[Editor’s Note: Nobody wants to send out or receive substandard produce, but face it, it happens. Previously, SPW Legal Editor Tiffany Comprés, who practices with the renowned international produce trade law firm, Sandler, Travis & Rosenberg, P.A in Miami, wrote about how distributors and other receivers can handle bad shipments. Now she covers the grower’s side]
If you ship product to a buyer, whether of your own accord or through a consignment deal, you have to know your rights in case the buyer claims the product arrived damaged or otherwise did not conform to the agreement between buyer and seller. There are many factors to consider in this assessment that will vary in every situation, but below are some helpful tips. Also remember that in general it is the buyer’s burden to prove that the product did not conform to the contract.
Was Inspection Timely?
Was the product inspected within the time required under your contract with the buyer? Although PACA requires a contract between the grower and the receiver (7 C.F.R. § § 46.31(d)(-(e), 46.32(a)), if there is no contract then PACA governs (or international law, if you are a foreign seller). Under both PACA and international law the general guideline is 24 hours after notice of arrival (note that if arrival is by truck, then only 8 hours).
If inspection was not timely, the consequences will be different if you are a foreign seller versus a domestic seller. In domestic sales governed by PACA, if inspection is not timely, then the buyer can still claim damages based on the gap between what the product, had it confirmed to the contract requirements, would have achieved in the market versus what the buyer was actually able to get for the non-conforming product.
In international sales, failure to give timely notice of non-conformity means the buyer loses all right to claim damages. PACA is much more flexible, and a late inspection that can show the product was damaged on arrival could be considered.
Was Inspection Comprehensive And Trustworthy?
Federal inspections are prima facie evidence of the quality and condition of the produce. See 7 U.S.C. § 499n(a); see also Fruit Distributing Corp. v. Gary D. Harney Co., 44 Agric. Dec. 1331 (1985). This means the inspection is presumed to be accurate and the results are treated as fact. As a consequence, the accuracy of a federal inspection is very difficult to challenge, and will usually have more weight than a non-federal inspection. That’s not to say a federal inspection can never be challenged, but as a general rule of thumb it is stronger evidence. A full inspection will similarly supersede a partial or restricted inspection. California Fruit Exchange v. Joseph Rothenberg, 7 Agric. Dec. 986 (1948).
Unless your contract with the buyer says otherwise, you have a right to counter-inspect. Ideally, get a full federal inspection as soon as possible. If the buyer relies on a restricted federal inspection to justify a rejection, the seller may get an unrestricted independent (i.e., non-federal) counter-inspection that may prove that it did comply with the contract. Getting an unrestricted federal inspection gives you the most leverage.
Was the product accepted before inspection?
This can be tricky. Generally, however, unloading qualifies as acceptance, as does diverting the shipment, consigning the shipment, or reselling the shipment. This isn’t a clear win, however. Acceptance by the consignee does not impair a claim for damages because the produce did not meet the terms of the contract. (7 C.F.R. § 46.2(dd)(3).)
Did The Grower Perform A Shipping Point Inspection?
This is a grower’s best tool in its defense against improper rejections. As we discussed in our previous article Damaged and Dirty: How to Recover On A Bad Shipment, whether the shipper sent the product in “suitable shipping condition” is the key.
“Suitable shipping condition” means that the produce meets the requirements of the contract at the time, and if the shipment is handled under normal transportation service and conditions, will assure delivery without abnormal deterioration at the contract destination agreed upon between the parties. See Cove Valley Packers, Inc. v. Pilgrim Fruit Co.,297 F. Supp. 200 (D. Mass 1969); 7 C.F.R. 46.43(j).
To avoid any questions in this regard, it is in the best interests of both the shipper and the buyer for the shipper to carefully document the state of the perishables as at the time they are delivered to the carrier.
Document, Document, Document!
Any inspection should be done as close to the time of delivery to the carrier as possible. In one case, 27 hours elapsed between the time of the USDA inspection and the time the carrier received the produce. Although the court did not exclude the certificate, the court found that “the length of time between inspection and delivery must be considered in determining the evidentiary weight to be given to the certificate.” Strock & Co., Inc. v. S. Pacific Co., 326 F. Supp. 695 (D. Mass. 1971) (citing Missouri Pacific R.R. Co. v. Elmore and Stahl, 377 U.S. 134 (1964)).
Also document the temperature of the container delivering the perishables to the carrier. This is particularly important with produce that is vulnerable to soft rot decay or other issues relating to temperature. Having temperature recorders at regular intervals in each container will help document any cold chain failures.
In summary – document, document, document!
[This column is published for the purposes of providing a general understanding of the law. It is in no way a substitute for individual legal consultation and anyone with a legal problem should not rely on these answers but should instead consult their attorney. If you have a legal problem and do not know an attorney, call your local Bar Association’s Lawyer Referral Service.]