International Trade Committee on March 21st, 2024

[Renate Jalbert]

I did mean permanently, that there's always an option for an importer to choose to utilize a broker's security versus posting their own security and registering in the CARM client portal and hosting security.

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

Right.

FedEx, I assume, operates on both sides of the border.

[Renate Jalbert]

Yes.

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

We heard from the CBSA on Tuesday that a new digital version of the American system cost $5 billion and had some issues. Can you comment on what FedEx has experienced with that system and how it might inform your concerns about this one?

[Renate Jalbert]

The system is different from how CARM is designed. The U.S. system has a component that's called ACE. It has a component for carrier reporting as well as customs broker reporting. There is an option for an importer to delegate the use of a broker. The requirement to report to customs, clear customs and account duties and taxes—where there are taxes in the U.S.—is the same, but the option to utilize a broker is absolutely viable in the U.S.

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

Okay.

Ms. Bilodeau, I would assume UPS has a similar experience. Would you care to comment?

[Tammy Bilodeau]

I would concur with everything Ms. Jalbert just said.

There needs to be an option for importers to continue to use customs brokers, who are the subject matter experts in customs clearance. Certainly, they have years of experience in ensuring that duty and tax obligations are remitted to the government accurately and compliantly.

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

Okay.

Now I'll turn to—

[Kim Campbell]

I wouldn't mind giving you a little more information about that system, if you don't mind. We'll pile on there a little.

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

Sure. Fire away.

[Kim Campbell]

For sure, I think it's important to say that the e-system in the U.S. is optional. It's not a mandated system.

More importantly, it's also important for you to know what was not shared with the committee on Tuesday: U.S. Customs initially outsourced their development, then took it back in many years ago because of the same experiences we are having here. That was a lesson learned that we didn't listen to.

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

Okay.

I'll go to Ms. Upton and pose that question.

Did you look at the U.S. experience? I would sure hope you did. Why did the government choose to go down the path it did and not have that option there?

[Louise Upton]

I apologize. I wish I could address that question for you, but it is beyond my area of expertise. I was not involved in that piece of it.

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

You're not aware of an initial planning stage of looking at other systems in the world.

I know nothing about customs brokerage. However, if I were given this task, that's the first thing I would do.

[Louise Upton]

That is correct.

As I mentioned, I joined the CARM program in 2020, during the pandemic. It was already well under way at that time.

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

Okay.

Do you know, from your experience since then, how difficult it would be to make that switch now—to make it optional or allow businesses to continue using brokers if they want to?

[Louise Upton]

From a technical solution perspective, I believe the transition measures put in place now will continue to allow that for a period of three to 12 months. It would be a continuation of that, technically. Therefore, from a technical solution....

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

However, after 12 months, even if everybody has it figured out—and it sounds like there might be situations where that wouldn't be the case—we'd still have new small businesses coming on that would have to figure it out. I guess I would like some assurances that, after the 12-month or three-month period, things would be easier for small businesses. This is the concern I'm hearing. My wife had a small business that imported from the States. We live close to the border, so we could just drive down to the border and deal with the broker there.

I'm concerned that we will continue to have this problem. The United States seems to have gone to a solution that offers that option.

[Louise Upton]

As a technical solution, it would continue what we're doing today. However, from a policy perspective, it's probably a question best asked of the CBSA, in terms of continuation.

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

Okay. I'll turn to Ms. Sider.

You talked about the errors and possible leakage of revenue.

The CBSA testified that the wonderful thing about CARM is that it's going to make everything perfect and that revenue is going to increase, because we will catch all that leakage. You're testifying to the opposite.

I wonder if you could expand on that.

[Candace Sider]

Yes, I would be happy to. It's a great question.

The perception is that small or medium-sized businesses are very savvy on customs import activities and legislation and on how to apply that legislation in the Customs Act. Truth be told—and Ms. Bilodeau made that comment—they're more concerned about running their business. They're small to medium-sized importers. They're not interested in doing the work they can have a customs broker do on their behalf.

There's a self-portal. There's a duty and tax tool that someone can go into and classify their own goods, if they choose to do that. However, if I don't have any experience or background in that, I can go in and select a tariff. Maybe it should carry a 10% duty rate, but I'll pick “other other other”, which is typically duty-free, so I'm not going to pay anything.

Where the onus is.... When we say there will be certainty in terms of duty and tax collection if we use the portal, nothing is further from the truth. Again, you have to be pretty savvy to determine the right amount of duties and taxes you are going to remit. E-commerce is a totally different environment. It attracts PST or HST, depending upon the provinces into which you're importing.

I will leave my comment at that. Thank you.

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

Thank you.

[The Chair, Liberal, Judy Sgro]

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

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Thank you, Madam Chair.

I'd like to thank all the witnesses for being with us today.

Ms. Upton, I'd like to ask you a couple of questions to start.

Before I do that, you made some comments to my colleague. I'm wondering if you could provide us with some of the contracts since Deloitte has been working on this project with the federal government. Could you provide to the committee any contracts from 2018 and prior to that in which you were involved on CARM, as well as any invoicing you provided and submitted to the federal government for payments since your first engagement with the federal government on this CARM project?

You made an interesting comment. You mentioned the yearly maintenance fees, and you said about $20 million. I find that interesting. I was looking at a federal website on CARM, and it said about $36.5 million. I'm not sure if that's for additional CBSA expenditures on top of the $20 million, but they had listed $36.5 million.

After that you said that after six years the government could determine whether or not it wanted to bring it in-house, but when I looked at the contract that was signed in 2018, section 1.4 said:

Grant of Right of Use of the Solution

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

Then it went on further.

According to my reading of this, then, Deloitte owns the portal. After spending $400 million, after six years, if the government wants to bring this in, does it have to pay Deloitte?

[Louise Upton]

Thank you for that.

There's a transition process. The way it works with the IP—because I know that became a question as well—