PACA’s application to carrier claims

The Perishable Agricultural Commodities Act (PACA, or the Act) gives the U.S. Department of Agriculture special jurisdiction over produce vendors who buy and sell wholesale quantities of fruits and vegetables in foreign or interstate commerce.

Industry veterans are well-aware of the value the PACA brings to the produce industry.

The scope of the PACA, however, is limited. The Act does not give the USDA jurisdiction over transportation firms or provide any mechanism for resolving disputes between produce vendors and transportation firms.

This notwithstanding, PACA regulations, precedent, and guidelines are often referenced in transportation disputes involving fresh produce. Sometimes these references are misplaced, but other times they are relevant or even pivotal. Consequently, it’s helpful for vendors, truck brokers, and carriers alike to have a solid understanding of core PACA principles when working through carrier claims.

In this three-part article we examine some key areas where PACA’s vendor-to-vendor rules and guidelines tend to be asserted in the context of carrier claims.

PART 1. – Good Arrival vs. Good Order

As a starting point, it’s important to understand that the warranty of suitable shipping condition is a warranty made by produce sellers, not carriers.

Sellers are responsible, under PACA regulations, for loading product that will arrive at contract destination without “abnormal deterioration” (see 7 CFR 46.43(j)) as defined by the PACA Good Arrival Guidelines, provided transportation conditions are normal. Carriers, on the other hand, are responsible for providing normal transportation conditions (e.g., maintaining proper air temperatures in the trailer).

Although this distinction may seem clear enough, claimants will sometimes rely on a clause in the bill of lading stating that the produce “was received [by the carrier at shipping point] in apparent good order” as support for the idea that the driver’s signature somehow certifies that the product was loaded in suitable shipping condition, and that therefore the carrier must be responsible for any failure of the product to make good arrival at destination.

But, of course, the driver is not responsible for determining whether the product is loaded in suitable shipping condition.

In fact, per PACA precedent, not even a USDA inspection certificate taken at shipping point is sufficient to prove produce was loaded in suitable shipping condition when a timely USDA inspection at destination shows abnormal deterioration. It’s important to recognize that the warranty of suitable shipping condition promises the produce will hold up in transit, which is simply not something that can be determined at shipping point—not even by trained USDA inspectors.

It follows then, that a driver’s signature on the bill of lading does not shift responsibility for the warranty of suitable shipping condition onto the carrier.

The driver’s signature, without any exceptions noted, merely creates the presumption that there were no readily apparent problems with the product (e.g., crushed boxes) at shipping point and that the listed quantity of product was in fact placed in the trailer, properly loaded and braced.

If excess condition problems are alleged at destination, any carrier responsibility must be based on improper temperature maintenance, or failure to use reasonable dispatch, or some other failure by the carrier to use due care to protect the perishable product in its possession. Attempts to hold carriers responsible for breach of the warranty of suitable shipping condition are misguided.

Look for Parts 2. and 3. in the weeks ahead.

The Perishable Agricultural Commodities Act (PACA, or the Act) gives the U.S. Department of Agriculture special jurisdiction over produce vendors who buy and sell wholesale quantities of fruits and vegetables in foreign or interstate commerce.

Industry veterans are well-aware of the value the PACA brings to the produce industry.

The scope of the PACA, however, is limited. The Act does not give the USDA jurisdiction over transportation firms or provide any mechanism for resolving disputes between produce vendors and transportation firms.

This notwithstanding, PACA regulations, precedent, and guidelines are often referenced in transportation disputes involving fresh produce. Sometimes these references are misplaced, but other times they are relevant or even pivotal. Consequently, it’s helpful for vendors, truck brokers, and carriers alike to have a solid understanding of core PACA principles when working through carrier claims.

In this three-part article we examine some key areas where PACA’s vendor-to-vendor rules and guidelines tend to be asserted in the context of carrier claims.

PART 1. – Good Arrival vs. Good Order

As a starting point, it’s important to understand that the warranty of suitable shipping condition is a warranty made by produce sellers, not carriers.

Sellers are responsible, under PACA regulations, for loading product that will arrive at contract destination without “abnormal deterioration” (see 7 CFR 46.43(j)) as defined by the PACA Good Arrival Guidelines, provided transportation conditions are normal. Carriers, on the other hand, are responsible for providing normal transportation conditions (e.g., maintaining proper air temperatures in the trailer).

Although this distinction may seem clear enough, claimants will sometimes rely on a clause in the bill of lading stating that the produce “was received [by the carrier at shipping point] in apparent good order” as support for the idea that the driver’s signature somehow certifies that the product was loaded in suitable shipping condition, and that therefore the carrier must be responsible for any failure of the product to make good arrival at destination.

But, of course, the driver is not responsible for determining whether the product is loaded in suitable shipping condition.

In fact, per PACA precedent, not even a USDA inspection certificate taken at shipping point is sufficient to prove produce was loaded in suitable shipping condition when a timely USDA inspection at destination shows abnormal deterioration. It’s important to recognize that the warranty of suitable shipping condition promises the produce will hold up in transit, which is simply not something that can be determined at shipping point—not even by trained USDA inspectors.

It follows then, that a driver’s signature on the bill of lading does not shift responsibility for the warranty of suitable shipping condition onto the carrier.

The driver’s signature, without any exceptions noted, merely creates the presumption that there were no readily apparent problems with the product (e.g., crushed boxes) at shipping point and that the listed quantity of product was in fact placed in the trailer, properly loaded and braced.

If excess condition problems are alleged at destination, any carrier responsibility must be based on improper temperature maintenance, or failure to use reasonable dispatch, or some other failure by the carrier to use due care to protect the perishable product in its possession. Attempts to hold carriers responsible for breach of the warranty of suitable shipping condition are misguided.

Look for Parts 2. and 3. in the weeks ahead.

Doug Nelson is Vice President of Trading Assistance for Blue Book Services Inc.