Marine Services Fees

Backgrounder for Icebreaking Services Fee - Revised Fee Structure Proposal

Introduction

On 4 December 1998, the Minister of Fisheries and Oceans outlined elements of a revised icebreaking services fee (ISF) proposal which would annually generate $6.65 million plus administration costs. The purpose of this document is to present both the details of this revised ISF proposal and the consultative process to be followed by the Coast Guard prior to finalization of the icebreaking services fee structure later this month. Background

On 14 May 1998, the Minister of Fisheries and Oceans announced that, in keeping with the government's March 1997 announcement, icebreaking services cost recovery would be implemented by December 1998. The following month, the Coast Guard released its Marine Services Fees Consultation Package which detailed proposed changes to the marine navigation services fees and proposed an icebreaking services fee (1). Meetings were held across the country providing commercial shipping representatives the opportunity to pose questions about package details and to express their views on both the marine navigation services fees and the ISF.

During the month of September, the Coast Guard considered the comments received regarding the marine navigation services fees and on 1 October 1998 the revisions to the marine navigation services fees came into effect. At that time, the Coast Guard released its assessment of comments received on the marine navigation services fees.

The Coast Guard also received several comments regarding the ISF during and subsequent to the formal consultation period. Additionally, a working group comprising regional commercial shipping representatives met with the Coast Guard during October to address issues concerning the June ISF proposal and possible alternative fee structures. The Coast Guard has carefully considered all comments received when developing the revised proposal. The Coast Guard's assessment of the main comments received regarding the June proposal is available in a separate document.

While all comments were considered, it was not possible to accept all of the changes recommended during consultation. For example, in many cases different proponents presented conflicting suggestions. In these and all other instances, the Coast Guard considered all sides of the issues and based its decisions on the public policy interest. The following revised ISF structure proposal addresses most concerns raised during consultation.

The process for commenting on this revised proposal is outlined in the section of this document entitled next steps.

Revised ISF Proposal

The icebreaking services fee will apply to all ships that are operating in the ice zone except fishing vessels, pleasure craft, and government ships (2).

Fee Structure

Overview

This revised proposal is built around a transit-based uniform icebreaking services fee. The fee will be uniform and will apply to each transit to, from, or between Canadian ports located within the ice zone during the ice season. The key terms are defined below:

"Ice season" means the dates associated with the ice zone per the ice zone map included as Annex I of this document. All arrivals and/or departures at any port located in the ice zone that occur during the ice season are subject to the ISF. As indicated on the map, the ice season dates vary for different areas of the ice zone, but may generally described as:

• the waters of the northeast coast of Newfoundland ~ Jan. 15 - May 15
• the waters of Lake Ontario ~ Dec. 21-24 and Apr. 1-15
• all other waters and estuaries of the Great Lakes, St. Lawrence River, and Gulf of St. Lawrence ~ Dec. 21 - Apr. 15

"Ice zone" means the areas where in a typical winter the Coast Guard provides icebreaking services in support of commercial shipping. A map of the ice zone is included as Annex I of this document.

"Ship" means a vessel, boat or craft, other than a fishing vessel, government ship, or pleasure craft (3).

"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.

"Uniform fee" means the same fee will apply to all chargeable transits regardless of ship size, ship type, whether the ship is carrying a cargo, etc.

Caps

There will be a maximum of eight chargeable transits per ship per ice season starting with the first day of the earliest ice season period (21 Dec.) and ending with the last day of the latest ice season period (15 May). This seasonal cap is not transferable between ships.

Additionally, there will be a maximum of three chargeable transits per ship per 30-day period beginning 21 December and per 30-day period thereafter. This seasonal cap is not transferable between ships.

Discounts

Each chargeable transit by a ship that has demonstrated superior ice strengthening may be subject to a discount in the ISF base rate (4). For application purposes, superior ice strengthening is defined as matching the requirements for Canada Vessel Type A, B, C or D, or Arctic Class (or internationally recognized equivalents). A table identifying the common international equivalents to Canada Vessel Type is included as Annex II of this document.

Application Details

A transit which occurs entirely along a route where no Coast Guard icebreaking services (5) are available during the ice season will not be subject to the fee. 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.

A transit which occurs between two remote locations or between a remote location and a port located north of 60° north latitude will not be subject to the fee. In common with the marine navigation services fees, remote locations are defined as those locations listed in Revenue Canada Form T4039 Northern Residents Deductions - Places in Prescribed Zones.

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.

Intraport movements will not be subject to the ISF. For application purposes, intraport movements are generally defined as those ship movements that remain exclusively within the boundaries of a single port. Also for application purposes, the terminal at Contrecoeur is deemed to be a port separate from Montreal.

Each transit completed by a tug-barge combination will be subject to a single transit fee which will be levied against the tug. However, tug and pilot boat transits for which the sole purpose is the support of a self-propelled ship will not be subject to the ISF (6).

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.

A portion of the transit fees paid by a ship during the ice season which are related to the transport of aggregates or gypsum may be subject to a rebate at the end of the ice season.

Rates

The base rate for each chargeable transit is $3,100. The base rate may be discounted for those ships demonstrating superior ice strengthening as defined above. No ship will be charged for more than three transits per 30-day period beginning 21 December or more than a total of eight transits per ice season. The maximum ISF paid by any ship, therefore, will not exceed $24,800 per ice season.

Next Steps

The release of this document marks the start of the final public comment period. Clients of Coast Guard icebreaking services are encouraged to participate in this process by reviewing the proposed fee structure contained in this document and submitting any comments to the Coast Guard no later than 15 December 1998. All comments should be directed to:

Tim Meisner, Director
Canadian Coast Guard, Service Delivery Renewal
200 Kent Street, Station S-034
Ottawa, Ontario K1A 0E6
Fax: 613-990-4338

All comments received by the deadline of 15 December will be considered before a final icebreaking services fee structure is implemented for 21 December 1998.

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. A client informing the Coast Guard of the details of the issue initiates the process. The Coast Guard will then review the issue and provide the client with the results of its assessment and, where appropriate, any actions to be taken. Should the client feel that the issue has not been satisfactorily resolved, the client may inform the Minister of the details of the matter. The Minister will review the details and take a final decision. Where deemed appropriate, the Minister may convene 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.

Notes:

1. The proposed ISF was set at $5,700 per transit and would generate revenue of $13,300,000 plus administrative costs of 3.9%.

2. Government ship means any vessel, boat or craft that is owned or operated by the government of any country other than Canada, a province, state, territory or municipality of a country for which no fee, tariff or freight rate is charged for the vessel's, boat's or craft's services, or any vessel, boat or craft owned or operated by the government of Canada.

3. Ships operated by, or on the behalf of, the government of the province of Newfoundland will not be subject to the ISF in accordance with Clause 31 of the 1949 Newfoundland Terms of Union.

4. In order to be considered for this discount, official documentation as prescribed by the Coast Guard must be provided to Coast Guard officials for their review and assessment.

5. Coast Guard icebreaking services provided for the purpose of facilitating the navigation of ships include route assistance, ice routing and information services, and marine facility and port maintenance.

6. To ensure that such transits are not subject to the ISF, operators of tug and pilot boats will be required to inform Coast Guard officials of any transits made solely for the purpose of supporting of a self-propelled ship.

Annex I

Annex II