A Good Arrival Quiz

The warranty of suitable shipping condition, often simply referred to as “good arrival” or “good delivery,” is unique to the produce industry. You won’t find it referred to in the Uniform Commercial Code and if your attorney doesn’t regularly practice in the produce industry, chances are he or she has never heard of it. Yet, this warranty has been fundamental to the produce industry for generations.

The Perishable Agricultural Commodities Act (PACA) regulation (7 CFR 46.43(J)) that sets forth this warranty provides, in part—
“Suitable Shipping Condition” …means that the commodity, at time of billing, is in a condition which, if the shipment is handled under normal transportation service and conditions, will assure delivery without abnormal deterioration at the contract destination agreed upon between the parties… The seller has no responsibility for any deterioration in transit if there is no contract destination agreed upon between the parties.

While the warranty of suitable shipping condition can be stated in relatively few words, applying it to real world trading scenarios is not always easy—test your familiarity with this quiz.

1. The PACA Good Arrival Guidelines help define “abnormal deterioration” at contract destination under the warranty of suitable shipping condition. True. The warranty of suitable shipping condition requires sellers to ship product that will arrive without abnormal deterioration, but does not define what abnormal deterioration is. And while, with the exception of head lettuce (for which abnormal deterioration is, in essence, defined by PACA regulation 7 CFR 46.44), this determination is ultimately left to a judge or arbitrator—usually an administrative law judge under PACA—the Good Arrival Guidelines guide these assessments.

2. An inspection taken two days after arrival is usually considered timely; therefore, if good arrival standards are exceeded by even 1 percent, this will demonstrate a breach of the warranty of suitable shipping condition. False. While inspections taken two days after arrival are usually considered timely, the inspection certificate must still be seen in light of the delay. The relevant question is: does the inspection certificate show the product failed to make good arrival on the day the product arrived (i.e., two days ago)? If good arrival standards are exceeded by just 1 to 2 percent it will be difficult for the buyer to argue that the inspection certificate shows the product was abnormally deteriorated on the day the product arrived, which is all the seller promises under this warranty.

3. When product is handled on consignment, the warranty of suitable shipping condition does not apply. True. The warranty applies to f.o.b. sales, not consignments. The Good Arrival Guidelines may, however, be relevant as a reference point when assessing the reasonableness of consignment returns.

4. If the duration of the trip is three days, it is proper to look to the three-day good arrival standard as opposed to the five-day standard. True. For all the commodities listed in the Good Arrival Guidelines other than head lettuce, more restrictive standards are provided for trips shorter than five days. The standard for head lettuce is different and applied more rigidly, because it is prescribed by PACA regulation.

5. The total percentage for average defects, as opposed to serious and very serious damage, is all that matters when assessing good arrival. False. Product may also fail to make good arrival for excess serious or very serious damage (or “injury” for product sold with a fancy grade). Accordingly, a shipment with just 4 percent total defects may fail to make good arrival if those defects are classified as very serious damage and exceed the relevant standard for the commodity in question.

6. If a shipment is by rail, and normal transportation is six to seven days, the five-day good arrival standard applies. True. Per industry precedent, the five-day guideline applies by default even if normal transportation times exceed five days such as a coast-to-coast trip by rail or an ocean voyage.

7. If less than all the product is inspected, the missing product needs to be factored in as defect-free product. True. Per PACA precedent, if a percentage of the product is missing, and therefore not available for inspection, then the percentage of defects reported on the inspection certificate needs to be reduced by the percentage of missing product to arrive at the relevant percentages.

8. When a shipment is sold with a grade it is possible for the product to make good arrival, but fail to make grade. True. Technically speaking, apples (US #1) that arrive at contract destination with 11 percent scarring (a quality defect) but no other defects make good arrival, but fail to make grade in breach of the sales agreement.

9. The Good Arrival Guidelines are mandatory and cannot be modified by agreement between the parties. False. Good Arrival Guidelines apply to f.o.b. sales by default, but contracting parties are free to agree to different standards applicable to their transactions.

10. Good arrival guidelines do not apply to shipments into Canada. False. The Fruit and Vegetable Dispute Resolution Corporation (DRC) publishes guidelines for shipments into Canada at www.fvdrc.com. For many commodities, PACA Good Arrival Guidelines have been adopted, but for others a Canada-specific guideline applies. To eliminate the potential for confusion, we recommend specifically stating which guideline will apply when product is shipped from the United States with a contract destination in Canada.

11. If no contract destination is specified, then the warranty of suitable shipping condition does not apply. True. The PACA regulation defining the warranty of suitable shipping condition (7 CFR 46.43(j)) provides, “The seller has no responsibility for any deterioration in transit if there is no contract destination agreed upon between the parties.”

12. If California strawberries are sold with a contract destination of Chicago, but the load is diverted to New York, then the warranty of suitable shipping condition does not apply. False. The warranty applies, but to establish a breach the buyer will need to show the condition of the product in New York is so advanced that the product would not have made good arrival in Chicago. It is important to remember that buyers bear the burden of proof after accepting a shipment (by diversion, unloading, or otherwise).

13. Carriers do not warrant that the product will make good arrival. True. An easy one. Carriers are responsible for protecting the product in their possession by, among other things, properly maintaining transit temperatures and delivering in a timely manner, but they do not warrant the product will make good arrival.

14. If the commodity in question is not listed in the Good Arrival Guide-lines, then it cannot be found to be abnormally deteriorated in breach of the warranty of suitable shipping condition. False. Although the Good Arrival Guide-lines help assess whether product is abnormally deteriorated upon arrival at contract destination, this determination is not dependent upon a good arrival standard. Since 15 percent average condition defects for a five-day trip is the most common standard, arguably this is an important reference point when assessing whether a commodity not listed in the Good Arrival Guidelines is abnormally deteriorated.

How did you do?
If you got 12 or more correct, you must be an industry veteran. If you got 10 or more correct, we’ll say you made good arrival. If you got less than 10 right, you may want to visit PACA’s training course at https://www.ams.usda.gov/rules- regulations/paca/education-training/online-course, and Blue Book’s New Hire Academy at www.producebluebook.com. These courses are available to members and provided at no charge. Please send questions or comments to Doug Nelson at dnelson@bluebookservices.com.