Finance Committee on June 1st, 2021

[Tamara Jansen, Conservative, Cloverdale—Langley City, BC]

I'm just wondering how much discussion has been had with different financial institutions about this program, because I know a number of the loan programs that were meant as COVID support didn't really work for many small businesses because of the way they were arranged. The requirement they had to fulfill in order to get the loan was just impossible for them to meet. Maybe they were under lockdown, so they couldn't put out any revenue projections.

How much actual discussion has been had with institutions to make sure this is actually going to help small businesses?

[Steve Watton]

I would say a fair amount. Over the last several years the program has undertaken a statutory review. The last review period ended last year and there was a fairly elaborate review undertaken. That was informed by discussions with not only lenders but also borrowers. There were awareness and satisfaction surveys done with the lenders and with the borrowers as well. Those discussions and consultations that have been had with the lenders and the borrowers informed the comprehensive review report. That report had a number of recommendations and was tabled in the House of Commons and in the Senate this past fall, so that's public information.

Many of these recommendations that are being proposed through budget 2021 had already been vetted through the financial institutions. That being said, the line of credit facility, to your point, is new and we are in active discussions right now with financial institutions to frame this up in such a way that it's going to be useful for the financial institutions to use, but also so that it is affordable and meets the needs of small business borrowers as well.

[Tamara Jansen, Conservative, Cloverdale—Langley City, BC]

Is there an interest rate tagged onto this?

[Steve Watton]

Yes, there is an interest rate, but that interest rate is going to be prescribed in the regulations. The maximum it could be is prime plus 5% or some lesser amount—this is just for the line of credit. On the loan side it's prime plus 3%, and of that 3% on the term loan side, 1.25% has to come to the government as an administration fee. It's the same thing on the prime plus upwards of 5%. That's still to be determined, but it would be no more than that. There would still be 1.25% coming to the government for the administration fee.

The increase in the allowable interest rate would be commensurate with the level of additional risk that the line of credit would have versus, say, a term loan for real property.

[The Chair, Liberal, Wayne Easter]

Mr. Falk.

[Ted Falk, Conservative, Provencher, MB]

Thank you, Mr. Chair.

I have two questions. First of all, how did the financial institutions that you got feedback from feel about this proposed change? Also, what exactly are you hoping this will result in?

[Steve Watton]

A number of changes are being proposed. I would say that all the feedback we've been getting from the financial institutions has been positive, and they are saying these measures will do more to help small businesses get access to financing. This is access to financing that would otherwise be unavailable. If they are falling under conventional lines of credit or conventional term loans, they will be given out under the conventional products within those financial institutions. It's only when the borrowers are a little higher on the risk spectrum that they would use this product.

[The Chair, Liberal, Wayne Easter]

Mr. Fast.

[Ed Fast, Conservative, Abbotsford, BC]

To follow up on that, the product is part of an existing program. This is not new. It's just that the program is being made more flexible. It's being somewhat expanded to clarify definitions on who can qualify for this, and what brings lenders to the table is the fact that the government is guaranteeing a percentage of any loan losses. Is that correct?

[Steve Watton]

Yes, that is correct.

[Ed Fast, Conservative, Abbotsford, BC]

Thank you.

(Clause 206 agreed to on division)

(On clause 207)

[Steve Watton]

Clause 207 is just a clarifying technical amendment to the program liability ceiling. The clause amends subsection 6(1) of the Canada Small Business Financing Act to better articulate the meaning of the program liability ceiling.

[The Chair, Liberal, Wayne Easter]

We'll go to the vote.

(Clause 207 agreed to on division)

[Steve Watton]

I'm sorry. There are two other subclauses in clause 207.

[The Chair, Liberal, Wayne Easter]

Okay. Do you want to give a little explanation on them?

[Steve Watton]

Yes. It's subclauses 207(2) and 207(3). This is where the lender liability limits get segregated and clarified for term loans and lines of credit.

Subclause 207(2) separates the liability limit for term loans and the liability limit for lines of credit.

Subclause 207(3) introduces proposed subsection 6(3) of the Canada Small Business and Financing Act to establish the liability limit in respect of the lender for lines of credit at a maximum of 15% of their CSBFP line of credit portfolio, and that a lesser percentage liability can be prescribed in the regulations.

[The Chair, Liberal, Wayne Easter]

I believe that was explained at the previous meetings as well, Mr. Watton, but thank you for that.

(On clause 208)

[Steve Watton]

Clause 208 basically deals with maximum loan size. This clause amends subsection 7(1) of the Canada Small Business Financing Act to increase the maximum loan size to $1.15 million and to allow for the line of credit facility. It sets the maximum amounts to be prescribed for different loan products—that is, $1 million for term loans and up to $150,000 for lines of credit—and maximum loan amounts for loan classes.

[The Chair, Liberal, Wayne Easter]

Thank you. It's pretty straightforward in the bill.

(Clause 208 agreed to on division)

(On clause 209)

[Steve Watton]

Clause 209 speaks to the coming into force of the amendments. Subclauses 205(2), 205(3) and 207(1) will come into force when the budget implementation act receives royal assent. The other clauses will come into force once regulatory changes go through. There's a regulatory package associated with these changes as well. That will need to go through later this year.

(Clause 209 agreed to on division)

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Watton, for your explanations and your help.

We will turn to division 19, with Yannick Mondy as the lead. It is on the Customs Act.

There are no amendments for clauses 210 to 219. Do we have unanimous consent to group them as one, with one explanation?

[Ed Fast, Conservative, Abbotsford, BC]

No, I don't think so.

[The Chair, Liberal, Wayne Easter]

All right. We will start with clause 210.

Ms. Mondy.

(On clause 210)

[Yannick Mondy, Director, Trade and Tariff Policy, International Trade Policy Division, International Trade and Finance Branch, Department of Finance]

Thank you.

Good evening. I'm the director for tariff and trade policy in the international trade and finance branch at the Department of Finance. Before I go into the intent of division 19 and its clauses, I would ask that Mr. Goran Vragovic be invited to appear as well. Mr. Vragovic is the director general for CBSA assessment and revenue management. He will help to assist on any technical questions relating to the amendments in division 19, part 4, of Bill C-30.

Overall, division 19, part 4, amends the Customs Act to make amendments to help to support the modernization of the payment processes of duties and taxes for commercial importers, primarily by establishing an interest-free period as well as a single harmonized billing cycle for monies owed, as opposed to the current terms of the act right now that set payment, interest and other monies owed on the basis of each transaction. As well, one of the amendments is looking to ensure a fair, consistent valuation of imports, importations of goods in Canada, by introducing a new definition in the Customs Act for the term “sold for export to Canada”.

Clause 210 allows importers to correct an import declaration before a deadline without triggering a redetermination that could generate penalties of interest. It effectively amends subsection 32.2(3) of the Customs Act and allows an importer to make an error correction before a certain deadline that will be set, without it being treated as a redetermination under paragraph 59(1)(a) of the Customs Act. The intention of this provision is to encourage more accurate final accounting and improve payment practices by commercial importers.

[The Chair, Liberal, Wayne Easter]

Thank you.

Mr. Vragovic is here as well now.

Mrs. Jansen.