PACC Committee Report
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May 2003The Government Response to the Seventh Report of the Standing Committee on Public Accounts ‑ Chapter 8 of the Auditor General’s December 2001 Report (Canada Customs and Revenue Agency: Managing the Risks of Non-compliance for Commercial Shipments Entering Canada).
This response pertains to the Seventh Report of the Standing Committee on Public Accounts, which recommends improvements to the way in which the Canada Customs and Revenue Agency (CCRA) manages the risk of non-compliance for commercial shipments entering Canada.
The Standing Committee has made recommendations pertaining to Chapter 8 of the December 2001 Report of the Auditor General of Canada (AG), entitled Managing the Risks of Non-Compliance for Commercial Shipments Entering Canada. Recommendations also stem from the May 2, 2002, meeting of the Public Accounts Committee, in which senior officials at the CCRA and the AG discussed the AG report with the Committee.
The Standing Committee’s recommendations have encouraged the CCRA to identify the best possible improvement strategies, many of which have already been undertaken. The CCRA is thankful to the Committee for its continued interest in improving the management of a program that affects all Canadians.
RECOMMENDATION ONE
Observation: Further to the Committee’s request at the May 2002 meeting, the CCRA submitted an executive summary of an action plan to the Standing Committee in October 2002. While the Committee welcomed the development of the plan, it noted that the document lacked specific timelines for the actions it proposed.
That the Canada Customs and Revenue Agency strengthen its action plan by specifying implementation and completion dates for each action and submit the revised plan to the Standing Committee on Public Accounts no later than 28 February 2003.
RESPONSE
The Government agrees with this recommendation.
As per the Committee’s request, a revised action plan, responding to the individual recommendations of the AG and including completion dates, critical milestones and target dates, was sent to the Committee.
RECOMMENDATION TWO
Observation: The Committee believed that Parliament must be informed of progress being made in making the plan operational as well as the outcomes achieved by corrective actions.
That the Canada Customs and Revenue Agency include a discussion of progress achieved and the results obtained as a result of its efforts to improve its management of the risks
surrounding non-compliance of commercial shipments entering Canada in its Performance Report for the period ending 31 March 2003.
RESPONSE
The Government agrees with this recommendation.
The CCRA has worked hard to improve its enforcement activities for commercial shipments. The past few years have seen the CCRA enhancing its current systems, forging links between its commercial and targeting systems, examining various sources of information, different technologies and interfaces, as well as potential mechanisms that will allow better communication with Customs Inspectors and targeters.
In addition to analyzing the results of examination activities, the CCRA continues to capture and track the results of post-release verification activities to determine if importers are complying with trade legislation and regulations administered by the CCRA, to ensure that our efforts are effective in improving and sustaining compliance. We have also had many accomplishments on the compliance verification training front, particularly, the development of a framework for a long-term learning strategy and plan for compliance verification officers. As part of the long-term strategy, the CCRA has finalized a core curriculum of training for compliance verification officers in a
nine-module course entitled Introduction to Trade Services which has been delivered in the regions over the past year, has trained in the new methodologies and has finalized a beginner-level accounting course.
A discussion of the progress achieved with respect to these efforts will be included in the Performance Report for the period ending 31 March 2003, to be released in the fall of 2003.
RECOMMENDATION THREE
Observation: The Committee noted that the CCRA has adopted a risk-management approach to its enforcement and compliance work and that this approach is highly reliant on the quality and availability of relevant information. The Committee noted that the CCRA’s systems for storing and retrieving information, and the kind of information it gathers, are not entirely suitable for the kinds of demands that must be satisfied.
That the Canada Customs and Revenue Agency conduct a thorough assessment of its data and information systems requirements related to all phases of its management of commercial shipments entering Canada and include its planned response to this review in its Report on Plans and Priorities for 2004.
RESPONSE
The Government agrees with this recommendation.
The CCRA is reviewing and improving all of its existing systems but does not have a mature, post-release verification system that would allow it to collect and analyze verification results, and, ultimately to identify and correct non-compliance trends.
To address the lack of a system, the CCRA has developed an interim solution to capture and analyze the results of post-release verifications undertaken as part of its Post Release Verification Plan, through the use of an Excel spreadsheet. A business case has been developed to move to a long-term solution: a fully automated, nationally accessible computer system.
The CCRA is considering technology being employed in the development of other Customs initiatives and is improving the accessibility of its targeting information and processes by enhancing its computer systems. An example would be the interface created in December 2001 between the Accelerated Commercial Release Operation Support System (a system that allows importers to transmit customs release and invoice information to any customs automated office) and its Commercial Driver Registration Program (a program for drivers who have demonstrated a high level of compliance with the laws administered by the CCRA). This interface provides information on drivers at the same time that a customs inspector is looking at information on the shipment, giving the CCRA the ability to target drivers and goods that are deemed high-risk.
RECOMMENDATIONS FOUR AND FIVE
Observations: The Committee noted that the new approach to compliance verification will require customs officers to acquire skills in such fields as auditing and accounting. The Committee pointed to the AG audit report, which listed numerous instances in which customs officers had indicated that their training and guidance were inadequate. The Committee noted that appropriate training is indispensable to effective compliance verification, especially as Customs Self Assessment (CSA) is implemented.
The Committee also took note of, and shared, the AG’s concern that the CCRA is going ahead with CSA before its compliance verification regime is solidly established.
That the Canada Customs and Revenue Agency complete and begin implementation of its core curriculum and long-term learning strategy for compliance verification officers prior to the implementation of Customs Self Assessment and include a discussion of the progress made and results obtained in its performance report for the period in question.
That the Canada Customs and Revenue Agency complete testing and implementation of its new approach to post-release compliance verification prior to establishing Customs Self Assessment.
RESPONSE
Acting on these recommendations is not possible given that CSA was implemented in December 2001, on the same day as the release of the AG report.
The CCRA believes that its new approach to verifying importer compliance will be successful. It is implementing CSA in a gradual, responsible, measured way: many goods will not initially be eligible for the CSA clearance process, e.g. goods that are regulated or controlled, or that are subject to other government departments’ intervention at the first point of arrival. Importers and carriers must have appropriate business processes and audit trails, a history of compliance, and undergo a three-part application and approval process; and, they are still subject to examinations and verification activities. The information on business processes that it obtains through the CSA approval process will help make verification activities more effective and efficient.
The CCRA has already strengthened its compliance verification regime through improved training, systems enhancements and better analysis of the results of verification activities. It continues to monitor participants’ compliance with CSA program requirements on an ongoing basis. The information on business processes that it obtains through the CSA approval process will help make verification activities more effective and efficient.
Indeed, as the AG stated in its December 2001 report, the modified approach to post-release compliance verification that the CCRA piloted in 2000 has had encouraging results and many of the key features of the CSA initiative have also been tested.
Furthermore, the CSA model of post-release verification has become a key element of modern border management by allowing border inspection agencies to rationalize resources by focusing on border security. In fact, CSA provided the basis for one of the
key achievements of the Smart Border process when the U.S. government agreed to a binational program on the CSA model. The resulting program, called Free and Secure
Trade (FAST), allows both governments to identify and facilitate low-risk truck traffic, allowing greater resources to be devoted to the scrutiny of higher-risk traffic as well as to the facilitation of bilateral trade.
monitoring and follow-up, an evaluation framework and public communications products.)
The new Administrative Monetary Penalty System (AMPS), implemented in 2002 as the CCRA’s main strategy to improve compliance, imposes monetary penalties on contraveners of Customs trade laws and regulations and is seen as an incentive to comply for all importers, including CSA clients.
The CCRA has always considered training to be the key to success in the implementation and maintenance of any program. It is well on its way towards implementing a long-term learning plan for compliance verification officers. A draft strategy, which incorporates training for both beginner and seasoned verification officers, was presented to senior managers in the fall of 2002 and approved in concept. Over the next few months, the CCRA will be detailing this learning framework and determining course content. In the meantime, the CCRA has already finalized a core curriculum of training for compliance verification officers in a nine-module course entitled Introduction to Trade Services. To have an effective and timely means of delivering the training, the CCRA conducted ‘train-the-trainers’ sessions, which equipped regional facilitators with the skills necessary to deliver the course. The course has been delivered on numerous occasions in the regions and at CCRA headquarters.
The CCRA has developed and finalized a basic accounting principles course suited to the needs of customs and is working on a practical course on the reading of financial statements. It continues to expand its curriculum of such courses by exploring a variety of other accounting and auditing courses to determine the best suited for compliance verification officers.
RECOMMENDATION SIX
Observation: The Committee expressed concern about a situation described by the Auditor General at the Ambassador Bridge in Windsor. The AG found that unless customs officers escort a truck from the bridge to the facility, which rarely happens, the Agency cannot ensure that the truck goes directly to the facility or that no one tampers with the shipment. The Committee noted that the CCRA sent a directive to all officers regarding the escorting of high-risk shipments and that while this was an appropriate short-term solution, more needed to be done to address the situation at Ambassador Bridge.
That the Canada Customs and Revenue Agency conduct an immediate assessment of the Windsor examination facility in order to identify permanent solutions to security concerns raised by the Auditor General of Canada. Relocation of the facility to a location closer to the Ambassador Bridge should be among the solutions considered. A report containing options considered, the solutions identified, and an action plan must be tabled in the House of Commons no later than 31 March 2003.
RESPONSE
The Government agrees with this recommendation, however, the CCRA, as only one of several government and departments and agencies involved, feels it is not prudent to issue a report on permanent solutions until all parties involved agree on an action plan. The Agency is working with its international, intergovernmental, and private sector partners on a possible permanent solution that would ultimately enhance the Windsor Gateway. The scope of this undertaking calls for ongoing discussions and consultations on recommendations made by a joint federal-provincial committee in the fall of 2002.
To immediately address security concerns at Windsor, the CCRA took steps to develop policies and procedures on the escorting of high-risk shipments at the Ambassador Bridge, and is currently updating and developing Customs Intelligence Profiles, which are designed to assist officers in identifying high-risk shipments and practices to smuggle inadmissible goods.
The CCRA’s vision for a permanent solution lies in the Windsor Gateway. On September 25th, 2002, the Governments of Canada and Ontario announced a Memorandum of Understanding to provide $300 million towards upgrading existing infrastructure on the Ontario approaches to the Windsor-Detroit border crossings. On December 20th, 2002, the Government of Canada and the Government of Ontario released the Windsor Gateway Action Plan, which makes specific recommendations for how this objective could be achieved within the context of the available funding. To date, neither government has officially endorsed the Action plan, but both are examining its recommendations. The vision of the Action Plan is such that the $300 million public sector investment could influence further private sector investment in new or improved approach plazas to current or future crossings. The Action Plan could then help CCRA to expedite the processing of traffic away from the Ambassador Bridge through the use of a secure controlled access road from the new approach to the bridge.