User Fees Consultation and Pre-proposal Notification

4.1 Appropriate input

Your input may include a formal complaint. This is considered appropriate input and you must indicate that your input is a formal complaint.

According to the User Fees Act, there are two categories of inappropriate complaints: frivolous and vexatious. All input will be considered with that in mind.

Input will be considered frivolous if, for instance, it contains no rational arguments or raises issues that go beyond the application of the User Fees Act. Input will be considered vexatious if it contains inflammatory language, indicates a desire to interfere with our operations, or seeks to illegitimately discredit the Canadian Grain Commission with the public or media. Input that targets specific individuals or contains offensive language will be dismissed.

4.2 How to submit your input

Your input must be received in writing between March 1, 2017 and midnight on May 1, 2017 to be considered within this process. Input may be submitted electronically, by fax or via post mail. Your input may be written in either English or French.

Input submitted by post mail should be sent to the following address. Please include a return address.

User Fees Comments
Canadian Grain Commission
600-303 Main Street
Winnipeg MB R3C 3G8

The following information is recommended when submitting your input:

• your full name
• your phone number
• your complete mailing address
• your email address
• the reason for the input, as well as how it relates to our user fees proposal
• how the proposal affects your interests, or those of the group you represent
• any additional information that is relevant

It is also recommended that you explain what type of resolution you seek, if applicable. This document is also available on our website and the Consulting with Canadians website. If you have any questions, please contact us.

Thank you in advance for your contribution.

4.3 How we use your input

We will study your input while considering:

• input received by other stakeholders on the same subject
• the legal or policy implications of your proposals, if applicable
• the cost of your proposals, and the source of funding, if applicable
• consistency with broader Government of Canada policies and priorities

You will receive a written response before our 60-day response and resolution period ends on June 1, 2017. Our goal is to provide a satisfactory response to your input. If you specify that your input is a formal complaint and it is not resolved to your satisfaction, you can request that it be examined by an independent advisory panel.

• Independent advisory panels

We are committed to an open and transparent process. Your input will be summarized in a report, so it cannot be considered confidential. If you have submitted input as an individual and do not represent a business, group or organization, your name will be protected according to the Access to Information Act and the Privacy Act.

4.4 Taking your input into account

The input submission process under the User Fees Act is not legally binding for the Government of Canada. All input received will be documented and noted in the user fees proposal tabled in both Houses of Parliament, whether or not it is studied by a panel.

4.5 Next steps

Following the end of the official consultation and complaint period and any recommendations by an independent advisory panel, we expect to move forward with a formal proposal to change our user fees. The proposal will take stakeholders’ input and any panel recommendations into consideration.

5.1 Fees and funding

Since the Canadian Grain Commission was established in 1912, we have charged fees to recover at least a portion of the costs of:

• providing services to the Canadian grain industry
• regulating grain handling in Canada

Updated user fees for Canadian Grain Commission services and licences came into effect on August 1, 2013. Prior to this fee update, fees had not changed since 1991.

The fees that came into effect in 2013 reflected the costs of providing our services and the changes in our services as a result of amendments to the Canada Grain Act. Changing our user fees created a cost recovery structure that no longer depended on annual ad hoc funding. The updated fees provided sufficient resources and more stable funding to:

• deliver our mandated services
• ensure Canada’s grain is safe, reliable and marketable
• ensure Canadian grain producers are properly compensated for grain they deliver to licensed grain companies

5.2 Authority to change fees

We have the authority to establish or change our user fees with the approval of the Governor in Council. This authority is found in Paragraph 116(1) (r) of the Canada Grain Act:

The Commission may, with the approval of the Governor in Council, make regulations, fixing, or prescribing the manner for determining, the fees for any service performed by or on behalf of the Commission and the fees for any licence issued by the Commission and prescribing the time and manner of payment of these fees.

In addition to the regulatory process, we must meet the requirements, expectations and conditions of the User Fees Act before we introduce a new user fee. Annex 1 summarizes the requirements of the User Fees Act.

5.3 Legal and policy requirements

The Canada Grain Act gives the Canadian Grain Commission the legal framework for developing and implementing user fees. The User Fees Act gives us additional requirements that we must complete before we change our user fees. To update a user fee or create a new one, we must:

• consult with stakeholders, giving them the chance to voice their concerns or suggest improvements to our services by completing a consultation process
• complete an impact assessment of the user fee
• compare the user fees and service standards with other countries, if relevant
• identify the cost to deliver the service
• identify what costs the user fee will address
• establish service standards and related performance measures
• establish an independent advisory panel to address any complaints
• report annually to Parliament

We used the following Treasury Board Secretariat documents to guide us:

• User Charging in the Federal Government – A Background Document
• Guide to Costing
• Policy on Service Standards for External Fees

The User Fees Act provides a framework for consultation on the establishment of user fees. However, changes to fees only come into effect after they have been set through the government regulatory process. As part of this process, we plan to publish the following in the Canada Gazette:

• the proposed changes to individual fees
• an impact analysis of the fees

5.4 Guiding principles for setting user fees

The Canada Grain Commission consulted with the industry about fees in 1985, 1992, 2010 and 2011. Based on these consultations, the following principles were recommended for our fees:

• costs should be recovered on an equitable basis for both eastern and western Canada
• charges should be made to users for all services wherever this is practical
• fees should be related to the costs
• those who use or benefit from our services should pay appropriate fees
• judgment should be exercised in applying minor fees to avoid excessive administration costs relative to revenue received
• where costs justify different fees, different fees should be assessed

The Canadian Grain Commission used the above principles, Treasury Board Secretariat costing guidelines and the requirements of the User Fees Act to develop proposed user fees and service standards. Accordingly, we will:

• consult stakeholders when user fees and service standards change
• set user fees to meet the costs of providing the service
• show the relationship between service standards and performance measures
• compare user fees to those in other countries where appropriate
• assess the impact of user fees on stakeholders
• minimize transaction costs in setting, collecting and administering user fees
• apply new or amended user fees consistently across services and regions
• design user fees that are easy to update and that can evolve with changes in the operating environment and annual costs

The proposed fees are set to not exceed our costs over a five-year period. The Government of Canada’s revolving fund policy requires that we balance our revenues and expenses over a specified business cycle. A revolving fund is a fund or account whose income is available to an organization to finance its operations and is not limited to any fiscal year.

User fees are established based on official inspection grain volumes from licensed terminal elevators. We have made changes to our grain volume forecasting methodology for the next five-year period. The proposed changes to our user fees are based on an updated time-series analysis model that includes 32 years of grain export data^{Footnote 2}. Our model is similar to the forecasting model used by the Federal Grain Inspection Service (our counterpart in the United States) and has been validated by several third-parties.

As actual grain volumes vary from year to year, this could result in revenue that may be more than the cost of providing services in a year where we inspect a high volume of grain, or result in revenue that is less than the costs of providing our services in a year where we inspect a low volume of grain.

7.1 Annual increases

To sustain our service standards, we anticipate an increase to our fees of 1.5% each year from 2018-2019 to 2022-2023. The 1.5% annual increase factor is based on:

• estimated future capital and operating costs
• increases to capital and operating costs experienced over the last 20 years
• estimated inflation

We will review annual increase factors as part of our review cycle to ensure that an annual 1.5% increase remains appropriate.

7.2 Regulatory approach

User fees are listed in Schedule I - Fees of the Commission in the Canada Grain Regulations. Currently, fees are fixed for individual fiscal years. Fees are either a flat amount per service, or are based on a fixed amount multiplied by the number of times a particular service is used. For example, the fee for official inspection is a fixed rate multiplied by the number of tonnes of grain inspected.

Since the Canadian Grain Commission has a fixed-fee schedule in the Canada Grain Regulations, every time we propose fee updates the regulatory process must be followed in order to update the fee table in Schedule I. The requirements of the regulatory process (to consult stakeholders and assess the impacts of proposed fee updates) duplicate the requirements that we must follow under the User Fees Act. Annex 1 summarizes the requirements of the User Fees Act.

We are proposing to replace the existing fixed-fee structure set out in Schedule I with a formula-based fee structure. This will prevent duplication and help streamline the process for updating fees in the future. Under this type of fee structure, the fee for a service or licence would be determined using a formula that is set out in the Canada Grain Regulations. A formula-based approach will allow us to forecast demand, grain volumes and service costs closer to the time of implementation.

Presenting our fees as formulas instead of publishing our fees in a fixed-fee table in Schedule I of the Canada Grain Regulations will not impact producers or the grain industry. The same information will still be available on our website. Annex 2 provides the descriptions for the proposed user fee formulas.

Other government departments use alternative formats for describing their fees in regulations. For example, the Canadian Nuclear Safety Commission uses formulas to establish many of their fees.

8.1 Producers and grain companies

We analyzed current costs and fees in the Canadian grain industry to understand how producers and industry stakeholders would be affected by the proposed changes to our user fees.

The total estimated average cost of moving wheat from a mid-prairie point to export position via the St. Lawrence ports or the Pacific seaboard was approximately $107.3 per tonne^{Footnote 5} in the 2014-2015 crop year (Table 3). This includes costs such as on-farm storage, primary elevator costs, transportation costs, marketing costs and terminal elevator costs. Canadian Grain Commission user fees are built into these costs. Our proposed fees represent approximately $1.50 per tonne, or 1% of the total estimated cost of moving wheat from a mid-prairie point to export position. This is a decrease of approximately 1% compared to the published 2017-2018 fee levels.

The impact of our proposed fee adjustments can also be compared to other fees and costs in the grain industry. We analyzed average maximum elevator charges for the 2015-2016 crop year (Table 4). These tariffs are for the services that elevators commonly provide for grain. Elevators set their own tariffs and can charge producers up to the maximum tariff they have listed. We found that our adjusted fees appear to be low compared to maximum elevator tariffs.

8.2 Canadians

Our proposed user fees are based on the Canadian Grain Commission retaining our annual appropriation of $5.37 million. This would keep the cost to the federal government, and ultimately Canadian taxpayers, at $5.37 million annually as a result of the recognition of our public benefit activities. Spread over approximately 17.7^{Footnote 6} million taxpayers or 35.9^{Footnote 7} million Canadians annually, this works out to $0.30 per taxpayer or $0.15 per Canadian for the amount of public benefit they receive from our grain quality and safety assurance activities. This amount is minimal since many Canadians consume at least one of the 20 regulated grains under the Canada Grain Act on a daily basis^{Footnote 8}.

11.1 Fee calculation

We developed our fees based on our estimated annual volume of business for each service. For example, our fee for inspection services was calculated based on the assumption that we would inspect 34.4 million tonnes of grain on outward inspection each year. The total annual direct, support and internal services costs for providing this service are $52.2 million, which results in a proposed per tonne inspection fee of $1.35. The same methodology was also used to calculate our fee for outward weighing services. The total annual direct, support and internal services costs for providing this service are $2.5 million, which results in a proposed per tonne weighing fee of $0.07.

• How costs were determined

11.2 Public benefit appropriation

Proposed user fees are based on the assumption that the Canadian Grain Commission would continue to receive an annual appropriation of $5.37 million. The annual appropriation is used to cover the costs associated with Governor-in Council appointments and to fund a portion of the Grain Research Laboratory, since these are considered public benefit activities. Given this level of appropriation, 91% of our costs would be recovered through user fees and the remaining 9% would be funded by annual appropriation.

11.3 Total projected costs and revenues

If user fees are updated as described in this document, the following table provides our activity costs and regulatory revenue estimates for the 2018-2019 to 2022-2023 fiscal years.

Phases of the User Fees Act

Definitions

Full costs

For each type of service or licence, full costs means the sum of the costs of the Canadian Grain Commission’s direct regulatory activities and indirect regulatory activities, including salaries and benefits, rental of office accommodation, supplies and equipment, professional services, communications, travel and training and less appropriation and external sources of funds.

Grain volume

Grain volume is the amount of grain that the Canadian Grain Commission expects to officially inspect and weigh annually based on a data-driven time series statistical model.

Annual inflation factor

For each type of service or licence, the annual inflation factor is based on expected increases to capital and operating costs.

Railway cars, trucks or containers inspected or weighed

For each type of service, railcars inspected or weighed is the expected number of Canadian Grain Commission inspected or weighed railcars annually.

Hourly rate other inspection services

For each type of service, hourly rate other inspection services is the full cost of other inspection services divided by the total number of hours spent by the Canadian Grain Commission on its other inspection services.

Base hours

For each type of service, base hours are the number of hours spent by the Canadian Grain Commission to perform the direct regulatory activity.

Hourly rate inspector

For each type of service, hourly rate inspector is the inspector’s hourly salary and benefits.

Licences issued

Licences issued are the expected number of licences issued annually.

Producer car applications

Producer car applications are the expected number of producer car applications that the Canadian Grain Commission will receive annually.

Documents issued

Documents issued are the expected number of documents that the Canadian Grain Commission will issue annually.

Term (t)

The term is the year of the user fee from the base year (0, 1,2,3,4, etc.).

Role in the grain industry

How user fees are amended

User fee increases

Government appropriation^{Footnote 13}

Service standards

Summary

An international comparison is limited because countries have different resource and service levels, service delivery models, user profiles, regulatory objectives and sources of revenue.

The Canadian Grain Commission found that the United States and Australia had the most comparable regulatory regimes and grain sectors. Regulators in the United States and Australia also charge fees for their services, specifically in the areas of inspection and weighing of grain and licensing of elevators and grain dealers. The proposed changes to the Canadian Grain Commission’s user fees are in line with user fees for similar types of services in the United States and Australia.

Our proposed fees for official inspection and licensing appear to be comparable to, or somewhat higher than, those charged in the United States. This is likely due to the different amount of federal appropriation that each organization receives. Approximately 9% of our revenue is from annual federal appropriation, whereas the Federal Grain Inspection Service received approximately 33% of its budget in annual federal appropriation in 2014. Our proposed service standards are in line with those of the Federal Grain Inspection Service.

Our proposed fees for inspection and licensing appear to be comparable to, or somewhat lower than, those charged in Australia. Australia increased their user fees in December 2015. The Australian Department of Agriculture and Water Resources no longer receives federal government appropriation for its services. Our proposed service standards are commensurate to those in Australia.