If It's Broke, You May Have To Eat It
'Better safe than sorry' a headache for foodstuff haulers
Q: We are a broker of perishable commodities. We hired a carrier that transloaded a load of cheese at its refrigerated warehouse, breaking the first seal and reapplying a second seal. The consignee rejected the load, and the cheese manufacturer fed the entire load to hogs without a Food and Drug Administration inspection, claiming first that "the government made them do it" because t.he original seal was not intact, and secondly that it was permitted to do so under the contract we Signed. The carrier refuses the claim. What should we do?
A: About four years ago I addressed the broken seal problem and the shipper's duty to mitigate damages, pointing out that shippers are hard-pressed to prove contamination due to a broken seal when the product otherwise is packaged in containers, boxes or shrinkwrap. (See "Sour pickles not spoiled," CCI July 2006.) Since that time, the destruction of perfectly good product due to broken seals has continued unabated. But no one has produced for me any security regulation trumping the shipper's duty to inspect the product and exercise reasonable mitigation.
This "better safe than sorry" attitude by shippers is becoming a major problem for the foodstuff industry. FDA on April 30 published a Notice of Proposed Rulemaking concerning "Implementation of the Sanitary Food Transportation Act of 2005." Included in the Federal Register notice was a compendium of existing FDA regulations, none of which lend any support to the cheese manufucrurer's position in your case.
In the absence of evidence of contamination, a broken seal does not require a shipper to deem the product unfit for human consumption subject to the Sanitary Food Transportation Act of 2005. FDA notes with approval a Michigan Department of Agriculture study that found a lack of adequate securement or lock created food transportation problems on smaller box trucks and for transporters of ethnic foods, as well as "little or no areas of concern" identified with larger (semi-tractor trailer) trucks inspected during the survey. (See Federal Register, Vol 75, No. 83, p. 22713.)
My review of the FDA regulation revealed one important caveat, though. FDA requires foodstuff shippers, receivers and transporters to establish and maintain chain of custody records for shipments, induding the shipment particulars and the name and address of every carrier in possession and control of the product during transit. (See 21 C.F.R. 1.352.) These regulatory requirements suggest that if the shipping community is serious about compliance, it needs to ensure shipments are not "double brokered" and that each bill of lading correctly identifies the name of the carrier to whom the product is tendered, not the broker.
In your case, I strongly disagree with any shipper's contention that the government requires destruction of foodstuff because of the broken seal, regardless of the cause and without any physical inspection or duty to mitigate. Unfortunately, this advice does not save you, because you contractually agreed to indemnify the shipper from loss. You waived the Carmack Amendment and the shipper's duty to mitigate, and you allowed the shipper "sole discretion, not subject to a reasonableness standard" to do whatever it wished with the product and send you the bill.
You should have watched what you were signing. You certainly cannot expect that any knowledgeable motor carrier you hire will waive the shipper's duty to mitigate damages unless a shipment is pract ically worthless. You certainly cannot expect cargo insurers to pay a claim under these circumstances.
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