Evidence of meeting #119 for Agriculture and Agri-Food in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was fertilizer.
A recording is available from Parliament.
Liberal
Francis Drouin Liberal Glengarry—Prescott—Russell, ON
I see.
Suppose things don't go well and CBSA remains silent, what other recourse do you have?
Can you turn to the Canadian International Trade Tribunal, or CITT, for example, or the Federal Court?
Is Sollio considering pursuing such remedies?
Chief Executive Officer, Sollio Cooperative Group
Given the sizable amounts at stake, we will continue to explore all avenues that would allow us to claim the tariffs paid. As you said, there are potential remedies.
Liberal
Francis Drouin Liberal Glengarry—Prescott—Russell, ON
I want to make sure I understand, Mr. Poisson.
CBSA is essentially saying that transit is unimportant to them. If the goods have not arrived in Canada, at port or in Canadian waters, CBSA considers that it is not in transit.
Is that correct?
Director, Governmental and institutional affairs, Sollio Cooperative Group
Actually, that's not quite accurate.
Of the eight vessels concerned, one was considered in transit, because it was in Canadian waters just before the sanction was imposed.
Director, Governmental and institutional affairs, Sollio Cooperative Group
That said, I repeat that there was an exemption for certain goods. The initial order imposed the general tariff on Russian goods, whereas the second order provided a new interpretation.
The rest is highly technical. I won't go into the details.
Liberal
Francis Drouin Liberal Glengarry—Prescott—Russell, ON
All right.
The reason we're here is that our colleagues have raised certain issues. CBSA officials will have the opportunity to testify a little later. We want to get to the bottom of this. Of course, we don't want things to get worse, and we hope there will be a positive outcome for farmers and for your organization.
Mr. Chair, is my time up?
Liberal
Francis Drouin Liberal Glengarry—Prescott—Russell, ON
All right.
In light of this order, what do you see as the future for Sollio Cooperative Group?
I believe you partnered with Agromart.
Is that correct?
Liberal
Francis Drouin Liberal Glengarry—Prescott—Russell, ON
You've mentioned the difficulty of sourcing from elsewhere, other than from Russia, and you're worried about the conflicts in the Middle East. From your perspective, you're seeing that the global marketplace is shrinking. The options to look for a source in other places are shrinking. Is that your analysis?
Chief Executive Officer, Sollio Cooperative Group
Yes, and I could give you a more concrete example. Phosphate is a clear example.
We saw some hurricanes recently in the Florida area. It's a primary production region. Other key regions include Morocco, and Russia itself. Without Russia as an option, when there is an interruption in supply, then the options become very limited for other regions. Given the time that's involved to—
Bloc
The Vice-Chair Bloc Yves Perron
Thank you, Mr. Kaastra.
Mr. Drouin, your time is up. That said, you're in luck. It's my turn to speak, and I'll allow Mr. Kaastra to finish his answer.
I would remind you that I had the committee's unanimous consent to participate in the rounds of questions.
Chief Executive Officer, Sollio Cooperative Group
Thank you.
I'll simply say that yes, those are limited options, so we're at more risk of supply shock if any of those regions are shut down for whatever reason.
Bloc
The Vice-Chair Bloc Yves Perron
You have nevertheless found new sources of supply, particularly in North Africa.
Is that right?
Chief Executive Officer, Sollio Cooperative Group
Yes. Algeria is an example, and Turkmenistan. There are other countries in the world that produce urea, for sure. In those circumstances, we see that the trade balance has evolved and that other countries that are still able to import from Russia, such as the U.S., India or others, are taking up some of that production, which liberates volume that's produced in other regions of the world for us to be able to source directly. It's really changed the trade flow in those cases.
Director, Governmental and institutional affairs, Sollio Cooperative Group
Allow me to clarify.
There are certainly other markets where we could source supply, but not in the same quantities. As Mr. Kaastra said in his remarks, we're talking about quality, quantity and price. Those attributes are not necessarily found in those markets.
In terms of how the supply works, ships usually arrive in the St. Lawrence Seaway at a specific time of year, during planting season. These vessels act as floating warehouses, if you will.
We have a respectable storage capacity, but it is ultimately limited if we take into account the huge volumes we import and the fact that we are the largest player in eastern Canada. That has an impact on logistics and it has an impact on our business. We want to ensure we have the right amount at the right time, especially since the planting season is getting shorter and shorter.
This morning, we sent the committee a document. It contains graphs that explain the evolution of the planting period. At one time, the period was about 20 days. Right now, the window is closing more and more. Indeed, we're talking about a few days or barely a week. So this is a critical moment. That shift is definitely having an impact on our business.
Bloc
The Vice-Chair Bloc Yves Perron
If I understand correctly, you're saying that it isn't viable for eastern Canada. The geopolitical situation is seemingly not improving and will continue in that direction for a while.
Have I understood that correctly?
Chief Executive Officer, Sollio Cooperative Group
The risk has increased with limited options. The more the options of various supply sources are limited, the more our risk increases. The cost is also higher because Russia, to eastern Canada, is a cheaper supply source in terms of transit. Also, as Marc mentioned, it also improves our ability to have the product there when we need it. When we have to source from other regions, it really just increases the risk of availability as well as the cost of supply to eastern Canada.
Bloc
The Vice-Chair Bloc Yves Perron
All right.
I'd like to come back to the substance of the story, that is, the dispute.
How much do you pay in tariffs on Russian fertilizers?
Vice President, Finance, Sollio Cooperative Group
Total tariffs paid amount to $33.5 million.
Bloc
The Vice-Chair Bloc Yves Perron
Of this $33.5 million, $7.8 million was waived for you, because the ships had already left Russia when the tariff was introduced. You received the money and redistributed it to your customers who had paid the fee. Now, 10 or 12 months later, the Canada Border Services Agency has come back to tell you that you have to pay these amounts after all, plus the interest accrued for the year. Did I understand correctly?
This procedure, which I find quite appalling, raises a number of questions.
First of all, you were unable to recover the sums you had credited to your customers. This is a direct loss for you.
The second thing is the state of insecurity it puts you in for the future. When you sign a contract, you know how much it costs. There's a set amount, and you sign at the bottom of the page. If the amount changes after a year, you'll have to make forecasts for the future, and this may prevent you from making investments in other sectors.
I'd like you to tell me about the uncertainty this creates for you, and then give your recommendations to the committee.
Vice President, Finance, Sollio Cooperative Group
In fact, we remitted $7.8 million to our customers within weeks of receiving the initial amount. Eleven months later, the agency billed us again for the $7.8 million, plus interest. At the time, we were very uncomfortable about billing our customers for this amount again. So, for the time being, Sollio Agriculture is responsible for this portion.
Chief Executive Officer, Sollio Cooperative Group
Then, to add to that, when we talk about Sollio agriculture, obviously it means the producers themselves. They are impacted by that. We're a co-operative, and the producers themselves, as owners of the co-operative, are the ones who are experiencing that cost and that loss.
To answer your second question or to speak to it, I think that a couple of things we've found difficult with the situation were the timing of the decision and the impact that it had on our ability to supply our farm clients just prior to the spring period. The supply chain is so long and extensive that to be able to pivot and find other sources in a matter of week.... At the time, we had eight vessels ordered from Russia. We were able to find replacements for two, but we really had no other choice but to bring in the other six at that point in time. Timing is very important in those cases.
Director, Governmental and institutional affairs, Sollio Cooperative Group
I would like to add something, if I may.