Regulations Amending the Licensed Dealers for Controlled Drugs and Narcotics (Veterinary Use) Fees Regulations: SOR/2022-123
Canada Gazette, Part II, Volume 156, Number 13
SOR/2022-123 June 3, 2022
FINANCIAL ADMINISTRATION ACT
P.C. 2022-615 June 2, 2022
Her Excellency the Governor General in Council, on the recommendation of the Minister of Health and the Treasury Board, pursuant to paragraph 19.1(a)footnote a of the Financial Administration Act footnote b and, considering that it is in the public interest to remit other debts, subsection 23(2.1)footnote c of that Act, makes the annexed Regulations Amending the Licensed Dealers for Controlled Drugs and Narcotics (Veterinary Use) Fees Regulations.
Regulations Amending the Licensed Dealers for Controlled Drugs and Narcotics (Veterinary Use) Fees Regulations
1 Sections 3 to 6 of the Licensed Dealers for Controlled Drugs and Narcotics (Veterinary Use) Fees Regulations footnote 1 are replaced by the following:
3 (1) The fee for a dealer’s licence or its renewal is $1,750 for each site at which the licensed activities are to be conducted.
First year of activities
(2) If the applicant has not completed their first calendar year of conducting activities under a dealer’s licence, the fee for the licence or its renewal is $875 for each site at which the licensed activities are to be conducted.
Remission — conditions
4 (1) Subject to subsection 5(2), remission is granted to an applicant in respect of their dealer’s licence or its renewal if
- (a) the fee payable is greater than an amount equal to 1.5% of the applicant’s actual gross revenue from the sale, testing and packaging/labelling of controlled drugs and narcotics for the previous calendar year;
- (b) the applicant provides a statement to the Minister of Health signed by the individual responsible for the applicant’s financial affairs that sets out the actual gross revenue
- (i) if the applicant has not completed a calendar year following the issuance of their first licence, within one month after the end of that year, and
- (ii) in any other case, if applicable, with the application for the renewal.
Remission — amount
(2) The amount of the remission is equal to the difference between the fee payable for the licence and the amount calculated in accordance with paragraph (1)(a).
5 (1) If the Minister of Health determines, on the basis of any available information, that the statement provided under paragraph 4(1)(b) is not sufficient to determine the actual gross revenue, the Minister must require, in writing, the applicant to provide additional information that is necessary to make that determination, within 90 days after the day on which the request is made.
Remission not granted
(2) Remission is not granted if
- (a) the applicant fails to provide the additional information within the period specified; or
- (b) the Minister determines that the additional information, provided within the period specified, is not sufficient to determine the actual gross revenue.
Timing of payment
6 (1) Subject to subsections (2) and (3), the fee for the dealer’s licence is payable on issuance by the Minister of Health of a written notice requiring payment once the licence has been issued or renewed.
(2) In the case of an applicant referred to in subsection 3(2), the fee is payable on issuance of the notice
- (a) once the statement referred to in subparagraph 4(1)(b)(i) is provided; and
- (b) in any other case, during the second month after the end of the calendar year following the issuance of the first licence.
Payment — additional information
(3) If additional information is required under subsection 5(1), the fee is payable on issuance of the notice once the licence has been issued or renewed
- a) after the Minister has assessed any additional information, if the applicant has provided it; or
- b) after the expiry of the period set out in subsection 5(1), if the applicant has not provided the information.
Coming into Force
2 These Regulations come into force on the day on which they are registered.
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the Regulations.)
The Licensed Dealers for Controlled Drugs and Narcotics (Veterinary Use) Fees Regulations (the Regulations) lack clarity on the following elements:
- The time at which applicants who have not completed their first year of conducting licensed activities must pay their licence fees if they do not seek fee remission or seek to renew their licence; and
- The circumstances under which the Minister may require an applicant to submit additional information to clarify their actual gross revenue to support a fee remission.
These issues may create uncertainty among applicants for dealer’s licences, may impose unnecessary costs, and have the potential to lead to an uneven application of the Regulations.
Dealer’s licence fees
The Minister of Health may issue dealer’s licences that permit persons to produce, assemble, sell, provide, transport, send, deliver, import, or export a controlled drug and narcotic. Under Part G of the Food and Drug Regulations and the Narcotic Control Regulations, the Minister may issue a dealer’s licence with a validity period up to three years after its effective date.
The Regulations set out the fees for a dealer’s licence to conduct activities in respect of controlled drugs and narcotics for veterinary use. For most applicants, the Regulations set fees for dealer’s licences for veterinary use at $1,750 per site where licensed activities take place. For applicants who have yet to complete a calendar year of conducting licensed activities, fees are set at $875 per site.
These fee amounts apply for every licence that is issued or renewed. Licences can be issued with a validity period up to 3 years. Since 2018, dealer’s licence fees have been subject to a requirement to be adjusted on an annual basis at the same rate as the Consumer Price Index from April of the previous year. This is in keeping with provisions of the Service Fees Act. In 2022, the fee for an applicant that has completed their first calendar year of conducting licensed activities is $1,882.52 and the fee for an applicant who has yet to complete a calendar year of conducting licensed activities is $941.26.
These Regulations do not apply to licensed dealers who belong to any branch or agency of the Government of Canada or a provincial government; or to licensed dealers engaged only in scientific investigation. As of April 2022, there are twelve licensed dealers paying fees under these Regulations. The Minister of Health issues on average 3 new licences every 4 years. This translates to less than one new dealer’s licence every year.
Remission of fees
The Regulations provide for a process for licensed dealer applicants to seek remission of all or a portion of their licensing fees. Eligibility for fee remission depends on the applicant’s actual gross revenue from licensable activities in the previous calendar year. To be eligible for a remission, an applicant must meet three criteria:
- Their fees must be greater than 1.5% of their actual gross revenue from the sale, testing, packaging, and labelling of controlled drugs and narcotics for the previous calendar year;
- They must provide a statement signed by the individual responsible for their financial affairs that sets out the actual gross revenue; and,
- The activity they are conducting must not require an establishment licence under Division 1A of Part C the Food and Drug Regulations.
If these criteria are met, an applicant is entitled to a remission of the difference between the fee amount and the amount that is 1.5% of the applicant’s actual gross revenue from the activities conducted in the previous calendar year.
On average, fee remission is sought 0.125 times per year, or once every 8 years.
Date of payment for fees
The Regulations set out two points in time for the payment of fees for dealer’s licences for veterinary use.
For applicants who have already completed a calendar year of activities under their licence, fees for dealer’s licences for veterinary use are payable when the licence is renewed.
For applicants who have yet to complete a calendar year of conducting licensable activities, the payment of fees is deferred until 90 days after the end of the first calendar year of conducting licensable activities under a licence.
As set out in the Interpretation Act, a calendar year means “a period of twelve consecutive months commencing on January 1”. For example, in the case of an applicant in their first calendar year of conducting licensed activities, the fee for a licence issued in June of 2020 is payable on April 1, 2022.
This deferral period is meant to allow an applicant time to gather information on revenues so that they may seek a fee remission if they are eligible.
Audited sales records
The Regulations allow the Minister to request additional information to validate an applicant’s eligibility for a remission. If the Minister determines that the signed statement of revenue to support the remission is not adequate to determine the applicant’s actual gross revenue for the previous calendar year, the Minister may require the applicant to submit sales records that have been audited by a qualified independent auditor.
The Regulations also provide for a method of settling any difference between an amount shown to be payable by audited sales records and an amount already paid. These provisions are drafted to permit the Minister to review audited sales records after the payment is made. The Regulations also limit the scope of information the Minister may request to audited sales records only. These records can be costly for the regulated party to obtain and may not always be necessary to determine fees.
Updating the Regulations
Health Canada and the Standing Joint Committee for the Scrutiny of Regulations have identified two areas that warrant revision to improve clarity and promote even application of the Regulations.
Timing of payment
The Regulations lack clarity regarding the timing of payment for applicants who have yet to complete a calendar year of conducting licensable activities and do not seek a renewal of their licence. This is because the Regulations provide for a date of payment that is contingent on the renewal of a licence.
Discretion to request additional information
The Regulations provide the Minister with discretion to decide whether to require applicants to provide audited sales records if a statement setting out the applicant’s actual gross revenue was inadequate to determine that revenue and the appropriate remission.
This could result in some uncertainty over the circumstances under which the Minister would decide not to request audited sales records should the statement provided by the applicant be insufficient to determine the actual gross revenue.
The objective of these amendments is to update regulatory requirements governing the payment of fees for dealer’s licences for veterinary use by:
- Clearly defining when fees are payable for all applicants irrespective of how long they have been conducting licensed activities or whether they seek renewal of their licence; and,
- Addressing concerns about the scope of the Minister’s authority to request additional information and the information that the Minister may request.
These amendments are designed to minimize impacts on the existing invoicing process and prevent administrative burdens for stakeholders. They do not change fee or fee remission amounts.
Prior to these amendments, applicants who sought fee remission after having completed their first calendar year of licensed activities were required to submit a statement of actual gross revenue, from specified licensable activities in the previous calendar year, within 90 days after the end of that year. This statement had to be signed by the individual responsible for the applicant’s financial affairs.
Under these amendments, the statement of actual gross revenue must be submitted by the end of January after the end of a calendar year following the issuance of the applicant’s first licence. For example, to obtain a fee remission, an applicant whose licence was issued in June 2020 and who has completed a first calendar year of conducting licensed activities must submit, in January 2022, a statement setting out the actual gross revenue from specified licensable activities in 2021.
Payment dates for dealer’s licence fees
These amendments express payment dates in terms of the Minister’s issuance of a notice requiring payment.
In the case of applicants who have yet to complete a calendar year of conducting licensed activities, the notice will be issued either:
- a) After the applicant has provided a statement of their actual gross revenue from licensable activities in the previous calendar year, or;
- b) If the applicant does not provide a statement of their actual gross revenue, during the second month after the end of a calendar year since the issuance of their first licence.
Because the validity period for a dealer’s licence may be up to 3 years, it is possible for an applicant to still be in the course of their first calendar year of conducting licensed activities when their licence must be renewed. The payment process in this case is illustrated in the scenario below:
- An applicant is issued their first licence on March 1, 2023, with a validity period of one year, meaning that the licence expires on March 1, 2024.
- Payment of the licence fee is deferred until they receive a notice requiring payment after their first full calendar year (i.e. January – December 2024) of activities. That calendar year ends on December 31, 2024.
- If the applicant decides not to renew their licence when it expires on March 1, 2024, a notice requiring payment will be issued in either January or February 2025, depending on whether and when a statement of actual gross revenue is provided.
- If the applicant does renew their licence before it expires on March 1, 2024, the fee for both the initial licence and the renewed licence is included in the notice requiring payment issued in either January or February 2025, depending on whether and when a statement of actual gross revenue is provided.
In the case of applicants who have completed their first calendar year of conducting licensed activities, the notice will be issued after a renewed dealer’s licence is issued.
For example, in the case where a licence is issued on March 1, 2023, to an applicant who has been conducting licensed activities for more than one calendar year, the notice will be issued following the issuance of the renewed licence.
In the case where the Minister requests additional information to determine the applicant’s actual gross revenue in the previous calendar year, the notice will be issued after the information has been examined. If an applicant does not provide additional information within 90 days of the Minister’s request, the notice will be issued after the expiry of that timeline.
For example, in the case where the Minister requests additional information on January 1, 2023, the notice will be issued after the applicant has provided the information and the Minister has examined it. If the applicant does not provide the information by April 1, 2023, the notice will be issued.
In all cases, the fee is payable upon the issuance by the Minister of a notice requiring payment.
These amendments only substantively impact the payment schedule for applicants who have yet to complete a calendar year of conducting licensed activities. On average, this is expected to affect less than one applicant per year. At the time of the coming into force of these amendments, there are no licence holders in their first year of conducting licensed activities.
Power to require additional information
Under these amendments, the Minister’s power to request additional information to support a fee remission is no longer discretionary. If the Minister determines that additional information is required to determine the actual gross revenue to assess the fee payable and the eligibility for fee remission, the Minister must request that additional information. These modifications do not change Health Canada’s existing practices to request information.
These amendments also expand the scope of information that can be requested by the Minister. For example, additional information that may be requested can include:
- Records that identify the number of persons employed for the previous fiscal year;
- Financial statements;
- Tax returns; or,
- Other official documents issued or certified by a business registration authority.
This expansion replaces the previous provisions that allowed the Minister to request only sales records audited by a qualified independent auditor. While the Minister still has the power to request audited sales records, the change allows the Minister to request from an applicant information less costly to obtain when this type of information is sufficient to confirm their actual gross revenue.
These amendments also set out additional details about when a request for additional information has been made by establishing that:
- An applicant is not eligible for remission if they do not provide information requested by the Minister within 90 days after the information is requested;
- An applicant is not eligible for remission if the information provided is not sufficient to determine the actual gross revenue in the previous calendar year; and,
- A notice requiring payment of the fee will be issued after the additional information has been examined or after the expiry of 90 days since the Minister’s request for information, if the information was not provided.
Health Canada sought stakeholders’ input on proposed regulatory changes via targeted consultations conducted on February 23, 2022. The department invited all licensed dealers who are required to pay fees under the Regulations to offer comments on these amendments. Stakeholders were also invited to provide comments in writing following the consultation session. Stakeholders did not raise any concerns with the proposed changes to the Regulations, which are expected to have a low to neutral impact on industry.
For these reasons pre-publication in the Canada Gazette, Part I, is not required.
Modern treaty obligations and Indigenous engagement and consultation
The amendments are not expected to impact treaties with the Indigenous peoples of Canada. Health Canada conducted an initial assessment that examined the geographical scope and subject matter of the initiative in relation to modern treaties in effect, and did not identify any potential modern treaty impacts.
Two alternative options were considered in the development of these amendments, which are described below.
Clarifying processes in guidance
The option of clarifying Health Canada’s expectations solely in industry guidance was considered. This option was rejected because the publication of guidance would not have addressed shortcomings in the administration of the Regulations related to requests for information, or resolved the lack of clarity regarding payment dates for certain applicants.
Delaying amendment of the Regulations
The option of grouping these amendments into a larger regulatory project was considered. This option was rejected because it would have resulted in a delayed resolution of concerns with the Regulations. This option would have stood in contrast to Health Canada’s commitment, as part of its Forward Regulatory Plan 2021-2023, to address issues identified by the Standing Joint Committee for the Scrutiny of Regulations without delay.
Benefits and costs
An analysis of the costs and benefits suggest that these amendments will have a relatively neutral impact on applicants for dealer’s licences and Health Canada. This section provides a description of the methodology used in the analysis, and a qualitative depiction of costs and potential benefits due to the regulatory change. There is likely no new cost for Canadians and limited costs are expected for industry and Health Canada. The costs and benefits of the amendments are described in terms of the incremental differences between two future scenarios: one where the Regulations continue to be in force (the baseline) versus one where this proposal is made into a regulation (regulatory scenario).
The baseline used for the cost-benefit analysis is the Licensed Dealers for Controlled Drugs and Narcotics (Veterinary Use) Fees Regulations. Currently, the fee for applicants that have not completed one calendar year of activities under a licence is payable 90 days after the completion of their first calendar year. If an applicant decides to seek fee remission, the applicant can be subject to additional inquiries by the Minister for independently audited sales records if it is determined that the statement of actual gross revenue provided is not adequate to determine that revenue.
The amendments to the Regulations are expected to have no cost impacts for Canadians and should not affect the supply of controlled drugs and narcotics for veterinary use in Canada.
Timing of payment
The amendments that clarify the timing of payment may have minimal costs for industry. Under the Regulations, applicants’ fees for dealer’s licences are payable when their licence is issued, except for those who have yet to complete a calendar year of conducting licensable activities. Based on internal statistics, it is assumed that, on average, 0.75 applicants per year will not have conducted a full year of activities. For those applicants, it is assumed that the timing of the applicant’s payment following invoicing will be the same as it was prior to the amendments. Therefore, it is estimated that these amendments may impact applicants that have not completed their first calendar year of activities. This is because fee payments are made approximately two months earlier than under the Regulations. This could be considered a lost value of money over the two month difference. However, these costs are small and would be incurred only once, and only by a small number of applicants (0.75 per year).
Timing of payment
Changing the timing of payment is not expected to impact Heath Canada’s processing of applications and fees.
Requesting additional information
Changing the type of additional information that Health Canada may request is expected to have a minimal impact. There may be additional analysis required to verify non-audited sales data. However, given the low volumes of requests expected, this amendment is assumed to have a relatively small to neutral impact on Health Canada.
These amendments to the Regulations are not expected to impact Canadians or the supply of controlled drugs or narcotics for veterinary use available in Canada.
Timing of payment
Clarification on the timing of payment is expected to provide minimal benefits to industry due to having a clear understanding of when fees are due.
Requesting additional information
The requirement for the Minister to request additional information to support a fee remission where the statement of actual gross revenue is inadequate may provide applicants with decreased costs compared to the baseline of completing an independent audit. Under the Regulations, if an applicant’s statement of actual gross revenue is not sufficient to determine that revenue then the Minister of Health may require the applicant to provide independently audited sales records. Under the amendments, the Minister of Health must request additional information if the statement of actual gross revenue is insufficient to determine that revenue. However, a broader range of information can be requested, which may not need to be independently audited. Therefore, it is estimated that providing additional information would be less costly for industry than the prior requirement of obtaining an independent audit. It is estimated based on a couple of studies and internal information that the annualized cost saving over the next ten years would be $326 per year for the industry.
Timing of payment
Clarification on the timing of payment is expected to provide minimal benefits to Government due to the clear understanding of when fees are due.
Small business lens
It is estimated that there are 4 small businesses that could be impacted by these amendments. These amendments could decrease costs for small businesses if they seek a fee remission, as an independent audit of sales records could be burdensome to obtain.
Any small businesses that become a new licence holder under these amendments may be required to pay the licence fee sooner than under the current Regulations. These costs are small and are considered reasonable given the increased clarity the changes provide.
As the amendments are done for clarity only and the Regulations already provide a means for businesses with low revenue to obtain a fee remission, no further flexibility for small businesses were considered.
The one-for-one rule applies as the amendment regarding requests for additional information would likely result in a reduction in administrative burden on industry. Under these amendments, additional information requested is expected to be easier to provide and therefore less costly and burdensome than the baseline of an independent audit to support a remission. The reduction in administrative burden is approximately $166 in 2012 dollars. This estimate assumes that the probability of this information being requested under the current regulations is around 0.5% per year and the reduction in burden from no longer requesting this information would be around 1,300 hours at an average hourly wage of around $50.
|Annualized administrative costs ($2012)||$166|
|Annualized administrative costs per business ($2012)||$14|
Regulatory cooperation and alignment
These amendments promote better alignment of the payment of the fees for dealer’s licences for controlled drugs and narcotics for veterinary use with the payment of the fees for dealer’s licences for human use. In particular, these amendments better align timelines for the payment of fees by applicants who have not completed a full calendar year of activities under a licence with the timelines set out in the Fees in Respect of Dealer’s Licences Regulations (human use).
Strategic environmental assessment
In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required.
Gender-based analysis plus
No gender-based analysis plus (GBA+) impacts have been identified for these amendments.
Implementation, compliance and enforcement, and service standards
These amendments come into force the day they are registered by the Clerk of the Privy Council of Canada.
These amendments do not change the amount of the fees prescribed for dealer’s licences for controlled drugs or narcotics for veterinary use.
A guidance document will be published by Health Canada describing the process of submitting documents in support of a fee remission and for the payment of the fees for a dealer’s licence. This document will include a detailed description of new submission and fee payment timelines under these amendments.
Compliance and enforcement
Non-payment of fees
In accordance with authorities provided under the Financial Administration Act and its regulations, the Policy on Financial Management and the Directive on Public Money and Receivables, Health Canada will take timely and cost-effective collection action to pursue all receivables due to the Department.
Existing service standards for the issuance of dealer’s licences are not affected by these amendments.
As articulated in Health Canada’s guidance on the Management of Applications for Controlled Drugs and Substances Dealer’s Licences, new applications for dealer’s licences remain subject to a service standard of 270 calendar days between the receipt of an application and the refusal or issuance of a licence. Similarly, applications for the renewal of a dealer’s licence will remain subject to a service standard of 90 calendar days between the receipt of an application and the refusal or issuance of a licence.
Compliance Policy and Regulatory Affairs
Policy and Regulatory Strategies Directorate
Regulatory Operations and Enforcement Branch