Vol. 132, No. 7 — April 1, 1998

Registration
SOR/98-152 12 March, 1998

PLANT PROTECTION ACT

Regulations Repealing the Plant Protection Fees Regulations

P.C. 1998-345 12 March, 1998

His Excellency the Governor General in Council, on the recommendation of the Minister of Agriculture and Agri-Food, pursuant to section 47 (see footnote a) of the Plant Protection Act (see footnote b), hereby makes the annexed Regulations Repealing the Plant Protection Fees Regulations.

REGULATIONS REPEALING THE PLANT
PROTECTION FEES REGULATIONS

1. The Plant Protection Fees Regulations (see footnote 1) are repealed.

2. These Regulations come into force on March 12, 1998.

REGULATORY IMPACT
ANALYSIS STATEMENT

(This statement is not part of the Regulations nor the Order.)

Description

The purpose of the Plant Protection Program is twofold: to prevent the spread of plant pests (e.g., insects and diseases) into, within, or out of Canada; and where the Minister determines that it is necessary and cost-justifiable, to take pest control measures in Canada. The program helps to maintain healthy agricultural and forestry industries valued at approximately $50 billion. The Canadian Food Inspection Agency (Agency) annually inspects imported commodities valued at approximately $4 billion. The Agency also annually certifies export products valued at approximately eight billion dollars.

In 1995, the Plant Protection Fees Regulations were enacted to offset the costs of delivering the program. The Agency has repealed the Plant Protection Fees Regulations and replaced them with the Plant Protection Cost Recovery Fees Order. The fees Order was enacted under the authority of the Financial Administration Act instead of the Plant Protection Act.

As a result of continued budget reductions, it is not possible for the Agency to maintain the present level of program delivery. Agency officials are reviewing all inspection programs with the view to cost reduction or cost avoidance. Under the Canadian Food Inspection Agency's Business Alignment Plan, equitable cost sharing agreements have been negotiated with industry.

The Plant Protection Cost Recovery Fees Order increases the fees stipulated in the Plant Protection Fees Regulations from 34% to 50%. In addition, the new fees for domestic inspection services are introduced and are calculated on a basis of 25% cost recovery. All other new fees are calculated at 50% for those import and export inspection services for which the Agency cost recovers. The fees Order includes fees for such services as laboratory tests and related services, designation of inspectors (i.e., accreditation), inspection services for domestic facilities (e.g., lumber mills, flour mills, field crop inspections) and conveyances (e.g., lakers, used containers). These services include re-inspection and follow-up actions (e.g., an inspection to verify the effectiveness of a treatment, release from detention). In addition to the fees for the issuance of an import permit or phytosanitary certificates, a fee is charged for the issuance of a Movement Certificate. The fees Order also contains a payment provision stipulating when the fees are payable.

All overtime fees, including the overtime inspection for grain contains a payment provision stipulating when the fees are payable. All overtime fees, including the overtime inspection for grain vessels, are specified in the FPI Branch Overtime Fees Order.

Alternatives

Agency officials assessed two alternatives.

Status Quo

Given the further budgetary cutbacks imposed by the government and the directions established by the Agency's Business Alignment Plan to respond to these cutbacks, maintaining current inspection services at 34% cost recovery is not a viable option.

50% Cost Recovery

Recovering 50% of the costs associated with import/export inspection services and 25% of the costs associated with domestic inspection services was considered feasible under the current economic climate. This level of cost recovery is in line with the Agency's Business Alignment Plan for 1996-97. This is the preferred option.

Benefits and Costs

Industry will continue to receive federal plant protection services at a reasonable cost. When the fees are prorated to the amount of material imported or exported, the increase in the cost per item is expected to be small, hence the price of consumer goods should not significantly increase.

This initiative also assists the Agency to maintain a program which benefits industry sectors and protects Canada against the introduction and spread of plant pests of potential economic importance. Industry incurs added benefit for continued access to export markets when pest introduction and spread is prevented.

The administrative costs associated with the collection of the fees have been incorporated into the fee levels.

The following table summarizes the estimated revenues the Agency can expect to generate under the Plant Protection Cost Recovery Fees Order.

number	ACTIVITY	ESTIMATED REVENUE ($000's)
1.	Designation (i.e., accreditation) of an inspector	28
2.	Import Permits, includes a Pest Risk Assessment	185
3.	Pre-clearance Inspections (Import Program)	30
4.	Commodity Inspection - Import Program (includes parcels sent by courier or mail)	750
5.	Fees for Ensuring Compliance with the Act and Regulations	100
6.	Laboratory Testing and Related Services (Import, Export and Domestic Programs)	200
7.	Approval of Facilities (e.g., greenhouses, nurseries, hardwood lumber facilities)	28
8.	Establishment and Conveyance Inspections	62
9.	Field Inspections (e.g., orchards, field crops, sod farms, peat bogs)	70
10.	Softwood Lumber Facility Inspections	115
11.	Commodity Inspections - Domestic Program (e.g., blueberries, used tires, forest products)	16
12.	Domestic Program Management	138
13.	Issuance of Movement Certificates	26
14.	Commodity Inspections - Export Program	1,000
15.	Issuance of Phytosanitary Certificates and Phytosanitary Certificates for Re-export	584
16.	Vessel Inspections (Grain Export Program)	530
	TOTAL	$3,862

International Trade

The Plant Protection Cost Recovery Fees Order complies with the World Trade Organization obligations for phytosanitary inspection procedures. The fee levels for inspection services are the same for imported and domestic products. The fees will be uniformly applied to all trading partners and do not exceed the actual costs of the services provided.

In the development and implementation of its cost recovery initiative, the Agency examined the effect of new service fees on international competitiveness. Although the Agency has elected to proceed with a more equitable and comprehensive package of service fees than that of the United States, the overall level of cost recovery is comparable.

Consultation

Prior to the prepublication of the Plant Protection Cost Recovery Fees Order, Canadian Food Inspection Agency officials consulted with representatives of various national industry associations and government officials from Newfoundland and Labrador, Nova Scotia, Prince Edward Island, and New Brunswick.

On September 6, 1997, both the Plant Protection Cost Recovery Fees Order and the revocation of the Plant Protection Fees Regulations were prepublished in the Canada Gazette Part I. The Canadian Food Inspection Agency distributed copies of the proposed regulations to more than 40 stakeholders. The Agency's regional offices distributed copies to regional industry groups and stakeholders for plant protection issues. Interested parties also had access to the proposed fees Order through the Internet on the Agency's website (i.e., www.cfia-acia.agr.ca).

In all, the Agency received 76 letters expressing concerns over the different provisions (i.e., fee schedules) contained in the fees Order.

The Agency received 42 letters from the general public, industry, and government officials (including members of Parliament) expressing their concerns about the proposed vehicle inspection fees at the ferry terminals in Newfoundland at Port aux Basques and Argentia. The main contentions were as follows: (1) the people being charged the fee were not the beneficiaries of the service, and (2) given that the inspections prevent the spread of pests (e.g., golden nematode, potato wart disease) to other parts of Canada, the service did not benefit Newfoundland. Concern was expressed that the fees would negatively affect Newfoundland's trade and tourism.

The Canadian Food Inspection Agency decided to further review the mandate of the stations and the operations governing the delivery of inspection services. In addition, further consultations will be undertaken on this issue. Thus, no direct vehicle inspection fees are included in the Plant Protection Cost Recovery Fees Order.

The remaining 34 letters came from the following industry sectors:

— potato producers;

— forest product manufacturers and producers;

— horticulture and nursery trades;

— grain handling operators;

— shipping/transportation.

General comments from these groups included questions about the application of the proposed fees. In response, the Agency amended the fees Order to clarify the definition of a lot and the application of the fee for review of an import permit application that requires a pest risk assessment.

The following outlines specific concerns expressed by industry and the Agency's response.

Potato Sector:

Given their understanding that the government was postponing, for 1997, the imposition of fees for services under the Seed Potato Certification Program (SPCP), potato producers expressed their concern that fee increases were being proposed. They also felt that as government inspection services are measures to assist industry and are viewed as such under the World Trade Organization Agreement, inspection services should therefore be used as a vehicle to enhance trade with foreign countries. Furthermore, producers felt that the implementation of fees would impair their ability to export potatoes.

Given the following factors, no amendments were made to the proposed fees for inspection services involving potatoes.

— In early 1997, Agency officials met with seed potato industry representatives to develop further cost avoidance and cost reduction measures as an alternative to increasing fees for services under the SPCP. The Agency acknowledged that with input from the industry, significant savings under the SPCP had been identified, resulting in postponement of the fees under the SPCP.

— The fees under the Plant Protection Cost Recovery Fees Order for inspection and laboratory services for potatoes cover phytosanitary certification, export inspections, and specific laboratory services for imported potato material. These services do not fall under the SPCP. The fees in this Order are not considered to be direct producer fees.

— These fees contribute to a portion of the Agency's costs to maintain its inspection services and support continued market access for Canadian shippers of seed potatoes.

While exporters of large shipments comprised of potatoes from a few seed sources pay an increased amount for these phytosanitary inspection services, exporters of smaller shipments from numerous seed sources have a reduced amount of fees.

A new initiative involving the delivery of potato inspection programs is being considered in response to a request from the industry in P.E.I. New initiatives to address program change would be part of the Agency's long-term business plan and will involve consultations with industry stakeholders. These initiatives may include entering into alternative delivery arrangements with industry and other government agencies under an accreditation scheme.

Forestry Sector:

Industry representatives disagreed with the proposed fees. It was their view that the Agency's involvement in the existing industry accreditation system did not warrant the proposed fees. In addition, it was suggested that the accreditation system covering the heat treatment and kiln certification programs could easily be expanded to provide the phytosanitary assurances required for other forest product exports. They also stated that the proposed fees would be an additional cost to the forestry industry and that the industry is in no position to absorb such costs.

Christmas tree exporters expressed a concern about the absence of an on-site inspection category for cut Christmas trees. This category had existed in the former Plant Protection Fees Regulations. Therefore, the proposed fees Order was amended to establish an inspection fee of $100 for Christmas tree yards where the cut trees are collected at one location prior to export. Christmas tree industry representatives disagreed with the fee category proposed for field inspection of such products.

Given the following factors, no other amendments were made to the proposed fees for inspection services involving forestry products.

— The Agency acknowledges that the Canadian Lumber Standards Accreditation Board and the lumber grading agencies incurred significant costs in the development and the implementation of the Heat Treatment and Kiln Dried Control Programs. The Agency's current audit and control role is required under the European Economic Community's (EEC) Plant Health derogation which permits entry of Canadian softwood lumber exports into EEC member countries. The derogation requires government to provide assurances that phytosanitary requirements have been addressed. The Plant Protection Cost Recovery Fees Order contributes to a portion of the Agency's costs related to international negotiations, audit, and maintenance/control actions under the phytosanitary structure that supports continued market access. However, the Agency is committed to reducing program costs by ensuring that each service is being delivered in the most efficient and cost effective manner.

— To address industry's suggestion of expanding the existing accreditation system, the Agency will explore alternative delivery arrangements involving accreditation of industry members during the fiscal year 1997-98. For example, Agency officials are currently developing an accreditation program for hardwood lumber exports that will streamline the existing program and reduce industry's inspection costs. Similarly, accreditation programs for softwood lumber and other forestry products may be developed jointly with industry for other international markets.

— The value of lumber exports in 1996 (softwood and hardwood) was approximately $13.5 billion and the proposed fees for the softwood lumber facility inspections are estimated to generate a revenue of $115,000. The Agency is open to reviewing situations where it can be demonstrated that inspection fees pose a serious economic threat to a sector.

Horticultural and Nursery Sectors:

The horticulture sector disagreed with the imposition of additional fees to help recover a portion of the costs of the Plant Protection Domestic Management Program. The sector expressed the view that in the case of these latter fees, there appears to be no relationship between the fee charged and the value provided to clients, and that the fees do not reflect Treasury Board's cost recovery policy. Sector representatives felt that the domestic program involves activities benefitting a much broader group than that being asked to pay the fees. In their opinion, the increased costs of inspection will negatively affect a producer since in current markets, profitability is marginal.

Upon further review, the Agency amended the proposed fees Order to lower the specific fees for imported shipments of fresh fruits and vegetables, based on the estimated number of shipments presented for entry into Canada. As a result, the fee for fresh fruits and vegetables, where the lot consists of not more than 250 boxes or bags, is $28. Where the lot consists of more than 250 boxes or bags, the fee is $48.

Given the following factors, no amendments were made to the proposed fees for services covering import shipments, phytosanitary export certificates, and domestic movement certificates.

— The Agency is of the view that interprovincial and international shippers of produce and other commodities benefit from the Plant Protection Domestic Pest Management Program. For example, the Agency's involvement in controlling the spread of quarantine pests permits produce shippers to market products without the imposition of phytosanitary movement restrictions. Shippers also benefit from reduced inspection costs. These benefits are supported by the surveillance activities (e.g., detection and testing) provided under the Plant Protection Domestic Management Program.

— The Agency is of the view that the fees proposed in the fees Order are consistent with the Treasury Board of Canada Secretariat's policy on cost recovery.

The horticulture sector acknowledged that the Agency's work with certain groups in the ornamental sector to set up certification and accreditation programs resulted in cost savings for the industry. For example, the Greenhouse Certification Program has been in operation since early 1997 and has resulted in significant savings for industry participants. The sector would like to see the Agency expand its efforts on this approach to other commodity groups rather than increase fees. The Agency will explore alternative delivery arrangements involving accreditation of horticulture industry members.

The nursery sector expressed the concern that the increase in fees will negatively affect the small mail order industry and that certain fees are significantly higher than the fees stipulated in the former Plant Protection Fees Regulations. The industry also requested that the fee for inspecting nurseries for apple ermine moth (based on two hectares) be reduced to accommodate nurseries smaller than two hectares. Comments were received on the proposed fees for inspections and for soil sample analysis indicating that the proposed fees are too high for such services within the quarantine zone in Saanich, B.C.

No amendments were made to the proposed fees Order to cover issuance of a phytosanitary certificate for shipments (e.g., mail order) valued under $1,600. However, in response to the concerns regarding the small mail order industry, the Agency will review situations where it can be demonstrated that inspection fees are posing a serious economic threat.

Furthermore, with the aim of reducing the Agency's program costs and inspection costs to industry, officials are developing the Canadian Nursery Certification program, which is being piloted in Ontario and British Columbia in preparation for full implementation in fiscal year 1998-1999.

The Agency amended the proposed fees for the apple ermine moth nursery field inspection to reflect the fee per hectare as requested by industry.

In response to concerns raised by producers within B.C.'s Saanich area, the Agency will review the existing methodology for soil sampling required for the certification of products from the quarantine zone. In the interim, soil samples from the zone will be analysed at the Agency's Newfoundland Soil Testing Laboratory. Fee proposals have not yet been developed for the services to be provided by this laboratory. As a result, the proposed fees Order was amended to clarify that the laboratory fees will only apply to testing done at the Centre of Expertise Laboratories at Sidney, B.C., at Nepean, Ontario, and at Charlottetown, P.E.I. In addition, the Agency has initiated new arrangements for the inspection of both equipment and cleaning activities within the zone.

The Agency is open to reviewing situations where it can be demonstrated that inspection fees pose a serious economic threat to a sector.

Grain Handling Sector:

The single letter received from this industry in eastern Canada expressed the view that the proposed fees would result in a significant increase in inspection costs. The response indicated that any cost increases would be borne by grain elevator operators, producers, and consumers, all of whom can least afford such increases - especially as markets for shipments from the Atlantic region appear to be shrinking.

Given the following factors, no amendments were made to the proposed fees for inspection services for the grain handling sector.

— The fees under the fees Order for grain and grain handling facilities contribute to a portion of the Agency's costs in providing the phytosanitary audit and maintenance/control actions.

— The Agency will further develop alternative delivery arrangements for inspection services based on a joint agreement with the Canadian Grain Commission, whereby a principle objective is to eliminate overlap and duplication. One example of this is an arrangement under which CGC inspectors collect grain samples and perform regular inspection of grain elevators for exports, and the Agency issues phytosanitary certificates and performs only systems inspections of the facilities.

Shipping/Transportation Sector:

This sector opposed the increase in ship inspection fees and therefore wanted a delay in the implementation of these fees pending consultation on the rationale for the increase and its effect on the sector.

Given the following factors, no amendments were made to the proposed fees Order for inspection services for the shipping/transportation sector.

— The Agency is of the view that the increase in the fees for ship inspections and other related inspection activities represents a portion of its costs in providing the inspection and maintenance/control actions to facilitate trade of the goods transported by this sector. Furthermore, the Agency continues to provide the level of service expected by the sector in question.

— The increased fees for ship inspection represent an equitable approach to cost recovery for all clients of plant protection inspection services. There has been no change in the existing fees for ship inspections for over 10 years, even though other cost recovery initiatives for other sectors were implemented on May 7, 1995.

The Canadian Food Inspection Agency's open and transparent consultative process complies with Treasury Board's updated Policy on Cost Recovery in every aspect.

The Canadian Food Inspection Agency will continue to conduct an annual review of the Plant Protection Program and its services. The review will continue to include consultations with all affected parties, including provincial governments.

Compliance and Enforcement

The authority to recover fees for services (e.g., testing, inspections) rendered under the Plant Protection Act is found in paragraphs 19(1)(b) and 19.1(b) of the Financial Administration Act.

Contact

Dr. Jean Hollebone, Director
Plant Protection Division
Canadian Food Inspection Agency
59 Camelot Drive
Nepean, Ontario
K1A 0Y9
Telephone: (613) 225-2342, extension 4316
FAX: (613) 228-6606

Footnote a

S.C. 1993, c. 34, s. 103

Footnote b

S.C. 1990, c. 22

Footnote 1

SOR/95-218

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