Monthly Archives: April 2012

The FDA detained my imported food… What can I do?

Under the Federal Food Drug & Cosmetic Act (FD&C Act) an article of food subject to a detention order may not be delivered to any of its importers, owners, or consignees.  To be clear, no person may transfer a detained article of food within or from the place where it has been ordered detained, or from the place to which it was removed, until an authorized FDA representative releases the article of food under or the detention period expires, whichever occurs first.  The transfer of an article of food in violation of a detention order is prohibited.

Can I Move my Detained Articles of Food?

Yes.  You have options!  The FD&C Act does not preclude all movement of detained food.  For example, at the FDA’s direction the imported food may be moved to a secure facility under an appropriate Customs’ bond, if required under the circumstances.  When the FDA issues an order detaining any article of food, a Notice of Detention (FDA 2289 Form) is issued to the custodian of the detained food and (if readily identifiable) the owner of the detained food.  Upon receipt of this notice, quick and informed steps need to be taken in order to minimize the impact of the detention.

An authorized FDA representative may approve, in writing, a request to modify a detention order to permit movement of a detained article of food for any of the following purposes:

(1) To destroy the article of food,

(2) To move the detained article of food to a secure facility under the terms of a detention order,

(3) To maintain or preserve the integrity or quality of the article of food, or

(4) For any other purpose that the authorized FDA representative believes is appropriate in the case.

21 C.F.R. 1.381(c).

As you can see, the importer possesses an arguably broad base for seeking a modification to a detention order.  Similarly, the FDA representative possesses broad authority to reject or deny your request.  This means that cooperation, professionalism, knowledge of your rights and a solid understanding of the FDA’s detention process is a MUST.

How to Modify a FDA Detention Order:

First, you must submit your request for modification of the detention order:

  • in writing and
  • to the authorized FDA representative who approved the detention order.

21 C.F.R. 1.381(d).  Importantly, the person who approved the detention order is identified in Box#17 of the Notice of Detention.  The FDA representative who approved the detention order is often NOT the same person who issued the Notice of Detention.  As a practical matter, a FDA Inspector issues the Notice of Detention and a FDA Compliance Officer approves the detention order.  Again, look at Box #17 on the Notice of Detention.

Secondly, you must state in your request:

  1. the reasons for movement;
  2. the exact address of and location in the new facility (or the new location within the same facility) where the detained article of food will be transferred;
  3. an explanation of how the new address and location will be secure, if FDA has directed that the article be detained in a secure facility; and
  4. how the article will be held under any applicable conditions described in the detention order.

Lastly, if you are requesting modification of a detention order for the purpose of destroying the detained article of food, you also must submit a verified statement identifying the ownership or proprietary interest you have in the detained article of food.

21 C.F.R. 1.381(d).

If FDA approves a request for modification of a detention order, the article may be transferred but remains under detention before, during, and after the transfer. FDA will state any conditions of transportation applicable to the detained article. You may not transfer a detained article of food without FDA supervision unless FDA has declined in writing to supervise the transfer. If FDA has declined in writing to supervise the transfer of a detained article, you must immediately notify in writing the authorized FDA representative who approved the modification of the detention order that the article of food has reached its new location, and the specific location of the detained article within the new location. Such written notification may be in the form of a fax, e-mail, or other form as agreed to by the authorized FDA representative.

21 C.F.R. 1.381(e).  Please note that the movement of detained food requires lots of separate written notices, approvals and other paperwork.  Care must be taken to keep your file as current as possible and to maintain copies of all the documents involved.  It is also important to properly identify all the relevant and necessary parties as their respective contact information will be needed to quickly and efficiently navigate this regulatory process.

Finally, you must ensure that any required tags or labels accompany the detained article during and after movement. The tags or labels must remain with the article of food until the FDA terminates the detention order or the detention period expires, whichever occurs first, unless otherwise permitted by the authorized FDA representative who approves the modification of a detention order under this section.

21 C.F.R. 1.381(f).

Take Away…

The key point here is that a solid understanding of your rights and the processes you must be prepared to navigate upon short notice is key to mitigating the risk to the value of your imported food.  Something as simple as quickly moving your perishable commodities from the port to a proper storage facility, as opposed to a shipping container, may make all the difference when it comes to your ability to sell your products post detention.

 

The law does not recognize “Price After Sale” terms…

Neither the UCC nor the PACA recognize the term “Price After Sale“.  The term is a subcategory of “Open Price.”  A.P.S. Marketing, Inc. v. R.S. Hanline & Co., Inc., 59 Agric. 154 Dec. 407 (2000), Sucasa Produce v. A.P.S. Marketing, Inc., 59 Agric. Dec. 421 (2000), and Well Pict, Inc. v. Ag-West Growers, Inc., 39 Agric. Dec. 1221, 1227-1228 (1980).

See Eustis Fruit Co., Inc. v. The Auster Co., Inc., 51 Agric. Dec. 865 at 877 (1991) (“The term “price after sale” usually contemplates the parties agreeing to a price following the prompt resale of the produce. Such a sale is either f.o.b., delivered, or some variation thereof, in accordance with the agreement of the parties.  If the parties do not specify f.o.b. or delivered then the Department assumes that the sale is f.o.b.”); Bonanza Farms, Inc. v. Tom Lange Co., Inc., 51 Agric. Dec. 839 at 846 (1991); M. Offutt Co., Inc. v. Caruso Produce, Inc., 49 Agric. Dec. 596 (1990).

Here is what you meant to say… “OPEN PRICE TERM”

UCC 2-305(1) defines an “Open Price Term” as follows:

(1) The parties, if they so intend, can conclude a contract for sale even though the price is not settled. 

This first section means that a valid and enforceable contract may exist for the sale of goods even if the parties have not settled on an agreed price term.  If the parties fail to agree upon a fixed price, the price will be set at a “reasonable price” and the question becomes: “what is a reasonable price?” 

Under UCC 2-305(1), the price is a reasonable price at the time for delivery if:

(a) nothing is said as to price (i.e. no party timely objects); or

(b) the price is left to be agreed by the parties and they fail to agree; or

(c) the price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded.

Here are some examples of how the USDA deals with Open Price Term cases:

“Open Price” assumes parties will negotiate a price after the goods are sold.  If they do not the reasonable value of the goods should be imputed.  A.P.S. Marketing, Inc. v. R.S. Hanline & Co., Inc., 59 Agric. Dec. 407 (2000), and J. Macchiaroli Fruit Co. v. Ben Gatz Co., 38 Agric. Dec. 565 (1979).  See also Anonymous, 5 Agric. Dec. 494 (1946).

The buyer cannot expect a seller to share in any losses which might be incurred in an open sale.  Sharyland L.P. d/b/a Plantation Produce v. C.H. Robinson Company, 55 Agric. Dec. 1341 (1996).   (emphasis added).

The term “open” is a generic term used to describe a SALE without a price being agreed to when the contract is first made.  Other similar terms, which all fit under the generic term “open“ are:

  •  “price after sale”
  • “price arrival”
  • “deferred billing”
  • “price after”  

These terms should be examined with care because they do not all have the same meaning. 

  • “price after sale” usually means that the parties will agree to a price after the buyer completes its resales at destination.
  • “price arrival” means that the parties will agree on a price when the goods arrive at destination after opportunity for inspection (see 7 C.F.R. 46.43 (cc)).

The terms “price after” and “deferred billing” are so vague that one must look solely to the context of the transaction and perhaps guess at what the parties intended.  See Eustis Fruit Co., Inc. v. The Auster Co., Inc., 51 Agric. Dec. 865 at 877 (1991) (The term “price after sale” usually contemplates the parties agreeing to a price following the prompt resale of the produce.  Such a sale is either f.o.b., delivered, or some variation thereof, in accordance with the agreement of the parties. If the parties do not specify f.o.b. or delivered then the Department assumes that the sale is f.o.b.).  See also Bonanza Farms, Inc. v. Tom Lange Co., Inc., 51 Agric. Dec. 839 at 846 (1991); M. Offutt Co., Inc. v. Caruso Produce, Inc., 49 Agric. Dec. 596 (1990); Dennis Produce Sales, Inc. v. Caruso-Ciresi, Inc., 42 Agric. Dec. 178 (1983); Northwest Fruit Sales v. The Norinsberg Corporation, 39 Agric. Dec. 1556 (1980); and Slayman Fruit Co. v. Wholesale Produce Supply, Inc., 30 Agric. Dec. 1751 (1971).

TAKE AWAY…

The KEY point here is that WORD CHOICE matters.  It is perfectly acceptable to use Open Terms on sales contracts, but clear and unambiguous language is needed.  Buyers bear the risk here… Don’t accept questionable language about price terms from your suppliers.  Vague terms should be deemed a red flag and steps should be taken as early as practicable to clarify the open terms.

A buyer’s failure to clearly define its open term contracts invites disputes about reasonable prices.  To this end, the USDA will not make a seller share in any losses.  So, if you have a deal to move distressed produce… the terms of that deal better be clear or the seller will assume all the risk.  You know what they say, no good deed goes un-punished.