May 13, 2020

Good Delivery Guidelines: PACA v DRC

It is more imperative than ever for the modern produce sales associate to build out their toolbox of resources, especially for when a problem arises and dispute objectivity is required, either domestically or in Canada. The two primary adjudication services to be aware of who handle fresh and frozen fruit and vegetable disputes are the Perishable Agricultural Commodities Act (PACA), which is managed by a division of the Agricultural Marketing Service (AMS) of the USDA, and The Fruit and Vegetable Dispute Resolution Corporation (DRC), a non-profit membership-based organization based in Ottawa, Canada.

The PACA was enacted into U.S. law in 1930 at the request of the fruit and vegetable industry to promote fair trade in the produce industry and protect businesses dealing in fresh and frozen fruits and vegetables by establishing and enforcing a code of fair business practices and by helping companies resolve business disputes. While a dispute resolution system existed in the U.S. under PACA, the pre-NAFTA regulatory system that prevailed in Canada proved to be ineffective in resolving most disputes. On the other hand, no international dispute settlement mechanism existed in Mexico, meaning that disputes over Mexican imports left Canadian and U.S. trading firms little choice beyond the court system. Thus, the birth of the DRC.

The DRC was established in February 2000 pursuant to Article 707 of NAFTA, which provided for the creation of a private commercial dispute resolution body for trade in agricultural commodities. DRC provides harmonized standards, procedures and services to their members to help them avoid commercial disputes and has contributed to a harmonious produce trade environment in Canada.

The DRC Guidelines for Good Delivery are the same as the PACA 5-Day Good Delivery Guidelines except for 30 commodities for which there are minimum standards established under the Canadian Fresh Fruit and Vegetable Regulations. For these 30 specific commodities the last column of the DRC Guidelines delineates the Canadian Destination Tolerances and Suitable Shipping Condition Guidelines.

In the last column there are five reference numbers in the Canadian Destination Tolerances and Suitable Shipping Condition Guidelines (example 15-10-5-10-4):

  1. The first highlighted number (example 15-10-5-10-4) refers to the total of condition defects allowed in an FOB no grade contract.
  2. The second and third highlighted numbers (example 15-10-5-10-4) refers to quality defects. Under an FOB no grade contract those numbers are not utilized to calculate contract compliance.
  3. The fourth highlighted number (example 15-10-5-10-4) refers to the fact that no individual condition defect can exceed 10%.
  4. The fifth and final highlighted number (example 15-10-5-10-4) is the amount of maximum decay allowed in an FOB no grade contract.

Therefore, when shipping to Canada, under an FOB no grade contract, the condition defect guidelines are the same as the PACA 5-day transit, other than the 30 named commodities. The protocols to follow are the same as PACA Good Delivery Guidelines when shipping to Canada, except “that no individual defect can exceed 10%”.

Have any questions, comments or concerns on any domestic or international sales transactions? Please do not hesitate to reach out to Western Growers Trade Practices Department’s Bryan Nickerson at [email protected] or 949-885-2392.