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Trading Assistance: Salvage Returns

All things considered, fresh produce vendors and carriers work pretty darn well together. Reasonable people with an eye toward future business can usually work things out.

And while the occasional dustup is inevitable, many of the disputes we see at Blue Book Services are very similar to countless disputes that have gone before. Perhaps some of these can be avoided.

In this article we look at one of the three issues our Trading Assistance team sees repeatedly and explain what we consider to be the key reasoning needed to work though these issues.

#3 Salvage Returns
Even when vendors and carriers agree as to fault, they may disagree as to damages.

Let’s say the carrier fully agrees that improper temperature control caused the condition defects reported at destination. Such an acknowledgement may help move the claim along, but the claimant (e.g., the receiver) will still need to support the losses it alleges.

A receiver that dumps defective product without support or blows it out the door at an unreasonably low price can expect the carrier to argue that the receiver failed to properly mitigate the losses.

But how can the reasonableness of the receiver’s actions be assessed? After all, it’s not always easy to assess the value of a truckload of produce that has been damaged in transit.

Fortunately, however, the U.S. Department of Agriculture (USDA) Perishable Agricultural Commodities Act (PACA) office has been laying down precedent for assessing salvage returns for generations.

This precedent provides, in essence, that to support salvage returns resellers of defective produce need to provide a USDA inspection certificate quantifying the extent of the defects and a detailed (carton-level) accounting reflecting a “prompt and proper” resale of the product.

The adequacy of the resale is then assessed in light of the condition of the product and the destination market value of the commodity in question.

Generally speaking, if the receiver (in our example) provides a USDA inspection quantifying the extent of damage to the product and a detailed accounting, the receiver will enjoy the benefit of the doubt as to adequacy of its sales effort.

However, if the extent of defects affecting the product is not quantified with a USDA inspection certificate, or if no detailed accounting of the sale is provided, the receiver will lose the benefit of the doubt and an estimated value of the product will be imputed (see Section 10.7 of our Transportation Guidelines for a discussion of how this estimated value may be determined).

Now, a vendor may correctly point out that PACA precedent is only directly appliable between vendors (U.S. vendors in interstate commerce to be more precise). But, of course, if a reseller can support its salvage returns to a produce seller with a USDA inspection certificate and detailed accounting, then surely carriers are entitled to nothing less.

This is an excerpt from a Trading Assistance feature in the July/August 2021 issue of Produce Blueprints Magazine. Click here to read the whole issue. 

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