International Trade Committee on Oct. 31st, 2006

[Dr. Elliot Feldman]

But that was the bargain. The bargain wasn't necessarily to also, therefore, pay an additional charge.

[The Chair, Conservative, Leon Benoit]

Your time is up, Mr. Harris.

I would like to encourage everyone to focus on Bill C-24. Let's stick to the subject at hand. We have the gentlemen here for less than an hour, so let's get on with the questioning.

Mr. Julian, go ahead, please. You have seven minutes.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Mr. Chair, thank you very much.

I am delighted that you are here today, Mr. Feldman, Mr. Pearson, and Mr. Woods. It's very important. This committee has to do its due diligence on Bill C-24, and the concerns you're raising are very significant and are something the committee needs to take into consideration.

I'm very pleased to follow Mr. Harris, because Mr. Harris raised the issue that he thinks other people may say other things about Bill C-24.

Now, we know, Mr. Chair, that in the last few days a number of organizations, municipalities, and industry representatives have written to the clerk to indicate that they want to be heard on Bill C-24. So I will raise a notice of motion. We have three notices of motion we sent to the clerk this morning prior to this committee. But I'll read mine out so that it's on the record:

That the Standing Committee on International Trade hear testimony from those organizations, businesses and municipalities that have recently written to the Committee to request to testify on Bill C-24, and that they be heard either in person, or by video, or telephone conference before the beginning of clause by clause consideration of Bill C-24 by this Committee.

That's a notice of motion for the beginning of the meeting on Thursday, Mr. Chair, and it's a good segue from Mr. Harris's comments.

I'd like to come back now to a point you raised, Mr. Feldman. In this turn, I'm going to concentrate on you. Mr. Pearson, I'll come back to you for questions on my next tour.

Mr. Feldman, you raised the issue of the payments that have been made. Essentially, the taxpayers picked up $950 million yesterday in payments out to companies. I certainly applaud this, as you did, and that the government has finally acted. They should have acted nine months ago and done this. We've said all along that the government had the power to take taxpayers' money and apply it to help the industry, and indeed, yesterday they proved that they can and that we were right on that matter.

Since the industry is receiving those taxpayers' funds, the issue, of course, is due diligence on taxpayers' money. We had a judgment on October 13 that essentially awards all the money back to Canada, as a taxpayer. And given that the taxpayers are picking up the tab, I guess the question would be what would happen--you referenced the fact that this committee and Parliament have the right to turn Bill C-24 down--if we indeed did turn down Bill C-24. How would that judgment of the Court of International Trade apply, and when would the taxpayers essentially get the money back that has been forwarded or advanced through EDC?

[Dr. Elliot Feldman]

There are at least two parts to your question, because there's the collection of the money and there's the return of the money.

As to the collection of the money, there's more than one factor in play. The United States has now withdrawn its extraordinary challenge to the NAFTA panel that decided there was no subsidy. The secretariat of NAFTA has filed a notice of panel completion. We have questioned the notice for technical reasons; nevertheless, that panel is complete, and now it is formal and official, if you will, that there is no subsidy on Canadian softwood lumber, as decided by the NAFTA process.

Consequently, the countervailing duty order, had it not been terminated by the United States on October 12, would have been revoked by virtue of the notice of panel completion arising from the withdrawal of the extraordinary challenge. That would have necessarily ended the collection of countervailing duties. It would not have led to the return of the money, because the orders apply on the same entries; that is, there is a dumping order and a countervailing duty order, and since they apply to the same entry, removing the countervailing duty order doesn't liquidate the entry. There's still an anti-dumping order on the same entry.

But the decision of United States Court of International Trade on October 13 said that there was no threat of injury and finalized that question. That applies to both orders. The court decision is subject to appeal, and we'll know whether it's being appealed in mid-December. There is an expectation, of course, that it will be appealed. Both Canada and the United States moved to dismiss the decision and therefore effectively, although not technically, to vacate the decision.

We don't believe that decision will be dismissed. We think that the legal argument seeking dismissal is erroneous, because they presumed that the action of revoking the orders on October 12 mooted that decision on October 13, but because the entries had not been liquidated, that decision is not mooted. We've had one session with the court on that question, and it appears that the court agrees, so it's subject to appeal. The appeal to the Court of Appeals for the federal circuit, as I've testified here before, could take about a year.

This very strong unanimous decision of a three-judge panel led by the chief judge of the court will not be overturned. I say that with confidence. Consequently, at that time, when the Court of Appeals would uphold the decision, then money would be returned.

The last dangling question is where we would be with respect to the anti-dumping order. We believe that the court would enjoin further collection of the anti-dumping duties pending the appeal because of the decision and because of the elimination now of the countervailing duty order. We think that within a brief period of time, collections would have stopped. Collections of the countervailing duty, which is the lion's share of the money, about 8% of the 11%, would have stopped now already, and then money would not be returned for about 12 months.

[The Chair, Conservative, Leon Benoit]

Mr. Julian, we still have some time.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thank you very much, Mr. Chair.

This is very relevant. I know where you're going. But the reality is that Parliament has the opportunity to amend, adopt, or reject legislation. My questions are in the line of what would happen if Parliament rejected this legislation.

[The Chair, Conservative, Leon Benoit]

Just keep in mind that you have about 40 minutes left, and these gentlemen have agreed to come to deal with the bill. Go ahead with that caution in mind.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

This is one of those scenarios around the bill. I just want to then be very specific, that if Parliament chose to reject this bill, essentially we wouldn't be paying these punitive duties, and essentially over a 12- month period we have a reasonable anticipation of getting all of the money back.

[Dr. Elliot Feldman]

That is correct.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Yes. Thank you for that. That's important for us to know as a committee, and certainly important for parliamentarians to know as well.

I'd like to come back to your testimony about clause 18, because this is very disturbing, of course, that essentially what we've been told the bill contains would mean that companies would be getting 82¢ back on the dollar. But with the special charge and the fact that there is really no provision for a refund on the special charge, what is your estimate of the actual amount of money on the dollar that companies would be getting back? I think it would be a surprise to many softwood companies to know the difference.

[Dr. Elliot Feldman]

Unless the phrase “"specifically provided” is changed, which certainly could be done, and unless, therefore, there was reliance not on the Financial Administration Act but on something internal to this legislation, then those who've received 82%, under the terms of the bill, would face an additional tax on the 100% of 20%. Where they gave up the 18% is not in the bill; they gave it up in the purchase and sale option. This gave the government authority to return it to them--less than 100%--and they gave it up in the irrevocable power of attorney, which authorized U.S. Customs authorities to turn the money over to the Government of Canada instead of to them.

So it's not in the bill; it's in those other two documents. By virtue of those transactions, the bill says they pay on all of the refund. All of the refund that in fact went to the Government of Canada is 100%, but they're getting 82% under the terms of the purchase and sale agreement that they signed with EDC.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

So what do you believe is the net impact of that double charge?

[Dr. Elliot Feldman]

I did this out once. Roughly, I think they come out with something like 67%—maybe it's a bit higher, but it's something like that, I think.

[The Chair, Conservative, Leon Benoit]

Okay, Mr. Julian, you're quite a bit over time already. Go ahead with a short question, then we'll go to the Liberals.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Exclusive of income tax?

[Dr. Elliot Feldman]

Yes, the income tax is another issue, but essentially, because of the way this legislation is currently crafted, the softwood companies would be getting 67¢ back on the dollar, and that's not even including the exchange laws.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Those who participate in EDC?

[Dr. Elliot Feldman]

Yes.

[The Chair, Conservative, Leon Benoit]

Thank you.

Now we'll go to the official opposition. Mr. Maloney, for five minutes.

[John Maloney, Liberal, Welland, ON]

Mr. Pearson, sometimes a portion of your presentation here today dealt with the ambiguity of the definition sections. Do you have any suggestions for us that would clarify some of those ambiguities?

[Darrel Pearson]

Well, they would be most appropriately dealt with through consultation with the industry. I'm not a specialist in defining those terms, because they are in fact terms that are industry-based. What would have made a lot of sense...and although it's not the most efficacious way of approaching the issue, perhaps you can deal with the issue through regulation as well, but it's not a great way of doing it, from a legalistic point of view. Consultation with the industry...I don't have a list of softwood lumber definitions for you, for example.

[John Maloney, Liberal, Welland, ON]

I will follow on with Mr. Harris' line of questioning. The industry has existed for a long time. We've had softwood lumber agreements, there's a history, so would this not already be established?

[Darrel Pearson]

You're assuming that the same people are going to be involved on Tuesday who were involved last Sunday, and that's just an improper assumption. It's not a static industry, number one. In fact, we're reading all the time about changes—potential consolidations, investment decisions, bankruptcies, receiverships. It's an industry that is in flux, and this legislation is going to last for three plus three years, potentially. So six years from now, I suspect, you'll be dealing with all kinds of different people who may have, today, relatively no knowledge of the industry. I don't think that's a particularly helpful way of approaching legislative definition, to assume that those who will use the legislation, because they're in the business, know what it means. It hasn't been in the area of customs since we had our first customs act and our first customs tariff. It's simply not the case.

For example, we've had disputes about tariff classification, not to get too mundane, over all kinds of different products, and I'm sure Mr. Feldman has had experiences in his country as well. The people who bring appeals to ascertain the meaning of those words, for purposes of taxation, have been in the business for decades. So it's not a proper way of approaching it, from a legalistic point of view.

[John Maloney, Liberal, Welland, ON]

I'm going to ask the opinion of both the legal counsel there.

I've been concerned about a specific clause, clause 75 of the bill, which purports to pierce the corporate veil to make officers and directors of a corporation libel for the actions of that corporation. My concern is due process.

Perhaps you wouldn't mind glancing at that clause. I've been told this is a normal clause that goes into legislation of this nature. I'm also confused about the last sentence, whether or not the person has been prosecuted or convicted. That's a little ambiguous to me, and I have yet to have anyone explain it to me.

Mr. Feldman.

[Dr. Elliot Feldman]

If I may, Mr. Maloney, rob 30 seconds of your time to amplify something that Mr. Pearson just said, the meaning of “softwood log” was debated through the last round of litigation. In Ontario this has been a particularly difficult debate because a softwood log is defined as a log that goes into a mill and gets processed into softwood lumber. The same log might have gotten processed for pulp or paper. If it goes into a pulp or paper mill, it's then a pulp log, and that definition is not the definition that applies necessarily in other provinces. When Mr. Pearson says we need to define “softwood log”, it certainly is not a known quantity. It's been a heavily litigated and disputed issue.