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ARBITRATION DECISION BRIEF: Whether the Inspection Certificate showed the correct product identity

This continues with our series of articles summarizing past DRC arbitration decisions. We believe these articles will help members to better understand how the DRC Dispute Rules and Regulations (R&R) apply in the event of a dispute.

The 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 #20579 – Parties Domiciled – United States and Canada

Facts

  • On March 3, 2020, Claimant sold to Respondent one truckload of limes comprised of 60 cartons of 175-count limes (Product of Mexico) at US$21 per carton, (US$1,260), and 300 cartons of 200-count limes (Product of Mexico), at US$22 per carton, (US$6,660) for a total of US$7,860. According to the invoice, the product was sold F.O.B.
  • The product was shipped on March 3, 2020, from McAllen, Texas to Respondent, in Toronto, Ontario, where the shipment arrived on March 8, 2020.
  • On March 9, 2020, Respondent requested a CFIA inspection of 300 cartons of 200 count limes received from Claimant. The inspection, performed at 10 am the same day, disclosed 43% average defects, including 17% permanent defects (12% blanching, 2% oil spots, 3% scars) and 25% condition defects (4%decay, 17% yellow color, 4% skin breakdown). Pulp temperatures at the time of the inspection ranged from 10.8 to 11C (approx. 51F). The inspector also noted that nearly all the decay was accompanied by mold.
  • Respondent reported reselling 50 cartons of the 200 count limes at CD$21 per carton and 250 of the 200 count limes at CD$22 per carton.
  • Respondent issued a cheque dated March 26, 2020 made payable to Claimant in the amount of US$3,705. This amount included payment of US$21 per carton for the 60 cartons of 175-count limes as invoiced and payment of US$8.15 per carton for the 300 cartons of 200-count limes. Claimant did not accept this cheque and returned it to Respondent.
  • Claimant issued a revised invoice billing Respondent for the 60 cartons of 175-count limes, at US$21 per carton, (US$1,260), and for the 300 cartons of 200-count limes, at US$18 per carton, (US$5,400) for a total F.O.B. invoice price of US$6,660.

Issue

Whether the CFIA inspection certificate showed the correct product identity

Arbitrator’s Analysis/Reasoning

The Arbitrator’s analysis focused on determining whether the CFIA inspection, in light of the product identity issues raised by the Claimant, established that the 200-count limes in the subject shipment did not comply with the contract requirements, thereby entitling Respondent to damages. 

Claimant stated that when the load of limes in question arrived at Respondent’s warehouse on Sunday, March 8, 2020, Respondent advised that the limes were in poor condition and sent photos of the limes to Claimant.  The photos, according to Claimant, showed limes from a previous order that was shipped to Respondent on February 20, 2020.  When questioned about the photos, the Claimant states Respondent insisted the photos were of the limes that just arrived even though the date tags showed otherwise. In order to resolve the issue, the Claimant states Respondent was asked to secure a CFIA inspection of the subject load of limes.

Respondent agrees that following arrival of the shipment and its discovery that the limes were in poor condition, photos of the limes were sent to Claimant per Claimant’s request.  Respondent states a single photo of 175-count limes was sent to Claimant as a result of a technological error, which was immediately rectified by contacting Claimant by email and telephone. Respondent states Claimant acknowledged the new pictures but continued to deny their validity.

Respondent submitted a copy of the photo of the 175-count limes, which bears a label with the handwritten date “02-20-20.” The file contains a number of other photos, some of which are the digital photos taken by the CFIA inspector, and some are the photos taken by Respondent.  There are photos showing just the limes inside the cartons, as well as photos showing the outside of the cartons and photos showing two pallets with dozens of cartons stacked upon each. 

Photos included in the file showed labels and QR codes associated with different purchase order and invoice number for the limes at issue in this dispute. This would appear to support the Claimant’s contention that some of the cartons made available to the CFIA inspector for inspection were from a different shipment of limes.

The CFIA inspection certificate shows defect percentages ranging from 0 to 10 percent for decay, 0 to 8 percent for skin breakdown, and 2 to 34 percent for yellow color.  The presence of sample cartons showing little, or no presence of a defect combined with those showing a significant percentage of the same defect may also be indicative of a non-homogenous load.

Based on the items just noted, it would appear that the integrity of the load was compromised prior to the CFIA inspection, such that it is impossible to ascertain with reasonable certainty that all 300 cartons of 200-count limes covered by the inspection were from the March 3, 2020 shipment herein in dispute.

Consequently, the inspection cannot be used to determine whether the 300 cartons of 200-count limes in question complied with the contract requirements. 

Arbitrator’s Decision

Respondent was ordered to pay Claimant the sum of US$6,660.00, plus the US$600.00 filing fee, within 30 days from the date of the Decision and Award.

DRC Comments

Unless proven otherwise, a government inspection such as a CFIA Inspection or USDA inspection, is considered prima facia evidence. In other words, it is considered a correct description of the condition of the product as well as the information contained on the cartons and other markings on the product, at the time the inspection is performed.

In this case, the markings on the cartons and the photos of the load, created reasonable doubt that the integrity of the load inspected was compromised.

As a receiver who requests an inspection to prove the condition of the product upon arrival, it is very important to request and make sure the inspector writes in his report all the information included in the cartons and can report Lot ID. The inspector can also refer to the invoice # connected to the load. This normally avoids any possible lot identity issues.

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

DRC Trading Standards and References: