Mr. Speaker, I rise to speak to Bill C-280, which amends the the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act to provide that perishable fruits and vegetables sold by a supplier to a purchaser, as well as the proceeds of sale of those fruits and vegetables, are to be held in trust by the purchaser for the supplier in the event that the purchaser has not fully paid for the produce and becomes bankrupt or subject to a receivership or applies to the court to sanction a compromise or an arrangement. My neighbour and esteemed colleague from Berthier—Maskinongé, who is our agriculture, agri-food and supply management critic, co-sponsored this bill.
Given the demand in Quebec for this measure, which could be helpful for our agricultural community, we could have introduced it. One of our wineries in Shefford reached out to let me know that, as a producer and processor in the wine industry, La Belle alliance agrees with the amendment proposed in Bill C‑280. They said they see the amendment as additional protection for produces of perishable fruits and vegetables that could help protect small- and medium-sized agricultural businesses from suffering undue losses in the event of the insolvency of commercial buyers.
Le Potager Mont-Rouge said that this is a bill that they are really passionate about because it ensures that producer sellers are financially protected. Their profit margins are already razor thin, and they are impacted by many external factors such as price fluctuations, imports and climate change, to name but a few. They have been in a situation like this themselves and have lost thousands of dollars.
This testimony from these two businesses shows how important this bill is. The Bloc Québécois is attentive to their concerns, so we are in favour of this bill and support it. I will therefore begin by explaining its benefits and then talk about the division of powers and the litigation system.
First, passing the bill could demonstrate to the U.S. government that Canada has a trust mechanism in place for cases of buyer bankruptcy. Indeed, the lack of such a mechanism in Canada was one of the main reasons why, in 2014, the U.S. decided to withdraw U.S. buyer bankruptcy and insolvency protection from Canadian suppliers. The Canadian government had actually committed to developing a legal framework similar to the U.S. Perishable Agricultural Commodities Act, or PACA, and thus restoring coverage under their bankruptcy protection law for perishable foods to protect our industry from losses in the event U.S. buyers went bankrupt.
Groups have been calling for this since their PACA coverage ended back in 2014. This protection is necessary because food products like fresh fruit and vegetables are perishable, and a supplier cannot simply take them back and resell them if a buyer goes bankrupt. The protection is intended to allow licensed suppliers that have a contract with a U.S. buyer to take legal action against the buyer in the event of non-payment due to bankruptcy.
The new process will require the value of the shipment to be held in trust in the bankrupt buyer's name so that the producer can recover this amount as a creditor. Before 2014, Canadian fruit and vegetable farmers were protected by a U.S. law if they were doing business in the United States and a company failed to make payment or went bankrupt. This is no longer the case, and the alternate procedure developed between the two countries is very complicated, especially for our smaller businesses.
Quebec's agricultural model is at the family farm scale and on a human scale. Currently, without this protection, Canadian suppliers of fruits and vegetables have to go through a special process to file suit under this legislation in the United States.
According to the Canadian Produce Marketing Association, suppliers have to deposit a bond equivalent to twice the amount required in the suit. Most suppliers do not have that much in liquid assets and the major buyers know that all too well. They are then forced to negotiate downward with the buyer to get at least some compensation instead of losing everything, especially since this type of debt is not a priority in a business' bankruptcy. Suppliers who are not protected do not have much chance of receiving decent compensation through the ordinary process. Under this bill, the trust mechanism ensures that the purchaser is the guarantor of the value of the shipment, without owning it, in the event of a default due to the application of one of the two pieces of legislation. The legislation stipulates that the buyer has 30 days to make the payment under the contract.
Under the Canada-United States Regulatory Cooperation Council initiative, Agriculture and Agri-Food Canada and the U.S. Department of Agriculture are committed to establishing comparable approaches in order to achieve the common goal of protecting fresh fruit and vegetable vendors from Canada and the United States from buyers who are not concerned with their payment obligations.
I will start with a bit of background. The legislation was first was created in the 1930s to try to protect vegetable producers from the multiple bankruptcies of their buyers. It then became an important tool in rebalancing the commercial relationship between producers and buyers. It is essentially designed to allow a licensed supplier who has a contract with a U.S. buyer to sue that buyer under the act in the event of a default in payment because of bankruptcy. The process will allow the value of the shipment to be placed in a trust in the name of the bankrupt so that the supplier can recover the amount owed as a creditor. Given the speed with which produce is resold by a merchant or spoils, it is quite rare that a fresh produce repossession situation will meet these criteria. This means that perishable food producers would be given super-priority status so they do not have to wait for the bankruptcy settlement to recover their property. However, in the context of the above conditions, producer associations explained that 15 days is not long enough, given that typical payment terms are about 30 days. However, 30 days is too long to expect to recover a product that can be resold. This provision is not well suited to the structure of the supply chain, which often operates with intermediaries such as wholesalers.
Second, with regard to jurisdictions, the most sensitive issue is the fact that Canada cannot really quickly pass a law like the one in the United States. The Perishable Agricultural Commodities Act, or PACA, is a program to protect farmers in case of bankruptcy, but it also encompasses all of the dispute settlement mechanisms for perishable goods. In Canada, the Bankruptcy and Insolvency Act falls under federal jurisdiction, but the regulations surrounding contracts fall under the jurisdiction of Quebec and the provinces. A legal framework like the PACA therefore cannot be developed unless there are negotiations or a collaboration between the federal government and the provinces, which is what we are hoping will happen. One of the arguments put forward by the federal government is that most trade disputes are resolved before bankruptcy occurs and so most of the American framework deals with issues that fall under provincial jurisdiction. Since it is complicated to operate using multiple dispute settlement regimes, the federal government just gives up rather than trying to find even a partial solution to the problem. We need to work on that.
Third, the official figures are much lower and limit the timeframe for claims to about 15 days. The major difference between the government and the industry figures can be explained by the fact that in order for it to become an official statistic, the producer must file a complaint. Most of the time, producers do not necessarily use official channels because they are too complex, and even more so after the end of privilege. Producers often have special business relationships with their client and try to accommodate them. The argument that there are few claims or that they represent a small percentage of farm receipts is very subjective. Producers used to have protection, but no longer do. We are simply being asked to restore protection given that, because of its proximity and the nature of goods, the United States is by far the most important trade partner for perishable goods. Restoring this protection for our producers who do business with the United States is not far-fetched at all.
Although the government is putting forward some arguments to demonstrate that an insurance similar to PACA is not the best option, especially because of the cost of credit and shared jurisdictions, we will continue to defend this bill. We are under the impression that the Liberal Party seems to want to defend its friends in the banking sector.
In conclusion, this bill is simply a response to the agricultural sector. Two years after Canadian producers' preferential access to PACA was removed, the Standing Committee on Agriculture and Agri-Food studied the issue. A number of key witnesses appeared before the committee. The NDP, the Liberal Party and the Conservative Party have all, at various times, pledged to fix the problem. From our perspective, it is clear that we need to move forward with this bill.
I thank my Conservative colleague for introducing this bill. It can make things better for businesses in Shefford, as I said in my introduction. Obviously, the pandemic was a unique situation, and it also exacerbated various issues in the agricultural sector.
I want to say one last thing. As the member for Shefford, I proudly represent a riding where agriculture is at the heart of its economy. This bill is a common-sense measure that gives farmers a little extra help to get through this difficult period, for their mental health, for their survival. As we know, farm succession is already facing several threats. Perhaps this bill will address some of the concerns of the next generation of farmers and give them the desire to continue, to produce what we eat every day and what sustains us. We need farmers.
Once again, I thank my colleague for this bill. The Bloc Québécois will be voting in favour, to support our agricultural model.
