International Trade Committee on March 21st, 2024

[Tony Baldinelli, Conservative, Niagara Falls, ON]

The government owns its own IP, which it has incorporated into your platform, but if the federal government wanted to use the platform, which you would probably hope to one day sell to other countries and other customs agencies throughout the world, who owns it?

[Louise Upton]

What I can tell you is that the transition plan anticipates that at some point at and/or before the end of the contract, should the government decide to do that, there would be a transition process whereby we would be responsible for transitioning all of the code and everything back over to the Government of Canada.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Would that be at a cost to the federal government?

[Louise Upton]

We are responsible for transitioning all of that back over.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Is that at Deloitte's cost?

[Louise Upton]

It's part of the transition plan that's been negotiated into the contract.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

But who's responsible for the costs of transitioning it back to the federal government?

[Louise Upton]

It is part of the contract.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Well, we'll find that out through my questions.

I will turn to some of my participants. Industry has concerns and questions about how the CBSA determines how critical an issue is, for example. The industry is concerned about accurate and predictable duty costs and regulatory compliance. What might be critical to you might not be critical to the CBSA, so when those tickets are put out, that could lead to months of frustration and waiting on your side.

Do you have any comments on that? Have you raised that issue with the CBSA?

[Candace Sider]

Actually we have raised the issue with the CBSA on a number of different occasions. It can take weeks or in some cases months to resolve tickets. We heard testimony the other day about how a resolution period of 10 days has now suddenly dropped to seven, but if it's a critical issue, it's a critical issue. It needs to be resolved in less than seven days, so late accounting penalties will be assessed for an importer after five days.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

It's also my understanding that you can't get an itemized list of all the transactions, and that would have to be done manually by a CBSA officer. Again, we're spending $400 million and we're asking a CBSA officer, on the side, to put that in an Excel spreadsheet and send it to you, and my understanding is that there's no commitment from the CBSA to provide it to you in a timely manner. Is that correct, Ms. Campbell?

[Kim Campbell]

I would love to talk about that, because one of our members, who's testing right now, just raised that with us.

Again, there are only 40 companies that we're testing—you would think they would have kid glove service throughout the testing period—and we're trying to assimilate these reports. It took them over two weeks to get a report after three tickets in to the CBSA, so you can only imagine what it will be like when we go live and 200 importers are potentially going to be requesting reports, because, to your point, they have to be done manually. I can confirm that right now we are being told there is no service level agreement other than the one that exists today, when we request those reports, and that's three weeks.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Wow.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Baldinelli.

Mr. Sheehan.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Thank you very much.

I just wanted to thank you all for your excellent testimony. We're going down a path that's really important. I'm from Sault Ste. Marie, so I'm very familiar with the trade that goes across the border. It's very significant, and this is a significant change for people.

One of the questions I want to ask is about how some of you mentioned that you felt the testimony you heard on Tuesday from the CBSA, which said it was very clear that goods will not be paused at the border and effective transition measures have been communicated within the regulation.... Why is this not your view? Could you delve into that?

I can't remember who said that. Was it Candace?

[Candace Sider]

We've been asking for the written transition plans for literally weeks and weeks. As we go into a subcommittee meeting, unfortunately, everything's verbal. It's on a slide that doesn't really solidify what those transition plans are, what the contingency plans are and what the comms plan is to communicate with us when they're down for this period of 16 days. How are we going to go about doing what we're doing?

Some of the testimony on Tuesday, quite frankly, was news to all of us. We had never heard some of the transition plan before. Now release is a different function from accounting.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Can you go into a bit of detail on that transition plan and the stuff that you didn't hear?

[Candace Sider]

Yes.

One of the things we had never heard before was that one of the strategies is to roll back, so as we go live on May 13, if they experience an issue or a challenge, there is an opportunity to roll back. We'd never heard that before.

For decades, we were told that there's a big bang approach and the system could not be implemented over a series of triages until we reached a steady state. As a result of that, from an industry perspective, we've spent millions and millions of dollars to get ready for IT.

Once we cut over and convert all data from B3 to this new format, which is the customs accounting declaration, we can't go back. That's a very serious concern for us, and we had never heard that before.

One of the other strategies they implemented was to say that importers can now utilize the use of a broker's business number. That's not necessarily true. Today, we use our business number in very unique situations. Typically, we will not use it on a commercial load. There's too much risk and liability. We can use our bonds associated with that. That's really going to be a business decision, in terms of....

What broker wants to use their business number when full liability is on the table for us for a period of four years? While there's a lot of discussion that the liability won't be passed on to the broker until a certain prescribed time, we have nothing in writing. It's very difficult for us to make those kinds of business decisions.

What happens at the back end? Release will take effect with the importer's business number. At the back end, if a broker makes a business decision not to use their business number, there will be no accounting of goods, which means no revenue collection, which means no revenue is paid to the government.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Okay.

There's also some mention of the CARM system having some flaws in its ability to properly calculate various things. Does this reflect that now the system isn't accurately accounting to ensure that the Government of Canada receives 20% of revenue forgone under the old system?

I can't remember who would be able to answer this one. Is it Kim?

[Kim Campbell]

I'll be more than happy to take a stab at it.

Yes, we were surprised by the characterization of the 20% that was reflected in an Auditor General report in 2017. When we refreshed ourselves, that Auditor General report.... We heard quite often through committee statements that the Auditor General said there was a 20% error, but in actual fact, the Auditor General reflected on customs' own reflection of what it believed was misclassified.

The other thing we find very curious about the next leap of faith in terms of the calculation, and CARM will fix it, is that the system actually makes calculations based on the information we provide. It's not that customs is going to be checking classifications at that point. It will still depend on the same data we get. The big difference now is that it's taking that information and making the calculations of the duties and taxes.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

You'll be feeding that same information to the new system, correct?

[Kim Campbell]

That's correct.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Savard-Tremblay, you have two and a half minutes.

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

Thank you, Madam Chair.

Ms. Upton, I want to go back to our discussion. You said that the business needs related to the contract had changed in six years. I think that is obvious. I don't think anyone is questioning that.

However, have all the final needs, the ones listed in the current traceability matrix, been met? Does CBSA agree that all needs have been met?

[Louise Upton]

As I said, I think that's a better question for the CBSA in terms of.... It's still continuing to evolve, as we would expect as we get closer to the launch, but that's a better question for the CBSA.