(UPDATED COVERAGE Oct. 3) The U.S. Department of Agriculture has revoked the privileged status Canadian produce sellers have enjoyed under the Perishable Agricultural Commodities Act effective Oct. 1.
Canadian agriculture department officials say they have been working in good faith and that the move by the U.S. contradicts terms of an agreement signed in late August.
“The change to Canada’s treatment under PACA is contrary to the spirit of the text agreed upon between the U.S. and Canada regarding the Regulatory Cooperation Council (RCC) Forward Plan released on Aug. 29, which states that Canada and U.S. will continue to examine financial protection measures collaboratively outside of the RCC,” according to a statement from Patrick Girard, senior media relations officer for the Canadian agriculture department.
Officials at the USDA’s Agricultural Marketing Service, which oversees PACA claims, notified Canadian officials of the change in an Oct. 2 e-mail. No AMS officials would comment on the record and the agency did not issue a news release on the change.
Canada was the only country with the preferred status, which meant Canadian produce sellers did not have to post surety bonds to pursue payment from delinquent U.S. buyers.
Canadian sellers now will have to post bonds equal to twice the amount they are attepmting to recover, in addition to the $100 filing fee thay have always had to pay.
The undated AMS e-mail told Susie Miller, director general of the market and industry services branch of Canada’s agriculture department, that the bond requirement “may be revisited” if Canada implements a system comparable to PACA. Miller did not immediately respond to requests for comment.
“As of Oct. 1, 2014, Canadian entities wishing to file a formal complaint against a PACA licensee must provide a surety bond prior to acceptance of the formal complaint for adjudication,” according to the e-mailed letter, signed Charles Parrott, deputy director of the USDA’s fruit and vegetable program.
Surety bonds for twice the amount of claims will making it difficult for small and medium operations to do business with the U.S., said Ron Lemaire, president of the Canadian Produce Marketing Association. Sellers would have to pay the existing $100 filing fee plus the surety bonds.
“That means someone who sold $200,000 worth of produce would have to post a bond of $400,000,” Lemaire said. “The produce industry just doesn’t have that kind of capital. Our government has let us down.”
Lemaire said the CPMA has been working with the recently formed Fresh Produce Alliance, the Canadian Horticulture Society and the Ottawa, Ontario-based Fruit and Vegetable Dispute Resolution Corp. to convince the Canadian federal government to act.
“It is very frustrating because this was avoidable if the Canadian government would have acted,” Lemaire said. “We had poor bureaucratic support until this year because they felt it wasn’t an issue that the U.S. would get tough on.
“But it’s being discussed right now in Parliament,” Lamaire said Oct. 2. “Just 15 minutes ago they said they have been working on it in recent months.”
It’s not surprising that the AMS revoked Canada’s privileged status, said Matt McInerney, executive vice president of the Irvine, Calif.-based Western Growers. He has been working on the issue since the PACA trust was established in 1984, he said.
“We were extremely optomistic earlier this year,” McInerney said. “Then this summer we discovered it appeared the Canadian government wasn’t going to act.”
Produce sellers in the U.S. ship about $10 million of fresh produce annually to Canadian buyers who don’t pay, McInnerney said.
Western Growers and several other industry groups issued a statement Oct. 1 indicating they didn’t think the Canadian government would resolve the problem. Other groups signing that statement were the Florida Fruit and Vegetable Association, the Produce Marketing Association, United Fresh Produce Association, Florida Tomato Exchange, the Northwest Horticultural Council and the Texas International Produce Association, which have all worked closely with the USDA for years on the issue, the statement said.
“The Canadian government has failed to live up to a 2011 pledge under the Canada-U.S. Regulatory Cooperation Council (RCC) to implement a similar program to protect U.S. companies that export to Canada,” the industry groups wrote.
“The RCC has identified 29 regulatory barriers to trade, including the need for Canada to initiate a payment protection program similar to PACA,” according to the letter. “The RCC is scheduled to meet Oct. 8 in Washington D.C. to announce the continuation of the trade resolution process for many industry sectors. It has said it won’t consider a produce payment protection program at the meeting.”
McInerney said it is his understanding that U.S. and Canadian officials are set to meet next week to discuss the PACA issue, but the meeting is not open to industry or the public.