Fruit and vegetable growers are keeping one eye on Bill C-280’s parliamentary progress and the other on the election countdown.
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The Financial Protection for Fresh Fruit and Vegetable Farmers Act, York-Simcoe MP Scot Davidson’s private member’s bill, received unanimous support in the House of Commons during its second reading mid-May.
Why it matters: Since 1985, Canadian stakeholders and the Fruit and Vegetable Dispute Resolution Corporation (DRC) have unsuccessfully lobbied for a Canadian equivalent of the U.S. PACA Trust protection.
“I’m optimistic that it will get to the committee review,” said Richard Lee, Ontario Greenhouse Vegetable Growers (OGVG) executive director. “The problem is if an election is called this year or this fall, it will result in the whole process starting over again.”
Bill C-280 emulates the United States Perishable Agricultural Marketing Act’s Trust (PACA Trust) in providing fresh produce sellers in Canada a financial protection mechanism to secure payment in case of buyer bankruptcy with no additional burden on the government.
The U.S. and Canadian fruit and vegetable industry historically had government reciprocity for buyer licensing regimes and rules to abide by, said Fred Webber, retired Fruit and Vegetable Dispute Resolution Corporation (DCR) president and CEO.
“In both the U.S. and Canada, there was a mechanism to help resolve (non-payment) disputes,” explained Webber. “Canada had a board of arbitration. U.S. had something similar through PACA – there was a process.”
In 1985 the introduction of the PACA Trust gave produce sellers a bankruptcy mechanism to claim against the accounts receivable, cash, and inventory derived from the sale of produce.
“This is not a claim across the board; it’s only for things derived from produce,” cautioned Webber. “It doesn’t attach to computers; it doesn’t attach to buildings. It doesn’t attach to anything (outside of) accounts receivable, cash, and inventory derived from the sale of produce.”
Simultaneously there was a challenge to the Canadian Licensing and Arbitration proceeding where a firm said non-payment was a provincial jurisdiction, not a federal one resulting in the board of arbitration no longer being able to enforce payment.
The DRC, a non-governmental agency, was created to address dispute resolution and provide default contract rules and licensing; however, it couldn’t secure the final piece of the puzzle – a trust system to back up the complaint and force payment.
As a result, on Oct. 1, 2014, the U.S. withdrew Canada’s preferred access to the PACA Trust payment dispute arbitration mechanism.
Webber explained that Bill C-280 could restore reciprocity and level the trade playing field.
“Why do they (the U.S.) have a trust that anybody can use? Food security,” he said. “When somebody in the world has a product to sell, the United States is a market of first choice because it is the safest place to sell.”
Making Canada a market of first choice increases food security and provides consumers with the quality, price point, and product variety they want.
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“We need to erase any fear there is of people selling to Canada,” said Webber.
In a highly perishable, cash-based industry where product flows quickly through the systems, the current bankruptcy right of repossession is useless for fresh produce farmers and sellers, said Ron Lemaire, Canadian Produce Marketing Association (CPMA) president.
“In the event of a bankruptcy in produce, you basically have nothing to repossess,” Lemaire explained. “It’s not like a washing machine.”
He said when a small independent grocer went bankrupt in Eastern Canada, the wholesaler was left on the financial hook for sold stock because there was no secured creditor recognition.
“He couldn’t see his growers lose their farms, so he took the hit on that one,” explained Lemaire. “In this event, if we had the (proposed Bill C-280) trust (and) if there was some asset available, he could have recovered something.”
He said the same goes for the greenhouse grower with more than $900,000 in unsecured Lakeside Produce bankruptcy claims.
“We work on such tight margins that a million dollars is significant to your business,” Lemaire said. “(Bill C-280) It’s no guarantee you get 100 per cent of your money, but it’s more than the nothing we’re getting right now.”
The impact of insolvency for growers could be the difference between being able to buy seed next year, turn on the gas, pay their labour, or a bank approving an operating line extension, said Lee.
“I think it (Bill C-280) is very critical,” Lee explained. “If you cannot ensure that members are protected, farmers are protected, and getting paid for the produce they grow, how are we going to feed North America?”
Lemaire estimates it could be early 2024 before the bill goes through the House committee, the Senate, and back into Parliament.
“This government has a lot on its plate to try and move things forward before the next election,” he said. “And we’ll have to follow due process.”
