Canada has enacted Bill C-280, amending the Bankruptcy and Insolvency Act and the Companies Creditors Arrangement Act to protect suppliers of perishable fruits and vegetables. This legislation mirrors the U.S. Perishable Agricultural Commodities Act (PACA), establishing a trust for unpaid suppliers.
Canadian fresh produce organizations anticipate this will stabilize the industry and potentially restore Canadian sellers' preferential access to the USDA's dispute resolution services. Previously, in October 2014, the USDA ended the reciprocity that allowed Canadian companies to use these services without a surety bond. The absence of a comparable dispute resolution system and trust protection program in Canada contributed to this decision.
Under the new law, if a purchaser becomes bankrupt or enters receivership without paying by the invoice due date, the produce and sales proceeds are held in trust for the supplier. This prioritizes fresh produce suppliers as creditors, reducing financial risk in the supply chain. Suppliers can also seek court intervention for disputes regarding their rights.
The law applies to sales where the fruits or vegetables remain unchanged despite minimal transformation. To benefit, suppliers must notify purchasers of their trust rights within 30 days of receipt and have payment terms of 30 days or less. Currently, no prescribed notice form exists, which may delay the realization of trust rights.
While awaiting the implementation of Bill C-280, U.S. suppliers can utilize the Canadian Fruit and Vegetable Dispute Resolution Corporation (DRC) services, as Canadian buyers must maintain DRC membership under Canada's regulations.
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