International Trade Committee on Oct. 18th, 2017

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

In my last half-minute here, I want to touch on the customs broker licensing system. It seems to me that your audit revealed some flaws in that system. It called into question even the licensing regime itself, and whether certain other penalties should apply. Do you have any general comments on the broker system?

[Michael Ferguson]

What I would say again is that the agency identified that over 15 years, roughly 20% of the items coming across the border were misclassified. We felt that this was information they should use to go back and assess the brokers' activities. Are some brokers doing better jobs than others? Why are some perhaps not doing as good a job as others?

We felt first of all, then, that they should use that type of information to do a periodic assessment of the brokers to see how well they are applying the rules. The other thing we noted was that the penalties are actually quite low; I think the average penalty was $150. The penalties are whatever the penalties are, but whether there is actually much deterrent effect in a penalty that averages $150 is the other thing that I think we said they should look at. Penalties presumably exist to be a deterrent. Are they deterring, and are they actually incenting the activity that you want, which is good management of the system?

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Thank you.

[The Chair, Liberal, Mark Eyking]

We have time for one more on the roster.

Mr. Carrie, you're taking the spot.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you. I will follow up on what my colleague was talking about.

Mr. Ferguson, you said that the program operates differently in practice from the way it's designed on paper. Some of the new disruptive technologies were mentioned. We could very soon be seeing trucks going across the border without drivers.

Looking ahead, does the department have the resources to look at this as an opportunity to reassess the way things are being done and maybe take advantage of some of the new technologies that are out there?

[Michael Ferguson]

Mr. Chair, it's really not something I can comment on; it wasn't part of the audit. The only place we even came close to that subject was on the issue of their world having changed a lot because of the cross-border mail business, the volume of packages coming across the border.

There's probably a significant risk to the organization that the world they operate in is changing quite a bit. Do they have the ability to keep up with it? I think that's a fair question for the department, but it wasn't something we dealt with in the audit.

[Colin Carrie, Conservative, Oshawa, ON]

I think you mentioned that it might be a good idea to get CBSA and Global Affairs here, just to follow up on their action plans. I think that's really good advice. I think they were all agreed on the recommendations in the report. I'm wondering how confident you are that CBSA and Global Affairs will follow through on the recommendations that they have agreed with.

For example, in the February 2016 report called “Controlling Exports at the Border”, CBSA and Global Affairs noted some recommendations on the high-risk exports, which they said they would implement by the end of 2016. Do you know whether they did so? Also, does your office have the opportunity to review compliance with recommendations?

[Michael Ferguson]

We have the ability to go back to do another audit in the same area. It's what we refer to as a follow-up audit. We'll go back to look at the recommendations we've made and see whether the departments have implemented them. We haven't done that yet on the audit on controlling exports at the border. We don't do it on all audits.

The problem is that it takes some time. We need to give the departments two to three years to implement the recommendations; then we have to start and plan another audit, execute the audit, and report it. By the time we've gone through that, another 18 months have passed. It's often four to five years at the soonest before we come back with another audit.

The department has put in place an action plan. I'm just looking at the action plan they presented to the public accounts committee. There are a number of things noted here for September 2018, June 2018, December 2019, March 2019; that's on the audit on customs duties. Those dates are in the future.

Part of what the public accounts committee and this committee can do is have the department in to ask whether they are on track, such that when a follow-up audit is done later on sometime in the future, it will show that they have dealt with all of the issues they said they were going to deal with. That would really be a useful part of the process, making sure that the departments understand that there is a real expectation that they will actually do something to deal with the recommendations.

We're not asking them necessarily to implement our recommendations exactly as we've put them. What we're asking them to do is show that whatever changes or improvements they make will mean they won't have the same problem in the future. There are many ways this can be done. I think it is useful for this committee to play a role in making sure that the department implements this action plan to ensure that they improve on the issues we identified.

[Colin Carrie, Conservative, Oshawa, ON]

Good.

How am I doing?

[The Chair, Liberal, Mark Eyking]

There's not much time left.

[Colin Carrie, Conservative, Oshawa, ON]

I have a quick one.

You touched on supply-managed goods escaping tariffs. In paragraph 2.54 of the report it is noted that supply-managed farm goods—milk, eggs, and poultry—were imported without duty on $131 million worth of products, but the section didn't cite a specific cause, and the recommendation was a little bit vague.

Did your office or CBSA ever establish the cause of these goods entering Canada duty-free?

[Michael Ferguson]

The fundamental cause, I guess, was that they didn't have the appropriate permit. The volume that was brought in was above the low-tariff volume, but the two organizations didn't make sure that what was imported did not actually exceed the volumes that were permitted to be imported. Again, it was an issue of not identifying that more was coming in than should have been coming in under a permit, and because more was coming in, that should have had the higher rate of tariff. They weren't monitoring that.

As I said, I think that earlier on, part of that problem was that the information existed in two different systems in two different departments, and they weren't periodically bringing that information together to identify that this was happening. I think that's something that they very much need to do.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much.

[The Chair, Liberal, Mark Eyking]

Thank you, Mr. Carrie. We had good questions and good dialogue with MPs. That wraps up our questioning.

Again, thank you very much, Mr. Ferguson, for coming and bringing your people. Thank you for your hard work. Speaking on behalf of the committee, we will question the department on their action plan and see how things are progressing. They come here periodically, so that will be one of the questions we'll ask.

We're going to suspend for a minute, and then we have some future business to discuss in camera.

Thank you.

[Proceedings continue in camera]