Tensions between Canada and the United States are growing over the issue of Canada’s lack of protection for American suppliers in the event of buyer insolvency.

Canadian companies exporting to the U.S. currently have the same rights as U.S. companies under the U.S. Perishable Agricultural Commodities Act Trust, but according to a Fresh Produce Alliance press release, if reciprocal measures are not soon introduced in Canada, that special status may be revoked.

In 2011, Canada committed to the Canada-U.S. Regulatory Council that it would establish comparable protection against buyers defaulting on payment obligations, but little progress has happened to date.

The government has reviewed and commissioned studies on current and traditional protection tools, and The Minister of Industry is expected to table a report to Parliament in the fall after which its recommendations will be studied by a Parliamentary committee.

According to the press release, the Canadian industry has requested the establishment of a limited statutory deemed trust, modeled on what currently exists in the United States, which would provide effective, inclusive protection that takes into account the unique characteristics of trade in perishable products.

The FPA estimates American suppliers lose at least $10 million annually through Canadian buyer insolvency.

The trust would benefit Canadian fruit and vegetable suppliers as well as American.

“Based on a study commissioned by Agriculture and Agri-Food Canada in 2013, actuarial specialists estimated that with $5 billion in annual sales, the average net bankruptcy loss in Canada’s fresh fruit and vegetable sector is approximately $19 million per year,” said Ron Lemaire, president of the Canadian Produce Marketing Association.

“This is an issue for our sector as the average annual sales for the approximately 10,000 fresh fruit and vegetable producers in Canada is only $85,000, and any bankruptcy could dramatically impact their businesses,” he added.

If Canada does lose its preferred status under PACA, the impact will be severe. Canada sells 40 percent of its fruit and vegetables to the United States, resulting in an export market valued at 1.6 billion.

“Canadian exporters will be hit extremely hard because they will have to meet costly bonding requirements to achieve the same level of U.S. PACA trust protection they have enjoyed in the past,” noted Jim DiMenna, president and chief executive officer of Red Sun Farms. Rural communities in Quebec, Ontario and British Columbia would be hit especially hard, as 85 percent of Canada’s produce is grown in those provinces.