International Trade Committee on April 14th, 2016

[Michael Ferguson]

Again, I think that's sort of part of the whole risk framework that CBSA needs to consider. I think the most concerning part of it is that somebody can file a paper declaration in Vancouver for goods that are leaving the country from an airport in Halifax, for example. There's a paper declaration filed in one place, a CBSA officer would then have to be able to look at it, decide, “Okay, this looks like it's a problem”, get in touch with somebody at the airport that the goods are leaving from, and then have the shipment actually looked at.

I think, again, electronic declarations would help with that. Then, as Mr. Swales mentioned earlier, having some ways in the system that would put up some red flags about some things about this shipment that should be looked at so that this information gets very quickly to the people at the port of exit where the goods are leaving from.

[Karen Ludwig, Liberal, New Brunswick Southwest, NB]

If an exporter has been identified as an exporter of risk, but the situation is cleared, is that exporter flagged for closer inspection going forward?

[Nicholas Swales]

Not necessarily.

[Karen Ludwig, Liberal, New Brunswick Southwest, NB]

What other agencies does the CBSA coordinate with, or should coordinate with, to better control exports?

[Nicholas Swales]

The discussion that we have about that in the report is around this question of the agency's third priority, which is the controls of other organizations. What we say is the way in which that is done by the other organizations is pushing targets to CBSA and saying, “Could you please find and look at this”. Our concern was that CBSA then didn't gather information on what happened, so that made it difficult for there to be a feedback loop as to how effective they were being. Certainly, what we recommend is that they establish a better risk assessment, which would require them to be having a dialogue with those organizations that issue permits.

[Karen Ludwig, Liberal, New Brunswick Southwest, NB]

Could you imagine that it would be a shared database among the organizations that are key players in this?

[Nicholas Swales]

It certainly could be. One example of that, and we don't describe it in here, but it's known as part of the process, is the database that manages export permits with Foreign Affairs, which is a database in which they collect and issue the permits, and the agency has some access to that information.

[Karen Ludwig, Liberal, New Brunswick Southwest, NB]

Why did your audit exclude the United States when roughly 90% of our exports are bound for the U.S.?

[Nicholas Swales]

The reason is that the primary means by which the agency is able to do its control work is through export declarations. Export declarations are not required for goods to the United States other than in certain cases where certain permits are required. That is because the system was set up based again on export statistics rather than on risk assessment. We have an agreement with the United States that says we'll use their import data as our export data. That means that we don't get declarations, and that is all permitted under the regulations.

[Karen Ludwig, Liberal, New Brunswick Southwest, NB]

Great, thank you.

[The Chair, Liberal, Mark Eyking]

Thank you.

We're going to go over to the Conservatives for five minutes. Mr. Van Kesteren

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

Thank you for being here this morning.

It's an interesting topic. I would have thought that of all the things to audit this would be one of the last things on the list, but I suppose there are risks there. One of the possible risks that hasn't been mentioned yet is that Canada is a through-port to go to the United States. How much of the audit focused on those things that come, say, from Europe that are going to the United States through the Canadian ports? Anything at all?

[Michael Ferguson]

I'll let Mr. Swales provide more detail, but fundamentally what the audit was looking at was items that Canadians are exporting that need declaration, so to the extent that's what the process is. As Mr. Swales mentioned, something that's destined for the United States from a Canadian exporter wouldn't need a declaration, so there would have been nothing to select from. But I'll see whether he has anything he would like to add.

[Nicholas Swales]

That's correct. The goods would have been assessed in most cases as they enter Canada as imports, rather than being considered as exports.

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

Yes, but then they get exported to the U.S.

[Nicholas Swales]

Yes, I'm not saying that they weren't exports. What I'm saying is that the risk assessment would be done on them as an import into Canada, and then not done as they left to the United States because of the exclusion on exports to the United States.

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

Ms. Ludwig was alluding to something that I wanted to go to, and that is that although we have a responsibility, and the responsibility is to wherever our exports are going, it would appear to me that the larger part of that responsibility would be from institutions like Interpol and the RCMP. It's been asked a number of times, but how much direction would come from this agency from those institutions, and do they have strong links to those institutions?

[Michael Ferguson]

It's important to remember the types of things that CBSA has put as its priorities in this area. There are different reasons why export controls are important, and they're not all necessarily international. Obviously, when you're dealing with export control, you are dealing with international trade. But, again, one of the reasons for export controls is to identify the proceeds of organized crime, something going on within the borders of the country, and making it harder for organized crime to profit from its activities.

CBSA would use whatever information they have available to them to be able to identify exporters that they consider to be risky exporters. But, again, in terms of the extent to all of that co-operation, as Mr. Swales mentioned, really what they do is they receive information from other organizations, other government departments, and because they can't do things like random searches of goods being exported, they don't really have the information to know the extent to which things are being exported without a permit. They do get some of that information from other partners, and they use that information to identify exporters that are at risk.

Again, this whole activity of export control is more just a series of activities, rather than a coherent system from beginning to end, to be able to identify those shipments that would be risky shipments.

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

In terms of our reputation globally, was that something that you looked at, too? How are we viewed by the rest of the world? Are we a country that has fairly good restraints or are we loose?

[Michael Ferguson]

We didn't do a survey of the opinion of other countries about Canada's exports. Again, I think CBSA have established their priorities very much in a way that is intended to try to respect Canada's international obligations. Whether it be to prevent the export of weapons technology or whether it be making sure that export permits are obtained in the places they're supposed to be obtained, they have put the emphasis on those types of things. From a priority-setting point of view, they've done a reasonably good job of doing that, and identifying that we need to make sure that we're living up to those international obligations and our international partners can have confidence in that. But then when we looked at the whole system, there were gaps in the system that would say that anybody who is trying to get around that system would be able to identify where those gaps are and how to get around them.

[The Chair, Liberal, Mark Eyking]

Thank you.

We're going to go to the NDP for three minutes.

[Tracey Ramsey, NDP, Essex, ON]

My question is on paragraph 2.60 and it's very concerning to me. When we're talking about illegal drugs that are being exported out of Canada I understand that's a high-risk area: “Agency officials told us that the limits on their examination authorities reduced their effectiveness in preventing the export of illegal drugs. This limited authority, together with limited resources, resulted in the Agency’s not setting export of illegal drugs as an examination priority.”

Further down in paragraph 2.61 they mention that “the Agency did not have the authority to conduct random examinations of non-reported shipments.”

I wonder if you can expand a little bit on what these limited authorities and limited resources are that are essentially having illegal drugs leave our country destined to others.

[Nicholas Swales]

Mr. Chair, the authority limitation is, as we explained, that non-reported shipments cannot be opened at random. This means that the officer needs to have information of some kind from a shipment, but not a declaration, and he needs to form an opinion that there is a risk. This means that you can't get a sense of how much of this is happening and where it's happening.

[Tracey Ramsey, NDP, Essex, ON]

So the limited resources, then...?

[Nicholas Swales]

The limited resources are to do with these points that we make in the other section of the report where we talk about where there is not systematic coverage—Canada Post parcel centres being an area of risk in this regard—and one of them didn't have any coverage at all.