#2 – An unrestricted USDA inspection certificate (or an unrestricted partial inspection certificate) is required to support all claims. Note that ordinarily (i.e., when the Agreement does not apply) a receiver may reject produce based on a restricted inspection or even without an inspection, thereby putting the burden of proving the rejection was wrongful on the seller.
#3 – Under the Agreement, when certain tolerances are exceeded, the percentage of product shown to be defective or the entire lot may be “rejected,” meaning it may be dumped, donated, or returned to the seller. This is quite different from ordinary rejections, where the entire shipment must be rejected, or the buyer will be deemed to have accepted the product (see 46 CFR 43(ii)).
#4 – Ordinarily defective product that retains commercial value may by accepted and sold to mitigate losses. But under the Agreement, the defective product, which serves as the basis for a price adjustment below the floor price, cannot be resold.
#5 – While the percentage of defects needed to be eligible for a price adjustment are similar to the five-day PACA Good Arrival Guidelines, namely 20% total condition defects, 15% for any one condition defect, and 8% for soft and/or decay, under the Agreement this tolerance applies regardless of the normal transportation time to the destination city. For example, tomatoes affected with 19% condition defects after a two-day trip would not be eligible for any price adjustment under the Agreement, even though these percentages would typically suggest a breach of the warranty of suitable shipping condition (assuming normal transportation conditions) in the absence of the Agreement.
#6 – Quality defects do not score against this tolerance, and the warranty of merchantability (which typically comes into play when quality defects exceed 33%) does not apply. This effectively makes quality defects irrelevant with respect to any adjustments below floor prices. Similarly, the Agreement provides that abnormal coloring, soil spot, blossom end discoloration, and surface discoloration (silvery-white and gold fleck) do not score against the applicable tolerance.
#7 – A USDA inspection must be called for no more than eight hours after the arrival of the tomatoes at the receiver’s location. Appeal inspections must be called for within 12 hours of the first inspection.
#8 – No adjustments below floor price are permitted if the tomatoes are inspected anywhere other than the destination city specified by the buyer or its agent. If no destination city is specified, the receiver has just six hours after taking title to the product (whether at shipping point if an f.o.b. sale, or at destination if a delivered sale) to call for a USDA inspection.
#9 – When a buyer chooses to accept a load of tomatoes affected with excessive condition defects (not caused by abnormal transportation conditions), the defective tomatoes must be rejected, and the price paid for the accepted tomatoes cannot fall below the floor price. Or, the buyer may reject the entire load of tomatoes.
#10 – The cost of inspecting, transporting, reconditioning labor, and dumping the defective tomatoes may be deducted from the seller’s invoice price. An accounting worksheet is available at http://enforcement.trade.gov/tomato/2013-agreement/2013-agreement.html.
