Evidence of meeting #32 for International Trade in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was clause.
A recording is available from Parliament.
10 a.m.
Conservative
Ron Cannan Conservative Kelowna—Lake Country, BC
So even though there are two different timeframes—ten years and six years—it's for the benefit of the minister rather than for the business?
10 a.m.
Manager, Softwood Lumber, Canada Revenue Agency
I'm not certain why there is a 10-year provision. However, as I say, it is a standard provision that we are using to administer our fairness policy.
10 a.m.
Conservative
Ron Cannan Conservative Kelowna—Lake Country, BC
Okay.
Clause 95 deals with corporations and directors of corporations. Is that standard language in there? It says if a corporation divides and becomes a new entity with more than 50% the same directors, a director shall not be assessed “more than two years after the person ceased to be a director of the corporation”. Is that somehow protecting the director's liability?
10 a.m.
Manager, Softwood Lumber, Canada Revenue Agency
Yes, it is the standard provision.
10 a.m.
Conservative
Ron Cannan Conservative Kelowna—Lake Country, BC
In clause 99, we're talking about how the federal government will distribute to the provinces the export charge, net of the cost to the consolidated revenue fund. What is the cost to the consolidated revenue fund of that fee? Is there a calculation of how that fund will be calculated?
10 a.m.
Director General, North America Trade Policy, Department of Foreign Affairs and International Trade
It would have to be net of administration and legal costs.
10 a.m.
Conservative
10 a.m.
Counsel, Trade Law Bureau, Department of Foreign Affairs and International Trade
That is yet to be worked out with the provinces in terms of an agreement of the overall cost sharing and what's to be netted out by the government to cover their administrative and legal costs to administer this agreement.
10 a.m.
Conservative
Ron Cannan Conservative Kelowna—Lake Country, BC
So will each province have a separate administration fee, or would it be...?
10 a.m.
Director General, North America Trade Policy, Department of Foreign Affairs and International Trade
I think it will have to be an acceptance by all provinces of costs that will be netted out prior to the payment to provinces that are eligible for payment--the balance owing. Those types of questions are still to be resolved with provinces. That will be done in the coming months.
October 24th, 2006 / 10 a.m.
NDP
Peter Julian NDP Burnaby—New Westminster, BC
Thank you, Mr. Chairman.
As Mr. Cardin pointed out, we're not exactly thrilled by this agreement. In light of all the job losses over the past few weeks since the implementation of the agreement, and given that the WTO clearly said that we were entitled to all of the money and that there was no need for us to tax our own companies, I find it somewhat ridiculous that we're looking into this.
Having said that, on our agenda for today is the clause-by-clause study of the bill and we thank you for joining us.
I want to start with subclause 18(3) of Bill C-24. It says:
Every specified person in respect of whom a covered entry is to be liquidated as a result of a revocation shall pay to Her Majesty in right of Canada a charge at the specified rate on the amount of any duty deposit refund that relates to the covered entry.
Further down, in subclause 18(5), it says:
The charge under subsection (3) becomes payable by the specified person on the later of
(a) the day on which this Act is assented to, and
(b) the day that is the earlier of
(i) the day on which the duty deposit refund is issued to the specified person or a designate of the specified person, and
(ii) the day on which the specified person sells the rights to the duty deposit refund to Her Majesty in right of Canada.
I'd like you to lead us through the practical implications of that particular clause.
10:05 a.m.
Counsel, Trade Law Bureau, Department of Foreign Affairs and International Trade
Thank you for the question.
The practical implications of a reading of subclauses 18(3) and 18(5) essentially provide for options for the taxpayer so that the charge becomes payable either on the date when this act receives royal assent, or on the date when the duty deposit refund is issued to the specified person or their designate, or on the date that the person has sold his rights to that refund to Her Majesty.
Perhaps you could direct me to your particular concern.
10:05 a.m.
NDP
Peter Julian NDP Burnaby—New Westminster, BC
The actual charge is payable, and at this point we don't know when moneys would be coming back. I guess my concern is, and I'd like you to lead us through this, that the implications are that a company would be liable for the amount before any EDC funds came back.
10:05 a.m.
Counsel, Trade Law Bureau, Department of Foreign Affairs and International Trade
As I understand the refund stream from the United States entities, those refunds are linked to entries. They aren't rolled up by entity. They aren't rolled up in any way other than presented through an individual refund. As we understand it, the refunds can commence, and the United States will establish its own schedule for making those refunds, and it's arguable that....
Mr. Robertson.
10:05 a.m.
Director General, North America Trade Policy, Department of Foreign Affairs and International Trade
It might be useful if I take the committee over the two processes with respect to this.
As you know, Export Development Canada, EDC, is buying the rights to the refunds from those importers of record that choose to participate in the program. The program was designed on the basis of the U.S. information that refunds could take up to two years, and hence, expedition is required.
EDC, having bought the rights to the refunds from those companies, will pay to the importers of record participating in that program approximately 82% of those refunds within four to eight weeks of those companies fulfilling the necessary documentation. This includes things like liens, to check that there are no liens on companies, and those types of elements. Those payments, both to the importers of record and the balance remaining--12%--to the U.S. interests, will be made within that time period I identified. EDC will be paid by the eventual liquidation of the refunds, and they'll be receiving the cheques for those importers of record as they come in.
You should note, however, that as payments are made throughout the duration, they receive interest from the U.S. side, because they can't keep money without paying interest on it. So the EDC process is that the EDC gives importers of record the money directly up front. They are paid later as the U.S. liquidation process unfolds, and that process unfolding also includes interest, as it's delayed.
With respect to the special charge--
10:05 a.m.
NDP
Peter Julian NDP Burnaby—New Westminster, BC
Yes. And that's because we're already aware of the fact that the Canadian taxpayers are picking up the tab for the moneys coming back, as we wait, possibly, as you mentioned, up to two years for the Americans to actually give us back the money that we have an entire right to. But the issue here is the kind of difficult situation the companies may find themselves in, because we know--and we've seen the job losses even after the first week of this agreement--that it's been catastrophic.
So that's my specific question.
10:10 a.m.
Director General, North America Trade Policy, Department of Foreign Affairs and International Trade
With respect to the second process--and that's the special charge--as you are aware, companies had a choice to make, and every importer of record received from the Government of Canada documentation saying they have a choice either to get an expedited refund through the EDC process, or to receive money directly from U.S. Customs as that process unfolds, which could take up to two years.
In addition, when they were asked to make the choice, they were also informed of the presence of the special charge, which has been implemented by the government. This special charge will be imposed one month after the company receives the money directly from Customs. Therefore, the legislation anticipates that some money may be received before royal assent, because the process begins even now.
So I think--if somebody can show me the specific section--what you're talking about is that the earliest the charge can be collected is after the royal assent, and if the money is given after the royal assent, then it's one month after that money is received.
10:10 a.m.
NDP
Peter Julian NDP Burnaby—New Westminster, BC
But my specific question was that it says “the day that is the earlier of”. We talked about the royal assent, but what the legislation calls for is “the day on which the specified person sells the rights”. So it is conceivable that a company will have a payable charge without having received any of the refunds back. Is that not true?
10:10 a.m.
Director General, North America Trade Policy, Department of Foreign Affairs and International Trade
I'm told that this clause is dealing with the EDC process, and therefore, with respect to the EDC process....
I'll let you continue on to interpret that.
10:10 a.m.
Counsel, Trade Law Bureau, Department of Foreign Affairs and International Trade
Ron, I think you had an observation about those who would be paying the special charge.
10:10 a.m.
Manager, Softwood Lumber, Canada Revenue Agency
The people who are referred to here are the people who have sold their right and will be receiving the refund through the EDC. They won't in fact be paying this charge.
10:10 a.m.
NDP
Peter Julian NDP Burnaby—New Westminster, BC
What's written clearly indicates that they would have to pay the charge even if they haven't received a refund. So a company that's cash strapped and laying off employees could conceivably, the way this legislation is currently crafted, pay that charge or be forced to pay that charge, have that charge as a payable, without having received a refund.
