Vol. 145, No. 5 — March 2, 2011
Registration
SOR/2011-45 February 17, 2011
CANADA GRAIN ACT
ARCHIVED — Regulations Amending the Canada Grain Regulations
P.C. 2011-243 February 17, 2011
His Excellency the Governor General in Council, on the recommendation of the Minister of Agriculture and Agri-Food, pursuant to subsection 116(1) (see footnote a) of the Canada Grain Act (see footnote b), hereby approves the making of the annexed Regulations Amending the Canada Grain Regulations by the Canadian Grain Commission.
The Canadian Grain Commission, pursuant to subsection 116(1) (see footnote c) of the Canada Grain Act (see footnote d), hereby makes the annexed Regulations Amending the Canada Grain Regulations.
Winnipeg, Manitoba, January 18, 2011
ELWIN HERMANSON
Chief Commissioner of the
Canadian Grain Commission
JIM SMOLIK
Assistant Chief Commissioner of the
Canadian Grain Commission
MURDOCH MACKAY
Commissioner of the
Canadian Grain Commission
REGULATIONS AMENDING THE CANADA GRAIN REGULATIONS
AMENDMENTS
1. Section 30 of the Canada Grain Regulations (see footnote 1) is replaced by the following:
30. The maximum shrinkage allowance that may be made on the delivery of grain to any licensed elevator is zero.
2. Paragraph 60(1)(b) of the Regulations is replaced by the following:
(b) supply to the Commission a report of the results of the completed weigh-over on the appropriate form supplied by the Commission or in an electronic format acceptable to it.
3. Schedule 4 to the Regulations is amended by replacing the reference “ (Section 9, subsections 33(1) and 39(1), section 44, subsection 45(2), paragraph 57(a), subsection 58(1), paragraph 60(1)(b) and subsection 68(1))” after the heading “SCHEDULE 4” with the reference “ (Section 9, subsections 33(1) and 39(1), section 44, subsection 45(2), paragraph 57(a) and subsections 58(1) and 68(1))”.
4. Form 8 of Schedule 4 to the Regulations is repealed.
COMING INTO FORCE
5. These Regulations come into force 30 days after the day on which they are registered.
REGULATORY IMPACT
ANALYSIS STATEMENT
(This statement is not part of the Regulations.)
Issue and objectives
Shrinkage is defined in the Canada Grain Act (the Act) as “the loss in weight of grain that occurs in the handling or treating of grain.” This gross weight loss can be due to several factors, including loss of grain and dust during handling, transportation, and processing, and loss of moisture during handling, storage, and drying.
Currently, different types of Canadian Grain Commission licensees (grain elevators and grain dealers) can charge producers different deductions for shrinkage. The Canadian Grain Commission (CGC) has set a maximum shrinkage allowance for two types of grain elevators (licensed primary and licensed terminal elevators) only, thus allowing the remaining two types of elevators (licensed process and licensed transfer elevators) and grain dealers to charge different deductions for shrinkage. Licensees that are permitted to deduct for shrinkage usually do not publicize their shrinkage deductions and therefore they are often not known by producers. This can create confusion for producers when they deliver their grain to different types of licensees because they end up receiving different prices.
In addition, currently, licensed primary elevators are required to conduct weigh-overs and report their results to the CGC. A weigh-over is the weighing and inspection of all grain in an elevator to determine the amount of grain in stock. The CGC allows primary elevator licensees to report weigh-overs via an online portal or via a paper form as supplied by the CGC; however, the current Regulations do not allow for online reporting.
Objectives
- Increase grain price transparency for producers.
- Address producer and stakeholder concerns of an uneven regulatory framework by creating a more level playing field at the national level relating to the ability of some grain elevators to charge producers any amount of shrinkage deduction, whereas others have a regulated maximum shrinkage allowance.
- Align weigh-over reporting requirements in the Canada Grain Regulations (the Regulations) with currently used electronic reporting practices, further the CGC’s paper burden reduction initiative and reduce paperwork burden for primary elevators.
Description and rationale
Section 30 of the Regulations regulates the maximum shrinkage allowance that may be made on the delivery of grain to a licensed primary or licensed terminal elevator and fixes it at zero. This regulatory amendment will ensure that the maximum shrinkage allowance applied to grain is the same regardless of the type of elevator to which the grain is delivered. The maximum shrinkage allowance for all four types of grain elevators will be regulated.
The regulatory amendment is intended to increase grain price transparency for producers by eliminating charges that are not included on the elevator receipt, cash purchase ticket or schedule of elevator tariffs. As a result, producers will be able to more easily determine their final grain price. Ensuring that maximum shrinkage allowances are the same regardless of elevator type will also address producer and stakeholder concerns of an uneven regulatory framework relating to the ability of licensed process and transfer elevators to deduct shrinkage from producers, whereas licensed terminal and primary elevators cannot.
Regulating shrinkage at all classes of elevators will not address inconsistency issues with respect to grain dealers. However, shrinkage deductions and price transparency are less of an issue since most grain dealers purchase and deal in grain, but do not take physical possession of grain directly. Since grain is not physically changing hands, shrinkage does not occur, and a shrinkage deduction is not needed. Furthermore, the Act does not give the CGC the authority to regulate shrinkage at grain dealers.
The costs of regulating shrinkage at licensed process and transfer elevators are expected to be minimal for process and transfer elevators as well as for producers because it is anticipated that elevators will shift their shrinkage assessment into their schedule of tariffs so that their tariffs reflect all of their handling costs. The evidence shows that this occurred when the CGC fixed the maximum shrinkage allowance at primary elevators at zero on August 1, 2003, as the estimated tariff at primary elevators increased by 10% between 2003 and 2008. As a result, grain prices will become more transparent to producers, yet it will likely not cost process and transfer elevators anything. The regulatory amendment is not designed to change costs or savings for stakeholders but rather is proposed to increase price transparency for producers and consistency amongst licensees.
In addition, the CGC is introducing a housekeeping amendment to require elevator licensees to report the results of their weigh-overs on the appropriate form supplied by the Commission or in an electronic format acceptable to it and eliminate the paper form from the Regulations. This is consistent with current practice as well as with the Government of Canada’s paper burden reduction initiative. Currently, only 1 of 316 licensed primary elevators uses the paper form.
The amendment to reduce the use of paper form for reporting weigh-overs will have a minimal savings impact for licensed primary elevators because they will no longer be required to produce paper forms and return them to the CGC by mail or fax.
Consultation
Initial consultations
In July 2009, a consultation document regarding the proposal to regulate the maximum shrinkage allowance to zero at licensed process and transfer elevators was emailed to 59 stakeholder organizations and 180 CGC licensees. The consultation document was also posted on the CGC’s external Web site as well as Service Canada’s consultation Web site. The CGC gave stakeholders over 100 days to provide their comments regarding the proposal.
The CGC received 28 formal responses from stakeholders (seven producer organizations, one producer, 19 grain industry organizations, and one provincial government). Twelve of the 28 responses were supportive of the CGC’s proposal to regulate the maximum shrinkage allowance to zero at licensed process and transfer elevators, and 16 of the responses were opposed. While there were more responses from those opposed to the proposed shrinkage change, most of those who supported the proposed change (mainly producers and producer organizations) represented thousands of producers each.
The producer and producer organization comments were mostly supportive of the CGC’s proposed changes. They submitted that producers should not be responsible for shrinkage costs once they have delivered grain to an elevator because elevators can control, to some degree, the amount of shrinkage that occurs after delivery by using careful handling practices and efficient equipment, while producers cannot control what happens to the grain once they have delivered it. However, most grain buyers opposed regulating maximum shrinkage allowances to zero because they think that since shrinkage exists, they should be allowed to apply deductions for shrinkage. The CGC does not dispute the fact that shrinkage occurs; however, once the grain has been delivered to an elevator, the elevator can control some of their shrinkage losses, whereas producers no longer control the grain.
Only one producer organization was not supportive of the CGC’s proposed changes and suggested that maximum shrinkage allowances should be eliminated for all types of elevators because producers could assess competitive bids from different elevators including shrinkage deductions. Several grain buyers, including licensees, also suggested that the CGC deregulate elevator shrinkage allowances. That proposal has been strongly opposed by the vast majority of producers. The CGC has heard from producers over the years that if elevators were permitted to deduct shrinkage it would become an industry standard and would be very difficult for them to negotiate shrinkage deductions with elevators.
One stakeholder suggested that the CGC should undertake a study in collaboration with the industry to determine actual shrinkage and set maximum shrinkage levels accordingly. The CGC conducted these types of studies in 1993 and 2003 and found that results often vary significantly from elevator to elevator and even within elevators over time, making it very difficult to produce concrete, robust findings.
Some of the transfer elevators in Ontario were opposed to the proposal because they operate in a different jurisdiction from their primary elevator counterparts. Primary elevators in Ontario are licensed under provincial legislation whereas terminal and transfer elevators across the country and primary and process elevators in western Canada fall under federal jurisdiction (i.e. under the Canada Grain Act). The transfer elevators in Ontario noted that shrinkage is not regulated at primary elevators in Ontario. However, regulating shrinkage to zero at transfer elevators would make the overall playing field more level at a national basis.
Upon stakeholder request, the CGC met with some of the grain buyers to further discuss the CGC’s proposed changes to regulate shrinkage to zero at process and transfer elevators. The grain buyers continued to favour either being allowed to deduct for shrinkage or having shrinkage deregulated. However, they acknowledged that if the CGC is going to regulate shrinkage, they prefer that all types of elevators are treated equally.
The CGC carefully reviewed and considered all of the comments received regarding the proposed changes. The proposal to regulate shrinkage to zero at all types of elevators would ensure a more consistent, transparent industry by requiring that all federally licensed elevators be subject to the same regulations regarding shrinkage deductions. Therefore, no changes were made to the regulatory amendment as a result of the comments received during consultations.
The amendment to require primary elevator licensees to report the results of their weigh-overs on the appropriate form supplied by the Commission or in an electronic format acceptable to it is not anticipated to impact current practice. All but one primary elevator have been submitting their weigh-over reports electronically since 2002. The amendment is administrative in nature and will bring the Regulations in line with current practice; therefore, the CGC did not consult on this administrative amendment.
Pre-publication comments
This regulatory amendment was pre-published in the Canada Gazette, Part I, on July 3, 2010, for 15 days and two submissions were received. One of the submissions was from the Canadian Canola Growers Association (CCGA), a producer organization representing tens of thousands of farmers, and the other was from the Western Grain Elevator Association (WGEA), an industry organization representing seven grain companies operating in Canada.
The CCGA supported the CGC’s regulatory amendment to set the maximum shrinkage allowance for all types of grain at both process and transfer elevators to zero. The CCGA expressed their concern for the lack of consistency between shrinkage regulations at primary and process elevators and the confusion that this creates. The CCGA also noted that producers should not be responsible for shrinkage once they have delivered grain since they cannot control what happens to it once delivered. The CCGA concluded by urging the CGC to proceed with the regulatory amendment as quickly as possible.
The WGEA opposed the regulatory amendment to regulate the maximum shrinkage allowance to zero for licensed process and transfer elevators. The WGEA stated that the regulation goes beyond the CGC’s legal authority to regulate shrinkage allowances. The CGC maintains that the regulatory amendment and the current regulation with respect to shrinkage allowance are within the statutory authority provided by the Act.
The WGEA claimed that statements in the Regulatory Impact Analysis Statement regarding “grain price transparency” were inaccurate and misleading. The regulatory amendment is intended to achieve greater grain price transparency. For greater clarity, the reference to grain price transparency does not refer solely to the price per tonne (or bushel). The reference to grain price transparency refers to how a shrinkage deduction will affect the ultimate amount of money that the producer will receive for their entire delivery of grain when taking into account the price per tonne, tariffs, volume of grain paid for, and any other deduction, such as shrinkage. Fixing the shrinkage allowance at zero improves grain price transparency because producers will only need to consider the price of the grain and the deducted tariffs to determine the ultimate amount they will be paid for their entire delivery of grain. With this amendment, non-advertised shrinkage deductions are one less factor that producers consider when deciding where to deliver their grain, thus making the transaction more transparent.
The WGEA suggested that the CGC is providing instructions to include the shrinkage assessment in grain companies’ tariffs. The CGC is not providing guidance to grain companies regarding including shrinkage assessments in tariffs, nor is the CGC regulating maximum tariff levels. The CGC simply believes, based on previous experience, that it is likely that licensed elevators will adjust their schedules of tariffs and/or reduce their grain prices so that their tariffs and grain prices reflect all of their handling costs. As noted in the description and rationale sections above, evidence suggests that this occurred for the shrinkage regulation enacted in 2003 where the estimated tariff at primary elevators increased by 10% between 2003 and 2008.
The WGEA reiterated that the CGC should conduct a study to determine actual shrinkage levels. The CGC maintains that any study to determine actual shrinkage levels at elevators would not produce consistent, concrete, robust findings, due to the nature of shrinkage. Shrinkage varies from elevator to elevator and also varies from year to year in the same elevator.
The WGEA also raised concerns regarding whether the relevant regulatory requirements were properly followed. This regulatory amendment was developed following the Cabinet Directive on Streamlining Regulations requirements.
The CGC has carefully considered all of the comments received and has also responded to stakeholders individually through written response. The CGC has determined that no changes to the regulatory amendments are warranted given that they will increase grain price transparency and address producer and stakeholder concerns of an uneven regulatory framework by creating a more level playing field regarding the ability of some grain elevators to apply deductions of any amount for shrinkage, whereas others have a regulated maximum shrinkage allowance.
Implementation, enforcement and service standards
The regulatory amendments limit the amount of shrinkage licensed process and transfer elevators can deduct from producers at zero. The CGC anticipates that all process and transfer elevators will comply as licensed primary elevators did in 2003 when the maximum shrinkage allowance was fixed at zero at primary elevators. The CGC has a variety of means to enforce this regulatory change, including the power to suspend a licence in response to failure to comply with the Act or Regulations.
With the coming into force of the amendment regarding weigh-overs and paper burden reduction, primary elevator licensees will be required to report the results of their weigh-overs on the appropriate form supplied by the CGC or in an electronic format acceptable to it.
The CGC will notify all licensees and stakeholders of the CGC’s decision to extend the maximum shrinkage allowance of zero to licensed process and transfer elevators by issuing letters directly to licensees and a news release to all stakeholders prior to the Regulations’ coming into force. The CGC will review and investigate any producer complaints received regarding shrinkage deductions at licensed elevators.
Contact
Eve Froehlich
Policy Analyst
Corporate Services
Canadian Grain Commission
600-303 Main Street
Winnipeg, Manitoba
R3C 3G8
Telephone: 204-983-6394
Fax: 204-983-4654
Email: eve.froehlich@grainscanada.gc.ca
Footnote a
S.C. 2001, c. 4, s. 89
Footnote b
R.S., c. G-10
Footnote c
S.C. 2001, c. 4, s. 89
Footnote d
R.S., c. G-10
Footnote 1
C.R.C., c. 889; SOR/2000-213