Agriculture Committee on June 6th, 2017

[Richard Domingue]

Certainly, the fact that multiple departments are involved does complicate things. The two organizations have to communicate and coordinate their efforts. We did not make a recommendation on centralization, specifically. Our recommendations focused on the strengths and weaknesses observed in the current system.

[Jacques Gourde, Conservative, Lévis—Lotbinière, QC]

Which department do you think should have control of the ball? In other words, which one should be in charge?

When two or three organizations are involved, each one works towards its own mandate, and opportunities are missed because of this silo approach.

Should one of the three departments take the reins?

[Richard Domingue]

We didn't provide an opinion on that specifically.

It's important to understand that the Canada Border Services Agency has a very specific mandate. They are the people on the ground. Global Affairs Canada is more involved on the policy side. Despite also having a presence on the ground, Global Affairs Canada doesn't have the staff needed to carry out these kinds of verifications.

In any case, we did not make a clear determination as to which department should be in control of the ball.

[Jacques Gourde, Conservative, Lévis—Lotbinière, QC]

I have one last question.

Is there an ad hoc team that conducts more specific verifications and determines, for instance, to tackle a given problem in order to find a solution? Conversely, are verifications conducted further to complaints involving a suspected permit violation? In that case, a warning or notice would go out to the importer, who would have to prove that their permit was valid.

[The Chair, Liberal, Pat Finnigan]

Could we get a quick answer to that, please?

[Richard Domingue]

As we explain in the report, the Canada Border Services Agency conducts random and targeted verifications. Targeted verifications are definitely the most effective, in that the information collected suggests a problem within a specific industry.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Domingue.

Ms. Lockhart, you have six minutes.

[Alaina Lockhart, Liberal, Fundy Royal, NB]

Thank you, Mr. Chair.

Thank you both for being here today.

I'm looking at your report, and the numbers in exhibit 2.2 are from 2015. These are on the customs duties on quota-controlled goods that weren't assessed. Has any follow-up work been done? Are the numbers for 2016 available yet?

[Michael Ferguson]

These were just numbers that we put together when we did the comparison of all of that quota information. The numbers were not coming from the department. Hopefully the department would keep those types of numbers up to date so that they would have an idea of it, but it would be something that they'd have to do.

[Alaina Lockhart, Liberal, Fundy Royal, NB]

Sure. I think those came from Global Affairs and Statistics Canada. That's where you drew the numbers from.

Yes, it would be interesting to see the changes for 2016. I understand there was an increased number of audits on supply-managed goods this year, and in fact there were six suspensions of importer licences because of that. Do you see that as a positive improvement, from your report?

[Michael Ferguson]

Well, the six that we referred to with regard to the duties relief program were all done before we issued the report.

Monsieur Domingue might know what has gone on since.

[Richard Domingue]

I understand that there was one additional case recently. My understanding is that they're up to seven, but when we did the audit, it was six. The seven needs to be verified. We don't know if that's—

[Alaina Lockhart, Liberal, Fundy Royal, NB]

Okay. I guess I'm just trying to verify whether or not we're moving in the right direction.

There's also been consulting amongst industry—including CBSA, Global Affairs, Finance, and Agriculture—with a working group of those stakeholders. Do you have any advice on what they should be focused on and what outcome they should be looking toward?

[Michael Ferguson]

This issue is obviously particularly complex. You start with whatever it is, the 7,000 different items that are in the customs tariff that have to be enforced. You have 10-digit coding that has to be applied to everything. You have to get it down to very detailed levels. Then you have duties that apply that are difficult. It's not just a matter of one duty on product x and another duty on product y. When you're dealing with something like diafiltered milk, for example, it's the protein level in the product that determines the level of the duty. So it's about applying the duties, knowing what the product is that's coming across the border, and then actually being able to enforce all of that.

Again, we have identified in here that in the case of a number of things coming across the border, importers will have up to four years to change the classification of what they brought in. By then the goods are long gone into the economy. If the importer's coming back four years later and saying, “You know what? I didn't bring in product x, I brought in product y”, it's difficult to know whether that was the right thing.

This is not going to be simple to solve, but I think it does no one any good to have a system that cannot be applied. I think what they need to do is to go back and figure it out. Is it enforceable? How do we enforce it? What different steps would we have to take to enforce it? How do we know whether people are complying with it? I think it's going to take a serious look at the whole system. What are the goods that the duties have to be applied on, and how can we then make sure that those duties are actually being applied?

For us, the way we look at this is that, again, it's not for us to say what the duty system should be, or what duty should be applied on, but once it's been decided, then there needs to be a system that actually enforces it. Again, Canadian producers, Canadian businesses, need to know that the rules are being applied as they expect them to be applied, so that they know what the market is that they're working in.

[Alaina Lockhart, Liberal, Fundy Royal, NB]

From what you're saying then, it is going to require several departments working together to address this.

[Michael Ferguson]

I think so, and it's going to be complex, but it's also important so that Canadian producers and Canadian industry are confident that when there is a system being explained to them, that system is actually the one that's being enforced.

[The Chair, Liberal, Pat Finnigan]

Thank you.

Now Mr. Anderson, for five minutes.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Again, I wanted to bring this up. We've been talking about supply-managed goods. In your report a couple of times you refer to quota-controlled products, and beef is on that list. Maybe I should know this, but in what areas is beef controlled with quota limits?

[Richard Domingue]

On quota-controlled goods, there are a number of products like steel and beef, and they are not necessarily supply-managed goods.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Okay, why are they—

[Richard Domingue]

Beef happened to be on this list, and steel would be on the list, but it's not under supply management.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Okay, it's just that you've included it in your list of imports of quota-controlled goods that exceed volume. These goods include dairy, chicken, turkey, beef, and eggs. Do you know what the limits are on beef? Where are those quota limits?

[Richard Domingue]

No, I don't have that.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

I am not aware of any and I was just surprised to see that included in the list.

What we're talking about today, is it applying just between the U.S. and Canada? When you talk about penalties not being paid and duties not being paid, did you examine steel and beef and other things as well, or is there a discussion? Are they limited to these supply-managed products that we're talking about?

[Richard Domingue]

We looked at those products listed in exhibit 2.2, so we didn't venture into the steel issue or duties paid or not paid on steel, for example.