Fundamentally, when produce is sold on an FOB basis, sellers promise that their product will be loaded in “suitable shipping condition,” meaning it will arrive at contract destination (Denver in this case) without abnormal deterioration (i.e., make ‘good arrival’) provided transportation is normal.
Fairly or unfairly, industry precedent provides that when product that makes ‘good arrival,’ even if by the slimmest of margins (say less than 1 percent), the buyer has no recourse against the seller. But if the product fails to make good arrival by just 1 percent, then the door opens wide for damages and sellers become responsible for the difference between the destination market value of the commodity in good condition and the value of the defective product that was delivered (as shown by a detailed account of sales reflecting a ‘prompt and proper’ resale of the product in question), plus incidental expenses, such as USDA or Canadian Food Inspection Agency (CFIA) inspection fees.
Carriers, on the other hand, make different promises under the contract of carriage. The most important of these is to deliver the product to destination with reasonable dispatch and to properly cool the trailer. When carriers breach the contract of carriage, they are responsible for the difference between the value that the product they picked up would have had, had they performed properly, and the value of the product that was actually delivered.
It goes without saying that a one-day delay, at proper temperatures, would not cause anywhere near 16 percent condition defects. At proper temperatures, any difference in the product’s condition over the course of a single day is very difficult to quantify.
The best we can do is look to an objective reference, such as the PACA Good Arrival Guidelines, which generally provides for an increase of average condition defects of one or two percent per day—arguably not an appreciable amount.
In other words, any claim against the carrier would need to be based on the difference in value between product affected with approximately 14 to 15 percent defects, as these apples most likely were on March 16 when they were supposed to deliver, and product affected with 16 percent defects, as these apples were on March 17. But because any difference based on sales proceeds would be minor and difficult to quantify, receivers of late product are typically left looking to establish damages based on market decline, with reference to USDA’s Market News reports.
However, damages, if any, resulting from market decline typically amount to only a relatively small percentage of the value of the product. Here, because the USDA’s Market News does not report prices in Denver, we look to the shipping point prices reported in Washington State on March 14 and 15 for evidence of market decline that might affect prices in Denver later in the week. The relevant report, however, shows shipping point prices holding steady during this timeframe, and therefore does not provide a clear basis for damages based on market decline.
