The following case study is based on facts presented to Blue Book for a written assessment earlier this year. Although the facts involved are rather routine, similar issues underlie many of the claims filed with Blue Book Services.
Facts A distributor sold 216 cartons of strawberries and 24 cartons of raspberries to a receiver in South Carolina on or about March 24, 2016. The product was shipped out of California as part of a mixed load from three different shippers. Loading and delivery were completed as scheduled. Upon arrival at destination, the receiver called for a U.S. Department of Agriculture (USDA) inspection, which was performed that same day, showing the strawberries were affected with 36% defects and 18% decay—well in excess of good arrival standards.
Pulp temperatures of 41°F were also reported on the USDA inspection certificate.
Assessment At the outset, we note that per PACA regulation, f.o.b. shippers only promise their product will make good arrival at contract destination if transportation conditions (e.g., air temperatures in the trailer) are normal. Specifically, 7 C.F.R. 46.43 provides (emphasis added)—
(i) F.o.b. (for example, f.o.b. Laredo, Tex., or f.o.b. California) means that the produce quoted or sold is to be placed free on board the boat, car, or other agency of the through land transportation at shipping point, in suitable shipping condition (see definitions of “suitable shipping condition,” paragraphs (j) and (k) of this section), and that the buyer assumes all risk of damage and delay in transit not caused by the seller irrespective of how the shipment is billed. The buyer shall have the right of inspection at destination before the goods are paid for to determine if the produce shipped complied with the terms of the contract at time of shipment, subject to the provisions covering suitable shipping condition.
(j) Suitable shipping condition, in relation to direct shipments, means that the commodity, at time of billing, is in a condition which, 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. If a good delivery standard for a commodity is set forth in §46.44, and that commodity at the contract destination contains deterioration in excess of any tolerance provided therein, it will be considered abnormally deteriorated. The seller has no responsibility for any deterioration in transit if there is no contract destination agreed upon between the parties.
Therefore, even here, when a timely USDA inspection certificate establishes that condition defects far exceed good arrival standards, if the product was subjected to extreme temperatures in transit, this could undermine the buyer’s proof that the shipper failed to ship the product in suitable shipping condition. This is especially true when a highly perishable commodity such as strawberries is concerned.
The following case study is based on facts presented to Blue Book for a written assessment earlier this year. Although the facts involved are rather routine, similar issues underlie many of the claims filed with Blue Book Services.
Facts A distributor sold 216 cartons of strawberries and 24 cartons of raspberries to a receiver in South Carolina on or about March 24, 2016. The product was shipped out of California as part of a mixed load from three different shippers. Loading and delivery were completed as scheduled. Upon arrival at destination, the receiver called for a U.S. Department of Agriculture (USDA) inspection, which was performed that same day, showing the strawberries were affected with 36% defects and 18% decay—well in excess of good arrival standards.
Pulp temperatures of 41°F were also reported on the USDA inspection certificate.
Assessment At the outset, we note that per PACA regulation, f.o.b. shippers only promise their product will make good arrival at contract destination if transportation conditions (e.g., air temperatures in the trailer) are normal. Specifically, 7 C.F.R. 46.43 provides (emphasis added)—
(i) F.o.b. (for example, f.o.b. Laredo, Tex., or f.o.b. California) means that the produce quoted or sold is to be placed free on board the boat, car, or other agency of the through land transportation at shipping point, in suitable shipping condition (see definitions of “suitable shipping condition,” paragraphs (j) and (k) of this section), and that the buyer assumes all risk of damage and delay in transit not caused by the seller irrespective of how the shipment is billed. The buyer shall have the right of inspection at destination before the goods are paid for to determine if the produce shipped complied with the terms of the contract at time of shipment, subject to the provisions covering suitable shipping condition.
(j) Suitable shipping condition, in relation to direct shipments, means that the commodity, at time of billing, is in a condition which, 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. If a good delivery standard for a commodity is set forth in §46.44, and that commodity at the contract destination contains deterioration in excess of any tolerance provided therein, it will be considered abnormally deteriorated. The seller has no responsibility for any deterioration in transit if there is no contract destination agreed upon between the parties.
Therefore, even here, when a timely USDA inspection certificate establishes that condition defects far exceed good arrival standards, if the product was subjected to extreme temperatures in transit, this could undermine the buyer’s proof that the shipper failed to ship the product in suitable shipping condition. This is especially true when a highly perishable commodity such as strawberries is concerned.
Both temperature tapes, as well as the reefer download, suggest the air temperatures in transit were maintained between34 and 36.5°F during the trip (with some very brief, periodic spikes to higher temperatures which appear to correspond to the reefer unit’s defrost cycles). Blue Book’s Transportation Guidelines provide the following rule of thumb for assessing air temperatures in transit—
Reefer systems are expected to provide steady temperatures in transit and should be set to run continuously, and not on a start-stop basis. Slight deviations in transit temperature based on, among other things, the location and accuracy of the temperature recorder, are inevitable and permissible. What constitutes a “slight deviation” will vary, but as a rule of thumb temperatures within the trailer should not deviate more than four (4) or five (5) degrees Fahrenheit from the agreed-upon transit temperature. If a temperature range is specified, any deviation will be assessed from the midpoint of the specified range. A temperature variance lasting less than twelve hours may also be categorized as a slight deviation, depending on the extent of the variance, the relative perishability of the commodity, and other circumstances. For example, a shipment involving multiple pick-ups or drops may be expected to experience temperature variance during loading and unloading. Nothing in this paragraph should be interpreted as to suggest a temperature deviation was slight, and therefore permissible or excused, when product has been frozen in transit.
Given that the bill of lading instructed the carrier to maintain air temperatures at 32°F, and given the highly perishable nature of strawberries, the temperature readings here test the limits of what we would call a “slight deviation.” Perhaps because this was a mixed load with different temperature instructions from different shippers, and perhaps because the driver was concerned about the risk of freezing injury, the reefer unit was set to 34° rather than 32°F—apparently without any communication with the shipper.
This, in our view, falls short of industry best practices. If the carrier receives different temperature instructions from different shippers, or, is not comfortable setting the reefer unit at the temperature the shipper(s) agreed upon, this discussion should have been held before the driver signed the bill of lading at shipping point, not after the product has been delivered.
If this were a full truckload of strawberries treated with Tectrol and wrapped in pallet bags, then we think the risk of freezing injury resulting from a properly functioning reefer unit set to run at 32°F would be minimal (we have seen cases where supply air temperatures in the high-20s for an extended period did not lower the pulp temperatures of strawberries treated with Tectrol anywhere near their highest freezing point of 30.7°F per the USDA). However, because this was a mixed load, we would hope the shipper acknowledged that these loads are typically shipped at warmer temperatures (e.g., 34°F). Ideally, the buyer would reach this understanding with the shipper when ordering the product, and communicate the agreed-upon temperature to the carrier in its rate confirmation to avoid a standoff at shipping point.
In any event, we do not believe the temperature readings presented here are sufficient to establish that the carrier failed to properly maintain transit temperatures in breach of the contract of carriage. What’s more, given the very high level of condition defects reported at destination, it appears to us that these berries would not have made “good arrival” even under ideal transportation conditions. The fact that the raspberries (even more highly perishable than strawberries) appear to have been accepted without complaint while the strawberries were affected with 36% total defects and 18% decay supports this conclusion.
Lastly, we note that although pulp temperatures reported on the USDA inspection were warm at 41°F, because this product was treated with Tectrol and wrapped in pallet bags (trapping heat from the product and shielding the product from direct exposure to the air circulating through the trailer), we would expect the pulp temperature readings to be a few degrees warmer than air temperatures in the trailer during the trip.
Accordingly, in our view, the pulp temperatures reported on the USDA inspection are not sufficient to override the air temperature readings from the three different recording devices placed on board with this shipment, all of which are specifically designed to record air temperatures and resolve disputes of this nature. Moreover, we note that no shipping point pulp temperature reading appears on the bill of lading.
Conclusion In summary, given the very high level of condition defects reported at destination, and the temperature readings suggesting transit temperatures were properly maintained, it appears to us that these strawberries were not shipped in suitable shipping condition (i.e., failed to make good arrival in breach of the sales agreement).
And while the warranty of suitable shipping condition may be excluded from an f.o.b. sales agreement with words (preferably written, of course) such as “the warranty of suitable shipping shall not apply” or terms such as “f.o.b. acceptance final”—here we see no indication that the warranty of suitable shipping condition was excluded by the shipper in this instance.
