The warranty of suitable shipping condition, often simply referred to as “good arrival” or “good delivery,” is unique to the produce industry. You won’t find it referred to in the Uniform Commercial Code and if your attorney doesn’t regularly practice in the produce industry, chances are he or she has never heard of it. Yet, this warranty has been fundamental to the produce industry for generations.
The Perishable Agricultural Commodities Act (PACA) regulation (7 CFR 46.43(J)) that sets forth this warranty provides, in part—
“Suitable Shipping Condition” …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… The seller has no responsibility for any deterioration in transit if there is no contract destination agreed upon between the parties.
While the warranty of suitable shipping condition can be stated in relatively few words, applying it to real world trading scenarios is not always easy—test your familiarity with this quiz.
1. The PACA Good Arrival Guidelines help define “abnormal deterioration” at contract destination under the warranty of suitable shipping condition. True. The warranty of suitable shipping condition requires sellers to ship product that will arrive without abnormal deterioration, but does not define what abnormal deterioration is. And while, with the exception of head lettuce (for which abnormal deterioration is, in essence, defined by PACA regulation 7 CFR 46.44), this determination is ultimately left to a judge or arbitrator—usually an administrative law judge under PACA—the Good Arrival Guidelines guide these assessments.
2. An inspection taken two days after arrival is usually considered timely; therefore, if good arrival standards are exceeded by even 1 percent, this will demonstrate a breach of the warranty of suitable shipping condition. False. While inspections taken two days after arrival are usually considered timely, the inspection certificate must still be seen in light of the delay. The relevant question is: does the inspection certificate show the product failed to make good arrival on the day the product arrived (i.e., two days ago)? If good arrival standards are exceeded by just 1 to 2 percent it will be difficult for the buyer to argue that the inspection certificate shows the product was abnormally deteriorated on the day the product arrived, which is all the seller promises under this warranty.
3. When product is handled on consignment, the warranty of suitable shipping condition does not apply. True. The warranty applies to f.o.b. sales, not consignments. The Good Arrival Guidelines may, however, be relevant as a reference point when assessing the reasonableness of consignment returns.
4. If the duration of the trip is three days, it is proper to look to the three-day good arrival standard as opposed to the five-day standard. True. For all the commodities listed in the Good Arrival Guidelines other than head lettuce, more restrictive standards are provided for trips shorter than five days. The standard for head lettuce is different and applied more rigidly, because it is prescribed by PACA regulation.