[Recorded by Electronic Apparatus]
Thursday, October 26, 1995
.1530 
[English]
The Chair: This meeting will come to order. We are continuing our reference into Bill C-102.
The next witness appearing before us is Don Goodwin, president of Tracon Consultants.
We look forward to your presentation, Mr. Goodwin.
Mr. Don Goodwin (President, Tracon Consultants): Thank you, Mr. Chairman.
Perhaps some background on why I'm here would help the members. I'm here independently as president of Tracon.
Tracon is a customs consulting company - strictly customs consulting - and we've been in the business for about 20 years, advising importers and foreign exporters on general customs matters with respect to Canada.
I've been involved in this customs business for almost 25 years, 7 of those years working with the evaluation division of Revenue Canada, Customs and Excise.
Tracon is affiliated with a number of similar organizations around the world that do the same thing in their country of import. Those countries include the U.S., Germany, Japan, New Zealand, Australia, and Korea. My colleagues in those countries and I trade information, policies, and precedents in our various countries to keep us all up to date on what's going on in the world.
I was present this morning during the many discussions on this Bill C-102, and in particular, the evaluation provisions, which is why I'm here - the sections on sale for export.
I agree with the positions taken by the Canadian Bar Association, the Canadian Importers Association Inc., and Harbour Sales.
There are two subject areas I would like to address to hopefully assist the members in their deliberations in this matter. Also, the day before yesterday I gave to the clerk a submission on this subject.
The two areas I'd like to discuss with you are: the European experience, as we heard discussed this morning, and the controversy over it, if I can say that; and the cost to Canadian producers in competition if this amendment goes through, which is an area I don't believe has been raised yet.
First, during this morning's discussion on the European matters, the chairman put it quite aptly when he said that the two parties appearing this morning were at 180 degrees to each other. One said that Europe does not accept the concept of successive sales, that being the evaluation people at Customs. The other parties said that those kinds of sales were acceptable, where there was a sale to a non-resident of Europe.
I've given the clerk of the committee two examples published from the European system. These are examples published on article 147 of the European Community Customs Code. The two examples are on pages 11 and 12 of my brief.
I hope they've been handed out now. Do the members have those two pages? I'm looking for these to be handed out to the members, if the clerk can help us.
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Again, these are the explanation and explanatory notes issued by the Customs Code Committee of the Customs Evaluation Section of the European Commission. They're dated June 7, 1995, and were provided to me by one of my colleagues in Frankfurt.
I draw your attention to examples 6 and 7. I'll take time to read them with you.
- Example 6:
- Canimpco of Paris enters into an agreement to buy 100 food mixers from Usco, a Missouri
entrepreneur, at a price of 22.50 ECU each. Usco negotiates with Makerco of Detroit to
manufacture the food mixers for a price of 20.75 ECU each, Makerco being responsible for
shipping the goods to Canimpco in Paris.
On the right-hand side is the European comment on how this transaction should be valued for duty purposes.
The important paragraph is the last paragraph on the right:
- However, it remains to be demonstrated that the sale to which the lower price corresponds was
already a sale for export to the EC, taking account of the requirement of direct supply by the
manufacturer.
- That's the direct shipment.
- The proof is complete if the products when sold by the manufacturer bear specifications or
marks showing their destination for the EC market.
- Mulnatco is a multinational hotel chain with hotels in several countries, including France. Each
French hotel is incorporated as a separate limited liability company. At the beginning of every
year, each hotel submits purchase orders to the New York head office for its supply needs for the
following twelve months. The head office then submits purchase orders to various suppliers in
the U.S.A. with instructions to send goods either to each hotel directly or to the New York office
for subsequent shipment to each chain hotel. The suppliers invoice the head office in New York,
which then bills each hotel in the chain.
- That's including the hotel in France.
- If the goods are sent to the head office before being shipped to France, then the sale for export
test (Test 2) can be positive only if any other elements of the proof are demonstrated: the goods
correspond to Community specifications or bear marks which indicate their destination for the
EC market.
The second area I wanted to discuss was what is likely to be an increase in the cost to Canadian producers for materials they purchase in manufacturing goods in Canada for sale in Canada and for export. I address this in my brief on page 3, and I'll read a part of that:
- Many manufacturers in Canada rely on imported materials to produce goods. This is especially
evident in any industry that consumes commodity-type goods such as steel. Commodity goods
are generally bought and sold throughout the world by trading companies. For example, in
Canada traders supply steel in various specifications and grades to Canadian machinery
manufacturers, automobile producers, white goods makers, etc. The products of these
businesses are very price competitive in Canadian and export markets. The steel is exported
directly to Canada by producing mills in countries such as Brazil, Germany, Korea and Spain.
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I submit that proposed amendment to the Customs Act will effectively raise the material cost of these Canadian manufacturers by one or two percent, a margin that on export contracts often means winning or losing the sale. This will be especially crucial in 1996, when, on their export sales to the U.S., those manufacturers will no longer be able to draw back the customs duty paid on that imported material. This is a NAFTA requirement. I submit, therefore, the proposed amendment will result in higher cost for our Canadian producers.
In conclusion, I hope I've been able to bring to you, first, evidence of European treatment; and second, a factor that you should be considering, which is the additional cost to Canadian producers who must compete with exporters worldwide. If there is still an opinion at the end of this session, your deliberations I think you have to be guided by the principle that says if there is a doubt, the benefit should go to the taxpayer, the taxpayer being the importer.
Thank you.
The Chair: Thank you, Mr. Goodwin. I take it that your first point is similar or the same as that presented to us this morning by the Canadian Bar Association and the Canadian Importers Association - the residence requirement for valuation for duty.
Mr. Goodwin: Yes, it is.
The Chair: Regarding the second point, I think this is the first time it's been adumbrated before us.
Would you like to address any of these issues?
Mr. Grubel (Capilano - Howe Sound): No, thank you.
Ms Patricia Close (Chief, Excise Section, Department of Finance): Mr. Chair, by the second point do you mean the drawback point?
The Chair: Yes, I guess so - the increased cost to Canadian producers and exporters who have to import goods.
Ms Close: I'd like to make two points. One is that we started at the increased cost to the consumer. The position we've been taking is that there will be no increased cost to the consumer if in fact the importer is following the guidelines set out by Revenue Canada. Those guidelines, Mr. Chairman, have in them the condition that a person in Canada has agreed with another person, and so on.
In other words, the resident requirement is right in the guidelines. The guidelines have been in force for 10 years. If an importer was not following those guidelines and Revenue Canada didn't catch it, then I guess the legislative change will mean an increase. But if the guidelines were followed...it's very clear that the guidelines do talk very explicitly about sale to export to Canada, purchaser in Canada. It's throughout the guidelines...so just to deal with that increased cost to consumer.
Now, it's quite true that on January 1, 1996, the drawback provisions do end on sales duty free into the United States. That was part of our commitment under the FTA. It was part of our commitment under NAFTA, although we did get a two-year extension in NAFTA; they were supposed to end January 1, 1994.
That's one of the reasons, Mr. Chairman, that you have in the bill before you 1,500 tariff lines on inputs on which we propose taking the duty down - in fact, the duty has come down as of June 13 when the ways and means motion came in - in order to meet that concern. What this decrease in duty essentially did was bring the Canadian tariff rate, where it was higher than the U.S. tariff rate on imported inputs, down to the same level, and sometimes below, to put our importers on a level playing field.
It is quite true, as the witness is saying, that with drawback ending there could be an increase to our manufacturers who import and subsequently export, because they will not get the drawback back if they export duty free into the United States. But I think that's a separate issue from what the value for duty is.
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The Chair: Yes.
Do you want to respond to that issue, Mr. Goodwin?
Mr. Goodwin: I'll respond to the first point about Government of Canada guidelines, which is the big question here. We submit that Revenue Canada guidelines are offside with what the Federal Court has directed in the harbour sales case, and I'm sure everybody else this morning said the same thing. So if importers were paying in accordance with Revenue Canada guidelines, they were paying too much.
The Chair: I was not here for the entire testimony this morning, but when I left we had a very different point of view on this particular issue as to whether the provisions of this bill were in line with the European and American way of dealing with this valuation for duty issue. Certainly the department was saying that we were only doing what the Europeans and the Americans were doing, but the testimony we got from the bar and from the importers was that it was just the opposite. You are saying that on this issue you side with the bar and with the importers.
Mr. Goodwin: Yes, that's right, Mr. Chairman.
The Chair: Have we come to any resolution of this issue? Have we arrived at any new understandings or are we still 180 degrees apart on this?
Ms Close: I think Mr. Jordan was saying that the Europeans overall are in accordance with the way we have been doing it in the past and propose to do it in the future by legislation, although there are some exceptions. The witness today has shown you some of those exceptions.
I think we have agreed that in the United States there have been three federal court cases in which the court has ruled against the customs administration, but nevertheless jurisprudence hasn't taken over from how it is in fact being administered on a day-to-day basis.
Seeing as Mr. Jordan was telling you there were some exceptions, maybe he could elaborate on the European examples in particular.
The Chair: I must confess to you that without a lot more work, I don't feel confident trying to understand this issue in the detail that I believe it deserves. If there is still disagreement, that means we will have to step in and make our own decision. I feel we should probably have time to study it in greater detail. You could save us this problem if we could get consent among you and the other witnesses, the way I understand you did so generously on another issue this morning.
Ms Close: We could certainly try, Mr. Chairman. We could talk to the various witnesses, the ones who are left anyway.
Another issue was raised about the international community and how they would feel about this change and whether we would be challenged. It's come to my attention that a copy of the customs guidelines was forwarded to the world's customs organizations several years ago. Copies were specifically provided to the U.S. and the European communities saying these are the guidelines, this is how customs works in Canada.
We've received no representations on this in the intervening time. The guidelines were to show how we operate, and we haven't gotten any representations from anybody.
The Chair: Okay.
Mr. Grubel: Mr. Chairman, I'm a total novice in this process. I personally feel it's a standoff. I hear what the government side says and I hear what the witnesses say. I know where self-interests lie, and they wouldn't take all the trouble of coming here unless it was becoming more expensive to them. As I said earlier, I'm also in favour of consumers, not just the importers but the people who ultimately will have to pay the bill for these kinds of things. Is there any way here in this government this issue can be taken for another opinion, or, in the end, some sort of arbitration on the issue? I personally feel I would be very uncomfortable supporting this legislation, in the light of what we have heard. On the other hand, I'm also very reluctant to say government shouldn't be doing it. Is there any method?
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Mr. Goodwin: I suggested to Dr. Close that there is a provision within the Department of Finance to refer these kinds of questions to the Canadian International Trade Tribunal. They have been in the past.
Mr. Grubel: But this is an internal matter.
Mr. Goodwin: Yes, but that's a Canadian International Trade Tribunal. It sits in judgment on cases of value for duty, such as the harbour sales case.
Ms Close: It's a little different. They give interpretations on value for duty. They are an appeal body. They work from Canadian legislation. I guess you could always figure out a way of sending a reference to the CITT, asking them their advice on what we should be doing.
But I think it's a matter of practice, what our other trading partners are doing. They have had our guidelines in front of them for years and they haven't reacted. All our trading partners are in the process of trying to clarify where they have problems with their legislation. The amendments in front of you are in fact just that: we're clarifying what's been administrative practice in Canada for ten years.
Mr. Goodwin: The CITT and its predecessor, the Tariff Board, in 1983 or 1984 was asked by the Department of Finance to review draft legislation that was brought before the House to change Canada's valuation law completely. There were extensive hearings on what that valuation change would do to imports in Canada and to consumers in Canada. That's the reference I'm suggesting. If you're looking for an independent body that has expertise, that's the body.
Mr. Grubel: Mr. Chairman, I wonder if it's in order that I move we have independent expert opinion of the sort that was suggested, in the national trade tribunal for Canada, to give us expert opinion on this before we reach a decision. This bill has been hanging around for a long time. A few more weeks' delay before it is enacted will not be a serious matter. To do injustice to the Canadian public and importers is simply too serious a matter to rush it through now on the basis of the information we have.
The Chair: Let's not make a motion on that, because I don't think we have a quorum at the table. But because of the doubt, I am inclined to defer consideration of this issue. We've certainly had three very strong witnesses before us today who have said they feel we're on the wrong track. I defer to the parliamentary secretary on this issue.
Mr. Grubel: What's the rush, David?
Mr. Walker (Winnipeg North Centre): If the committee's not satisfied with the explanations of the officials, Mr. Chairman, if you'll give me one minute to speak with the officials...if you don't mind. Give me one minute.
The Chair: I'm not saying we're not satisfied, Mr. Walker. I think none of us feel we are expert enough to make a judgment between two disparate views presented to us.
Mr. Fewchuk (Selkirk - Red River): Mr. Chairman, could I suggest that...Mr. Walker has asked for us to take a two-minute recess. Could we do that now so he could discuss it with the officials?
The Chair: That's a great idea. Take two.
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The Acting Chair (Mr. St. Denis): We'll call this meeting back to order.
Mr. Walker: Mr. Chairman, I'd like to thank the committee for the indulgence of the break and the chance to discuss this with officials. There are points in the development of a piece of legislation where there's a difference of opinion between the departmental witnesses. Sometimes people come in at great expense to themselves to discuss the direction we're going.
I've had a chance to discuss the differences with the officials and I think we should proceed. But before we proceed, I'd like the chance to have this discussed more fully for a few minutes. So through the leadership of Patricia Close we'll explain our position and invite the witness to say a few more words on it. Then I think we can proceed, if you don't mind.
The Acting Chair (Mr. St. Denis): Fair enough.
Ms Close: We'd like to bring up Stuart MacDonald, who's another expert within the department, to try to explain this one more time, as he explained it to us while we were sitting there. Just for one second we'd also like to address the issue of an independent arbitrator on this.
The real independent arbitrator is completely independent and is the valuation committee of the WTO. All legislation, once passed - not draft and bill - on customs valuation will be sent and is always sent to this committee. That will give us the truth on whether or not independent arbitration is consistent with the code. So before that, I think you will have very different opinions from different points of view.
Just let us try once more to explain where the difference of view may be coming from for the various witnesses in this room today.
Mr. Stuart MacDonald (Chief, Evaluation Division, Department of National Revenue): I am the delegate to the technical committee on customs valuation in Brussels of the World Customs Organization. Perhaps I can put this European Union issue into some kind of context.
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If you look at the valuation regulations the European Union has in place, on the surface it looks as if it will permit earlier sales and, in fact, the European Union recognizes the possibility of earlier sales.
Outside the valuation provisions, however, the European Union has regulations for who can be the importer of record. The importer of record must be a resident of the European Union, so where the European Union has put its residency requirements into its declarant regulations, we have no such regulation on who can be the declarant. Anybody can be the declarant; the vendor can be the declarant.
The result of this is that the European declarant, the valuation declarant, has to be the one who declares the value. If we think back to the maps that Mr. Wizlabicki showed this morning, it is highly unlikely that declarant in the EU will have the facts surrounding that earlier transaction, because the vendor to the person in the EU would be giving him his commercial data.
The guy who's selling me the goods would have to tell me what he paid for them. So in reality, they put it in a different place. We're putting our residency requirements in the valuation provisions because we don't have residency requirements, as the Europeans do, for who can be the importer of record. The end result, however, is largely the same when it comes to establishing value.
Does that help?
Mr. Goodwin: We're still at 180 degrees and I'm sure my colleagues from this morning will say the same thing. Granted the European community requires that an importer be a resident, but it does not require the price to that resident to be the value for duty. That's what we say Bill C-102, the valuation section, requires. We're still at 180 degrees.
Mr. Grubel: I think the discussion about what Europe is doing and whether or not it's consistent with certain codes will ultimately be settled the way Madam Close says. However, this uncertainty and opposing testimony is the kind of controversy that unfortunately regularly leads to court cases in our society.
People have disputes over facts and interpretation. That's why we go to some place to have judgments made on those kinds of issues. If there is an ambiguity, I would urge the Government of Canada - being in opposition as I am - that if there is an issue and it comes to whether or not something that needs to be straightened out or clarified raises the ire and fears of those affected and they will end up having to pay more, to lean over backward and go in the direction of bias in favour of the consumer.
I think the revenue for the elimination of the deficit that would be collected by this is trivial and meaningless; it's probably the deficit we would have in one minute in one year. That's very important. On the other hand, if we would lose competitiveness and impose an extra cost on consumers, I feel the bias should go against those kinds of actions and I would like to go on record as saying this.
If we can't have an objective information adjudication of the dispute before we vote for this bill, if this is being ruled out for whatever bureaucratic reason I don't understand, then I believe if there is a bias, I would urge the members of this committee and the government to say the bias should go in favour of the very badly already hurt consumer in Canada.
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Mr. Pillitteri (Niagara Falls): It seems to me that the remark made by Mr. Grubel is that we're not consumers. I'm a consumer, too. We're all consumers here, no matter which side of the House we're from.
There is of course his remark that globally it will go to a tribunal - that is the case. If the other ones do abide by it, and if there is anything that is not accepted, that would certainly be the next step. But I'm prepared, Mr. Chairman, to take that chance and to pass it now, today, and I know I'll be on the side of the consumers and the business people of Canada.
Mrs. Brushett (Cumberland - Colchester): Having come from the manufacturing sector, I would just like to add my voice. Something that this does protect is manufacturing jobs in Canada. If you are manufacturing, you are consumers as well and you are selling back here in Canada, but you pay the invoice price in importing. We've been importing for the last 25 years and the price we paid was that invoice price from the shipper from the foreign country, whether there were middlemen or not.
I agree with what we are saying. This is appropriate because in the end it protects those jobs here at home. We just can't come and go through all the countries of the world through fax machines. They're not paying for manufacturing, for overhead, for warehouse space, for heat and lights and all the other things that it takes to be a manufacturer in this country.
I say it is important that we recognize those manufacturing jobs, which we lose more of to this very kind of thing day after day. I support this legislation.
The Acting Chair (Mr. St. Denis): Colleagues, with your indulgence, we do have witnesses waiting. I believe they are going to be addressing the same subject. So for the moment, if we could excuse Mr. Goodwin, Ms Close, and the officials, I invite the Canadian Institute of Chartered Accountants to come forward and help shed some light on this ``King Solomonian'' subject.
Mr. Fewchuk: Are we going to vote on it?
The Acting Chair (Mr. St. Denis): We have one more witness, Mr. Fewchuk.
We'd like to welcome Catherine McCutcheon, chair of the commodity taxation committee, and Nancy Harley, a member of the same committee, who are here on behalf of the Canadian Institute of Chartered Accountants.
Whichever one of you is going to lead off can feel free to start.
Ms Catherine McCutcheon (Chair, Commodity Taxation Committee, Canadian Institute of Chartered Accountants): Thank you.
Good afternoon, Mr. Chairman, members of the committee. I am chair of the CICA commodity tax committee. With me is Nancy Harley, a member of our committee.
The CICA is pleased to have this opportunity to appear before the committee on Bill C-102. We are here specifically to comment on the ``purchaser in Canada'' proposal contained within the bill.
It is the position of the CICA that this proposal on ``purchaser in Canada'' should not be enacted. We are concerned that the reason for passing this proposal is not compelling. More importantly, to enact the proposal would put Canada, on the principle of evaluation, out of step with our major trading partner, the United States, and with the European Union.
In 1985 Canada adopted the GATT valuation code, which states that the price paid for goods when they are sold for export to Canada is the primary basis for valuing goods. In doing so, Canada brought itself into line with the U.S., the EU, and Japan, all of whom had adopted the GATT valuation code in 1980.
Revenue Canada, Customs and Excise issued memorandum D13-4-2, ``Sold for Export to Canada'', in 1989, after consultation with many stakeholders. The administrative position of Customs in the sale-for-export area is outlined in that memorandum.
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There have been differences of opinion on parts of that memorandum involving the determination of which sale would constitute the valid sale for export to Canada in situations in which there were multiple sales prior to importation. Presently, the Customs Act allows the value for duty to be determined by the selling price from a foreign manufacturer to a foreign middleman where this is the transaction by which the goods are sold for export to Canada. Officials with Customs have taken the position that it is the selling price from the foreign middleman to the Canadian purchaser that is the value by which the duty is to be determined.
In the recent Harbour Sales case, Customs contended Harbour Sales was required to pay duty on its selling price because it did not have sufficient Canadian presence to qualify as a purchaser in a sale for export to Canada. The Canadian International Trade Tribunal ruled the residency of Harbour Sales was not relevant since there is no residency requirement in the Customs Act. The Federal Court of Canada upheld the decision of the tribunal.
In response to this decision, Customs developed the proposed amendments to negate the findings of the tribunal and the federal court. The priority concern of Customs, according to its consultation package released on July 31, 1995, is its inability to audit records in support of declared value - such records not being in Canada - and therefore, ``the Department would be totally reliant on the goodwill and cooperation of non-resident purchasers.''
We find it difficult to understand Customs' concerns in this matter. Memorandum D13-4-2 recognizes situations in which non-residents are purchasers in sales for export to Canada. The onus is clearly on the importer to show the validity of the sale for export's transaction price as outlined in memorandum D1-4-1, ``Invoice Requirements of Canada Customs'', paragraph 6 of which reads as follows:
- Under the GATT valuation system, the value for duty of imported goods will normally be
determined from data submitted by the importer/owner and/or his agent who will be
responsible for its accuracy. However, it is the Department's responsibility to satisfy itself
regarding the accuracy of the data submitted
- There is therefore provision for them to obtain documentary evidence from exporters to
facilitate their verification activities.
Mr. Fewchuk: Excuse me.
Mr. Chair, could you have them stop chatting and get them to pay attention please. It is hard to hear.
The Acting Chair (Mr. St. Denis): Okay. Excuse me, Herb and Dianne. We don't mind your talking, it's just that....
I'm sorry. Go ahead, Catherine.
Ms McCutcheon: Fine, thanks.
At any rate, we quoted excerpts from D1-4-1 that we felt were evidence of existing precautions in place. Therefore, we find it difficult to understand how Customs could not verify the declared value in a sale for export where that is the price the importer is trying to present.
Consistency is our primary concern. We believe that Canada, as a trading nation, should have legislation and procedures as consistent as possible with those of our major trading partners. Our conclusion is that this proposal for ``purchaser in Canada'' goes against that concept. In our view, the proposal is tantamount to erecting a non-tariff trade barrier at a time when tariff rates are being reduced globally. In our view, the proposal will be particularly detrimental to small and medium-sized businesses and will result in higher prices to consumers.
We offer two examples of lack of consistency in our submission. We refer to the recent U.S. case decision of Nissho Iwai American Corp. v. United States, in which back-to-back sales were deemed acceptable as value for duty when it can be proven that the earlier sale was the sale for export to the U.S. You've probably heard reference to this case.
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As well, we rely heavily on the debate that occurred in recent times in the European Community. In June of this year, the European Commission released its final text of commentary on amendments to article 147 of the Customs Code implementing provisions. This article states that where the goods are subject to more than one sale prior to entry into EC customs territory, an earlier sale may be used as the basis for value for duty where it can be demonstrated that the earlier sale led to the export of the goods to the community.
According to the commentary, this may be demonstrated if the goods are manufactured according to EC specifications; if the goods in question were manufactured or produced specifically for a buyer in the EC; or if specific goods are ordered from an intermediary who sources the goods from a manufacturer and the goods are shipped directly to the EC from the manufacturer.
In those instances in which evidence required under sentence 3 of article 147 is not provided, the basis for value for duty is the last sale that led to the introduction of the goods into the customs territory of the community. Frankly, we think the EU position is a good position and it is something that Canada could look to for a solution to the debate going on.
In conclusion, it is the position of the CICA that there is not sound reason for the ``purchaser in Canada'' amendment. It is our understanding that Customs, as the act and regulations now stand, has the necessary powers and precautions in place that impose the onus on the purchaser to prove the validity of the sale for export transaction price. We believe it is important for Canada, as a major trading partner, to be in step with our major trading partners on valuation legislation and procedures.
Thank you.
The Acting Chair (Mr. St. Denis): Thank you, Ms McCutcheon. We'll turn to questions.
Herb, did you have any questions?
Mr. Grubel: I just wanted to say that I very much appreciate your testimony. I'm a quick reader, and I found that it is very much in overlap with the other one.
I apologize if I disrupted you. I'm sure the topic of conversation was very much in your interest.
Thank you.
The Acting Chair (Mr. St. Denis): Spoken like a true politician.
Some hon. members: Oh, oh.
The Acting Chair (Mr. St. Denis): We've actually had a fairly thorough briefing by a number of witnesses, including yourselves, on the ``purchaser in Canada'' issue. I feel like I should change my name to King Solomon in order to deal with this particular issue.
If I may say so on behalf of some of my colleagues, I guess it boils down to the fact that if there continues to be a concern - and there would appear to be - over the application of the ``purchaser in Canada'' provision, we either trust that the WTO panel will find any inconsistencies at the stage of reviewing the legislation, if it is passed, or we do not trust in that. If legislation is enacted, hopefully the timing will not be so long that any great damage would be caused.
So if there are no questions and you have nothing else to add, Ms McCutcheon, we'll excuse you.
Ms McCutcheon: I guess I would just say, Mr. Chairman, that rather than leave it to a review by the WTO after it has been passed by Canada, I would rather have it reconsidered at this level.
As you're probably aware from some of the commentary you heard when the EU was headed in this direction - and I believe it was France in particular that was concerned for the same reason, that of proof being required - there was a lot of controversy and concern at the enactment of something that would go as far as last sale. A more reasonable article - the amended article as it currently stands - was therefore brought in.
I don't think we're suggesting that Canada do anything more liberal than the EU, just that it should adopt something similar to what they have in place.
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The Acting Chair (Mr. St. Denis): We like things liberal.
Before I excuse you, I want you to know that the quality of your presentation was high and it's no reflection on you that we haven't spent as much time with you as with the others. It's just that the sequence of events is such that we've dealt with this quite a bit today.
I understand that we have a couple of representatives from the Canadian Chamber of Commerce, who want to take a couple of minutes to bring us up to date on something that came up this morning.
Colleagues, you'll recall that earlier today, some time for negotiation was provided for a different issue.
We don't have name cards in front of you, so maybe you could just give us your names for the record, and then review for us what has transpired.
Mr. Eric Miller (Canadian Chamber of Commerce): Mr. Chairman, my name is Eric Miller, and this is Larry James, who has worked very closely with us on this particular issue.
We've prepared a statement that's been agreed to by the customs officials and we'd just like to read it into the record.
Mr. Chairman and committee members, the Canadian Chamber of Commerce would like to express our thanks to this committee for its attention and goodwill on the matter we brought forth this morning. We would also like to thank the customs officials with whom we have been able to come to an agreement. A motion has been tabled that is agreeable to both parties. Also, both parties have indicated a willingness to work together on the drafting of regulations relating to the machinery program.
Thank you.
The Acting Chair (Mr. St. Denis): Good. We hope to please some of the witnesses some of the time, anyway. Thank you for that.
Don't go away. We're going to take a short break, so we'll be back in maybe 5 or 10 minutes.
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The Vice-Chair (Mr. Campbell): Before proceeding to clause by clause with respect to the bill before us, Bill C-102, we are welcoming back officials for a few moments. I also understand that there are some remarks on behalf of the government that Ms Whelan would like to read into the record.
Ms Whelan (Essex - Windsor): Thank you, Mr. Chairman.
Bill C-102 provides a number of important amendments to improve the competitiveness of our export sector and maximize the benefits Canada enjoys under our free trade agreement, including enhancements to Canada's duty deferral programs and tariff reductions on manufacturing inputs.
Travellers' exemptions are also increased in this bill. As well, the legislation contains changes to improve the operation of the customs tariff and the Customs Act, including changes to the valuation provisions of the Customs Act.
A number of witnesses have shared with the committee today their views on the valuation provisions of Bill C-102. They have expressed the view that these amendments are contrary to the thrust of the GATT and WTO valuation code, inconsistent with the valuation practices of our major trading partners, incompatible with the NAFTA, and generally inconsistent with the competitiveness and trade revitalization thrust of this tariff bill.
For these reasons, the witnesses have suggested that the valuation provisions should not be enacted.
We understand and appreciate these views. However, we view them differently.
We are convinced that the proposed amendment is completely consistent with the GATT and WTO valuation amendments. In our view, this is evidenced by the fact that many of our trading partners have likewise identified this problem area and they too have taken corrective measures.
We have compared our practices to those of our major trading partners, and while we have each addressed the problem in slightly different ways, using somewhat different words, the results have been surprisingly similar. We have also carefully reviewed the NAFTA, and we are confident that the proposed provisions are indeed consistent with it.
Furthermore, because the amendments proposed in Bill C-102 reflect the valuation policies and practices that have been in place in Canada since the GATT valuation code was introduced in 1985, they will not increase values, nor duties and taxes payable.
Finally, several technical amendments have been presented to rectify errors or redundancies in the bill and to allow rubber footwear in transit to Canada on June 13, 1995, the date on which the lower British preferential tariff was withdrawn, to benefit from the lower rate.
In summary, this legislation will promote the continued good health of Canada's large and vital export sector. It will help us maximize the benefits we enjoy under our free trade agreement, and the changes proposed in the legislation will be welcomed by the great majority of Canadians affected by them.
Thank you.
The Vice-Chair (Mr. Campbell): While the record will identify her as such, I should have introduced Ms Whelan as appearing on behalf of the Parliamentary Secretary to the Minister of Finance. Of course she herself is the Parliamentary Secretary to the Minister of National Revenue.
Thank you very much for those comments.
We will now proceed to clause-by-clause consideration of the bill. In the interest of expediency, I am proposing that we will proceed to approve clauses in blocks, if we can, and we will pause at each of the several clauses where amendments are proposed, to approve first the amendment, of course, and then the clause itself.
Again in the interest of time, you have each been provided with copies of the amendments, to which I would ask you to refer. If any member insists, then of course we could read the amendments into the record and we could perhaps be here for a very long time.
I'm informed by the Parliamentary Secretary to the Minister of National Revenue that there might indeed be one amendment that we should pause and read into the record, but for all the others it would suffice if you were to refer to the amendments before you.
I might just ask a question of the parliamentary secretary.
Is that because that one amendment is not in the package that is before them?
Ms Whelan: Actually, I believe now they would have it. There are three new amendments before them; they are changes to clauses 19, 45, and 46. I have a comment that I'll make when we get to clause 19. It might not be necessary to read them in.
The Vice-Chair (Mr. Campbell): If members are agreeable, then I would like to proceed in that way.
Shall clauses 1 through 6 inclusive carry?
Clauses 1 to 6 inclusive agreed to on division
.1640
On clause 7
The Vice-Chair (Mr. Campbell): An amendment, which you will have before you, is proposed to clause 7.
Shall the amendment carry?
I'm sorry. In each case, Mr. St. Denis, you will be proposing the amendments, so should I pause and...?
We will know, Mr. St. Denis, that in each case you are proposing the amendment.
Amendment agreed to [See Minutes of Proceedings]
Clause 7 as amended agreed to on division
Clauses 8 to 18 inclusive agreed to
On clause 19
The Vice-Chair (Mr. Campbell): An amendment to clause 19 has been proposed by Mr. St. Denis.
Shall the amendment carry?
Ms Whelan: At this point I would like to read into the record some notes for clauses 19, 45, and 46, if I may.
The Vice-Chair (Mr. Campbell): Thank you. Please proceed.
Ms Whelan: In accordance with the directions of the chairman, departments, and members of Canadian Chamber of Commerce on the issue raised by the members on October 26, 1995, a compromise was reached and three amendments are being proposed as a result.
Clauses 45 and 46 are amended to delete ``two years'' and replace it by ``four years''. Clause 19 is amended to provide the deputy minister the authority to reclassify goods under the machinery remission up to four years.
The Vice-Chair (Mr. Campbell): Thank you.
Amendment agreed to [See Minutes of Proceedings]
Clause 19 as amended agreed to on division
Clauses 20 to 28 inclusive agreed to on division
On clause 29
The Vice-Chair (Mr. Campbell): An amendment to clause 29 has been proposed by Mr. St. Denis.
Amendment agreed to [See Minutes of Proceedings]
Clause 29 as amended agreed to on division
On clause 30
The Vice-Chair (Mr. Campbell): Mr. St. Denis has proposed an amendment to clause 30.
Amendment agreed to [See Minutes of Proceedings]
Clause 30 as amended agreed to on division
Clauses 31 to 33 inclusive agreed to on division
On clause 34
The Vice-Chair (Mr. Campbell): There's an amendment moved to clause 34.
Amendment agreed to [See Minutes of Proceedings]
Clause 34 as amended agreed to on division
Clauses 35 to 44 inclusive agreed to on division
On clause 45
The Vice-Chair (Mr. Campbell): Mr. St. Denis has proposed an amendment to clause 45.
Amendment agreed to on division [See Minutes of Proceedings]
Clause 45 as amended agreed to on division
On clause 46
The Vice-Chair (Mr. Campbell): Mr. St. Denis has proposed an amendment to clause 46.
Amendment agreed to on division [See Minutes of Proceedings]
Clause 46 as amended agreed to on division
On clause 47
The Vice-Chair (Mr. Campbell): An amendment is proposed to clause 47.
Amendment agreed to [See Minutes of Proceedings]
Clause 47 as amended agreed to on division
Clauses 48 to 54 inclusive agreed to on division
On clause 55
The Vice-Chair (Mr. Campbell): An amendment is proposed by Mr. St. Denis to clause 55.
Amendment agreed to on division [See Minutes of Proceedings]
Clause 55 as amended agreed to on division
Clauses 56 to 59 inclusive agreed to on division
On clause 60
The Vice-Chair (Mr. Campbell): An amendment to clause 60 has been proposed.
Amendment agreed to [See Minutes of Proceedings]
Clause 60 as amended agreed to on division
On clause 61
The Vice-Chair (Mr. Campbell): An amendment to clause 61 has been proposed.
Amendment agreed to [See Minutes of Proceedings]
Clause 61 as amended agreed to on division
On clause 62
The Vice-Chair (Mr. Campbell): Mr. St. Denis has proposed an amendment to clause 62.
Amendment agreed to [See Minutes of Proceedings]
Clause 62 as amended agreed to on division
Clauses 63 to 65 inclusive agreed to on division
On clause 66
The Vice-Chair (Mr. Campbell): An amendment is proposed for clause 66.
Amendment agreed to [See Minutes of Proceedings]
Clause 66 as amended agreed to on division
Clause 67 agreed to on division
On clause 68
The Vice-Chair (Mr. Campbell): An amendment is proposed to clause 68.
Amendment agreed to on division [See Minutes of Proceedings]
Clause 68 as amended agreed to on division
Clauses 69 to 114 inclusive agreed to on division
On clause 115
The Vice-Chair (Mr. Campbell): An amendment is proposed to clause 115.
Amendment agreed to on division [See Minutes of Proceedings]
Clause 115 as amended agreed to on division
.1645
On schedule I
The Vice-Chair (Mr. Campbell): We're just locating to deal with the schedules if members will bear with us for one moment.
We need a clarification from the officials. We have a bit of a discrepancy between the two pieces of information we've been given. Are there three amendments to schedule I or two amendments to schedule I?
I understand that there are three amendments proposed to schedule I and that they are in the package before committee members. Is that correct?
The witnesses are signifying that's correct.
Shall the three amendments carry?
Amendments agreed to [See Minutes of Proceedings]
Schedule I as amended agreed to on division
On schedule II
The Vice-Chair (Mr. Campbell): There are two amendments proposed to schedule II.
Amendments agreed to [See Minutes of Proceedings]
Schedule II as amended agreed to on division
On schedule III
The Vice-Chair (Mr. Campbell): There is one amendment proposed to schedule III.
Mr. St. Denis, I understand you are proposing one amendment to schedule III.
Amendment agreed to [See Minutes of Proceedings]
Schedule III as amended agreed to
The Vice-Chair (Mr. Campbell): Shall the title carry?
Some hon. members: Agreed.
The Vice-Chair (Mr. Campbell): Shall the bill as amended carry, on division?
Some hon. members: Agreed.
The Vice-Chair (Mr. Campbell): Shall the committee order a reprint for use at report stage?
Some hon. members: Agreed.
The Vice-Chair (Mr. Campbell): Shall I report the bill to the House?
Some hon. members: Agreed.
The Vice-Chair (Mr. Campbell): Thank you, members, for your indulgence. That's a bit of a complicated series of things to approve.
We will now adjourn to the call of the chair. Thank you.