Timely request for an inspection

Q, We bought a load of watermelons under FOB DRC Good Arrival terms. The load was received on a Thursday evening and on Friday morning we contacted the shipper to let him know that we were requesting a CFIA inspection. The CFIA inspection was performed on Monday. The results of the inspection show the product failed to meet DRC Good Arrival by 1% and we have already sold a portion of the product. After several discussions with the shipper, they are only willing to offer a small price adjustment. What would be DRC’s advice on this matter?

A.Jaime Bustamante: First of all, you took the correct actions by informing the shipper and requesting the inspection in a timely manner and proceeded in accordance with DRC Trading Standards. While we understand that you are not in control of how long it takes to get the product inspected, as a FOB buyer, this time delay falls under the buyer’s responsibility. Unfortunately, you have three elements against you in trying to claim damages against the shipper:

  1. Timely Inspection – The inspection was performed four days after arrival.
  2. DRC Good Arrival Guidelines- The inspection report indicates the product failed only by 1% which could mean that if inspected upon arrival, the product could have met DRC Good Arrival tolerances.
  3. Representative Sample – Because a portion of the product was not available for inspection, it needs to be determined if the amount of product inspected is considered a representative sample. The rule of thumb for product inspected to be considered a representative sample is: “more than 75% of the load needs to be available for the inspection”.

As a side note, by receiving product and selling a portion of it prior to getting it inspected, you have lost the right to reject that product. You can offer the shipper to move the product out but, they will be under no obligation to accept it. Unloading the product for any other purpose than an inspection is an act of acceptance.

We would also like to point out that, in our experience, a lot which fails DRC Good Arrival Guidelines by 1% four days after arrival would almost surely have made good arrival if inspected the day it arrived.

DRC Trading Standards: Section 11 – Broker Duties

The common definition of a broker is “an agent who negotiates a contract of purchase and sale”. According to DRC Trading Standards, a broker who fails to perform any specification or duty in connection with a transaction may be held liable for damages happening as a result thereof. What are those specifications or duties?

  • Fully inform the parties involved in the transaction of all the terms and conditions proposed.
  • Submit to the seller and buyer a proper Memorandum of Sale or Confirmation of Sale, including all of the essential details of the agreement such as the INCOTERM, product description, price, brokerage fees or commission, payment terms, and any other detail.
  • The Memorandum of Sale or Confirmation of Sale must identify the party who engaged the broker. If not identified, it would be assumed the broker was engaged by the buyer.
  • The broker will be entitled to payment of brokerage fees by the party who engaged them to act as a broker.
  • A broker may not be entitled to brokerage fees if there has been a failure to perform its duties.
  • A broker does not guarantee the performance of the contracting parties but is entitled to receive prompt payment of brokerage fees when a valid and binding contract is negotiated.
  • Unless specifically agreed, the broker is not responsible for payment to the seller by the buyer.
  • A broker who acts in a dual capacity, either as a true broker or as a buying broker, must clearly disclose this status prior to completion of the contract.
  • A broker has no authority to file a claim with a carrier. However, if the broker comes into possession of valuable information related to a carrier claim, the seller/buyer should be advised promptly of the information.

It is important to understand that this definition is not meant to cover the rights and responsibilities of a transportation broker.  However, there are some similarities and for those in logistics or who are transportation intermediaries, we suggest a review of Section 3 of DRC’s Transportation Standards.

DRC’s Participation at Trade Shows

Recently DRC had the pleasure of exhibiting at the CPMA’s 94th Annual Convention and Trade Show in Montréal, Québec from April 2-4, and the 5th annual Viva Fresh Expo which took place in San Antonio from April 25-27.

Thank you to everyone who came by the DRC booth at these events or who took time to speak with us on the trade show floor. It was great to see many familiar faces, catch up with DRC members and meet new contacts. As always, we appreciate the many questions posed by both members and non-members. A common theme among the many discussions was the Canadian regulatory changes that came into force in January 2019.

Both shows offered great educational opportunities. CPMA’s Learning Lounge and business sessions were informative and thought provoking and the Educational Sessions at Viva Fresh generated numerous discussions on issues affecting the produce industry. It is always insightful to hear firsthand different perspectives and concerns based on an individual’s real-life experiences and position in the produce supply chain. Such opportunities inspire us to continue to grow, make improvements and enhance the manner in which we assist members.

As we continue to attend events we look forward to hearing from our members and potential members as we work to enrich and add further value to the range of services DRC provides to industry.

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