Table of Contents

1. Introduction

2. Marine Industry Overview

3. Commercial Perspective

4. Government Perspective

5. Moving Forward

4. Government Perspective

Recognizing that large segments of Canada's transportation system were operating at less than optimum efficiency, in 1994 the Government of Canada set out a comprehensive strategy to modernize Canadian transportation and prepare it for the 21st century. This included a review intended to modernize Canada's marine management and regulatory regime. At the request of the Minister of Transport, the House of Commons Standing Committee on Transport (SCOT) undertook a comprehensive study of the national marine sector in early 1995. The Committee report - A National Marine Strategy - contained a number of recommendations to improve the marine system, many of which were subsequently addressed by the National Marine Policy.

In December 1995, the government announced its National Marine Policy and its intention to bring in legislation containing comprehensive changes to the ports, Seaway, ferries and pilotage components of the marine industry. Reflected throughout the National Marine Policy is the principle of commercialization. Specifically, the objectives of the National Marine Policy were to:

• Ensure affordable, effective and safe marine transportation services;
• Encourage fair competition based on transportation rules applied consistently across the marine transport system;
• Shift the financial burden for marine transportation from the Canadian taxpayer to the user;
• Reduce infrastructure and service levels where appropriate, based on user needs; and
• Continue the Government of Canada's commitment to safe transportation, a clean environment, and service to designated remote communities. The government would also maintain its commitment to meet all constitutional obligations.

The Canada Marine Act (CMA), which received Royal Assent in 1998, is intended to encourage a more efficient marine transportation system, in part, by enabling marine infrastructure to be managed in a more commercial manner and allowing more local input into decision-making objectives. The CMA established the first single, comprehensive piece of legislation to govern many aspects of Canada's marine sector. The CMA streamlined marine legislation and allowed for the establishment of (CPA) along with continued divestiture of certain harbour beds and port facilities. The Act facilitated the commercialization of the St. Lawrence Seaway and contained provisions for the further commercialization of federal ferry services. It also aimed to improve the way Pilotage Authorities operate in Canada.

4.1 Canada Port Authorities

The National Marine Policy of 1995 sought to redefine the management and operations of Canada's major ports. It identified the need for Canada's national ports to operate under clear, consistent criteria, applied equitably from coast to coast, and noted that the federal government must focus on ports that are vital to domestic and international trade, and on preserving access to remote regions. Accountability to users and to the general public was to be transparent and effective.

The CMA has created a National Ports System made up of independently managed CPAs. Generally, the CPAs operate financially self-sufficient ports that are critical to domestic and international trade.

As an agent of the Crown, a CPA possesses the powers to engage in activities related to shipping, navigation, transportation of passengers and goods and the handling and storage of goods. CPAs may also engage in other activities that are deemed in its Letters Patent to be necessary to support port operations, although they may not act as Crown agents for these activities.

CPAs have no recourse to the federal Treasury to pay off debts, but remain eligible to benefit from government programs of general application providing for grants. CPA borrowing to support capital investments must be obtained from private sector lenders, each CPA pays an annual charge to the Crown based on its gross revenues. Surpluses at each port must be re-invested in the port.

With the exception of the Vancouver Port Authority, which has a nine-member board of directors, the boards of directors of CPAs are each composed of seven members. The majority of the members are nominated (for appointment) in consultation with port users. In addition, the federal, provincial and municipal governments each appoint one director. Transparency of operations is maintained through public annual audited financial statements, public land use plans, annual general meetings open to the public, and reporting under the Access to Information Act.

Total operating revenues of CPAs reached $279 million in 2002, up $13 million from 2001. Vancouver and Sept-Îles reported the largest increase in revenues. As illustrated in the table below, tonnage handled at CPA ports dropped from 220.4 million tonnes in 2001 to 215.1 million tonnes in 2002. Vancouver, Saint John, Sept-Îles, Montreal and Quebec City combined accounted for 67 per cent of total cargo handled by CPAs. In 2002, CPAs handled 52.7 per cent of total port traffic in Canada.

Table 8: Marine Traffic Handled at Canada Port Authorities, 2002 vs. 2001

(Millions of Tonnes)

4.2 Public Ports

On March 1, 1999, Part 2 of the CMA came into force for existing public ports. Under the National Marine Policy, the majority of ports under the control and administration of Transport Canada were designated as regional/local. These ports range from operations that support significant local and regional commercial activity to very small facilities with little or no commercial traffic. Whether a port supports an isolated community or several large industries, Transport Canada's operational role is normally limited to enforcing regulations regarding public port and public port facility use, monitoring port operations, and collecting user fees. Services such as cargo handling are supplied by the private sector. These regional/local ports were to be transferred to other federal departments or to provincial governments, municipal authorities, community organizations or private interests. Public ports are also being deproclaimed once Transport Canada has relinquished the last of its ownership interests at such ports to a new owner, including the harbour beds, as appropriate. The objective of the Port Divestiture Program is to position regional/local ports to respond more effectively to local needs and to function in a more commercial and cost-effective manner.

As of July 31, 2004, 452 of the 549 public ports and public port facilities under Transport Canada's control and administration had been transferred (218), deproclaimed (211) or demolished (5), or have had the department's interests terminated (18). Transport Canada is monitoring local port entities for compliance with the terms and conditions of any federal contributions that may have been received by these entities.

The federal government will continue to maintain remote ports that serve the basic transportation needs of isolated communities, unless local interests express a willingness to assume ownership of such port facilities. Thirty-two remote ports have been divested since 1996, leaving 29 remote ports nationwide under the administration of Transport Canada.

While assessing the post-transfer viability of ports was not a requirement of program approval, based on evidence from several divested ports, in general, divested ports are prospering and operating more efficiently than when they were under federal administration.

4.3 St. Lawrence Seaway

The St. Lawrence Seaway (Seaway) is a unique bi-national inland waterway, extending into the industrial heartland of North America and serving 15 major international ports and some 50 regional ports on both sides of the Canada/US border. The Seaway locks (15 in total) overcome the differences in elevation in the system. The Montreal/Lake Ontario (MLO) section has seven locks - five Canadian and two American. The Welland Canal links Lake Ontario and Lake Erie with a series of eight locks - all Canadian.

In 2001, the Canadian Seaway saw its third full year of management by the St. Lawrence Seaway Management Corporation (SLSMC). The SLSMC was constituted as a not-for-profit corporation under Part II of the Canada Corporations Act on July 9, 1998, and is governed by a nine-member board of directors. The board reflects all the diversity of the Seaway mosaic.

The SLSMC assumed responsibility for the operations and maintenance of the navigational aspects of the Canadian portion of the Seaway on October 1, 1998, following the successful negotiation of a management contract with the federal government pursuant to Part 3 of the CMA. This agreement is in force until March 31, 2018.

The government continues to own the fixed assets and bears alone the financial risk associated with traffic and revenues. If revenues from operations are not sufficient to cover operating costs and asset renewal costs, the government is responsible for covering the resulting deficits. The government remains committed to the long-term integrity of the Seaway - terms in the agreement ensure that asset renewal (including capital and major and regular maintenance) is sufficient to safeguard the national interest in the system. In 2003/04, the SLSMC spent $26M in asset renewal (major maintenance and capital).

The two main sections of the Seaway, the MLO section and the Welland Canal section, attracted an estimated 40.9 million tonnes of traffic in the 2003 season, 1.3 per cent less than in 2002.

4.4 Ferries

The National Marine Policy also outlined the federal government's goal to make the marine sector commercially oriented and reduce its involvement in the direct delivery of transportation services. This move was intended to allow the private sector to provide some of these services.

Since that time, Marine Atlantic Inc. (MAI), a federal Crown corporation, commercialized some of its routes and transferred others to the Province of Newfoundland and Labrador. Further, its Borden/Cape Tormentine route was terminated with the opening of the Confederation Bridge in 1997. The corporation will continue to provide constitutionally guaranteed ferry services between Nova Scotia and Newfoundland. Federally supported ferry services in Atlantic Canada are now limited to those provided by Marine Atlantic Inc. and by two private-sector operators: Northumberland Ferries Ltd. and C.T.M.A. Traversier Ltée. In addition, the federal government provides an annual grant ($22.9 million in 2001) to the British Columbia Ferry Corporation (BC Ferries).

As a further example of improved efficiencies and how the National Marine Policy is being successfully implemented in the ferry program, an agreement with Bay Ferries Ltd. for the two Bay of Fundy services has been structured to phase out operating subsidies.

Ferry services carried approximately 39 million passengers and 15.4 million vehicles in 2003.

4.5 Pilotage

Marine Pilotage involves directing and controlling the movement of a vessel through coastal and inland waters and providing navigational and/or ship handling advice to the master of the vessel for this purpose.

The Pilotage Act of 1972, as amended in 1998 by the CMA, governs marine pilotage in Canada. Under this Act, four regional pilotage authorities were established as Crown corporations - Atlantic, Laurentian, Great Lakes and Pacific. The four Pilotage Authorities are mandated to provide safe and efficient pilotage services that respond to the particular requirements of local traffic, as well as to the varied geographic and climatic conditions of the waterways concerned. The four Authorities, among other functions, control the supply of pilots and the circumstances under which they must be engaged, negotiate the remuneration of pilots, determine the areas where pilotage is compulsory, and set tariffs for pilotage services.

While maintaining their regional organization, the CMA made several changes to the Pilotage Act intended to improve the efficiency and financial stability of the Authorities, including:

• Permitting Chairpersons to serve part-time as well as full-time;
• Removing Pilotage Authorities' access to appropriations from the federal Treasury;
• Modifying the tariff setting mechanism to expedite the process; and
• Instituting a new arbitration mechanism for settling contract disputes between the Authorities and pilots.

The Authorities are governed by seven person boards, appointed by the Governor in Council, consisting of a chairperson, two pilot representatives, two shipping industry representatives, and two community representatives. Pilotage Authorities' clients and key stakeholders on the East Coast are the members of the Canadian Shipowners Association, the Shipping Federation of Canada, and the St. Lawrence Ship Operators Association, while on the West Coast shipping interests are represented by the Chamber of Shipping of British Columbia.

The Authorities are governed by seven person boards, appointed by the Governor in Council, consisting of a chairperson, two pilot representatives, two shipping industry representatives, and two community representatives. Pilotage Authorities' clients and key stakeholders on the East Coast are the members of the Canadian Shipowners Association, the Shipping Federation of Canada, and the St. Lawrence Ship Operators Association, while on the West Coast shipping interests are represented by the Chamber of Shipping of British Columbia.

The CMA also mandated a review of major pilotage issues such as compulsory pilotage area designations, the licensing and certification process, and vessel exemptions. In conducting the review, the Minister was assisted by the Canadian Transportation Agency. The review panel released its report containing 21 recommendations in November 1999. Arguably, the most significant recommendation related to using a risk-based assessment process for any changes to pilotage regulations. In 2000, Transport Canada developed a Pilotage Risk Management Methodology (PRMM) as a formal process for evaluating any significant changes to operational pilotage issues. All four Pilotage Authorities have approved and adopted the PRMM and have hired consultants to conduct specific risk assessment studies on outstanding issues highlighted by the CTA panel.

In 2003, of the four pilotage authorities, only the Great Lakes Pilotage Authority generated a net loss. Total revenues generated by all Pilotage Authorities reached approximately $120M in 2003 (preliminary numbers).

4.6 Canadian Coast Guard

The Canadian Coast Guard is a key national institution by which Canada exerts its influence over its water and its coasts and delivers on public expectations of clean, safe, secure, healthy and productive waters and coastlines. A vital symbol of Canada's sovereignty as a maritime nation, the Coast Guard delivers services to Canada and Canadians on four equally important levels:

• delivering Coast Guard programs;
• supporting departmental programs;
• supporting other government departments; and
• serving the broader Canadian interest.

The Canadian Coast Guard plays a vital role in maintaining an accessible and sustainable national maritime transportation system by providing mariners - both commercial and recreational - with national programs and services related to aids to navigation, marine communications and traffic services, marine search and rescue, pollution response, icebreaking and waterways management.

Additionally, the Coast Guard manages and operates the departmental fleets (vessels and helicopters) and provides valuable maritime expertise and services in support of all mandated activities of the Department - particularly Science and Conservation and Protection - as well as the non-military marine activities of other federal departments and agencies, as mandated by the Oceans Act. As the only multi-functional and highly adaptable on-the-water platform system in Canada, the Coast Guard fleet - which consists of 107 vessels and 27 helicopters - is instrumental to the federal government in fulfilling its maritime mandate.

The Coast Guard's work also has an international dimension, through various bodies such as the United Nation's International Maritime Organization and the International Association of Marine Aids to Navigation and Lighthouse Authorities. Canada's international obligations in safety, security and environmental protection - such as the International Conventions on Maritime Search and Rescue, Oil Pollution Preparedness, Response and Co-operation, on Prevention of Pollution from Ships, and on Safety of Life at Sea - are fulfilled through Coast Guard programs and activities.

Coast Guard's activities are mandated by a number of legislative acts, including the Oceans Act and the Canada Shipping Act, as well as more regionally specific acts such as the Arctic Waters Pollution Prevention Act. They are also, in part, established in precedent and governed by public expectations.

4.7 Government Spending on Transportation

In 2002/03, governments spent $14 billion on roads and public spending on public transit services totaled $2.6 billion, while federal and provincial governments spent $2 billion on air, marine and rail transportation combined. Public spending related to marine mode, after excluding the transfer of the BC Ferry debt to the provincial government hovered around $1 billion in 2002/03 (see explanation below). The share of the marine mode in public spending on transportation reached five per cent, a level that has not changed significantly since the mid-1990s. Government spending in the air mode reached 3.5 per cent on gross government spending, down 18 per cent. Whereas in the rail mode, public spending has grown by 14.4 per cent per year since 1999/2000, accounting for 1.7 per cent of gross government spending on transportation - 75 to 80 per cent of this total was spent on rail passenger subsidies.

Table 9: Transport Expenditures/Evenues by Mode and Level of Government, 1999/2000 - 2002/03

(millions of dollars)

On table 9, in 2002/03 total expenses from all levels of government totaled $978M. The federal portion of spending can be broken down further with the details on table 10 and 11. The total federal operating, maintenance and capital expenditures are split between Coast Guard Operations ($498M), Ports and Harbours ($120M) and Marine Safety and Policy ($59M). In addition to this, a total of $109.2M was spend on direct federal subsidies in the marine modes. When we add to this the provincial, territorial and local government spending of $193M, you have a total of $978M in marine related spending in 2002/03.

Table 10: Federal Operating, Maintenance and Capital Expenditures, 1999/2000 - 2003/04

(Millions of Dollars)

Notes:

1. Includes expenses for small fishing ports by Fisheries and Oceans Canada.

2. Includes contributions by Transport Canada to the Champlain and Jacques Cartier bridges, and expenses of the National Capital Commission, Public Works and Government Services, Parks Canada, and Indian and Northern Affairs.

3. Cash basis.

4. Includes expenses of the Civil Aviation Tribunal.

5. Includes expenses for the regulation and inspection of the transport of dangerous goods, Security and Emergency Preparedness, the Canadian Transportation Agency, and other multimodal safety, policy and analysis. Large increases in 2001/02 related to the purchase of explosives detection equipment.

F. Planned and/or actual.

Table 11: Direct Federal Subsidies, Grants and Contributions by Mode, 1999/2000 - 2003/04

(Millions of Dollars)

Notes:

1. Includes air carrier assistance of $99 million in 2001/02 and a cabin security enhancement program of $28 million 2002/03 and $6 million in 2003/04.

2. Includes contributions to the Port Divestiture Fund, a payment of $36 million to the Government of Quebec for the transfer of ferry wharves in 2000/01 and $64 million for the payment of a loan guarantee to Ridley Terminals in 2003/04.

3. Includes a payment of $214 million to the Hamilton Harbour Commission for the settlement of a civil litigation.

4. Offset federal programs to the elimination of the Western Grain Transportation Act Program.

5. Includes $33 million in 2002/03 and $74 million in 2003/04 under the Strategic Highway Infrastructure Program.

6. Includes in 2002/03 and 2003/04 the estimated road and transit portion of the Toronto Waterfront Revitalization Project.

7. Spending included previously under Highway Modes.

8. Includes small amounts not classified elsewhere.

F. Planned and/or actual.

In 2003/04, total federal direct subsidies, grants and contributions are expected to grow to $805 million.

4.8 Canadian Transportation Regulatory Framework

Below is a list of Marine Acts and Regulations for which the Minister of Transport is responsible and/or for which he shares responsibility:

The federal government has long recognized that an effective market depends on the responsiveness of its regulatory framework and processes. The 2003 Speech from the Throne identified Smart Regulation as a priority. It was recognized in the Speech that the world is changing and in an evolving environment, Canada needs a regulatory system that responds quickly and effectively to the challenges of rapid scientific and technological change, as well as emerging opportunities and risks in global markets. It was also acknowledged that there is a resulting need for integrated and transparent government institutions and public policy. An External Advisory Committee on Smart Regulation (www.smartregulation.gc.ca) has been created to work towards building a national regulatory system that enables Canadians to take advantage of new knowledge and supports Canada's participation in an international economy. It promotes a regulatory system that should adhere to the following principles: effectiveness, flexibility, transparency, accountability, and cooperation.

4.9 Innovation and Technology

The Technology Roadmap was initiated by the National Research Council (NCR) to identify future technology market needs and scope out the most effective method to achieve them. A Marine and Oceans Industry Technology Roadmap Steering Committee comprised of 30 members including marine industry companies from across the country with support from the NRC, Industry Canada, Department of Fisheries and Oceans, Natural Resources Canada and Environment Canada tabled its special report "Thinking Beyond Our Shoreline" to Industry Canada on December 11, 2002. The Report identifies 1,200 technology ideas, many of which are relevant to such marine operations as security and defence and port development. The NRC has established a Technology Road Map website to keep its information on innovation technologies fresh, it can be found at: http://www.nrc-cnrc.gc.ca/clusters/ocean/home_e.html. The road map is intended as practical forecasting tool through which marine and ocean industries can identify future needs

4.10 Marine Policy Initiatives

Transport Canada's focus is to consider how legislation and policy can respond to market opportunities and challenges as the marine sector evolves, to ensure that service and infrastructure providers have the necessary tools to contribute positively, not only to enhance the competitiveness of Canada's transportation system, but also more broadly to Canada's economic strength and trading relationships. The department is currently involved in a comprehensive range of marine initiatives to support policy development in order to more effectively position Canada's marine sector within the domestic and international transportation marketplace.

Marine Benefit Study

Transport Canada, in partnership with Canada's major marine industry associations, is conducting a comprehensive study of the significance and value of marine transportation to Canada. The study will examine the marine and marine-related transportation industry as related to the shipment, transhipment, storage and handling of commodities. The study will be national in scope but will provide a regional and sectoral breakdown of economic impacts. The study will create a fundamental benchmark against which future developments and will help to support future Canadian policy direction with respect to infrastructure, regulations and pricing/fee decision-making.

Marine Navigational Services Study

Transport Canada, in partnership with Fisheries and Oceans Canada and industry stakeholders, is committed to evaluating alternative methods of delivering marine navigational services (MNS). Phase I of the study described the existing MNS system and methods of delivering MNS in selected other countries that may have useful lessons learned for Canada. Transport Canada and Fisheries and Oceans Canada are currently engaging industry and initiating Phase II of the study, which will explore whether alternative methods of delivering MNS might benefit both the government and the marine industry by contributing to a more efficient and equitable provision of MNS.

Great Lakes St. Lawrence Seaway Study

Transport Canada is currently working with the US Department of Transportation, the US Army Corps of Engineers and the Canadian Seaway Corporation on a comprehensive study to assess the ongoing maintenance and capital requirements of sustaining and optimizing the Seaway and the existing marine infrastructure on which it depends. The focus of the study is principally navigational. While the study will assess the infrastructure needs of the Seaway, along with the engineering, economic and environmental implications of those needs, particular emphasis is being placed on the costs of maintaining the existing infrastructure. The future level of these costs has a major impact on the continuing viability of the system and ultimately on the development of government policy. The study, initiated in May 2003 pursuant to a Memorandum of Cooperation signed between the Minister of Transport and the US Secretary of Transportation, is expected to be completed by Fall 2006.

Shortsea Shipping

Transport Canada is exploring shortsea shipping opportunities as a means to improve utilization of waterway capacity, strengthen intermodalism, alleviate highway congestion, facilitate trade, and reduce greenhouse gas emissions. Shortsea shipping - the movement of cargo and passengers by water between points that are in relatively close proximity to one another - includes domestic as well as international maritime transport along coastlines, to and from nearby islands, or within lakes and river systems and may also include crossborder traffic with the US and Mexico. Generally speaking, shortsea shipping is designed to increase the efficiency and environmental sustainability of an overall integrated transportation system in order to meet current and future demands arising from economic expansion, increased trade, population growth and urbanization.

In positioning shortsea shipping among a range of policy initiatives, Transport Canada has taken a multi-faceted approach that has included conducting a series of shortsea shipping workshops, research projects and studies, as well as concluding a Memorandum of Cooperation with the US and Mexico, and developing a website for effective communication. In addition, a national shortsea shipping conference is planned for November 2004 in order to take advantage of the momentum developed within the marine industry. Transport Canada will continue to pursue an action plan involving industry, other government departments and agencies, other levels of government, and other countries, in order to raise awareness and promote shortsea shipping as a component of an integrated transportation system.

Canada Marine Act Review

The CMA required the Minister of Transport to complete a review of the provisions and operation of the Act and report back to both Houses of Parliament during the fifth year following Royal Assent. A review panel undertook consultations with stakeholders and prepared a report with recommendations on the operation and provisions of the CMA and observations on general marine issues. The Minister of Transport tabled this report in the House of Commons in June 2003. The Review Report made two general recommendations and a number of specific recommendations concerning the implementation issues related to Canada Port Authorities, the St. Lawrence Seaway, public ports, pilotage and ferries. The report also included a number of observations on general marine issues. In an effort to appropriately address these issues, the department is conducting studies to assess the state of the marine industry markets and trends, particularly in respect of recommendations/observations that have significant financial implications.

Marine Skills and Labour Force Development

Transport Canada is committed to working with other departments, other levels of government, and transportation sector stakeholders to ensure the continued availability of a world-class workforce for the transportation sector. An aging workforce in the marine transportation sector has the potential to create a shortfall of available workers over the next decade due to attrition. This places a premium on the sector's ability to attract new and skilled workers in an environment where there is cross-sector competition for workers as other sectors face similar trends. Many jobs in the marine transportation industry require high skill levels with requirements for new skills and continuous training. Marine sector employers express concerns with the availability of training, funding for training, as well as the ability of marine training institutes to recruit youth to marine training programs. Transport Canada is exploring ways to gain an understanding of the human resource challenges facing the marine transportation sector, the concerns of marine transportation stakeholders, and ways that the department can assist in skills and labour force development.

International Marine Policy

Transport Canada participates on a number of multilateral organizations dealing with economic aspects of international shipping - IMO, United Nations Commission on International Trade Law, Organization for Economic Cooperation and Development, International Oil Pollution Compensation Fund, Asia Pacific Economic Cooperation, North Atlantic Treaty Organization and World Trade Organization. International marine policy and legislation relies heavily on a multilateral approach and the harmonization of Canadian law with international maritime conventions and agreements:

Canada is currently chairing the executive committee of the International Oil Pollution Compensation Fund that deals with pollution claims caused by the prestige incident;

Work is underway to introduce regulations under the Marine Liability Act in order to harmonize differences in liability and insurance regimes between Canada and the US in respect of passengers. In August 2003, the department released a report regarding a proposal for a new compulsory passenger insurance regime under the act; and

On a broader scale, the department is also examining current trends in international shipping and the extent to which Canada's international shipping policies are appropriate.

Freight Sustainability Demonstration Program

Transport Canada's Freight Sustainability Demonstration Program (FSDP: www.tc.gc.ca/FSDP) was created to help freight transportation industries put new and under-utilized technologies, as well as, new operational practices, to the test in real-world situations to demonstrate and evaluate their fuel saving potential. The goal of the FSDP is to help the freight transportation sector improve its economic performance while reducing its environmental impact, including greenhouse gas emissions that are responsible for climate change. Through demonstrations, it gathers practical information to be shared with the freight community. A total of $4.5M is available to industry through the FSDP for this purpose. The FSDP covers up to 50 percent of eligible expenses of demonstrations in all freight modes (air, marine, rail, truck and intermodal) to a maximum contribution for any single project of $250,000.

Canada's Maritime Cabotage Policy

In relation to marine cabotage, Canada has pursued an unbroken policy of protection. The primary goal has been to provide a protected environment in which Canadian shipping could prosper, without being exposed to the full force of international competition. Canada protects its maritime cabotage activities principally through two legal instruments: the Coasting Trade Act and the Customs Tariff. The Coasting Trade Act allows for the temporary importation of a non-Canadian registered or non duty-paid Canadian registered vessel, when no Canadian registered duty-paid vessel is available or suitable to carry out the activity. The Customs Tariff sets the import duty at 25% of the fair market value of the vessel for most types of ships being imported into Canada.

A recent report commissioned by Transport Canada indicates that both national and global shipping trade and business environments have changed and it is time to re-evaluate the Canadian cabotage policy. The report concludes that the current cabotage regime must be modified by gradually introducing a commercial environment that would allow mobility between the domestic and international sectors. This would allow Canadian ship operators to achieve greater efficiency by seeking alternative employment for their ships in the international market when there is low demand in the domestic market (or to adjust to the seasonality of certain trades such as the Great Lakes). A full review of the cabotage and customs tariff regime would entail extensive research, interdepartmental consultation and cooperation and discussions with industry and labour. Transport Canada is currently considering its options.

4.11 Marine User Fees

A variety of user fees are levied against the Canadian marine industry. Fees are levied both by government departments such as Fisheries and Oceans Canada and Transport Canada and by other organizations such as CPAs, the SLSMC and Pilotage Authorities.

Table 12: Marine User Fees in Canada

Cumulative Impact of Federal Fees on the Commercial Marine Transportation Industry in Canada Synthesis of Background Information - Final March 2002

In 2000-2001, approximately $481M was collected in fees. The majority of this was collected by CPAs, Pilotage Authorities and the SLSMC.

4.12 Transportation Safety and Security

When it comes to the safety record of the commercial marine industry consider the following. In 2003, there were 18 cargo vessels involved in accidents, which represents a 22% decrease compared to 2002, and a 31% decrease from the five year average of 26.

In 2003, the accident rate for commercial vessels (includes cargo vessels, ferries, tankers, passenger vessels, tugs and barges) was at the all time low of 2.7 per 1000 movements (5.2 in 1994), despite the increase in movements to 38,726 (up from 32,728 in 1994). This represents a decrease of the number of Canadian flagged vessels involved in shipping accidents from 202 in 1994 to 164 in 2003. This compares to 57 foreign flagged vessels or a rate of 1.4 accidents per 1000 movements in 2003 for foreign flagged vessels in the same category - an all time low. This means that foreign flagged vessels have reduced the total number of vessels involved in shipping accidents from 157 in 1994 to a total of 57 in 2003. In 2003, 89% of vessels involved in shipping accidents reported to the Transportation Safety Board were Canadian-flag vessels. Fifty-four percent of these were fishing vessels, 35% were commercial non-fishing vessels and the remaining 11% were non-commercial/pleasure craft or service vessels.

4.13 Modal Comparison - Safety Statistics

Now, let's compare this with the rail and road modes of transport.

In 2003, 1,030 rail accidents were reported to the Transportation Safety Board, a 5% increase from 2002 but a 3% decrease from the 1998-2002 average of 1,062. In the rail industry, freight trains accounted for 80% of trains involved in rail accidents in 2003. A total of 148 main-track derailments were reported in 2003 (157 in 1994), a 28% increase from 2002 (116) and a 25% increase from the five year average of 118. The most significant increase located in the province of Ontario. To date in July 2004, a total of 668 accidents have been reported, resulting in a rate of 12.7 accidents/million train miles, up from 11, 6 at the same time last year and 12,2 for the 1999-2003 average.

On the commercial vehicle safety side, despite the fact that ever-increasing amounts of goods are transported by commercial carriers, the share of serious collisions involving commercial vehicles has held steady over the years. On average, crashes involving commercial vehicles account for approximately 20% of all traffic fatalities (resulting in 519 in 2002) and 10% of all serious injuries each year (resulting in approximately 1,650 injuries in 2002). Canada's federal, provincial and territorial governments are working together to reduce the maximum driver workday by 12.5%, reduce the number of maximum daily driving hours by 18.8% and increase daily off-duty time by 25% in order to address the issue of driver fatigue, a major factor leading to most accidents on the road.

4.14 Security

During 2003, public confidence in the security of the transportation system continued to increase. Working with government, industry and other stakeholders, Transport Canada introduced new security initiatives in all modes and continued to implement security enhancements announced in 2001. Progress was achieved on the adoption and implementation of the International Ship and Port Facility Security Code with the development of guidelines for ship and port facility security assessments and plans, consultations on the development of the regulatory framework, and the development of an oversight, compliance and enforcement program.

In addition, the CCG is developing an Automatic Identification System that will allow it to improve the surveillance of vessels with `near real-time' identification and tracking of vessels approaching and operating in Canadian waters.

4.15 Transportation and the Environment

25 per cent of greenhouse gas emissions in Canada is attributable to the transportation sector; 81.6 per cent from road transportation, 9.7 per cent from air, 3.4 per cent from rail and 5.1 per cent from marine. Marine emissions fell by over 27 per cent between 1980 and 2002.

Pipeline and air transportation each increased domestic energy consumption by 5.2 per cent in 2003. Road transportation energy use increased by 2.2 per cent, while rail and marine transportation energy use declined by 9.3 and 10.2 per cent.

Transport Canada has authority for certain environmental issues (e.g. Canada Shipping Act, Arctic Waters Pollution Prevention Act, Transportation of Dangerous Goods Act) and works with other federal government departments in this area. The federal government strives to improve the environment management of its operations by mitigating adverse impacts. By reducing its own environmental impacts, Transport Canada seeks to set a positive example for others in the transportation sector. Although the department no longer directly operates many components of the transportation system, it retains the role of landlord and overseer for major components. In this role, Transport Canada is responsible for ensuring appropriate stewardship of its land and facilities.

Transportation-related water pollution remains an important issue. The federal government aims to protect the integrity of aquatic and terrestrial ecosystems, avoid human exposure to hazardous substances and preserve human enjoyment of the environment. In 2003, for example, the federal government continued to prevent, detect and respond to marine pollution incidents through a national marine spill preparedness and response system. It participated in and contributed to the development of new regulations through meetings of the IMO. Amendments to the Dangerous Goods Shipping Regulations have resulted in a greater consistency between Canadian dangerous goods regulations and international marine pollution agreements. These regulations require clear identification of marine pollutants to minimize accidental pollution and proper marking and labeling of packages.

Canada brought into force in 2003 new limits for oil spill incidents from tankers as part of the International Convention on Civil Liability for Bunker Oil Pollution Damage and the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage agreed to by the IMO.

Studies have shown that vessel transport is safer, requires less fuel, and produces fewer emissions per tonne-kilometre of cargo carried than either rail or truck transport. This is an important consideration in meeting greenhouse gas emissions targets.

Table 13: Environmental and Safety Indices by Mode of Transport

Étude comparative des impacts environnementaux des modes de transport de marchandises dans l'axe du Saint-Laurent, Annexe 1