Vol. 144, No. 27 — July 3, 2010

Regulations Amending the Canada Grain Regulations

Statutory authority

Canada Grain Act

Sponsoring agency

Canadian Grain Commission

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issue and objectives

Shrinkage is defined in the Canada Grain Act (CGA) as “the loss in weight of grain that occurs in the handling or treating of grain.” This gross weight loss can be due to several factors, including loss of grain and dust during handling, transportation, and processing, and loss of moisture during handling, storage, and drying.

Currently, different types of Canadian Grain Commission licensees (grain elevators and grain dealers) can charge producers different deductions for shrinkage. The Canadian Grain Commission (CGC) has set a maximum shrinkage allowance for two types of grain elevators (licensed primary and licensed terminal elevators) only, thus allowing the remaining two types of elevators (licensed process and licensed transfer elevators) and grain dealers to charge different deductions for shrinkage. Licensees that are permitted to deduct for shrinkage usually do not publicize their shrinkage deductions and therefore they are often not known by producers. This can create confusion for producers when they deliver their grain to different types of licensees because they end up receiving different prices.

In addition, currently, licensed primary elevators are required to conduct weigh-overs and report their results to the CGC. A weigh-over is the weighing and inspection of all grain in an elevator to determine the amount of grain in stock. The CGC allows primary elevator licensees to report weigh-overs via an online portal or via a paper form as supplied by the CGC; however, the current Regulations do not allow for online reporting.

Objectives

• Increase grain price transparency for producers.
• Address producer and stakeholder concerns of an uneven regulatory framework by creating a more level playing field at the national level relating to the ability of some grain elevators to charge producers any amount for shrinkage whereas others have a regulated maximum shrinkage allowance.

• Align weigh-over reporting requirements in the Canada Grain Regulations with currently used electronic reporting practices, further the CGC’s paper burden reduction initiative and reduce paperwork burden for primary elevators.

Description and rationale

Section 30 of the Canada Grain Regulations (CGR) regulates the maximum shrinkage allowance that may be made on the delivery of grain to a licensed primary or licensed terminal elevator and sets it at zero. This regulatory proposal would ensure that the maximum shrinkage allowance applied to grain is the same regardless of the type of elevator to which the grain is delivered. The maximum shrinkage allowance for all four types of grain elevators would be regulated.

The proposal is intended to increase grain price transparency for producers by eliminating charges that are not included on the elevator receipt, cash purchase ticket or schedule of elevator tariffs. As a result, producers will be able to more easily determine their final grain price. Ensuring that maximum shrinkage allowances are the same regardless of elevator type will also address producer and stakeholder concerns of an uneven regulatory framework relating to the ability of licensed process and transfer elevators to deduct shrinkage from producers whereas licensed terminal and primary elevators cannot.

Regulating shrinkage at all classes of elevators will not address inconsistency issues with respect to grain dealers. However, shrinkage deductions and price transparency is less of an issue since most grain dealers purchase and deal in grain, but do not take physical possession of grain directly. Since grain is not physically changing hands, shrinkage does not occur, and a shrinkage deduction is not needed. Furthermore, the CGA does not give the CGC the authority to regulate shrinkage at grain dealers.

The costs of regulating shrinkage at licensed process and transfer elevators are expected to be minimal for process and transfer elevators as well as for producers because it is anticipated that elevators will shift their shrinkage assessment into their schedule of tariffs so that their tariffs reflect all of their handling costs. It is believed this occurred when the CGC regulated shrinkage at primary elevators to zero on August 1, 2003, as the estimated tariff at primary elevators increased by 10% between 2003 and 2008. As a result, grain prices would become more transparent to producers, yet it will likely not cost process and transfer elevators anything. The proposed regulatory amendment is not designed to change costs or savings for stakeholders but rather is proposed to increase price transparency for producers.

In addition, the CGC is proposing a housekeeping amendment to require elevator licensees to report the results of their weigh-overs on the appropriate form supplied by the Commission or in an electronic format acceptable to it and eliminate the paper form from the CGR. This would be consistent with current practice as well as with the Government of Canada’s Paperwork Burden Reduction Initiative. Currently, only 1 of 316 licensed primary elevators use the paper form.

The proposal to reduce the use of paper form for reporting weigh-overs will have a minimal savings impact for licensed primary elevators because they will no longer be required to produce paper forms and return them to the CGC by mail or fax.

Consultation

In July 2009, a consultation document regarding the proposal to regulate the maximum shrinkage allowance to zero at licensed process and transfer elevators was emailed to 59 stakeholder organizations and 180 CGC licensees. The consultative document was also posted on the CGC’s external Web site as well as Service Canada’s consultation Web site. The CGC gave stakeholders over 100 days to provide their comments regarding the proposal.

The CGC received 28 formal responses from stakeholders (7 producer organizations, 1 producer, 19 grain industry organizations, and 1 provincial government). Twelve of the twenty-eight responses were supportive of the CGC’s proposal to regulate the maximum shrinkage allowance to zero at licensed process and transfer elevators, and sixteen of the responses were opposed. While there were more responses from those opposed to the proposed shrinkage change, most of those who supported the proposed change (mainly producers and producer organizations) represented thousands of producers each.

The producer and producer organization comments were mostly supportive of the CGC’s proposed changes. They noted that producers should not be responsible for shrinkage costs once they have delivered grain to an elevator because elevators can control, to some degree, the amount of shrinkage that occurs after delivery by using careful handling practices and efficient equipment, while producers cannot control what happens to the grain once they have delivered it. However, most grain buyers opposed regulating maximum shrinkage allowances to zero because they suggested that they should be allowed to charge shrinkage fees since it exists. The CGC does not dispute the fact that shrinkage occurs; however, once the grain has been delivered to an elevator, the elevator can control some of their shrinkage losses, whereas producers no longer control the grain.

Only one producer organization was not supportive of the CGC’s proposed changes and suggested that maximum shrinkage allowances should be eliminated for all types of elevators because producers could assess competitive bids from different elevators including shrinkage deductions. Several grain buyers including licensees also suggested the CGC deregulate elevator shrinkage allowances. This proposal has been strongly opposed by the vast majority of producers. The CGC has heard from producers over the years that if elevators are permitted to charge shrinkage it would become an industry standard and would be very difficult for them to negotiate shrinkage charges with elevators.

One stakeholder suggested that the CGC should undertake a study in collaboration with the industry to determine actual shrinkage and set maximum shrinkage levels accordingly. The CGC conducted these types of studies in 1993 and 2003 and found that results often vary significantly from elevator to elevator and even within elevators over time, making it very difficult to produce concrete, robust findings.

Some of the transfer elevators in Ontario were opposed to the proposal because they operate in a different jurisdiction than their primary elevator counterparts. Primary elevators in Ontario fall under provincial jurisdiction whereas terminal and transfer elevators across the country and primary and process elevators in western Canada fall under federal jurisdiction (i.e. under the Canada Grain Act). The transfer elevators in Ontario noted that shrinkage is not regulated at primary elevators in Ontario. However, regulating shrinkage to zero at transfer elevators would make the overall playing field more level at a national level.

Upon stakeholder request, the CGC met with some of the grain buyers to further discuss the CGC’s proposed changes to regulate shrinkage to zero at process and transfer elevators. The grain buyers continued to favour either being allowed to deduct for shrinkage or have shrinkage deregulated. However, they acknowledged that if the CGC is going to regulate shrinkage they prefer that all types of elevators be treated equally.

The CGC carefully reviewed and considered all of the comments received regarding the proposed changes. The proposal to regulate shrinkage to zero at all types of elevators would ensure a more consistent, transparent industry by requiring that all federally licensed elevators be subject to the same regulations regarding shrinkage deductions. Therefore, no changes were made to the proposed regulatory amendment as a result of the comments received during consultations.

The proposal to require primary elevator licensees to report the results of their weigh-overs on the appropriate form supplied by the Commission or in an electronic format acceptable to it is not anticipated to impact current practice. All but one primary elevators have been submitting their weigh-over reports electronically since 2002. This proposal is an administrative amendment and will bring the Regulations inline with current practice; therefore, the CGC did not consult on this administrative proposal.

Implementation, enforcement and service standards

The proposed regulatory amendments would prohibit licensed process and transfer elevators to deduct shrinkage charges from producers. The CGC anticipates that all process and transfer elevators will comply as licensed primary elevators did in 2003 when shrinkage was regulated to zero at primary elevators. The CGC has a variety of means to enforce this regulatory change, including the power to suspend a licence in response to failure to comply with the CGA or CGR.

The CGC will notify all licensees and stakeholders of the CGC’s decision to extend the maximum shrinkage of allowance of zero to licensed process and transfer elevators by issuing letters directly to licensees and news releases to all stakeholders prior to the Regulations coming into force. The CGC will review and investigate any producer complaints received regarding shrinkage deductions at licensed elevators.

With the coming into force of the amendment regarding weigh-overs and paper burden reduction, primary elevator licensees will be required to report the results of their weigh-overs on the appropriate form supplied by the Commission or in an electronic format acceptable to it.

Contact

Eve Froehlich
Policy Analyst
Corporate Services
Canadian Grain Commission
600–303 Main Street
Winnipeg, Manitoba
R3C 3G8
Telephone: 204-983-6394
Fax: 204-983-4654
Email: eve.froehlich@grainscanada.gc.ca

PROPOSED REGULATORY TEXT

Notice is hereby given that the Canadian Grain Commission, pursuant to subsection 116(1) (see footnote a) of the Canada Grain Act (see footnote b) and subject to the approval of the Governor in Council, proposes to make the annexed Regulations Amending the Canada Grain Regulations.

Interested persons may make representations concerning the proposed Regulations within 15 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Cindy Creran, Canadian Grain Commission, 600-303 Main Street, Winnipeg, Manitoba R3C 3G8.

Ottawa, Ontario, June 17, 2010

JURICA ČAPKUN
Assistant Clerk of the Privy Council

REGULATIONS AMENDING THE CANADA GRAIN REGULATIONS

AMENDMENTS

1. Section 30 of the Canada Grain Regulations (see footnote 1) is replaced by the following:

30. The maximum shrinkage allowance that may be made on the delivery of grain to any licensed elevator is zero.

2. Paragraph 60(1)(b) of the Regulations is replaced by the following:

(b) supply to the Commission a report of the results of the completed weigh-over on the appropriate form supplied by the Commission or in an electronic format acceptable to it.

3. Schedule 4 to the Regulations is amended by replacing the reference “(Section 9, subsections 33(1) and 39(1), section 44, subsection 45(2), paragraph 57(a), subsection 58(1), par a graph 60(1)(b) and subsection 68(1))” after the heading “SCHEDULE 4” with the reference “(Section 9, su b sections 33(1) and 39(1), section 44, subsection 45(2), par a graph 57(a) and subsections 58(1) and 68(1))”

4. Form 8 of Schedule 4 to the Regulations is repealed.

COMING INTO FORCE

5. These Regulations come into force on the day on which they are registered.

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Footnote a
S.C. 2001, c. 4, s. 89

Footnote b
R.S., c. G-10

Footnote 1
C.R.C., c. 889; SOR/2000-213

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