Cost Recovery Initiative: Consultation Document

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Table of Contents

1. Preface

The Canadian Food Inspection Agency (CFIA) is proposing to streamline and update its cost recovery regime, including consolidating service categories, establishing service standards, and revising fees. When the CFIA was created in 1997, several programs from across the federal government were transferred to the Agency and the existing cost recovery regimes for each program were adopted by the CFIA. This has resulted in a fee regime that is complex and inconsistent across sectors and programs. The CFIA currently has hundreds of sector-specific fees, resulting in some regulated parties being charged more than others for similar services because the manner in which the fees are calculated differ (e.g. by weight, by number of inspected products, or by hour).

In addition, most fees have not changed since the organization was created almost twenty years ago, but the cost of delivering services has increased with inflation and other factors. This means that the portion of the costs covered by regulated parties has decreased over time. Today, the CFIA recovers less than 10% of its costs from regulated parties, with the remaining 90% of costs paid by taxpayers.

During this consultation phase, the CFIA is seeking your input on:

  • a proposed streamlined list of services that allows fees to be charged consistently for similar CFIA services
  • proposed service standards
  • the appropriate level of cost sharing between regulated parties and taxpayers
  • impacts of potential fee increases on businesses

A streamlined and updated cost recovery regime will benefit regulated parties by ensuring greater consistency in fees and greater predictability in service delivery. Striking a reasonable balance of cost sharing will also be responsive to both the interests of regulated parties and taxpayers' expectations for prudent use of public funds.

2. Consultation process

This document represents the first phase of a two phased consultation process on the CFIA's cost recovery regime. In this first phase, we are seeking input on the proposed streamlined list of services, services standards, the appropriate level of cost sharing between regulated parties and taxpayers, and the impacts of potential fee increases on businesses. We are not proposing any specific changes to fee amounts at this time. The CFIA will consult on a proposal for new and updated fees as part of the second phase of the consultations.

We want to hear from you.

This document:

  • Informs you, the stakeholder, of the approach taken by the CFIA to update the list of services and associated service standards
  • Describes how you can participate in the consultation process
  • Seeks your input on a streamlined list of services and service standards
  • Seeks your input on the appropriate level of cost sharing between regulated parties and taxpayers for CFIA activities

You will notice questions contained in blue text boxes throughout the document. Please review and provide your responses to the CFIA by mail or e-mail using the contact information identified in Section 12 - Providing your input. Industry associations are urged to gather feedback from their members on the questions posed in this document related to the proposed changes. For ease of reference, a summary of the questions is included as Annex 1.

Regulated parties are also encouraged to complete an impact assessment questionnaire. This questionnaire will allow the CFIA to better understand how fee increases may affect businesses as it develops its proposal for changes to fees.

From January 2017 until March 2017, a series of consultation opportunities, such as webinars (web-based seminars) and face-to-face meetings between the CFIA and stakeholders will be organized. We encourage you to participate in these meetings in order to seek further information on the proposed changes and to provide your feedback.

3. Background information

Guiding principles

In developing an updated list of services and service standards as well as future proposals related to fees, the CFIA will apply the following guiding principles:

  • stakeholders should be consulted when establishing new and/or changing existing fees and service standards;
  • fees should have a direct relationship to the cost of providing the service;
  • the standard of services related to the fee should be clear;
  • transaction costs in setting, collecting and administering fees should be minimized;
  • new or amended fees should be applied on a common basis and consistently across services and sectors;
  • fees should be easily adaptable to changes in the operating environment, and easy to update; and,
  • fees should balance affordability to regulated parties and impact on their businesses with the cost to the Agency of delivering activities that benefit regulated parties.

These principles are consistent with the CFIA Cost Recovery Policy and Framework as well as broader Government of Canada guidance, including the following:

4. CFIA services

Currently, the CFIA Fees Notice has hundreds of fees, organized by commodity. Existing fees are complex, inconsistent, and defined differently for different commodities. For example, import inspections of eggs are charged a flat rate per shipment; import inspections of animals are charged per animal; and import inspections for plant commodities are charged by the lot. This means that the CFIA currently has multiple fees for the same service (such as inspection), often performed by the same inspectors and all charged on a different basis (e.g. by weight, by unit, by lot, by the hour). This leads to different amounts being charged for the same service.

Furthermore, many food commodities produced in or imported into Canada currently have no applicable fees (e.g. baked goods, oils, spices). Once the Safe Food for Canadians Act and regulations are in forceFootnote 1, the new requirements will apply to all food imported, exported or traded between provinces, and many previously non-federally registered commodities will require CFIA services for the first time.

To address the complexity and inconsistency in the current CFIA Fees Notice, the CFIA is proposing to streamline its list of services and to charge for the services on a consistent basis. As outlined in Table 1, this would include grouping services into nine service categories, each linked with either a flat rate or an hourly rate fee. The end result would be a reduction in the overall number of fees and a consistent basis upon which the Agency charges fees across its activities. The proposed service categories are also broad enough to cover new CFIA services that may arise in the future in response to changes in the operating environment.

Table 1 - Canadian Food Inspection Agency proposed service categories
Service Description Basis for fee
Application Process a permission or document request; which includes screening and assessment. Permissions include licenses, registrations, certificates, permits, etc. Flat Rate
Technical review Review, assessment and evaluation by CFIA subject matter experts of relevant materials (as needed) including (but not limited to) premises/product information, planning documents, data, etc. Hourly Rate
Requested Inspection Inspection done at request of regulated parties, either in support of a request for a permission for export, import or trade between provinces, in support of a product registration or for inspection pursuant to a work shift agreement. Hourly Rate
Follow-up inspection CFIA inspection activities carried out to ensure that a regulatory contravention or prior non-compliance has been corrected. Hourly Rate
Audit CFIA assessment and evaluation of adherence to certain program or system requirements. Hourly Rate
Requested Laboratory Test Testing that is done in a CFIA laboratory to support a permission for export, import or trade between provinces or a product registration. Flat Rate
Follow-up Laboratory Test Testing that is done in a CFIA laboratory as part of a follow-up inspection to ensure that a regulatory contravention or prior non-compliance has been corrected. Flat Rate
Official Document Issuance of an official document (license, registration, permit, certificate, etc) which may include preparation, signing or endorsement. Flat Rate
Technical Training Provision of CFIA training to third party/designated participants on inspection methods, testing methods, or other technical activities. Hourly Rate

5. How streamlining the list of services may affect you

The proposed list of service categories outlined in Table 1 consolidates the existing services into nine general categories. The various services that the Agency provides will not change as a result of the proposed streamlining of services. How the services and fees are presented in the CFIA Fees Notice and individual invoices, however, will change. Below is an example of how the change would be applied in practice.

Service categories and basis for fees - illustrative example

A livestock company wishes to export live hogs to Mexico and approaches the Agency to obtain an export certificate for a shipment of 100 animals.

Service Category Current basis for fees Proposed basis for fees
Inspection Based on the number of animals regardless of the length of the inspection:  $46 for the first animal and $6 per animal for the remaining 99 animals ($640 for inspection). Hourly rate (fee based on the length of the inspection).
Issuance of official document Based on the number of animals regardless of the cost of issuing the document: $25 for the first animal on the certificate and $1 for each remaining animal ($124 for the certificate). Flat rate (fixed fee based on the cost of issuing the document).

The effect of the proposed changes to the list of services would be the following:

  1. There would be significantly fewer fees in the Fees Notice;
  2. Regulated parties would be charged on a consistent basis; and
  3. The basis for fees would be more closely aligned with the cost of providing the service.

The proposed introduction of a streamlined list of services would result in a rebalancing of the existing fees paid by regulated parties. The individual fees that are currently in the Fees Notice would be replaced by a flat rate (i.e., a fixed amount), an hourly rate, or a combination of the two, depending on the requested service. This may result in total fees paid for a service either increasing or decreasing. Revised fees will be determined later in 2017 and will be informed by the feedback received through this consultation. Proposed new fees will be the subject of the next phase of consultations.

We want your feedback. Please provide your views on the following questions using the contact information identified in Section 12:

  1. Is the proposed list of services clear and understandable to you?  What refinements could be made?
  2. Is it clear where the CFIA services you currently receive fit within the proposed service categories?

6. Service standards

The CFIA's objective in introducing service standards is to provide regulated parties with increased predictability and more consistent service levels across the organization.

Explicit service standards currently do not exist for many CFIA services. Some informal service standards exist (e.g. approximately ten business days to process simple import permit applications and longer for complex applications).

The CFIA is proposing service standards for each of the nine service categories. Once approved and implemented, service standards will be tracked. The CFIA will also report annually on how it has met these service standards.

In developing these standards, the CFIA observed the principles of:

  • Objectivity - based on facts
  • Feasibility - based on what is possible in terms of capacity
  • Measurability - based on what is quantifiable

Service standards tell you:

  • How quickly you will receive a response
  • What amount of time is required to complete a requested service

As outlined in Table 2, there are two different types of service standards being proposed. The first type of service standard provides an acknowledgement of a request within a set time period together with an expected timeframe for completion of a requested service. This service standard will apply to the majority of services.

Although acknowledgement of a request will be provided within a set time period, more precise service standards for completion of services such as inspection, technical review, audit and issuing official documents are not proposed at this time. The diverse range of requirements and activities that are captured within and across each of these service categories does not allow for a one size fits all approach. In addition, demand fluctuations over the course of the year make it difficult to predict in advance what the capacity will be to complete requests.

The second type of service standard commits to providing the results of an inspection or diagnostic test within a set time period. For inspection results, the service standard commits to providing the report within five business days of a completed inspection. For laboratory tests, timeframes for the results of each test will be standardized and published in the revised Fees Notice.

As programs change and technologies evolve, efficiencies may be gained that allow for additional refinement of service standards over time. For example, the transition from paper-based to electronic administration of services may enable the Agency to adopt shorter service standards.

The CFIA is committed to achieving the proposed service standards. It will track progress to ensure that these standards are being met and will take corrective measures when needed. As part of the implementation of any new service standards, the CFIA will ensure that personnel have the training and tools required to consistently and efficiently apply and meet them. Complaints about the quality and timeliness of CFIA services can continue to be communicated with the CFIA's Office of Complaints and Appeals.

Table 2 - Proposed service standards for service categories
Service Service Standard
Application Acknowledgement of request, including an expected timeframe for completion, will be provided within 2 business days of receiving the request
Technical review Acknowledgement of request, including an expected timeframe for completion, will be provided within 2 business days of receiving the request
Requested inspection

Inspection reports, as required, will be provided within 5 business days of a completed inspection

Where inspection service is provided as a result of a work shift agreement Table Note 2, services will be provided according to the terms of the agreement

Follow-up inspection Inspection reports, as required, will be provided within 5 business days of a completed inspection
Audit Acknowledgement of audit request, including an expected timeframe for completion, will be provided within 2 business days of receiving the request
Requested laboratory test Timeframe for the release of test results will be standardized for each test and published in the new fees notice
Follow-up laboratory test Timeframe for the release of test results will be standardized for each test and published in the new fees notice
Official document Acknowledgment of request for document (i.e. application), including an expected timeframe for completion, will be provided within 2 business days of receiving the request. Document will be provided within 15 business days of all requirements being received by the CFIA
Technical training Acknowledgement of request, including expected timeframe for completion, will be provided within 5 business days of receiving the request

Table Notes

Table Note 2

A workshift agreement is specific to the meat slaughter sector and outlines the schedule by which the operator conducts activities subject to CFIA oversight in a registered facility.

Return to table note 2  referrer

In certain circumstances, regulated parties have expressed an interest in paying increased fees to have service delivery expedited. The CFIA is interested in hearing more from regulated parties on their willingness to pay increased fees in exchange for expedited services.

We want your feedback. Please provide your views on the following questions using the contact information identified in Section 12:

  1. Is it clear to you how the proposed service standards would apply to the CFIA services that you receive? 
  2. Going forward, what areas should we focus on when considering additional refinements to service standards?
  3. To what extent are you willing to pay increased fees for expedited services? Which services in particular would this apply to?

7. CFIA approach to cost recovery

One of the objectives of the first phase of consultations on cost recovery is to seek input on the appropriate level of cost sharing between regulated parties and taxpayers. A discussion on this subject (see Section 10) would benefit by first outlining CFIA's overall approach to cost recovery and the fee setting process.

As noted earlier, CFIA's cost recovery regime has not changed in twenty years. Currently, less than 10% of CFIA's costs are recovered through fees charged to regulated parties. Increases in costs related to equipment, rents, salary, and other inflationary factors have resulted in higher costs to deliver services without a corresponding increase in fees.

The CFIA's intent is to move towards fees that are more reflective of the cost of CFIA activities. The objective is to ensure a fair distribution of costs between taxpayers and regulated parties.

Other federal departments and agencies have also updated their cost recovery regimes in recent years. For example, in June 2016, the Health Canada's Pest Management Regulatory Agency (PMRA) published a proposal in Canada Gazette Part I to revise fees with respect to pest control products. PMRA's current fees have not changed since 1997. The proposal includes an annual adjustment to increase fees by 2% in future years. Health Canada's Health Products and Food Branch introduced updated fees for drugs and medical devices in 2011, which also included a 2% annual increase in fees. These fees had previously been unchanged since 1995.

8. CFIA approach to fee setting

As CFIA works to develop a cost recovery proposal for the second phase of consultations, it will follow Treasury Board Secretariat's Guide to Establishing the Level of a Cost-Based User Fee or Regulatory Charge when developing fees.

This Guide outlines the three main steps in the fee setting process:
Step one - estimating the full cost of an activity
Step two - assessing the upper limit of the fee
Step three - consideration of pricing factors.

Pricing factors that the CFIA will be considering include:

  1. Mix of public - private benefits: the Canadian agriculture and agri-food industry benefits from many CFIA activities as the primary end users of CFIA services. These are considered private benefits. Where a particular CFIA activity confers a benefit to a regulated party, the regulated party is expected to contribute to the costs of this activity. The general public also benefits from CFIA activities from a health and safety perspective (consumer protection). These are considered public benefits. As a result of this mix of private and public benefits, CFIA services are funded by both private and public funds.
  2. International benchmarking: as part of its analysis, the Agency will compare its cost recovery approach, including services, service standards, and fees with those of major trading partners.
  3. Other considerations: fees may also be adjusted to take other factors into account, such as:
    • fairness and equity of the fee across industry sectors
    • economic impact on regulated parties; ability of regulated parties to pay
    • competition with the private sector
    • public policy objectives
    • need for interdepartmental and/or multi-jurisdictional co-ordination
    • regulatory efficiency

9. Appropriate cost sharing between regulated parties and taxpayers

The CFIA estimates that the full cost of its activities is $824 million per year.

The activities undertaken by the CFIA provide benefits to both regulated parties (private benefits) and taxpayers (i.e. public benefits). Regulated parties benefit from CFIA services, such as receiving export certification and product registrations. These services allow regulated parties to sell their products, either internationally or on the Canadian market. Regulated parties also benefit from other CFIA activities such as compliance verification and surveillance. Such activities support a robust science-based regulatory system that promotes food safety and protects Canada's plant and animal resource base. This in turn enhances market access for Canada's food, plants and animals.

Taxpayers benefit from CFIA activities from a health, safety and security perspective. CFIA activities prevent and manage food safety risks, protect plant resources from pests, diseases and invasive species and prevent and manage animal diseases.

Determining the public and private benefits related to the proposed CFIA service categories and other CFIA activities is important because it helps determine how costs should be shared between taxpayers and regulated parties. In particular, the determination of private benefits derived by regulated parties helps to establish the upper limit for future cost recovery revenues. It is important to note that this alone is not an indicator of what fees should be, since other factors such as economic impacts also need to be considered in the development of a fee proposal.

Table 3 outlines a scale that has been developed in determining the allocation of benefits to the regulated party (private benefits) and the taxpayer (public benefits).

Table 3 - Explanation of benefits to regulated parties (private benefits)
Share of benefits to regulated parties Explanation
0% No benefit to regulated parties; virtually all benefits are derived by the public.
25% Most benefits are derived by the public but a portion of benefit is derived by the regulated party.
50% Benefits are shared equally between the regulated party and the public.
75% Most benefits are derived by the regulated party but a portion of benefit is derived by the public.
100% Virtually all benefits are derived by the regulated party; no benefits derived by the public.

As a basis for discussion during this phase of consultation, Table 4 identifies the proposed benefits derived by regulated parties (private benefits) for each service category, along with a supporting rationale. The table also identifies the potential private share of benefits for compliance verification and surveillance, as well as emergency response activities.

Table 4 - Potential benefits to regulated parties

On-demand services
Activities % Benefit to regulated parties Rationale
Applications and official documents 100% These services involve processing requests from and for the benefit of regulated parties.
Technical reviews and training 75% Most benefits accrue to regulated parties; however, such services can reduce health and safety risks to Canadians (when related to imports and interprovincial trade), meaning that the public shares a portion of the benefits.
Requested inspections, laboratory tests and audits related to exports 100% Such services directly benefit regulated parties that export. While exports contribute to the Canadian economy, this is secondary to the benefits that accrue to regulated parties.
Requested inspections, laboratory tests and audits related to imports and interprovincial trade 75% Most benefits accrue to regulated parties; however, such services can reduce health and safety risks to Canadians (when related to imports and interprovincial trade), meaning that the public shares a portion of the benefits.
Follow-up inspections and laboratory tests 100% When non-compliance is observed, regulated parties are responsible for the costs of follow-up services to verify correction.
Other regulatory activities
Activities % Benefit to regulated parties Rationale
Compliance verification and surveillance 75% These activities provide benefits to regulated parties, such as consumer confidence and market access. They also reduce health and safety risks to Canadians.
Emergency response 0% Response activities are focused principally on reducing health and safety risks to Canadians.

Based on the information outlined in Table 4, one can estimate the value of benefits to regulated parties in relation to the full cost of CFIA activities. Of the estimated $824 million annual full cost of CFIA activities, our analysis suggests that $533 million of these costs represent benefits to regulated parties. Under the current cost recovery regime, the CFIA recovers only $55 million (about 10%) from regulated parties. The remaining $478 million (about 90%) is supported by taxpayers.

We are seeking your views on the appropriate level of cost sharing between taxpayers and regulated parties. We also want to understand the impact of potential fee increases on businesses. This feedback is essential for the CFIA to develop a fee proposal that balances the views of taxpayers and regulated parties. This fee proposal will be the subject of the next phase of consultations.

We want your feedback. Please provide your views on the following questions using the contact information identified in Section 12:

  1. For the various categories of CFIA services, what share of the costs should be covered by regulated parties? What factors need to be considered?
  2. What share of the cost should be covered by taxpayers? What factors need to be considered?

10. Impact assessment

The CFIA recognizes that any changes to fees may have an economic impact on regulated parties. In order to fully assess impacts, the CFIA requires details from you on how potential fee increases may impact your competitiveness and affect business decisions.

We want your feedback. Please complete the impact assessment questionnaire so that we can understand how potential fee increases may affect your business.

The information received from the completed questionnaires will be considered in developing proposed fees for phase two consultations.

11. Comparison with other countries

A review of the fee regimes in the United States, Australia, New Zealand and the United Kingdom reveals that these countries have approaches to cost recovery that are similar to CFIA's proposed approach, in particular with respect to defining services for which fees apply, costing to inform fee setting as well as authority to recover fees from regulated parties. However, while national standards are set at the federal level in these countries, not all services are delivered by federal departments or agencies. In some instances, services are delivered at the state level, at the municipal level or by independent accredited agencies, thus making specific fee comparisons challenging.

Based upon a review of the information, the following was observed:

Fee setting

  • In determining fees, the surveyed countries make reference to full costing of services.
  • Generally, all four countries have established fees for administrative services such as certificate preparation and verification, license/registration issuance, import document controls and, laboratory tests.
  • Hourly rates are generally used for inspection functions, charged based on a quarter hour or part thereof.
  • With regard to the submission of applications for various licenses, permits and documents, in a number of cases there is a fixed charge for the application, plus an assessment charge on an hourly basis after the first hour.
  • Overtime rates have been established for work performed outside employees' normal hours of duty.

The CFIA will take into consideration the level of fees charged for comparable regulatory services in other countries as its cost recovery proposal is developed in advance of the second phase of consultations.

12. Providing your input

We want to hear from you. The CFIA is seeking your feedback on the following:

  • the proposed streamlined list of services that allows fees to be charged consistently for similar CFIA services
  • the proposed service standards for CFIA services
  • the appropriate level of cost sharing between regulated parties and taxpayers
  • impacts of potential fee increases on businesses

Please submit your written comments by April 21, 2017, to:

Director - User Fees
Canadian Food Inspection Agency
1400 Merivale Road
Ottawa, Ontario
K1A 0Y9
or by email: CFIA_Cost-Recovery.ACIA_Recouvrement-des-couts@inspection.gc.ca

If you have any questions, please contact us.

A summary of comments received on this paper, as well as the results of the impact assessment questionnaire, will be published on CFIA's website.

Please check the registration page for notifications of upcoming webinars and meetings related to cost recovery in which you can participate.

Thank you in advance for your contribution.

13. Privacy statement

The CFIA is committed to protecting the privacy rights of individuals, including safeguarding the confidentiality of information provided by individuals and institutions.

Personal information submitted for this document is collected under this Agency's legislative authority. A summary of comments and feedback received on this document, as well as the results of the impact assessment questionnaire, will be published on CFIA's website; however, any personal information will be removed prior to the information being used. The information will be accessible to the User Fee Division and any staff who have a need to know.

Please note that by submitting comments, you consent to:

  • having the comments published (without your name or any other personal identifier) in whole or in part, and
  • having the comments edited by the CFIA to be summarized for publishing on CFIA's website.

Personal information collected by the CFIA and the Government of Canada is protected from disclosure to unauthorized persons and/or agencies pursuant to the provisions of the Privacy Act. Individuals to whom the personal information pertains have the right to the protection of, correction, and access to their personal information under the Privacy Act, subject to certain exceptions and exemptions.

For inquiries concerning the treatment of personal information in the custody of CFIA, individuals may contact the Access to Information and Privacy Office at:

By email: ATIP-CFIA-AIPRP@inspection.gc.ca
In writing: Access to Information and Privacy Office
Integrity and Redress Secretariat
Canadian Food Inspection Agency
1400 Merivale Road, Tower 1, Room 0-149
Ottawa, ON K1A 0Y9

Individuals have the right to file a complaint to the Privacy Commissioner of Canada regarding the CFIA's handling of their personal information.

The personal information collected will be retained and disposed of in accordance with the Agency's retention and disposal schedule.

14. Annex 1 - Summary of questions for feedback

List of services

1. Is the proposed list of services clear and understandable to you? What refinements could be made?

2. Is it clear where the CFIA services you currently receive fit within the proposed service categories?

Service standards

3. Is it clear to you how the proposed service standards would apply to the CFIA services that you receive?

4. Going forward, what areas should we focus on when considering additional refinements to service standards?

5. To what extent are you willing to pay increased fees for expedited services? Which services in particular would this apply to?

Cost sharing between regulated parties and taxpayers

6. For the various categories of CFIA services, what share of the costs should be covered by regulated parties? What factors need to be considered?

7. What share of the cost should be covered by taxpayers? What factors need to be considered?

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