International Trade Committee on March 19th, 2024

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

Will there be user fees that we will have to pay to any vendor—Deloitte or anybody else who has worked on this project—as a result of this project?

[Ted Gallivan]

I don't know what you mean by user fees. There is an ongoing maintenance cost to run the data and store the data produced by CARM. There is an ongoing maintenance cost related to the massive amounts of data we need to store and ongoing upgrades. If that's what you're referring to, yes, there is.

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

How—

[The Chair, Liberal, Judy Sgro]

I'm sorry; your time is up, Mr. Seeback.

Go ahead, Mr. Sidhu.

[Maninder Sidhu, Liberal, Brampton East, ON]

Thank you, Madam Chair.

Thanks to Mr. Gallivan and his team for coming today to make sure that our questions are answered.

I've had many conversations with industry. They are definitely concerned about the fast-approaching launch day in May. I understand why this initiative is very important for the government to ensure that appropriate revenues and duties are collected.

My question to you is on the number of importers already registered for the new CARM system before the launch date. What is that number?

[Ted Gallivan]

I think part of the confusion lies between the 80,000 businesses that are active importers and the total number of businesses—200,000—that have ever imported something. Some of them may be from more than a decade ago. Right now, businesses that represent 86% of commercial trade are registered within the CARM system. In addition, we've allowed a six-month extension for people who aren't registered to continue to use it, and an additional 12 months for anybody who wants to use the broker BN.

I can turn to Mr. Leahy for a more detailed breakdown of the 80,000 and the 200,000. I think the key point is that businesses representing 86% of the trade in this country are already registered. We have six months past the go-live date when you don't have to be registered and an additional six months or a full year when you can use the broker BN. Those measures were in direct response to concerns by industry.

Mike, I don't know if you want to colour that in.

[Mike Leahy, Director General, Commercial Projects, Canada Border Services Agency]

The precise number of CARM account holders is 56,000. Again, as Mr. Gallivan said, that's a breakdown of big importers and small importers. Today we're in southern Ontario talking to people who come to the border and signing up those clients.

There's been a lot of conversation about the number. When we look at total number of businesses out there, it is 160,000 to 200,000. When we look at how many people import, that's been our focus, and we're breaking down that group into whether they have a CARM account, because if they're importing, they will need a CARM account to submit payments. That's been the focus of our outreach.

[Maninder Sidhu, Liberal, Brampton East, ON]

Thank you.

In terms of transition, I know many folks are concerned that switching over to this new system will cause significant delays at the border. Industry also continues to raise concerns about the readiness of the IT system.

How can you reassure these importers that the transition to the new system will not create long delays at the border?

[Ted Gallivan]

The first point to make, as I said in my opening remarks, is that the two systems we use to release goods into the country are called ACROSS and eManifest and those aren't impacted. There definitely is a risk, and we share the concern of industry around the risk, but the risk is weeks and months down the road in the accounting systems. We're working hard to mitigate it.

The second thing we've done—I mentioned allowing brokers to continue to use their broker BN for a year—is agreed to keep financial security at $5,000 for an additional year to not introduce additional change. There's also a legislative provision regarding the importer of record. We've agreed to make that a prospective change and not a retroactive change to keep the space free of change and tightening. As I mentioned, the regulations already allow 180 days for people to continue to operate without a business number.

We've also heard from industry around payment extensions and around additional time to test their systems. In the representations that were referred to, businesses themselves are saying they're not ready. We're taking a careful look at what additional weeks, to allow businesses to get their IT systems ready, might look like, and we're carefully considering what further transitional rules might look like.

[Maninder Sidhu, Liberal, Brampton East, ON]

I know CBSA is taking on a new role of calculating duties and taxes. That's also a concern from industry, which has had specialists in calculating duties and tariffs for many years now. Why is CBSA taking this approach?

[Ted Gallivan]

I would point back to our own analysis, confirmed by the OAG, that up to 20% of the cases, out of $40 billion, are calculated incorrectly. However, again, we're trying to be very sensitive in the approach.

CARM will flag and give feedback on the calculation being incorrect, and then there's a three-tier process available to the business community. First is a ticketing process, an informal call to the CBSA indicating they disagree with the calculation. That goes right to people like Mike in the business unit. Second is informal recourse at no cost outside the court system, where an independent unit within CBSA will consider their perspective on the correct calculation of tax. Finally, third is ultimately recourse to the courts, which we all want to avoid.

[Maninder Sidhu, Liberal, Brampton East, ON]

That's good for clarity, because I understand the industry really well and there's a lot of concern over industry specialities. It feels like the industry is being penalized because 20% are misclassifications, so it's good to hear that.

Can you tell me what other countries in the OECD are using this type of system? Are there any other countries in the OECD using it?

[Ted Gallivan]

The U.S., the U.K. and Australia, three G20 partners, have developed similar systems, but I think it's important to note that it is a bit like apples to oranges. Every country has a slightly different regime.

The U.S. has spent $5 billion over 17 years, the U.K. has spent $1.7 billion over six years and Australia has spent $800 million over 14 years to develop equivalent systems. We have an international benchmarking report that we're including in the package that we'll submit to the committee to inform your study.

[Maninder Sidhu, Liberal, Brampton East, ON]

If you can, please submit some more information on the U.S. system, like when they brought it in and how that's going.

Thanks, Madam Chair.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Next we have Mr. Savard-Tremblay for six minutes.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you, Madam Chair.

Thank you to all the witnesses for their participation.

I have a lot of questions, so I would ask the witnesses to give yes or no answers, at least to start.

Further to a previous study, the committee heard from witnesses and received briefs from external clients, in particular. According to those submissions, the solution was poorly designed. That leads me to think that, before Deloitte built the solution, there may have been a problem in communicating or reviewing the requirements of the solution that was being built.

Did you systematically review the design of what Deloitte was going to build?

[Ted Gallivan]

It's hard to answer that. We had a lot of discussions internally before we, ourselves, decided on the solutions we were going to adopt. Overall, government employees had the final say on the system design, so we are—

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Did the agency consult with representatives of all the sectors concerned? Were they involved in the process?

[Ted Gallivan]

I chair a committee that meets every week. It has representatives from every sector of the agency.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Great.

Were representatives across all sectors of the agency satisfied with the technical and performance specifications that had been identified?

[Ted Gallivan]

Definitely not. We had good discussions internally about the ideal design. Ultimately, that is the purpose of the committee that I just mentioned. We certainly had a lot of lively debate internally about the design of the system.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

The contract includes a statement of work stipulating the requirements.

Is the agency satisfied and does it consider that the requirements have been fully met, yes or no?

[Ted Gallivan]

As to the contract, the agency feels that it has received good value thus far. We still have a lot of work to do, however, since there are several phases to the project, extending over several years.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

So not all the requirements have been met. That is what you just confirmed.

Did Deloitte resolve the problems identified by the agency in its review of the functional technical specifications?

[Ted Gallivan]

Let me just clarify something because I may not have been clear.