Industry Committee on Nov. 25th, 2013

[Glenn Thibeault, NDP, Sudbury, ON]

Thank you, Chair.

I'd like to thank both our witnesses for being here today.

I'd like to start with you, Ms. Nott. We've heard previously that potentially dangerous counterfeit goods like batteries, electrical equipment, and even pharmaceutical drugs have been making their way into the legitimate supply chain and ending up on retailers' shelves.

Maybe you can lend us a little insight and explain how a counterfeit product would go from the black market, so to speak, to a legitimate one, and end up on a retailer's shelf. In other words, how are counterfeit goods permeating the legitimate supply chain?

[Joy Nott]

In order to explain that, I'll quickly do a compare-and-contrast of an import coming into Canada versus an import going into the United States.

For an import coming into Canada with any sort of trademark or brand name associated with it, it shows up at the border and is.... I'll use Canada Goose as the example, since he's my co-witness. Jackets would show up at the border and would be described to customs officers as winter jackets, men's and ladies' winter jackets. Even if an officer opened up the box and took a look at the actual jackets, if they were branded “Canada Goose” and were counterfeit, there's nothing in the way our current process works for that officer to do anything about that shipment.

If the documentation coming with it legitimately says they're men's and ladies' winter jackets, if that's what the officer finds in the box, and if it's the right piece count and whatever else, right now the officer has to shrug and let the shipment go, even if the officer strongly suspects as a consumer that it's not actually Canada Goose. There is nothing they can do to stop that shipment from proceeding into the marketplace.

In the United States, however, in exactly the same scenario, a U.S. Customs officer would open up the box—I'm oversimplifying for the sake of illustration—and check a database. The officer would say that Canada Goose has registered their trademark and is telling them that only the following 15 factories, for example, or 20 factories, which is what I think he just said, are authorized to ship that product to that country. That particular shipment, for example, is not coming from one of those factories, or that particular shipment is not actually going to Canada Goose, but Canada Goose has told them that all imports of their product from foreign countries would be addressed to them. That sort of database, then, tells the officer there's something wrong with this shipment.

Secondly, that database turns to the importer and actually expects that importer, if they're going to use something like Canada Goose.... If they want to import these and they're branded “Canada Goose”, where is their written confirmation from Canada Goose that they, Mr. or Ms. Importer, have the authorization of Canada Goose to bring these goods into the country? Without that written confirmation that they are legally allowed by the owners of the trademark to import those goods into the market, the goods are seized, whereas today at the border we don't have anything comparable.

As I was saying earlier, while we are fully in support of this piece of legislation, our fear is that at the border, given the resources and given how this would be a new process for Canada Customs, we don't know how that process would be launched and what would actually happen with a shipment at the border. The devil is in the details, and we don't know those details.

[Glenn Thibeault, NDP, Sudbury, ON]

Sure. I know we're going to get to some questions soon, and some of my colleagues will ask about the resource piece.

But in your opinion, do you think Bill C-8 will have a tangible impact on the volume and flow of counterfeit products entering Canada?

[Joy Nott]

I really do, as long as we can get those details right and how it operationally happens at the frontier points.

None of my members expressed any concern about customs officers having undue power or being expected to become trademark experts. Those aren't the concerns we're hearing. We are hearing that they're very much in favour of having something, anything, in place today that would stop that Canada Goose shipment I was talking about earlier. Something to give customs officers the authorization and the power to say, “Hmmm, something is suspect here. We're going to detain these shipments at the very least.” Having the power to confiscate them at the border, with evidence from Canada Goose proving them to be counterfeit, so they don't hit the marketplace, that in itself is huge.

Going back to what Mr. Spreekmeester was talking about, online counterfeit, I don't think there's ever going to be—not in this legislation anyway—anything to stop an individual consumer from going online and buying an individual jacket through United Parcel Service or Federal Express or Canada Post, and shipping it to an individual at their home. Even this piece of legislation doesn't try to address that because I don't know how you would. I share my co-testifier's concern with how you tackle online counterfeit, and business directly to consumers. That's a tough nut to crack.

But for business to business, other G-8 countries have tackled this problem. Canada would be well served in following their example.

[Glenn Thibeault, NDP, Sudbury, ON]

That flows right to my next question.

What's your perspective on whether Bill C-8 will protect Canadian consumers from unwittingly purchasing potentially dangerous counterfeit products found in some of Canada's largest retail chains?

[Joy Nott]

I do think the world is never perfect. Will it completely exclude every single circumstance? No, I don't think that's realistic. Will it cut down significantly on the number of counterfeit products finding their way into legitimate supply chains? Yes, I think it will—the caveat being, as long as we have some workable, feasible plan for boots on the ground, at the border. If we give the customs officers the tools they need, I do think it would make a significant impact. At the very least, it would stem the flow.

Last year, I was in Hong Kong and the whole concept of counterfeiting came up. It was well noted, by the different companies I was talking to, that Canada really has no infrastructure in place to address counterfeits, at the time of import, at the border.

[The Chair, Conservative, David Sweet]

Thanks very much, Ms. Nott.

[Joy Nott]

The fact that it’s known internationally, I don't think serves us well.

[The Chair, Conservative, David Sweet]

Thank you. No, it wouldn't.

Now we go to Mr. McColeman for seven minutes.

[Phil McColeman, Conservative, Brant, ON]

Thank you, witnesses, for being here today.

Kevin, you mentioned something very interesting about the amount of investment you've made in trying to win this battle or trying to make a dent in it, and that some importers have gone to jail.

Can you describe how that happened, in which countries, and the process you had to go through to get that done?

[Kevin Spreekmeester]

Sure, I'll speak from a lay perspective because I'm not of a legal mind. In Sweden, we caught someone importing counterfeit. We were alerted by our legal firm in Copenhagen, which operates throughout Scandinavia on our behalf. The police went to that person's home and found plenty of Canada Goose and other products. They arrested them and we prosecuted them. Within Scandinavian law, they were fined and sent to jail.

In China, we raided a factory—the Chinese authorities worked with us. Again, someone was sent to jail. I don't know many of the details beyond that. If I had to worry about all those details, I'd not get any marketing done.

[Phil McColeman, Conservative, Brant, ON]

I appreciate that. Having had my own businesses all my working life prior to my political life, I can imagine the kind of margin you have to build into your product cost just for doing the things you're doing, which could well be used, as you say, to expand and create jobs and do all the good things as you build more market share and/or reduce the price to consumers at the same time.

As far as the online trade is concerned and trying to find a way to counteract that goes, are there any leading jurisdictions right now that you're aware of around the globe that are making any inroads on this one? I'd like both witnesses to answer this question—

[Kevin Spreekmeester]

I don't know of any leading jurisdictions. I can tell you what the fear is, and that's the infringement of freedom of speech when it comes down to it. Through our participation in the outdoor industry and their anti-counterfeit task force, we learned that when monitoring the Internet for anti-counterfeiting purposes on an anti-counterfeit platform there's a fine line between impinging on freedom of speech, freedom of expression, and policing. That's where the holdup seemed to be, certainly in the United States. But I've yet to see a good example globally of any region that has taken the lead and policed the Internet outside of the MarkMonitor-type examples of just going after counterfeit websites.

[Phil McColeman, Conservative, Brant, ON]

Ms. Nott, do you have comments here?

[Joy Nott]

I would have to agree with that. I'm not personally aware of any sort of jurisdiction that's taken a remarkable lead in this area. It's a problem. I think just Internet law overall is something that's still in its infancy in a lot of jurisdictions, including both Canada and the United States.

As these things surface, the United States I know is highly concerned about it because, obviously, a lot of the brands and large multinationals are U.S.-based companies. I know there's a high level of concern in the United States, but I don't think they've figured out anything yet on a business to consumer level, meaning for those one-off purchases where you buy something on the Internet and have it shipped to your home. I don't think anybody has gained any real traction in that particular regard.

[Phil McColeman, Conservative, Brant, ON]

We had a witness from the Canadian Chamber of Commerce, which actually has a division, as you know, dealing with IP and counterfeit. In his testimony he talked about a simplified approach to when goods arrive at the border and handling those goods.

It struck a note, Ms. Nott, when you had said that we have to guard against slowing down legitimate trade and make sure things don't get held up in terms of delivery timelines and such. Are you aware of what he described as a simplified approach? He used a European example for that approach for the process when goods arrive, how they're dealt with expeditiously to determine counterfeiting, and how decisions are then made and the products are either destroyed or go into the chain.

[Joy Nott]

There are a number of jurisdictions that have some sort of process set up at the border to safeguard against counterfeits entering into the country. The United States, of course, being our largest trading partner, has a process in place. While their process is probably well known to a lot of Canadians, I would just hesitate to say that we should just adopt the American way, or strictly adopt the European way.

I think there are best practices to be learned. Since we're entering this now for the first time, I think that it would behoove Canada to take a look at how other jurisdictions are dealing with this and adopt their best practices for boots-on-the-ground processes at the border and create our own way of doing it.

I can say for example that in the United States they have a quite comprehensive methodology at the border. However, it's very paper-driven, literally driven with documents that need to be faxed to various government authorities and whatever. I don't mean to sound flip, but it's a process they probably put in place some time in the 1980s and they're now struggling with how to take that process and automate it. I would suggest that we try to avoid walking in their footsteps and look at how do we can make this a clean 21st century solution for Canadian importers and Canadian business overall right from day one, as opposed to investing in older-type infrastructure and copying some of our trading partners.

[Phil McColeman, Conservative, Brant, ON]

Thank you.

[Joy Nott]

My overall concerns are with that and the constraints that I understand Canada customs is currently dealing with.

[The Chair, Conservative, David Sweet]

Thank you, Ms. Nott.

Thank you, Mr. McColeman.

Now on to Mr. Bélanger.

[Mauril Bélanger, Liberal, Ottawa—Vanier, ON]

Thank you, Mr. Chairman.

I want to apologize to Ms. Nott and Mr. Spreekmeester. I'll be diverting our attention and, hopefully, I'll have time to get back and ask them a couple of questions.

Mr. Chairman, as I mentioned earlier, I would like to move a motion for which notice has been given by my colleague Madam Sgro. I'll read it, then I'd like to say why I'm moving it now.

The motion has been distributed to folks. Here it is:That, given that co-operatives greatly empower each member, that they follow a model resulting in a combination of business success and social responsibility, and play an important role in the economy and in our communities, and to follow on logically from the Special Committee on Co-operatives and the fact that the government has completed the transfer of the responsibility for co-operatives to Industry Canada following a recommendation of the Special Committee, the Standing Committee on Industry, Science and Technology establish a Subcommittee on Co-operatives; and that the members of the subcommittee be named after the usual consultations with the Whips; and that the committee consist of seven members which shall include four members from the government party, two members from the Official Opposition and one member from the Liberal Party, provided that the Chair is from the government party; that in addition to the Chair, there be one Vice-Chair from each of the opposition parties; that the subcommittee be granted all of the powers of the Committee pursuant to Standing Order 108(1) except the power to report directly to the House.

The reason I am moving it now is that, unfortunately, I suspect that we may end up having to deal with this in camera. I would hope not, but in case we do I want to say publicly that I will be moving this motion now.

Mr. Chairman, in the spirit of cooperation, I am quite prepared to finish the rounds and deal with this afterwards, if that's your wish. I do believe in cooperation and working that way. I always have. That will be up to you.

When I moved the motion initially in the House to create a special committee, the government was opposed. I had a couple of ministers and a parliamentary secretary approach me and ask that we not do that. But to everyone's surprise, the motion was adopted unanimously and the committee did good work. I have said, and I'll repeat, that the government reacted well to many of the recommendations that were made.

The responsibility is here now, and there are a number of issues that flow from that transfer. I mentioned a few of them, and I'll do so again. For instance, there is a the Business Development Bank. Its mandate had to be reviewed two and a half years ago; it hasn't been and should be, because they would love to be able to do more in terms—

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

On a point of order—

[The Chair, Conservative, David Sweet]

On a point of order, Mr. Lake.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

In respect to the witnesses, Mr. Bélanger said that he'd be willing to defer this to the end of the meeting. That would make sense, given that we have witnesses who took the time to come to testify.

Could we go on to that? We have a half hour scheduled for committee business.

[Mauril Bélanger, Liberal, Ottawa—Vanier, ON]

That will be the chair's call, but I do have seven minutes, don't I?