The $2 billion worth of Canadian produce sold south of the border may be in jeopardy.
The U.S. has made the decision to rescind Canada’s preferred trading status and its access to the United States Perishable Agricultural Commodities Act (PACA).
The act allowed Canadian farmers and produce distributors to file a claim against U.S. buyers to recover unpaid bills for imported commodities – usually root vegetables, greenhouse produce, apples and cherries.
Buyers were obligated to follow trading rules between the two countries or risk losing their licence.
“It was a big stick,” said Ron Lemaire, president of the Canadian Produce Marketing Association. “You filed a claim and you got your money.”
The cost of filing a claim was $100, but now growers and distributors trying to recoup unpaid bills will need to jump through extra hoops. They must post double the value of the outstanding debt to go through the mediation process to try and claim what’s owed.
That means to retrieve a $100,000 claim, a farmer will need to post a $200,000 bond.
Lemaire says it’s just not feasible for most farmers to tie up that much cash. He foresees a large increase in bankruptcies and losses.
The decision was made following Canada’s inability to form a dispute resolution system similar to the one that exists in the U.S.
Lemaire says Canada has been discussing that aspect of the trade agreement for decades without instituting a program to protect U.S. buyers, and the U.S finally lost patience.
Lemaire says about 10,000 small farmers sell to the U.S., but the vast majority of them – about 75% – sell $85,000 or less a year across the border through dealers.
Without any enforcement in place giving U.S. buyers incentive to pay, Lemaire predicts an escalation of losses into the tens of millions annually.
The Fresh Produce Alliance has been meeting with government representatives and members of the Liberal and NDP to push their point.
The Alliance hopes the government can implement a Canadian payment protection system similar to the U.S. in order to encourage the U.S. government to reinstate Canadian access.
Acting assistant deputy minister of agriculture, Fred Gorrell, said U.S. actions were "disappointing" and "surprising" and the department of agriculture has talked with the U.S. embassy and the USDA.
The government, he said, is looking at what it can do to minimize impact on Canadian farmers and the process to deal with U.S. "slow payment, partial payment and no payment" is expected to be ironed out by early 2015.
The bankruptcy insolvency component, which has been the sticking point in dealing with the U.S. should be resolved by end of 2015, he said.
Of course the timeline is contingent on the present federal government remaining in power, he agreed.