I recently received a phone call from a Western Growers regular member inquiring about a USDA inspection they have been provided by their buyer on a straight load of cauliflower size 9’s, 1248 cartons, all the same label. The buyer asserted that some of the pallets of cauliflower did not look as uniform with respect to condition, in comparison to the majority of the load and requested the USDA inspection. At the direction of the receiver, the inspector separated the load into two lots. Lot A contained 864 cartons and lot B contained 384 cartons. It is important to remember that the buyer purchased 1248 cartons of 9 count cauliflower on this contract. In this situation it is also important to recognize that because the contract was for 1248 cartons, it is considered one commercial unit for purposes of compliance at contract destination. Also, the buyer had unloaded and therefore accepted the cauliflower. The results of the inspection were as follows: lot A contained 6% yellow to brown discoloration with no other defects noted. Lot B contained 21% yellow to brown discoloration with no other defects noted.
So what approach needs to be taken to determine if the entire shipment (one commercial unit) complied with the FOB terms of sale? The following formula can be utilized to determine the average or blended percentage of defects for the full lot:
Lot A: 864 cartons times (6) % defects (864 x 6) equal 5184
Lot B: 384 cartons times (21) % defects (384 x 21) equal 8064
13,248 divided by 1248 cartons shipped equals total number of defects or in this case 10.62 which is rounded up to 11%.
By using this calculation formula, we were able to confirm the entire shipment of cauliflower met contract upon arrival and therefore the shipper is entitled to seek payment in full as invoiced.
In my next blog I will address a somewhat similar situation when a portion of the contracted load has been already sold prior to inspection.
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, so I can walk you through the calculations. Should you have any questions on this or any other topic please contact me at 949-885-2269 or TommyO@wga.com.
About Tommy O
Tommy O, as he’s often referred to, is our resident expert on all things related to PACA guidance, product arrival issues, product guarantees, collections on slow pay and disputed contracts and so much more. For decades, members have relied on him as their go-to guy when they’re in a pinch – his decades of experience working with the produce industry, the DRC, CDFA, USDA and PACA have proven invaluable, saving members millions of dollars.
Straight from Tommy O delivers practical tips and insights on how you can reduce your risk, protect your sales contracts, save money and stay up to speed on the latest industry regulations.