Thank you very much, Chair. I'm very happy to be here.
Thank you for the opportunity to discuss financial protection measures for Canada's fresh produce sector.
The Canadian fresh produce sector is an integral component of our agriculture and agri-food sector. In 2014, the Canadian fresh produce industry produced $4.4 billion of fresh fruits and vegetables. In the same year, Canadian global exports of fresh fruits and vegetables were $1.6 billion, of which almost 95%, or $1.5 billion, went to the United States.
Canada's primary vegetable exports to the U.S. are greenhouse tomatoes, peppers and cucumbers, as well as mushrooms. Canada's primary fruit exports to the U.S. are predominantly blueberries, followed by cranberries and apples. Canada also imported $6.6 billion of fresh fruits and vegetables, 55% or $3.6 billion of which was from the United States. The horticulture industry benefits from access to numerous federal and cost-shared programs.
Since 2007, federal-provincial-territorial governments have provided $1.3 billion in support through business risk management programs to producers of fruits, vegetables and potatoes. In 2014, horticultural producers were advanced $131 million through the advance payments program. Additionally, the horticulture industry has received $37 million from our department for innovation and marketing initiatives.
Finally, the sector also has access to the AgriRisk initiatives program which supports industry in its efforts to research, develop and implement new agricultural risk management tools.
The U.S. Perishable Agricultural Commodities Act, also known as PACA, is a legislative mechanism for the fresh produce industry to resolve non-payment and is administered by the U.S. Department of Agriculture.
It requires licensing of all buyers, it can suspend or revoke buyer licences for non-payment, and it provides mitigation and arbitration services between buyers and sellers. It also includes a deemed trust, which requires buyers' property to be held in trust to secure payment of any amount owed to a seller ahead of all other creditors. PACA addresses non-payment by both solvent and insolvent buyers.
Under the Canada-U.S. regulatory co-operation council initiative, Agriculture and Agri-Food Canada and the U.S. Department of Agriculture committed to establish comparable approaches to achieve the common goal of protecting Canadian and U.S. fresh produce sellers and buyers that default on their payment obligations.
As part of our commitment, between 2012 and 2014, the Government of Canada amended the Canadian Food Inspection Agency's Safe Food for Canadians Act to provide authority for regulations that will require membership in a third-party single-dispute body for fresh produce sellers who trade interprovincially and internationally.
Currently the Canadian Food Inspection Agency's licensing and arbitration regulations require buyers of fresh produce who sell interprovincially or internationally to be members of the dispute resolution corporation, or be licensed by the Canadian Food Inspection Agency. Both entities provide dispute resolution services and can require the posting of financial security by buyers as a risk mitigating measure. Unfortunately certain buyers have used the dual entities to evade seller payment and posting of financial security.
Exemptions within the current licensing and arbitration regulations have also permitted fraudulent activities. For example, buyers who buy produce from sellers located within their province are able to trade internationally and interprovincially without a DRC membership or a CFI licence, and therefore, they do not adhere to the trading rules pertaining to payment.
The Government of Canada is committed to the continued financial viability of the fresh produce sector. The government's priority is to implement the Safe Food for Canadians Act regulations. The regulations will require sellers and buyers of fresh produce, who trade interprovincially or internationally, to be members of a single-dispute resolution body, likely the DRC.
These regulations will ensure the adherence of fresh fruit and vegetable buyers to a unified set of trading rules that govern against slow, partial, or no payment by buyers, with strict penalties for buyer non-payment. This approach should address the majority of non-payment issues faced by sellers of fresh produce.
Non-payment also occurs between fresh produce sellers and buyers at the interprovincial level, but interprovincial trade does not fall within the federal government's jurisdiction. The Government of Canada will work with the provinces to create a comprehensive national framework that will help to ensure all Canadian buyers of fresh produce adhere to fair and ethical trading practices.
As of October 1, 2014, the U.S. no longer permitted Canadian fresh produce sellers free access to the formal dispute resolution process of PACA because they did not consider the Government of Canada's financial protection approach as comparable to theirs. Canadian companies trying to recover unpaid bills that are not resolved at the informal dispute resolution stage now need to post a bond to move forward with a formal claim.
Canadian sellers of fresh produce still have access to PACA and its dispute resolution services as well as the deemed trust. No interruption in trade or increased incidences of non-payment has been found subsequent to the October 1 announcement.
Regarding Canada's fresh produce sector's ability to recover any non-payments from U.S. buyers, statistics provided by the U.S. Department of Agriculture reveal that 90% of non-payments are resolved at the informal dispute resolution stage at no cost to the Canadian industry to initiate the process.
Further, the trade of fresh produce between Canada and the U.S. has continued to rise over the last four years, by 55% for fresh fruits and 26% for fresh vegetables, showing that the U.S. remains an important market for Canadian fresh produce.
The Government of Canada continues to explore approaches that will enhance financial protection for sellers of fresh produce and any decisions will be evidence-based.