Agriculture Committee on May 9th, 2016

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Gilvesy.

Now we'll start our round of questions. We'll start with Monsieur Gourde for six minutes.

[Jacques Gourde, Conservative, Lévis—Lotbinière, QC]

Thank you, Mr. Chair.

I would like to thank the witnesses who are with us today.

I am happy to hear your comments on the protection of producers. I am very sensitive to these matters since I was an exporter myself, of hay though, not fruit and vegetables. The dynamics are the same though: there is a buyer, a seller and a distributor. Transportation is a also a challenge, a significant one, especially for fruit and vegetables. Certain problems arise during transport. A shipment may be fine at the outset, but a problem can arise, for example, with a delivery from Canada to Florida, which takes between 27 and 30 hours. This can affect the quality of the fruit or vegetables transported. This can lead to lengthy negotiations with the buyer, who can argue that the quality has been affected. The producer then has a second choice: accept the offer or lose the entire shipment. It happens.

Are such cases considered losses? You mentioned a total of $100 million. Unfortunately, producers sometimes do business with people starting out in the field or with fly-by-night companies. Trust can be built up over a few months with buyers, and then it very soon comes to light that the buyer has not paid any producers during that time. These people can purchase from $1 million to $2 million per week from producers. Then it turns out that they owe $100,000 to one producer, $150,00 to another and $200,000 to someone else. These could be producers from all provinces in Canada or even from the United States. A number of producers fall victim to this and receive a letter from a creditor or trustee saying that they will never see the money again.

Ms. Fowlie, is this type of problem recorded or is it only the bankruptcies that are recorded? You mentioned $100 million earlier. That is not a lot of money considering all the problems that can occur in this industry.

[Anne Fowlie]

The figures I mentioned are published in the United States pursuant to the PACA. Clearly, there is information with figures available to the public. In Canada, the Fruit and Vegetable Dispute Resolution Corporation does of course have information on the number of complaints relating to unacceptable products.

As you said, these products are highly perishable so the risk in this sector is very high.

[Jacques Gourde, Conservative, Lévis—Lotbinière, QC]

Do you have any further comments?

[Anne Fowlie]

On Wednesday, you will hear from another witness who represents the Fruit and Vegetable Dispute Resolution Corporation. He will be able to answer questions that are more technical and that require documentation to which we do not have access.

[Jacques Gourde, Conservative, Lévis—Lotbinière, QC]

You also said that producers have lost their power to deal with purchasers who do not want to pay. Even if legislation is put forward, what power does the producer have if the purchaser decides not to pay or is able to demonstrate that the product delivered is not what was expected? The issue is not insolvency, but rather that a shipment can be refused. A lot of money can be at risk.

[Anne Fowlie]

The situations in Canada and the United States are different. In the United States, the Perishable Agricultural Commodities Act includes provisions to resolve problems. We do not have these mechanisms in Canada. That is why we are here today. We want to tell you about our situation.

[Jacques Gourde, Conservative, Lévis—Lotbinière, QC]

Moreover, there will not be any more people on site in the United States to look into disputes.

For my part, I have taken a plane to resolve cases in Florida because I was losing all my shipments. Once I got there, I could see that the claim was exaggerated. The purchaser took advantage of the fact that I was Canadian and was 2,700 kilometres from Florida. They were very surprised when I arrived by plane to see what was going on. There was indeed a problem with 5% of the shipment, but the remaining 95% was in very good condition. The purchaser had claimed that 95% of the shipment was bad. The seller has to have some mobility to go see what is going on.

In short, will the service be offered or not?

[Anne Fowlie]

With the dispute resolution corporation in Canada, there are mechanisms to resolve those types of issues in Canada and also with the U.S.

As far as within the U.S. and any complaints that you would make, there are also those types of mechanisms within the PACA. Those resolutions are made.

[The Chair, Liberal, Pat Finnigan]

Thank you, Ms. Fowlie.

Thank you, Mr. Gourde.

Mr. Peschisolido, you have six minutes.

[Joe Peschisolido, Liberal, Steveston—Richmond East, BC]

Thank you, Mr. Chair. Mr. Lemaire, Ms. Fowlie, and Mr. Gilvesy, thank you for coming out and presenting us with a very thoughtful and thorough talk.

I've been hearing much of what you've said for the past year or so, during the campaign and beforehand, and for the past six months. What struck me was that I got two things when I was speaking to the fruit and vegetable growers. As you may know, I'm from Steveston—Richmond East. It's basically Vancouver and then Surrey, Langley, Abbotsford, and Chilliwack.

There were two things, first, the precarious nature of the business, the boom and bust cycles. They were kind of envious of the marketing board system because, in our part of the world, the blueberry, the strawberry, the potato, and tomato farmers are near the dairy farmers, the chickens, and the turkeys. They compare their situation with the supply management system.

The second part was the intergenerational aspect, that they're all family farmers. Which is a wonderful thing, but it also concerned them because if the business went down, they went down because it wasn't a company. They could be structured in a corporate way or in a business way, but it was their family.

If you had to provide me and other members of the committee with an action plan, what we could do to help you to deal with some of the concerns or obstacles that the three previous witnesses had, what would be in it?

[Ron Lemaire]

I can begin by framing up a few things. This has now been over-researched.

[Joe Peschisolido, Liberal, Steveston—Richmond East, BC]

We need some action then.

[Ron Lemaire]

That's right. We've spent many years looking at it and hearing questions like today, “Give us the data, what is the data on the impact of insolvency?” The reality is the data is very difficult to come by relative to how the data's collected by Stats Canada. When we go back and look at what the true impact here is, we're talking about a trade tool. When we look at one of the comments made earlier about the data looking at the United States, it was that our trade has increased and we haven't seen any dramatic shift within PACA.

Well, there are two things there. Mr. Gorrell from Agriculture Canada made a very good point. We're in a very strong position with where our Canadian dollar is currently. We're in a little bit of a rainbow right now as a fruit and vegetable sector being able to ship to the U.S. and being a preferred country of purchase because of our dollar position and the very strong growers we have who grow quality product. But that's not always going to be the situation. As Mr. Gilvesy has mentioned, there is a tipping point, and when a bankruptcy hits without protection here in Canada, growers will not get paid, and the family farm that you talked about will break down.

As I mentioned earlier, the series of how we sell in produce is a function of that in that many small farms are selling $85,000 a year to a larger dealer who then sells to the retailer or exports. It's that mechanism of supply chain that, if one doesn't get paid, then the trickle effect through the entire system impacts the rural community and the family farm itself, the fabric of how we sell and market fruit and vegetables across Canada and how we export.

The big piece here is looking at where are we today. Today we are missing a trade tool that we used with the U.S. for many years, a privileged access to a fair and ethical trade tool in the U.S. and the big stick. A member asked the question about going down to the U.S. and having to meet the buyer and get payment protection. Well, we've already seen Canadian farmers not access that, such as the B.C. farmer who had to only take half the value of their product, because they don't have the big stick that they had with PACA to begin with.

Now there are two pieces here. It's that dispute resolution mechanism that we lost in the U.S. because in Canada we do not have the insolvency tool to protect sellers and farmers in the event of a bankruptcy. We heard earlier today the data around mentioning 81.1 and 81.2 under the Bankruptcy and Insolvency Act that protects aquaculturists and farmers. The challenge we have with that is that it doesn't work. The reality is that the 15 days prior to actually pick up your product and then the 15 days to claim after don't function within the fundamental tenet of how produce is sold and how the perishable nature of the product functions.

There's never an opportunity to collect, and then the time frame afterward is not within a feasible amount of time to actually then collect the product, if there is any at the front end, and then collect the payment afterwards. It doesn't work for a farmer, and it's only focused to people who have their hands in the dirt. The sellers in the market don't qualify either. We have that farmer who sold to the bigger farmer, who becomes a dealer who then sells to a wholesaler, who then sells to the U.S. Nobody beyond the person who had their hands in the dirt fits into that system, but all must be part of it to be functional, just like the U.S. has created.

So let's not over-reserach this anymore. We've found that bonding doesn't work. Insurance doesn't work, nor pooling of funds. All of these things were researched under the regulatory co-operation council.

As we heard earlier, we also have enabled a new legislative tool that will be available to the committee on Wednesday, and the dispute resolution corporation will present and answer questions on it. The tool is available and viable to actually put into play and move forward. It's all ready to go. We just need to have action.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Lemaire.

Thank you, Mr. Peschisolido.

Ms. Brosseau, you have six minutes.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

Thank you, Mr. Chair.

I would like to thank the witnesses for being here today. We are pleased to see you before the committee again.

I know there has been broad support for restoring access to PACA. In the last legislature we had a Liberal member on committee. I think you will remember Mark Eyking who did work a lot on PACA. He was a strong advocate, and I think there was a lot of support, at least from opposition at that time to gently nudge. We were asking the government to restore PACA. More recently, I think it was on October 7, 2015. I'm just going to read this press release. It says:

Liberal Agriculture critic Mark Eyking stated that a Liberal government would defend Canadian fruit and vegetable producers by resolving the entirely avoidable dispute with the United States over [the] Perishable Agricultural Commodities Act ...

It goes on to say, “Canadian fruit & vegetable growers used to enjoy...PACA, a low-cost dispute resolution system”, and now for the last little bit, over about “a year ago after the Conservatives failed to create a comparable system”, we no longer have it.

It just goes on to say that:

In consultation with industry...including the Canadian Horticultural Council & the Canadian Produce Marketing Association (CPMA), [the] Liberal government would create a...mechanism in Canada and work with the United States to reinstate the access that our fruit and vegetable exporters had under PACA.

So it was a promise. It's great that we are studying this at committee. It's important. We have two meetings. We're not going to overstudy this. Hopefully we can get more action on it.

There was also a motion brought forward in this Parliament, the 42nd Parliament, by my amazing colleague Tracey Ramsey. She put forward a motion asking:

That, in the opinion of the House, the government should: (a) introduce a payment protection program for produce growers like the Perishable Agricultural Commodities Act (PACA) in the United States that will allow sellers to maintain an ownership trust until payment has been received; (b) implement this payment protection program for produce growers by September 30, 2016; (c) take immediate steps to negotiate with the United States to restore Canada’s privileged access under PACA, with the aim of restoring access by December 31, 2016.

I imagine you guys support that motion, and maybe this could be an opportunity for the government, or this committee to recommend to the House to adopt this motion. I was wondering if I could maybe just get comments on the urgency, because before there was consensus on the urgency to restore access to PACA. It's something that does not cost anything, and you guys did amazing work. I want to thank you for the work you have done, and also the work that Mr. Cuming did with the bill that he brought forward on January 22, 2015.

I also understand there have been some modifications to the bill. If you could maybe speak briefly to those, I'll give you the floor. Thank you.

[Ron Lemaire]

I think it would be best that the technical aspects of the Cuming bill—we'll call it that for now—be left to the dispute resolution testimony on Wednesday. This is how unique produce operates. We have three organizations that are lockstepped—focused on not only this issue but many—sitting here providing testimony today. The DRC, as part of our partnership in the industry, is also lockstepped with where we're going. We rely heavily on the DRC to provide technical briefings and technical analysis specifically on PACA.

Fred Webber, who will be presenting on Wednesday, is the technical expert in Canada on this specific issue, and I think it would be best if you save your questions for Fred on Wednesday because he can definitely provide clear insight on everything around the proposed tool, and how it can address federal needs, and also how it has accounted for some of the questions that were posed earlier to the government.

[Anne Fowlie]

Perhaps I could add just very quickly a comment as to the urgency, and thank you for that, because it is urgent. It's important to understand around that context. You spoke to the small farms in the Lower Mainland. The context is everything in those small and medium-sized enterprises. There's no tool in Canada, so if someone makes a conscious decision to sell in the United States.... Previous to my life at CHC, I worked in New Brunswick in the potato industry, and I was on a sales desk. I made a very conscious decision not to sell in Canada because I had protection and I had recourse in the U.S.

For that carrot producer, whether in Ontario or Manitoba or the Lower Mainland, this is $50,000. It's a lot of money. In big business, perhaps it's not, but in the context, it is a lot of money. There's no tool in Canada. If he had chosen to sell in the U.S., he would have had free and open access to all of the provisions of the U.S. PACA previously. He still has access now. However, if we wants to chase that $50,000, and this will respond to your question a bit as well, he has to come up with $100,000 to chase it. We talk about bankers. They're probably not going to be too anxious to advance him that $100,000 to go and chase the $50,000.

So it's urgent, yes, and context is very important.

[George Gilvesy]

Perhaps I could add something from my perspective.

As you heard from some of the statistics I gave, the greenhouse vegetable sector is a real bright light for Canadian agriculture. Our members are investing anywhere from $800,000 to $1 million an acre to put up a greenhouse. We've seen in Ontario the equivalence of an automobile factory invested, over the last five years, into greenhouses in the province.

Now, there will not be a faster showstopper than not being paid. If American buyers get onto the system of not paying Canadian suppliers, that will be a showstopper.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Gilvesy. We'll have to move on.

Mr. Drouin, you have six minutes.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Thank you. Just let me know when I'm at two minutes, because I'll be sharing my time with Monsieur Breton.

Thank you for being here and discussing PACA. I have a few questions. First, how long had the industry taken advantage, prior to October 2014, of PACA in the States?

[Anne Fowlie]

[Inaudible--Editor] put in place, so it's been a good number of years. It has been many years since I was on the sales desk. There are lots of other people before me, but since the deemed trust was implemented—

[A voice]

In 1930 [Inaudible--Editor].

[Anne Fowlie]

It was 1930 for the PACA to start with, and then the deemed trust was added.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

I'm a bit perplexed as to why previous governments—it's no partisan jazz, I'm assuming the Liberal governments were there too—haven't acted on putting a PACA-like system in Canada. I'm assuming you've had past conversations about this. What was the push-back, and do you have a sense of why we didn't?