Policy & Positions Manual
National Issues - Finance
Canada Border Services Agency - Customs & Immigration Programs (2008)
As a result of the implementation of the Treasury Board External Charging Policy, the Canadian Border Services Agency (CBSA) was required to “freeze” border services at the level provided when the policy was introduced. Any requests subsequent to that policy were to be treated on a direct cost recovery basis, or not provided at all.
While these costs have been applied to all new facilities, such as the Port of Prince Rupert, these will also impact plans for expansion of existing facilities such as the Belleville Terminal. The Chamber believes that the most significant challenge of this policy is the impact on new, or expanded, air services across the country.
Smaller airports are being unfairly penalized by this policy since service levels are not adjusted to reflect current demand. Where airports are obliged to contract with CBSA for additional scheduled service, they either lose a large portion of the benefit from the new trans-border and international traffic, or must increase aeronautical fees to cover the cost. Carriers and passengers both suffer from this inequitable treatment as the costs are passed on to users and the ability to attract new service for the community suffers.
The economic benefits resulting from increased international air traffic can far outweigh the cost of providing Customs services. Direct tax benefits to the Federal Government alone should justify the additional cost. Where it can be demonstrated, through pre-determined criteria, that the benefits of this service extend beyond a single user or supplier, the system should adjust to accommodate the need without additional cost to the airport operator. Existing services should be reviewed and more appropriately allocated to meet demand.
As an example, Kamloops has an international service operated by Horizon Air to Seattle. This service is provided on a daily basis during the four-month winter ski season. Horizon Air uses a Q-400 (Dash 8-400) 70 seat aircraft for the service. A 70% average load factor for the flight translates to 49 inbound seats.
At a charge of $14 each, that comes to $686 for Customs Clearance as a direct charge to the air carrier. This goes directly to the carrier’s bottom line rather than as a surcharge for each passenger, and adds costs to the operation that are solely attributable to the Kamloops operation.
In Kelowna, customs clearance service is provided at no cost to Horizon Air. In order to offset the customs charge in Kamloops, Horizon Air needs to give away up to four seats per flight to compensate.
While Customs Clearance in Kamloops costs $686 in the example, the average daily spend of $225 totals $11, 025, times an average length of stay of four days comes to a directly local economic benefit of $44,100. That results in tax to the Federal Government of $2,206 (@ 5% GST).
THE CHAMBER RECOMMENDS
That the Federal Government move immediately to remove the inequitable cost recovery mechanism for new or expanded Customs and Immigration services where a legitimate business case exists and provide these services on the same basis as they are provided in other areas of the country and at the same cost to Canadians.
