Vol. 151, No. 28 — July 15, 2017

Regulations Specifying Territories and Indicating International Registers

Statutory authority

Coasting Trade Act

Sponsoring department

Department of Transport

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

The amendments to the Coasting Trade Act (CTA) in Bill C-30, An Act to implement the Comprehensive Economic and Trade Agreement Canada-European Union (EU) Comprehensive and Economic Trade Agreement (CETA) between Canada and the European Union and its Member States and to provide for certain other measures, received royal assent on May 16, 2017.

CETA is the first time that Canada has liberalized the maritime coasting trade regime through a trade agreement. Under the CTA, CETA benefits are based on the nationality of the owner of the ship (or the nationality of the individuals that control the corporation that owns the ship) and the country of registration of the ship.

However, to add clarity and ensure that the scope of application of the amendments in the CTA are consistent with the obligations in the CETA, greater certainty is required with respect to what territory is considered to be part, or not, of the Territory of the EU and with respect to which second, or international, registers may benefit from the CETA under the CTA.

Background

Canadian Coasting Trade Regime

The CTA reserves coasting trade in Canadian waters to Canadian registered and duty paid vessels. A coasting trade licence is required to use a foreign or a Canadian non-duty paid vessel in Canada’s coasting trade. Pursuant to subsection 3(1) of the CTA, no foreign ship or non-duty paid ship can engage in coasting trade without a licence.

Coasting trade licences are issued by the Canada Border Services Agency on behalf of the Minister of Public Safety when the Minister is satisfied that the Canadian Transportation Agency has determined that “no Canadian vessel is suitable and available” to perform the activity described in the licence application. In addition, before a licence is issued, any applicable duties and taxes must be paid under the Customs Tariff and the Excise Tax Act, with the foreign vessel also meeting all applicable safety and pollution prevention requirements.

Bill C-30/CETA

Work on the CETA dates back to 2007 when Canadian and EU leaders agreed to conduct a joint study examining the costs and benefits of pursuing a closer economic partnership. Formal negotiations began in 2009 and the final agreement was signed during the EU-Canada Summit on October 30, 2016. More details regarding the CETA, can be found at http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/ceta-aecg/index.aspx?lang=eng.

Amendments to the CTA allow EU and Canadian entities, including third-party entities under Canadian or EU control, to perform certain coasting trade activities without requiring a temporary coasting trade licence. These coasting trade activities include the following: the repositioning of empty containers (on a non-revenue basis); feeder services between the ports of Montréal and Halifax and private dredging services.

A coasting trade licence will continue to be required for federally procured dredging services. An EU entity will be permitted to bid on contracts at/or exceeding the procurement threshold for construction services in the CETA of 5M Special Drawing Rights, currently assessed at $8.5M Canadian (re-assessed every two years). In the case of high-value contracts, a coasting trade licence will be issued without consideration of a suitable Canadian registered vessel being available.

Objectives

The objective of the proposed Regulations is to specify those territories not referred to in the definition of “territory of the European Union” and to indicate those registers that are international registers, for the purposes of applying the CTA.

Description

The following is a description of the proposed Regulations:

Under subsection 2(1) of the CTA, “territory of the European Union” means the territory in which the Treaty on European Union, done at Maastricht on February 7, 1992, and the Treaty Establishing the European Economic Community, done at Rome on March 25, 1957 — renamed the Treaty on the Functioning of the European Union — as they are amended from time to time, are applicable, in accordance with the conditions specified in those treaties.

Schedule 1 of the proposed Regulations sets out territories that are not referred to in the definition “territory of the European Union.” Schedule 2 of the proposed Regulations sets out registers that are international registers for the purpose of paragraph 3(2.1)(c) of the CTA.

“One-for-One” Rule

The “One-for-One” Rule does not apply to the proposed Regulations, as there is no expected change in administrative costs to business.

Small business lens

The small business lens does not apply to the proposed Regulations, as there are no costs (or insignificant costs) on small business.

Consultation

The Government of Canada has had open consultations regarding CETA dating back to 2008 when a notice was published in the Canada Gazette seeking Canadians’ input on the possibility of negotiating a trade agreement with the EU. These consultations were open to all stakeholders and groups.

During the fall of 2009, Transport Canada (TC) also sought input from marine stakeholders regarding the CETA negotiations. In addition, Global Affairs Canada, in collaboration with Innovation, Science and Economic Development Canada, sought input specifically regarding federally procured dredging services for the purposes of the negotiations. TC met regularly with several stakeholders, including railways, shippers, Canadian vessel owners and operators, and associations which allowed them to clarify their positions and provide additional background information. These exchanges contributed to the Department’s understanding of stakeholder positions.

TC also established a government/industry working group over 2015–2016 to discuss industry concerns and to inform amendments to the CTA. On June 10, 2016, TC met with stakeholders to discuss the scope of application of the legislation as part of the government/industry group. There was limited discussion with respect to the subject matter contained in the proposed Regulations. However, there was positive reaction with respect to some territories of EU Member States being excluded.

On June 21, 2016, TC met with stakeholders to discuss the scope of application of the legislation as part of the government/industry working group. There were no issues raised with respect to the list of qualifying second, or international, registers.

The EU was also consulted on the proposed Regulations, including the list setting out territories not referred to in the definition of “territory of the European Union” in subsection 2(1) of the CTA and the list setting out international registers of Member States of the EU for the purpose of paragraph 3(2.1)(c) of the CTA.

Rationale

The proposed Regulations are intended to harmonize regulatory requirements and increase regulatory compatibility with the EU. Ship owners that intend to engage in an activity permitted without a coasting trade licence will be required to provide information establishing that ownership and vessel registry requirements are met before the activity begins. It is incumbent on the person seeking to undertake these activities to establish that all requirements are satisfied.

Scope of application

Amendments to the CTA grant targeted market access to Canada’s coasting trade to EU and Canadian entities, and third party entities under Canadian or EU control. To add clarity, the proposed Regulations include a list which specifies territories that are not referred to in the definition of “territory of the European Union” in subsection 2(1) of the CTA.

This mirrors the approach of the EU treaties, which include a list of Member State territories to which the EU treaties do not apply.

Given that CETA has a specific geographic scope of application which makes a distinction between territories of the EU for the general application of the agreement and one that is meant for the tariff treatment of goods, clarity of scope with respect to the CTA is required to ensure appropriate application.

International, or second, registers

As not all Member States of the EU have second, or international, ship registers and not all existing EU second, or international, ship registers may benefit from CETA, proposed Regulations identifying qualifying international registers are required for the purpose of applying the CTA.

In CETA, Annex II-C-14 of CETA limits EU second, or international, ship registers to those listed in paragraphs 2 and 4 of the Annex to Commission communication C (2004) 43 – Community guidelines on State Aid to maritime transport.

These proposed Regulations are administrative. They are expected to have no measurable costs, and they are considered to be a low-impact regulatory change. The proposed Regulations are being prepublished in the Canada Gazette, Part I, for a 15-day comment period.

Contact

Joyce Henry
Director General
Marine Policy
Transport Canada
330 Sparks Street
Ottawa, Ontario
K1A 0N5

PROPOSED REGULATORY TEXT

Notice is given that the Governor in Council, pursuant to paragraphs 7(a) (see footnote a) and (b) (see footnote b) of the Coasting Trade Act (see footnote c), proposes to make the annexed Regulations Specifying Territories and Indicating International Registers.

Interested persons may make representations concerning the proposed Regulations within 15 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 sent to Joyce Henry, Director General, Marine Policy, Department of Transport, Place de Ville, Tower C, 330 Sparks Street, Ottawa, Ontario K1A 0N5 (tel.: 613-991-3536; fax: 613-998-1845; email: joyce.henry@tc.gc.ca).

Ottawa, July 13, 2017

Jurica Čapkun
Assistant Clerk of the Privy Council

Regulations Specifying Territories and Indicating International Registers

Territories in Schedule 1

1 The territories set out in Schedule 1 are not referred to in the definition territory of the European Union in subsection 2(1) of the Coasting Trade Act.

International registers

2 The registers set out in Schedule 2 are international registers for the purpose of paragraph 3(2.1)(c) of the Coasting Trade Act.

Coming into force

3 These Regulations come into force on the day on which section 94 of the Canada–European Union Comprehensive Economic and Trade Agreement Implementation Act, chapter 6 of the Statutes of Canada, 2017, comes into force but, if they are registered after that day, they come into force on the day on which they are registered.

SCHEDULE 1

(Section 1)

Territories

SCHEDULE 2

(Section 2)

International Registers

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