Earlier this month, Canadian fruit and vegetable processors or wholesalers lost preferred access to the United States Perishable Agricultural Commodities Act (PACA).
“Without PACA access, Canadian companies trying to recover unpaid bills will have to post double the value of what they are trying to recover as bond to make a claim,” says Ron Lemaire, president of the Canadian Produce Marketing Association. “For example, a small producer owed $50,000 would have to post $100,000 cash to make a claim, effectively removing $150,000 from their cash flow/operating line for up to one year. Many cannot afford this will simply have to walk away, losing what is rightfully owed to them.” Situations like this can devastate not only the producer, but all the businesses connected to them and hits rural communities particularly hard, he says.
In 2013, Canada’s fresh fruit and vegetable sector supported 147,900 jobs and created $11.4 billion in real GDP.
PACA access is an important financial risk management tool, says Lemaire, and unless Canada creates an equivalent program for U.S. processors, Canada’s fruit and vegetable industry could be a significant disadvantage when shipping produce south. As Lemaire explains in the audio interview below, slow pay or no pay events in relation to perishable items can be more complicated because, in the event of a dispute or problem, there’ may be no product left to retrieve or capture value from.
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