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Vol. 134, No. 36 — September 2, 2000
Regulations Amending the Seeds Regulations
Statutory Authority
Seeds Act and Canada Agricultural Products Act
Sponsoring Agency
Canadian Food Inspection Agency
REGULATORY IMPACT ANALYSIS STATEMENT
Description
The Canadian Seed Program provides a number of services including the development of seed standards, certification of seed, registration of seed establishments, accreditation of individuals to perform specified activities, training, information, inspection and enforcement.
The Seeds Regulations specify that pedigreed (certified) seed must be labelled with an official tag issued by the Canadian Food Inspection Agency (CFIA). The appropriate Canada pedigreed grade name must appear on the official tag for all major crop kinds. Also appearing on this tag are the names and logos of the CFIA and the Canadian Seed Growers' Association (CSGA). The official tag and Canada pedigreed grade name are "marks of conformity" for seed meeting the standards of the CSGA and the Seeds Act and its Regulations.
The CSGA is recognized in the Seeds Act as a seed standards body with respect to varietal (genetic) purity standards for seeds. The Canada pedigreed grade names under the Seeds Regulations designate standards that include the CSGA standards and other standards for seed including germination, freedom from weeds and disease.
Registration of establishments to process pedigreed seed and accreditation of individuals to sample, test and label this seed with official tags is an integral part of the current Seed Program. Prior to 1960, the Canada pedigreed grade name (official tag) could only be applied to seed by an inspector after official sampling and testing; over the past 40 years the Seed Program has slowly expanded the scope of accredited activities such that all pedigreed seed in Canada, other than that certified under the Seed Schemes of the Organisation for Economic Co-operation and Development, is now sampled, tested, graded and labelled by the private sector. Until 1982 all of the seed testing in support of certification was done in government laboratories; since then, accredited seed laboratories (there are now 45) have tested seed. In 1993, the Government stopped offering seed certification services (sampling, testing, grading and labelling) for domestic seed.
Due to the fiscal pressures of the mid-90s, the Food Production and Inspection Branch (FPIB) of Agriculture and Agri-Food Canada negotiated with its industry clients for increased cost recovery of services provided. The CSGA, the Canadian Seed Trade Association (CSTA) and the Commercial Seed Analysts Association of Canada (CSAAC) formed a negotiating team to respond to FPIB's "Business Alignment Plan" (BAP). One of the results was the establishment of the Canadian Seed Institute (CSI) in 1996 and its official recognition by the CFIA in 1998. The stated purpose of this organization is to "deliver approved services" in support of the Canadian seed certification and import accreditation programs. Its major objectives are to keep costs down while increasing the ability of the industry to manage its own quality control requirements.
The initial service that the CSI delivered was the establishment of quality management standards for the seed industry and the recommendation, to the CFIA, of seed establishments that met those standards. The Agency has been registering and renewing registrations of establishments based on a recommendation from the CSI since December 1998.
During BAP negotiations (1995-98), it was clearly understood that once CSI became fully operational the Government would no longer provide the same services in a competitive environment. To that end, the Seed Program had planned to (1) move forward with fees increases in 2000 to bring its level of cost recovery to 100 percent, and (2) in the medium term, propose amendments to the Seeds Regulations that would enable the CFIA to cease providing services to the seed certification and import accreditation programs that were available through the CSI or other approved conformity verification bodies.
There are approximately 1 550 establishments in Canada that are registered under Part IV of the Seeds Regulations to process pedigreed seed (approved conditioners — ACs) or to store graded seed in bulk (bulk storage facilities — BSFs) and approximately 2 000 individuals licensed as operators of establishments. Registered seed establishments (RSEs) range in size from small family-run operations to large multi-national organizations. Seventy percent of RSEs are located in Western Canada. Although many were hesitant about the CSI, the majority accepted that the CSI approach was the only way to keep costs down.
The process for establishment registration involves application, initial conformity assessment, recommendation, registration and ongoing surveillance. All of these activities, except registration, are currently performed by the CSI.
Fees for the seed certification and import accreditation programs were last increased in 1998 to recover approximately 50 percent of the cost of the program (as designed and costed in 1994). It was thought at the time that these fees would be sufficiently high to encourage RSEs to use the services provided by CSI. However, as it turns out, CFIA fees are, on average, lower for substantial numbers of seed establishments. This has resulted in some RSEs (about 150 or 10 percent of all seed establishments) never moving over to the CSI program and, more significantly, others are considering dropping out of the CSI program and returning to the CFIA program.
The CFIA, therefore, finds itself unable to fully withdraw from providing those same services that the CSI was established to deliver. At the same time, the financial health of the CSI is threatened if even a relatively small number of seed establishments decide to pass on their biennial complete systems audit (at a cost of $350-$800 depending on the size and scope of accreditation of the establishment) and fall back under the CFIA administered program.
Increasing CFIA fees to full cost recovery or withdrawing from providing the services would result in the majority of seed establishments having to pay higher annual renewal fees than now possible under the CFIA program. For example, a BSF can be renewed for $190 under the current CFIA fee structure; full cost recovery would see this increase to approximately $500; and CSI fees are about $350. Similarly, a small AC might pay $475 under the current CFIA fee structure; full cost recovery would see this increase to approximately $900; and CSI fees for such an establishment are about $550.
A change in the status quo is being requested by the Seed Program of the CFIA with the full support of the major, national seed associations. Government involvement in the provision of services that are available from the private sector results in duplication and inefficiencies. Continued Government intervention is no longer required, nor can it be justified.
Alternatives
1. Cost recovery
Charging fees to recover the full cost of providing services to the RSE program would be consistent with Government statements at the time of the BAP negotiations in 1995-98. It is, however, fraught with difficulties, including determination of current costs. Cost recovery is also not as acceptable as it was when the Government was initially exerting control over the budget deficit.
2. De-regulation
The seed industry is unanimous in opposing whole scale de-regulation of seed. Seed certification, by definition, requires a set of rules and procedures that must be followed in order to ensure that the product conforms to specified standards. In Canada, seed certification, while voluntary, is intricately woven into the structure of the whole Seed Program. Some varieties can only be sold by variety name if the seed has been certified, making this voluntary program essentially mandatory for the marketing of certain seeds.
3. Privatization
Privatization of seed standards is a potentially contentious issue with consequential effects that may be difficult to quantify. There is no entity that is currently willing to assume the role of the Government in establishing, maintaining and enforcing seed certification standards. It could be possible through the Standards Council of Canada (SCC) to establish seed certification standards as part of the National Standards System, e.g., the Canadian Standards Association, or another standards writing body, could assume responsibility for the standards, the Canada pedigreed grade names and the official tags. The standards for varietal purity are already established by the CSGA and referenced in the Seeds Regulations. The CSGA has not expressed any willingness to assume responsibility for the seed certification program.
4. Status quo
Without changes it is likely that the CSI will fail and CFIA will be required to administer the entire RSE program.
5. Withdrawal of CFIA from certain services
The accreditation of the CSI as a conformity verification body has reduced the Government's role in the hands-on delivery of certain services to the seed industry. Some services have essentially been privatized through a process of recognizing the CSI for the delivery of services previously delivered by Government. This includes the initial assessment of seed establishments, recommendations to the Registrar and subsequent audit of these establishments to ensure that they continue to meet the minimum standards for operation. Standards for operation, review and approval of the CSI are modelled on the International Organization for Standardization's (ISO) Guide 39 "General requirements for the acceptance of inspection bodies" to ensure due diligence and the continuing acceptance of Canadian seed in the international marketplace.
Now that the period of transition is completed, there is no longer any need for the CFIA to continue to provide services that the CSI is now accredited to provide, and in direct competition with the CSI. In order to withdraw from these activities, an amendment to the Seeds Regulations is required so as to clearly require that the services of an approved conformity verification body must be used in applying for, or renewing, any registration, licence or accreditation in respect of the Canadian seed certification and import accreditation programs.
Benefits and Costs
The current design of the Canadian seed certification program involves the CFIA as the ultimate standards body, the CSGA as the body that establishes varietal purity standards and the accreditation of seed industry personnel by the CFIA to perform specific seed certification activities (sampling, testing and grading) within a quality system (registered seed establishment or accredited seed laboratory). The CSI, in its role as an approved conformity verification body, provides assurances that personnel are competent and quality systems implemented. Entities recommended by the CSI are exempt from paying CFIA fees.
This program design is in keeping with overall Government policies elaborated over the past decade, especially those coming out of the Regulatory Review of 1992 and Program Review a few years later. Hence, the status quo is unacceptable as it could result in the re-entry of the CFIA into the day-to-day operations of RSEs at a time when the resources for such activity have been cut and the costing structure does not provide for adequate income to deploy the necessary resources.
Deregulation is also unsuitable as the seed industry has been quite clear that it is willing to assume the responsibility for a quality systems based approach to seed certification.
The privatization option has many benefits. However, the past five years have been tumultuous for the seed industry and some time must pass before it is ready to consider further dramatic changes. As the CSI develops its expertise and gains experience it may eventually be in a position to assume responsibility for the standards in addition to the inspection activities discussed herein. Alternatively, the CSGA may eventually determine that they are willing to assume the responsibility for seed certification and, in partnership with the CSI as its inspection body, take over the standards (for both seed and establishments), official tags and Canada pedigreed grade names.
The only reasonable options now, therefore, are cost recovery or withdrawal of CFIA from certain services. Both options result in increased fees for industry participants and neither option is widely acceptable to those who will have to pay the higher fees. However, they do address Government commitments to the seed industry during BAP negotiations and are deemed by the national seed organizations as appropriate.
As these two options result in broadly similar costs to the industry a full cost-benefit analysis was determined to be not warranted.
1. Cost Recovery
Implementation of full cost recovery for the seed certification and import accreditation programs would result in fees that are estimated to be between two and four times present CFIA fees. Smaller establishments would be more adversely affected as they are currently subsidized by larger establishments. Program design specifies annual partial systems audits as well as seed sampling and testing at every establishment. Although CFIA fees under full cost recovery would be significantly higher than today, they would not be considerably higher than CSI fees for some establishments. This could result in some establishments willingly paying more to remain under the CFIA program, resulting in duplication and inefficiency.
2. Withdrawal of CFIA
Implementation of an amendment to the Seeds Regulations that would require the use of an approved conformity verification body, where one exists, would enable the Seed Program to cease providing certain services in support of the seed certification and import accreditation programs. All of these services would be available from the CSI or other bodies that may wish to offer such services, if approved by the CFIA. Fees would have to be paid to the conformity verification body by any individual, establishment or laboratory that wanted to participate in the programs. In many cases those fees are more than current CFIA fees but less than what would be charged under full cost recovery.
This option would result in CSI having a monopoly on the provision of services that are required for a seed establishment to be registered, an operator licensed or a grader accredited. There is no guarantee that their prices will not rise. However, it is an industry-managed, not-for-profit organization with a primary objective of keeping costs down. It may also be subject to competition in the future.
Consultation
Seed industry and Government representatives met extensively over the 1995-98 period. Both parties clearly understood that once the CSI became fully operational the Government would no longer provide the same services in direct competition with the CSI.
Initially, it was planned to raise the fees that the CFIA charges for services under the RSE program to fully recover the cost of providing those services once the moratorium on fee increases expired in 2000. It was anticipated that these higher fees would price the CFIA out of the market for these services. The CSI wrote to the CFIA in March 2000, requesting that the fees be increased as they were now fully operational and under the impression that CFIA fees were to be increased at that time. The CSGA and the CSTA also submitted letters of support for this initiative.
Further analysis of the issue identified a number of concerns and therefore the CFIA met in April 2000, with members of the CSI board of directors and representatives of both the seed growers and the seed trade to examine the current situation and review options. A consensus was reached that a regulatory option, whereby the CFIA would cease to provide subsidized services in direct competition with the CSI, was the best option.
A 30-day comment period will be provided following prepublication in the Canada Gazette, Part I. At the time of prepublication, the Regulatory Impact Analysis Statement and the proposed amendment will be published on the CFIA Web site at http://www.cfia-acia.agr.ca.
Compliance and Enforcement
There are no compliance and enforcement issues related to this proposal. The CFIA continues to be responsible for the establishment of standards for seed and for inspection and enforcement programs related to these standards.
Contact
Michael Scheffel, Chief, Seed Standards, Seed Section, Plant Health and Production Division, Canadian Food Inspection Agency, 59 Camelot Drive, Nepean, Ontario K1A 0Y9, (613) 225-2342 (Telephone), (613) 228-6629 (Facsimile), mscheffel@ em.agr. ca (Electronic mail).
PROPOSED REGULATORY TEXT
Notice is hereby given that the Governor in Council, pursuant to subsection 4(1)(see footnote a) of the Seeds Act and section 32 of the Canada Agricultural Products Act(see footnote b), proposes to make the annexed Regulations Amending the Seeds Regulations.
Interested persons may make representations with respect to the proposed Regulations within 30 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Michael Scheffel, Chief, Seed Section, Plant Health and Production Division, Canadian Food Inspection Agency, 59 Camelot Drive, Nepean, Ontario, K1A 0Y9, Tel.: (613) 225-2342, Fax.: (613) 228-6629.
Ottawa, August 23, 2000
MARC O'SULLIVAN
Assistant Clerk of the Privy Council
REGULATIONS AMENDING THE SEEDS REGULATIONS
AMENDMENTS
1. (1) The portion of subsection 2(1)(see footnote 1) of the English version of the Seeds Regulations(see footnote 2) before the definition "biotechnology" is replaced by the following:
2. (1) The definitions in this subsection apply in these Regulations.
(2) Subsection 2(1) of the Regulations is amended by adding the following in alphabetical order:
"conformity verification body" means an independent body that has an agreement with the Agency under subsection 14(1) of the Canadian Food Inspection Agency Act to administer specific tasks, including assessing, recommending for acceptance and subsequent audit of establishments, operators, graders and laboratories that process, import, sample, test, grade or label seeds; (organisme de vérification de la conformité)
(3) The portion of subsection 2(2)(see footnote 3) of the English version of the Regulations before the definition "accredited grader" is replaced by the following:
(2) The definitions in this subsection apply in Parts I, III and IV.
2. (1) Paragraph 13.1(1)(a)(see footnote 4) of the Regulations is replaced by the following:
(a) apply for accreditation in writing to
(ii) the Registrar, if there is no conformity verification body;
(2) Section 13.1 of the Regulations is amended by adding the following after subsection (1):
(1.1) When making an application under subparagraph (1)(a)(ii), the applicant shall include the applicable fee set out in the Canadian Food Inspection Agency Fees Notice.
(3) Subsection 13.1(2)(see footnote 5) of the Regulations is replaced by the following:
(2) If an individual has obtained a mark of at least 80% on the evaluation referred to in paragraph (1)(b) and at least 90% on the evaluation referred to in paragraph (1)(c) or a mark of at least 80% on the evaluation referred to in paragraph (1)(d), the Registrar shall, either on the recommendation of a conformity verification body or, if there is no conformity verification body, on payment of the applicable fee set out in the Canadian Food Inspection Agency Fees Notice, accredit that individual as a grader for a period ending on December 31 of the following year and issue a certificate certifying that the person is an accredited grader.
(4) Subsection 13.1(5)(see footnote 6) of the Regulations is replaced by the following:
(5) Unless the accreditation of a grader has been suspended or cancelled under section 13.2, and subject to subsections 13.2(7) and (8), the Registrar shall renew the accreditation of a grader annually, on the recommendation of a conformity verification body or, if there is no conformity verification body, on payment, before January 1 of the year in respect of which the accreditation is to be renewed, of the applicable fee set out in the Canadian Food Inspection Agency Fees Notice.
(5) Section 13.1 of the Regulations is amended by adding the following after subsection (6):
(7) If a conformity verification body refuses to make a recommendation to the Registrar that an applicant's accreditation as a grader be certified or renewed, the conformity verification body shall send a notice of that decision to the applicant by registered mail, giving the reasons for the decision and advising that the applicant may request that the Registrar review the decision. The conformity verification body shall also send a copy of the notice, including the reasons, to the Registrar.
(8) The applicant may, within 30 days after the day on which the notice is received, make a written request to the Registrar for a review of the decision.
(9) The request shall include the reasons why the applicant believes that the Registrar should review the decision and may include or be accompanied by any documentation or information that the applicant considers appropriate. The request shall also include the applicable fee set out in the Canadian Food Inspection Agency Fees Notice.
(10) On receipt of the request, the Registrar shall review the decision.
(11) The review shall be conducted as informally and expeditiously as possible and in such a way as to permit the applicant to present the applicant's case and to reply to any evidence, but shall not include oral representations unless the Registrar determines that they are necessary.
(12) If the Registrar finds that the conformity verification body should have recommended that the applicant's accreditation as a grader be certified or renewed, the Registrar shall certify the accreditation or renew it, as the case may be, as if the recommendation had been made.
(13) The Registrar shall send a notice of the Registrar's decision and the reasons for it to the applicant by registered mail.
3. Subsection 13.2(9)(see footnote 7) of the Regulations is replaced by the following:
(9) If an individual's accreditation as a grader has been cancelled for a reason set out in any of paragraphs (3)(b) to (e), the Registrar shall not accredit the individual as a grader again unless 24 months have gone by since the cancellation and the individual satisfies the conditions set out in subsections 13.1(1) and (2).
4. The heading "Tuber Grade Sizes"(see footnote 8) after section 47.8 of the Regulations is repealed.
5. Section 80(see footnote 9) of the Regulations is replaced by the following:
80. (1) An application for the registration of an establishment as an approved conditioner, an authorized importer or a bulk storage facility shall be made in writing
(a) to a conformity verification body; or
(b) to the Registrar, if there is no conformity verification body.
(2) When making an application under paragraph (1)(b), the applicant shall include the applicable fee set out in the Canadian Food Inspection Agency Fees Notice.
6. The portion of section 81(see footnote 10) of the Regulations before paragraph (a) is replaced by the following:
81. If an application is made under section 80 for the registration of an establishment as an approved conditioner, the establishment has the documents referred to in subsection 86(1) and the equipment referred to in subsection 86(2) and either a conformity verification body recommends the registration or, if there is no conformity verification body, the applicant pays the applicable fee set out in the Canadian Food Inspection Agency Fees Notice, the Registrar shall
7. The portion of section 81.1(see footnote 11) of the Regulations before paragraph (a) is replaced by the following:
81.1 If an application is made under section 80 for the registration of an establishment as an authorized importer, the establishment has the documents referred to in subsection 86(1) and the facilities referred to in subsection 86(3) and either a conformity verification body recommends the registration or, if there is no conformity verification body, the applicant pays the applicable fee set out in the Canadian Food Inspection Agency Fees Notice, the Registrar shall
8. The portion of section 82(see footnote 12) of the Regulations before paragraph (a) is replaced by the following:
82. If an application is made under section 80 for the registration of an establishment as a bulk storage facility, the establishment has the documents referred to in subsection 86(1) and the facilities referred to in subsection 86(3) and either a conformity verification body recommends the registration or, if there is no conformity verification body, the applicant pays the applicable fee set out in the Canadian Food Inspection Agency Fees Notice, the Registrar shall
9. Section 83(see footnote 13) of the Regulations is repealed.
10. Section 84(see footnote 14) of the Regulations is replaced by the following:
84. Unless the registration of an establishment is suspended or cancelled under section 87 or 88, and subject to section 92, the Registrar shall renew the registration of every establishment annually, on the recommendation of a conformity verification body or, if there is no conformity verification body, on payment by the establishment, before January 1 of the year in respect of which the registration is to be renewed, of the applicable renewal fee set out in the Canadian Food Inspection Agency Fees Notice.
84.1 (1) If a conformity verification body refuses to make a recommendation to the Registrar that an establishment be registered as an approved conditioner under section 81, as an authorized importer under section 81.1 or as a bulk storage facility under section 82, or that the establishment's registration be renewed under section 84, the conformity verification body shall send a notice of that decision to the applicant by registered mail, giving the reasons for the decision and advising that the applicant may request that the Registrar review the decision. The conformity verification body shall also send a copy of the notice, including the reasons, to the Registrar.
(2) The applicant may, within 30 days after the day on which the notice is received, make a written request to the Registrar for a review of the decision.
(3) The request shall include the reason why the applicant believes that the Registrar should review the decision and may include or be accompanied by any documentation or information that the applicant considers appropriate. The request shall also include the applicable fee set out in the Canadian Food Inspection Agency Fees Notice.
(4) On receipt of the request, the Registrar shall review the decision.
(5) The review shall be conducted as informally and expeditiously as possible and in such a way as to permit the applicant to present the applicant's case and to reply to any evidence, but shall not include oral representations unless the Registrar determines that they are necessary.
(6) If the Registrar finds that the conformity verification body should have recommended that the establishment be registered as an approved conditioner, an authorized importer or a bulk storage facility, or that the establishment's registration be renewed, the Registrar shall register the establishment or renew its registration, as the case may be, as if the recommendation had been made.
(7) The Registrar shall send a notice of the Registrar's decision and the reasons for it to the applicant by registered mail.
11. (1) Subsection 95(1)(see footnote 15) of the Regulations is replaced by the following:
95. (1) Subject to section 97, an individual who wishes to be licensed as an operator of a registered establishment shall
(a) apply for a licence in writing to
(ii) the Registrar, if there is no conformity verification body; and
(b) submit to an evaluation that is set by the Registrar that measures knowledge of the principles and practices for the handling, storage, labelling and documentation of seed.
(2) The portion of subsection 95(2)(see footnote 16) of the Regulations before paragraph (a) is replaced by the following:
(2) In addition to the evaluation referred to in paragraph (1)(b), an individual who wishes to be licensed as an operator of an approved conditioner shall submit to an evaluation that is set by the Registrar that measures
(3) Section 95 of the Regulations is amended by adding the following after subsection (2):
(3) An individual is not eligible to submit to an evaluation referred to in paragraph (1)(b) or subsection (2) that is administered by the Agency unless the individual has paid the applicable fee set out in the Canadian Food Inspection Agency Fees Notice.
12. The portion of section 96(see footnote 17) of the Regulations before paragraph (a) is replaced by the following:
96. The Registrar shall, on the recommendation of a conformity verification body or, if there is no conformity verification body, on payment of the applicable fee set out in the Canadian Food Inspection Agency Fees Notice, issue a licence to the individual as an operator of an approved conditioner, a bulk storage facility or an authorized importer, as the case may be, if the individual has obtained a mark of
13. Section 97(see footnote 18) of the Regulations is repealed.
14. Section 98(see footnote 19) of the Regulations is replaced by the following:
98. Unless a licence is suspended or cancelled under section 99 or 100, and subject to section 104, the Registrar shall renew the licence of an operator annually, on the recommendation of a conformity verification body or, if there is no conformity verification body, on the payment by the operator, before January 1 of the year in respect of which the licence is to be renewed, of the applicable fee set out in the Canadian Food Inspection Agency Fees Notice.
98.1 (1) If a conformity verification body refuses to make a recommendation to the Registrar that an individual be licensed under section 96 or that an individual's licence be renewed under section 98, the conformity verification body shall send a notice of that decision to the applicant by registered mail, giving the reasons for the decision and advising that the applicant may request that the Registrar review the decision. The conformity verification body shall also send a copy of the notice, including the reasons, to the Registrar.
(2) The applicant may, within 30 days after the day on which the notice is received, make a written request to the Registrar for a review of the decision.
(3) The request shall include the reasons why the applicant believes that the Registrar should review the decision and may include or be accompanied by any documentation or information that the applicant considers appropriate. The request shall also include the applicable fee set out in the Canadian Food Inspection Agency Fees Notice.
(4) On receipt of the request, the Registrar shall review the decision.
(5) The review shall be conducted as informally and expeditiously as possible and in such a way as to permit the applicant to present the applicant's case and to reply to any evidence, but shall not include oral representations unless the Registrar determines that they are necessary.
(6) If the Registrar finds that the conformity verification body should have recommended that the individual be licensed, or that the individual's licence be renewed, the Registrar shall license the individual or renew the individual's licence, as the case may be, as if the recommendation had been made.
(7) The Registrar shall send a notice of the Registrar's decision and the reasons for it to the applicant by registered mail.
15. Subsection 104(2)(see footnote 20) of the Regulations is repealed.
16. Section 105(see footnote 21) of the Regulations is replaced by the following:
105. If an individual's operator's licence has been cancelled for a reason set out in any of paragraphs 100(b) to (e), the Registrar shall not issue an operator's licence to the individual again unless 24 months have gone by since the cancellation and the individual satisfies the conditions referred to in sections 95 and 96.
COMING INTO FORCE
17. These Regulations come into force on the day on which they are registered.
[36-1-o]
Order Adding a Toxic Substance to Schedule 1 to the Canadian Environmental Protection Act, 1999
Statutory Authority
Canadian Environmental Protection Act, 1999
Sponsoring Department
Department of the Environment
REGULATORY IMPACT ANALYSIS STATEMENT
Introduction
Recognizing that chlorofluorocarbons (CFCs) and halons deplete the ozone layer and have adverse effects on the environment, Canada, along with 23 other nations, signed the Montreal Protocol on Substances that Deplete the Ozone Layer (Montreal Protocol) on September 16, 1987. This treaty is designed to prevent a global environmental and health problem from reaching the crisis stage.
Parties to the Protocol, now totaling 173, have implemented control measures to achieve emissions reductions of Ozone- depleting Substances (ODSs). These reductions are intended to prevent damages resulting from gradual destruction of the ozone layer and thus contribute to protecting the environment, health and human life.
Since 1987, Canada has adopted regulations to meet its Montreal Protocol commitments. The Ozone-depleting Substances Regulations, 1998 (Regulations) control the import, manufacture, use, sale and export of ODSs as well as products containing ODSs.
The purpose of these amendments is to clarify the Regulations and to reflect Canada's international commitments. These amendments will:
— ensure that Environment Canada is advised of the location of any imported recovered, recycled, reclaimed or previously used controlled substances, by requiring that the importer of these controlled substances remains responsible for their re-exportation;
— require that additional information be provided for the request of permits in the Schedules of the Regulations;
— remove the requirement to submit an annual report for recovered, recycled, reclaimed or used controlled substances. Quarterly reports will still be required;
— require holders of permits for the import and/or export of used, recovered, recycled or reclaimed hydrochlorofluorocarbons (HCFCs) to provide quarterly reports. Annual reports will no longer be required;
— require that notification of transit shipments of controlled substances be made prior to their entry into Canada;
— clarify that the sale of controlled substances to foreign flag ships shall be treated as domestic sales;
— prohibit the reuse of controlled substances recovered from metered-dose inhalers, except for essential purposes;
— modify the reduction schedule for methyl bromide to reflect our international commitments;
— add bromochloromethane (Halon 1011) to the list of controlled substances and prohibit its production and consumption as of January 1, 2002; and
— prohibit the trade of HCFCs with non-Parties to the Montreal Protocol as of January 1, 2004.
These amendments will come into effect on January 1, 2001.
Alternatives Considered
No other alternatives to amending the existing Regulations have been judged appropriate to ensure that the private sector will comply with the proposed amendments. Other measures such as voluntary approaches would not ensure that the objectives of the proposed amendments will be fulfilled.
Anticipated Impacts
Administrative Amendments
Costs
Compliance with these amendments will result in additional administrative costs because the schedules of the Regulations will require the private sector to provide more information. However, it is expected that these additional costs will be somewhat offset by the reduced expenses related to not requiring annual reports on recovered, recycled, reclaimed or used ODSs.
The requirement to notify of the transit shipment of controlled substances is new in the Regulations. This requirement is expected to add minor additional administrative costs to those involved in the transit shipment of controlled substances.
Consequently, the additional administrative costs are expected to be minimal further to the implementation of these amendments.
Benefits
The administrative amendments will improve the tracking and accounting of controlled substances. These improved administrative controls will reduce the risk of releases of controlled substances into the atmosphere. Benefits of the improved administrative controls will therefore stem from the damages avoided due to a reduction in the release of ozone depleting substance.
A quantitative comparison of the costs and benefits was not possible.
Metered-dose Inhalers
The recovery of material from metered-dose inhalers for other uses is a new activity in Canada. The metered-dose inhalers amendment is targeted at banning this activity before it becomes widespread. Given that the recovery of material from metered-dose inhalers is on a small-scale, the anticipated impact on business activity of the amendment is anticipated to be negligible.
Methyl Bromide
Benefits
Benefits of Methyl Bromide (MBR) elimination stem from future costs avoided. One important category of avoided costs is avoided health damages. Essentially, reduced emissions of ODSs reduce the incidence of skin cancers, cataracts and other effects. This reduction in health effects can translate into monetary benefits.
Based on the proposed controls for MBR, monetized health benefits are estimated to be in the order of $9.9 million over the period 2001 to 2060 (1999 present value discounted at 5 percent). The breakdown of benefits is included in Table 1 below.
| Table 1: Overview of Monetized Health Benefits NPV 1999$ @ 5 percent discount rate |
|
|---|---|
| Non-melanoma cases avoided | $1.3 million |
| Melanoma cases avoided | $0.3 million |
| Deaths from skin cancer | $6.9 million |
| Cataract cases avoided | $1.4 million |
| Total | $9.9 million |
Costs
The proposed regulations will result in the elimination of 1 712 tonnes of MBR over the time period 2001 to 2020. The average cost of replacing this eliminated quantity is in the order of $4 per tonne. The costs of the Regulations are therefore estimated to be in the order of $3.8 million over a 20-year period and assuming a 5 percent discount rate.
Net Present Value
The proposed Regulations to phase out the use of MBR will result in a net benefit to Canadian society in the order of $6.1 million. The benefit cost ratio of 2.6 (9.9/3.8) indicates that the results are insensitive to changing the assumptions. This implies that the proposed MBR Regulations are socially desirable.
Bromochloromethane
Costs
The compliance with these amendments will result in additional costs to the public and private sectors due to the need to replace existing bromochloromethane total flooding (fire extinguishing) systems and to dispose of the extracted material. Given the small quantity of bromochloromethane that is being banned (504 kg) the compliance costs are expected to be minimal. Costs will be in the order of $63,050 (1999 present value).
Benefits
Usual benefits related to a reduction in ODS emissions are fatal and non fatal skin cancer cases, weakening of the immune system, damages to fisheries, agriculture and material as well as damages resulting from climate change consequences. The present value of a bromochloromethane reduction as a result of the amendment is estimated to be in the order of $12,600.
Net Present Value
Although the costs of compliance associated with the amendments are greater than the benefits (net present value of -$50,450), the overall cost is minimal.
The negative result of the net present value is insensitive to changes in either the discount rate or assumptions.
Benefits and Costs
An overview of the costs and benefits of the proposed amendments are presented in Table 2.
| Table 2: Overview of Costs and Benefits NPV 1999$ @ 5 percent discount rate |
|||
|---|---|---|---|
| item | Costs | Benefits | Net Present Value |
| Administrative Amendments | negligible | negligible | unknown |
| Metered-dose inhalers | negligible | negligible | unknown |
| Methyl bromide | $3.8 million | $9.9 million | $6.1 million |
| Bromochloromethane | $63,050 | $12,600 | -$50,450 |
Consultation
Due to the limited impacts of the proposed amendments, Environment Canada did not hold a consultation meeting on the proposed amendments. A discussion document, however, was sent to 2 500 stakeholders and posted on Environment Canada's ozone Web site. Subsequent to this consultation, Environment Canada received comments from nine companies. Four members of the National Advisory Committee (NAC) under the Canadian Environmental Protection Act, 1999 (CEPA) also provided their comments. Information was also provided to stakeholders who had questions on the proposed amendments.
Comments have been considered in subsequent changes in the current draft of the Regulations. For example, concerns were expressed regarding the proposed 30-day period to provide a notice prior to the entry of a transit shipment into Canada. Environment Canada now proposes that the notice be provided 15 days before the transit shipment enters Canada.
Comments were also received on the proposed amendment that states that the calculated level of consumption for a person shall never exceed that person's consumption allowance during the year. Some stakeholders argued that this may complicate the management of the import, manufacture and export of controlled substances. Environment Canada recognizes that the management of the import, manufacture and export of controlled substances may be difficult. However, Environment Canada believes that this proposed change will ensure the consistent application of the Regulations between allowance holders and permit holders, over and above ensuring that Canada's commitments under the Montreal Protocol are met. Other comments received, including those received from the four members of the NAC under CEPA, were supportive of the proposed amendments.
Further to publication in Part I of the Canada Gazette, any comments provided to Environment Canada will be taken into consideration prior to having these amendments published in Part II of the Canada Gazette.
Compliance and Enforcement
Since the Regulations are promulgated under the Canadian Environmental Protection Act, 1999 (CEPA), the Enforcement and Compliance Policy implemented under CEPA will be applied by CEPA enforcement officers. Among other things, the policy outlines measures designed to promote compliance, including education and information, and to promote technical development and consultation on the preparation of the Regulations.
In verifying compliance with these Regulations, CEPA enforcement officers will abide by the Enforcement and Compliance Policy, which sets out a range of possible responses to offenses: warnings, enforcement officers' guidelines, ticketing, ministerial orders, injunctions, prosecution and civil suits by the Crown for the recovery of costs in specified circumstances. If, on inspection or following the report of a suspected offense, a CEPA enforcement officer confirms that an offense has been committed, the enforcement officer will select the appropriate response, based on the following criteria:
— Nature of the offense: This includes consideration of the damage, the intent of the alleged offender, whether it is a repeat offense, and whether an attempt has been made to conceal information or otherwise subvert the objectives and requirements of CEPA;
— Effectiveness in achieving the desired result with the offender: The desired result is compliance within the shortest possible time and with no further repetition of the offense. Factors to be considered include the offender's history of compliance with CEPA, willingness to cooperate with enforcement officials and evidence of corrective action already taken; and
— Consistency: enforcement officers will consider how similar situations have been handled in determining the measures to be taken to enforce CEPA.
It is anticipated that the proposed amendments will have a negligible impact on enforcement.
Contacts
Alex Cavadias, Commercial Chemicals Evaluation Branch, Toxic Pollution Prevention Directorate, Department of the Environment, Ottawa, Ontario K1A 0H3, (819) 953-1132 (Telephone), alex.cavadias@ec.gc.ca (Electronic mail), or Arthur Sheffield, Regulatory and Economic Analysis Branch, Economic and Regulatory Affairs Directorate, Department of the Environment, Ottawa, Ontario K1A 0H3, (819) 953-1172 (Telephone), arthur. sheffield@ec.gc.ca (Electronic mail).
PROPOSED REGULATORY TEXT
Notice is hereby given, pursuant to subsection 332(1) of the Canadian Environmental Protection Act, 1999(see footnote c), that the Governor in Council proposes, pursuant to subsection 90(1) of that Act, to make the annexed Order Adding a Toxic Substance to Schedule 1 to the Canadian Environmental Protection Act, 1999.
Any person may, within 60 days after the publication of this notice, file with the Minister of the Environment comments with respect to the proposed Order or a notice of objection requesting that a board of review be established under section 333 of the Canadian Environmental Protection Act, 1999(see footnote d) and stating the reasons for the objection. All comments and notices must cite the Canada Gazette, Part I, and the date of publication of this notice, and be sent to Vic Shantora, Director General, Toxics Pollution Prevention Directorate, Environmental Protection Service, Department of the Environment, Ottawa, Ontario K1A 0H3.
A person who provides information to the Minister may submit with the information a request for confidentiality under section 313 of that Act.
Ottawa, August 23, 2000
MARC O'SULLIVAN
Assistant Clerk of the Privy Council
ORDER ADDING A TOXIC SUBSTANCE TO SCHEDULE 1 TO THE CANADIAN ENVIRONMENTAL PROTECTION ACT, 1999
AMENDMENT
1. Schedule 1 to the Canadian Environmental Protection Act, 1999(see footnote 22) is amended by adding the following after item 51:
52. Bromochloromethane, that has the molecular formula CH2BrCl
COMING INTO FORCE
2. This Order comes into force on the day on which it is registered.
[36-1-o]
S.C. 1994, c. 26, s. 65
R.S., c. 20 (4th Supp.)
SOR/96-252
C.R.C., c. 1400
SOR/96-252
SOR/96-252
SOR/2000-183
SOR/2000-183
SOR/96-252
SOR/91-526
SOR/2000-183
SOR/2000-183
SOR/2000-183
SOR/2000-183
SOR/2000-183
SOR/2000-183
SOR/2000-183
SOR/2000-183
SOR/2000-183
SOR/2000-183
SOR/2000-183
SOR/96-252
SOR/96-252
S.C. 1999, c. 33
S.C. 1999, c. 33
S.C. 1999, c. 33
NOTICE:
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