Entire shipment not available for government inspection.
The Key Point
Any missing product must be considered free of defects.
Average defects shown on an inspection certificate across the entire shipment.
Q. We are a shipper based in the Southwest. This winter, we shipped a load of cucumbers FOB to a receiver on the East Coast. When the load arrived, the receiver called us to report issues with the product. We were told a USDA inspection would be called for that day. We were confident we shipped great product, so we were not expecting any news of a failed government inspection.
The following day, we received a copy of the inspection certificate showing 18 percent average condition defects (no serious damage or decay). Upon further review, we noticed only a portion of the shipment—500 of the 800 cartons shipped—was inspected. Can a receiver establish a breach of the sales agreement when only a portion of the lot was inspected?
A. Yes, a breach of the warranty of suitable shipping condition may be established with a government inspection certificate that only covers a portion of the product shipped. Buyers are not required to make the entire shipment available for inspection and may sell a portion of the lot in question without waiting for a USDA inspection.
There is a caveat, however. Any product not made available for inspection must be considered free of defects when assessing whether the inspection certificate shows a breach of the sales agreement.
This rule is well established by precedent decisions issued under the USDA’s Perishable Agricultural Commodities Act (PACA) and ensures that shippers are not prejudiced by missing product.
In your scenario, the 500 cartons of cucumbers that were not made available for inspection must be averaged into the percentage of defects reported on the inspection certificate.
To do this, multiply 18 (the total percentage of defects) by 500 (the number of cartons inspected); then divide this figure by 800 (the total number of cartons shipped). This results in an average of 11.25 percent condition defects for the shipment as a whole, which would not establish a breach of the warranty of suitable shipping condition.
So, in your case, your receiver has not proven the cucumbers failed to make “good arrival” despite the high percentage of condition defects reported on the inspection certificate.