Canada Gazette, Part I, Volume 147, Number 13: Regulations Amending the Canada Grain Regulations

March 30, 2013

Statutory authority

Canada Grain Act

Sponsoring agency

Canadian Grain Commission

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Background

The Government introduced amendments to the Canada Grain Act (CGA) through the Jobs and Growth Act, 2012. The changes to the CGA streamline the operations of the Canadian Grain Commission (CGC) and remove services that are mandated by the CGA but are no longer needed in today's grain sector. For example, mandatory official inward inspection and official weighing services conducted by the CGC, along with complementary requirements, are eliminated. Amendments to the CGA are anticipated to come into force on August 1, 2013. As a consequence of changes to the CGA, amendments are required to the Canada Grain Regulations (CGR) and their accompanying schedules.

Issues and objectives

The proposed regulatory amendments are consequential to amendments to the CGA contained within the Jobs and Growth Act, 2012. The objectives of this regulatory package are to align the CGR with the amendments to the CGA, and to make housekeeping changes to improve consistency, clarity and ease of use.

Description

The following are descriptions of the proposed regulatory changes.

1. Proposed regulatory changes related to CGA amendments that eliminate the requirement for official CGC inward inspection and weighing

The Jobs and Growth Act, 2012 removes the requirement for CGC staff to officially inspect and officially weigh all grain upon inward receipt into licensed terminal elevators. Under the amended CGA, inspection and weighing upon receipt of grain must now be conducted by the elevator operator or a third-party service provider, unless there is an exemption by regulation or order of the Commission. A third-party service provider can be requested by the party delivering the grain — shipper, producer car shipper, prairie elevator — if so desired. As these legislative amendments move the responsibility for conducting inward services to the private sector, there are several sections of the CGR that need to be amended, repealed or drafted to bring the CGR into line with the amended CGA.

New regulatory provisions are required to prescribe the manner in which terminal elevator operators or third-party service providers will take a sample upon receipt at a terminal elevator, and the sample retention time frame. The proposed Regulations would require that the sample be taken in accordance with the Commission's Sampling Systems Handbook and Approval Guide, and that the sample be retained for a time frame of not less than seven days after the grading of the sample. In addition, regulatory amendments are proposed to introduce, and amend, exemptions from mandatory terminal elevator inward inspection and weighing requirements.

The amended CGA establishes a process in the event of a disagreement following an inward inspection. Elevator operators and shippers, including producer car shippers, have the right to request binding determination of grade and dockage by the CGC. Final determination would rest with the office of the Chief Grain Inspector for Canada. A regulatory provision is proposed prescribing the manner in which a sample must be taken by the terminal elevator operator, a reinspection request time frame, the portion of the sample to be forwarded, and the time frame in which the sample must be forwarded to the Chief Grain Inspector for Canada.

The amended CGA also establishes a process for inspection and weighing of grain at discharge from a terminal elevator when grain is destined for another licensed elevator. As a consequence, a new section to the CGR is proposed, which sets out that a sample must be taken in accordance with the Commission's Sampling Systems Handbook and Approval Guide, and retained for a time frame of not less than seven days.

In addition, the amended CGA establishes two recourse mechanisms related to failure to inspect and weigh grain at receipt into, or discharge from, a licensed terminal elevator.

• (i) Under the first recourse mechanism, if a licensed terminal elevator operator fails to have the grain inspected and/or weighed, a shipper would have the right to apply to the CGC and request an order declaring the grain to be the highest grade and class of the kind that was delivered, or require the operator to deliver to the shipper the same volume of grain shipped of the highest grade and class of the kind that was delivered. As part of the application, the CGA requires the shipper to sample the grain in the prescribed manner and include all samples with his or her application. As a consequence, new regulatory provisions are proposed to prescribe the manner in which a sample would be taken by the shipper in order that it be available if a terminal elevator operator fails to inspect grain on receipt or have it inspected by a third party.
• (ii) Under the second recourse mechanism, if a terminal elevator fails to inspect or weigh grain destined for another licensed elevator, an operator of a licensed elevator that is to receive the grain has the right not to accept the grain; or to agree to receive the grain, take a sample in the prescribed manner, and forward all samples to the Commission for a final determination of grade and dockage. Consequently, new regulatory provisions are proposed to prescribe the manner in which samples must be taken by the licensed elevator operator who agrees to receive uninspected or unweighed grain.

2. Proposed regulatory changes related to the legislative repeal of the grain appeal tribunals

As the Jobs and Growth Act, 2012 repeals mandatory CGC inward official inspection, and since the grain appeal tribunals were established only to examine appeals on official CGC inward inspections, all references to the tribunals have been removed from the Act. The amendments establish that there is only one level of appeal on official inspection, to the Chief Grain Inspector for Canada.

As a consequence, it is proposed that all references to the grain appeal tribunals in the CGR be repealed. Section 4.1 and Form 3 of Schedule 2 of the CGR regarding the Oath or Solemn Affirmation of Office of Member of Grain Appeal Tribunal would be repealed. Also, sections 11 through 14 of the CGR (the procedures for grain appeals) would be amended to remove references to the grain appeal tribunals while maintaining one level of appeal on official inspection, to the Chief Grain Inspector for Canada.

3. Proposed regulatory changes related to legislative amendments that combine terminal and transfer elevator classes

The Jobs and Growth Act, 2012 amends the CGA definition of “terminal” elevator to combine terminal and transfer elevators into a single class of elevators called “terminal” elevators. The amended definition adds the principle use of receiving grain from other elevators and removes the reference to official inspection and official weighing. As a consequence of these legislative changes, all references to “transfer” elevator in sections 9, 47, 51, 53, 57, subsection 58(1), and section 59 would be amended to bring the CGR in line with the legislation. In addition, Form 9 of Schedule 4 (Terminal Elevator Receipt) would be amended for use by the new “terminal” elevator class, and Form 10 (Transfer Elevator Receipt) would be repealed.

4. Proposed regulatory changes related to the legislative repeal of registration and cancellation

Currently, during official inward inspection and weighing, the CGC records the official grade and weight of grain (registration) as it is unloaded from railcars or trucks into licensed terminal elevators or transfer elevators that receive western grain by rail. Subsequently, the CGC records the official grade and weight of grain upon discharge from licensed terminal or transfer elevators onto vessels for export (cancellation). Cancellation of grain receipts upon discharge is dependent on registration of grain receipts upon receipt into licensed terminal or transfer elevators. As a direct consequence of the Jobs and Growth Act, 2012 repealing the requirements for CGC provision of official inward inspection and weighing, the CGA requirements related to registration and cancellation of terminal and transfer elevator receipts are repealed. Consequently, the regulatory provisions related to registration and cancellation of terminal and transfer elevator receipts in section 58 of the CGR are no longer relevant and would be repealed.

However, during public consultations, stakeholders requested that the CGC continue activities related to the collection of data currently provided by terminal and transfer elevator operators through the registration and cancellation processes. As a result, the current transfer elevator reporting requirements will be amended (section 27) to require all terminal elevators to continue to report this type of data to the CGC.

5. Proposed regulatory changes related to the legislative repeal of weigh-overs

Given the legislative repeal of registration and cancellation, the related weigh-over requirements for operators of licensed primary, terminal, and transfer elevators are also removed, including the definitions of, and provisions related to, overages and shortages. As a consequence of these legislative amendments, section 60 (Weigh-overs) of the CGR would need to be repealed along with the definitions of “gross handling variance” and “gross handling variance percentage” in section 1.

6. Housekeeping amendments

Four housekeeping changes unrelated to the CGA amendments are being included in this regulatory proposal. These amendments improve consistency of language, align the Regulations with operational practices, and improve clarity and ease of use of the CGR.

• (i) The prescribed sample size for samples submitted to the CGC for “grading of unofficial samples” and for assessment as per the “subject to Inspector's Grade and Dockage” provisions will be amended from 750 g to 1 kg to be consistent with the sample sizes prescribed for the new recourse and disagreement mechanisms described above. Consequently, paragraphs 7(2)(a) and 35(1)(a) and subsection 36(1) of the CGR would be amended by replacing 750 g with 1 kg.
• (ii) Currently, paragraph 70(1)(c) of the CGR allows any person to transport or cause to be transported grain for export by container on the condition that the Commission be notified in writing before the grain is transported. To maintain the CGC's oversight role in collecting, monitoring, warehousing, and reporting data related to grain exports by container, and to reduce the reporting burden for container exporters, an amendment is proposed to require container exporters to report to the Commission on a weekly basis instead of prior to each individual shipment.
• (iii) In order to improve consistency of language, an amendment would be made to the French version of the Special Bin Form (Form 15 of Schedule 4) to align the terminology respecting “tonne” with the English version of the form. On the French form, “tonne” would be replaced with “tonne métrique.”
• (iv) An amendment is proposed to remove “solin” from subsection 5(1) of the CGR and eliminate its corresponding grade schedule and quality standards (Table 13 of Schedule 3) in order to align the CGR with current operational decisions and practices (pursuant to section 16 of the CGA).

Consultation

Introduction of the Jobs and Growth Act, 2012 has generated extensive stakeholder discussions throughout the agricultural community and received wide coverage in the media. Stakeholders, including CGC licensees, producer groups, and grain handling industry and associations have expressed their positions on CGC inward inspection and weighing services through numerous public consultation forums over the last few years.

Most recently, in February 2012, the CGC sent out an engagement letter to grain sector stakeholders requesting feedback on the key areas of the CGA where change was being considered. Feedback from this process was used in the development of legislative reforms.

Prior to this, in 2010–11, the CGC consulted with producers, producer organizations, CGC licensees, industry organizations and other relevant organizations, in accordance with the requirements of the User Fees Act, regarding its sustainable funding model and changes to its user fees. The user fee consultation process was completed in February 2012, with 48 formal written submissions received from external stakeholders. One of the major feedback themes was that the CGA should be modernized and CGC services streamlined with unnecessary services eliminated prior to updating user fees. The amendments to the CGA identified in the Jobs and Growth Act, 2012 eliminate mandatory CGC inward inspection and weighing services.

The proposed amendments in this regulatory package are consequential to the CGA inward inspection and inward weighing amendments contained within the Jobs and Growth Act, 2012. These regulatory changes have had a minimal level of consultation as changes to the CGA, and the impacts of these, have been communicated widely and received extensive media coverage. As stakeholder concerns were raised during the CGA amendment process and comments were considered, very little additional change will result as a consequence of the proposed CGR amendments.

In December 2012, the CGC held focus group meetings with terminal elevator operators, shippers and marketers, producers and producer groups, as well as other stakeholders to explain the legislative amendments and the consequential regulatory changes included in this proposal. The consequential amendments to the CGR are expected to be uncontroversial and will be appreciated by most interested stakeholders as they add clarity to the CGA changes and reduce unnecessary costs and CGC services. Given this situation, public interest, stakeholder opposition and potential controversy on the regulatory proposal itself is expected to be low.

“One-for-One” Rule

The “One-for-One” Rule refers to the Government initiative to reduce regulatory red tape and control administrative burden to Canadian businesses. The “One-for-One” Rule applies to this regulatory package as the proposed regulatory provisions add minimal administrative burden in some areas and decrease administrative burden in other areas.

1. Sample retention by the private sector

Amendments to the CGA repeal CGC official inward inspection and weighing services and move performance of inward services to the private sector. Amended section 70.5 of the CGA states: “An operator of a licensed terminal elevator shall retain for the prescribed period any sample of grain taken as part of an inspection under subsection 70(1) or (2) or section 70.2 or 70.3.” Consequently, the proposed paragraph 6.2(b) of the CGR would prescribe the sample retention time frame for the private sector providers as not less than seven days after the date of the grading of the sample in order that the sample is available given a potential grade dispute.

Currently, official samples representing inward receipts are obtained and retained by the CGC for a period of no less than 15 days as described in paragraph 30(1)(b) of the CGA. In practice, the CGC actually retains these types of samples for a minimum of 20 days. As CGC inward inspection services are intended to be provided on a cost-recovery basis and these services are no longer mandated, the shift in responsibility for sample retention from the CGC to the private sector is anticipated to result in an administrative cost increase to terminal elevator operators.

The “One-for-One” Rule applies in this situation because the seven-day prescribed sample retention time will result in a small increase in administrative burden for the affected stakeholder group overall.

Estimated increase in administrative burden

The CGC estimates that the annualized average increase in administrative burden for all stakeholders for the sample retention regulatory provision is $533,503. This represents $18,397 annually per stakeholder.

Assumptions used in the calculation of administrative burden

The stakeholder group affected by the proposed sample retention regulatory provision is licensed terminal elevators. This group represents 16 terminal elevators and 13 transfer elevators (to be reclassified as terminals) for a total of 29 facilities.

In the 2010–2011 crop year, 311 911 railcars were sampled and inspected upon receipt at licensed terminal and transfer elevators. This represents an average of 10 756 railcar unloads (samples) per licensed terminal (transfer) facility annually. This calculation is used as an estimate of the number of samples that each facility will need to retain per year, recognizing that in practice, this number will vary by facility given — shift scheduling, seasonal work loads, yearly crop production, commercial contracts, and physical facility unload capacity.

Given the average number of railcar unloads/samples for retention per year, it is estimated that each elevator will need to allocate 0.3 person-years per annum per 10 000 samples (or 10 756 average annual railcar unloads). This represents the cost required to manage the administrative tasks of sample transfer, tracking, storage and disposal. These administrative time estimates are based on accepted calculations contained in a 2003 independent economic study commissioned by the CGC. The Statistics Canada average annual wage rate including overhead is also assumed.

Consultations with stakeholders on estimates

Assumptions and costing estimates regarding the increase in administrative burden placed on stakeholders by the proposed Regulations are based on both face-to-face consultations with licensed terminal (transfer) elevator operators and existing internal data sources. The CGC formed a working group with licensed elevator representatives to discuss the regulatory change and work out an understanding of terminal elevator operational realities and potential administrative costs resulting from moving samples within a facility, storing and tracking the samples, and disposal of the samples after seven days. Additional sample storage space or sample packaging needs were not identified as being an issue for the elevator operators. The CGC will attempt to validate its costing assumptions during the 30-day comment period following prepublication in the Canada Gazette, Part Ⅰ.

2. Terminal elevator reporting of grain handling data to the CGC

As a direct consequence of repealing CGC provision of official inward inspection and weighing, subsections 58(2), 58(3), and 58(4) of the CGR related to CGC registration and cancellation of terminal and transfer elevator receipts are no longer relevant and are being repealed. However, given feedback from stakeholder consultations, collection of this type of grain handling data from terminal and transfer elevators remains important to many industry stakeholders including shippers, railways, and the Canadian Transportation Agency for purposes of marketing and monitoring programs.

Consequently, along with combining the terminal and transfer elevator licence class into one “terminal” class, section 27 of the CGR (Transfer Elevator Reports) is being amended to replace “transfer” elevator references with “terminal” elevator references in order to require the new class to continue to report daily receipt and shipment data to the CGC. This will allow the CGC to continue to compile this type of grain inventory data as requested by industry stakeholders.

Currently, CGC inspectors and weighers are responsible for registering inward grain shipment data as it is received into terminal and some transfer elevators. The proposed Regulations would now require elevator operators to provide similar inward grain receipt data to the CGC and would result in a slight increase in administrative burden.

When grain is shipped out of a terminal or transfer elevator, CGC staff is responsible for cancelling the grain receipts. Elevator operators are currently required to provide notification to the CGC when grain shipments take place in order that the CGC can cancel the grain receipt. Under the proposed Regulations, elevator operators will still provide this type of shipment data to the CGC. This would not result in an increase or decrease in administrative burden.

The “One-for-One” Rule applies in this situation as the introduction of daily reporting for the 16 elevators licensed under the current terminal elevator class will result in a small increase in administrative burden for this stakeholder group.

Estimated increase in administrative burden

The CGC estimates that the annualized average increase in administrative burden for all stakeholders resulting from the regulatory change in the reporting requirement is $84,570. This represents $5,286 annually per stakeholder.

Assumptions used in the calculation of administrative burden

The repeal of the provisions in subsections 58(3) and 58(4) that require terminal and transfer elevators to submit receipts for shipments of grain does not result in a decrease in administrative burden. This type of information will continue to be required by the terminal elevator reporting requirements in the proposed Regulations.

The 16 elevators currently classified as “terminal” elevators will be directly affected by the repeal of the registration requirements. Currently, the type of grain inventory information required with the new reporting provisions is already generated by terminal elevators for their own grain accounting purposes. Given this, the increase in administrative burden is limited to the time required for elevator operators to report this existing information to the CGC. This stakeholder group does not represent the 13 transfer elevators scheduled to be reclassified as “terminal” elevators; these facilities already input and provide grain inventory data to the CGC through an electronic grain inventory system and will not experience any increase in administrative burden given the new, comparable reporting format requirement.

Based on existing statistical data for the 2010–11 crop year, terminal elevators inspect and weigh an estimated 10 756 railcar unloads annually. This number is used to estimate the number of railcars — or grain data information blocks — that each elevator will need to report to the CGC each year, recognizing that in practice this number will vary by facility, given shift scheduling, seasonal work loads, yearly crop production, and physical facility unload capacity.

For each of the 10 756 railcar unloads the CGC estimates that approximately 20 data fields will be populated at one minute per railcar, which translates into an additional administrative reporting requirement of approximately 179 hours per year for each terminal elevator. This is based on operational information gathered from a 2012 CGC trial exempting inward inspection at terminal elevators in Thunder Bay, Ontario. Feedback from discussions with transfer elevators currently reporting through the existing electronic reporting system also supports CGC estimates as this reporting burden is comparable to that of the operations exempted from CGC inward services in the Thunder Bay trials. The Statistics Canada average annual wage rate including overhead is also assumed.

Consultations with stakeholders on estimates

Assumptions and costing estimates regarding the increase in administrative burden placed on stakeholders by the proposed reporting regulation are based on consultations with licensed terminal (transfer) elevator operators, instances where exemptions from inward requirements have been in place, and existing internal data sources and published statistics. The CGC will attempt to validate its costing assumptions during the 30-day comment period following prepublication in the Canada Gazette, Part Ⅰ.

3. Elimination of weigh-over reporting for primary elevators

As a consequence of the legislative repeal of all sections of the CGA related to operators of licensed primary elevators regularly conducting weigh-overs and submitting reports to the CGC, section 60 of the CGR would be repealed. Currently, primary elevators must conduct weigh-overs and submit a report to the CGC not less than once every three years. The “One-for-One” Rule applies in this situation because the repeal of the requirement for primary elevators to submit weigh-over reports to the CGC will result in a decrease in administrative burden for the affected stakeholder group.

Estimated decrease in administrative burden

The CGC estimates that the annualized average decrease in administrative burden for all stakeholders resulting from the removal of the primary elevator weigh-over reporting requirement is $1,217. This represents $4 per stakeholder.

Assumptions used in the calculation of administrative burden

The stakeholder group affected by the proposed regulatory reduction is licensed primary elevators in Canada. As of August 1, 2012, there were 344 primary elevators.

Based on consultation with a representative group of both medium and large licensed primary elevators and internal knowledge, an average of 20 minutes is required for an elevator operator to populate the data fields and submit the online CGC primary weigh-over report to the CGC. As these reports are required only once every three years, this accounts for approximately seven minutes of reporting burden per year per primary elevator. The Statistics Canada average annual wage rate including overhead is also assumed.

Consultations with stakeholders on estimates

Consultations with a representative group of licensed primary elevators, CGC weigh staff, and CGC statistical staff formed the basis of the estimates used to calculate the decrease in administrative weigh-over reporting burden. The CGC will attempt to validate its costing assumptions during the 30-day comment period following prepublication in the Canada Gazette, Part Ⅰ.

4. Data reporting by container exporters

To maintain the CGC's oversight role in collecting, monitoring, warehousing, and reporting data related to grain exports by container, an amendment to paragraph 70(1)(c) of the CGR is proposed to require container exporters to report to the Commission on a weekly basis. Historically, operations exporting grain in containers were required to report details of each shipment to the CGC prior to export, regardless of shipment frequency. The “One-for-One” Rule applies in this situation as the regulatory amendment would reduce the administrative reporting cost to persons who export grain by container by allowing them to provide a summary of weekly exports instead of notifying the Commission prior to each export shipment.

Estimated decrease in administrative burden

The CGC estimates that the annualized average decrease in administrative burden for all stakeholders resulting from the change in the reporting requirement regulation is $59,789. This represents $4,599 annually per stakeholder.

Assumptions used in the calculation of administrative burden

The stakeholder group affected by the proposed Regulations is container exporters. At present, this group represents only the 13 container export facilities located at port position from Vancouver, British Columbia, to Halifax, Nova Scotia.

Based on internal information, the CGC estimates that container export facilities could spend an average of 5 hours per week generating and submitting reports detailing each shipment prior to export. This represents 260 hours of administrative reporting burden per year per facility to satisfy current CGC reporting requirements.

Given the similar nature of the information and number of data cells to be populated and included in the proposed weekly container export reports, the CGC used the weekly reports currently generated by licensed primary and process elevators as a proxy to calculate the weekly reporting obligation for container exporters. Based on feedback from consulting directly with a representative group of both medium and large licensed primary and process elevators, it is estimated that it takes an average of 2 hours per week to generate a CGC summary report. This represents 104 hours of administrative commitment per year per facility to satisfy weekly CGC reporting requirements.

Given these estimates and the amendments to reporting frequency, container export facilities will each save approximately 3 hours per week or 156 hours per year in administrative costs. The Statistics Canada average annual wage rate including overhead is also assumed.

Consultations with stakeholders on estimates

Estimates regarding the decrease in administrative reporting cost for container export facilities are based on consultations with licensed primary and process elevator operators, container exporters, and the CGC Statistics Unit. The CGC will attempt to validate its costing assumptions during the 30-day comment period following prepublication in the Canada Gazette, Part Ⅰ.

“One-for-One” Rule summary

The regulatory package has both “IN” and “OUT” portions, but results in an overall net “IN” of $557,067 for the affected stakeholder group — licensed terminal elevators. The proposed regulatory amendments will trigger the need to remove further regulatory provisions within 24 months in order to offset any incremental administrative cost associated with this package.

Benefits and costs

The amendments to the CGA contained in the Jobs and Growth Act, 2012 streamline the CGC's operations by removing CGC services that are mandated by the CGA, but are no longer needed in today's grain sector. These legislative changes will reduce overall regulatory burden and costs on producers and the grain industry. The CGA amendments are estimated to result in a cost savings to industry of approximately $20 million. However, these types of direct legislative cost benefit impacts are excluded from this analysis.

The qualitative benefits of the regulatory changes would allow the CGC to continue to ensure that Canada's grain is safe, reliable, and marketable and that Canadian grain producers are protected. The Canadian grain sector will continue to benefit from grain quality, quantity and safety assurance, research, market access, and producer protection, as well as regulatory oversight — all the elements of Canada's brand reputation.

Besides industry-wide qualitative benefits, the regulatory package has definite impacts on specific stakeholder groups — licensed terminal, transfer and primary elevators, and container loading facilities — in the following areas: responsibility for sample retention; weigh-overs; implementation of daily reporting for terminal elevators; and reporting of container export shipments.

Sample retention by the private sector

As a result of the legislative repeal of mandatory CGC official inward inspection and weighing services and moving inward service responsibility to the private sector, terminal elevator operators will now be responsible for retaining samples from inward inspections. As a consequence, the proposed Regulations prescribe the sample retention time frame for the private sector providers as not less than seven days after the date of the grading of the sample which allows for the sample to be forwarded to the CGC if there is a disagreement.

Currently, the CGC is mandated to obtain and retain samples representing inward receipts for a period of no less than 15 days. As CGC sample storage space is currently located within terminal elevator premises, it is assumed that additional capital investment by terminals will not be necessary to comply with the 7-day storage requirement. During stakeholder consultations, building space or additional packaging needs were not identified as being a critical capital cost component or regulatory compliance issue. However, elevators will incur an administrative cost increase as they will be responsible for managing sample transfer, tracking, storage and disposal. Based on existing information and data, the CGC estimates that the average increase in administrative burden for all stakeholders for the sample retention regulation is approximately $533,503.

Sample retention is currently considered part of the CGC's inward inspection service, which is intended to be provided on a cost recovery basis through CGC user fees. Shifting the responsibility for sample retention to the private sector will benefit licensed terminal elevators as annual CGC inward inspection service fees of approximately $20 million would be eliminated, and elevators would only be responsible for their own sample administration costs.

Elimination of weigh-overs

As a consequence of legislative amendments to the CGA, section 60 of the CGR dealing with weigh-over requirements would be repealed, resulting in reduced costs for both industry and the CGC.

Currently, Western Canada's 344 licensed primary elevators must conduct weigh-overs and submit a report to the CGC not less than once every three years. Although primary elevators will continue to perform weigh-overs for internal stock reconciliation purposes, and report data related to handling operations to the CGC in compliance with regulated reporting requirements, removing the weigh-over requirement will save elevator operators the additional administrative cost of reporting weigh-over results to the CGC. Based on existing information, this is estimated at $1,217 annually. In addition, the CGC will also save on administrative dollars as it will no longer be required to collect and maintain the incoming data.

In terms of licensed terminal and transfer elevators, the current Regulations require that the CGC weigh-over any grain, grain products or screenings at least once every 30 months for the existing 16 terminal elevators and at least once every 60 months for the 13 existing transfer elevators. In order to complete a weigh-over, these facilities are shut down for an average of 10 days, depending on the capacity of the elevator and the grain stocks in store at the time of the weigh-over. As a result of these mandated weigh-overs, industry stakeholders incur several direct costs and additional opportunity costs, including elevation and grain movement in-store costs; staff salaries and overtime; revenue loss due to halt of incoming grain receipts; rail rerouting fees; logistical down stream costs in the primary elevator network; and potential loss of marketing opportunities or sales. All of these cost categories vary widely depending on elevator capacity, operation hours and schedule, and timing of the weigh-over. Based on industry knowledge and existing CGC weigh-over reports, average terminal or transfer elevator weigh-over costs are between $100,000 and $300,000 per weigh-over. Given the 29 existing terminal and transfer elevators, the regulatory elimination of weighovers represents an average overall compliance cost savings of $1.8 million annually, assuming each weigh-over results in costs of about $200,000.

The CGC would also capture benefits as human resources would no longer be required for mandatory weigh-over activities. Approximately 80 CGC labour hours are required per weigh-over to ensure the process is conducted in the prescribed manner. Assuming the Statistics Canada average annual salary rate and the historical weigh-over average of six completed per year, the repeal of mandatory weigh-overs at terminal and transfer elevators results in annual savings of approximately $15,000 in CGC salary dollars.

Overall, the elimination of the regulatory requirements associated with primary, terminal and transfer elevator weigh-overs would result in a total net benefit of approximately $1.816 million annually to both industry and government.

Repeal of registration and cancellation requirements and implementation of reporting requirements for terminal elevators

As a direct consequence of repealing the CGC provision of official inward inspection and weighing services, the CGR requirements related to CGC registration and cancellation of terminal and some transfer elevator receipts would be repealed. As a result of these changes, terminal and transfer elevators will no longer be required to pay the current total CGC registration and cancellation fee of $0.16 per tonne.

However, stakeholder feedback indicates that collection of this type of grain handling data from terminal and transfer elevators remains important to many industry stakeholders. Consequently, a regulatory amendment is proposed to require the new “terminal” elevator class to continue to report daily receipt and shipment data to the CGC. As requested by industry, the CGC would continue to compile grain inventory data for both grain sector stakeholder use and for statistical purposes. Based on projections, the CGC estimates that the new reporting system will cost affected stakeholders a total of approximately $0.015 a tonne. Given the 15-year average export volume of 23.3 million tonnes, industry cost savings would be $3.4 million dollars annually. The reporting change would also result in a minimal increase in strictly administrative costs estimated at $84,570 for the affected stakeholder group.

Overall, the repeal of the registration and cancellation requirements and the move to daily reporting by terminal elevators would result in a net benefit of over $3 million.

Data reporting by container exporters

To maintain the CGC's oversight role in collecting, monitoring, warehousing, and reporting data related to grain exports by container, a regulatory amendment is proposed to require container exporters to report to the Commission on a weekly basis. This amendment would reduce administrative reporting costs for container exporters by allowing them to provide a summary of weekly exports instead of notifying the CGC in advance of each export shipment, regardless of shipment frequency. Based on internal information, the CGC estimates that the annualized average decrease in administrative costs resulting from the change in the reporting requirement regulation is $59,789 over all affected stakeholders.

Cost-benefit summary

The amendments to the CGA contained in the Jobs and Growth Act, 2012 reduce the overall regulatory burden and are estimated to result in cost savings to industry of approximately $20 million. The qualitative benefits of the regulatory package would allow the Canadian grain sector to continue to benefit from grain quality, quantity and safety assurance, research, market access, and producer protection. Besides these industry-wide qualitative benefits, the regulatory package is estimated to result in a net benefit of $4.5 million annually.

Small business lens

The small business lens does not apply to this proposal as there are insignificant costs to small business.

Rationale

This regulatory proposal is expected to have minimal impact as the proposed changes are consequential to the CGA amendments contained in the Jobs and Growth Act, 2012.

1. Proposed regulatory changes related to CGA amendments that eliminate the requirement for official CGC inward inspection and weighing

The original purpose of official inward inspection and inward weighing was to ensure that grades and weights were recorded accurately and fairly. The service was established when primary elevators in Western Canada and terminal and transfer elevators were owned by different companies. Shippers wanted a system of checks and balances and wanted the CGC to act as a third party.

Over time, there have been many changes in the grain handling system that led to a review of the need for the CGC to inspect and weigh every shipment of grain that is unloaded at a terminal or transfer elevator. The CGC has consulted stakeholders and received feedback over the last several years indicating that CGC official inward inspection and weighing services are no longer needed in today's grain sector. The amendments to the CGA recognize that inward services provide value to the grain sector, but who provides these services is best determined by those involved in the transaction. These legislative changes reduce costs paid by the industry and producers, support an unbiased determination of grain grade and weight on inward terminal elevator shipments, and support an unbiased determination of grain grades and weight on shipments from one terminal elevator to another. The CGA amendments reflect a continued commitment to the integrity of grain quality and transactions in the handling system.

Consequential amendments are required to align the Regulations with the amended CGA. The proposed Regulations will require that terminal elevator operators or third-party samplers take a sample upon receipt at a terminal elevator in accordance with the Commission's Sampling Systems Handbook and Approval Guide, as per current industry practice. In addition, the proposed Regulations will require that the sample be retained for not less than 7 days after the date of the grading of the sample. Currently, section 6 of the CGR requires that the CGC retain official inward samples for a minimum of 20 days after the date of the grading of the sample. Given that CGC inward services, of which sample retention is a part, are intended to be provided on a cost-recovery basis, the reduction in the sample retention time frame will actually decrease overall cost to the industry. However, the shift in responsibility for sample retention to the industry will result in a slight increase in administrative costs.

The regulatory amendments will also set out exemptions to terminal elevator inward inspection and inward weighing requirements, and to terminal elevator official outward inspection and outward weighing requirements. These proposed regulatory amendments (sections 48 and 49) are aligned with current regulatory exemptions detailed in sections 48 and 50 of the CGR.

Legislative amendments to the CGA also establish a process if there is a disagreement following an inward inspection by a terminal elevator operator or private third-party service provider. The consequential regulatory requirements are closely aligned with the current regulatory requirements for “grading of unofficial samples” and “grain appeal procedures” as detailed in sections 7 and 11 of the current CGR. Through consultations with industry stakeholders, it was determined that an appropriate time frame for submitting an application for reinspection to the Chief Grain Inspector for Canada was within five days after the date of the original inspection. In the current environment, shippers are aware of the grade and dockage assigned to their grain almost immediately upon unloading at a terminal elevator. A five-day time frame provides sufficient opportunity for the shipper and terminal operator to review grading and/or dockage disagreements prior to asking for CGC binding determination of grade and dockage.

In addition, the amended CGA establishes two recourse mechanisms related to failure to inspect and weigh grain at receipt into, or discharge from, a licensed terminal elevator. As a consequence of the first recourse mechanism, a new regulation is proposed to set out the manner in which a sample must be taken by the person who caused the grain to be shipped to the terminal elevator. As a consequence of the second recourse mechanism, a new regulation is required to set out the manner in which samples must be taken by a licensed elevator operator who agrees to receive uninspected grain. These proposed regulatory requirements are closely aligned with the current regulatory requirements for “grading of unofficial samples” as detailed in section 7 of the current CGR. This existing procedure is well understood and accepted by industry stakeholders.

2. Proposed regulatory changes related to the legislative repeal of the grain appeal tribunals

Currently, appeals to the grain appeal tribunals relate to CGC official inward inspection services. Under the amended CGA, industry or private sector inspectors would assign initial inward grades as grain is received by licensed terminal elevators instead of the CGC. Consequently, all references to the grain appeal tribunals are repealed from the CGA, and are no longer required, and would be repealed from the CGR.

However, amendments to the CGA do retain a process for appeal to the Chief Grain Inspector for Canada on official inward CGC grain grades in the off chance that the CGC actually performs an inward inspection. Consequently, the proposed CGR amendments would outline the procedure to appeal to the Chief Grain Inspector for Canada. The regulatory proposal for this appeal process mirrors what is currently in place.

3. Proposed regulatory changes related to legislative amendments combining terminal and transfer elevator classes

Legislative amendments remove all references to transfer elevator in the CGA and where appropriate, replace “transfer” with “terminal.” As a consequence, all related references to transfer elevators would be removed from the CGR.

4. Proposed regulatory changes related to the legislative repeal of registration and cancellation requirements

Given the legislative repeal of CGC registration and cancellation requirements, the related regulatory provisions will need to be repealed. As a result, the CGC would no longer collect terminal elevator grain handling data facilitated through the terminal elevator registration/cancellation process.

During stakeholder consultations, it was made clear that terminal elevator grain handling data and information remains important and is used by many different stakeholders in the grain sector. Stakeholders requested that the CGC continue activities related to the collection and publication of data that is currently provided by terminal and transfer elevator operators through the registration and cancellation processes. To address this issue, regulatory amendments are proposed to require the new “terminal” elevator class to continue to report this type of information to the CGC. Currently, the CGC and licensed terminal and transfer elevators are in operational discussions on how to transition the reporting systems most easily and with minimal cost.

5. Proposed regulatory changes related to the legislative repeal of weigh-overs

The original purpose of weigh-overs was to ensure accurate weighing at primary elevators and accurate weighing and reconciliation of stocks stored in terminal and transfer elevators. In today's grain handling environment and operational reality, regular and random weigh scale inspections, along with the weighing requirements that licensees must meet, are better tools for ensuring accurate weighing at all elevators. Therefore, the amended legislation repeals weigh-over requirements for operators of licensed primary, terminal and transfer elevators. This includes the definitions related to weigh-over overages and shortages. As a consequence, the definitions of “gross handling variance” and “gross handling variance percentage” and section 60 of the CGR are obsolete and would need to be repealed to bring the CGR in line with the amended CGA.

6. Housekeeping amendments

• (i) Increasing the prescribed sample size from 750 g to 1 kg is for consistency purposes. It is already industry practice to take samples larger than 1 kg in order to have sufficient product for other grading and testing needs.
• (ii) The proposed regulatory amendment to simplify reporting requirements for container exporters will reduce the administrative and reporting burden, while allowing the CGC to maintain its oversight role in collecting, monitoring, warehousing, and reporting data related to grain exports by container.
• (iii) The Special Bin Agreement Form (Form 15 of Schedule 4 of the CGR) was amended in a previous CGC regulatory package effective August 1, 2012. The proposed amendment to the French version of the form is to align the terminology respecting “tonne” with the English version of the form and address consistency of language. It is also consistent with language used in relation to weights in Schedule 1 of the CGR.
• (iv) Solin is currently listed in subsection 5(1) of the CGR as one of the 21 seeds designated as grain for purposes of the CGA. Solin is a yellow-coated oilseed with high linolenic properties that was developed from flaxseed to produce light oil suitable for cooking. In April 2012, the Western Standards Committee (WSC) recommended that the association between yellow-seeded flax and solin be eliminated and, as a consequence, that solin be removed as one of the official 21 grains. It is important to note that the WSC is constituted pursuant to the CGA and represents the business interests of all segments of the grain value chain. Membership includes Government, producers, processors, breeders, exporters and any others the CGC deems advisable.

At its November 2012 meeting, the WSC passed a unanimous motion to remove solin as one of the 21 official grains. As a result, as of August 1, 2013, there will no longer be a grade schedule or quality standards for solin. This decision was based on the fact that solin is no longer being marketed to Canadian producers as a seed for planting and has not been in production for approximately five years. Only one Canadian grain company has marketed solin in the past and has shipped or cleared all stocks in the grain handling system with no intention to re-establish a solin market. Solin breeders have already contacted the Canadian Food Inspection Agency (CFIA) to implement the variety deregistration process.

Removing solin from the list of 21 grains will align the Regulations with the unanimous decision of the WSC. As well, the registration process for new flax varieties will be much simpler and more cost effective for breeders. Both the CGC and the CFIA have notified the oilseed industry and producers that all solin varieties will be cancelled as of August 1, 2013.

Implementation, enforcement and service standards

These regulatory changes are consequential to CGA amendments that were widely communicated after introduction of the Jobs and Growth Act, 2012. The regulatory amendments are targeted to come into force on August 1, 2013, to coincide with the expected coming into force of the CGA amendments.

The CGC met with several stakeholder groups throughout the months following introduction of the Jobs and Growth Act, 2012. The CGC will continue to meet with stakeholders and will be providing communication regarding all aspects of the CGA amendments and the corresponding CGR amendments. In order to ensure a smooth operational and administrative transition, the CGC will be informing grain producers, grain producer organizations, grain industry associations, and CGC licensees of the changes to the CGA and the corresponding changes to the CGR through news releases and letters or notices to target audiences.

The proposed regulatory amendments do not impact the CGC's mandate and do not require any new mechanisms to ensure compliance and enforcement. The CGC will continue to ensure compliance with the new requirements using its existing enforcement and compliance tools.

Contact

Melanie Gustafson
Policy, Planning and Producer Cars
Canadian Grain Commission
303 Main Street
Winnipeg, Manitoba
R3C 3G8
Telephone: 204-983-1894
Email: melanie.gustafson@grainscanada.gc.ca

PROPOSED REGULATORY TEXT

Notice is given that the Canadian Grain Commission, pursuant to subsection 116(1) (see footnote a) and paragraph 117(a) (see footnote b) of the Canada Grain Act (see footnote c), proposes, with the approval by the Governor in Council, to make the annexed Regulations Amending the Canada Grain Regulations.

Interested persons may make representations with respect to the proposed Regulations within 30 days after the date of publication of this notice. All such representations should cite the Canada Gazette, Part Ⅰ, and the date of publication of this notice and be addressed to Melanie Gustafson, Policy Analyst, Canadian Grain Commission, 601-303 Main Street, Winnipeg, Manitoba R3C 3G8 (tel.: 204-983-1894; fax: 204-983-4654).

Ottawa, March 21, 2013

JURICA ČAPKUN
Assistant Clerk of the Privy Council

REGULATIONS AMENDING THE CANADA GRAIN REGULATIONS

AMENDMENTS

1. The definitions “gross handling variance” and “gross handling variance percentage” in section 1 of the Canada Grain Regulations (see footnote 1) are repealed.

2. Section 4.1 of the Regulations and the heading before it are repealed.

3. Subsection 5(1) of the Regulations is replaced by the following:

5. (1) The following seeds are designated as grain for the purposes of the Act: barley, beans, buckwheat, canola, chick peas, corn, fababeans, flaxseed, lentils, mixed grain, mustard seed, oats, peas, rapeseed, rye, safflower seed, soybeans, sunflower seed, triticale and wheat.

4. Subsection 6(1) of the Regulations is replaced by the following:

6. (1) An official sample taken under section 30 of the Act shall be taken in accordance with the Commission's Sampling Systems Handbook and Approval Guide dated August 16, 2012.

5. The Regulations are amended by adding the following after section 6.1:

TERMINAL ELEVATOR AND THIRD PARTY SAMPLES

6.2 A sample taken as part of an inspection under subsection 70(1), (2) or 70.2(1) or section 70.3 of the Act shall

• (a) be taken in accordance with the Commission's Sampling Systems Handbook and Approval Guide dated August 16, 2012; and
• (b) be retained for not less than seven days after the date of the grading of the sample.

6. Paragraph 7(2)(a) of the Regulations is replaced by the following:

• (a) consist of at least 1 kg;

7. Paragraph 9(b) of the Regulations is replaced by the following:

• (b) in the case of Canadian grain inspected on discharge from terminal elevators, in Form 13 of Schedule 4.

8. Sections 11 to 14 of the Regulations are replaced by the following:

11. An application for the reinspection of grain under section 39 of the Act shall be made in writing and include the following information:

• (a) the identification of the parcel of grain from which the official sample was taken;
• (b) the name and location of the elevator or other place where the official sample was taken;
• (c) the date of the official inspection; and
• (d) the grade and dockage assigned to the grain by the official inspection.

12. For the purpose of section 40 of the Act, an appeal lies under section 39 of the Act in respect of grain that has been officially inspected on discharge from a primary elevator to a terminal elevator.

13. The result of an appeal to the chief grain inspector for Canada shall be given without delay in writing by the chief grain inspector for Canada to the appellant and to the operator of the elevator where the grain was officially inspected.

14. If, as a result of an appeal taken under section 39 of the Act to the chief grain inspector for Canada, a grade is assigned to the grain that is different from the grade previously assigned to it, the inspection certificate revised in accordance with section 41 of the Act shall bear the date on which the appeal was decided.

9. Section 27 of the Regulations and the heading before it are replaced by the following:

TERMINAL ELEVATOR REPORTS

27. Every day, the operator of a terminal elevator shall submit to the Commission, in an electronic format acceptable to the Commission, a report respecting the elevator's operations during the preceding day.

10. Paragraph 35(1)(a) of the Regulations is replaced by the following:

• (a) taking a representative portion of at least 1 kg from the sample referred to in section 34;

11. The portion of subsection 36(1) of the Regulations before paragraph (a) is replaced by the following:

36. (1) If the operator of a licensed primary elevator and a person delivering grain to the elevator do not agree on the grade of the grain or the dockage in the grain, and an interim primary elevator receipt is issued, the operator, in the presence of the person delivering the grain, shall take a representative portion of at least 1 kg from the sample referred to in section 34 and shall

12. Sections 47 to 51 of the Regulations and the heading “Dockage” after section 51 are replaced by the following:

47. The operator of a licensed terminal elevator may receive grain without causing it to be inspected and weighed and without issuing an elevator receipt for it if the grain is transferred directly from a railway car or other conveyance to a ship and is officially inspected and weighed on transfer to the ship.

RECEIPT AND DISCHARGE OF GRAIN FROM LICENSED TERMINAL ELEVATORS

48. The operator of a licensed terminal elevator may receive grain without causing it to be inspected or weighed if

• (a) it is eastern grain;
• (b) it is foreign grain; or
• (c) it is western grain that has been previously inspected and weighed at a licensed terminal elevator.

49. The operator of a licensed terminal elevator may discharge grain without causing it to be officially inspected and officially weighed if

• (a) it is for export to the United States; or
• (b) it is not for export.

DOCKAGE DETERMINATION AT LICENSED TERMINAL ELEVATOR

50. The operator of a licensed terminal elevator shall make an accurate determination of dockage of grain delivered at the elevator, computing the dockage to the nearest 0.1%.

REINSPECTION BY THE CHIEF GRAIN INSPECTOR FOR CANADA

51. (1) An application and a sample referred to in subsection 70(5) of the Act, for reinspection by the chief grain inspector for Canada, shall be forwarded to the chief grain inspector for Canada within five days after the date of the original inspection.

(2) An application referred to in subsection (1) shall include

• (a) the identification of the parcel of grain from which the sample was taken;
• (b) the name and location of the licensed terminal elevator where the sample was taken;
• (c) the date of the original inspection; and
• (d) the grade and dockage assigned to the parcel of grain.

(3) A sample of grain referred to in subsection (1) shall

• (a) consist of at least 1 kg;
• (b) be taken in such a manner as to ensure that it is an average and representative sample of the parcel of grain from which it is taken;
• (c) be forwarded, with all shipping charges prepaid, in a container that will maintain the integrity of the sample;
• (d) be accompanied by a form acceptable to the Commission that states the name and post office address of each person to whom the report respecting the grade and dockage of the sample is to be sent; and
• (e) be identified on the form by a distinguishing number or mark that the shipper has not previously used in respect of any other sample during that crop year.

SAMPLING OF GRAIN IF NOT INSPECTED ON RECEIPT AT A LICENSED TERMINAL ELEVATOR

52. A sample referred to in subsection 70.1(2) of the Act shall

• (a) be taken on loading of the grain into a railcar;
• (b) consist of at least 1 kg;
• (c) be taken in such a manner as to ensure that it is an average and representative sample of the parcel of grain from which it is taken; and
• (d) be forwarded to the Commission, with all shipping charges prepaid, in a container that will maintain the integrity of the sample.

SAMPLING OF GRAIN ON RECEIPT FROM A LICENSED TERMINAL ELEVATOR WHERE GRAIN IS NOT INSPECTED

52.1 A sample referred to in subsection 70.4(2) of the Act shall

• (a) consist of at least 1 kg;
• (b) be taken in such a manner as to ensure that it is an average and representative sample of the parcel of grain from which it is taken; and
• (c) be forwarded to the Commission, with all shipping charges prepaid, in a container that will maintain the integrity of the sample.

13. The portion of section 53 of the Regulations before paragraph (a) is replaced by the following:

53. If the operator of a licensed terminal elevator wishes to obtain the permission of the Commission under paragraph 75(b) of the Act to discharge from the elevator grain containing dockage, the operator shall make a written request to the Commission stating

14. The portion of section 57 of the Regulations before paragraph (a) is replaced by the following:

57. The operator of a licensed terminal elevator may specially bin any grain if either

15. The heading before section 58 and sections 58 to 60 of the Regulations are replaced by the following:

TERMINAL ELEVATOR RECEIPTS

58. A terminal elevator receipt shall be in Form 9 of Schedule 4.

COMPULSORY REMOVAL OF GRAIN FROM LICENSED TERMINAL ELEVATORS

59. (1) A notice in writing given by the operator of a licensed terminal elevator to the last known holder of a terminal elevator receipt under section 77 of the Act shall

• (a) be delivered to the holder of the receipt in person or sent by registered mail to the holder's latest known address;
• (b) show the numbers of the elevator receipts issued in respect of the grain to be removed from the elevator;
• (c) make the demand that the grain be removed from the elevator; and
• (d) show the final date by which the holder is required to take delivery of the grain.

(2) If the operator of a licensed terminal elevator gives the notice in accordance with subsection (1), the operator shall at the same time forward a copy of the notice to the Commission.

16. Paragraph 70(1)(c) of the Regulations is replaced by the following:

• (c) any grain for export by container on the condition that the Commission is presented, in an electronic format acceptable to the Commission, with a report respecting any grain exports that took place during the preceding week.

17. Form 3 of Schedule 2 to the Regulations is repealed.

18. Form 9 of Schedule 4 to the Regulations is replaced by the Form 9 set out in the schedule to these Regulations.

19. Form 10 of Schedule 4 to the Regulations is repealed.

20. Form 15 of Schedule 4 to the French version of the Regulations is amended by replacing “tonne” with “tonne métrique”.

COMING INTO FORCE

21. These Regulations come into force on August 1, 2013.

SCHEDULE
(Section 18)

SCHEDULE 4
(Section 58)

FORM 9

TERMINAL ELEVATOR RECEIPT

field description 1	field description 2
Grain	Protein (%)
Grade	Net tonnes
Dockage (%)	Delivered via rail (ID)
Delivered via truck (ID)	Vessel name
Date grain received	Accrued storage paid to date
WARNING: If the charges accruing under this receipt have been unpaid for more than one year, the grain may be sold and after that the holder is entitled to receive, on surrender of this receipt, only the money received from the grain less those charges and the costs of sale.	WARNING: The right of a holder of this receipt to obtain delivery of grain referred to in the receipt may be altered by the issuer by notice to the last holder known to them. Every holder must notify the issuer of their name and address without delay.
NOTE: If this receipt is issued for grain referred to in subsection 71(2) of the Canada Grain Act, the following statement is required to be printed on the form: “This receipt is subject to recall and adjustment”.

[13-1-o]