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ARBITRATION DECISION BRIEF: Timely and proper notice of inspection and temperature recorder recovery

Continuing with our series of articles summarizing past DRC arbitration decisions. We believe this will help members to better understand how the DRC Dispute Rules  and Regulations (R&R) apply in the event of a dispute. DRC Dispute R&R state that all DRC arbitrations are private and confidential. As such, the names of all parties, including arbitrators and companies are not included. A reminder that DRC’s sole role is as administrator of the arbitration process; DRC does not participate in any hearings. Therefore, this summary is based solely on the arbitrator’s written decision and may not reflect important information shared with the arbitrator through written briefs or verbal testimony.

Case: DRC File #19478 – Parties Domiciled – United States and Canada

Facts

  • The Claimant shipped to the Respondent 540 boxes of Grapes on July 6, 2015. According to the invoice, the product was sold F.O.B. at $9.00/box. 
  • The Respondent received the shipment in Canada on July 10, 2015, and a private inspection was performed. The private inspection revealed  2% decay, 13% brown discoloration, 4% translucent and discoloured, 3% wet and sticky, 5% shattered, and pulp temperature ranging from 33.7F(.95C) to 34.5F(1.3C).
  • On July 14, 2015, Claimant instructed Respondent to secure and provide a CFIA inspection, which was never conducted. The Claimant also requested a copy of the temperature recording tape, which was not provided.
  • The Respondent supplied an account of sale and remitted the proceeds of USD$7,472.70 after a deduction of USD$13,123.80 from the original invoice value of USD$20,596.50.

Issues

  • Whether the Respondent failed to adequately inform Claimant regarding the problem of the product on arrival.
  • Whether the Respondent failed to properly document what happened to the temperature recorder. 
  • Whether there was an agreement between the parties to use an independent private commercial inspection service.

Arbitrator’s Analysis/Reasoning

The grapes arrived on Friday, July 10, 2105. The first communication from Respondent to advise Claimant there was a problem was not until Sunday, July 12, when they faxed a copy of the private inspection to Claimant. This left two days since arrival before a problem was reported. Had Respondent advised Claimant the day of arrival that the product was showing trouble and a private inspection had been requested, Claimant could have reacted and responded as they deemed necessary.

When Respondent sent the email on July 12, 2015 (Sunday) with the results of a private inspection, an “automatic out of office reply” was sent back to Respondent by Claimant’s recipient which indicated that person would be out of the office until July 20, 2015, and if anything is needed, please call the office at the phone number indicated. Furthermore, a formal email response was sent on July 13, 2015 (Monday) by Claimant reiterating to call the office as the recipient of the email was out.

Claimant’s invoice indicates that the grapes were sold FOB. The risk of loss would have passed to Respondent once Claimant loaded the product onto the truck. Respondent is therefore responsible for notifying the supplier of the problem and failed to do so in a timely manner.

It is clear from both parties that Claimant requested a CFIA inspection on July 14, 2015, which was never requested or performed by Respondent. Respondent communicated problems on a shipment by means of email and received a response that would clearly indicate their communications to Claimant had failed to be delivered accordingly.

Respondent claims that Claimant has accepted private inspections in the past and therefore should apply in this case. However, it is unclear as to there being any “past experiences” whereby Claimant accepts inspections performed by any independent inspection bodies. The DRC Good Inspection Guidelines are precise and very clear as private inspections are not typically given the same weight as government inspections.

While there is no evidence offered to prove or disprove temperatures in transit were carried out as instructed, Respondent has failed to provide the temperature recording tape to substantiate what the in-transit temperatures were, as requested by Claimant.

Arbitrator’s Decision

Respondent failed to prove that time and temperature while in transit were in good order. Respondent was fully instructed by Claimant to call the office in both email communications and did not do so on a timely basis. Respondent failed to request a CFIA inspection. Therefore, Claimant is owed the balance of its invoice price, USD$14,117.52 funds to be paid by Respondent no later than thirty days from the date of this decision.

DRC Comments

FOB receivers/buyers, have the burden to prove time and temperature while in transit are acceptable, specifically when a temperature recorder is placed on the load at shipping point and the BOL includes it. If a BOL includes a temperature recorder and the driver signs for it, the carrier is obligated to deliver that item along with the product. When a temperature recorder is lost, the receiver must document its absence and let the carrier know of a potential issue.

Timely notice of a problem is essential when claiming damages. In this case, the receiver waited two days after the product arrived to notify the claimant of a problem, as well as with a private inspection. While the Respondent argued that private inspections have been used in the past and therefore a previous course of dealing had been established, there was not sufficient evidence to demonstrate this. Unless otherwise agreed, DRC members must request a government inspection prior to requesting a private inspection service. Alternative inspections services must be discussed, understood, and agreed, and preferably in writing.    

For more information regarding the sections of DRC Trading Standards applied to this dispute, refer to the following sections:

DRC Trading Standards: