Evidence of meeting #81 for International Trade in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was goods.
A recording is available from Parliament.
NDP
Tracey Ramsey NDP Essex, ON
One of your recommendations was to improve the import forms. You talked about the inconsistencies in those forms. I wonder if you can speak a little further to the recommendations you made. How do you think that issue can be resolved?
Principal, Office of the Auditor General
Thank you, Mr. Chair.
One of the issues that the Auditor General just mentioned is the poor description on the form. We do question the need.... Even though it's not a formal requirement, many businesses spend time and effort trying to fill out that form properly. Meanwhile, another set of businesses basically put in whatever they want. It could be a part number, it could be sets, kits, whatever.
We suggested to CBSA that they should review that part of the form, because obviously it's not something that's useful to them. The description on the form cannot always be matched with the HS code. It means that when they do verification ex post, there's no value to the descriptive.
We did try, through text analysis, to match the descriptive with the HS code, and that's when we realized that it was often misdescribed. We had to basically abandon our objective, which was to try to see if the goods had been properly classified.
On the form side, as I mentioned earlier, importers have the ability to retroactively amend the form. This could be for up to four years. Under NAFTA, it's only one year. We were told by CBSA that the longer it takes to amend the form, the more likely it is that the amendment will be incorrect. That's one part of the problem associated with the amendment of the form. There's also the fact that it could allow importers to play with the float by underestimating the value of the goods shipped. On the last day, four years minus one day, they will submit an amendment to their import form. Then they owe money, but they had the money for four years in their pocket.
Principal, Office of the Auditor General
There are always those risks with the forms right now in the amendment process.
Liberal
The Chair Liberal Mark Eyking
Thank you, sir. Thank you, Ms. Ramsey.
We're going to move over Madam Lapointe.
Liberal
Linda Lapointe Liberal Rivière-des-Mille-Îles, QC
I would like to thank all the witnesses for being here.
The information you have provided today is very interesting.
Your report pertains to 2015. What period does the previous report on the agency cover? Do you have information about the previous report?
Philippe Le Goff Director, Office of the Auditor General
The last time we focused on this part of the agency was in 2010.
Liberal
Linda Lapointe Liberal Rivière-des-Mille-Îles, QC
Okay.
From 2010 to 2015, have you seen an improvement or worsening of the problems you identified?
Director, Office of the Auditor General
If memory serves me, there was next to no improvement in the number of elements classified correctly.
Liberal
Linda Lapointe Liberal Rivière-des-Mille-Îles, QC
So there was no improvement between 2010 and 2015.
You conducted the audits in 2010 and in 2015. In 2010, was the problem related to insufficient staff?
My colleague was wondering if the problem was the result of a lack of staff.
Director, Office of the Auditor General
It is essentially a problem involving information and information management.
Liberal
Linda Lapointe Liberal Rivière-des-Mille-Îles, QC
You said the number of parcels being imported is increasing as a result of e-commerce. You talked about the $20 minimum and said there is no charge at $200. Yet people are calling for that amount to be increased to $800.
You said the cost is nil at $200, but if the agency hired one person, it would recoup four to six times their salary. In that case, should the $20 minimum be maintained and more employees assigned to inspections?
Auditor General of Canada, Office of the Auditor General
That is something different. Increasing the number of officers is one way of monitoring and evaluating the whole system. It is not just a parcels; duties also apply to other items. It would also be possible to increase duties based on further investigation of the merchandise.
Liberal
Linda Lapointe Liberal Rivière-des-Mille-Îles, QC
Okay.
That is interesting.
We did a study on spent hens in August 2016. In your 2015 report, you seemed to be saying there were a lot of problems with value added, primarily in the case of chicken. We were alerted to the problem at customs, namely, that it was difficult to distinguish the various products. A DNA test was even suggested.
Had you identified and quantified this problem?
Principal, Office of the Auditor General
We did not specifically audit spent hens in our work. After discussing it with the agency, we quickly realized that it was a problem. We were told that a DNA test could be done to differentiate real table chickens from spent hens, but we did not pursue that, in part because there was some doubt about the efficacy of the test.
Liberal
Linda Lapointe Liberal Rivière-des-Mille-Îles, QC
Okay.
You had already highlighted a problem, namely, that spent hens were being imported and then leaving the country after processing.
Principal, Office of the Auditor General
Yes, in our example, it was made into marinated chicken.
Liberal
Linda Lapointe Liberal Rivière-des-Mille-Îles, QC
Yes, because people thought we were receiving regular chicken and it was then leaving the country as marinated chicken.
Liberal
Linda Lapointe Liberal Rivière-des-Mille-Îles, QC
The spent hens were less expensive than chicken when they entered the country, and they were leaving the country as improved chicken.
You are saying that all your recommendations will be implemented in the action plan in 2017-18.
October 18th, 2017 / 4:05 p.m.
Principal, Office of the Auditor General
It will essentially be in 2018.
Liberal
Linda Lapointe Liberal Rivière-des-Mille-Îles, QC
Okay.
Were your recommendations accepted on the whole?
Principal, Office of the Auditor General
The agency and the departments concerned accepted all of our recommendations.
Liberal
Linda Lapointe Liberal Rivière-des-Mille-Îles, QC
Okay.
Returning to the parcels that enter Canada, should there be more inspections to ensure that people are paying the appropriate duties?
Principal, Office of the Auditor General
The challenge is volume. There are hundreds of thousands of packages arriving, particularly at the postal processing plant in Vancouver. At certain times of the year, such as a few months before Christmas, the volume increases substantially. There are so many packages in Vancouver that those packages are sometimes sent by truck to the processing plant in Montreal. They are sorted in Montreal and then returned to the appropriate distribution centre in Canada.
There are so many parcels crossing the border, from Asia and China in particular, that is nearly impossible for the customs service to manage. Staff would have to be increased substantially. That is why we are talking about the $200 minimum. The agency says it starts to recoup its costs on goods imported when their value exceeds $200.