The Problem: Returns on product that failed to make good arrival.
The Key Point: Buyers who receive distressed produce are expected to resell it in a “prompt and proper” manner.
The Solution: When distressed product is not properly resold, an estimated market value may be imputed.
QUESTION:
We are a shipper based in Costa Rica. Recently we shipped a container of papayas to a wholesaler in Montreal. Upon arrival, our customer took some pictures and called for a private inspection certificate, rather than a CFIA [Canadian Food Inspection Agency] inspection like we would expect. The inspection certificate indicated significant condition defects ranging from 21 to 27 percent across the 5 lots (distinguished by size), including 8 to 11 percent decay.
Based on these pictures and the inspection results, our customer dumped the product and is offering no return. Additionally, they expect us to pay for the freight, the cost of the inspection, and dumping fees. Although we agree there were problems with this product, we do not think the papayas should have been dumped, and believe we are entitled to a significant return. Please advise.
ANSWER:
Based on the documentation provided, we do not think your customer has shown that these papayas were without commercial value. Although the photos suggest significant problems, they don’t quantify the extent of the defects—this is what inspection certificates are for.
The inspection certificate used in this case was issued by a private inspection firm. As you suggest, CFIA inspections are preferred, but we see nothing to suggest you objected to the use of the private inspection certificate in a timely manner. It goes without saying that if you did not intend to recognize the results of the private inspection certificate, you should, in good faith, have promptly objected to this certificate so your customer could have called for a CFIA inspection of the papayas.
In the absence of such an objection, we would recognize the private inspection certificate, which clearly supports your customer’s claim that the papayas were not shipped in suitable shipping condition. However, the certificate also indicates that more than 60 percent of the product was free from defects, suggesting that this shipment retained commercial value. In fact, the sample-level detail on the certificate indicates each lot contained defect-free cartons which could have been sold without repacking. This notwithstanding, the inspector notes that the papayas “should be repacked,” which further supports your position that this entire container should not have been dumped.
Although the wholesaler claims the product was deteriorating so rapidly that resale was not possible, no follow-up inspection was taken to support this claim.
Based on the documentation presented, which shows that more than 60 percent of the product was free from defects, and which includes a statement from a third-party inspection stating that the papayas should be repacked, we must conclude that your customer has not established this product had no commercial value.
When a buyer cannot show (with a detailed accounting) that it resold distressed product in a “prompt and proper” manner, the value of the distressed product may be imputed based on the percentage of defects shown on the inspection certificate. Applied here, damages would equal approximately 40 percent of the destination market value of papayas in good condition. This amount, plus inspection fees, could then be properly deducted from your invoice to arrive at the amount your customer would owe you for this fruit.
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