Archived - Audit of Commercial Rail

December 2015

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1.0 Introduction

1. The Canada Border Services Agency (CBSA or the Agency) is mandated to balance national security and public safety with the facilitation of legitimate cross-border trade and travel. The Agency has been invested with the legislative and regulatory authority to control the flow of people and goods by the Government of Canada. Program specific policies, procedures and partnerships prescribe how each program will be delivered and implemented thus enabling border service officers (BSOs) to:

  • intercept people and goods that are inadmissible to Canada; and
  • process legitimate travel and trade seeking entry into Canada within established service standards.

2. The oversight of all cross-border commercial stream and traveler stream activity falls under the Admissibility Determination Program (ADP) activity of the Agency’s Program Alignment Architecture. The Agency’s organizational structure reflects the segregation of border entry activities into commercial and traveller streams with the establishment of a Commercial Programs Directorate (CPD) and a Traveller Programs Directorate (TPD) at Headquarters.

3. People and goods enter Canada by four modes, namely, air, highway, marine or rail. When crossing the border in one of these modes, that entry will occur in either the traveller or commercial stream. The segregation into streams enables the Agency to develop policies, procedures, operational skill sets and infrastructure needed to fulfill the legislative and regulatory requirements unique to each stream and to meet its mandate.

4. The rail commercial stream represents diverse [*] origins for commercial imports. The 2013–2015 National Border Risk Assessment (NBRA) identified a number of risks in the rail commercial stream. Further, this mode of cross-border travel and commerce has not been the subject of an audit in recent years.

5. The 2014–2015 Report on Plans and Priorities budgetary allocation for rail in fiscal years 2015–2017 was $18,860,420 and $18,860,129, respectively, and human resourcing for both fiscal years was [*] full-time equivalents.

Rail Commercial Processing

6. The Agency provides commercial and traveller services at 27 designated rail ports of entry (POEs) across Canada, all of which are entry points for the importation of commercial goods into Canada. The origin and disposition of these goods can be summarized as follows:

  • Goods arriving from the United States (U.S.) with a final destination in Canada or transiting through Canada for export.
  • Goods arriving at a Canadian port of entry (POE) from a foreign country other than the U.S. and transported by rail to their final destination in Canada.

7. Commercial rail transport is important to Canada’s transportation system with railroads operating over 280,000 kilometers of track in North America, of which approximately 46,000 kilometers are situated in Canada. Thirteen rail carriers currently import goods into Canada, with Canadian National (CN) and Canadian Pacific (CP) responsible for the transportation of 95% of those imports. Rail-based trade with the United States in 2011 totalled approximately $85 billion, representing 17% of the total value of traded goods in all modes of transportation. Most rail import shipments consist of bulk commodities such as chemicals (e.g., fertilizers) or open car bulk commodities such as automotive products.Footnote 1

8. A commercial release is finalized when cargo or conveyance is permitted entry into Canada. A release can occur automatically through the Agency’s commercial processing systems, or manually by a BSO. In the rail mode, for example, carriers submitting cargo and conveyance information to the Agency through its electronic data interchange (EDI) must do so in advance of arrival at the border. These submissions are assessed by BSOs prior to the cargo and conveyance arrival or at the point of importation, and a decision is made to grant entry into Canada, refer the cargo or conveyance for an examination or deny entry.

9. Examinations are a key tool in determining the degree of compliance with regulations governing the importation of commercial goods and conveyances. An examination can originate from a random referral by the Agency’s electronic commercial systems or from a commercial BSO functioning as a commercial or targeting officer. The primary objective of examinations is to prevent the entry of inadmissible, non-compliant goods into Canada and to obtain strategic information and intelligence on volumes, commodities and trends to circumvent importation regulations.

10. Table 1 provides a comparative illustration of the number of examinations for the four modes of entry in the commercial stream.

Table 1 – Number of Commercial Examinations
Mode Number of Commercial Examinations
FY 2012-13 FY 2013-14 FY 2014-15
[*] [*]* [*] [*]
[*] [*] [*] [*]
Marine [*] [*] [*]
Rail [*] [*] [*]Footnote 2
Total [*] [*] [*]

Source: CMRS – Fiscal years 2012-2013 and 2013-2014 are unaudited figures
* The percentages represent the number of commercial releases that were examined.

11. Transport Canada reports that for 2014, the value of rail commercial importations was $126.2 billion and the tonnage transported was 320.2 million tonnes. Refer to Appendix B for these figures in the air, highway and marine modesFootnote 3.

12. For 2014–2015 there were 30,754 cross-border conveyance passages in the rail mode. Note that a single rail passage would include a number of rail cars. Refer to Appendix B for these figures for the air, highway and marine modes.

2.0 Significance of the Audit

13. The Audit of Rail was approved as part of the CBSA’s 2014–2015 to 2016–2017 Risk-Based Audit Plan.

14. The audit objective was to assess the adequacy of the management control framework for the rail program. Specifically, the audit assessed whether:

  • There are effective processes and practices in place to deliver the rail program; and
  • Management has reliable information for decision making.

15. The audit scope included the assessment of practices in place to effectively manage and deliver the commercial rail program. Specifically, the scope included a review of existing governance processes, commercial targeting, health and safety training, existing tools, and reliability and accuracy of information used for decision making.

16. The audit scope excluded:

  • The rail travellers program, because the results of the planning phase indicated that a management control framework was in place for the rail travellers program. In addition, there were low numbers of rail travellers as a percentage of total travellers (see Appendix B for the comparative position of the rail traveller stream with other modes of entry into Canada);
  • Intermodal shipments consisting of goods arriving into Canada via the marine mode transferred onto rail in Canada, as high risk goods entering Canada through the marine mode are screened and examined (when referred) by the CBSA at the marine port; and
  • Exports using rail mode, since the Office of the Auditor General is performing an audit of exports.

3.0 Statement of Conformance

17. The audit conforms to the Internal Auditing Standards for the Government of Canada, as supported by the results of the quality assurance and improvement program. The audit approach and methodology followed the International Standards for the Professional Practice of Internal Auditing as defined by the Institute of Internal Auditors and the Internal Auditing Standards for the Government of Canada, as required by the Treasury Board’s Policy on Internal Audit.

4.0 Audit Opinion

18. The audit identified gaps in the commercial rail program’s [*]. Improved strategic direction, infrastructure, information for decision makers and targeting would help reduce the risk of non-compliant goods and/or inadmissible individuals from entering Canada through the commercial rail mode.

5.0 Key Findings

19. Governance structures, including oversight committees are in place to monitor the commercial program. However, there has been minimal discussion, strategic direction, analysis and oversight of the commercial rail mode. [*]

20. Gaps pertaining to the rail mode have been identified and documented. [*]

21. [*]

22. [*]

23. [*]

24. Should the Agency decide to increase its capacity to conduct more examinations at the border, it will be important that hazards specific to the rail yard environment are identified and assessed, and formalized training programs for rail yard examinations and health and safety awareness is implemented.

6.0 Summary of Recommendations

25. The audit makes three recommendations relating to:

  • strengthening governance practices by establishing a strategic vision, objectives and oversight, and reporting mechanisms for the commercial rail mode;
  • prioritizing the highest risk areas in the commercial rail mode and closely monitoring the progress towards implementation of the resulting management action plans; and
  • developing and implementing a comprehensive management control framework for the commercial rail program.

7.0 Management Response

The Programs Branch agrees with the recommendations provided within this Audit and believes that they will further enhance the Agency’s ability to carry out its mandate in the commercial rail mode. Commitments to strengthen governance, identify and prioritize risk, and complete a management control framework will be achieved by December 2017.

8.0 Audit Findings

8.1 Governance

Audit Criteria:

  • Roles, responsibilities, and accountabilities for the commercial rail program have been formally defined and communicated.
  • An oversight body(ies) has been established and provides strategic direction as well as monitors the commercial rail program.
  • Senior management and oversight bodies request and receive sufficient, relevant and timely information to support decision-making.
  • Rail information is complete, timely and accurate to support decision making.

Roles, Responsibilities and Accountabilities

26. The Commercial Program Directorate (CPD), Programs Branch, is functionally responsible for the commercial stream. The CPD is responsible for program performance and reporting, developing and maintaining policies, regulations, legislation, providing program strategy and policy direction (including Other Government Departments (OGDs), identifying and addressing potential risks of any proposed or existing program and operational changes that would affect program integrity. The CPD is also responsible for the development of a Rail Cargo Program and providing program strategy and policy direction related to current and future advance commercial information processing.

27. The Border Operations Directorate, Operations Branch, is responsible for providing operational direction and guidance on pre-border and at-border commercial activities in all modes with an objective of ensuring national consistency in the operational delivery of CBSA programs, collecting and providing performance data to help assess program performance and re-determine priorities, goals and resource allocations, and reporting through such instruments as the Weekly Operational Briefing report and the quarterly Performance and Service Standards Report.

28. In the regions, BSOs deliver the commercial rail program by reviewing ACI and information provided by the importer/broker to ensure the admissibility of the goods into Canada and make a final release decision and ensure that the necessary requirements are being met by clients, including other government departments. The regions also ensure that where compliance is not being met by clients that the necessary action is taken.

29. The roles and responsibilities for the commercial rail program have been established, documented and communicated. BSOs delivering commercial rail services seek operational and policy guidance from Regional Program Officers or from Headquarters (HQ) where direct contacts have been established.

Oversight Bodies

30. To be successful in achieving objectives, organizations and their programs require sound governance that clearly delineates oversight authorities, decision-making procedures, and accountability. Effective governance helps ensure objectives are realized, resources are well-managed, and the interests of stakeholders are protected and reflected in key decisions.

31. Program oversight helps ensure that program objectives are achieved in an efficient and effective manner. It also ensures that any issues facing the program are resolved based on the input from relevant stakeholders. A key control by which a program can maintain oversight is by establishing governing committees with clear mandates to determine priorities, identify issues, exchange information, and facilitate the management of the program.

32. The audit identified the following four Agency committees in which components of commercial rail governance and oversight would be expected: the Executive Committee (EC), the Operational Border Executive Committee (OBEC), the Border Commercial Consultative Committee (BCCC), and the Commercial Program Management Table (CPMT) — see Appendix C for more information about each committee’s mandate, membership and meeting frequency.

33. As part of this audit, 2014-2015 terms of reference and meeting minutes for each of the above committees were reviewed to determine if the committees provided oversight of the commercial rail program and its related activities.

34. The results of the review indicated that only one out of four committees, the CPMT, contained evidence of rail discussions, specifically the Rail Control Self-Assessment, related to key risks within the commercial rail mode. However, there was no strategic direction or specific commercial rail mode mandates outlined in the CPMT’s terms of reference.

35. In summary, the governance structure in place to manage the commercial rail program, specifically CPMT and CPD, is not effective. There has been minimal discussion, strategic direction, analysis and oversight of the commercial rail mode at key Agency oversight committees. [*]

Information for Decision Making

36. Monitoring and reporting are critical activities in meeting program objectives and improving internal processes and controls. Successful monitoring and reporting requires timely communication of relevant and accurate information.

37. To make informed decisions about the commercial rail mode, management should receive information which accurately reflects its current state. This information should include how well the commercial rail mode is operating against established objectives and information about risks specific to this mode.

38. The high-level performance objectives set for the rail program are included in the 2014–2015 Report on Plans and Priorities and the 2014–2015 Performance Measurement Framework (PMF).

39. The strategic objective for the rail commercial stream as stated in the 2014–2015 PMF is ‘Goods that are non-compliant with legislation administered by the CBSA are intercepted at rail ports of entry and result in a seizure action’, and has a performance target of 0.6%.Footnote 4

40. The audit reviewed the most recently available Agency performance reporting instruments which would provide evidence that senior management is receiving performance information about the rail commercial stream. These included the Agency Performance Summaries (APS) which are presented at the Executive Committee, Performance and Service Standards Reports (PSSR), CBSA Trends Reports, and the 2013-2014 Departmental Performance Report (DPR).

41. There is evidence of commercial rail performance reporting to senior management for fiscal year 2013–2014.

  • The April 2013 PSSR provided the number of examinations and enforcement actions in the rail commercial stream. However, it did not report rail commercial stream performance against its performance target.
  • The February 2013 APS reported a 0% success rate against the 2012-2013 performance target of 0.05% of goods examined at a rail port of entry-rail yard that are seized.
  • The 2013–2014 DPR reports a 5.1% success rate against a performance target of 2.5% of commercial goods examined that result in an enforcement action in the rail mode.

42. However, for 2014–2015, there was no performance reporting on commercial rail activities in the APS, the PSSR, the CBSA Trends Reports or the DPR. The absence of performance reporting prevents senior management from having complete and timely information to understand the current state of the rail commercial mode, to provide strategic oversight, monitor progress against objectives, understand risk areas and prioritize resources.

43. The accuracy of information was examined by comparing the number of completed examinations obtained from a 2014-2015 Accelerated Commercial Release Operating Support System (ACROSS) extraction to the number of commercial rail examinations recorded in the Consolidated Management Reporting System (CMRSFootnote 5). CMRS identified that [*] referred examinations were recorded in ACROSS. Our analysis of the ACROSS data confirmed that only [*] result narratives were recorded..

44. The most likely explanation for this discrepancy is that CMRS counts an examination as “completed” even if there is no examination narrative in the ACROSS examination report. Without the narrative, it is not possible to conclude whether or not an examination was, in fact, completed.

45. The Agency has recognized this as a gap and has provided a process in ACROSS to prevent the misrepresentation of examination results. It appears, however, that this process is not being used in all cases where it is warranted.

46. Inaccurate information undermines the integrity of data presented to program management. This affects management’s ability to monitor and report on the current state of the rail program in a manner which facilitates achieving program objectives and improving internal processes and controls.

Recommendation 1:

The Vice President of the Programs Branch, in collaboration with the Vice President of the Operations Branch, should strengthen governance practices by establishing a strategic vision, oversight for the rail mode within the commercial continuum and take steps to ensure reporting mechanisms currently in place are utilized.

Management Response Completion date
The Programs Branch agrees with this recommendation and will proceed with strengthened governance, including a renewed focus on rail at the Commercial Program Management Table (CPMT) to strategically manage the Agency’s approach to existing issues in the rail mode. In addition, a strategic vision for rail will be developed and completed within one year of tabling the Audit. January 2017

8.2 Risk Management

Audit Criteria:

  • Program risks are identified, assessed, communicated, mitigated and monitored to ensure the achievement of program objectives.

47. Risk management is a critical component to the success of the CBSA in carrying out its mandate. The 2010 Enterprise Risk Management Policy states that “risk management will be integrated into the organization's philosophy, practices and decision-making processes.”As such, the rail program must assess and manage risk to ensure that trade and travel is facilitated across Canada's border and that Canada’s population is safe and secure from border-related risks.

48. Through various risk management initiatives and processes, the CBSA has identified several risks related to the commercial rail mode in the following documents:

  • 2012 Rail Commercial Risk Assessment;
  • 2013–2015 National Border Risk Assessment;
  • 2013–2014 and 2014–16 Border Risk Management Plans;
  • 2013 CBSA Enterprise Risk Profile (ERP);
  • 2013 POE Commercial PMT Risk Profile;
  • 2014 Commercial Rail Examination Program Gap Analysis and Recommendations; and
  • 2015 Rail Control Self-Assessment.

49. Common risks identified through these risk assessments included:

  • [*] ;
  • [*];
  • [*];
  • [*]; and
  • [*].

50. The NBRA serves to inform CBSA senior management and program administrators about the strategic enforcement risks that the Agency faces at the border.[*]

51. The draft Action Plan for the 2012-2013 National Border Risk Assessment provides short and long term risk mitigation strategies for the commercial rail mode. There is no evidence that this Action Plan was approved by senior management.

52. In 2012-2013, the Enterprise Risk Management and Transformation Initiatives Division (ERMTID) facilitated a risk assessment exercise for the Commercial Program Management Table. A commercial Risk Profile was developed to help guide and inform business planning and priority-setting activities for the various modes in the commercial stream. The outcome of this exercise was a prioritization of the commercial modes based on the effectiveness of existing controls, and likelihood and impact of the risks[*] .

53. [*]

54. [*]

55. [*]

Recommendation 2:

The Vice President of the Programs Branch should identify the highest risk areas in the commercial rail mode and closely monitor the progress towards implementation of the resulting management action plans. Furthermore, if risks within the rail mode are accepted, such decision should be formally approved and documented.

Management Response Completion date
The Programs Branch agrees with this recommendation. As part of the 2015-16 Enterprise Risk Profile initiative the Commercial PMT identified [*]. Programs Branch will review the findings and recommendations of existing risk assessment documents and use those to identify and develop a plan to mitigate the areas of highest risk by April 2016. April 2016

8.3 Commercial Rail Referrals, Targets and Examinations

Audit Criteria:

  • The process for creating targets is defined and based on risk.

56. Referrals for examination are one of the key methods the CBSA uses to assess compliance with commercial goods importation regulations. This process includes collection and analysis of data information, use of detection tools, judgement of front-line officers and random checks. Under the authority of the Customs Act, “examinations allow CBSA officers to either confirm that goods have been properly reported and accounted for or to intercept goods and persons who are not complying with Canadian laws.”

57. Examinations are also an essential part of the Agency’s intelligence cycle. They provide vital information about the methods used to import noncompliant goods or circumvent the payment of duties and taxes, trends on the types of goods being imported illegally, ports of entry which may be vulnerable to illicit cross-border activity, etc. Intelligence gathered through examinations enhances the Agency’s ability to strategically manage border risks. It is essential, therefore, that examinations be completed and that established Agency policies and procedure be followed.

58. Specifically, rail commercial goods can be referred for examination in three distinct methods: 1) Targeted referrals, 2) BSO referrals, and 3) Random referrals. The CBSA Enforcement Manual has defined each type of referral, noted in Table 2 below.

Table 2: Referral types and definitions
Referral Type Definition

Target

A type of referral that uses advance information to identify high-risk people, goods and conveyances that may pose a risk to national security and/or public safety priorities.

Random

Referrals based on a system, sometimes computer generated, which selects shipments and persons for examination in an indefinite pattern are considered random referrals.

Border Services Officer

A referral that a border services officer makes to the secondary inspection area following the establishment of point of finality because they have reasonable grounds to suspect that additional examination or investigation is necessary to make a decision on release.

59. This audit specifically focused on the processes, methodologies and effectiveness of targeting which is described in the section below.

Targeted Referrals

60. The Customs Act, the Reporting of Imported Goods Regulations and the Transportation of Goods Regulations establish the time, manner and who is required to send pre-arrival data pertaining to commercial cargo (for import or in-transit) and conveyances entering or moving in-transit through Canada. These requirements apply to all rail operators transporting commercial goods into Canada.

61. The receipt of pre-arrival cargo and conveyance data enables the Agency to:

  • More effectively manage higher risk goods and identify threats to health, safety, and security prior to the arrival of cargo and conveyances in Canada;
  • Allow lower risk goods a more efficient, stream-lined process at the border; and,
  • Control the movement of in bond goods.

62. Targeting activities for most rail commercial goods are being conducted by the Agency’s [*] .

63. The [*] reviews pre-arrival cargo data to identify high-risk goods and conveyances that may pose a risk to national security.

64. The targeting process begins with a review of the data provided by the rail carriers from their proprietary business systems. This information includes destination province and city, origin state and city, conveyance identification, shipper, commodity description and railcar tracking and movement information. Access to these business systems enables the [*] to review cargo and importer and railcar movement data prior to it being made available to the Agency as per the acts and regulations mentioned above. In addition, the rail carrier business systems provide data on the movement of railcars which is not a requirement of the reporting obligations cited above.

65. When the pre-arrival cargo data are submitted to the Agency’s ACROSS system, the [*] conducts additional reviews in other Agency systems. If a decision is to issue a target, the final step is to enter the examination request for the targeted cargo in ACROSS.

66. The advanced information received from the rail carriers is provided on a voluntary basis as a result of negotiations between the [*] and the rail carriers. At the time of the audit, there was no evidence that an agreement between the Agency and the rail carriers has been formalized.

67. [*]

68. Although targeting activities are performed, there was no evidence of a documented methodology, including policies, procedures, and/or guidance documents.

69. [*]

70. [*] Footnote 6

71. [*]

72. While there are currently challenges with rail targeting, it should be noted that the National Targeting Center (NTC) will assume targeting responsibilities for commercial rail in 2016.

Rail Commercial Referrals and Examinations

73. Examination results are important because they provide rail program feedback and intelligence on how the examination was conducted, what was or was not found and identify higher risk areas for targeting. The entering of examination results in the appropriate systems is known as ‘closing the loop’ with a goal of ensuring that detailed examination results for all referrals are being captured and that 100% of referrals are being correctly released in the appropriate system.

74. To review examination practices, an ACROSS data extraction of all commercial rail examination referrals for fiscal 2014–2015 was obtained by the audit team. The total number of referrals generated in fiscal year 2014–2015 was [*], broken down by referral type in Chart 1 below:

Chart 1: Total referrals, by referral type (FY 2014–2015) [*]

75. [*].

76. [*].

Charts 2, 3 and 4: Referrals Examined / Not Examined, by referral type (FY 2014–2015) [*]

77. If a referral is not examined, the Agency requires it to be overridden in accordance with established procedures. These procedures require that a [*] authorize the override via use of a proper override code in the ACROSS system and that a narrative detailing why the override occurred be entered in the ACROSS examination report. A correctly executed override would, for example, include a narrative section indicating the rationale for the override, the name of the superintendent authorizing the override, and an override code.

78. The audit examined the extent to which the required procedures to validate an override were followed [*].

79. [*]

80. Finally, examinations performed are deemed resultant or non-resultant. An examination is deemed resultant when an enforcement action is taken, for example if contraband materials are found. [*].

81. [*]

The findings noted in the above section are addressed through recommendation #3.

8.4 Commercial Rail Infrastructure

Audit Criteria:

  • Regions have access to appropriate infrastructure to conduct examinations as required by the commercial rail program.

82. As noted in Section 8.2, physical examinations of referred cargo are an essential element of the Agency’s intelligence gathering cycle and compliance programs. Conducting examinations requires both human and infrastructure resources. This audit focused on infrastructure for conducting examinations as the absence of examination infrastructure has the potential to impact the number and effectiveness of examinations being performed on commercial rail cargo.

83. The Agency, under Section 6 of the Customs Act, has the authoritytorequire the owner or operator of any railway operating internationally to provide, equip and maintain free of charge to CBSA, at or near the railway, an adequate building, accommodation or other facilities for the proper detention and examination of imported goods or for the proper search of persons by customs officers.

84. [*].

85. [*].

86. .

87. [*]:.

  • [*].
  • The Agency requires all in-bond cargo to be sealed, and these seal numbers are recorded in the Agency’s ACROSS system.
  • Carriers are subject to monetary penalties for not presenting cargo for examination. [*].
  • BSOs at some FPOA border crossings review rail cargo documentation prior to release.
  • [*].

88. [*].

89. [*].

90. [*].

The findings noted in the above section are addressed through recommendation #3.

8.5 Physical Security

Audit Criteria:

  • Access to goods planned for examination is limited to authorized individuals and is physically restricted.

91. Goods that are in-bond must be secured and protected against theft and tampering until released by the CBSA. Trains carrying goods that have been referred for examination are held in rail yards which are managed by rail carriers responsible for the security and integrity of rail cargo. [*].

92. Physical security requirements for the commercial rail program are prescribed through the Partners in Protection (PIP) Program. PIP is a CBSA program to which companies conducting cross-border business can subscribe, on a voluntary basis, which encourages private companies that are a part of the trade chain to enter into a partnership with the CBSA to help detect and prevent contraband smuggling and terrorism. It is designed to streamline and make border processes more efficient for low-risk, pre-approved businesses recognized as trusted traders.

93. Admission into the PIP program requires completion of a number of steps, which are summarized below:

  • Completion of a security self-assessment profile outlining how security requirements will be met;
  • Site validation by a CBSA officer; and
  • Full re-certification of the program every four (4) years.

94. [*].

95. [*].

96. [*].

The findings noted in the above section are addressed through recommendation #3.

8.6 People (Training and Awareness)

Audit Criteria:

  • Employees are provided with the necessary training, tools, and information to support the discharge of their responsibilities related to rail examinations.

97. Examinations of cargo and/or conveyances which occur in rail yards present unique conditions due to the operating environment. These include the threat posed by the movement of rail cars and locomotives and the need to be aware of what areas in the yard present the most danger to officer safety.

98. Also, the equipment used to transport cargo in the rail mode can be unique to this mode, such as rail cars used to transport bulk commodities (e.g., oil, grain and chemicals).

99. The Canada Occupational Health and Safety Regulations require that the CBSA develop, implement and monitor, in consultation with the Policy Health and Safety Committee (PHSC), a prescribed program for the prevention of hazards in the work place, appropriate to the size and the nature of the hazards in it. This program must also provide for the education of employees in health and safety matters.

100. The Agency’s Hazard Prevention Program completed a Job Hazard Analysis (JHA) in 2003 which identified health and safety risks related to the cross-border movement of people and goods common to all modes, but not specifically for the rail mode.

However, the Agency has:

  • conducted an assessment of the health and safety risk;
  • documented health and safety requirements to follow when conducting examinations in rail yards;
  • documented information on the rail yard examination procedures; and
  • identified the tools to use when conducting rail yard examinations and provided the training to use these tools;

101. It would also be expected that the Agency would equip BSOs with the guidance, training, tools and information needed to conduct examinations in rail yards in a manner that minimizes or eliminates personal health and safety risks.

102. The Agency has provided guidance on conducting examinations in rail yards in the Customs Enforcement Manual. This Manual contains specific procedures to follow when performing an examination (e.g., testing for fumigants prior to the exam, recoding results, tool usage) and on health and safety practices to follow when conducting examinations (e.g., blue flagging or blue lightingFootnote 7 and using tools such as fall protection systems). Additionally, mandatory safety and awareness training is provided by CN to BSOs conducting examinations in their Winnipeg rail yard.

103. While the Agency provides mandatory health and safety training to all employees, it has not developed training programs specific to rail yard examinations or health and safety awareness in this mode.

104. Should the Agency decide to increase its capacity to conduct more examinations at the border, consideration should be given to revisiting the JHA to ensure hazards specific to the rail yard environment are identified and assessed, and formalized training programs for rail yard examinations and health and safety awareness are implemented.

Recommendation 3:

The Vice President of the Programs Branch, in collaboration with the Vice President of the Operations Branch, should develop and implement a comprehensive management control framework for the commercial rail program.

Management Response Completion date
The Programs Branch agrees with this recommendation and will complete the development of a comprehensive management control framework for endorsement by Executive Committee by April 2016, which will include integrated risk assessment and targeting, completion of examinations, physical security, and periodic monitoring to ensure controls are operating as intended. The control framework will be implemented by December 2017. December 2017

Appendix A – About the Audit

Audit Objectives and Scope

The objective of this audit was to assess the adequacy of the management control framework for the rail program. Specifically, the audit assessed whether:

  • There are effective processes and practices in place to deliver the rail program; and
  • Management has reliable information for decision making.

The audit scope included the assessment of practices in place to effectively manage and deliver the commercial rail program. Specifically, the scope included a review of existing governance processes, commercial targeting, commercial training, health and safety training, existing tools, and reliability and accuracy of information used for decision making.

The audit reviewed data from the fiscal years 2012–2013 to 2014–2015. The audit’s scope excluded:

  • The Rail Travellers Program: The results of the planning phase indicated that a management control framework was in place for the rail travellers program. In addition, there were a low number of rail travellers as a percentage of total travellers (0.31% of total travellers) [*].
  • Intermodal shipments: These are goods arriving in Canada via the marine mode, transferred onto a railcar and then delivered throughout Canada. Intermodal shipments were excluded from this audit as high risk goods entering Canada through the marine mode are screened and examined by CBSA at the marine port.
  • Exports: Since the Office of the Auditor General is performing an audit of exports, this aspect of the program was not examined as part of this audit.

Risk Assessment

A preliminary risk assessment was conducted during the planning phase to identify potential areas of risk and audit priorities; it included a visit to the Southern Ontario Region in which the audit team observed an inspection of rail passengers and conveyance at the VIA rail station located in Niagara Falls. The risk assessment also included discussions with key personnel involved in the rail program and a review of corporate documents relating to the rail program. It identified the following key risk areas:

  • [*].
  • There is a risk of employee injury through the conduct of examination of rail cars.
  • [*].
  • [*].

Approach and Methodology

The audit was conducted in accordance with the Internal Auditing Standards for the Government of Canada andthe Institute of Internal Auditors Standards for the Professional Practice of Internal Auditing.

The following techniques were used during the examination phase of this audit:

  • Reviews of applicable policies, directives and procedures governing the commercial rail program.
  • Interviews with officers and managers in regional offices including Winnipeg, Vancouver and Fort Frances implicated in the management or the examination of commercial rail.
  • A review of rail targets and referrals to assess whether recommended rail examinations are being conducted.
  • Data analysis on the average distance between the first point of entry in commercial rail and the first point of intervention for goods entering Canada from the U.S. in 2014–2015.
  • A review of the oversight mechanisms and security protocols in place to ensure goods referred for examination in commercial rail are adequately secured by third parties.

Audit Criteria

Given the preliminary findings from the planning phase, the following criteria were chosen:

Lines of Enquiry Audit Criteria

1. Governance

  • 1.1 An oversight body(ies) has been established and provides strategic direction as well as monitors the commercial rail program.
  • 1.2 Senior management and oversight bodies request and receive sufficient, relevant and timely information to support decision-making.
  • 1.3 Roles, responsibilities, and accountabilities for the commercial rail program have been formally defined and communicated.
  • 1.4 Rail information is complete, timely and accurate to support decision making.

2. Risk Management

  • 2.1 Program risks are identified, assessed, communicated, mitigated and monitored to ensure the achievement of program objectives.

3. Stewardship

  • 3.1 The process for creating targets is defined and based on risk.
  • 3.2 Regions have access to appropriate infrastructure to conduct examinations as required by the commercial rail program.
  • 3.3 Access to goods planned for examination is limited to authorized individuals and is physically restricted.
    (e.g., rail cars and goods for examination are physically secured)

4. People (Training and Awareness)

  • 4.1 Employees are provided with the necessary training, tools, and  information to support the discharge of their responsibilities related to rail examinations.

Appendix B - Data

Number of Travellers by ModeFootnote 8


Mode
Number of Travellers
FY 2012–2013 FY 2013–2014 FY 2014–2015

Air

26,260,426 27,245,083 29,135,271

Highway

71,016,937 69,318,283 65,782,419

Marine

3,049,159 2,247,029 2,269,356

Rail

291,030 290,122 289,798

Total

100,617,552 99,100,517 97,476,844

Source: CMRS, unaudited

The following three tables provide a comparative illustration of the four modes of importation in the commercial stream in terms of the dollar value of goods entering Canada, cargo and conveyance volumes, and cross-border passage activity.

Cargo Dollar Value and Tonnage by Mode - 2014Footnote 9
Mode $ (billions) Volume (millions tonnes)
Air $111.3 1.1
Highway $335 251.4
Marine $205 475[*][*]
Rail $126.2[*] 320.2[*]

Source: Transport CanadaFootnote 10
* Figure for 2014. However, Transport Canada reports that this represents an increase of 6.6% from the previous year
** Figure for 2012, last year available

Commercial Stream Conveyances Passages
Mode 2012-2013 2013-2014 2014-2015
Air Cargo 7,903 7,581 6,976
Highway Trucks 5,384,830 5,425,464 5,354,303
Marine Cargo 16,479 13,851 16,479
Rail Cargo 28,544 29,438 30,754

Source: CMRS, unaudited

Appendix C – Governance Committees

CBSA committees in which components of commercial rail governance and oversight would be expected:

Executive Committee (EC) The Executive Committee, chaired by the President and attended by Vice-Presidents, Directors General and legal counsel, is the CBSA’s senior management decision-making forum responsible for the overall strategic management and direction of the Agency's policy, program and corporate responsibilities.

The mandate of the EC is to set the strategic direction and provide ongoing oversight for the integrated business plan of the Agency, to ensure objectives are met, to determine priorities and resource allocation within a risk management context, and to establish a robust governance framework against the Management Accountability Framework (MAF) and audit expectations.

Operational Border Executive Committee (OBEC) – The audit confirmed that there are no terms of reference for the OBEC. A review of the meeting minutes for 2014–2015 for attendees identified attendance by the VP of Operations and other branches, Directors General (HQ), Regional Directors General and invited presenters. This committee meets weekly.

Border Commercial Consultative Committee (BCCC) – The overall mandate of the BCCC is to provide CBSA officials and commercial stakeholders with a forum for dialogue on Canada's border operations. The BCCC is chaired by the Vice-President, Programs Branch, and includes membership by representatives appointed by organizations representing Canada's commercial interests involved in trans-border trade activity, and CBSA representatives as deemed appropriate. This committee meets three times annually. The BCCC forms sub-committees as warranted, such as the Examination and Other Government sub-committees.

Commercial Program Management Table (CPMT) – The mandate of the CMPT is to effectively guide, oversee, plan and monitor the POE Functional Program. This committee is chaired by the Director General of the Commercial Programs Directorate and its membership includes Regional Directors General, the Chief Financial Officer and various Directors General and Directors.

Appendix D – Imaging Technology

VACIS x-ray image of a railcar carrying vehiclesFootnote 11

[*]

Appendix E - Overrides

Overrides Authorized / Not Authorized (FY 2014–2015)
Override Authorization Process A) Targeted B) Random C) BSO TOTAL
(A+B+C)

Total Referrals not Examined

* * * *

Override Authorized via use of proper override code (requirement 1)

* * * *

Override Authorized via superintendent narrative in override field (requirement 2)

* * * *

TOTAL overrides authorized - fulfilling both requirements 1 and 2

* * * *

Source: ACROSS data extraction for 2014-2015

Appendix F – List of Acronyms

  • ACROSS – Accelerated Commercial Release Operations Support System
  • AMPS – Administrative Monetary Penalty System
  • APS – Agency Performance Summary
  • BCCC – Border Commercial Consultative Committee
  • BNSF – British Northern Santé Fe
  • BSO - Border Services Officer
  • CBSA – Canada Border Services Agency
  • CMPT – Commercial Program Management Table
  • CMRS – Consolidated Management Reporting System
  • CN – Canadian National Railway
  • CP – Canadian Pacific Railway
  • DPR – Departmental Performance Report
  • EC – Executive Committee
  • EDI – Electronic Data Interchange
  • FPOA – First Point of Arrival
  • FPOI – First Point of Intervention
  • HQ – Headquarters
  • IO – Intelligence Officer
  • JHA – Job Hazard Analyses
  • NBRA – National Border Risk Assessment
  • NTC – National Targeting Center
  • OBEC – Operational Border Executive Committee
  • OGD – Other Government Department
  • PIP – Partners in Protection
  • PHSC – Policy Health and Safety Committee
  • PMF – Performance Measurement Framework
  • POE – Port of entry
  • PSSR – Performance and Service Standards Report
  • RPP – Report on Plans and Priorities
  • RWG – Rail Working Group
  • US-CBP – United States Customs Border Protection
  • VACIS – Vehicle and Cargo Inspection System

Notes

Footnotes

Footnote 1

Transport Canada report : Transportation in Canada 2014 Annual Report Overview, pp15

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Footnote 2

This number *is not from CMRS, it is a result of detailed testing performed during the audit.

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Footnote 3

Transport Canada report: Transportation in Canada 2014 Annual Report Overview

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Footnote 4

Note that the performance target for the rail commercial mode for 2013-2014 was 2.5% of imported commercial goods examined that result in seizure action and that this performance measure is set at 0.6% for FY 2014-2015.

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Footnote 5

ACROSS lacks a dynamic reporting capability. CMRS acts as a clearing house that pulls information from a variety of databases, including ACROSS, then arranges it into a user friendly format, provides users with a window they can use to access this information via the CMRS portal to produce reports for senior management.

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Footnote 6

An examination is deemed resultant if it results in a seizure of goods, results in the issuance of an AMPs penalty, warrants an ascertained seizure, or identifies inadmissible goods which are destroyed, abandoned to the Crown or exported.

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Footnote 7

Blue flagging (daytime) and Blue Lighting (evening or conditions of poor visibility) refers to the practice of placing a blue flag or light at both ends of the track where a Customs examination is being performed. This informs those moving rail cars around the yard that that track is closed. In Winnipeg, a track that is blue flagged/light is electronically monitored and locked to prevent it use.

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Footnote 8

Data extracted from CBSA’s Consolidated Management Report System is as of August, 2015.

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Footnote 9

These figures represent international trade which includes imports and exports.

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Footnote 10

Transport Canada Reports: Transportation in Canada 2013 and Transport Canada Annual Report Overview

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Footnote 11

Rail VACIS Brochure June 30 2010, p.2 (Published by: Science Application International Corporation (SAIC))

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