Agriculture Committee on June 12th, 2023

[The Chair, Liberal, Kody Blois]

I call this meeting to order. Colleagues, welcome to meeting number 67 of the House of Commons Standing Committee on Agriculture and Agri-Food.

I'll start with a few reminders. You know the format. This meeting is taking place in hybrid format and the proceedings will be made available via the House of Commons website. Just so you are aware, the webcast will always show the person speaking rather than the entirety of the committee. Of course, taking screenshots or photos of your screen is not permitted.

I have a couple of notes here, colleagues. We have Ms. Hedy Fry subbing in for Ms. Taylor Roy. Welcome to the committee, Ms. Fry.

We also have Mr. Epp subbing in for Mr. Barlow this evening.

Pursuant to the order of reference of Wednesday, May 17, 2023, the committee will commence its consideration of Bill C-280, an act to amend the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act, regarding a deemed trust for perishable fruits and vegetables.

I would now like to welcome the sponsor of the bill for the first one-hour panel, Mr. Scot Davidson, the member of Parliament for York—Simcoe. I do want the record to show, of course, that the MP for Simcoe helped bring some vegetables from the area. We certainly appreciate that—all committee members. I'll leave it for folks at home to see.

Good job, Mr. Davidson. We're all proud of our horticulture sector and I know that it exists in your riding.

Before I turn it over to you for five minutes for your opening remarks, I would be remiss if I did not recognize Theo and Diane Rood, who are the parents of Lianne Rood. They are in the committee gallery in the back.

It's great to have you here on Parliament Hill with us. You should be very proud of your daughter. She's a tremendous member of Parliament.

Mr. Davidson, we'll go over to you for five minutes.

[Scot Davidson, Conservative, York—Simcoe, ON]

Thank you, Mr. Chair, and good evening.

I'm very excited to be here at agriculture committee tonight. I'm very grateful for the unanimous support Bill C-280 received at second reading, and I look forward to further co-operation as we work to pass this bill. Together we can finally establish a limited deemed trust for our hard-working produce farmers right across this great country.

This couldn't be a more pressing and timely issue right now. Earlier this month a Statistics Canada report showed that there was a significant decline in fresh fruit and vegetable availability for Canadians in 2022. This year also saw a high-profile bankruptcy of Lakeside Produce in Leamington, Ontario, which had crippling financial implications for the entire produce industry.

This was followed up by an in-depth article in the Toronto Star, “Is this the end of lettuce?”, where it was reported that more three-quarters of all produce consumed in Canada is imported. This threatens Canada's food security, as access to fresh produce from foreign markets is increasingly being jeopardized by climate change, trade protections and supply chain issues.

According to experts cited in that article, Canada was previously “way more self-reliant in fresh fruits and vegetables—we produced a lot more of what we consumed domestically. And since World War Two, all that has seriously deteriorated, largely because there's very limited policy supports for [produce growers] compared to, say, the grain or the animal sectors.”

At its core, Bill C-280 is a recognition of the need to support Canada's produce sector just as we support other agricultural sectors, by ensuring that Canada's bankruptcy laws recognize the particular challenges and demands of growing and selling fresh fruits and vegetables. This is achieved by establishing a limited deemed trust for produce sellers, which would give them priority access to the proceeds of sale, limited to only the inventory, accounts receivable and cash on hand derived from the sale of produce during the bankruptcy proceedings of an insolvent produce buyer. This will help offset the loss of their sold produce.

The mechanism accounts for the especially perishable nature of fresh produce and the typical payment term that exists in the industry, both of which are significant deficiencies of the agricultural protection and dispute resolution mechanisms that currently exist.

There is a clear need for financial protection for Canada's fresh fruit and vegetable growers. This very committee has acknowledged as much on multiple occasions. You might think that no one reads your report, but Mr. Chair, I do. I spend day and night reading agriculture reports and Senate committee reports. It's unbelievable.

Bill C-280 enacts the very protections this committee has recommended the government put in place. It will strengthen an industry whose supply chain supports more than 249,000 jobs in Canada, amounting to $9.8 billion in wages. It will make our food security more resilient by reducing losses in an agriculture subsector that experiences more bankruptcies than most others. It will enhance the affordability and the accessibility of fresh fruits and vegetables for Canadians.

The reduction in costs for Canadian consumers will save as much as 5% to 15% on their annual fresh fruit and vegetable purchases, and it will open the door to reinstating reciprocal access to the financial protection establishment by the Perishable Agricultural Commodities Act in the United States, which will greatly support Canadians exporters who have been disadvantaged for far too long, despite the significant volume of produce sold to buyers in the U.S. every day.

Here today, Mr. Chair, we have an obligation to support our Canadian farmers. Instead of dire warnings of the “end of lettuce”, Bill C-280 represents the beginning of something more. Canada's produce sector can be positioned not only to feed Canada but to feed the world like never before.

Thank you to the committee. I look forward to your questions.

[The Chair, Liberal, Kody Blois]

Thank you very much, Mr. Davidson, for your opening remarks. I think you hit it spot on.

This committee has been calling for this type of initiative, this type of legislation, for quite some time. Frankly, I'll call it multipartisan support across the board, and you saw that reflected at second reading. However, we do want to dig in, ask questions and talk about the impetus for why this bill is coming forward and some of the pieces of the legislation.

Mr. Epp, you're going to have the first chance to take a crack at Mr. Davidson for up to six minutes. It's over to you.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

Thank you, Mr. Chair.

Thank you to my colleague Mr. Davidson, my colleague and friend from the soup and salad bowl.

I believe I have the honour of representing probably the highest vegetable production—in gross value, anyway. Not that we would ever compete or be competitive, but ours has both the greenhouse sector and the processing sector in our ridings.

You mentioned Lakeside Produce. This is just a sampling of the letters that came into my office encouraging us and this committee to look at Bill C-280. I very much appreciate your bringing that forward.

Lakeside Produce had a chilling and devastating effect, so I appreciate your bringing that out. It's been brought out that only 0.1% of the transactions of the values end up in bankruptcy. That's been one of the challenges of this legislation.

Why is it still needed if only 0.1% of the transactions end up in bankruptcy?

[Scot Davidson, Conservative, York—Simcoe, ON]

Thank you for your question. Through you, Mr. Chair, I would challenge. I think the soup and salad bowl is the largest in the Holland Marsh in York—Simcoe.

This is a needed piece of legislation. First of all, it's going to encourage more growth in the agriculture sector. Just the very nature of having this protection.... I'll let the committee understand this. One of the first things that happened to me during COVID in York—Simcoe was right when COVID hit. I was out in the riding in the Holland Marsh one day, and I had a farmer come up to me and say, “Scot, I don't think I'm going to plant my field.” I said, “Ken, why is that?” He said, “I'm so worried about getting paid. I don't know what's going to happen to these big companies, these big distributors.” That was all unknown to us.

He said, “I can sit at home and basically pay the taxes on my farm and not plant and, if I do plant, it's going to cost me $2 million. Scot, if I don't get paid, I'm going to lose this third-generation farm. I'm not here looking for a handout from the government. I'm just looking for assurances that I'm going to get paid for my produce.”

That's why this legislation is so important for people like Ken and obviously for people who were affected by Leamington, which was a $183-million bankruptcy, I believe.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

The Bankruptcy and Insolvency Act allows for 15 days for someone who's not getting paid to make a claim. Why doesn't that work?

[Scot Davidson, Conservative, York—Simcoe, ON]

There are a whole bunch of different things. As I investigated this bill and insurance in different sectors, 30 days was the chosen number of days when we looked at the legislation. We chose that because it does work for farmers. This was about listening to our fresh produce farmers. I'm sure you have spoken to them in Leamington.

You probably do take us on tomatoes, Dave, but that's why the 30 days was chosen.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

Exactly, 15 days.... I know, from the vegetable growers I've represented over most of my career, that you don't know that you're not being paid. Often the terms of sale are extended past the 15 days when your lien protections under the existing legislation have run out.

Other sectors have created financial protection plans where the sellers pool an insurance fund, and I know in the past in the processing sector that it turned into an operating fund for processors. The sector did away with that. I know it exists in some other sectors. Why do you think it wouldn't work in fresh produce? I know it wouldn't.

[Scot Davidson, Conservative, York—Simcoe, ON]

There are a whole bunch of different mechanisms out there, whether we look at grain, pork or dairy. This was a mechanism that farmers who came to me suggested would work best for them.

Through this whole process, I was listening to farmers about what would work the best for them, and it's really the simplest, Dave.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

That's exactly it. It looks like you've looked at all of the alternatives.

As you've brought this legislation forward, have you faced push-back? Where have the roadblocks been pointed out to you, if there are any?

[Scot Davidson, Conservative, York—Simcoe, ON]

I think that, after seeing what this committee has studied.... Members of the committee can correct me if I'm wrong, but farmers have been looking for this legislation for a while. I think this committee has recommended this three times in the past to the government, and I'm just really happy—I have to be honest—that everyone voted for this.

I think we're going to be able to work together. This is a good, robust bill, and I want to see it get passed.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

Can you talk about what this does for us with our largest trading partner, the U.S., and a little of the history of PACA? We call this PACA. Why do we call it PACA?

[Scot Davidson, Conservative, York—Simcoe, ON]

It's a perishable food act. There are a number of things that I think members will allude to if this gets passed. There was a letter relating to this earlier, which was alluded to, that we would get reciprocity with the U.S.

We have to look at this whole bill as giving our fresh produce farmers certainty in the market. That's what they're looking for. I think it's a sector in Canada...and I've talked about this before. You can move a General Motors plant, but you can't move a farm. We are blessed in Canada with the most arable land, and this is one sector that I believe should be...and this isn't a partisan comment.

When I look at the budget, I believe I'm looking for a vision of the country. One of the visions for Canada should be agriculture. That should be something that we're pushing. We should be doing everything we can for agriculture to become number one in the world. From Ontario and Quebec, and right from coast to coast to coast, we should have have that as a vision for the country.

We go into non-OECD countries to teach people how to grow fruit and how to make fresh water. This is an industry that I believe in and that I know everyone in this room believes in. That's why we're all here together.

I think this is a great piece of legislation and we have to try to get this passed.

[The Chair, Liberal, Kody Blois]

We'll keep it at that.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

Thank you, Mr. Chair.

I've used up my 20 seconds that I donated the last time I was here.

[The Chair, Liberal, Kody Blois]

There you go. We're all square now.

Mr. Drouin, you have six minutes.

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

Thank you so much, Mr. Chair.

Mr. Davidson, welcome to committee. Congratulations on earning the opportunity to present a private member's bill. Not every member of Parliament gets to have that honour in this place. I want to be thankful to you for presenting a bill that I can certainly line up behind. I have just a couple of questions.

Obviously, you mentioned it: The committee has recommended on multiple occasions that PACA should be a bill that we should move forward with. However, oftentimes the dispute resolution corporation has been raised. Why do you feel that particular mechanism does not answer the current needs in the Canadian market?

[Scot Davidson, Conservative, York—Simcoe, ON]

This legislation was drafted after speaking to a number of people and a number of farmers. I know there are going to be experts behind me who are going to be able to nail down exactly what is in the DRC.

However, this was the needed piece of legislation that was the simplest that we could see in the fresh fruit and vegetable sector for some sort of financial protection that would work with the 30-day terms.

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

I think you mentioned, and my colleague Mr. Epp mentioned, the reciprocity in the U.S. and that assurance.... Are we getting that assurance from the U.S. if your bill passes? Obviously, once PACA was passed in the U.S. and the U.S. didn't feel we had a reciprocal agreement in Canada, then it required that our Canadian producers make a deposit, which obviously affects cash flow.

Do we have that particular assurance that, if your bill passes, our Canadian exporters will no longer have to put down that deposit? We can say, yes, we have the environmental regulatory framework in place in Canada to replicate what you have in the U.S. Everybody is assured, and we can give that access back to Canadian producers and exporters.

[Scot Davidson, Conservative, York—Simcoe, ON]

I truly believe that, if this becomes law in Canada, we're going to get that reciprocity. There was a letter that was issued with the previous Congress that they would like to see that.

I think we have a great committee here. I don't see why that would change. It makes sense to do that. This is something that I think would have been nice to see in the new NAFTA agreement. However, I'm confident that, if you send me to Washington, I will get this done. I know that with Kody and everyone—I'm sorry, Mr. Chair—we'll get this reciprocity done.

It is a new Congress. I can't speak on behalf of the United States currently, but there was a letter a couple of years ago that said, if we got this done, that would happen.

With conditions now, given my comments on COVID-19 and the challenges that our fresh produce farmers face, I think even more that it's timely for this law.

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

Okay.

What we heard in this committee previously was that our financial sector was worried about superpriority. Do you have the assurance that this somehow impacts superpriority for...?

Let's be honest: This bill only applies in bankruptcy situations. However, it does provide assurance in case something terrible happens. It does provide the assurance to our producer community and those who operate up the flow chart....

It's not just about producers. It's also about processors who might deal with retailers. They will get the same guarantees through your bill. That's certainly something I heard from the stakeholders you would have been dealing with.

Have you been approached by the financial sector saying they're worried about this, or is there silence?

[Scot Davidson, Conservative, York—Simcoe, ON]

There's silence.

I'm confident that, how it was drafted, it will be strictly for our fresh fruit and vegetable growers if they sell to the distributors.

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

You mentioned that there's similar legislation in the U.S. The banking sector didn't somehow fall apart and everybody didn't go bankrupt because of the similar bill in the U.S.

[Scot Davidson, Conservative, York—Simcoe, ON]

That's correct.

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

Okay.

I have a last question, Mr. Chair. I think I have about one minute left.

You mentioned some particulars in your bill. Can you explain the 30 days for payment back? I've heard from some stakeholders that they're worried about those who might tend to finance their particular operations through accounts receivable. They would be worried about this bill, because that might change their financial agreements with their banking sector.

Are you hearing that, or not at all?