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Icebreaking Program

Proactive Disclosure

Marine Services Fees

Backgrounder and Assessment of comment on Icebreaking Services Fees

Application

Definition of Transit

Comment: The definition of transit is unclear.

Assessment: "Transit" means any movement by a ship which includes one departure port, one arrival port and no intermediate port calls in between. That is, a direct voyage from Port A to Port B without stopping at another port enroute. Should a voyage from Port A to Port B include a port call at Port C while the ship is enroute to Port B, the journey A to C to B would be considered two transits.

Only those transits occurring during the ice season where the departure port and/or the arrival port is a Canadian port located within the ice zone will be subject to the ISF.

Exempt Intraport Movements from ISF

Comment: Intraport movements should not be subject to the ISF.

Assessment: The Coast Guard agrees with this statement and will not be applying the ISF to ship transits which remain exclusively within the boundaries of a single port. For application purposes, the terminal at Contrecoeur is deemed to be a port separate from Montreal.

Exempt Tugs/Pilot Boats from ISF

Comment: Tugs and pilot boats supporting a commercial ship should not be subject to the ISF.

Assessment: The ISF will not apply to tug and pilot boat transits for which the sole purpose is the support of a self-propelled ship. Each transit completed by a tug-barge combination, however, will be subject to a single transit fee which will be levied against the tug.

Exempt Bunkering Stops from ISF

Comment: Stops for bunkering should not be subject to the ISF.

Assessment: A stop at a Canadian port located in the ice zone for the sole purpose of bunkering, responding to a medical emergency, undertaking emergency ship repairs, responding to a government department or agency request to stop; or making an overnight stop required due to the seasonal removal of lighted aids to navigation will not trigger a transit fee.

Exempt Floating Fuel Stations from ISF

Comment: Floating fuel stations should not be subject to a fee for each fuelling operation.

Assessment: Floating fuel stations which complete a transit that originates and terminates at the same port without an intermediate stop at another port will only be subject to a single transit fee regardless of the number of mid-stream fuelling operations carried out on the transit.

ISF Should Not Apply at the Port of Sydney

Comment: ISF should not apply to ships calling at Sydney.

Assessment: A MAB subcommittee determined the ice zone as that area where, in a typical winter, the Coast Guard provides icebreaking services in support of commercial shipping. Coast Guard records indicate that, during a typical ice season, the Coast Guard provides icebreaking services (e.g. route assistance, ice routing and information services, and marine facility and port maintenance) to commercial ships bound for or from Sydney.

Transshipped Grain

Comment: When grain is transshipped, only one leg of the voyage should be subject to the ISF consistent with the marine navigation services fees.

Assessment: The ISF is levied against the ship and not the cargo, thus, there is no reason why any leg of a transhipment should be exempt from the ISF. The fee will apply in the same manner whether a cargo is moved on a multiple transit journey with a single ship or multiple ships.

Under limited circumstances, the marine navigation services fees provide an exemption for transshipped cargoes. The exemptions, however, only apply to those fees which are based upon cargo tonnage. There are no similar exemptions for those marine navigation services fees which, like the ISF, are based upon ship movements or size.

Low-value Commodities

Comment: The fees for ships transporting low-value commodities, such as gypsum, aggregates and salt, should be reduced to recognize the low per tonne value of these commodities.

Assessment: The only two low-value commodity flows identified by an 1996 economic impact study as potentially sensitive to disruption were gypsum and aggregates. Measures were taken to mitigate potential disruption to shipments of these two commodities by capping the marine navigation services fees applied to ships carrying gypsum and aggregates, and similar measures are outlined in the revised ISF structure.

In response to industry requests for economic safeguards, a marine services fee dispute resolution process is available to address issues on fee structure or impact. At the discretion of the Minister, the process may include the establishment of an independent fee review panel to assist in the assessment of the issue. In such cases, any recommendation provided by a fee review panel would be considered in the final decision taken by the Minister. As well, over the next three years, the Treasury Board Secretariat has committed to further studying the impact of government cost recovery on the marine shipping industry.

Ships Using Little or No Icebreaking Services

Comment: Some ships claim to use little or no icebreaking services and should not be subject to the ISF.

Assessment: The ISF recovers a portion of the cost of all icebreaking services provided for commercial ships including the availability of icebreakers and ice routing information. While some ships may use more icebreaking services than others, most ships calling at Canadian ports in the ice zone benefit from some Coast Guard icebreaking services. For this reason, the ISF will be applied to all transits except those transits which occur entirely along a route where no Coast Guard icebreaking services are available during the ice season. The identification of such routes will be made on a case-by-case basis and will be subject to change if the availability of icebreaking services changes.

Structure

Inequitable Regional Revenue Targets for ISF

Comment: Certain regions will pay in excess of 100% of their regional icebreaking costs under the proposed uniform rate for all of eastern Canada.

Assessment: The ISF is not levied against regions or ports; it is paid by ships transiting the eastern Canada ice zone during the ice season. The Coast Guard deploys icebreakers from the Newfoundland, Maritimes, Laurentian, and Central regions as a single, coordinated unit. The ice, icebreakers, and commercial ships all move seamlessly across regional boundaries. Icebreakers may be based in one region, but often assist ships traveling to and from ports located in other regions. For this reason, a uniform transit fee applied in all areas where icebreaking services are typically provided is being applied.

While agreement has not been reached between the Coast Guard and industry as to how regional boundaries and cost should be determined, commercial ships will not be paying anything near 100% of the full cost to the Coast Guard of providing icebreaking services for commercial ships. In fact, ships subject to the ISF will be paying only $6.65 million of the costs attributed to them by the Coast Guard; the remaining $69 million cost of services provided to commercial ships will continue to be borne by Canadian taxpayers.

Regionally Based ISF

Comment: Fees should be regionally based.

Assessment: A MAB subcommittee examined a variety of different icebreaking fee structures and recommended that "if icebreaking fees are implemented, they be based on a uniform transit fee for transits into, out of, or within ice areas in eastern Canada". The Coast Guard accepts this recommendation and believes that the uniform transit fee structure best reflects the nature of icebreaking services provided for commercial ships.

The Coast Guard's winter icebreaking program is delivered as a single, integrated program across all four Coast Guard regions located in eastern Canada. Icebreakers are deployed throughout the ice zone to respond effectively to client requirements and changing weather conditions. This reality, combined with the fact that many ship movements comprise the waters of more than one region make a single fee applicable to all ships calling at Canadian ports located in the ice zone the more logical, simple and practical approach.

ISF Should Not Be Uniform

Comment: The fee should not be uniform, but rather should be based on such factors as cargo tonnage, gross tonnage, and distance covered.

Assessment: The MAB subcommittee recognized that the greatest demand for icebreaker assistance often occurs at, or near, the point of arrival or departure and recommended that "if icebreaking fees are implemented, they be based on a uniform transit fee for transits into, out of, or within ice areas in eastern Canada". The Coast Guard accepts this recommendation and believes that the uniform transit fee structure best reflects the nature of icebreaking services provided for commercial ships.

Different ISF Rate for Small Ships

Comment: Small ships should not have to pay the same rate as larger ships due to their reduced ability to shoulder the fee (i.e. smaller cargo loads).

Assessment: The economic studies conducted to-date addressed the issue of ability to pay and indicated that the implementation of the ISF at $13.3 M would not lead to significant disruption in current shipping patterns. A rate set to recover only 50% of this level would further ensure that there is no significant disruption.

ISF Should be Based on Voyages, not Transits

Comment: Ships making short-haul or multi-transit voyages are unfairly treated by a uniform transit fee per leg.

Assessment: In recognition of those ships which make frequent transits or which complete multiple-transit voyages, the seasonal cap on the maximum number of chargeable transits has been reduced from twelve to eight and an additional cap of three chargeable transits per 30-day period has been introduced.

Change in Ice Season Dates

Comment: The ice season for the Great Lakes should reflect the Seaway closing and opening dates.

Assessment: The ice season dates have been revised on Lake Ontario to better reflect the provision of icebreaking services in this area. The revised Lake Ontario ice season will run from December 21-24 and April 1-15.

Great Lakes As Separate Ice Zone

Comment: The Great Lakes should be considered a separate zone due to its unique situation.

Lower ISF Cap

Comment: The level of the cap should be reduced from twelve.

Assessment: The Coast Guard agrees that a cap of twelve transits per ship per ice season does not fully address the concerns of frequent traders and ferries. As a consequence, the cap will be reduced to eight transits per ship per ice season. Furthermore, a cap of three transits per ship per 30-day period will be introduced.

ISF Discounts Inappropriate

Comment: The three ice capability discounts proposed should be dropped in favour of a larger discount based solely upon ice class.

Assessment: The Coast Guard has revised the ice capability discounts and they are now based solely upon ship ice class.

ISF Discounts Too Low

Comment: The proposed discounts are not large enough to reflect the investment made by owners of ice capable ships.

Assessment: While the incremental investment required of owners desiring ice capable ships may be substantial, the Coast Guard does not view the ISF discounts as direct incentives for such investment choices. Rather, ice discounts have been introduced to recognize that ships with enhanced ice capability may demand less icebreaking services. The Coast Guard agrees that the revised ice capability discounts, which are based solely upon ship ice class, are a fair recognition of ship ice capability.

Engine Power ISF Discount

Comment: The discount for engine power should only be applied if the ship is guided by an experienced ice officer.

Assessment: The engine power discount has been removed in response to the strong support demonstrated for revised ice capability discounts based solely upon ship ice class

Ship Ice Class

Comment: International ice class equivalencies should be recognized.

Assessment: The Coast Guard will recognize equivalent international ice class when considering the eligibility of a ship for the ice class discount.

Ferries

Ferries Are an Essential Service

Comment: Ferries provide an essential service which should not be subject to the ISF.

Comment: The Coast Guard has established that the full cost of icebreaking services provided for commercial ships is $76 million. Ferries and other commercial ships are being asked to pay only $6.65 million of this cost with the remainder continuing to be borne by Canadian taxpayers. There are a variety of ferries operating during the ice season. Some of these are operated by governments, others are privately-run. Most have called on the Coast Guard for icebreaker assistance or benefited from Coast Guard ice information at some point over the years.

The transit-based fee structure was designed taking into account the unique nature of ferry operations. The cap on the maximum number of transits per ice season (originally proposed at twelve) has been further reduced to eight per ship per ice season. Furthermore, a cap of three transits per ship per 30-day period is being introduced. Finally, government-owned ferries which do not charge a fare for their services will not be subject to the ISF.

Rates for Ferries

Comment: The ISF rates should be lower for ferries to reflect that they do not generally carry cargo.

Assessment: The demand for Coast Guard icebreaking services is not directly related to the size of a ship, the amount of cargo carried, nor purpose of the transit. For this reason, the rates are uniform for all types of ships. However, most ferries will benefit from the seasonal and 30-day caps on the number of chargeable transits.

Caps Should Apply to Routes, Not Individual Ships

Comment: The cap should apply to a ferry route and not to a specific ship as ferries are sometimes replaced due to breakdown, etc.

Seasonal Ferries Pay the Same as Year Round Operators

Comment: Ferries which operate for only a week or two out of the entire ice season pay the maximum ISF the same as ferries used for the full season.

December 7, 1998