Agriculture Committee on May 16th, 2016

[Tracey Ramsey, NDP, Essex, ON]

Yes. I think it's of concern that 75% of the fruit and vegetable producers are small businesses. Their average sales are $85,000 or less a year.

We're talking about people who are going to be unable to put that up or who are going to lose everything they have, essentially, in trying to do that. That's a huge risk, because when you put up this double bond, what ends up happening if you can't recover those funds is that the money is gone. You're unable to invest in your farm, as Mr. Verkaik was saying.

[Fred Webber]

You're talking about family farms, and I want to be a little bit of an opportunist here. This is all about family farms.

A number of you have asked, “Aren't there other things? Isn't there factoring? Isn't there insurance? Why don't the other traditional tools work?” It's because we're talking about family farms.

One of the last reports that was done by Aon Insurance talked about the fact that 20% of the buyers are actually not insurable. These buyers buy at three or four times what their net worth is. Family farms are at a distinct disadvantage. Yes, insurance is a great viable option between two healthy, large firms, business to business, but to look at insurance as a farm-to-fork solution.... A number of reports that I'm more than happy to provide point to the fact that, yes, insurance works for large, successful, well-financed operations; it's the small and family farms that can't do it.

[Tracey Ramsey, NDP, Essex, ON]

If we look back to 2011, we had the Canada-United States Regulatory Cooperation Council making a commitment saying that something has to happen here. The Conservatives did nothing. Many Liberals that I know of actually have this as a campaign promise up on their website. Some of them still do, and I've had conversations with them. It is an easy fix.

This is something that's coming prepackaged. You've already done the work. All of the bureaucrats behind the scenes have done the work. This is ready to go. It doesn't need any further investigation or thought. What it needs is for people to vote on it and put it into action so that farmers can be protected and enjoy access to the American market. I'm from southwestern Ontario, so I know the U.S. is our largest trading partner. We're right next door to them. We see the impacts of this dramatically.

Have you been in discussions with the Minister of Agriculture on this issue? Where does it sit with the current Liberal government?

[Fred Webber]

The minister is engaged. He is aware of it. We're aware that there are a number of other priorities on his plate, but to answer your question, yes, he is aware of it, and we're waiting our turn.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Webber, and thank you, Ms. Ramsey.

We'll go to Mr. Drouin.

I would ask you to specify who you want to address your question to, especially for the video conference.

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

Thank you, Mr. Chair.

I want to thank the witnesses for appearing before us today.

My question is addressed to Mr. St-Denis.

You mentioned that when there was a problem getting paid, one of the parties has to agree to join the Fruit and Vegetable Dispute Resolution Corporation. What is happening currently?

[Jocelyn St-Denis]

It is voluntary.

As Mr. Webber was saying earlier, in the context of the renewal of the Canadian Food Inspection Agency, CFIA, membership in the Fruit and Vegetable Dispute Resolution Corporation, or DRC, may be made obligatory in order to do business and to obtain a licence to sell fruit and vegetables. Currently, if one of our clients is a member of the DRC, he or she has access to support and assistance for mediation or arbitration. However, if a client is at fault, he has no obligation to pay us anything. We have no way of forcing anyone to pay us the amounts we are owed.

In the recasting of the CFIA, which could take place later this year or the next, making membership in the DRC mandatory in order to be able to do business in the fruit and vegetable sector was one of our demands.

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

Thank you very much.

Mr. Webber, I want to make sure I understand the double bond and the 90 days to respond. How long does a double bond have to be in the U.S.? Is it until the issue is resolved?

[Fred Webber]

When someone approached PACA in years past, when the big stick was still alive and well, most of the ones that went forward that were informal quickly went formal. You have to post the double bond before you can move into the formal process. That money is held until a decision is reached. Once the decision is reached, if there is no counterclaim, the money is returned. That money is held in case the buyer has a counterclaim for unpaid freight or some sort of recall, whatever the case may be, because PACA obviously has jurisdiction over only its own buyers, so in order to be fair, they want to hold some cash in case there is a counterclaim.

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

How long does it usually take on average for PACA to come up with a resolution on a matter? Does it depend?

[Fred Webber]

It depends on the complexity of it. You can look at my own statistics. Some of them come and go in as little as 90 days, and some of them drag on a little bit longer. It has to do with the complexity of the case and whether there has to be a hearing, perhaps whether somebody has to come from another country, but I would say it's somewhere between three and twelve months.

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

Thanks.

With regard to the deemed trust and the confusion within the industry, if Canada were to move forward with passing a law and deemed trusts were part of it, are you confident that the U.S. would accept that solution?

[Fred Webber]

I absolutely am. I have to confess that in addition to the fact that I used to work there, I think you can see my age and recognize that I keep in touch with a number of people who have risen to positions of some knowledge within USDA. I can assure you that if something resembling their deemed trust is put forward, there will be reciprocity.

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

Speaking of age, I heard this issue of us not responding with a similar process has been going on for more than 50 years now.

[Fred Webber]

I wouldn't say that's true. We had reciprocity for many years. In all honesty, before the DRC was created in 2000, we were at this doorstep once before when the Canadian Supreme Court ruled that a federal agency couldn't rule on private contracts with low-pay, no-pay. There was a break there then too. You had a situation in which the PACA and the U.S. could deal with private contracts and no pay, and the Canadians couldn't. It was through the creation of the DRC under NAFTA that we headed this off once before.

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

Thanks.

I know some of the other committee members have asked already and I don't want to confuse the issue, but other than the deemed trust, are there issues you believe we should incorporate if a law were presented before Parliament?

[Fred Webber]

Let's just talk about reciprocity.

The first goal is to help Canadian producers—farmers, shippers, whatever. In terms of just the U.S., there need to be a lot of things for the two countries to have this kind of a reciprocal relationship.

One is federally sponsored inspection. Produce is an industry that regularly has problems. How red should a strawberry be? How soft is too soft? Is the banana yellow enough? There has to be somebody to resolve those kinds of disputes, so we both have federally sponsored inspection services.

We both have now, with the PACA and DRC, a way to resolve disputes. There's a licensing regime that helps vet out the bad characters. You have to post a bond if you've had a problem in your past and you want to be in.

The third part of that is the deemed trust. It is the part that is missing. Is there room for other things? Absolutely. As the industry moves forward and you put a deemed trust under it as a foundation so that everybody can participate.... The industry has been very good at policing itself, and if somebody wants to use some of the other tools, they'll do that business to business.

If your question is whether there is something else that should be in the law that would approach this industry from farm to fork, I would have to say no. I would say this would totally close the issue.

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

If I have time for a last question—sorry, you won't have time to respond.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Drouin.

We'll go to the second round. Mr. Longfield, you have six minutes.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you.

Would you like to finish your question, Francis?

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

Sure. Thank you, Lloyd.

With regard to your conversations with the banks, in Quebec I know that the Mouvement des caisses Desjardins is a big lender to the industry. Have you had dialogue with them to tell them not to worry about this, and that our neighbours south of the border agree with this solution? Have you had this conversation? Are you feeling any blowback from that particular sector?

[Fred Webber]

That's a difficult question. We have not talked to the Bankers Association in some time. I can't speak for my other colleagues and what they have done. To be perfectly honest, at one point there was a BIA consultation, and people were looking for that.

What we have done is approach the Bankers Association. We've talked to individual banks and tried to explain some of this. The document, the white paper I referred to earlier, is a step in that direction. However, until the thing is moving, to be perfectly honest, if you think about it, as a group—I'm probably going to get myself into trouble here—the banks have first come...they have that priority. Why in the world would they publicly state that they're willing to take any sort of second position? They have said in so many words that if this is a policy and if you have an industry that is unique, keep it narrow.

We need to do more work with the banks. I will concede that, but they're asking us first whether it's good policy and if we can keep it narrow.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you, and thank you all for your presentations.

It seems we have two different numbers that we're talking about.

Last meeting we had a number presented from the department of a total of $479,337 on 10 claims. The claims were down from 13 to 10. We were increasing exports, but our claims were going down. That was one piece of information.

Today we're talking about $18 million to $25 million. Is that because we're looking at two different things? Is one thing all of Canada and the States, and one is only the Americans? Do you know how those numbers would be so different?

[Fred Webber]

The first set of numbers you were talking about, I believe, have to do with disputes. Some time ago there was a discussion to the effect that the worst-case scenario over five years was only a $7 million problem. There were some statements like that made.

That has to do with the disputes. That has to do with the ones between solvent companies. There might have been a company that was slow pay. There might have been an inspection problem. There might have been a legitimate dispute.

The number I quoted is from insolvency. The company has closed its doors and is no longer operating.

There's a problem with statistics in this, and those of us who were involved in the Regulatory Cooperation Council hearings beat our heads against the wall trying to gather information. The statistics simply do not get far enough down to the granular level to be able to pull this kind of information out. In the early days, we had people come in from the Office of the Superintendent of Bankruptcy trying to figure it out, and it was all about coding. Is this a produce business, or is this a pallet and trucking business?

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you, and thank you for being brief on the answer.

I have a follow-up question. I come from a manufacturing background, exporting manufactured products. That's very different from fruits that are going bad on the shelf. In my world, we would have a line of credit set up if we were working with a bank with an unknown creditor who would be maybe paying us, or maybe not.

Who covers the $18 million to $25 million? It's a deemed trust, but who physically covers that money? If you don't get paid, there's $25 million that goes down the toilet because the place has gone out of business. Who covers that money?