Blog: The Wheat Sheaf
Submission to CGC's consultation on accumulated surplus funds 2 of 2
Ms. Patti Miller
c/o: User Fees Comments
Canadian Grain Commission
600-303 Main Street
Winnipeg, MB R3C 3G8
Via Email: email@example.com
Re: Consultation User Fees
Dear Ms. Miller,
The Alberta Wheat Commission (AWC) is pleased to have the opportunity to offer comment on the Canadian Grain Commission’s (CGC) consultation on user fees for the next five-year cycle, commencing April 1st, 2018.
AWC acknowledges the recent announcement that the CGC has sought to reduce its user fees to $1.35/tonne, eight months prior to the end of the current five-year cycle. We agree that this was necessary to reduce any further accumulation of the surplus which as of September 30th, 2016 had reached $107.2 million. By way of background, AWC has also made a submission as part of the CGC’s consultation on the accumulated surplus in which we requested that the surplus, in its entirety (less $35.6 million in contingency), be directed to reducing user fees over the next five-year cycle. This reduction would apply to reduced user fees, the amount of which is to be determined as part of this consultation.
AWC supports the CGC’s stated intention to update its grain forecasting methodology to more accurately reflect actual volumes and prevent large surpluses from accumulating in the future. We believe that any such system must take into account an overall trend toward higher yields and production volumes and be reviewed on an annual basis instead of every five years.
Due to the inter-related nature of user fees and services, AWC views this consultation as an appropriate opportunity to comment on the role that the CGC plays both in the oversight and provision of mandatory outward weighing and inspection services. AWC is aware that a number of our major international buyers have contract stipulations which require exporters to procure outward inspections from a private inspection firm. This is often because these firms operate globally, purchasing grain from a number of jurisdictions and so for the sake of consistency, prefer to have the same firm conducting these inspections.
As a result, AWC is advised that roughly 80 per cent of export shipments are being double inspected by the CGC and a private third party. This means that increasingly, the CGC’s mandatory inspection and certificate final is becoming redundant, adding a layer of administration and cost, making Canada less efficient and competitive.
In addition, the CGC is in a unique and potentially conflicting role serving as both the regulator and service provider. When a regulatory agency such as the CGC operates on a cost-recovery basis there is an inherent risk that budgetary needs will drive policy as opposed to what may be in the best interests of Canada’s grain sector – which should be the CGC’s mandate and role.
It has also been demonstrated that private sector alternatives can offer more comprehensive service, (operating 24 hours a day, 7-days per week) at a fraction of the price. AWC is of the view that outward inspection services should be optional depending on the nature of contractual obligations of the exporter. AWC is also recommending that the CGC reconsider its role as service provider for outward inspection services and instead provide oversight and accreditation of third parties to provide those services on a cost competitive basis. If a customer requires a CGC Certificate Final, third parties could be accredited by the CGC to provide the inspection service.
AWC is also recommending that the CGC seek an increase in the public benefit appropriation that it receives from the federal government. As outlined in the consultation paper, the CGC’s current annual appropriation is $5.37 million, which represents approximately 9% of its total costs. As suggested earlier in our submission, AWC is of the opinion that all mandatory services, where the customer does not have the option to engage a third-party competitor, must be covered by the federal government. Other jurisdictions have recognized the public benefit associated with inspection services and as a result, governments in the United States (U.S.) and Australia (two of Canada’s largest competitors in the global marketplace) offer significantly higher public sector contributions. In the U.S., approximately one-third of the cost related to inspection services offered by the Federal Grain Inspection Service are covered by the government. That amount increases to 40% in Australia.
The fact that inspection services must be performed by the CGC (essentially creating a monopoly and eliminating competitive alternatives) and that the public benefit appropriation only reflects 9% of the CGC’s costs, ultimately increases costs for producers and decreases their competitive advantage.
AWC is pleased to have the opportunity to participate in this consultation and invite you to contact us should you have any questions with respect to this submission.
Chair, Alberta Wheat Commission