U.S. and Canadian industry leaders say there are fresh signs that Canada is seriously considering how to incorporate a PACA-like system to protect fresh produce suppliers in Canada and the U.S.
The U.S. and Canada recently agreed on a plan to bring the two countries together in regulatory approaches, enhance security and boost trade and travel.
The plan, announced Dec. 7 by Canadian Prime Minister Stephen Harper and U.S. President Barack Obama, endorses similar approaches to financial risk mitigation tools for Canadian and U.S. fruit and vegetable suppliers. U.S. and Canadian produce marketers for years have been urging Canadian authorities to adopt a financial protection similar to the trust provisions of the Perishable Agricultural Commodities Act. PACA protection allows fresh produce marketers to have first priority on assets if a buyer declares bankruptcy.
The U.S.-Canadian action plan addresses common approaches to food safety regulation, streamlines certification requirements for cross-border shipping and other issues. But the mention of a Canadian system for financial protection for fresh produce suppliers in the event of bankruptcy of a buyer attracted the most notice.
“A complimentary, harmonized approach would be invaluable for the North American trading block,” Matt McInerney, executive vice president of Irvine, Calif.-based Western Growers. “Anything that progresses that down the road we are very supportive of.”
McInerney credited Canadian trade leaders who have been working for years to highlight the value of a Canadian system that would resemble PACA.
The issue of a Canadian risk mitigation system came up during meetings between the two countries’ leaders, said Fred Webber, incoming chief executive officer and president of the Ottawa-based Fruit and Vegetable Dispute Resolution Corp.
“It should be a pretty clear signal from the top to the bottom that this is of interest and people need to work on it.”
Webber said he believes there has been a lack of understanding in Canada on how important reciprocity is between the U.S. and Canada on issues of dispute resolution and getting paid. While the DRC addresses trade disputes in Canada, Webber said the industry has been waiting for a solution that would extend protection to unpaid shippers.
Webber said authorities in Canada are exploring steps to establish a PACA-like system.
In Canada, contract law issues are typically relegated to the provinces. That is different than in the U.S., he said, where interstate commerce is covered under federal authority.
“It is not so clear (in Canada) if the government has that power, or if they have to go into an agreement with the provinces,” he said.
Webber said there may be a perception the issue is more important to U.S. exporters than to Canadian growers.
“It is not. It is incredibly important to Canadian producers as well,” he said. “If a big company goes down (here), it takes down small farmers and wholesalers.”
McInerney said the U.S. model may not be the same as adopted in Canada, but needed elements are protection of the producers — Canadian growers and those from the U.S. and other countries — to have standing to get recovery for monies owed in the event of a bankruptcy.
McInerney said he expects meetings about moving toward the risk mitigation system in the first quarter of 2012.
“The fact the president and prime minister have put risk mitigation in the action plan moving forward is very positive for industry on both sides of the border,” said Ron Lemaire, president of the Canadian Produce Marketing Association, Ottawa. “It is definitely going to insure that the bureaucratic process keeps the issue moving forward.”
More information is at www.borderactionplan.gc.ca.