FEDERAL REG

SOR/2016-256: Regulations Amending the Canada Grain Regulations

REGISTRATION OF FEDERAL REGULATION - VIA OIC DATABASE, PRIOR TO PART II OF THE GAZETTE

Registered
September 30, 2016


REGULATORY IMPACT ANALYSIS STATEMENT (This statement is not part of the Regulations.) Issues Producer cars — Application for Producer to Obtain Railway Cars Form The Canadian Grain Commission (CGC) has modernized its Producer Car Allocation Program to ensure ongoing efficiency, timely service, and relevance in the changing grain transportation environment. As part of this process, automatic confi... (Click for more)


Published on September 30, 2016

Bill Summary

SOR/2016-256: Regulations Amending the Canada Grain Regulations

REGULATORY IMPACT ANALYSIS STATEMENT (This statement is not part of the Regulations.) Issues Producer cars — Application for Producer to Obtain Railway Cars Form The Canadian Grain Commission (CGC) has modernized its Producer Car Allocation Program to ensure ongoing efficiency, timely service, and relevance in the changing grain transportation environment. As part of this process, automatic confirmation emails are now sent to a producer’s email address immediately after the CGC receives a new producer car order — a completed Application for Producer to Obtain Railway Cars form. Although the form has been updated in the electronic car ordering system, and the actual paper application form now includes a producer email address field, Form 14 of Schedule 4 (the Application for Producer to Obtain Railway Cars form) to the Canada Grain Regulations (CGR) does not reflect this change. For consistency, it is necessary to update Form 14 of Schedule 4 to include a producer email address field. Penalty payment mechanism — Grain delivery contracts Section 29 of the CGR requires that any contract between a producer and a grain company for the purchase of grain within a specified delivery period must include a provision stating that if a grain company does not accept a producer’s delivery within the delivery window negotiated in the contract, the grain company must pay the producer a penalty. The penalty is negotiable and must be agreed upon by the producer and the grain company in the contract and be based on either a daily amount or a lump sum. However, both grain companies and producers have expressed the wish to specify other penalty payment alternatives in their contracts (e.g. setting off against other commitments a producer may owe to a licensee during the crop year). Licensing obligation and security reports — Monthly liability report Licensed grain dealers, primary elevator operators, and process elevator operators must provide the CGC Licensing Unit with monthly reports of their liabilities to producers. Section 23 of the CGR requires that licensees supply this information for the previous month to the CGC, but does not state a specific date, which causes uncertainty for licensees. To address this issue, operationally the CGC has been requesting monthly liability reports from licensees on the 15th of the following month of the period being reported. For clarification, it is necessary to amend Section 23 to make it consistent with operational practice. Background Producer cars The Canada Grain Act (CGA) requires that producer cars are available to farmers. Producer cars are used to ship grain directly to a particular destination and provide producers a delivery alternative to the licensed grain handling system. The CGC allocates producer cars that are for a confirmed sale in the order in which application orders are received, while working within certain parameters (train run service, access to loading sites, and car availability) and respecting the orderly movement of grain. In order to ensure ongoing efficiency, timely service, and relevance in the changing grain transportation environment, the CGC reviewed all of the processes of its Producer Car Allocation Program in fiscal year 2014–2015. As a result of this review, the CGC modernized its business and communication processes. Penalty payment mechanism — Grain delivery contracts Most grain delivery contracts are a commercial decision between a grain company and a producer, and specify a delivery time frame. In the past, consequences for contract non-compliance have been typically unbalanced in favor of grain companies. Effective August 1, 2014, section 29 of the CGR was amended in order to regulate penalty provisions in grain delivery contracts between producers and licensed grain companies. The precise nature of the penalty provision to be included in contracts is not completely defined in regulation and each grain company can have a unique strategy regarding how to implement this requirement. Although section 29 accomplishes the regulatory objective, it does not clearly allow for a penalty that could be structured and paid using a mechanism as agreed to by the contracting parties, other than a set daily amount or single lump sum. Licensing obligation and security reports — Monthly liability report Licensed grain dealers, primary elevator operators, and process elevator operators must provide monthly liability reports to the CGC Licensing Unit as part of CGC licensing and reporting obligations. A monthly liability report identifies a licensee’s outstanding payments and other obligations for grain to producers as of the last day of each month. As required by the CGA, the CGC uses this information to establish the amount of security that each licensee must provide for the purpose of covering potential liabilities to producers in the event of a company default. Operationally, the CGC currently requests that licensees submit this report by the 15th of the following month of the period being reported. Objectives The three objectives of this proposal are as follows: Provide for consistency with current operating practices by amending Form 14 (Application for Producer to Obtain Railway Cars form) of Schedule 4 of the CGR to include a field for a producer email address. Provide flexibility for penalty payment alternatives in delivery contracts between grain companies and producers by amending section 29.3 to clarify that a penalty amount can be paid using a mechanism as agreed to by the parties to the contract, other than as a daily amount or lump sum. Provide certainty for CGC licensees, and improve compliance with and enforcement of the CGC Licensing Program, by amending section 23 to add a specific date for submission of monthly liability reports to the CGC. Description This proposal adds a field for a mandatory producer email address in Section A - Producer Identification of Form 14 Application for Producer to Obtain Railway Car of Schedule 4; adds a paragraph to section 29.3 to clarify that a penalty can be structured and paid using a mechanism that may be agreed to by the parties to the contract, other than a daily amount or a lump sum; and clarifies section 23 by adding wording that each licensed grain dealer, primary elevator operator and process elevator operator must submit a monthly liability report to the CGC no later than the 15th day of the month following the reporting month. “One-for-One” Rule The “One-for-One” Rule does not apply to this proposal, as there is no change in administrative costs to business. Small business lens The small business lens does not apply to this proposal, as there are no costs on small business. Consultation Stakeholders were consulted on the modernized producer car application process, including the addition of a mandatory producer email address, in July 2015. The CGC hosted both an in-person meeting and a webinar on July 17, 2015, to discuss the updated producer car program business practices with affected stakeholders. Follow-up information packages were sent to all producer car administrators and producer car loading facilities. In addition, on request, the Commission held face-to-face meetings with producer organizations, producer car loading facilities, grain marketers, and a short-line railway group. Stakeholders were supportive of the change as it facilitates modernized producer car ordering procedures. Stakeholders have not been formally consulted on the amendment to penalty payment mechanisms in grain delivery contracts in section 29. However, given that both grain companies and producers have enquired about the ability to use alternative penalty payment mechanisms in their contracts, during the past year, CGC Commissioners have provided information at various producer group annual general meetings and farm shows in order to clarify how the penalty payment clause can be applied. Commissioners have also had numerous informal discussions with stakeholders about their understanding of penalty payment mechanisms. Licensees have not been consulted on the amendment to section 23 regarding the addition of a specific date by which they must submit their monthly liability reports to the CGC Licensing Unit. Licensees should be supportive of this amendment as it simply formalizes current reporting procedures. Once these amendments come into force, licensees will be reminded of this requirement. Rationale The addition of a mandatory producer email field on Form 14 of Schedule 4 (the Application for Producer to Obtain Railway Cars form) presents no risk or cost to stakeholders. This amendment is necessary to reflect the modernized operating practices of the CGC’s Producer Car Allocation Program. The amendment to section 29 will address the question raised by both grain companies and producers about their ability to specify other alternatives in delivery contracts to deal with the way in which the penalty amount may be paid (other than as a daily amount of lump sum). The amendment presents no risk or cost to stakeholders and will facilitate practical grain delivery contract penalty arrangements. Amending section 23 will provide regulatory certainty for licensees and will not negatively impact their operations. In practice, the CGC Licensing Unit already requires that licensees submit their monthly liability reports by the 15th of the following month of the period being reported. This amendment presents no costs to licensees. Implementation, enforcement and service standards These regulatory amendments will come into force on the day on which they are registered. Contact Melanie Gustafson Policy Analyst Canadian Grain Commission 303 Main Street Winnipeg, Manitoba R3C 3G8 Telephone: 204-292-5721 Email: [email protected] Footnote a S.C. 2014, c. 8, s. 5 Footnote b R.S., c. G-10 Footnote c S.C. 2014, c. 8, s. 5 Footnote d R.S., c. G-10 Footnote 1 C.R.C. c. 889; SOR/2000-213, s. 1

This Bill does not amend any statutes.

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