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.
Conservative
Chris Warkentin Conservative Grande Prairie—Mackenzie, AB
It doesn't resolve that situation, I guess.
President and Chief Executive Officer, Fruit and Vegetable Dispute Resolution Corporation
When there's a bankruptcy of a produce firm.... I hate to put this out there like this, but the produce is usually their travelling money. No one leaves produce to sit when they close the doors. They sell it out at fire sale prices. They do something with it. There's never produce there.
Conservative
Chris Warkentin Conservative Grande Prairie—Mackenzie, AB
Okay, but I guess what I'm trying to establish is that this provision only works if there's some asset left—that after the process of bankruptcy, there's something left, some asset.
President and Chief Executive Officer, Fruit and Vegetable Dispute Resolution Corporation
Somewhere there is an account receivable, I would argue, unless the person just didn't bother to collect the account receivable.
Conservative
Chris Warkentin Conservative Grande Prairie—Mackenzie, AB
Okay. I just wanted to establish that. I wanted to ensure that this was in fact the case.
Now, in terms of a deemed trust versus an actual trust, many industry groups have check-offs, either for research and development or for this type of provision. Has there been any suggestion that an actual trust through a checkoff would be another alternative that could be undertaken?
President and Chief Executive Officer, Fruit and Vegetable Dispute Resolution Corporation
There have been many studies over the years on these kinds of things.
The uniqueness of the produce isn't just that it's so perishable; it's that a strawberry was picked on Monday morning and you can put it on your breakfast food on Friday. It may have shipped directly from the farmer's field to the chain store, but it's gone through four or five different hands to get there. It has been consolidated and reconsolidated. Who's the checkoff program going to go to?
Conservative
President and Chief Executive Officer, Fruit and Vegetable Dispute Resolution Corporation
That's part of the reason. The answer to your question is that it has been studied. In the industry's view—and I believe, quite frankly, following the RCC analysis—it's just not viable in this industry.
Conservative
Chris Warkentin Conservative Grande Prairie—Mackenzie, AB
So the only thing we're asking the Government of Canada to do is to simply change the priority, I guess, by which the assets of a bankrupt company are paid out, so that in the case of a produce farmer, they are the priority, the first person on the list. Is that correct?
President and Chief Executive Officer, Fruit and Vegetable Dispute Resolution Corporation
If I might adjust that just a bit, the produce assets themselves—if it's similar to what's in the U.S.—never actually become part of the bankruptcy estate. The receiver or the trustee would look at it and say, “This belongs to the farmer, so I'll set it over here.” If the receiver has claims worth $200,000 and accounts receivable worth $100,000, those farmers get 50 cents on the dollar. That's it. That's as simple as it works.
Conservative
Chris Warkentin Conservative Grande Prairie—Mackenzie, AB
I can see how that would work, but if there's somebody who is a slow payer, as Jason talked about, which means that this asset was sold years or months ago, how does that work into this?
President and Chief Executive Officer, Fruit and Vegetable Dispute Resolution Corporation
It really doesn't. Currently, buyers all must have either a CFIA licence or a DRC membership. By this time next year, hopefully, it'll be a DRC membership.
We have prompt payment as 10 days. Thirty days is about as long as it gets. People would have filed a dispute long ago. In fact, under the DRC rules, to help push the due diligence, if a seller doesn't bring his claim forward within nine months, he loses his rights to that money. Between the time the buyer is still solvent and the time the seller comes to the DRC, there are nine months to bring the claim forward. As soon as the account goes past due, he has a right to come to us. If they do not abide by a decision or our opinion, his membership is removed, and he can no longer bring product in from outside the country or the province.
Liberal
The Chair Liberal Pat Finnigan
Thank you, Mr. Webber.
Thank you, Mr. Warkentin.
Go ahead, Mr. Peschisolido, for six minutes.
Liberal
Joe Peschisolido Liberal Steveston—Richmond East, BC
I too would like to thank the witnesses.
Mr. St-Denis, you spoke with passion and clarity.
Mr. Verkaik, thank you as well for your thoughts. Mr. Webber, I was actually also very struck by the clarity in your comments, because just like Mr. Warkentin, I was trying to wrap my head around this. It brought me back to law school days, of secure creditors and all of that.
That being said about the complexity, I think we'll agree at the committee that this is a problem and that we all want to help you fix the problem.
You've been at it for a while. What do you think is holding this back? Why haven't we created a deemed trust? Why haven't we created a mechanism that would resolve the problem?
President and Chief Executive Officer, Fruit and Vegetable Dispute Resolution Corporation
I believe there are two very easy answers. It is a very complicated issue, as you've just heard. Trying to get one's arms around it is very difficult. Even in the days when we started in the regulatory co-operation council, there were still people who believed there was a pool of money and that somehow the Canadian government was being asked to write a cheque. It took a long time to get that out of the system and explain to people that it wasn't the case, that there were no cheques being written.
Also, the Americans in particular do what I'll call fist-pounding, asking to have this fixed. You guys can do this in the U.S. We have nothing in Canada. They continually were asking for what they called a temporary restraining order. Part of that is because they themselves don't fully understand the tool they have. The request for a temporary restraining order, quite frankly, when we were talking to Industry Canada, now Innovation, is where they stuck. They said that in Canada, you can't do that. That's the use of a trust before the company becomes insolvent, so you can't do that.
We've stepped back and said, “Oh, wait a minute, here's the sticking point that a lot of people don't understand.” Prior to the election—and I promise I won't get into politics here—I believe, in working with the civil servants, we had agreement that this, in fact, could be done.
We went back to Professor Cuming and said, “Look, this is what we've learned.” In the U.S. and Canada—two countries separated by a common language, as they say—with the industry trying to explain something it truly didn't understand themselves, there was a huge amount of confusion. It has only been very recently, since we went back to Professor Cuming and said, “Fix this; straighten this out”, that we all understand what's happening.
I have to confess that years have probably been wasted over misunderstandings.
Liberal
Joe Peschisolido Liberal Steveston—Richmond East, BC
Mr. Verkaik, your situation in the Holland Marsh area is similar to the situation in B.C. in the Okanagan Valley and in my neck of the woods, in Steveston—Richmond East, because we're dealing with the Americans. A lot of the crop growers sell to the American market, but there's also a huge amount of trade going on within the Lower Mainland.
Are there suggestions other than the deemed trust that you believe will satisfy the Americans?
Chair, Ontario Fruit and Vegetable Growers' Association
I do not believe that.
Liberal
Joe Peschisolido Liberal Steveston—Richmond East, BC
Okay.
What seems to strike me is that this is an ongoing issue. It strikes to the very core of the viability of the whole industry. Are there other things that can be done, other than the deemed trust, or do you believe that is the only option we have?
Chair, Ontario Fruit and Vegetable Growers' Association
Respectfully, I truly believe this has been studied for a long time, and thoroughly. It keeps coming back to the deemed trust.
There are other options that were looked at, and they are just not viable.
Liberal
The Chair Liberal Pat Finnigan
Okay.
Thank you, Mr. Peschisolido.
Ms. Brosseau, you have the floor for six minutes.
NDP
Ruth Ellen Brosseau NDP Berthier—Maskinongé, QC
Thank you, Mr. Chair.
I thank the witnesses for being here today.
I am going to give the floor to my colleague Tracey Ramsey. She has done some good work on the American Perishable Agricultural Commodities Act, or PACA. She is going to question the witnesses.
Tracey Ramsey NDP Essex, ON
Thank you, Ruth Ellen.
Thank you for your wonderful presentations.
Jason and I could probably have a conversation about which has richer farmland, my riding of Essex in southwestern Ontario or the Holland Marsh. We have the Hillman Marsh, actually, down in my riding.
With my being from a riding that represents agriculture very heavily, I know how important PACA is to the fruit and vegetable growers in my region. The lack of action by the Conservative government over the past two years has cost family farms tremendously. I might even go so far as to say we've lost family farms, which is something we simply can't afford anymore. We see many family farms disappearing from our landscape, unfortunately, and PACA is one reason that's been happening in southwestern Ontario.
I think we all can agree that sellers aren't protected, that this puts farmers at peril, that this is a threat to the family farm. I'm going to give you an example. In York—Simcoe, there was a farm that lost $38,302 on a load of produce to the U.S. because they didn't have the funds to post a double bond. I think a lot of people don't understand the double bond. I wonder if you can speak a bit about that, and the impacts on family farms when they have to consider being able to post a double bond, and if you think farms are losing out and potentially even being eradicated because of their inability to put up those funds.
Chair, Ontario Fruit and Vegetable Growers' Association
Is that to me?
It is a challenge. If I have to post a double bond, the tight cash flow on farms does make it a challenge. It would depend on every situation and it would depend on the amount of money. The double bonding process, compared to what we used to have, is absolutely a challenge. Maybe Fred can speak to it a little better.
President and Chief Executive Officer, Fruit and Vegetable Dispute Resolution Corporation
The double bond is an interesting phenomenon. One of the questions that came up last week was “Why?”
It was originally put in to guard against frivolous complaints. The guy might file a claim, but he would in fact owe the buyer for freight or other things. However, double does seem a bit high.
The problem with it, in the context of your question, is to look at what's happening. The farmer has harvested his crop. He has sold his crop and can't have his money. He's already out of pocket $50,000.
Now he has to go and find an organization in the United States that's recognized by the USDA, and this isn't a bail bond kind of thing. This is a cash bond. You have to find somebody who will give you essentially a cash bond equal to twice that. He's out of pocket $50,000, and now he has to find an asset of $100,000 that isn't already pledged to somebody else to get that cash. It just doesn't happen.
If you look at some of the statistics, and I won't go into the weeds here today, less than 1% of the claims filed with PACA from outside of the U.S. and Canada go formal.
It's not because, as the record says, they're resolved. Resolved just means a formal document was never filed. It means they couldn't afford to move forward.