Good afternoon, Mr. Chair and members of the committee.
Each organization has a short statement that we would like to provide. We are a unified team in the produce industry. I would like to start things off. Thank you for the opportunity to speak today.
CPMA is a not-for-profit organization, based here in Ottawa, that is made up of every segment of the produce industry supply chain, representing over 90% of the fresh fruit and vegetables sold in Canada. We are very fortunate to represent a sector that both is a significant economic driver for communities and improves the health and productivity of Canadians.
In 2013, the fresh produce sector supported over 147,000 jobs and created $11.4 billion in real GDP. CPMA, together with our partners in the Canadian fruit and vegetable industry, has been working for many years toward establishing a tool to protect fruit and vegetable growers and sellers in Canada during bankruptcy. In the United States, as you heard, if a produce buyer goes bankrupt, growers and sellers can rely on a trust provision under the Perishable Agricultural Commodities Act, PACA, to receive payment. In Canada, our growers and sellers have no such protection, and this lack of payment protection during bankruptcy in Canada results in disproportionate financial risk for our growers and sellers.
Fresh produce is not like other products, such as televisions and cars. Its highly perishable nature means that shipments cannot be reclaimed. This is key in this issue. Current rules managed by the federal government severely limit the ability of growers and sellers to collect payments for their products in the event their buyer declares bankruptcy. In practice, fresh produce suppliers have no protection.
Currently, Canadian and U.S. firms operating in Canada lose an average of $19 million per year through Canadian buyer insolvency. This data was collected through a report that was conducted under the regulatory co-operation council a few years ago. Seventy-five per cent of Canada's 10,000 fruit and vegetable producers are small businesses with average sales of less than $85,000 per year. One bankruptcy can have devastating ripple effects throughout the supply chain and the often small communities where farms and other parts of the supply chain are located. Canada's failure to provide protection has also created a trade irritant with our largest market and put our exporters at even further risk.
PACA protections are not limited to cases of bankruptcy. On October 1, 2014, the United States withdrew Canada's preferential access to the act's dispute resolution mechanism. Viewing the dispute and bankruptcy mechanisms as part of the same system, the U.S. made a decision that was a direct result of Canada's failure to provide a reciprocal and comparable system of insolvency protection. The U.S. dispute resolution mechanism offered critical protection for the 1.9 billion dollars' worth of produce that we send to the U.S. every year.
Payment disputes are a common occurrence in the complex world of fresh fruit and vegetables. Before October 2014, with a $100 informal complaint under PACA, or a $500 formal complaint, Canadian companies could threaten the licence to operate of any buyer who was delinquent with their bills, a big stick that often led to a quick resolution and payment. Now, Canadians must post a bond that is double the value of the outstanding bill to file a complaint or, more likely, walk away from their claim and take a fraction of what they are owed.
The real-life example of the B.C. farmer was noted in the previous testimony. I won't go into further detail, as the information was provided correctly, but in short, this B.C. blueberry grower had to walk away from a $128,000 sale and accept only $60,000. Cases like that of the B.C. grower are why the produce industry is united in its request for the creation of a limited statutory deemed trust, which provides a no-cost solution and the most effective means to ensure fair protection for growers and sellers. It must be noted that a trust would cover only 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.
Dr. R.C.C. Cuming of the University of Saskatchewan is an expert in Canada's bankruptcy laws, and has drafted turnkey legislation that is ready to go. This turnkey tool addresses federal-provincial jurisdictional discussions by coming into effect only when there is an insolvency.
Creation of a deemed trust would also meet U.S. requirements for a comparable Canadian system that would restore Canada's preferential access to PACA programs, including the dispute resolution tool under PACA as well.
The need for a PACA-like trust in Canada for the fruit and vegetable sector has broad-based support, not only within our industry but also outside of it. In October 2015 the Canadian Chamber of Commerce passed a resolution calling for the creation and implementation of a limited statutory deemed trust that provides financial protection for produce sellers in Canada in the event of bankruptcy in the first legislative session after the 2015 election. The industry position has also been endorsed by the Canadian Federation of Agriculture, the Canadian Federation of Independent Business, the Association of Municipalities of Ontario, and the Food Processors of Canada.
Resolving this particular trade dispute would not be difficult. While the U.S. Department of Agriculture understandably felt it was no longer tenable to continue offering to Canadians benefits that were not extended to any other country and not reciprocated for U.S. growers in Canada, they have made it clear that they are ready and willing to reinstate Canada's privileges as soon as Canada develops a comparable mechanism. A PACA-like statutory deemed trust would be a solution of no cost to the government or to industry. Implementation of a trust will significantly reduce supply chain disruptions and the vulnerability of small businesses and rural communities, and it will improve trade relations with our largest and most important trading partner.
The research and due diligence has been done. The options have been studied. The fruit and vegetable sector hopes we can count on this committee to support the creation of a limited statutory deemed trust to protect our growers.
I'd like to thank you for allowing me the time to present and to provide our insights from the Canadian Produce Marketing Association.