If you are a grower/shipper who has consigned their product to a commission merchant or are a commission merchant handling product on consignment for a grower/shipper, common documentation will be exchanged to demonstrate a prompt and proper resale.
First of all, unlike a price-after-sale arrangement, a consignment is not a sale. A consignment creates an agency relationship between the grower/shipper and the receiver. As the shipper you remain the beneficial owner of the product, until the receiver sells the entire product on your behalf. After the receiver has completed selling the entire product, the receiver is only permitted to deduct usual and customary expenses directly connected to the sale of the product, along with any agreed upon commissions. The following are the components of a detailed accounting:
- Date product physically received at receiver’s facility;
- Lot numbers must be assigned to the product received;
- The date and the amount sold on a given date along with the gross prices received must be reflected;
- For any discarded product a dump certificate, dump slip or donation receipt must be reflected; and
- Reasonable and customary expenses by the receiver should also have all corresponding documents, including copies of the paid freight bill, donation receipts and dump slips, as well as any other expenses incurred in the handling of the product.
If any of these fundamentals are omitted from the detailed account of sales, then the receiver may have failed to properly support and document the sales of the shipper’s product and could be responsible to the shipper for the fair market value of the product utilizing the Federal State Market News prices.
Always remember, it important, to carefully scrutinize the detailed accounting provided, to make sure all documents correspond accordingly. It is also just as important to remember that if you question the returns and deductions a shipper can request the PACA to audit the records of the receiver to verify the accuracy. Therefore, if you are a receiver make sure you list all sales, retain all inspections, donations, dump tickets and any other document to support your return.
Should you run into a situation where your not sure if you have received or provided the necessary documents, please feel free to contact us to discuss and review.