Good morning, Mr. Chair, and members of the committee. Thank you for the opportunity to appear today along with my fellow witnesses.
I am joined by Brad Loynachan, director of trade policy within the CBSA's trade and anti-dumping programs directorate, whom I may turn to in responding to some of your questions.
I will begin by saying that we agree with the five recommendations made to the CBSA by the Auditor General.
In response, we have developed a detailed action plan which is now being implemented. The plan reflects the essential role the agency has to maintain the integrity of our country's customs duties regime and the importance of this regime to Canada's competitiveness and prosperity.
I will begin with a brief review of the roles that each of the departments here today play in the customs regime. As a way for the federal government to obtain revenue and protect certain sectors of the economy, this regime is intrinsically linked to the mandate of all three departments.
Finance Canada is responsible for developing and implementing policies on trade and tariffs, including the customs tariff. It also provides analysis and advice on the government's international trade and finance policy agenda.
As for the CBSA, our overall mandate is twofold. We secure the border, while ensuring that goods and people cross the border as expeditiously as possible. Under our facilitation role, we are also responsible for assessing the duties and taxes owed to the Government of Canada. Increasingly, we do this job in a fast-paced, complex global trade environment, one characterized by a 30% increase in the number of individual importations since 2012.
Maximizing the benefits of trade for Canadians and Canada's prosperity is central to the government's policy agenda, and the CBSA takes its role in supporting trade very seriously.
Global Affairs Canada is responsible for controlling the import of goods for which Canada requires an import permit, such as beef, chicken, and dairy products. The goods are listed on the import control list found in the Export and Import Permits Act.
Returning to the CBSA, I wish to stress our dual mandate: we prevent the entry of those travellers or goods posing potential threats to Canada while facilitating the free flow of legitimate cargo and people at the border.
As mentioned, our officers assess duties and taxes on goods coming across the border, totalling more than $71 million in duties and taxes per day. A large part of this comes from the importation of commercial goods, which is central to our discussion today.
Assessing duties and taxes is a shared responsibility between importers and the CBSA. Let me be clear. Our customs regime is grounded in voluntary compliance by the importers and risk management by the CBSA. Much like Canadians are expected to voluntarily declare and pay their taxes, the Customs Act places the onus on importers to self-assess and ultimately pay their trade-related duties and taxes. Importers or their brokers are expected to provide correct declarations to the CBSA, and the agency then risk assesses the declaration.
For importers potentially posing a threat to Canada's security or safety, the agency examines the shipment to decide whether it should be released, refused entry, or confiscated. After the goods have been released, the agency confirms the duties and taxes owing and accepts the payment. The CBSA has the legislative right to conduct trade verifications to ensure compliance with all import requirements, including the proper assessment of duties and taxes, and the issuance of applicable penalties.
While it's our job to protect the health, safety, and security of Canadians, we must do so in ways that facilitate legitimate trade across our borders to keep the economy moving. This is a process that we seek to improve all the time. That brings me to to our response to the report's recommendations.
In the report, the Auditor General found that the agency's controls on the import of supply-managed goods were inadequate. We recognize the seriousness of this finding given our country's strong commitment to the supply management system.
From this finding, the report's fourth recommendation called on us to work with Global Affairs Canada to better enforce tariff rate quotas by reviewing the process of verifying permits. In response to this recommendation, the CBSA acted quickly to strengthen pre-existing compliance measures.
Specifically, we have increased the number of trade compliance verifications targeting supply-managed goods, so that additional duties and taxes owing as a result of non-compliance will be assessed. Since April 2016, this change has yielded $72 million in additional revenues that would not have otherwise been assessed.
We also moved to audit participants in our duties relief program, under which certain pre-authorized companies are allowed to import goods without paying customs duties at the time of importation on the condition that the goods are later exported. CBSA verifications are ongoing and have resulted in the suspension or revocation of eight licences since May 2016.
Moving forward, we will continue on this track of increased verifications, making sure that the integrity of Canada's supply management regime is upheld through the proper assessment of duties and taxes and adherence to program conditions.
We will also review how the CBSA validates that goods being imported respect permits issued by Global Affairs Canada. We will address any gaps in the process while exploring automated means to carry out these functions more efficiently. We will complete this review by September 2018.
The Auditor General's fifth recommendation, also pertaining to controlling goods, called for making licences under the duties relief program renewable, and requiring a financial deposit from importers proportional to the value of the duties at risk. In fulfilling the agency's commitment to strengthening compliance as referred to in recommendations 4 and 5, we will, in consultation with Global Affairs and Finance, complete this work by March 2019.
Moving to the Auditor General's other recommendations, related to the assessment of duties, we also take seriously the finding that misclassification of imported goods has taken place.
As such, we will follow recommendation 1, which calls for a review of our customs brokers regime, including consideration of a licensing process that requires periodic assessment of a broker's compliance record, and shared liability between brokers and importers when it comes to compliance with certain requirements. This review will include consultations with impacted stakeholders, including customs brokers. We will complete this review by September 2018.
In response to recommendation 2, our agency will review its penalties, aiming to create a more meaningful deterrent to those importers who do not comply with the law relating to import revenues or with the agency's trade programs. To do this, we will consider strengthening the rules around specific penalties, namely, our administrative monetary penalty system, or AMPS, as well as the rules around seizures and qualifications for the CBSA's privilege programs, such as the trusted trader program. Again, consultation with our stakeholders will be an important component of the review.
Finally, Mr. Chair, we also agree with recommendation 3, which is to review the time period allowing for adjustments to be made to import declaration forms after the fact without compromising our ability to conduct compliance verifications. To this end, in consultation with our stakeholders, our agency is conducting a review of the current legislative provisions that will be completed by December 2019. As always, we seek the optimal balance between the agency's ability to conduct meaningful compliance verifications and our responsibility to facilitate trade.
In closing, let me say again that we take this report's findings seriously, and our actions speak to this. Let me also reiterate that trade facilitation is critical to Canada's prosperity, and our agency is committed to responding to the needs of the import and export communities to help enhance Canada's competitiveness.
I wish to thank the Auditor General for his report and recommendations, and for helping us to make further improvements.
With that, I'm now pleased to take your questions.