[Recorded by Electronic Apparatus]

Thursday, May 2, 1996

.0911

[English]

The Chairman: Order.

There are no votes this morning, so we're in no great rush, unless members have other things in their schedule today.

Maybe we'll start, David, with you giving a summary, a recapitulation of what you said yesterday, and then we'll open the floor to questions.

Mr. David Rideout (Director General, Inspection Directorate, Department of Fisheries and Oceans): Thank you, Mr. Chairman.

There are just five points that I'd like to raise by way of introduction, following up on yesterday's discussion. The first is that the cost-recovery initiative for inspection services is part of the overall program review cuts of 1995, which is within the government's commitment to see some significant cuts within departments.

For us, the initiatives that have occurred with respect to these cuts and with respect to improved efficiencies are our quality management program, on which I gave a review, which is a program that essentially holds the plant processor responsible and accountable for the quality control of the plant.... We are part of the audit of that.

In terms of our own operations, we've reduced our lab facilities across the nation from 23 to 6. We've closed 30 field offices. We've reduced our employee situation by 134 full-time equivalent positions. The effective cost to taxpayers for the program has been reduced from $33 million for the 1991-92 fiscal year to $19 million for the 1997-98 fiscal year, which represents a reduction of 42%.

With respect to cost recovery, we've consulted widely across the nation. We had 31 sessions, including representation from 314 importers and approximately 300 processors.

We prepublished the regulations on April 13. There's a 30-day comment period. We'll be reviewing the comments after May 13. As well, we're committed to a one-year review, and I've taken some initiatives to begin that review immediately following the May 13 date.

So that's just a brief summary of what we introduced yesterday.

The Chairman: Thank you very much.

Mr. Scott (Skeena): You talk about inspection. Is your department responsible for not only inspection of fish but also inspection of seal meat?

Mr. Rideout: Yes, it is.

Mr. Scott: What kind of a certificate do you issue after you do the seal meat inspection?

Mr. Rideout: Generally, it's not a requirement of our inspection program to issue certificates with any product, including seal meat. The certificate requirement is generally that of the importing country. So it would depend on what the importing country has requested. I don't think that's different for seal meat than for any other product.

.0915

So the European Union, say, may wish to have a certificate of health, for example, that says the product was processed in an appropriate facility and so on. If the product complied, we would then issue a Canadian certificate that stated it complied with that.

Mr. Scott: The reason for my questions is that I've received information that there's a difficulty for people who are harvesting seals having the ability to export their product, simply because many, if not most, of the countries to where that meat would be sent require a meat inspection certificate not unlike what, I believe, the Department of Agriculture and Agri-Food would be providing here in Canada. The information I have is that Fisheries and Oceans doesn't have the ability to issue that kind of a certificate and in fact issues what I guess what we could call a fish inspection certificate. Consequently, many seal exporters are having great difficulty reaching markets, because the customers have to have certificates consistent with the product they're purchasing.

Are there any comments you could make with regard to that? Apparently this is a serious issue on the part of many exporters, particularly in Newfoundland and Labrador. Could you expand on that a little bit?

Mr. Rideout: As I indicated yesterday, I'm relatively new to this job, but I can give you what is a brief overview from my perspective. Possibly Mr. Prince could provide some details if we have them available here.

A meat inspection certificate would I think require that it be inspected by a veterinarian. We do not have any veterinarians on staff at Fisheries and Oceans. We have no authority under our act or regulations to issue that type of certificate. But the seal product does fall within the auspices of our act and regulations. As a consequence, we can only issue the certificate we have the authority to issue, that is, a fish inspection certificate.

Mr. Scott: So it might be fair to say, then, or it might be fair to at least draw the conclusion, based on the information we've received, that in Canada we're harvesting those seals under the auspices of the Department of Fisheries and Oceans, and the inspections you are giving would not be consistent with the certificates of inspection other countries would accept in terms of the product.

It would seem to me, then, there's at least a good possibility that the arguments that have been advanced to this committee - or to me, at least - are valid in that there seems to be a bureaucratic hurdle for those in Canada who are harvesting seals, and who want to sell that product abroad, to be able to do that.

Have you no corresponding agreements with Ag Canada or with other federal departments that would allow the proper certificates to be issued for this product so that the people actually out there trying to make a living doing this can feel confident that they would be able to have their product accepted in other countries?

Mr. Rideout: First of all, the inspection we would do on any product, seal or fish or whatever, is one in which we are providing the equivalent kind of assurances of health safety and quality for that product. So from that point of view, I think there most likely would be equivalency between what we're doing and what Agriculture might be doing.

Mr. Scott: Are you aware of any circumstances where people have actually exported seal meat from Canada only to have the product not accepted by another country on the basis that the proper certification was not in place?

Mr. Rideout: No, I'm not aware of any.

Have we had any complaints respecting that?

.0920

Mr. Cameron Prince (Director, Fish and Fish Products Branch, Department of Fisheries and Oceans): We're not aware of any difficulties that any exporters of seal meat have encountered in any other country as a result of not having the proper certification.

Mr. Scott: As a result of not having this certification that they actually require to be exporting meat to other countries...?

Mr. Prince: As far as I'm aware there has been a long-standing inspection program for seal meat in the province of Newfoundland. Protocols have been established. Agriculture and Agri-Food Canada is fully aware of our program and we're not aware of any difficulties in that area.

Mr. Scott: Do you have a breakdown of your costs for fish inspection on the west coast versus the east coast?

Mr. Rideout: We can get that for you.

Mr. Scott: But you do fish inspection on both coasts.

Mr. Prince: Yes.

Mr. Rideout: We do fish inspection across the country. We have a region in Winnipeg that's -

Mr. Scott: For freshwater fish.

Mr. Rideout: Yes.

Mr. Scott: I wonder if it would be possible to get that breakdown. The fishery on the Atlantic coast is much larger, and we recognize that, but it would be good for the committee to see that.

Mr. Rideout: We'll get it for you.

The Chairman: Thank you, Mr. Scott. Mr. Wells.

Mr. Wells (South Shore): The amount you're raising through inspection is $4.8 million. I understand that $4 million of that is new.

Mr. Rideout: That's correct.

Mr. Wells: Is that $4.8 million divided between east and west coast?

Mr. Rideout: Yes, it's east and west coast, $2.4 million from importers and $2.4 million from the domestic industry.

Mr. Wells: How did the department arrive at that breakdown? First, how did they arrive at the $4.8 million? Then why did they divide it between domestic and import? What was the rationale?

Mr. Rideout: I believe the rationale was related to raising $10.8 million from the program, in other words to reduce the effective cost of the program from $33 million to $19 million. We've raised $6 million of that through reductions, lab rationalization and increased efficiencies. To maintain the standard of service, we needed to raise the other portion of that $10.8 million through cost recovery.

Mr. Wells: So it's a matter of simple arithmetic, not based on the service provided?

Mr. Rideout: I guess that's what I'm saying. Through lab rationalization, through improved efficiencies and rationalization of our office structure and so on, we felt we could raise $6 million for the cuts from our service, but we could not raise the entire $10.8 million.

Mr. Wells: So the bottom line is that you had to come up with $10.8 million. You decided you could reduce your budget by $6 million, which left $4.8 million.

Mr. Rideout: Which we've done, yes.

Mr. Wells: So it's based on simply a budgetary requirement you had to make.

Mr. Rideout: Yes.

Mr. Wells: What about the rationale between the division into one-half domestic and one-half import? Is that simply to spread the cost so that nobody would have to pay a disproportionate share?

Mr. Rideout: No. In the domestic market we found in terms of fish consumption that there was a fifty-fifty split between import and domestic product. As well, I think there's a trade element here. If we had raised the entire $4.8 million from our import inspection program without having a similar effect on our domestic industry, we could be setting ourselves up for a trade complaint.

Mr. Wells: So you say a fifty-fifty split between domestic.... How do you define a domestic operation as opposed to import?

Mr. Rideout: I'm saying domestic consumption is 50% import product and 50% domestically produced product.

.0925

Mr. Wells: Did you determine at some point the number of domestic processors that are also importers? In fact, do both actually end up paying double because they import their fish, process it, and then export it?

Mr. Rideout: I believe that would have been taken into consideration, yes. Plus I think it would have been raised.

Mr. Wells: You think it was taken into consideration or you know it was taken into consideration?

Mr. Rideout: I wasn't there during the initial stages of the development of the program, but I -

Mr. Wells: I can suggest that in my initial discussions on this - and this was before my discussions with your colleague, where I raised this as well - there was a lot of surprise in the department when they recognized in Nova Scotia that many of our so-called ``domestic'' producers are also the importers. They're one and the same. Surprise was expressed in your department from people I discussed it with that in fact they're one and the same and these people were paying twice.

Mr. Rideout: First of all, I was six years in southwest Nova Scotia as a fish inspector, and it comes as no surprise to me that this was occurring, because I know we were shipping great quantities of fresh dressed cod and haddock down into the Boston market, with fresh dressed pollack coming back for salting. The area people there know very well that is what goes on, and the area chief from southwestern Nova Scotia was one of the key people in the consultations.

Mr. Wells: Who was that person?

Mr. Rideout: Mr. Libby. He was one of the coordinators for us, and I'm sure he would have understood this is standard practice.

Mr. Wells: I've no doubt whatsoever Mr. Libby understood that, and I wish some of the things Mr. Libby had said had been followed. But we'll get into that again later.

Do you know how many there are, if we can quantify it - if we can just take the Nova Scotia situation as an example of the domestic...or also the importers?

Mr. Rideout: No. I could make a guess, but I don't know exactly.

Mr. Wells: Would you make a guess?

Mr. Rideout: I would think it would be twenty to thirty, from my experience.

Mr. Wells: Would you provide me with a list of those?

Mr. Rideout: Sure. Those are plants that are -

Mr. Wells: Both.

Mr. Rideout: - importers and exporters.

Mr. Wells: They're going to pay part of the 50% that's charged to the domestic and they're also going to pay part of the 50% that's allocated to importers.

I was interested in hearing your expression yesterday about ``consultations'' with industry. I've met with the same industry, who feel there were no consultations. In fact, my understanding is the meetings were not billed as consultations when the industry met with Mr. Libby, they were billed as information sessions. Can you tell me what your understanding is about the meetings you refer to? Were they meant to be simply to advise the industry of what was coming down the tube, or were they meant to be consultation, which I interpret as meaning you were looking for advice and if that advice was reasonable advice you would take it into account when putting the regulations and the fee structure together? Do we actually have consultations or do we have information sessions?

.0930

Mr. Rideout: I think you had both. We went out to the industry and provided information on the budget situation that we are facing within the inspection service of the department. We provided some indications of the kinds of approaches that might be appropriate in order to raise the$4.8 million, and we received a number of suggestions of possible approaches. Some were verbal and some were written. We took those and we developed a proposal based on that, and then we reviewed that with the broad-based industry advisory group.

Mr. Wells: Did you take a proposal with you to these information sessions, or did you simply go into the meetings saying ``We're getting $4.8 million from this sector and this is how we're going to collect it''?

Mr. Rideout: I don't think they would have said that. I think what would have occurred is that they would have said ``We need to raise $4.8 million from this sector, and here are some possible approaches that we could take''.

Mr. Wells: So they did present some possible approaches to this group?

Mr. Rideout: I would say yes.

Is that right?

Mr. Prince: Yes.

Mr. Wells: Would you provide me and this committee with the information that was provided to that group during these information sessions? There were eight of them, I believe, and I assume that the same information was given to each of the eight groups that met. Can you tell me who was invited? I'd like a list.

Mr. Rideout: I can tell you now. We invited all of the industry. It was found afterward that we might have missed some members, but the intention was to invite all of the industry.

Mr. Wells: I don't doubt the good intention. Can you tell me how many people you didn't invite?

Mr. Rideout: Yes. I think it worked out to 20%.

Mr. Wells: To date, have those 20% received directly from your department any information that this is happening?

Mr. Rideout: Well, there is a Canada Gazette notice that went out on April 13, which is also another form of consultation in terms of getting industry's views on the proposal. So it is yet another forum. Prior to that, a communiqué was sent out to the industry.

Mr. Wells: When you say ``the industry'', does that mean all members or selected members?

Mr. Rideout: It would be to all registered fish-processing facilities.

Mr. Wells: Okay. But the first communiqué that went to all, you say, went to 80% and 20% were missed.

Mr. Rideout: What I'm saying is that I think the intention of the information sessions or consultations was to get the message out to every registered plant processor.

Mr. Wells: But you now recognize that that didn't happen, that in fact you missed 20% of the industry.

Mr. Rideout: There was 80%, yes. There were some smaller processors, I think.

I'm sorry. I guess that occurred only in Nova Scotia. The rest of the country was fully covered.

Mr. Wells: How many processors do you have registered in Nova Scotia?

Mr. Rideout: Approximately 320, I think.

Mr. Wells: So about 70 or 75 didn't get notice?

Mr. Rideout: On the information side.

Mr. Wells: Those must be the 75 that called me.

Mr. Rideout: Most likely.

Mr. Wells: I understand that most of them didn't get notice until the province gave it about ten days ago, which they did because they had many complaints from processors who knew nothing about this coming down because they had never been notified.

You say that they were also given notice by having it gazetted. Were each of the 300-plus sent copies of the Gazette? Is that what you're suggesting? Tell me how that would be notice to the fish plant owners.

Mr. Rideout: That was distributed through, as I understand it.... I think all Canadians can subscribe to the Canada Gazette or can achieve it through their libraries, and so on.

Mr. Wells: I would hate to think that your method of advising fish plants is to put it in the Gazette.

Mr. Rideout: Please don't understand that that's what I mean. I'm saying as a start that it is available to all Canadians.

.0935

Mr. Wells: I understand that. I'm one of the few subscribers.

Mr. Rideout: As I understand it, we distribute it through associations to its members. So if they weren't a member of an association, they most likely didn't get a copy.

Mr. Wells: Do you know how many of the 300-plus we're referring to are members of organizations?

Mr. Rideout: No, I don't.

Mr. Wells: Would you be surprised if I told you it was less than 50%? Perhaps that's an unfair question.

Mr. Chairman, I don't want to take all of the time, but I want to make sure I exhaust this topic.

The Chairman: Mr. Byrne is next, if you want to take a rest.

Mr. Wells: If I have time, I'd like to continue on with this particular consultation issue and then come back to some other issues.

Mr. Verran (South West Nova): I'd like to pass my time to Mr. Wells, Mr. Chairman.

The Chairman: Time is not an issue, then.

Mr. Wells: Okay.

So as of today, how many of the fish plants that are federally registered have received some information directly from your department, excluding what may have been in the Gazette?

Mr. Rideout: All.

Mr. Wells: So what did you send, and when did you send it, to the remaining 20%?

Mr. Rideout: We sent a communiqué dated March 6.

Mr. Wells: What day did you send it?

Mr. Rideout: About March 19, as I understand it.

Mr. Wells: What did that communiqué say?

Mr. Rideout: The communiqué has been provided to the committee.

Mr. Wells: So that was the one that was sent to them.

Mr. Rideout: Yes.

Mr. Wells: As to the consultations that commenced on June 12, 1995, were there recommendations, suggestions, or ideas of any kind submitted to you arising out of those consultation or information sessions?

Mr. Rideout: Yes.

Mr. Wells: Would you tell us what those recommendations were and who made the recommendations?

Mr. Rideout: I'm afraid I can't do that, because I don't have the complete list. I saw one before coming to this meeting, prepared by the Fisheries Association of Newfoundland and Labrador. It provided a schedule of proposed fees, depending on the size of the plant, the number of employees, square footage - that type of thing. In terms of prior to the gazetting, I not sure how many others we had received in writing. But since the gazetting, we have received others, such as an importer from Toronto who has requested that we consider a half-cent-a-pound levy on import product rather than the fees we've set out.

I think the proposals we've received have focused in three areas: the small-plant/large-plant area, the small-importer/large-importer area, and the level of certification.

Mr. Wells: Would it be fair to assume, then, that you are prepared to take a serious look at the present fee structure and change it if inequities are shown?

Mr. Rideout: As I said yesterday, I've made some calls to some industry members to talk to them about the situation vis-à-vis the need to raise the $4.8 million, and their views on cost recovery itself, and implementing the one-year review, beginning that immediately. I personally would become engaged in that process to ensure that we had appropriate consultations following the implementation of the regulations. So we're fully committed to taking a look at all ideas.

.0940

Mr. Wells: Do you truly have an open mind with respect to making changes in that fee structure, or is it simply an exercise of listening?

Mr. Rideout: We have to look at all the ideas that have been put forward and see if we can construct something that might be workable. The problem to date is that most of the ideas have been verbal. The industry has not provided many written proposals that would provide us with something to really chew on.

The problem we face, for example, with the small plant and large plant issue is how you define a small plant. We've had some very serious difficulties doing that. I think many members of the industry recognize those difficulties because a small plant or an operation changes throughout the year.

The other side of it is that we can't get into a cost-recovery regime that becomes administratively costly to operate. There have to be efficiencies even within the operation of the regime itself.

But to answer your question, yes, we have a very open mind to finding a resolution to these problems.

Mr. Wells: You said you didn't receive written submissions from industry.

Mr. Rideout: We did receive some, but not as many as we would have liked in terms of formal proposals.

Mr. Wells: At any time through the consultation process - and I would like that in quotation marks because I think you realize that I don't think it was sold by your department as consultation - were there any requests during that process for industries to submit to DFO written proposals for changes? Or was the expectation that after the information session there would be more actual consultation where those views would be taken into account? Based on what I heard in my meeting with the processor, the latter is the case and not the former. I would like to get your answer.

Mr. Rideout: I would like to make two points. One is that unfortunately I wasn't there at the time. I haven't asked the question directly to staff, but from what I've heard since, there has been this concern that we haven't had written proposals. That's the first point.

I'd like to go back to the question of consultation. By way of introduction yesterday I wanted to inform you that I had come to this job from the position of executive director of the Fisheries Resource Conservation Council. That council prides itself on its consultations and the openness and transparency of its approach. I have been part of managing that consultative process for a year and a half. I've seen what has gone on with inspection and I see similar attempts to consult, from my view. But I can tell you that I will bring a very open and transparent consultative approach to the inspection service as director general.

Mr. Wells: Commencing right away?

Mr. Rideout: Absolutely. I've started the process already.

Mr. Wells: So you're suggesting through us to the industry that they take advantage of this 30-day period for comment, and then if they have concrete proposals they can be submitted and you will seriously consider them.

Mr. Rideout: Absolutely.

Mr. Wells: I want to get back to some of the recommendations that came out of the eight consultation meetings. Maybe I shouldn't call them recommendations. These were the summaries of the comments, concerns or ideas that came out. Whether or not they were actually recommendations we can decide.

In my meeting with the industry when we discussed these, some of the people I met had in fact been at these meetings either in Yarmouth or Sydney or wherever; some had not. I was told that one of the key recommendations or suggestions that came out of those meetings was that if cost recovery was a must - and they were told it was a must, that the $4.8 million had to be collected - their suggestion was that it be prorated according to the size of the processing establishment. Did that information ever get from the meetings in the region to the decision-makers in Ottawa?

.0945

Mr. Rideout: Yes.

Mr. Wells: Was it incorporated into the fee structure?

Mr. Rideout: It was incorporated into an option as one of the options to be looked at and it was reviewed with the committee that has been struck to review the policy initiatives of the inspection directorate.

Mr. Wells: The fee structure that was gazetted, did it distinguish between the small plant and the large plant, and if so how?

Mr. Rideout: No, it didn't. There is only one fee for plants. But the regulatory impact analysis statement does indicate that this was something that was considered and that there were difficulties in defining what is a small plant versus a large plant. There was also some concern about the administrative difficulties of implementing a two-tiered system.

Mr. Wells: So you're saying it was rejected for administrative purposes.

Mr. Rideout: No, sir, I'm saying it was rejected because it was very difficult to determine what is a small plant versus what is a large plant.

Mr. Wells: I'm having trouble with that one. I don't have any trouble. I can give you two examples, because I have probably the smallest and the largest in my riding. I have no desire to see the largest have to pay a lot more, but I do know the fee will put some of the smallest out of business tomorrow.

Mr. Rideout: I guess the question is whether you use number of employees, square footage, hours, or profit margin. What are the criteria you use to determine the fee structure, and what if those criteria change throughout the period, as it has been our experience occurs? For example, with employees, a plant may have four employees one day, five the next, eight the next, ten the next, depending on what quantities and species of fish are coming in. That was one of the real difficulties we faced.

I should say there may be other approaches. I'm hopeful when we get into the consultative process, post-regulations, we'll be able to stimulate discussion on other approaches.

Mr. Wells: You say ``post-regulations''. Does that mean after the small ones have to pay the fee and go out of business?

Mr. Rideout: It's my hope, sir, that we can implement the consultative process immediately, and if any ideas can be found we would implement them as quickly as possible.

The Chairman: Are you concerned about the size of the fee or the accumulation?

Mr. Wells: I'm going to get into the cumulative impact, but I thought I would set it up first.

The Chairman: You're doing very well.

Mr. Wells: On this topic, maybe I'll ask just one more question. I can give you a chance and then I can come back.

Mr. Scott: I would just like to say I do have some more questions, but I'm willing to let Derek go on, because he's on a roll here.

Mr. Wells: To some extent I'm happy to hear you recognize the concerns of some of the smaller plants. Is that a fair comment: that you recognize some of the concerns expressed by some of the smaller plants?

Mr. Rideout: Yes, but that's not new. The whole system has recognized those concerns and has tried to deal with them and felt the proposal does deal with them. There were some real difficulties in developing the proposal from the point of view of how you can find something that would be fair and equitable.

Mr. Wells: So because of the difficulty you decided to have one fee across the board. In other words, if it's too tough to tackle, just put one straight fee in -

Mr. Rideout: We had no proposals from industry on defining what is a small plant, a large plant.

Mr. Wells: With respect, the industry's position is they weren't given an opportunity to provide that information. They're expectation was after the information session there would be consultations where these sorts of things would be discussed. That never happened. That's the position of the industry. Perhaps you could comment on that.

Mr. Rideout: I'd say they still have that opportunity, through the Canada Gazette notice.

.0950

Mr. Wells: Of course that's why we're here, so we'll ensure that will happen.

Mr. Chairman, if I might just put this on the record, even though some of it's been answered.... Again, I'm trying to cover many of the issues that the industry discussed with me when I met with them on the issue of consultation.

When the people who were parts of the meetings in the regions finished their meeting with the DFO official, one of the recommendations they say they delivered to DFO officials was that a full consultation phase with the industry of the entire inspection program should take place prior to the department's implementation of the cost-recovery initiatives.

Was that part of the recommendation that came back to your department from your regional officials?

Mr. Rideout: I'm sorry; I haven't been aware of that, but I'd like to get some clarification. Are you talking about a full consultation on the entire inspection system?

Mr. Wells: Yes. The entire inspection program.

Mr. Rideout: I'll have to get back to you on that. I can't answer it. I don't know whether it was part of the review or not.

That was an incorrect statement. I'm sure that everything that was sent in was part of the review. Whether it was something that could be done was another question.

Mr. Wells: Would you go back through the record and review the recommendations that came out of the information sessions and advise this committee if one of the recommendations was a full consultation phase with industry? If it was, did it occur, and if not, why not? Because of your newness to the job, that is a question to which I don't expect to have the answer right now. I would ask you if you would take that question, check out the recommendation, and advise me if it was followed.

Mr. Rideout: I can tell you that if you have the recommendation there, then it was reviewed. I have enough confidence in the system to say that.

Mr. Wells: I have information basically that industry has told me was part of the consultation process.

Mr. Rideout: If it was part of the consultation process, then it was reviewed.

I can't tell you the reason why it was rejected. I'm not sure, but if they wanted a broad consultation on the overall program, I would think that would be seen as occurring in another forum for other reasons and that the cost-recovery initiative would be seen as being separate from that.

In terms of putting the cost-recovery initiative off, that is extremely difficult for us, because if we don't raise the $4.8 million from cost recovery we'll have to raise it from program funds.

Mr. Wells: I assume that the reality you're facing is that you have to cut your budget by a certain amount of money and what you don't cut internally you have to raise, and if you don't raise part of the $4.8 million you will have a further cut in your department.

Mr. Rideout: That's correct, and the major part of my budget is salaries.

Mr. Wells: Yes. I understand that.

I think this was in your evidence yesterday, but for the record can you clarify what has happened in your department over the last year with respect to downsizing?

Mr. Rideout: With respect to the inspection services directorate?

Mr. Wells: Yes, just the inspection services.

Mr. Rideout: As part of the program review one cuts, we have had a cut of $6 million. We reduced by $2 million in the first year and $2 million last year, and we'll be reducing by $2 million in this fiscal year.

I can't identify for you today the exact cuts that were done last year, but I think they were more in the range of laboratory rationalization and closure of some offices and the subsequent lay-off of some staff, if I'm not mistaken.

As well, we amalgamated the regions. The gulf and Scotia Fundy regions were amalgamated in terms of inspection services, and headquartered out of Moncton.

.0955

Mr. Wells: I'll make just two more points. I want to go on the record here to tell you that I want to explore in more detail the issue of import sector and domestic sector. I've read all the background material that has come out from the department. Everything I read talks about $2.4 million from the import sector, $2.4 million from the domestic sector. In none of the information I've received from your department is there a recognition that in many cases this is one and the same. In fact, part of the domestic sector is also part of the import sector, and they actually ended up paying more than I think was anticipated when the concept was put together about separating the two, where in many cases they are not separate, especially in the ridings of Mr. Verran and myself.

I want to go on to the question of cumulative impact. Many of the questions we've been raising over the last number of months, especially through round tables Mr. Verran and I have been having with our industry for close to a year now, is the concern about the cumulative impact of not only this but also all other fees that are now being either increased or imposed on industry.

Can you tell me what impact studies have been done by either your division or elsewhere in the department to determine the impact of these fees on the viability of industry, and second, the cumulative impact of these fees, in addition to other fees either imposed or increased, on the viability of the industry, both domestic and as it relates to being able to compete in the foreign export markets?

That may be something you have to further research. I'd like to get a general answer now and perhaps a more thorough written answer when you've had more opportunity to review it.

Mr. Rideout: In terms of the impact of these fees on the industry with regard to gross revenues in the import sector, it's 0.2% of the value of $1.2 billion. Of fish imported into Canada, the cost-recovery initiative is 0.2% of that amount. In terms of the domestic centre, it's 0.08% of the $3.2 billion in the value of fish produced.

In terms of an overall impact analysis, I know the department had to raise $50 million from cost recovery, of which we are $4.8 million. In determining the $50-million figure, I suspect there would be some assessment as to how that could be done and what the impact would be. But I don't have that information specifically, and I don't know whether the component of our cost recovery is part of the development of our process.

Mr. Wells: When you reply to that question with information to the committee, after this meeting, I would ask that you answer for me that question specifically. I don't want an encyclopedia of information that I have to spend two hours reviewing to find the answer, which is what I got the last time I asked a question. I would like that question answered directly and concisely, as it was asked, without an encyclopedia of information with the answer buried inside it. Could I ask you to provide that to me?

.1000

Mr. Rideout: Yes. And the question exactly is?

Mr. Wells: It's on the record, I think, if you want to get a copy of the question from the record and respond to the question. I'm not interested in all the information. I want the question answered directly.

By the way, I've had that letter to the department in writing for four and a half months now, I think, without a response.

Mr. Rideout: I'm sorry - to our service?

Mr. Wells: No, to the department, DFO.

Mr. Rideout: I'll be able to respond only for the service I'm responsible for. I will pass on your request -

Mr. Wells: I only expect you to respond on what you are able to answer. I just make it for the record, as I do each time I speak to DFO officials. I keep asking for their response. I know there is an encyclopedia on my desk that may contain the information, but I haven't had the three hours to review it yet. I would just like you to answer that question as it relates to you, precisely and directly.

Mr. Rideout: Yes.

Mr. Wells: Thank you.

The Chairman: Mr. Scott.

Mr. Scott: Mr. Rideout, can you tell me how many employees are in your service altogether, including your regional headquarters and your headquarters here in Ottawa?

Mr. Rideout: I believe there are 412.

Mr. Scott: How many would work here in Ottawa?

Mr. Rideout: 24.

Mr. Scott: Do you do inspections only, or are there any other services your particular department provides? Is it only inspections?

Mr. Rideout: A lot of work is related to inspections. We inspect the plants, we inspect the vessels, we inspect the trucks, we inspect the product. But yes, it's an inspection service.

Mr. Scott: Without going into a great deal of detail, can you describe briefly for the committee what it is you actually do? Can you describe what the general overview of your department is?

Mr. Rideout: Our sector provides reasonable assurance that fish and fish products are produced in a sanitary and wholesome environment and are themselves safe, meet appropriate quality standards, and are not fraudulently displayed in terms of labelling and that sort of thing. We do that through a process of inspecting both domestic and imported product. We are in the process of developing, as I was saying yesterday, a quality management program. There's also a quality management program for importers.

Mr. Scott: I'm just trying to get a sense of what you do. You go to fish plant operations and you do inspections, I would assume, on a random basis.

Mr. Rideout: From my perspective, three key functions can be done by a service like ours in ensuring quality and wholesomeness of food fish products. One is the policy function. Another is the operational function. The third is the audit function. We perform the policy function, developing the policies, the regulations, the manuals - those sorts of things - plus the training and so on for our staff. We are looking more and more towards industry doing the operational functions, through quality management programs domestically in the plants and through quality management programs for importers, where they do their own quality control and we go in and do the third function, which is to audit what it is they're doing and to audit product to make sure it's safe, wholesome, and meets appropriate standards for quality.

Mr. Scott: That's where I'm leading to in all this. I was coming to the point of asking you if there are any privately run inspection services right now which industry can contract with and which you can then audit and provide the final quality assurance for, but where in fact the services of inspection are done outside government.

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Mr. Rideout: I think they exist. I believe we actually see some contracting out of lab services by plants. We've encouraged some plants, particularly the smaller processors, to link up in terms of quality management. That's a potential for reducing their costs yet still maintaining the management program.

One of the real problems faced by the industry with that contracting out is that our system here in Canada has become internationally recognized. There are a number of countries that provide ease of access for Canadian fish product because it has been inspected by the Canadian fish inspection service. The European Union is a good example of that. While other products sit at the border waiting to be inspected, our products move into the market because they have been inspected here in Canada. For many of the processors the fact that it has been inspected by the Canadian inspection service means that it moves quite freely.

Mr. Scott: I appreciate that, but if I'm hearing you right you're saying that industry and government are moving towards a situation where industry is going to be much more involved in inspecting itself, and government is going to perform more of an audit function and less of an inspection function.

Mr. Rideout: We're there.

Mr. Scott: You're there now?

Mr. Rideout: Yes. We're just fine-tuning the system now.

Mr. Scott: Being that you are there now, how long a period of time has this process taken? Has this happened over the last two or three years?

Mr. Rideout: It has been a process in place for about ten years, but the systems have been in place for several years now.

Mr. Scott: Based on that, I would then expect that your budgetary requirements and your workforce - and as you said, most of your budget goes to salary - would have been reduced significantly over the last ten years. Is that the case?

Mr. Rideout: Yes. The figure I used was 134 FTEs, full-time equivalents, from fiscal year 1991-92 to fiscal year 1997-98. That is the overall reduction.

Mr. Scott: Do you foresee further reductions in your department as industry takes over more functions that were heretofore provided by your department?

Mr. Rideout: Not necessarily in that area, because the audit function is a key component to ensuring the integrity of the quality management program. We have determined frequencies of inspection that we have to meet in order to meet our service standards.

I do see some potential movement in that direction when the fish inspection service joins with the agriculture inspection service and the health people, in the new food inspection agency slated to come on stream in April 1997. At that point there will be efficiencies in terms of corporate services, offices, laboratories, the possibility of polyvalent inspectors, that sort of thing. There should be efficiencies within that organization, and it is predicted that those efficiencies will probably yield in the order of $44 million by fiscal year 1998-99.

Mr. Scott: I think you said there were three primary functions that your department -

Mr. Rideout: From my perspective, in terms of trying to give you a broad overview of what we do, yes.

Mr. Scott: There is policy, and you can't ever expect industry to direct policy. That's the proper role of the government. There is operations, which is actually doing the inspections. From what I'm hearing, you say you're already there in terms of operations being largely handed over to industry.

Mr. Rideout: That's correct.

.1010

Mr. Scott: Then the third is audit. Of course, nobody would expect that you would have fish processors auditing themselves. You can't do that.

So what you're saying is that the 400-odd staff you have there are directly employed in either the policy or audit end, but very little, if any, are employed in the inspection end. Is that more or less correct?

Mr. Rideout: I would say the audit end...and if you were to use inspectors' jargon, you would call it an ``inspection''. So it's more on the operational end. In other words, we're not doing quality control for industry as we were 10 years ago in a number of areas.

Mr. Scott: When you do your auditing, is that done on a random basis - I assume it would be - where you just pick certain plants at certain times, walk in and do an inspection to ensure that what they say they're doing in terms of quality assurance is actually being achieved?

Mr. Rideout: It's based on that, but it's also based on the rating the plant has. If the plant is rated in the higher level, then it's an exceptional type of plant, and the amount of inspections an inspector would do in that plant is greatly reduced from that of a poor plant, or what we call a ``satisfactory'' plant.

As well, there are other benefits to the plant for getting a higher rating in terms of requests for certificates. This comes to the cost-recovery initiative as an example. For the highly rated plant, their frequency of inspection on a certificate is one in ten. In other words, they could actually inspect the product for the certificates nine times out of ten. The tenth time we would inspect. The charge for that is $25 versus $100, when we have to inspect, as opposed to a satisfactory plant, where we have to inspect every lot for certificate issue.

Mr. Scott: That's what I'm coming to. For plants that do run a high-quality operation, in the fee structure - and I'll be perfectly honest with you, I'm not totally familiar with the fee structure - are there incentives for plants to do the best they can on their own? Are there proper financial incentives there? You say there's a reward if you have a plant on the high end - I forget the exact term you used - and they would in fact receive a break in terms of the fees they would pay as opposed to a plant that has a poorer or lower rating that would then require more frequent auditing and inspection.

Mr. Rideout: In terms of the cost to do an inspection - and that's another point that comes back to the large plant and small plant - we found it doesn't take any less effort to do a small plant than it does to do a large plant, and the fee we're suggesting is a fee for that inspection.

In other words, your plant gets rated. We go in and do the full rating of it annually. That's essentially what the registration fee is for. The ratings are ``excellent'', ``good'' and ``satisfactory''. If you're an excellent plant in need of certificates, for example, then you are benefiting from the minimum cost. If, for example, you need ten certificates and you're an excellent plant, then the cost to you is going to be $325. If you are a satisfactory plant, the cost to you is going to be $1,000, because we would charge $100 per certificate for a satisfactory plant as opposed to $100 for one certificate, and $25 for the other nine, in terms of an excellent plant. That's where the benefits accrue in terms of those sorts of things.

As well, they get to run their business. We're not in there saying they have to do this, clean up that, or whatever. They, as opposed to our inspectors, determine when and how they do it.

.1015

When I was inspecting, it would in some cases be a matter of us saying ``Stop that line right now and fix that problem that exists''. Now it's their employee who comes to the manager and says ``Look, in terms of our QMP program we have to take action here'', and the dialogue is between two people in the same plant understanding the responsibilities they have and understanding that if they don't comply they will probably lose their rating and therefore will fall into the lower bracket.

Mr. Scott: In percentage terms, how many of the plants that we're talking about would you think fall into the excellent group? Is it a high number, like half the plants?

Mr. Rideout: As I understand it, yes, it is about 50%.

Mr. Scott: That fall into the excellent rating?

Mr. Rideout: Yes.

Mr. Scott: What ratings do you have besides excellent?

Mr. Rideout: We have four, actually: excellent, good, satisfactory, and fail.

Mr. Scott: I imagine fail means that you would shut them down.

Mr. Rideout: Fail means that they've got deficiencies that they have to correct, that they don't operate; but if they correct those deficiencies they can operate pending our inspection. It has some significance to them in terms of their operation, that's for sure.

Mr. Scott: This is my first brush with fish inspection, so I don't know anything about it.

So you're saying that right now there are built-in incentives for plants to be in the excellent category and to stay in it?

Mr. Rideout: Yes, there are.

Mr. Scott: There are built-in financial incentives right now, but they don't relate to the annual fees; they relate to the ongoing costs of obtaining certificates as required.

Mr. Rideout: As well as access to markets, in terms of moving into Europe. If they're on the list and they're on a derogation list, they get into markets like Europe.

Mr. Scott: That's understandable.

Mr. Rideout: We're working with the United States as well, and with New Zealand, Australia, and South American countries. So a tremendous amount of work is going on there to ensure ease of access for our products.

Mr. Scott: So you're saying that, regardless of whether they've got an excellent rating or a fail rating, if they have an operating plant you do a full inspection once every year?

Mr. Rideout: Yes.

Mr. Scott: You're saying that the full inspection that's done every year is what this annual fee relates to?

Mr. Rideout: In terms of rating it, yes.

Mr. Prince tells me that we inspect an excellent plant.... The frequency of inspection in terms of verification is every two months, but it is a fee for that inspection.

Mr. Scott: Regardless of whether you've got an excellent -

Mr. Rideout: I might have misled you. I'm just thinking. There is a frequency of inspection for the plant so it maintains its rating from one year to the next. But we are charging the fee based on the inspections.

Mr. Scott: So what you're saying is, regardless of whether a plant fits into an excellent category or a satisfactory category - I forget the four -

Mr. Rideout: The good and -

Mr. Scott: Regardless of what category they fall into, that will not affect their annual licence fee? No matter how good an operation they run, there's no financial incentive in terms of the annual fees?

Mr. Rideout: That's correct.

Mr. Scott: Has any consideration been given to that in terms of your cost recovery?

Mr. Rideout: That gets to the whole issue, again, of if you have a plant that is, let's say, a satisfactory plant and it becomes a good one, do you refund the fees? What do you do in that case, or if you have an excellent plant that goes to good? With the frequencies of inspection that we do, you have that kind of movement throughout the year.

When that occurred, I suspect that we would be into a fairly difficult situation administratively to monitor that, in that when the funds come in they go into the Consolidated Revenue Fund, yet we'd have to be moving funds out of that and back into the hands of those processors that, for example, moved into a less expensive rating.

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Mr. Scott: That's fine for now.

The Chairman: Derek.

Mr. Wells: I want to talk to you about the guiding principles for cost recovery you talked about yesterday. I'm looking in my notes where I wrote them down, but I'm sure you remember them.

Mr. Rideout: Our guiding principles are to deliver the service, be equitable, simple to administer, and include incentives to encourage compliance.

Mr. Wells: I want you to expand on the principle of equity. ``Equitable to all sectors'': what does that mean to you as you interpret it and as you put fees in place, recognizing that one of your guiding principles is equity to all sectors?

Mr. Rideout: I would say fairness: not to harm one sector unduly at the expense of another.

Mr. Wells: And is it your opinion that this present structure is equitable?

Mr. Rideout: It is my opinion that the structure meets the four principles and you can't take one out and exclude the others. There may be some apparent inequities, but when you review those against the other principles.... For a lot of people the issue is small plant, big plant. But when we measure that against the administrative costs for that and the fact that we're having a hard time determining what is a big plant and what is a small plant, I would say the proposal meets those principles and under those circumstances is as equitable as we can possibly make it at this point.

Mr. Wells: That gives us something to work with, anyway.

Fees to reflect effort and cost of delivery. I don't want to get into big plant versus small plant either. That's not the purpose of the exercise. In my view the purpose of the exercise is fairness. Do you feel the present fee structure reflects the effort in each case? We're talking about an across-the-board $1,500, regardless of size. Does that fee reflect the effort?

Mr. Rideout: Yes.

Mr. Wells: So you're saying there's no difference in the effort or the cost of delivery amongst any of the 300-plus plants you inspect. I understand you can't have a fee specific to each plant. I'm not suggesting that. But you're saying there is no difference in effort.

Mr. Rideout: I have to refer back to my personal experiences. I was responsible for Cape Sable Island and Bear Point as district supervisor for fish inspection.

Mr. Wells: I know it well.

Mr. Rideout: I spent as much time in Alphie Halliday's plant as I did at Sable Fish Packers or at Connors Brothers, which was what it was called at that time, in Clark's Harbour. The issues were different, but the time taken.... And it's not just the inspection of the plant, it's the discussion. An inspection of a plant involves a number of steps. We are very insistent, and have been, in the training of our inspectors, that if you walk into a plant and walk out without any paper transaction of what you've done, a form filled or whatever, then you really haven't completed an inspection. There is a process to inspection, and one aspect of that process is the post-inspection interview with the operator.

I myself personally spent as much time on those smaller plant inspections as I did on the larger plant inspections. When you get into a plant, inspecting a mega-plant such as the National Sea Products plant in Lunenburg, then of course you're into a larger operation. But the processes are all the same. If you're really going at a full plant inspection, from my perspective when I was doing it, there was a day there or a day at a smaller plant. There really wasn't a great deal of difference.

.1025

The other thing was that you had to return to some of the smaller plants because of the nature of the plant and the nature of the operation. The larger plants had the staff or the equipment to be able to resolve the problems right there on the spot. So there are -

Mr. Wells: You are dealing with specifics and I appreciate that, but on average.... We can always pick out a small plant that gives problems, and I assume the one you're referring to required more attention than others.

Mr. Rideout: No, actually. The one I was referring to was in my experience an excellent plant.

Mr. Wells: I wanted to put that on the record because I think you may have left the wrong impression. That's why I gave you the chance to expand on it.

Mr. Rideout: That's certainly not my intention. The two plants were just two that came to mind, and I probably shouldn't have mentioned their names. I thought you would know those two plants and would be able to see the difference in size. Yet from my perspective there is an equal amount of effort going into each one, or very much equivalent.

Mr. Wells: You mentioned a one-year review. Who will do that review, what will it consist of, and what are the aims of the review?

Mr. Rideout: There is not a formal written document that outlines what the review will do. It was intended to look at the approaches to the review after the regulations were put in place.

Since assuming the job of director general, I have concluded that I personally need to be engaged in this. What I plan to do late in May or early in June is to meet with industry associations. I've made contact with the Southwestern Nova Scotia Fish Packers Association. I've made contact with people from the eastern shore of Nova Scotia. I've touched base with some processors in P.E.I. There is a process in Newfoundland I can link up with and I've talked to some people in New Brunswick. I have not been able to talk to Quebec or British Columbia yet, but I will be doing that. I met with the Fish and Seafood Association of Ontario last week.

I would like to personally meet with these people in a consultative format and begin the approach. I'd like to see the regional directors of inspection follow up on that approach with industry from each region, with a view to developing any proposals that industry might come forward with, and then going back to industry with those proposals in a follow-up consultation as soon as possible. That's the off-the-cuff approach that I've developed personally and am going to try to implement to see if we can't get an open and transparent consultative approach in terms of this particular review. If it can be completed prior to one year, all the better.

Mr. Wells: There has been some discussion about the efficiencies or lack of efficiencies, or the cost-effective methods or lack of cost-effective methods of delivering the service you deliver. I know you're relatively new to this position. Will you be reviewing the method of providing the service?

I compare it somewhat to the recent review we had of marine service fees and the coast guard, which you may or may not have followed. Some of the concerns of industry were that some of the services being delivered were not needed and some of the services being delivered were not delivered efficiently and cost-effectively. Industry becomes concerned when they are expected to pay. They therefore want to be part of a process whereby they can determine whether or not the service is needed: Is it efficient? Is it cost-effective? How can we reduce costs and ultimately reduce the cost to industry?

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Have you considered any or all of those issues, and will you consider any or all of those issues over the next number of months? Will you work with industry to try to find a more cost-effective method of delivering the service?

Mr. Rideout: I guess the answer is no and yes. No, I haven't reviewed it and, yes, I will consider it if there are proposals or proposed approaches that would do that.

Mr. Wells: I know there are proposals that have been before your particular section in excess of six months - based on the information I have received - that have not been acted on. That is a frustration when industry sees efficiencies you can incorporate and you do not incorporate them. I can give you details on that after the hearing.

I would like a commitment from you that in fact you will look at those issues and work with industry.

Mr. Rideout: But we already do work with industry. We have processes in place to allow for industry input. I guess if there are concerns, and if there are proposals for more efficient operations, then, yes, I would certainly look at them.

Mr. Wells: Do you have a process whereby you could meet with a specific industry? For example, could you meet with representatives of the salt-fish industry to look at ways in which the service you provide to them could be delivered more efficiently and perhaps at a lesser cost, zeroing in on the expertise they would have? Could you do the same thing with the shrimp industry, for example, which has provided proposals to your division that have not been complied with and that would make it a more efficient and more cost-effective method of delivering the service?

Mr. Rideout: I guess I'll put it this way: I'm on the hook for the inspection budget. I'm accountable for the delivery of the service of fish inspection in Canada. If I can find ways to do the job better and more efficiently, I will take on board whatever ideas come forward. But I have to also say that I can't take those on board if they in any way would compromise the entire national system.

Mr. Wells: I appreciate that.

Mr. Rideout: There are probably some problems associated with getting localized inspection efficiencies in terms of their impact on the national program. I have to be careful of that.

Mr. Wells: Do you have a process in place right now where you work with industry to determine where you can be more efficient? Is there a process right now to do that?

Mr. Rideout: I'm not aware of a formal, all-encompassing process, but there is an industry policy advisory committee that does, I suspect, look at those types of issues.

Mr. Wells: Can you tell me who is on that committee?

Mr. Rideout: I'm sorry, I don't have the names with me.

Mr. Wells: Can you tell me if all provinces are represented on that committee?

Mr. Rideout: Do you mean provincial governments? There are no provincial governments on that committee.

Mr. Wells: I mean representatives from each province that has processing plants.

Mr. Rideout: There are people who represent all provinces on that committee, yes.

Mr. Wells: Perhaps you could provide us with the names of the people on that committee and what part of the industry they represent.

Mr. Rideout: Yes.

The Acting Chairman (Mr. Verran): Are you leading up to the end of that series, Derek?

Mr. Wells: Am I running out of my time, Mr. Chairman?

The Acting Chairman (Mr. Verran): I'm sharing my time with you, as you know. I just thought you might want to pass it on to another member and then come back again.

Mr. Wells: I certainly can do that. I have probably another five or ten minutes of questions. I know our time is limited to some degree, but I think I'm getting at least most of the serious concerns on the record. I know some of the answers will come later.

So I'll give up the microphone for the moment, Mr. Chairman, as long as I have the opportunity to come back for perhaps one more round.

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The Acting Chairman (Mr. Verran): All right, Mr. Wells.

Before passing to Mr. Byrne, I would like to ask if you do a yearly or semi-yearly inspection on the whole physical plant. If that is so, surely it would take more time to inspect National Sea Products, for instance, than a little plant over on the bay shore, which I'm sure you're familiar with, that employs about 20 people at different times of the year. You give the same time, and you were in the inspection service yourself for seven years in the area that I'm familiar with and that Derek is familiar with.

If you just take a package of fish and inspect it and look around right there, you can do that in a very short time. But I assume that at least periodically you go into the freezers, into the packing area, into the storage area, into where the fish itself is being processed, and you do a real physical inspection, the white-glove bit, of every nook, corner, cranny, storage area, where the cleaning gear is kept, and everything else. That point hasn't been brought out and I would like to know the routine of the department.

Mr. Rideout: I think you've accurately described what fish inspectors used to do and don't do any more. That's the plant's responsibility now. What the inspector does is audit that approach. If I used the word ``audit'', I was referring to it as an inspection. There is a frequency of those occurrences depending on the rating of the plant. If a plant is rated excellent it will get audited approximately once every two months. If it's a satisfactory plant, the first level, then the inspections will be much more frequent.

That audit involves the whole gamut of inspection activities and checking the records of the plant to make sure its quality control program is operating appropriately. As well, there is a post-audit discussion with the plant manager, which in many instances can be quite time-consuming.

The Acting Chairman (Mr. Verran): So when you say ``audit'' you're referring to what I or the average person would call an inspection?

Mr. Rideout: Yes.

The Acting Chairman (Mr. Verran): You say that approximately every two months you would go into National Sea, for instance - I keep using that; it's in Derek's riding, but it's one of the big international plants located in the area. You would go through the whole plant, the cleaning lockers, the freezing areas, the packing areas, the processing areas, look in the corners to see what things are there that would be considered unhealthy. You do that every two months. Do I understand that right?

Mr. Rideout: Well, yes. The inspection of a fish-processing facility is not an easy task regardless of its size. The first thing is to look at the type of operation, whether it's a high-risk or low-risk operation. That's important. Second, there is a whole series of procedures an inspector has to follow in carrying out the inspection. Third, when an inspector does, as you say, the white-glove treatment, if he or she finds a problem, he or she has to categorize that problem. The action to be taken with respect to the plant is based on that categorization of the problem. Of course if there is a critical deficiency in the plant, the action is quite serious and has to be immediate. Regardless of the size of the plant, the time taken to do that is equivalent. It's not a function of size. It's a function of risk and of ensuring the health and safety and quality of the product that goes out of that plant.

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The Acting Chairman (Mr. Verran): Taking into consideration the health and safety issue and the question of risk, one of the problems with this is the small processors, and we have a lot of them. You said the department has a problem defining what a small processor is, but the local people, both the fishing people and the processors, have no trouble defining them.

It's a matter of communication as well, because they can't understand how you can say it takes the same time to do one of these plants - and we have a number of them - belonging to the large national and international companies. The little plant in Parkers Cove or over in Hillsburn, where there are four or five of them, and Longmire's and Halliday's and all those.... Until now there hasn't been any way to convince the people who run and work in those plants that it takes the same amount of time to do an inspection there as it does in the larger plants. That's a real problem for me to understand, never mind the people who own the plants.

Mr. Rideout: I understand that, but what I'm saying is that there's a real procedure involved in inspecting the plant, and even though it may seem to be a small building, it's not just a question of going in and going out. There is a process that has to be followed and a number of checks have to be made. The plant records have to be checked in terms of their quality control.

In terms of the large plant and small plant issue, there are a number of questions in terms of how you quantify it. I'd like to give you an example from my point of view. This is not anything that I've heard or received because of my position. Let's say 25 employees is the cut-off and there are two plants, one having 27 employees and the other one 25. My fear would be that the person with 27 would lay off two employees so that he could get to 25 and get the lower fee, even though the fee doesn't compare at all to the salary and the benefits that are there.

The Acting Chairman (Mr. Verran): I appreciate your comments. You've giving them from your personal experience and I'm a person who sometimes appreciates life and personal experience over the facts and figures. As my friend Derek mentioned, sometimes it's a three-hour read to get to the bottom line, which probably could be covered in two paragraphs.

Why then, some time ago, did the health inspection service go into the plants and do an exceptional type of inspection that caused the fishing processors - you've been there, so you know a lot of them, how small they are, what margins they work on and what difficult times there have been - to spend thousands of dollars to bring their plants up to what seemed like an extraordinary standard? I know there's a background to this, but I'd like you to explain it to the committee. The inspections had been going on and everything was all right, and then suddenly you come in and say that in order to keep processing you'll have to spend $10,000 or $12,000 - $18,000 in some cases - at medium and small plants in order to keep processing.

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Mr. Rideout: I don't know the specifics of the -

Mr. McGuire (Egmont): It's a big job, Harry, but you're getting carried away.

The Acting Chairman (Mr. Verran): I like this chair, Joe, and I don't think I'm going to give it up.

Mr. Rideout: In terms of your query, one of the things we do that I'm not sure is well known or appreciated by the general public, but I think is appreciated by of the industry, is the international effort that we've put in place. For some products moving into the European market, there is a significant inspection effort by the Europeans at the border. Canada negotiated a derogation from that and recognition of the Canadian quality management program.

The Europeans, when they receive a product certified as Canadian, will let it pass without inspection into Europe. This ease of access is very valuable for the Canadian industry. However, the Europeans were not willing to just say fine, you do it. Just as we audit the operations of a plant, they wanted to audit our operations, and they did. As a result, they found some problems that need to be corrected.

While we tried to negotiate the best type of correction of the problems, particularly if we could find a sanitation solution to a construction problem, that's what we would do. The reality was that if we were to maintain the European border derogation to allow our products to pass freely, we needed to correct the problems they identified. We also needed to show the Europeans that we are concerned about the results of their audit, so we instituted a special study by three internationally reknowned inspectors. They came in and reviewed our system. They found that our system was appropriate but that improvements could be made. So we're in the process of putting those in place.

I think the industry as a whole, when it saw what could be lost by losing that derogation into the European Community, fully supported the activities undertaken by the inspection system, and saw the need to correct the deficiencies pointed out by the Europeans.

I'm not sure if that's the case you're talking about, but I suspect it is.

Mr. Verran: Thank you. I believe you are on target there.

I want an honest answer here, and I'm sure you've been honest with all the questions, but as as a new director you have to go along with the policy that's in place. It doesn't appear that DFO has taken into consideration the bottom line - again I go to the large national and international plants - because the profit margin hasn't been taken into consideration in the deliberations, considerations, recommendations and policy you're putting in place, it appears to many.

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Do you believe this is a deliberate attempt by DFO once again to wash out the little plants in favour of the big ones so that there will only be eight or ten big plants left to deal with and all the little guys in the fishery will be washed aside? We've heard about stacking and giving the big plants the opportunity to take over the whole damned thing so you won't have to worry about little plants any more. With that comes the devastation of small coastal fishing communities, people, a way of life, their children.

That's a real problem with people in the industry and it has gone further than the industry, with business people, with the communities. You're familiar with Yarmouth and all those communities. There is a real perception that it's the direct and deliberate policy of DFO to get rid of the little people in the fishery so the big shots and the multi-millionaires can have the whole damned thing.

The Chairman: That's a more appropriate question for the minister when he comes for the estimates. You don't decide policy, but you can answer it if you want.

Mr. Rideout: I do want to answer it. I want to answer it as a maritime Canadian.

I've been on this job for two and a half weeks. I knew this was a concern to many people. I knew I was coming here and I prepared as best I could to answer the questions you've put to me. In all of the investigation and preparation I've done for this work, I have not seen any reference, indication, hint, whatever, that there's any agenda other than to be the most cost-efficient and best inspection service in the world. That's what we're about. That's what we want to do and that's what I want to do as the DG of inspection. There is a real concern for all players in the industry and a desire to make sure that our inspection service is there to meet the needs of all sectors of the industry - large, small, one-man operation or 2,000-person operation. As far as I'm concerned there is no agenda other than the one for budget and efficiency.

Mr. Verran: Chairman, I want to thank Mr. Rideout for his honest answers.

Because I missed part of yesterday's meeting, I didn't realize you have been in this position for only two weeks. You're coming into a very difficult position, which I'm sure you're aware of. I can only end by saying that there are a lot of problems in the part of the department you're taking over, and I wish you good luck with it. If there is any way that I or the members of this committee can be helpful to you, we'll certainly try. But at the same time, we have an obligation and a duty to try to make sure things are done in the best interests of the fish processing plants that serve our area.

Mr. Rideout: If I may, Mr. Chairman, one thing you can do for me is that if you find your constituents are not being consulted appropriately, I'd like to know. I will do something to repair any problems that occur with that consultative process.

The Chairman: I think Mr. Wells wants to finish up.

Mr. Wells: Let me ask a quick question on the upcoming single food inspection agency. Will there be a DFO inspection service in the future? If this agency is going to be in place next year, why are we going through this whole process now when it's all going to be done by a single food inspection agency in the very near future?

Mr. Rideout: I don't think the agency will be created without some act of Parliament. It is at that point that we would know exactly what the structure will be and whether or not there will be a DFO inspection service within that agency. I suggest strongly that there would be, and I certainly plan to work hard and diligently to ensure that there is.

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Mr. Wells: The province also has registered plans. Is there any duplication of effort? Is there any possibility of setting up one single process whereby plants can have one-stop shopping when it comes to registration and fees and things of that nature? Is some type of cooperative agreement with the province being discussed?

Mr. Rideout: I believe it is, through the Canadian food inspection system group that is operating out of Ottawa but is co-chaired by the person in charge of the office of food inspection plus two provincial representatives. I'm sorry I don't have their names, but there is a process in place to look at that as I understand it. It's more on food inspection in total, which would encompass fish.

Mr. Wells: Would you agree that having a provincial licence and a federal licence is duplication, that it's not necessary in today's environment?

Mr. Rideout: Actually no, I wouldn't. The federal act and regulations only give us authority for a product to be exported from the province, either to another province or to another country, whereas there are processors who want to just deal with product domestically within the province. We don't have a role in that. We don't have an authority there. If a plant was doing both there might be some duplication, but for one that wants to deal exclusively in the province I'd say no.

Mr. Wells: Would you be receptive to some proposals on that? Would you be open for discussion on that issue if we could present some compelling arguments to you why it could work?

Mr. Rideout: I'm open to all proposals. My problem on this particular issue is that there is probably another organization that should be looking at it in terms of the Canadian food inspection system review.

Mr. Wells: I'd like to pursue that.

I have one other question on the fee structure itself. We're talking about a $1,500 basic fee and an additional $1,000 or $500...you know the details. I want to ask you a question about the additional fee. Is it charged on each species handled?

Mr. Rideout: No.

Mr. Wells: How is it charged?

Mr. Rideout: It's charged per plant registration. We have around 1,150 fish-processing facilities, but we have about 1,800 or 1,900 plant registrations. A plant could be registered to process fresh and frozen fish or canned fish or molluscan shellfish or salted fish. I understand there are some plants that think that even though they haven't been doing fresh and frozen fish, if they don't buy that licence they may lose the opportunity to process fresh and frozen fish in the future.

That's certainly not part of the agenda here. The Fish Inspection Act and regulations require us to issue a registration certificate when it's requested and when the plant meets the compliance requirements. So if a processor is saying, I don't know whether I'm going to do that, but I have to buy this license or otherwise I won't be able to do it, it's not entirely correct.

Mr. Wells: Have you had much discussion with respect to the certificates? Even though we look at the $1,500 and the $1,000 and the $500 as big numbers, the one number that's going to add up very quickly for some is the $25 certificate charge. How much discussion has there been? How much analysis has been given to the effect that this $25 fee for each certificate is going to have on some industries as opposed to others? Has that been studied at all?

Mr. Rideout: We've done a pretty thorough analysis to see whether we can in fact raise the$4.8 million from cost recovery. We've taken a look and made some estimates on what would be happening. There are those in the industry who feel there's going to be a real burden for them; lobster exporters is one group. That is one reason I want to institute a process as soon as possible to look at the system to see if there are proposals for how we can maintain the system and at the same time maybe address some of those concerns.

Mr. Wells: That goes with the initial questions that you're prepared to take a look at if representations are made on that particular issue.

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Mr. Rideout: Yes, we're going to look at all the comments we receive.

Mr. Wells: How are temporary certificates going to work?

Mr. Rideout: I'm not sure there is a temporary certificate. You are either issued a certificate or you aren't. It's not part-time, I don't believe.

Mr. Wells: In the discussions I've had with industry they have referred many times to temporary certificates to the end of July.

Mr. Rideout: Oh, that may be the plant registration pending cost-recovery fees. It's just that they've extended the registration until the time that they would issue the next one. There would be a fee if they've extended it until the end of July, assuming that the fees would be in place, and we would then charge the $1,500 fee from July to July.

Mr. Wells: Would you direct me to the regulatory authority for this?

Mr. Rideout: The minister has the authority to register a plant when it's requested, provided the plant meets the requirements of the regulations. There is no time limit, I don't believe, in the regulations for a plant certificate.

Mr. Wells: Could you provide a copy of that regulatory authority to the committee dealing with the temporary certificate we're referring to? There's been some question -

Mr. Rideout: I don't believe they're called temporary certificates. That may be the jargon, but I don't believe that's what they are. They are certificates of registration that potentially have an expiry date on them.

Mr. Wells: You're correct that it's referred to in the industry - not by your department or officially - as a temporary certificate. It has now taken on that designation in the industry. It has been questioned, and I believe questioned directly to you through the department in some correspondence. Some were questioning the legality of those certificates, the regulatory authority under which they're issued.

Mr. Rideout: It is under the fish inspection regulations.

Mr. Wells: I want to put that on the record. The reason I'm asking the question is that I want it on the record.

Mr. Rideout: I can tell you, it's under the authority of the fish inspection regulations. Do you need a copy of those?

Mr. Wells: No. Do you know the specific regulation?

Mr. Rideout: It's probably six or seven, but I'm just....

Mr. Prince: I think it's 14.

Mr. Wells: Okay, that's fine.

Mr. Rideout: I can find out and certainly let you know.

Mr. Wells: Just clarify it again.

Mr. Rideout: I'm sorry, it's section 15.1.

Mr. Wells: Perhaps I could get a copy of that for my own purposes, just so I have it for my file.

The Chairman: The time is up.

Mr. Wells: Thank you very much. I appreciate your indulgence.

The Chairman: Before we go I want to ask if Derek and Alan would get together on a report or some suggestions to Mr. Rideout through the minister before the 13th. You seem to know more about this than anybody, Derek. Could you get together with Alan and make a memorandum or something with suggestions to the minister?

Mr. Wells: I would be pleased to do that, Mr. Chairman.

Mr. Rideout: I have to be away next week, but if any members would like to discuss anything privately or have any questions, I'd be glad to make the time available to meet with them and hopefully answer their questions or look at their concerns.

The Chairman: Thank you very much. The meeting is adjourned.

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