A day of reckoning may soon arrive for Canadian produce exporters who ship to the U.S. market.
At the request of the produce industry, the federal government may soon withdraw preferential treatment for marketers of Canadian fruits and vegetables exporting to the U.S. under the U.S. Department of Agriculture’s Perishable Agricultural Commodities Act trust protection.
An alliance of Canadian fresh produce industry leaders is sounding the alarm over the lack of progress there to set up a PACA-like trust system for U.S. and Canadian sellers of produce.
U.S. officials are warning that Canada’s special status in the USDA’s PACA trust could soon be revoked if Canada does not implement a similar payment protection program, according to a news release from the Fresh Produce Alliance, a joint initiative of the Canadian Produce Marketing Association, the Canadian Horticultural Council and the Ottawa-based Fruit and Vegetable Dispute Resolution Corporation.
Industry members from both countries are asking that the Canadian government keep the commitment it made under the Canada-U.S. Regulatory Cooperation Council, according to the release.
In 2011, the Canadian government committed to establish a program protecting produce suppliers from buyers that default on payments. However, little progress has been made, according to the release.
The unresolved issue was not included in the second round of Regulatory Cooperation Council agenda, announced in late August by Canadian and U.S. officials. Instead, the issue of financial protection for Canadian and U.S. fruit and vegetable sellers in Canada was assigned “outside the RCC,” perhaps to be addressed by the U.S.-Canada Consultive Committee on Agriculture.
The PACA is 30 years old, and the inability of the Canadian government to resolve the issue is extremely frustrating to U.S. exporters, said Matt McInerney, executive vice president of Irvine, Calif.-based Western Growers.
“We had great hopes for the Regulatory Cooperation Council process, but we won’t be included in the RCC follow-up phase,” he said.
While the RCC did result in Canada moving to a unified trust system, McInerney said that license does nothing before a bankruptcy court. The PACA gives priority to fruit and vegetable suppliers in bankruptcy proceedings.
“We have been signalling, begging, cajoling, doing everything possible to get the attention to say we need to get some comparability here, and we continue to be ignored,” he said.
Ron Lemaire, CPMA president, said the Canadian fresh produce industry is not happy with the lack of progress.
An outcry by growers is needed to make sure the issue becomes important to politicians in Canada, he said, and Canadian Minister of Agriculture Gerry Ritz needs to be a champion for the issue.
“At this point, there is frustration on both sides of the border because we have been dealing with the issue for over 30 years,” he said, calling the threat to Canadian exporters “very real.”
McInerney said the U.S. produce industry has made it clear that if progress doesn’t appear to be a priority for the Canadian government, the USDA should should treat Canadian marketers like Canada is treating U.S. exporters. McInerney didn’t speculate if or when the U.S. government will deliver that message.
“But it should come as no surprise that this day of reckoning was going to be upon us at some point,” he said.
Removal of benefits could be announced any day, according to the release from the Fresh Produce Alliance, putting Canada’s $1.6 billion in produce exports to the U.S. at higher risk of payment default.
“Canadian exporters will be hit extremely hard because they will have to meet costly bonding requirements to achieve the same level of protection they have enjoyed in the past,” Jim DiMenna, president of Red Sun Farms, said in the release.
Canada is the only country in the world that is exempt from bonding requirements in PACA disputes, McInerney said. Exporters from all other countries have to file bonds with the PACA equal to twice the amount of any claimed damages in any formal reparation proceeding.
Canadian industry leaders said posting that bond money in PACA disputes will be a burden.
Given that three quarters of Canada’s 10,000 fruit and vegetable producers are small businesses with average sales of less than $85,000 per year, the added costs could be crippling, according to the release. Failure to resolve the issue could prove disastrous for Canadian exporters and their communities, according to the release.
In a letter sent to Canadian government officials this summer, the Fresh Produce Alliance asked for “urgent action” by the government of Canada to put in place a limited statutory deemed trust for the fresh fruit and vegetable sector.
As far back as 1999, the letter said that members of the Canadian Horticultural Council have unanimously adopted a series of resolutions seeking resolution to issues related to financial protection for producer sellers through a “U.S. PACA-like” system or other means.
“The time is long past for reciprocity to be removed at this point in time,” McInerney said. “ It will be a sad day if we have to revert to this, but it is not for lack of trying to find pathways for some workable compromise solution.”