Hon. Michael L. MacDonald moved second reading of Bill C-280, An Act to amend the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act (deemed trust — perishable fruits and vegetables).

He said: Honourable senators, I am pleased to speak today as the Senate sponsor of Bill C-280, the financial protection for fresh fruit and vegetable farmers act. The bill before us, an initiative of the member of Parliament for York—Simcoe, Scot Davidson, arrives with near-unanimous support at third reading in the other place, passing by a margin of 315 to 1.

Colleagues, it’s easy to take for granted our accessibility to food and proper nourishment. Most of us will simply visit our local supermarket weekly, fill our cart with our usual necessities and stock our refrigerators and pantries at home. We forget just how much we actually rely upon the producers of this food: the farmers. We rely upon them three times a day, every day.

Our farmers have always played an essential role in this country. In many ways, they are a cornerstone industry. They are an indispensable workforce. They feed our families and communities — rural and urban, big and small.

However, despite their essential role in supplying our families and communities with nutritious produce, fruit and vegetable farmers, in particular, are financially vulnerable due to the nature of their product. That is the issue Bill C-280 proposes to address.

Our current bankruptcy laws do not provide adequate financial protection for Canadian fresh fruit and vegetable farmers. Unlike other sectors, fruit and vegetable producers are particularly vulnerable because the provisions of the Bankruptcy and Insolvency Act and related legislation do not account for the unique nature and characteristics of the sector; in particular, it does not account for the fact that their product is quickly perishable.

In circumstances where a buyer of produce unexpectedly becomes insolvent and is unable to or fails to pay the suppliers, these farmers will most likely incur that loss without the ability to recuperate payment or their product. Currently, under existing laws, it is near impossible for our farmers to recoup the economic value associated with the product delivered. By the time insolvency proceedings have concluded, the produce in question has long since perished and can no longer be repossessed and resold.

Adding to the vulnerability of fruit and vegetable farmers, the sector has a lengthy typical payment term whereby it can take upwards of 30 days or more after the product is delivered to buyers before the supplier receives payment. In an industry that already has a small margin on returns, this leaves our fruit and vegetable farmers particularly vulnerable to buyer insolvency, an occurrence that is unfortunately fairly common — more common than we realize.

For the most part, the sector consists of small- and medium-sized growers, many of which are family farms. Lacking the financial protections needed, the farmers are often unable to reinvest into their business in a sufficient manner, severely limiting the potential growth of the sector.

Another challenge facing our growers is the loss of protection under the U.S.’s Perishable Agricultural Commodities Act, or PACA, which provided preferential treatment and protection for Canadian companies that sell products to the United States. This protection was revoked for Canadian companies in 2014 due to a lack of reciprocal mechanisms in place in Canada, further exposing our fruit and vegetable farmers to increased financial risk.

Bill C-280 offers the financial protections this sector needs.

The legislation proposes establishing a limited deemed trust for produce sellers, which would give them priority access to the proceeds of sale, limited to only the inventory, accounts receivable and cash on hand derived from the sale of produce during the bankruptcy proceedings of an insolvent buyer.

By establishing a limited deemed trust and providing priority access, Bill C-280 ensures that Canada’s bankruptcy laws recognize the unique challenges and demands of our fruit and vegetable farmers, and provides them with the financial protections warranted for the especially perishable nature of fresh produce and the lengthy typical payment term that currently exists in the industry.

As I stated, colleagues, Bill C-280 received pan-partisan support in the other place, passing nearly unanimously by a margin of 315 to 1. This is truly a non-partisan issue.

This is about providing this essential sector with the protections it needs by recognizing the unique nature of the industry and the current deficiencies of our bankruptcy laws. This is about ensuring the viability and growth of this sector and the Canadian farming business.

It is important to note as well that this legislation comes with no cost to the government or to the taxpayer. The government would not be required to carry any financial liability or backstop any losses.

Bill C-280 also has support from across the industry as well. In fact, they’ve been advocating for these provisions for years.

During consideration of this bill, the House of Commons Agriculture and Agri-Food Committee heard from stakeholders from across the industry.

Keith Currie, President of the Canadian Federation of Agriculture, offered the following:

While this bill would provide the much-needed financial support to our fresh fruit and vegetable sector, which supports nearly 250,000 jobs in this country, it is about much more than that. Bill C-280 is about preserving the fibre of local and rural farming communities, maintaining the integrity of our food supply chains and supporting Canada’s domestic food security.

He continued:

. . . risk management is a big part of what we do. From the moment that seed goes in the ground or that calf is born, there is a risk that I won’t see a crop at the end of the day or see that calf mature into a milker or head to market. However, unlike cash crop, livestock or supply-managed producers in Canada, fresh fruit and vegetable producers carry additional risks and costs that are unique to the production of perishable goods.

Mr. Currie outlined that the government has protections in place for other sectors, including, for example, the Canadian Grain Commission holding roughly $1 billion of financial security from individual licence holders to pay grain sellers in case a grain buyer becomes insolvent. But no such financial security exists for the fruit and vegetable sector.

Offering the Canadian Federation of Agriculture’s support to the legislation, Mr. Currie stated that Bill C-280 is “. . . a tailored solution to a clear gap in our risk management tool kit for Canadian producers.”

The Fruit and Vegetable Growers of Canada, or FVGC, is also adamant in their support for the bill, and hopeful for its swift adoption. At the Agriculture and Agri-Food Committee, the association stated:

This legislation offers a framework that bolsters the stability of our industry and promotes fairness in business practices, ensuring the viability and growth of our sector for years to come.

FVGC sees this bill as a game-changer, providing our members with much-needed protections and possibly leading to greater market opportunities. . . .

A more robust and secure Canadian produce industry, backed by these protective measures, would help to address the growing concerns of Canadian food security and food sovereignty.

The association also explained why the finer details of the legislation are significant:

A key aspect of this legislation is that, once the proceeds from the sale of fresh produce are deemed to be held in trust for the supplier, they are not included in the company’s property. This is significant, because it means these assets would be protected, and it does not take away from other creditors’ ability to access their claims . . . .

Additionally, the definitions included in the legislation consider the realities of our industry. Acknowledging that the fruits and vegetables might be repackaged or transformed, and yet remain the beneficial property of the supplier, is an important detail.

Colleagues, this legislation will also potentially pave the way for reinstating the Perishable Agricultural Commodities Act, or PACA, protection in the U.S. for Canadian growers. As I had mentioned, PACA was revoked for Canadian growers nearly 10 years ago because of a lack of reciprocity in Canada. The reinstatement of protections under PACA for Canadian exporters would be welcomed enthusiastically by our growers, ensuring preferential treatment and a dispute resolution mechanism that had been crucial for Canadian companies that sell to the United States.

Patrice Bourgoin, General Manager of the Quebec Produce Growers Association, echoed this sentiment at committee, stating that Bill C-280 reflects the tried-and-true model in the United States, and that implementing this legislation would, indeed, pave the way for Canadian reinstatement under U.S. regulations.

The Quebec Produce Growers Association also explained how important it is to provide protection and stability to the supply chain by stating:

If one of the links has not received payment, it affects the entire system, right down to the family farm. . . .

Colleagues, Bill C-280 offers a solution by way of a safety net that the industry not only wants but needs.

Again, there is no burden to the government; there is no burden to the taxpayer.

This legislation would create a more predictable and stable market by providing the financial assurances our farmers deserve — financial assurances that will allow our farmers the opportunity to reinvest in their business, and that will ultimately result in a reduction of costs to Canadians, saving consumers an estimated 5% to 15% on their annual fresh fruit and vegetable purchases.

This bill is a game-changer for this sector, colleagues. I ask for your support in sending it to committee as soon as possible.

Thank you.