Cancel OK

Produce Pointers: Negative returns

The Problem
Negative return from price-after-sale (PAS) transaction.

The Key Point
Price-after-sale sellers are not responsible for negative returns.

The Solution
Understand your rights and responsibilities when buying or selling product on a price-after-sale basis.

Q. We are a shipper based in Seattle. We had a surplus of exotic fruit and sold a few pallets of dragon fruit on a PAS basis to a new customer. A few weeks later, this customer wants to invoice us for their freight expenses, because their sales proceeds did not cover the cost of transportation. Can they do this?

A. When product is sold on a price-after-sale basis, there is a Perishable Agricultural Commodities Act (PACA) precedent providing that the buyer cannot recoup losses from the seller after accepting the product (Sharyland L.P. d/b/a Plantation Produce v. C.H. Robinson Company, 55 Agric. Dec. 1341 (1996)).

Cliff Sieloff
Cliff Sieloff is a Claims Analyst for Blue Book Services Inc.

Although the buyer can typically deduct freight from its gross proceeds, thereby reducing the return to you, when doing so leaves a negative balance the seller is not responsible for that negative balance.

Therefore, the prospective price-after-sale buyer who is concerned its proceeds may not cover expenses is advised to reject the shipment or renegotiate terms, perhaps handling the product on consignment, which would permit the receiver to recoup losses from you as the consignor.

So, to answer your question: no, your dragon fruit customer cannot invoice you for negative return freight expenses.

There tends to be a fair amount of confusion regarding the terms “consignment” and “price-after-sale,” but if you can establish that this was, in fact, a price-after-sale transaction, then precedent suggests your buyer cannot recoup these losses.

Cliff Sieloff is a claims analyst for Blue Book Services’ Trading Assistance group.