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.

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

Yes—a hundred per cent. I think that when there's uncertainty in business.... Let's be honest. We have trying economic times right now, especially for farmers, whether it's increased input costs—again, alluding to corrugate—climate change or different banks being worried about different things with different farmers. I think this is one piece of legislation that would give certainty to creditors, to say, “You know what? That person's receivable is going to be backed by this deemed trust, that Bill C-280”, which we're going to come out with.

I think it is actually going to help the industry immensely. It's something that, again, fresh produce farmers have been waiting for. It's time for this committee to get it done—for sure.

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

Yes. My office spoke to Mr. Cuming on a couple of occasions.

I think that for this bill that was drafted and that's in front of you, Bill C-280, the first and foremost thing that people have to understand—I think we have a witness here who is going to be able to explain it, if you have those questions, a lot better than I can—is that, under their constitution, the U.S. is set up differently than Canada is. I think that's what Mr. Cuming was referring to: how legislation like this would work in Canada.

That's why we worked with Fred Webber and others to make sure this legislation respects provincial jurisdiction first and foremost. This was written respecting how Canada's Constitution and Canada's law in only federal jurisdiction.... Again, we did consult with him on that.

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

I have a quick question, Mr. Davidson.

In the 42nd Parliament, we had an individual, Mr. Ronald Cuming, appear before the committee. He had worked with a draft of this law. Did you ever take a look at his draft? Is Bill C-280 in any way similar to what he had come up with? Are you familiar with the work he had done previously?

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

Thank you very much, Mr. Chair.

Welcome, Mr. Davidson, to our committee.

It's nice to see Bill C-280 come here. Congratulations on getting such a strong showing of support at second reading. I think that's put a lot of wind into the sails behind this bill. Obviously, from what I've seen with the questioning so far, you're getting a pretty favourable response.

I'm always interested in learning a little about what inspires MPs to come up with their PMBs. You mentioned that particular farmer in your riding. Were there any other examples that led you to take this path?

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

That's an excellent answer. Once again, we're happy to hear what you have to say.

I'd like to return to some things you said. Earlier, you mentioned a grower who was hesitating about planting his crops. I too have heard the same sort of arguments. I even saw that a number of crops had not been planted because the grower was afraid of not having enough labour for the harvest, owing in part to problems in connection with foreign workers. Unfortunate experiences from previous years have made people cautious.

I've also seen some growers switch to field crops because they require less labour given that the process can be mechanized. We all know that growing fruit and vegetables is extremely arduous. They are subject to bad weather and unpredictable climate conditions. We need to do everything possible to help them. From this standpoint, Mr. Davidson, the bill you are defending, C‑280, is excellent. The committee will continue its efforts to have it passed quickly.

Thank you.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

Thank you, Mr. Chair.

Thank you to my colleague Mr. Davidson, my colleague and friend from the soup and salad bowl.

I believe I have the honour of representing probably the highest vegetable production—in gross value, anyway. Not that we would ever compete or be competitive, but ours has both the greenhouse sector and the processing sector in our ridings.

You mentioned Lakeside Produce. This is just a sampling of the letters that came into my office encouraging us and this committee to look at Bill C-280. I very much appreciate your bringing that forward.

Lakeside Produce had a chilling and devastating effect, so I appreciate your bringing that out. It's been brought out that only 0.1% of the transactions of the values end up in bankruptcy. That's been one of the challenges of this legislation.

Why is it still needed if only 0.1% of the transactions end up in bankruptcy?

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

Thank you, Mr. Chair, and good evening.

I'm very excited to be here at agriculture committee tonight. I'm very grateful for the unanimous support Bill C-280 received at second reading, and I look forward to further co-operation as we work to pass this bill. Together we can finally establish a limited deemed trust for our hard-working produce farmers right across this great country.

This couldn't be a more pressing and timely issue right now. Earlier this month a Statistics Canada report showed that there was a significant decline in fresh fruit and vegetable availability for Canadians in 2022. This year also saw a high-profile bankruptcy of Lakeside Produce in Leamington, Ontario, which had crippling financial implications for the entire produce industry.

This was followed up by an in-depth article in the Toronto Star, “Is this the end of lettuce?”, where it was reported that more three-quarters of all produce consumed in Canada is imported. This threatens Canada's food security, as access to fresh produce from foreign markets is increasingly being jeopardized by climate change, trade protections and supply chain issues.

According to experts cited in that article, Canada was previously “way more self-reliant in fresh fruits and vegetables—we produced a lot more of what we consumed domestically. And since World War Two, all that has seriously deteriorated, largely because there's very limited policy supports for [produce growers] compared to, say, the grain or the animal sectors.”

At its core, Bill C-280 is a recognition of the need to support Canada's produce sector just as we support other agricultural sectors, by ensuring that Canada's bankruptcy laws recognize the particular challenges and demands of growing and selling fresh fruits and vegetables. This is achieved by establishing a limited deemed trust for produce sellers, which would give them priority access to the proceeds of sale, limited to only the inventory, accounts receivable and cash on hand derived from the sale of produce during the bankruptcy proceedings of an insolvent produce buyer. This will help offset the loss of their sold produce.

The mechanism accounts for the especially perishable nature of fresh produce and the typical payment term that exists in the industry, both of which are significant deficiencies of the agricultural protection and dispute resolution mechanisms that currently exist.

There is a clear need for financial protection for Canada's fresh fruit and vegetable growers. This very committee has acknowledged as much on multiple occasions. You might think that no one reads your report, but Mr. Chair, I do. I spend day and night reading agriculture reports and Senate committee reports. It's unbelievable.

Bill C-280 enacts the very protections this committee has recommended the government put in place. It will strengthen an industry whose supply chain supports more than 249,000 jobs in Canada, amounting to $9.8 billion in wages. It will make our food security more resilient by reducing losses in an agriculture subsector that experiences more bankruptcies than most others. It will enhance the affordability and the accessibility of fresh fruits and vegetables for Canadians.

The reduction in costs for Canadian consumers will save as much as 5% to 15% on their annual fresh fruit and vegetable purchases, and it will open the door to reinstating reciprocal access to the financial protection establishment by the Perishable Agricultural Commodities Act in the United States, which will greatly support Canadians exporters who have been disadvantaged for far too long, despite the significant volume of produce sold to buyers in the U.S. every day.

Here today, Mr. Chair, we have an obligation to support our Canadian farmers. Instead of dire warnings of the “end of lettuce”, Bill C-280 represents the beginning of something more. Canada's produce sector can be positioned not only to feed Canada but to feed the world like never before.

Thank you to the committee. I look forward to your questions.

[The Chair, Liberal, Kody Blois]

I call this meeting to order. Colleagues, welcome to meeting number 67 of the House of Commons Standing Committee on Agriculture and Agri-Food.

I'll start with a few reminders. You know the format. This meeting is taking place in hybrid format and the proceedings will be made available via the House of Commons website. Just so you are aware, the webcast will always show the person speaking rather than the entirety of the committee. Of course, taking screenshots or photos of your screen is not permitted.

I have a couple of notes here, colleagues. We have Ms. Hedy Fry subbing in for Ms. Taylor Roy. Welcome to the committee, Ms. Fry.

We also have Mr. Epp subbing in for Mr. Barlow this evening.

Pursuant to the order of reference of Wednesday, May 17, 2023, the committee will commence its consideration of Bill C-280, an act to amend the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act, regarding a deemed trust for perishable fruits and vegetables.

I would now like to welcome the sponsor of the bill for the first one-hour panel, Mr. Scot Davidson, the member of Parliament for York—Simcoe. I do want the record to show, of course, that the MP for Simcoe helped bring some vegetables from the area. We certainly appreciate that—all committee members. I'll leave it for folks at home to see.

Good job, Mr. Davidson. We're all proud of our horticulture sector and I know that it exists in your riding.

Before I turn it over to you for five minutes for your opening remarks, I would be remiss if I did not recognize Theo and Diane Rood, who are the parents of Lianne Rood. They are in the committee gallery in the back.

It's great to have you here on Parliament Hill with us. You should be very proud of your daughter. She's a tremendous member of Parliament.

Mr. Davidson, we'll go over to you for five minutes.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

That's exactly where I was going with my next question.

May I ask what representations AAFC has made to Finance around the implementation of Bill C-280 once it's passed and, in particular, the speed it can happen at and how quickly we can lobby the U.S. for recovery for our Canadian sellers under PACA?

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

Thank you.

The minister supported Bill C-280 today. That was good to see. In the past she has provided information that there are only negligible losses in the fresh market sector, and I just had a bankruptcy in my region that affected a producer to the tune of $1 million.

May I ask to what extent the banking sector has lobbied AAFC and/or the minister regarding Bill C-280?

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

Okay. Thank you for that.

You probably thought you were going to be safe from a PACA question today, but I'm going to prove you wrong. I was very happy to see the vote today on Bill C-280. This has been a long time coming. I guess my question is this. It's been a long journey. In the 42nd Parliament both this committee and the Standing Committee on Finance made recommendations. In this Parliament this committee and the Standing Committee on Finance again made recommendations.

I guess after seven and a half years of your government being in power, it's taken the opposition—it's taken us—to get this bill up front, debated and sent to committee. In other words, the initiative lay with us. Every time we tried to convince your government that this is what people wanted and needed and that this was what was needed to protect our perishable fruit and vegetable sector because existing tools did not work—and they have been explaining this to your department time and time again, ad nauseam—they lost their preferential access in the United States, which I sure hope came up in your discussions with your U.S. counterparts.

Why now? Why has your government now done an about-face, and why is it now going along with what has been demanded for so long?

Financial Protection for Fresh Fruit and Vegetable Farmers Act

[The Speaker, Liberal, Anthony Rota]

Pursuant to order made on Thursday, June 23, 2022, the House will now proceed to the taking of the deferred recorded division on the motion at second reading stage of Bill C-280, under Private Members' Business.

The question is on the motion.

The House resumed from May 16 consideration of the motion that Bill C-280, An Act to amend the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act (deemed trust – perishable fruits and vegetables), be read the second time and referred to a committee.

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

Mr. Speaker, York—Simcoe is the soup and salad bowl of Canada and Lake Simcoe. At this very moment, the planting season has begun for fresh fruits and vegetables, and I want to wish all farmers right across Canada the best of luck.

I know we are not allowed to use props, and I will set him down, but Gwilly flew in all the way from Bradford West Gwillimbury for this debate tonight.

Canadian farmers have been doing their part, working hard this spring to plant delicious produce to feed our nation. These farmers deserve our support, no matter if they are growing carrots in the Holland Marsh, potatoes in Brookfield, celery in Winnipeg, bell peppers in Abbotsford, tomatoes in Leamington or peaches in Vineland.

Through the establishment of a limited deemed trust for produce farmers, we can safeguard Canada's food security, promote Canadian produce exports and increase the affordability of domestic produce for Canadian consumers. Simply put, the trust is a tool that would be used by sellers of produce to recover the money made from the sale of their produce when a buyer goes bankrupt.

Unfortunately, the Liberal members have made it clear that they are completely out of touch with the boots-in-the-mud, real-world realities faced by our country's produce farmers. the Liberals claim that their one size-fits-all approach to Canadian agriculture works and that the bill is not needed, but they could not be more wrong. The government fails to acknowledge that fresh fruits and vegetables are highly perishable or that produce growers have unique challenges that differ from other products and industries.

There are already many supports available to other agricultural sectors, like dairy and grain, that are not available to the produce sector. It is common sense to provide support that is crafted specifically for the produce sector. More than anyone else, Bill C-280 would benefit the small and medium-sized family farms and farming operations, which are the backbone of the country's produce sector.

Seventy-five per cent of fruit and vegetable producers are small businesses. Their average sales are $85,000 or less a year. This is a sector with small margins, and it is these sorts of farms that will benefit most from limited financial protection. One missed payment from a bankrupt buyer could lead to many of these farms closing their doors for good.

Fortunately, this bill will promote financial stability across the entire supply chain and support payment for suppliers all the way back to the producers. A stalk of celery is not the same as a carton of eggs, and a tomato is not the same as a piece of beef. The government must recognize the unique challenges facing the produce sector and recognize there are currently glaring deficiencies in our bankruptcy laws for these growers.

Bill C-280 has been a long time coming. I would like to thank the Canadian Produce Marketing Association, the Fruit and Vegetable Growers of Canada, the Holland Marsh Growers' Association and the many other agriculture organizations that have supported this important bill.

I am also grateful for the real-life expertise of Fred Webber, former president of the Fruit and Vegetable Dispute Resolution Corporation. Fred was also an official in the U.S. Department of Agriculture, where his responsibilities included the PACA deemed trust. His insights were invaluable as this bill was drafted.

Hard-working farmers do not want a handout. After all, this bill costs taxpayers nothing. They just want to be able to sleep at night without worrying about unpaid invoices and spoiled product as they work to grow the fresh fruits and vegetables we all enjoy.

Canadian fresh produce farmers deserve to be paid for the food they grow. They are the ones knee-deep in the mud working the field every day to grow our country's fruits and vegetables. It is time for members of this House to roll up their sleeves, put on their rubber boots and support this common-sense Conservative bill, Bill C-280.

[Andréanne Larouche, Bloc, Shefford, QC]

Mr. Speaker, I rise to speak to Bill C-280, which amends the the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act to provide that 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 produce and becomes bankrupt or subject to a receivership or applies to the court to sanction a compromise or an arrangement. My neighbour and esteemed colleague from Berthier—Maskinongé, who is our agriculture, agri-food and supply management critic, co-sponsored this bill.

Given the demand in Quebec for this measure, which could be helpful for our agricultural community, we could have introduced it. One of our wineries in Shefford reached out to let me know that, as a producer and processor in the wine industry, La Belle alliance agrees with the amendment proposed in Bill C‑280. They said they see the amendment as additional protection for produces of perishable fruits and vegetables that could help protect small- and medium-sized agricultural businesses from suffering undue losses in the event of the insolvency of commercial buyers.

Le Potager Mont-Rouge said that this is a bill that they are really passionate about because it ensures that producer sellers are financially protected. Their profit margins are already razor thin, and they are impacted by many external factors such as price fluctuations, imports and climate change, to name but a few. They have been in a situation like this themselves and have lost thousands of dollars.

This testimony from these two businesses shows how important this bill is. The Bloc Québécois is attentive to their concerns, so we are in favour of this bill and support it. I will therefore begin by explaining its benefits and then talk about the division of powers and the litigation system.

First, passing the bill could demonstrate to the U.S. government that Canada has a trust mechanism in place for cases of buyer bankruptcy. Indeed, the lack of such a mechanism in Canada was one of the main reasons why, in 2014, the U.S. decided to withdraw U.S. buyer bankruptcy and insolvency protection from Canadian suppliers. The Canadian government had actually committed to developing a legal framework similar to the U.S. Perishable Agricultural Commodities Act, or PACA, and thus restoring coverage under their bankruptcy protection law for perishable foods to protect our industry from losses in the event U.S. buyers went bankrupt.

Groups have been calling for this since their PACA coverage ended back in 2014. This protection is necessary because food products like fresh fruit and vegetables are perishable, and a supplier cannot simply take them back and resell them if a buyer goes bankrupt. The protection is intended to allow licensed suppliers that have a contract with a U.S. buyer to take legal action against the buyer in the event of non-payment due to bankruptcy.

The new process will require the value of the shipment to be held in trust in the bankrupt buyer's name so that the producer can recover this amount as a creditor. Before 2014, Canadian fruit and vegetable farmers were protected by a U.S. law if they were doing business in the United States and a company failed to make payment or went bankrupt. This is no longer the case, and the alternate procedure developed between the two countries is very complicated, especially for our smaller businesses.

Quebec's agricultural model is at the family farm scale and on a human scale. Currently, without this protection, Canadian suppliers of fruits and vegetables have to go through a special process to file suit under this legislation in the United States.

According to the Canadian Produce Marketing Association, suppliers have to deposit a bond equivalent to twice the amount required in the suit. Most suppliers do not have that much in liquid assets and the major buyers know that all too well. They are then forced to negotiate downward with the buyer to get at least some compensation instead of losing everything, especially since this type of debt is not a priority in a business' bankruptcy. Suppliers who are not protected do not have much chance of receiving decent compensation through the ordinary process. Under this bill, the trust mechanism ensures that the purchaser is the guarantor of the value of the shipment, without owning it, in the event of a default due to the application of one of the two pieces of legislation. The legislation stipulates that the buyer has 30 days to make the payment under the contract.

Under the Canada-United States Regulatory Cooperation Council initiative, Agriculture and Agri-Food Canada and the U.S. Department of Agriculture are committed to establishing comparable approaches in order to achieve the common goal of protecting fresh fruit and vegetable vendors from Canada and the United States from buyers who are not concerned with their payment obligations.

I will start with a bit of background. The legislation was first was created in the 1930s to try to protect vegetable producers from the multiple bankruptcies of their buyers. It then became an important tool in rebalancing the commercial relationship between producers and buyers. It is essentially designed to allow a licensed supplier who has a contract with a U.S. buyer to sue that buyer under the act in the event of a default in payment because of bankruptcy. The process will allow the value of the shipment to be placed in a trust in the name of the bankrupt so that the supplier can recover the amount owed as a creditor. Given the speed with which produce is resold by a merchant or spoils, it is quite rare that a fresh produce repossession situation will meet these criteria. This means that perishable food producers would be given super-priority status so they do not have to wait for the bankruptcy settlement to recover their property. However, in the context of the above conditions, producer associations explained that 15 days is not long enough, given that typical payment terms are about 30 days. However, 30 days is too long to expect to recover a product that can be resold. This provision is not well suited to the structure of the supply chain, which often operates with intermediaries such as wholesalers.

Second, with regard to jurisdictions, the most sensitive issue is the fact that Canada cannot really quickly pass a law like the one in the United States. The Perishable Agricultural Commodities Act, or PACA, is a program to protect farmers in case of bankruptcy, but it also encompasses all of the dispute settlement mechanisms for perishable goods. In Canada, the Bankruptcy and Insolvency Act falls under federal jurisdiction, but the regulations surrounding contracts fall under the jurisdiction of Quebec and the provinces. A legal framework like the PACA therefore cannot be developed unless there are negotiations or a collaboration between the federal government and the provinces, which is what we are hoping will happen. One of the arguments put forward by the federal government is that most trade disputes are resolved before bankruptcy occurs and so most of the American framework deals with issues that fall under provincial jurisdiction. Since it is complicated to operate using multiple dispute settlement regimes, the federal government just gives up rather than trying to find even a partial solution to the problem. We need to work on that.

Third, the official figures are much lower and limit the timeframe for claims to about 15 days. The major difference between the government and the industry figures can be explained by the fact that in order for it to become an official statistic, the producer must file a complaint. Most of the time, producers do not necessarily use official channels because they are too complex, and even more so after the end of privilege. Producers often have special business relationships with their client and try to accommodate them. The argument that there are few claims or that they represent a small percentage of farm receipts is very subjective. Producers used to have protection, but no longer do. We are simply being asked to restore protection given that, because of its proximity and the nature of goods, the United States is by far the most important trade partner for perishable goods. Restoring this protection for our producers who do business with the United States is not far-fetched at all.

Although the government is putting forward some arguments to demonstrate that an insurance similar to PACA is not the best option, especially because of the cost of credit and shared jurisdictions, we will continue to defend this bill. We are under the impression that the Liberal Party seems to want to defend its friends in the banking sector.

In conclusion, this bill is simply a response to the agricultural sector. Two years after Canadian producers' preferential access to PACA was removed, the Standing Committee on Agriculture and Agri-Food studied the issue. A number of key witnesses appeared before the committee. The NDP, the Liberal Party and the Conservative Party have all, at various times, pledged to fix the problem. From our perspective, it is clear that we need to move forward with this bill.

I thank my Conservative colleague for introducing this bill. It can make things better for businesses in Shefford, as I said in my introduction. Obviously, the pandemic was a unique situation, and it also exacerbated various issues in the agricultural sector.

I want to say one last thing. As the member for Shefford, I proudly represent a riding where agriculture is at the heart of its economy. This bill is a common-sense measure that gives farmers a little extra help to get through this difficult period, for their mental health, for their survival. As we know, farm succession is already facing several threats. Perhaps this bill will address some of the concerns of the next generation of farmers and give them the desire to continue, to produce what we eat every day and what sustains us. We need farmers.

Once again, I thank my colleague for this bill. The Bloc Québécois will be voting in favour, to support our agricultural model.