Vol. 150, No. 25 — December 14, 2016
SOR/2016-307 December 2, 2016
MARINE LIABILITY ACT
Marine Liability and Information Return Regulations
P.C. 2016-1082 December 2, 2016
His Excellency the Governor General in Council, on the recommendation of the Minister of Transport, pursuant to subsections 74.4(3) (see footnote a) and 117(1.5) (see footnote b) of the Marine Liability Act (see footnote c), makes the annexed Marine Liability and Information Return Regulations.
Marine Liability and Information Return Regulations
1 (1) The following definitions apply in these Regulations.
Act means the Marine Liability Act. (Loi)
Administrator means the Administrator of the Ship-source Oil Pollution Fund. (administrateur)
receive, in respect of contributing oil, means to receive the oil into tankage or storage immediately after carriage by a ship. (recevoir)
(2) For greater certainty, and for the purposes of these Regulations, contributing oil and contributing cargo are considered to be imported by sea or shipped by sea if they have been carried to or from a place that is seaward of a straight line drawn
- (a) from Cap-des-Rosiers to West Point, Anticosti Island; and
- (b) from Anticosti Island to the north shore of the St. Lawrence River along the meridian of longitude 63° W.
Ship-source Oil Pollution Fund
Consumer price index
2 (1) For the purposes of paragraphs 110(3)(b) and 113(3)(b) of the Act, the average of the Consumer Price Index for any 12-month period must be calculated by dividing by twelve the aggregate of the Consumer Price Indexes, excluding the food and energy components, for each month in that 12-month period.
(2) If the quotient obtained contains a fraction, the fraction must be expressed as a decimal fraction rounded to one digit after the decimal point as follows:
- (a) if the second digit after the decimal point is less than five, that digit shall be dropped; and
- (b) if the second digit is five or greater than five, the first digit after the decimal point must be increased by one and the second digit must be dropped.
International Fund and Supplementary Fund
3 (1) This section applies in respect of contributing oil, as defined in paragraph 3 of Article 1 of the Fund Convention, that
- (a) has been imported by sea into Canada, in bulk as cargo on a ship, and is to be unloaded at a terminal installation or port in Canada;
- (b) has been shipped by sea to a port in the United States, in bulk as cargo on a ship, has subsequently been imported into Canada by a mode of transport other than a ship, and is to be unloaded at an installation in Canada; or
- (c) has been shipped by sea from a place in Canada or from an offshore installation in the exclusive economic zone of Canada, in bulk as cargo on a ship, and is to be unloaded at a terminal installation or port in Canada.
(2) Any person who receives, in a calendar year, contributing oil in a quantity exceeding 150 000 metric tons must file with the Administrator, no later than February 28 of the following calendar year, an information return in respect of that oil.
(3) For the purposes of subsection (2), the quantity of contributing oil is the aggregate of the quantity received by the person and the quantities received by associated persons.
(4) The information return must include
- (a) the name, mailing address, email address, phone number and fax number of the person;
- (b) the total quantity of contributing oil received in that calendar year; and
- (c) where applicable, the name and address of associated persons that have received contributing oil.
International Hazardous and Noxious Substances Fund
4 (1) This section applies in respect of contributing cargo that
- (a) has been imported by sea into Canada and is to be unloaded at a terminal installation or port in Canada; or
- (b) has been shipped by sea from a place in Canada or from an offshore installation in the exclusive economic zone of Canada, and is to be unloaded at a terminal installation or port in Canada.
(2) A receiver who receives, in a calendar year, the following types and quantities of contributing cargo must file with the Minister, no later than February 28 of the following calendar year, an information return respecting that cargo:
- (a) liquefied natural gases referred to in paragraph 2(b) of Article 16 of the Hazardous and Noxious Substances Convention, in any quantity;
- (b) liquefied petroleum gases referred to in paragraph 2(c) of Article 16 of the Hazardous and Noxious Substances Convention, in a quantity exceeding 17 000 metric tons; or
- (c) any hazardous and noxious substances referred to in paragraphs 5(a)(ii), (iii), (v), (vi) and (vii) of Article 1 of the Hazardous and Noxious Substances Convention, in a quantity exceeding 17 000 metric tons.
(3) A receiver who receives, in a calendar year, contributing cargo in the form of oils referred to in paragraph 1(a)(ii) of Article 19 of the Hazardous and Noxious Substances Convention, in a quantity exceeding 17 000 metric tons, must file with the Administrator, no later than February 28 of the following calendar year, an information return respecting that cargo.
(4) For the purposes of subsections (2) and (3), the quantity of contributing cargo is the aggregate of the quantity received by the receiver and the quantities received by associated persons.
(5) The information return referred to in subsections (2) and (3) must include
- (a) the name, mailing address, email address, phone number and fax number of the receiver;
- (b) the type of contributing cargo, and the total quantity of each type of contributing cargo received in that calendar year;
- (c) if the receiver received contributing cargo as an agent or mandatary for a principal or mandator, the name of the principal or mandator, and the type and quantity of cargo received;
- (d) if the receiver received contributing cargo from an agent or mandatary, the name of the agent or mandatary and the type and quantity of cargo received; and
- (e) where applicable, the name and address of associated persons that have received contributing cargo.
5 The Marine Liability Regulations (see footnote 1) are repealed.
Coming into Force
6 These Regulations come into force on the day on which they are registered.
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the Regulations.)
Amendments to the Marine Liability Act (MLA) to implement the 2010 Protocol to the International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea (the Convention) received royal assent in December 2014. Under the Convention, Canada is required to report to the International Maritime Organization (IMO) and the Hazardous and Noxious Substances Fund (HNS Fund) the quantities of bulk hazardous and noxious substances (HNS) cargo above certain thresholds received by individual receivers in a calendar year. The amendments to the MLA require receivers of bulk HNS, in accordance with the Regulations, to report to a federal authority on information respecting quantities of HNS received. The amendments also include regulatory powers to stipulate the timing of reports to the federal authority by receivers of bulk HNS in Canada, and to specify the content of those reports.
In addition to implementing reporting requirements under the Convention, the former Marine Liability Regulations are reorganized and clarified to maintain consistency with the reporting requirements and are renamed to better reflect their content. As a result, the Marine Liability Regulations are repealed and replaced by the Marine Liability and Information Return Regulations.
Hazardous and noxious substances (HNS) are defined by the Convention by making reference to the various other international conventions and codes, such as the International Code for the Construction and Equipment of Ships Carrying Dangerous Chemicals in Bulk, which set out safety requirements for transporting various substances, materials and articles onboard ships that are deemed noxious, dangerous, and hazardous. Estimates indicate there are approximately 6 500 substances covered under the definition of HNS. This includes packaged/ containerized (i.e. not bulk) HNS that would not be subject to the reporting requirements in the Regulations, but damage caused by such substances is still covered by the Convention. Approximately 2 900 substances fall under the reporting requirements. HNS includes substances such as chemicals (e.g. chlorine, caustic soda), refined oil (e.g. aviation fuel, naphtha), acids (e.g. sulphuric acid, battery acid), fertilizers, alcohols, liquefied natural gas (LNG), and liquefied petroleum gas (LPG). The International Oil Pollution Compensation Funds has created the HNS Finder, a tool to help receivers determine whether a substance is captured by the Convention and the reporting requirements. The HNS Finder is updated as substances are added to the various conventions and codes to which the Convention refers.
There is currently no comprehensive Canadian or international liability and compensation regime for ship-sourced incidents involving HNS. Canada is party to an international liability and compensation regime covering pollution damage related to persistent oil spills, such as crude oils, fuel oils, and lubricating oils, and bunker oil from oil tankers (i.e. the 1992 Civil Liability Convention and the 1992 Fund Convention and the 2003 Supplementary Fund Protocol which create the International Oil Pollution Compensation Funds [IOPC Funds]). Spills of bunker oil from ships other than oil tankers are covered by the Bunkers Convention, to which Canada is also party. The domestic Ship-source Oil Pollution Fund (SOPF) provides additional compensation for oil pollution damage in Canada by any type of ship and from any type of oil.
The HNS Convention fills a gap in the global network of marine liability and compensation conventions by setting out a liability regime, based on the “polluter pays” principle, to compensate claimants for damage arising from the international or domestic carriage of HNS by sea. The two-tier model of compensation — similar to the international oil pollution liability and compensation regime — combines the shipowners’ strict liability, up to limits set out in the Convention, backed by compulsory insurance (tier 1), and an HNS Fund comprised of contributions from the receivers or importers of HNS cargo (tier 2). Contributions to the HNS Fund will be collected directly by the Fund, under the authority of the HNS Convention. Receivers in state parties will make contributions to the Fund mainly after an incident has taken place (i.e. post-incident — with the exception of administrative costs). The HNS Convention adds to the oil regime by covering more substances (e.g. non-persistent oils [gasoline, light diesel oil, kerosene, etc.], chemicals, noxious liquids, gases, etc.) and additional damage, such as loss of life and personal injury, related to HNS incidents.
To enter into force, the HNS Convention must be ratified by at least 12 states that have a minimum of 40 million tonnes of cargo contributing to the Fund’s general account (everything except oils, LNG, and LPG). Four of the ratifying states must have a registered ship’s tonnage of at least 2 million gross tonnes. Therefore, the Convention must be ratified by states with major ports and industries receiving HNS cargo and large ship registries, so as to financially support a global compensation fund. To ratify the Convention, Canada must have collected reports on contributing cargo (bulk HNS carried by sea) received in its ports and offshore installations for the calendar year (i.e. January 1 to December 31) preceding the year of ratification and report these to the Secretary General of the IMO upon ratification and annually thereafter so the IMO can determine whether the coming-into-force conditions have been met. To ensure that all persons who are obliged to contribute to the HNS Fund can be located and invoiced if necessary, the Convention requires all state parties to report to the Director of the HNS Fund, once the Convention comes into force, on an annual basis, details of all persons (e.g. contact details and quantities of contributing cargo) who are liable to contribute to the Fund. The Convention also imposes sanctions against contracting states, including making them liable for any financial loss, in the event of non-reporting or misreporting of HNS receipts.
The objective of the regulatory amendments is to set out the reporting requirements for bulk HNS received in Canada, as provided for in the MLA. This includes setting out the thresholds for reporting, what information is to be reported, when reporting must be done and, where necessary, to which government authority reports are to be submitted. The objective of the Regulations was also to reorganize and clarify certain parts of the existing Marine Liability Regulations to facilitate understanding and ensure consistency with the reporting requirements under the Convention.
Since the Marine Liability Regulations were opened to add the reporting requirements, the opportunity was taken to modernize the existing regulatory requirements to ensure consistency throughout. The existing Regulations are separated into two parts: the SOPF part and the pollutants part. Though no substantive changes to the existing regulatory requirements are proposed, sections would be moved around and parts would be created or repealed. Therefore, the existing Regulations would be repealed and replaced with the Marine Liability and Information Return Regulations.
The “Definitions and Interpretation” section, originally under the SOPF part, has become its own section that applies to the Regulations in their entirety. The definition of “terminal installation” has been removed, as this term is already defined in the 1992 Fund Convention. A provision has been added to the Regulations to clarify the boundaries of what qualifies as a “by sea” voyage on the east coast of Canada, as it is not always clear where the St. Lawrence River ends and the Gulf of St. Lawrence, which is considered to be part of the sea, starts. This provision draws a line between a point on the mainland near Gaspé to West Point on Anticosti Island and another line going north along the meridian of longitude 63 degrees west, from the north side of Anticosti Island to a point on the mainland. This geographic parameter is consistent with the definition of “inland waters of Canada” in the Marine Personnel Regulations. Similar provisions outlining geographic parameters for other areas in Canada were deemed unnecessary as the natural boundaries are clear.
The new Part 1 is entitled “Ship-source Oil Pollution Fund” and will retain the Consumer Price Index provisions for the calculation of the levy amount and the limit of liability for the SOPF for the purposes of sections 110 and 113 of the MLA.
The new Part 2, entitled “International Fund and Supplementary Fund,” will house the existing reporting requirements for the IOPC Funds because the reporting requirements are not related to the SOPF in any way. Some clarifications to the existing reporting requirements have been made. For example, the wording for the provision that requires persons to report the aggregate of the quantity of oil received by the person and associated persons is simplified and harmonized with the wording used for the reporting requirements for HNS. In addition, the type of information that is required to be filed as part of the reporting requirements for the IOPC Funds has been added to provide clarity to stakeholders. A new requirement has been added to require receivers to report who they are associated with. This is to ensure that data input into the electronic reporting system can be validated (i.e. to ensure that the same data is not reported multiple times) since associated persons can report separately. This is not expected to increase the burden associated with reporting for companies that receive persistent oil as there are a small number of companies that receive persistent oil above the reporting thresholds.
The new Part 3, entitled “International Hazardous and Noxious Substances Fund,” houses the HNS reporting requirements. Part 3 requires persons in Canada to report once a calendar year, to the appropriate government authority, the total quantities of bulk HNS received, if, in a calendar year, they receive
- over 17 000 tonnes of non-persistent oils;
- over 17 000 tonnes of LPG;
- any quantity of LNG cargo; and
- over 17 000 tonnes of any other bulk HNS cargo.
Receivers of HNS other than oils will report to the Minister of Transport, as per the MLA. Receivers of HNS that are oils will report to the Administrator of the SOPF, which already receives reports of persistent oils for the purposes of the IOPC Funds. This part also sets out the type of information that is required to be filed as part of the reporting requirements to provide clarity to stakeholders, including contact information for the receiver, the type and quantity of contributing cargo received and who the receiver is associated with.
Canada must also report to the HNS Fund on the quantities of persistent oil received above 150 000 tonnes. Since persons that receive this oil already report to the Administrator of the SOPF for the purposes of the IOPC Funds, an additional reporting requirement for the purposes of the HNS Fund was deemed unnecessary. The Administrator will use the existing data to meet Canada’s reporting requirements under the HNS Fund.
In the case of HNS that are not persistent oils, the HNS Convention allows for an agent/principal relationship under the definition of receiver. If the person who physically receives the HNS cargo acts as an agent for a principal, then the principal (i.e. the owner of the cargo) shall be deemed the receiver if the agent identifies the principal (this only applies if the principal is located in a state party to the HNS Convention). This allows the physical receivers of cargo, such as storage companies, to pass on the obligations to pay a levy to the principal receivers (owners of the HNS), provided they are located in a state party. To ensure that Canada collects accurate information, the Regulations require that the agent report the name of the principal and the type and quantity of cargo received on the principal’s behalf and that the principal report the name of the agent and the type and quantity of cargo received from the agent.
The Regulations require that reports on HNS receipts for a calendar year be filed on an annual basis, no later than February 28 of the following calendar year. This is consistent with the requirements to file receipts of persistent oil with the SOPF. The Regulations also require that reports of HNS that are non-persistent oils be made to the Administrator of the SOPF, given that the SOPF will make the contributions to the HNS Fund on behalf of oil receivers in Canada.
The Regulations also set out that if the quantity of a given contributing cargo received in Canada by any person is combined with the quantities of cargo within the same category (i.e. oil, LNG, LPG, or any other bulk HNS) received in Canada by any associated person and exceeds the above limits, the person must report the total quantity even though the quantities received by the person and associated persons separately would not exceed the thresholds set out in the Regulations.
Part 2 of the former Regulations prescribes pollutants for the purposes of Part 6, Division 2 of the MLA, which refers to section 180 of the Canada Shipping Act, 2001 (CSA 2001). Pollutants for the purpose of section 180 are prescribed in that statute. Therefore, it was determined that there is no need to prescribe pollutants in the Regulations.
Pursuant to paragraph 6(b) of the Red Tape Reduction Regulations, the Treasury Board is proposing to exempt these Regulations from the application of section 5 of the Red Tape Reduction Act, as Canada has no discretion regarding the requirements due to international obligations under the HNS Convention. The HNS Convention requires that Canada report to the IMO and HNS Fund. Specifically, it sets out how states will report to the IMO and the HNS Fund, including the type of information required in the reports (individual contributors), the thresholds for reporting and the quantities of each HNS received by each contributor. Therefore, Canada is required to collect this information from its HNS receivers to meet its legal obligations under the HNS Convention.
However, Transport Canada has considered the potential impacts of the HNS reporting requirements on administrative burden for businesses. Specifically, two requirements would impose additional administrative burden to approximately 50 stakeholders: compiling and reporting required data to the designated authority; and being familiar with the electronic reporting system. It is estimated that each stakeholder would need two hours annually to compile and report the necessary data, and one hour in the first year to understand the electronic reporting system.
The annualized value of the total administrative burden imposed by the Regulations on businesses is $2,266 (IN). (Note that the figure stated in the “One-for-One” Rule is an annualized value with a 2012 present value base year, as required by the Red Tape Reduction Regulations, and thus is different from the value of $3,178 as reported below.)
Small business lens
The Regulations do not fall within the area of applicability of the small business lens. Overall, the Regulations are expected to have a low impact on the economy, imposing $3,178 annual costs on all businesses (including small businesses), and it is estimated that there are no more than five small businesses that will be impacted by the Regulations. It follows that the total annualized costs on small businesses are under $1 million and costs on small businesses are not disproportionately high. Therefore, the small business lens does not apply to these Regulations, as there are insignificant costs on small business.
Transport Canada has worked closely with stakeholders in the shipping, chemical and oil industries during the development of the 2010 HNS Convention and in the lead-up to Bill C-3, which made the necessary amendments to the MLA. In 2010, Transport Canada issued a discussion paper and consulted with key stakeholders on a proposal to implement and ratify the HNS Convention. These stakeholders support a global HNS liability and compensation regime that provides the basis for legal uniformity among major maritime nations. In fact, representatives of some of the affected stakeholders testified to Parliament in support of the amendments to the MLA.
Targeted consultations on the Regulations with affected stakeholders began in March 2015. Stakeholders were generally supportive of the Regulations as they do not present a significant increase in burden to industry and they are necessary to implement the HNS Convention, which is seen as a benefit by the HNS industry, given it provides a broader base for liability and compensation than would a domestic regime. Any views expressed during consultations were taken into consideration and integrated where possible into the Regulations.
A number of stakeholders requested additional clarity on what qualifies as a “by sea” voyage on the east coast of Canada. A provision was added to the Regulations to clarify the boundary at the mouth of the St. Lawrence River.
Two minor concerns were raised with regard to the reporting requirements. First, a concern was expressed regarding the burden associated with aggregating data from all associated persons because, although companies may be associated, they are operated as independent organizations. This would create a need to coordinate amongst the associated persons to collect the necessary data. The cost associated with the burden to report was adjusted to reflect this.
Second, certain stakeholders indicated that they already report quantities of certain liquid fuels to Environment and Climate Change Canada (ECCC) under the Fuels Information Regulations, No. 1 (Fuels Information Regulations) and expressed a concern that they would effectively be double reporting. The Fuels Information Regulations require every person who produces in Canada or imports into Canada more than 400 cubic metres (approximately 300 tonnes) of liquid fuels to report the quantity produced or imported. Some stakeholders would be required to report both under the Regulations and the Fuels Information Regulations. However, there are a number of differences between the two reporting requirements that make it unfeasible to use the same reports. First, in addition to the oils that are reported under the Fuels Information Regulations, there are over 2 000 other HNS (e.g. chemicals, acids, fertilizers, alcohols, liquefied petroleum gas) that have to be reported. Second, in addition to the importers that already report under the Fuels Information Regulations, the Regulations require all persons that receive HNS by sea to report. This includes imports, but also domestic movements, which are not captured under the Fuels Information Regulations. Third, persons that are associated with one another would have to report if, together, they surpass the reporting thresholds for a particular category (persistent oil, non-persistent oil, LPG or other HNS). It is therefore possible that some stakeholders below the 300-tonne threshold of the Fuels Information Regulations would be captured. In addition to the differences in reporting requirements, the HNS Convention requires Canada to accurately report receivers and quantities of HNS received in Canada to IMO and the HNS Fund. If the information that is provided by stakeholders through the Fuels Information Regulations was used for the purposes of the Regulations, to avoid double-reporting, the volumes and densities would have to be converted to tonnes and information would come from two different sources (ECCC and the HNS reporting system).
The proposed Marine Liability and Information Return Regulations were published in Canada Gazette, Part I on Saturday, June 11, 2016, followed by a 30-day comment period. Transport Canada received comments of support from three stakeholders, including detailed comments from the Canadian Fuels Association. Their comments had three elements: (1) the Canadian Fuels Association recommended that Transport Canada share the reporting template with potential reporting parties in advance of enacting the Regulations to provide an opportunity for comments and/or clarification; (2) the Association suggested that the reporting template allowed for reporting cargo by volume, and include predetermined conversion factors to ensure accurate and consistent reporting by all parties, given that the petroleum industry often measures cargo movements by volume instead of weight; and (3) it would be appreciated if Transport Canada would alert stakeholders when a substance is added or removed from the HNS Finder.
Transport Canada will share the reporting template and work with stakeholders to implement an electronic reporting system. Given that the obligation to report will start on January 1, 2017, but the annual report will not be due until more than one year later (February 28, 2018), this will provide Transport Canada an opportunity to work with those that are required to report and allow those stakeholders to comment or seek clarification on the reporting system.
The requirement under the HNS Convention is to report in metric tonnes. Transport Canada will work with the associations to develop conversion tools, if required. Transport Canada will also alert stakeholders through the reporting system (i.e. to those stakeholders that are registered to use it), and through communicating with industry associations when a substance is added or removed from the HNS Finder.
Instruments other than regulation, such as standards, policies, and economic instruments, were deemed inappropriate to obtain the outcomes needed. They would not ensure that stakeholders report their HNS receipts, do not provide Canada certainty that it will be able to collect the necessary reports and meet its international requirements and do not provide Canada the ability to enforce non-compliance. To ratify the HNS Convention, Canada must collect reports on HNS received in Canada for the calendar year prior to ratifying. In addition, once Canada ratifies the Convention, it must continue to provide reports to the HNS Fund. If Canada does not meet this requirement under the HNS Convention, it would be subject to sanctions, such as denial of compensation for an HNS incident in Canadian waters. If Canada cannot ratify the Convention or does not meet its reporting requirements, then Canada would be without a comprehensive international liability and compensation regime for HNS incidents.
The Regulations set out a threshold of 17 000 tonnes for reporting non-persistent oils, LPG and other bulk HNS cargo, instead of the 20 000 tonne threshold on which Canada must report to the HNS Fund. This will allow for better monitoring of HNS trade flows and those parties that would be on the margins of the annual threshold that could potentially be required to pay contributions to the HNS Fund in any given year and help ensure Canada provides accurate data. This is particularly important because the expected number of receivers in Canada has been estimated to be low with many smaller receivers under the annual 20 000 tonnes threshold. The estimated number of receivers is approximated as up to 50. It is important to note that the establishment of a lower national threshold is only for the purpose of reporting annual HNS receipts to the Minister and the Administrator and not for the purpose of providing contributions to the HNS Fund. Information collected from those under the contribution threshold will not be shared with the HNS Fund in any way.
The risk of an HNS incident occurring is low and the administrative burden associated with the regulatory requirements is proportionately low. In addition, stakeholders will only be required to report once per year. Transport Canada is in the process of building an electronic reporting system to minimize reporting time and offer flexibility to stakeholders. Users would have individual profiles, login to a secure web-based portal with 24-hour access, input their data into a web form and select from a predetermined list of HNS. The reporting system would be managed by Transport Canada and data would be stored in a secure central database and accessible only by certain Transport Canada and SOPF officials granted access as administrators. Though users would only be legally required to report once a year, they could submit data as often as they wanted to (e.g. per shipment, daily, weekly, monthly).
These reporting requirements are not expected to impact other areas or sectors. As the costs associated with this proposal are minimal, it is unlikely that they would be passed onto consumers. Reports on HNS will be required annually, after goods have been received by marine transportation. It is expected that most affected stakeholders already collect the information that will be reported. Furthermore, the information that would be reported is not likely to affect whether a good is transported or not.
The Regulations allow the Government of Canada to collect the necessary information on the quantity of bulk HNS received in Canada to make it possible to ratify the HNS Convention. A cost-benefit analysis was conducted to assess the impact of the Regulations on stakeholders where a 10-year (2017–2026) time period and a 7% discount rate was used.
The costs of the Regulations on stakeholders are expected to be low. Affected stakeholders likely already record the data they would be required to report. Therefore, the incremental costs associated with the proposal include time spent compiling data from existing databases and reporting the information to the designated authority. It is estimated that up to approximately 50 stakeholders would be affected by this requirement and each business would need 2 additional hours every year to compile and report the necessary data. In addition, there are expected costs associated with familiarization with the electronic reporting system, which would take 1 hour for each of the 50 stakeholders in the first year of the 10-year period. The present value of the total costs to the industry is estimated at $22,323 over the 10-year period, corresponding to an annualized value of $3,178.
There are also expected costs to the Government for the creation of an electronic reporting system to receive reports of bulk HNS. The associated governmental costs are mainly the time spent on the development and maintenance of the system, including related corporate services, such as translation and relevant training. A factor of 10% has also been used to account for unintended costs and other uncertainty factors. Over a 10-year period, the present value of the total government costs is estimated at $1,257,388.
In summary, the present value of the total quantitative costs of the Regulations over a 10-year period is $1,279,711 including $22,323 to the affected businesses and $1,257,388 to Transport Canada, which corresponds to an annualized value of $182,202 in total.
These Regulations are also expected to have qualitative costs associated with the implementation of the HNS Convention. If Canada were to ratify the HNS Convention and it were to come into force, there would be costs to shipowners associated with obtaining compulsory insurance and applying for a compulsory insurance certificate; costs to receivers of HNS associated with initial contributions to fund the HNS Fund; possible costs associated with contributions to the HNS Fund should an incident involving HNS occur; and costs to the Government associated with the issuance of insurance certificates. These costs are expected to be low. Affected shipowners are likely to already have insurance to cover damages from the goods they transport. The administration of the HNS Fund is expected to be shared with the IOPC Funds, which already exists; therefore, major infrastructure is already in place. Contributions to the HNS Fund post-incident would be shared amongst all member states, the Convention cannot come into force until it is ratified by those states with major ports and industries receiving HNS cargo, and Canada is expected to be a relatively small receiver of HNS cargo. Transport Canada already issues insurance certificates for two other international liability conventions. Therefore, issuing additional certificates for the Convention would not have a significant impact on costs to the Government.
Regarding benefits, the implementation of the reporting requirements will make it possible for Canada to ratify the HNS Convention. Without the HNS Convention, there is significantly less compensation available for victims of HNS incidents. If Canada ratifies the Convention and it comes into force, shipowners would be required to carry compulsory insurance and would be strictly liable for damage and expenses caused by incidents of HNS from their ships (tier 1). Canadians affected by damage from a ship-source incident of HNS would also have access to the HNS Fund (tier 2). Under the HNS Convention, the combined maximum compensation under both tier 1 and tier 2 would be up to approximately $450 million. Under existing general maritime liability provisions in Part 3 of the MLA, for an average-sized ship of 20 000 gross registered tonnes, the limit of liability of shipowners for personal injury and loss of life is approximately $40 million and for other claims is approximately $20 million. There is no strict liability, meaning that claimants must establish that the shipowner was negligent or had the intent to do harm before they will be compensated for any losses.
In addition, with the creation of the HNS Fund as a source of additional compensation, it is expected that incidents and their adverse effects on property, the environment and the health of humans, animals and plants would be more likely to be effectively cleaned up and removed. This means that the long-term negative environmental and health impacts of an HNS spill would be reduced. Furthermore, with the implementation of strict liability, it is also expected that victims of HNS incidents would be less likely to go to court to recover costs, resulting in a reduction in legal costs.
Therefore, the Regulations are expected to have a positive overall impact for Canadians.
Implementation, enforcement and service standards
The Regulations will come into force on January 1, 2017. Therefore, those persons required to report under the Regulations will be required to collect the necessary data over the 2017 calendar year (January 1 to December 31), and report this data to the appropriate federal authority by February 28, 2018. Reports would be made through an electronic reporting system that would allow persons to select from a predetermined list of HNS and fill in a preset form with the information required to be reported under the Regulations.
Under the MLA, receivers of HNS are required to file reports on the quantities of HNS received, in accordance with the Regulations. As discussed, the Regulations will require receivers of HNS to report by February 28 the quantities of HNS they receive in the previous calendar year. As per the MLA, any person who fails to file the necessary report is guilty of an offence and liable on summary conviction to a fine not exceeding $1,000 for each day of default.
In addition, the Minister may enter a place where it is believed there are any records, books of account, accounts, vouchers or other documents relating to the information that is to be reported; examine anything at the place and copy or take away for further examination or copying any such documents; and require the owner, occupier or person in charge of the place to give the Minister all reasonable assistance in connection with the examination and to answer all proper questions relating to the examination and, for that purpose, require the owner, occupier or person in charge to attend at the place with the Minister. Every person who contravenes these requirements is guilty of an offence and liable on summary conviction to a fine not exceeding $100,000.
Manager/Senior Policy Advisor
International Marine Policy
330 Sparks Street