Keeping up with potential pitfalls when it comes to declaring grain can save producers from frustrating repercussions.
That’s according to legal experts from Winnipeg-based law firm D’Arcy & Deacon LLP. By M
“Grain producers are now required by the Canada Grain Act to, once each crop year, (complete) an eligibility declaration,” lawyer Donn Pirie said during a recent webinar hosted by Alberta Grains. “That typically occurs prior to their first delivery to the Canadian Grain Commission.”
Why it matters: To avoid penalties, producers are urged to review contracts, ensure compliance with product use and maintain their records.
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Legally required declarations have been in place for years in Western Canada, following the signing of the Canada-U.S.-Mexico Agreement (CUSMA).
Starting in the latter half of 2022, the CGC expanded it to a nationwide eligibility declaration requirement on crops that were “subject to variety registration based on quality considerations,” as opposed to all grains grown in the West.
Declarations “support Canada’s commitment to allow US-grown grain to receive an official grade” under CUSMA, the CGC said at the time, as well as protecting “the integrity of the Canadian grain quality system.”
Then CGC chief commissoner Doug Chorney said the change simplified the rule and was a “more flexible approach that better responds to the needs of the Canadian grain sector.”
After CUSMA was signed, D’Arcy & Deacon LLP partner John Stewart said, the commission met with grain companies and agreed on a policy where one declaration, combining commercial declaration and CGC-mandated declaration, could be used, as long as all parts of the document were listed and given to producers.
“So, the commercial terms of these declarations from the different companies that were involved would include additional information concerning crop inputs and other warranties concerning the grain crops that were being delivered,” he said.
In other words, the combined document now included company-specific contractual terms.
Tripping over paperwork
Combining declarations has grown increasingly common, webinar attendees heard, and that brings some words of caution for producers.
With a combined declaration, producers must affirm that the grain they deliver complies with the guidance on crop protection products, the lawyers warned. Any false or inaccurate declarations could have producers facing penalties under the Canada Grain Act as well as liabilities for damages or indemnifications.
“There have been issues regarding different crop protection products being brought back and forth across the border or being used strictly in accordance with the label for those products,” Stewart said. “There may very well be, in the hands of some producers, some grain in their operation that has, in fact, been treated by these products and wouldn’t be permitted to be delivered under contracts that they’re signing.”
Those producers may face contractual disputes, indemnification demands, or even legal claims for consequential damages. Producers also have a duty to notify grain companies as soon as they can if they can’t fulfill their contractual obligations, listeners heard.
Organizations like Keep It Clean regularly publish information on maximum residue levels and product red flags for various crops and markets.
Combining declarations is also not intended as a tool to forgo contract negotiations, Pirie said.
“In fact, the contract should be negotiated before the declaration is presented for signature, and both should be reviewed at the same time.”
To avoid accidental non-compliance, producers should review both delivery declaration provisions and verify company-specific terms before signing contracts. Declarations should be separately outlined to ensure clarity.
“If the end user has contracted with the grain company to go ahead and source the grain that they need for a particular use, and the grain company delivers to the end user grain that doesn’t meet those specific requirements, then the end user will claim against the grain company, and the grain company then has the right to claim those consequential damages back against a producer itself who violated the contract by delivering the grain not in accordance with the declaration that’s required,” Stewart said.
Changing goalposts
Stewart and Pirie also warned that if the circumstances of the grain no longer match details laid out in the declaration — as might be the case, for example, in grain held over from a previous season — the farmer might end up shopping for a different market.
“If it was barley or wheat that was undeliverable pursuant to a specific contract, it may end up that the producer has to contact a feed company and see whether or not they have an opportunity to purchase,” Stewart said.
“What the producer cannot do is deliver it with this declaration under that contract. If they do so, they will face liability for having done what they shouldn’t have done.”
Pirie and Stewart have also heard from producers concerned about inconsistencies in joint declarations across grain companies.
While companies retain the right to set specific contract terms tailored to their market needs, standardization could ease producer burden, Stewart said. However, Pirie added that legislative action would likely be required to mandate that.
Keeping track
The two stressed the need for producers to maintain thorough records, such as grain samples, that could help resolve any disputes that may arise.
Compliance with Clean Fuel Regulations now require producers to identify the origin of grain heading for specific markets like the U.S. Seeded acreage reports and production records will help in these situations, Stewart said.
A final piece of advice from Stewart and Pirie was for producers to take their time when reviewing contracts and to consult legal counsel when necessary.
“We should be sitting down and getting these declarations looked at at a time when we have the ability to either compare the commercial terms that we have in our contracts with the commercial terms in a joint declaration, and we should be reasonably familiar with the Canadian Grain Commission declaration and be able to recognize in it which section of these combined declarations that were signed ahead of time,” Stewart said. “If it’s unclear, don’t sign it.”
Producers can also exercise their ability to negotiate the terms of their contract, Pirie added.
