Transport Committee on March 26th, 2007

[Deborah Bourque]

It's my understanding that Canada Post tried to resolve this issue diplomatically through the Universal Postal Union. It is a body of the United Nations that brings together postal administrations from around the world to look at issues like privatization, public services, deregulation, exclusive privilege, and the universal service obligation. So it's my understanding that Canada Post did try to resolve that issue through the UPU. When they were unable to do so, they resorted to the courts.

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

An over-20-year period sounds to me like a rather long-term investment in the pursuit of a particular issue. I'm wondering whether that concern really surfaced when the profitability of the private companies came to light.

[Deborah Bourque]

I think you'd have to ask Canada Post that.

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

We will, but I was wondering, from the perspective of someone who is representing the unions, whether there has been a diminution of membership as a result of that competition.

[Deborah Bourque]

No, I couldn't say there's been a decrease in our membership because of the competition. Frankly, that's not our primary concern here. Our primary concern is that the exclusive privilege not be undermined, because we understand very clearly that it's the exclusive privilege that allows Canada Post to provide the universal service that it does. We're really concerned that it would be undermined and that this is just the first step in perhaps complete deregulation of Canada Post. That would be a complete disaster for service in this country, particularly in the rural and more isolated communities.

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

Ms. Howell, what percentage of the business of your association members is conducted in rural communities or for rural clients?

[Gwyneth Howell]

I don't have that information. It's the percentage for rural?

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

Right.

[Gwyneth Howell]

Unfortunately, I don't have that information. I could get it and forward it to you.

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

That might be helpful for us. As you can imagine, I'm trying to think in terms of the impact so that the universal obligation can be maintained, or so that we can determine whether it is, in fact, in jeopardy.

My other question will probably have to be for Canada Post. I'm just curious, because the numbers I have access to don't really give us an indication of the size of your industry itself. You pointed out that one of your members represents a $5 million income for Canada Post. What is the size of your industry in dollar terms?

[Evan Zelikovitz, Consultant, Public Affairs, Canadian International Mail Association]

Mr. Chairman, let me try to respond to that question.

As we indicated in our opening remarks, this industry is made up of a number of different entities. It's not just a function of international mail companies that are actually distributing the mail overseas to other countries. It involves small or large printers. It would involve Quebecor, St. Joseph Print, Transcontinental Printing, or smaller printers that do printing for a U.S. company or a South African company and send it to another jurisdiction.

By the way, Mr. Chairman, this is predominantly in the United States. Most of the international mail activity, contrary to what CUPW has claimed, does not take place in developing countries. The majority of international mail goes directly to the United States Postal Service.

Any claims made that this is going overseas to developing countries and that for some reason there's an abuse of the UPU are false. In fact, there are penalties imposed against developing countries that dump excessive amounts of international mail coming from another jurisdiction into those industrialized countries. That in itself is a legitimization of this practice.

If you look at just international mail companies that actually send the mail over to another jurisdiction, there are probably seven or eight major companies that do that in Canada. Based on the numbers we have put together, that represents approximately $70 million to $100 million.

However, there are a number of smaller what we call letter shops, mail houses, filming houses, and even some printers that are doing projects here in Canada that are sorting the mail, preparing it, taking trucks and transporting it down into the United States through the USPS. That results in perhaps another $30 million or $40 million or $50 million.

The overall impact, when you look at the economic activity that's being generated by printing companies and by envelope manufacturers who are supplying these entities, is in the hundreds of millions of dollars, but that's not revenue that is going to go to Canada Post. These are international companies for the most part, and Canadian companies that use the services of these companies because they have preferential rates, and they have quality of service. If they don't have a conduit to mail, they're not going to use Canada Post, because Canada Post's rates are too high, and they don't have an equal quality of service. They're going to take that money out of Canada.

All in all--and again, I'm trying to answer your question--this is an entity or an industry that provides some $300 million or more in economic activity. The international mailers alone account for about $70 million in actual distribution of mail that will not resort to Canada Post.

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

All your clients are commercial clients.

[Evan Zelikovitz]

Absolutely.

That sort of speaks to the first question about rural mail service. This has nothing to do with rural mail service. This has nothing to do with residential mail service. That's not to suggest that there are not very important contributions from corporations in rural Canada.

It would be worthwhile if there had been claims five years ago or ten years ago or seven years ago from CUPW suggesting that this market is having an impact on the ability to deal with universal postal service in rural Canada. Our members, CIMA, have not heard anything from CUPW at all about this until recently, when they have—

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

So you disagree with—

[The Chair, Conservative, Merv Tweed]

We're going to Mr. Laframboise.

I'm sorry, we're on tight time today.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

You will agree with me that this is rather complex. I have looked at the cases and at the appeals. There is a French interpretation, that is to say that the legal terms were not the same in English and in French. We can see that the judge made a decision.

Please enlighten me. In theory, all mail weighing 500 grams or less is the exclusive privilege of Canada Post, is it not, Ms. Bourque? What do the remailers do? They take letters weighing 500 grams and less and everything that is being mailed outside of Canada, and they collect all that mail, which they should not have the right to do, given the exclusive privilege of Canada Post. Is that correct?

[Deborah Bourque]

Yes.

I must say that I'm not an expert on the international remail industry, but that is my understanding. Mail is collected here in Canada by these businesses, and it's transported to other countries where there are lower postage rates.

There are mailing houses in Canada that collect mail and process it so they can take advantage of volume discounts, but that mail is still delivered and processed through Canada Post. That's not a violation of the exclusive privilege. It's the notion of collecting the mail and transmitting the mail to another country for delivery that violates the exclusive privilege. The exclusive privilege is clearly laid out. I think it's in section 14 of the Canada Post Corporation Act.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Ms. Howell, how did this break down? You knew from the outset that you could not touch the mail weighing 500 grams or less. You were allowed to do so. Is that what you are explaining to us? You produced some Canada Post texts from 1992. You were allowed to do things that were not permitted under the legislation. Is that correct?

[Gwyneth Howell]

These international remailers, for example, were under the impression that the Canada Post Corporation Act, subsection 14(1), says “within Canada”. They took that to mean that it was domestic distribution only. Some of these companies started back in the 1980s and have been collecting international mail for distribution through foreign postal administrations since that time. It was only in, I believe, 1995 or 1996 that the first legal action was taken.

So these companies had already been doing this for 10 or 12 years, in some cases, with no indication from Canada Post that they were doing anything wrong. They read the act. Most of the companies that I'm aware of read it in English, and they interpreted it one way. They didn't read it in French, because I think to most Canadians, if you have an English version and a French version, apparently they are going to mean the same thing.

They set up shop. They started taking this international mail for distribution through foreign postal administrations. In some cases it was about costs, in some cases it was about service, and in some cases it was about having a better look for the mail for direct marketers who wanted a local look for the place where the mail was being delivered.

They did this for over a decade with no opposition from anyone. Then Canada Post came forward and said that this is illegal and you can't do that, when Canada Post had known all along, or for many years, that these companies were doing just that and had basically condoned it. Again, to refer to the 1988 Manager, “Outbound mail is not covered by exclusive privilege.”

These companies basically had been doing something. They had created nice little companies for themselves, employed Canadians, and set up these businesses here, only to be told after a decade or so that they couldn't do this; it's illegal.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Last spring or fall, you turned to the minister's office, because the minister had made a statement to the effect that this would be settled in the weeks to come.

Did the minister's office tell you that the legislation would be amended, or that the English version would be kept and the French version corrected?

[Gwyneth Howell]

Our understanding of the statement in the House--and we had communicated with several people in the government--was that it was going to be amended to allow these companies to keep operating as they had for, at that point, over 20 years. That's what we understood from the minister's message.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Since that statement, have you met with people from the minister's office? Was a bill tabled? Were you sent any documents or has nothing happened?

[Gwyneth Howell]

No, we haven't seen any draft, and we haven't seen any documents whatsoever. We met with the minister's office, I believe, just today. I wasn't involved in that meeting. As far as we're aware, as far as our member companies are aware, it hasn't progressed anywhere from that with regard to a draft amendment or anything to the legislation.

[Evan Zelikovitz]

I would just like to add a comment to that, Mr. Chairman.

We've had very encouraging and healthy discussions with the minister's office and the minister himself, who has indicated strong support to ensure that these Canadian companies continue to operate. We've also had very healthy and encouraging support from all of the Canadian business groups and associations from across the country that we've met with. They have endorsed this and have sent letters either to committee members themselves or to the minister himself, the CFIB, the National Association of Major Mail Users, the Envelope Manufacturers Association, and Canadian printing and imaging associations. This impacts an awful lot of companies.

As well, we've also recently received a letter confirming support from members of the Liberal Party, from the critic for crown corporations, Mr. Wrzesnewskyj, who we met with a couple of weeks ago and who understood our issues. I understand he delivered a letter to Minister Cannon suggesting that the vast majority of opposition members would be supporting any changes that the government would bring forward. We have spoken to a number of people.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Mr. Zelikovitz—