Blue Book Services recently launched the “New Hire Academy,” an online training program designed to help new hires learn produce industry fundamentals and avoid costly setbacks. The program consists of five sessions covering: (1) trading customs and rules, (2) the PACA trust, (3) sales and account management, (4) Blue Book ratings, and (5) transportation customs and rules.
In this article we recap some of the key points from the first session on trading customs and rules. The “PACA Trust” and “Transportation Customs and Rules” sessions will be covered in subsequent Blueprints articles. Each of the sessions is available for online viewing at www.producebluebook.com.
#1 – Confirming Verbal Agreements
Produce buyers and sellers will sometimes say, “There was no contract, it was all done over the phone.” Verbal agreements are binding and usually just as good as written agreements, provided you can prove the alleged agreement was really made. The same is true of modifications to the original agreement, such as price adjustments. All too frequently disputes arise when a buyer alleges that the original agreement was modified and the seller denies agreeing to the modification. It’s important to keep in mind that the party alleging the modification has the burden of proving it.
Thankfully, proving that an agreement was made is easy enough by simply sending a confirming fax or email to the other party. It doesn’t have to be formal or even signed by the other party. It is the other party’s failure to object to the confirmation that gives it its significance. Simply establishing the habit of carefully confirming all agreements and modifications in writing will help prevent costly setbacks.
#2 – Suitable Shipping Condition
Produce sellers implicitly warrant that their product will make “good arrival” at the contract destination when they sell on an f.o.b. (free on board) basis. Technically this is called the ‘warranty of suitable shipping condition’ and U.S. Department of Agriculture (USDA) Perishable Agricultural Commodities Act (PACA) regulation (7 CFR 46.43(j)) provides—
Suitable shipping condition … means that the commodity [at time of shipment] is in a condition which, if the shipment is handled under normal transportation … conditions, will assure delivery without abnormal deterioration at the contract destination agreed upon between the parties…. The seller has no responsibility for any deterioration in transit if there is no contract destination agreed upon between the parties.
There’s a lot packed into this warranty, but essentially f.o.b. sellers promise that their product will hold up during normal transportation and arrive at the contact destination without excessive deterioration as defined by the applicable “good arrival guidelines” (see below).
#3 – Good Arrival Guidelines
The good arrival guidelines published by PACA and the Fruit and Vegetable Dispute Resolution Corporation (DRC), in effect, define the term “abnormal deterioration” as used in the warranty of suitableshipping condition. These guidelines are available at www.ams.usda.gov for PACA and for product sold into Canada at DRC’s www.fvdrc.com.
The example guideline here is for sweet peppers. At the top, after the header, you’ll see the commodity identified, followed by the U.S. grade standard in the next row, which (in essence) is the amount of defects permitted at shipping point. Still tracking downward by row is the optimum transit temperature.
