One of the most challenging terms to understand in our industry is the Fruit and Vegetable Dispute Resolution Corporation’s (DRC) Good Arrival Guidelines (Good Arrival). Before delving into this term, it is essential to understand that Good Arrival only applies to transactions where the parties fail to agree on a specific grade standard, the condition of the product upon arrival, or when the parties agree to a no-grade standard contract.
Additionally, Good Arrival only applies to Free on Board (FOB) sales. For DRC purposes, any sale where the INCOTERMS begins with an “F” or a “C”, falls under the FOB sales concept indicated in section 20.1 of DRC Trading Standards. You can also read more about INCOTERMS in the following articles:
- Incoterms® in Maritime Transportation Transactions and the DRC
- Q & A’s – North American Terms vs. INCOTERMS
To fully understand Good Arrival, we first need to explain the concept of “Suitable Shipping Condition/Good Delivery”. This term implies that a seller assures that, under normal transit time and temperature, the product will meet the agreed quality and condition requirements upon shipment. This infers that some degree of deterioration will normally occur over time, even under the best of transit conditions. This is reflected in the extended percentage of tolerances of defects allowed (1.5 times tolerance of percentage of defects at origin) when the product arrives at its destination.
Good Arrival is a combination of the Perishable Agricultural Commodities Act (PACA) 5 Day FOB Good Delivery Guidelines and Canadian Destination Tolerances and Suitable Shipping Condition Guidelines.
Let’s look at two examples: Asparagus and Avocados
The second column is for reference purposes only and is not used on FOB transactions. The third column is based on PACA Good Delivery Guidelines. The main difference in how PACA determines whether a product fails or meets Good Delivery is based on transit times, as the percentage of tolerances vary depending on transit days. For DRC purposes, we only used the PACA Good Delivery tolerances from the 5-day transit tolerances. The fourth column only applies to FOB transactions where the commodity is shipped to Canada, because that commodity has a Canadian grade standard and minimum import requirements apply.
One important element that must be mentioned is that product defects are split between quality/permanent defects and condition defects. Quality/permanent defects are those that do not change with time and only apply to transactions where a grade standard is agreed upon, whereas condition defects are those that change with time. If you are looking at a CFIA inspection, the difference between a quality/permanent and a condition defect is easily identified because a (P) and a (C) will be prior to the named defect, respectively.
In the example of the asparagus where the asparagus are shipped within the United States of America (USA), in FOB transactions, whether the transaction references a grade standard such as FOB U.S. #1(quality/permanent and condition defects count), or the transaction references FOB Good Delivery terms (only condition defects count), the tolerances of defects at destination are 15% total defects, 8% serious damage, and 3% decay.
If these same asparagus were to be shipped to Canada based on FOB U.S. #1 or FOB Good Arrival/Good Delivery, the tolerances of defects at destination are 15% total defects, 10% total quality/permanent defects, 5% of the same single quality/permanent defects, 10% of the same single condition defect, and no more than 3% decay. Quality/permanent defects only count on transactions where a grade standard is referenced.
In the example of the avocados, regardless if the product is shipped within the USA or to Canada, on FOB transactions, given that Canada does not have an avocado grade standard, the tolerances of defects allowed defaults to PACA 5-day Good Delivery or the tolerances established in the third column which are 15% total defects, 8% serious damage, and 3% decay.
Let’s put this information into practice and answer the following questions:
- A load of asparagus is shipped from the USA to Canada under FOB no grade Good Delivery terms. The asparagus are inspected by the CFIA upon arrival, and the inspection report shows: (P)5% trimming, (C)2% decay, (C)7% spreading, and (C)4% shriveling. Does this product fail or meet DRC Good Arrival?
Yes____ No____ - A load of avocados is shipped from Mexico to Canada under FOB no grade Good Delivery terms. The avocados are inspected by the CFIA upon arrival and the inspection report shows: (C)4% decay, (C)3% discoloration, and (P)5% scars. Does this product fail or meet DRC Good Arrival?
Yes____ No____
If you are not sure about the answers to the above questions, contact our trading assistance staff at 613-234-0982 ext. 224 or send us an email at jbustamante@fvdrc.com or dpalomino@fvdrc.com.
You may also want to contact our office to request a webinar where we can address DRC Good Arrival Guidelines, among other topics of interest to your staff.
