International Trade Committee on Aug. 3rd, 2016

[Alexander Lawton]

With diafiltered milk, we conduct a series of sampling measures at the border to confirm whether the goods actually are diafiltered milk or not. There have been results, and I really can't get into the actual numbers right now. I don't have them in front of me, unfortunately. That's a measure we primarily look at to confirm whether the goods imported are actually—

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

Are producers fined?

[The Chair, Liberal, Mark Eyking]

Okay, maybe we can go back to that, but the time is up.

We're going to move over to the Conservatives, to the other Dutchman whose football team didn't do very well. But anyway, next time....

Go ahead, Mr. Van Kesteren, for five minutes.

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

Thank you, Mr. Chair.

Thank you for being here. It's been a most informative meeting. I want to follow up with Mr. Fonseca's line of questioning. I'm wondering if you can give us some numbers. We've talked about diafiltered milk. What about the spent fowl? Can you give us some numbers? How often do you check?

There was a comment made that they look the same. I'm not a chicken farmer, but I know the broilers are six weeks and they're little meaty birds, and a two-year old laying hen is.... We have some hens, and they're a whole lot bigger. So, can't you just visually inspect those things?

I want to get some confirmation from border services. How much of this is being investigated, and how often are we successful in putting a dent in what's taking place?

[Brad Loynachan, Director, Trade Policy, Canada Border Services Agency]

Good morning. My name is Brad Loynachan. I'm the director of trade policy with the Canada Border Services Agency.

First and foremost, I would just like to emphasize that CBSA recognizes industry concerns and plays a key role at the border in ensuring the proper classification of goods being imported.

First, on spent fowl and the challenges around that, although age certainly sounds like it would be a reasonable kind of—

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

I'm not saying age, I'm saying size.

[Brad Loynachan]

Well, age and size often play a critical role. However, industry clearly has advised us that this is not the case. Otherwise, we would have deployed that intelligence or those tools to our border services officers to help us distinguish.

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

Can I just interject? I'm wondering what industry you're referring to, because farmers can tell you that. I mean, I'm not a farmer and I know that.

[Brad Loynachan]

One of our key stakeholders is the Chicken Farmers of Canada, who have actually been working with us based on that challenge, the limitation to visually distinguish between spent fowl and broiler at points of entry or in the raw state. They've been working with government in terms of developing a DNA test that, as we mentioned earlier, may be deployed to help us ensure that the classification of chicken being imported is in fact as declared.

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

Do you have some numbers on how many cases are being identified?

[Brad Loynachan]

Certainly.

To give people context, in fiscal year 2015-16 there were 3,340 importations declared as spent fowl. That's a very large number, of course, and as we've noted, it continues to grow. In terms of verification, the CBSA between the years 2012 and 2014 did post-release verifications for 25 separate importers. They were all non-resultant, which means that we did not find evidence, through a books and records verification, of non-compliance. There are currently eight additional ongoing verifications.

[The Chair, Liberal, Mark Eyking]

Mr. Seppey wanted to add a comment.

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

Well, I'm going to ask him a question, so maybe he can comment then.

I'm curious to know, as a consumer, whether Agriculture Canada is actively or proactively informing the public of the fact that there are different types of chicken. I certainly want to know, and I certainly haven't seen that in any supermarkets. I mean, when you see the chicken on sale, you just assume that it's.... Has there been some action taken to possibly inform the consumer, or force the supermarkets to tell us what we're purchasing?

Then you can answer that other thing you wanted to jump in on.

[Frédéric Seppey]

On your first question, on the policy, Canada is a science and evidence-based jurisdiction. When it comes to prescribing information on labels, we're mainly trying to focus on what could constitute a health and safety hazard. You are absolutely right that there's an interest. As a consumer, I'm interested in knowing exactly, in having as much information as possible on labels. There are different ways of getting to that. There are voluntary standards or mandatory standards. In the case of spent fowl, it's very difficult to do that, although if you purchase a can of chicken noodle soup, for example, you'll often see that it refers to “mechanically divided”, and so on. That's recognized as being a reference to spent fowl.

To your previous question, where you were saying that from your perspective as a farmer it should be distinguishable, you're thinking of the bird, but it's important to know that in 2015, of the volume and the quantity of spent fowl that was imported, only 17% came in the form of a live bird. The bulk of it came in the form of breasts. You can distinguish; probably, if you see two birds, you may have a sense of what the difference is.

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

Aren't the spent breasts in a package larger? I've seen the broilers. The spent breasts are huge.

[Frédéric Seppey]

But can you say that with certainty and make it very definitive, because that's a requirement of CBSA? CBSA has to be clear that to challenge an interpretation, a declaration.... By default we consider that the traders are honest and that they are declaring what they are importing. Of course, as a risk management agency, CBSA will do spot checks, but you cannot distinguish with precision. When you see a breast, it's very challenging to say for sure whether it's spent fowl or broiler meat.

[The Chair, Liberal, Mark Eyking]

Okay, you're well over time. They were very good questions, though.

We're going to move on to the Liberals and Mr. Drouin.

Go ahead, sir, for five minutes.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Thank you, Mr. Chair.

My riding, Glengarry—Prescott—Russell, is home to more than 300 dairy producers. Mr. Chair, I know that you've actually been to the St-Albert cheese factory, which will soon be holding its curd festival, from August 17 to 21. They make the best cheese curds in the country, and they use 100% Canadian milk.

Mr. Seppey, in July, I had an opportunity to speak with a number of dairy producers. Over the past few months, I have heard that producers are complying with cheese compositional standards. In fact, for cheddar, I think they use 83% milk and about 17% milk protein. I was told that too much milk protein reduces the cheese quality. People would no longer like cheddar. With the use of diafiltered milk, however, milk protein content is estimated to be between 10% and 20% greater. The argument that complies with cheese standards isn't a comprehensive solution, as I see it. It represents an 80% to 90% shortfall as far as the standards go.

I've spoken to industry representatives and many producers about modernization, and I know discussions on the subject have taken place. You've talked to many of the players involved. How would modernization affect dairy processors and producers here, in Canada, and what does modernization mean?

[Frédéric Seppey]

Modernization means having the capacity to make better use of all milk components produced in Canada in order to make value-added products. We produce excellent cheeses, yogurts, and butter, all of which require huge quantities of fats. Like in many countries, including the U.S., Canada has a surplus of non-fat solids. A way of dealing with that surplus is by subjecting it to a drying process and turning it into skim milk powder. It can, however, be used for animal food. It might be possible to export it, but that would mean subsidized exports, and we'll no longer be allowed to have export subsidies by 2020. So it's a short-term solution. Ultimately, we need to develop new, mostly domestic, markets to make better use of these non-fat solids.

It may be possible to use them the same way that diafiltered milk is used in other products, for example. We hear a lot about diafiltered milk being used in cheesemaking, but it's also used to make yogurt and energy drinks. We could also see these products frequently being used in food processing because they have properties that allow processors to achieve certain objectives.

So modernization of the dairy sector means providing Canadian users with a wider range of products for use in dairy processing and further processing. Both of those sectors make use of all components, not just fats—which are always in demand—but also non-fat solids—which are surplus products.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

If I'm not mistaken, I don't think dairy producers really had access to those markets because they didn't have the category to sell diafiltered milk. I think the sale was limited to use in animal food. I think Ontario has pushed ahead on that. According to a news release, Dairy Farmers of Canada seems to be in talks with processors on the matter.

My next question has to do with DNA testing to identify spent fowl. That's one solution that's been discussed. What would stand in the way of implementing such a measure?

[Brad Loynachan]

In terms of DNA testing, the CBSA's role in the interdepartmental working group is primarily to ensure that any solution is feasible at the border. As I pointed out, there are 3,340 importations of goods declared as spent fowl in the average year, which in fact becomes a barrier in and of itself, meaning our capacity to be able to test each and every shipment.

The premise of DNA testing certainly would be that we would spot check. That may or may not be done at points of entry, based on border congestion and contamination issues. We are looking at the possibility of that being done inland in conjunction with partners, but the primary concern really around DNA testing is, again, ensuring that the test is reliable. As most of you would probably know, any trade decision, including a decision regarding classification by the CBSA, would be appealable to external review bodies such as the Canadian International Trade Tribunal or the courts.

Going back to the earlier comments, ensuring that the CBSA does in fact get classification right is critical to our governmental reputation. If in fact the method of classifying or the tools that we deploy or use to classify are not solid or deemed reliable by government.... We are working with industry. Industry actually brought the test forward to us. It would be the government's role to ensure that the test is scientifically proven by government officials or external review bodies who have accreditation, before proceeding with that method.

[The Chair, Liberal, Mark Eyking]

Thank you, sir. Your time is up, and we're going to move over to the Conservatives now, and Mr. Hoback for five minutes.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair, and good morning, gentlemen. It's great to see you here this morning on this issue.

Now put yourself in a farmer's shoes, especially in the dairy and the chicken sector. You're in a sector that's very highly regulated. Every time you turn around, government is in control of what you do and how you proceed, and it has worked very well for them. But now you see somebody breaking the rules and you see the government sitting there trying to figure out how to define what spent chicken is.

Maybe you should get rid of the spent chicken classification and look at a different way to address the processors' requirements for chicken. Instead of trying to wait for a new DNA testing program and trying to figure out how to identify what's a spent chicken versus a regular chicken, maybe get rid of the category altogether because, obviously, you can't identify it.

Have you looked at that option?

[Dean Beyea]

Spent fowl exists as a tariff classification—

[Randy Hoback, Conservative, Prince Albert, SK]

But if you've got a classification that can't be defined or can't be properly identified as spent fowl, then you've got a bad classification, do you not?