Insurance won't cut it when buyers default on payments say Canada's hort growers

Friday, July 19, 2013

by SUSAN MANN

Horticulture farmers are concerned the federal government is looking at insurance-based schemes as part of efforts to develop financial protection for produce sellers.

Canadian Horticultural Council president Keith Kuhl says in the council’s June newsletter, Hort Shorts, this is a “grave concern and while we will continue to fully participate in the process an additional cost solution is not comparable to the no-cost option Canadians enjoy in the United States through provisions of the Perishable Agricultural Commodities Act (PACA).”

Kuhl couldn’t be reached for comment.

The American Perishable Agricultural Commodities Act ensures U.S sellers and Canadians operating in the American market get paid for their fruits and vegetables when companies go bankrupt or default on payments. Canada doesn’t have similar legislation to protect produce sellers and dealers here. That means Canadian farmers selling in the domestic market and American farmers exporting to Canada are at the back of the line in a long list of creditors trying to get paid when companies go belly up or default on payments. There are also provisions in the American Act to deal with delinquent buyers who are slow or refuse to pay.

In the June Hort Shorts article, it says “the ultimate objective remains to develop a made-in-Canada solution that ensure the Canadian approach to financial risk mitigation provides comparable outcomes to what is offered in the United States.”

James Watson, spokesman for Agriculture and Agri-Food Canada, says by email the Canadian Food Inspection Agency began public consultations on the policy framework for the new Safe Food for Canadians Act, which will include the possibility of a single licensing approach for producer dealers “for the purposes of fair and ethical trade.”

The government is also pursuing discussions with stakeholders on other risk mitigation measures beyond licensing, he says.

The work to develop financial protection for producer sellers is being done as part of the Canadian and American Regulatory Cooperation Council announced by Prime Minister Stephen Harper and American President Barack Obama in February 2011. The two leaders agreed to joint action plans to boost security, trade, travel, and increase regulatory transparency and coordination between the two countries.

Ontario vegetable farmer Ken Forth of Lynden says insurance-based schemes are not what farmers want for protection from non-paying buyers. “I know something about the insurance industry,” he adds. “I can see a big problem with that one.”

The Regulatory Cooperation Council is a joint effort between Canada and the United States and “insurance will not meet the reciprocity test” because the system in the United States is based on legislation to protect growers when buyers don’t pay, he says.

“I know some people who have dealt with them (insurance companies) and it took 10 years” to resolve the matter, Forth notes. In contrast, the American legislation provides for “pretty much immediate” payment in cases of default.

In addition, the American legislation enables farmers who haven’t been paid to have a restraining order put against the delinquent company’s account. “They have to pay or they’re not in business anymore,” he says. But an insurance-based system doesn’t address the delinquent company’s refusal to pay so the company can continue not paying other growers.

Reimbursing growers through insurance doesn’t have anything to do with the company involved. “It has to do with the insurance company, which is another party out there so the guy could just keep on doing what he’s doing many times over,” says Forth.

The plan that’s developed in Canada doesn’t have to mirror the American’s PACA. But the PACA can be used and made to work here, he notes. “We’ve been told by some experts that it could be made to work.” BF