Bill C-280

Financial Protection for Fresh Fruit and Vegetable Farmers Act

An Act to amend the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act (deemed trust – perishable fruits and vegetables)

This enactment amends the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act to provide that the perishable fruits and vegetables sold by a supplier to a purchaser, as well as the proceeds of sale of those fruits and vegetables, are to be held in trust by the purchaser for the supplier in the event that the purchaser has not fully paid for the fruits or vegetables and becomes bankrupt or the subject to a receivership or applies to the court to sanction a compromise or an arrangement.

Financial Protection for Fresh Fruit and Vegetable Farmers Act

[Lianne Rood, Conservative, Lambton—Kent—Middlesex, ON]

Madam Speaker, I would like to thank my colleague from York—Simcoe for putting Bill C-280, the financial protection for fresh fruit and vegetable farmers act, forward. It is a very important bill, and it has been a long time coming. I was elected nearly four years ago and we have been talking about this through the last two Parliaments, and I know it was talked about long before then. It is great to see all parties come together to support something that will help our Canadian produce growers, packers and shippers immensely.

During a Zoom call with The Fruit and Vegetable Growers of Canada, I heard that 52% of perishable product sales to U.S. customers from Canadian suppliers await payment from the United States. California producers and suppliers have a similar problem with their Canadian customers. On October 1, 2014, the United States Department of Agriculture revoked preferred treatment for Canadian shippers under the Perishable Agricultural Commodities Act. This was taken in retaliation for an action on the part of Canada with regard to establishing some type of trust protection from bankruptcy for all fresh produce shipped into the U.S. Under that status, Canadian companies did not have to post surety bonds when trying to collect payments from delinquent buyers. No other nation had such status.

Without the special status, a Canadian shipper must now post a bond for twice the amount they are seeking to collect. Taking action to recover $100,000 would require the purchase of a $200,000 bond. Current rules severely limit the ability of produce growers and sellers to collect payment in the event that their buyer declares bankruptcy.

While products like electronics can be reclaimed by the seller, highly perishable produce is lost because of the obvious. It spoils and rots very quickly, costing Canadian and U.S. firms that operate in Canada an average of $19 million per year, but there is a policy solution to this. In 1984, the United States Congress established “deemed trust” provisions through the Perishable Agricultural Commodities Act, also known as PACA, and that protected shippers in the event their buyer became insolvent. The PACA trust helps suppliers of perishable products ensure prompt payment by buyers.

The trust gives suppliers interest in a debtor's assets. Creating a reciprocal legal framework in Canada by federal statute for a PACA-like “deemed trust” would not draw on federal or provincial public treasuries but would offer Canadian producers and suppliers the means to collect on accounts payable from U.S. customers and give U.S. producers and suppliers the means to collect on accounts payable from Canadian customers.

My colleagues have gone into a lot of the details of this bill and I would like to take a bit of a different approach. I would like to give some personal perspective and a little history of my experience in the fresh produce sector to provide some personal context on how this legislation would benefit growers and shippers.

I grew up on a produce farm. I am a third-generation farmer and my grandparents on both sides of my family were essentially pioneers in the produce industry in the area that I grew up in, which is my hometown of Grand Bend, Ontario. My dad's parents, my Oma and Opa, immigrated from Holland and were one of the first five families to start farming in what is called the Klondike marsh. My mom's parents immigrated to Canada from Poland via Germany and moved to Grand Bend after living in the Chatham area where they first started growing vegetables.

They cleared their land and began farming in the Grand Bend bog, which used to be a shallow lake that was drained to become rich farmland. They grew potatoes, onions, carrots, lettuce and onion sets over the years. Eventually, my dad's parents retired and the family farm that my grandparents started, which now involved two families, took over growing some of the vegetables that my Oma and Opa used to grow. Farmers are innovators, and I would like to give one example from personal experience.

When I was growing up, it would be time to harvest our potatoes and my dad would go out to the field and hand-dig potatoes to see what stage of growth they were at. There are many things that farmers can automate, but this is not one that can be automated. This is still done by farmers putting their hands in the dirt and digging those little nuggets out of the ground by hand. When my dad would do test digs, he would bring all these little potato nuggets home, and we would never waste them. We would cook them up and eat them for supper. I can tell everyone that those were the most absolutely delicious potatoes.

To provide some context, back in the 1980s when I grew up, the CFIA regulations stipulated that undersized potatoes could not be packaged, and so all of those small undersized potatoes that we harvested would either be discarded for cattle feed or put in a compost pile. There was an enormous amount of perfectly good eating potatoes that became food waste because of packaging regulations. There came a point where my mom thought, “Well, jeez, we're always throwing these undersized potatoes out and they're the most delicious thing ever. Why are we doing this when they taste so good?” These little mini nuggets were so delicious that we wanted to share them with everybody else. Our farm made an application to the CFIA asking that we be able to bag these mini potatoes and sell them. So, the mini gourmet potato bag was born, and our family farm became the first farm in Canada to bring mini potatoes to market.

Now, members are probably wondering why the short history lesson on my family farm. Well, I wanted to provide context from the unique perspective that I hold as the only parliamentarian who is still involved in the fresh produce industry and produce farming.

Before my parents retired from farming, their farm was growing over 1,000 acres of potatoes in southwestern Ontario for grocery retailers. To meet grocery store expectations, we also relied on local smaller farms as well as smaller farms from across Canada in different provinces to supply us with Canadian product in our season. If we could not supply the grocery stores with the product they wanted when they wanted it, then they would not even consider us as a farm to be a supplier. However, the grocery stores had to supply year-round, and so we had to grow potatoes around North America in order to keep the supply going to supply grocery stores. We had farms contracted to custom grow for us in California, Florida, Idaho, North Carolina and Michigan. Our packing facility in Grand Bend used to process anywhere from 5,000 to 6,000 acres through it per year.

Members can imagine the coordination that it would take to keep everything going when we have farms across North America supplying us. There would be a constant flow of trucks coming back and forth from all over the United States into Canada and from Canada into the States. The potatoes would be coming for us to process and package in our plant so that we could then give Canadians fresh potatoes on the grocery store shelves. We had to do this year round. With bringing upwards of 4,000 acres of fresh potatoes across the border to Canada from the United States every year, members can imagine the dollar value that would be for that product.

However, not only did we pack potatoes from the U.S., we also exported our excess crop during harvest season to the United States. The growing season in the United States is different from Canada's growing season in many parts. Being neighbours, we rely on each other to ensure a fresh food supply year-round. Canadians grow an abundance of fresh, perishable food, far greater than what we consume, and we are blessed to live in a country to be able to do so, but with that comes a huge amount of risk.

In this industry, it is standard practice to be paid 30 to 45 days from the time a product is received. As members can imagine, the shelf life of fresh produce is far less than the payment terms that sellers are working with. The intricacies of our supply chain for fresh food are far greater than anyone could ever imagine. When farmers are exporting millions of dollars in perishable food from the United States without a reciprocal agreement to ensure that they have a mechanism to be paid in the event of a dispute or a bankruptcy, it becomes a risky business. One bad deal or one dispute could literally bankrupt a family farm, especially since most companies could not afford to put up a bond worth double what they are disputing. Produce farmers work on such tight margins that one sale of a quarter of a million dollars or a half million dollars could be three to five tractor-trailer loads of goods to one customer in the States, which they might not get paid for. This could bankrupt a smaller farmer. While this might sound extreme, I have seen this happen to a young farmer first-hand.

In Canada, when there is a dispute between growers and sellers in this country, we have a mechanism to resolve those disputes, but without the deemed trust, we have no mechanism to resolve disputes between growers and sellers in the United States and Canada that is affordable for growers to access.

I am very passionate about this industry, because it has literally been my family's bread and butter my entire life. I have friends across the industry who would welcome this important change, because it would help protect the livelihoods of families, their farms and their businesses. Creating this deemed trust and having that reciprocal agreement with the U.S. would protect farms from having to bear those losses in the event of a dispute.

This will save family farms. I will always fight for Canadian farmers, their livelihoods and their legacies. At a time when food security and food sovereignty are top of mind, this is needed to protect this industry in Canada, and that is why I support this bill on behalf of my constituents and consumers.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Madam Speaker, I am extremely proud to be standing in the House on behalf of the fruit and vegetable farmers in my region of Cowichan—Malahat—Langford. My region and the Cowichan region have a long and storied history in agriculture. I would like to remind all members that the Cowichan Valley is in fact Canada's only Mediterranean climatic zone. The Halkomelem language is the language of the Quw'utsun; the Cowichan name is the anglicized version of that, and it roughly translates into the “warm lands”.

We are an agricultural powerhouse in the Cowichan region. I have been proud to call that area my home for over 30 years, and I am proud to be standing in this House in support of Bill C-280. This is a measure that has long been talked about in this very chamber, and we now have an opportunity to actually change the law. As many colleagues have pointed out, this is going to be of no cost but of huge benefit to the people it directly concerns.

I want to thank the people who have spoken before me: the sponsor, the member for York—Simcoe; the member for Kings—Hants; and the member for Berthier—Maskinongé. I have the pleasure of serving with two of those colleagues on the Standing Committee on Agriculture and Agri-Food. I have been the proud agricultural critic for the NDP since January 2018, so I know this subject very well. This is my third Parliament on the agriculture committee, and this subject has come up time and time again.

I do not want to delve too much into the details. We know that this issue matters because of the nature of the product we are talking about. Fruits and vegetables only have a tiny bit of shelf life before they have no more value. This is a unique product, and that is why we need to have this kind of a deemed trust.

It is not as though farmers, who are taking all the risk, can recoup losses by taking the product back; it is perishable in nature. We know that farmers deal with high costs. They have high input costs. It is expensive to buy machinery and erect greenhouses. In fact, almost all farmers' money is tied up in infrastructure, whether that is machinery or land. They are, in other words, land rich but cash poor.

This is a business model that is based on the tightest of margins, and anything the Parliament can do to ease up and make the payment process more guaranteed is something we should look at seriously. I am happy to say Bill C-280 would do that.

I would argue that, instead of this being just a Conservative bill, this bill is expressly non-partisan. I know the NDP has been fighting for this, as part of our electoral promise to Canadians, since 2015. Moreover, it is non-partisan by virtue of the fact that the second reading of this bill was unanimous. It sailed through committee. We had three meetings; we heard from a variety of witnesses. However, we decided as a committee to report this bill back to the House without amendments. It has the committee's stamp of approval, and I hope members in this chamber take note of that and seek to give it rapid passage.

This bill has been the subject of many committee studies. I have almost lost count of how many times, at different committees and different parliaments, we have seen a recommendation for this type of measure to be enacted by the House of Commons.

The time is now. I would like to see this bill pass through third reading, get to the Senate and start getting the traction it needs. The Fruit and Vegetable Growers of Canada, the Canadian Produce Marketing Association and the thousands of people they represent are watching us. They are waiting for action.

I will conclude my remarks by proudly saying that I will be supporting this bill, along with the NDP caucus. We look forward to its speedy passage to the other place; hopefully, it will eventually find its way to the Governor General's desk and receive the royal assent it deserves.

[Kody Blois, Liberal, Kings—Hants, NS]

Madam Speaker, it is always a pleasure to rise in the House to discuss and debate a bill, especially a private member's bill. That is precisely why we are here this evening. We are debating Bill C‑280, a very important bill for our farmers, especially for fruit and vegetable growers.

I believe that our agriculture and agri-food sector was very important to all Canadians before the pandemic, but it has become even more important since the pandemic. We think it is important to reinforce the supply chain, and bring in new investments and initiatives for our producers. Bill C‑280 is certainly the type of initiative that can ensure their success.

Before I go too much further, I would like to thank and congratulate the hon. member for York—Simcoe for helping to shepherd this bill through the House.

As I had the privilege of reporting this bill back before it came to third reading in debate, I know this is a bill that is supported unanimously in the House. This is an initiative that came back from the agriculture committee with no amendments and was widely supported. I would like to not only, of course, recognize the member for York—Simcoe, but also recognize that there are many members of the House, in fact, all of us, who believe in this initiative.

I would be remiss without talking about the member for Glengarry—Prescott—Russell, the parliamentary secretary to agriculture, who has been on the record for supporting these types of initiatives. The member for Cowichan—Malahat—Langford in British Columbia has also been a strong champion. Any time we had a report where he could reasonably try to find a way to get “deemed trust”, which were the words that we were using, he would make sure they were included in the report. I would say that all sides of the House see the initiative. I send my congratulations to the member for York—Simcoe for bringing it forward.

For those Canadians who are at home, perhaps watching and asking what Bill C-280 is, and wondering what these guys and gals are talking about in Parliament, this is about creating a priority under the Bankruptcy and Insolvency Act to allow farmers who are shipping product to buyers who become insolvent to have a superpriority to be able to claim.

I think back to my days at Dalhousie law school when we start talking about priority under provincial legislation. It is when one lines up and tries to reclaim some of what one is owed from the particular buyer or creditor who is required to be paid.

It is very difficult, when one is talking about a perishable product, for that product to actually be claimed. It is not like it is a sack of potatoes, although even potatoes are perishable, but this is not something like grain, something that can be recovered and come back to the supplier to be resold or recaptured for the economic value.

The member for York—Simcoe talked about the fact that not only could a perishable product be perishable, it could also be transformed into a different type of product. One thinks about fresh strawberries that are then sliced and put into different fruit salads and things of that nature. It is impossible for our farmers who are selling that product to actually be able to, under the existing legislation, recoup the economic value associated with that.

This is a type of legislation that has no cost. This is not going to cost the Government of Canada one single cent. This is about creating legislative change that prioritizes and empowers farmers to be able to support themselves.

I want to give members an example. The member opposite, of course, talks about the salad bowl of Canada. I do not know if we have the same connotation in the Annapolis Valley, but let me tell members, between our apple producers and our horticulture producers, I am very proud of the Annapolis Valley in Kings—Hants as a growing region.

I have had the opportunity to talk to the farmers about what this type of deemed trust legislation would mean. I will give an example. Andy Vermeulen, a farmer from Canning, Nova Scotia, sells a variety of vegetables. He would normally look to Atlantic Canada, or maybe Ontario or Quebec, but he also ships to New England.

The hon. member for York—Simcoe talked about the fact that there is no alignment right now between the dispute resolution that is available to the American producers and the Canadian producers who are selling into that market because we do not have an equivalent type of legislation. That is being proposed here in Bill C-280.

This would allow our farmers to have the same access to those tools, such that if Andy Vermeulen sends his product to Boston, he would have some recourse if the seller went bankrupt or does not pay. It would give further teeth to our farmers to be able to re-collect the money that is owed to them.

With the cost of living and higher costs, including for fuel, fertilizer and materials, it is very important to find a way to help our farmers financially.

This is something that can ensure we have some financial protection. It does not come with a large cost. In fact, there is no cost to the treasury.

I think this is going to be something that is supported by farmers across the country. I will give the example from Nova Scotia. I am sure for my colleagues from Quebec, Ontario, Newfoundland and Labrador, British Columbia, and everywhere in between, this makes sense. That is exactly why we can see that every member of the House is supporting it here today.

The last thing I want to say is that I think there are more opportunities for this type of thinking. Those of us at the agriculture committee often hear that people would like to see not necessarily new program spending, although those programs are great. I will get to that in a moment about some of the things that I am very proud of that this government has introduced.

Sometimes it is these little legislative tweaks, or a regulatory change here or there, that really empower farmers and our agricultural community to continue to do the amazing work they have been doing. The member for York—Simcoe talked about the hardened hands of the men and women who do really important work, and the fact that we need farmers three times a day. I think those are extremely powerful words, which I would second.

We should all be thinking about little measures that we can do, especially in the environment right now. The Minister of Finance has signalled this. The President of the Treasury Board has talked about program review and government being very smart and wise about how it spends money. I am fully on board with that, but let me also say that there is a lot that can be done on the non-cost side that could make a huge difference. We, all parliamentarians, should be looking at what we can do to build upon Bill C-280 to do even more in the days ahead. It is something that I look forward to exploring with my colleagues at the agriculture committee.

One such idea is the opportunity for an expedited pathway for regulatory approvals around seeds, feeds and crop protection products. I have talked about this at great length, but I will continue to go on the record. I will have, hopefully, even something more to say in a couple of days with this piece of legislation.

There is tremendous opportunity when we look at the applicants who come to either Health Canada, PMRA or the CFIA with existing approvals from what I would call trusted jurisdictions: the United States, Europe, Australia and New Zealand. We know that, if a process was undertaken in one of these jurisdictions, it was science-based and credible. The likelihood of it being approved in Canada is extremely high.

We have to create a model so that, if an applicant arrives at Health Canada in this country and wants to give those tools to our farmers, we can tighten the timelines between when that application is made and when the product can be registered on the basis of using some of the strengths of science in jurisdictions elsewhere. It is a really straightforward policy, and I think it would make a lot of sense. Again, it is another initiative that does not cost money.

I am proud of what this government has done on the agricultural side. I could go into it at great length, but I am proud of what we are all doing as parliamentarians here tonight to advance the interests of Canadian farmers. This bill, of course, has had Liberal support. We look forward to seeing this off to the Senate and hopefully get it into farmers' hands and available as soon as possible.

[Scot Davidson, Conservative, York—Simcoe, ON]

moved that the bill be read the third time and passed.

Madam Speaker, we want to get to a vote right away tonight. I know all my colleague are excited to get Bill C-280 passed.

It is a pleasure to rise once again to speak to my private member's bill, Bill C-280, the financial protection for fresh fruit and vegetable farmers act. I am encouraged by the support this common-sense Conservative bill has had so far, but we need to keep pushing. It is all the more important as we look to address the high food prices, rising inflation and strained supply chains we see in Canada today. I will take the opportunity this evening to reiterate the urgent need for the financial protection of this bill and the benefits it will bring, and will address some of the questions raised at committee.

We all know we need a doctor maybe once a year and need a firefighter once in a lifetime if we are really unlucky, but we need a farmer three times a day, every day. That is a fact. Despite their importance in supplying local communities with safe and nutritious fruits and vegetables, there is not enough financial protection for Canadian fresh fruit and vegetable suppliers. In circumstances where buyers become insolvent and fail to pay for fresh fruits or vegetables they were supplied, farmers are out of pocket for those losses.

To address this, Bill C-280 proposes to establish a limited deemed trust that would provide much needed financial protection for the entire fresh fruit and vegetable sector in Canada. This bill would give fresh fruit and vegetable suppliers priority access to the proceeds of sale, limited to the inventory, accounts receivable and cash on hand derived from the sale of the produce, during the bankruptcy proceedings of an insolvent buyer. This will help offset the loss of their sold produce.

For too long, the existing provisions within the Bankruptcy and Insolvency Act and adjacent legislation have not provided adequate priority for fresh fruit and vegetable suppliers when insolvencies occur, as these provisions do not take into consideration the unique characteristics of the sector. While the act technically allows suppliers to recover their products following a bankruptcy, it provides no rights when the product has been resold, is no longer identifiable or is no longer in the same state, which is to be expected with most fresh fruits and vegetables.

Fresh fruits and vegetables are subject to rapid perishability. Their shelf life can be sometimes measured in mere hours. By the time insolvency proceedings have concluded, the spoiled product is no longer of any value and cannot be repossessed or resold.

The superpriority provision for farmers in the act does not address the needs of fresh fruit and vegetable suppliers, who regularly receive payments 30 days or more after they have delivered the product. These longer payment terms are typical in the industry. They accommodate the rapid pace of trade and complex storage and transportation arrangements that must be made between many parties to get fruits and vegetables to market over the course of a short growing season. As such, the requirement in the BIA that fruits and vegetables must have been delivered within 15 days of bankruptcy to be covered under the superpriority means that most fresh produce becomes unprotected. This lack of financial protection for Canada's fresh fruit and vegetable sector has had devastating consequences, as farmers and other suppliers find themselves as unsecured creditors with little recourse for their losses.

It is well established that bankruptcies are considerably higher in this sector than in any other agriculture sector across Canada. They occur twice as often as those in livestock and are over 10 times the rates of the poultry and grain sectors, which are heavily regulated in Canada. The average net loss from non-payments, partial payments and delayed payments in the Canadian fruit and vegetable trade amounts to at least 1.53% of a supplier's gross revenue. This is a significant amount for those in the fresh produce sector considering their high overhead and capital costs, small profit margins and reduced risk management capability. While this amount is significant, it does not even capture the full extent of non-payment. Many firms simply close their doors and walk away from their businesses.

These losses are routinely absorbed by farmers, but they are not captured in bankruptcy data. These losses are especially devastating considering that three quarters of Canada’s fresh fruit and vegetable producers are small businesses with sales of less than $85,000 per year, many of which rely on a single buyer for the bulk of their crop. These smaller-scale producers do not have the capability to make credit checks on their buyers, negotiate conditional sales agreements or take other safeguards typical in other industries. Their ability to pursue repayment and other forms of recourse when a buyer does not pay is also extremely limited.

As one can imagine, bankruptcies within the fresh fruit and vegetable industry can jeopardize farms and livelihoods, and the constant fear of non-payment limits our farmers’ ability to invest in their businesses, grow and actually plan for the future. The bankruptcy of Lakeside Produce in Leamington, Ontario, this past winter demonstrated just how wide-ranging the impact that bankruptcy has had on the entire fresh produce industry. When it went bankrupt, Lakeside Produce owed $188 million to suppliers across the fruit and vegetable sector. There were 17 Canadian produce companies among Lakeside’s creditors, which accounted for $1.7 million in unsecured claims.

The lack of financial protection for the fresh produce industry in Canada also impacts our competitiveness and capacity to trade with the United States. Suppliers are no longer able to access the dispute resolution and financial protection processes that exist in the U.S. through the Perishable Agricultural Commodities Act, without incurring significant financial costs. This severely disadvantages Canadian produce businesses given the high volume of produce sold to buyers in the U.S. Having a financial protection tool in place in Canada would pave the way for the United States Department of Agriculture to restore Canadian produce sellers’ preferential access to the U.S. dispute resolution mechanism for fresh fruits and vegetables.

With the adoption of Bill C-280, we could finally ensure that Canada’s bankruptcy laws work for fresh fruit and vegetable suppliers in a form that recognizes the particular needs and challenges of the industry. By doing so, there would be considerable benefits for Canadians.

The financial protection would strengthen a pivotal industry in Canada, increase economic activity and bring economic benefit to the entire fresh fruit and vegetable value chain. With greater certainty and reduced risk, we would see more investment and growth as Canadian farms and greenhouses expand their operations and return operations to Canada that had migrated to the United States when access to PACA was lost. These measures would also result in a reduction in prices for Canadian consumers, which I know is top of mind for all MPs in this House tonight. We would expect to see a decrease in prices for Canadians by as much as 15%, which would save families as much as $900 million on their annual purchases of fresh fruit and vegetables.

While this bill was being studied at committee, there were questions about why the bill would extend the deemed trust protections to all suppliers of perishable fruits and vegetables, which is perhaps considered by some to be too broad. However, it is important to remember that within the fresh fruit and vegetable industry, the large retail trade, farmers’ markets, food service and hospitality trades are far less affected by the lack of financial protection. For the most part, it is the growers and others involved in the first sale, such as packers, brokers and shippers, who are most vulnerable to payment disruption and who would need the financial protection afforded by Bill C-280 the most.

That said, this industry is highly integrated, and bankruptcies involving producers, dealers, shippers, wholesalers, distributors and retailers impact the stability of the market. A bankruptcy at any point along the supply chain can result in farmers going unpaid, so it is essential that all suppliers receive the necessary protection. Crucially, protecting fresh produce suppliers equally is needed to access the equivalent protection offered by the Perishable Agricultural Commodities Act in the United States, which covers all suppliers along the chain.

Another question raised has been the impact of these financial protections on the banking industry. While it is true that by giving priority access to produce suppliers, banks will see their claims receive a lower priority, the benefits of protecting fresh fruit and produce suppliers outweigh the distributional impacts for the banking industry. Moreover, the banking industry would actually benefit from the increased predictability of payments when lending to those in the fresh fruit and vegetable sector. This has been the case in the United States under the PACA deemed trust, which has been reported to be a net positive to the banks, in addition to the produce sector itself.

Canada relies on boots on the ground, hands in the muck and rubber boots on the farm to provide fresh locally grown produce to our citizens. When these farmers suffer losses due to buyer insolvency, it threatens our very food security by reducing the availability of Canadian grown products.

We already know this is happening. Earlier this year, a Statistics Canada report showed that there was a significant decline in fresh fruit and vegetable availability for Canadians in 2022. More than three-quarters of all produce consumed in Canada is imported. As access to fresh produce from foreign markets is increasingly jeopardized by climate change, carbon taxes, trade protections and supply chain issues, our food security becomes more and more threatened right here at home. For much of our nation's history, Canada was far more self-reliant in the fresh fruit and vegetable trade, with production far outpacing consumption, but the failure to reduce risk and provide certainty to the fresh fruit and vegetable sector has seen this decline significantly. This needs to change.

Fundamentally, Bill C-280 recognizes the need to support Canada's produce sector, just as we support other agriculture sectors, by ensuring that Canada's bankruptcy laws recognize the particular challenges and demands of growing and selling fresh fruits and vegetables. Canada's fresh fruit and vegetable farmers should always be paid for the fresh fruits and vegetables they sell. By passing Bill C-280, we can ensure that our food security is protected and that our produce sector is strengthened. By putting this important financial protection tool in place for produce supplies, we will support the economy and lower costs for all Canadians from coast to coast to coast, so let us get it done.

The House proceeded to the consideration of Bill C-280, Financial Protection for Fresh Fruit and Vegetable Farmers Act, as reported (without amendment) from the committee.

Agriculture and Agri-Food

[Kody Blois, Liberal, Kings—Hants, NS]

Mr. Speaker, I have the honour to present, in both official languages, the 11th report of the Standing Committee on Agriculture and Agri-Food entitled Bill C-280, An Act to amend the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act (deemed trust – perishable fruits and vegetables).

Sometimes Canadians watch this House and think that we cannot get along, but I want to give special credit to the sponsor of this bill, the member for York—Simcoe. During the opportunity for the member to come to our committee, he is in the soup and salad bowl of Canada, and he brought a whole bunch of vegetables to the committee as a sign of goodwill.

We are in full support of this legislation. It is a great opportunity for the parties to work together in the House. I would like to congratulate the hon. member.

[Lianne Rood, Conservative, Lambton—Kent—Middlesex, ON]

Thank you, Chair.

I just wanted to take a quick opportunity to thank all of the staff who work so hard for us on these reports, and say thank you to the committee members for getting Bill C-280 passed. I know our fruit and vegetable farmers will be happy to see this go back to the House. It's great to be able to work together to get something done, so congratulations, team.

[The Chair, Liberal, Kody Blois]

I call the meeting to order.

Welcome to meeting number 70 of the Standing Committee on Agriculture and Agri-Food.

Thank you for your patience, colleagues, during the few minutes that we had some technical difficulties. Thank you to our team for getting us up and online.

We had more substitutions earlier on, but our regular members have come back.

I will welcome Ms. Khalid, who is here for Mr. Turnbull.

Welcome back to the committee. It's always great to have you.

Colleagues, pursuant to the order of reference of Wednesday, May 17, 2023, the committee is meeting to proceed with the clause-by-clause consideration of Bill C-280, an act to amend the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act (deemed trust – perishable fruits and vegetables).

To help us with the clause-by-clause study of Bill C-280, I would like to welcome our witnesses.

From the Department of Agriculture and Agri-Food we have Mr. Tom Rosser.

Welcome back. You're no stranger, of course.

From the Department of Industry, we have Samir Chhabra, director general, marketplace framework policy branch; and Paul Morrison, special adviser, corporate, insolvency and competition directorate.

Thank you, gentlemen, for joining us here in the room.

I'd like to provide the members of the committee with some instructions and a few comments on how the committee will proceed with the clause-by-clause.

As the name indicates, this is an examination of all the clauses in the order in which they appear in the bill, except for the short title, which will be considered at the end. I will call each clause successively, and each clause is subject to debate and a vote.

If there are amendments to the clause in question, I will recognize the member proposing it, who may explain it. The amendment will then be open for debate. When no further members wish to intervene, the amendment will be voted on. Amendments will be considered in the order in which they appear in the bill and in the package each member received from the clerk. Members should note that new amendments must be submitted in writing to the clerk of the committee.

The chair will go slowly to allow all members to follow the proceedings properly—slowly but efficiently.

Amendments have been given an alphanumeric number at the top right corner to indicate which party submitted them. There is no need for a seconder to move an amendment. Once moved, you will need unanimous consent to withdraw it.

During debate on an amendment, members are permitted to move subamendments. These subamendments must be submitted in writing. They do not require the approval of the mover of the amendment. Only one subamendment may be considered at a time, and that subamendment cannot be amended. When a subamendment is moved to an amendment, it is voted on first. Then another subamendment may be moved or the main amendment may be considered and voted on.

A lot of you have been around Parliament for a while and know the procedure. I'm sorry if that was repetitive; it's just for the benefit of the group.

Once every clause has been voted on, the committee will consider and vote on the short title, the title and the bill itself. If amendments are adopted, an order to reprint the bill may be required so that the House has a proper copy for use at report stage. Finally, the committee will have to order the chair to report the bill to the House. That report will contain only the text of any adopted amendments as well as an indication of any deleted clauses.

There you go. It's a lot of procedure, folks.

Pursuant to Standing Order 75(1), consideration of clause 1, the short title, is postponed.

(On clause 2)

On clause 2, as I understand it—I have my agenda here; I think it's been shared—we have G-1, which is the first amendment to be called.

I'll look to you, Mr. Drouin, if you'd like to explain G-1 to us.

[Brad Wiseman]

I do understand the memorandum on the summary of the U.S. reactions to PACA. The issue is we have to get a clear guidance from the banking industry on how they will interpret Bill C-280. That's what we need to do.

The memo and the analysis did not take into consideration the priority payables, and it's going ahead of the bank when you had secure facilities for working capital purposes. We need full clarity, and we don't want to do it after the fact. Now's the time to get it right, to have clear interaction, in present day, with the banking institutions.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Thank you very much, Mr. Chair.

Mr. Wiseman and Mr. Lemaire, thank you both for being here and helping guide our committee through its study of Bill C-280.

I also have some questions on the credit issue. It's not the first time I've heard this brought up. I think it's the first time it's come up from a witness, Mr. Wiseman.

I've heard from the government, through conversations we've had in advance of this bill, that there were some concerns about that. I've also had conversations with the staff of the CPMA. I believe in one of those conversations there was a lot of talk about the United States and how, in fact, having this trust actually adds more stability, which might encourage lenders to look more favourably on the person who's needing access to that credit.

I think there was reference to industry having provided a white paper by a lawyer or an economist whose firm had worked with banks on both sides of the border in support of this.

Mr. Lemaire, are you aware of that? Is that document something that could be produced and tabled with this committee so that all members could have access to it?

[Ron Lemaire]

We do have the benefit of the Fruit and Vegetable Dispute Resolution Corporation, and these are all of the tools within the DRC. What would happen if there was a bankruptcy with Bill C-280 protecting the supply chain? Let's say a packer was then able to generate some funds out of the bankruptcy. If they did not pay their grower, the grower could then leverage the Dispute Resolution Corporation to bring them to a dispute to access the monies owed. That's what the DRC is there for. What the DRC does not do is provide the protection of bankruptcy.

[Brad Wiseman]

I absolutely agree with that comment.

The risk would be lower because you're making a stronger business model for the entire industry. That's what's great about Bill C-280. The challenge is that the banks are losing the security because the growers are going ahead of the banks. That is the challenge. That is the uncertainty.

We have a great opportunity to get it right and we still need to do further investigations with the banking institutions.

[Brad Wiseman]

I'm bringing up the concern because I have a clear understanding of what the technical issues are. It becomes a priority payable. I have direct experience with U.S. financing and PACA. With it becoming a priority payable, there is the risk that it will come off the borrowing days, and right now there is no clear guidance from lenders.

I'm taking this opportunity of bringing it to the committee to say, “Let's take our time. Let's see. How will the banking industry decide how it interprets Bill C-280?” We do not want to be in a situation where we have a borrowing base calculation, but then packers, wholesalers and retailers that have focused just on produce get it all ground down due to the large payables that they would have.

We still do not have a clear understanding. We still need to take that time. We still need to do that analysis.

[Lianne Rood, Conservative, Lambton—Kent—Middlesex, ON]

Thank you, Chair.

Thank you, witnesses, for being here today and for your testimony.

Mr. Wiseman, I have a question for you to start off with.

In this legislation, Bill C-280, the provision would not come into effect until after 30 days of not being paid, and 35 to 40 days is when most banks would say that the debt is bad and will refuse to finance against such debt. Payments in arrears are often strung out and made partially for much longer than that. Do you believe this legislation would affect the financing of receivables?

[Ron Lemaire, President, Canadian Produce Marketing Association]

Good evening, Mr. Chair and committee members.

On behalf of the Canadian Produce Marketing Association, I want to thank the committee for the opportunity to speak to Bill C-280 , the financial protection for fresh fruit and vegetable farmers act.

CPMA represents over 830 companies growing, packing, shipping and selling fresh fruits and vegetables in Canada. We support Bill C-280, as it is a critical fit-for-purpose tool for an industry that is unique and currently unprotected. CPMA also concurs with witness testimonies of June 12 which frame rationale and support for the bill.

It's from this perspective of a diverse membership that CPMA would like to emphasize the importance of maintaining the existing provisions of Bill C-280 that provide financial protection to all suppliers of fresh produce. I'd also like to table, in both official languages, a letter sent earlier this spring to all members of Parliament from 35 national and regional organizations from across the country voicing their support for this important legislation across the entire supply chain.

As noted by previous witnesses, all suppliers across the fresh fruit and vegetable supply chain are vital to the stability of the market. Packers, wholesalers, brokers and others act as a critical intermediary between growers, retailers and food service, and it is essential that they receive the necessary protection to ensure that payments are able to flow down the chain and ultimately to the grower. What happens when those suppliers go bankrupt and can't pay the farmer or simply walk away because they cannot turn a profit? The farmer doesn't get paid, and the Bankruptcy and Insolvency Act does not provide effective protection for fresh produce sellers in Canada due to the high perishability of their products and the industry's longer payment terms.

During the committee's June 12 meeting, there were questions around the definition of “fruit and vegetable supplier” and whether Bill C-280 might benefit retailers. It's true that retailers often operate in closed ecosystems where produce is bought and distributed by centres and sold to corporate stores, franchises or through other commercial relationships, in effect, operating as a wholesaler. At the same time, we must recognize that this business relationship still ultimately results in fresh fruit and vegetable growers requiring payment for their product, payments that could be jeopardized if the deemed trust protection is limited to the first level of sale.

As an example, in the 2015 bankruptcy of Target Canada, Sobeys Wholesale, which was contracted to supply produce and other foods, was left in a position to self-insure $3 million in debt. Had they not done this, we would have seen a ripple effect in the Canadian produce industry that would have been significant.

Under the provisions of Bill C-280 as written, all suppliers would benefit equally. This definition of “supplier” is key to providing the equivalent protection we see in the U.S. Perishable Agricultural Commodities Act, PACA, which covers all suppliers along the chain. Bill C-280 would therefore enable Canada to obtain and reinstate the reciprocal protection for Canadian sellers that was lost under PACA in 2014.

A letter of commitment was sent on May 12, 2016, from the USDA to then AAFC assistant deputy minister Gorrell, confirming the steps required for reciprocity and comparable systems. These include: mandatory licensing of fresh produce dealers on a federal level; the availability, comparability and effectiveness of dispute resolution systems; investigative and enforcement authority; and a deemed like trust system, which would allow for comparable outcomes to the PACA system in the United States. We have three of the four steps.

In closing, I will note that this has been a long road. There is now political will and unanimous support at second reading. This is a clear sign of the importance of Bill C-280 and the need to move this legislation forward. In doing so, you will provide a vital tool that will stabilize a fragile system. I would encourage the government to move forward as quickly as possible.

We'd like to thank Scot Davidson and all of you in this room for your support to move this important issue forward.

I look forward to the opportunity for any questions.