June 18, 1926

AGRICULTURE AND COLONIZATION COMMITTEE

CATTLE INDUSTRY


Mr. W. F. KAY (Brome-Missisquoi) presented the fourth report of the select standing committee on Agriculture and Colonization as follows: Your committee has had under consideration the order of reference respecting the- cattle industry, with power to examine into the whole situation, and to recommend such measures as would, in the opinion of this committee, be beneficial to the further development of that industry, and after consideration of this matter, recommend to the House the following resolutions as passed separately by this committee at a meeting held this day, namely: (1) That this committee recommend that a Canadian representative at Washington should be appointed at once. (2) That this committee recommend that the government enter into negotiations with the United States looking toward the entry of Canadian cattle into the United States market on more favourable terms than at present. (3) That this committee recommend that the Canadian customs tariff against the United States cattle should be placed on the same rate and same specific basis as the United States tariff against Canadian cattle, with a provision that if the United States tariff duties be removed ot reduced, the Canadian duties would thereupon be removed or reduced to the same extent.


CUSTOMS INQUIRY

REPORT OF SPECIAL COMMITTEE-FINDINGS AND RECOMMENDATIONS


Mr. PAUL MERCIER (St. Henri) presented the third and final report of the special committee appointed to investigate the administration of the Department of Customs and Excise as follows: The Special Committee appointed to investigate the administration of the Department of Customs and Excise, beg leave to present the following as their Third and Final Report: 1. On the 5th February 1926 the House of Commons adopted the following resolution: That a Special Committee of this House, consisting of nine members, be appointed forthwith to Customs Inquiry-Report investigate the administration of the Department of Customs and Excise and alleged serious losses to the public treasury because of inefficiency or corruption on the part of officers of the Department and others, and that such investigation extend back over such period of time as the Committee may decide and have regard to all matters affecting the prevention of smuggling, the prosecution of offenders, the seizure, storage and disposal of smuggled goods, or goods seized for purposes of excise or other taxes, the appraisal of goods for revenue purposes, the collection of customs and excise duties, the knowledge of ministers or officials of offences or irregularities affecting the public service in said department, the efficiency of the administration thereof, and the necessity of safeguarding the public revenue and the public treasury, and that such Committee have power to send for persons, papers and records, to adjourn from place to place, to print the evidence taken before the Committee, and to report from time to time. 2. By a subsequent resolution the Committee was constituted as follows: Messrs. C. W. Bell, K.C. (Hamilton West), Hon. R. B. Bennett, K.C., D. Donaghy, K.C., A. J. Doucet, J. C. Elliott, K.C., D. M. Kennedy, P. Mercier, K.C. (St. Henri), E. C. St. Pere, Hon. H. H. Stevens. Mr. Paul Mercier, K.C. was elected Chairman. Mr. Elliott having been appointed a Minister of the Crown and by resolution of the House of Commons Mr. William T. Goodison was appointed to the vacancy so created, on March 15th 1926.' 3. Your Committee sat from 9th February to 11th June, held 115 sittings, and heard 224 witnesses. Mr. R. L. Calder, K.C. was appointed Counsel to the Committee and Mr. R. D. Tighe, Assistant Counsel, both appointments being ratified by the House. Certain interested parties were represented by Counsel on a number of the hearings, by leave of the Committee. 4. Notwithstanding the time devoted by the Committee to the taking of evidence the matters referred to it by the order of reference could not be completely reviewed. Much evidence was taken in connection with the Port of Montreal: the situation at Beebe and Rock Island, Quebec: and the operation of distilleries. The commiittee have also with some detail examined into iliquor smuggling in the Maritime Provinces. The committee have examined in a general way the conduct of business at certain customs ports of Ontario. The committee have not dealt, except incidentialiy, with the Middle West and the Pacific Coast. To a degree, therefore, this report is incomplete and suggestive rather than final. Full audit and extradepartmental investigation would be profitable in improving the service and recovering a large amount of revenue. 5. Since 1897 the Customs Department has been under the control of s responsible Minister. In 1918 the Department of Excise, which had been a separate department of the Public Service since the year 1868 was amalgamated with the Customs Department and in 1920 and 1924 respectively the amalgamated departments were charged with the collection of sales and Income Taxes. The administration of these amalgamated departments is a serious task. The Customs frontier between the United States and Canada is a very long one and the position and number of bridges and highways crossing the boundary together with the extended line of sea coast rendered the suppression of smuggling difficult. The adoption by the United States of the Eighteenth Amendment has increased the difficulty, because it has made the incentive to illegally convey intoxicating liquor to the United States very great, and with the mass production of many products in that country there is a correspondingly great incentive to illegally import such products into Canada. In the year 1925 smuggling assumed such large proportions that a number of business men made representations .to the Government, in consequence of which an Act, Chapter 39 of the Statutes of 1925, was passed making smuggling an indictable offence, where the goods were of the value of more than $200 and the penalties incurred by such smuggling increased. 6. The evidence submitted to the Committee leads to the general conclusion that for a long time the Department of Customs and Excise had been slowly degenerating in efficiency and that the process was greatly accelerated in the last few years. Apparently the Hon. Jacques Bureau, then Minister of Customs, failed to appreciate and properly discharge the responsibilities of his office and as a result there was a lack of efficient, continuous and vigorous control of subordinates by the Headquarters Staff at Ottawa. 7. The procedure provided by the Customs Act in the matter of Customs seizures is as follows: Upon making a seizure the Collector or Seizing Officer forthwith reports the circumstances of the case to the Commissioner of Customs (Section 174). Thereupon the Commissioner notifies the owner or claimant of the thing seized, stating the reasons for the seizure, and calls upon such owner or claimant to furnish within thirty days any evidence he may desire to submit. (Section 175). After the expiration of thirty days or sooner, if evidence is forthcoming on the part of the owner or claimant, "the Commissioner may consider and weigh the circumstances of the case and report his opinion and recommendation thereon to the Minister." (Section 176). The Minister thereupon either gives his decision and states the terms upon which the thing seized or detained may be released or the penalty or forfeiture remitted or refers the decision to the Court (Section 177). The Committee finds that this procedure was not followed. Although, as a rule, the facts are correctly recited in the summary submitted to the Minister, the opinion is not infrequently at variance with such facts, and the recommendation is so drawn as to elicit a decision to which such facts are repugnant. This discrepancy is accounted for by the fact that the report upon the evidence was in many instances preceded by a conference, and the recommendation was dictated by an intelligent anticipation of the Minister's wishes in the premises. 8. The Committee is of opinion that the administrative duties of the Department of Customs and Excise should be left to the Executive Officers of the Department. Where the value of the goods or the amount in question is $200 or more the procedure should be automatic and not subject to Ministerial interference or control. Where the goods in question are under $200 the case would fall under the heading of "Petty Offences" and the Minister's discretion might there find a proper field for its exercise. 9. The Committee finds that theft of motor vehicles has frequently been associated with smuggling on the Quebec Customs frontier. The procedure followed by the Department in dealing with cars stolen and smuggled has resulted in an advantage to the thief and receiver as against the owner of the car. In the opinion of the Committee the procedure might be modified so as to provide that when the owner has established his title to the satisfaction of the department the car should be forthwith released to him,under bonds to re-export it, and upon payment of charges for storage, etc., such release to be made at a time and place of which notice should be given to the person in whose possession it was at time of seizure in order that he may take such legal proceedings as are competent to him to assert any claim thereto or lien thereupon. 10. The Committee find that it is the common practice of the Department to grant clearances to vessels



Customs Inquiry-Report



wholly or partly laden with liquor for the United States, or allegedly bound for a foreign port, but admittedly sailing to "rum rows," and that false landing certificates have been produced to obtain cancellation of bonds given for foreign export of cargoes so cleared. The Committee further finds that a strong presumption is raised that some proportion of the liquor so shipped and cleared finds its way back into Canada for consumption. The Committee, therefore, recommend that excise and sales tax be levied on all Canadian made intoxicating liquors released from bond, no matter where they are carried and consumed, and that duty and sales tax be levied on all alcoholic liquors entering Canada, whether in bond or otherwise, irrespective of their ultimate destination. Doubts have been cast upon the sufficiency of existing legislation to prohibit or authorize regulations prohibiting the illegal export of intoxicating liquors to the United States. To the extent to which such legislation may be insufficient the Committee recommends that it be amended. The Committee further recommends that, as soon as possible, regulations be made to prohibit clearances being granted to vessels carrying liquor as cargo, sailing from a Canadian Port to a United States Port, such regulations to make an exception in favour of liquor being imported into the United States in accordance with the laws of that Country. 11. Subsection 4 of Section 171 of the "Excise Act" provides that "no spirits subject to excise which have not been warehoused for at least two years shall be entered for consumption". By reason of special circumstances arising out of the War, Parliament on the 1st day of July, 1920, Chapter 52, 10-11 George Fifth, Section 4, amended the section by adding thereto a . proviso empowering the Governor General to suspend the operations of the said subsection during such period or periods as he may deem necessary. From sessional paper No. 84, 1926, it appears that by Order in Council the following distilleries have been permitted to enter for consumption the spirits manufactured during the period of nine months or less from the date of distillation: Gooderham & Worts, P.C. 641, April 17t.h, 1924. Distillery Corporation Limited, P.C. 1646, September 14th, 1925. Manitoba Refinery Company (Ltd), P.C. 1903, October 20th, 1925. Consolidated Distilleries of Manitoba, P.C. 29, January 7th, 1926. In the oipinion of the committee such unmatured spirits are unfit for human consumption and their release is injurious to the public health. The committee therefore recommends that Section 4 of Chapter 52, 10-11 George Fifth, be repealed at the present session of parliament and that the orders in council issued thereunder be, thereupon forthwith, cancelled. The committee further recommends that the technical regulations now governing the denaturing of alcohol be revised by competent experts so as to render all classes of denatured alcohol non-potable, and that where the Regulations under Section 171 of the Excise Act provide for the warehousing of potable liquors they shall provide for the maturing of such liquor in wood for a period of at least two years. ' 12.* The committee recommends that the following firms and companies should be proceeded against in the proper forum to recover the sums, if any, now owing by them to the Crown: John Gaunt Company. Dominion Distillery Products and Associated enterprises. B. B. Glove Co. Jas. A. Gilmore Co. Globe Suspender Co. Perfecto Garment Co. Peerless Overall Co. R. & G. Manufacturing Co. Reliable Garment Co. Stanstead Manufacturing Co. W. M. Pike & Sons. Standard Manufacturing Co. Telford Bros. Garment Co. Telford & Chapman. Jenkins Overall Co. Ltd. Snag Proof Limited. Rock Island Overall Co. Alco Dress Co. , O. B. Earle Co. Royal Cloak Co. Miracle Dress Co. Hollinger & Packer. Klover Dress Co. Poyaner Group of Companies. Woodlens Limited. With reference to the distilleries, the committee has not had time to investigate them all. The committee recommends that a thorough audit and examination be made of the records and accounts of all the distilleries in respect of all matters relating to a loss of customs, excise and sales tax revenue. 13. The committee finds that the following officers have been delinquent in their duties and recommends that their sendees be dispensed with: 1. R. P. Clerk, Inspector of the port of Montreal. 2. A. E. Giroux, Superintendent of Customs and Excise, Montreal. 3. W Duval, Preventive Officer at Montreal. 4. John Landv, Customs Officer, Montreal. 5. Collector E. Brownlee, of Beebe, Quebec. 6. Marvin A. Sawyer, Customs Officer at Rock Island, and that in the interest of the public service arrangements should be made for the retirement of the following persons: 1. R. R. Farrow, Deputy Minister. 2. W. S. Weldon, Collector of Customs at Montreal. 3. Henry McLaughlin, Surveyor of Customs at the port of Montreal. 14. The committee recommends that the conduct of the officers at the port of Windsor, Ontario, and other important ports, should be further investigated and that the services of such of them as are found guilty of evasion of duty should be dispensed with. 15. The committee recommends that the evidence of J. A. E. Bisaillon given before this committee with reference to his bank account for the amount of S69.000 be transmitted to the Attorney-General for Quebec, for the purpose of comparison with the evidence given by him on the same point at preliminary inquiry at Quebec, P.Q., in the case of Rex vs Symons et al, and for such action by the said Attorney-General as the evidence may warrant; and further that the evidence in connection with the Morris Delage Motor Car case be transmitted to the said Attorney-General for such further action as the said evidence may warrant. 16. The committee recommends that for reasons of sound economy and increased efficiency there should be a reduction made in the number of ports of entry into Canada. In support of this recommendation the committee would call attention to the following facts: The United States has 270 customs ports of entry. The United Kingdom of Great Britain and Ireland has 80 ports of entry. On the other hand, Canada has a total of 681 places at which customs revenue is collected. Customs Inquiry-Report 17. For the prevention of smuggling and of other frauds a strong preventive force under a capable administrator is necessary, and the committee, therefore, recommends: 1. That the Preventive Service be re-organized under a Chief, possessed with the highest qualifications for such office, clothed with wide powers of initiative, direction and control. 2. That such Chief Preventive Officer be authorized to select his staff in consultation with the Civil Service Commission. 3. That the Chief Preventive Officer be authorized to organize within the Preventive Service a secret service force, with special training in criminal investigation work, which force shall be under the general executive direction of the Chief of the Preventive Service. 4. That Preventive Officers and persons authorized to act as Customs and Excise Officers be given power to arrest without a warrant persons found committing any act declared by the Customs and Excise Acts to be an indictable offence. 5. That in connection with Preventive Service work the R.C.M.P. services be used for Patrol Work on the border, and while so engaged they be given full powers as Customs Officers. Pending the reorganization of the Preventive Service the R.C.M.P. should be immediately detailed for Patrol Service on all important points on the Border. 18. The evidence adduced before the Committee disclosed two outstanding facts, namely- First, the methods of appraisal are exceedingly careless and fail to safeguard the interests of the importer or the revenues of the Country from being defrauded by undervaluation, and Secondly, persons appointed as appraisers are in many instances untrained in the branch to which they are appointed. The Committee recommend that the appraisal branch be re-organized and that all appraisers be chosen because of their competency to estimate the values of the class of goods they are appointed to appraise. 19. The Committee recommends that in future 'the provisions of Sections 213 and 213a of the Customs Act, which provide for the removal of buildings within a hundred yards of the boundary which are made use of in smuggling operations, be strictly enforced. The situation created by the location of Derby Line, Vermont, and Rock Island, Quebec, as brought to the attention of the Committee is of a grave nature, and they recommend that a bond be established in each factory in which bond goods imported from the United States shall be placed until released for manufacturing purposes, and that an officer be appointed to look after such bond at the owner's expense. 20. The Committee recommends that Schedule "C" Prohibited Goods, of the Customs Act, be amended to include merchandise which is marked in contravention of the Gold and Silver Marking Act. That Act provides for prohibition of the importation of articles improperly marked, but Customs Officers ordinarily are not acquainted with the provisions of the Act, and for this reason the Committee recommends the inclusion of the prohibition in schedule "C" of the Customs Act. 21. Where articles containing precious metals are seized and forfeited the Committee recommends that they be not sold in the open market, as at present, but should be melted down and disposed of as bullion. 22. The Committee recommends that the regulations governing the distribution of the proceeds of fines and forfeitures be revised and that more liberal treatment be accorded informers and seizing officers. The moieties granted seizing officers in respect of seizures made 14011-298* by them should not however, be distributed to such officers as each seizure is made. Such moieties should be paid into a special fund and periodically distributed to all the members of the Customs and Preventive Services. 23. The Committee recommends that in cases of commercial smuggling or under-valuation, where the offenders are known, they should at once be arrested and brought to trial with the utmost promptness. The Committee further recommends that the Department of Justice be requested to select at once capable and experienced Counsel in important centres, and retain them to act for the Department of Customs and Excise in all future cases. 24. The real solution of the difficulties at such points as Windsor, Niagara Falls, where traffic is heavy, and where a thorough examination of vessels and vehicles cannot be carried out, will be found in the discovery in advance by investigators of the secret sendee of the persons who make a practice of smuggling at these points, and their arrest when passing the Customs barrier. The Committee recommends that at bridges, ferries and main highways, where traffic enters Canada, in addition to the regular Customs supervision, vessels and vehicles should 'be searched at frequent, irregular and uncertain times. The uncertainty as to what vehicles will be examined, and as to when such examinations will be made, should operate as a strong deterrent of smuggling. Your Committee recommend that such of the account books and other books and papers belonging to the firms mentioned in Clause Twelve of this Report, as may be necessary for use in any action that may be taken against the said firms, be retained by the House in order that they may be available if required. Your Committee submit herewith for the information of the House, their Minutes of Proceedings and the Evidence taken by them.


CON

Arthur Meighen (Leader of the Official Opposition)

Conservative (1867-1942)

Right Hon. ARTHUR MEIGHEN (Leader of the Opposition):

May I ask if we can

depend upon action being taken on Monday with respect to this report, by way of motion to adopt or otherwise? So far as we are concerned we are prepared to go on to-day, but I recognize that we have not the right under the rules.

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LIB

Paul Mercier

Liberal

Mr. MERCIER (St. Henri):

Monday or Tuesday.

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Subtopic:   REPORT OF SPECIAL COMMITTEE-FINDINGS AND RECOMMENDATIONS
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CON

Arthur Meighen (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MEIGHEN:

It is only right, in connection with a matter of such importance, that we should know.

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LIB

William Lyon Mackenzie King (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Liberal

Right Hon. W. L. MACKENZIE KING (Prime Minister):

The reply first made by the chairman of the committee presents the position of the government at the moment. We are prepared to proceed on Monday if possible, but otherwise definitely on Tuesday. I have on the order paper a resolution with respect to external affairs which I have assured different members of the House would be taken up first thing on Monday. When that matter is concluded we are prepared to go on with this report. Before I knew when this report would be presented, I gave the assur-

469S

Peace River Election

ance that this resolution would be the first order of business on Monday, but I can assure my right hon. friend definitely that we will at the latest go on with the report on Tuesday.

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CON

Arthur Meighen (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MEIGHEN:

Why not go on with the resolution this afternoon?

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LIB

William Lyon Mackenzie King (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Liberal

Mr. MACKENZIE KING:

This afternoon will be taken up by supply. I might say to my right hon. friend that I think hon. members of this House will wish to read the report before beginning to debate it.

Topic:   CUSTOMS INQUIRY
Subtopic:   REPORT OF SPECIAL COMMITTEE-FINDINGS AND RECOMMENDATIONS
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?

Some hon. MEMBERS:

Hear, hear.

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LIB

William Lyon Mackenzie King (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Liberal

Mr. MACKENZIE KING:

I for one wish to consider it carefully, and I believe the House will be in a better position to debate it after having had ample opportunity of considering it.

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CON

Arthur Meighen (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MEIGHEN:

I have not even commenced to insist that we go on with the motion this afternoon, but this is a matter in which this side of the House is just as much interested as are hon. members opposite, and which indeed is as much under the control of this side of the House as it is under the control of my hon. friends opposite. The report itself is not, a government presentation, and consequently we are entitled to know when it will come up.

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LIB

William Lyon Mackenzie King (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Liberal

Mr. MACKENZIE KING:

If my right hon. friend wants a definite time fixed without possibility of change I will say Tuesday, but if it will help to accommodate him to have the debate Monday evening, provided we finish this resolution, I am prepared to say we will be prepared to go on then.

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CON

Arthur Meighen (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MEIGHEN:

That is, we may go on Monday after the resolution is debated.

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Subtopic:   REPORT OF SPECIAL COMMITTEE-FINDINGS AND RECOMMENDATIONS
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LIB

William Lyon Mackenzie King (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Liberal

Mr. MACKENZIE KING:

Yes.

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Subtopic:   REPORT OF SPECIAL COMMITTEE-FINDINGS AND RECOMMENDATIONS
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June 18, 1926