International Trade Committee on Sept. 25th, 2024

[The Chair (Hon. Judy A. Sgro (Humber River—Black Creek, Lib.)), Liberal, Judy Sgro]

We'll come to order.

This is meeting number 117 of the international trade committee.

Pursuant to Standing Order 108(2) and the motion adopted by the committee on Tuesday, February 6, the committee is resuming its study of the CBSA assessment and revenue management system, or CARM, as we all refer to it.

We have with us today, from the Canada Border Services Agency, Ted Gallivan, executive vice-president, and Mike Leahy, director general, commercial projects.

We apologize for starting late, but you understand how that is.

Welcome.

With the agreement of the committee, given the time constraints and given that we have the written submissions from the two witnesses, we'll go straight into the questions from the members.

We'll start with Mr. Baldinelli for five minutes, please.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Thank you, Madam Chair.

Thank you to the witnesses for being with us today.

Mr. Gallivan, last March the committee heard that CBSA is approved to spend up to $526 million on CARM. About $438 million had already been allocated and spent to date. Of that, you said that about $182 million had gone to Deloitte Canada. Are these numbers still accurate at this point in time?

[Ted Gallivan, Executive Vice-President, Canada Border Services Agency]

The numbers at that point in time remain accurate. Obviously time has passed, so the numbers would have increased proportionately. I can confirm to the committee that we remain under the envelope of $526 million.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Do you know what that number is at this point in time?

[Ted Gallivan]

We recently updated figures up until December 2023. We are in the process of bridging the remaining nine months. We'll be updating that similarly to our website as soon as our CFO has a chance to validate them.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

It's kind of disappointing, Madam Chair, that we're here today and.... I mean, Deloitte has been provided with $182 million by the Government of Canada. It would have been beneficial for them to be here because, for one, I would like them to have been here to hear CBSA testimony. When we met in March, there seemed to be some discrepancy over the ownership of the portal.

On March 19, at this committee, my colleague Kyle Seeback asked you about it directly. He said, “So the Government of Canada is going to own this IT solution.”

Your response was that “we, too, have been investigating the question of what aspects of IT people own.” You further stated, “We have asked lawyers who are experts in IP to give us advice.”

Mr. Gallivan, would it not have been prudent on behalf of taxpayers to do that work before concluding a contractual relationship determining ownership before signing the contract?

[Ted Gallivan]

I think there are two parts to the intellectual property.

First, will Canadians continue to get value from the funds they've invested? I think the answer has always been clear in relation to the CBSA being able to use the intellectual property created through these investments. Deloitte confirmed that in testimony at this committee, saying that the contract does allow for a transfer of all of the functionality back to the CBSA.

The more esoteric question was whether Deloitte could resell this intellectual property to another government. I think I used Argentina as an example. That was the question that required the intervention of lawyers, and that was a question that had been raised in the process of consultation. I think there has never been a question of the Government of Canada getting value for its investment. There was a question of whether or not Deloitte could, if somebody was interested, resell this product to another government.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

In essence, you're comfortable with the fact that the government has spent half a billion dollars and doesn't own the portal.

[Ted Gallivan]

Madam Chair, that wasn't my testimony, nor was it the testimony of Deloitte. Deloitte has been very clear that should the CBSA exit the contract for any reason, they will transfer back the intellectual property, the programs, to the CBSA.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

When you look at the contract, section 1.7 says:

Ownership of Intellectual Property for Contractor-Furnished Software

Canada acknowledges that Intellectual Property ownership of the Contractor-Furnished Software incorporated into the CARM Phase 2 Solution belong[s] to the Contractor or its licensor and is not transferred to [the government] under the Contract.

Deloitte owns the IP.

[Ted Gallivan]

Again, Madam Chair, if we're talking about IP in relation to the ability of the Government of Canada to have a portal serving Canadian businesses, the answer is, we own that aspect of the IP and can continue to provide the excellent services of CARM in perpetuity if we walk away from the Deloitte contract—

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Do you mean that under section 1.4, which says, “The Contractor grants to Canada the right to access and use...the Solution”, they've created it, but they're giving you the right to use it, and you're paying $500 million for that right?

[Ted Gallivan]

That was Deloitte's testimony before this committee, that the government has bought—

[Tony Baldinelli, Conservative, Niagara Falls, ON]

No, that's the contract. That's the actual contract.

[Ted Gallivan]

Madam Chair, the CBSA's testimony and Deloitte's testimony have been clear. The half-billion dollar investment of Canadian taxpayers is secure. We can continue to own and operate that system. Deloitte testified to that in front of the committee.

The clause that is being referred to relates to Deloitte's ability to resell the intellectual property to other potential clients.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Mr. Gallivan, in your testimony in March, you spoke about the first delay that was implemented. You mentioned that it was done at the request of stakeholders. That request was in the fall retail season of 2023, and CBSA agreed to do that.

We're in the fall again. If stakeholders are still asking and stating that there are concerns with this portal, would you not agree that it should be delayed again as we head into the holiday season, for the same reasons? I don't think—

[The Chair, Liberal, Judy Sgro]

I'll allow Mr. Gallivan to answer. You are out of time.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Thank you, Madam Chair.

[Ted Gallivan]

I have yet to hear of any stakeholder asking for further delay because of the holiday retail season in 2024.

[The Chair, Liberal, Judy Sgro]

Mr. Sidhu, you have five minutes, please.

[Maninder Sidhu, Liberal, Brampton East, ON]

Thank you, Madam Chair.

Thanks to our witnesses for being here.

We've heard from a variety of stakeholders, including CBSA, on the CARM launch. I wanted to follow up on the conversations that we had a few months ago in terms of readiness, and importers and custom brokers being ready for this.

Where are we? Are we seeing more of an uptick in terms of importers now registered? I know that by volume we had a big increase back then, but do we have more importers now on board?

[Ted Gallivan]

To start with, the CBSA has been using CARM since May 2024. That aspect of the launch has been quite successful. Maybe we'll come to that later.

This committee heard that only 1% of client software usage had been certified in the spring. I'm happy to say that we have 24 different software products certified to interact between the private sector and CARM. That represents 99% of all commercial imports in Canada. That was the metric that was appended to a letter of representation that this committee received. I would say that today, as we sit here, 99% of commercial imports have software ready to interact.

In relation to registration, 94% of the top 3,000 importers are registered. Of micro-businesses, 60% are already registered. We have additional measures in place to get additional micro-businesses over the line. In terms of software certification or business registration, we're largely there. We've also published six customs notices after consultation with stakeholders.

[Maninder Sidhu, Liberal, Brampton East, ON]

I'd like to hear about the 40% of micro-businesses that are left to come on board and what steps you are taking to get them on board.

[Ted Gallivan]

Sure. The first point on that is working with the CFIB through webinars, having a person on site, etc., to help get them in the door. They're largely cash importers anyway. They come into the customs office. They provide a cheque. They're not dependent on the portal, and they're not portal users today.

Second, because they do tend to come in and interact with our border officers, we have our ports of entry set up to register people on arrival. Should that not work, we also have the ability to allow them to do their importation without registering. We have the ability to allow people to do their importation without having a business number.

[Maninder Sidhu, Liberal, Brampton East, ON]

We heard some reservations in terms of the duties and tax calculation on CBSA's side, that it was not as perfect as it could be a few months ago. Where are we with those calculations now?