DRC Trading Standards – Section 19 Part III

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We are almost at the end of our review of all sections of DRC’s Trading Standards. In this issue, we address the last three terms in section 19 which includes “Reject without reasonable cause”, “Suitable shipping condition” and “Truly and correctly account”. We will end the series with a summary of section 20 – Trade Terms and section 21 – Interpretation.

Reject without reasonable cause

The word rejection in our industry is sometimes used loosely. We sometimes hear of receivers referring to rejecting the product but while still in possession of the load. When this occurs they have unknowingly committed an act of acceptance (see our November Solutions Blog which included the concept of acts of acceptance). In order to make a rejection in a proper and timely manner, a receiver must make sure that: a) there is legal justification to refuse produce within reasonable time, b) not refuse produce that complies with the contract and c) has not committed an act of acceptance. As a receiver, if you have received produce in deteriorated condition or that has failed to meet contract terms, but you have committed an act of acceptance, you can offer the product back to the shipper or seller. However, if the shipper or seller does not accept the load back, your only recourse left is to claim damages or secure an agreement in writing to change the terms of the contract.

Suitable Shipping Condition

This term only applies to FOB transactions where the seller assures that, under normal transit conditions, the product will meet the agreed quality and condition requirements when the product is shipped. This implies that some degree of deterioration will normally occur even under the best transit conditions due to the perishable nature of the commodities in our industry. This term is also known as Good Delivery or Good Arrival where percentage of tolerances of defects are increased in comparison with the tolerances established by the grade standard where applicable.

Truly and correctly account

Consignment and Joint Account Transactions require that an itemized account of sale is submitted per transaction. An itemized account of sales must include the date of receipt and date of final sale, the quantities sold at each price, or other disposition of the produce, and the proper, usual or specifically agreed upon selling charges, expenses properly incurred and any other expense agreed upon. While these are the only terms that require an itemized accounting, when a receiver decides to claim damages and uses an account of sales to prove their damages, they must be prepared to meet the requirements of an itemized account of sales. Additionally, sales and expenses must be supported by their respective sales tickets, receipts, or invoices if required. In addition, regrading or repacking require its own accounting method which allows a deduction from the invoice price based on the labour and shrink (the amount of discarded product) costs, the portion of the freight of the lost product, the cost of the inspection (if applicable) and other costs as a result of having the product repacked or regraded.