International Trade Committee on March 19th, 2024

[Mona Fortier, Liberal, Ottawa—Vanier, ON]

It's too fast for me to decide.

[The Chair, Liberal, Judy Sgro]

Why don't we just hold it off until Thursday? It's not fair. There's a lot here, and I think the committee needs a chance to review it.

Is that okay, Mr. Savard-Tremblay?

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

In that case, I would like us to debate it at the beginning of the meeting and then vote on it as soon as possible.

[The Chair, Liberal, Judy Sgro]

Yes, that should be fine. We'll deal with this on Thursday as the first point of business.

Mr. Cannings, you have two and a half minutes, please.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you.

I'm just going to continue with the questions about Deloitte.

You said that the Americans spent $5 billion on this and that the Australians spent $800 million. I forget what the U.K.'s spending was. I think it was around $1 billion.

Has Deloitte been involved with any of them, and how could it use the experiences of those countries in developing this?

[Ted Gallivan]

Deloitte's expertise is mainly with the private sector, so it is mainly their experience with building accounting systems for global multinationals and having road-tested processes in place.

The U.S. did outsource its project, and that was an issue. As the CBSA embarked on it, we chose to mitigate the challenge of outsourcing with strong project management.

I think part of the lesson we learned—and we drew from the U.S. experience—was that you have to have dedicated resources that are focused on managing the contract and holding the contractor accountable. That's what we set up within the CBSA.

There's a group of almost 30 people whose sole focus is to make sure that taxpayers are getting value for the $182 million we've given Deloitte so far.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

What can you say CBSA learned from, say, the U.S. experience? You said there were issues there.

[Ted Gallivan]

I think with the question around the 17 years, the 14 years and some of the representations you're hearing from businesses today, the time for consultation has to end, and at a certain point you need to freeze the design and then move into testing and implementation. If you hold the design open too long, you get into increased costs and delaying the benefits.

There are two costs. You can look at how much it cost to build CARM, but I mentioned a possible revenue lift in the range of $400 million, or $160 million a year. The estimates vary. There are tens of millions of dollars of benefits and there's also a burden reduction for Canadian business.

I think a key lesson learned from the U.S. and Australian experiences is that at some point you have to stop the consultation on design.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll go now to Mr. Baldinelli for five minutes, please.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Mr. Gallivan, I just want to build on some of the comments from your opening statement when you talked about CARM and the acquisition of CARM.

When it was acquired in 2018, you indicated that it was probably the largest contract then. Was that sole-sourced or was it a competitive procurement process?

[Ted Gallivan]

It was a competitive process.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

I want to go back to the contract. It's 2024 and you indicate that you're still trying to determine and people are still trying to determine what the government owns and doesn't own.

I'm just looking at a copy of the contract. Under section 1.4, “Grant of Right of Use of the Solution”, it says:

The Contractor grants to Canada the right to access and use...the Solution, which includes:

(i) all rights for Internal Users to access and use the Solution for government purposes as defined in the SOW....

I could go on.

Section 1.7, “Ownership of Intellectual Property for Contractor-Furnished Software”, says, “Canada acknowledges that Intellectual Property ownership of the Contractor-Furnished Software incorporated into the CARM Phase 2 Solution belong to the Contractor or its licensor”.

My question is this. You've indicated we've spent to date about $430 million, and we're talking from 2014 to 2018. Should the government not have figured out by now what it owns and doesn't own in regard to CARM?

[Ted Gallivan]

I think what we're talking about is an investment in a multi-year project, an investment that we are confident in having an ROI for.

Questions around intellectual property emerged. The question we asked ourselves was, do we own the actual data, the information? The answer was yes. We also asked ourselves, if we decided to build CARM in-house ourselves, would we be at risk of litigation? We're not. We could do that. What other intellectual-type property questions were there? To go back to my original testimony, what we found is that the design could be resold by Deloitte to another government.

I think we, too, shared the question about what the limits were on intellectual property and who owned what. We were trying to assure ourselves that taxpayers wouldn't be beholden to a third party forever for a system. We satisfied ourselves that for multiple years we have a fixed-price maintenance contract with Deloitte—

[Tony Baldinelli, Conservative, Niagara Falls, ON]

That's $36 million?

[Ted Gallivan]

That's correct.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Okay.

Now, quickly if I could, who determines whether the government has received good value for the money it is spending?

[Ted Gallivan]

That's an excellent question.

We did two independent benefits realization reports, and we had third parties confirm to us that the benefits were positive. Again, the OAG talked about a 20% discrepancy. If there's a 1% discrepancy on the $40 billion a year, that's $400 million a year in additional revenue. Our own regulatory package talked about $160 million, so it's easily in the tens of millions of dollars, at a very low marginal lift in terms of compliance.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

When you look at the website—just google “CARM process”—you can find some of the old archived web pages. They say in their vision statement, “The vision of CARM is to deliver a globally-leading customs experience that is customer-centric”, and then it continues on.

As my colleague mentioned earlier, I've never been inundated as much as I have by stakeholders, since being here in 2019, on any other committee topic. They have expressed their concerns to us. They're are concerned about this drop-dead date, May 13, and the implementation.

I was talking to one individual, and they said to me that the ability does not exist for an importer to access an itemized receipt through the CARM client portal that breaks down the duties and taxes calculated and invoiced by the CBSA at the transaction level. Essentially, CBSA has created a platform where they issue an invoice to an importer at the end of each month for payment without providing any backup to the importer supporting how CBSA arrived at the specific duties and taxes owed by the importer for each transaction invoice.

Can you understand their concerns with that? I'm hearing that CBSA is working on a back-of-house kind of solution to address some of those issues, but I don't think there is a timeline on how quickly they can be produced.

From what I understand, we're talking about a contract of $430 million, and to find a solution to that, a CBSA officer will have to manually design an Excel spreadsheet to provide a detailed, itemized list to that importer. For $430 million, I think we can do a lot better than having a CBSA officer working on an Excel spreadsheet.

We're talking $430 million. How can we rationalize this as modernization if we're going backwards?

[Ted Gallivan]

I'll start with the stakeholders and CBSA's responsiveness to stakeholders.

In the summer of 2023, we were working towards an October 2023 implementation. Stakeholders came to us and said they didn't want to risk this during the busy fall retail season and we needed to push the date. At the request of stakeholders, we changed the date from the fall of 2023 to May 13. We're now hearing the same representation as you are from the same stakeholders.

Going back to my earlier testimony, if stakeholders need a period of weeks—and we've heard them—to test their systems and get their systems up to speed, we're actively working on what the parameters of that additional extension would be. We're hearing stakeholders and want to work with them so they can comply voluntarily. If additional time will work, we want to do that.

The representation has suggested that those who are ready to go with CARM go with CARM. I think that has a lot of merit. We definitely want the businesses that are ready and want to move to work with it. Indirectly, if that's a smaller number, that's not bad either, and a smaller number of businesses will go onto this system first.

We're very alive to this. We had consultations as recently as last Friday with stakeholders, and we're working on it actively.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Ms. Fortier, you have the floor.

[Mona Fortier, Liberal, Ottawa—Vanier, ON]

Thank you very much, Madam Chair.

I want to thank the witnesses for being with us today.

I think they understand that we have concerns. We want to make sure that the system meets the needs and that Canada's trade continues to be profitable while allowing us to achieve the desired growth. To achieve that, are well aware that the system has to be computerized. There is no choice. You have illustrated that very well. The government has to deal with barriers in the internal development of the system. From what I understand, we are all working to computerize the system, not only so that it works, but also so that it benefits businesses.

With regard to businesses, some of them have concerns. Are you assisting them in the process? Is there an assistance plan to support the transfer of knowledge and practices?

[Ted Gallivan]

I will go back to what I said in my answer to your colleague. Many groups have spoken to us about small businesses. We have employees at entry points, on site, to help small businesses with the registration process. At the Queenston Lewiston Bridge border office, in the Niagara Falls area, we have two employees and thus far we have helped 25 small businesses register. The system is explained to them—

[Mona Fortier, Liberal, Ottawa—Vanier, ON]

I see that you recognize the importance of providing assistance. Thank you for providing examples. Perhaps you could give us some more later on.

What steps could we take as legislators to facilitate your work over the coming phases?

Perhaps we should look into certain aspects, regulations or policy in particular, as you said earlier.

How can we help you complete this project successfully? That is the objective right now.

[Ted Gallivan]

We would be pleased to receive opinions from third parties regarding financial security. Our current system allows for goods to be imported without making payments at the border. To manage that risk, we have a system that requires a measure of financial security, but we want to replace it. We have received feedback from the private sector. People don't like our timelines or our calculations, so we have deferred the project.

What kind of financial security system can we have at the border that reduces the burden on those who follow the rules while protecting taxpayers against financial losses resulting from those who do not pay the amounts due? That is something very important to be explored. We are very open to suggestions.

[Mona Fortier, Liberal, Ottawa—Vanier, ON]

We are looking into that in light of the concerns that have been raised. If you have any recommendations for us, you may submit them in writing to the committee. We could include them in our report.

Now I would like to talk about the relationship with Deloitte.

While I was at Treasury Board, I had the privilege of looking at government contracts. From my understanding, Deloitte offers a degree of complementarity. The company prepares the project and makes sure that public servants or members within government can look after the system thereafter.

Can you elaborate on the complementary relationship with Deloitte as a supplier?