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DRC: Solving Disputes
By Tim Linden

The Dispute Resolution Corporation is a year old and living up to its name and pre-launch billing.

Launched as a means to solve disputes that occur as the result of inter-country produce shipments among the United States, Canada and Mexico, the DRC, which is headquartered in Ottawa, currently has more than 840 members and has intervened in scores of disputes. Thus far, about 75 files have been opened and two cases have gone through the entire process to formal arbitration with judgment made and money collected. And DRC President and CEO Stephen Whitney said that on a daily basis, questions are asked, advice is given and disputes are prevented, or nipped in the bud. The Dispute Resolution Corp. is the latest, and seemingly most successful, in a continuing effort to bring some security to inter-country trading. The Perishable Agricultural Commodities Act has long offered a tried-and-true method to handle disputes between U.S. shippers and U.S. receivers and even foreign shippers and U.S. receivers. However, for years, when U.S. shippers send product to Canada and a dispute arose, getting paid was often problematic. Canada has had a number of different programs in place over the last couple of decades, but none offered the security inherent in the PACA. Consequently, when the North American Free Trade Agreement was signed, efforts began to establish some type of dispute resolution system that would protect produce growers, shippers and receivers from the three countries when selling to each other. The voluntary DRC is the offshoot of those efforts. The corporation was put together in the fall of 1999 with an official starting date of Feb. 1, 2000. The DRC was off and running in early 2000 and has now settled in doing what it promised to do, which is to solve disputes in an orderly and binding fashion. Any time two members are involved in a dispute, their membership contract requires them to use the DRC to solve the disputes -- unless the PACA has jurisdiction and either of the parties opts for that avenue. If the DRC is used, the program calls for a five-step dispute resolution process. The Produce Reporter Co., which publishes The Blue Book -- the industry's leading credit reference material -- has been hired by the DRC to take any complaints up through the first four level. As such, Fred Webber, who is vice president of special services for the Produce Reporter Co., has been given the title of director of trading assistance for DRC. His department at The Blue Book is the group that actually handles complaint calls to DRC. Mr. Whitney explained that the first four steps of the dispute resolution process involve: education and prevention; answering calls and giving advice; coaching, consultation and opening a file if necessary; and informal consultation and the beginning of the arbitration process. The fifth step is formal arbitration, and if the two parties go to this step, they must agree on the use of a specific arbitrator. Mr. Webber and The Blue Book are one of the approved arbitrators, so they may or may not be involved in this fifth and final step. There are also other approved arbitrators. As of March 1, Mr. Whitney said files had been opened on 75 cases. Once a file has been opened, the clock starts to tick. According to DRC procedures, from the opening of a file until the case is closed will be no more than 120 days. Both cases that went to arbitration were heard and a decision rendered in the specified time. Matt McInerney, chairman of the DRC and senior vice president at Western Growers Association, said the big news is that the disputes were able to be solved within the prescribed time. While the PACA is the model that the DRC was fashioned after, PACA formal dispute resolution can take years. Mr. McInerney said that when the DRC was being formulated, the parties agreed that solving disputes quickly was very important. He said the fact that the system as it was designed bodes very well for its future. While the DRC has been very successful in getting members in Canada (632), it has been less successful in the United States (199) and the number of Mexican companies involved (9) has been very disappointing. Mr. McInerney said the two cases that went to arbitration and the many others that are being solved before reaching that final stage should help spur membership. It is only natural, he said, that some companies take a wait-and-see approach before joining. "The message now is that the momentum is very, very good," said Mr. McInerney. "There has been a number of actions and all have been favorably settled, which by that I mean they have been settled within the time constraints and the judgments have been paid within the time constraints." In fact, one of the judgments involved California potato shipper Johnston Farms of Bakersfield. Harley Philips was very pleased with the results. "We used the system and were very pleased with the way it went together," said Mr. Philips. "We had a dispute and we got it solved within about 100 days, and got paid 30 days later. I've used PACA and had disputes run two, three, four years and then all you get is a judgment. You are not sure you are going to get paid." Mr. Philips said that over the years, he has had disputes settled in many different fashions including PACA, the courts and previous systems in Canada. "Of all the systems I have been involved in, this system seems to be the best." Judy Chong, president of Wing Chong Farms in Toronto, was also involved in an arbitration through DRC last year in a case involving another Toronto wholesaler. Wing Chong Farms was successful in its claim, and Ms. Chong said the DRC membership has already paid for itself. Because Canada had a weak dispute resolution system, the DRC has been endorsed by the Canadian government as the system for resolution of Canadian vs. Canadian disputes as well as those of an international nature. Because Ms. Chong's dispute involved another company in her same province, she would not have been eligible to have it solved easily under the old system. The company would have had to take the matter to court -- a costly and time-consuming endeavor. "This worked out great for us," she said. While Ms. Chong has not yet insisted that the people she does business with are members of the DRC, she said "we strongly encourage it." Mr. Whitney said about 60 percent of Canadian companies are members and he expects that number to continue to increase. Canada is where most of the DRC's efforts have been focused. Mr. Whitney said it made sense to sign up Canadian receivers before putting on a big push for membership by U.S. and Mexican grower-shippers. The effort in Mexico has been lacking, but Mr. Whitney said a representative for Mexico has recently been hired and he anticipates membership from that country will start to grow. Mr. Webber said the relationship between the DRC and The Blue Book has worked well this first year and he hopes it is a long-term relationship. "That is our goal," he said. However, Mr. Webber did say that because of The Blue Book's involvement, there has been some confusion about the linkage between the two groups. "We want to get the message across that we are separate entities. On a contractual basis, we are involved with regard to informal mediation," he emphasized. Mr. Webber said it is a good fit for The Blue Book as its goal is to facilitate fair trading among members and produce industry traders. He said membership in the DRC is another indication that a company is a worthy business partner. But he stressed that the DRC is not a rating service and anyone can join. He urged Blue Book members to check the credit worthiness of a company as well as their membership in DRC when assessing them as a business partner. The fee for DRC membership is $535. The cost of the membership includes all steps in the dispute process up to formal arbitration. Mr. Whitney said formal arbitration costs an additional $500. To date, virtually all of the files opened involved either two Canadian companies or a Canadian receiver and a U.S. shipper. A U.S. shipper and a U.S. receiver involved in a dispute could use the DRC if both agreed and both were members. Because of the speed in which the DRC is solving disputes, Messrs. McInerney, Whitney and Webber said it is possible that some companies might decide to take that route in the future. But for now the DRC is content on moving forward and helping to bring resolutions to an area that was lacking before. Mr. Whitney said the DRC is operating in the black, meaning membership dues and fees are covering the cost of operation. However, he admitted that to be able to have multiple offices, including one in Mexico, membership needs to grow.

The 800-plus members to date is ahead of schedule, but the ultimate goal is still about 1,500 members.