Payment protection information for producers

How to Manage the Risk of Not Being Paid

This information

• Explains the risk of not being paid by licensed primary elevators, process elevators and grain dealers
• Explains payment protection provided under the Canada Grain Act
• Explains the rules laid out in the Canada Grain Act and Canada Grain Regulations
• Provides suggestions for managing nonpayment risks

The risk of not being paid

While it doesn’t happen often, occasionally producers are not paid for the grain they sell to licensed primary elevators, process elevators and grain dealers. How?

• A grain company goes out of business due to financial failure.
• For other reasons, a company is unwilling or unable to pay a producer.

If that company is licensed by the Canadian Grain Commission (CGC), it is required by law to post security that covers the unpaid purchases it makes from western grain producers. Licensees usually provide bonds or letters of credit. Eligible producers can make claims to the CGC to recover part or all of the money they are owed if a licensee is unable or unwilling to pay.

Take the assessing your risk quiz!

The Canada Grain Act and payment protection

The Canada Grain Act limits producer compensation to the amount of security posted by a given company. It does not provide for guaranteed full payment.

Example:

If the amount of security available is sufficient to pay 80 percent of eligible claims, individual claimants would receive only 80 percent of what they are owed.

The CGC is not liable for shortfalls in security. Nevertheless, the Canada Grain Act does provide useful tools for managing your risk of not being paid.

The rules

For interpretation of how these rules apply in specific circumstances, contact the Canadian Grain Commission Licensing Unit.

1. Check if the company is licensed by the Canadian Grain Commission.

Contact the CGC and find out who is licensed before you do business with them.

CGC licensees are required by the Canada Grain Act to post security to cover their outstanding payments to producers. If a company is unable or unwilling to pay you, the CGC has the authority to investigate, and if appropriate, to pay you from this security.

Be aware:

• Payment protection is limited to the amount of security posted by the licensee.
• There are rules that you must follow to be eligible for compensation.
• If the company you are dealing with is not licensed by the CGC, we will not be able to help you.

2. When you deliver your grain, always obtain a receipt that identifies the grain, grade, weight, price and date of the delivery.

Currently, 21 crops are eligible for payment protection.

To prove your claim, you need one of the following documents:

• Combined primary elevator receipt
• Primary elevator receipt
• Interim primary elevator receipt
• Special bin primary elevator receipt
• Grain receipt
• Cash purchase ticket

A scale ticket is not sufficient to support a claim.

3. Get paid when you deliver the grain. If that is not possible, get paid within 90 days of delivery. When you are paid, cash your cheque immediately.

If you are paid on delivery and the cheque or ticket is good, there is no risk of nonpayment. While you may defer receiving payment, the longer you do so, the greater your risk.

If you deliver grain to a licensed primary elevator, process elevator or grain dealer, you may make a claim against the company’s security if you are not paid within 90 days from the date of delivery. If you wait longer than 90 days to exchange your elevator or grain receipt for a cash purchase ticket or cheque, you are not covered.

Once you receive a cash purchase ticket or cheque, you are covered by the licensee’s security for 30 days maximum from its issuance, or until 90 days from the date of grain delivery. The lesser of the two time periods applies.

Example:

• If you submit your receipt and receive a cash purchase ticket on the 15th day after your delivery, you are covered for 30 days, not the 76 days left in the 90-day period.
• If you submit your receipt and receive a cash purchase ticket on the 75th day after your delivery, you are covered for only the 16 days left in the 90-day period, not 30 days.

When a licensee refuses to pay you for your grain, or the financial institution denies payment on your cash purchase ticket or cheque, you have 30 days to notify the CGC in writing after the refusal or failure.

4. If you experience any delays in being paid, contact the Canadian Grain Commission immediately.

When a licensee refuses to pay you for your grain, keeps stalling on payment or the financial institution denies payment on your cash purchase ticket or cheque, you have 30 days to notify the CGC in writing. In general, the sooner you contact us, the sooner we can begin to help.

Ways to manage nonpayment risk

1. Limit your risk exposure.

• When you make a grain delivery and don’t seek payment or when you defer payment for tax reasons, you are, in effect, either lending grain, money or both to the buyer.
• Generally, the sooner you get payment, the lower your risk of payment loss.
• When you are asked by a buyer to wait for payment, you increase your risk if you deliver.
• If you are promised a significantly better payment than available from other buyers, you may be increasing your risk
• Don’t put all your eggs in one basket. Selling to more than one buyer spreads your risk.
• Get paid after each delivery when making a series of deliveries (rather than grouping deliveries into one large payment).
• If you have concerns about the buyer, deliver to another buyer you trust.
• Some commodities are riskier than others because they are destined for either specialized, riskier or smaller markets or lack adequate hedging mechanisms. Such commodities require increased vigilance.

2. Ask questions.

• While some buyers take more time to pay than others, a capable buyer will pay immediately if asked.
• Ask when you will get paid before you make your delivery, especially if you don’t know the buyer.
• Ask others who have dealt with the buyer whether they have been paid promptly.

3. Make certain you understand your contract.

The CGC does not control contracts agreed to between producers and licensees. It makes good sense to read your contract and, if necessary, have your lawyer review and explain any contract you sign.