User Fee Proposal: Importer Licensing for the Non-Federally Registered Sector
The consultation closed 2012-06-29.
This paper is intended to act as a basis for discussion with stakeholders and for eventual tabling in Parliament of a user fee proposal pursuant to the Canadian Food Inspection Agency Act and the User Fees Act. The goals of the consultation are:
- to propose service standards and an accompanying user fee schedule; and
- to obtain an enhanced understanding of the impact of the proposed user fees and consider stakeholder perspectives, concerns and suggestions prior to finalizing user fee recommendations.
- Invitation to Comment
Table of Contents
- Executive Summary
- 1.0 Introduction
- 2.0 Legislative and Policy Framework
- 3.0 Current Service Standards and User Fees
- 4.0 Proposed Service Standards and User Fees
- 5.0 Complaints and Comments During Consultations
The CFIA was created in 1997 and retained the cost recovery approaches of its parent organizations. No new user fees or increases to existing fees were made before the year 2000. In 2002, the government extended indefinitely a commitment to introduce no new user fees or increases to existing fees, contributing to an inability to keep existing fees in line with the costs of delivering services and to the complexity of the current CFIA fee schedule. This commitment is no longer in effect and the CFIA is now reviewing its service standards and user fees in an effort to align fees with the cost to deliver services where private benefits are derived, adjust to technological advances, to recognize industry improvements in quality control and risk management, and to provide fair and equitable treatment across all industry sectors.
Imports of food and food products have experienced considerable growth over the past decade. The total value of food imported into Canada has increased by approximately 45% in the past 9 years, growing from $20.9 billion in 2001 to $30.5 billion in 2010. Raw ingredients and food products are imported from an estimated 190 countries, which have varying levels of food safety controls.
In December 2007, the Government of Canada announced its Food and Consumer Safety Action Plan (FCSAP), a component of which is to enhance Canada’s food safety system for imported food products in the non-federally registered sector (NFRS). In support of this commitment, the CFIA is proposing to introduce regulations that would meet the principal objectives of strengthening the accountability of importers in the NFRS and enhancing the CFIA’s ability to communicate important food safety information to potentially affected parties.
The proposed regulations would impose general obligations prescribing food safety requirements on importers of NFRS products and would also require that importers of these products obtain an import licence to perform importation activities.
The CFIA is proposing to charge a user fee for the issuance of an import licence pursuant to the proposed regulatory requirement that importers of NFRS products obtain an import licence to perform importation activities.
In accordance with the World Trade Organization Agreement on Import Licensing Procedures, the CFIA is proposing to issue an import licence within a maximum of 10 working days upon receipt of a complete application.
An import licence issued by the CFIA will allow importers of NFRS products to perform importation activities; this activity is of direct benefit to importers and the CFIA is proposing to fully cost recover the issuance of an import licence. The CFIA anticipates that approximately 25,000 import licences will be issued within every two year period, as each import licence will be valid for a two-year period. The cost to deliver this service is derived from the employees dedicated to delivering this service which is composed of two groups: the IM/IT group and the Importer Licensing Unit (ILU).
|Description||Proposed User Fee - FY2013/14||Proposed User Fee - FY2014/15||Proposed User Fee - FY2015/16||Proposed User Fee - FY2016/17||Proposed User Fee - FY2017/18|
|Issuance of an IFS import licence||$259.48||$263.94||$268.48||$273.10||$277.80|
1. The Canadian Food Inspection Agency (CFIA) is dedicated to safeguarding food, animals and plants, and contributing to a safe and accessible food supply and plant and animal resource base, thereby enhancing the health and well-being of Canada's people, environment and economy. The CFIA's activities are aimed at protecting Canadian food consumers, Canadian agricultural production (including forestry), and our environment. In addition to Canadians, more specifically these activities benefit Canadian farmers, fishers, foresters, processors and distributors (including importers and exporters).
2. The CFIA was created in 1997 and retained the cost recovery approaches of its parent organizations, Agriculture Canada and the Department of Fisheries and Oceans, in the agri-food and seafood sectors, respectively. The programs that migrated from Health Canada and the former Consumer and Corporate Affairs had no cost recovery component associated with their program activities.
3. The original intent of Parliament was for the CFIA to be partially dependant on revenue generated by user fees for its operations. However, the government of the time made a commitment to introduce no new user fees or increases to existing fees before the year 2000. The intent was to reassure Parliament that the proposed CFIA would achieve efficiencies through cost reduction and cost avoidance rather than through the imposition of additional fees. In 2002, the moratorium on new or increased user fees was extended indefinitely but is no longer in effect.
4. The government’s commitment to introduce no new user fees or increases to existing fees prevented the CFIA from reducing the complexity and inconsistency of the CFIA Fees Notice. A 2008 report by the Auditor General (OAG)3 found that many fees charged by government have not kept pace with increasing costs. The CFIA is now reviewing its service standards and user fees in an effort to keep pace with technological advances, to recognize industry improvements in quality control and risk management, and to provide fair and equitable treatment across all industry sectors.
5. Imports of food and food products have experienced considerable growth over the past decade. The total value of food imported into Canada has increased by approximately 45% in the past 9 years, growing from $20.9 billion in 2001 to $30.5 billion in 2010. Raw ingredients and food products are imported from an estimated 190 countries, which have varying levels of food safety controls.
6. In December 2007, the Government of Canada announced its Food and Consumer Safety Action Plan (FCSAP), a component of which is to enhance Canada's food safety system for imported food products. In support of this commitment, the CFIA is proposing to introduce regulations that would meet the principal objectives of strengthening the accountability of importers in the non-federally registered sector (NFRS) and enhance the CFIA's ability to communicate important food safety information to potentially affected parties.
7. The proposed regulations would impose general obligations for additional food safety requirements on importers of NFRS products and would also require that importers of these products obtain an import licence to perform importation activities.
8. The NFRS consists of all foods regulated solely under the Food and Drugs Act (FDA) and accounts for 70% of the food products available in the Canadian marketplace such as alcoholic and non-alcoholic beverages, fats and oils, bakery products, infant formula, cereals, juices, coffee or tea, spices and seasonings, confectionery and snack foods.
9. The FDA does not, however, provide the authority needed to establish an importer licensing regime, which is a key component of a robust import control system. Therefore, the CFIA is developing an importer licensing regime under the authority of the Canada Agricultural Products Act (CAPA).
10. CAPA provides the authority to control food products that meet the definition of an “agricultural product”4. Under CAPA, the CFIA has the ability to prescribe conditions for food safety, labelling, licensing and inspection activities similar to other food programs (e.g. meat, fresh fruit and vegetables, processed products, etc.)
11. Based on the definition of an “agricultural product” in CAPA, the majority of imported food products currently regulated solely under the FDA would also be regulated under CAPA. The scope of the regulatory proposal, under CAPA, will encompass 86% of imported food products in the NFRS. Once the proposed regulations enter into force, the subset of the NFRS that meet the definition of an imported “agricultural product” will be referred to as the Imported Food Sector (IFS).
12. The proposed licensing requirement will make it mandatory for importers of IFS products to have an import licence, except where the product is not intended for sale in Canada, and
- weighs 20 kilograms or less,
- is used as food for the crew or passengers on any vessel, train, motor vehicle, aircraft or other means of transportation, or
- is imported from the US into the Akwesasne Reserve for use by an Akwesasne resident.
13. Failure to meet the proposed licensing requirement could result in the seizure and detention of the imported product or other action provided for in law. The release of imported food products and ingredients at the border is done in collaboration with the Canada Border Services Agency (CBSA). The CBSA is responsible for the initial import inspection service at all Canadian ports of entry for the majority of commodities that the CFIA regulates. This includes a review of import documentation, including the import licence.
14. Subsection 24(i) and section 25 of the Canadian Food Inspection Agency Act provide the authority for the Minister of Agriculture and Agri-Food to fix the fees for a service or the use of a facility, or to fix fees in respect of products, rights and privileges provided by the CFIA, respectively.
15. The CFIA’s policy regarding user fees, as set out in its Cost Recovery Policy and Framework, states:
“The Canadian Food Inspection Agency will charge a user fee for services that provide service recipients direct benefits beyond those received by the general public.”
16. The User Fees Act (UFA), March 2004, created a legal framework within which regulating authorities are required to implement user fees, including the establishment of service standards and reporting of performance in meeting service standards.
17. In November 2004, Treasury Board introduced a Policy on Service Standards for External Fees. This policy represents the government's commitment to those who use its services. Service standards represent an important management tool for measuring, assessing, communicating and improving service performance.
18. In March 2008, Treasury Board updated its Guide to Costing. The guide is based on generally accepted management accounting principles and presents a logical seven-step approach to be used for all costing exercises, including the development of cost-recovery proposals.
19. Treasury Board guidance5 states that cost-based user fees and cost-based regulatory charges serve to recover an amount up to the full cost of the associated activity from users or direct-benefit recipients.
20. In Canada, all food offered for sale is subject to the Food and Drugs Act and Drug Regulations (FDA and FDR) and the Consumer Packaging and Labelling Act and Regulations (CPLAR). Examples of requirements under the FDA and CPLAR are: no person shall sell an article of food that has in or on it any poisonous or harmful substance and no dealer shall apply to any prepackaged product or sell, import into Canada or advertise any prepackaged product that has applied to it a label containing any false or misleading representation that relates to or may reasonably be regarded as relating to that product, respectively. Neither the FDA/R, nor the CPLAR provide the authority needed to establish an importer licensing regime.
21. Importers of NFRS products into Canada are not currently required to have an import licence. As such, the CFIA does not currently issue an import licence to the NFRS to perform importation activities. Therefore, the CFIA does not have existing service standards or user fees for this service.
22. The CFIA is proposing to charge a user fee for the issuance of an import licence6 pursuant to the proposed regulatory requirement that importers of IFS products obtain an import licence to perform importation activities.
23. In accordance with the World Trade Organization Agreement on Import Licensing Procedures7, the CFIA is proposing to issue an import licence within a maximum of 10 working days upon receipt of a complete application.
24. In order to assess the timeliness of service delivery, the CFIA will monitor and record the time at which completed applications are received and the time at which the licence is issued. In accordance with the requirements of the User Fees Act, the performance of the CFIA in meeting these service standards will be reported annually in the CFIA’s Departmental Performance Report.
25. The cost analysis for this service is based on the projected full cost that is anticipated to be incurred by the CFIA in FY2013/14 and FY2014/15 for the issuance of import licences to importers of IFS products. The full cost is defined as all resources consumed, including program support and internal services, to deliver this service.
26. The employees dedicated to delivering this service are made up of two groups: the IM/IT group to support the importer licensing system and the Importer Licensing Unit (ILU).
27. The importer licensing system will require 8.63 employees to maintain it. These costs per year are:
|IM/IT Support Costs||Amt ($)|
|Salary and Benefits||823,587|
|Internal Service Support||184,998|
|Total IM/IT support costs for importer licensing system||2,335,635|
28. The total ongoing IM/IT support costs for the importer licensing system is based on the cost of application support services (e.g. network usage, ongoing support and maintenance, “bug” fixes, and minor enhancements) that can be directly attributed to the importer licensing system as well as the replacement and configuration of hardware, whether scheduled (replaced due to age, compatibility, etc) or unscheduled (replaced due to breakdown, accidents, etc).
29. The portion of the ILU that contributes directly to the issuance of import licences is an 8 person team made up of 7 FTE’s from the Program Administration Group and supported by 1 FTE from the Administrative Services Group. This team is responsible for acting as data-entry clerks to process manual applications and will provide initial support for basic on-line application issues and general inquiries. The annual cost of the ILU that directly supports the issuance of import licences is:
|ILU Costs||Amt ($)||Amt ($)|
|Salaries and Benefits||538,205|
|Operating and Maintenance||30,300|
|Office supplies and small equipment||6,800|
|Internal Service Support||176,224|
|Total ILU costs to support the importer licensing regime||907,817|
30. The total ILU costs attributable to the issuance of import licences is based on the cost of the employees required to provide basic on-line application services and general inquiries support and processing of manual applications.
31. Each import licence will be valid for a two-year period and the size of the IFS importer community is estimated to be 25,000 entities. Therefore the cost to issue an import licence to perform importation activities is:
|Full cost of the importer licensing regime||Amount|
|Ongoing IM/IT support costs||$2,335,635|
|Annual total full cost for the importer licensing regime||$3,243,451|
|Bi-Annual total full cost for the importer licensing regime||$6,486,902|
|Number of import licences to be issued||25,000|
|Fee per import licence||$259.48|
32. Based on this level of demand, the proposed fee per import licence is $259.48 for FY 2013/14.
33. An import licence issued by the CFIA will allow importers of IFS products to perform importation activities; this activity is of direct benefit to importers. Therefore, consistent with the CFIA’s Cost Recovery Policy and Framework, the cost of issuing an import licence will be fully cost recovered. The following factors contributed to this decision:
- in the absence of importers, the CFIA would not provide this service;
- an import licence is required only if importers wish to import IFS products into Canada; and
- importers bring products into Canada from foreign jurisdictions. Canada does not have the legal authority to impose Canadian legislative requirements on foreign producers.
34. The CFIA is proposing to fix fees for the issuance of an import licence for importers of IFS products at the following rates for the next five years.
|Description||Proposed User Fee - FY2013/14||Proposed User Fee - FY2014/15||Proposed User Fee - FY2015/16||Proposed User Fee - FY2016/17||Proposed User Fee - FY2017/18|
|Issuance of an IFS import licence||$259.48||$263.94||$268.48||$273.10||$277.80|
* based on the forecasted costs for FY2013/14 the proposed user fee for FY2014/15 to FY2017/18 has been determined by applying an annual inflationary factor of 1.72% - refer to paragraphs 36 and 37.
35. Projected Costs and Revenues*
|FY 2013/14||FY 2014/15||FY 2015/16|
* assuming constant demand, an annual inflationary factor of 1.72% is applied to project costs and revenues for three years - refer to paragraphs 36 and 37.
36. Similar to the approaches of other government departments, the CFIA has included an annual inflation adjustment. This annual adjustment will help keep fees in line with rising costs due to inflation.
37. The annual inflation adjustment is the average of the percentage change in the consumer price index over the previous five years8 as reported by Statistics Canada9. This proposal uses this average inflationary factor to propose fees for an IFS import licence for each of the next five years.
38. The CFIA is committed to reviewing fees every five years or more frequently if necessary. At that time, the service standards and the costs associated with delivering the services/program will be reviewed and reflected in a revised user fee proposal, as appropriate.
39. The CFIA considered four foreign jurisdictions for the benchmarking exercise: Australia, New Zealand, the United States, and the United Kingdom. The U.K. was the only other jurisdiction found to issue import licences comparable to those being proposed by the CFIA. However, Australia and New Zealand issue import permits10 that are similar in nature to the import licences being proposed by the CFIA.
40. In the U.S., the Food and Drug Administration (FDA) is not authorized to license food importers.
41. The FDA currently registers the facilities of individual food importers. Importers can import food and food products into the U.S. without prior approval by the FDA, as long as the facilities that produce, store or otherwise handle the products are registered and prior notice of incoming shipments is provided to the FDA.
42. Facility registration is only required once for each facility and there is no charge for the registration or updates to any registration.
43. With the introduction of the Food Safety Modernization Act in January 2011, the FDA now has the authority to collect fees and require importers to prove that products they imported meet U.S. standards (i.e., importers must verify that their foreign suppliers have adequate preventive controls in place to ensure safety).
44. For trade purposes, the U.K. requires an import licence for importing any foods that have no animal content, such as rice, fruit, bread and vegetables. This licence may also be used to restrict imports by imposing quantitative limits.
45. The Rural Payments Agency (RPA) is responsible for receiving and processing applications for import licences as well as issuing licences. Importers and exporters need to be registered with the RPA before a license can be issued.
46. The RPA commits to issuing electronic and paper licences within 5 working days, however, the average time to issue licences is generally 3 working days from the date of receipt of a complete application.
47. There is no charge for an import licence. However, in some cases an applicant may be required to make a security deposit for a licence. The deposit is returned if the terms of the licence are met.
48. The Australian Government does not issue import licences. However, the Australian Quarantine and Inspection Service (AQIS) requires commercial importers to obtain import permits prior to importing all food except for food that is imported from New Zealand, was made or produced in New Zealand, and is not a risk food11.
49. The assessment of applications and issuance of import permits by AQIS may take up to 10 working days. The permit is generally valid for 2 years and may be used multiple times during this period.
50. The Australian Government requires AQIS to recover 100% of the cost of its activities. The fee to apply for a food control certificate is made up of a lodgement fee and an assessment fee. The lodgement fee is associated with the submission of the application and is fixed at A$150 (manual) or A$85 (electronic). The assessment fee relates to the review of the information in the application and is fixed at A$80 per item, up to 1 hour or A$160 up to 2 hours and A$40 per item for each additional ¼ hour.
51. The New Zealand Government does not issue import licences. However, all importers are required to be listed with the New Zealand Food Safety Authority (NZFSA) prior to importing food for sale. There is no fee associated with this registration.
52. Imported foods that are on the NZFSA prescribed foods list12 must be cleared by the NZFSA Central Clearing House before they can be imported. Clearance is granted, via the issuance of a permit, if the importer can demonstrate that the imported food is safe and suitable for its intended use. Two types of permits are available: single use permits and multiple release permits. The process of issuing permits to release the imported food may include sampling and testing.
53. Application for a single use permit costs NZ $49.06 per permit. Permits that take longer than 15 minutes to process will incur additional time chargeable at 15 minute increments at the hourly rate of NZ $98.13/hour. Issuing or renewal of a multiple release permit is $140.30 per hour payable in 15 minute units with a minimum charge of NZ $35.07. Additional charges are applied if there is a requirement for sampling and testing.
54. The CFIA proposes to issue import licences for the NFRS within 10 working days of receiving a complete application.
55. This service standard is comparable to that of Australia, which issues permits within 10 working days, but is longer than that of the U.K. which commits to issuing import licences within 5 working days. No service standard could be identified for the issuance of import permits in New Zealand.
56. The CFIA proposes to charge $259.48 for the issuance of import licences to the NFRS. This rate allows for the full recovery of costs associated with the issuance of import licences.
57. The U.K. does not administer a charge for the issuance of import licences. The CFIA’s proposed fee is more than the base charge administered by Australia and New Zealand for the issuance of import permits, A$85 – 150 and NZ$49.06 – 140.30, respectively. However, the issuance of import permits in Australia and New Zealand may be subject to additional charges, based on an hourly rate, depending on the nature and complexity of the application.
58. According to the User Fees Act (UFA), the CFIA is required to notify stakeholders of a proposed user fee. An on-line consultation on this proposal began on April 20, 2012 and will end on June 29, 2012. Those wishing to participate in the consultation can do so by visiting the CFIA’s website at: www.inspection.gc.ca.
59. Section 4.1 of the UFA outlines the complaints process. Complaints or comments about the proposal can be submitted until June 29, 2012. If a complaint is received, the CFIA will try to resolve the complaint and provide notice in writing of any proposed measures to resolve the complaint.
60. If a complaint is not resolved to a complainant’s satisfaction within 30 days after June 29, 2012, the complainant may request in writing that the complaint be referred to an independent advisory panel. This written request must be received within 10 days following the 30 day period.
61. If appropriate, the independent advisory panel will prepare a report for the Minister with its findings and recommendations for resolving the dispute. The CFIA will consider the panel’s recommendations and include the panel’s report in the tabling package.
1 Consistent with the World Trade Organization Agreement on Import Licensing Procedures - PDF (57 kb), import licensing is defined as an administrative procedure used for the operation of import licensing regimes requiring the submission of an application or other documentation (other than that required for customs purposes) to the relevant administrative body as a prior condition for importation into the customs territory of the importing member.
3 Report of the Auditor General of Canada to the House of Commons, Chapter 1, Management of Fees in Selected Departments and Agencies, May 2008
4 As per the Canada Agricultural Products Act, “agricultural product” means (a) an animal, a plant or an animal or plant product, (b) a product, including any food or drink, wholly or partly derived from an animal or a plant, or (c) a product prescribed for the purposes of this Act.
6 Consistent with the World Trade Organization Agreement on Import Licensing Procedures, import licensing is defined as an administrative procedure used for the operation of import licensing regimes requiring the submission of an application or other documentation (other than that required for customs purposes) to the relevant administrative body as a prior condition for importation into the customs territory of the importing member.
8 2010: 1.8%; 2009: 0.3%; 2008: 2.3%; 2007: 2.2%; 2006: 2.0%
10 A permit is generally linked to a specific shipment while a licence is issued to a person/entity to perform a specific activity.
11 Food of a particular kind may be classified as risk food if the Australia New Zealand Food Authority advises the Minister under subsection 17 (1) of the Imported Food Control Act, that the food has the potential to pose a high or medium risk to public health.
12 List the foods that appear on the NZFSA prescribed foods list
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