Vol. 151, No. 4 — February 22, 2017

Registration

SOR/2017-9 February 3, 2017

PEST CONTROL PRODUCTS ACT
FINANCIAL ADMINISTRATION ACT

Pest Control Products Fees and Charges Regulations

P.C. 2017-79 February 3, 2017

His Excellency the Governor General in Council, on the recommendation of the Minister of Health and the Treasury Board, hereby makes the annexed Pest Control Products Fees and Charges Regulations pursuant to

Pest Control Products Fees and Charges Regulations

PART 1

Fees for the Examination of an Application in Respect of a Pest Control Product
Non-Application

Section 2

1 Section 2 does not apply in respect of

Fees

Registration or amendment — Schedule 1

2 (1) The fee for the examination by the Minister of an application to register a pest control product — other than a type of application set out in Schedule 2 or 3 — or to amend such a registration that includes a component set out in column 1 of Schedule 1 is the fee set out in column 2.

More than one component — Schedule 1

(2) If an application referred to in subsection (1) includes more than one component set out in column 1 of Schedule 1, the fee is the sum of the applicable fees set out in column 2 for all of the included components.

Semiochemicals and microbial agents — Schedule 2

(3) The fee for the examination by the Minister of an application in respect of a pest control product that is a semiochemical or microbial agent for each type of application set out in column 1 of Schedule 2 is the fee set out in column 2.

Applications filed together — Schedule 2

(4) If more than one type of application set out in column 1 of Schedule 2 is filed in respect of the same pest control product at the same time, the fee for the examination by the Minister is the highest of the applicable fees set out in column 2 in respect of those applications.

Other applications — Schedule 3

(5) The fee for the examination by the Minister of an application in respect of a pest control product for each type of application set out in column 1 of Schedule 3 is the fee set out in column 2.

Applications filed together — Schedule 3

(6) If more than one type of application set out in column 1 of Schedule 3 is filed in respect of the same pest control product at the same time, the fee for the examination by the Minister is the highest of the applicable fees set out in column 2 in respect of those applications.

Processing

3 The fee for the processing by the Minister of any of the following applications, other than an application to renew a registration, is $1,133:

Applications not mentioned in schedules

4 The fee for the examination by the Minister of an application in respect of a pest control product, other than an application to renew a registration, that does not include any component set out in Schedule 1, that is not mentioned in Schedule 2 or 3 and that does not require an evaluation is $247.

Renewal

5 The fee for the examination by the Minister of an application to renew the registration of a pest control product is $80.

Annual Adjustment of Fees

Fee adjustment

6 Every fee set out in this Part is to be increased on April 1 of each year by 2%, rounded up to the nearest dollar.

Timing of Payment

Meaning of preliminary review

7 (1) In this section, preliminary review means a review by the Minister of the information that is submitted with an application to determine whether the information is sufficient to enable the Minister to conduct an evaluation of the pest control product.

Payment — $2,500 or less

(2) If the total fee for an application under this Part is $2,500 or less, it must be paid when the application is filed.

Payment — more than $2,500

(3) With the exception of fees for applications made in respect of paragraphs 1(a), 1(b), and 3(a) of Schedule 3, which must be paid in full at the time the application is filed, when the total fee for an application under this Part is more than $2,500,

Preliminary review and evaluation

(4) The preliminary review and the evaluation begin on receipt of the relevant payments.

Fee Reduction

Definitions

8 (1) The following definitions apply in this section.

actual gross revenue means the amount that the person who makes an application to register a pest control product referred to in subsection 2(1) collects during the fee verification period from the sales in Canada of that product. (recettes brutes réelles)

anticipated gross revenue means the amount that the person who makes an application to register a pest control product referred to in subsection 2(1) expects to collect during the fee verification period from the sales in Canada of that product. (recettes brutes prévues)

fee verification period, in respect of a pest control product for which an application for a fee reduction is approved under subsection (3), means the period that begins on the day on which the pest control product is first sold in Canada as a registered pest control product or as an active ingredient in a registered pest control product and that ends three years after that day. (période de vérification des droits)

sales in Canada means

Application for fee reduction

(2) A person who files an application to register a pest control product referred to in subsection 2(1) may apply at the same time to the Minister for a reduction of the fee.

Recalculation of fee

(4) If the Minister approves a fee reduction, the fee that is payable at the end of the fee verification period is the lesser of

Payment when application is filed

(5) A person who applies for a fee reduction under subsection (2) must, at the time of filing the application, pay, in accordance with subsection 7(2) or (3), the higher of

Records of sales in Canada

(6) Within 60 days after the end of the fee verification period, the person must provide the Minister with the records of the sales in Canada, prepared in accordance with generally accepted accounting principles and certified by the individual responsible for the person’s financial affairs.

Reconciliation — balance owing

(7) If the records of the sales in Canada establish that the amount that the person paid under subsection (5) is less than the amount of the fee calculated in accordance with subsection (4), the person must pay the balance within 60 days after the day on which the fee verification period ends.

Reconciliation — overpayment

(8) If the records of the sales in Canada establish that the amount that the person paid under subsection (5) is more than the amount of the fee calculated in accordance with subsection (4), the Minister must repay the amount of the overpayment to the person.

Audited records

(9) If the Minister determines, on the basis of any information that is available to him or her, that the certified records of the sales in Canada are not adequate to determine the person’s actual gross revenue, the Minister may require that the person provide records of the sales in Canada that have been audited by a qualified independent auditor.

When records inconsistent

(10) If there is any inconsistency between the certified records and the audited records, the fee is to be based on whichever records show the higher amount of sales in Canada.

When records not submitted

(11) If the person does not submit the records in accordance with subsections (6) and (9), the fee payable is the total fee calculated under subsections 2(1) and (2) and section 3, minus any portion of the fee that the person paid under subsection (5).

PART 2

Annual Charge

Payable annually

9 (1) A registrant must pay each year, in respect of every pest control product that is registered in their name on April 1 of the year, an annual charge that is the lesser of

Certified records

(3) When the annual charge is paid under paragraph (1)(b), the registrant must, when paying it in full or when making the first quarterly instalment, provide the Minister with the records of the sales in Canada for the fiscal year referred to in that paragraph, prepared in accordance with generally accepted accounting principles and certified by the individual responsible for the registrant’s financial affairs.

Audited records

(4) If the Minister determines, on the basis of any information available to him or her, that the certified records are not adequate to calculate the annual charge, the Minister may require that the registrant provide records of the sales in Canada that have been audited by a qualified independent auditor.

When records inconsistent

(5) If there is any inconsistency between the certified records and the audited records, the calculation of the annual charge is to be based on whichever records show the higher amount of sales in Canada.

When records not submitted

(6) If the registrant does not submit the records in accordance with subsections (3) and (4), the annual charge that is payable by the registrant is $3,600.

PART 3

Repeal and Coming into Force
Repeal

10 The Regulations Prescribing the Fees to be Paid for a Pest Control Product Application Examination Service Provided by or on behalf of Her Majesty in Right of Canada, for a Right or Privilege to Manufacture or Sell a Pest Control Product in Canada and for Establishing a Maximum Residue Limit in Relation to a Pest Control Product (see footnote 1) are repealed.

Coming into Force

Registration

11 (1) These Regulations, except section 6, come into force on the day on which they are registered or on April 1, 2017, whichever is later.

Section 6

(2) Section 6 comes into force on April 1 of the year after the year in which these Regulations are registered.

SCHEDULE 1

(Subsections 2(1) and (2), paragraphs 3(b) and (c), section 4 and subsection 8(1))

Fees for Applications to Register, or to Amend the Registration of, a Pest Control Product Other Than a Semiochemical or Microbial Agent

Item

Column 1

Component of Application

Column 2

Fee ($)

1

Product chemistry — active ingredient

4,873

2

Product chemistry — end-use product or manufacturing concentrate

2,713

3

(a) Toxicology data accompanying an application to register a pest control product that consists of or that contains a new active ingredient

75,807
 

(b) Toxicology data accompanying an application to register a pest control product — or to amend the registration of a pest control product — that contains a registered active ingredient

15,830
 

(c) Toxicology data — acute toxicity studies only

2,954

4

(a) Exposure data accompanying an application to register a pest control product that consists of or that contains a new active ingredient

17,498
 

(b) Exposure data accompanying an application to register a pest control product — or to amend the registration of a pest control product — that contains a registered active ingredient, when a new risk assessment is necessary

5,758
 

(c) Exposure data — other

5,214

5

Metabolism data

28,943

6

Residue data

15,838

7

(a) Environmental fate data accompanying an application to register a pest control product that consists of or that contains a new active ingredient

42,685
 

(b) Environmental fate data accompanying an application to register a pest control product — or to amend the registration of a pest control product — that contains a registered active ingredient, when a new risk assessment is necessary

23,637
 

(c) Environmental fate data — other

11,546

8

(a) Environmental toxicology data accompanying an application to register a pest control product that consists of or that contains a new active ingredient

37,277
 

(b) Environmental toxicology data accompanying an application to register a pest control product — or to amend the registration of a pest control product — that contains a registered active ingredient, when a new risk assessment is necessary

23,690
 

(c) Environmental toxicology data — other

2,465

9

Value and effectiveness data for a pest control product

906

10

Identification of compensable data

2,162

SCHEDULE 2

(Paragraph 1(d), subsections 2(1), (3) and (4), paragraph 3(c) and section 4)

Fees for Applications in Respect of a Pest Control Product that is a Semiochemical or Microbial Agent

Item

Column 1

Type of Application

Column 2

Fee ($)

Semiochemicals, other than straight-chain lepidopteran pheromones, and microbial agents

1

Registration of a new active ingredient — food use

7,236

2

Registration of a new active ingredient — non-food use

4,341

3

Amendment of registration — new risk assessment necessary — environmental fate data, environmental toxicity data or exposure data

2,894

4

Amendment of registration — data required, label changes

1,447

5

Amendment of registration — data required, other

1,158

6

Amendment of registration — no data required

290

Straight-chain lepidopteran pheromones

7

Registration of new active ingredient

579

8

Amendment of registration

290

SCHEDULE 3

(Paragraph 1(d), subsections 2(1), (5) and (6), paragraph 3(c), section 4, and subsection 7(3))

Fees for Other Applications in Respect of a Pest Control Product

Item

Column 1

Type of Application

Column 2

Fee ($)

1

(a) Research authorization — major crops, other than research authorizations set out in paragraphs (c) and (d)

5,080
 

(b) Research authorization — minor use crops, other than research authorizations set out in paragraphs (c) and (d)

5,080
 

(c) Research authorization — microbial agents, semiochemicals and any substance listed in subparagraph 1(d)(ii) of these Regulations

1,217
 

(d) Research authorization — greenhouse crops and non-agricultural uses

1,217

2

Research notification

247

3

(a) Registration of active ingredient to be used in pest control product manufactured only for export

7,827

(b) Amendment to registration of active ingredient used in pest control product manufactured only for export 

1,133

4

(a) Specification of maximum residue limit for a previously unexamined pest control product

125,461

(b) Specification of maximum residue limit for an unregistered use of a previously examined pest control product

15,838

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary

Issues: As the federal organization responsible for regulating pest control products in Canada, Health Canada’s Pest Management Regulatory Agency (PMRA) conducts pre-market reviews of applications to register pest control products in Canada and undertakes a range of post-market regulatory activities. Health Canada’s current fees regulations (see footnote 2) for pest control products have remained unchanged since 1997 despite the increased costs of providing these services.

Description: The Pest Control Products Fees and Charges Regulations (the Regulations) will replace the current fees regulations for pest control products.

Key elements of the Regulations are as follows:

  • Application fees will, in most cases, increase based on an intended private sector share of approximately 30% of Health Canada’s costs to review pest control product applications.
  • An annual adjustment to application fees will increase these fees automatically by 2% on April 1 of each year.
  • New fees will be established for the review of applications to register or amend the registration of microbial agents (e.g. bacteria) and semiochemicals (e.g. pheromones), as well as chemically equivalent “generic” versions of pest control products.
  • The annual charge applied to each registered pest control product will increase to reflect inflation since 1997.

Cost-benefit statement: The Regulations will have minimal impacts on applicants, registrants, and pest control product users. The fees are not expected to significantly affect industry incentives to register new pest control products or maintain the registration of currently marketed pest control products. Impacts on pest control product prices paid by pesticide users are also expected to be limited, since the fees to register pest control products represent a very small percentage of the product development costs embedded in retail prices.

While the quantified net benefits of the Regulations are zero, the increased revenues retained by Health Canada will result in important unquantified benefits, in particular the maintenance and, in some cases, the improvement of service standards for pre-market review activities, as well as the improvement of the timeliness and transparency of post-market review activities.

“One-for-One” Rule and small business lens: The “One-for-One” Rule and small business lens do not apply to these Regulations, as changes to user fees are beyond the scope of the implementation of these rules. Moreover, since these Regulations are intended to update fees that are already being paid by applicants, there will be no additional administrative burden on applicants and registrants of pest control products in Canada. The structure of the annual charges and the fee reductions for applicants to register new products with low sales volumes support small business and niche products of importance to Canadian users (e.g. the agriculture sector).

Domestic and international coordination and cooperation: Consultations have been conducted with industry stakeholders, including Canadian subsidiaries of foreign corporations. The revised fees and annual charges are similar to those in other countries and there is no expected conflict with international trade agreements or obligations. The fees and annual charges in the Regulations are reasonably in line with, if not lower than, fees currently applied for similar activities by the United States Environmental Protection Agency (U.S. EPA), the foreign regulator found to be most comparable.

Health Canada’s Pesticide Cost Recovery Official Notice of Fee Proposal was approved by Parliament on May 15, 2015.

Issues

The cost recovery system for pest control products consists of two main elements: fees for the pre-market scientific assessment of applications to register a pest control product, and an annual charge applied to each registered pest control product, which primarily supports post-market regulatory activities essential to health and environmental protection, including the cyclical re-evaluation of older pest control products and special reviews.

Since the current fees regulations came into effect in 1997, the cost of pre- and post-market review activities has increased due to inflation and the growing complexity of pest control product applications. For example, pest control product applications have increased in size since 1997 from an average of 2 000 pages of data and supporting information to over 8 000 pages in 2016. There is also a greater diversity in the types of pest control products being registered, including products that contain living organisms (microbial agents). These increasing funding pressures will impact Health Canada’s ability to meet performance standards and commitments for pre- and post-market review activities.

Objectives

The Pest Control Products Fees and Charges Regulations will update application fees to better reflect Health Canada’s current costs to conduct the pre-market science-based review of applications to register pest control products. This will result in increased revenues and, by retaining these additional revenues, Health Canada will be able to maintain or improve service delivery standards for reviewing pre-market pest control product applications.

The Pest Control Products Fees and Charges Regulations will also update the annual charge applied to each registered pest control product to help defray the costs of conducting post-market regulatory activities. By retaining additional revenues from the annual charge increase, Health Canada will improve the timeliness and engagement with affected stakeholders on post-market regulatory decisions, which will enhance the transparency of post-market regulatory activities.

Description

Update of existing fee schedules in the Regulations

Overall, the Regulations will increase pest control product application fees to cover a higher share of Health Canada’s costs to review these applications. The fees will be equivalent to approximately 30%, on average, of service delivery costs, with adjustments to several specific fees where necessary to ensure they do not exceed the corresponding fee of the U.S. EPA Office of Pesticide Programs, which is the U.S. government authority responsible for pesticide regulation. Requiring a higher private sector share would have resulted in a large number of specific application fees exceeding comparable U.S. EPA fees. Such a scenario could create a disincentive to registering new pest control products in Canada.

Various countries with advanced pesticide regulatory systems collect fees, charges or levies. The U.S. EPA, the United Kingdom Chemicals Regulation Directorate of the Health and Safety Executive, and the Australian Pesticides and Veterinary Medicines Authority were identified as comparable to Health Canada with respect to the level of scientific rigour applied during the pre-market application review processes; data requirements for registration and reviews; and the types of regulatory services offered.

A comparative analysis found that while all four countries share similar regulatory processes, each country follows a distinct approach for recovering costs from applicants and registrants of pest control products. Health Canada’s approach compares most closely to the U.S. EPA’s cost recovery system. Industry stakeholders also support aligning Health Canada’s fees with the U.S. EPA, since many registrants are active in both countries. The fees are reasonably in line with, if not lower than, fees currently charged by the U.S. EPA.

Health Canada undertook an activity-based costing exercise to identify the resources required to support each service or activity related to the review of applications subject to the fees. The activity-based costing exercise focused on developing full costs consistent with Treasury Board’s Guidelines on Costing. (see footnote 3) Costs were calculated using internal time tracking data and salary costs over an 18-month period. Full costing includes program services, program management, and corporate and administrative costs that support Health Canada’s review of applications to register pest control products.

The costing exercise revealed that in many cases increased fees are appropriate, including increased fees for the evaluation of metabolism and residue data. In other cases, changes in scientific methodologies and administrative efficiencies have reduced costs to Health Canada and justify a reduction in fees. That is the case, for example, for the evaluation of toxicology data.

The fees are listed in Schedules 1, 2 and 3 below. Details are also provided where the fees deviate from the 30% level of cost recovery; represent a new approach from the 1997 fees; require an explanation of rationale; or were changed as a result of stakeholder comments.

Fees for the issuance or amendment of a certificate of registration of a pest control product may be based on one or several of the components listed in Schedule 1.

Schedule 1 — Fees for applications to register, or to amend the registration of, a pest control product other than a semiochemical or microbial agent

Item

Component of Application

New Fee

Previous Fee

Average Cost to Health Canada

New Fee / Cost to Health Canada

Explanatory Note

1

Product chemistry — active ingredient

$4,873

$1,172

$16,244

30%

N/A

2

Product chemistry — end-use product or manufacturing concentrate

$2,713

$1,172

$9,042

30%

N/A

3a

Toxicology data accompanying an application to register a pest control product that consists of or that contains a new active ingredient

$75,807

$98,248

$252,690

30%

N/A

3b

Toxicology data accompanying an application to register a pest control product — or to amend the registration of a pest control product — that contains a registered active ingredient

$15,830

$35,456

$52,768

30%

N/A

3c

Toxicology data — acute toxicity studies only

$2,954

$4,274

$9,847

30%

N/A

4a

Exposure data accompanying an application to register a pest control product that consists of or that contains a new active ingredient

$17,498

$24,384

$58,325

30%

N/A

4b

Exposure data accompanying an application to register a pest control product — or to amend the registration of a pest control product — that contains a registered active ingredient, when a new risk assessment is necessary

$5,758

$24,384

$19,192

30%

N/A

4c

Exposure data — other

$5,214

$9,742

$17,380

30%

N/A

5

Metabolism data

$28,943

$6,034

$96,475

30%

N/A

6

Residue data

$15,838

$8,448

$52,794

30%

N/A

7a

Environmental fate data accompanying an application to register a pest control product that consists of or that contains a new active ingredient

$42,685

$26,953

$142,284

30%

N/A

7b

Environmental fate data accompanying an application to register a pest control product — or to amend the registration of a pest control product — that contains a registered active ingredient, when a new risk assessment is necessary

$23,637

$26,953

$78,790

30%

N/A

7c

Environmental fate data — other

$11,546

$6,738

$38,488

30%

N/A

8a

Environmental toxicology data accompanying an application to register a pest control product that consists of or that contains a new active ingredient

$37,277

$14,882

$124,257

30%

N/A

8b

Environmental toxicology data accompanying an application to register a pest control product — or to amend the registration of a pest control product — that contains a registered active ingredient, when a new risk assessment is necessary

$23,690

$14,882

$78,966

30%

N/A

8c

Environmental toxicology data — other

$2,465

$3,720

$8,216

30%

N/A

9

Value and effectiveness data for a pest control product

$906

$906

$35,042

3%

Health Canada has recently changed processes for assessing value; costs for this new approach have not been quantified. Consequently, Health Canada proposes to maintain the existing fee at this time. Any future changes to this fee will be made following stakeholder consultation.

10

Identification of compensable data

$2,162

—

$6,486

33%

The compensable data assessment is a component of an application for a pest control product subject to the data protection provisions of the Pest Control Products Regulations.

Health Canada has committed to developing a database of compensable data that applicants can consult when seeking to register generic pest control products. This tool will ensure that greater information is shared with stakeholders. Upon its completion, the time required for the data compensation assessment will be less than it is currently. Resultant savings will be considered in future re-assessments of the application fees.
Establishing fees for microbial agents and semiochemicals

When Health Canada’s current fees came into effect in 1997, the pesticidal use of microbial agents and semiochemicals (e.g. bacteria and insect pheromones) was considered to be a new and emerging technology. Since the scientific methodologies and data requirements remained under development, it was not possible to accurately determine the full costs to review applications to register products within this class. Therefore, these substances were exempt from application fees associated with scientific review; currently, applicants are only required to pay the basic administrative fee payable for all types of applications.

Since this time, Health Canada has gained considerable experience with reviewing these products. In developing the fees for this class of products, Health Canada reviewed applicable U.S. EPA fees, where applications to register these types of products normally receive the maximum fee reduction available. Given the U.S. EPA’s approach to fees for these products, and to facilitate the registration of products with lower risk profiles, the Canadian fees for this class of product are equal to the minimum U.S. EPA fee.

Schedule 2 — Fees for applications in respect of a pest control product that is a semiochemical or microbial agent

Item

Type of Application

New Fee

Previous Fee

Average Cost to Health Canada

Fee / Cost to Health Canada

Explanatory Notes

Semiochemicals, other than straight-chain lepidopteran pheromones, and microbial agents

1

Registration of a new active ingredient — food use

$7,236

$262

$197,844

3.6%

N/A

2

Registration of a new active ingredient — non-food use

$4,341

$262

$213,783

2.0%

N/A

3

Amendment of registration — new risk assessment necessary — environmental fate data, environmental toxicity data or exposure data

$2,894

$262

$176,897

1.6%

N/A

4

Amendment of registration — data required, label changes

$1,447

$262

$107,983

1.3%

N/A

5

Amendment of registration — data required, other

$1,158

$262

$79,369

1.5%

Includes change in source of active ingredient or formulation.

6

Amendment of registration — no data required

$290

$154

$7,207

4.0%

N/A

Straight chain lepidopteran pheromones

    

7

Registration of a new active ingredient

$579

$262

$39,239

1.5%

N/A

8

Amendment of registration

$290

$262

$85,982

0.3%

N/A
Fees for other applications in respect of a pest control product

Health Canada prescribes fees for a number of review activities that may not result in the registration of a pest control product, or the amendment of an existing registration, or do not otherwise fit within the fee schemes of Schedule 1 or 2. These activities and their fees are described in Schedule 3.

Schedule 3 — Fees for other applications in respect of a pest control product

Item

Type of Application

New Fee

Previous Fee

Average Cost to Health Canada

New Fee / Cost to Health Canada

Explanatory Notes

1a

Research authorization — major crops, other than research authorizations set out in paragraphs (c) and (d)

$5,080

$150

$16,932

30%

N/A

1b

Research authorization — minor use crops, other than research authorizations set out in paragraphs (c) and (d)

$5,080

$150

$16,932

30%

This fee will be required only in limited circumstances as the size of trials needed to support a minor use registration would normally fall under a research exemption or the research notification criteria.

1c

Research authorization — microbial agents, semiochemicals and any substance listed in subparagraph 1(d)(ii) of these Regulations

$1,217

$150

$16,932

7%

In order to continue to support low-volume, niche products and non-conventional products, the fee will be comparable to the U.S. EPA Pesticide Registration Improvement Extension Act of 2012 fee for experimental use permit for biopesticides (straight chain lepidopteran pheromones).

1d

Research authorization — greenhouse crops and non-agricultural uses

$1,217

$150

$16,932

7%

Research authorizations are not normally required for studies conducted to support minor use registrations as the studies are usually conducted on fewer than five hectares and would normally fall under the research exemption or research notification criteria established in the Pest Control Products Regulations (with the exception of operational/demonstration trials and research in greenhouses).

The original proposed fee presented in the March 2014 consultation document was $5,080; however, research in these areas do not qualify for a fee exemption or for the research notifications fee. To not impede research on greenhouse crops, which is typically submitted by smaller companies, the fee will be aligned with fees charged for Item 1c of this schedule.

2

Research notification

$247

$0

$1,841

13%

The original proposed fee presented in the March 2014 consultation document was $552. After consideration of stakeholder comments, Health Canada reduced the fee to $247 to better align with the minimum fee related to the average level of effort required by Health Canada to process an application.

3a

Registration of active ingredient to be used in pest control product manufactured only for export

$7,827

$4,601

$25,948

30%

These fees are based on the processing fee and relevant component costs from Schedule 1 (Items 4b and 9) to better reflect the data requirements required to do the assessment.

3b

Amendment to registration of active ingredient used in pest control product manufactured only for export

$1,133

$154

$7,498

15%

The activities associated with this type of amendment are similar to the costs associated with processing an application; the fee is set at the same level (e.g. section 3 of the Regulations).

4a

Specification of maximum residue limit for a previously unexamined pest control product

$125,461

$8,448

$259,520

48%

The fee for Maximum Residue Limits (MRLs) are based on resources required to conduct such reviews rather than on whether they are for domestic use or for imported food commodities, which is consistent with the goals of the World Trade Organization Sanitary and Phytosanitary Agreement. The fee is significantly lower than the equivalent U.S. EPA fee for an import tolerance. It was recognized that the fee should be reflective of the costs to Health Canada for evaluation services in respect of MRLs and at the same time be both affordable to industry and be reflective of the smaller Canadian market. Should a submission for a Canadian registration follow an existing import MRL, the fees for the Canadian registration will take into account the work already completed so as to not charge for components already assessed.

Under the current cost recovery framework, MRLs for new active ingredients and previously registered active ingredients are charged a fee of $8,448; however, this does not reflect the amount of work that is actually required to review these applications. Consequently, the fee has been raised to $125,461 for the specification of MRLs for a previously unassessed pest control product.

4b

Specification of maximum residue limit for an unregistered use of a previously examined pest control product

$15,838

$8,448

$58,113

27%

Fees related to MRLs have been divided to better reflect the higher level of work required for previously unassessed active ingredients. The fee will be based on the processing fee and relevant component costs from Schedule 1 (chemistry, metabolism, human acute and chronic toxicology, and residue data) to reflect more robust data required for the application — currently only the residue data fee is charged for a previously assessed active ingredient.
Processing fee

An updated processing fee of $1,133, found in section 3 of the Regulations, will apply to each application made under Schedule 1 and for those pest control products listed in section 3 of the Regulations. As indicated during Health Canada’s consultations on the regulatory proposal, only the processing fee will apply for applications for an emergency registration under section 18 of the Pest Control Products Regulations (PCPR) to permit the use of a pest control product in the emergency control of a seriously detrimental infestation. The current basic application fee is $262, and the average cost to Health Canada of processing an application is $3,777. Thus the fee represents 30% of the cost to Health Canada.

Minimum fee

The minimum fee for applications that do not include a component set out in Schedule 1, that are not mentioned in Schedule 2 or 3 and do not require an evaluation will be $247. The Regulations will increase the minimum fee to $247 from the current amount of $150 set in 1997. This amendment to the minimum fee is directly related to the average level of effort required by Health Canada to process an application that does not require significant science review. The average cost to Health Canada for processing these applications is $825. The $247 represents approximately 30% of the average costs.

Annual adjustment of application fees

The Regulations will establish an annual adjustment to increase user fees associated with applications in relation to pest control products by 2%. The annual fee increase will be applied automatically on April 1 of each year rounded up to the nearest dollar.

Consistent with other policies already in place at Health Canada, the 2% annual fee adjustment is based on a five-year weighted average of public service wage adjustments and the Core Consumer Price Index (CPI) — Weighted Index.

Annual fee adjustments are consistent with other international jurisdictions, which make adjustments to their fees to reflect changing costs and workload. For example, the U.S. EPA pesticide application fees increase by 5% every second year.

The current lack of adjustment capability has not allowed fees to keep up with inflationary increases to Health Canada costs. Increasing fees in small increments on an annual basis will provide sustainable funding, operational predictability for both Government and industry, and lessen the impact of more substantial increases at a later time.

Annual charge

The annual charge applies to each registered product. Revenues from the annual charge help defray the costs of post-market regulatory activities essential to health and environmental protection, including the cyclical re-evaluation of older pest control products and special reviews. These regulatory activities help ensure that registered products continue to meet evolving scientific requirements and are adequately regulated throughout their lifecycle. Under these Regulations, the maximum annual charge will be increased from $2,690 to $3,600 and the minimum annual charge will be increased from $75 to $100. These increases were calculated based on applying a cost of living increase to the current minimum and maximum annual charge, taking into account similar charges in other jurisdictions, the results of the cost-benefit analysis and stakeholder input.

The United Kingdom and Australia apply annual charges in combination with annual levies based on a percentage of product sales for each registered pest control product. The U.S. EPA has the authority to charge each registrant a maintenance fee up to a maximum amount, which is updated every five years through its regulations. To accommodate small business, the U.S. EPA can adjust the maintenance fees based on company size.

The annual charge applied to each registered product is the lesser of $3,600 or 4% of annual sales with a minimum of $100. The policy of providing incentives to register niche products with low sales has been in effect since the cost recovery regime was first established in 1997. This policy supports the availability of niche products of importance to Canadian users (e.g. the agriculture sector).

The annual adjustment of 2% will not apply to the annual charge, as this could result in the annual charge rapidly exceeding the average comparable charge applied by the U.S. EPA.

Full payment for research authorizations and products manufactured for export

The Regulations have been amended since their Canada Gazette, Part I, prepublication to require full payment at the time of application for Schedule 3, paragraphs 1(a) and (b) $5,080 (research authorizations) and Schedule 3, paragraph 3(a) $7,827 (manufacture for export). These submissions currently would qualify for the incremental payment option of 10%, 25% and 65% established in subsection 7(3) of the Regulations because they are greater than $2,500. However, these submissions do not follow the same administrative process as applications to amend a registration or to register a pest control product described in Schedules 1 and 2; these have shorter processing times (180 days and 67 days respectively in comparison to other reviews that can take up to 22 months). Full payment of these fees at the time of application is therefore warranted to avoid Health Canada and applicants having to process three separate invoices over a period of only a few months.

Regulatory and non-regulatory options considered

Status quo

Health Canada considered maintaining the existing cost recovery framework. However, current fee levels do not accurately reflect the current costs to Health Canada of application review activities or the benefits accruing to industry from this service. As costs continue to increase, Health Canada’s ability to maintain service standards for application review would suffer; alternatively, Health Canada would need to reallocate funds from essential post-market review activities in order to maintain pre-market review performance.

Updated fees and annual charge (approved option)

The Regulations will better reflect the current costs of application review activities and ensure a more appropriate cost-sharing balance between Government and applicants and registrants of pest control products. By retaining the additional revenues resulting from the increased fees, Health Canada will be able to maintain or improve service delivery standards for reviewing pre-market applications as well as improve the timeliness and transparency of post-market review activities that help protect the health and environment of Canadians.

Costs and benefits

The costs and benefits of the Regulations are based largely on a cost-benefit analysis commissioned by Health Canada in August 2014. (see footnote 4) The analysis assumed that there would be no change to the PMRA’s funding levels (as this is not part of the regulatory proposal itself) and estimated the impacts that the changes to the fees and annual charge presented in the Pesticide Cost Recovery Pre-Proposal Notice (see footnote 5) would have on pest control product registrants, distributors and users. (see footnote 6)

As the fees and charges have changed since the 2014 analysis was commissioned, the cost-benefit statement (below) has been updated accordingly. The cost-benefit statement has also been updated to reflect the fact that the increased revenues from the fees and charges will be retained by Health Canada under the Regulations.

Costs

Industry responses to a survey, which was part of the cost-benefit analysis, suggested that on average 50% of application fee and annual charge increases would be passed through the supply chain to pest control product users. Based on this assumption, it is estimated that the Regulations will reduce net revenues of pest control product registrants by 0.8% and lead to a 0.11% increase in pest control product prices paid by users.

Industry survey respondents also indicated that increased application fees would have a small effect on incentives to register new pest control products, with an estimated reduction in pest control product applications of no more than 2 to 6%. Based on an extrapolation of responses, it is estimated that roughly 150 (approximately 2%) pest control products currently registered will be discontinued by registrants as a result of the increase to the annual charge, most of which have no sales or very limited sales in Canada.

Benefits

A number of non-quantified benefits will result from the fee increases and Health Canada retaining the additional revenues. By establishing most fees at approximately 30% of costs, the Regulations will ensure a more appropriate cost-sharing balance between the beneficiaries of this service: specifically, pest control product registrants, who benefit commercially from access to the marketplace following a registration decision; and the public, which benefits from access to innovative products to control pests.

Increased revenues from the new application fees will also allow Health Canada to maintain or improve service delivery standards for reviewing pest control product applications. Improvements will include reduced review timelines for applications to amend formulations (from 9 months to 6 months) and reduced timelines to generate compensable data lists (from 450 days to 365 days). These improvements will contribute to greater predictability and timeliness of pre-market reviews.

Revenues from the annual charge are used to help defray the costs of post-market regulatory activities, such as the cyclical re-evaluation of older products (15 years after the last major registration decision), so that Health Canada can ensure that registered products continue to meet modern scientific standards and conduct special reviews any time there are reasonable grounds to believe that a registered product poses unacceptable risks.

By retaining the additional revenues, Health Canada’s capacity to improve the timeliness and engagement with affected stakeholders on post-market regulatory decisions will enhance the transparency of post-market regulatory activities. Faster post-market decisions will support timely identification of potential health and environmental risks and implementation of risk management measures where unacceptable health and environmental risks are identified.

Projected revenues

Overall, the Regulations will result in approximately $4.3 million in additional revenue in the first year, revenue that will be retained by Health Canada. Health Canada currently collects approximately $9 million in fees for services and annual charges related to pest control products; therefore, it is anticipated that the net revenues generated by the Regulations will increase to $13.8 million annually by year five.

Projected revenues (millions of dollars)

Revenue Sources

Current Average Revenues

Projected Revenues — New Fees

Year 1

Year 2

Year 3

Year 4

Year 5

Based on estimated annual increase of 2% to application fees

Application fees

3.6

6.3

6.4

6.6

6.7

6.8

Annual charge

5.4

7.0

7.0

7.0

7.0

7.0

Total revenues

9.0

13.3

13.4

13.6

13.7

13.8
Cost-benefit statement

Category

Base Year 2016

Final Year 2020

Total (PV) [7%]

Annualized Average
 

(M $C)

(M $C)

(M $C)

(M $C)

Quantified impacts (in Can$, 2016 price level / constant dollars)

Monetized

        

Benefits — Increased revenues to PMRA

4.30

4.80

33.90

4.56

Costs — Registrants Application fees

1.35

1.60

11.30

1.48

Costs — Registrants Annual charge

0.80

0.80

5.60

0.80

Costs — Consumers Higher product prices

2.15

2.40

17.00

2.28

Net benefits

0.00

0.00

0.00

0.00

Quantified but non-monetized

Benefits

n/a

Costs

  • Small reduction in future registrations of active ingredients and pest control products as a result of the application fees (no more than 2 to 6%).

  • Small increase in the number of products discontinued or not renewed (estimated at approximately 2%).

Unquantified

Benefits

  • Increased equity resulting from a shift in costs to direct beneficiaries.

  • Fees and charges that better reflect actual service costs.

  • Increased funding for core activities, which will result in:

    • improved timeliness and transparency of post-market regulatory activities; and

    • maintained or improved service delivery standards for pre-market reviews.

Costs

n/a

Dealing with uncertainty/risk
 

  • Health Canada developed the estimate of the incremental fees.

  • Monte Carlo simulation not undertaken — monetized net benefits are zero because the Regulations involve a shift in the allocation of costs, not the generation of new costs.

As summarized in the cost-benefit statement, the monetized costs (i.e. to pest control product applicants and registrants) equal the monetized benefits (i.e. to Government/Canadians) because the Regulations involves a shift in the allocation of costs, not the generation of new costs.

“One-for-One” Rule

The “One-for-One” Rule does not apply to these Regulations, as user fees are considered to be out of scope of the “One-for-One” Rule as stated in Appendix B of Controlling Administrative Burden That Regulations Impose on Business: Guide for the ‘One-for-One’ Rule. (see footnote 7)

Small business lens

As stated in Hardwiring Sensitivity to Small Business Impacts of Regulation: Guide for the Small Business Lens, “taxes, fees, levies and other charges, because they constitute transfers from one group to another, are not considered to be compliance or administrative costs, whether they are intended as incentives to foster compliance and change behaviour or whether their purpose is to recover the costs of providing a service.” (see footnote 8) Therefore, the small business lens does not apply to these Regulations.

Nevertheless, Health Canada recognizes that, in certain situations, fees might result in a burden on certain groups, or individual fee payers. Health Canada’s fee structure has always included measures not to discourage the availability of products to Canadians, as well as to encourage innovation and access to new products. The Regulations include mechanisms that will continue to provide reductions to pre-market review fees and minimum annual charges where products have low sales volumes, thereby supporting small businesses and niche markets.

Consultation

Stakeholder consultations on the modernization of the pest control product cost recovery regime began in 2010. Consultations included

A summary of these consultations can be found in the Regulatory Impact Analysis Statement for the proposed Pest Control Products Fees and Charges Regulations, which were prepublished in the Canada Gazette, Part I, on June 11, 2016.

Canada Gazette, Part I

The proposed Regulations were prepublished in the Canada Gazette, Part I, for a 75-day consultation period, which ended on August 25, 2016. During the Canada Gazette, Part I, consultation period, Health Canada received comments from four stakeholders. While some stakeholders sought clarification on some issues, there were no major concerns or objections to the proposed Regulations.

Two stakeholders’ comments expressed overall support for the proposal provided that there are no reductions to Health Canada’s funding and that the increased revenues from the revised fees structure are directed to support priority activities such as

This is consistent with stakeholder comments during the previous consultations held on the proposed Pest Control Products Fees and Charges Regulations.

Better review times for Category B and C submissions

One stakeholder stated that the proposed increase in fees should result in better performance for review times by Health Canada and suggested that Health Canada establish reduced timelines for the review for Category B and C submissions in the Management of Submissions Policy (MOSP) for the domestic pesticide industry’s standard submission types.

Response

The review for a domestic class product involves the same level of review as for other product classes for a given application type. As a result, the application timelines as outlined in the MOSP do not differ based upon product classification. However, the MOSP will also be updated to capture reduced Category C timelines for certain applications.

On a routine basis, Health Canada reviews and evaluates application timelines and application categories to identify process improvements for both industry and Health Canada. In 2014, Health Canada proposed updates to the notification/non-notification policy, which were established in the Notification/Non-notification Directive (DIR2016-02). (see footnote 9) This has resulted in some Category B and C amendments qualifying as notifiable changes. This update lessened the financial and regulatory timeline impact for industry and resulted in government efficiencies.

In addition to the proposed changes outlined above, Health Canada is in the process of modernizing the electronic pesticide regulatory system (e-PRS). The viability of the proposal for shorter timelines cannot be considered until the full business impact of these proposed changes is assessed.

Pre-submission consultations

One stakeholder reiterated their request to have a formal pre-submission consultation process, including “subject to registration” requests, with associated fees and timelines established in the Regulations and the MOSP.

Response

Pre-submission consultations are a free service that provides applicants an opportunity to receive guidance from Health Canada on the requirements to register or amend a pest control product or guidance on a study protocol. Pre-submission consultations are not currently a mechanism to seek regulatory decisions regarding proposed data packages. Pre-submission consultations were introduced over a decade ago to improve the quality of regulatory submissions and thereby create efficiencies for both government and industry. While pre-submission consultations were originally targeted at smaller, first-time applicants, this opportunity to seek clarification on specific applications was also well received by larger, more experienced pesticide registrants.

Health Canada has undertaken a number of initiatives over the years to help applicants better understand their regulatory requirements through guidance documents and training. Health Canada regularly meets with stakeholders to discuss the pre-submission process and provides further guidance around meeting regulatory requirements. In addition, the use of new electronic tools such as webinars and electronic decision trees has made training more accessible for both government and industry.

Fees for enhanced pre-submission consultations are not being considered at this time. However, Health Canada will take the following measures:

Basic processing fee — $1,133

One stakeholder suggested that the basic processing fee of $1,133, which used to be broken down into Category A/B $262 and Category C/D $154, be split into two as before. The stakeholder recommended that Category A/B submissions should be $1,133, while Category C/D should be comparable with the semiochemical/microbial agent applications, other than straight-chain lepidopteran pheromones, and microbial agents ($290 for an amendment with no data required). The stakeholder suggested that there was very little difference in the work required for a Category D submission and a notification. Therefore, they proposed the fees should be similar.

Additionally, as this category includes label reviews, the stakeholder indicated that if label changes were being mandated by Health Canada, rather than at the request of the registrant, then there should be an exemption from this fee. The stakeholder has requested this to be considered for the final publication of the Regulations in the Canada Gazette, Part II.

Response

The basic processing fee covers all work performed by Health Canada on an application that is not specifically addressed by other fee components. This includes work such as setting-up applications within the internal tracking system (e-PRS), coordinating and managing applications through the review process, reviewing label and/or statement of product specifications forms, assessing fees (including fee reduction requests) and preparing decision letters and/or correspondence with the applicant. The level of effort is very similar across submission categories and types; therefore, Health Canada is not prepared to split the basic processing fee based on the category and type of submission and will maintain one fee for simplicity.

Regarding fees for label changes mandated by Health Canada — such as those stemming from a re-evaluation of an active ingredient that may require product labels to be updated to reflect changes to risk mitigation to ensure risks are acceptable to maintain registration — Health Canada must expend resources to verify that the label changes that are made address the new requirements sufficiently. If a similar amendment was requested by the registrant, and not as a result of re-evaluation, much higher fees could be charged to account for any scientific review that may be involved.

Furthermore, it should be noted that under the Notification/Non-notification Directive (DIR2016-02), (see footnote 11) a number of applications that were previously classified as Category C application can now be processed through notification applications and will be subject to lower fees ($247).

Performance measurement and penalties

One stakeholder requested clarification on how penalties will be imposed if the average time exceeds the published time by greater than 10%. The stakeholder stated that the proposal did not explain what recourse there was for companies whose submissions were delayed but might not be making a similar submission in the following calendar year. The stakeholder requested that a mechanism be established for refunding fees on submissions that did not meet their timelines.

Additionally, the stakeholder asked that Health Canada look to revise the MOSP to ensure timelines are appropriate if a submission type is consistently over or under the published time for completion.

Response

Pursuant to section 5.1 of the User Fees Act, where a regulating authority’s performance in a particular fiscal year in respect of a user fee does not meet the standards established by it for that fiscal year by a percentage greater than 10%, the user fee shall be reduced by a percentage equivalent to the unachieved performance, to a maximum of 50% of the user fee. Pursuant to subsection 7(1) of the User Fees Act, the reduced user fee applies from the day on which the annual report for the fiscal year is tabled under until the day on which the next annual report is tabled.

On a routine basis, Health Canada reviews the service standards established in the MOSP and consults with stakeholders on any proposed changes. These reviews evaluate application timelines and application categories to identify process improvements for both industry and Health Canada.

Emergency registrations

Two stakeholders commented that the Regulations do not mention specific fees for emergency registrations and recommended the Regulations be amended to include fees for these registrations.

Response

These comments were previously addressed in the December 2014 pre-proposal notice. As Health Canada indicated at that time, and as stated above, applications for emergency registrations under section 18 of the PCPR to permit the emergency control of a seriously detrimental infestation will only be charged the processing fee of $1,133.

Semiochemicals and microbial agents

One stakeholder noted that Schedule 2 fees for microbial agents and semiochemicals did not include any fees for pest control products (end-use products); rather it only established fees for new active ingredients and amendments to an existing registration. The stakeholder requested clarification about the fees that would be applied to end-use products that are semiochemicals or microbial agents.

Response

The stakeholder is correct: Schedule 2 does not set fees for microbial agents and semiochemical end use products. Health Canada will consider establishing fees for semiochemical and microbial agent end use products when the Regulations are reviewed (e.g. in three to five years).

Rationale

The Pest Control Products Fees and Charges Regulations will repeal the current Regulations Prescribing the Fees to be Paid for a Pest Control Product Application Examination Service Provided by or on behalf of Her Majesty in Right of Canada, for a Right or Privilege to Manufacture or Sell a Pest Control Product in Canada and for Establishing a Maximum Residue Limit in Relation to a Pest Control Product. The repealed Regulations will be replaced with the new Pest Control Products Fees and Charges Regulations. Revenues from the updated fees will establish an appropriate balance between public and private contributions for the assessment of pest control products and help Health Canada to maintain or improve its performance standards for pre-market science reviews. The timeliness and transparency of post-market review activities will also be improved as a result of these Regulations. This will benefit consumers and industry (pest control product applicants, registrants and users), while continuing to prevent unacceptable risks to human health and the environment.

Implementation, enforcement and service standards

Implementation

The proposed Regulations will come into effect on the day they are registered or April 1, 2017, whichever is later. Applications received before the Pest Control Products Fees and Charges Regulations come into force will continue to be subject to the existing fee regime.

Enforcement

Any unpaid fees or charges by applicants or registrants  will be collected according to standard practice. Furthermore, Health Canada can refuse to consider applications from registrants if they fail to pay a fee or charge as required under the Regulations, in accordance with paragraph 23(1)(b) of the Pest Control Products Act.

Service standards

The 2012 Treasury Board of Canada Secretariat Policy on Service Standards for External Fees supports the User Fees Act in relation to service standards. The policy states that the provision of services external to the federal government, for which fees are collected, must have service standards that are measurable and relevant for paying stakeholders. These service standards must be developed in consultation with paying and non-paying stakeholders. The service standards and consultation feedback must also be reported to Parliament annually. Departments must have a monitoring system in place to ensure that fee-related activities are subject to audit.

When the current fees regulations were first established in 1997, a Management of Submissions Policy (MOSP) was published that established service standards in relation to pest control product applications. In 2010, revised service standards were made available for stakeholder consultation. In 2013, the revised MOSP (see footnote 12) was published on Health Canada’s website. Performance against service standards is included in an annual report to Parliament required by the Pest Control Products Act. The standards are also discussed with stakeholders twice a year during meetings of Health Canada’s Economic Management Advisory Committee.

Health Canada will process submissions to register pest control products or amend registrations in accordance with the legislative framework and with the principles of its MOSP.

Examples of service standards set out in the MOSP

Category A submission (includes new active ingredients, new MRLs and major new use registration):

Category B submission (includes new formulations, changes in current formulations, new hosts and/or pests added to existing products):

Examples of similar service standards in the United States

Although a direct comparison is not possible due to the country-specific registration systems, the following examples provide an approximate range of service standards for similar application types in the United States.

Category A submission:

Category B submission:

Updates to MOSP

With the introduction of the fees and as indicated in the Pesticide Cost Recovery Pre-Proposal Notice, the MOSP will be updated to align with the coming into force of the new fees Regulations and will include the following:

Performance measurement and evaluation

Health Canada is committed to service improvements and reports regulatory performance against service standards as part of the Departmental Performance Report. (see footnote 13) In addition to the Departmental Performance Reports, Health Canada also reports annually to stakeholders through its Pest Management Advisory Council and the Economic Management Advisory Committee.

In addition to the above-mentioned reporting requirements, Health Canada must report to Parliament annually on performance against service standards.

As required under section 7 of the User Fees Act, Health Canada must report annually to Parliament on associated costs, revenues and performance. Health Canada will continue to provide this information through its annual report to Parliament, as it is also required by the Pest Control Products Act.

As required under the User Fees Act, the user fees charged by Health Canada will be reduced for not meeting established service standards the following year. The fee reductions will be determined based on the average time to complete all submission types falling under each performance timeline. If the quantity of approved submissions not meeting established service standards exceeds 10% for a calendar year, fees for that service line will be reduced the following year by a commensurate percentage, up to 50% of the user fee amount.

It is anticipated that a review of the Regulations will take place in three to five years, consistent with the Cabinet Directive on Regulatory Management. (see footnote 14)

Contact

Jordan Hancey
Health Canada
Pest Management Regulatory Agency
Policy, Communications and Regulatory Affairs Directorate
2720 Riverside Drive
Ottawa, Ontario
K1A 0K9
Email: pmra.regulatory.affairs-affaires.reglementaires.arla@hc-sc.gc.ca