The Problem: A high percentage of defects on product sold without a grade.
The Key Point: The checksum may need to be reduced to arrive at the relevant percentage of defects.
The Solution: Avoid rushing to judgment when interpreting inspection certificates.
QUESTION: We are an importer-shipper based in southern California. I just received a U.S. Department of Agriculture (USDA) inspection certificate on some watermelons we sold, which indicates the product had 20 percent average defects. I realize that sounds bad, but I explained that we did not sell the product on a U.S. #1 basis, and that this was just a no-grade f.o.b. sale. Nobody I know of sells watermelons with a grade. Anyway, the buyer still thinks we breached the sales agreement. A third-party review might help us overcome this impasse.
ANSWER: The inspection certificate indicates a checksum of 20 percent average defects less than 48 hours after leaving shipping point; however, 8 percent of the watermelons were affected by quality defects, which do not score against good arrival when product is sold without a grade. Therefore, the relevant checksum for the 41 bins that were inspected is only 12 percent. From there, we must also account for the missing bins (those that were not inspected) because the warranty of suitable shipping condition is based on the average across the entire lot, not just a portion of the lot. Taking in the missing bins at zero percent defects (per longstanding industry precedent) reduces the total condition defects to 8.5 percent, which is well within good arrival guidelines even for a short two-day trip.
Based on the information provided, we see no basis for any claim that this product failed to make good arrival, or otherwise failed to comply with the sales agreement.
The Problem: Negative return from price-after-sale transaction.
The Key Point: Price-after-sale sellers are not responsible for negative returns.
The Solution: Understand your rights and responsibilities when handling product on a price-after-sale basis.
QUESTION: We are an importer-shipper based in the Pacific Northwest. We sold a few pallets of exotic fruit on a price-after-sale basis to a buyer who now wants to recoup its freight expenses from us because its proceeds did not cover the cost of the transportation. Can they properly charge us with the freight?
ANSWER: When product is sold on a price-after-sale basis there is Perishable Agricultural Commodities Act (PACA) precedent providing that the buyer cannot recoup losses from the seller after accepting the product. So although the buyer can typically deduct freight from its gross proceeds, thereby reducing the return to you as the price- after-sale seller, when doing so leaves a negative balance, the seller is not responsible for that negative balance.
The price-after-sale buyer who does not think its proceeds will cover expenses is advised to reject the shipment or renegotiate terms, perhaps handling the product on consignment, which would permit the receiver-consignee to recoup losses from you as the consignor.
We see a fair amount of confusion about the terms for consignment and price-after-sale, but if you can establish that this was, in fact, a price-after-sale transaction, then the precedent suggests your buyer cannot recoup these losses.
Your questions? Yes, send them in. Legal answers? No, industry knowledgeable answers. If you have questions or would like further information, email firstname.lastname@example.org.