Evidence of meeting #61 for Agriculture and Agri-Food in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was seed.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Michael Ferguson  Auditor General of Canada, Office of the Auditor General
Richard Domingue  Principal, Office of the Auditor General
Dave Carey  Director, Government Affairs and Policy, Canadian Seed Trade Association
Rebecca Lee  Executive Director, Canadian Horticultural Council
Ken Forth  Chair, Trade and Marketing Committee, Canadian Horticultural Council

11:30 a.m.

Auditor General of Canada, Office of the Auditor General

Michael Ferguson

Penalty rates is an issue we flagged. Clearly, it's tough to know whether the penalties affect importers' behaviour.

I'm going to ask Mr. Domingue to elaborate.

11:35 a.m.

Principal, Office of the Auditor General

Richard Domingue

I want to make clear that the penalty is imposed on the Canadian importer, not on the exporter, American or otherwise. It is therefore up to Canadian importers to ensure that they are following the rules on quota-controlled goods, for instance.

11:35 a.m.

Liberal

Pierre Breton Liberal Shefford, QC

It boils down to the same thing: the penalties are still very low.

11:35 a.m.

Principal, Office of the Auditor General

Richard Domingue

Indeed, there isn't much incentive to behave properly and follow the rules.

11:35 a.m.

Liberal

Pierre Breton Liberal Shefford, QC

Exactly.

What would you recommend? Do the penalties need to go up?

11:35 a.m.

Principal, Office of the Auditor General

Richard Domingue

In paragraph 2.35 of our report, we recommend that the Canada Border Services Agency review its penalty rate scale.

11:35 a.m.

Liberal

Pierre Breton Liberal Shefford, QC

Do you believe a review of the rate scale could serve as a deterrent?

11:35 a.m.

Principal, Office of the Auditor General

Richard Domingue

The optimal penalty rate is the one that serves as a deterrent. We didn't specify an amount in the report. However, a certain degree of market discipline is necessary, and if that discipline goes hand in hand with appropriate penalties, it should serve as a deterrent.

11:35 a.m.

Liberal

Pierre Breton Liberal Shefford, QC

We're talking about companies, here. A speeding ticket for going 125 kilometres per hour on the highway costs more, not to mention the demerit points. In this case, the economic impact on the Canadian market is significant. Thank you for that recommendation.

I'm not sure whether you think the agency's six compliance verifications in relation to supply-managed goods had a positive effect. Personally, it strikes me as a positive initiative and a step in the right direction. I wonder why the agency doesn't do more of them. Did any of your recommendations deal with that specifically? Considering that six out of six importers were found to be non-compliant, what should be done to ensure more such verifications are performed?

11:35 a.m.

Auditor General of Canada, Office of the Auditor General

Michael Ferguson

I should point something out. As paragraph 2.62 of our report indicates, it was the agency that decided to pursue the verifications in those specific cases. It was the agency, then, that conducted the verifications. In each case, the agency identified problems. It may be a good idea to ask the agency whether more such verifications are possible. That's a question for the agency, since it was the one that conducted all six.

11:35 a.m.

Liberal

Pierre Breton Liberal Shefford, QC

I see it as a step in the right direction.

Given your examination, do you think the agency has sufficient financial and human resources to further improve its control mechanisms? What can you tell us about that?

11:35 a.m.

Principal, Office of the Auditor General

Richard Domingue

We didn't examine resources, specifically, or assess whether the agency had the necessary resources to deliver the program.

That said, during the audit, we certainly observed some frustration on the agency's part in terms of the efforts devoted to program controls. Would more resources fix the problem? I'm not sure.

Instead of simply suggesting that the agency acquire more resources, we opted to focus on increased market discipline, so that the agency doesn't have to do as much monitoring. Our recommended approach was a bit more preventive, in other words, issuing permits with expiry dates, charging higher penalties, and working with Global Affairs Canada to verify compliance with import permits.

11:35 a.m.

Liberal

Pierre Breton Liberal Shefford, QC

I quite like the educational dimension and the suggestion around increased market discipline. I do, nevertheless, think that the rules should set out enforcement measures and control mechanisms.

You mentioned some frustration on the agency's part. Could you elaborate on that?

11:40 a.m.

Liberal

The Chair Liberal Pat Finnigan

Thank you, Mr. Breton. Unfortunately, your time is up.

Mr. Gourde, you may go ahead for six minutes.

11:40 a.m.

Conservative

Jacques Gourde Conservative Lévis—Lotbinière, QC

Thank you, Mr. Chair.

I would like to thank the witnesses for being here.

Our importers have quotas they must comply with, quotas set by the Department of Foreign Affairs and International Trade, now known as Global Affairs Canada.

Our dairy producers have a predetermined volume of production that is permitted every month, and if they do not reach it, they can produce a bit more the following month. At a certain point, that production is capped under the quotas.

Are importers subject to regular follow-up, either monthly or quarterly, in terms of duty-free volumes permitted? Is that monitored at all? If an importer reaches their quota after nine months, they should no longer be able to import for the next three months, but they may continue to do so, regardless. Is that something that can be monitored?

11:40 a.m.

Principal, Office of the Auditor General

Richard Domingue

In theory, yes. Global Affairs Canada is responsible for controlling permits issued to importers.

In the course of the audit, however, we noted a discrepancy between the volume declared to the Canada Border Services Agency and the volume authorized by Global Affairs Canada under import permits. That's why we state in the report that 131 million dollars' worth of goods were imported without the appropriate customs duties being paid. In fact, the Canada Border Services Agency and Global Affairs Canada do not have a coordinated system.

11:40 a.m.

Conservative

Jacques Gourde Conservative Lévis—Lotbinière, QC

Did you note any schemes by importers where, for instance, they declared that a 20-tonne truck was carrying a 17-tonne shipment of chicken that was in fact 20 tonnes? I'm referring to situations where the reported volume is underestimated; the actual volume could be 10% or 12% higher than what is declared every time a shipment enters the country. At the end of the day, that means a lot more products are being imported.

11:40 a.m.

Principal, Office of the Auditor General

Richard Domingue

Earlier, we were discussing incentives or the lack thereof. We didn't note that kind of thing, specifically. However, in an effort not to go over an import permit volume, someone could easily underestimate the value of their imports to keep more room as the year progresses. That is a possible tactic, but not one we observed.

11:40 a.m.

Conservative

Jacques Gourde Conservative Lévis—Lotbinière, QC

Are shipments subject to checks? If we go back to my example, is there a possibility that the truck whose declared volume was 17 tonnes could undergo a random weight check, or is that not something that is done?

11:40 a.m.

Principal, Office of the Auditor General

Richard Domingue

The Canada Border Services Agency does not perform front-line controls. Its mission is to facilitate trade, and since these are perishable goods, they need to move across the border quickly. They are not subject to any controls when they cross the border, including the Canada-U.S. border.

11:40 a.m.

Conservative

Jacques Gourde Conservative Lévis—Lotbinière, QC

Is it possible they could be subject to control once they reach their destination, on the importer's end?

11:40 a.m.

Principal, Office of the Auditor General

Richard Domingue

Any control activities are performed at the destination point, at the storage facility or processing plant.

11:40 a.m.

Conservative

Jacques Gourde Conservative Lévis—Lotbinière, QC

Once the shipment is unloaded, the goods are transferred to various storage facilities. They can be divided amongst three or four different locations, making it practically impossible to retrace them.

11:40 a.m.

Principal, Office of the Auditor General

Richard Domingue

Retracing goods that have been dispersed across the system is the challenge that the Canada Border Services Agency faces. They may have been stored in a warehouse one day and be gone the next; the goods can indeed end up somewhere else.

11:40 a.m.

Conservative

Jacques Gourde Conservative Lévis—Lotbinière, QC

I think that's a huge challenge. A reopening of the borders could send import volumes up by 3%, 4%, or even 5%, and the range of products would be even more diverse. That increases the possibility of goods coming into the country without being subject to adequate controls. Yogurt, cheese, and other product imports could be slightly higher, making it difficult to pinpoint exactly how many litres, kilograms, and so forth are coming in.

That doesn't even include cases where goods have perished in transit. Does that quantity come off the licence? Control mechanisms need to be reviewed.

Would it be easier to centralize the control function, instead of delegating it to three different departments?