North America: DRC provides more information on Harper

As a result of increased interest in the Harper/Obama Regulatory Cooperation Council’s (RCC) initiative on financial risk mitigation, at the beginning of August DRC (Ottawa, Canada) answered a few commonly asked questions to help its members understand its positive implications for both Americans and Canadians in the supply chain. In a follow-up to that article, they have published more Qs and As to keep their members informed and up to date on industry initiatives.

Question: In your recent Q&A notice it was mentioned that the US treats Canadian shippers better than Canada treats Canadian shippers. Could you elaborate on that?

Answer: While the DRC provides very comparable tools as PACA in the US for resolving payment and other issues between solvent trading partners, the situation is very different when the buyer becomes insolvent, or simply walks away from his obligations. Let’s say that today, a Canadian shipper sends out two loads, one to the next province, and the other to a buyer in the US. And to make the point, let’s also say both of the buyers file for bankruptcy before paying the Canadian shipper. In the US, the unpaid Canadian shipper will be given the same priority access to the produce related assets as a US shipper in the bankruptcy proceedings. In the case of the Canadian buyer’s bankruptcy, the Canadian shipper has no priority and stands with other unsecured creditors.

Question: One of the items in the July update indicated industry was seeking a “single licensing … system for Canada.” Frankly, we were unaware there was a difference between a DRC membership and a CFIA license in Canada. We do business with both DRC members and CFIA licensees, and wonder why there needs to be a single system?

Answer: If you are doing business with both DRC members and CFIA licensees you are in fact trading under two different sets of rules. DRC members are trading under rules very similar to those in the US, while CFIA licensees are not subject to prompt payment or other default contract terms. The CFIA licensing and arbitration process focuses on breaches of a standard (i.e. grade) and cannot arbitrate/mediate contract issues between parties (i.e. buyer specification, good arrival, etc.). Also similar to USDA-PACA, DRC membership may require significant financial security for firms, and related parties who have experienced financial difficulty in the past. Those requirements under CFIA are usually less stringent and do not have any employment restrictions.

Question: What is the current status of the RCC initiative?

Answer: During these past months there have been three government to government meetings including stakeholders, with a fourth such meeting scheduled for this fall. There have also been four working groups meeting independently on the Canadian side reviewing and evaluating a number of potential solutions and models put forth. Those groups have now finished their work and will be presenting their recommendations to the bilateral government teams for evaluation, review and implementation. It is anticipated the government teams will have their plan ready for release in March of 2013.

For more information:
Fred C Webber
Fruit and Vegetable Dispute Resolution Corporation
Tel: +1 613-234-0982
Fax: +1 613-234-8036
fwebber@fvdrc.com
www.FVDRC.com