Comments on Producer Payment Protection Amendments to Canada Grain Act

0n November 1, 2013 the NFU has submitted comments on the proposed Amendments to the Canada Grain Regulations Canada which was posted for public comment in the Canada Gazette, Part Ⅰ Vol. 147, No. 40 — October 5, 2013.

Our submission states:

The National Farmers Union (NFU) welcomes the opportunity to comment on the proposed regulations amending the Canada Grain Regulations with regard to adoption of an insurance-based producer payment protection model in the Canadian Grain Commission’s Licensing Program.

The regulatory impact analysis provided on the Canada Gazette Part I is unduly narrow, focusing on only a select few of the effects on licensed grain companies that would result from a shift from bond-based security to an insurance system. The analysis fails to examine the impacts on farmers and the effects of the proposed change on broader public interests. When the proposed changes are examined in this broader context, it is clear that an insurance-based producer payment security system will benefit a few large companies at the expense of farmers, some smaller licensed grain companies, Canadian financial institutions and Canadian regulatory authority over grain transactions. While the federal government’s regulatory change analysis attempts to frame the proposed regulation as a simple housekeeping type of measure, in fact, if adopted, it would have significant, long-term economic and governance implications.

Currently, the CGC licenses companies and requires them to hold a bond or other security with bonding companies approved by the Treasury Board of Canada. The amount of security required is set by the CGC and adjusted as necessary based on mandatory monthly reporting of outstanding liabilities (payments owing on grain received) of the companies. In the event a licensed company refuses to pay, becomes insolvent or closes without paying for grain it has received, the CGC uses the security to pay farmers what they are owed.

In the 2012 Budget Implementation Act, the Canada Grain Act was amended to allow regulations to establish an insurance-based system to replace the long-standing bond security system. The proposed regulations are the means to implement this change.

Briefly, the new insurance-based system would eliminate the requirement for licensed grain companies to hold bond security. Instead, they would be required to take out credit insurance. The CGC has engaged a single company to provide insurance for all licensees. Licensed companies will no longer be required to report their obligations for payment and security position to the CGC. Under the proposed new system, farmers will be able to make a claim if they do not get paid, but they must submit their claim within specified time limits, and the maximum payout will be reduced to 95% of what they are owed.

For the full brief, please download the PDF 

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