CFIA User Fee Proposal: Destination Inspection Service
Summary of Respondent Comments and CFIA Responses (Phase III)

Table of Contents

Introduction

Destination inspection is a quality-related inspection service for fresh-produce shipments. The service is demand driven and the results of the inspections are of direct benefit to the fresh produce industry, supporting the process by which the industry settles commercial disputes, primarily between sellers and purchasers.

The CFIA has made significant improvements over the past several years to the Destination Inspection Service (DIS) program. It now benefits from a line management structure with dedicated staff and priority-based dispatching for destination inspection. DIS inspectors are well equipped and trained with a continually updated manual, delivering consistent, uniform and time-sensitive inspections nationally with clear lines of communication and accountability. Training staff in each area support the continuous improvement of the service using quality management principles. The result is high quality, accurate inspections, delivered on-time by trained government inspectors with service standards.

To support these enhancements, the CFIA committed to move to full cost recovery for the DIS program, phased-in over three years. The CFIA is in its third and final year of implementing a full cost recovery model for the services.

The Agency undertook a 70-day consultation on a user fee proposal for the third stage of the phased-in fees for DIS. The proposal set out revised service standards and user fees that were anticipated to be fixed in the CFIA Fees Notice on April 1, 2013. The CFIA invited comments from interested parties, including notification through the World Trade Organization, from December 13, 2012 to February 21, 2013.

This report consolidates and summarizes the comments received during the consultation period that directly pertain to the user fee proposal and the CFIA's response to those comments.

About the Consultation

The consultation was conducted online and included posting the user fee proposal on the CFIA website and providing a link on the Consulting Canadians website, issuing a World Trade Organization notification, engagement with national industry associations and outreach through front-line staff. Thirteen complete responses were received: five through the online questionnaire and eight through written correspondence.

Respondent Profile

Table 1: Respondent Profile
Categories of Respondents Distribution
Individual 15%
Firm/Business 31%
Association 54%
Government Organization 0%
Non-governmental Organization 0%
Other 0%
Total Number of Respondents 13
Table 2: Primary Respondent Firm/Business Focus
Firm/Business Focus Distribution
Exporter 0%
Importer 8%
Manufacturer 0%
Distributor/Broker 23%
Research 0%
Industry Association 54%
End user (for example, consumer) 8%
Other 8%
Total Number of Respondents 13

Of the respondents who identified as businesses, two employ staff greater than 100, one employs staff between 50 and 100 employees, and one employs staff less than 10. Seven responses were received from Ontario, two from Quebec, one each from Alberta and British Columbia, and one each from California and Florida, USA.

The industry associations that responded promote both Canadian and international fresh produce industries, and collectively represent a total membership in excess of 22,000.

Proposed User Fees

The CFIA had proposed increasing the hourly rate of DIS inspections from $145 per hour to $190 per hour, while maintaining the call-out fee at $50 per inspection.

The CFIA introduced the call-out fee in April 2012 in order to recover travel costs and labour costs of the DIS inspector on a 'per inspection' basis.

What We Heard

Key Respondent Messages

  • There was overall support for the DIS service, including recognition of the importance of DIS' role in the industry-government initiative to support fair fresh produce trade in North America.
  • Three respondents (23%) fully supported proposed user fee increases and two respondents (15%) did not support proposed user fee increases. The remaining eight respondents (62%) supported full cost recovery of the service but expressed concern with the business model on which proposed fees were based.
  • More than half of the respondents suggested that fee increases, as proposed, would result in a further drop in demand for DIS services and place Canadian businesses in jeopardy in the North American produce sector.
  • The Agency did not propose any changes to service standards at this time. Respondents continue to be supportive of the current service standards, and provided positive comments regarding improvements to service, transparency and accountability of those standards.

The comments received on the proposal pertained to the proposed user fees; particularly with regard to the increase in the hourly rate and the relevance of the current business model on which the full costs were based. The CFIA responses to comments received are set out below.

Amount of fee increase

Comment: Application of the proposed increase in hourly rate and the call-out fee per inspection amounts to a minimum charge of $240 per inspection; fee considered too high/ unrealistic especially for smaller loads or low-valued shipments; expected to further decrease demand of CFIA service/may artificially inflate market value of services.

Response: The proposed hourly rate and call-out fees were based on the total costs to the CFIA of delivering the DIS program in 2011-12. The costing methodology was consistent with the approach that was adopted for the DIS in close consultation with industry.

The CFIA acknowledges industry concerns related to affordability and inspection demand observed in 2012-13 suggests that the original business and costing models are no longer appropriate for DIS. The CFIA has re-examined its business model in response to comments received and an adjusted business model has been adopted. The adjusted business model (explained below) results in a decreased hourly rate and elimination of the separate call-out fee.

DIS business model

Comment: Concerns were raised around the function of the current business model, in that it was outdated and inflexible to market fluctuations; stakeholders questioned the feasibility of dedicated DIS inspectors.

Response: Further to the review and analysis of past DIS inspection and financial information, the Agency has re-examined its business model for DIS and has made some adjustments. The following highlights the changes of moving from the current dedicated DIS model to a prioritized DIS model.

Current Dedicated DIS Model

Since 2007, DIS inspectors have been exclusively dedicated to the service – i.e. they do not perform any other CFIA program delivery activities. Dedicating inspectors served to ensure that, irrespective of other CFIA priorities, DIS service standards for response time would be consistent. The costing methodology for the fully dedicated model relies exclusively on historical data, and therefore is inherently inflexible to fluctuations in inspection demand. The decline in inspection demand observed in 2012-13 poses a challenge for the current model. Further, industry feedback suggests that the fully dedicated model is too costly for end-users of the service.

Adopting a Prioritized DIS Model

The dedicated model was adopted to ensure that service standards would be met, regardless of changes to Agency priorities. When demand was constant, the model was simple to administer and easy to maintain. Given the decline in demand for DIS, and the relative maturity of the program, a new model has been adopted which will see DIS inspectors shift from being dedicated exclusively to service delivery, to being prioritized to DIS activities. Based on specific criteria, DIS inspectors will be assigned tasks in support of other CFIA programs, but this work will be carried out after DIS inspections have been completed.

The prioritized model increases the affordability of DIS. Whereas the dedicated model's fees sought to offset the entire annual cost of the DIS program, the prioritized model will introduce a fee that recovers the cost of a unit of time of a DIS inspector. Any unused inspection capacity within the DIS will be reassigned to other program delivery activities, with costs supported by CFIA budgets. This approach increases the fairness of DIS fees by ensuring that end-users are only billed for the services that they access.

Service standards will not be affected. To maintain DIS service standards, inspectors will only be assigned other duties when there are no outstanding DIS inspection requests. Further, the other activities that DIS inspectors will take on will not be time-sensitive and will not be directly related to food safety. This will ensure that the priority of DIS is maintained and that end-users of the DIS will see no change to the service standards for DIS (80% of all inspection requests responded to within 8 business hours; 100% within 24 hours).

The DIS management cadre will broaden the scope of work effort to other CFIA organizational priorities to a degree that does not impact on DIS service recipients and yet has an overall benefit on the Agency and its annual priorities. Efficient utilization of DIS staff and management during times of low or no demand reduces the overall costs in the calculation of the DIS inspector hourly rate, as illustrated in the revised costing tables below.

Table 3: DIS inspector cost break-down
CFIADIS Inspector (EG) Cost
(Based on 2012-2013 financial information)
Amount Percent
Salary (Weighted average - EG 3, 4, 5) $60,615 34%
Employee Benefit Plan $15,378 9%
Operating & Maintenance $7,706 4%
Accommodation $2,107 1%
Vehicle Amortization $2,096 1%
DIS Program and NHQ Support Cost $67,667 38%
Internal Services Cost ($22,028 per FTE) $22,028 12%
Total annual cost of a DIS EG $177,597 100%
Available annual working hours per annum 1,035
Average EG hourly cost for field work $171
Table 4: DIS and NHQ support cost break-down
DIS and NHQ support Cost
Amount
Salary $594,669
Employee Benefit Plan $150,867
Operating & Maintenance $67,041
Accommodation $77,307
Amortization -
NHQ Program Support Cost $19,664
Internal Services Cost ($22,028 per FTE) $185,035
Total annual DIS program support cost $1,094,584
Program support cost per DIS field FTE $65,326.46 Table Note 1
Operations branch (NHQ) support cost $2,341
Total annual DIS and NHQ support cost $67,667

Notes

Table Note 1

Program support cost per FTE is calculated by dividing total annual DIS program support cost by 16.76 field FTE, which represents total FTE directed to DIS service delivery in 2012-13.

Return to table note 1 referrer

Table 5: Summary of current, proposed and revised DIS user fees
Fee Year 2
2012-13
Year 3
Proposed
Year 3
Revised / Final
Hourly Rate $145 $190 $171
Call-out fee $50 $50 $0
Cancellation fee $70 $70 $70

Service Standards

Current service standards (80% of all inspections requests responded to within 8 business hours; 100% within 24 hours) were developed in past consultation with stakeholders. No changes to service standards were proposed in the phase 3 consultation. Comments received indicate continued support for DIS service standards and praised the service improvements over the last couple of years. In addition, stakeholders commended the Agency on its transparency and accountability of the current DIS service standards.

As noted above, the adoption of a prioritized DIS model will not affect service delivery or service standards.

Final DIS User Fees

As a result of respondent comments, the CFIA will seek to have user fees for the DIS program revised in the CFIA Fees Notice as follows:

(a) for the inspection of domestic fresh produce or fresh produce entering Canada from a foreign jurisdiction $171/hr, assessed at $42.75 per 15 minutes, subject to a 1 hour minimum charge
(b) for the witnessing of the destruction or disposal of fresh produce and the issuance of a Notice of Dumping or other Disposition $171/hr, assessed at $42.75 per 15 minutes, subject to a 1 hour minimum charge
(c) call-out per inspection service visit in (a) or (b) Repealed, no longer to be used
(d) for the cancellation of inspection services requested after an inspector has been dispatched $70.00

These fees would remain in place until the next revision is completed. The Agency has committed in its Cost Recovery Policy and Framework to undertake a review of service standards and user fees every five years.

Next Steps

Pursuant to the Canadian Food Inspection Agency Act, the revised user fees for Destination Inspection Service will be fixed and published in the CFIA Fees Notice. The revised fees are anticipated to come into force on April 1, 2014 and will be published in the Canada Gazette, Part I within 30 days of the coming into force.

The CFIA would like to thank everyone who contributed their time to this consultation process and shared their views.

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