Moved, for Senator MacDonald, third 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).

Honourable senators, I rise to speak to third 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). As you know, colleagues, the purpose of Bill C-280 is twofold. First, it establishes a deemed trust for perishable agricultural commodities in Canada, which will prioritize payments to produce suppliers in cases of buyer insolvency. This protection would ensure that farmers, distributors and all suppliers in the perishable goods supply chain would have a secured, reliable mechanism to recover unpaid funds.

Second, Bill C-280 would help restore Canada’s preferred trading partner status by re-establishing reciprocity with the United States under the U.S. Perishable Agricultural Commodities Act, or PACA.

In his testimony to the Senate Banking Committee, Massimo Bergamini, Executive Director of the Fruit and Vegetable Growers of Canada, noted the need for these measures. He said:

The concerns we are raising today and have been raising for almost 40 years are not theoretical. The 2023 bankruptcy of Lakeside Produce in Leamington, Ontario, left over $188 million in unpaid liabilities to growers and suppliers. The collapse of the company sent shockwaves through the growing community, with some individual growers reporting losses of up to $500,000 —

 — in unpaid invoices. He continued, saying:

For small and medium-sized family farms, these losses were . . . devastating.

Had . . . Bill C-280 been in place, they would have offered financial protection from the catastrophic loss of income . . . .

Colleagues, beginning in 1937, Canadians had access to the U.S. PACA dispute resolution system for almost 70 years by paying only a $100 filing fee. No other country was given this preferential treatment. However, when the United States Department of Agriculture, or USDA, introduced the PACA trust in 1984, reciprocity was agreed to on the basis of Canada’s ability to provide three key services to their fresh produce industry: first, a government-run inspection service; second, mandated licensing and dispute resolution; and, third, insolvency protection tools like the PACA trust.

There was little dispute about the first two requirements, but the third, insolvency protection, was missing, and that was problematic. The U.S. produce industry pressed Canada for this for the next 30 years. During that time, Canadians were able to enjoy full access as a preferred creditor in U.S. insolvencies, but nothing comparable was offered to U.S. sellers who sold into the Canadian market.

In the 1990s, discussions began in earnest between Canadian and U.S. stakeholders to address the resulting trade and dispute issues in the fresh produce sector. The U.S. PACA system served as a model for creating a similar framework in Canada, but no resolution was found.

In 1999, the Fruit and Vegetable Dispute Resolution Corporation, or DRC, was officially established as a non-profit organization under an agreement between the Canadian and U.S. governments and industry stakeholders. The goal was to provide a framework for dispute resolution, trade standardization and financial protections for fresh produce sellers and buyers operating in North America.

For the next 15 years, the DRC played a significant role in cross-border trade, helping to maintain confidence in the produce market by resolving disputes efficiently and promoting fair trading practices. However, the shortcomings in the bankruptcy and insolvency process remained unresolved.

In 2014, Industry Canada was conducting a review of the Bankruptcy and Insolvency Act. In a brief submitted by the Fresh Produce Alliance, led in part by the DRC, the alliance drew the attention of Industry Canada to changes that were needed to the Bankruptcy and Insolvency Act in order to resolve the dispute. In their July 14, 2014, brief, they outlined the challenges facing the fresh produce industry and recounted the ongoing and extensive efforts that had been made to establish payment protection for the industry. They reviewed the various proposals that had been put forward to address the U.S.-Canada imbalance and noted the following:

Legal advice and experience in other jurisdictions indicates that the most effective way to provide protection to fresh fruit and vegetable sellers in Canada is through the creation of a limited statutory deemed trust to ensure that bankruptcy assets are secure and accessible.

They addressed concerns that such a deemed trust would impact employees’ claims under provisions established through the 2008 Wage Earner Protection Program Act and noted that studies had shown no such credit reductions would result. They spoke to the concern that a deemed trust would reduce the pool of assets available to other creditors, including banks, and thereby increase the cost of borrowing.

Once again, there was no evidence that this would materialize, and, in fact, they stated that “The overall effect of the PACA in the U.S. has been to expand lending security, not reduce it. . . .” The Fresh Produce Alliance noted that there was “. . . a solid consensus in favour of the establishment of a deemed trust . . . .” for the fresh fruit and vegetable supply chain and that action was urgently required.

Regrettably, however, no action was taken. Three months later, the hammer dropped. In a letter dated October 1, 2014, the deputy administrator of the USDA Fresh Fruit and Vegetable Program informed Canadian officials that because the country does not have a “dispute resolution system comparable to the U.S. system,” Canadian shippers would, effective immediately, lose their preferred status and join every other country in the world: In order to file a complaint, they would now have to post security worth 200% of the value of the complaint.

The move was a clear retaliation for the decades-long failure of Canada to establish some type of trust protection from bankruptcy for all fresh produce shipped into the country from the U.S. The Americans were not asking Canada to establish a system which was identical to the Perishable Agricultural Commodities Act, or PACA, system, only that it would offer reciprocal protection for U.S. exports.

At the time, Fruit and Vegetable Dispute Resolution Corporation lamented the lack of government action on behalf of their industry and stated the following:

The revocation of Canada’s preferred status can be reversed, but it will require implementation of simple and no cost insolvency protection tools that are comparable to the PACA Trust. We hope Canada’s elected officials will respond favorably and see that the US is only encouraging its shippers be treated the same way Canadian shippers have been treated in the US for years.

That, colleagues, was 10 years ago.

Today, we finally have before us a bill which will address the inequities and give hope to our producers that reciprocity will once again be restored. This bill is viewed favourably by the U.S. Department of Agriculture and has the support, colleagues, of every political party in the House of Commons, every cabinet minister, member and the entire fruit and vegetable industry.

Colleagues, this bill has received a lot of debate. I think almost everything that needs to be said has been said on this bill. Today, colleagues, I am asking for your support as well. This bill promises to bring an end to the long wait for reciprocity. I hope that today — today, colleagues — you will vote in favour of Bill C-280 at third reading and support our agricultural sector.

Thank you, colleagues.

I move adjournment of the debate.