Public Accounts Committee on Nov. 9th, 2017

[Rick Stewart]

The short answer is yes. The one document in question for our ministry was a document that was created before the date of the new access—

[Chandra Arya, Liberal, Nepean, ON]

I would like the Auditor General to address this, please.

[Michael Ferguson]

Thank you.

I think there's not much more I can say, other than we asked for the information. The information was an analysis that was done under the previous government. It isn't covered by the most current order in council.

To this date, Finance has refused to give us that analysis, and we still don't have it.

[Chandra Arya, Liberal, Nepean, ON]

Chair, I think we should look at this at a later date.

Thank you.

[The Chair, Conservative, Kevin Sorenson]

You still have two minutes.

[Chandra Arya, Liberal, Nepean, ON]

Thank you.

Mr. Stewart, I would like to go back to recommendation 2.63 on the duties relief program. Can you ensure that you are not going to stop agencies from implementing that recommendation?

If you want, I can read it, “making licences renewable, conditional on an importer's compliance record; and requiring a financial deposit...”.

[Rick Stewart]

What I can say on that is we work very closely with CBSA on an ongoing basis on all of these issues, and we will work constructively with the agency.

[Chandra Arya, Liberal, Nepean, ON]

Do you accept this recommendation?

[Rick Stewart]

Yes, we do.

[Chandra Arya, Liberal, Nepean, ON]

Thank you.

There was another thing on agriculture which my friend is going to address.

Mr. Ossowski, on recommendation 2.35 regarding penalties on non-compliant importers, the average penalty was found to be $151. The penalty for a first offence was $150. I don't understand how it can be so close to the first offence penalty. How can you explain that?

[John Ossowski]

First of all, we accept the Auditor General's recommendations on this, and we will review all trade-related administrative monetary penalties. I think there is opportunity to adjust this.

Again, this is a voluntary compliance regime, and we're trying to do corrective measures. I agree that the numbers probably need to be looked at in terms of what is a meaningful deterrent.

[Chandra Arya, Liberal, Nepean, ON]

Thank you.

[The Chair, Conservative, Kevin Sorenson]

Mr. Arya, your time is up.

I will now go to Mr. Nuttall, please, for five minutes on the second round.

[Alex Nuttall, Conservative, Barrie—Springwater—Oro-Medonte, ON]

Thank you, Mr. Chair, and thank you to members of the government for joining the committee today.

I want to pick up where Mr. Christopherson left off. It's actually quite surprising that it is so easy to skirt the system, in terms of bringing commercial goods into the country and of the duties that are payable.

My own experience crossing the border at Niagara with backpacks for kids in government housing is that it is actually very difficult to bring goods in. I've been charged commercial duties, sometimes personal duties, sometimes no duties, based on the agent or whatever at the border. That there are people going by with goods in their trucks that are eventually going to be changed so that they can skirt the number of dollars they need to pay up front has really two effects. The first one is that the Government of Canada could potentially become the largest funder of some of these businesses. Essentially, we're banking American or other businesses and helping them compete with Canadian businesses—which is the second outcome.

You have to balance the speed with which things can get across the border to ensure that it is a process that isn't too onerous and actually dissuades trade, with protecting the interests of our border, of our country, of our businesses. How do you foresee changing this system to balance these factors? The honour system apparently isn't working, in many cases.

[John Ossowski]

I would say that overall, understanding the complexity that my officers have to deal with on a day-to-day basis—we administer 90 pieces of legislation at the border and 17 million commercial releases—by and large I think that $30 billion in duties and taxes reflects a job that they do very well.

Is there leakage? Yes. Is it as cynical as the Auditor General said? Potentially it is, but for me, quite frankly, it is about using the resources I have and applying them to where the risks are. If I have intelligence or if I have systems or information from partners about where I can better focus my efforts, I will do that, but it will never be reduced to zero.

[Alex Nuttall, Conservative, Barrie—Springwater—Oro-Medonte, ON]

That's understood. My background is in banking. I had writeoffs every single year, which I had, across the board, to take care of. I knew they were going to be there. I didn't know who they were going to involve, but I was going to have writeoffs. The same should be the case with CBSA. The same should be the case, quite frankly, with all of our departments.

What is your estimation, then, of what's missing, in terms of percentages or in terms of global dollars? Do you have that type of information? Is it measured? Without measurements in place, you're never going to be able to wean down and reduce those numbers.

[John Ossowski]

In order to come up with a global estimate of what might be missed, I think we'd have to do probably an unaffordable number of random verifications to get a dataset big enough to give us a sense of it. As I was explaining right now, because of the recommendations that the Auditor General has pointed out on the supply-managed side, we have moved from the bias more towards the targeted, because of these specific issues.

In a perfect world, I would have sufficient resources to do sufficient random as well, to give you that sense, but I don't have them.

[Alex Nuttall, Conservative, Barrie—Springwater—Oro-Medonte, ON]

I have one other question on this, and then hopefully I'll have time for another question.

If a company today were to bring goods into the country and either accidentally or on purpose put the wrong product or whatnot inside the vehicle, and the tariff regime changed—let's say with a trade agreement that's going to go in a different direction—and three years from now they come back and say that actually the goods were x or y, instead of a or b, which tariff regime would they be responsible for paying under? Would it be the current one existing today, or would it be one that potentially could change down the road?

[John Ossowski]

It would be under the regime at the point in time that the transaction took place.

[Alex Nuttall, Conservative, Barrie—Springwater—Oro-Medonte, ON]

If they decided to change it three years down the road, is there no penalty in saying that the tariff is now three times the...?

Okay.

[The Chair, Conservative, Kevin Sorenson]

Thank you, Mr. Nuttall. We will come back. We have two hours today, so we'll be able to come back.

Mr. Massé.

[Rémi Massé, Liberal, Avignon—La Mitis—Matane—Matapédia, QC]

Thank you, Mr. Chair.

Like my colleagues, I was particularly taken aback by the Auditor General's report. I did not sleep well. I don't know if I can use such language in the committee, but I'm damned angry.

I am angry for the following reason. Two years ago, some producers and farmers held a demonstration in my riding. There were 200 farmers who demonstrated in Matane. Six-foot tall men had tears in their eyes when they told me that they did not understand what was going on, and that they were losing income because they felt that dairy products were getting through at the border without permits. I answered that that was impossible and that our public servants and our government were taking all the necessary measures to ensure that we have adequate controls at the borders. I defended my position for weeks and months.

Today, I realized certain things from reading the Auditor General's report.

For instance, in the Auditor General's presentation, one can read this:

We observed that a significant volume of controlled goods entered Canada without the required permit. We estimated that in 2015, $131 million worth of dairy, chicken, turkey, egg products and beef were imported without a permit.

That's shocking.

I was a federal public servant for 17 years. I was responsible for operations and programs and it was my responsibility to ensure that the programs and services that I managed operated within the framework I was given.

I must admit that words fail me.

Mr. Ossowski, what do you have to say to the farmers who will probably see that they were right to demonstrate?

[The Chair, Conservative, Kevin Sorenson]

Mr. Ossowski, I'm not sure where Mr. Verheul would fit in on this as well. Some of the items you're referring to....

Maybe you could give us a little explanation of some of the items that would be involved here. For example, if we're talking cheese, it's not just blocks of cheese.

I'll give you extra time, because I'm going on about this, but I think we need to understand a little better how this type of product comes across. It doesn't come across as cheese. It may come across as a pizza additive on the top when there's a cheese makeup in it.

That's my understanding. If I'm wrong, correct me.

[John Ossowski]

Thank you for the question.

As I said in the opening remarks, we take the recommendations and findings of the Auditor General seriously. We understand the importance of the supply-managed sector. We've done more in terms of our targeting efforts as a result of this and, as I've mentioned, in terms of some of the changes we've made to move more towards targeting.

Milk is a particularly sensitive issue, particularly milk proteins. We're looking to do more sampling, because—Brad may be able to help me here—essentially the customs tariff, in terms of diafiltered milk and milk proteins that may be used in cheese or cheese products.... Industry recognizes, as we do, that it's around 85% protein content that needs to be in there. We need to do sampling of this material and do the appropriate duty adjustment, if it doesn't meet that threshold.

This is another area in which we're making more efforts. We accept the Auditor General's recommendations and we will do the best we can.

[Rémi Massé, Liberal, Avignon—La Mitis—Matane—Matapédia, QC]

I have trouble understanding why we need a report like this for the CBSA to react and take the necessary corrective measures. And yet, there are some highly competent and dedicated people in your agency who want to ensure that they fulfil the mandates they are given. Let me repeat that I am appalled. It's almost as if you needed the Auditor General's report to get you to react.

I also want to thank the Auditor General and his employees for enlightening us about the situation. This ensures that when events like these occur, the departments and agencies can take the necessary corrective action.

Mr. Ossowski, I would like to know your opinion about the measures you took or will take to ensure that this type of situation does not reoccur. When another audit is done in two or three years, we have to make sure that we are not faced once again with the same situation in another border control sector.