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Making Life Tougher For The Little Guy:
USDA Good Delivery Standards Have Not Kept Up With Industry Standards

Jim Prevor’s Perishable Pundit, September 26, 2013

We received a bittersweet letter today from a longtime colleague and friend. We think it speaks to an important industry problem, though, one different than the one our correspondent identifies:

Effective September 15th, I retired as President of High Point Marketing of NJ, Inc. I have spent over fifty years, most of my adult life, in the Produce Industry. It is time to move on and spend some leisure years traveling with my wife of forty-six years, Carolyn. My sons Garren and Ryan Pflueger will begin their journey as I did so many years ago, with their New Company, HPM FRESH, INC., in Paramus, NJ. Of course I will be available for advice and guidance if needed.

In 1961, I joined in business with my father and older brother at J. Pflueger and Sons Wholesale Produce Company in Pittsburgh, Pennsylvania. We had a Wholesale operation in the Strip District at 1811 Penn Ave in the Produce Market. There I learned to buy and sell produce at the young age of nineteen, learning from my older counter parts as I went. I was always open to learn and discovered that older men that were established in the business for many years had a wealth of knowledge that was given to me for free.

Among them, I especially remember the Zidenstein Brothers Company. Oscar Zidenstein taught me the expertise about Maine Potatoes and New York State fall cabbage. Another well-respected man in the Pittsburgh market was Dick Battaglia of Demase and Manna Company. Dick liked my hard work ethic and took interest in me, and from him I learned about Western Vegetables, Northwest Apples, Pears, Eastern Peaches and Tomatoes, to name a few! Too many others to mention were all my mentors, whom I met during my daily travels through the early morning hours of the Pittsburgh Wholesale Produce Market.

In 1967, after my father retired, I joined the United States Department of Agriculture, Fruit and Vegetable Market News Service as a Market News Reporter. I was to stay with the USDA through 1986. Our function was to collect and disseminate current, unbiased Market Price Information to the Industry. In March, 1967, I reported to the Philadelphia office where I was trained in the techniques of collecting and reporting this information through printed reports and local radio broadcast. During my time in Philadelphia, I traveled and worked in many Wholesale Terminal Markets and Shipping Point offices throughout the United States gaining a wealth of knowledge about the growing and packing of various produce commodities. 

In 1977, I was selected to head up the New York City Office at Hunts Point where I made several innovations in reporting the Market News Conditions of the largest market in the United States. I initiated "The Early Sheet", prices of that day, that were quickly distributed to all companies on the market by 9:00AM the same day, instead of the next day as was previous before my arrival. Also, in 1979, I authored the "CHILEAN FRUIT AND MELON REPORT", covering all imported fruit arriving into the United States from Chile. During that year, I was invited by the growers of Chile and the Chilean Shipping Line based in Valparaiso to travel to Chile to speak to the growers, shippers and transportation companies about the value of Market News information and how it could help them make intelligent market decisions in their daily business.

In 1986, I was offered a position with Prevor Marketing International on the Hunts Point Market working in the Import Sales Department, which I accepted. While there, I met other mentors who furthered my career in the business and my knowledge of it. Namely Mr. Michael Prevor, principal of Prevor Marketing International, a third-generation family business. Mr. Prevor was a "Wealth of Knowledge" and was both highly respected in the industry and an exceptional human being. I remember one morning he came into the import office and nearby where I sat was the coffee pot. He asked politely if he could have a cup? I thought to myself “It's his coffee” and I simply said “help yourself,” but I thought “What a MAN!” In 1989, Prevor Marketing was sold to a foreign company and after about one year they decided not to continue in the produce business. High Point Marketing was formed that year, and we have continued over twenty five years, completing thousands of transactions without incident. I feel that I have earned an impeccable reputation in the industry. 

On a personal note: In May 2011, an Unlicensed PACA Shipper (unknown to us at the time) from Florida that was selling Argentine Garlic contacted us. They sent us a shipment that was rejected for condition problems but unfortunately was inspected upon arrival (Restricted to the upper 4 layers of the pallet) by the USDA and was graded US#1. However Anthony Sharrino (A Garlic Expert in the industry) of Eaton and Eustis Company in Boston called me and said that the Garlic was PURE GARBAGE. We ordered two subsequent unrestricted Inspections and found the Garlic failed to Grade US#1 account of condition, only (5) and (14) days after arrival. The Garlic was held at the Lucca Cold Storage, who holds a 99.33% Superior GFS rating certificate. The garlic was stored securely in cold storage at 32 degrees Fahrenheit and accordingly, Garlic in good condition can be stored for nearly a year in cold storage without incident, according to University of California at Davis. They work with all California Garlic growers providing advice and guidance of their garlic crops.

Apparently, the pallets were FACED OFF, with slightly better Garlic on top and the POOR CONDITION in the Lower Layers of the pallet, to deceive the USDA inspectors and High Point Marketing of NJ, Inc. The shipment delivered by the unlicensed shipper was shipped to High Point Marketing short weight and misbranded, in violation of Federal PACA Law and Interstate Commerce. The alleged fraud took place through (8) States of the Union, from Florida to New Jersey! When the unlicensed, dishonest shipper discovered that his alleged fraud was revealed, he abandoned his industrial grade garlic leaving High Point Marketing with sunk costs! The USDA/PACA refuses to enforce federal PACA Law, hold the shipper accountable for committing Federal and State Violations, and hold the dishonest shipper accountable for their actions!

Instead, PACA has decided to hold us liable for the shipment going off the information of the first Restricted Inspection only. Subsequent USDA unrestricted inspections and a private inspection by Carapella Enterprises revealed the same information that the garlic condition failed to Grade US#1, which they have ignored. We have appealed!

Furthermore, which brings me to my final point, it is my strong belief that the USDA PACA GOT IT WRONG THIS TIME! It may be time for a Top to Bottom revamping of the agency. There must be people in place that know the produce industry, so they can make fair and intelligent decisions. The decisions must be fair to receiving companies as well as shippers. We have operated in the industry for over twenty-five years without incident and have an unblemished reputation,  and it is our opinion that this company that is operating in the industry (unlicensed) has defrauded High Point Marketing of NJ, Inc., USDA inspectors and the inept PACA agency.

Presently, we are in negotiations with the PACA regarding the Poor Condition Garlic that we received and that the shipper refused to take back, (after his scam was uncovered). It appears to me that as they usually do (99 percent of the time), the PACA went with the shipper on its decision. Although everyone conducting business in the produce industry must maintain a license that pays for the PACA  that pays for the day-to-day operations of the PACA  receivers do not get the same consideration as do shippers.

In order not to encourage the dishonesty of this (unlicensed PACA) Florida shipper, and have them prey on another unsuspecting honest company like us, l have decided not to voluntarily place new capital in the company (as the product was dumped). This means that any judgment PACA might impose may go unpaid. For me, it is a matter of principle, but I would rather just close my company and retire than reward the behavior of this shipper. Not a fitting end for an UNBLEMISHED CAREER  in the industry such as mine. I want the industry and our peers to know the truth and know that we are not at fault! 

I believe strongly that a petition must be started regarding the Unfair Treatment that the PACA gives Receivers in the industry and perhaps they too can learn the correct way to administer the law correctly and fairly as they apparently know little about the industry and how it works when it comes to knowing produce! 

You have my permission to use all information included in this letter in any way you please.

— Mike Pflueger, President Retired
High Point Marketing of NJ. Inc.

We are, of course, sorry for Mike’s travails. We know nothing of this particular transaction, but have never known Mike to tell a lie in more than three decades of association. So we hope his appeal goes well and that he can end his career with an unblemished record.

Yet, whatever the merits of this particular case and whatever the truth about bias at PACA, we identify the root problem here in antiquated grade standards that have the effect of biasing the whole system against smaller operators.

Look, it's tough in business. It looks like the USDA Good Arrivals Guidelines allow 4% decay on arrival for garlic, which means one needs 5% to be out of grade. On a product like garlic, which the industry perceives as a hardware item and expects to be perfect, an arrival with 4% decay and 11% other defects would be considered complete garbage in the trade. Yet, it would still pass good arrival. This is a major problem for the industry, and it does not just apply to garlic.

Sure, one might argue that a smart broker/buyer would demand a higher standard, but it would be hard to get this, especially if a shipper is selling the garlic for a grower and doesn't have specific rights to offer this.  Of course those with great market power can and do impose tougher standards. No major chain store will accept garlic with 4% decay and 11% other defects. Not one.

This poses a great question for the USDA: Why do we have grade and good delivery standards at all in 2013? Wal-Mart and Costco don’t need them. The purpose of grade standards is to help the little guy to facilitate commerce by establishing a lingua franca and a default position in the marketplace. But if those standards have drifted over time to be far from the industry norm, those low standards disadvantage the small receivers who have little choice but to buy at the norms established by USDA.

In general, the USDA good arrival standards (and even the grade standards at shipping point) were created at a time when standards in the marketplace were lower and technology of shipping, precooling, packing, etc., were nowhere near what they are today. The "good arrival guidelines" are the same now as they were when The Grandpa Pundit would buy carrots shipped in an unrefrigerated railcar that was topped with ice at all the major cities along the way. To require that garlic with 4% decay and a variety of other condition defects must legally be accepted at the same price as perfect garlic makes the USDA standards largely irrelevant and makes the integrity of the shipper much more important.

As an old USDA employee, Mike thought he could rely on legal standards to protect him, but the standards are so low and so disjointed from industry expectations that they can’t serve that purpose.

For receivers, this is a warning. The integrity of the shippers one deals with is everything. Any top garlic shipper, given an inspection showing 4% decay and 11% other defects would realize the product isn’t suitable for the purpose intended and would work with the receiver — legalities aside — to mitigate the damages.

For shippers, it is, of course, an opportunity. It shows that building reputation, enhancing Blue Book moral responsibility ratings and the like are crucial.

Yet for the USDA, all of this is troubling. The point of having grade standards is so that anyone can buy from anybody and be confident in what they are getting. If “what they are getting” is so distant from what the trade expects as to be irrelevant, the USDA standards quickly become irrelevant as well.

We wish Mike Pflueger a happy retirement and think it should be noted that his final act in the trade has been of great service in raising this important industry issue.

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