Author: DRC

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.

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 5^th 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.

The Canadian Food Inspection Agency recently issued the following reminder to all importers:

“UPDATED LINK

As many commercial importers and customs brokers are aware, the Canadian Food Inspection Agency (CFIA) has been encouraging its clients to submit their release requests through the Single Window Initiative (SWI) Integrated Import Declaration (IID) when declaring CFIA regulated imports to the Canada Border Services Agency (CBSA).

Soon, the SW IID will be the only electronic declaration option for commercial importers and customs brokers who declare CFIA regulated imports. It will replace the EDI Other Government Department (OGD) Pre-Arrival Review System (PARS) and the OGD Release on Minimum Documentation (RMD) legacy systems.

While many CFIA clients are already using the SW IID, we strongly encourage that all CFIA regulated commercial importers and customs brokers make the switch to the updated import declaration system as soon as possible.

To learn more about the SW IID and its benefits, read our notice to industry.”

This reminder is connected to an article published in DRC’s blog in March 2019 titled: “Canadian Confirmation of Sale (COS) for CFIA”

The term dumping has been thrown around the various trade media as of late, but what exactly is dumping?  In terms of international trade, the Merriam-Webster dictionary defines dumping as “the selling of goods in quantity at below market price.” In this blog post we will breakdown the general concept of dumping a little further, but without going into the specifics of the various forms of dumping, such as price to price dumping and price cost dumping.

Dumping involves two aspects.  The first, the exporter, or a group of exporters working together, is selling a product, to an importer at a price that is lower that what the exporter would sell in their domestic market or would cost the exporter to produce the product.  The second aspect of dumping is the quantity of goods that is sold.  Dumping involves the repeated selling of large quantity of goods.  These two aspects in conjunction would eventually grant the exporter(s) the ability to control a percentage or a segment of the foreign market.  Dumping is a form of price discrimination.  Price discrimination occurs in many forms, but they all involve selling the same product at different prices to different groups of consumers.  Regarding international trade dumping, customers of the importing country are being favoured by being able to purchase a commodity at a lower than market price. This reduced price ensures that the importer continues to purchase from that exporter to continue customer patronage and maintain a competitive selling advantage.

This sounds great for the bottom-line customers, however, there are two main drawbacks regarding dumping.  Dumping leaves little room for other international exporters and domestic businesses the ability to compete against that exporter.  Then, once the exporter has a good grasp on that foreign market and other businesses are no longer able to successfully compete or seen as a threat, the exporter can now control the supply, quality and price in the future of that commodity, thus having a monopoly on the market.

With so much attention and unfavorable press, one would think that the practice of dumping would be prohibited.   The World Trade Organization (WTO), the only organization that has the authority to deal with rules of trade between countries does not prohibit dumping, nor does it act against exporters accused of dumping.  The WTO does however monitor and regulate what measures a country can and cannot take when they believe that an exporter is dumping product in their country.  Unless a country can prove that exporter is dumping product and causing harm to domestic industries there is often no recourse against dumping.

As a result of these factors, most countries are not a fan of dumping, and aim to prevent it as opposed to combatting it. Usually, when a country enters a free trade agreement with other countries, there is a stipulation surrounding dumping and the imposing of tariffs and quotas to exporters to be proactive against dumping.  Taking this proactive approach has been more successful to combat dumping, as for a country to prove that dumping is occurring is a costly and time-consuming activity.

So why would an exporting country risk industry backlash and financial recourse if dumping is proven?  In the short term, dumping can benefit the exporting country with job creation and sustainability of employment.  As the exporter continues to increase their market share in the importing country, individuals will be able to maintain their employment, as well new jobs being created as the exporter foreign market share increases.  On the flip side, in the importing country, dumping has the ability to promote innovation in domestic industries as well as other international competitors, in their quest to remain current and competitive.  Domestic companies are going to need to get creative and find additional ways to keep or recoup their share of their domestic market and grow internationally.

In conclusion dumping is a complex issue with many factors, and numerous arguments can be made to be in favour of or to oppose dumping depending on your position or role.  There are valid points that an exporter can make, as well as importers, government and even the consumer.

For the fresh fruit and vegetable industry, Section 10 (Dealer Duties) of the DRC Trading Standards is considered the default practice for making a timely and proper claim. It is important to recognize that these are the guidelines which must be followed when the shippers/sellers and receivers/buyers have not established their own specifications for such actions.  Numbers 1 – 3 of Section 10 outline the procedures a receiver must follow when a load is received in deteriorated condition while 4 -7 state a shipper’s responsibilities prior to and while loading the shipment.

Numbers 1 – 3

A receiver who wants to reject a load received in deteriorated condition must request a government inspection (unless there is an agreement for a private survey) within 8 working hours, exclusive of Sundays and holidays. Within 3 hours of receipt of the inspection report, the receiver must share the results of the inspection report and advise the shipper/seller that they reject the product.

If the intention is to keep the product, the inspection results must be shared within 24 hours and every reasonable effort to market that product as soon as is practicable under the circumstances must be undertaken.

Once a receiver has secured evidence of a breach of contract or that the load failed to meet DRC Good Arrival Guidelines, the receiver has the right to claim damages. Unless the shipper/seller and the receiver/buyer renegotiate a new way to handle the product (such as consignment or repacking), a receiver who is in possession of a damaged load is only entitled to claim damages. This section also requires the receiver to secure a dump certificate if more than 5% of the load is going to be dumped. This differs from Section 9 which requires an inspection showing that the product has no commercial value when dumping more than 5% of the load. What these two sections indicate is that both of these documents (ie: dump certificate and inspection demonstrating no commercial value) are needed to back up a receiver’s claim.

Numbers 4 – 7

The shipper must load the product in such a way that it will meet contract terms or DRC Good Arrival Guidelines under normal transit time and temperature at the named destination. Some of these procedures include properly securing the load, ensuring appropriate air circulation and temperature compatibility when there are multiple commodities within a single shipment. DRC Transportation Standards cover in detail the responsibilities of the shipper and the carrier at point of loading.

Between 1995 and 1999, NAFTA provided the table to discuss a unified set of rules and regulations as well as a private dispute resolution mechanism for the fresh fruits and vegetables sector. In 2000 the DRC was born from a vision shared by produce industry leaders and government in Canada, the United States and Mexico that included:

• a unified system for fruit and vegetable trade that would avoid trade irritants and facilitate effective trade dispute resolution,
• a strengthened North American trading block for fresh fruits and vegetables, and
• each country having a dispute resolution system, a licensing and inspection regime and backed by an insolvency tool.

While a dispute resolution system existed in the US under the PACA, the pre-NAFTA regulatory system that prevailed in Canada, through the Canada Agricultural Products Act (CAP Act), proved to be ineffective in resolving most disputes and included no provision to address payment in situations of insolvency. Mexico did not have licencing requirements and government quality destination inspections like the ones existing in the US and Canada.

When DRC opened for business, members were located primarily in NAFTA countries until a membership option was opened for those trading partners dealing with NAFTA countries. Fast forward nearly twenty years and today members are found in 17 countries with South America and Europe mainly representing those countries. For Canadians a DRC membership is more than good business, it is the law. For those outside of Canada, DRC membership offers enhanced financial protection, education and a proven alternative dispute resolution mechanism that works. As DRC looks to the future, efforts to grow membership beyond continental North America will continue to expand by participating in trade shows and other initiatives outside of North America.

NAFTA provided the foundation for DRC and now we have a global presence where NAFTA no longer limits DRC’s outreach. Members represent the entire supply chain, with buyers accounting for 58%, suppliers 32% and all other segments representing the remaining 10%.

Following our two previous articles (February and March) where we began analyzing DRC Trading Standards, this time we will examine Section 8: Returns, Rejections, or Credit Memorandums on Sales, and Section 9: Accounting for Discarded Produce.

Section 8: Returns, Rejections, or Credit Memorandums on Sales

This section does not refer to the action of returning, rejecting, or issuing a credit memorandum on sales. This section does outline the required information each of these documents must have, such as the buyer’s name, sales ticket number, lot number, date the allowance was granted, and amount of the credit or adjustment, including the reason or reasons these documents were issued. A notation must be made on the original sales ticket referring to the adjustment and showing where the credit memorandum is filed.

It is essential that these documents are approved by a duly authorized person. A duly authorized person does not have to be an owner or director of the company. Anyone within the company with the capacity to bind the organization, such as buyers or sellers, could be considered a duly authorized person.

Section 9: Accounting for Discarded Produce

There are several key elements to take away from this section. Such elements are:

• determining if the product has any commercial value,
• what you need to do when dumping more than 5% of the load,
• who can provide a certificate regarding the disposition of the discarded produce and,
• understanding the difference between witnessing the dumping of product versus getting a condition inspection confirming the product has no commercial value.

We recommend that you read this section of the Trading Standards carefully when you have an opportunity.

DRC is preparing to lead an industry initiative to review Canada’s grade standards for the fruits and vegetables covered by the (CFIA) Canadian Grade Compendium Volume 2 – Fresh Fruit or Vegetables.

As is the case with all grade standards documents, the Compendium is the lexicon, or recognized language for describing fruit and vegetable commodities and associated defects.

A common lexicon is necessary in order for federal inspectors, buyers, sellers and others to communicate in a common language when they are separated by geographic distances.

DRC will work with industry stakeholders such as the Canadian Horticultural Council, the CPMA and others throughout the 18-month project to ensure fulsome and inclusive discussions as recommendations for change are developed. Review teams will also consider the corresponding US grade standards as part of the review. The Canadian and US fruit and vegetable grade standards are foundational to the DRC’s Good Arrival Guidelines and Trading Standards, which serve to establish liability in a mediation and arbitration process.

The overall objective is that in due course, DRC will take on responsibility for hosting the Compendium and coordinating future updates through a service agreement with the CFIA.

The provision of Incorporation by Reference (IR) within the new Safe Food for Canadians Regulations gives rise to the opportunity for the initiative.

Q. We are having a friendly discussion with our strawberry customer about a load which arrived in Toronto, ON with marginal problems.   We both agreed the berries were sold FOB Good Delivery, and we further agreed the berries would not have more than 1% decay. The berries arrived at the destination pulping warm with 2% decay, but within the DRC Good Arrival Guidelines published on your website. We agree the berries did not meet our agreement and this is a transportation claim based on the warm temps.  The carrier has taken the position that while temperatures were a bit warm, the product made good arrival and he will not accept any claim. What is DRC’s position on this matter?

A.Jaime Bustamante. DRC’s Rules and Regulations are the default rules when the contract between buyers and sellers is silent regarding some of the terms and conditions. In this case, there was an agreement between the parties to modify the strawberry tolerances, specifically the decay part, from 3% total decay to 1% decay. Therefore, there is no question the product failed to meet contract terms upon arrival. In addition, it appears all the parties, including the carrier, agree there is a breach of contract due to the product being subject to warmer than desirable temperatures during transit. Technically, for a receiver to make a successful claim against the shipper, the receiver needs to prove that transit time and temperatures were satisfactory. It is possible that the warm temperatures during transit contributed to the deterioration of the berries, and thus made it fail to meet contract terms. Therefore, because transit temperatures were not satisfactory, this would not be a shipper’s claim.

The carrier’s argument that the product met DRC Good Arrival Guidelines is valid only when the tolerances indicated in the buy and sell contract are not modified. If the product had met the 1% decay tolerance, the carrier would not be at fault because the product would have met the buyer’s and seller’s modified Good Arrival terms even when exposed to warmer than desired temperatures.

The DRC is happy to welcome Tammy McDowall to our team as Manager, Communications and Membership. Tammy brings over 15 years of management experience. This includes spending a decade working in the Canadian healthcare administration and management field, comprising eight years working for Canada’s largest practice management company.  Some of her experiences include internal policy and international project development. Through all these experiences, Tammy has learned to engage others and excel in her ability to build relationships and rapport with individuals at all levels of an organization.

Despite her success in the healthcare field, Tammy has always had an interest in agriculture as she spent many of her childhood summers in the Caribbean with her grandmother learning to tend to a wide variety of fruit trees and animals on the family property.

Tammy went to the University of Ottawa and studied Criminology and Philosophy.  She has a wide range of interest, and in her spare time, she also enjoys going to the different museums and galleries around Ottawa, hiking in nature and cheering on her favourite sports teams.