Evidence of meeting #13 for Agriculture and Agri-Food in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was paca.
A recording is available from Parliament.
4:40 p.m.
President and Chief Executive Officer, Fruit and Vegetable Dispute Resolution Corporation
Okay.
Absolutely. In fact, the gentleman who wrote the letter withdrawing reciprocity has laid out the point several times publicly about what it would take, and it is essentially the deemed trust.
4:40 p.m.
Conservative
4:40 p.m.
Liberal
The Chair Liberal Pat Finnigan
Thank you, Mr. Shipley.
We will now go to Monsieur Breton.
You have the floor for six minutes.
4:40 p.m.
Liberal
Pierre Breton Liberal Shefford, QC
Thank you, M. Chair.
I thank all of the witnesses for the valuable information they have given us today.
I am going to give Mr. Webber a little break and speak to you, Mr. St-Denis.
In Quebec, we are all very proud of your enterprise. I congratulate you and your team on your success. Your company, Vegpro, has facilities in the United States, correct?
4:40 p.m.
Executive Director, Finance and Business Strategies, Vegpro International Inc.
Yes we do. We have an agricultural farm—
4:45 p.m.
Executive Director, Finance and Business Strategies, Vegpro International Inc.
We have an agricultural farm in Florida, in the Belle Glade area.
4:45 p.m.
Liberal
Pierre Breton Liberal Shefford, QC
Excellent. Thank you.
Even though you are a Canadian company, you have facilities in the United States. Are your facilities there subject to the PACA regulations?
4:45 p.m.
Executive Director, Finance and Business Strategies, Vegpro International Inc.
When we make a sale directly from our facility in Florida, we have protection under PACA. We are Canadian businesses who do business in Florida. In 95% of cases, our sales are invoiced by a Canadian company, even if the majority of the product comes from Florida during part of the year.
4:45 p.m.
Liberal
Pierre Breton Liberal Shefford, QC
You are a large enterprise. Earlier we were talking about smaller farmers. We may consider that you are a medium or a large enterprise, and that is positive.
Despite the fact that you are a large enterprise, how does the non-reciprocity of these guarantee standards affect your business, both in the U.S. and in Canada? What financial risks have you incurred over the past years as compared to what occurs in a good year?
4:45 p.m.
Executive Director, Finance and Business Strategies, Vegpro International Inc.
A large enterprise has bigger problems, and a small enterprise has smaller ones.
For us, a client's debt may reach $150,000, $200,000 or $300,000. For a business doing sales of $80,000 a year, that amount would be smaller. We also deal with bigger clients and they also run the risk of bankruptcy.
Let's take Steinberg as an example; they were a grocery retailer in Quebec. They were a big client. Everyone in the agricultural milieu wants to sell to retailers like that. Steinberg went bankrupt and as a consequence a large number of farmers lost large amounts of money. I can't tell you how much we lost, but it was considerable.
The higher the volume of sales, the greater the risk. A large business may have small receivables as well, but its general risk is high. Quite often, these days, bankruptcies happen suddenly.
One of the important concerns currently is food safety. Ready-to-eat products are high-risk for consumers. They could contain Listeria or E. coli, for example. So clients are careful about that. Losses can happen quickly. Our product is sold to other processors who incorporate it into their products. If those processors have problems, there is sure to be a domino effect and it will affect us in turn.
4:45 p.m.
Liberal
Pierre Breton Liberal Shefford, QC
If you have disputes with clients, you have to give a security deposit that is twice the value of the claim. What has happened over the past year? Did you file any claims?
4:45 p.m.
Executive Director, Finance and Business Strategies, Vegpro International Inc.
Over the past year, we did not have to make any claims under PACA. However, we did make some in previous years. We did not have to make any deposit. All we had to do was follow the rules and the procedure.
Our farm is a large one, and our enterprise purchases products from a lot of small farms. Our business packages and markets products from a lot of small farms that operate close to our facilities. These people generally do not have access to the markets we have access to. Even if we sell their products, they are assuming a risk because if we are not paid, they are not paid either.
Over the last year, fortunately, we were lucky. Our business is fortunate in that we sell to retailers and large enterprises, which is not the case for the majority of agricultural producers.
4:45 p.m.
Liberal
Pierre Breton Liberal Shefford, QC
In a few seconds, can you tell us what you think of the trust proposal we have been discussing?
4:45 p.m.
Executive Director, Finance and Business Strategies, Vegpro International Inc.
We are entirely favourable to this measure, not only for reciprocity with the United States, but also to protect farmers in transactions between clients in Canada. There has not been any protection and there is none here, whereas there is in the United States. I have taken part in many discussions over the past three or four years. I have also been involved in this exercise. We have looked at several solutions. As Mr. Webber was saying, certain solutions are not good ones for 85% of agricultural producers. We want a solution that will suit all of the producers.
4:50 p.m.
Liberal
The Chair Liberal Pat Finnigan
Thank you, Mr. St-Denis and Mr. Breton.
Mr. Gourde, you have the floor and you have five minutes.
4:50 p.m.
Conservative
Jacques Gourde Conservative Lévis—Lotbinière, QC
Thank you, Mr. Chair.
My question is also addressed to Mr. St-Denis.
In bankruptcy cases, do you see history repeat itself? Do you notice after a few months that the facilities are the same but the distributors and purchasers have changed names? Do you see that you're delivering to the same locations, but that the name of the enterprise is different? You have to play the game and you don't have a choice. The owner is a new person. You start proceedings and there is a certain frustration.
Are American producers guilty of abuses with regard to the products you sell?
4:50 p.m.
Executive Director, Finance and Business Strategies, Vegpro International Inc.
When I spoke earlier about the PACA, I said that we had some rights, but that the American purchaser had responsibilities, and if a complaint is submitted under PACA and is not settled, those people can lose their permit to do business. It takes quite a long time before they can start up in business again. Mr. Webber would be able to give you a more detailed answer on how that works. In the U.S., under PACA you cannot declare bankruptcy or close the business today and start up again next door the next day. If there are complaints, these people are found and penalized.
4:50 p.m.
Conservative
Jacques Gourde Conservative Lévis—Lotbinière, QC
Mr. Webber, during your career, have you seen businesses that abused Canadian producers, that declared bankruptcy or found stratagems to get around paying Canadian producers?
4:50 p.m.
President and Chief Executive Officer, Fruit and Vegetable Dispute Resolution Corporation
Unfortunately, that's true on both sides of the border. What Jocelyn was trying to explain is that the rules we have at DRC are very similar to PACA. If you go bankrupt, close down your business, and just walk away, you can't come back and get another licence or another membership for—depending on what the person did—between three and five years. If you want to come back before that, there's a very significant bond that has to be posted. Those bonds and the people who have posted them are actually posted on the USDA website. A number of people do post them.
In terms of bankruptcies and people who abuse, yes, they go after them, and they actually investigate those cases of alter ego, case of the guy shutting down and trying to open another business in his wife's name or his uncle's name or his son's name. They go and check, because again, under their rules and under ours, he can't even be on the premises as an independent contractor, sweeping the floors or anything else, or they'll have to post an employee bond.
In the produce business, because it is so unique and because it is so easy to pick a farmer's pocket, there are very stringent rules in place for who can have a licence under PACA.
4:50 p.m.
Conservative
Jacques Gourde Conservative Lévis—Lotbinière, QC
In your experience, what percentage of purchases remain unpaid to producers? Would you say under 5%, or is it higher than that?
4:50 p.m.
President and Chief Executive Officer, Fruit and Vegetable Dispute Resolution Corporation
I think we should probably make a separation between those disputes that involve a legitimate inspection—for example, the strawberries weren't as red as they should be, so what we really are looking for is an adjustment service—as opposed to cases of somebody who just doesn't want to pay.
I would hate to put a percentage on it. I will tell you the percentage is low and currently has been, but that's because of what you hear us call the “big stick”.
When I was at PACA, when I'm at the DRC, most of our work is done on the telephone. The person wants to know what they should do and whether they are going to win or lose, because both PACA and DRC provide default rules.
When there's a problem over payment, there is a maximum time to pay. There is a way to handle claims. What normally happens is they know they are going to lose. They call me. They want an opinion. They open a dispute file. Once they see they're going to lose under the rules, they pay the bill. It's the same in PACA.
That's actually one of the big concerns about having lost reciprocity. The U.S. buyers will now have learned that when Jocelyn makes a call to PACA, they can say, “You know what? I think we're going to wait and see if Jocelyn can come up with that $100,000 to file this $50,000 complaint.” It's no skin off his teeth. Then if Jocelyn comes up with the $100,000, he says, “Oh, you know what? I made a mistake. I do owe that”, and he writes a cheque.
One of the big fears of the reciprocity isn't about the number of complaints filed today; it's about the fact that as the buyers learn there is no more big stick, that's going to change. Without an easy way to file a PACA complaint, it's really easy to clip a dollar or two. Jocelyn's a busy guy. He can't chase some guy down in Louisiana over a dollar or two per package.
I hope that answers the question.
