At its core, the bill establishes a deemed (or statutory) trust that will allow grower-shippers in both Canada and the United States to invoke the trust in case of a buyer bankruptcy, giving them a high level of certainty that their unpaid invoices will be paid. Because Canada has relatively few bankruptcies, this argument wasn’t strong enough to move the ball for so many decades. Many members of Parliament just didn’t find it to be a compelling enough case.

However, representatives of Canada’s fresh produce industry said the significance of the new law can’t be overstated as it will significantly increase food security in Canada and offers other advantages for the fruit and vegetable sectors on both sides of the border.

As soon as regulations can be written implementing the new law, Luc Mougeot, president and CEO of the Fruit and Vegetable Dispute Resolution Corporation, which is headquartered in Canada, said Canadian and U.S. growers and shippers will be able to utilize the deemed trust for actual bankruptcies. Canada is a net importer of fruits and vegetables so there are many U.S. suppliers shipping to Canadian buyers that will welcome this new statutory level of protection with open arms.

But Mougeot argued that the mere presence of the new law will help to mitigate the risks of shipping to Canadian buyers, which in itself tends to raise the cost of goods. He said it has been estimated that U.S. shippers charge an average premium of 30 percent to Canadian buyers because of the lack of this bankruptcy protection. In addition, he said Canadian buyers have reportedly used the lack of this protection on suppliers when negotiating the payment of overdue bills, indicating that there is always the bankruptcy option if a seller doesn’t agree to a discount.

Canadian Produce Marketing Association President Ron Lemaire said the biggest impact that will probably occur because of the passage of Bill C-280 is the reestablishment of preferred access to PACA by Canadian shippers. Without that access, a Canadian shipper has had to post a cash bond worth double the value of a load to dispute their case through the PACA resolution process. Few can afford to take that route.

Lemaire revealed that the USDA has repeatedly articulated four conditions that must be met before a reciprocity agreement is implemented. CPMA and others in Canada have already begun working with USDA and U.S. produce association to reinstate Canada’s preferred access to PACA and ensure equal treatment in the produce supply chain in Canada and the United States now that the final piece of the puzzle will soon be in place.

The USDA’s four conditions for Canada to receive preferred access and enter into a reciprocity agreement are mandatory licensing for Canadian buyers, a produce industry dispute resolution system, investigative and enforcement authority for the Canadian Food and Inspection Agency, and the development of a “deemed trust” similar to the PACA Trust system.

Mougeot said that the passage of Bill C-280 was amazing as it was maneuvered through Parliament in a manner that is rarely or ever used for bills of this magnitude.  Member of Parliament Scott Davidson introduced it as a private members bill, typically used because the proposed law only affects a single person or a small group not everyone.

“I was completely stunned and shocked when it passed the House of Commons,” he said. “At that point, I started to believe it might get done.”

In reference to Canada’s number one sport, Mougeot praised Davidson for “excellent stick handling” in moving the bill through Parliament, including all three readings and the final Royal Assent formality, which occurred Dec. 12 and turned the concept into law.

Massimo Bergamini, who is the new executive director of the Fruit and Vegetable Growers of Canada, told The Produce News on Thursday, Dec. 19, that with just three months under his belt as leader of the group, he does not have the historic perspective of his colleagues, but just the fact that it took 40 years to get the bankruptcy protection bill passed is amazing. He expects the bankruptcy protection coupled with the reinstatement of preferred access to the PACA will have a positive impact on U.S.-Canadian trade but in a gradual, measured way.

He believes that at least part of the passage of the bill must be credited to the high visibility food issues currently enjoy in both Canada and the United States.

“Food insecurity and cost of groceries are top of mind, which has the ability to change the political agenda,” he said, adding that this bill was associated with a zero net cost to government and a feel-good story for the grower community.

He believes Bill C-280 was able to move through Parliament quickly because legislators wanted to be seen as doing something to address these food insecurity issues. To the extent that the bankruptcy provision will relieve at least one stress point on producers, and potentially lower costs, is a positive outcome politicians can point to.

Bergamini is hopeful that this action will signal to members of Parliament that there are other legislative reforms that can be passed to reduce food insecurity and appeal to their constituents. He noted that list of potential reforms includes mitigating business risk management, improving safety net programs for food producers, and increasing trade and support programs for the agricultural industry.

He said his trade associations will be pushing aggressively to address these concerns as the time appears to be ripe to do so.