A situation with Canadian Canola in China has been escalating for the last few weeks and this market, that last year was worth $2.7billion dollars to Canadian farmers, is no longer welcoming the product. Exporters of Canadian canola are being told that their product is non-compliant because of harmful pests found in their shipments.  This action is taking place following Canada’s arrest of Huawei’s Chief Financial Officer late last year*.

In response to some general questions about whether coverage for receivables generated from the sale of canola is still available, the Receivables Insurance Association of Canada has polled its members in order to determine the coverage pulse of the receivables insurance market.

Generally speaking:

  • Insurance coverage for receivables generated from the sale of agricultural products, whether those sales be to domestic buyers or foreign buyers, is still readily available.
  • Understandably, the risk appetite for receivables owing by Chinese buyers (and not just those buyers purchasing canola) has been modified by some of the underwriters and become more conservative. They have commented that there is extra scrutiny when analyzing Chinese buyers, particularly with respect to ownership.
  • When looking at payment terms for contracts in China, shorter and more secure payment terms are preferred.
  • Outside of China, there have not been any changes to the coverage available for the sale of all agricultural products. Exporters continue to avail themselves of this coverage through standard credit insurance policies issued by the insurers (specialized policies are not required for agricultural products) and can include features such as pre-shipment and pre-delivery coverage.
  • The Chinese have raised a quality issue. While we are not aware that there are any receivables involved at this time, it does beg the question as to how the credit insurance community would respond if the Chinese did renege on their payment obligations for quality reasons. All insurers responded in a like manner stating that if there is a dispute, that dispute must first be resolved before a claim could be paid (receivables insurance covers valid receivables and if the receivable is disputed, its validity is in question until that dispute is resolved). RIAC strongly promotes the use of robust, enforceable and independent dispute resolution conditionality in all sales contracts but particularly so if there may be the potential for politically motivated disputes.

So the good news is that, despite the headlines, Canadian established receivables insurers are continuing to protect Canadian businesses against buyer non-payment or insolvency and against specified political risks that result in receivables not being paid. If receivables don’t get paid, a business’ lifeblood – their cash – dries up leading to financial trouble.

If you have any specific questions regarding the coverage offered by the credit insurers operating in Canada, please contact them directly or speak with a specialist receivables insurance broker (they are all identified in the RIAC website  (https://receivablesinsurancecanada.com).

by Ian Miller, Past and Founding Chair of the Receivables Insurance Association of Canada (RIAC) and Emeritus RIAC Member.


*please see: Canola producers want fast resolution to feud with China — but are ready to look elsewhere | CBC News