Mr. Chairman and committee members, thank you for the opportunity to appear before the House Standing Committee on Finance to speak to the amendment to the Safe Food for Canadians Act that will authorize the Governor in Council to make regulations related to fresh fruits and vegetables, specifically the requirement to be a member of a specified entity or organization. This amendment would also repeal the Board of Arbitration.
My name is Fred Webber. I'm the president and CEO of the Fruit and Vegetable Dispute Resolution Corporation, commonly known as the DRC. I'm here representing the industry in support of both of these items.
The highly perishable nature of fruits and vegetables makes commerce in these commodities unique. It is a credit to the industry that they can move to Canadian consumers a product whose shelf life is measured in days, once harvested, while they're still fresh and with maximum nutritional benefit. Because the product deteriorates quickly, and supplies and quality can vary widely, licensing standards and specialized dispute resolutions have long been part of the fresh fruit and vegetable business.
The sector contributes $10 billion in economic activity to the Canadian economy, and provides direct employment to 90,000 people. Because of Canada's climate and resulting short growing season, we must import much of our fruit and vegetable needs. You'll not find many bananas and oranges growing here, particularly in February.
A dispute settlement body that maintains a common set of trading standards helps makes each party's rights and responsibilities clear and provides a forum for fair and ethical trading. In that light, a bit of history would be helpful here.
From 1934 to 1974 the Canadian Board of Arbitration administered the licensing and dispute resolution program for shippers and receivers of fresh fruits and vegetables. In 1974 that board's statutory authority to provide rulings over disputes was challenged in court and proven illegitimate. In 1983 the Canada Agricultural Products Act was amended to partially reinstate the authority of the board of arbitration and strengthen licensing requirements. The board still remained unable to rule on contract law disputes pertaining to non-payment and commercial contracts.
This situation also created an imbalance with Canada's trading partners, particularly the United States, who allows Canadian sellers to utilize and benefit from the licensing and dispute resolution provided under the USDA's Perishable Agricultural Commodities Act. In the world, only Canadian shippers from Canada do not have to post a bond or other form of security to do so. Preserving this relationship was important to both Canadian and American business. A dedicated group of government and industry stakeholders organized a committee under the authority of article 707 of NAFTA, which provides for the private resolution of commercial disputes.
The organization that I represent is the result of those NAFTA organization negotiations. We're a not-for-profit corporation based in Ottawa. We provide education, trading standards, mediation, and binding arbitration to members. The DRC model is the model that government and industry have evaluated and studied as the type of entity to provide the services contemplated under the pending Safe Food for Canadians Act regulation specific to trade in fresh fruits and vegetables.
In 2000 the Canadian government recognized that the DRC met or exceeded the requirements of the Canadian federal produce licence and arbitration system, and amended the regulations to state that DRC members were exempt from the federal licence. Today over 90% of Canadian buyers have opted for that DRC membership.
For the last 14 years since the inception of the DRC, the vast majority of produce transactions have in fact been transacted utilizing the DRC membership rules and trading standards. There has been no use of the Canadian Board of Arbitration because the disputes are handled to conclusion by the DRC.
In 2011 the U.S.-Canada Regulatory Cooperation Council committed to establishing comparable approaches to achieve a common goal of protecting Canadian and U.S. fruit and vegetable suppliers from buyers who default on their payment obligations. A portion of this initiative was the strengthening and streamlining of the licensing system and dispute resolution system in Canada. The DRC model was again identified as the potential solution for the licensing and dispute resolution process by stakeholders from both the U.S. and Canada.
The work of the RCC in this area flowed into the portion of the Safe Food for Canadians Act that we are discussing today. The DRC and its model for dispute resolution were identified and supported as the vehicle that Canada would support based on the results of the exhaustive CFIA consultation that concluded in November of 2013. This is not a surprise, as the vast majority of the industry had already adopted the DRC into their business plans.
Even though we established an effective system for licensing and dispute resolution during the course of normal business transactions, one area where we are lacking and where we are out of sync with the U.S. is in the protection for suppliers in the event of a buyer bankruptcy or insolvency. This remains an outstanding issue for us, and we continue working with our partners in the RCC process. We are now looking at amendments to the Bankruptcy and Insolvency Act in order to help us create a deemed trust, similar to what exists in the United States, to give suppliers of perishable fruits and vegetables a limited priority to access the funds generated from the sales of their products.
Both of these amendments are the result of a wonderful collaboration between civil servants and government and industry. These amendments have been discussed at great length, and there's been great support for both of them.