Movement continues toward a single licensing model in Canada. Currently the Canadian Food Inspection Agency is conducting a consultation with the industry to determine if there should be a single licensing authority in Canada and if the DRC and its trading standards should be that authority.

Since the implementation of NAFTA, the number of international and domestic transactions between fresh fruit and vegetable firms operating in Canada, Mexico and the U.S. increased dramatically, and so did the potential for private commercial disputes.

Previously, a dispute-resolution system existed in the U.S., none existed in Mexico, and the regulatory system that prevailed in Canada was widely considered ineffective in resolving the majority of disputes. Industry stakeholders and governments of the three countries recognized the need to fix the Canadian problem, establish a dispute resolution system in Mexico and enhance trading relationships among fresh produce dealers across the NAFTA region.

As a consequence of the relentless, collaborative efforts of the North American produce industry and the governments of Canada, Mexico, and the U.S., the Fruit and Vegetable Dispute Resolution Corporation (DRC) was created. A non-profit, industry-led organization, the DRC’s membership base includes the complete fresh produce value chain in North America, as well as in certain regions outside North America.

DRC’s mandate is to provide education, consultation, mediation and arbitration to the produce trade. It also works closely with industry associations and governments on behalf of members to reform legislation, make federal inspections more accessible, develop best practices and level the playing field for participants.

Governed by a Board of Directors, DRC members represent all facets of the produce industry, including those transportation companies who transport fresh fruit and vegetables. When the Canadian Food Inspection Agency amended the Licensing and Arbitration Regulations of the Canadian Agricultural Products Act to allow DRC members an exemption from a federal produce license, the majority of buyers in Canada voluntarily moved over to DRC. This in spite of the fact that DRC membership and its governing rules hold members accountable to higher standards regarding private contracts, slow pay and other issues not provided for under the CAP Act. Today only about 100 buyers remain under the licensing provisions of the CAP Act.

Why would buyers voluntarily put themselves in the hands of a third party? Why is there movement towards a single licensing model in Canada based on this model? While the answers certainly vary, the common theme is fair and ethical trading. Firms can and are encouraged to enter into contracts with agreed upon specs, rights and responsibilities. Given the fast-paced trading environment of the fresh produce industry, most transactions are unencumbered by lengthy, complex contracts. DRC provides a kind of default contract, holding members to a set of rights and responsibilities based on industry norms. When those trading standards do not clarify the situation, a neutral third party determines how the dispute should be settled.

“The process allows the parties to go on doing business together while learning from the dispute resolution process,” said Fred Webber, DRC’s current president and chief executive officer. “A key component of all DRC mediations and arbitrations is the focus on what went wrong and how to avoid the issue in the future.”

There is also a matter of trade across borders. One former retail buyer, who requested to remain anonymous, stated that before DRC, Canadian buyers were at a distinct disadvantage. If a producer had an opportunity to sell to a Canadian buyer versus a U.S. firm regulated by the Perishable Agricultural Products Act, they would choose the U.S. buyer based on the protections offered by PACA. And that applies to both U.S. and Canadian producers.

Implementation of DRC in Canada, whose rules are harmonized with PACA, has put Canadian buyers on a more level playing field with U.S. buyers, increasing volume, product availability and reducing prices for consumers.  

Some have referenced DRC as a collection tool, but Webber disagrees. “In the beginning, getting people paid was a focus," he said. "Today, we spend far more time resolving legitimate disputes in the market place. We measure our success in disputes resolved, not dollars changing hands. Slow pay and no pay instances take care of themselves. If you do not pay promptly without reasonable cause, you either conform or — simply put — you are terminated from membership.”

Buyers also benefit from common rules as produce can arrive with problems, and buyers have real issues trying to move distressed merchandise into markets that demand quality, particularly during peak seasons and good supply. Having a set of trading standards to follow allows them to move the product promptly and gives them a road map of how to document the losses.

Jaime Bustamante and Andrea Asbreuk, who handle the majority of trading assistance issues at DRC, concur that today most buyers and sellers call for advice immediately so that they can resolve the issue before it becomes serious.

“Once we have the facts and the parties review what happened with our neutral advice, most disputes are resolved and we never hear from the parties on that issue again,” said Bustamante.

“Our statistics show that even when a file is opened and the strengths and weaknesses of the case are reviewed, over 85 percent of files are resolved informally and amicably,” added Asbreuk.

What does the future hold for DRC? “I think the original goal of DRC by the founders was a good one," said Webber. "That goal was that we would provide excellence in education and mediation to the point where there would never need to be a formal arbitration. We are still working toward that goal, so expect increased educational tools for the industry from DRC and continued polishing of our dispute resolution skills.”