Vol. 150, No. 24 — June 11, 2016

Pest Control Products Fees Regulations

Statutory authority

Pest Control Products Act

Sponsoring department

Department of Health

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary

Issues: As the federal organization responsible for regulating pest control products in Canada, Health Canada’s Pest Management Regulatory Agency (PMRA) conducts pre-market reviews of applications to register pest control products in Canada and undertakes a range of post-market regulatory activities. Health Canada’s current fees regulations (see footnote 1) for pest control products have remained unchanged since 1997 despite the increased costs of providing these services.

Description: The proposed Pest Control Products Fees Regulations (the proposed Regulations) would replace the current fees regulations for pest control products.

Key elements of the proposal are as follows:

  • Application fees would, in most cases, increase based on an intended private sector share of approximately 30% of Health Canada’s costs to review pest control product applications.
  • An annual adjustment to application fees would increase these fees automatically by 2% on April 1 of each year.
  • New fees would be established for the review of applications to register or amend the registration of microbial agents (e.g. bacteria) and semiochemicals (e.g. pheromones), as well as chemically equivalent “generic” versions of pest control products.
  • The annual charge applied to each registered pest control product would increase to reflect inflation since 1997.

Cost-benefit statement: The proposed Regulations would have minimal impacts on applicants, registrants, and pest control product users. The proposed fees are not expected to significantly affect industry incentives to register new pest control products or maintain the registration of currently marketed pest control products. Impacts on pest control product prices paid by pesticide users are also expected to be limited, since the fees to register pest control products represent a very small percentage of the product development costs embedded in retail prices.

While the quantified net benefits of the proposal are zero, the increased revenues retained by Health Canada would result in important unquantified benefits, in particular the maintenance and, in some cases, the improvement of service standards for pre-market review activities, as well as the improvement of the timeliness and transparency of post-market review activities.

“One-for-One” Rule and small business lens: The “One-for-One” Rule and small business lens do not apply to this proposal, as changes to user fees are beyond the scope of the implementation of these rules. Moreover, since this proposal is intended to update fees that are already being paid by applicants, there would be no additional administrative burden on applicants and registrants of pest control products in Canada. The structure of the annual charges and the fee reductions for applicants to register new products with low sales volumes support small business and niche products of importance to Canadian users (e.g. the agriculture sector).

Domestic and international coordination and cooperation: Consultations have been conducted with industry stakeholders, including Canadian subsidiaries of foreign corporations. The revised fees and annual charges being proposed are similar to those in other countries and there is no expected conflict with international trade agreements or obligations. The fees and annual charges proposed by Health Canada are reasonably in line with, if not lower than, fees currently applied for similar activities by the United States Environmental Protection Agency (U.S. EPA), the foreign regulator found to be most comparable.

Health Canada’s Pesticide Cost Recovery Official Notice of Fee Proposal was approved by Parliament on May 15, 2015.

Issues

The cost recovery system for pest control products consists of two main elements: fees for the pre-market scientific assessment of applications to register a pest control product, and an annual charge applied to each registered pest control product, which primarily supports postmarket regulatory activities essential to health and environmental protection, including the cyclical reevaluation of older pest control products and special reviews.

Since the current fee regulations came into effect in 1997, the cost of pre- and post-market review activities has increased due to inflation and the growing complexity of pest control product applications. For example, pest control product applications have increased in size since 1997 from an average of 2 000 pages of data and supporting information to over 8 000 pages in 2016. There is also a greater diversity in the types of pest control products being registered, including products that contain living organisms (microbial agents). These increasing funding pressures will impact Health Canada’s ability to meet performance standards and commitments for pre- and post-market review activities.

Objectives

The proposed Pest Control Products Fees Regulations would update application fees to better reflect Health Canada’s current costs to conduct the pre-market science-based review of applications to register pest control products. This would result in increased revenues and, by retaining these additional revenues, Health Canada would be able to maintain or improve service delivery standards for reviewing pre-market pest control product applications.

The proposed Pest Control Products Fees Regulations would also update the annual charge applied to each registered pest control product to help defray the costs of conducting post-market regulatory activities. By retaining additional revenues from the annual charge increase, Health Canada would improve the timeliness and engagement with affected stakeholders on post-market regulatory decisions, which would enhance the transparency of post-market regulatory activities.

Description

Update of existing fee schedules in the Regulations

Overall, the proposed Regulations would increase pest control product application fees to cover a higher share of Health Canada’s costs to review these applications. The proposed fees would be equivalent to approximately 30%, on average, of service delivery costs, with adjustments to several specific fees where necessary to ensure they do not exceed the corresponding fee of the U.S. EPA Office of Pesticide Programs, which is the U.S. government authority responsible for pesticide regulation. Requiring a higher private sector share would have resulted in a large number of specific application fees exceeding comparable U.S. EPA fees. Such a scenario could create a disincentive to registering new pest control products in Canada.

Various countries with advanced pesticide regulatory systems collect fees, charges or levies. The U.S. EPA, the United Kingdom Chemicals Regulation Directorate of the Health and Safety Executive, and the Australian Pesticides and Veterinary Medicines Authority were identified as comparable to Health Canada with respect to the level of scientific rigor applied during the pre-market application review processes; data requirements for registration and reviews; and the types of regulatory services offered.

A comparative analysis found that while all four countries share similar regulatory processes, each country follows a distinct approach for recovering costs from applicants and registrants of pest control products. Health Canada’s approach compares most closely to the U.S. EPA’s cost recovery system. Industry stakeholders also support aligning Health Canada’s fees with the U.S. EPA, since many registrants are active in both countries. The fees proposed by Health Canada are reasonably in line with, if not lower than, fees currently charged by the U.S. EPA.

Health Canada undertook an activity-based costing exercise to identify the resources required to support each service or activity related to the review of applications subject to the proposed fees. The activity-based costing exercise focused on developing full costs consistent with Treasury Board’s Guidelines on Costing. (see footnote 2) Costs were calculated using internal time tracking data and salary costs over an 18-month period. Full costing include program services, program management, and corporate and administrative costs that support the Pest Management Regulatory Agency (PMRA) review of applications to register pest control products.

The costing exercise revealed that in many cases increased fees are appropriate, including fees for the evaluation of metabolism and residue data. In other cases, changes in scientific methodologies and administrative efficiencies have reduced costs to the PMRA and justify a reduction in fees. That is the case, for example, for the evaluation of toxicology data.

The proposed fees are listed in Schedules 1, 2 and 3 below. Details are also provided where proposed fees deviate from the 30% level of cost recovery; represent a new approach from the 1997 fees; require an explanation of rationale; or were changed as a result of stakeholder comments.

Fees for the issuance or amendment of a certificate of registration of a pest control product may be based on one or several of the components listed in Schedule 1.

Schedule 1 — Fees for applications to register, or to amend the registration of, a pest control product other than a semiochemical or microbial agent

Item

Component of Application

Proposed Fee

Current Fee

Average Cost to Health Canada

Proposed Fee / Cost to Health Canada

Explanatory Note

1

Product chemistry — active ingredient

$4,873

$1,172

$16,244

30%

N/A

2

Product chemistry — end-use product or manufacturing concentrate

$2,713

$1,172

$9,042

30%

N/A

3a

Toxicology data accompanying an application to register a pest control product that consists of or that contains a new active ingredient

$75,807

$98,248

$252,690

30%

N/A

3b

Toxicology data accompanying an application to register a pest control product — or to amend the registration of a pest control product — that contains a registered active ingredient

$15,830

$35,456

$52,768

30%

N/A

3c

Toxicology data — acute studies only

$2,954

$4,274

$9,847

30%

N/A

4a

Exposure data accompanying an application to register a pest control product that consists of or that contains a new active ingredient

$17,498

$24,384

$58,325

30%

N/A

4b

Exposure data accompanying an application to register a pest control product — or to amend the registration of a pest control product — that contains a registered active ingredient, when a new risk assessment is necessary

$5,758

$24,384

$19,192

30%

N/A

4c

Exposure data — other

$5,214

$9,742

$17,380

30%

N/A

5

Metabolism data

$28,943

$6,034

$96,475

30%

N/A

6

Residue data

$15,838

$8,448

$52,794

30%

N/A

7a

Environmental fate data accompanying an application to register a pest control product that consists of or that contains a new active ingredient

$42,685

$26,953

$142,284

30%

N/A

7b

Environmental fate data accompanying an application to register a pest control product — or to amend the registration of a pest control product — that contains a registered active ingredient, when a new risk assessment is necessary

$23,637

$26,953

$78,790

30%

N/A

7c

Environmental fate data — other

$11,546

$6,738

$38,488

30%

N/A

8a

Environmental toxicology data accompanying an application to register a pest control product that consists of or that contains a new active ingredient

$37,277

$14,882

$124,257

30%

N/A

8b

Environmental toxicology data accompanying an application to register a pest control product — or to amend the registration of a pest control product — that contains a registered active ingredient, when a new risk assessment is necessary

$23,690

$14,882

$78,966

30%

N/A

8c

Environmental toxicology data — other

$2,465

$3,720

$8,216

30%

N/A

9

Value and effectiveness data for a pest control product

$906

$906

$35,042

3%

Health Canada has recently changed processes for assessing value; costs for this new approach have not been quantified. Consequently, Health Canada proposes to maintain the existing fee at this time. Any future changes to this fee would be made following stakeholder consultation.

10

Identification of compensable data

$2,162

$ 6,486

33%

The compensable data assessment is a component of an application for a pest control product subject to the data protection provisions of the Pest Control Products Regulations.

Health Canada has committed to developing a database of compensable data that applicants can consult when seeking to register generic pest control products. This tool will ensure that greater information is shared with stakeholders. Upon its completion, the time required for the data compensation assessment will be less than it is currently. Resultant savings will be considered in future re-assessments of the application fees.

Establishing fees for microbial agents and semiochemicals

When Health Canada’s current fees came into effect in 1997, the pesticidal use of microbial agents and semiochemicals (e.g. bacteria and insect pheromones) was considered to be a new and emerging technology. Since the scientific methodologies and data requirements remained under development, it was not possible to accurately determine the full costs to review applications to register products within this class. Therefore, these substances were exempt from application fees associated with scientific review; currently, applicants are only required to pay the basic administrative fee payable for all types of applications.

Since this time, Health Canada has gained considerable experience with reviewing these products. In developing proposed fees for this class of products, Health Canada reviewed applicable U.S. EPA fees, where applications to register these types of products normally receive the maximum fee reduction available. Given the U.S. EPA’s approach to fees for these products, and to facilitate the registration of products with lower risk profiles, the proposed Canadian fees for this class of product are equal to the minimum U.S. EPA fee.

Schedule 2 — Fees for applications in respect of a pest control product that is a semiochemical or microbial agent

Item

Type of Application

Proposed Fee

Current Fee

Average Cost to Health Canada

Proposed Fee / Cost to Health Canada

Explanatory Notes

Semiochemicals, other than straight-chain lepidopteran pheromones, and microbial agents

1

Registration of a new active ingredient — food use

$7,236

$262

$197,844

3.6%

N/A

2

Registration of a new active ingredient — non-food use

$4,341

$262

$213,783

2.0%

N/A

3

Amendment of registration — new risk assessment necessary — environmental fate data, environmental toxicity data or exposure data

$2,894

$262

$176,897

1.6%

N/A

4

Amendment of registration — data required, label changes

$1,447

$262

$107,983

1.3%

N/A

5

Amendment of registration — data required, other

$1,158

$262

$79,369

1.5%

Includes change in source of active ingredient or formulation.

6

Amendment of registration — no data required

$290

$154

$7,207

4.0%

N/A

Straight chain lepidopteran pheromones

   

7

Registration of a new active ingredient

$579

$262

$39,239

1.5%

N/A

8

Amendment of registration

$290

$262

$85,982

0.3%

N/A

Fees for other applications in respect of a pest control product

Health Canada prescribes fees for a number of review activities that may not result in the registration of a pest control product, or the amendment of an existing registration, or do not otherwise fit within the fee schemes of Schedule 1 or 2. These activities and their proposed fees are described in Schedule 3.

Schedule 3 — Fees for other applications in respect of a pest control product

Item

Type of Application

Proposed Fee

Current Fee

Average Cost to Health Canada

Proposed Fee / Cost to Health Canada

Explanatory Notes

1a

Research authorization — major crops, other than research authorizations set out in paragraphs (c) and (d)

$5,080

$150

$16,932

30%

N/A

1b

Research authorization — minor use crops, other than research authorizations set out in paragraphs (c) and (d)

$5,080

$150

$16,932

30%

This fee would be required only in limited circumstances as the size of trials needed to support a minor use registration would normally fall under a research exemption or the research notification criteria.

1c

Research authorization — microbial agents, semiochemicals and any substance listed in subparagraph 1(d)(ii) of these Regulations

$1,217

$150

$16,932

7%

In order to continue to support low-volume, niche products and non-conventional products, the proposed fee would be comparable to the U.S. EPA Pesticide Registration Improvement Extension Act of 2012 fee for experimental use permit for biopesticides (straight chain lepidopteran pheromones).

1d

Research authorization — greenhouse crops and non-agricultural uses

$1,217

$150

$16,932

7%

Research authorizations are not normally required for studies conducted to support minor use registrations as the studies are usually conducted on fewer than five hectares and would normally fall under the research exemption or research notification criteria established in the Pest Control Products Regulations (with the exception of operational/demonstration trials and research in greenhouses).

The original proposed fee presented in the March 2014 consultation document was $5,080; however, research in these areas do not qualify for a fee exemption or for the research notifications fee. To not impede research on greenhouse crops, which is typically submitted by smaller companies, Health Canada proposes that the fee be aligned with fees charged for Item 1c of this schedule.

2

Research notification

$247

$0

$1,841

13%

The original proposed fee presented in the March 2014 consultation document was $552. After consideration of stakeholder comments, Health Canada reduced the proposed fee to $247 to better align with the minimum fee related to the average level of effort required by Health Canada to process an application.

3a

Registration of active ingredient to be used in pest control product manufactured only for export

$7,827

$4,601

$25,948

30%

These fees are based on relevant component costs from Schedule 1 (Items 1, 4b, and 9) to better reflect the data requirements required to do the assessment.

3b

Amendment to registration of active ingredient used in pest control product manufactured only for export

$1,133

$154

$7,498

15%

The activities associated with this type of amendment are similar to the costs associated with processing an application; the fee is set at the same level (e.g. section 3 of the proposed Regulations).

4a

Specification of maximum residue limit for a previously unexamined pest control product

$125,461

$8,448

$259,520

48%

The proposed fees for Maximum Residue Limits (MRLs) are based on resources required to conduct such reviews rather than on whether they are for domestic use or for imported food commodities, which is consistent with the goals of the World Trade Organization Sanitary and Phytosanitary Agreement. The proposed fees are significantly lower than the equivalent U.S. EPA fee for an import tolerance. It was recognized that the proposed fees should be reflective of the costs to Health Canada for evaluation services in respect of MRLs and at the same time be both affordable to industry and be reflective of the smaller Canadian market. Should a submission for a Canadian registration follow an existing import MRL, the fees for the Canadian registration would take into account the work already completed so as to not charge for components already assessed.

Under the current cost recovery framework, MRLs for new active ingredients and previously registered active ingredients are charged a fee of $8,448; however, this does not reflect the amount of work that is actually required to review these applications. Consequently, the proposed fees have been raised to $125,461 for the specification of MRLs for a previously unassessed pest control product.

4b

Specification of maximum residue limit for an unregistered use of a previously examined pest control product

$15,838

$8,448

$58,113

27%

Fees related to MRLs have been divided to better reflect the higher level of work required for previously unassessed active ingredients. Fees are now proposed to be based on all relevant component costs from Schedule 1 (basic application fee, chemistry, metabolism, human acute and chronic toxicology, and residue data) to reflect more robust data required for the application — currently only the residue data fee is charged for a previously assessed active ingredient.

Basic application fee

An updated basic application fee of $1,133 is proposed and would apply to each application made under Schedule 1 and for pest control products listed in section 3 of the proposed Regulations. The current basic application fee is $262, and the average cost to Health Canada of processing an application is $3,777. Thus the proposed fee represents 30% of the cost to Health Canada.

Minimum fee

The minimum fee is for applications that are received through streamlined processes and do not require significant science review. This proposed minimum fee would be applicable to those applications not included in either Schedule 1, 2 or 3. The proposal would see the minimum fee increased to $247 from the current amount of $150 set in 1997. This amendment to the minimum fee is directly related to the average level of effort required by Health Canada to process an application that does not require significant science review. The average cost to Health Canada for processing these applications was $825. The $247 represents approximately 30% of the average costs.

Annual adjustment of application fees

The proposed Regulations would establish an annual adjustment to increase user fees associated with applications in relation to pest control products by 2%. The annual fee increase would be applied automatically on April 1 of each year rounded up to the nearest dollar.

Consistent with other policies already in place at Health Canada, the 2% annual fee adjustment is based on a five-year weighted average of public service wage adjustments and the Core Consumer Price Index (CPI) — Weighted Index.

Annual fee adjustments are consistent with other international jurisdictions, which make adjustments to their fees to reflect changing costs and workload. For example, the U.S. EPA pesticide application fees increase by 5% every second year.

The current lack of adjustment capability has not allowed fees to keep up with inflationary increases to Health Canada costs. Increasing fees in small increments on an annual basis would provide sustainable funding, operational predictability for both Government and industry, and lessen the impact of more substantial increases at a later time.

Annual charge

The annual charge applies to each registered product. Revenues from the annual charge help defray the costs of post-market regulatory activities essential to health and environmental protection, including the cyclical reevaluation of older pest control products and special reviews. These regulatory activities help ensure that registered products continue to meet evolving scientific requirements and are adequately regulated throughout their lifecycle. Under this proposal, the maximum annual charge would be increased from $2,690 to $3,600 and the minimum annual charge would be increased from $75 to $100. These proposed increases were calculated based on applying a cost of living increase to the current minimum and maximum annual charge, taking into account similar charges in other jurisdictions, the results of the costbenefit analysis and stakeholder input.

The United Kingdom and Australia apply annual charges in combination with annual levies based on a percentage of product sales for each registered pest control product. The U.S. EPA has the authority to charge each registrant a maintenance fee up to a maximum amount, which is updated every five years through its regulations. To accommodate small business, the U.S. EPA can adjust the maintenance fees based on company size.

The proposed annual charge applied to each registered product is the lesser of $3,600 or 4% of annual sales with a minimum of $100. The policy of providing incentives to register niche products with low sales has been in effect since the cost recovery regime was first established in 1997. This policy supports the availability of niche products of importance to Canadian users (e.g. the agriculture sector).

The annual adjustment of 2% would not apply to the annual charge, as this could result in the annual charge rapidly exceeding the average comparable charge applied by the U.S. EPA.

Regulatory and non-regulatory options considered

Status quo

Health Canada considered maintaining the existing cost recovery framework. However, current fee levels do not accurately reflect the current costs to Health Canada of application review activities or the benefits accruing to industry from this service. As costs continue to increase, Health Canada’s ability to maintain service standards for application review would suffer; alternatively, Health Canada would need to reallocate funds from essential post-market review activities in order to maintain pre-market review performance.

Updated fees and annual charge (recommended option)

The new fee Regulations would better reflect the current costs of application review activities and ensure a more appropriate cost-sharing balance between Government and applicants and registrants of pest control product. By retaining the additional revenues resulting from the increased fees, Health Canada would be able to maintain or improve service delivery standards for reviewing pre-market applications as well as improve the timeliness and transparency of post-market review activities that help protect the health and environment of Canadians.

Costs and benefits

The costs and benefits of the proposed Regulations are based largely on a cost-benefit analysis commissioned by Health Canada in August 2014. (see footnote 3) The analysis assumed that there would be no change to the PMRA’s funding levels (as this is not part of the regulatory proposal itself) and estimated the impacts that the changes to the fees and annual charge presented in the Pesticide Cost Recovery PreProposal Notice (see footnote 4) would have on pest control product registrants, distributors and users. (see footnote 5)

As the proposed fees and charges have changed since the 2014 analysis was commissioned, the cost-benefit statement (below) has been updated accordingly. The cost-benefit statement has also been updated to reflect the fact that the increased revenues from the proposed fees and charges would be retained by Health Canada under the current proposal.

Costs

Industry responses to a survey that was part of the cost-benefit analysis suggested that on average, 50% of application fee and annual charge increases would be passed through the supply chain to pest control product users. Based on this assumption, it is estimated that the proposed Regulations would reduce net revenues of pest control product registrants by 0.8% and lead to a 0.11% increase in pest control product prices paid by users.

Industry survey respondents also indicated that increased application fees would have a small effect on incentives to register new pest control products, with an estimated reduction in pest control product applications of no more than 2 to 6%. Based on an extrapolation of responses, it is estimated that roughly 150 (approximately 2%) pest control products currently registered would be discontinued by registrants as a result of the proposed increase to the annual charge, most of which have no sales or very limited sales in Canada.

Benefits

A number of non-quantified benefits would result from the fee increases and Health Canada retaining the additional revenues. By establishing most fees at approximately 30% of costs, the Regulations would ensure a more appropriate cost-sharing balance between the beneficiaries of this service: specifically, pest control product registrants, who benefit commercially from access to the marketplace following a registration decision; and the public, which benefits from access to innovative products to control pests.

Increased revenues from the new application fees would also allow Health Canada to maintain or improve service delivery standards for reviewing pest control product applications. Improvements would include reduced review timelines for applications to amend formulations (from 9 months to 6 months) and reduced timelines to generate compensable data lists (from 450 days to 365 days). These improvements would contribute to greater predictability and timeliness of pre-market reviews.

Revenues from the annual charge are used to help defray the costs of post-market regulatory activities such as the cyclical re-evaluation of older products (15 years after the last major registration decision) so that the PMRA can ensure that registered products continue to meet modern scientific standards and conducting special reviews any time there are reasonable grounds to believe that a registered product poses unacceptable risks.

By retaining the additional revenues, Health Canada’s capacity to improve the timeliness and engagement with affected stakeholders on post-market regulatory decisions would enhance the transparency of post-market regulatory activities. Faster post-market decisions would support timely identification of potential health and environmental risks and implementation of risk management measures where unacceptable health and environmental risks are identified.

Projected revenues

Overall, the proposal would result in approximately $4.3 million in additional revenue in the first year, revenue that would be retained by Health Canada. Health Canada currently collects approximately $9 million in user fees and annual charges for services related to pest control products; therefore, it is anticipated that the net revenues generated by the proposal would increase to $13.8 million annually.

Projected revenues (millions of dollars)

Revenue Sources

Current Average Revenues

Projected Revenues — New Fees

Year 1

Year 2

Year 3

Year 4

Year 5

Based on estimated annual increase of 2% to application fees

Application fees

3.6

6.3

6.4

6.6

6.7

6.8

Annual charge

5.4

7.0

7.0

7.0

7.0

7.0

Total revenues

9.0

13.3

13.4

13.6

13.7

13.8

Cost-benefit statement

Category

Base Year 2016

Final Year 2020

Total (PV) [7%]

Annualized Average

 

(M $C)

(M $C)

(M $C)

(M $C)

Quantified impacts (in Can$, 2016 price level / constant dollars)

Monetized

       

Benefits — Increased revenues to PMRA

4.30

4.80

33.90

4.56

Costs — Registrants

Application fees

1.35

1.60

11.30

1.48

Costs — Registrants

Annual charge

0.80

0.80

5.60

0.80

Costs — Consumers

Higher product prices

2.15

2.40

17.00

2.28

Net benefits

0.00

0.00

0.00

0.00

Quantified but non-monetized

Benefits

n/a

Costs

  • Small reduction in future registrations of Technical Grade Active Ingredients and pest control products as a result of proposed application fees (no more than 2 to 6%)
  • Small increase in the number of products discontinued or not renewed (estimated at approximately 2%)

Unquantified

Benefits

  • Increased equity resulting from a shift in costs to direct beneficiaries
  • Fees and charges that better reflect actual service costs
  • Increased funding for core activities, which will result in
    • Improved timeliness and transparency of post-market regulatory activities
    • Maintained or improved service delivery standards for pre-market reviews

Costs

n/a

Dealing with uncertainty/risk

 
  • Health Canada developed the estimate of the incremental fees
  • Monte Carlo simulation not undertaken — monetized net benefits are zero because the regulatory proposal involves a shift in the allocation of costs, not the generation of new costs

As summarized in the cost-benefit statement, the monetized costs (i.e. to pest control product applicants and registrants) equal the monetized benefits (i.e. to Government/Canadians) because the proposal involves a shift in the allocation of costs, not the generation of new costs.

“One-for-One” Rule

The “One-for-One” Rule does not apply to this proposal, as user fees are considered to be out of scope of the “One-for-One” Rule as stated in Appendix B of Controlling Administrative Burden That Regulations Impose on Business: Guide for the ‘One-for-One’ Rule. (see footnote 6)

Small business lens

As stated in Hardwiring Sensitivity to Small Business Impacts of Regulation: Guide for the Small Business Lens, “taxes, fees, levies and other charges, because they constitute transfers from one group to another, are not considered to be compliance or administrative costs, whether they are intended as incentives to foster compliance and change behaviour or whether their purpose is to recover the costs of providing a service.” (see footnote 7) Therefore, the small business lens does not apply to this proposal.

Nevertheless, Health Canada recognizes that, in certain situations, fees might result in a burden on certain groups, or individual fee payers. Health Canada’s fee structure has always included measures not to discourage the availability of products to Canadians, as well as to encourage innovation and access to new products. The proposal includes mechanisms that would continue to provide reductions to pre-market review fees and minimum annual charges where products have low sales volumes, thereby supporting small businesses and niche markets.

Consultation

Informal stakeholder consultations on the modernization of the pest control product cost recovery regime began in 2010. Consultations were conducted with registrants of pest control products, importers, exporters and distributors, Canadian agriculture producers and associations, federal and provincial government departments and the Canadian public. Input from these consultations was used to develop the proposed fee structure.

Regular bilateral and multilateral consultations (with registrants of pest control products, Canadian agriculture producers and associations, federal and provincial government departments and the Canadian public), including discussions of proposed fees, occurred between 2010 and 2015 via meetings of the Economic Management Advisory Council and the Pest Management Advisory Council (Health Canada’s PMRA advisory bodies) as well as formal presentations to committees of CropLife Canada and the Canadian Consumer Specialty Products Association (i.e. the main industry associations for the pest control product industries).

On March 14, 2014, the Pesticide Cost Recovery Consultation — A Consultation Document in Advance of Parliamentary Proposal (see footnote 8) was published and posted on the Health Canada Web site and provided a 45-day comment period. As part of the consultation process, Health Canada hosted two webinars (on March 19, 2014, and April 17, 2014) to provide stakeholders with an overview of the proposal as they developed comments on the proposal for submission to Health Canada.

All stakeholders who commented on the use of the increased revenue supported Health Canada’s PMRA reinvesting it. Furthermore, they preferred that the Government’s share of the funding not be eroded through further reductions in appropriations. Some stakeholders suggested working towards better alignment of global joint review timelines and costs. Most stakeholders were in agreement with regular incremental fee adjustments to eliminate the need for large increases in the future. Some specific comments suggested conducting a periodic costing analysis to ensure all fees and charges take into account associated improvements, efficiencies and processes, and actual resources required. Other stakeholder priorities identified for further investment included maintaining or improving pre-market review performance standards, participating in international regulatory and science policy development, resolving pest control product related trade irritants that affect the agricultural sector, and modernizing the PMRA’s electronic infrastructure.

These comments were received and considered by Health Canada, and in some cases resulted in changes to the fee proposal before the pre-proposal notice User Fees Act, the Pesticide Cost Recovery Pre-Proposal Notice — A Consultation Document in Advance of Parliamentary Proposal was published on December 12, 2014.

Official notice of fee proposal

In accordance with the requirements of the User Fees Act, the Pesticide Cost Recovery Pre-Proposal Notice — A Consultation Document in Advance of Parliamentary Proposal (see footnote 9) was published on Health Canada’s Web site for 45 days from December 12, 2014, to January 27, 2015.

During the complaint resolution period between December 2014 and January 2015, Health Canada hosted a webinar to provide an overview of the Pesticide Cost Recovery Pre-Proposal Notice. Health Canada also consulted bilaterally with the seven stakeholders who provided 14 comments regarding various aspects of the proposal, including administrative fees for processing applications; timelines for generic registration and compensable data; research authorization fees; fees for the establishment of maximum residue limits; service standards and penalties; and harmonization with international regulators. In addition, comments were received on the need for fee reductions for small business, exemptions for those activities for which there would be no fees charged and associated activities funded by the annual charge. Lastly, some stakeholders wanted clarification regarding the intended use of the additional funding obtained through enhanced cost-recovery fees.

All comments were resolved within 30 days after the expiry of the complaint resolution period set out in the December 2014 Pesticide Cost Recovery Pre-Proposal Notice. Comments were addressed either through further clarification of the proposal or, in some cases, through changes to some specific fees or service standards. For example, for Item 10 of Schedule 1, the fees were reduced from $21,617 with a 120-day timeline to $2,162 with a timeline of 365 days. The fees for research authorizations for greenhouses and non-agricultural uses [item 1(d) of Schedule 3] were reduced from $5,080 to $1,217.

Tabling in Parliament

Consistent with subsection 4(2) of the User Fees Act, on April 23, 2015, the Senate Standing Committee on Agriculture and Forestry reviewed Health Canada’s proposal to Parliament for user fees and service standards for pest control products (entitled Pesticide Cost Recovery Official Notice of Fee Proposal) and recommended that it be approved. The proposal was approved without amendment by Parliament on May 15, 2015.

Rationale

This regulatory proposal would repeal the current Regulations Prescribing the Fees to be Paid for a Pest Control Product Application Examination Service Provided by or on behalf of Her Majesty in Right of Canada, for a Right or Privilege to Manufacture or Sell a Pest Control Product in Canada and for Establishing a Maximum Residue Limit in Relation to a Pest Control Product. The repealed Regulations would be replaced with the new Pest Control Products Fees Regulations. Revenues from the updated fees would establish an appropriate balance between public and private contributions for the assessment of pest control products and help Health Canada to maintain or improve its performance standards for pre-market science reviews. The timeliness and transparency of post-market review activities would also be improved as a result of this proposal. This would benefit consumers and industry (pest control product applicants, registrants and users), while continuing to prevent unacceptable risks to human health and the environment.

Implementation, enforcement and service standards

Implementation

The proposed Regulations would come into effect the day they are registered. Applications received before the proposed Pest Control Products Fees Regulations come into force would continue to be subject to the existing fee regime.

Enforcement

Any unpaid fees or charges by applicants or registrants would be collected according to standard practice. Furthermore, the PMRA can refuse to consider applications from registrants if they fail to pay a fee or charge as required under the proposed Regulations, in accordance with paragraph 23(1)(b) of the Pest Control Products Act.

Service standards

The 2012 Treasury Board of Canada Secretariat Policy on Service Standards for External Fees supports the User Fees Act in relation to service standards. The policy states that the provision of services external to the federal government, for which fees are collected, must have service standards that are measurable and relevant for paying stakeholders. These service standards must be developed in consultation with paying and non-paying stakeholders. The service standards and consultation feedback must also be reported to Parliament annually. Departments must have a monitoring system in place to ensure that fee-related activities are subject to audit.

When the current fee Regulations were first established in 1997, a Management of Submission Policy (MOSP) was published that established service standards in relation to pest control product applications. In 2010, revised service standards were made available for stakeholder consultation. In 2013, the revised MOSP (see footnote 10) was published on Health Canada’s Web site. Performance against service standards is included in an annual report to Parliament required by the Pest Control Products Act. The standards are also discussed with stakeholders twice a year during meetings of Health Canada’s Economic Management Advisory Committee.

Health Canada will process submissions to register pest control products or amend registrations in accordance with the legislative framework and with the principles of its MOSP.

Examples of service standards set out in the MOSP

Category A submission (includes new active ingredients, new MRLs and major new use registration):

Category B submission (includes new formulations, changes in current formulations, new hosts and/or pests added to existing products):

Examples of similar service standards in the United States

Although a direct comparison is not possible due to the country-specific registration systems, the following examples provide an approximate range of service standards for similar application types in the United States.

Category A submission:

Category B submission:

Updates to MOSP

With the introduction of the proposed fees and as indicated in the Pesticide Cost Recovery Pre-Proposal Notice, it is anticipated that the MOSP will be updated to align with the coming into force of the new fees Regulations and will include the following:

Performance measurement and evaluation

Health Canada is committed to service improvements and reports regulatory performance against service standards as part of the Departmental Performance Report. (see footnote 11) In addition to the Departmental Performance Reports, Health Canada also reports annually to stakeholders through its Pest Management Advisory Council and the Economic Management Advisory Committee.

In addition to the above-mentioned reporting requirements, Health Canada must report to Parliament annually on performance against service standards.

As required under section 7 of the User Fees Act, Health Canada must report annually to Parliament on associated costs, revenues and performance. Health Canada will continue to provide this information through its annual report to Parliament, as is also required by the Pest Control Products Act.

As required under the User Fees Act, the user fees charged by Health Canada would be reduced for not meeting established service standards the following year. The fee reductions will be determined based on the average time to complete all submission types falling under each performance timeline. If the average time exceeds the published time by greater than 10%, a fee reduction equivalent to the amount by which the target is missed, up to a 50% reduction in the fee, will be applied to the relevant submission types in the year following the annual report being tabled.

It is anticipated that a review of the proposed Regulations will take place in three to five years, consistent with the Cabinet Directive on Regulatory Management. (see footnote 12)

Contact

Jordan Hancey
Health Canada
Pest Management Regulatory Agency
Policy, Communications and Regulatory Affairs Directorate
2720 Riverside Drive
Ottawa, Ontario
K1A 0K9
Email: pmra.regulatory.affairs-affaires.reglementaires.arla@hc-sc.gc.ca

PROPOSED REGULATORY TEXT

Notice is given that the Governor in Council proposes to make the annexed Pest Control Products Fees Regulations pursuant to

Interested persons may make representations concerning the proposed Regulations within 75 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 Jordan Hancey, Manager, Policy Development, Regulatory Affairs, Pest Management Regulatory Agency, 2720 Riverside Drive, Ottawa, Ontario K1A 0K9 (email: pmra.regulatory.affairs-affaires. reglementaires.arla@hc-sc.gc.ca).

Ottawa, June 2, 2016

Jurica Čapkun
Assistant Clerk of the Privy Council

Pest Control Products Fees Regulations

PART 1

Fees to be Paid for the Examination of an Application in Respect of a Pest Control Product
Non-Application

Section 2

1 Section 2 does not apply to any of the following:

Fees

Registration or amendment — Schedule 1

2 (1) The fee payable for the examination by the Minister of an application to register a pest control product — other than a type of application set out in Schedule 2 or 3 — or to amend such a registration that includes a component set out in column 1 of Schedule 1 is the fee set out in column 2.

More than one component — Schedule 1

(2) If an application referred to in subsection (1) includes more than one component set out in column 1 of Schedule 1, the fee payable is the sum of the applicable fees set out in column 2 for all of the included components.

Semiochemicals and microbial agents — Schedule 2

(3) The fee payable for the examination by the Minister of an application in respect of a pest control product that is a semiochemical or microbial agent set out in column 1 of Schedule 2 is the fee set out in column 2.

Applications filed together — Schedule 2

(4) If more than one type of application set out in column 1 of Schedule 2 is filed in respect of the same pest control product at the same time, the fee payable is the highest of the applicable fees set out in column 2 in respect of those applications.

Other applications — Schedule 3

(5) The fee payable for the examination by the Minister of an application in respect of a pest control product set out in column 1 of Schedule 3 is the fee set out in column 2.

Applications filed together — Schedule 3

(6) If more than one type of application set out in column 1 of Schedule 3 is filed in respect of the same pest control product at the same time, the fee payable is the highest of the applicable fees set out in column 2 in respect of those applications.

Processing

3 The fee payable for the processing by the Minister of any of the following applications, other than an application to renew a registration, is $1,133:

Applications not mentioned in schedules

4 The fee payable for the examination by the Minister of an application in respect of a pest control product, other than an application to renew a registration, that does not include a component set out in Schedule 1, that is not mentioned in Schedule 2 or 3 and that does not require an evaluation is $247.

Renewal

5 The fee payable for the examination by the Minister of an application to renew the registration of a pest control product is $80.

Annual Adjustment of Fees

Fee adjustment

6 Every fee set out in this Part is to be increased on April 1 of each year by 2%, rounded up to the nearest dollar.

Timing of Payment

Meaning of preliminary review

7 (1) In this section, preliminary review means a review by the Minister of the information that is submitted with an application to determine whether the information is sufficient to enable the Minister to conduct an evaluation of the application.

Payment — $2,500 or less

(2) When the total fee that is payable for an application under this Part is $2,500 or less, it must be paid when the application is made.

Payment — more than $2,500

(3) When the total fee that is payable for an application under this Part is more than $2,500, it is payable as follows:

Preliminary review and evaluation

(4) The preliminary review and the evaluation begin on receipt of the relevant payments.

Fee Reduction

Definitions

8 (1) The following definitions apply in this section.

actual gross revenue means the amount that the person who makes an application to register a pest control product referred to in subsection 2(1) earns during the fee verification period from the sales in Canada of that product. (recettes brutes réelles)

anticipated gross revenue means the amount that the person who makes an application to register a pest control product referred to in subsection 2(1) expects to earn during the fee verification period from the sales in Canada of that product. (recettes brutes prévues)

fee verification period, in respect of a pest control product for which an application for a fee reduction is approved under subsection (3), means the period that begins on the day on which the pest control product is first sold in Canada as a registered pest control product or as an active ingredient in a registered pest control product and that ends three years after that day. (période de vérification des frais)

sales in Canada means

Application for fee reduction

(2) A person who makes an application to register a pest control product referred to in subsection 2(1) may apply at the same time to the Minister for a reduction of the fee that is payable.

Conditions

(3) The Minister must approve a fee reduction if the following conditions are met:

Recalculation of fee

(4) If the Minister approves a fee reduction, the fee that is payable at the end of the fee verification period is the lesser of

Payment when application is made

(5) A person who applies for a fee reduction under subsection (2) must, at the time of making the application, pay the higher of the following amounts in accordance with subsections 7(2) or (3):

Records of sales in Canada

(6) Within 60 days after the end of the fee verification period, the person must provide the Minister with the records of the sales in Canada, prepared in accordance with generally accepted accounting principles and certified by the individual responsible for the person’s financial affairs.

Reconciliation — balance owing

(7) If the records of the sales in Canada establish that the amount that the person paid under subsection (5) is less than the amount of the fee calculated in accordance with subsection (4), the person must pay the balance within 60 days after the end of the fee verification period.

Reconciliation — overpayment

(8) If the records of the sales in Canada establish that the amount that the person paid under subsection (5) is more than the amount of the fee calculated in accordance with subsection (4), the Minister must repay the amount of the overpayment to the person.

Audited records

(9) If the Minister determines, on the basis of any information that is available to the Minister, that the certified records of the sales in Canada are not adequate to determine the person’s actual gross revenue, the Minister may require that the person provide records of the sales in Canada that have been audited by a qualified independent auditor.

When records inconsistent

(10) If there is any inconsistency between the certified records and the audited records, the fee payable is to be based on whichever records show the higher amount of sales in Canada.

When records not submitted

(11) If the person does not submit the records in accordance with subsections (6) and (9), the fee payable is the total fee calculated under subsections 2(1) and (2) and section 3, minus any portion of the fee that the person paid under subsection (5).

PART 2

Annual Charge

Payable annually

9 (1) A registrant must pay each year, in respect of every pest control product that is registered in their name on April 1 of the year, an annual charge that is the lesser of

Timing of payment

(2) The annual charge is payable as follows:

Certified records

(3) When the annual charge is paid under paragraph (1)(b), the registrant must, when paying it or when making the first quarterly instalment, provide the Minister with the records of the sales in Canada for the fiscal year referred to in that paragraph, prepared in accordance with generally accepted accounting principles and certified on behalf of the registrant by the individual responsible for the person’s financial affairs.

Audited records

(4) If the Minister determines, on the basis of any information available to the Minister, that the certified records are not adequate to calculate the annual charge payable, the Minister may require that the registrant provide records of the sales in Canada that have been audited by a qualified independent auditor.

When records inconsistent

(5) If there is any inconsistency between the certified records and the audited records, the annual charge payable is to be based on whichever records show the higher amount of sales in Canada.

When records not submitted

(6) If the registrant does not submit the records in accordance with subsections (3) and (4), the annual charge that is payable by the registrant is $3,600.

PART 3

Repeal and Coming into Force
Repeal

10 The Regulations Prescribing the Fees to be Paid for a Pest Control Product Application Examination Service Provided by or on behalf of Her Majesty in Right of Canada, for a Right or Privilege to Manufacture or Sell a Pest Control Product in Canada and for Establishing a Maximum Residue Limit in Relation to a Pest Control Product (see footnote 13) are repealed.

Coming into Force

Registration

11 (1) These Regulations, except section 6, come into force on the day on which they are registered.

Section 6

(2) Section 6 comes into force on April 1 of the year following the year in which these Regulations are registered.

SCHEDULE 1

(Subsections 2(1) and (2), sections 3 and 4 and subsection 8(1))

Fees for Applications to Register, or to Amend the Registration of, a Pest Control Product Other Than a Semiochemical or Microbial Agent

Item

Column 1

Component of Application

Column 2

Fee ($)

1

Product chemistry — active ingredient

4,873

2

Product chemistry — end-use product or manufacturing concentrate

2,713

3

(a) Toxicology data accompanying an application to register a pest control product that consists of or that contains a new active ingredient

75,807

(b) Toxicology data accompanying an application to register a pest control product — or to amend the registration of a pest control product — that contains a registered active ingredient

15,830

(c) Toxicology data — acute studies only

2,954

4

(a) Exposure data accompanying an application to register a pest control product that consists of or that contains a new active ingredient

17,498

(b) Exposure data accompanying an application to register a pest control product — or to amend the registration of a pest control product — that contains a registered active ingredient, when a new risk assessment is necessary

5,758

(c) Exposure data — other

5,214

5

Metabolism data

28,943

6

Residue data

15,838

7

(a) Environmental fate data accompanying an application to register a pest control product that consists of or that contains a new active ingredient

42,685

(b) Environmental fate data accompanying an application to register a pest control product — or to amend the registration of a pest control product — that contains a registered active ingredient, when a new risk assessment is necessary

23,637

(c) Environmental fate data — other

11,546

8

(a) Environmental toxicology data accompanying an application to register a pest control product that consists of or that contains a new active ingredient

37,277

(b) Environmental toxicology data accompanying an application to register a pest control product — or to amend the registration of a pest control product — that contains a registered active ingredient, when a new risk assessment is necessary

23,690

(c) Environmental toxicology data — other

2,465

9

Value and effectiveness data for a pest control product

906

10

Identification of compensable data

2,162

SCHEDULE 2

(Section 1, subsections 2(1), (3) and (4) and sections 3 and 4)

Fees for Applications in Respect of a Pest Control Product that is a Semiochemical or Microbial Agent

Item

Column 1

Type of Application

Column 2

Fee ($)

Semiochemicals, other than straight-chain lepidopteran pheromones, and microbial agents

1

Registration of a new active ingredient — food use

7,236

2

Registration of a new active ingredient — non-food use

4,341

3

Amendment of registration — new risk assessment necessary — environmental fate data, environmental toxicity data or exposure data

2,894

4

Amendment of registration — data required, label changes

1,447

5

Amendment of registration — data required, other

1,158

6

Amendment of registration — no data required

290

Straight-chain lepidopteran pheromones

7

Registration of new active ingredient

579

8

Amendment of registration

290

SCHEDULE 3

(Section 1, subsections 2(1), (5) and (6) and sections 3 and 4)

Fees for Other Applications in Respect of a Pest Control Product

Item

Column 1

Type of Application

Column 2

Fee ($)

1

(a) Research authorization — major crops, other than research authorizations set out in paragraphs (c) and (d)

5,080

(b) Research authorization — minor use crops, other than research authorizations set out in paragraphs (c) and (d)

5,080

(c) Research authorization — microbial agents, semiochemicals and any substance listed in subparagraph 1(d)(ii) of these Regulations

1,217

(d) Research authorization — greenhouse crops and non-agricultural uses

1,217

2

Research notification

247

3

(a) Registration of active ingredient to be used in pest control product manufactured only for export

7,827

(b) Amendment to registration of active ingredient used in pest control product manufactured only for export 

1,133

4

(a) Specification of maximum residue limit for a previously unexamined pest control product

125,461

 

(b) Specification of maximum residue limit for an unregistered use of a previously examined pest control product

15,838

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