Thank you, Madam Chair, and honourable members of the committee.
My name is Candace Sider, and I am the vice-chair of the board of directors for the Canadian Society of Customs Brokers, CSCB. I am honoured to share the views of Canada's customs brokers concerning the implementation of CARM.
Customs brokers are licensed by the CBSA and act with legal authority on behalf of importers and exporters. Every year, customs brokers handle more than 90% of import transactions for Canada's 227,000 importers. We ensure that accurate duties and taxes are submitted for billions of dollars' worth of goods each year.
Our success in facilitating trade depends on access to technology and processes that keep goods moving.
The CSCB and other trade chain partners have been providing input for more than a decade to ensure that CARM functions to keep goods flowing while not unduly burdening traders. It was meant to be a technological solution that would modernize the border and revenue collection by making it easier for traders to interact with the government.
Unfortunately, the CBSA's approach to CARM implementation does not reflect or address the concerns that we and others have been raising. Furthermore, on Tuesday we heard several statements by CBSA executive vice-president Ted Gallivan that we feel require clarification.
During his testimony, Mr. Gallivan stated that CARM implementation would be delayed from October 2023 until May 2024 because the trade community was not ready. It is true that customs brokers and importers are not aligned with the CBSA's view that CARM will be ready to go live in May 2024 in its current state, which, to be frank, has a myriad of deficiencies that need to be addressed prior to its going live.
Our members are concerned about the impacts on small or infrequent importers, especially due to the onerous registration process. They are also frustrated by the lack of support from the CBSA and the long response times for help desk issues and dispute resolution.
We experienced new issues daily during the system testing. The CBSA has advised that some of the key issues and defects will not be resolved before CARM goes live in May.
For example, system testing revealed defects in essential processes like the calculation of duties and taxes. Automated calculations appear to be based on a fundamental misunderstanding of how processes like duty remission work. It is not acceptable for Mr. Gallivan to state that the errors result from trade simply calculating duties and taxes differently than the CBSA does.
In the test environment, our members purposely entered incorrect duty rates to see if CARM would detect the errors. CARM did not detect the errors and accepted the inaccurate calculations. If these defects are not addressed, the result will be inaccurate revenue assessment and collection by the government and amplification of the revenue leakage problem that CARM was supposed to address.
Mr. Gallivan's testimony on Tuesday also demonstrated contradictory messaging from the CBSA, which contributes to uncertainty for importers. On the issue of financial security, Mr. Gallivan advised the committee that importers would require only $5,000 in security to have goods released without payment of duties and taxes. However, what he didn't tell you is that the CBSA has been advising the trade community for at least five years that the minimum security amount would be $25,000. He also didn't tell you that draft policy guidance shared with the trade community in the past two weeks stated that the minimum bond amount would be $5,000 but that the policy guidance was later adjusted to read $25,000. The lack of clarity by the CBSA on important issues is creating confusion and uncertainty for customs brokers and their clients.
Similarly, Mr. Gallivan also advised the committee that the CBSA had several layers of contingency planning if the May 13 go live does not go as planned. He referred to one contingency plan as a “rollback”, which would mean a return to existing systems.
The first time traders heard of this possibility was during Mr. Gallivan's testimony. We have been told for close to a decade that the CBSA must turn off existing systems to allow the new CARM functionality to work and that a big-bang approach to implementation was the only option for CARM. Therefore, customs brokers and importers have invested millions of dollars in reprogramming their own systems. Once trade begins the cutover to CARM, a rollback to older systems will not be an option.
Canada cannot afford to implement an IT system with key deficiencies that will impact cross-border flows and force manual processing and workarounds to keep trade flowing.
Traders need a functional system where the CBSA has addressed all design flaws to ensure that trade continues to flow and revenue is collected. With our lack of confidence in the current solution, we recommend a full postponement of the go live until, at the earliest, October 2024.
We welcome the opportunity to support this committee in its study of CARM. I would be pleased to answer any questions.
Thank you.