Mr. Speaker, the department has experienced a significant number of defaults by customs brokers in the past two years where security was inadequate to cover the defaults. Therefore, to protect the Crown and importers a security increase was deemed essential.
Importers remain fully liable for payment of duties and taxes under the Customs Act regardless of any arrangement with the customs broker to act on their behalf. In the case of defaults by customs brokers, importers who have already delivered payment of their duties and taxes to the customs brokers are required to pay the unsecured portion of the total amount a second time directly to the department.
On the basis of consultations, it was decided that the new security level would be equal to 100 per cent of the average monthly K84 invoice up to a maximum of $10 million.
The $10 million ceiling applies regardless of whether the security is posted by importers or by customs brokers on behalf of its clients.
The ceiling was established because the surety industry advised that there is not sufficient security available in Canada to guarantee the total liability that the brokerage community carries in any given month.
History has shown that most of the difficulties have arisen from the small to medium sized brokers whereas larger brokers have not shown any evidence of being a risk. Therefore, it is essential that the higher risk group be covered to 100 per cent.
I should also mention that the Canadian Society of Customs Brokers has negotiated a master bond with a surety company which will be available to its members. This should greatly facilitate companies being able to acquire the necessary security.
The surety company underwriting the Canadian Society of Customs Brokers' master bond has indicated that, under the new security regime, it will cover the 80 companies which they currently secure.