The United States Has Removed Canada’s Preferred Access To PACA Programs
In the last few days, you may have seen articles in the press about the United States potentially taking action to change how Canadians do business in the United States under the Perishable Agricultural Commodities Act (PACA), by removing the waiver of bonding requirements for dispute resolution services. They have done it. Effective immediately, Canadians are now required to post a bond, double the amount of their claim, in order to file a dispute with PACA.
Since 1937, Canadians have been accessing PACA’s dispute resolution system in the US by only paying a $100 filing fee. No other country currently enjoys this preferred treatment. Now that the US has followed through on their threat, Canadians will join every other country in the world and have to post $50,000.00 USD in security just to file a $25,000.00 complaint.
Why now? When USDA introduced the PACA trust in 1984, reciprocity was agreed to on the basis of Canada’s ability to provide three key services to the their fresh produce industry: government run inspection service (DIS); mandated licensing and dispute resolution (DRC); and, insolvency protection tools like the PACA trust (no Canadian equivalent). The North American produce industry has been urging for this third piece in Canada for over thirty years now, and unfortunately, lacking a concrete solution through the RCC process, the USDA has lost patience. Canadians have enjoyed full access as a preferred creditor in US insolvencies, and nothing comparable has been offered to sellers in the Canadian market. The action by USDA is severe, but it would be unreasonable to think the unfair trade imbalance could continue without eventual retaliation.
Access to affordable, high quality dispute resolution services either from DRC or the USDA had resulted in increased accountability. Over 16,000 buyers and shippers across Canada and the US were forced to conduct business fairly and ethically because if they did not, their trading partner had equal access to recourse mechanisms. Knowing this, the approximate number of official complaints brought forward annually is a modest 1500.
Over the last 75 years, the potential to file a dispute without posting a large bond has kept fair and ethical trading practices consistent across Canada and the US. The 75 years of reciprocity between Canada and the US for dispute resolution has resulted in a proportionately small number of issues for that very reason.
Make no mistake, the removal of Canada’s preferred status is not about the resolution of legitimate disputes; it is only about the Canadian government’s unwillingness to create a risk mitigation tool which would provide sellers with an avenue for recourse when a firm closes their doors with obligations owing.
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.