Proceedings of the Standing Senate Committee on
National Finance
Issue 29 - Evidence - November 22, 2012
OTTAWA, Thursday, November 22, 2012
The Standing Senate Committee on National Finance met this day at 2 p.m. to examine the subject matter of all of Bill C-45, A second Act to implement certain provisions of the budget tabled in Parliament on March 29, 2012 and other measures introduced in the House of Commons on October 18, 2012.
Senator Joseph A. Day (Chair) in the chair.
[English]
The Chair: Honourable senators, this is our seventh meeting on the subject matter of Bill C-45, A second Act to implement certain provisions of the budget tabled in Parliament on March 29, 2012 and other measures.
[Translation]
Last Tuesday, with the officials, we discussed the proposed amendments to the Canada Shipping Act, 2001, which is to be found in section 2 of part 4, on page 193 of the bill.
Today it is our pleasure to welcome a representative of Lloyd's Register Canada Limited, who will provide some explanations to us on these amendments affecting shipping industry workers.
[English]
We are pleased to welcome Barry M. Shepherd, Marine Manager, Central and Eastern Canada: Great Lakes, Quebec and Atlantic Canada, with Lloyd's Register Canada Limited.
Mr. Shepherd, thank you very much for being here on fairly short notice. We understand that you have some opening remarks about the industry to set the stage and then remarks with respect to these amendments and how they might impact the industry. We are looking forward to your comments.
Barry M. Shepherd, Marine Manager Central and Eastern Canada: Great Lakes, Quebec and Atlantic Canada, Lloyd's Register Canada Limited: Thank you for inviting me. I thought I would start off with a few comments about what classification is. I read through the notes from the minutes of the meeting held a couple of days ago, so I get a sense that there has been a fair bit of discussion about classification. I will talk about Lloyd's Register, of course, but classification societies are worldwide. There are five recognized classification societies in Canada, which I think you went through the other day, namely Lloyd's Register, American Bureau of Shipping, Det Norske Veritas, Germanischer Lloyd and Bureau Veritas.
Lloyd's Register is the oldest classification society in the world. We started in 1760, in London. We are still London- based. The organization has offices globally. We first set up an office outside of the U.K — in Canada — in 1852. That office was in Quebec, so we have been in Canada for a few years anyway.
Lloyd's Register started off in the marine business. Today, we are active in four main business streams: marine; energy, which covers the oil and gas business; transportation; and quality assurance systems. As far as classification is concerned, it is sort of an old term, if you will. It really means that it is about risk assessment, and classification societies, at their core, are risk assessment specialists. Our focus is on quality systems and on standards. We write the standards for the way ships are built. We maintain those standards during their life, and we have standards about how the ships are scrapped. We are truly with a ship from the point when it is a twinkle in someone's eye to the point where it becomes razorblades again.
Lloyd's Register is a non-profit-distributing organization. We have charitable status in the U.K. We do not have any shareholders, and we do not have any owners. We have been managed by committee for 252 years. We managed to survive, so hopefully we can do it for at least another 250 years.
As an organization that is non-profit-distributing, that does not mean that we do not make profits. We do. Those profits are necessary to ensure our stability as an organization. Those profits are fed back into the industry in terms of research and education programs.
We invest a minimum of around £10 million a year in Lloyd's Register Educational Trust. In addition to that, we invest in universities, colleges and research institutions globally. In Canada, we are working with Dalhousie, UBC and the Marine Institute in Newfoundland at this time.
Lloyd's Register classes about 7,000 ships globally, ranging from cruise ships to aircraft carriers to boat carriers to tankers to ferries. You name it; we class it. The organization has developed rules for different types of ships. These rules are maintained in accordance with our internal procedures, and, if you look at the original Transport Canada regulations, a lot of them were built on the basis of Lloyd's Register rules going back some years.
The objective, if you will, of ship classification is to verify the structural strength and integrity of the vessel, of its machinery systems, of its electrical systems and of its structure. To that end, when a ship is classed with Lloyd's Register, or with any classification society for that matter, the vessel is under a very strict survey regime.
This survey regime is similar to the regime that a vessel that is currently certified with Transport Canada is under, but it is very much an organized regime. It is dependent on the type of ship that we are dealing with, but every ship essentially goes through a five-year cycle, during which time it is under survey and all aspects are examined. When I say all aspects, I mean that the structure of the ship is looked at in detail. The vessel is dry docked. The propeller shaft is looked at. The machinery is looked at. Every year, a ship is examined to ensure it meets the requirements of the class society and of the flag that the vessel is flying.
We are a recognized organization for over 100 flags globally. You may have heard the term "flags of convenience"; it is an old term and not really relevant in this day and age. However, a lot of flags simply base their own regulations on the international standards, such as SOLAS and MARPOL, which are the two major standards to which ships adhere internationally.
In Canada, we are signatory to those standards, and as a recognized organization in Canada, we certify the vessel not only for classification but also to ensure that it meets these external regulatory standards, which we refer to as statutory standards.
In Canada, apart from the SOLAS and MARPOL conventions to which Canada is signatory, there are a number of regulations that are unique to Canada. These are covered in the Canada Shipping Act. As a delegated organization in Canada, we are charged with the responsibility for ensuring that vessels meet not only our standards, that is, the classification standards of our organization, but also the regulatory requirements under the Canada Shipping Act as well as the MARPOL and SOLAS regulations as far as they are applicable to any particular ship.
The surveys that are held annually are essentially general examinations of the vessel. There is a focus on the safety equipment, as always. When I say safety equipment, I mean equipment such as firefighting and lifesaving equipment. Each year, a certain part of the vessel is examined, whether it be the hull or the machinery, so that, at the end of that five-year period, we have examined all parts of that vessel. In order to verify that this is happening, we keep records.
These, of course, are Internet-based today, and this Internet recording system, which we refer to as CD LIVE, is a transparent system available to both the owners and to the flag. In Canada, for example, the Canadian authorities have access to this so that they can see the status of the vessel.
While we are delegated under the Canada Shipping Act and certain owners have delegated these responsibilities to us, a number of owners have chosen to stay with Transport Canada, even though those vessels might well be classed with Lloyd's Register. Again, the delegation program is voluntary. Even though these vessels might not be delegated to Lloyd's Register, they are still classed with Lloyd's Register. These records are still open to Transport Canada to examine because these vessels still fly the Canadian flag.
The survey process is such that we maintain around 40 surveyors across Canada, based in the major ports of Vancouver, Toronto, Montreal, Quebec, Halifax, St. John's, Newfoundland and Saint John, New Brunswick.
We have surveyors who are based in Chicago and Toledo. These are based out of our Lloyd's Register North America operation, so they are not part of Lloyd's Register Canada but they are exclusive surveyors to Lloyd's Register.
When I say exclusive surveyors to Lloyd's Register I mean they meet our quality standards. They are hired by, and can only work for, Lloyd's Register. In order to maintain our standard with the International Association of Classification Societies Ltd., or IACS, these surveyors must be trained and their training must be maintained within a very high standard.
When the surveys are undertaken by surveyors, in some instances there may be a requirement for two or more surveyors to attend. I bring this up because I noticed there were some questions about how the industry would respond to the delegation of vessels of greater than 24 metres. If my memory serves me is there are about 1,000 ships out there likely to be delegated or subjected to a compliance program. A bit of math says that will be about 200 ships a year. If we are looking on average at three or four days per ship per year to do surveys, it gives you an idea of the numbers we will be looking at in terms of surveyors.
Having said that, we manned in Canada to suit the number of ships we currently have under the delegation program. Lloyd's Register has about 180 ships under the delegation program at the moment, which are in class with us and delegated.
Our present numbers are more than able to deal with those numbers of ships. If we are faced with an increasing number of vessels, as we expect with the alternate compliance program for domestic ships, then we would anticipate a phased-in approach over a period of three to five years as these existing smaller ships are offered for delegation. The expectation is that these vessels will be brought in at the time of their five-year docking. This provides the best opportunity, as a classification society, to examine those vessels.
I will talk about the process by which a vessel will be brought into class. At this point, we would expect to see if a vessel is offered to us for delegation.
Smaller vessels generally are not required to have class. Class is generally required for commercial ventures. This is not normally required for the types of domestic operations that smaller vessels are involved in. However, if the delegation program is to be extended to these smaller vessels that may not have been classed before, then as organizations with particular standards, we must go through a series of checks and balances to ensure that these vessels are suitable for class.
That is not to say that because these vessels have been with Transport Canada we somewhat disbelieve they are in good quality, but this is the process we have. If we were to have a vessel that changed class from one of our existing colleagues in ABS to Lloyd's Register, the process involves verification of maps and examination of the vessel whilst in dry dock to get a good feel for the vessel and to understand what the structure and status of machinery are like before we are prepared to accept the risk of this vessel into our class.
Once these vessels are accepted to class we go back to our standard routines, but there is a process by which classification of an existing vessel comes in.
I can give examples that have happened over the past few years. We have had vessels not classed that have in under the classification process. One of them is the Chi-Cheemaun based in Tobermory. It is a ferry that operates over to Manitoulin Island. That vessel came in under class a number of years ago and has since been fully delegated.
The process is there. It is not something we need to invent. It is well understood. It is a matter of timing and organizing the necessary manpower so we know we can meet the needs of the industry going forward.
I am cognizant that I have been speaking for 15 minutes and I read in the notes 5 minutes, so perhaps I should allow for some questions.
The Chair: That was very helpful Mr. Shepherd. Thank you for giving us that background. We heard from the government officials, but it is always helpful to have someone in the business.
What, if any, relationship does Lloyd's Register have to Lloyd's of London, the insurance people?
Mr. Shepherd: We would have to back to 1760 to a character named Edward Lloyd for that one. He is the one who opened a coffee house on Fenchurch Street. At that time, the insurance brokers were sharing coffee — I believe it was coffee, but I suspect it was probably gin — at this coffee house, and a group of surveyors got together and formed Lloyd's Register. There were connections way back, but there is not a connection between the insurance Lloyd's and Lloyd's Register. We are completely separate entities.
The Chair: Are any of the classification societies related or tied into any insurance?
Mr. Shepherd: To the best of my knowledge they are not. I say to the best of my knowledge; I cannot be sure. It is highly unlikely.
Senator Buth: Thank you for the description that you have just gone through, but you have me confused.
I need clarification about class and the ongoing inspections because I do not quite understand. Something is classed and then you go through the inspection but it always has the same class?
Mr. Shepherd: The classification process starts when the vessel is in the design phase. Some say it starts even before then, in that the owners will approach the class society with a design with the intent to have it built in a shipyard somewhere.
Generally, the shipyard will not sign a contract unless the drawings they are agreeing to have been reviewed and approved by a class society.
Senator Buth: Like an engineer's —
Mr. Shepherd: It is basically that process. It is a global process. We have had a lot of examples in Canada in the past couple of years where CSL and Algoma — two big operators in Canada — are building ships in China. However, all the plan approval work, design work has happened in Canada at the Toronto office where I am based. We have about 24 engineers in Burlington; we call it Toronto because most people could not find Burlington on the map.
At that stage, the owners have gone to the shipyard with the approved drawings with Lloyd's Register stamps to say this vessel has been designed in accordance with Lloyd's Register's rules, or one of the other four class societies, and that it meets our standards. At this point they are willing to sign on and agree on a price for the vessel and then they will start construction.
I will roll back a bit. This is the part when we come back to delegation. In Canada, up until the delegation program, it would have been normal for the owner to contact Transport Canada and say we will build this bulk carrier in China. It will be built to Lloyd's Register class, but it will have a Canadian flag on it. Transport Canada will send inspectors to China along with all the staff we have in China. We have around 800 people in China who survey vessels during construction. I do not go there that much, but we have people there who will oversee that construction.
Before delegation, Transport Canada would have sent inspectors over. Now all the construction oversight is left to the class society and it truly is oversight. We will have surveyors looking at every structure. Every module and every weld is looked at.
Eventually the ship is built, and now it will be delivered. Just as a matter of interest, CSL's first Chinese-built Great Laker will be arriving in Montreal in about three weeks. It was delivered in China and came across the Pacific. It took nearly a month and a half to get here, but it is the first Great Laker built since about 1983, so it is a big occasion for us.
This vessel was built under delegation. Transport Canada did not monitor that build, but they did monitor the drawings. As the drawings were approved by Lloyd's Register, they were sent to the Quebec office of Transport Canada where they reviewed those drawings. They were sent there because the vessel is based in Montreal. The vessel has been surveyed through construction. It has now been delivered and is on its way.
You might ask what type of survey will go on. First, when that vessel arrives in Canada, there will be an examination by Transport Canada. It is more of an oversight to ensure we were doing our jobs rather than if the ship needs it. Nonetheless, the vessel has been delivered with a full slate of certificates, which I will not go through in full. Regardless, these certificates are the class certificate, which underlies everything; the safety equipment certificates; and various other certificates to deal with oil pollution under the MARPOL regulations. A great wad of certificates goes with this vessel, all issued by Lloyd's Register.
In order that those certificates maintain their validity, after one year, we will go back on board that ship and carry out a full slate of surveys to assess the general examination of the vessel and to check the lifesaving and firefighting equipment.
We do that with two hats on: We do it as a class society, because as a class society, we want to ensure that ship remains safe. However, we are also doing it because it has a Canadian flag on the back end and we are authorized by Transport Canada to do those surveys.
As a class society, the firefighting and life-saving equipment is not really part of our jurisdiction. That comes when a flag society asks us to do that. When we are doing it, the certificate that we issue says "on behalf of Canada" and we are signing as an authorized representative. That is opposed to the class certificate, which says "this vessel is classed with Lloyd's Register." There are two sets of documents.
I noticed there was some reference to withdrawal of certificates if fees are not paid. Rather than go to that end, if we have any concerns over that vessel and the owner is not dealing with them, then the biggest stick we have is that we withdraw the class certificate. Strictly speaking, we cannot withdraw a statutory certificate, which is the one we issue on behalf of Canada, because those certificates can be withdrawn only by the minister, strictly speaking. However, we can withdraw the class certificate. Once you withdraw the class certificate, essentially the whole pack of cards falls because, at this point, everything is based on the vessel being in class.
Every year, there is an annual survey during which these inspections go. At the two-and-a-half year mark, there are additional surveys.
As a ship ages, these additional surveys become more onerous. At the end of five years, the vessel is dry-docked and there is a special survey, which is a thorough examination of every tank and space on that ship — every section of the hull is looked at, thickness measurements are made. As a ship ages — and every five years it reaches a new point in its life — these surveys become more onerous.
By the time you get to a ship that is, say, 20 years old, the in-depth surveys can take many days. We have ultrasonic readings being taken. Something on the order of say 10,000 ultrasonic readings are made of all aspects of the hull so that we can build up a picture of the structure. We are concerned that the ship has begun sailing around in salt water and there might be some wastage. We want to see where that is. Not only that, but we want to have some objective details, so we can go back to this.
As a delegated organization, we are doing those surveys wearing two hats: The class hat and the —
Senator Buth: So you have the vessel from cradle to grave. Once it is classed with Lloyd's Register, it is with Lloyd's.
Mr. Shepherd: That is it.
Senator Buth: What are the costs?
Mr. Shepherd: I will be careful, because some of this may be considered confidential information to Lloyd's Register.
The fees that we charge are based on a scale of fees that starts off by looking at the size of the vessel. We have a scale of fees that are a fee numeral to that vessel and are based on, first, its overall dimensions — length, breadth and depth. Then we look at its gross tonnage. Having these numbers, we can then base our fee. We also have coefficients to take into account. As a vessel ages, there are more surveys.
Then we have coefficients to define the different ship types. For example, an old roll-on, roll-off ferry — say 20 years old — will be in pretty good condition if it has been sailing coastal waters, which most ferries do, or even fresh waters. However, a bulk carrier that has been struggling, carrying all kinds of ore around the lakes for 30 years or more, will have a lot more stuff to look at, so the coefficients have been derived to take into account those extended surveys.
I will give you some round numbers. I anticipated this question. If we took a 24-metre vessel — and this is a real case — it would have a gross tonnage of about 62 gross tonnes. You will appreciate that 24 metres is not particularly large. Our annual fee will be about $4,000 a year.
Senator Buth: That covers whatever needs to happen, does it?
Mr. Shepherd: That covers the periodic surveys, which are the surveys we know we will do.
If they have damage, that will be extra. If they have run aground or if there is machinery failure, they need to call us in. We will examine it with their engineers or anyone else in attendance, such as the Transportation Safety Board of Canada. Those will be in addition to those fees.
For a larger vessel, say a 60-metre ferry at about 2,800 gross tonne, we would probably be looking at $16,000 a year, so about $80,000 over a five-year period.
I should ensure it is clear that these are averages. Generally speaking, the larger fee occurs at the end of the five-year period when we are doing most of the surveys, although we have mechanisms where we can spread the fee equally over five years, depending on how the owner wants to deal with it.
If we now get up into the big ships, say a Great Lakes bulk carrier, we will be looking at $150,000 over five years. That is the sort of scale of fees.
Senator Buth: I am assuming you support the changes.
Mr. Shepherd: Absolutely.
Senator Buth: Do you see any issues that might arise with any of the changes?
Mr. Shepherd: I will talk now as I see it from the industry. I can see that there will be some owners who are reluctant because they are not really aware of how class works and the fees may well be a barrier. I understand that there is some work going on within Transport Canada to look at the current fees that are charged by Transport Canada for this service. Although, interestingly enough, if you drill down into the fees that we charge for the smaller vessels versus the fees that are charged by Transport Canada, there is not that much difference.
I can see that owners might be concerned that there are not enough boots on the ground. When I talked about Lloyd's Register having about 40 exclusive surveyors in Canada, you can probably double that if you look at the other class societies. Lloyd's Register has always had the biggest footprint in Canada, but the other class societies are well manned, and if you perhaps double that number, you get a sense of the numbers of surveyors in Canada. All of us will have to increase our numbers — there is no doubt about that — if this program starts to take traction in a couple of years. Again, I think that might be something that concerns the industry.
Senator Buth: Do other countries do the same thing as this bill is proposing to do?
Mr. Shepherd: That is a little difficult to answer because so many countries have so many different ways of dealing with things. I can talk about the U.K., for example. The U.K. has a similar program to Canada, only surprisingly enough it is more restrictive in that the MCA, which is the Maritime and Coastguard Agency, is more restrictive than Transport Canada in the sense of what surveys they delegate to class. However, it is mainly to do with the large passenger ships like the big cruise ships, which fly the red ensign.
For smaller vessels they have similar programs. In fact, one of the models that we have been discussing with Transport was based on one of the models derived in the U.K.
Many countries simply allow class to take the lead on most surveys because they do not have the type of infrastructure that is in Canada or in the U.S. or in the U.K., where there is a resident inspection board. The major flag states, such as Panama, Liberia and the Marshall Islands, for example, have smaller vessels in their registry — they are not all big bulk carriers. Essentially everything is classed, and we are authorized for all the statutory surveys.
The answer is yes, mostly. The more complex flag states — the ones that have had large domestic fleets — tend to have derived more rules that need to be developed outside of the International Convention for the Safety of Life at Sea. This is one of the aspects that Transport Canada has been looking at to try to deal with the fact that we have a number of requirements in addition to what is required under the normal international conventions to address. Many European flags also have these additional requirements.
Senator Finley: You already covered one of my questions. I would like to go back to the insurance issue. A woman who was here the other day, a ship's captain, I understand, talked about the holistic approach that is taken with regard to the registering of ships. She made it clear that there is absolutely no element of insurance involved in this. What is the relationship between Lloyd's Register and maritime insurance? Insurance companies would have to go somewhere, one would assume, for data, so they must come to you. Would you explain that?
Mr. Shepherd: That is true to a certain extent. A number of years ago, Lloyd's Register owned Lloyd's Register - Fairplay, which was the owner of a lot of ships' data. We felt that there were some conflicts so we sold that aspect of our organization. We no longer have that data, but an organization called IHS Fairplay now holds all of that data.
Getting back to your question about the data and the relationship between insurance and class, there is no formal relationship between the organizations. We have no shared ownership or anything of that nature. Generally, in order for deep sea ships or convention ships, shall we say, and large commercial operators, such as those on the Great Lakes, to get insurance, their vessels normally have to be classed, not necessarily by Lloyd's Register but by one of the recognized organizations. Usually, it is one of the organizations recognized under the International Association of Classification Societies.
Senator Finley: That is five organizations.
Mr. Shepherd: In Canada.
Senator Finley: How many similar organizations would you calculate are worldwide doing what you do in Canada?
Mr. Shepherd: Doing what we do in Canada and globally there are about 50 organizations. Of those 50 organizations, only a dozen belong to IACS. Only these organizations meet the quality standards recognized by most of the insurance companies.
Senator Finley: The entire commercial array — thousands of ships, presumably, and many owners — all have to rely on a relatively small group of companies to even qualify for insurance, one would assume. I would guess that no insurance company will insure a vessel that is not on your register or on one of the others.
Mr. Shepherd: IACS class is about 90 per cent of the global tonnage, which is 90 per cent of 46,000 ships. Your statement is true, in a certain way, because a dozen or so companies out there certify or class ships, as we do. It is on the basis of that classification that those companies will gain insurance or certainly part of the process through which they will gain insurance.
Senator Finley: That IACS takes on contracts to oversee the construction, maintenance and overhauling of ships is almost monopolistic. Although I would not call it that, it is very close to that. In effect, you drive whether an organization can get insured.
Mr. Shepherd: Obviously, we do not dictate that. The insurance companies have decided that they need to have some mechanism by which they can measure the quality of the risk. By going to one of the dozen or so members of IACS, they know that these organizations have put in place the measures and the standards by which these vessels are certified or classed.
Senator Finley: There is a direct working link — not an ownership link — between the insurance companies and IACS.
Mr. Shepherd: It is maybe a bit more complex than that in these days of the global shipping business. On top of the work that we do, there are numerous vetting companies, which are external to Lloyd's Register and have nothing to do with Lloyd's Register or any class societies. Most of them have been spawned, if you will, by big mining operators, for example. Vetting companies rate ships, and the ratings are published to become yet another mechanism for them to measure as to whether they are willing to risk their organizations on these particular vessels.
Bear in mind that insurance companies may be insuring not only the ship but also the cargo. It becomes a bit more convoluted than that, but one of the mechanisms they use to assess the risk is to determine which class society is classing the vessel. This is one of the issues that we, as a class society, have to watch for because there are international memorandums of understanding, such as the Paris and Tokyo MOUs, that look at class societies' performance and rate us. If our rating starts to slip, that can affect the way we do our business. Obviously, our standards have to be maintained because if we start to see a poor rating, it is possible that an owner may go to an insurance company to find out whether they are willing to insure their ship. They will be asked a few questions, such as what class society the ship is with and what flag the ship will fly. They start rating the vessel and then go to the various MOU databases, such as Equasis, which are wide open to the public. They can see the sort of history the ship has had and can start to rate that vessel as to whether they want to risk their company on that particular vessel.
Senator Finley: Have there been any criminal issues or any form of conspiracy or collusion between the registering party and an insurance company or owner?
Mr. Shepherd: I would like to say no. I am not aware of any. That is all I can say. Certainly, I am not aware of anything with Lloyd's Register, and I am not aware of anything with any of the major class societies.
Senator Finley: My last question is about CD LIVE, I believe you called it.
Mr. Shepherd: ClassDirect LIVE is our database.
Senator Finley: You said that it was available for live viewing or online access by owners and flags.
Mr. Shepherd: Yes.
Senator Finley: How about end users, someone who wants to rent or lease a ship or whatever you do with ships? If I wanted to look up, because I am going on a cruise, the state of the Royal Grand Princess or something, can I access this database?
Mr. Shepherd: No, but, if you were buying the Royal Grand Princess, you could.
Senator Finley: I think I would have actually paid enough to do that.
Mr. Shepherd: If you were going to buy it, you could approach Princess. Then Princess would say to us, "We would like you to grant access to Senator Finley so that he can look at the vessel," but no, it is not a public forum. We have strict confidentiality agreements between us and our clients. Of course, for the flag that the vessel is flying, that extends to the flag state, but it does not extend to the general public.
Senator Callbeck: Thank you, Mr. Shepherd, for being here. It is certainly a very complex area, and you are helping us to understand it.
There are five classification societies in Canada, and I take it that you are the largest.
Mr. Shepherd: Yes.
Senator Callbeck: You have been here for a long while, since 1852, I think you said, and you are managed by a committee. There are no shareholders or owners. The profits that you make go back into research and education. I am interested in the structure. How do you function? What is the makeup of the committee? How does the membership change and so on? Has it been like this since 1852?
Mr. Shepherd: The committee is made up of individuals from various walks of life: owners, underwriters, flag states, managers and even Ministry of Defence people in the U.K. There are committees. I should probably start from the ground up here. In Canada, we have a Canadian advisory committee, which is formed by a group of senior people inside the industry, mainly CEOs, from across Canada. The director general of Transport Canada sits on this committee, and it is an advisory group.
The chair of that committee can sit on our general committee back in the U.K. Bear in mind that we are representing about 100 countries. We do not have committees in every country; we group some together. Nonetheless, there are a lot of members who then ultimately occupy the general committee chairs back in London, and then we have a group of trustees who form the formal committee who make most of the decisions based on input from the CEO and the marine director.
If you are asking how we organize ourselves within our daily operations, it is very much run like any other company. Above me, I have a country manager. Then, in the Americas, we have a president, as it would be in other parts of the world. We have general managers depending on what the flavour of the title is, and these report back through to our various paid marine directors. At the end of the day, they are actually guided by the chair and the group of trustees.
Senator Callbeck: Is this structure unique to your society, or are the other four in Canada structured similarly?
Mr. Shepherd: I am not entirely sure, to be honest with you, but we are one of the few organizations that are entirely independent of any owners or any government connections. I believe that Germanischer Lloyd, the German company, actually has an owner based in Hamburg. The American Bureau of Shipping, ABS, is organized similarly to us. I am not too sure about Bureau Veritas. They are, arguably, the largest class society in the world, although they do not have marine as such a big proportion of their business. Det Norske Veritas, the Norwegian organization, has similar arrangements to us.
Senator Callbeck: You mentioned the Canadian advisory committee, which has CEOs across Canada. Who determines who goes on that committee?
Mr. Shepherd: As a class society, we recommend, but it is the chair and the committee who ultimately decide who will sit on it.
Senator Nancy Ruth: I have some questions for clarification. I wanted first to ask you about the concept of risk in your organization. You were talking about small vessels not being necessarily required to have class. If they are, Lloyd's has to accept them into a class and to accept the risk. What is the risk here?
Mr. Shepherd: If we take a vessel that has been designed and built to Lloyd's Register rules then we know, from the inception, that the materials that the vessel was built with were from approved mills. We know that the metal itself was tested, using mechanical and chemical testing methods. We know that the welding procedures that the vessel was put together with were approved by Lloyd's Register, and we know that there were X-rays and other ultrasonic measurements made to verify the integrity of the welds.
All that went on during the building of the vessel. Then, as the vessel went into service, we know that, for the life of that vessel, there has always been Lloyd's Register exclusive surveyors examining that vessel and maintaining it to our rules.
If we take an existing vessel into class, then we do not know those things. If it comes from another IACS member — say an owner decides that they want to transfer a vessel from ABS to Lloyd's Register — then, to a certain extent, because we know the background of these other organizations and know that they have similar processes to us, we regard the risk as minimal. Then we would take that vessel into class, but we are still required to see drawings. We are still required to do surveys so that we can see, with our own eyes, that that vessel meets our requirements. They are not always accepted, even from another IACS member.
If we take a vessel that has never been classed, then we have to rely on the fact that there were processes in place, during that building phase, that were equivalent to our standards.
As a class society, dealing with, say, a vessel that might have been certified to Transport Canada regulations, we obviously look at Transport Canada as an organization that has got standards and processes. We look at those vessels in a similar way. Only because the vessel has never been classed and the drawings have never been approved by us, we expect to take the original drawings and have our plan approval people in Toronto or Burlington, for example, examine those drawings. They will see that they match up to our standards. We will also carry out on-site examinations of the vessel — close-up examinations — to determine whether there has been any deterioration. It can come down to stuff like whether the thickness of the steel was acceptable. Were continuous welds used when they were welding the structure together, or were they using short sections of weld? There are a lot of things that we will look at and decide whether or not we will be happy with this vessel.
Then, of course, we look at the history. If the thing is 20 years old and has been in service and everything looks fine, then, obviously, we will start looking at it with a slightly less jaundiced view. Then we look at the machinery. We look at the way the operations and the machinery have been carried out.
Senator Nancy Ruth: So the risk is to your reputation and good name?
Mr. Shepherd: It is part of that because, at the end of the day, classification societies survive on their reputations. You saw the pictures of the Costa Cruise ship. That was not classed by Lloyd's Register. It was classed by the Italian class society, RINA, but they have lost class customers over that. To be associated with that sort of high-level disaster will not do your reputation any good.
Senator Nancy Ruth: On another point, you said that in Canada some ships would come to you to be built, and some would stay under Transport Canada. Can you give us some examples of why one shipowner would come to you and another would stay with Transport Canada?
Mr. Shepherd: Bearing in mind that they have the choice of the other four class societies, I would like to think they would come to us because we offer the most services in Canada. By that I mean we are the only organization that has a plan approval department in Canada.
You may ask why that is of any interest to a client. When a vessel is damaged and needs structural changes or repairs, an on-site surveyor looks at the damage, but he will probably have to report back to the office and ask what they can do to fix it. We do not have to go to London or anywhere outside of Canada; we can deal with it here in Canada. That, frankly, is why we have put so much infrastructure in place. We have been here the longest and have the biggest share of the market, and we want to ensure that we keep it. We are selling our service in Canada.
Senator Nancy Ruth: Are you confident that Transport Canada can offer the same services for those shipowners who wish to build through them?
Mr. Shepherd: I am not entirely sure if Transport Canada will be maintaining the services that they have delivered in the past, particularly in the plan approval area. We are doing the bulk of it right now. In this business we are all fighting over the same pool of people. There is not, unfortunately, a never-ending stream of engineers and naval architects out there. As the national shipbuilding program moves ahead, it will be even harder to keep people in these roles. I would say that it will be a challenge for Transport Canada to maintain people.
Senator Nancy Ruth: What do you do on the disposal end of flags flying under Canada?
Mr. Shepherd: We have something called green ship. All new ships now have an inventory of all substances that go on board them, the type of boarding used in insulation being one example. Of course asbestos is not used anymore, but unfortunately we still find vessels built in Turkey, for example, that have traces of asbestos in them. We are aware of that and have to deal with it.
The green ship program essentially inventories that ship so that when it finally goes to the scrapyard, whether it be in Canada or in India, for example, at least there is documentation to address that. Now, unfortunately, once it gets into the hands of a scrapyard in a foreign country there is little we can do about it, but we can provide the documentation and guidance if owners and scrapyards are willing to take it on.
If I recall correctly, we have only one scrapyard of any scale in Canada, and it is in Port Colborne. He has a quality system there for environmental standards to deal with the business of scrapping ships. Rather than the horror stories of people running ships up on a beach in India and cutting things apart without due regard for what was on them, there is documentation on board to show what materials are there and where they are, but at the end of the day we cannot control what will happen in a foreign yard.
Senator Nancy Ruth: Your company supplies the information; it does not send it to a particular dockyard or country?
Mr. Shepherd: We provide the information to the owner. A number of older lakers have left Canada in the past year or two and all of them have gone through a green ship survey. They have left here and the owners have a document they can pass on showing the status of the materials onboard the ship.
Senator L. Smith: Is there anything missing from this legislation dealing with your business? Are there any improvements or changes that could be made to it?
Mr. Shepherd: Frankly, we have been in discussion with Transport Canada for over a dozen years, I would say. The first vessel went into delegation about 12 years ago. It was the Canadian Enterprise. The program was in its infancy then and has grown and evolved since.
We have regular meetings with Transport Canada where we hash out the details. The system has evolved to the point that I will be surprised if we have missed anything, because we have gone through this with, as I said, about 180 ships, including new builds in China, Chile and Italy, for Canadian owners. We have earned the bruises because of all the things we thought we saw there.
The program is now in a much evolved, mature state. As we now look at taking on vessels greater than 24 metres, I doubt that we have missed anything significant because essentially everything else has been verified over that 12 years of experience with the existing program.
Senator L. Smith: Have you any frustrations or impediments in dealing with governments, using Canada as an example, such as bureaucracy and red tape?
Mr. Shepherd: I would not say so. We are a big organization and have our own internal red tape, so we fully understand that Transport Canada has its own unique aspects of red tape. However, we have had nothing but good experiences working with Transport Canada. The regular RO meetings that happen twice a year are great venues where we can air issues.
We understand that there are challenges with documentation and, necessarily, delays in getting documents out. There are translation and legal issues to address, but we find the same issues within our own organization. I would say that we have a mature system in place.
Senator L. Smith: As we move forward with our economic plan for moving our commodities, shipping will obviously be a major part of that. What challenge will that present for you? You mentioned a few points earlier about personnel, but if this goes to the scale to which we think it will go, what impact will that have on Lloyd's?
Mr. Shepherd: We are anticipating growth in Western Canada and in Eastern Canada. The joint support ships, the polar icebreaker project and the AOPS project are just starting to take shape now, and we do not know whether we will win those. We will bid on them with the other four class societies, but we have plans in place to man for those projects.
Looking at the larger projects, such as the potential mining expansion in Baffinland or LNG out of Melville Island, we are already addressing this with owners. We are starting to look at the types of ships that will be necessary. We are looking at LNG fuelling systems. You are probably aware that STQ are about to build a 100-metre ferry in Italy that will be liquid natural gas fuelled, which will be on the Matane-Tadoussac run across the St. Lawrence. That is another area where we anticipate expansion. We anticipate that there will be LNG fuelling for deep-sea ships in the major ports of Vancouver, Montreal and Halifax.
We are approaching all of these areas from a global perspective. We are a big organization. We have 7,000 people around the planet who can work on these projects. It is a matter of harnessing all of that energy to work within both our borders and the ships that will probably be servicing areas such as pipelines and gas exploration.
Senator L. Smith: We would be hopeful that with this fantastic opportunity for your organization, you mentioned earlier that you invest profits into education, and you outlined the Canadian universities that are —
Mr. Shepherd: As I mentioned, we are already working with three universities in Canada. Our expectation is that we will be expanding those. In fact, we have already started to look at some LNG projects.
Lloyd's Register is setting up two centres of excellence at universities globally, with one in the United Kingdom and one in Singapore. Those will be where the bulk of our engineers are based globally, and not just marine staff but also energy transportation staff for the technical review. I am not talking about the field surveyors who will be scattered around the planet. However, in Canada, we can see more activity right now on the West Coast with UBC and more activity on the East Coast with both Memorial and Dalhousie.
Senator Ringuette: You indicated that on your advisory board you have CEOs and a director of the Department of Transport.
Do the other four classification entities have a similar board makeup? Is someone from Transport Canada on the other four boards?
Mr. Shepherd: I could not comment. They have a similar makeup. I believe some of the organizations amalgamate their committees across North America as opposed to one committee for Canada, one committee for the U.S. I am not sure of the makeup.
I would imagine that ABS —
Senator Ringuette: I think you are a closed society in Canada. There are only five of you so you certainly know who the board members of the other entities are.
Mr. Shepherd: No, I really do not.
Senator Ringuette: Who is the Transport Canada director on your board?
Mr. Shepherd: It is Director General Donald Roussel.
Senator Ringuette: I understand you run as a non-profit entity.
Mr. Shepherd: Non-profit-distributing.
Senator Ringuette: Do your board members get a per diem or an annual fee, or is it totally voluntary?
Mr. Shepherd: Totally voluntary.
Senator Ringuette: There are no financial benefits whatsoever?
Mr. Shepherd: No, none.
Senator Ringuette: What would happen if a vessel classified by one of the 38 non-IACS members wanted to flag the Canadian flag? What would happen in that circumstance?
Mr. Shepherd: It has happened. They have to change class to one of the five recognized class societies in Canada if they wish to have a Canadian flag.
Senator Ringuette: You have a monopoly on the situation here.
Mr. Shepherd: In that sense yes, but I do not think Transport Canada or the Canadian flag put any blocks to that. If you are willing to invest in Canada, open an office here and put the people on the ground, I do not think anyone will stop you meeting.
In a sense I can understand where you are coming from, but when I recall the contents of the delegation agreement there were certain criteria that had to be met in order to be considered as a delegated organization. One of them was that you had exclusive offices and exclusive personnel in Canada.
Senator Ringuette: You indicated earlier that you have a big portion of the Canadian market on the one hand and on the other hand you have a director of Transport Canada on your board. I do not know what happens on the board and the decisions that are made. However, from my perspective, it is a bit of a conflict of interest — with Transport Canada and the general Canadian population in that regard — when you are looking at somewhat exclusive privilege that is given to your group and the four other groups, but particularly to you because you have the bulk of the Canadian market.
Mr. Shepherd: Well, I might say that the board is an advisory board. There is no —
Senator Ringuette: You would have a particular communication ability with the director of Transport Canada on your board.
Mr. Shepherd: I can certainly understand why you would say that. At the same time, we meet with Transport Canada and all the other ROs twice a year, and I am not aware of whether Transport Canada attends other committee meetings with other class societies. I simply do not know.
If you were to ask if this monopoly was in some way useful to Lloyd's Register, I would say from a business perspective that we are not generating any business through the members of the committee. It is purely an advisory committee to act as guidance for the class society. I do not believe there are any blocks to any other class society setting up business in Canada. We are successful because we have invested heavily in Canada. We have invested with people; we have invested with training; and we hire Canadians. If anyone else is willing to invest as much as we have, maybe they will reap similar success.
Senator Ringuette: I certainly hope that more would be investing and creating jobs in Canada. However, there is this notion of competition out there, and if there are 50 such organizations in the world — 12 being IACS world standard builders — what happens if a ship is classified by one of the other 38 members? We would be looking at 45 that are not present in Canada, seven of whom would be into the IACS group. What would happen to a ship wanting to have the Canadian flag from one of those seven that is in the IACS group but not here in Canada? Would they still have to go through one of the five of you?
Mr. Shepherd: If they wanted to enter into the delegation program, they would have to.
Senator Ringuette: Each one of you does not recognize the other members of IACS?
Mr. Shepherd: We do, but we do not have any say in this. As a class society we will simply be there because we are in Canada. We are authorized in Canada. We are not there to block anyone else getting authorized in Canada. However, if an owner has a ship that is classed — again I use one of the other class societies, such as RINA — and if they want to bring their ship into Canada with a Canadian flag on it and enter a delegation, they would have to choose one of the five existing class societies that are authorized, or RINA has the opportunity to seek authorization themselves.
Senator Ringuette: How long have you had the director from Transport Canada on your advisory board?
Mr. Shepherd: I have been involved in the committee as a secretary for about 10 years. It goes way back. It is one of those positions that have always been open to a member of the flag state. We always generally invite a flag state to the committee, and you will appreciate that along with all other members of the committee, it is there to provide guidance to Lloyd's Register. It is not for us to solicit business.
Our mission statement is not to make money for anybody. It is not part of our business. Fundamentally, it is where we have a lot of difference with other organizations. At the end of the day, Lloyd's Register's business is to improve the safety and standards of shipping globally. That is what we stand for.
Senator Ringuette: Of the net revenue that your organization makes in Canada, how much would be reinvested in research and development in Canada?
Mr. Shepherd: I really could not give you hard numbers.
Senator Ringuette: Oh, come on; you have been on the board for 10 years.
Mr. Shepherd: The board does not dictate that. That is dictated outside the board.
Senator Ringuette: Let me reverse the question. How much of the net benefits or profits would be invested outside of Canada? Would the members of the advisory board be able to tell us that, like the gentleman from Transport Canada? Who can tell us that, if not you?
Mr. Shepherd: That would need to come from London.
Senator Ringuette: From London?
Mr. Shepherd: Yes.
Senator Ringuette: I see. I have a very clear picture.
Senator Runciman: Mr. Shepherd, you mentioned a couple of times the number of 180 ships.
Mr. Shepherd: Under delegation.
Senator Runciman: Is that the size of the Canadian industry?
Mr. Shepherd: No. I think there are about 300 classed ships in Canada.
Senator Runciman: Are most of those on the Great Lakes fleet?
Mr. Shepherd: A big chunk of them are, yes. There is a small portion of ocean-going ships, tankers and the like, under the Canadian flag. We have about 180 of that 300 under delegation.
Senator Runciman: You mentioned earlier that the notion of flags of convenience does not seem to be the issue it once was. Could you elaborate? It seems to me, and I could be wrong, but in respect to Canada Steamship Lines, for example, I remember reading stories about their being registered in Barbados for taxation reasons.
I am curious as to why you do not think this is an issue any more. There is still the taxation issue, obviously.
Mr. Shepherd: As far as the taxation issue goes, financially there may still be advantages to flagging vessels offshore. However, in terms of the safety standards, these international flags such as Marshall Islands, Barbados and Liberia are all signatories to the SOLAS and IMO convention. Essentially, the standards to which their vessels are being surveyed are the same standards.
Senator Runciman: You are thinking primarily in terms of safety standards.
You talked about compliance inspections and highest-risk vessels. I am curious about the Great Lakes fleet because I remember reading it was on average about 40 years of age. Would they fall within that higher-risk category? In terms of cost implications that Senator Buth raised earlier, are they the companies that are expressing concern about any cost implications associated with this?
Mr. Shepherd: No, all the Great Lakes companies, which are primarily CSL, Algoma and Lower Lakes, have vessels that are primarily inside the program anyway, and they have been classed since they were new builds.
With respect to the age of the vessel, my answer is no. As I mentioned earlier, the survey requirements are more onerous as a vessel ages, so they are subject to far more scrutiny as these vessels age. I mentioned about thickness measurements. We mitigate the risk by looking at these vessels more carefully as they age and working with the owners on hull renovation programs.
Senator Runciman: Regarding the incorporation by reference in the international standards, is there any cost implications associated with that? I know that is referenced in the act as well.
Mr. Shepherd: I do not know that there are cost implications.
There may be an improvement on the process we go through now. I read in the notes about the document we are referring to as the supplement. Right now, to use the senator's example of a ship coming into Canada, we examine that vessel. Bear in mind that ship, even if it was classed with one of the other IACS members, still meets the same standards that we have as a global organization.
We would conduct surveys to measure where it is against the Canada Shipping Act and essentially derive a gap analysis. This is actually quite a lengthy process. Once we have established that gap analysis then we have recommendations about what alterations may be needed to bring the vessel into Canada. It could be insulation, it could be structural, or it could be fire protection. The supplement does away with a lot of that work because, again, having nearly a dozen years' experience on this we know where the problems will be. In many ways I think it will improve things.
Senator Runciman: This is perhaps not directly related, but you have referenced Algoma and CSL building new ships out of China. Is there simply not the capacity in Canada, or is it capacity and cost or a combination of other factors as well that Canadian companies are building ships in China and not looking here?
Mr. Shepherd: It is unfortunate. The last lake boat was built in Collingwood, which of course does not have much of a shipbuilding business any more. That is the reality. Infrastructures die, and the workforce goes with it; this is one of the big challenges right now with the national shipbuilding programs to redevelop those workforces and that infrastructure.
Senator Runciman: The taxation changes that were incorporated in last year's budget are encouraging a rebuild of the fleet.
Mr. Shepherd: Yes, for the larger vessels that are over 126 metres.
The Chair: Senator Finley has a supplementary question.
Senator Finley: I cannot remember what it was a supplementary to.
I have not been witness to all of the testimony on this so I may be asking something that has already been answered. The reason I thought about it was that you made reference to the Italian cruise ship that went for a joy ride, I suppose, and in this holistic approach that you have to the whole issue of maritime things, who oversees the operating instructions? How do they pilot the ship, how do they run the ship, what are the ongoing maintenance requirements while it is at sea and so forth? Does your organization do that?
Mr. Shepherd: We can do, but it is a three-part question there.
Organizations such as ours do audit the company's safety management system. The safety management system is where those procedures that you are talking about exist.
Senator Finley: Who sets those?
Mr. Shepherd: The code itself, the International Safety Management Code, is set by SOLAS, but the actual procedures are written by the companies or the managing companies of those vessels, and these are audited by the class societies.
The manning of the vessel is a flag affair. The safe manning certificate is issued by the flag, and that is pretty much global. We do not say what qualifications the master must have. In Canada there is a criterion in the Canada Shipping Act that drives that.
When we audit the vessel we verify they have the appropriate certification. We would verify by audit that they are conducting their procedures, but at the end of the day you cannot be there all the time with them. That is the oversight process.
The class aspect is that we are looking at material, parts of the ship; the audit process is looking at the safety management system, and then the flag looks at the certification issue. At the end of the day, the company takes the responsibility for making sure that these things are done.
Senator Finley: "The company" is what?
Mr. Shepherd: The company is the authorized representative that owns the ship.
Senator Ringuette: I have two short follow-up questions. First, is the director from Transport Canada who sits on your advisory board in any way whatsoever implicated in the Canada Shipping Act? Second, there are CEOs on your advisory board? How many times a year does your advisory board meet so that the CEO who sits on that advisory board would also have a meeting with the director of Transport Canada?
Mr. Shepherd: Once a year.
Senator Ringuette: My first question was in regard to the Canada Shipping Act. Is the director of Transport Canada who sits on your board implicated whatsoever? I want it to be clear. I do not want to make any presumptions. Is that person implicated whatsoever in the Canada Shipping Act that we are looking at right now?
Mr. Shepherd: I do not believe so.
Senator Ringuette: You do not believe so?
Mr. Shepherd: I do not believe so. I believe the Canada Shipping Act refers to the minister.
Senator Ringuette: I asked if he was implicated in his job at Transport Canada with this act.
Mr. Shepherd: I do not really understand the question; I am sorry.
Senator Ringuette: Is there a relationship between the member on your advisory board from Transport Canada and the Canada Shipping Act that we are looking at? Is there any relationship?
Mr. Shepherd: I would have to say I really do not know. When you say "implication" —
Senator Ringuette: Implication. Sir, you have indicated in response to my questions earlier that the member had been on your board for quite a long time.
Mr. Shepherd: The position, not the individual.
Senator Ringuette: Certainly, sir, in the discussions that have been happening over the years, you know what position this director of Transport Canada holds and what his or her responsibilities are. Is the responsibility of that director of Transport Canada in any way linked to the Canada Shipping Act that we are looking at?
Mr. Shepherd: Maybe I can answer that by saying that, as a class society, we invite members to join the committee to provide advice and guidance. It is also a forum where we are able to discuss issues such as I raised before — we were talking about LNG fuelling and other operations in Canada and globally.
I am trying to answer your question, but I do not really understand it. As an individual, I am a "user" of the Canada Shipping Act, if you will; I use it as a reference document. I do not understand the term "implication." If you can understand it from my perspective, as a class society —
Senator Ringuette: I will use another word.
The Chair: We must finish this up quickly. It was supposed to be one or two short questions.
Senator Ringuette: Is there any responsibility in regard to the Canada Shipping Act that the director of Transport Canada that sits on the board has?
Mr. Shepherd: I do not know what his responsibilities are. He is a person whom I refer to within Transport Canada. As a private individual, I really cannot talk about the responsibilities of an individual who works for Transport Canada.
The Chair: Thank you. Mr. Shepherd, I would like one point of clarification: You talked about ships being built for Transport Canada and National Defence. Is it our practice to classify those ships, as well?
Mr. Shepherd: In the past, it has not been. In most navies of the world — Actually, I will step back from that for a moment. Most of the existing Coast Guard vessels were built to Lloyd's Register class, but then the class was, generally speaking, dropped at delivery. As government vessels, they were not commercial and there was no requirement to maintain class. In a sense, they used us as the quality system during the build.
There has been no classification for naval vessels in Canada in the past. If you look globally now, the Royal Navy in the U.K. uses Lloyd's Register as their quality assurance.
The Chair: I thought I heard you say that your society would be bidding to get the work for the new ships that would be built.
Mr. Shepherd: We will.
The Chair: You will be hoping to get the contract from the Government of Canada with respect to the new ships that are coming forward.
Mr. Shepherd: Yes.
The Chair: Thank you. I wanted to clarify that.
Colleagues, that concludes this particular session. Permit me on the members' behalf to thank Mr. Shepherd for being here from Lloyd's Register Canada Limited and helping us understand the industry very well.
Our next session will be by video conference. Ms. Coshan, thank you for agreeing to join us by teleconference on such short notice.
[Translation]
We are resuming our study of the subject matter of all of Bill C-45, A second Act to implement certain provisions of the budget tabled in Parliament on March 29, 2012 and other measures, introduced in the House of Commons on October 18, 2012.
[English]
In our second session this afternoon we will be looking at the proposed amendments to the Hazardous Materials Information Review Act. These amendments can be found in Division 13 of Part 4 of the bill at page 260 and following. Yesterday we discussed these amendments with officials from Health Canada, and today we welcome Rita Coshan, Chair, Council of Governors of the Hazardous Materials Information Review Commission. She is appearing from Regina, Saskatchewan.
Ms. Coshan, I understand you have some opening remarks to help us understand the role of the group that have you chaired. We now give you the microphone.
Rita Coshan, Chair, Council of Governors, Hazardous Materials Information Review Commission: Thank you, Mr. Chair, for the invitation to provide comments and to participate in this discussion. As you mentioned, my name is Rita Coshan. I am providing remarks on behalf of the Council of Governors of the Hazardous Materials Information Review Commission. I previously made these comments on November 6 to the House of Commons Standing Committee on Health. I chair this council, which has representation from employer, supplier and worker organizations, as well as from governmental, occupational health and safety jurisdictions across Canada.
The Council of Governors advises the minister on aspects of the current Hazardous Materials Information Review Act, such as procedures used by the commission to review claims for confidential business information. In addition to being the current chair of this committee, I have worked in the field of provincial occupational health and safety for over 23 years, as a WHMIS coordinator, as a toxicologist and currently as the director of health services.
In my role as chair of the Council of Governors, I would like to make a few general remarks with respect to the group of amendments to the Hazardous Materials Information Review Act contained in Bill C-45, but I want primarily to focus my remarks on clause 274, which establishes a legislated external advisory committee to advise the Minister of Health on matters related to the act to replace the current Council of Governors.
The Council of Governors recognizes that this bill will amalgamate the current Hazardous Materials Information Review Commission with the national office of WHMIS, otherwise known as NOW, within a directorate of Health Canada. We recognize that this has the potential to enhance hazard communication in the workplace and result in more informed and protected workers. The amalgamation of these functions presents many opportunities to share existing complementary technical, policy and enforcement expertise and resources for synergistic improvements in service delivery. This is particularly important right now as we are rapidly moving forward to adopt the global harmonization system within WHMIS — in step with the United States, I might add.
The amendment contained in clause 274 replaces the current Council of Governors with a ministerial advisory council that basically has the same stakeholder representation as exists now with the council in the new legislation. The ministerial advisory council in fact has a broader role than that of the current council in that it is granted legislative authority to advise the minister on all aspects related to the act.
The effectiveness of the current advisory capacity has been exercised several times in the recent past. In fact, the amendment to create the legislated advisory council was a recommendation of the current Council of Governors. The Council of Governors has also recently provided advice to the minister with respect to addressing the scope of products to be covered by the Hazardous Products Act and they are subject to the Hazardous Materials Information Review Act and its provisions. We anticipate that these recommendations will be addressed in the upcoming amendments of the Hazardous Products Act.
The need for an effective ministerial advisory committee is related to the fact that chemical hazard communication in the workplace falls within the mandates of both health and labour and falls in the mandates of provincial, territorial and federal legislation.
Many of the outcomes of effective WHMIS and HMIRA legislation are seen in the workplace. The workers, the employers and the workplace occupational health and safety inspectorate have a front-line view of how well chemical hazard communication and the protection of confidential business information is working and meeting the intended outcome of informed and protected workers. It has been my experience that workplace stakeholders primarily raise their concerns and most directly communicate within the occupational health and safety framework of labour ministries.
At the same time, the Hazardous Materials Information Review Commission and the national office of WHMIS have definitely benefited from their association with Health Canada — I can say that because I was around prior to the functions of WHMIS being in Health Canada — and have benefited from their access to its expertise and experience with a broad spectrum of hazardous materials and enforcement programs.
This overlap into the mandates of two types of ministries and several levels of government means that continuing communication and partnerships are keys to its ongoing success. Key, too, is the profile of this workplace-based program as a directorate within the health ministry. Health Canada is a very large and complex ministry with abundant and competing pressures. I would like to end by saying that all stakeholders will have to continue to work very diligently and cooperatively with Health Canada to ensure that the profile and the success of this important program are maintained.
Thank you, Mr. Chair. I would be happy to answer any questions at this time.
The Chair: That is the end of your formal presentation, and we thank you very much. We will go into some discussion with senators, but could you just clarify your remarks from the point of view that the Council of Governors, presumably, if this legislation passes, will disappear and then a new advisory group to the Minister of Health will be created. Are we going from a council that actually had some authority to order or to require certain things to be done, or are we going from one advisory group to another advisory group?
Ms. Coshan: From our perspective, in terms of the role that we have and that we anticipate that we will have in the future, we do not see a large difference. Having been involved on committees with respect to the national office of WHMIS and the commission, there is often a lot of reception to the advice that we provide. We do not see that changing. I do believe that although the matters on which we can advise are much broader with the amendment, the fact that we may have less authority to establish rules in terms of the process to me is of lesser impact than the increase in our ability to advise on all aspects of the act.
The Chair: Previously, could you grant exemptions? Was your review and advice required to be followed, and now it is just advice to the minister that may or may not be followed? Is there a difference in that regard?
Ms. Coshan: In terms of our role on day-to-day matters, in my experience it has always been advisory on big picture operational issues. In terms of the appeal process, we would advise on process, but we were not as involved in the day- to-day procedures and rules, even though that is stated as our role. We were functioning at more of a strategic level, looking at the overall programs and presenting the perspective of stakeholders; and I do not see that changing.
The Chair: That clarification is helpful.
Senator Buth: I want to go back to the comment you and an official from the department made on the global harmonization system and the need to ensure that there are good coordination and good opportunities to share information as we move forward in the global harmonization system. Can you tell us what that is, the importance of it and what we are heading toward?
Ms. Coshan: Yes, I can. The Globally Harmonized System is an international system of hazard communication that many countries, both developed and developing, are adopting. The words and symbols would be common on labels. It would be common content on data sheets that speaks to hazards and the appropriate types of controls to use. It is a common system worldwide. The implication is that it is a different classification system of chemicals. New labels need to be applied as well as new data sheets of different content. A tremendous amount of work needs to be done in terms of legislation at the federal level and at the provincial and territorial levels.
With respect to workplace products, they have to complement federal supplier requirements and provincial- territorial employer requirements. We have to do legislative changes at various levels of government in a coordinated fashion within a very compressed period of time. I believe it was in December 2011 that this initiative was expedited with an agreement between Prime Minister Harper and President Obama to fully implement this by June 2015. The scope of the changes that need to be accomplished is very ambitious. We need to focus our efforts and work together to do this in a compressed period of time.
Senator Buth: You see the amalgamation of the commission and the national office within a directorate in Health Canada as being of benefit.
Ms. Coshan: Yes. I have known people in both agencies for a period of time, so I am familiar with their skill sets. It will be of benefit to have a number of skill sets all within one agency and coordinating. For example, there are skills within HMIRA in terms of preparing data sheets and the toxicological aspects of classification that will assist suppliers in preparing the classifications under a new and complicated regime.
Senator Callbeck: Your brief is very positive on the proposed amendments to Bill C-45. Do you have any concerns about these amendments? Are you worried about any aspects?
Ms. Coshan: Going forward, my presentation is positive, but it also underlines that it is complicated when you are dealing with two levels of government. It is also complicated when you have two ministries with slightly different mandates. For jurisdictional labour ministries, it is sometimes difficult to have impact within a large federal ministry of health. We have to make our voices heard. I also see the benefits because part of the global harmonization is to harmonize hazard communication for all types of products, such as consumer products, workplace products, pesticides, and products in transport. Health Canada has a role in all of those other programs, so there is benefit to the WHMIS being within Health Canada.
Senator Callbeck: In other words, you see the benefits but you also recognize that there will be challenges dealing with the different governments and with two ministers.
Ms. Coshan: Yes.
[Translation]
Senator Bellemare: I would like to hear what you have to say, briefly, on the federal-provincial issue, because hazardous materials and health and safety in the workplace are very closely related to the provincial level. Some of these matters fall under provincial jurisdiction. I would like you to expand a bit on this to tell us how the advisory committee can help to improve communication with the provinces, and whether it can or not.
I would also like you to explain how you work, because that is an interesting aspect of collaboration on a theme that touches everyone, in this global world; and I would like to hear what you have to say concerning the work of your committee in its relationship with the provinces.
[English]
Ms. Coshan: I have to add one more comment. Occupational health and safety jurisdictions are typically provincial and territorial. In each of those jurisdictions, we have individuals who are designated federal inspectors. We also operationalize the enforcement of federal legislation in our provinces, so we very much see the impacts of the Hazardous Products Act and HMIRA from the perspective of the federal requirements in the province and our own employer requirements in the province. We have to remember that the Hazardous Materials Information Review Act maintains the hazard communication of WHMIS while protecting confidential business information. The Hazardous Products Act requires hazardous communication and sets out the requirements for classification labelling and data sheets. When we speak about the benefits of the new advisory committee for this act, we have to remember that it is only a small part of the big picture because it is also about communication with respect to the Hazardous Products Act, which is beyond the scope of this committee.
The benefit of having representation is more, I think, with respect to the caucuses that we represent: the suppliers, the employers, and the people who represent the OSH inspectorate. I am not sure if I am answering your question.
[Translation]
Senator Bellemare: Who sits on your advisory committee? Are there provincial representatives, representatives from the various occupational health and safety boards, or officials from other departments or other regional federal offices?
[English]
Ms. Coshan: The membership of the current council and the future ministry advisory committee are set out in legislation, so it does specify representation from worker organizations, supplier organizations, employer organizations and provincial OSH regulators. It is quite explicit in terms of the composition. It even indicates the number of members from the different organizations.
The Chair: Can you tell us for the record what the provincial OSH organizations are? What does OSH stand for?
Ms. Coshan: That is occupational health and safety, or safety and health.
The Chair: We traditionally think of it as health and safety, but have you turned it around just to get a nice flowing word like OSH, right?
Ms. Coshan: Yes.
Senator Chaput: I think I heard you say that you enforce the operations on provinces. What did you mean by that? Is it through inspections? Is it through standards? Is it on a regular basis? What does that mean?
Ms. Coshan: We wear the two hats. When we act as federal inspectors for the purposes of enforcing the Hazardous Products Act and the regulations under the Hazardous Products Act, we will review products supplied to workplaces in the province to see if they are properly classified and if they have appropriate hazard class pictograms on the labels. We ensure that they disclose the ingredients as they should and that they disclose appropriate personal protective equipment, ventilation requirements, the appropriate first aid responses and measures. We check the hazard classification and the communication of the hazards that the suppliers supply to the employers, and then we have a number of enforcement tools if the suppliers are not meeting those standards.
Senator Chaput: How often would you do that?
Ms. Coshan: It would very much depend on the different provinces. The manufacturing provinces would be doing more than the smaller provinces that rely more on distributors versus primary manufacturers and importers. For example, Ontario would have a lot more inspections and enforcement activities than Prince Edward Island.
Senator Chaput: Does it happen that a province would not agree with certain labels that you want to enforce; and if so, what happens?
Ms. Coshan: If the inspector does not agree with the supplier, we would raise those issues with the national office of Workplace Hazardous Materials Information System, WHMIS, and we would seek their looking into it and establishing a decision, and that is what would be in force.
Senator Chaput: The federal would be enforcing what needs to be enforced, and the supplier from the province has to agree before putting whatever it is on the market, before selling it?
Ms. Coshan: It is not really a presale condition. We will audit a cross-section of suppliers that already have the products in distribution, just to make sure that they are being properly classified. This all falls outside the scope of the Hazardous Materials Information Review Commission, but that is how we coordinate with the national office of WHMIS.
Senator Chaput: If it is out of the scope, who takes care of that, to ensure there is no presale when there is a danger of selling the product? Who watches that, if it is out of your scope?
Ms. Coshan: We do that; it is just that we wear a number of hats here. I am just bringing to your attention that the scope of Bill C-45 is only with respect to the Hazardous Materials Information Review Act, and the enforcement activity I am speaking about is under the Hazardous Products Act.
The Chair: Ms. Coshan, you indicated that you have had quite a number of years of experience with the occupational safety and health organization. How long you have been with the Council of Governors in this federal organization, and how long have you been chair?
Ms. Coshan: I believe I have been on the council since 2003, perhaps, and I believe I have been the chair for three years, but please do not quote me on that.
The Chair: I promise you I will not quote you on that.
Could you tell us a little bit about the relationship between the Council of Governors and the commission? We are talking here in this legislation of doing away with both, and you have given us a point of view from the council perspective. What is the governance relationship between council and commission?
Ms. Coshan: The commission has been a stand-alone agency, and they are very much a high-functioning agency. They will prepare reports for us, communicate actions or strategies that they have drafted, and seek our input. We communicate well. We have a number of teleconferences throughout the year, and we typically have one face-to-face meeting each year. We are able to have active discussions. I really do not see that changing. I have looked at the bill, and there is certainly a mechanism to continue to operate at the level we are at and perhaps advise on a broader range of subjects.
The Chair: I understand your comments with respect to the advice and the minister getting a good cross-section of advice from a council, which is needed. What I am worried about are some of the other functions the commission performs that your council has not been involved with. Are the remarks that you have given us today remarks on behalf of the council and the commission or on behalf of the council alone?
Ms. Coshan: Strictly on behalf of the Council of Governors.
The Chair: Does anyone have any questions flowing from that?
Ms. Coshan, that is the end of our questions. Thank you very much for being with us via teleconference on very short notice. We understand your position clearly. You have helped us understand the role of the commission and the council. We will now try to do our job based on the good advice you have given us.
Ms. Coshan: Thank you for the opportunity.
The Chair: This concludes our witnesses for today, and we are right on time. I will see you all on Tuesday morning, which is our next meeting.
(The committee adjourned.)