Trouble loads aren’t much fun. They can be inefficient and frustrating.
On the other hand, handling trouble loads is part of buying, selling, and transporting fresh produce.
Doing it well limits headaches, waste, and financial losses—and may help preserve valuable business relationships.
Industry veterans understand this and are unlikely to fall asleep at the wheel when managing a trouble load and securing salvage returns.
Still, reminders can be helpful and may help keep less experienced produce professionals from veering off the road like Clark Griswold on his way to Wally World.
Don’t Be Clark
Let’s imagine Clark is a truck broker and one morning he receives an email from his retail customer notifying him that one of his shipments is being rejected due to the carrier’s failure to properly maintain temperature control.
The email includes some close-up pictures of fruit he wouldn’t want to eat and a temperature tape indicating abnormally warm temperatures during the trip.
Clark calls the carrier, who acknowledges a temperature control problem, and instructs the carrier to take the shipment to XYZ Wholesaler’s location to be “handled for the carrier’s account.”
All parties understand this to mean that XYZ will sell the product on consignment and remit the salvage returns to Clark, who will then place a claim against the carrier.
At this point Clark figures he’s got this situation under control and goes to work on new business. (Side note: even with a timely U.S. Department of Agriculture (USDA) inspection certificate, it can be difficult to value distressed produce; therefore, rejected produce is typically salvaged on a consignment basis.)
Inspections & Accountings
Although the carrier in our example acknowledges failing to maintain proper temperature control, how do we know the extent of the condition problems affecting the produce taken to XYZ for salvage?
Pictures show that at least some of the product was not in great condition, but we’re talking about a truckload of produce here, not a few boxes.
So, while pictures may help communicate problems, USDA inspections, or Canadian Food Inspection Agency (CFIA) inspections in Canada, are what is used to objectively quantify—in a standardized way—the condition of a shipment of fresh produce.
But whose responsibility is it to call for the inspection? Clark is pretty sure it’s not his. He didn’t do anything wrong. The carrier is the one that screwed up. The carrier should pay for the inspection certificate.
In a way Clark is right: the need for an inspection certificate (if, in fact, the produce is showing appreciable defects or warm pulp temperatures) was created by the carrier’s failure to maintain temperature control.
Consequently, this expense may be included in the losses ultimately claimed against the carrier.
But it is XYZ that needs the inspection certificate, and a detailed account of sales, to demonstrate its sales effort was reasonable under the circumstances.
If “reasonable” sounds too vague, a “prompt and proper” standard is also applied in Perishable Agricultural Commodities Act (PACA) precedent decisions—but that’s pretty vague too.
And really, it’s difficult to come up with an objective rule or formula that would be an improvement over a good faith case-by-case assessment of the adequacy of salvage returns informed by a timely inspection certificate and a detailed accounting.
The bottom line is that wholesalers like XYZ tend to get the benefit of the doubt provided a timely government inspection and detailed accounting are provided in support of the salvage returns. But when no inspection certificate or accounting is provided, a below market salvage may very well be deemed unsupported.
Particularly if Clark is planning to set off his damages as a credit against freight invoices owed to the carrier, he may be tempted to simply accept XYZ’s returns uncritically, figuring, “Not much of a salvage return but ‘it is what it is.’”
But while the lack of support for salvage returns may not seem like Clark’s problem—it was XYZ that salvaged the product that the carrier damaged—it may become Clark’s problem soon. Clark, after all, will need to support his claim against the carrier.
And while the carrier in our example acknowledges its failure to maintain temperature control, the carrier (or its insurer) can be expected to challenge the amount of damages claimed against it as unsupported.
Imagine the carrier anticipated a $1,500 claim and receives a $15,000 claim that Clark cannot support. Now it’s starting to feel like Clark’s problem.
And if Clark was asleep at the wheel and simply accepted XYZ’s proffered returns (e.g., invoicing XYZ for the returns XYZ proposes) he may be left without any recourse against XYZ, and without full support for his claim against the carrier. Not what Clark had planned.
So how could Clark have avoided this predicament?
Well, of course, he could have objected to the absence of support for XZY’s salvage returns and preserved his right to pursue a claim against XYZ if necessary.
But if we rewind a little further, to when Clark was placing the product with XYZ, we see that he could have reminded XYZ of the need for (1) an inspection certificate quantifying the extent of the damage to the product, and (2) a detailed account of sales showing the selling price for each of the cartons.
Had Clark set this expectation out the outset, surely XYZ would have been more likely to provide the support needed to show a “prompt and proper” salvage effort. And if XYZ failed to provide the needed support despite this specific request, this would at least put Clark in a good position to insist that XYZ make amends.
By taking an active role in helping to mitigate losses and support returns, and by avoiding a passive pass-through mindset (“Whatever, I’m just passing losses through to the carrier anyway”), produce pros avoid making a difficult transaction worse, and get back to driving good business sooner.
Staying alert and doing the right things when trouble loads arise is a win-win for all involved.
This is a Trading Assistance feature in the March/April 2023 issue of Produce Blueprints Magazine. Click here to read the whole issue.