I appreciate the government taking the position to help out here.
Following on what both my colleagues have said, if we don't have the minister here, it's an announcement, really. It's saying that the House recognizes the industry, the call for the problem to get resolved and to meet with the producers. I have a sense from the discussions the minister has had—and I appreciate the fact that he has been out talking, too—that he's been briefed on the whole issue of diafiltered milk and has met with a number of the dairy producers, so I'm convinced by his actions that the 18 days is not the issue. I think the issue would be not having come to this committee. That would be an issue, I think.
If it just became an announcement to meet and not do anything, we're going to break before we would hear it as an announcement, rather than coming as something from this committee. We've all agreed on the significance that it has to this industry, not only to the producers but also on the processing side, so I would support that.
I'm seeing some nods, so I think you could request it and it would happen. I think everyone, not just in this committee but on the dairy and the processing side, really needs to hear from the minister, and I'm almost convinced that he's prepared to do that because he's had some ongoing consultations.
Are we ready to vote on the amendment?
All in favour of the amendment, please indicate.
(Amendment agreed to)
The Chair: Thank you, everyone.
Now we'll have to vote on the main motion, as amended by Madame Brosseau and Mr. Warkentin.
You have it in front of you, the original motion, and then we have the amendments, with a date, “18 days” as of today, instead of “30 days”, and the other amendment by Mr. Warkentin, “That the minister appear in front of the committee at his earliest convenience”.
Those in favour of the motion, please indicate.
It looks like we have unanimous consent. Thank you, everyone.
(Motion as amended agreed to [See Minutes of Proceedings])
The Chair: The other thing we have to do very quickly before we move on to our guest is the approval of the budget for the study. The total amount requested is $6,900.
If it's the pleasure of the committee, we need a motion to adopt the—
Sorry to our witnesses for the little bit of a delay, and thank you very much for being here with us today.
We shall now get into the business of PACA, the United States Perishable Agricultural Commodities Act.
With us today by video conference, from Vegpro International Inc., we have Monsieur Jocelyn St-Denis, executive director of finance and business strategies. Welcome, Monsieur St-Denis.
From the Fruit and Vegetable Dispute Resolution Corporation, we have Mr. Fred Webber, president and chief executive officer. Welcome, Mr. Webber.
From the Ontario Fruit and Vegetable Growers' Association, we have Mr. Jason Verkaik, chair. Again, welcome to you all.
I'll allow 10 minutes. We will start with Mr. St-Denis, as he is on video conference, and we never know how that will go.
Good afternoon and thank you for the opportunity for Vegpro International Inc. to appear before this committee studying PACA, the Perishable Agricultural Commodities Act.
My name is Jocelyn St-Denis and I am the director of Finance at Vegpro International. Our company is located in Sherrington, south of Montreal, in Quebec. The shareholders of our company are five family farms that decided to coordinate their production and pool their marketing. As the employee of an agricultural producer, my main objective will be to acquaint you with our reality as farmers.
Whether we are talking about a small family farm, a co-op or a larger enterprise, the challenges are many in 2016. We must grow a quality product, sell it at a good price and receive payment for it. This allows us to live from our work, invest in maintaining our production capacity and comply with all of the increasingly numerous regulations, be it in the area of health and food safety, or the environment and sustainable production, in addition to a phenomenon we cannot control, the weather.
Vegpro produces iceberg head lettuce, and romaine, young shoots of the spring mix type, and baby spinach. We also produce onions, carrots and several other vegetables on a smaller scale. We also package and market these products for other small farms in our area who do not have warehouses or packing equipment.
Most of these fruits and vegetables are highly perishable and when they are ready for harvest, they must be sold. All of that can be organized, but we all know that the weather has the last word. All you need is a warmer period, a rainstorm, and suddenly you have twice the anticipated crop.
Every day, every producer has to sell his or her produce because if they do not do so, they run the risk of losing it. So, early in the morning, we assess the quantities of produce to be harvested and we do our sales work. Everything has to be sold before noon, because our produce has to be shipped that very evening. Sometimes we have to sell to clients we do not know, and our decisions have to be made quickly or otherwise we lose the product.
Since the product is perishable, we are at the mercy of the market, and at Vegpro International Inc., we deal with that reality. I will give you a few examples.
A client may refuse to pay if he feels that the quality was not satisfactory, and we will realize that 21 or 30 days later when the invoice remains unpaid.
It happens that market prices drop suddenly below the agreed-upon price, and the client will refuse to pay without concluding a new agreement.
A client may refuse the product at his door, five hours away from us. Then we must find another client for that product rather quickly, because the carrier has another client to serve when he returns and he has to empty his trailer. We accept the first client who wants to buy the product, and we assume the risks. It also happens sometimes that a client simply refuses to pay for no reason, or he may have gone out of business or gone bankrupt.
Vegpro, its shareholder farms and other producers in Quebec have suffered losses following several bankruptcies over the years, such as Michel Desjardins Ltée, Les Produits Golden Touch, Fruits Atlas International Ltée, The S. Baizer company, Fruits Botner Ltée, Gérard Viau Inc., National Fruits Inc., who were all distributors. For some time now, fruit growers in Quebec have been seeking bankruptcy protection, the most recent ones being Les marchés 4 saisons, La Fruiterie de l'Outaouais, the Groupe Épicia and Les Jardins Valmont. When a client of the industry refuses to pay or goes bankrupt, more than one producer suffers, because that client usually had several suppliers.
The industry has put in place a dispute settlement organization, the Fruit and Vegetable Dispute Resolution Corporation, whose representatives are here today. When there is a conflict, both parties must agree to use its services. Even if it is shown that the client is in the wrong and that he must pay, we have no legal way of obliging him to do so, and we cannot recover or seize our product, as opposed to a manufacturer who makes tables or chairs.
In the United States, there is the PACA. I will not do a presentation on how that legislation works, but on its results.
The American government and the industry put it in place because they recognized the financial risks the farmers faced as well as their high losses. An American farmer who sells his product in the United States is automatically protected against bad practices or his clients' bankruptcies, because under the law he has rights and he can recover the money that is owed him. In addition, those who purchase agricultural products have obligations under the PACA. The consequences of bad practices are considerable and can even lead to their losing the right to continue to do business.
In Canada, the farmer has no protection and has even less than those who work in other sectors of activity, because his or her product is perishable and is consumed quickly. When someone goes bankrupt, even though the law is the same for everyone, we no longer have access to our product.
Moreover, aside from bankruptcy, some people refuse to pay. An average-sized farm—usually a family farm—does not have many clients and is at the mercy of blackmail. What happens when there are financial losses? The producer cannot pay his suppliers and cannot reimburse his credit line. It is harder for him to maintain his infrastructures and equipment. The banks should view protection for farmers favourably, because this will make loans more secure.
In addition to the financial losses incurred by farms, the fact of not having a PACA in Canada has led some Canadian producers to prefer to sell their product in the United States, because it is less risky for them. Moreover, some American producers are refusing to sell in Canada, or, when they do so, they won't necessarily sell us their best product. In certain cases, this forces Canada to source produce in other countries where the food safety risks are higher.
Our situation got worse in 2015 when the United States abolished protection for Canadian farmers that was equivalent to what American producers have. Before that, when we sold our produce to the United States, we had the same rights and the same protection under the PACA as American producers had. They took away that privilege because Americans who sell to Canada do not enjoy equivalent protection.
In order to benefit from the protections afforded by the PACA, we have to deposit twice the value of our claim with our complaint. A truckload of fruit or vegetables may be worth between $10,000 and $50,000. Given the funds they must find and immobilize for a certain period of time, a lot of small farmers give up and take the losses, because they are unable to deposit the required sums. As of now, we are even beginning to see Canadians who choose to invest and settle in the United States rather than in Canada.
In Canada we have never had any protection, and we have for a long time been asking for a system comparable to the American one. The PACA allowed Vegpro to recover more than $100,000 when a single American client went bankrupt, but we saved much more than that. We were protected from losses due to unfair practices on the part of American clients because we had rights and they had obligations. Henceforth, those rights are much more difficult to access and many farmers consider them inaccessible.
Canada has to protect its food sovereignty, and in order to do so it must ensure that farms of all sizes that feed the Canadian population continue to be in business and to produce quality fruit and vegetables that can be consumed safely.
I thank you for your attention, and for your interest in our situation.
Thank you, Mr. Chairman and members of the committee.
I appreciate the opportunity to discuss with you the importance of a Canadian-made deemed trust in relation to fruits and vegetables. This Canadian-made legislation would protect fruit and vegetable farmers and sellers within Canada. The creation of this tool would also reinstate Canadian fruit and vegetable farmers and sellers to preferred status, which was recently revoked with our largest trading partner, the United States.
My name is Jason Verkaik. I am a fourth-generation family vegetable farmer in the Holland Marsh in Bradford, Ontario. I also chair the Ontario Fruit and Vegetable Growers' Association. I'm here to share some stories about how farmers in the growing area where I farm have been impacted negatively due to the lack of this important tool.
I was able to listen to the standing committee last Monday in regard to the deemed trust. A few themes caught my attention, one being that some people do not think this is a big enough problem to warrant a no-cost-to-government, industry-accepted, highly effective tool that was once promised to our largest trading partner.
I strongly disagree, so I decided to talk with farmers in our area. This is what I found out.
In 2008, a company called Top of the Hill Produce was forced into receivership. There was over $3 million left owing to vegetable farmers for carrots, onions, beets, cabbage, and potatoes. I was able to talk with 14 farmers who were affected by that. Not one of the farmers was able to collect anything for these outstanding receivables. The range in what was owed was as high as half a million dollars to as low as $15,000, with an average of $80,000 to $100,000 per farm.
I know the larger farms had more money left owing; however, if you take a percentage of their total sales, it represents 10% to 40%. On average, farms run a profit of 3% to 4%. These numbers would not be captured in the data that gets presented. This does not make it any less real.
What is also important to note is that there was no dispute on the quality of the vegetables, and this buyer was paid for what he used the farmers' vegetables for. Some of the farmers had to remortgage to stay in business near the end of their career.
In 2011, a vegetable packing facility went into receivership. They were called Holancin Farms. I was able to find 12 farmers with a total of over half a million dollars uncollected, ranging from $5,000 to $200,000. This does not even represent the total owing to farmers, just the ones I could catch up with.
Unfortunately for some farmers, they were involved in both of these insolvencies.
In 2014 there was another bankruptcy. Not only did they owe farmers money, but the farmers were also victims of a trickle-down effect of slow and no pay.
These examples are of Canadian losses due to insolvency.
I'll briefly tell you my experience. I had done business with one company for about 10 years. It was very good business. We had a strong relationship. We were doing close to $1 million of business between the months of October and May in any given year. Slowly, one-month regular payment turned to slow pay, which eventually turned to no pay. I was out about $143,000.
I continued to try to collect the debt and was assured I would get it. Remember, I had had a good business relationship for 10 years. After more time had passed, I lost my patience and said I would need to take stronger action. His words to me were that if I took legal action, I would force him into bankruptcy, and then I wouldn't see a dime. Shortly after that I received a cheque for $20,000 and a commitment to slowly pay what he owes. I'm still waiting to collect more, as are a bunch of other farmers, for a total of close to three-quarters of a million dollars.
Now I'm going to cite an example of having lost our preferred status with PACA. There's a farmer-packer in our area who had sold $78,000 worth of vegetables to a customer in the United States. He went through the proper process through PACA to collect what was not being paid. There was no dispute on the quality of the vegetables. During the process, our preferred status under PACA was revoked due to the Canadian government's not being able to come up with a Canadian-made deemed trust.
He was still able to access PACA; however, he was told that to be able to continue, he'd have to post double bond, which was $156,000. He was unable to come up with that money in the 90-day time frame. The case was considered resolved. Obviously that's a bad choice of words, but that's what comes across on the data sheet.
The buyer who purchased the produce was a broker, and he had no company assets outside of a couple of telephones and a desk.
When farmers fail to get paid due to insolvency, some need to remortgage to keep going. They also lose the ability to reinvest back into their farms. They lose out on being able to tap into government programs for innovation and infrastructure, such as Growing Forward, and environmental farm plans.
We do over $10 billion in fruit and vegetable trade between Canada and the United States. This Canadian-made deemed trust, along with single licensing, is protecting our food security through protecting our domestic supply and our needed trade. History teaches us that nations that take care of their food supply flourish. If a nation does not take the necessary measures to protect the very ones with the knowledge and the ability to grow food, it does not bode well for long-term sustainability.
Farmers have many risks. Weather is number one. They accept this risk and respect the challenge it brings. However, there is another kind of weather they should not have to endure, and that is whether or not they get paid. I strongly and respectfully encourage this committee to brief the minister on this need in a timely fashion and on the urgency that comes with it.
Only one solution works for the industry, our United States trading partner, and the uniqueness of Canadian law: a Canadian-developed deemed trust. This file has been on the table for half a generation. It has been studied and reviewed for decades. Over the past five years it has been brought to the forefront.
There has been thoughtful, respectful, and accurate development of a Canadian-made deemed trust by our industry through Professor Cuming. We have unanimous support within the industry to move this legislative framework forward, and we are looking for your support.
Mr. Chairman and members of the committee, thank you for this opportunity to speak to you regarding the Perishable Agricultural Commodities Act, or the PACA, as it is more commonly known.
My name is Fred Webber. I am the president and CEO of the Fruit and Vegetable Dispute Resolution Corporation. Before moving to Canada, I was formerly a United States Department of Agriculture civil servant working in the PACA branch regarding the trust and dispute resolution under PACA. I am a dual citizen. I have been a proud Canadian citizen for 10 years.
I'm here to talk to you about, one, the framework of the PACA and our loss of reciprocity; and two, why the U.S. deemed trust provisions have been so successful and how that model could be recreated here in Canada.
First, PACA comprises two distinct components: an administrative division responsible for licensing, bonding, and dispute resolution, which is similar to the functions of the organization I represent, the DRC; and a deemed trust. For over 50 years, reciprocity of access to dispute resolution services existed between Canada and the U.S. Canadians had access to PACA dispute resolution and Americans had equally unencumbered access to Canada's Board of Arbitration.
Unfortunately, two events occurred that challenged this unique relationship. The first was that in the seventies, the Supreme Court of Canada ruled that the Board of Arbitration did not have the authority to rule on matters of contract law, disabling dispute resolution services we had up until that point. The second was that in the eighties, the USDA amended the PACA to include a deemed trust.
Although Canadian legislation has since remedied the dispute resolution component, the DRC, we are still missing a deemed trust provision, which is ultimately why the USDA removed Canada's preferred access to their dispute resolution services. I repeat, it was the lack of a deemed trust that caused them to remove the preferred access to the dispute resolution piece. That is a very confusing piece that has confused people for a couple of years.
This brings me to my second point, a deemed trust. The trust is a tool used by sellers of produce to recover the moneys made from the sale of their produce. Simply put, the farmer and other sellers retain an ownership interest in the product until they are paid.
The product, the account receivable pending from the resale of their product, or the cash on hand from selling that product remain the property of the seller. It is restricted to those assets. The produce seller's claim does not extend to other assets, and if these specific assets do not satisfy the seller's claim, the seller will receive only a partial payment. The trade understands this and is okay with it. They are not looking for 100% guarantee. A 100% guarantee encourages moral hazard. Why would you be careful who you sell to if you're going to have a guarantee? One thing the trust does very well is encourage people to do their due diligence and sell to people with a track record or else know that they're selling to a new person and do it carefully.
Contrary to what some may think, the trust does not cost the government any money. There is no pot to pay into. There is no pool of money. There is no cost to taxpayers. This system is doable in Canada, and in fact Professor Ron Cuming has drafted suggested legislation wording on how a deemed trust could be implemented in Canada.
Professor Cuming is a well-known law professor at the University of Saskatchewan, respected for his expertise in the relationship of provincial and federal laws related to bankruptcy. You have a short version of his biography, and I apologize for the shortness; we didn't have time to have it translated. If you look him up on the Internet or at the law school, you will see a very long list of the bankruptcy files he has worked on. He is definitely what I would call one of the smartest people in the room on this particular issue. Furthermore, Professor Cuming has advised numerous provincial governments on drafting of their respective bankruptcy and insolvency legislation.
We believe this document, which has been circulated to you, represents the foundation for the preferred solution of the industry. First and foremost, it protects Canadian farmers, packers, shippers, and others in the produce industry in the Canadian marketplace, and it will restore the preferred rights under PACA that were lost in October of 2014.
I'm looking forward to taking your questions, but before I do, I would like to make three specific clarifications on issues raised at last Monday's meeting. You may recall that several of the presenters deferred questions to me; that is only because I was the one who worked directly with Professor Cuming on some of these other files.
First, on the federal-provincial division of power, this issue has been unclear.
In the last couple of years in particular, working with government officials, both elected and in the public service, we worked through a lot of that. It is unfortunate that several years ago industry and the government could not have communicated better to understand exactly what was in the Canadian Constitution that was stopping a harder look at the PACA trust. Industry simply did not understand the insolvency-solvency piece. The federal government, we now all understand, cannot step in until the buyer is insolvent.
The United States is able to use the PACA trust before there is bankruptcy. We are not asking for that. The dispute portion of this has been resolved. That is why the DRC was created. A buyer has to have a DRC membership or a CFIA licence. Assuming that the amendments to the Safe Food for Canadians Act go through as intended, a DRC membership will be a condition of doing business. The part about the industry's need for getting paid by a solvent firm has been addressed. We would argue that Professor Cuming's most recent draft removes any ambiguities and clearly focuses on the buyers afer they are insolvent, which we believe places the issue solely within federal jurisdiction.
Second, the concern was brought forward that banks would be reluctant to extend credit to those in the produce industry as a result of any trust. In my experience working for the USDA, produce buyers were no less likely to be extended credit. Furthermore, I respectfully tabled to the committee an opinion letter written by Rachel Spiegel, an attorney and economist. Based on Ms. Spiegel's interview with banks in the U.S., she claims banks see the trust as a net gain for agricultural lenders lending to agricultural clients. She further reports there's been no decrease in loans following the implementation of the trust in the U.S.
I would also add that the main banks here in Canada are also operating in the U.S. and are already subject to the PACA trust. I have heard nothing from any bank specifically referencing losses because of the PACA trust. The trust is not new to them. They've been operating in the U.S. marketplace subject to the PACA trust.
If you look at Ms. Spiegel's bio when that report comes around, you will see her law firm represents food and banks in both countries. I would highly encourage you to look at it.
Finally, the statistics presented to you last Monday suggest the problem is small. I respectfully disagree. Unfortunately, numbers quoted were understated. Instead, I would refer you to the Conference Board report discussed on Monday. The results of the Regulatory Cooperation Council stakeholder meetings and the Aon report all state the losses in the produce industry from insolvency average between $18 million and $25 million per year. I would be happy to provide those reports to you.
Thank you. I would be pleased to field your questions.
I believe there are two very easy answers. It is a very complicated issue, as you've just heard. Trying to get one's arms around it is very difficult. Even in the days when we started in the regulatory co-operation council, there were still people who believed there was a pool of money and that somehow the Canadian government was being asked to write a cheque. It took a long time to get that out of the system and explain to people that it wasn't the case, that there were no cheques being written.
Also, the Americans in particular do what I'll call fist-pounding, asking to have this fixed. You guys can do this in the U.S. We have nothing in Canada. They continually were asking for what they called a temporary restraining order. Part of that is because they themselves don't fully understand the tool they have. The request for a temporary restraining order, quite frankly, when we were talking to Industry Canada, now Innovation, is where they stuck. They said that in Canada, you can't do that. That's the use of a trust before the company becomes insolvent, so you can't do that.
We've stepped back and said, “Oh, wait a minute, here's the sticking point that a lot of people don't understand.” Prior to the election—and I promise I won't get into politics here—I believe, in working with the civil servants, we had agreement that this, in fact, could be done.
We went back to Professor Cuming and said, “Look, this is what we've learned.” In the U.S. and Canada—two countries separated by a common language, as they say—with the industry trying to explain something it truly didn't understand themselves, there was a huge amount of confusion. It has only been very recently, since we went back to Professor Cuming and said, “Fix this; straighten this out”, that we all understand what's happening.
I have to confess that years have probably been wasted over misunderstandings.
Thank you for your wonderful presentations.
Jason and I could probably have a conversation about which has richer farmland, my riding of Essex in southwestern Ontario or the Holland Marsh. We have the Hillman Marsh, actually, down in my riding.
With my being from a riding that represents agriculture very heavily, I know how important PACA is to the fruit and vegetable growers in my region. The lack of action by the Conservative government over the past two years has cost family farms tremendously. I might even go so far as to say we've lost family farms, which is something we simply can't afford anymore. We see many family farms disappearing from our landscape, unfortunately, and PACA is one reason that's been happening in southwestern Ontario.
I think we all can agree that sellers aren't protected, that this puts farmers at peril, that this is a threat to the family farm. I'm going to give you an example. In York—Simcoe, there was a farm that lost $38,302 on a load of produce to the U.S. because they didn't have the funds to post a double bond. I think a lot of people don't understand the double bond. I wonder if you can speak a bit about that, and the impacts on family farms when they have to consider being able to post a double bond, and if you think farms are losing out and potentially even being eradicated because of their inability to put up those funds.
The double bond is an interesting phenomenon. One of the questions that came up last week was “Why?”
It was originally put in to guard against frivolous complaints. The guy might file a claim, but he would in fact owe the buyer for freight or other things. However, double does seem a bit high.
The problem with it, in the context of your question, is to look at what's happening. The farmer has harvested his crop. He has sold his crop and can't have his money. He's already out of pocket $50,000.
Now he has to go and find an organization in the United States that's recognized by the USDA, and this isn't a bail bond kind of thing. This is a cash bond. You have to find somebody who will give you essentially a cash bond equal to twice that. He's out of pocket $50,000, and now he has to find an asset of $100,000 that isn't already pledged to somebody else to get that cash. It just doesn't happen.
If you look at some of the statistics, and I won't go into the weeds here today, less than 1% of the claims filed with PACA from outside of the U.S. and Canada go formal.
It's not because, as the record says, they're resolved. Resolved just means a formal document was never filed. It means they couldn't afford to move forward.
Let's just talk about reciprocity.
The first goal is to help Canadian producers—farmers, shippers, whatever. In terms of just the U.S., there need to be a lot of things for the two countries to have this kind of a reciprocal relationship.
One is federally sponsored inspection. Produce is an industry that regularly has problems. How red should a strawberry be? How soft is too soft? Is the banana yellow enough? There has to be somebody to resolve those kinds of disputes, so we both have federally sponsored inspection services.
We both have now, with the PACA and DRC, a way to resolve disputes. There's a licensing regime that helps vet out the bad characters. You have to post a bond if you've had a problem in your past and you want to be in.
The third part of that is the deemed trust. It is the part that is missing. Is there room for other things? Absolutely. As the industry moves forward and you put a deemed trust under it as a foundation so that everybody can participate.... The industry has been very good at policing itself, and if somebody wants to use some of the other tools, they'll do that business to business.
If your question is whether there is something else that should be in the law that would approach this industry from farm to fork, I would have to say no. I would say this would totally close the issue.
Thank you, Mr. Chair. I also want to thank Mr. Webber, Mr. Verkaik, and Mr. St-Denis for being with us today.
I didn't quite understand why the NDP member from Essex would come out and say what she did and undermine the competence of the players in the industry, the players in governments, and our public service.
Quite honestly, I think you said it right. I've been with various organizations, including the Canadian Horticultural Council, the Greenhouse Vegetable Growers, the fruit and vegetable growers, all of them. From those meetings and from personal conversations, I can tell you it was all about how we get there. How can we make this happen and yet meet the requirements under the law, the dispute resolutions, and the financial requirements of the growers?
Communications can be a big struggle in our businesses and even at home. There are large complexities out there. We talked about other options. I'm involved in different agricultural and commodity groups, and we've looked at checkoffs, insurance, and other things. We had to boil them down to see how they worked, especially for the horticultural group.
I appreciate that Professor Cuming has brought forward a draft that may be workable for both the industry and the government. I have colleagues on the government side, and if there's something there, I'm not going to take shots at you. As Lloyd said, we've had 50 years of PACA with the United States. We had preferential treatment—we get that—but we're going to work with you to make sure that this comes to fruition.
Mr. Verkaik, you may have reflected on this when you had a claim under PACA. Mr. Webber, you said it could take three to 12 months to get paid, depending on the complexity of the claim. What happened with your financial institution? Were they willing to extend your credit beyond 30 days? You have your input costs coming in, and you have your transportation. You have all that to deal with. Could going through a resolution process and putting in a request for payment through PACA take away the concern for finances that comes from not being paid?
A large enterprise has bigger problems, and a small enterprise has smaller ones.
For us, a client's debt may reach $150,000, $200,000 or $300,000. For a business doing sales of $80,000 a year, that amount would be smaller. We also deal with bigger clients and they also run the risk of bankruptcy.
Let's take Steinberg as an example; they were a grocery retailer in Quebec. They were a big client. Everyone in the agricultural milieu wants to sell to retailers like that. Steinberg went bankrupt and as a consequence a large number of farmers lost large amounts of money. I can't tell you how much we lost, but it was considerable.
The higher the volume of sales, the greater the risk. A large business may have small receivables as well, but its general risk is high. Quite often, these days, bankruptcies happen suddenly.
One of the important concerns currently is food safety. Ready-to-eat products are high-risk for consumers. They could contain Listeria or E. coli, for example. So clients are careful about that. Losses can happen quickly. Our product is sold to other processors who incorporate it into their products. If those processors have problems, there is sure to be a domino effect and it will affect us in turn.
I think we should probably make a separation between those disputes that involve a legitimate inspection—for example, the strawberries weren't as red as they should be, so what we really are looking for is an adjustment service—as opposed to cases of somebody who just doesn't want to pay.
I would hate to put a percentage on it. I will tell you the percentage is low and currently has been, but that's because of what you hear us call the “big stick”.
When I was at PACA, when I'm at the DRC, most of our work is done on the telephone. The person wants to know what they should do and whether they are going to win or lose, because both PACA and DRC provide default rules.
When there's a problem over payment, there is a maximum time to pay. There is a way to handle claims. What normally happens is they know they are going to lose. They call me. They want an opinion. They open a dispute file. Once they see they're going to lose under the rules, they pay the bill. It's the same in PACA.
That's actually one of the big concerns about having lost reciprocity. The U.S. buyers will now have learned that when Jocelyn makes a call to PACA, they can say, “You know what? I think we're going to wait and see if Jocelyn can come up with that $100,000 to file this $50,000 complaint.” It's no skin off his teeth. Then if Jocelyn comes up with the $100,000, he says, “Oh, you know what? I made a mistake. I do owe that”, and he writes a cheque.
One of the big fears of the reciprocity isn't about the number of complaints filed today; it's about the fact that as the buyers learn there is no more big stick, that's going to change. Without an easy way to file a PACA complaint, it's really easy to clip a dollar or two. Jocelyn's a busy guy. He can't chase some guy down in Louisiana over a dollar or two per package.
I hope that answers the question.
I will go back to what I said previously.
The difficulties are not just about our trading relationship with the United States. The deemed trust we have been discussing for some time is a matter which affects our business relationship with other Canadians, in this country. I think it is important to note that. It is not only because we are losing our privileged access right to the American remedies that we are here discussing this, but because there are other needs related to trade within Canada.
As a commercial activity, agriculture is challenging. I mentioned a few of those challenges at the beginning of my presentation, such as sustainable production, the environment, and healthy and safe food. I think that all of these aspects are dealt with well for the moment, on both sides of the border. We have some common concerns.
I would like to talk about herbicides and pesticides, which are not subject to PACA, but are a good illustration of the relationship between two countries whose borders are often defined by a river or by a simple line drawn on the ground. Products that are authorized in the U.S. are used close to the border, but are prohibited in Canada. This weakens Canadians' capacity to compete with American producers.
A produce merchant or an input supplier has a larger market in the United States. The approval process is much more important and he obtains a better return on his investment than if he supplies a smaller market like Canada. This is a very important topic right now as regards organic products.