Cost Recovery

Summary of the New Substances Notification Cost Recovery Proposal

Overview

• Understanding the Proposed Fee Structure
• Assessment of the Cost Recovery Proposal
• TABLE Summarized Proposed Fees

The current proposal to recover part of the costs of the New Substances Notification (NSN) program is the result of approximately one year of consultations between government, industry, and other stakeholders. The proposal is outlined in detail in the document entitled Discussion Paper: Cost Recovery for the CEPA New Substances Notification Program (Chemicals and Polymers). The proposal follows the government policy of recovering costs for "services that provide identifiable recipients with direct benefits beyond those received by the general public…," and adheres to the Treasury Board policy on cost recovery.

The justification for the recovery of program costs is derived from the Treasury Board document cited above. However, the implementation of cost recovery is a departmental responsibility, in this case involving Environment Canada and Health Canada. As with other cost recovery initiatives, the current proposal incorporates the "user pay, user say" principle in three fundamental ways:

• includes program clients in a meaningful consultation process,
• establishes clearly-defined service standards which tie fees to a measurable level of performance,
• establishes a joint government/industry advisory panel to the NSN program.

The proposed fees are shown in the table at the end of this document.

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Understanding the Proposed Fee Structure

The proposed fees are based on costs associated with the services provided by the NSN program in evaluating and processing new substance notifications. Only part of the total NSN program costs are proposed to be recovered (~26%). This is a reflection of the fact that the NSN program generates both public and private benefits; according to Treasury Board policy. Public benefits are associated with general revenue expenditures, while private benefits establish a basis for the recovery of costs from individual beneficiaries. For special activities only, full costs are proposed to be recovered.

Proposed fees vary according to notification schedule since the assessment and processing of different schedules incur different government costs. Another reason for differing fees is because the direct benefits which accrue to notifiers vary depending upon notification schedule. For example, notifications which do not lead to DSL listing are associated with private benefits which typically accrue to the notifier, whereas for notifications which lead to DSL listing, there is a mix of private benefits which accrue either to the individual notifier or to a group of notifiers. Only those costs associated with individual private benefits are to be recovered. Consequently, the proposed fees are intended to reflect the appropriate mix of individual and group benefits for each notification schedule.

Transitional substance notifications are excluded from cost recovery. Fees will not be assigned to this group of substances as long as the appropriate notification schedules are submitted on time in accordance with CEPA regulations. Otherwise, fees may be assigned as with new substance notifications.

The proposed fees are designed so that the overall costs recovered for the notification of a single substance, which eventually becomes eligible for DSL listing, are the same regardless of the notification route taken. A new chemical may be notified in stages, for example, beginning with a Schedule I, followed by a Schedule II notification, and later by a Schedule III. The same chemical may be submitted directly as a Schedule III. The fee reduction provision for staged notifications provides a mechanism which maintains a standard overall fee:

New chemical notified as a Schedule III

• fees Total = 3 500 $

The same new chemical notified in stages

• Schedule I = 500 $
• Schedule II = 1 500 $ (2 000 $ - 500 $)
• Schedule III = 1 500 $ (3 500 $ - 2 000 $)
• Total fee = 3 500 $

Three other fee reduction opportunities have been included in the current proposal:

Matched Notifications: A flat rate of $500 will be charged when a notifier has obtained permission to use required information from another notification, i.e. when a notification is "matched" with another. This fee reflects the incremental cost of assessing and processing the matched notification.

Consolidated Notifications: Where a notifier introduces a series of similar new substances which are supported by the same technical data, the notifier may be eligible for a consolidated notification fee reduction. In this case, the full fee would be applicable to the first substance submitted, and the other in the series notifications (up to a maximum of six) would be charged a flat fee of $250.

Small- and Medium-sized Enterprises (SMEs): Cost recovery programs typically include special reductions aimed at providing relief for SMEs. A fee reduction is proposed for notifiers satisfying the condition that company annual sales are less than $10 million. The reduction mechanism would be a sliding scale according to the percentage of the $10 million annual sales figure reported. For example, companies with $5 million in annual sales would be charged 50% of the appropriate fee, those with $2.5 million in annual sales, 25% of the fee, and so on, with a minimum fee of $100.

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Assessment of the Cost Recovery Proposal

Subject to the requirement outlined in the Treasury Board Cost Recovery policy, the current proposal will undergo a business impact analysis involving the participation of several industry clients. The purpose of this analysis is to determine and assess the potential impacts that the proposed fees may have on the introduction of new substances into Canada. A joint advisory group of industry and government representatives (known as the Business Impact Advisory Group or BIAG) has been established to guide an independent Consultant who is undertaking the impact analysis. BIAG will ensure that the assessment methodology is capable of determining and assessing the potential impacts of the proposed fees and that it meets the needs and expectations of effected parties. Through the application of a questionnaire, the assessment will examine questions such as overall impacts of fees on competitiveness, sales, profits, and the identification of any disproportionately impacted groups. The data generated from the analysis will be kept in confidence by the Consultant conducting the impact analysis. The Consultant will aggregate the data and provide observations to BIAG on the potential impacts of the proposed fees. The analysis will be used by Environment Canada and Health Canada to determine the final fees.

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*p= preliminary (DSL incomplete substance);
*f= final (DSL eligible substance)

To determine fees for each new substance being submitted in stages use the following method:

• initial submission: use the Per Schedule Fees column
• all subsequent submissions: use Staged Notifications Fees column