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A reminder that cherry season is in full swing and it is important to remind industry to be informed and aware of expectations for Washington cherries. Washington cherries can be treated as a separate State grade and they have a standard that is a little more lenient than other cherry standards in order to allow for some production issues that Washington cherries have typically faced. During the 2016 DRC Board and Annual General Meetings, changes were made to the By-Laws and Operating Rules notably making the introduction to DRC Good Arrival simpler and easier to understand. Small changes were also made in the US #1 column to more accurately reflect ONLY USDA Grade Standards. Users will note the line for Washington Sweet Cherries has been removed. Nothing has changed for firms who agree to purchase and sell Washington #1 sweet cherries. The reference has simply been removed as the table is meant to reflect the default guidelines when no grade or other specification has been agreed upon. There are many grade standards on many different commodities which parties may reference and agree to contract for. Like the Washington #1 standard, it must be agreed to or the default Good Arrival Guidelines apply.

DRC Good Arrival Guidelines are compiled from PACA Good Arrival Guidelines, USDA Grade Standards and Canadian Grade Standards. The grade for Washington #1 Cherries was created by Washington State to account for production issues faced by Washington growers. The Washington guideline allows for 30% defects versus 15% defects for USDA good delivery.

When industry buyers purchase or think they are purchasing Washington cherries and the seller includes wording Washington #1 Sweet Cherries, there may be some confusion. The seller may be referring to standard expectations and not the product itself.

Always be sure to take a close look at documents you are receiving and double-check that the documents include the agreed upon grade standards. In the case of a dispute, the burden is on the shipper to prove that the terms were discussed, understood and agreed upon (DUA). If you are buying cherries from Washington you should be aware of the standard and double-check all documentation. The practice of verifying your documentation to ensure grade standards are as agreed should not be exclusive to the cherry category.

A lot of questions have been cropping up about consignment and price after sale. There seems to continue to be some confusion around these two terms and we thought it best to underline the differences and importance that they not be interchanged. During a consignment transaction, the receiver does not take title to the product whereas in a price after sale transaction, the receiver does take title to the product. In the case of a dispute, there are different requirements and burdens of proof for both transaction types.

Consignment:

The first thing to note about consignment is that the consignee does not own the product. It is owned by the consignor until it is sold at which point ownership is transferred from the consignor to the buyer. The consignee’s role is to sell the product at the best possible price available in the market less any expenses that have been agreed upon. It is the responsibility of the consignee to submit an itemized account of sales. The account of sales should indicate price, amount and date sold for each product in their care less-usual and customary expenses such as freight, warehousing fees, a commission and any other agreed upon fees or expenses for which the consignee has paid. A consignee is always entitled to commission on consignment which typically falls in the 8% to 15% range but it should be established in writing.

When a load is on consignment, there is no requirement for the consignee to request a federal inspection to prove the product is in good or bad condition. The only time a consignee is obligated to request a federal inspection is when more than 5% of the load is dumped. The inspection required in this case is a condition inspection to prove that the product being disposed of has no commercial value. This does not mean a dump certificate where the inspector witnesses the dumping of the product, the dump certificate is not sufficient to demonstrate the product had no commercial value.

The consignment transaction is based on trust between the consignor and the consignee. The consignor is limited to claim against the consignee based on the itemized account of sales, not on the condition or quality of the product unless more than 5% of the load is dumped.

The consignee is not obligated to sell the product at market prices, only obligated to do their best to sell at the best possible price. Market News or InfoHort are NOT a point of reference for sales in the case of a consignment transaction unless the parties indicated in writing a minimum guaranteed price or specific reference Market News or InfoHort in their written agreement.

On a consignment transaction, as a consignee, you are obligated to move the product quickly and sell at the best price possible in a proper and timely manner. On consignment you must give priority to that product. It is important to note that when you agree to sell on consignment, you cannot resell on consignment. Unless agreed to in writing, a consignee also may not sell to a sister company or companies that are linked to the consignee.

Price after sale:

Price After Sale (PAS) is a sale where no price has been agreed upon and is also sometimes referred to as open price sale or open sale. In the case of PAS, the buyer, after the product has been sold offers a return to the seller. If the seller does not agree with the return submitted, the buyer has the burden to show why they are giving this return at that price. An account of sales showing a prompt and proper resale is normally the most common method to show how the buyer reached the return offered. However, an account of sales is not required. If the return does not at least yield market prices, it is the responsibility of the buyer to show why they were not able to sell the product at market prices.  If an account of sales is submitted, it needs to include the same elements of an itemized account of sales as indicated in a consignment transaction, except a commission is usually not allowed unless agreed upon.  If there is no damage to the product, and the product was received in sound condition, the expectation is that the product will sell close to or at prevailing market prices. During a PAS transaction, when the buyer receives product and there is damage, the buyer is obligated to request a federal inspection to prove that the load fails or meets the DRC Good Arrival Guidelines.

Correcting interchanged terms on an invoice:

Consignment and PAS are two separate terms that should not be interchanged. If you receive an invoice that mistakenly interchanges the two terms, be sure to contact the other party to have it corrected. In the case of a consignment transaction, should there be an issue regarding this term, you have to show that this term was discussed, understood and agreed upon (preferably in writing). DRC Good Arrival Guidelines indicate that in the absence of an agreement on the terms of the transaction, the default would be FOB No Grade Good Arrival Guidelines. In addition, if there is no price agreed upon, the price defaults to market price.

DRC’s Board and Annual General Meeting was held June 7-9, 2017 in Ottawa, Ontario. DRC reported to members and the Board on key DRC priorities including DRC’s role under the Safe Food for Canadians Act, Membership, Marketing, and Trading Assistance. The Board also reviewed and approved financial statements and previous meeting minutes. The DRC Board was pleased to welcome allied associations, Members of Parliament, Embassy representatives and industry members during the various events and meetings.

The Board met with Members of Parliament to continue to discuss and facilitate the introduction of a trust or an obligation imposed by agreement or by law similar to the U.S. deemed trust provisions included under the Perishable Agricultural Commodities Act (PACA). DRC Board interest on establishing a trust in Canada extends beyond trade and reciprocity with the U.S. A deemed trust would help ensure monies flow down the chain and stop the “domino effect” that often occurs when insolvency strikes anywhere in the marketing chain.

Members of the DRC Board met with the Honourable Lawrence MacAulay, Minister of Agriculture and Agri-Food and members of his team. While it was a positive meeting, the Board members were told that progress on the trust would have to include the involvement of the Honourable Navdeep Singh Bains, Minister of Innovation, Science and Economic Development and his team. Canadian industry is pushing for a deemed trust, a resolution to the reciprocity dispute with the U.S. and stronger payment tools and will likely be disappointed that a Canadian trust has encountered another obstacle to overcome. While this new development is surprising, it does not change the priority of the file and the work that will continue to move it forward.

The meeting also confirmed that single entity licensing is moving forward. Membership in DRC will be the requirement under the proposed Safe Food for Canadians Regulations (SFCR), replacing the former option of either a DRC membership or a License under the Canadian Food Inspection Agency (CFIA). A DRC membership and abiding by DRC business and trading standards will be a requirement going forward.

For more information please call or email the DRC Help Desk at:

DRC Help Desk | 613-234-0982 | [email protected]

 

DRC was pleased to once again participate in this year’s CPMA convention and trade show. This year’s event was held May 9-11th at the Metro Toronto Convention Centre. It was great to see so many of DRC’s members at CPMA helping to promote DRC services and supporting the pending regulatory changes. We thank and appreciate our members for continuing to be great ambassadors for DRC and for introducing us to prospective members.

DRC participated in the North American Trade Committee (NATC) and the CPMA Government Issues Management (CGIM) meetings. During the trade show, the DRC staff were busy fielding questions at the booth that ranged from membership requirements to anticipated regulatory changes. A number of questions on the dispute resolution process were also fielded.

There was good traffic and a lot of new contacts were made. DRC also noted an increase in company representatives from firms outside of Canada including Mexico, Ecuador, Spain, France, Peru, Egypt and Tunisia. DRC was also pleased to meet with a number of associations in order to provide information and discuss how the pending changes may impact their members. These associations included:

o   The Norfolk Fruit Growers’ Association

o   Ontario Produce Marketing Association

o   Quebec Produce Growers Association

o   B.C. Blueberry Council

o   B.C. Produce Marketing Association

o   PEI Potato Board

o   Potatoes New Brunswick

o   Nova Scotia Department Association

For more information or to see how you can help be a DRC Ambassador, please call or email the DRC Help Desk at:

DRC Help Desk | 613-234-0982 | [email protected]

DRC is pleased to release the 2016 DRC Annual Report. The report includes an overview of membership and trading assistance statistics, the strategic plan, highlights of many of the events DRC attended and an overview of many of the activities in which DRC participated in 2016.

We are pleased to report that we continue to see low numbers in formal arbitration which is a reflection of the consultation process and education expertise DRC provides to the industry. All indications point to members getting used to the rules and resolving issues based on DRC guidance and expertise. It was also interesting to note this year that the report shows continued membership growth and high member retention rates. The report also touches on updates to the Corporate Strategic Plan for 2017-2020 which was approved by the Board in 2016.

Please click here to view the 2016 DRC Annual Report.

DRC members can access a pdf of the full report including financial statements via the members-only portal online at FVDRC.com. Please log in with your password in order to view the full report. Alternatively you may request a pdf copy via email by contacting the Help Desk.

For more information please call or email the DRC Help Desk at:

DRC Help Desk | 613-234-0982 | [email protected]

When engaging in a business deal in the produce industry, be sure to keep written records of your communications. That means keep a copy of all of your notes, a record of your emails and any pertinent documents. If arrangements are made over the phone, be sure to confirm details of the conversation in writing be it in a call log or your supplier file.

How long should you keep these records? There are certain records and documents that must be kept for at least two years including (but not limited to):  invoices, inspections, sales tickets, purchase orders, and bills of lading.

For other written records pertaining to a deal, they should be kept until the file is settled and closed. Should there be an issue that may lead to a dispute, we recommend keeping records for at least 9 months from the time you were aware there was an issue. Nine months is the filling deadline for registering an issue with DRC.

Emails, phone logs, handwritten notes, or supplier file entries are all relevant in the case of a dispute. Any document showing that something has been discussed and agreed to may be deemed pertinent during the dispute resolution process.

A great example is to always be sure to remind the buyer and document in writing that you are expecting a federal inspection unless you agree on a private inspection. Any and all unusual agreements such as private inspections and restrictive contract terms like “FOB Acceptance Final need to be Discussed, Understood & Agreed Upon (DUA). DUA is an acronym you’ll want to remember. The party claiming such special agreements will have the burden of proving they were agreed to if the other party objects when disputes arise.  If you don’t know what all the rules are, you may agree to something that might limit your rights. An arbitrator will look at your notes in the course of the dispute resolution process. Your notes should make it clear what terms have been discussed, agreed and understood between the shipper and the receiver. Stay tuned for more on DUA in a future Solutions article.

For more information please call or email the DRC Help Desk at:

DRC Help Desk | 613-234-0982 | [email protected]

Another reminder to be sure to mark your calendar for DRC’s Board and Annual General Meeting that is being held June 7-9, 2017 in Ottawa, Ontario. DRC will be reporting to members and the Board on key DRC priorities including DRC’s role under the Safe Food for Canadians Act, Membership, and Trading Assistance.  The Board will also receive and review financial statements and previous meeting minutes.

For more information please call or email the DRC Help Desk at:

DRC Help Desk | 613-234-0982 | [email protected]

Curbing theft is an industry-wide responsibility. The best way to put a stop to stolen loads is to shine a light on the issue. The two most important things you can do in the event of a stolen load are:

1. Call the authorities and report the load stolen
2. Call your local and national trade associations and report the theft

Be sure to ask the authorities to release the details so that information about the incident may be shared.  It is not unusual in our industry for a load to be rejected for a multitude of reasons. Frequently, you may see someone else’s name on a bill of lading.  Do your part to help curb theft and take a moment to call the shipper to confirm the authenticity of the load. It only takes a brief phone call to the shipper to help head off a stolen load. Stolen loads do not help anyone in our industry. A shippers label on a stolen load may harm reputations, do your part and ensure the legitimacy of the load.

Jaime Bustamante, and Paola Gonzalez were on hand to represent DRC at the Viva Fresh Produce Expo April 20-22^nd in Austin, Texas. The expo was heavily focused on networking and education. It also included field and farm tours, a dietician’s symposium, a spotlight on merchandising and an in-depth education program focused on issues impacting the industry. Some of the topics covered included: how technology and marketing drive growth; knowing your GMO’s; nutrition, preventative medicine and healthy eating; and the impact and future of NAFTA.

If you are interested in DRC representation at an event or speaking engagement, please reach out to the DRC Help Desk at:

DRC Help Desk | 613-234-0982 | [email protected]

Q. We are a Canadian company who recently started to import citrus from Spain and South Africa. We’ve asked our suppliers to ship the goods on delivered basis because we don’t want to be responsible for any transportation issues. Looking at the terms of sale printed on the different Bills of Lading from various suppliers, we’ve seen CFR or CIF. How does this affect us in the event of a transportation claim?

A. (Answer provided by Trading Assistance Staff) 

You may have heard about or seen International Commercial Terms or INCOTERMS such as FOB, EXW, CFR, CIF. While you may be familiar with some of them, it is important to understand what they mean. The INCOTERMS were developed to avoid costly misunderstandings by clarifying the tasks, costs and risks in the International delivery of goods from sellers to buyers. According to the latest publication from the International Chamber of Commerce (ICC), these three-letter trade terms include:

Rules for any mode of transport:

EXW: Ex Works – Risk of transit is on the buyer when product is at the disposal of the buyer.

FCA: Free Carrier – Risk of transit is on the buyer when the product has been delivered to the carrier.

CPT: Carriage Paid To – Risk of transit is on the buyer when the product has been delivered to the carrier.

CIP: Carriage and Insurance Paid to – Risk of transit is on the buyer when product has been delivered to the carrier.

DAT: Delivered at Terminal – Risk of transit is on the seller when product is placed at the disposal of the buyer at the place of named destination.

DAP: Delivered at Place – Risk of transit is on the seller when product is placed at the disposal of the buyer at the place of named destination.

DDP: Delivered Duty Paid – Risk of transit is on the seller when product is placed at the disposal of the buyer at the place of named destination but also has to pay any duty for both export and import and customs.

Rules for sea and inland waterway transport:

FAS: Free Alongside Ship – Risk of transit is on the buyer when the product is delivered to the named port of shipment.

FOB: Free on Board – Risk of transit is on the buyer when the product is (delivered to the named port of shipment.)

CFR: Cost and Freight – Risk of transit is on the buyer when the product has been delivered to the carrier but the seller is responsible to arrange and pay for costs and freight to the named port of destination.

CIF: Cost, Insurance & Freight – Risk of transit is on the buyer when the product has been delivered to the carrier but the seller is responsible to arrange and pay for costs, insurance and freight to the named port of destination.

The INCOTERMS are used in international commercial transactions to move product from point “A” to point “B”. They are not however consistently used in the produce business within North America. Instead, “F.O.B.” and the term “Delivered” and some variances of these terms have been adopted as the terms most commonly used for inland transportation within North America. These North American variations of the trade terms can be found in Section 20 of DRC’s Trading Standards found at www.fvdrc.com should you wish to compare terms used in North America to the INCOTERMS found at iccwbo.org.

To answer your question, in the absence of an agreement on the terms of the transaction, the official documents of the transaction and DRC’s default rules will be used to establish the contract. In the event of a transportation problem, the information on the Bill of Lading is considered the contract between the transportation company and whoever is responsible for the risk in transit. In your case, CFR (Cost and Freight) and CIF (Cost, Insurance and Freight) indicate the risk of transit is on the buyer. Technically, if you continue using these terms, in the event of a transportation dispute, you would be responsible for paying the shipper/seller in full and filing the claim with the transportation firm. We strongly suggest that when dealing with product shipped by maritime transportation that you make sure that you and your supplier are in agreement regarding the risk of transit. Successfully resolving any claim requires that everyone work together. Transparency and agreement are essential in establishing rights and responsibilities of all parties. Lack of agreement and confusion over terms may not only cost you money, but valuable trading partners as well.