The role of the Canadian Food Inspection Agency (CFIA) is to safeguard Canada's food supply.
This includes food safety by identifying contamination to prevent foodborne illnesses, ensuring regulatory compliance, accurate labeling, and traceability in the supply chain. One of their divisions, the Destination Inspection Services (DIS), is responsible for inspecting fresh produce at destination (in Canada) for quality defects, grade defects and any other conditions issues or temperature issues.
To get straight to the point, about ten days ago the CFIA announced the intention to discontinue Destination Inspection Services. "This caught us by total surprise," says Guy Milette, EVP of Courchesne Larose and Past Chair of the Canadian Produce Marketing Association (CPMA). "The entire North American produce supply chain is built on government-based USDA and CFIA inspections as these are the two only officially recognized inspection bodies in a situation of arbitration or mediation with either USDA/PACA or the Dispute Resolution Corporation (DRC)," added Milette.
© Courchesne Larose
Right: Guy Milette
Consequences of discontinuation
One of the biggest consequences of termination would be financial protection for produce sellers. In the U.S., PACA protects growers and produce sellers. Up until about a decade ago, Canada had that protection by definition and was able to access PACA and get financially protected. It's a process that's fast, furious, and efficient. "However, the USDA suspended access to financial protection to all Canadian companies". To regain this protection, Canada would have to offer reciprocity in the financial protection to U.S. companies.
"The project of obtaining a financial protection for produce sellers is a long journey, and the Canadian produce and agriculture industry, strongly leaded by CPMA, have been working on this for the past decade," commented Milette. "Slowly, we are trying to get back that financial protection when we ship to the U.S. and the DIS plays a big role in making it happen," he added. They are the only recognized entity of inspection for the USDA. Western Growers in California for instance will recommend all their members to only accept CFIA DIS inspections.
If the DIS discontinues, the financial protection program will just collapse and all the work of the past ten years to regain financial protection will go to waste. As soon as the Canadian produce industry found out what was going on, political decision makers were contacted and asked about the domino effect this will create. Currently, several industry organizations, including the CPMA, are working hard trying to wake up the Canadian government and come to a solution. As a result, even if the CFIA's decision is not changed, the effective date is on pause and hopefully, the government will rethink the impact of cutting this service.
The planned abolition would also have a significant impact on Canada's Fruit and Vegetable Dispute Resolution Corporation, acting as a referee between parties when a purchase and sale do not go according to plan. "Arbitration from DRC services is all based on DIS inspections," commented Milette. It was a shock for DRC as well as CFIA never informed them of their plans either, before announcing it.
"I am certain CFIA didn't deeply understand the impact and the domino effect before they announced this decision and are not aware of the magnitude." The next few weeks are going to be quite important.
Accessibility of produce
Abolition of the DIS is also expected to have an impact on accessibility of produce. Looking at current market conditions for produce in California for instance, growers have more than enough options to sell their products in the domestic market or other export solutions. If a California shipper no longer can obtain DIS inspections and is forced to opt for a private inspection service instead, they may decide not to ship to Canada and keep their produce in the domestic market because there are less risks involved and it would be less costly. That could result in lower availability for Canadians and a higher demand, driving prices up.
Why terminate these services?
The reason behind the discontinuation of Destination Inspection Services is to save money. In the wake of recent Federal cuts, the industry was not surprised to see some cuts but never expected to see DIS disappear. In the past 20 years, the private sector of inspection services has grown, which has reduced the number of inspections made by the DIS. As a result, the DIS started receiving less revenue and at one point, the federal government needed to raise the prices of inspection services to make up for the expenses. "Because it is such an important service, as an industry we agreed on a cost recovery base." This meant that every year, the agency used to assess their revenue and determined how it compared to their expenses. If necessary, prices for inspection services would go up. "The fact that we had agreed to a cost recovery, makes the announcement from CFIA puzzling."
However, in the past seven or eight years, the method of reviewing the cost recovery adjustment at CFIA changed. Since then, it looks like the cost recovery adjustment has been based mostly on cost of living. As a result, prices went up by only a few percentage points each year, which wasn't enough. The industry would prefer to be told the prices of DIS inspections will rise nine or ten percent next year, rather than being told that this essential service will disappear.
What is the alternative?
If the government proceeds on discontinuing DIS, shippers have no choice but to do a private inspection. The DIS focuses strictly on the condition, the quality, the grade and the defects while private inspection services could have a different mandate. In addition to quality, they often provide more pictures, the status and condition of a container, the set temperature of the refrigeration unit, but also assist with breaking the seals, unloading, and much more. However, private inspection services, even if they are widely used, aren't automatically recognized. That's something seller and buyer need to agree on upfront.
"One thing is for sure; the fresh produce industry needs to rally to make sure CFIA DIS services are here to stay because they are critical to our industry."
Tomorrow, an article will be published with comments from Ron Lemaire, President of the Canadian Produce Marketing Association.
For more information:
Guy Milette
Courchesne Larose
Tel: (+1) 514-525-6381
[email protected]
www.courchesnelarose.com
