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Retailer’s Wrongful Rejection

A case study on late claims
Trading Assistance

The following case study is based on an arbitration filed with Blue Book Services. The facts described below set up a relatively common dispute between a truck broker and a produce shipper following a retailer’s rejection of a shipment of produce.

The claimant, a produce shipper (the Shipper), sold 450 cartons of organic red seedless grapes out of Mexico to a major retailer (the Retailer). The grapes were sold free-on-board (FOB) from Nogales, AZ for delivery to the East Coast. The Retailer hired the respondent, a truck broker (the Truck Broker), to arrange for the transportation of these grapes and 1,395 cartons of grapes from another supplier (ABC), on the same truck.

The Shipper’s bill of lading instructed the carrier to maintain transit temperatures at 32°F and indicates the grapes were pulping at 32°F as well. The rate confirmation issued by the Truck Broker instructed the carrier to maintain temperatures at 35°F. What, if any, temperature instruction was given from the Retailer to the Truck Broker is not known.

Upon arrival, the Retailer inspected the grapes and subsequently rejected them, complaining of “quality issues.” The Retailer’s Quality Assurance Form reports “splits, decay/mold, leakers, shrivel, webbing” and specifically indicates that the grapes were not damaged in transit. Pulp temperatures of 37°F were reported.

An inspection by the U.S. Department of Agriculture (USDA) was performed the next day, after the product had been unloaded at a local wholesaler’s warehouse, indicating the grapes were affected with a total of 7% condition defects, including 1% wet and sticky, and less than 1% decay, good enough to meet the U.S. No. ­­­­­1 Table Grape grade standard. The inspection certificate reported 41 to 42°F pulp temperatures.

Unfortunately, the transit temperature information related to this shipment is incomplete. Per the bill of lading issued in connection with ABC’s grapes, a porta­ble temperature recorder was placed in the trailer. Yet, although the Retailer confirms ABC’s grapes were “received in full,” both the Shipper and the Truck Broker report being unable to obtain a copy of the temperature tape from the Retailer. The Retailer’s receipt of this recorder is also indicated by its Quality Assurance Form, which answers “yes” to the question “Temp. Recorder: Is it present?”

The Truck Broker did, however, obtain a temperature download from the refrigeration unit. The download indicates return air temperatures within the trailer reached 40°F at different points during the trip before returning to temperatures in the mid-thirties.