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Rajah Lehal

Understanding Crop Demand by Importing Countries and Their Regulations

November 05, 2015

Links from this article: Read the article here.

The old adage “the customer is always right!” applies to farming as it does to every industry. Grain contracts require farmers to assure that their crop meets the standards for (among other things) the Maximum Residue Limits (MRL) for customers, who are often importing countries with different standards than those which apply to the domestic Canadian market. For example Cargill’s contract requires farmers to sign a Declaration of Eligibility for Delivery Form, which “includes an indemnity for all costs incurred in relation to any delivery that is made contrary to the representations made in such document.” Failure to make an honest declaration about the pesticides applied to the crop can result in rejection of the crop. This brings with it domestic and international ramifications. Costs incurred in relation to a delivery made contrary to a declaration can bring huge risk. The article points out that the cost of a rejected cargo “could be in the range of $20 million, not including future losses cost by lost sales” because of demurrage, shipping and handling expenses. Since grains and oilseeds are fully traceable from point of origin to delivery, the farmer who inadvertantly (or even worse, purposely) fails to make an accurate declaration risks both the destruction of international markets for Canadian products, and personal bankruptcy.

2015 has been a hard year for Canadian farmers due to refused imports from Canada’s major importers: the U.S., Japan and EU countries. The reason? Crops with trace residue of quinclorac and chlormequat have been refused. This article describes it as being mainly due to Canadian’s less stringent restrictions on the use of pesticide when compared to other nations. When a buyer nation has no standard set for that particular chemical (or has higher standards), it is probable that they will reject any crops that have been grown using that chemical. So what is good for Canada, may not be good for the rest of the world, which means it isn’t actually good for Canada either. “The customer is always right”. Farmers need up to date information about the standards of their foreign customers, and would be wise to use only those chemicals permitted by their customers. To protect their markets, and their businesses, they should also adhere to the standards contained in the contracts they sign.

Read the article here.Take away:

  • Failure to accurately declare the pesticides applied to a crop can result in exposure to millions of dollars in liability for indemnity costs.
Farming Law

Written by Rajah. Rajah Lehal is Founder and CEO of Clausehound.com. Rajah is a legal technologist and technology lawyer who is, together with the Clausehound team, capturing and sharing lawyer expertise, building deal negotiation libraries, teaching negotiation in classrooms, and automating negotiation with software.