due diligence - Fruit and Vegetable Dispute Resolution Corporation

Claiming Damages: The Power of an Itemized Account of Sales

Post author By DRC
Post date September 13, 2024
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When dealing with quality or condition issues in the produce industry, providing an account of sales is the most efficient method to demonstrate how the product was handled when there is a breach of contract. If you need to claim damages, it’s good business practice to be ready to provide an Itemized Account of Sales. This detailed account must include the date of sale, quantity for each item sold, the price for each sale related to the load in question, and applicable expenses connected to the breach of contract, such as freight on board (FOB) transactions, the cost of the inspection, brokerage fees, and any other agreed expense. Documenting this information is key to proving your case. It displays the net returns and helps identify if the load was handled properly.

The Fruit and Vegetable Dispute Resolution Corporation (DRC), a trusted authority in the produce industry, emphasizes the importance of an Itemized Account of Sales in consignment transactions. It is the main requirement a consignee must submit to the consignor. However, we recommend that every buyer or receiver be ready to provide one if they need to claim damages or resolve a problem.

If an Itemized Account of Sales is unavailable and the method used to provide a return is not verifiable or satisfactory, be aware that other methods can be used to determine the fair value of the product that can be used. This flexibility means you can sometimes reduce the invoice value by the percentage of defects on the federal inspection, which may or may not represent actual losses.

DRC Trading Standards under section 6 indicate that “Sales Tickets/Invoices” shall be filed or stored for two years. If your client challenges the Itemized Account of Sales in an arbitration process, you may be asked by the arbitrator to produce the “Sales Tickets.” The sales tickets and expenses should match your Itemized Account of Sales information.

There are three different options for handling products received in deteriorated condition. Each option has its reporting requirements for submitting an account of sales. These options cannot be mixed in a single account of sale:

Consignment or Open Sales, including Price After Sales (PAS).
Damages (for breach of contract when parties cannot agree on terms of handling).
– USDA Market News or Agriculture and Agri-Food Canada Infohort available.
– USDA Market News or Agriculture and Agri-Food Canada Infohort not available.
Repacking or Regrading, also known as Labor and Shrink.

Here is a sample template of each Itemized Account of Sales for your reference.

For any questions or clarification about itemizing the account of sales, the DRC Help Desk is here to support you.

We talk about this every day here in the office. We question how our members get hooked on for so much money or find themselves in a complicated bind. The answer frequently follows the same pattern: our clients assume they know enough about their customers. With a DRC membership and a little due diligence, you can avoid putting your business at risk:

First of all, is your customer or prospect a DRC member? If you don’t know the answer to this question, take notice of the red flag waving in the air. We recommend you visit our website to find out if they are a member. If you are unable to find them in our public member list, contact our office, and we can help.
If you discover your customer or prospect is a DRC member, contact our Trading Assistance Staff to find out if they are a member in good standing. Our Trading Assistance Staff can also provide additional information and guidance that you will find valuable.
Have you ever requested references and checked on who those references are? Many firms find themselves with nonexistent references or later find out they have a bad reputation. References are only good if they are reputable.
When someone contacts you on behalf of a company, ensure that the person is an employee or an actual company representative. We have often seen people believing they are dealing with the company receiving the goods when they are actually dealing with an intermediary.
If your customer or prospect is in the United States, check out “The Perishable Agricultural Commodities Act,” also known as PACA. Here, you can find out the status of their PACA license.
Is your trading partner in the Blue Book Services? If not, why not? If a firm is not listed, they are either not dealing with significant volume or could be a new business.
Take the time to learn about the Blue Book Services’ rating system and credit scores. Being listed only means they are either members of the credit agency or they are conducting enough business to show up on “the radar screen.” A company listed without a rating does not mean their business status is “OK”; it could mean they are not ratable or the information on file is insufficient to establish a rating!
Do the phone numbers, addresses, personnel, and EXACT company name match up with DRC’s records? If they don’t, this could be another red flag.
Are you doing business with companies that do not have a DRC membership? Or do they at least have a DRC arbitration agreement? If not, why not? You are exposing yourself to needless risk and expense should challenges arise.

Without fear of contradiction, many disputes could easily have been avoided by checking with the DRC and practicing some due diligence before the sale. Everybody “takes a chance” occasionally, but is it worth taking the risk? Consider a DRC membership as your risk mitigation tool.

Peruse the DRC website for more information. Should other questions arise, reach out to our Help Desk. We look forward to assisting you.