Clearly as retaliation for inaction on the part of Canada with regarding to establishing some type of trust protection from bankruptcy for all fresh produce shipped into the country, the U.S. Department of Agriculture has revoked the specialized treatment Canadian shippers have received under the Perishable Agricultural Commodities Act for decades.
In a letter dated Oct. 1, 2014, and obtained by The Produce News, Charles W. Parrott, deputy administrator of the USDA Fruit & Vegetable Program, informed Canadian officials that because the country does not have a “dispute resolution system comparable to the U.S. system,” as of that date Canadian shippers will now be treated like every other foreign shipper utilizing the PACA’s reparation services.
Though the action was taken with regard to PACA’s dispute resolution system, there is no doubt it was designed to express frustration over Canada’s inability to form a trust protection program similar to the one that exists in the United States.
In recent weeks several produce organizations on both sides of the board have warned Canadian officials that this action was imminent because of the failure to address the trust protection issue. In realty, with the Dispute Resolution Corp., Canada does have a system to handle disputes that is similar to what exists in the United States. What Canada does not have is a trust protection program that puts shippers of fresh produce in a priority position when their product become part of a bankruptcy proceedings.
Canadian officials have been working through a long list of issues of reciprocity with the United States for a couple of years now with one of those being the trust protection concern for fresh produce. Recently, Canadian officials took that issue off the table declaring that a change in the country’s fresh produce licensing addressed the problem.
Reaction disputing this from both sides of the border was swift.
Industry leaders from Western Growers, Florida Fruit & Vegetable Association, the Produce Marketing Association, United Fresh Produce Association, Florida Tomato Exchange, the Northwest Horticultural Council and the Texas International Produce Association expressed frustration at a lack of progress toward reciprocity with a joint press release earlier this week.
“The inability of the Canadian government to resolve such a longstanding issue — one it committed to resolving — is a missed opportunity and extremely discouraging to U.S. exporters,” said Mike Stuart, FFVA president. “We need leadership from Canada to find a path forward to a solution. Producers in both countries depend on it.”
Matt McInerney, executive vice president of Western Growers Association, emphasized the importance of a payment priority program for U.S. shippers. “Protections afforded under PACA may seem less than sexy and may appear insignificant — until you don’t get paid. Then they become one of the most valuable protections afforded to a family farmer.”
A little more than a week ago, the Canada-based Fresh Produce Alliance warned this action would occur if Canada didn’t address the trust protection issues.
“According to data collected by the Fresh Produce Alliance, American suppliers are losing at minimum $ 10 million annually through Canadian buyer insolvency,” said Anne Fowlie, executive vice president of Canadian Horticultural Council, which along with Canadian Produce Marketing Association and the Fruit & Vegetable Dispute Resolution Corp., makes up the Fresh Produce Alliance. “This is, coincidentally, about the same amount that Canadian suppliers are recovering each year through the U.S. Perishable Agricultural Commodities Act Trust. Hundreds more Canadian suppliers depend on the security PACA offers for ease of mind in their trade relationships.”
On both sides of the border, the USDA’s action on PACA claims is considered a direct response to the trust fund inaction.
McInerney of Western Growers explained that under PACA rules, Canadian shippers have been treated just as U.S. licensees for decades. That has allowed Canadian shippers to pursue a formal complaint without posting a bond worth twice the amount of the damage they are claiming.
Under this new protocol outlined by Parrott of the USDA, disputes originated by a Canadian shipper moving to a formal hearing stage will need to be accompanied by the bond, just as disputes are treated by shippers from any other country.
In his letter to Susie Miller, director general of Agriculture and Agri-Food Canada, Parrott said that in the future if Canada does implement a dispute resolution system similar to the PACA, the need for a bond would be revisited.
The Fresh Produce Alliance was quick to react, aiming its displeasure at Canadian officials rather than the U.S. action.
“Without PACA access, Canadian companies trying to recover unpaid bills will have to post double the value of what they are trying to recover as bond to make a claim,” stated Ron Lemaire, president of the CPMA. “For example, a small producer owed $ 50,000 would have to post $ 100,000 cash to make a claim, effectively removing $ 150,000 from their cash flow/operating line for up to one year. Many cannot afford this [and] will simply have to walk away, losing what is rightfully owed to them.”
Situations like this can devastate not only the producer, but also all the businesses connected to them and hits rural communities particularly hard, according to the Fresh Produce Alliance.
“The Fresh Produce Alliance has repeatedly briefed and met with various ministers and [members of Parliament] to raise the importance of the issue,” added Fowlie, “yet the government has not taken necessary mitigating action, despite warnings that the removal of PACA access was imminent without confirmation of a Canadian solution.”