In my last blog I gave you the formula for “USDA Inspections: Formula for Calculating Percentages of Defects for contract compliance purposes when an inspection separates the shipment into different lots”. This blog will focus on calculating percentages of defects for contract compliance purposes when not all of the cartons (full lot) shipped are inspected at destination.
One of the first things you need to check when reviewing the results of a USDA inspection is pulp temperatures, date of the inspection and how many cartons are available at time of inspection versus how many cartons were shipped. The USDA inspection certificate will reflect the number of units (cartons or bags) that are available at time of inspection. This information is particularly important when calculating good delivery and determining if your produce meets contract specifications under the terms of the sales contract. The expectation is that we want to make certain that there is a full and complete sampling made on all the cartons shipped.
In PACA case law (precedent PACA Decisions), it has been determined that any cartons not available at time of inspection and are considered to effectively have zero condition defects. Therefore, the cartons which were not available at time of inspection with zero condition defects must be averaged with the condition defects disclosed on the USDA inspection in order to determine whether the product meets contract specification.
The following formula can be utilized to determine the percentage of defects for the entire lot:
Let’s say out of the 1248 cartons shipped 384 were not available at time of inspection because the buyer had already sold them. That leaves 864 available to be inspected. For discussion purposes let’s say the inspection reflected 21% yellow to brown discoloration with no other defects noted.
The calculation is:
Step one: 864 cartons times (21) % equals 18144
Step two: 18144 divided by 1248 total cartons shipped equals 14.53% which needs to be rounded up to 15%.
15% under an FOB No Grade contract would meet contract terms on a five day ride to the east coast.
Should you be faced with a similar situation when it comes to the formula on percentages of allowable defects, please give me a call or send me an email. Should you have any questions on this or any other topic please contact me at 949-885-2269 or TommyO@wga.com.