As a Free on Board (FOB) buyer/receiver, it is important to understand what actions to take if you receive a product that does not meet the contract terms or DRC’s Good Arrival Guidelines. Additionally, on a FOB transaction, once the carrier picks up the product, the buyer/receiver becomes the owner of the load.
But what if you find that the product is in poor condition during unloading? You have the right to reject the load, but to maintain this right, you must immediately load the product back into the truck and request a government inspection, or if agreed upon, a private inspection.
If the inspection report confirms that the product does not comply with DRC’s Good Arrival Guidelines or contract terms, you have three options: reject the product and return it to the shipper, renegotiate the contract terms, or claim damages if they cannot agree on renegotiating the contract, and rejecting the load is not an option.
What is required when you REJECT a load?
The proper or legal act of rejection requires that you:
- Do not divert a shipment by sending your product to a different location from the one indicated in the bill of lading (BoL).
- Do not unload the shipment except for the purpose of inspection.
- Give your notice of rejection within a reasonable time.
Rejecting a load requires you to follow the procedure indicated in DRC’s Trading Standards – Section 10, which states:
“2. Where a receiver has:
- purchased an perishable agricultural commodity that is damaged or in a deteriorated condition, or
- offered to handle a perishable agricultural commodity on consignment that is damaged or in a deteriorated condition, he shall:
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within 8 working hours, exclusive of Sundays and holidays, after receipt of notice of arrival of the shipment of a perishable agricultural commodity apply for inspection and, within three hours after he has received an oral or a written report of the result of the inspection, advise the shipper or the seller’s local representative in writing that he rejects the perishable agricultural commodity,
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within 24 hours of the receipt by him of a certificate in respect of the inspection forward a copy thereof to the shipper of the perishable agricultural commodity,”
What to do when ACCEPTING a load in deteriorated condition?
Remember that the ownership of the load is transferred to the buyer/receiver once the carrier picks up the product. If the inspection report confirms the product has failed to meet DRC Good Arrival Guidelines or contract terms, and you still wish to accept the load, then you can renegotiate the contract terms.
But what if you and the seller cannot agree on a price adjustment? You may negotiate other alternatives such as Repacking, Price After Sale or Consignment terms. However, if no agreement is reached, you can only claim damages.
Claiming damages is a process where the buyer/receiver must salvage the product to the best of its capabilities to minimize the loss. The responsibility is to market the product and make every reasonable effort to sell it at the best possible price and as quickly as possible. From the sales, you can deduct any expenses resulting from the breach of contract, such as freight, inspection costs, brokerage, and any other agreed-upon expenses. The most straightforward way to demonstrate damages is by presenting an account of sales.
Remember that the DRC Trading Standards are a set of rules and guidelines that apply to all transactions made by DRC members. Although members can also have their own Standard Operating Procedure (SOP), it is your responsibility to demonstrate that your clients have discussed, understood, and agreed with your SOP. Protect your business by getting familiar with and understanding the DRC Good Arrival Guidelines and Trading Standards.
For more information, contact:
Nicole MacDonald
Communications and Marketing Specialist
Fruit and Vegetable Dispute Resolution Corporation
Email: [email protected]
Ph: +1-613-234-0982
