.

Jeff Honey grew up in Quebec and is fluently bilingual, provided seminars in English or French. Previous to joining OPMA in 1995, Jeff was with the Canadian Food Inspection Agency (CFIA). The senior inspector at the Ontario Food Terminal for over five years, Jeff supervised an inspection staff of up to sixteen people. Since 1996, OPMA have trained more than 900 people from across Canada including growers, packers, shippers, wholesalers, retailers, logistics specialists, buyers and sales staff.

OPMA Seminar Session 1

March 22, 2017 8:00 am – 4:00 pm

OPMA Seminar Session 2

March 23, 2017 8:00 am – 4:00 pm

OPMA Seminar Session 3

March 24, 2017 8:00 am – 4:00 pm

Seminars will be held at the OPMA offices: 165 The Queensway, Suite 225, Toronto, Ontario, M8Y1H8, Canada

For more information please contact Jeff Honey at 416-519-9390 ext. 232. To register, please fill out the form at:

http://www.theopma.ca/wp-content/uploads/OPMAtemplatetrainingregist.form_.pdf

 

Q. We recently delivered overseas product to our Toronto customer. Upon arrival, the receiver relayed concerns about condition including bruising and discoloration. Five days after the load’s arrival, our customer advised us that the product had been sold but they were seeking a significant adjustment. To date we have not received any documentation regarding the claim. If we make an offer to settle are we accepting that they do not need to prove damages and provide the proper documentation? What options are available to us?

A. (Answer provided by Jaime Bustamante, Trading Assistance Manager)
Consistent with industry and DRC Rules a valid claim has three parts:

1. The receiver must provide prompt notice of a problem. In this case, your customer appears to have complied.
2. The supplier must acknowledge a breach of contract or the customer must provide a federal inspection demonstrating a breach.
3. Should the inspection show product failed to meet contract terms or DRC Good Arrival Guidelines, the customer still needs to provide the method used to arrive at the offer. In our industry, the most common method is an account of sales quantifying monetary damages. In this example, neither appears to have been made available.

Therefore, to answer your question, you can accept or propose a settlement offer without documentation however you lose your ability to request proof in future.  Essentially, you are taking the customers word as fact, acknowledging and accepting the stated condition of the product and the return. If you would like a higher return, you can provide an offer/counter-offer clearly listing the amount you’d settle for and a response deadline with the clause that, should the offer not be accepted, you will be seeking payment in full. If the offer/counter-offer is rejected, the customer will be bound to pay the original invoice price less provable damages (most popular method is with a federal inspection and a prompt and proper account of sales). Lacking this documentation, an arbitrator (should it go to arbitration) would likely award payment in full.