Allegations have resurfaced that Canadian pulse exporters are fraudulently shipping American green lentils as Canadian product.
Jeff VanPevenage, president of Columbia Grain International, initially raised this concern with Canadian government and industry officials last fall and is now ringing the alarm bell once again.
“Canadian grain companies continue to come down to the U.S. and pay premiums to the U.S. market for green lentils, bring them up to Canada, call them Canadian lentils and export them as such,” he said.
The math works because the duty on Canadian lentils heading to India is 20 percentage points less than United States lentils.
VanPevenage alleges Canadian firms are buying U.S. Richlea green lentils, blending them with Canadian Laird green lentils and selling them to India.
“They are mislabelling them as Canadian lentils to get the lower tariff,” he said.
The Canadian Food Inspection Agency said there is no evidence that is occurring.
“The CFIA has reviewed re-exports of U.S.A.-origin pulses and confirmed they are being appropriately identified as U.S.A.-origin on the certificate,” it said in an email response.
The CFIA said exporters have a legal responsibility to accurately declare the origin of pulses they are exporting. The agency reviews the information on applications before issuing phytosanitary certificates.
VanPevenage said the current economics are simply too tempting for everybody to play by the rules. Canadian grain companies can afford to pay more for the U.S. Richlea lentils than their U.S. counterparts like Columbia Grain because of the tariff disparity between the two countries.
Canadian green lentils are still selling for US$100 per tonne less than U.S. green lentils in recent Indian tenders because of the tariff disparity.
He said Canadian farmers are being victimized by this practice because processors and exporters are buying U.S. product instead of Canadian green lentils
VanPevenage alleges there are only a few unscrupulous companies that are buying U.S. lentils and selling them as Canadian but they are buying large volumes.
Export statistics from North Dakota, Montana and Washington show that Canada imported 29,618 tonnes of U.S. green lentils through the first six months of 2020.
That compares to 76,646 tonnes for all of 2019 and 15,442 tonnes for 2018.
Volumes are on the rise since India decided to charge a heftier duty on U.S. lentils in retaliation for U.S. import tariffs on steel from India.
VanPevenage said there is no reason for Canada to import green lentils because it has ample domestic supplies of the commodity.
The Canadian Special Crops Association sent a letter to its members on Aug. 6 reminding them of the consequences of misrepresenting the origin of lentils on applications for phytosanitary certificates.
There can be penalties of up to $10,000 for a first offence and up to $250,000 and two years of imprisonment for subsequent offences.
However, VanPevenage doesn’t put much faith in the CFIA enforcing that section of the Canada’s Plant Protection Act.
“There is really no enforcement. If you want to be a bad actor, you’re going to be a bad actor,” he said.
He wants the CFIA to start tracking imports of U.S. lentils to ensure they are either being consumed in Canada or exported out of the country as U.S. product, subject to the higher U.S. duties.