The following case study is based on a claim filed with Blue Book Services. The facts described below set up a classic dispute between a carrier, receiver, and grower-shipper.
Facts The claimant, a carrier, was hired by a grocery wholesaler to haul a truckload of strawberries from Salinas, CA to the grocer’s facility in New York state. The truck was loaded on May 1 and delivered very early in the morning of May 5. The load consisted of 3,102 cases of strawberries packed in four different lots.
Three of the lots were accepted at destination, but a lot consisting of 1,430 cases of strawberries, identified on the bill of lading as “4/2 lb. consumer” was rejected and ultimately salvaged for far less than the original selling price, leading to the dispute that is the subject of this claim.
A timely U.S. Department of Agriculture (USDA) inspection of the lot indicated all 1,430 cases were made available for inspection and that the product was affected with 22 percent average condition defects and 17 percent serious defects, including bruising and decay.
Additionally, the inspector noted the following on the certificate: “Calyxes fresh and green. Berries generally bright, few fairly bright. Generally ripe and firm. Decay is in early stages.” Pulp temperatures at the time of inspection ranged from 32 to 38°F.
A review of the temperature information shows that transit temperatures were unusually low in transit. The bill of lading instructs the carrier to maintain air temperatures between 32 and 34°F, and yet the portable recorder indicates air temperatures were at or below 28°F for nearly 24 hours, and below the instructed temperature range for the majority of the trip. Similarly, the reefer download shows abnormally low temperatures, including supply air readings in the mid-to-low 20s during the final day before arrival in New York.
Assessment At the outset, we note that when produce is sold on an f.o.b. basis, sellers are contractually obligated to load product that will withstand normal transportation conditions to arrive at contract destination in good condition as defined (in essence) by the Perishable Agricultural Commodities Act’s (PACA’s) good arrival guidelines, unless different terms are agreed to by contract.
The warranty of suitable shipping condition applies to f.o.b. sales of produce and is defined, in relevant part, as follows by PACA regulation (7 C.F.R. 46.43(k)): “Suitable shipping condition”…means that the commodity, at time of [shipping], 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 following case study is based on a claim filed with Blue Book Services. The facts described below set up a classic dispute between a carrier, receiver, and grower-shipper.
Facts The claimant, a carrier, was hired by a grocery wholesaler to haul a truckload of strawberries from Salinas, CA to the grocer’s facility in New York state. The truck was loaded on May 1 and delivered very early in the morning of May 5. The load consisted of 3,102 cases of strawberries packed in four different lots.
Three of the lots were accepted at destination, but a lot consisting of 1,430 cases of strawberries, identified on the bill of lading as “4/2 lb. consumer” was rejected and ultimately salvaged for far less than the original selling price, leading to the dispute that is the subject of this claim.
A timely U.S. Department of Agriculture (USDA) inspection of the lot indicated all 1,430 cases were made available for inspection and that the product was affected with 22 percent average condition defects and 17 percent serious defects, including bruising and decay.
Additionally, the inspector noted the following on the certificate: “Calyxes fresh and green. Berries generally bright, few fairly bright. Generally ripe and firm. Decay is in early stages.” Pulp temperatures at the time of inspection ranged from 32 to 38°F.
A review of the temperature information shows that transit temperatures were unusually low in transit. The bill of lading instructs the carrier to maintain air temperatures between 32 and 34°F, and yet the portable recorder indicates air temperatures were at or below 28°F for nearly 24 hours, and below the instructed temperature range for the majority of the trip. Similarly, the reefer download shows abnormally low temperatures, including supply air readings in the mid-to-low 20s during the final day before arrival in New York.
Assessment At the outset, we note that when produce is sold on an f.o.b. basis, sellers are contractually obligated to load product that will withstand normal transportation conditions to arrive at contract destination in good condition as defined (in essence) by the Perishable Agricultural Commodities Act’s (PACA’s) good arrival guidelines, unless different terms are agreed to by contract.
The warranty of suitable shipping condition applies to f.o.b. sales of produce and is defined, in relevant part, as follows by PACA regulation (7 C.F.R. 46.43(k)): “Suitable shipping condition”…means that the commodity, at time of [shipping], 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.
Although it is sometimes said that abnormal transit temperatures “void” the warranty of suitable shipping condition, this is simply not true. A careful reading of the definition (above), as well as PACA precedent, makes it clear that the seller’s responsibility is to load product in suitable shipping condition at shipping point before the product is shipped.
This responsibility exists regardless of the conditions in transit; however, for practical purposes, it is often difficult for the buyer at contract destination to show the seller failed to load product in suitable shipping condition when transportation conditions were abnormal. There are times, however, when a breach of the warranty of suitable shipping condition can be shown despite abnormal transporta-tion conditions.
Meanwhile, transportation providers have a separate but related duty under the contract of carriage to provide normal transportation service and conditions, including maintaining proper air temperatures inside the trailer while the produce is in their possession.
Here, the temperature reports from the reefer unit and the portable recorder both indicate that air temperatures in the trailer were far below the temperature instructions provided by the shipper, and far below any temperature that could be considered normal for fresh produce. Consequently, we must conclude that the carrier breached the contract of carriage by failing to properly maintain air temperatures in transit.
That said, however, and as explained above, our determination that the carrier breached the contract of carriage does not preclude a finding that the shipper failed to load these strawberries in suitable shipping condition in breach of the sales agreement. Therefore, the pivotal question presented in this dispute is, did the temperature abnormalities recorded during this trip cause or materially contribute to the excessive levels of defects reported by the USDA inspection certificate?
If so, then it follows that the shipper complied with the warranty of suitable shipping condition, and that the losses resulted from the carrier’s failure to properly maintain air temperatures in transit. But if not, then it follows that the shipper failed to load the strawberries in suitable shipping condition, and that this—rather than the carrier’s failure to properly maintain transit temperatures—damaged the berries and caused the losses incurred.
We believe there are a number of points to be made in support of the carrier’s position that the temperature abnormalities did not cause the excessive levels of defects shown on the inspection certificate. First, although the air temperatures in the trailer were far colder than they should have been during the trip, we think it is important to remember that these berries were not directly exposed to the cold air in the trailer because they were shielded by the modified atmosphere created inside the plastic bags used to cover the pallets for treatment with Techtrol.
Not only would the plastic have physically shielded the berries from direct exposure to the cold, this layer would have simultaneously trapped heat from the respiration of the berries. Strawberries are known to respire at a significant rate, generating their own heat which can be trapped by the plastic bags used to cover the pallets for treatment with Techtrol.
In our experience handling claims involving strawberries, we have come to expect the pulp temperatures to be appreciably warmer than the air temperature readings in the trailer due to the modified atmosphere the berries are typically shipped within. In our view, it is possible that the Techtrol treatment applied here created a protective layer around the berries that kept the pulp temperatures above their highest freezing point of approximately 30.6°F, despite the cold temperatures within the trailer.
Second, the “Problem Notification” form completed by the receiver indicates that the berries were pulping at 35 to 36°F—well above the 30.6°F freezing point for this commodity. This is especially significant considering that the coldest temperatures were recorded during the final hours before arrival at destination.
If the berries were not cold upon arrival, shortly after being exposed to the coldest temperatures recorded during the trip, this suggests air temperatures in the trailer were simply not cold enough for sufficient time to freeze this product.
Third, the USDA inspection certificate includes a notation that reads—“Calyxes fresh and green. Berries generally bright, few fairly bright. Generally ripe and firm. Decay is in early stages.”
In our view, descriptions such as “fresh and green” calyxes and a “bright” appearance are generally inconsistent with shipper’s position that the strawberries were frozen and then thawed before the USDA inspection on May 6, 2013. “Fresh” and “bright” are simply not descriptions we would associate with strawberries that were frozen and thawed.
And fourth, as the carrier points out, the only lot rejected was comprised of these 1,430 cases of strawberries. The remaining 1,672 cases of strawberries transported in the same trailer were accepted at contract destination without complaint. The carrier essentially asks, “Why would the cold have seriously damaged one lot of strawberries, while leaving the others unharmed?”
Conclusion Taken together, we think the facts suggest the temperature abnormalities recorded during this trip did not cause or materially contribute to the excessive levels of defects witnessed upon arrival. Accordingly, in our view, the preponderance of the evidence suggests these strawberries were not loaded in suitable shipping condition and therefore arrived at destination with abnormal levels of deterioration, leading to the losses that were the subject of this dispute.
