Mr. Speaker, it is an honour to rise in this place today and speak to Bill C-280, an act to amend the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act, deemed trust, perishable fruits and vegetables. I am pleased to second this bill introduced by my colleague from York—Simcoe, in June of this past year, to support the financial protection for fresh fruit and vegetable farmers.
Last week, I had the opportunity to speak to Bill S-227, establishing a national food day. During that speech, I took the opportunity to outline four factors that influence how much structure a particular food commodity gets and its efficient marketing between producers and buyers.
The factors were the perishability of the product, the complexity of its biology or technology, the ratio of buyers and sellers, and the international setting into which that product is marketed or traded. Today, I want to focus on one particular sector and one particular factor.
It is well known that fresh fruits and vegetables are highly perishable with a limited shelf life. I believe it is important for us to protect our farmers during the bankruptcy of a buyer. Unfortunately, current existing laws do not take this into account. The perishability of the product for sale is at the heart of the justification for this legislation.
This legislation aims to resolve this concern by establishing a deemed trust for fresh produce sellers, ensuring they have priority access to an insolvent buyer’s assets related to the sale of fresh product. It is important for us to note that the legislation also comes at no cost to the federal government.
The big banks will likely be opposed to this legislation, and I will come back to this point later.
The need for a financial protection mechanism has been a major focus of the sector for several years and has been included among many recommendations by stakeholders. A deemed trust mechanism is needed to address gaps in market stability, trade and food security. It is crucial that we help ensure Canadians continue to have access to fresh fruits and vegetables.
Growing, harvesting, packing and marketing fruits and vegetables comes with risks and costs that are unique to the production of perishable goods and returns on these investments are delayed until payment is collected, which is usually long after the product has been consumed by Canadians or has spoiled due to delayed payment.
Bill C-280 establishes an important tool to ensure that growers receive payment for their products, even in the event of a buyer bankruptcy. That means when produce has arrived at its destination, even if the buyer is unwilling to pay, the farmer will still get paid at least partially. Unlike in other buyer-seller relationships with perishable food, a farmer is not able to find and ship to another seller to make up for the lost sale.
It should be noted that in addition to providing healthy food to Canadians, the fresh produce supply chain supports 249,000 jobs in Canada. It is important that we continue to support these jobs and workforce in our country.
The introduction of a financial protection mechanism in Canada would also open the door to the reinstatement of preferential treatment under the U.S.'s Perishable Agriculture Commodities Act, or PACA for short, for Canadians selling produce into the United States. This preferential treatment had been in place prior to 2014 when it was rescinded by the U.S. due to a lack of reciprocal protection in Canada for U.S. sellers.
PACA was established in the U.S. at the request of the fruit and vegetable industry to promote fair trade within the industry. Since it was rescinded in 2014, several organizations representing parts of the Canadian agricultural sector have been lobbying consistently for an amendment to Canada’s laws so that the U.S. would revisit Canada’s preferential status.
The key issue that led to Canada’s preferential treatment being rescinded was protection in the case of insolvency for U.S. sellers, which has been difficult for Canada to implement since agricultural concerns are a shared responsibility between provincial legislatures and the federal government.
Before 2014, if bankruptcy or insolvency in the supply chain resulted in Canadian producers not getting paid, to start the dispute resolution process with preferential treatment under PACA would only cost the Canadian company $100. This dispute process was helpful and affordable to Canadian farmers because the traditional method of repossessing shipments would not work, as I said earlier, due to the high perishability of the product in question.
Without preferential access, Canadian companies trying to recover unpaid bills must post double the value of what they are trying to recover as a bond to make the claim. For an example, a small producer who is owed $50,000 would have to post $100,000 in cash to make a claim, effectively removing $150,000 from their cash flow or operating line for up to a year. Many cannot afford this and would simply walk away, losing what is rightfully owed to them, putting Canadian businesses at a steep disadvantage.
Canada did not choose to leave this agreement. Instead, we had our preferential status revoked in 2014 because U.S. legislators felt that their American suppliers to Canada were not adequately protected. Canadian companies are now treated under PACA the same as any other foreign licence.
In 2011, a bilateral regulatory co-operation council established by both the U.S. and Canada and created in Canada was created to address regulatory incompatibility between the U.S. and Canada that could be hampering trade. The issue of this inadequate trust protection was one of 29 issues identified.
It has been eight years since our Canadian fruits and vegetable farmers had preferential treatment under PACA, and it is time we change that. This bill offers the financial protection needed for fresh fruit and vegetable farmers to protect and support Canadian produce growers. Bill C-280 would pave the way for a reciprocal arrangement that would support Canadian businesses selling to our largest trading partner. Obviously, that is the U.S. Our farmers need a larger market to sell perishable produce. In my area, the greenhouse industry exports more than 75% of their production across the border to the U.S. and they need to have peace of mind, when they ship their products, that they will be getting paid.
It is important to understand that Bill C-280 would not require the government to offset or backstop losses incurred by farmers in the event a buyer could not meet its financial obligations. The legislation being proposed would create a deemed trust, which would cover accounts receivable, cash and inventory of the buyer stemming from the sale of produce on short-term transactions with payment terms not exceeding 30 days. Essentially, if a Canadian company sold produce to a U.S. buyer, who then resold it but did not pay the Canadian company, the trust would provide the mechanism to recover cash or accounts receivable for what was sold.
I am very proud to support local farmers in my riding and farmers across Canada by supporting this bill to give them the peace of mind they need. In particular, in southwestern Ontario there is a large greenhouse sector and a vibrant fresh fruit and vegetable sector. A recent bankruptcy of a vegetable marketing enterprise in southwestern Ontario only further supports the need for this legislation. The Minister of Agriculture has stated to the Standing Committee on Agriculture and Agri-Food that this legislation is not necessary because there have been negligible losses due to bankruptcy. I am sure that the farm that suffered a $1-million loss very recently because of the marketing company bankruptcy would very much disagree with that statement, and I would hope that my colleagues across the aisle would not bow to pressure from the big banks and support this bill.
The recommendation for a financial protection mechanism is not a new idea. It has been proposed repeatedly by stakeholders for several years. It has been long enough. It is time for us to take these recommendations and turn them into action. We need to show farmers that we support their efforts, their time and their resources and acknowledge the financial uncertainty it takes to produce perishable goods for our country. Let us stand with our farmers and protect them so they may continue to produce these very essential needs.
I am proud to second this bill, speak to this initiative brought forward by my colleague and champion the cause for fresh fruit and vegetable producers. I hope that my colleagues around this room will also support this initiative for our farmers.
