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ARBITRATION DECISION BRIEF: Whether the Claimant submitted its claim within DRC statute of limitations (nine (9) months), and if the Respondent fulfilled his duties according to the DRC Rules after receiving a commodity in deteriorated condition.

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 #20568 – Parties Domiciled in Canada – Ontario and Saskatoon

Facts

  • On May 7, 2019, the Claimant sold 600 cases of beef tomatoes from Mexico to the Respondent.
  • An invoice dated May 15, 2019, indicates the shipment was sold FOB Laredo, TX, at USD$15.65 per carton for a total invoice of USD$9,570. Billing terms were net 30 days, due on June 14, 2019.
  • The Respondent picked up the shipment in Laredo, TX, on May 16, 2019, and delivered it to the Respondent’s facilities in Calgary, AB, on Sunday, May 19, 2019. When the load was received in Calgary, AB, a note on the receiving report stated: “Needs grading for soft and colour sorting.” No defects were noted, and the tomatoes were not listed as distressed.
  • On May 21, 2019, the Respondent emailed the Claimant and stated: “The tomatoes aren’t holding up and are very soft. We are calling an inspection on what we have”.
  • A CFIA Inspection was requested and performed on May 21, 2019, showing:

May 21, 2019

Defect

Average

Range

 

Firm Ripe

95%

 

 

 

(C) Soft

6%

 

 

 

(C) Decay

0%

0%

0%

 

(C)Discoloration

4%

0%

10%

 

(C) Soft Areas

4%

0%

10%

 

(P) Scars

2%

0%

5%

 

(C)Sunken Areas

2%

0%

5%

 

  • On May 22, 20219, a second CFIA Inspection was requested. The second CFIA Inspection report noted a slight increase in softness and listed other variables not indicated in the first report. Still, only 388 cartons were inspected, showing:

May 22, 2019

Defect

Average

Range

 

Turning

2%

 

 

 

Semi-Ripe

1%

 

 

 

Firm Ripe

88%

 

 

 

(C) Decay

1%

0%

5%

 

(C)Discoloration

3%

0%

5%

 

(C) Skin Punctures

1%

0%

5%

 

(C) Soft

8%

0%

25%

 

(C) Soft Areas

6%

0%

15%

 

(C)Sunken Areas

3%

0%

5%

Issues

Whether the Claimant submitted its claim within the DRC statute of limitations (nine (9) months), and if the Respondent fulfilled his duties according to the DRC Rules after receiving a commodity in deteriorated condition.

Arbitrator’s Analysis/Reasoning

  1. Is the arbitration claim barred under the DRC rules?

According to the DRC rules:

Article 4        Limitation of Claims.

  • Unless the parties otherwise specifically agree in writing, no Claim may be brought under these Rules by one member against another unless the Claim is notified to the DRC by filing a Notice of Dispute within nine (9) months of when the Claim arose or within nine (9) months of when the claimant ought reasonably to have known of its existence. Failure to file the Notice of Dispute with the DRC within this time is deemed an abandonment of the Claim and shall prevent recovery against another member.

The record is devoid of communication efforts after May 28, 2019. Neither party submitted evidence of further communication. 

The Respondent argues that the Statute of Limitations began running on May 21, 2019, because they ordered an inspection on that date. Just because someone orders an inspection, doesn’t mean there won’t be some type of resolution on the file. There is no evidence that the invoice would not be paid. How long should a company try to collect on an invoice before they reasonably know it is not going to be paid? It is reasonable in this industry that resolution could take months.

The actual invoice date was June 14, 2019, therefore, the statute period would have commenced on June 15, 2019.

The Claimant filled its complaint with the DRC on March 9, 2020, within the 9-month time period. The complaint was filed within the Statutory time limit and the arbitration will go forward.

  1. Does the Claimant present a case against the Respondent for recoverable damages?

The complaint states that the Respondent purchased the tomatoes from the Claimant.  The Respondent sent the product to Calgary Alberta. On arrival, the Respondent’s receiving report indicated the product arrived at 7:18 AM on Sunday May 19, 2019. The report indicated the tomatoes needed grading for soft and colour sorting. Other than that notation, there is no other evidence of a problem with the load of tomatoes. If the tomatoes were deteriorating, an inspection could have been requested on Sunday, the day of their arrival. 

Two days later, the Respondent contacts the Claimant and tells them there is a problem with the tomatoes. They have an inspection done that day and another inspection the day after. The first inspection report shows 18% total defects.

In Canada, in the absence of an agreement on grade, the default is the DRC “Good Arrival Guidelines.”

DRC Good Arrival Guidelines

Tomatoes

15 – total allowable defects

10 – total allowable permanent defects

05 – total allowable same permanent defect

10 – total allowable same single defect

05 – total allowable decay

Two days after arrival, the tomatoes fail to meet DRC Good Arrival Guidelines but only by 2% (permanent defects such as “scars” do not count on no grade contracts). Could this product have met DRC Good Arrival Guidelines if inspected upon arrival?

The record is devoid of further communication between the parties regarding the transaction or payment thereon.

Further, even though the Respondent claims the product was defective and didn’t meet specs, they produce no documentation regarding the disposition of the product. They claim part of the load was dumped, with no documentation to support their claim. What happened to the remaining tomatoes? There is no documentation to support their limited accounting.

Clearly, the Respondent purchased the tomatoes from the Claimant. The invoice has not been disputed. Regardless of other issues, the Respondent failed to prove its case. No evidence of transit temperatures in this FOB sale were provided. An inspection 2 days after arrival is only marginally out of spec and is completely different than the QC report on arrival. And finally, as already stated the disposition of the tomatoes is not properly documented.   

Regarding the Respondent’s client involvement, there may have been a separate agreement for the purchase. However, their participation was not well explained and not a major factor in the decision. The Respondent stated they were “told” to purchase the tomatoes.

Arbitrator’s Decision

Award in favor of the Claimant in the amount of USD$10,248.00 (USD$9,570.00 plus arbitration fee of USD$678.00) to be paid within 30 days.

DRC Comments

DRC members must observe the limitation of claims established under DRC Dispute Resolution Rules. DRC Members have nine (9) months from when the dispute arose to file a notice of dispute with us. Therefore, the following dates can be taken into consideration when determining if a dispute arose within the limitation of claims:

  • the invoice dates
  • the payment terms
  • the date notifying of a claim
  • the date a return or a liquidation report is submitted
  • the date when negotiations are finished

It is up to the parties to make their arguments as to when they believe a dispute started.

Even when product arrives on a weekend or a holiday, buyers/receivers can proceed to request a government inspection. In any event, once an act of acceptance has occurred, such as unloading a load from the truck and releasing the truck, the clock starts ticking regarding timely performance of an inspection.

One issue the arbitrator dismissed entirely were the respondent’s client specs. The respondent could have successfully proven that the specs where part of the contract if they would have been able to show through a contract or a communication such as an email, that these specs where discussed, understood, and agreed to.

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

Receiver Duties (Fruit and Vegetable Dispute Resolution Corporation Trading Standards s.10 (2)(b)(ii))

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Automated Import Reference System (AIRS)

For those who are not aware of the Canadian import requirements for fresh fruits and vegetables, the Automated Import Reference System (AIRS) is a great tool under the Canadian Food Inspection Agency (CFIA) for information on importing a regulated commodity into Canada.

AIRS helps you identify the import requirements of those commodities regulated by CFIA by searching for their Harmonized System classification, origin, destination, and end use for that commodity to be imported.

You can contact us at DRC to help you navigate the AIRS search engine or you can follow their tutorial which you can find on the following link:

https://inspection.canada.ca/food-safety-for-industry/video/airs-tutorial/eng/1528316420730/1528316421089

You can find the latest import requirements under AIRS, and we encourage our members to become familiar with it. 

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Membership Updates for April 15, 2022

Welcome New Members

From March 15 until April 15, 2022, DRC welcomed the following new members:

ALRAHMA IMPORT LTD. (Also d/b/a Alrahma Import)

AB

Canada

BHANDARI FOOD TRADING INC.

ON

Canada

BONFRUIT (A d/b/a of Torobunch-Pro Inc.)

QC

Canada

CULTIVARES SAC

Lima

Peru

DI VAIN ENTERPRISES (A d/b/a of Quetzal Silva Torres)

BC

Canada

FOMACOP SARL (Also d/b/a Fomacop)

Chichaoua

Morocco

FRESH PACKING CORPORATION

CA

United States

KARANS INTERNATIONAL DISTRIBUTORS LTD.

BC

Canada

KONKAN IMPORTS INC.

ON

Canada

TAMARIN-GOUTT INC.

QC

Canada

THE FUTURES EXCHANGE LTD. (Also d/b/a Greenhouse-Garlic)

ON

Canada

 

DRC Membership: change in status

As of April 15, 2022, the following organizations no longer hold a DRC membership:

EMPACADORA DE AGUACATES SAN LORENZO, S.A. DE C.V.

Michoacan

Mexico

ESXA IMPORT & EXPORT (A d/b/a of Ngoc Quynh Nguyen)

QC

Canada

EXOCAN GROUP INC.

QC

Canada

EXPORTADORA BEST BERRY CHILE S.A.

Bio-Bio

Chile

JOHN GREENE LOGISTICS COMPANY

FL

United States

K & C SPECIALTIES INC.

CA

United States

KEN CORBETT FARMS, LLC

GA

United States

KENWEST TRADING LTD.

BC

Canada

MACARTHUR’S QUALITY FLOWERS & PLANTS INC.

NS

Canada

MAMA’S GREENHOUSE (A d/b/a of 963358 Ltd.)

AB

Canada

MARCHÉ STEVE-ANNA INC.

QC

Canada

NAVS GROCERY ( A d/b/a of 2726265 Ontario Inc.)

ON

Canada

QTI (A d/b/a of QTI Service Corporation)

TX

United States

SERVICIOS COMERCIALES AGROFINE EXPORT SPA

Biobío

Chile

T. E. PRODUCE IMPORT AND EXPORT LTD.

BC

Canada

UNIFRUTA WORLD PRODUCE/UNIFRUTA PRODUITS DU MONDE (Faisant également affaire sous 9850759 Canada Inc.)

QC

Canada

VEG FRESH FARMS, LLC (Also d/b/a Good Life Organics)

CA

United States

For details regarding a change in status, please contact the office.

Important note: Following membership termination, the former member remains liable for claims arising prior to their termination if the claim is submitted to DRC by way of a Notice of Dispute within nine (9) months from when the claim arose or within nine (9) months from when the claimant ought reasonably to have known of its existence.

 

About DRC

DRC is a non-profit membership-based organization whose core work is business-to-business commercial dispute resolution for produce. DRC is a referee between parties when a purchase and sale do not go according to plan. Members adhere to a common set of trading standards and member responsibilities that promote fair and ethical trading for produce entering the North American marketplace. In Canada, membership in the DRC is a regulatory requirement to trade fresh fruits and vegetables (i.e.: buy, sell, import, export) unless excepted from the regulations. Today, DRC has members in 16 countries outside of North America, and membership continues to grow annually. Anyone exporting fresh fruits and vegetables to Canada must sell to a DRC member.

In addition to the DRC’s Operating Rules and Trading Standards, DRC offers a comprehensive, tailored suite of tools to build the knowledge and capacity of members to avoid or resolve disputes, including education, mediation and arbitration. DRC has ability to impose sanctions and disciplinary actions towards members who do not conduct business in accordance with the terms of their membership agreement.

To date, DRC has resolved claims in excess of $105 million dollars. Although arbitration is available, 80% of these claims have been settled in an average of 26 days through our informal consultation/mediation services. Arbitration awards are court enforceable in countries that are signatories to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards or subsequent conventions.

To learn more, reach out to our Help Desk at info@fvdrc.com or (+1) 613-234-0982 or visit us at www.fvdrc.com.

 

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ARBITRATION DECISION BRIEF: Whether there was an agreement between the parties on how the product would be handled after arriving in a deteriorated condition and if the Respondent fulfilled his duties according to the DRC Rules.

Our continuing series of articles summarizing past DRC arbitration decisions is intended to 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 #20820 – Parties Domiciled – Spain v. Canada

Facts

On February 12, 2021, the Claimant sold the Respondent a container of 1,480 boxes of sizes 90, 100 and 120 lemons from Spain. The invoice shows that the product was sold at USD$19.75/box with a total invoice amount of $29,230.

The container was shipped from Spain on February 22, 2021, arriving at the Montreal Terminal on March 10, 2021, discharged from the vessel on March 11, 2021, and was railed to Toronto on March 18, 2021.

A CFIA Inspection was requested and performed on March 20, 2021 and revealed the following:

  • 360 boxes of 90s 7% decay, 5% contact spot, 11% skin breakdown, 1% peteca
  • 416 boxes of 100’s 6% decay, 4% contact spot, 17% skin breakdown, 2% peteca
  • 704 boxes of 120s 9% decay, 4% contact spots, 17% break down and 1% peteca

On March 22, 2021, the Respondent informed the Claimant of the results of the CFIA inspection. The Claimant requested the Respondent not to move the load until the shipping line surveyor could inspect the load. The Claimant removed the hold on the product on March 23, 2021, although a surveyor had not been on-site. On March 25, 2021, the Respondent proceeded to clean, repack and sell the product.

On March 29, 2021, the Claimant requested an update on the sales. The Respondent replied that the product was selling slowly and that they would try bagging some of the fruit.

On April 5, 2021, 15 days after arrival, the Respondent warned the Claimant of a potential dump of the remining inventory of 1,263 boxes which represented 85% of the total load. The Claimant replied that if a dump was necessary, a CFIA dump certificate and a CFIA inspection showing that the product has no commercial value would be needed.

On April 14, 2021, the Respondent supplied to Claimant an account of sale for the 1,480 boxes at five separate price tiers: 70 boxes at USD$36, 73 boxes at USD$27.50, 35 boxes at USD$25, 195 boxes at USD$16.50, 159 at USD$4 and 948 boxes dumped, resulting in an aggregated sale proceeds of USD$9,256.00. After deducting sorting and cleaning, bagging, freight, inspection, dump certificate and customs clearance expenses totalling USD$9,441.35, Respondent declared that the total expenses exceeded the sale proceeds in the amount of USD$185.35.

Issues

  • Whether there was an agreement between the parties on how the product would be handled after arriving in a deteriorated condition.
  • Whether the Respondent fulfilled his duties according to the DRC Rules after receiving a product in a deteriorated condition.

Arbitrator’s Analysis/Reasoning

Why did the two parties involved not consent to a mutually agreeable new contract since the Claimant breached the original contract?

When there is a breach of contract, what is equally important after getting an inspection to substantiate that, is a mutually agreeable plan of action going forward. Regrettably, this did not happen.

Why did the Respondent not obtain a “No Commercial Value” inspection as per the Claimant’s request?

DRC Trading Standards, Section 9, indicate the following regarding commercial value:

“The term “commercial value” means any value that a commodity may have for any purpose that can be ascertained by the exercise of due diligence without unreasonable expense or loss of time. 

When produce is being handled for or on behalf of another person, proof as to the quantities of produce destroyed or discarded in excess of five percent of the shipment shall be provided by procuring an official certificate…”

 The Respondent stated they did not have customers now or 15 days ago when the product arrived. If this was the case, why did the Respondent not outrightly reject the product since they state they had no customers for the product?

The arbitrator did not accept the Respondent’s account of sale as submitted. The Respondent charged CAD$4,260.00 for “Sorting and Cleaning” but it provides an account of sale with values ranging from CAD$36.00 to CAD$4.00.

When a commodity is sorted and cleaned, that effort is to remove the distressed product resulting in the remaining product being of the original grade of the contract. Product is not sorted and cleaned to be sold on a consignment basis. if the product was sorted and cleaned, what was the point of sorting and cleaning if the salvage was not going to bring better sales given the efforts and costs?

Given the lack of sales and the excessive amount of product dumped, the arbitrator did not believe the Respondent did the best they could to salvage these goods. If both parties had agreed to cleaning, sorting, and bagging in advance, the Respondent could have stated they would take these actions to have a fire sale on the product since it is continuing to deteriorate.

The arbitrator did not accept the Claimant’s proposed settlement of offering a 31% total invoice credit. In the arbitrator’s opinion, this fruit arrived in good time and presumably good temperature with a significant amount of problems as substantiated by the CFIA Inspection. This product would only further deteriorate as time went on.

The Claimant demanded USD$20,168.70 plus DRC fees of USD$2,800.00 and two other incidental amounts. Because this was a CIF transaction and there was a breach of contract by the Claimant, the Respondent would be entitled to deduct the inland and customs clearance expenses indicated in their account of sales.

Both parties share in the responsibility in this matter. The Claimant shares responsibility for breaching the contract with some very distressed product, and the Respondent for so little salvage given all the efforts they claim to have undertaken to yearn results and the significant amount of product dumped.

Arbitrator’s Decision

Given that the arbitrator did not find the Claimant’s remedy reasonable, and that the Respondent has failed to properly salvage the load, the arbitrator awarded the Claimant USD$11,484.35. This award represents 50% of the USD$20,168.70 claimed by the Claimant plus USD$1,400.00, which is half of the DRC arbitration fees.

DRC Comments

There are a few points in this decision that DRC members must take into consideration in their transactions:   

  • Once a receiver has secured evidence of a breach of contract after receiving a product in a deteriorated condition, unless the parties renegotiate a new way to handle the product (such as consignment, price after sale, or repacking), a receiver who is in possession of a damaged load is only entitled to claim damages.
  • When more than 5% of the load needs to be disposed of or destroyed, a receiver would require a dump certificate and a governmental inspection demonstrating that product has no commercial value to support the claim.
  • An account of sales must be properly supported by sales tickets, invoices or any other material corroborating the sales and expenses incurred.

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

DRC Trading Standards:

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Quality Grade Standard or No Quality Grade Standard Transactions

One issue that continues to appear in disputed transactions handled by DRC Trading Assistance Staff is if the seller and buyer agreed on a commodity grade standard.

Each country, region, or economic union, has grade standards for commodities grown and traded in these territories. In the United States and Canada, US Grade Standards and Canadian Grade Standards are the grade standards buyers and sellers are most familiar with. However, there are other commodity grade standards such as the FAO’s CODEX Alimentarius and the United Nations Economic Commission for Europe (UNECE) Standards for Fresh Fruit and Vegetables.

While there are some similarities among the grade standards for specific commodities from the above-mentioned jurisdictions, there are significant differences which make each grade standard stand “its own”.

Therefore, for DRC members, it is a good trade practice to, when discussing the terms of a transaction, agree on a specific, defined grade standard if that is the intention. This is particularly important because for DRC members who fail to demonstrate that a specific grade standard was agreed upon, the transaction defaults to No Grade, DRC Good Arrival Guidelines.

DRC Good Arrival Guidelines is a combination of PACA 5 Day FOB Good Delivery Guidelines, CFIA Canadian Destination Tolerances and Suitable Shipping Condition Guidelines which establish the maximum percentage of defects allowed at destination for FOB shipping point transactions. Suitable Shipping Condition is defined as sellers assuring that the product will meet the agreed quality and condition requirements when the product is shipped. The seller also assures that the product will not deteriorate abnormally if proper transit time and temperatures are maintained during shipment. This implies that some degree of deterioration will normally occur over time, even under the best of transit conditions

Section 20, Trade Terms of the DRC Trading Standards states that INCOTERMS such as CPT, CIP, CFR, and CIF are all deemed to be the same as FOB except that the seller assumes the costs associated with the named INCOTERM. However, the risk of transit remains with the buyer.

Unless there is an agreement on a specific and defined grade standard, such as US #1, Canada #1, Codex Class I, or UNECE Class I (also known as CAT I in the Spanish and French versions of the CODEX Standards or UNECE Standards), all transactions between DRC members will default to FOB No Grade Good Arrival.

Finally, another important matter to consider when negotiating the terms of the transaction, when a grade standard is agreed upon, all defects scored in a quality/condition inspection report count towards the total percentage of defects allowed. However, when no grade standard is identified as part of the terms of the transaction or the transaction defaults to DRC Good Arrival Guidelines, only condition defects count towards the maximum percentage of defects allowed. Permanent or quality defects are those that do not change with time such as scars or hollow stems. Condition defects are those that change with time such as decay, bruising, soft to name a few.

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Membership Updates for March 15, 2022

Welcome New Members

From February 15 until March 15, 2022, DRC welcomed the following new members:

ACTUAL TIME LOGISTIC GROUP (A d/b/a of 2449915 Ontario Limited)

ON

Canada

CDMG BUSINESS LTD.

BC

Canada

FRUITS ET LÉGUMES ALIOUNE INC.

QC

Canada

GMSY CANADA LTD.

ON

Canada

HUA GUANG INTERNATIONAL INC.

ON

Canada

KK BEE LTD.

ON

Canada

NATURE’S EMPORIUM LIMITED PARTNERSHIP (Also d/b/a Nature’s Emporium)

ON

Canada

OCEAN KING PRODUCE INC.

CA

Canada

TAYLORS CONTINENTAL FOODS

ON

Canada

UNISEL CO. SIA

Latvia

Latvia

 

DRC Membership: change in status

As of March 15, 2022, the following organizations no longer hold a DRC membership:

12618109 CANADA INC.

AB

Canada

9421-0986 QUEBEC INC.

QC

Canada

AGRITRADE FARMS, LLC

FL

United States

ATLANTIC TROPICAL TRADING (A d/b/a of  Rajendra Sukul)

ON

Canada

CHADI IMPORT-EXPORT INC. (Faisant également affaire sous Cha

QC

Canada

CHAUHAN FRUITS ET LÉGUMES (A d/b/a of 9277-1625 Québec Inc.)

QC

Canada

CHIYUE FOOD PROCESSING INC.

ON

Canada

EPICUREAN PRODUCE (A d/b/a of Endri Demeti)

ON

Canada

FRUTICOLA VILLAMANGOS, SPR de RL (Chis&Co)

Chiapas

Mexico

LE PALMIER D’OR / MARCHÉ ARDIS (Faisant également affaire so

QC

Canada

MACNAB GRAPE COMPANY LIMITED

ON

Canada

MODES ENTERPRISE LTD. (Also d/b/a Naruto Seafruit Market)

BC

Canada

RAAZFOOD (A d/b/a of 5004405 Ontario Inc.)

ON

Canada

SABATINO TRUFFLES CANADA INC.

QC

Canada

SKYFRUIT INTERNATIONAL INC.

AB

Canada

TENDER HOPE WINERY (A d/b/a of Tender Hope Holdings Ltd.)

BC

Canada

TOP SHELF SPECIALTY

CA

United States

VELJAON SPECIALIZED IMPORTS INC.

ON

Canada

WEN HO OF CANADA LTD. (Also d/b/a Wen Ho)

ON

Canada

 

For details regarding a change in status, please contact the office.

Important note: Following membership termination, the former member remains liable for claims arising prior to their termination if the claim is submitted to DRC by way of a Notice of Dispute within nine (9) months from when the claim arose or within nine (9) months from when the claimant ought reasonably to have known of its existence.

About DRC

DRC is a non-profit membership-based organization whose core work is business-to-business commercial dispute resolution for produce. DRC is a referee between parties when a purchase and sale do not go according to plan. Members adhere to a common set of trading standards and member responsibilities that promote fair and ethical trading for produce entering the North American marketplace. In Canada, membership in the DRC is a regulatory requirement to trade fresh fruits and vegetables (i.e.: buy, sell, import, export) unless excepted from the regulations. Today, DRC has members in 16 countries outside of North America, and membership continues to grow annually. Anyone exporting fresh fruits and vegetables to Canada must sell to a DRC member.

In addition to the DRC’s Operating Rules and Trading Standards, DRC offers a comprehensive, tailored suite of tools to build the knowledge and capacity of members to avoid or resolve disputes, including education, mediation and arbitration. DRC has ability to impose sanctions and disciplinary actions towards members who do not conduct business in accordance with the terms of their membership agreement.

To date, DRC has resolved claims in excess of $105 million dollars. Although arbitration is available, 80% of these claims have been settled in an average of 26 days through our informal consultation/mediation services. Arbitration awards are court enforceable in countries that are signatories to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards or subsequent conventions.

To learn more, reach out to our Help Desk at info@fvdrc.com or (+1) 613-234-0982 or visit us at www.fvdrc.com.

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DRC Trading Standards and Dispute Resolution Rules Updated

 

During the December 2021 DRC Board of Directors meeting, the Board approved changes to DRC’s Trading Standards and Dispute Resolution Rules. These changes provide clarity and updates to certain terms or concepts.

The following sections from DRC’s Trading Standards and articles from DRC’s Dispute Resolution Rules that have been upgraded and the subject of the amendment:

DRC Trading Standards

  • Section 19.7 – Proper reference to DRC Good Arrival Guidelines
  • Section 20.1 – INCOTERMS 2020 updated
  • Section 21 – The United Nations Convention on Contracts for the International Sale of Goods (CISG) and United States Uniform Commercial Code (UCC)

DRC Dispute Resolution Rules

  • Article 1.b.vii – Counterclaim definition updated
  • Article 1.b.viii – Counterclaim with setoff definition updated
  • Article 2.3 – Arbitration Awards enforceable in the courts
  • Article 3 – Arbitration Awards enforceable in the courts
  • Article 33.2 – Counterclaim or Counterclaim with setoff submission
  • Article 33.3 – Counterclaim or Counterclaim with setoff submission
  • Article 53 – Virtual Hearings
  • Article 62 – Arbitration Awards enforceable in the courts

These amendments came into in force on February 15, 2022.

If you have any questions about these changes, please contact Jaime Bustamante, Director of Trading Assistance at 613-234-0982 ext. 224

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Membership Updates for February 15, 2022

Welcome New Members

From January 15 until February 15, 2022, DRC welcomed the following new members:

 

 

COMARCA FRESH LLC

TX

United States

FRONTERRA GROUP INC. (También haciendo negocios como Fronterra)

FL

United States

GEM-PACK BERRIES, LLC. (Also d/b/a Gem Pack Berries)

CA

United States

GLOBAL LIONS CONSULTING COMPANY LTD.

BC

Canada

MCCONNELL TRANSPORT LIMITED

NB

Canada

OPERADORA COMERCIAL DATI S DE RL DE CV (También haciendo negocios como Mexafruits)

Queretaro

Mexico

PATEL SWEETS & SNACKS LTD. (Also d/b/a Patel Supermarket)

BC

Canada

RAINFOREST PRODUCE IMPORTS INC.

ON

Canada

ROUTE D’ENVOI CANADIENNE INC. / CANADIAN SEND ROUTE INC.

QC

Canada

ROYALHALO PRODUCE LTD. (Also d/b/a Royalhalo)

BC

Canada

TASTYFRUTTI INTERNATIONAL, LLC

PA

United States

 

 

 

 

       

DRC Membership: change in status

As of February 15, 2022, the following organizations no longer hold a DRC membership:

AGRUMES ED-REC / ED-REC CITRUS (A d/b/a of 9365-3822 Quebec Inc)

QC

Canada

ASLCHEM INTERNATIONAL INC.

BC

Canada

CADI EXPRESS INC.

ON

Canada

FRESCO PRODUCE, LLC

TX

United States

LATCANAM LTD. (Also d/b/a LatCan, Uniberries)

AB

Canada

M & S PRODUCE INC. (A d/b/a of 9120-9064 Quebec Inc.)

QC

Canada

METAGRO NATURELLES RESSOURCES INC.

QC

Canada

MO-NA FOOD DIST. LTD. (Also d/b/a Mona Food)

AB

Canada

SHORE FRESH PACKERS LTD.

ON

Canada

SUNGIVEN FOODS CANADA INC. (Also d/b/a Sungiven Foods Canada)

BC

Canada

TERRA RIKKA ORGANICS INC. (Also d/b/a Terra Rikka)

BC

Canada

TERROIR CANADA (Faisant également affaire sous Kamel Bairi)

QC

Canada

TOP NORTH AMERICA LTD.

ON

Canada

TUTTIFRUTTI INTERNATIONAL INC.

PA

United States

WORLD DIRECT TRADING INC.

BC

Canada

 

 

For details regarding a change in status, please contact the office.

Important note: Following membership termination, the former member remains liable for claims arising prior to their termination if the claim is submitted to DRC by way of a Notice of Dispute within nine (9) months from when the claim arose or within nine (9) months from when the claimant ought reasonably to have known of its existence.

 

About DRC

DRC is a non-profit membership-based organization whose core work is business-to-business commercial dispute resolution for produce. DRC is a referee between parties when a purchase and sale do not go according to plan. Members adhere to a common set of trading standards and member responsibilities that promote fair and ethical trading for produce entering the North American marketplace. In Canada, membership in the DRC is a regulatory requirement to trade fresh fruits and vegetables (i.e.: buy, sell, import, export) unless excepted from the regulations. Today, DRC has members in 16 countries outside of North America, and membership continues to grow annually. Anyone exporting fresh fruits and vegetables to Canada must sell to a DRC member.

In addition to the DRC’s Operating Rules and Trading Standards, DRC offers a comprehensive, tailored suite of tools to build the knowledge and capacity of members to avoid or resolve disputes, including education, mediation and arbitration. DRC has ability to impose sanctions and disciplinary actions towards members who do not conduct business in accordance with the terms of their membership agreement.

To date, DRC has resolved claims in excess of $105 million dollars. Although arbitration is available, 80% of these claims have been settled in an average of 26 days through our informal consultation/mediation services. Arbitration awards are court enforceable in countries that are signatories to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards or subsequent conventions.

To learn more, reach out to our Help Desk at info@fvdrc.com or (+1) 613-234-0982 or visit us at www.fvdrc.com.

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ARBITRATION DECISION BRIEF: Whether there was a breach of the contract and did the Respondent suffer damages

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 #19418 – Parties Domiciled – Ontario, Canada vs Richmond, BC

Facts

Respondent hired Claimant to transport five loads of fresh produce (mixed vegetables) from Houston, TX., to Surrey, BC., between January 23, 2015, and March 11, 2015. The invoices show a desired temperature of 35F for all shipments and a USD $28,500 freight amount for all invoices.

Respondent claimed damages on one of the loads (BoL#17294).

BoL#17294 shows 15 different varieties of vegetables on the load. A CFIA inspection was performed just on four of the 15 commodities, showing the following results:

  • Gai Lan – Pulp Temperature of 5F
  • Discoloration 7% (Water-soaked discolouration affecting more than 20% of the                                                      plant)
  • Wilting 85% (Affecting more than 20% of the plant; limp and pliable)
  • Baby Bok Choy – pulp Temperatures of 34F-35F
  • Decay 0%
  • Bruising 11% (More than 2 leaves are materially bruised)
  • Wilting 8% (Affecting more than 2 leaves per plant)
  • Yu Choy Sum – Pulp Temperature of 37.2F
  • Decay 0%
  • Wilting 69% (Affecting more than 20% of the plant; limp and pliable)
  • Yu Choy Mieu – Pulp Temperatures of 37.2F-39.5F.
  • Decay    0%
  • Wilting             61% (Affecting more than 20% of the plant; limp and pliable)

In an email dated June 10, 2015, the Claimant offered a final settlement of $4,000 (no currency specified) adjustment to their invoices to resolve the matter.

The Claimant sought a total of USD$30,700, which included USD$2,200 Arbitration fees.

Issue

Whether there was a breach of the contract and did Respondent suffer damages

Arbitrator’s Analysis/Reasoning

Supporting documentation submitted by Respondent clearly references BoL# 17771, which was signed completely clean and free of protest on arrival.

The BoLs do not specify a desired temperature while in transit, but Claimant’s invoices state “maintain 35F”.

The BoL with the “Hi” temperature notation was for a shipment in February 2015, BoL# 17294.

Therefore, it appears that Respondent is claiming losses on a properly delivered shipment (BoL# 17771) and not on the shipment that arrived with high temperatures (BoL# 17294).

BoL# 17294 had 15 different items on the load. There are four CFIA Inspection certificates submitted by Respondent for only four of those items. Two certificates show normal pulp temperatures (Gai Lan 34.5F, Baby Bok Choy 34F-35F). One certificate for Yu Choy Sum shows 37.2F. Recommended temperatures for this product must be assumed to be as stated on Claimant’s invoices as 35F. Given that it is only warmer by 2F, one would not expect damages, if any, to be too severe. The certificate for Yu Choy Mieu shows 37.2F-39.5F, which might be considered a little on the warmer side.

Three of the certificates show large percentages of “limp and pliable” and the 4th certificate shows “bruising and wilting”. There are 4 varieties of vegetables highlighted as the damaged goods in question on the invoice from Respondent’s supplier in Texas. The other 11 items have not been highlighted nor inspected as per the submitted documents.

The extent of the damages cited by CFIA on these 4 items could possibly be attributed to poor shipping condition at the time of shipment. In addition, the temperatures during shipment did not affect 11 items or 73% of the load.

Respondent is claiming on a load that was received without objections. That is, Respondent did not claim on the load that was protested for “Hi” temperatures. Respondent’s documents include a temperature recording tape. However, the  temperature recording device with a serial number or tape number is not documented or identified to verify which shipment it belongs to. Further to that, the tape submitted reflects the in-transit temperatures of 32F-33F.

There is, however, an email that Respondent submitted where it appears there had to have been some discussions about temperature and losses.

Claimant submitted an email dated June 10, 2015, suggesting splitting $22,136.00 loss three ways. There is no indication if this loss was USD$ or CAD$.

Furthermore, Claimant offered only a credit of $3,000.00 (no currency specified) and then finally raised the offer to $4,000.00 with immediate payment of the balance due.

In the arbitrator’s opinion, the e-mail where the Claimant offers a credit to the Respondent, does not present itself as admission by Claimant to causing any damage, more so it represents a token of trying to resolve a problem and move forward.

Regardless of any of the commentary provided herein, Respondent is claiming on a shipment that was signed free and clear on arrival.

Respondent has not submitted any claim or documentation to substantiate claim, on the only shipment that had a notation as to “Hi” temperatures. Therefore, the arbitrator concluded there were no objections or consequences from that shipment arriving with “Hi” temperatures.

Arbitrator’s Decision

The Respondent was required to remit to Claimant the amount of USD$30,700 payable within 30 days of the date of this decision.

DRC Comments

When making a claim against a transportation company, receivers must be able to link the transit temperatures or transit delays to the damage or deterioration presented on the product upon arrival.

In this case, the receiver only inspected a small portion of the load, that is four of the fifteen commodities included in the BoL and invoice, and the results of the inspections show acceptable temperatures. While it is possible that a truck can damage only a portion of a load, when transit temperatures are close to the desired transit temperature, it would be difficult for a truck to damage only a portion of a load.

Settlement offers exchanged by emails during a negotiation to try to close a file between parties, does not necessarily mean an agreement has been reached. In the arbitrator’s analysis, emails exchanged between parties, which show Claimant’s offer of a $4,000 credit to settle the dispute, did not mean the carrier was accepting liability. Sometimes, these types of offers are made to prevent matters from escalating and to continue the business relationship.

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Have you paid your membership fees?

A friendly reminder that annual membership fees are due. Per the By-laws of the Corporation, failure to pay membership fee may result in termination of your membership, and leave you unprotected in future sales. You can pay your membership renewal fees by credit card through our Members Only Portal.

You can access Members Only Portal from our website at https://www.fvdrc.com/membership/member-login/ by clicking “Login Now” button. For first login only primary contacts get access to the portal. To create your password, enter your email address in Forgot Password section and click on “Send Password Reset Link”. You will instantly receive an email with a link to reset your password. You will only have to do this once.

If you have any questions regarding your outstanding annual membership fees, please contact us asap at DRC Help Desk | +1-613-234-0982 | info@fvdrc.com