International Trade Committee on Oct. 31st, 2006

[John Maloney, Liberal, Welland, ON]

Thank you for your comments.

[Dr. Elliot Feldman]

Let me come to your question now.

I reviewed some of the discussion in last week's hearing; I had the privilege to do that thanks to whoever sent me the transcript. I saw that you had raised this question before.

My annotated version--you can see all the red and green tabs--has a lot of tabs related to the tax provisions on which I have consulted our American tax folks. A lot of the provisions here are not common in the United States, but I've been told, as you were told, that they are common here in Canada, so it is hard for me to address the question in terms of what the normal tax law is in Canada.

Some of these provisions seem to us quite draconian. Documents and records of companies are subject to search and seizure, sometimes on pretexts that have really nothing to do, it seems, with the enforcement of the provisions of this act, which are supposed to be about the export tax. But some people have said that's just normal in Canadian tax law. If they're normal in Canadian tax law, why they have to be recited here again in this bill I also don't know, but I'm told that's normal too.

The best I can answer is that it is fairly alien to American practice and experience as to tax provisions.

On your question of piercing the corporate veil, some of these items seem draconian, and they seem invasive as to searches of records and in the difficulty of maintaining proprietary rights over some of these records that in American tax law would be more protected. In the end, it is a matter both for this committee and Parliament as to the tax provisions that are passed here. I don't think I can enlighten beyond that.

[Darrel Pearson]

I might be able to offer something in that respect.

The vast majority of these types of provisions--I'm creating a basket for ones that I didn't deal with, basically--are quite common in respect of Canada's import-related and taxation-related statutes. I believe they are repeated for good purpose.

However, insofar as clause 75 is concerned, the last phrase there is peculiar, and I suspect, although there are probably people in a better position than I right this moment, that it relates in part to the retroactive nature of this proposed legislation. It hasn't received assent, and I suspect that if activities even today were such that someone had already committed an offence per se, it may have been written in language such that, whether or not the person has been prosecuted or convicted, it would cover off the potential retroactivity.

That's the best I can do. That phrase is a little odd, but it may relate to the somewhat odd approach that has been taken with the promulgation of the bill.

In that respect I have a very brief comment. A lot of the things I have spoken about might have been looked after and been less contentious if they had begun with promulgation of policy and regulations to support the bill. Unfortunately, you're not at that stage. It has been done in reverse.

[John Maloney, Liberal, Welland, ON]

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Maloney.

We'll go to Mr. André, but first, in terms of the definition and the tariff classifications, the agreement itself seems to have a fairly comprehensive definition. Annex 1A has pages of definition. Is there a problem not having that definition in Bill C-24, in your view? What's the issue here?

[Dr. Elliot Feldman]

Thank you for that question.

Parliament has the option of incorporating Annex 1A. I wouldn't encourage Parliament to do that, because it's the American definitions of all the terms. Annex 1A is crafted out of the provisions of the orders, and Parliament is under no obligation to simply endorse or embrace the way the United States chose to define all the terms—but it could.

[The Chair, Conservative, Leon Benoit]

And the point is that it is defined in the agreement fairly comprehensively.

[Dr. Elliot Feldman]

The United States has defined those terms, and you have a choice—

[The Chair, Conservative, Leon Benoit]

And they've been agreed to by Canada.

[Dr. Elliot Feldman]

But you have a choice, because this legislation does not presently incorporate Annex 1A as your definitions.

[The Chair, Conservative, Leon Benoit]

Okay.

Mr. Pearson, go ahead.

[Darrel Pearson]

When you use the term “comprehensively”, I suspect it's because it's a long list.

But with respect, Mr. Benoit, from the point of view of a customs attorney, it's not comprehensive; it's vague. And from the point of view of the industry, it will be vague. I mentioned this at the beginning, just because there are references to tariff items.... Tariff items are subject to broad interpretation, and then the rest of the language uses terms such as “including”, and so forth, which leave things rather open-ended.

By the way, if we do know what these terms are—and the industry is well aware of what these products are—why not deal with them? I guess that's what we're saying.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Pearson.

Mr. André, five minutes.

[Guy André, Bloc, Berthier—Maskinongé, QC]

Good morning, Messrs. Feldman and Pearson. I will speak in French because I can express myself better in that language. Thank you for being here today and for giving us different points of view about this bill.

You are no doubt aware that the Conseil de l'industrie forestière du Québec and all Quebec industries supported the agreement: the figure generally given, Mr. Harris, is 92% of industries in support. Nevertheless, this support was unenthusiastic, as you know. The demands of the various parties for support to industry through loan guarantees and other means gradually created a form of pressure. We are now reaching the final stage. The agreement was signed on July 1, in Geneva, where I was as well. The companies were exhausted. In Quebec, they wanted to be reimbursed. They were experiencing major job losses, suffering from a lack of support and similar problems. Here we are now with Bill C-24. We in the Bloc Québécois will support it because we have been told to do so by Quebec industry and our party is responsive to its members.

According to what you said, this bill does not fully reflect the agreement. You spoke about tax treatments under the agreement that were not included in the bill. I undertand what you are saying, of course. My colleague Mr. Cardin, who is not here, told you that your testimony was interesting, but that we had reached a different stage. Criticism must be taken into account. We are trying to move forward, because the pressures are enormous. The companies, who have begun to receive reimbursement, first had to complete a form, which was anything but easy. We know that the process is lengthy and that there are issues involved in all of this.

The companies want to be reimbursed. No one wants to go back before the courts: that would be going round in circles, unless there is an election, as Mr. Cardin was saying. Even then, it would not deal with the company issue.

Are there any amendments you would like to make to this bill, without casting doubt on all of the contents and the fact that the companies want reimbursement?

[Dr. Elliot Feldman]

Thank you. I believe that what what involved was in fact several questions.

Let me take the last statement first. I suggest that you simply delete section 18. If I remember the sequence of events correctly, I was here on the day that Monsieur Guy Chevrette said that if the government were to provide them loan guarantees they would not endorse this agreement. It was on the basis of his saying that because they didn't have the loan guarantees they did endorse the agreement, I believe, that the Bloc Québécois then said okay, then we support the agreement. If I remember the sequence correctly, that occurred before there was any discussion of a special charge. So the Bloc Québécois agreed to the agreement that would provide money, not a special charge that would take it away.

You could most help the industry and most easily amend the bill without undoing the agreement by deleting article 18 of the agreement.

I need to add that you're in an interesting sequence as well. The United States has revoked the orders and can't go back to restore them. The money is all coming back regardless of what this Parliament now does, for whatever reason that the United States revoked the orders. We all have our own theories about that—and if someone wants to indulge me I'll be happy to elaborate—but regardless, it has happened. The orders are revoked, the money's coming back, and there is no restoring of the orders. Whatever you do in Parliament as to that development doesn't matter; taxing the refunds does, and you don't have to. It was never part of the agreement. It was never part of the Bloc's pledge when it supported the agreement.

[The Chair, Conservative, Leon Benoit]

Mr. Pearson, do you want to respond to that as well--the specific changes you would make?

[Darrel Pearson]

I think I've covered in detail the areas that require more precision.

[The Chair, Conservative, Leon Benoit]

There's nothing beyond that?

[Darrel Pearson]

No.

[The Chair, Conservative, Leon Benoit]

Thank you.

Monsieur André, your time is up.

Mr. Menzies.

[Ted Menzies, Conservative, Macleod, AB]

Thank you, Mr. Chair.

Thank you, gentlemen, for coming today. I appreciate the comments and recognize that they are mostly constructive, in that we want to make sure this bill is solid--as you specifically noted, Mr. Pearson--and this industry, which has been hobbled with litigation for an awful lot of years, doesn't have to go right back to court to face challenges on something as simple as definitions.

Mr. Pearson, I would like you to share a copy of your comments with this committee. I wish we'd had them before to follow along as you raised them, but I appreciate them and accept them as constructive.

You talked about clause 5, time of loading. What is your concern there, and what you do suggest to improve that?

[Darrel Pearson]

By the way, we are preparing a French-language version of my notes, so they will be provided to the committee.

[Ted Menzies, Conservative, Macleod, AB]

I appreciate that. Thank you.

[Darrel Pearson]

Clause 5 establishes the time at which a softwood lumber product is considered exported. It says it's at the time when the product was last loaded aboard a conveyance for export. That time will vary depending on how the business is being done, obviously.

What's missing is what actually constitutes the act of exporting, which is required in order for you to have a sense of when you are loading for export.

[Ted Menzies, Conservative, Macleod, AB]

But if it's on a transport vessel, if it's off-loaded, then it's not exported, right?