Evidence of meeting #78 for Public Accounts in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was goods.

A video is available from Parliament.

On the agenda

MPs speaking

Also speaking

Michael Ferguson  Auditor General of Canada, Office of the Auditor General
John Ossowski  President, Canada Border Services Agency
Rick Stewart  Assistant Deputy Minister, International Trade and Finance Branch, Department of Finance
Steve Verheul  Assistant Deputy Minister, Trade Policy and Negotiations, Department of Foreign Affairs, Trade and Development
Brad Loynachan  Director, Trade Policy, Canada Border Services Agency

10:10 a.m.

Conservative

The Chair Conservative Kevin Sorenson

Thank you.

I'll go now to Ms. Shanahan, please.

10:10 a.m.

Liberal

Brenda Shanahan Liberal Châteauguay—Lacolle, QC

Thank you very much, Mr. Chair.

Thank you to all the witnesses here today. Again, we had a very informative report this morning.

I'm just thinking back to my MBA case competition days. This would have been one heck of a juicy case for really fresh eyes and thinking on what is, as the Auditor General has referred to, a whole new way of doing business. It's a new economy, in other words.

So many of the issues that we're talking about here this morning have to do with culture, how the business culture is changing, the import-export, and our relationships in an economy that is à la fois a virtual economy but also requires a physical on-site actual verification.

Just to put it on the record, my riding of Châteauguay—Lacolle has, I believe, one of the busiest border crossings. Am I correct? Is it, with Windsor, Mr. Ossowski?

10:10 a.m.

President, Canada Border Services Agency

John Ossowski

It's definitely in the top 10. I don't know exactly where it ranks in terms of commercial volumes, but it's definitely high.

10:10 a.m.

Liberal

Brenda Shanahan Liberal Châteauguay—Lacolle, QC

Yes, and certainly we've had some action of a different nature there in recent months.

When I'm speaking to my citizens, they know what's going on at the border, either because a lot of them work there or they have families...a “Bélanger” on our side is a “Belanger” on the other side. They know what's going on. On that diafiltered milk thing, that was definitely something that my folks knew about and reported. Do you have a tip line? When you say you heard from industry.... How long does it take for information to filter from the ground to action at the agency?

10:10 a.m.

President, Canada Border Services Agency

John Ossowski

Absolutely we have a tip line, and absolutely we consult with industry regularly and have very open channels of communication. We do everything we can to sort of shift our efforts to make sure that we're dealing with the risks as we are made aware of them.

10:15 a.m.

Liberal

Brenda Shanahan Liberal Châteauguay—Lacolle, QC

Okay. I do appreciate—I think we heard that in Mr. Verheul's testimony—the fact there is a good news story here, and that is the sharing of information now between the Department of Agriculture and the CBSA. Can you expand a bit on that?

10:15 a.m.

Assistant Deputy Minister, Trade Policy and Negotiations, Department of Foreign Affairs, Trade and Development

Steve Verheul

Yes, certainly. We require individual permits for any imports of any of the supply-managed products. Given that we do this on a separate track, we now have been providing regular information to CBSA to allow them to make sure they can track that at the border, to ensure those products coming across do have a valid import permit in order to be imported into Canada.

10:15 a.m.

Liberal

Brenda Shanahan Liberal Châteauguay—Lacolle, QC

Has that resulted in a net positive benefit to the crown?

10:15 a.m.

Assistant Deputy Minister, Trade Policy and Negotiations, Department of Foreign Affairs, Trade and Development

Steve Verheul

Well, we only put this most recent process in place in September, so we're still waiting to assess the results. We certainly have that expectation.

10:15 a.m.

Liberal

Brenda Shanahan Liberal Châteauguay—Lacolle, QC

Okay.

To go on, then, to the challenge at hand that the Auditor General brought up in terms of really what is this modernization of this system, can we talk a bit about the trusted trader program? Certainly for my producers in my riding—we're one of the biggest vegetable producers in Quebec, and that business is going very well—there was a problem early in our mandate that had to do with a very outdated kind of paper-based certification process, which fortunately we were able to resolve in a timely manner. It just brought to light that there were processes in place that really were out of date.

Who can speak to that? Mr. Ossowski.

10:15 a.m.

President, Canada Border Services Agency

John Ossowski

We do have a trusted trader program and we have other tools available to us in terms of what's actually on the manifest of the vehicle. In the future, probably not too far down the road, you could see a case where—I'll take Windsor as an example—an auto part, I understand, could cross the border seven times during the production of a vehicle.

10:15 a.m.

Liberal

Brenda Shanahan Liberal Châteauguay—Lacolle, QC

Yes, but how can we incentivize? My understanding is that there's software involved. At one point, we heard this in OGGO, the government operations committee. There is software involved, and it's still bulky and unworkable, and there are still these paper-based processes. How can we move this process along in a speedier fashion?

10:15 a.m.

President, Canada Border Services Agency

John Ossowski

I think you raise a good point, which is that when we put in our requirements, we have to make sure that we consult with industry and don't put in a system that's overly complex, so that they can actually build the systems to interface with us properly. As you're aware, some of these businesses might be running their whole operation off their iPads, so we can't necessarily.... There are very different levels of complexity in who we're working with in the stakeholder community. We consult with them as we develop these systems and processes to make sure that there is not an unfair burden on the small versus the large, but it is a complex ecosystem that we're talking about here, so we do our best to work with them as we make these changes.

10:15 a.m.

Liberal

Brenda Shanahan Liberal Châteauguay—Lacolle, QC

Excellent. We need to modernize on the technical side, but also, people on the ground, eyes and ears on the ground, are very important.

Auditor General, I'd like to ask you about recommendation 2.41 regarding the four-year period when the importers can make changes. Apparently, in the action plan they have that this “will be completed by December 2019”. Why would it take 30 months to comply with this recommendation?

10:15 a.m.

Auditor General of Canada, Office of the Auditor General

Michael Ferguson

Again, this is about the four-year period. I think this is something that would require some sort of a legislative change, probably, and that type of process requires consultation and those types of things. I don't know what the exact period of time would be, but certainly there would be a number of steps, such as consultation, that would be involved in making that type of a change.

10:15 a.m.

Conservative

The Chair Conservative Kevin Sorenson

Thank you, Ms. Shanahan.

We'll now move to Monsieur Deltell, please.

10:15 a.m.

Conservative

Gérard Deltell Conservative Louis-Saint-Laurent, QC

Chair, I want to get back to the point that I raised a few moments ago about the e-commerce and the new area that is rising up, and also to what Mr. Chen said a few minutes ago about the

$20 minimum threshold. As Mr. Chen mentioned, the agency and the Department of Finance are not in complete agreement.

I could have asked both to explain their points of view but since we have little time, I'm going to put the question to the arbiter.

Mr. Ferguson, what do you think about that? Who is right?

10:20 a.m.

Auditor General of Canada, Office of the Auditor General

Michael Ferguson

It's not really a disagreement. It's a matter of two different parts of the calculation. On what Finance has calculated here, what we're saying is that Finance calculated the loss of revenue, which was $66 million, but what they didn't include was that there would be less administrative cost incurred, or they didn't give us the information about how much administrative cost savings there would be.

In what Finance gave us, they provided us only how much the revenue would go down. They didn't provide us how much administrative costs would go down. All we had were some other analyses that CBSA had done before, which had shown that, for example, at $100 it costs them more to administer a $100 level than they actually collect.

The reason it looks like it's two different calculations is that when we asked Finance to provide us the information about how much the reduction was—and again, I think we've heard today that they did that type of calculation—they didn't provide us that information on the reduction of the administrative costs. They just provided us the information on the reduction of the revenue.

10:20 a.m.

Conservative

Gérard Deltell Conservative Louis-Saint-Laurent, QC

Okay, but the issue is the same. Do we have to raise the seuil minimal? Do you think we should raise it?

10:20 a.m.

Auditor General of Canada, Office of the Auditor General

Michael Ferguson

We came to the conclusion that the Department of Finance should review the threshold and determine whether it is reasonable. It is important to consider all aspects of this problem, including the income and the administrative costs. As we mentioned earlier, other questions must be taken into account such as the impact on imports.

It is not up to me to determine if a change is desirable, but in my opinion it is important that the Department of Finance conduct a thorough analysis. We did not have access to all of the information produced in the past in this regard.

10:20 a.m.

Conservative

Gérard Deltell Conservative Louis-Saint-Laurent, QC

As Mr. Ossowski mentioned earlier, e-commerce is developing quickly and it is clear that nothing is going to stop it. It may reach a plateau at some point but that day is still far away. Frankly, I can't see when that plateau will be reached, since people are so fond of this technological convenience.

I understand your reserve and I respect it, Mr. Ferguson. You present the facts objectively. Consequently, I should direct the question to Mr. Ossowski in order to obtain a more engaged response.

Mr. Ossowski, because of the constant increase in electronic commerce, do you think we should increase efforts and personnel to deal with the issue of the minimum threshold?

10:20 a.m.

President, Canada Border Services Agency

John Ossowski

I think this really is a question for the Department of Finance. They establish the policy. They would look at the historical nature in terms of when it was established and at the conditions now and would decide if an adjustment needs to be made.

As I mentioned, the volumes are high. Particularly on the postal side, they've grown considerably. As I've mentioned, there are many risks in the postal mode that we're dealing with, such as fentanyl. This is just one aspect of it, and it really is a policy issue that I'll defer to my colleague on.

10:20 a.m.

Conservative

Gérard Deltell Conservative Louis-Saint-Laurent, QC

I would also like to hear your opinion, Mr. Stewart.

10:20 a.m.

Assistant Deputy Minister, International Trade and Finance Branch, Department of Finance

Rick Stewart

I have two quick observations.

One is that we rely on CBSA, of course, to determine what their administrative cost is. Coming back to this question of what the right level of de minimis is, we regularly get representations both from importer groups, which are seeking consideration of a higher threshold, and from domestic retailers—the Retail Council of Canada and the Canadian Federation of Independent Business—which have concerns about competitiveness and a level playing field. This is not a new issue for us.

With respect to the committee, I think, Mr. Chair, the framing that you noted a few moments ago, about this trade-off between the cost of administering a system and the inherent protections a system offers in the interests of both consumers and the domestic producers and retailers, is a policy question that I'm not at liberty to discuss today.

It essentially boils down to a policy question: what is the value of a system that provides that flexibility to facilitate consumers' wishes for cheaper products while still protecting a system that allows Canadian retailers and producers to be competitive and vibrant? That's the essential policy question, and the price determines that balance. The price falls out of that balance.

10:25 a.m.

Conservative

The Chair Conservative Kevin Sorenson

Yes, and can I just let every member of Parliament know that regardless of what changes would ever be made, there would be thousands of letters on both sides of the issue coming into your offices. I remember one day when 10 shoe retailers in my constituency called me about de minimis, while on the other hand you have the consumer, the customer, and they're getting used to shopping online. This is a massive political consideration, too, for small business and consumers.

Mr. Ferguson, please, and then back to you, Mr. Deltell. I stole your time.