Regulations Amending the Explosives Regulations, 2013 (Restricted Components): SOR/2022-121

Canada Gazette, Part II, Volume 156, Number 13

Registration
SOR/2022-121 June 3, 2022

EXPLOSIVES ACT

P.C. 2022-613 June 2, 2022

Her Excellency the Governor General in Council, on the recommendation of the Minister of Natural Resources, pursuant to section 5footnote a of the Explosives Actfootnote b, makes the annexed Regulations Amending the Explosives Regulations, 2013 (Restricted Components).

Regulations Amending the Explosives Regulations, 2013 (Restricted Components)

Amendments

1 Section 1 of the Explosives Regulations, 2013 footnote 1 is replaced by the following:

Overview

1 This Part sets out the scheme and application of these Regulations and exempts some explosives from provisions of the Explosives Act. It also defines certain terms that are used in the Regulations, including “explosives”. Finally, it explains the function of the notes that are used in the Regulations.

2 Section 3 of the Regulations is repealed.

3 Part 20 of the Regulations is replaced by the following:

PART 20

Restricted Components

Overview

454 This Part prescribes components of explosives for the purpose of the definition restricted component in section 2 of the Explosives Act, restricts the sale of those components and sets out the requirements for their sale and storage.

Definitions

455 The following definitions apply in this Part.

component seller
means a person who sells a restricted component. (vendeur de composant)
product seller
means a person who manufactures a product, other than an explosive, for sale using a restricted component. (vendeur de produit)
sell
includes offer for sale. (vendre)

Chief Inspector’s delegate

456 The duties and functions of the Chief Inspector of Explosives that are set out in subsections 467(1) and 468(1), section 488, subsections 489(1), 500(1) and 501(1) and sections 514 and 515 may be performed by an inspector designated by the Chief Inspector.

Components

Prescribed components

457 The components set out in Tables 1 to 3 to this Part are prescribed for the purpose of the definition restricted component in section 2 of the Explosives Act.

DIVISION 1

Tier 1 Requirements

Definition

458 In this Division, Tier 1 component means a restricted component set out in column 1 of Table 1 to this Part.

Authorized Sale and Acquisition

Sale

459 Only a person who is authorized by this Division may sell a Tier 1 component.

Acquisition

460 A Tier 1 component may be acquired for the purpose of manufacturing products, other than explosives, for sale only by a person who is authorized by this Division to acquire a component for that purpose.

Sale — use in laboratories

461 (1) Any person may sell a Tier 1 component for use in a laboratory that is part of or affiliated with

Sale — component seller

(2) A component seller may sell a Tier 1 component. The component seller must comply with this Division.

Acquisition — product seller

462 A product seller may acquire a Tier 1 component for the purpose of manufacturing products for sale. The product seller must comply with this Division.

Component Sellers and Product Sellers List

Component sellers list

463 Only a component seller who is on the component sellers list referred to in subsection 467(1) is authorized to sell a Tier 1 component.

Application — component seller

464 (1) The component seller must complete, sign and send to the Chief Inspector of Explosives the application form provided by the Department of Natural Resources. The application must include the following information:

Security plan

(2) The application must also include a declaration that a security plan has been prepared for each location where the Tier 1 component will be stored or sold. The plan must include

Product sellers list

465 Only a product seller who is on the product sellers list referred to in subsection 468(1) is authorized to manufacture a product, other than an explosive, for sale using a Tier 1 component.

Application — product seller

466 (1) The product seller must complete, sign and send to the Chief Inspector of Explosives the application form provided by the Department of Natural Resources. The application must include the following information:

Security plan

(2) The application must also include a declaration that a security plan has been prepared for each location where the Tier 1 component will be stored. The plan must include

Listing of component seller

467 (1) If a component seller provides the information required by section 464, the Chief Inspector of Explosives must include their name on the component sellers list, assign them a number and provide them with a document that certifies the number and effective date of listing.

Duration of listing

(2) A listing is effective for five years after the date that is set out in the document.

Listing of product seller

468 (1) If a product seller provides the information required by section 466, the Chief Inspector of Explosives must include their name on the product sellers list, assign them a number and provide them with a document that sets out the number and effective date of listing.

Duration of listing

(2) A listing is effective for five years after the date that is set out in the document.

Notice of change

469 Every component seller and product seller must provide the Chief Inspector of Explosives with a written notice of any change to the information provided in an application within 10 days after the date of the change.

Rules for Component Sellers and Product Sellers

Responsibilities of component sellers and product sellers

470 Every component seller must ensure that the requirements set out in sections 471 to 487 are met at each location where they store or sell a Tier 1 component. Every product seller must ensure that the requirements set out in sections 471 to 480 are met at each location where they store a Tier 1 component.

Authorized location

471 A Tier 1 component can only be stored at or sold from a location that has been disclosed in an application or in the notice of change referred to in section 469.

Notice

472 The local police force must be informed in writing of all locations where a Tier 1 component is to be stored or sold.

Locked structures

473 (1) Any structure that contains a Tier 1 component and every door, window or other point of access to a building in which the component is stored must be locked when it is not attended.

Key control plan

(2) A key control plan must be prepared in writing and implemented.

Lighting

(3) All main entrances to a building in which a Tier 1 component is stored must be lit at all times outside business hours.

Security plan

474 The security plan of a component seller or product seller must be implemented and must be updated every 12 months.

Sign

475 (1) A sign that warns against unauthorized access must be posted on the outside at each entrance to each location where a Tier 1 component is stored.

Access

(2) Access to a Tier 1 component must be limited to people authorized by the component seller or product seller.

Employee list

476 A list of the employees who work at each location where a Tier 1 component is stored or sold must be kept at that location.

Verification

477 When a Tier 1 component is received,

Stock management

478 (1) A stock management system must be put in place to account for a Tier 1 component that is under the control of the component seller or product seller.

Audit

(2) An annual inventory audit of the component must be performed.

Weekly inspections

(3) Weekly inspections of the component must be carried out. A record of the results of each inspection, including any loss or tampering and the cause of any loss that is not attributable to normal operations, must be kept for two years after the record is made.

Annual inventory

479 For each calendar year, an inventory must be submitted to the Chief Inspector of Explosives in the form provided by the Department of Natural Resources. The inventory must be submitted no later than March 31 of the year following the year of the inventory and must include the following information:

Theft or tampering

480 If any theft or attempted theft of, or tampering with, a Tier 1 component is discovered,

No sale

481 (1) A sale of a Tier 1 component must be refused if

Reporting

(2) Every refusal to sell the component under subsection (1) or section 487 must be reported to the Chief Inspector of Explosives and to the local police force within 24 hours after the refusal.

Identification

482 Before a Tier 1 component is sold, the buyer must be required to establish their identity by providing

Intermediary

483 A Tier 1 component may be sold to a buyer who is unable to establish their identity in accordance with section 482 if another component seller confirms in writing that they have been provided with the identification required for that buyer. The confirmation must set out the type of document provided to the other component seller and its reference number.

Record of sale

484 (1) A record of each sale of a Tier 1 component must be kept for two years after the date of the sale. The record must include the following information and documents:

Annual sales contract

(2) In the case of a component seller who has entered into an annual sales contract with a buyer, the information required under paragraphs (1)(a)(d) and (i) need only be recorded once in each calendar year.

Access

(3) The record of sale must be kept locked up when it is not being used and must be made available only to a person who needs access to it in the course of their employment.

Exception

(4) Subsections (1) to (3) only apply if the quantity of a Tier 1 component sold is more than 1 kg.

Shipping — vehicle

485 (1) When more than 1 kg of a Tier 1 component is shipped by vehicle,

Shipping — rail

(2) When a Tier 1 component is shipped by rail,

Notice

486 When a Tier 1 component is sold to a buyer who is not a component seller or product seller, the buyer must be provided with a written notice stating that

Responsibility of employee

487 An employee of a component seller must refuse to sell a Tier 1 component if

Suspension and Removal

Suspension

488 (1) If a component seller or product seller fails to comply with the Explosives Act or these Regulations, the Chief Inspector of Explosives may suspend them from the component sellers list or product sellers list. The suspension continues until the component seller or product seller remedies the failure to comply.

Removal

(2) If a component seller or product seller fails to comply with the Explosives Act or these Regulations on more than one occasion, the Chief Inspector of Explosives may remove them from the component sellers list or product sellers list.

Right to be heard

489 (1) Before suspending or removing a component seller or product seller from the component sellers list or product sellers list, the Chief Inspector of Explosives must provide them with written notice of the reasons for the suspension or removal and its effective date, and give them an opportunity to provide reasons why the listing should not be suspended or removed.

Exception

(2) A component seller or a product seller is suspended automatically and without notice if they fail to submit the annual inventory required under section 479.

Review

490 (1) Within 15 days after the date of a component seller’s or product seller’s suspension or removal from the component sellers list or product sellers list, they may send the Minister a written request for a review of the decision of the Chief Inspector of Explosives.

Minister’s decision

(2) The Minister must confirm, revoke or amend the decision under review.

DIVISION 2

Tier 2 Requirements

Definition

491 In this Division, Tier 2 component means a restricted component set out in column 1 of Table 2 to this Part.

Authorized Sale and Acquisition

Sale

492 Only a person who is authorized by this Division may sell a Tier 2 component.

Acquisition

493 A Tier 2 component may be acquired for the purpose of manufacturing products, other than explosives, for sale only by a person who is authorized by this Division to acquire a component for that purpose.

Sale — use in laboratories

494 (1) Any person may sell a Tier 2 component for use in a laboratory that is part of or affiliated with

Sale — component seller

(2) A component seller may sell a Tier 2 component. The component seller must comply with this Division.

Acquisition — product seller

495 (1) A product seller may acquire a Tier 2 component for the purpose of manufacturing products for sale. The product seller must comply with this Division.

Exception

(2) The requirements set out in this Division do not apply to a product seller who acquires or manufactures a restricted component set out at item 10 or 11 of Table 2 to this Part for the purpose of manufacturing a product for sale.

Component Sellers and Product Sellers List

Component sellers list

496 Only a component seller who is on the component sellers list referred to in subsection 500(1) is authorized to sell a Tier 2 component.

Application — component seller

497 The component seller must complete, sign and send to the Chief Inspector of Explosives the application form provided by the Department of Natural Resources. The application must include the following information:

Product sellers list

498 Only a product seller who is on the product sellers list referred to in subsection 501(1) is authorized to manufacture a product, other than an explosive, for sale using a Tier 2 component.

Application — product seller

499 The product seller must complete, sign and send to the Chief Inspector of Explosives the application form provided by the Department of Natural Resources. The application must include the following information:

Listing of component seller

500 (1) If a component seller provides the information required by section 497, the Chief Inspector of Explosives must include their name on the component sellers list, assign them a number and provide them with a document that certifies the number and effective date of listing.

Duration of listing

(2) A listing is effective for five years after the date that is set out in the document.

Listing of product seller

501 (1) If a product seller provides the information required by section 499, the Chief Inspector of Explosives must include their name on the product sellers list, assign them a number and provide them with a document that sets out the number and effective date of listing.

Duration of listing

(2) A listing is effective for five years after the date that is set out in the document.

Notice of change

502 Every component seller and product seller must provide the Chief Inspector of Explosives with a written notice of any change to the information provided in an application within 10 days after the date of the change.

Rules for Component Sellers and Product Sellers

Responsibilities of component sellers and product sellers

503 Every component seller must ensure that the requirements set out in sections 504 to 513 are met at each location where they store or sell a Tier 2 component. Every product seller must ensure that the requirements set out in sections 504 to 508 are met at each location where they store a Tier 2 component.

Authorized location

504 A Tier 2 component can only be stored at or sold from a location that has been disclosed in an application or in the notice of change referred to in section 502.

Locked component

505 (1) A Tier 2 component must be locked up when it is not attended.

Sign

(2) A sign that warns against unauthorized access must be posted on the outside at each entrance to each location where a Tier 2 component is stored.

Access

(3) Access to a Tier 2 component must be limited to people authorized by the component seller or product seller.

Employee list

506 A list of the employees who work at each location where a Tier 2 component is stored or sold must be kept at that location.

Stock management

507 (1) A stock management system must be put in place to account for a Tier 2 component that is under the control of the component seller or product seller.

Weekly inspections

(2) Weekly inspections of the component must be carried out. A record of the results of each inspection, including any loss or tampering and the cause of any loss that is not attributable to normal operations, must be kept for two years after the date on which the record is made.

Theft or tampering

508 If any theft or attempted theft of, or any tampering with, a Tier 2 component is discovered,

No sale

509 (1) The sale of a Tier 2 component must be refused if the component seller has reasonable grounds to suspect that the component will be used for a criminal purpose.

Reporting

(2) Every refusal to sell the component under subsection (1) or section 513 must be reported to the Chief Inspector of Explosives and to the local police force within 24 hours after the refusal.

Identification

510 Before a Tier 2 component is sold, the buyer must be required to establish their identity by providing

Intermediary

511 A Tier 2 component may be sold to a buyer who is unable to establish their identity in accordance with section 510 if another component seller confirms in writing that they have been provided with the identification required for that buyer. The confirmation must set out the type of document provided to the other component seller and its reference number.

Record of sale

512 (1) A record of each sale of a Tier 2 component must be kept for two years after the date of the sale. The record must include the following information and documents:

Annual sales contract

(2) In the case of a component seller who has entered into an annual sales contract with a buyer, the information required under paragraphs (1)(a)(d) and (i) need only be recorded once in each calendar year.

Access

(3) The record of sale must be kept locked up when it is not being used and must be made available only to a person who needs access to it in the course of their employment.

Exception

(4) Subsections (1) to (3) do not apply to the sale of a Tier 2 component set out in column 1 of Table 2 to this Part if the quantity sold is no more than the quantity set out for that component in column 2 of Table 2 to this Part.

Responsibility of employee

513 An employee of a component seller must not sell a Tier 2 component if they have reasonable grounds to suspect that the component will be used for a criminal purpose.

Suspension and Removal

Suspension

514 (1) If a component seller or product seller fails to comply with the Explosives Act or these Regulations, the Chief Inspector of Explosives may suspend them from the component sellers list or product sellers list. The suspension continues until the component seller or product seller remedies the failure to comply.

Removal

(2) If a component seller or product seller fails to comply with the Explosives Act or these Regulations on more than one occasion, the Chief Inspector of Explosives may remove them from the component sellers list or product sellers list.

Right to be heard

515 Before suspending or removing a component seller or product seller from the component sellers list or product sellers list, the Chief Inspector of Explosives must provide them with written notice of the reasons for the suspension or removal and its effective date, and give them an opportunity to provide reasons why the listing should not be suspended or removed.

Review

516 (1) Within 15 days after the date of a component seller’s or product seller’s suspension or removal from the component sellers list or product sellers list, a component seller or product seller may send the Minister a written request for a review of the decision of the Chief Inspector of Explosives.

Minister’s decision

(2) The Minister must confirm, revoke or amend the decision under review.

DIVISION 3

Tier 3 Requirements

Definition

517 In this Division, Tier 3 component means a restricted component set out in column 1 of Table 3 to this Part.

Authorized Sale

Sale

518 A component seller may sell a Tier 3 component. The component seller must comply with this Division.

Rules for Component Sellers

Theft or tampering

519 If any theft or attempted theft of, or any tampering with, a Tier 3 component is discovered,

No sale

520 (1) A sale of a Tier 3 component must be refused if the component seller has reasonable grounds to suspect that the component will be used for a criminal purpose.

Reporting

(2) Every refusal to sell the component under subsection (1) or section 521 must be reported to the Chief Inspector of Explosives and to the local police force within 24 hours after the refusal.

Responsibility of employee

521 An employee of a component seller must not sell a Tier 3 component if they have reasonable grounds to suspect that the component will be used for a criminal purpose.

TABLE 1
Tier 1 Restricted Components
Item

Column 1

Name of component (Chemical Abstracts Service Registry Number (CAS RN)) and concentration expressed as a percentage by weight (w/w)
1 Ammonium nitrate (CAS RN 6484-52-2) in solid form at a concentration of at least 28% w/w of nitrogen in relation to ammonium nitrate
2 Calcium ammonium nitrate
  • (a) that is a mixture of the following essential ingredients:
    • (i) ammonium nitrate and calcium carbonate,
    • (ii) ammonium nitrate and calcium magnesium carbonate, or
    • (iii) ammonium nitrate, calcium carbonate and calcium magnesium carbonate;
  • (b) that is prepared as homogeneous prills or granules;
  • (c) that has a maximum combustible material content, expressed as carbon, of 0.4% w/w; and
  • (d) that has a minimum content of carbonates of 20% w/w at a minimum purity level of 90% w/w
TABLE 2
Tier 2 Restricted Components
Item

Column 1

Name of component (Chemical Abstracts Service Registry Number (CAS) RN)) and concentration expressed as a percentage by weight (w/w)

Column 2

Quantity
1 Hydrogen peroxide (CAS RN 7722-84-1) at a concentration of at least 30% w/w 1 L
2 Nitromethane (CAS RN 75-52-5) at a concentration of at least 90% w/w 1 L
3 Potassium chlorate (CAS RN 3811-04-9) at a concentration of at least 90% w/w 1 kg
4 Potassium perchlorate (CAS RN 7778-74-7) at a concentration of at least 90% w/w 10 kg
5 Sodium chlorate (CAS RN 7775-09-9) in solid form at a concentration of at least 90% w/w 1 kg
6 Nitric acid (CAS RN 7697-37-2) at a concentration of at least 75% w/w 4 L
7 Potassium nitrate (CAS RN 7757-79-1) at a concentration of at least 90% w/w 25 kg
8 Sodium nitrate (CAS RN 7631-99-4) and potassium nitrate (CAS RN 7757-79-1) mixture at a concentration of at least 90% w/w 25 kg
9 Sodium nitrate (CAS RN 7631-99-4) in solid form at a concentration of at least 90% w/w 25 kg
10 Hexamethylenetetramine (CAS RN 100-97-0) at a concentration of at least 90% w/w 0 kg
11 Aluminum powder (CAS RN 7429-90-5) in dry form, at a concentration of at least 70% w/w and with a particle size of less than 200 μm 1 kg
TABLE 3
Tier 3 Restricted Components
Item

Column 1

Name of component (Chemical Abstracts Service Registry Number (CAS RN)) and concentration expressed as a percentage by weight (w/w)
1 Acetone (CAS RN 67-64-1) at a concentration of at least 90% w/w
2 Ammonium nitrate (CAS RN 6484-52-2) in solid form at a concentration of at least 28% w/w of nitrogen in relation to ammonium nitrate, contained in a cold pack
3 Calcium ammonium nitrate
  • (a) that is a mixture of the following essential ingredients:
    • (i) ammonium nitrate and calcium carbonate,
    • (ii) ammonium nitrate and calcium magnesium carbonate, or
    • (iii) ammonium nitrate, calcium carbonate and calcium magnesium carbonate;
  • (b) that is prepared as homogeneous prills or granules;
  • (c) that has a maximum combustible material content, expressed as carbon, of 0.4% w/w;
  • (d) that has a minimum content of carbonates of 20% w/w at a minimum purity level of 90% w/w; and
  • (e) that is contained in a cold pack

4 The Regulations are amended by striking out all of the asterisks.

Coming into Force

5 These Regulations come into force on the first anniversary of the day on which they are registered.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary

Issues: Part 20 of the Explosives Regulations, 2013 (the Regulations) restricts the acquisition and sale of 10 restricted components and sets out the requirements for their sale and storage. The Regulations have increased controls on the sale and on the use of these restricted components by members of the general public and improved the reporting of suspicious transactions. However, other chemicals continue to be misused for the manufacturing of homemade explosives (HMEs) and have shown to be problematic in Canada and other countries. The misuse of these chemicals could be a threat to the safety and security of Canadians.

Description: The amendment will add four chemicals (calcium ammonium nitrate (CAN), hexamine, aluminum powder and acetone) to the currently regulated 10 restricted components.

Rationale: Canada must strengthen the security controls around the four above-mentioned chemicals in order to proactively address potential threats their use in HMEs may pose to Canadian public safety. Previous terrorist events around the world have shown that criminals are using new recipes and bomb-making techniques, which are intended to circumvent existing restrictions and controls. Analysis and consultations with law enforcement partners have shown strong support for adding CAN, hexamine, aluminum powder, and acetone to the currently regulated ten restricted components. These chemicals are inexpensive, readily available and easily converted into HMEs. The amendment considers the regulatory burden and cost to industry while applying the appropriate safety and security controls. Extensive consultations were conducted and the feedback was used to find a sensible control regime on the four new explosives precursor chemicals, based on the level of risk.

Issues

The Government of Canada has a vital role to play where access to explosives precursor chemicals is concerned. Of importance are the chemicals used to make homemade explosives (HMEs), which are commonly referred to as explosives precursor chemicals (termed “restricted components” for those that are subject to the Explosives Regulations, 2013 [the Regulations]). Given the history of large-scale attacks involving HMEs among Canada’s allies, proactive government action is needed in trying to mitigate potential threats before events occur.

As part of the ongoing commitment of Natural Resources Canada (NRCan) to the safety and security of Canadians and to further align the Canadian approach with that of international allies, NRCan constantly reviews and updates the Regulations to address national security issues. Chemicals such as calcium ammonium nitrate (CAN), hexamine, aluminum powder and acetone were used in international attacks and in threats from domestic extremists in Canada. The Government must ensure the proper level of control for certain sale and storage activities in relation to these chemicals.

The current list of restricted components in the Regulations must be proactively updated to capture any chemicals that could be a threat to the safety of Canadians. Regulating the acquisition and sale of calcium ammonium nitrate, hexamine, aluminum powder and acetone (the four chemicals) will strengthen security and help identify suspicious activities (tampering, theft and suspicious purchases). It will enable enforcement activities with respect to the sale and secure storage of these chemicals, hence reducing the making of HMEs in Canada.

Background

The Explosives Act (the Act) and the Regulations regulate the manufacturing, testing, acquisition, possession, sale, storage, transportation, importation and exportation of explosives, the use of fireworks, and specify security measures relating to restricted components. The main objectives of the Act are to ensure public safety and to strengthen national security.

Part 20 of the Regulations restricts the acquisition and sale of restricted components and sets out the requirements for their sale and secure storage. Currently, there are 10 restricted components listed in the Regulations.

The Regulations have increased controls on the sale and the use of these restricted components by members of the general public and improved the reporting of suspicious transactions. However, other chemicals have been used for the manufacture of HMEs and have shown to be problematic in other countries. The misuse of these chemicals is a threat to the safety and security of Canadians.

Legitimate use

The four chemicals have many legitimate uses and are available through manufacturers, distributors and a variety of retailers (primarily department stores, hardware stores, pharmacies, outdoor stores, discount stores, agriculture stores and paint stores).

Calcium ammonium nitrate is primarily used as a fertilizer, preferably on acidic soil. It is also an ingredient in some instant cold packs. These packs have a pouch of either ammonium nitrate (AN) or calcium ammonium nitrate (CAN) and a separate pouch of water. When the pouch is broken and the AN or CAN mixes with the water, an endothermic reaction occurs and the pack becomes cold. These are different from the gel packs that need to be put into a freezer to get cold.

Hexamine is utilized as a curing agent for phenolic resins, petroleum production, food and agriculture, pharmaceuticals, rubber vulcanization, corrosion inhibitor and in explosives. Hexamine is also the primary ingredient in camping stove fuel tablets.

Aluminum powder is commonly used in the manufacture of silver metallic pigments for coatings, electronics and packaging, added to form lightweight concrete, is utilized as an alloying agent, and as fuel in explosives, pyrotechnics and propellants. Aluminum powder is also utilized by sculptors and in the marine sector due to its corrosion resistance.

Acetone is utilized as an industrial and laboratory solvent, paint thinner/cleaner, degreaser, and nail polish remover.

Terrorist use

Calcium ammonium nitrate-based HMEs have been used in many terrorist events in Europe and Afghanistan. Over half the explosive devices found or detonated in Afghanistan are made from ammonium nitrate (AN) that was derived from calcium ammonium nitrate.

Hexamine was used in Ontario by a person who pledged allegiance to the Islamic State in Iraq and Syria for making an HME with the intent of carrying out an attack in Ontario. Hexamine was also used in the explosives that detonated during the Mumbai railway attacks in 2006.

Aluminum powder is commonly used and can be found in most recipes as a fuel to make a variety of homemade explosive formulations. Aluminum powder was part of the explosive used in the Parkdale blast in Alberta in 2018.

Acetone is an ingredient required for making triacetone triperoxide explosives that have been used in terrorist attacks such as the London subway bombings (2005), the Paris attacks (2015), the Brussels bombings (2016 and 2017) and the Manchester Arena bombing (2017).

Objective

The primary objective of the amendments is to strengthen the security regime for restricted components by updating the list of restricted components in the Regulations to include the four additional chemicals of concern. Imposing regulatory measures on calcium ammonium nitrate, hexamine, aluminum powder and acetone will place security controls on their sale and storage in order to minimize illegitimate access to the chemicals. Law enforcement will be made aware of any tampering, theft or suspicious sales. The amendments will also make administrative amendments to Part 20 of the Regulations to clarify intent.

Description

The amendments include the following:

  1. change the structure of Part 20 to create a three-tiered layout;
  2. update the list of restricted components;
  3. add ammonium nitrate and calcium ammonium nitrate contained in cold packs as Tier 3 restricted components;
  4. use Chemical Abstracts Service Registry Numbers (CAS RN) and concentration limits to define restricted components; and
  5. make administrative changes.

1. Change the structure of Part 20 to a three-tiered layout

Currently, Part 20 of the Regulations has many sections on regulatory requirements. Some sections are common to all 10 restricted components and some sections outline specific regulatory requirements for either ammonium nitrate or for the other nine restricted components. As ammonium nitrate is the restricted component with the highest-risk, there are more regulatory requirements for its sale and storage than the other nine restricted components.

The amendments will change the layout of the sections in order to increase ease-of-use and provide more clarity around the requirements for each restricted component by creating three separate divisions; Tier 1, Tier 2 and Tier 3.

Within each tier, stakeholders will be able to clearly see all requirements pertaining to their specific restricted component. The structure will be such that restricted components that fall within Tier 1 have the most requirements whereas the ones in Tier 3 have the least.

This new structure will not change the number of requirements for restricted components that are already included in the Regulations.

2. Update the list of restricted components

The following chemicals will be added to the current list of 10 restricted components:

(a) Calcium ammonium nitrate

Calcium ammonium nitrate (CAN) will be regulated as a Tier 1 restricted component and will be subject to the same requirements as ammonium nitrate, as both chemicals are similar and have the highest security risks compared to the other chemicals.

Sellers of CAN (component sellers) and manufacturers that acquire CAN to make other products for sale (product sellers) will have to enrol with NRCan and meet the applicable requirements of Part 20. The requirements mostly focus on storage controls (controlling access, locking, security and key control plan), shipment controls, sales controls (checking identification (IDs), keeping sales records, refusing suspicious sales), tracking and reporting inventory, and reporting any theft or tampering, and any refusals to sell.

(b) Hexamethylenetetramine and aluminum powder

The amendments will add hexamethylenetetramine (commonly called hexamine), CAS RN 100-97-0 and aluminum powder, CAS RN 7429-90-5, in dry form and with a particle size of less than 200 μm, as Tier 2 restricted components. Sellers of these two chemicals (component sellers) will have to enrol with NRCan and meet the applicable Tier 2 requirements of Part 20, which are identical to the requirements of the current nine restricted components that are included under this tier. The requirements mostly focus on storage controls, sales controls (checking IDs, keeping sales records, refusing suspicious sales), tracking inventory, and reporting any theft or tampering, and any refusals to sell. Companies that acquire any of these two chemicals to manufacture other products for sale (product sellers) will not be subject to the regulatory requirements.

(c) Acetone

Acetone, CAS RN 67-64-1, will be regulated as a Tier 3 restricted component in order to minimize the burden on the industry, as there are thousands of sellers of acetone across Canada.

Tier 3 requirements for acetone seller (component sellers) will be to refuse the sale of acetone if there are reasonable grounds to suspect that the acetone will be used for a criminal purpose; and to report to police and to NRCan any such refusals of sale, any theft or attempted theft or if any tampering with acetone is discovered.

There will be no requirements to enrol with NRCan, no storage controls, and no requirements for ID checking and keeping sales records. Companies that acquire acetone to manufacture other products for sale (product sellers) will not be regulated.

3. List ammonium nitrate and calcium ammonium nitrate contained in cold packs as Tier 3 restricted components

The amendments will add ammonium nitrate and calcium ammonium nitrate when contained in cold packs (also known as instant cold packs or instant cold compress) in Tier 3.

Tier 3 requirements for sellers of AN or CAN contained in cold packs will be to refuse the sale if there are reasonable grounds to suspect that the cold packs will be used for a criminal purpose; and to report to police and to NRCan any such refusals of sale, any theft or attempted theft or if any tampering with AN/CAN in cold packs is discovered.

There will be no requirements to enrol with NRCan, no storage controls, and no requirements for ID checking and keeping sales records.

4. Use Chemical Abstracts Service Registry Numbers and concentration limits to define restricted components

In agreement with suggestions made by stakeholders during consultations, United Nations (UN) dangerous goods numbers will be replaced with Chemical Abstracts Service Registry Numbers (CAS RN) and concentration limits by weight (w/w) to better define the restricted components that are regulated. CAS RNs will be added to three restricted components (i.e. ammonium nitrate, hydrogen peroxide, and nitric acid) that are currently not defined by UN dangerous goods numbers.

5. Make administrative updates

The amendments will also make the following administrative changes:

Regulatory development

Consultation

Early consultations and the first prepublication in the Canada Gazette, Part I, on May 18, 2019

NRCan undertook a series of early consultations from October 2017 to December 2018 with stakeholder groups such as Fertilizer Canada, Responsible Distribution Canada, the Canadian Paint and Coatings Association, the Canadian Consumer Specialty Products Association and Amazon. The feedback received during these consultations informed the development of the proposed amendments as well as the analysis of potential impacts.

The proposed amendments were published in the Canada Gazette, Part I, on May 18, 2019, for a 30-day consultation period. Four submissions were received.

The Canadian Consumer Specialty Products Association commented on the need to revise some of the definitions (restricted component product, component seller, and product seller) to provide more clarity while remaining consistent with the overall intent of the Regulations. NRCan agreed that the current definitions were unclear to stakeholders and to NRCan inspectors and is proposing modifications to the definitions to improve clarity.

The Canadian Consumer Specialty Products Association also commented that the regulatory text should clearly state that companies that acquire hexamine, aluminum powder or acetone to manufacture other products for sale (product sellers) are fully exempt from the Regulations, including that they do not need to enrol with NRCan for inclusion on the product sellers list. NRCan agreed that there was a need to clarify the regulatory text, and is proposing updates to the Regulations to clearly state that the requirements set out in Tier 2 will not apply to a product seller who acquires or manufactures a hexamine or aluminum powder for the purpose of manufacturing a product for sale, and that they will not need to enrol with NRCan. Similarly, Tier 3 requirements will only apply to component sellers and not product sellers. There will be no change in the original intent nor the actual requirements.

The Canadian Paint and Coatings Association commented that most industrial types of paint stores will have concerns with respect to the previously proposed requirements on acetone (for example, the requirements for enrolments, storage controls, and sales controls such as checking IDs, keeping sales records and tracking inventory). NRCan agreed to move acetone from Tier 2 requirements to Tier 3 requirements in order to reduce the burden on sellers of acetone. NRCan wants to balance the risk and burden on society, as acetone is sold by thousands of sellers across Canada.

Additional consultations (November 2020 to March 2021)

Between November 2020 and March 2021, the latest changes to the proposal were discussed with stakeholders from the chemical and explosives industry, law enforcement and other governmental agencies such as, but not limited to, Fertilizer Canada, Responsible Distribution Canada, Canadian Paint and Coating Association, Canadian Consumer Specialty Products Association, Retail Council of Canada (RCC), Amazon, and eBay.

Consultations with major stakeholders were positive and welcomed. NRCan communicated its commitment to respecting the industry’s commerce activity while being committed to the public safety concerns and objectives that are associated with restricted components and HMEs. Stakeholders expressed support for the amendments.

Stakeholders expressed support for the tiered approach to the Regulations and for changing the proposal to regulate acetone as Tier 3. Suggestions were received to identify the restricted components by CAS RNs instead of UN numbers. NRCan agreed with this suggestion and has modified the amendments to include CAS RNs.

NRCan also consulted with law enforcement and other governmental agencies to get their input on the proposal. The feedback they provided during the consultations was of great importance in validating the choice of chemicals to be regulated. It was also recommended to change the exemption quantity for having to keep sales records from 1 kg to 0 kg for hexamine. NRCan agreed with this proposal after analyzing the security risks of the quantities of hexamine required to make powerful HMEs.

Second prepublication in the Canada Gazette, Part I, on June 5, 2021

The proposed amendments were published in the Canada Gazette, Part I, on June 5, 2021, for the second time, for a 30-day consultation period. The following organizations provided comments:

The following summarizes the key comments received and NRCan’s responses.

A. Concentration limits

Two stakeholders requested to have concentration limits specified for all restricted components in order to assist component and product sellers in identifying regulated chemicals. One stakeholder asked for assurance that the government will provide clarity on the regulation of specific products upon request.

NRCan agreed to define concentration limits for all restricted components. With the exception of three components that currently have defined concentration limits, all new concentration limits were set at 90% with the exception of one, at 70%. This approach aligns with the original scope of the amendment to only regulate high-concentration chemicals and will support sellers in the identification of products that are regulated. These limits were verified and concurred by the Canadian Explosives Research Laboratory. The newly defined concentration limits were also well received and supported by the stakeholders. Stating concentration limits is also used in the regulation of explosives precursor chemicals in comparable jurisdictions such as the European Union. NRCan also assured the one stakeholder that it is always available to answer any queries on whether specific products are regulated or not.

B. Definition of calcium ammonium nitrate

One stakeholder commented that the proposed definition of CAN was not entirely clear and had the potential to cause confusion for stakeholders. In particular, the inclusion of “ingredients represent a minimum content of 95% by weight” in condition (a) was a concern, as it was unclear to the stakeholder how this interacts with the condition in (d) “at a minimum purity level of 90% by weight”. The stakeholder recommended replacing “ingredients represent a minimum content of 95% by weight” with “essential ingredients”.

NRCan discussed and agreed to update the definition proposed by the stakeholder. The updated language was also discussed and validated by the Canadian Explosives Research Laboratory as it is imperative that the definition remains scientifically accurate and concurrent with industry-approved definitions used in other jurisdictions and in Fertilizer Canada’s CAN Security Code of Practice. The updated language is technically accurate and meets the original intent.

C. Area of application

One stakeholder expressed concerns regarding the area of application of these regulations and more specifically, if product sellers located outside of Canada would be affected by the regulations.

NRCan clarified with the stakeholder that the Regulations are Canadian regulations and only apply to activities in Canada. With that said, no changes were needed as a result of this comment.

D. Exemption for product sellers

One stakeholder requested further precision around the wording used to describe some exemptions in the regulatory text, more specifically for product sellers using hexamethylenetetramine and aluminum powder and for product sellers using a Tier 1 component.

NRCan replied to the stakeholder that product sellers acquiring hexamethylenetetramine (CAS RN 100-97-0) at a concentration of at least 90% by weight and aluminum powder (CAS RN 7429-90-5) in dry form at a concentration of at least 70% by weight and with a particle size of less than 200 μm will not have to comply with any regulatory requirements of Part 20 as per the exemption of subsection 495(2). For product sellers of Tier 2 components, the exemption only applies to those product sellers using hexamethylenetetramine or aluminum powder. In addition, there will be no such exemption for product sellers using a Tier 1 component to manufacture a product, for sale.

E. Guidance material

Two stakeholders requested to review guidance materials in advance of finalization of the proposal in the Canada Gazette, Part II.

NRCan agreed with the comments and has engaged with some of the main stakeholder associations to review drafts and provide feedback on various guidance documents it has developed, such as the Guide for Recognizing and Reporting Suspicious Transactions of Explosives Precursor Chemicals; Pamphlet for sellers of Tier 1; Pamphlet for sellers of Tier 2; Pamphlet for sellers of Tier 3; Pamphlet for recognizing suspicious transactions; 5R card (remember, recognize, refuse, record, report); An overview of a video on chemical security awareness; and An overview of a self-guided training for sellers of Tier 1 and Tier 2 components. The draft documents were well received and final documents will be shared with stakeholders by the end of summer 2022.

F. Public access to the list of component and product sellers

One stakeholder would like to have a public listing of all enrolled component and product sellers to facilitate verification of enrolment before a transaction.

Mandating the publication of enrolled sellers would be a significant change to the scope of the amendment. Consequently, NRCan will not be incorporating this change in this particular amendment. A response was sent to the stakeholder indicating our position and communicating our availability to answer any queries on whether a seller is enrolled or not.

G. Responsibility of employers

One stakeholder commented for NRCan to consider adding regulatory requirements for the provision of employee training, training record retention and proof of competency.

Regulating the provision of employee training and related training activities would be considered a significant change to the scope of the amendments. Consequently, NRCan will not be incorporating this change as part of this particular amendment. A response was sent to the stakeholder indicating our position and directing them to various documents and training materials that were developed and will be available for sellers in order to assist them and their employees in complying with the regulations.

H. Coming-into-force period

In response to a comment from one of the largest impacted stakeholders, NRCan agreed to extend the original 90-day coming-into-force period to one year. This will provide stakeholders more flexibility to properly implement the new requirements and ensure full compliance. As such, the regulations will come into force on the first anniversary of the day on which they are registered.

Modern treaty obligations and Indigenous engagement and consultation

The amendments are mostly targeted towards the chemical industry supply chain and will not impact the modern treaties with the Indigenous peoples of Canada.

Instrument choice

NRCan considered the following options to meet the stated objectives.

Option 1: Maintaining the status quo

Under the status quo, the four chemicals would continue to be easily accessible and the potential risks of them being used in HMEs would not be addressed (for example, many new HMEs are made from ammonium nitrate (AN) that was derived from calcium ammonium nitrate). Not putting control on sales and other activities involving these chemicals would be inconsistent with actions taken on similar chemicals both in Canada and abroad (the US has regulatory requirements around calcium ammonium nitrate and aluminum powder, and the EU regulates calcium ammonium nitrate, hexamine, aluminum powder, and acetone). Given the need to reduce the potential for these chemicals to be used in HMEs and to enhance public safety, maintaining the status quo is not a viable option.

Option 2: Implement non-regulatory measures for the identified explosives precursor chemicals

This option would entail implementing non-regulatory measures to address the potential public safety risks associated with the four chemicals. These measures would include developing and implementing guidelines and increasing the level of outreach and communication initiatives. While these tools could possibly achieve the objectives, there are uncertainties as to their effectiveness given their voluntary nature. Considering the four chemicals have very similar characteristics and risk profiles as the 10 chemicals that are currently regulated, are inexpensive, readily available and easily converted into powerful explosives, using non-enforceable voluntary tools would not provide adequate protection and would not constitute an effective measure for ensuring public safety. Furthermore, this approach would be inconsistent with measures in place for the current restricted components, which could create confusion within stakeholder groups and decrease the effectiveness of the control regime. Therefore, this option is not deemed an appropriate option to address the issue and was not considered any further.

Option 3: Amending the Regulations to add the four chemicals to the list of restricted components

There is evidence that some of the four chemicals were used in HMEs in Canada. Their continued uncontrolled availability contributes to the risk of these chemicals being used in potential terrorist attacks in the future, with adverse consequences on Canadians and their way of life. Given the importance of ensuring the safety of Canadians and the need to support the preventative actions of law enforcement partners against potential threats, adding the chemicals to the list of restricted components through regulatory amendments is the preferred and selected option. This will provide adequate control while preserving legitimate access to the chemicals. This approach will better align Canada’s regulatory regime to that of the European Union.

Regulatory analysis

Sector profile

Canada’s $52-billion chemical industry operates in every province and territory, with key clusters in Ontario, Alberta and Quebec. The chemical supply chain is extensive and complex, and includes manufacturers, distributors and retailers of restricted components.

It is expected that approximately 18,192 Canadian sellers (component and product sellers) will be impacted by this proposal. The table below provides the estimated number of businesses currently engaged in the selling of the chemicals being considered by this proposal.

Table 1: Number of businesses
Stakeholder group Number of small businesses table b1 note a Number of medium and large businesses Total
Calcium ammonium nitrate sellers 100 100 200
Hexamine sellers 100 300 400
Aluminum powder sellers 95 5 100
Acetone and AN/CAN in cold packs sellers 4 925 12 567 17 492
All sellers 5 220 12 972 18 192

Table b1 note(s)

Table b1 note a

A small business, for the purpose of the small business lens, is any business, including its affiliates, that has fewer than 100 employees or less than $5 million in annual gross revenues.

Return to table b1 note a referrer

Benefits and costs

The amendments will benefit Canadians, as they will help mitigate the security, health, and safety risks associated with the use of chemicals to make homemade explosives. These benefits have the potential to be significant, as evidenced by past terrorist events. However, given the low incidence of such events, it is difficult to estimate their probability in Canada and by how much the amendments will reduce this probability. Benefits are thus described qualitatively due to the limited data available.

Conversely, the amendments will increase administrative and compliance burdens for the chemical industry and other stakeholders. NRCan sought input from the Retail Council of Canada, Responsible Distribution Canada, and Fertilizer Canada (FC) regarding the expected costs of the amendments on their businesses. Their responses provided data to assist in quantifying the expected costs that will be borne from complying with the amendments. The incremental costs have been monetized in accordance with the Treasury Board of Canada Secretariat’s Guidance on Cost-Benefit Analysis.

The parameters used were the following: number of years: 10 (2022–2031); price year for costing: 2021; present value base year: 2022; discount rate: 7%. The regulations will come into force in spring 2023. There is an assumption that stakeholders will start incurring costs and implementing some key activities before the coming-into-force date (CIF) in order to ensure full compliance. NRCan understands that affected stakeholders will not wait until CIF to start getting ready and implementing some of the core costs. Therefore, the costing parameters in this report remain relevant.

The costs and benefits are discussed below. Overall, the amendments are expected to result in net benefits to Canadian society. For a copy of the cost-benefit analysis report, please contact NRCan at ERDmms@nrcan.gc.ca.

Administrative costs

NRCan estimated that the main administrative costs, which are costs incurred demonstrating compliance with regulations, will be as follows. Labour costs were obtained from a National Occupation Code (NOC) list from Statistics Canada’s Table 14-10-0307-01 Employee wages by occupation, annual (formerly CANSIM 282-0152).

(1) Applying for enrolment

CAN, hexamine, and aluminum powder stakeholders are expected to spend about 30 minutes at a wage rate (including overhead) of $29 per hour (NOC 11 Office support occupations) to complete an application form and send it to NRCan. It is assumed that the proportion of impacted businesses will be 100%.

(2) Providing notice of any changes in application

CAN, hexamine, and aluminum powder stakeholders are expected to spend about 10 minutes at a wage rate of $29 per hour (NOC 11 Office support occupations) to make changes to the information provided in an application and send it to NRCan. It is assumed that the proportion of impacted businesses will be 2.5% each year, as only a small portion of businesses will need to make changes to the information in an enrolment application.

(3) Renewing enrolment

CAN, hexamine, and aluminum powder stakeholders are expected to spend about 10 minutes at a wage rate of $29 per hour (NOC 11 Office support occupations) to renew their enrolment once every five years. It is assumed that the proportion of impacted businesses will be 100%.

(4) Informing local police of the location of CAN

CAN stakeholders are expected to spend 10 minutes at a wage rate of $47 per hour (NOC 05 Middle management occupations in retail and wholesale trade and customer services) to notify police of locations where CAN is stored or sold. It is assumed that the proportion of impacted CAN businesses will be 100%.

(5) Recording weekly inspections

CAN, hexamine, and aluminum powder stakeholders will spend about five minutes each week at a wage rate of $30 per hour (NOC 31 Retail sales supervisors and specialized sales occupations) to keep records of the inspections. It is assumed that the proportion of impacted CAN businesses will be 10%, as about 90% of CAN stakeholders also sell AN or abide by the Fertilizer Canada (FC) Code of Practice for CAN and already keep records of weekly inspections. It is assumed that the proportion of impacted aluminum powder and hexamine businesses will be 100%.

(6) Submitting annual inventory for CAN

CAN stakeholders will spend about 1.5 hours at a wage rate of $47 per hour (NOC 05 Middle management occupations in retail and wholesale trade and customer services) to submit a yearly inventory to NRCan. It is assumed that the proportion of impacted CAN businesses will be 10%, as about 90% of stakeholders also sell AN or abide by the FC Code of Practice for CAN and will have inventory processes implemented and submitted to NRCan.

(7) Recording sales

CAN, hexamine, and aluminum powder stakeholders will spend an average of two minutes at a wage rate of $25 per hour (NOC 33 Sales representatives and salespersons - wholesale and retail trade) to record an ID for an average of 300 CAN transactions per year per business, 50 hexamine sales per year per business, and 15 aluminum powder sales per year per business.

Compliance costs

NRCan estimated that the main compliance costs will be as follows.

(8) Having locked structures

CAN, hexamine, and aluminum powder stakeholders are expected to spend $517 for locksmith services or new locked cabinets. It is assumed that the proportion of impacted businesses will be 10% for CAN stakeholders, as about 90% of CAN stakeholders also sell AN or abide by the FC Code of Practice for CAN and already have lockable structures. It is assumed that the proportion of impacted businesses will be 5% for aluminum powder and hexamine stakeholders, as about 95% of hexamine and aluminum powder stakeholders already have lockable structures (some are already selling explosives, other restricted components [RCs], or other dangerous goods) or can store them behind a counter that is attended.

(9) Lighting all entrances for CAN buildings

CAN stakeholders will spend $1,034 to install new lighting. It is assumed that the proportion of impacted CAN businesses will be about 10%, as about 90% of CAN stakeholders also sell AN or abide by the FC Code of Practice for CAN and already have lighting outside.

(10) Posting signs and controlling access

CAN stakeholders will spend about $207 and hexamine and aluminum powder stakeholders about $21 to post signs and control access. It is assumed that the proportion of impacted CAN businesses will be 10%, as about 90% of CAN sellers already have warning signs (they sell AN or follow FC’s code of practice for CAN). It is assumed that the proportion of impacted hexamine and aluminum powder businesses will be 25% and 50% respectively, as about 75% of hexamine and 50% of aluminum powder stakeholders already have signs for unauthorized access (some are already selling explosives, other RCs, or other dangerous goods).

(11) Developing security and key control plans for CAN

CAN stakeholders are expected to spend four hours at a wage rate of $47 per hour (NOC 05 Middle management occupations in retail and wholesale trade and customer services) to develop the security and key control plans. It is assumed that the proportion of impacted CAN businesses will be 10%, as about 90% of CAN businesses also sell AN or abide by FC’s Code of Practice for CAN and already have security and key control plans in place.

(12) Implementing security and key control plans for CAN and updating the plans every 12 months

CAN stakeholders are expected to spend one hour at a wage rate of $47 per hour (NOC 05 Middle management occupations in retail and wholesale trade and customer services) to update their plan every 12 months. It is assumed that the proportion of impacted CAN businesses will be 10%, as about 90% of CAN businesses also sell AN or abide by the FC Code of Practice for CAN and already have security and key control plans implemented and being updated.

(13) Conducting weekly inspections

CAN, hexamine and aluminum powder stakeholders will spend about 10 minutes each week per inspection at a wage rate of $30 per hour (NOC 31 Retail sales supervisors and specialized sales occupations). It is assumed that the proportion of impacted CAN businesses will be 10%, as about 90% of stakeholders also sell AN or abide by the FC Code of Practice for CAN and already have weekly inspections. It is assumed that the proportion of impacted hexamine and aluminum powder businesses will be 100%.

(14) Understanding regulatory requirements for refusal of sale

CAN, hexamine, aluminum powder, acetone, and AN/CAN contained in cold packs stakeholders will spend about four hours upfront and one hour annually at a wage rate of $25 per hour (NOC 33 Sales representatives and salespersons - wholesale and retail trade) to understand regulatory requirements on refusing sale to ensure compliance with the Regulations. NRCan will provide guidance documents and a training video to assist with understanding the regulatory requirements. It is assumed that the proportion of impacted CAN businesses will be 10%, as about 90% of stakeholders also sell AN or abide by the FC Code of Practice for CAN and already understand the requirements. It is assumed that the proportion of impacted aluminum powder, hexamine, acetone, and AN/CAN contained in cold packs sellers will be 90%, as about 10% of these stakeholders also sell explosives or other RCs and already understand the requirements for refusing sale.

(15) Reporting refusal to sell or suspicious activity

CAN, hexamine, aluminum powder, acetone, and AN/CAN contained in cold packs stakeholders will spend about one hour at a wage rate of $47 per hour (NOC 05 Middle management occupations in retail and wholesale trade and customer services) to report a suspicious activity to the Chief Inspector of Explosives and to the local police force. Based on current report rates, it is estimated that there will be around 35 reports submitted per year combined for all the sellers (0.2% of stakeholders will be affected).

(16) Checking identification

CAN, hexamine and aluminum powder stakeholders will spend about one minute at a wage rate of $25 per hour (NOC 33 Sales representatives and salespersons - wholesale and retail trade) to check ID. It is estimated that there will be on average 300 CAN transactions per year per business, 50 hexamine transactions per year per business, and 30 aluminum powder transactions per year per business.

(17) Keeping records of sale locked

CAN, hexamine and aluminum powder stakeholders will spend about two minutes at a wage rate of $47 per hour (NOC 05 Middle management occupations in retail and wholesale trade and customer services) for 365 times per year to keep their sales records locked. It is assumed that the proportion of impacted businesses will be 5%, as about 95% of companies already have electronic records that are password protected and are therefore locked.

(18) Securing vehicle and rail shipment of CAN

CAN stakeholders will take about 30 minutes at a wage rate of $31 per hour (NOC 41 Transport and heavy equipment operation and related maintenance occupations) to secure their shipments. It is estimated that there will be on average 200 shipments per year per business. It is assumed that the proportion of impacted businesses will be 50%, as about 50% of companies already follow the FC Code of Practice and some shipments occur with AN.

(19) Providing a written notice for CAN sales

CAN stakeholders will spend about one minute at a wage rate of $25 per hour (NOC 33 Sales representatives and salespersons - wholesale and retail trade) for an average of 300 sales per year per business to hand out the notice, provided by NRCan, to the buyer and the driver. It is assumed that the proportion of impacted businesses will be 100%.

Table 2.A: Total annualized costs to stakeholders by chemical and activity — administrative costs (CAN$ 2021)
Activity Calcium ammonium nitrate Hexamine Aluminum powder Acetone and
AN/CAN in cold packs		 Total
Applying for enrolment $409 $817 $204 Not applicable $1,430
Providing notice of any changes in application $24 $49 $12 Not applicable $85
Renewing enrolment $95 $191 $48 Not applicable $334
Informing local police of locations $222 Not applicable Not applicable Not applicable $222
Recording weekly inspections $2,702 $54,046 $13,512 Not applicable $70,260
Submitting annual inventory $1,402 Not applicable Not applicable Not applicable $1,402
Recording sales $50,224 $16,732 $1,253 Not applicable $68,209
Total $55,078 $71,835 $15,029 $0 $141,942
Table 2.B: Total annualized costs to stakeholders by chemical and activity — compliance costs (CAN$ 2021)
Activity Calcium ammonium nitrate Hexamine Aluminum powder Acetone and
AN/CAN in cold packs		 Total
Having locked structures $1,472 $1,472 $368 Not applicable $3,312
Lighting all entrances $2,944 Not applicable Not applicable Not applicable $2,944
Posting signs and controlling access $589 $294 $147 Not applicable $1030
Developing security and key control plans $532 Not applicable Not applicable Not applicable $532
Implementing security and key control plans $935 Not applicable Not applicable Not applicable $935
Conducting weekly inspections $5,437 $108,744 $27,186 Not applicable $141,367
Understanding regulatory requirements for refusal of sale (upfront) $279 $5,027 $1,257 $219,838 $226,401
Understanding regulatory requirements for refusal of sale (annual) $490 $8,827 $2,207 $386,013 $397,537
Reporting refusal to sell or suspicious activity $19 $37 $9 $1,635 $1,700
Checking identification $25,873 $8,619 $1,292 Not applicable $35,784
Keeping records of sale locked $5,823 $11,764 $2,912 Not applicable $20,499
Securing vehicle and rail shipment $321,170 Not applicable Not applicable Not applicable $321,170
Providing a written notice $25,873 Not applicable Not applicable Not applicable $25,873
Total $391,436 $144,784 $35,378 $607,486 $1,179,084
Consumer costs

Consumers of calcium ammonium nitrate, hexamine, and aluminum powder might see a slight increase in the cost of the restricted components. This will be a result of businesses having to recuperate the additional cost and passing the cost onto consumers. The likelihood of this is low, as there are some alternatives on the market, especially for hexamine (camping fuel tablets), and therefore it is likely that most costs will be absorbed by businesses rather than passed on to consumers.

Government costs

NRCan will use existing resources to implement and administer the amendments. While implementation may require reallocation of internal resources, the overall impact on operations is expected to be small and thus the associated opportunity costs will be minimal.

Enrolments: The Government of Canada will incur limited incremental costs related to processing new enrolments. Many of the sellers are already enrolled for other restricted components. Based on the number of new enrolments expected to be received by NRCan initially, it is estimated that the total incremental cost to the Government of Canada in processing applications for enrolment, update of current enrolment, or renewal of enrolment will be $6,350 over 10 years (or $904 annually). Enrolments are renewed every five years.

Enforcement: Incremental enforcement activities are not expected to be significant, as many stakeholders already sell restricted components and are part of the annual inspection plan. Although it may seem like these new inspections will take away or delay other inspections, the risk-based inspection plan that has been put in place by NRCan ensures that efforts are allocated to the highest priority sites. It is therefore not expected that the addition of these new chemicals will negatively impact current compliance and enforcement activities or necessitate added resources.

Promotion and training: Promotional activities to raise awareness about the requirements, such as publishing web materials, training videos, guidance documents and pamphlets, holding webinars, contacting targeted stakeholders, and responding to enquiries, are being undertaken to support the implementation of the amendments. These activities will be conducted heavily in the first year of implementation. As many of the identified potentially impacted stakeholders already sell other restricted components or explosives, the additional compliance promotion effort by NRCan will be minimal.

Public safety benefits

As explosives precursor chemicals continue to be misused for the manufacturing of homemade explosives in large-scale attacks around the world and in threats from domestic extremists, there is a strong general public expectation that the Government will take all reasonable steps to ensure the safety and security of its citizens while protecting their economic well-being. The amendments will have a positive impact on public safety, as the intended security measures will minimize illegitimate access to the restricted components. The increased level of controls on sales and storage will make it more difficult for criminals to acquire or steal these components, hence reducing the risk to Canadians caused by their misuse.

Strengthened access controls to restricted components in Canada will help ensure that criminals and terrorists will encounter efficient barriers that hinder their plans to proceed with attacks with HMEs using any of the four chemicals, or that they will be more easily detected. Law enforcement will be alerted of any tampering, theft or refusal of suspicious sales regarding the four new restricted components. Since restricted components began to be regulated in 2008, there has been a number of instances where suspicious transactions were reported to law-enforcement agencies, which led to investigations. Thanks to additional reporting and better communication and signage on the four new restricted components, police will have more leads to investigate, therefore reducing the risk of HME-related crimes. This should result in a reduced number of incidents and associated emergency response costs (police, ambulance, fire) as well as a reduced risk for damage to public infrastructure and associated repair costs, and a reduced risk of injuries and deaths and related healthcare costs.

Benefits to industry

The amendments will result in increased industry awareness of the potential for the chemicals to be misused. This will reduce the risk of these businesses becoming involved in investigations if an incident were to occur. For stakeholders, it will reduce the risk of having negative media attention if their restricted component were used in an attack.

Benefits to the economy

Terrorist attacks using HMEs will have negative impacts on the Canadian economy. Given the limited number of incidents that have occurred, it is not possible to reliably assess this impact. However, as demonstrated in other countries, cost associated with terrorist-related events using HMEs will be significant. Europe has the most similarities to Canada in their explosives regulation regime and has also been victim to terrorist attacks using HMEs, providing insights into the magnitude of the impacts to their economy and potential benefits to avoiding such incidents from occurring in Canada. The RAND Europe study, which was commissioned by the European Parliament, investigated the cost of terrorism inflicted in the European Union. The study determined that terrorism negatively impacted the economic growth in Europe and around €180 billion in gross domestic product was lost between 2004 and 2016. The hardest-hit countries with the biggest financial loss were the United Kingdom (€43.7 billion), France (€43 billion), Spain (€40.8 billion) and Germany (€19.2 billion). While these costs encompass all terrorist attacks, including those carried out without the use of homemade explosives (knives, rifles, use of vehicles), they still are representative of the scope of potential financial loss. Published documentation also shows the cost inflicted by terrorist attacks using explosives in the European Union increased by CAD $1.2 billion (€778.8 million) in 2015 and by CAD $917 million (€586.3 million) in 2016.

The economic consequences could also include weakened consumer confidence, reduced consumption and border delays (increased security). NRCan continues to assess which chemicals should be regulated to help prevent such financial losses from happening in Canada.

Benefits to the Government

A new provision was added to enable delegating some of the duties and functions of the Chief Inspector of Explosives (CIE) under Part 20 of the Regulations to an inspector designated by the Chief Inspector.

The plan is to allow up to five inspectors to conduct the CIE duties of subsections 467(1), 468(1), 500(1) and 501(1). It would take approximately 5 minutes 390 times per year to conduct these duties. It would be beneficial to NRCan to conduct compliance and enforcement activities by more than one person (the CIE), as this change will achieve administrative and operational flexibilities. It would also be beneficial to the industry and to the Government to have a service for enrolments assigned to more than one person at NRCan. There might be small financial saving by delegating some of the authorities to a position with a lower hourly wage than that of the CIE, but this would not be significant.

The estimated present value of total costs from the amendments is summarized in Table 3.

Table 3: Cost-benefit statement
Impacted stakeholder 2022
(implementation year)		 2031 Total
(present value)		 Annualized average Annualized average per stakeholder
Sellers of calcium ammonium nitrate $456,565 $223,708 $3,136,135 $446,515 $2,233
Sellers of hexamine $248,792 $106,250 $1,521,450 $216,620 $542
Sellers of aluminum powder $59,143 $24,620 $354,035 $50,407 $504
Sellers of acetone and AN/CAN contained in cold packs $1,906,337 $197,060 $4,266,723 $607,485 $35
NRCan $3,709 $220 $6,350 $904 $904
Total cost $2,674,546 $551,858 $9,284,693 $1,321,931  
Sensitivity analysis

As with any analysis, many of the assumptions used are subject to a degree of uncertainty. The variance of these assumptions will impact the overall costs, lowering or decreasing them as compared to the central estimate. To determine the potential impact of such variance, a sensitivity analysis was performed for two scenarios. A high-cost and low-cost scenario.

The high-cost scenario was created by examining the combined impact that would result if key variables were set to their upper ranges. For instance, what if it takes 15 instead of 10 minutes to perform weekly inspections? What if the assumed wage classifications performing key tasks were higher than estimated? The low-cost scenario was created in a similar fashion combining the lower ranges of selected variables that were determined as uncertain.

The sensitivity analysis demonstrates that even accounting for the potential of higher costs for several of the model variables, the estimated total cost for the regulations would remain relatively constant, resting between a range of around $8 and $13 million. Even if costs were closer to those under the high-cost scenario (less than $13 million), this is considered reasonable given the objectives of the regulations to decrease risks associated with HME.

More information on the sensitivity analysis and methodology used in the cost-benefit analysis can be found in the full cost-benefit analysis report, available on request.

Small business lens

Over the 2022–2031 period, a total of 5,220 small businesses across all stakeholder groups are expected to be impacted by the amendments. The total annualized value of costs to small businesses is estimated to be about $496,341, or about $95 per small business. The total present value of costs is estimated to be about $3,486,091, or about $668 per small business. To ensure a high level of security with respect to the targeted chemicals and products is attained and to maintain the effectiveness of the Regulations, no additional flexibility mechanism could be introduced through the amendments in order to reduce the administrative burden on some small businesses. There would be no difference in costs for sellers of the chemicals whether they are small business or a medium/ large business. However, a decision was made to reduce requirements for sellers of acetone from the May 18, 2019, proposal (from Tier 2 to Tier 3), which will benefit almost five thousand small businesses. NRCan made this decision in response to stakeholder concerns expressed during the consultation.

Small business lens summary
Table 4A: Small business lens compliance costs by stakeholder
Group Annualized average Present value
Sellers of calcium ammonium nitrate (no change) $195,718 $1,374,643
Sellers of hexamine $36,196 $254,228
Sellers of aluminum powder (no change) $33,609 $236,056
Sellers of acetone and AN/CAN contained in cold packs $171,042 $1,201,327
Total compliance cost $436,565 $3,066,254
Table 4B: Small business lens administrative costs by stakeholder
Group Annualized average Present value
Sellers of calcium ammonium nitrate (no change) $27,539 $193,425
Sellers of hexamine $17,959 $126,134
Sellers of aluminum powder (no change) $14,277 $100,277
Sellers of acetone and AN/CAN contained in cold packs Not applicable Not applicable
Total administrative cost $59,775 $419,836
Table 4C: Small business lens costs — summary
  Annualized value Present value
Total compliance cost table c6 note a $436,566 $3,066,254
Total administrative cost $59,775 $419,836
Total cost (all impacted small businesses) $496,341 $3,486,091
Cost per impacted small business $95 $668

Table c6 note(s)

Table c6 note a

See the "Benefits and costs" section for details for each activity.

Return to table c6 note a referrer

One-for-one rule

The one-for-one rule applies because the amendments will impose incremental administrative costs to businesses and are therefore considered “burden in” (triggering Element A) under the rule.

The estimated annualized administrative cost is $62,016, which is equivalent to about $3.41 per business. The cost increase is a result of new administrative requirements, such as an applicant having to enrol and keep application information up to date, being applied to stakeholders of the newly added chemicals. For sellers of calcium ammonium nitrate, additional administrative requirements include submitting an annual inventory. More details on the requirements considered to be administrative burden is detailed in the “Benefits and costs” section. The monetized costs presented in this section have been expressed in 2012 Canadian dollars (2012 CAN$) and discounted to a 2012 base year (as opposed to the figures reported for the cost-benefit analysis, which are in 2021 CAN$ and discounted to 2022). These calculations are done in compliance with the Red Tape Reduction Regulations, which specify the required method for estimation of administrative burden.

Regulatory cooperation and alignment

The current Canadian restricted components program regulates 10 of the highest-risk chemicals and focuses on all sellers of these chemicals. The United States controls 300 chemicals of concern, including calcium ammonium nitrate and aluminum powder. The US’s Chemical Facility Anti-Terrorism Standards (CFATS) is a regulatory program focused specifically on security at high-risk chemical facilities. The Department of Homeland Security (DHS) performs an authorization inspection at the facility prior to granting a security plan approval. Once a facility’s plan is approved, DHS conducts regular compliance inspections to verify that a facility is implementing the agreed-upon security measures.

The European Union has 18 chemicals on its list of concern chemicals including calcium ammonium nitrate, hexamine, aluminum powder and acetone. Of these chemicals, seven are restricted (including calcium ammonium nitrate), and access and use of the chemicals is controlled. Member States may decide to grant access to the public to these substances only through a system of licenses and registration. Licensing regimes vary among countries. Eleven are subject to a reporting of suspicious transactions obligation (including hexamine, aluminum powder, and acetone). The concentrations for hexamine and acetone are lower in the EU compared to Canada so more products are captured in the EU. In addition, the EU regulation introduces obligations for economic operators who place such substances on the market. Operators must ensure the appropriate labelling of restricted explosives precursors.

Canada has a regulatory program and approach that is different from that of the United States and similar to that of the European Union. These amendments will help Canada to better harmonize the chemicals that will be regulated to the chemicals already regulated in the United States and the European Union. Also, Canada will introduce a Tier 3 category for acetone as well as ammonium nitrate and calcium ammonium nitrate contained in cold packs where the only requirements will be to refuse suspicious sales and to report suspicious activities and any refusals to sell. This approach will better align Canada’s approach to that of the European Union.

Canada and the United States updated their Regulatory Cooperation Council Workplan in 2020 to promote harmonization of regulations on explosives precursor chemicals where achievable, and collectively limit impact on commerce.

Strategic environmental assessment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required. The amendments will make changes to the Regulations that will not result in physical works and will have negligible environmental effects. This proposal is not likely to result in public environmental concerns.

Gender-based analysis plus

No gender-based analysis plus (GBA+) impacts have been identified for this proposal. The security requirements for storage, transport, and sale of restricted components will not negatively affect persons based on considerations such as gender, sex, age, language, education, geography, culture, ethnicity, income, ability, sexual orientation, and/or gender identity.

Implementation, compliance and enforcement, and service standards

Implementation

These amendments will come into force on the first anniversary of the day on which they are registered. This will provide time for industry stakeholders to implement any changes required to comply with the new regulatory requirements. As part of the implementation of these amendments, NRCan will notify stakeholders of the changes and provide additional information on the Department’s website. Continued engagement with industry stakeholders will be maintained. NRCan intends to work with restricted components sellers to achieve compliance with all amendments by addressing issues and providing the necessary information to comply by way of guidance documents and corresponding templates.

Compliance and enforcement

Compliance and enforcement activities will begin on the regulations’ coming-info-force date. Compliance and enforcement activities may include the following: monitoring establishment compliance through an inspection program; compliance verification and investigation activities based on complaints or identified non-compliance with the Regulations; and education, consultation and information sharing through the development of documents and other compliance promotion activities. Outreach activities aimed at informing manufacturers, distributors and retailers of restricted components will take place to increase awareness of the measures set out in the proposal and to assist parties in achieving compliance.

NRCan will actively monitor compliance throughout the supply chain, including manufacturers, distributors and retailers of restricted components. The Chief Inspector of Explosives has the right to suspend a seller’s enrolment where the Act or the Regulations are contravened. The Chief Inspector may cancel a seller’s enrolment in situations where there has been a repeat history of non-compliance with the Act and Regulations or where the seller jeopardizes the security or safety of the public. In both cases, the seller must be notified in writing and be given a reasonable opportunity to give reasons as to why suspension or cancellation is unwarranted. In a case where the Chief Inspector chooses to suspend or cancel a seller’s enrolment, the seller may submit a request to the Minister within 15 days to review that decision. In the absence of valid enrolment, the seller cannot sell and, if found to be in violation, may be charged under the Act.

Service standards

NRCan develops and publicly releases service standards that address the timeliness of authorizations on an annual basis for improved service predictability and performance for high-volume regulatory authorizations. The service standard to process an enrolment application from a restricted component seller and product seller is 30 days from receipt of the complete application.

Contact

Rinaldo Jeanty
Director General and Chief Inspector of Explosives
Lands and Minerals Sector
Natural Resources Canada
Telephone: 613‑948‑5200
Email: ERDmms@nrcan.gc.ca