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Tomato Suspension Agreement, Contract Destination, Warranty of Suitable Shipping Condition

Conclusion and effect
Reparation Report

The following summary of a precedent-setting reparation decision issued under the Perishable Agricultural Commodities Act (PACA) is intended to help companies understand their rights and responsibilities under PACA. The names of the companies involved have been changed, but the key facts and core reasoning PACA used to reach its decision are presented.

Topics: Tomato Suspension Agreement, Contract Destination, Warranty of Suitable Shipping Condition

Seller, Inc.
(Rio Rico, AZ)


Buyer, Inc.
(Bonita Springs, FL)
Decided February 4, 2016

Seller, Inc. (Seller) sold Buyer, Inc. (Buyer) a shipment consisting of 3,120 cartons of Mexican on-the-vine tomatoes at $14.95 per carton f.o.b. (free-on-board), for a total of $46,644.00. The tomatoes shipped from McAllen, Texas to the Buyer’s customer in Birmingham, Alabama. While in transit, however, the buyer diverted the shipment to a receiver in Brooklyn, New York.

Upon arrival, the receiver in New York called for a U.S. Department of Agriculture (USDA) inspection. The inspection was performed the same day and showed the tomatoes were affected by 28 percent average condition defects. Because of the high percentage of defects, the Buyer did not pay the Seller for the tomatoes.

The Seller, however, challenged the value of the USDA inspection because the product was supposed to be shipped to Birmingham. Additionally, the Seller argued that the 2013 Suspension Agreement for Fresh Tomatoes from Mexico (Suspension Agreement) applied to this transaction by virtue of a notice to this effect included on the bill of lading; and therefore, per the terms of the Suspension Agreement, “any inspection of the tomatoes should take place at the destination of delivery specified prior to shipment, and no adjustment will be granted for a USDA inspection taken at a different destination from the first destination specified.”

It was determined by PACA, however, that the reference to the Suspension Agreement on the bill of lading did not apply because the parties did not agree to these terms prior to the purchase of the tomatoes. As for the percentage of defects shown on the USDA inspection, PACA explained that the warranty of suitable shipping condition applied.

Because the Buyer did not produce a printout from the portable temperature recorder placed on the truck, and was not otherwise able to prove transit temperatures were normal, PACA found that the Buyer had failed to prove a breach of the warranty of suitable shipping condition.

Consequently, PACA held that the Buyer was liable for the full purchase price of the shipment plus interest and fees.

These summaries are not issued by the USDA, nor the PACA Branch, and should not be mistaken for an official government statement or release.



Tony Augello is a Claims Analyst at Blue Book Services, Inc.