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UNITED STATES: i DEPARTMENT or AGRIGUELFE DEPARTMENT CIRCULAR 413

Washington, D. C. Issued April, 1927

EXTENT AND CAUSES OF REJECTIONS OF BOXED APPLES FROM THE STATE OF WASHINGTON SEASONS 1922 TO 1925

R. R. PAILTHORP and J. W. PARK

Marketing Specialists, Division of Fruits and Vegetables, Bureau of Agricultural Economics

CONTENTS Page Page Srigresiseriny "ey ee ee oe 1 | Disposition of rejected cars____-..._-_____-_- 6 Meads of Sale ee eee Se ee SS 1 | Reasons for rejections and allowances_______- Reductions in price caused by rejections____ 2 | Relation of number of allowances and rejec- Comparison of price reductions on allowances MAOHS:GG NOR = = ce 2 ts Ae Ree 9 ee ages rer SUR ATi a ee ee ee ere eee 4 | Purchase on Government certificates________ 11 Cars rejected and resold at the original f. o. b. Obtaining proper confirmation of sale________ 12 BEICR OF MOTO ser se ee ee FRA NARI AC es ok OS eee a ee 14 INTRODUCTION

One of the outstanding problems of the fruit and vegetable industry concerns the rejection of shipments purchased at point of origin by buyers in distant city markets. This circular deals with rejec- tions of boxed-apple shipments from the State of Washington during the three shipping seasons 1922-23, 1923-24, and 1924-25.

Phases of the problem which were given attention in this study include methods of sale of boxed apples, extent of rejections, amount of price reductions, disposition of cars which were rejected and resold by the shipper, reasons given by buyers for rejecting shipments or requesting allowances, relation of rejections to price changes, pur- chases on Government certificates, and confirmation of sales.

The number of sellers who cooperated in supplying records was 15 for the year 1922-23, 12 for 1923-24, and 13 for 1924-25. The number of cars handled by these firms and considered in this study represented 38.1 per cent of the car-lot shipments for the State in 1922-23, 46.4 per cent in 1923-24, and 43.8 per cent in 1924-25. Of the 15 sellers who cooperated in 1922-23, 9 were local dealers, 3 were private sales agencies, and 3 were cooperative associations. Of the 12 who cooperated in 1923-24, 5 were local dealers, 4 were private sales agencies, and 3 were cooperative associations; and for 1924-25, 6 were local dealers, 4 were private sales agencies, and 3 were cooperative associations.

METHODS OF SALE

A tabulation of the methods of sale of Washington apples for the three years indicates that on the average 81.5 per cent of the car-lot 37493°—27 1

2 DEPARTMENT CIRCULAR 413, U. S. DEPT. OF AGRICULTURE

sales were on a basis of f. 0. b. usual terms,! 4.7 per cent were sold at auction direct, 8.2 per cent were sold either on a cash track basis or delivered at destination, 2.9 per cent were consigned, and 2.7 per cent were exported direct. (Table 1.) For the year 1923-24 f. o. b. usual-terms sales were 72.5 per cent which is considerably less than for either of the other two years, while the percentages sold direct at auction, delivered or on track and direct for export were larger in 1923-24 than in the other years. The tabulation for the three-year period does not show any decided trend in the percentages of the crops scold by the various methods.

TasLeE 1.— Methods of sale of Washington apples

LS Pe je nO are Se 15 10, 777 38. 1 85. 2 4.3 5.6 2.3 p OQZ=24 eS Owe Sale 12 17, 449 46. 4 72.5 7.4 12.8 3.2 4.1 OQ 2422 Fie ie Aes eer 13 11,019 43. 8 86.9 255 6.1 3o2 168}

The highest percentages sold f. 0. b. usual terms by any firm were 93.6 in 1922-23, 84.5 in 1923-24, and 96.5 in 1924-25; the lowest for the three years were 55.7, 50.0, and 67.9, respectively.

In 1922-23 one firm sold 29 per cent direct at auction, which is the highest percentage sold in this way by any one firm during the three- year period. The auction was used by all firms in 1922-23 and 1924-25 and only one firm did not make any sales through the auction in 1923-24.

For the three-year period the highest percentage sold delivered for cash on track by any one firm was 28 per cent in 1924-25 and one firm did not make any sales on this basis in 1922-23.

The records show that in 1922-23, three firms did not consign any cars; in 1923-24, two firms did not consign; and in 1924-25, five firms did not consign. The highest percentage consigned by any firm for any of the three years was 25.7 in 1922-23.

Four firms did not export any cars direct in 1922-23, and in both 1923-24 and 1924-25, five firms did not export direct. The highest percentages exported direct were in 1922-23, when two firms each exported 11.3 per cent of their shipments.

In this study only shipments sold f. 0. b. usual terms were con- sidered as subject to rejection by the buyer, but since more than 80 per cent of the Washington shipments are sold on this basis the rejec- tion problem concerns a large part of the crop.

REDUCTIONS IN PRICE CAUSED BY REJECTIONS

Reductions in price on cars rejected and resold on an f. o. b. basis were computed by subtracting the resale price from the original f. o. b. price. On cars resold on a delivered basis the reductions

1 Under an f. o. b. usual-terms sale the buyer is permitted the privilege of inspection at destination to determine before payment whether the shipment conforms to the terms of the contract. These terms require the buyer to assume all losses from damage or deterioration in transit that are not attributable to the neglect of the shipper. The buyer must file all claims against the carriers that arise out of damage in transit.

~~.

CAUSES OF REJECTIONS OF BOXED APPLES 3

were computed by subtracting the selling price, less freight, from the original f. 0. b. price. In case an allowance was made to the original receiver the price reduction was the amount of such allowance.

On cars which were rejected there were frequently additional charges for diversion, demurrage, and for extra icing or heater service, inspection, telegrams, etc., which were chargeable to the shipper. It was impossible to obtain accurate figures for the cost of these services and in computing price reductions caused by rejections these charges were not considered, but such costs were at least partly balanced by settlement of certain railroad claims filed by shippers.

Price reductions caused by rejections and allowances occurred on 10 per cent of the cars sold f. o. b. usual terms as a yearly average for the three-year period. (Table 2.) The figure decreased from

PER CENT 0 10 20 30 40 50 60 70 80 30 100

1922-"23

deg

1924-25

3-YEAR AV.

Rejections on which Price . ss = a ;

Gadictions were made = | fob. Shipments Be Total Shipments

Fic. 1.—Number of rejections on which price reductions were sustained relative to total and f. o. b. shipments, Washington State boxed apples, 1922-1925. The number of rejected cars on which price reductions occurred relative to total and f. 0. b. shipments, decreased during the three-year period, 1922-1925, and averaged 8.2 per cent of the total shipments which was equivalent to 10 per cent of the f. o. b. shipments

15.2 per cent for 1922-23 to 9.0 per cent for 1923-24 and again to 6.0 per cent in 1924-25. These percentages are equivalent to 13.0, 6.5 and 5.2, respectively, of the total shipments. (Fig. 1.)

TABLE 2.—Rejections and allowances on f. o. b. sales Item | 1922-23 | 1923-24 | 1924-25 | Average

Mramenethig 2 PS POSZATE FS le 15 | 12 | die ee Comsmeitifie: bitte ris et ts seetion I evi. = 9, 182 | 12, 658 Sy SB pore te ese Cars sold f. 0. b. on which price reductions were

| ee eee Oe eee ee Te ap eee per cent__| 15.2 | 9.0 6.0 10.0 Cars sold f. o. b. on which allowances were made to

Grigial receiver. = ferns ES LSS per cent__ 8.8 | 5.4°] 4.5 6. 2 Cars sold f. 0. b. which were rejected and resold at a

FOCUCIION TT rics 2 a en 5 per cent_. 6.4 | 3.6 15 3.8 Amount of price reductions on f. o. b. sales of these |

firms by reason of allowance or resale_.____-_____- | $309,325.58 | $201,899.02 | $102,881.01 |... Average price reduction per car on cars on which | }

Sedtciiots were mage 2) - $221. 58 | $177. 26 | $178.92 | $192.59 Average price reduction per car sold f. 0. b-________ $33. 69 $15. 95 $10. 74 | $20. 13 Average price reduction per car on total tonnage -___) $28. 70 $11. 57 $9. 34 | $16. 54 Price reductions in terms of f. 0. b. price of rejected |

Gare Sts ee ate. Se Bea ee Ee per cent__| 225.4 19.2 13.1 19.6

j

1 F. o. b. sales as used in this table means f. o. b. usual terms. ? Based on reports of 13 firms.

4 DEPARTMENT CIRCULAR 413, U. S. DEPT. OF AGRICULTURE

When a comparison is made of the number of cases on which price reductions were caused by allowances with the number where the reductions were caused by resale after rejection, it was found that the three-year average figure for the former was 6.2 per cent of the f. o. b. sales, against 3.8 for the latter. Of the cars on which price reductions were sustained in 1922-23, 58 per cent were on allowances; in 1923-24, 60 per cent were on allowances; and in 1924-25, 75 per cent were on allowances. This seems to indicate an increasing tendency on the part of shippers to adjust differences with original buyers rather than to dispose of rejected cars through other channels.

The average price reduction per car on cars which were rejected and resold at less than the original price, or on which allowances were made, averaged $192.59 for the three-year period, and ranged from $221.58 for 1922-23 to $177.26 in 1923-24. When these figures were considered along with the total number of f. o. b. sales it was found that the reduction per car sold f. 0. b. averaged $20.13 for the three- year period and when spread over the entire tonnage shipped, averaged $16.54 per car for the period. The reductions averaged 19.6 per cent

PER CENT 50

ee Price Reductions me) Original fo.b. Price

Fic. 2.—Relation of price reductions, due to rejections, to original f. 0. b. price of rejected cars, Washington State boxed apples, 1922-1925. Price reductions caused by rejections, expressed in percentage of original f. 0. b. price of rejected cars, declined steadily during the three-year period, 1922-1925, and averaged almost one-fifth of original price on rejected cars

of the original f. 0. b. price of rejected cars and declined from 26.4 per cent in 1922-23 to 13.1 per cent in 1924-25. (Fig. 2.)

It is interesting to find the total. amount granted as allowances or forfeited on resale of rejected cars by Washington apple shippers. Assuming the records studied were representative for the State, this amount was approximately $812,000 in 1922-23, $435,000 in 1923-24, and $235,000 in 1924-25.

COMPARISON OF PRICE REDUCTIONS ON ALLOWANCES AND RESALES Each year the amount of the reduction in price per car in cases

where allowances were made to the original buyers was less than on cars which were rejected and resold to other buyers at less than the

=

CAUSES OF REJECTIONS OF BOXED APPLES 5

invoice price. It was not possible to determine whether the cars on which allowances were made averaged higher in quality, condition, or grade than the cars which were rejected and resold. For the period studied, the average reduction on allowances was $137.10 per car, and on cars rejected and resold at less than the invoice price, $288.02. (Table 3.) These figures represent 14.0 per cent and 28.2 per cent, respectively, of the original f. 0. b. price of the cars involved.

Both the allowances and reductions due to resale, when compared to the original f. 0. b. price, show a decline over the period of the study. The allowances in terms of the f. 0. b. price amounted to 18 per cent in 1922-23, 13.1 per cent in 1923-24, and 10.9 per cent in 1924-25. In the case of cars which were rejected and resold at less than the original price, the corresponding percentages were 36.5, 28.3, and 19.7.

For 1922-23 complete records were not available on cars which were rejected and resold at the same or higher price. When such cars were taken into consideration for the two later years, the net price reduction in percentage of the invoice price on cars which were rejected and resold was 26.0 for 1923-24 and 16.3 for 1924-25, instead of 28.3 and 19.7, respectively, as stated in the preceding paragraph, when only cars resold at less than the invoice price were considered.

TABLE 3.—Comparison of price reductions on allowances and resales

Item 1922-23 1923-24 1924-25 Average

Riser reporting) ssf) Pe ett ra te 15 12 Lee ee Cars on which allowances were made___------------ 1794 683 426,\-- 22s Invoice price on cars on which allowances were

pee Coes te eA ee Se se eee $625, 316.65 | $624,937.90 | $585, 774.71 |_____-_-__ SUPE ee ee ee ee ee $112, 840. 56 $81, 684. 42 $633:716:60 | 222.4 = Price reduction per car on allowances__________-__- $142. 12 $119. 60 $149. 57 $137. 10 Percentage of invoice price allowed_____ _per cent__ 18. 0 Bea! 10.9 14.0 Cars rejected and resold at a lower price__________-_- 527 458 1461 ee es Invoice price on cars rejected and resold at a lower

nts wee ee ee See et eee $481, 840.15 | $425,328.86 | $199, 149.31 |_._-______ Price reduction-on resales — oe N23 ee $175, 657.61 | $120, 214. 60 cst hes Ce eG lay) les ae te ae Price reduction per car on resales________.________-- $333. 32 $262. 48 $268. 25 $288. 02 Price reduction in percentage of invoice price on

Beadle: 2 Cp ey ty Staley. Say 2 per cent_- 36. 5 28.3 1927 28. 2

1 For 1922-23 the number of cars used in the comparison in this table was slightly less than the number used in Table 2.

CARS REJECTED AND RESOLD AT THE ORIGINAL F. O. B. PRICE OR MORE

The number of rejected cars which were resold at the invoice price or at an advance over this price was very small. “In 1923-24, 38 cars or 3.2 per cent of the cars rejected as reported by 12 firms, were resold at the original f. 0. b. price or more. The advance over the original price on these cars averaged only $31 per car or 3.6 per cent of the invoice price on such cars. In 1924-25, 27 cars or 4.4 per cent of the cars rejected as reported by 13 firms were resold at the original f. o. b. price or more. The advance over the f. o. b. price on these cars averaged only $37.22 or 2.9 per cent of the invoice price on these cars. It appears from these figures that reductions in price were sustained on more than 95 per cent of the cars which were rejected.

6 DEPARTMENT CIRCULAR 413, U. S. DEPT. OF AGRICULTURE DISPOSITION OF REJECTED CARS

An analysis was made of the methods of sale employed in disposing of cars originally sold f. o. b. but rejected and resold at less than the original price. (Table 4.) As an average for the three-year period approximately 30 per cent of these cars were sold at auction, between 10 and 11 per cent were consigned and about 60 per cent were sold to other buyers. The fact that 40 per cent of these shipments were sold through the auction or were consigned indicates that sellers have experienced difficulty in finding buyers for rejected cars.

TaBLE 4.—Method of resale of cars which were rejected and resold at less than original price

Method of resale

Season Sold to

Auction | Consigned | other buy- ers

Per cent Per cent Per cent

DE AIS SARI Pt Ey to ng NAc ey a pean ea Doe 34. 14. ip ONY As 97 Stgiis at gh A Ls de a OS Se By ase ees AS Bea 2503 9.6 65. 1 O24 Db era Ne ane eel cytay omens. 2 EN SLT he SE Ee San 29. 5 8.2 62.3 DN) eh eV eng Lge So 2 a ee epee ete 29. 7 10,7 59. 6

REASONS FOR REJECTIONS AND ALLOWANCES

Buyers’ reasons for rejections and requests for allowances are shown in Table 5. In many instances several reasons were given by the buyer for rejecting a shipment. In such cases the most important reason, if it could be determined, was tabulated. Decay and scald, and decay and overripeness were often of equal importance. Where the relative weight of the factors was difficult of interpretation they could not be listed separately.

The terms “‘quality”’ and ‘‘condition’’ as used by the trade seemed to be synonymous and included such factors as decay, scald, internal breakdown, and overmaturity. When buyers used either of these terms, it was often impossible to determine the particular factor which influenced them to ask for an allowance or to reject the car.

In 1922-23, approximately 80 per cent of all rejections and allow- ances were granted on account of complaints of poor condition (decay, overripeness, scald, freezing, internal breakdown, and water core) as compared with approximately 13 per cent on account of complaints regarding grade and pack (color, bruises, sizing, etc.). Im 1923-24, about 43 per cent of the rejections and allowances were on account of complaints by buyers relating to condition factors, and about 20 per cent were classified under grade factors. For the year 1924-25, con- dition factors were given as reasons by buyers for almost 69 per cent of the rejections, and grade factors were listed as reasons in about 11 per cent of the cases. For the three-year period, condition factors were given as reasons for rejections in 63.6 per cent of the cases, grade factors in 14.6 per cent, and miscellaneous reasons in 21.8 per cent of the cases.

CAUSES OF REJECTIONS OF BOXED APPLES ¢

There were many controversies concerning sizes of apples used in filling orders in both 1923-24 and 1924-25. In 1923-24 an unusually high percentage of the crop was of the large sizes and there were many complaints by buyers because too many boxes of large-size fruit were included in their shipments.

Buyers’ reasons for rejecting shipments, as shown in Table 5, indi- cate that condition factors were the most frequent causes of rejec- tions.

TABLE 5.—Buyers’ reasons for rejecting or requesting allowances

Percentage of season’s total rejections or requests for allowances Reason 1922-23 1923-24 1924-25 | Average Condition: Per cent | Per cent | Per cent | Per cent Dee eT EL RET ESET ig 2 2? * ee ed iweal 14.4 32.3 21.3 Seale = aes a ee 9.7 4.0 a5 4.7 DEEN G Seale = eee eee eee eee 7.8 1.4 so eee Decawandourripe 2.) “Se eee Rb) oe MA] 9.9 1.0 3.8 4.9 aL ee Set RA EOE SO eae TRI OREN SELON 10. 2 ard 44 8.4 Do 7 a) ee ee ee ee a ee ae ee eee eee 55 ara 3.0 3.9 Buatiiiy, OFCOHGIbi OMS = 5 Fos ee te nk 15.7 6.1 14, 2 12.0 Internal breakdowniand -water. core===.! 2 22 Boe 3.2 5.2 7.3 5. 2 PRL ah ee he hy ee es) 79.1 42.9 68.8 63. 6 Grade: Dib p20 (Che, ee Wee OE ge A et play 2 en oe = 4.4 4.8 4.0 4.4 WolGn es 6 te ee oe ee eS Le 4.1 IZED 3.0 6.4 Ack ane-siming: 8 Ee oN ee ee 28 1.9 1.6 2.3 DEST SOEd eee 3 ene eae te Bi es Batre PN: - Ae 1.4 es FAs? 17 Sh Oe Boe ede eren © RUSE ee ae! A ot Se | 12.6 20.4 10.9 | 14.6 _————— ee Miscellaneous: HanTOAR SeEaICe> sees ae ee 8 OM Bd MeL 1.6 2.4 1.0 wf Disputes concerning specifications 1_______________________- 70.3 21.2 15. 4 13. 0 Undetermined (and miscellaneous)_.______________________- 4.4 13. 1 3.9 tok igiget et ee ae se aie 136 Fle > Ouee 21.8 0! 100.0 | 100.0 | 100. 0

1 Mostly on account of sizes.

A buyer is not justified in rejecting shipments purchased f. o. b. usual terms which, upon arrival at destination, show damage from such condition factors as scald and decay unless such damage was apparent at shipping point. Federal shipping-point inspection is available in the boxed-apple districts. The certificates issued by this service describe the condition of the fruit at time of shipment and will prevent many disputes between buyer and seller in regard to condition factors which may develop in transit.

Grade factors were of relatively minor importance. Miscellaneous factors, such as disputes concerning sizes of fruit were, of considerable importance, especially in the two later years. The tabulation shows that scald which was a frequent reason for rejection in 1922-23 was less important the following year and practically of no importance in 1924-25. The increased use of oiled wraps in the two later years was the principal reason for the decreasing amount of scald. In ica ay there was considerable trouble on account of poor color of the fruit. /

8 DEPARTMENT CIRCULAR 413, U. S. DEPT. OF AGRICULTURE

RELATION OF NUMBER OF ALLOWANCES AND REJECTIONS TO PRICE |

Shippers generally believe that there is a strong tendency on the part of buyers to reject or ask allowances on f. o. b. purchases when the condition of the market makes it seem likely that the buyer will suffer a loss or at least will not realize a profit on the transaction.

On the other hand, buyers claim that they often accept shipments which fail to meet the terms of the sale contract when they can do so without sustaining a loss. But they deny that they are under obligation to accept shipments which arrive in poor condition, even though they have not expressly stipulated ‘‘good condition”’ in the sales contract.

A study was made to determine what relation existed between price fluctuations and the number of cars rejected. As a first step in this study the weekly car-lot shipments for the State of Washington and the number of cars rejected weekly were compared. Both the shipments and rejections were expressed in percentage of the season’s totals and were then plotted. (Figs. 3, 4, and 5.) For 1923-24 and

i }

oe Rejections

0 2 9 16 2330 7 14 21 28 4 I 1825 2 9 16 2330 6 13 2027 3 10 17 24 3 10 17 24 31 7 1% 2128 5 12 19 26 SEPT. OCT. NOV. DEC. _ SAN.- FEB. MAR. APR. MAY 1922 1923

Fic. 3—Relation of number of rejections per week to total Washington shipments per week, Wash- ington State boxed apples, 1922-23. The number of cars rejected weekly in 1922-23 did not vary in direct proportion to the number of cars shipped. Price changes and condition of fruit had considerable influence on the number of rejections during the season

1924-25 it appeared that the number of rejections varied in rather close proportion with the number of cars shipped. (Figs. 4 and 5.) There was, however, some tendency for the number of rejections relative to shipments to increase as the seasons progressed.

For 1922-23, Figure 3 shows that factors other than the number of cars shipped must have influenced the number of rejections. In this year the number of rejections relative to shipments increased in the latter part of the season. This was a year in which prices had a tendency to decline until about the 1st of March, after which jobbing prices improved somewhat. In the other two years, jobbing prices, after declining sharply at the beginning of the seasons, remained at near the low point until December, when an upward trend began and continued through the remainder of the season.

The relation of frequency of rejections to the trend of f. o. b. and jobbing prices is shown graphically in Figures 6, 7, and 8. In these figures the zero line represents the average percentage of shipments rejected each week during the period. It was figured that a little

™

=

he

CAUSES OF REJECTIONS OF BOXED APPLES

- —— Shipments

Rejections

1 8 5 2229 6 13 2027 3 10 7 24 1 8 15 2229 5 i2 19 26 2 9 16 23 | -8 15 2229 5 12 19 26 3 10 7 2 SEPT. OCT. NOV. DEC. JAN. FEB. MAR. APR. MAY

= 1924

Fic. 4.—Relation of number of rejections per week to total shipments per week from Washington State, 1923-24. There was a close relation between the number of weekly rejections and volume of shipments in 1923-24. Other factors such as price changes and condition of fruit apparently had only a minor influence in determining the number of cars rejected per week during the season

SEASON j TOTAL 3 ae “i ae Po ER, 6 St

2 One unas 1825) 6 IS 2229 6 13 2027 3 10 7 2431 7 2128 7 1 21 28 4 18 25 2 9 623 SEPT. OcT. NOV. DEC. JAN. FEB. MAR. APR. MAY 1924 1925

Fic. 5.—Relation of number of rejections per week to total Washington State shipments per week, boxed apples, 1924-25. In 1924-25 the number of weekly rejections shows a fairly close relation to the volume of weekly shipments. Other factors such as condition of fruit and price changes proba- bly had some influence in determining the number of rejections

10 DEPARTMENT CIRCULAR 413, U. 8S. DEPT. OF AGRICULTURE

a a | a ee 60 7

40 —— eveenee Jobbing Prices <a ; fa ee emmo==e £.0.5. Prices

+S7.2

20 | cay aes i fe

P \ pt * ae ie = ee JFLUA Nei Z2e eA LLB eS Wu Stel SienlGm235s300)..6 euler 2Oln2 7s NOM tra o24 Si h10) aii a eS) OocT. NOV. DEC. JAN. FEB. MAR

1922 1923

Fic. 6.—Relation of frequency of rejections to prices to jobbers and f. 0. b. prices, Washington State boxed apples, 1922-23. Deterioration of apples probably served to increase the rate of rejections after the middle of December, 1922. When prices fell below the average for the period there was a tendency for the number of rejections relative to shipments to increase

+126.0

‘PER CENT

ey é che ee

60 = Jobbing Prices eme——- £.0.b. Prices 40 20 ‘Ne \ ou ce Aol wee Ke escort | Ory b Av. O a | [\pw fee ee J eee ee eese canes” ha we e _ wR, > ‘ oa =20 y = c i on | Lee -60

GimIsiecO Rem IS nlOl ines ellen is a2eln2S 15 Miramiol (26q 2S eiicmes ais ees aieeneo) mSmnlounioMmizGn Silo OcT. NOV. DEC. JAN. FEB. MAR. APR. MAY

1923 1924

Fic. 7.—Relation of frequency of rejections to prices to jobbers and f. 0. b. prices, Washington State boxed apples, 1923-24. The number of rejections relative to shipments in 1923-24 tended to increase as the season progressed. For the season as a whole there appeared to be but slight relation between the number of rejections and price changes

CAUSES OF REJECTIONS OF BOXED APPLES ll

over two weeks was required on the average in the two later years and almost three weeks in 1922-23 for shipments to reach market. Rejections were therefore stated in percentages of shipments of the second or third week previous. The zero line also represents the average of the weekly price indices for the period. The jobbing price index was determined from records of daily sales on important

PER CENT +17L6 +106.0 +100.0 + 156.7

= = Aesections 60 +. aes 2= Jobbing Prices

_| 4 em—e—+ £0.45. Prices | | 2 40 | Tepe

20

i

es ee ee eee

ed Pe i See ee -80 :

® 18 2 ' 8 i 2229 6 13 20 27 3 10 17 24 31 7 % 2% 28 7 & 2 26 & U 18 25 2 9 OocT. NOV. DEC. JAN. 5. MAR. APR. MAY 1924 1925

Fic. 8—Relation of frequency of rejections to prices to jobbers and f. o. b. prices, Washington State boxed apples, 1924-25. The trend of rejections relative to shipments throughout the season of 1924-25 was upward. There was little relation between price changes and number of cars rejected

markets covering a certain size and grade of important varieties. The f. 0. b. price index was determined in a similar manner from ship- ping point price records.

In Figure 6 it will be noted that the number of rejections fell below the average during the first half of the 1922-23 season, whereas the price trend for the most part was slightly above the average. During the last half of the season, the number of rejections rose above the average whereas the price trend was mainly below the average. It is significant that during the early season when fruit was in prime condi- tion, there were comparatively few rejections, but during the latter half when the fruit was getting ripe and showing deterioration, rejec- tions and allowances were heavy. Perhaps the sharp drop in rejec- tions during the last three weeks may be accounted for by receipts of cold-storage stock in good condition.

An examination of Figures 7 and 8 shows that there was but slight relation between price changes and number of rejections in 1923-24 and 1924-25. There was a tendency in each of the three years for rejections expressed in percentage of shipments to increase as the season progressed. The deterioration in condition of apples during the latter part of the season probably tends to increase the percentage of rejections.

PURCHASE ON GOVERNMENT CERTIFICATES

Some buyers make a practice of purchasing on the basis of Govern- ment shipping-point inspection certificates. These certificates state the condition of the car and equipment, and the variety, grade, size,

12 DEPARTMENT CIRCULAR 413, U. 8. DEPT. OF AGRICULTURE

maturity, and general condition of the fruit. Thus the buyer is informed as to whether the apples were hard, firm, ripe, or overripe and whether scald, decay, or other storage diseases or freezing injury were in evidence at shipping point. Purchases made on such a basis leave little chance for misunderstanding at the time of delivery. Such certificates are also valuable documents in connection with railroad claims and in the arbitration or adjustment of claims for allowances.

Records of Government inspections indicate that in 1922-23 slightly less than one-third of the car-lot apple shipments from Washington were inspected at shipping point. In 1923-24 about 40 per cent, and in 1924-25 about 55 per cent, were inspected at shipping point.

OBTAINING PROPER CONFIRMATION OF SALE

In many transactions, legal confirmation of sales which protect both buyer and seller was not obtained. It is a conspicuous fact that in a large number of reported transactions, sellers were advised by their counsel that they had no recourse to the courts in obtaining damages resulting from alleged unjustified rejection of shipments because they had failed to secure signed confirmations from buyers. Some shippers make it a policy to secure a signed ‘“‘standard confir- mation of sale”? or they require their brokers to issue a ‘‘broker’s memorandum of sale.’”’ When a sale is handled through a broker copies of either of these forms, signed by the buyer and by the broker as the seller’s agent, are binding, unless, in event of amistake by the broker, one of the parties to the transaction immediately files a pro- test he the other conclusively disproving his agreement to the terms as stated.

An actual offer to sell should specify the commodity to be sold, the quantity thereof, the price, and the time of performance. If the offer is accepted, a valid contract results. It must be understood that the mere quotation of a price is not an offer to sell, but only an invitation for an order or offer to buy, and the sale in such a case is not com- plete until the seller accepts the order. When a seller uses the words, ‘““we quote,” he is, according to a trade custom which would be recog- nized in law, soliciting an order, but when he intends to make a defi- nite offer to sell, he should use the words, ‘‘we will sell,” or other words of similar import.

It must be realized that f. 0. b. wire sales made through a seller’s agent or broker are very difficult to establish in the courts unless there is a written sales memorandum signed by the buyer, or a confirmation of the broker’s order signed by the party to be charged, if handled through a broker. This is because the rule in most jurisdictions is that all sales of personal property in excess of the value of $50 must be evidenced by a memorandum or other writing signed by the party to be charged, or his agent, in order to constitute a legal and binding contract. The original telegram or telegrams, however, signed by the sender and filed with the telegraph company, are considered by the courts as meeting these requirements. When a legal contract has been consummated by telegram between the principals to the con- tract, it is unnecessary to confirm such contract by letter or other

CAUSES OF REJECTIONS OF BOXED APPLES 13 written instrument. But as a matter of good practice it is always wise to confirm telegrams by letter or by sending through the mails a copy of the telegram, to guard against errors in transmission.

In stating the foregoing, it is assumed that the telegrams contain all the essential elements of a contract. In wire sales through bro- kers, it is advisable, in order to have proof of agency, available, that there be secured a written confirmation, signed by the buyer, of the broker’s action in consummating the sale. Sellers often accept tele- graphic orders from brokers or salesmen without the buyer’s confir- mation in writing. This failure to secure sufficient evidence of the sales is due, not to the policy of most sellers, but to the failure of the brokers or other representatives, for various reasons, to secure the signed confirmation. Therefore, many f. o. b. sales are not in shape to enable the seller to maintain an action on the contract, although they were confirmed by wire by his broker in accordance with customary trade practice. The following is the form of the standard confirma- tion of sale recommended by trade organizations.

STANDARD CONFIRMATION OF SALE

In Person__ __

eae enmereg sere te Oe) Oe Check how sold },elephone___- Date fi d Telegraph ____ PRP reuMeRRNINC EL ees ee at eae

The Broker or Salesman on receiving notice of the Seller’s acceptance of the Buyer’s order shall fill out this Standard Confirmation of Sale in triplicate and present all three copies to the Buyer for authentification by his signature. The Broker or Salesman shall also sign the three copies on behalf of the seller and shall deliver one copy to the Buyer and one to the Seller and shall retain the third for his file. This Standard Confirmation of Sale as authenticated by the Buyer and Broker or Salesman shall constitute the complete contract of sale and neither party shall have the right to rely on oral representations or promises of the other. All modifications must be in writing and authenticated in the manner provided above for this Standard Confirmation of Sale to which such modifications shall refer. Unless the Seller makes immediate objection upon receipt of his copy of this Standard Confirmation of Sale, showing sale was made contrary to authority given the Broker or Salesman, he shall be conclusively presumed to agree that the terms of sale as set forth herein are fully and correctly stated.

0) Pe oe ee Ser gl ee ae ake Same rt ee a ea a oar Ao ei 192. 2 SP ee RE tek PERT G10 = Pert] as a ee (P. O. address) ENE See ease OR A ts oc , - n e ig e s Destination eR ae ee eee) ney. rte Ane RAs 2 Ie eee APL) AROS Seg okt Ree ae: Raeaad delivery preferred |. ten eae ot ites Ser a 2 Postive routing melitor secoweét Of 2 FA 20s 8 (Sele) 2 ayo his pee | (P. O. address) SET es iy), le ay aces eee See Shipping station or district ere tie ICN a er ee ee Te Ronmecat.—. So

(If car sold while rolling state date of shipment and approximate location when posse, alse: routing.)) Care No: andanitial: 2 22) ee ee ek eS Pie neener) valto ie reiigipedss* oe... eae bo ee a eee ee (Iced, ventilated, standard ventilation, shipper’s protective service, or carrier’s protective service.) Style of equipment—Refrigerator car___________-_---

Rie ere 20 oe a Ventilated care. 22-8 Stock taro. js). (Style of equipment to be designated by check or cross.) Sale made (f. o. b. or delivered) ______________ Terms, how payable________-

arian eamte UR Metra y ew me cag FN es a

(It is understood, unless otherwise stated herein, this sale is made in con-

templation of and subject to the Standard Rules and Definitions of Trade Terms printed on the back hereof.)

14. DEPARTMENT CIRCULAR 413, U. 8. DEPT. OF AGRICULTURE

QUANTITY COMMODITY AND SPECIFICATIONS PRICE (Stened rue Fi. Stal eee a ore

Buyer

Seller 1 5 yi acne SRR Ra IN PST NOMI 8S

Broker cr Salesman.

I hereby certify that I am authorized by the Seller named above, as his Broker or Salesman, to fill out this Standard Confirmation of Sale and sign and authen- ticate the same in his behalf.

SUMMARY

On the basis of this study of about 43 per cent of the total shipments for the period covered, it was found that, as an average for the three- year period, 1922— 1925, about 81 per cent of Washington State boxed apples were sold on a basis of f. 0. b. usual terms. About 8 per cent were sold on a delivered basis or for cash on track, while the sales made direct at auction, direct for export or consigned, amounted to less than 5 per cent each.

For the three-year average, reductions from the original price, caused by rejections, occurred on 10 per cent of the cars sold f.o. b. usual terms, ranging from 15.2 per cent in 1922-23 to 6 per cent in 1924-25. For the cars on which there were reductions in price the average reduction was approximately 20 per cent of the invoice price.

Price reductions on rejected cars which were resold to other buyers were heavier than on rejected cars on which allowances were made to the original buyers. But there was no means of determining whether the average condition or grade of shipments handled by the latter method was better than in the case of shipments which were rejected and resold. There appears to be an increasing tendency on the part of sellers to adjust differences by making allowances to orig- inal buyers rather than to resell to other buyers. Of the cars on which price reductions occurred, allowances to the original buyers were made in 58 per cent of the cases in 1922-23, in 60 per cent of the cases in 1923-24, and in 75 per cent in 1924-25.

Of the cars which were rejected and resold at less than the invoice price, about 60 per cent were resold to other dealers, about 30 per cent were sold at auction, and about 10 per cent were consigned.

Less than 5 per cent of the rejected cars were resold at the original invoice price or more, and on these cars the advance over the original invoice price averaged only about 3 per cent, as indicated by records for 1922-23 and 1923-24.

Reasons given by buyers for rejecting shipments related mainly to condition of the fruit, including such factors as decay, scald, over- ripeness, freezing injury, and internal breakdown. Condition factors were given as reasons for rejection in over 60 per cent of the cases as an average for the three-year period. Grade factors like color, pack and sizing, bruising and blemishes were much less frequent reasons for rejections, averaging less than 15 per cent for the three-year period. Miscellaneous causes such as disputes concerning specifi-

~~?

CAUSES OF REJECTIONS OF BOXED APPLES 15

cation of sizes, etc., were frequent reasons for rejections, especially in the two later years. |

For the three-year period as a whole the correlation between price changes and number of rejections was not pronounced. Prices in general did not fiuctuate sharply, but the changes were of a gradual nature. In 1922-23 the number of rejections relative to shipments tended to increase during periods of declining and low prices, but in the other years the number of rejections per week was in fairly close proportion to the number of cars shipped. Each year there was some tendency for the number of rejections relative to shipments to increase as the season progressed. ‘The deterioration in condition of the fruit was probably the main reason for this tendency.

As a means of improving conditions relating to apple rejections and reducing the amount of price reductions due to rejections, it is sug- gested that buyers and sellers make it a practice to secure written confirmation of sales on a standard form on transactions handled through a broker or agent; that complete specifications including a statefnent on sizes, condition of fruit, etc., be written into the sale contract; that in case of sales negotiated direct between buyer and seller all information essential to a valid contract be included in the letters or telegrams. The use of the Government shipping-point inspection service supplies a definite description of the shipment at point of origin and helps to prevent misunderstanding between buyer and seller. Improvements in methods of handling and storing apples which result in better condition are no doubt assisting in decreasing the number of rejections.

ORGANIZATION OF THE

UNITED STATES DEPARTMENT OF AGRICULTURE 7, a April 8, 1927

CCTOLATY OF SANTICUUUTE.2 2 ue _ ee W. M. JARDINE. PUSETSULTUL SIS CONELONY = ee ee ee R. W. Dunuap. Director of scientije Work = 22 2. 2 A. F. Woops. Director of Regulatory Work_._..___------_- WaLTER G. CAMPBELL. Drector, Oo; Lethenston: Work 2 C. W. WARBURTON. DICELOT OF AN OLIROUN OW.) 2. NELSON ANTRIM CRAWFORD. Director of Personnel and Business Adminis- ss EGA LILA [goo ES CRG a lis le Se DOES 8 ees SA RR SO ak W. W. StockBERGER. IS OLDE TR OM ote ee ety ey a ee. Set R. W. WILLIAMS. WW CAIN ere a es ee ee 2 ee CHARLES F. Marvin, Chief. Bureau of Agricultural Economics_-_-------- Luoyp 8S. Trenny, Chief. Bureau of Animal Padustry = 22-2. 2 ae JoHN R. Mouter, Chief. Bureau af ans Pasi. = 3 ee WiuuraM A. Taytor, Chief. URGRCSHISETEIEO =, 2 he eee sa oe RET W. B. GREELEY, Chief. BUTE MOMCHUISET Pine Se es em C. A. Browne, Chief. BOGE HO] SOUS <5 care ae See _ Eee Mitton WHITNEY, Chief. Burtaiwol ntomologys. a = 2: L. O. Howarp. Chief. Bureaw. of Biological Survey. — 4 ~-- == - E. W. NeEtson, Chief. Buren bo) Ee aolie Roads 2 ko... ae Tuomas H. MacDona tp, Chief. Bureau_of Home Heonomics_—_— ~~~. 322 22— LovutsE STANLEY, Chief. Biureausoy; Dairy-lndusirye: = 228: - 2 ae C. W. Larson, Chief. Office of Experiment Stations____-_-------- E. W. ALLEN, Chief. Office of Cooperative Extension Work.___-_-- C. B. Smitu, Chief. J EAS CAS 3 pap tes 2 ah AON SERENE RRR 6 LN CLARIBEL R. BARNETT, Librarian. Federal Horticultural Board... - 2. C. L. Maruatt, Chairman. Insecticide and Fungicide Board__-_-__------ J. K. Haywoop, Chairman. Packers and Stockyards Administration _ _-__-- JoHN T. Caine, III, in Charge. ‘h Grain Futures Administration__.__--_----- J. W. T. DUVEL, in Charge... eh

This circular is a contribution from

Bureau of Agricultural Economics--_------ Luoyp S. Trenny, Chief. Division of Fruits and Vegetables_----- We tts A. SHERMAN, Chief Market- ing Specialist, in Charge 16

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U.S. GOVERNMENT PRINTING OFFICE: 1927

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