Delivery of Grain – Chemical Documentation Requirements for Canadian Grain Delivered to the U.S.

What documentation is required regarding the producer’s chemical use when grain of Canadian origin is delivered to a U.S. grain facility?

Unless specified in contracts no specific documents related to chemical use are required to sell grain to U.S. grain elevators or to anyone in the U.S.

All crop protection chemicals (or pesticides) used in the U.S. are regulated by federal and state law. Before farmers and other applicators can use them, crop protection chemicals undergo extensive research, development, testing, governmental review and approval to protect human health and the environment. Pesticide use and development are regulated by the U.S Environmental Protection Agency (EPA) under several different U.S. laws, including the Federal Insecticide, Fungicide, and Rodenticide Act and the Pesticide Registration Improvement Act. EPA enforcement provides for use of chemicals in accordance with labels it approves. EPA regulation and enforcement is integral to safe use of crop protection chemicals and providing for grain that does not exceed Maximum Pesticide Residue Levels.  Any use of chemicals that is not consistent with EPA regulation is a violation of law and may render grain not merchantable.

The U.S. Food and Drug Administration (FDA) conducts a surveillance monitoring program that analyzes samples of produce and commodities of both domestic and foreign origin for pesticide residues.  If residues are found that exceed established tolerances or for which no tolerance is established, enforcement action can be taken (e.g., rejection of foreign shipment).

While many of the contracts used to buy and sell grain include clauses under which buyer and seller agree to comply with the U.S. and Canadian regulatory prerequisites applicable to the contract, in the U.S. system grain buying and selling is an environment under which grain is essentially traded in the U.S. with an “implied warranty of merchantability” meaning the grain being sold is subject to a warranty implied by law that goods are reasonably fit for the general purpose for which they are sold. In international sales law, merchantability forms part of the ordinary purpose of the goods. According to Article 35(2)(a) of the United Nations Convention on Contracts for the International Sale of Goods, a seller must provide goods fit for their ordinary purpose.

In the United States, this obligation is in Article 2 of the Uniform Commercial Code (UCC). This warranty will apply to a merchant (that is, a person who makes an occupation of selling things) who regularly deals in the type of merchandise sold. Under U.S. law, goods are ‘merchantable’ if they meet the following conditions:

  1. The goods must conform to the standards of the trade as applicable to the contract for sale.
  2. They must be fit for the purposes such goods are ordinarily used, even if the buyer ordered them for use otherwise.
  3. They must be uniform as to quality and quantity, within tolerances of the contract for sale.
  4. They must be packed and labeled as per the contract for sale.
  5. They must meet the specifications on the package labels, even if not so specified by the contract for sale.

If the merchandise is sold with an express “guarantee”, the terms of the implied warranty of merchantability will fill the gaps left by that guarantee. If the terms of the express guarantee are not specified, they will be considered to be the terms of the implied warranty of merchantability. The UCC allows sellers to disclaim the implied warranty of merchantability, provided the disclaimer is made conspicuously and the disclaimer explicitly uses the term “merchantability” in the disclaimer. Some states, however, have implemented the UCC such that this cannot be disclaimed.

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