Thank you, Mr. Chairman, members.
I have represented Arctic Ventures in business, including the food business, since 1985 in Iqaluit.
We have used the food mail program for the 25 years we have been in business in Iqaluit, and before that, at another business I owned in Arctic Bay. We saw very little wrong with the food mail program as it operated over the years, except that we did not have the freedom to source our food inventory from wherever we wanted.
When we realized in the last few years that the program was under review and faced potential changes, and when we realized that the minister might rely heavily on a report that had been commissioned by his department--the, in our view, deeply flawed Dargo report--we lobbied consistently to discredit that report and in favour of a modified status quo.
I say “modified” because there was blatant and unconscionable misuse of the existing program. This misuse came about as a result of INAC's own foolishness in allowing items to become eligible for shipment through food mail that had only the most tenuous connection to food. Retailers and individuals in some communities were shipping Ski-Doo parts, dishwashers, clothes dryers, and even truck tires. This abuse is largely why the program was overbudget and out of control, and this abuse led to the review and to the announced changes.
Some months ago changes to product eligibility were announced by INAC. Most of those changes affected products in the higher rate category. These changes didn't affect us. In Iqaluit my company did not use this category, because the food mail rate was fairly close to our negotiated freight rate and it didn't warrant our using that category. However, all communities past Iqaluit use this category extensively. I cannot comment on how changes to product eligibility implemented on October 1 are affecting them.
The changes that will impact Arctic Ventures and all other retailers are those that will take effect on April 1, when Canada Post's involvement with the program ends. We have been provided with no details on how the program will work, other than the broad generalities that were announced by the minister. We would dearly love to know the specifics of the program.
Here is what we understand.
Retailers can order their supplies from wherever they choose and have them delivered to an entry point of their choice.
Retailers will be expected to have their suppliers ship eligible-for-subsidy and ineligible items on separate waybills, as the new program is a waybill-based subsidy program.
INAC will determine and announce a subsidy rate for each community, a community-specific rate. Presumably this will be an amount per kilogram.
Each retailer will negotiate his own freight rate for food cargo and other cargo with the air carrier of his choice in communities where there is a choice. Fortunately, in Iqaluit there is a choice. The retailer will determine a freight cost to be applied to the food products landed in his community by subtracting the subsidy per kilogram from the negotiated freight rate per kilogram and then adding in the cost of local haulage.
At the end of each time period--presumably each month--the retailer will submit his claim for the subsidy, based on waybills and supporting invoices. We assume we will have to submit all of this, so the photocopiers will be busy. We have heard that INAC may contract out the processing of these claims but we have no confirmation of this. And the next stage is, we wait for our cheque.
Who benefits from this new program? You would hope that I would say it's the consumer. I'm not so sure it's the consumer. The big winner, in my view, is the North West Company--owner of Northern stores and NorthMart stores--with stores in almost every community. They have huge purchasing power with whichever airline they decide to ship their cargo. Money talks and they have money. They will negotiate the best freight rates with northern carriers because of their volume. The rest of us will pay higher freight rates and have to set our prices accordingly.
But I do not believe the dominant retailer will substantially undercut our prices. They never have in the past. Rather, they will price the same as us, or a few pennies lower, and their profits will be correspondingly higher.
So this program, in my view, has handed the North West Company a windfall, and for some small businesses a death sentence.
What about quality? Under the existing program, the carrier was required to deliver perishable product within a certain short timeframe. Who will ensure timely delivery of perishable food under this new laissez-faire program? No one will. Our shippers will consign our cargo to the airline, and we will wait.
Whose cargo will be carried first? Whose cargo will get there while still fresh? You know the answer to that. North West Company's cargo will take priority over everybody else's cargo because they will negotiate that priority as part of their contract negotiations. This will provide an incentive for customers to shop at NorthMart or at Northern.