Canada Gazette, Part I, Volume 148, Number 44: Regulations Amending the Canadian Aviation Security Regulations, 2012 and the Designated Provisions Regulations (Air Cargo)

November 1, 2014

Statutory authority

Aeronautics Act

Sponsoring department

Department of Transport

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary

Background

Civil aviation remains a favoured target of terrorist attacks. Airports, aircraft and passengers offer the kind of high-profile targets that terrorists seek, and damage to a nation's civil aviation sector can cripple a nation's economy and sense of security. The events of October 29, 2010, when explosive devices were found in air cargo packages bound for the United States from Yemen, underscored the importance of continuously enhancing air cargo security regimes, echoing domestic and international recommendations and commitments, including

• The Final Report of the Commission of Inquiry into the Investigation of the Bombing of Air India Flight 182 (2010); (see footnote 1)
• The Canadian Air Transport Security Authority Act Review (2006). (see footnote 2)

Budget 2010 provided funding of $95.7 million to enhance air cargo security in Canada. Phase one has been completed, including putting in place security measures made under the Aeronautics Act (see footnote 3) to introduce requirements for air carriers and other members of the Air Cargo Security Program. These measures addressed security gaps and brought Canada in-line with its key trading partners.

Air cargo shipments at Canadian airports total $100 billion annually. Over 400 million kilograms of cargo are moved on passenger aircraft. Eighty percent of all air cargo departing Canadian airports is destined for international destinations (non–United States). The International Civil Aviation Organization, the Universal Postal Union and the World Customs Organization all have standards in place for the security of all cargo and mail placed aboard an aircraft. Canada's key trading partners, including the United States and the European Union, require all cargo destined for their airports to be secure. This highlights the importance of keeping cargo moving efficiently across borders. Inconsistency with international standards could put Canadian trade at risk.

Alignment of Canada's Air Cargo Security Program with those in other jurisdictions, especially the United States and the United Kingdom, has been a consistent priority throughout the development of the program. On May 31, 2012, the Government of Canada announced the Canada–United States Action Plan on Perimeter Security and Economic Competitiveness, under which Canada and the United States agreed to mutual recognition with respect to their air cargo security programs. This means that cargo shipped on passenger aircraft need only be screened once at the point of origin and not in the other country, thereby reducing delays and economic costs associated with screening the cargo twice.

In Canada, approximately half of all cargo that is transported by air travels on passenger flights.  The security measures made under the Aeronautics Act establish the standard and means by which cargo must be secured.

Issues

Enhanced screening requirements will soon be introduced in Canada. In the absence of an internationally equivalent program to enable cargo screening throughout the air cargo supply chain and maintain the security of that cargo until it is delivered to a passenger aircraft, air carriers and approved members of the program would be required to actively screen all air cargo. Active air carrier screening of all air cargo is slow and impractical and would result in bottlenecks, delays, additional costs and uncertainty for shippers, freight forwarders, air carriers, manufacturers and consumers. Shippers need to be given the authority to screen their own goods. In order to do so, there must be a regulatory framework and program in place for the maintenance and enforcement of air cargo security that international partners will recognize.

Objectives

The Government of Canada is committed to maintaining a secure and efficient air cargo system. The expected outcomes of the proposed amendments are the secure, timely and efficient domestic and international movement of air cargo. There would be decreased reliance on in-airport screening, allowing for an efficient flow of goods.

The objectives of the proposed amendments are to

• Replace the current registered shipper program with a more robust known consignor program, in order to address security gaps in the secure supply chain;
• Provide a flexible option to help shippers cope with enhanced screening requirements coming into effect in 2015 by allowing for security screening to take place where it is most convenient in the supply chain, based on their business model;
• Maintain Canadian shippers' economic competitiveness in terms of access to international markets, in conjunction with new in-bound screening requirements expected from our international partners in 2015; and
• Align regulations with those emerging among major trading partners and international associations.

Description

Pursuant to sections 4.71 and 4.9 of the Aeronautics Act, the proposed amendments would outline the rules for those who wish to screen, transport or store secure air cargo in the secure supply chain, including shippers/consignors, third-party service providers (i.e. truckers, warehouse operators) and freight forwarders.

The proposed amendments would allow for the creation of new categories of participants at the program level and would put in place requirements on how cargo tendered by such parties must be transported and stored in the secure supply chain. The current registered shipper would be replaced with two categories of participants: known consignors, who would be subject to the proposed amendments, and account consignors, who are not covered by these amendments. (see footnote 4) Third-party service providers, such as truckers, warehouse operators and freight forwarders, would also be covered by the proposed amendments and would be required to register with the program to be authorized to handle secure cargo as certified agents.

Since participation in the Air Cargo Security Program would be voluntary, shippers would not need to become part of the secure supply chain to continue to have goods shipped by air. Cargo originating from an unknown shipper (i.e. a shipper who is neither a known consignor nor an account consignor) would need to be screened by a member of the Air Cargo Security Program or an air carrier and could travel domestically and internationally on passenger flights.

Known consignors

The current Air Cargo Security Program does not allow shippers to screen and secure their own goods that are intended to be transported by air. The proposed amendments would allow persons (the consignors or originators of the goods) to become known consignors at the program level and to screen and tender their own goods as secure cargo to either members of the Air Cargo Security Program or directly to air carriers. (see footnote 5)

The proposed amendments would cover the following areas in relation to known consignors:

1. Facility security (i.e. physical security requirements such as access control);
2. Personnel security (i.e. background checks and screening requirements for personnel responsible for air cargo);
3. Chain of custody (i.e. the storing and transporting of secure air cargo);
4. Training (i.e. requirements based on job functions);
5. Screening; and
6. Record keeping (i.e. the information required to accompany secure air cargo, training records, background checks).

Air cargo screened by a known consignor would have to be identified as secure. Certain information would therefore have to accompany the cargo, either electronically or as an attached cargo security form.

It would be an offence for a known consignor to tender secure air cargo unless the cargo was packaged, stored and transported in accordance with the proposed regulations and maintained in a secure manner. In addition, known consignors would be required to ensure only authorized cargo representatives have access to air cargo. An authorized cargo representative would be an employee of the known consignor, be trained to perform his or her duties, and possess a security clearance or have undergone a background check that demonstrates he or she does not pose a risk to aviation security. The known consignor would also be required to designate a cargo security coordinator who is responsible for coordinating and overseeing compliance with the regulatory requirements that apply to the known consignor and for acting as the principle contact between the known consignor and the Minister of Transport with respect to aviation security matters.

Certified agents

Currently, third-party service providers are regulated as agents of the air carrier or member of the Air Cargo Security Program to whom they provide services. The proposed amendments would require that entities such as cargo operators, warehouse operators and trucking companies, who will be known as certified agents at the program level, be certified to transport or store secure cargo in the secure supply chain. (see footnote 6)

The proposed amendments would cover the following areas in relation to certified agents:

1. Facility security (i.e. physical security requirements such as access control);
2. Personnel security (i.e. background checks and screening requirements for personnel responsible for air cargo);
3. Chain of custody (i.e. the handling and transporting of secure air cargo);
4. Training (i.e. requirements based on job functions);
5. Verification screening (the certified agent will be required to screen in order to verify that the cargo was screened by a known consignor, that access was restricted and that the cargo was not tampered with); and
6. Record keeping (i.e. the information required to accompany secure air cargo, training records, background checks).

The certified agent would be required to add certain data to the information that accompanies secure cargo (i.e. the cargo security form).

Certified agents would be required to ensure that only authorized cargo representatives have access to air cargo. An authorized cargo representative would be an employee of the certified agent, be trained to perform his or her duties and possess a security clearance or have undergone a background check that establishes that the person does not pose a risk to aviation security. The certified agent would also be required to designate a cargo security coordinator who would be responsible for coordinating and overseeing compliance with the regulatory requirements that apply to the certified agent and for acting as the principle contact between the certified agent and the Minister of Transport with respect to aviation security matters.

In the following illustration, the first two layers depict the program that is currently in place, namely that cargo can be screened/secured by the air carrier or regulated agent (approved participant). The proposed amendments would allow for the third layer to become possible, with the screening occurring at the shipper (known consignor) level. Any screened/secure cargo (see solid green boxes) would need to be handled securely by the air carrier, regulated agent, known consignor or certified agent.

In the illustration above, the first scenario shows cargo that arrives at the air carrier in a state where the security of the cargo could not be verified. In this situation, the air carrier will screen the cargo before placing it on an aircraft. The second scenario shows that the regulated agent received cargo from a shipper that had not screened and secured the cargo, so the cargo could not be verified as secure. In this case, the regulated agent decided to screen and secure the cargo before forwarding it to the air carrier. On receipt of this cargo, the air carrier verifies the chain of custody and, if satisfied, places the cargo on the aircraft. If not satisfied, the air carrier re-screens the cargo as depicted in scenario 1. The third scenario shows the proposed amendments allowing the known consignor to screen and secure the cargo at the source before handing it over to the certified or regulated agent. On receipt of this cargo, the regulated agent would verify the chain of custody and, if satisfied, would forward the cargo to the air carrier. The air carrier would also verify the chain of custody before placing the cargo on the aircraft. At any step in the supply chain, if the chain of custody could not be verified, the cargo would have to be screened and secured before the air carrier would place it on an aircraft.

Regulatory and non-regulatory options considered

In 2009, a number of options as to how Canada's air cargo regime might look were developed and reviewed, reflecting highly diverse approaches to screening and secure supply chain management. These ranged from complete responsibility on the part of industry for virtually all aspects of air cargo security to complete government-managed security on-site at airports, comparable to that provided by the Canadian Air Transport Security Authority (CATSA) for passenger and baggage screening.

Due, in part, to the recommendations of the Standing Senate Committee on National Security and Defence and the findings of the Final Report of the Commission of Inquiry into the Investigation of the Bombing of Air India Flight 182, which emphasize the need for regulations specific to air cargo security as well as the need to have the legal certainty of a Canadian regulatory framework in place for international trading partners, non-regulatory options were given limited consideration. It is crucial that all participants in the air cargo industry be held to the same standard, which cannot be accomplished through non-regulatory options. Air carriers and freight forwarders are already subject to the requirements of the security measures made under the Aeronautics Act regarding the screening and handling of secure air cargo, which is the baseline scenario of this proposal. The secure supply chain cannot be enhanced or remain secure if similar requirements are not imposed for all participants. A regulated regime would ensure that all entities handling air cargo would face comparable requirements, together with meaningful oversight and enforcement. Furthermore, in order for Canada to be aligned with its international trading partners, an air cargo security program, supported by a regulatory framework, must be in place.

Industry participant accreditation regime

Accreditation regimes in the United Kingdom, Australia and the United States were assessed and individual elements were considered for inclusion in a regime proposed for Canada.

Similar to the current proposed Regulations, the accreditation regime option involved a scheme wherein participants applied to the voluntary regime and were validated by independent accreditors, with the entire program being overseen by Transport Canada, although at arm's length.

Two options were proposed: one that involved full regulation and another that involved a combination of regulatory and non-regulatory options.

• Option 1: An enhanced air cargo security regime, with direct Government certification of all screeners except for shippers. Shippers would be accredited by freight forwarders and cargo screening facilities, with an accreditation regime to govern shippers and thirdparty service providers seeking to become participants in the secure supply chain.
• Option 2: An enhanced air cargo security regime, with a focus on a comprehensive cargo screening agenda that would see direct Government certification of anyone screening cargo to make it secure (consignors, freight forwarders, independent cargo screening facilities, etc.) and an accreditation regime for third-party service providers seeking to become participants in the secure supply chain.

Both options required that cargo — once screened — would be stored and transported in a manner that would prevent unauthorized access until it was placed on an aircraft. Both options also featured at least some degree of continuing regulation and related compliance provisions and were considerably more substantial and comprehensive than the status quo in that they provided for the establishment of a new regulatory regime governing screening and supply chain security and related oversight.

However, an accreditation regime also carries with it some disadvantages. It is burdensome to administer and more expensive for participants, and generally requires more training of the accreditors. There is potential for inconsistency in reporting and inspecting. In addition, an accreditation regime would involve a new way of doing business, which could mean a cultural shift, bringing along with it a potential operational delay and market adjustment while the system was implemented. One of the most significant disadvantages would be the perception that Transport Canada was delegating its authority to industry, with less direct oversight of participants.

Current proposal: Regulation of all parties directly by Transport Canada

This option features an enhanced air cargo security regime, with the focus on a comprehensive cargo screening agenda that would see direct Government certification of anyone screening cargo and anyone handling secure cargo.

This would be the least expensive option with the least amount of burden, both for Government and for industry. This option would clearly consolidate control of screening in the hands of the Government, eliminating the perception that Transport Canada may be delegating its authority to industry. Furthermore, this option would not preclude the addition of an accreditation regime for non-screening agents or a training regime in the future, should the need arise. Finally, given that Canada's international partners are moving towards increased regulation, it is a sound decision to create a similar, comprehensive program in order to assure partners that air cargo security is a priority.

Benefits and costs

Transport Canada has conducted an analysis of the benefits and costs of the proposed amendments. The analysis is complicated by recently introduced changes to the regulatory framework for air cargo security in Canada, including the security-sensitive measures made under the Aeronautics Act, which require air carriers to secure all air cargo before loading on a passenger aircraft.

In the absence of the proposed amendments, achieving a level of security equivalent to that in other jurisdictions (e.g. the United States) would require air carriers or approved members of the program to screen all air cargo before loading it on to a passenger aircraft. This “baseline scenario” would result in cargo bottlenecks, delays, and higher security screening fees for all shippers.

Benefits

The proposed amendments would provide shippers with the option of shipping by air as known consignors, and would enable third-party service providers to handle secure cargo as certified agents. Benefits of the proposed amendments would be driven primarily by known consignor participation, and would

• Enable known consignors to secure their own cargo, bypass air carrier and regulated agent screening systems, and reduce shipping delays and risks;
• Reduce the systemic burden on air carrier and regulated agent screening capacities, and reduce shipping delays for other shippers dependent on these capacities; and
• Lower the cost of securing air cargo for known consignors and other shippers.

Known consignors: Reduced shipment delays and risks

The proposed amendments would enable known consignors to screen their own cargo, significantly reducing any potential for delays associated with air carrier or regulated agent screening. Assuming that 1 000 to 1 500 known consignors would account for between 30% and 50% of air cargo volumes, Transport Canada estimates that the resulting delay reductions would yield benefits of $60 million over 10 years.

Transport Canada has consulted with internal and external subject matter experts, including those in other jurisdictions (the United States and the United Kingdom) that have implemented similar programs, and has identified a number of other potential benefits for known consignors:

• Improved reliability of air cargo shipping;
• Reduced likelihood of damage due to physical screening by other supply chain participants;
• Liability management (i.e. in the event of unlawful interference with civil aviation);
• Fewer insurance claims for loss or damage;
• Fewer invalidated guarantees for damaged goods; and
• Opportunity to market known consignor participation as a mark of quality and shipping excellence.

Other shippers: Reduced shipment delays

While more significant benefits would accrue to known consignors, other shippers would also benefit from the resulting reduction in systemic demand for air carrier and regulated agent screening services. This decreased demand would reduce delays and cargo bottlenecks for other shippers. Transport Canada estimates that the resulting delay reductions would yield benefits of $30 million over 10 years.

Lower cost of screening air cargo

The proposed amendments would lower the demand for air carrier and regulated agent screening services, and are expected to result in lower fees for these services, relative to the baseline scenario.

For other shippers (non-known consignors), Transport Canada assumes that an average screening fee of $0.15 per kilogram would be levied by air carriers and regulated agents, consistent with fees in other jurisdictions with similar programs and with input from Canadian stakeholders. In the absence of the proposed amendments, demand on air carrier and regulated agent screening capacities would be higher. Transport Canada expects that the associated screening fees would be higher ($0.20 per kilogram, by assumption) and the proposed amendments would, therefore, result in savings for other shippers. The proposed amendments are expected to save other shippers $62 million over 10 years.

For known consignors, this security screening fee would be avoided and replaced with internal costs of complying with the proposed amendments (e.g. improved fencing, security clearances). Assuming a $0.20 per kilogram baseline screening fee, Transport Canada estimates that known consignors would avoid screening fees of $161 million over 10 years.

Certified agents

For third-party service providers, participation in the secure supply chain as certified agents would enable them to handle secure cargo. Under the baseline scenario, third-party service providers would be unable to handle secure cargo.

Compliance costs

Costs of the proposed amendments would include initial and ongoing known consignor participation costs, certified agent participation costs, and costs to Transport Canada and other Government agencies.

Known consignor participation costs

Transport Canada has evaluated a range of possible compliance costs associated with known consignor participation, using analyses from the United States and surveys of Canadian stakeholders, including

• Security self-assessments and known consignor applications;
• Closed-circuit television security systems;
• Fencing;
• Security doors and access cards;
• Employee training;
• Chain of custody;
• Incremental cargo packing time/effort; and
• Incremental inspection-related activities.

It is expected that known consignor participation costs would be offset by the benefits of participation — including reductions in delays and avoided air carrier / regulated agent screening costs.

Taking the above compliance elements into consideration, Transport Canada estimates that known consignors would bear costs of $60 million over 10 years, which would be offset by the reduction in screening fees described above.

Certified agent participation costs

Transport Canada has evaluated a range of possible compliance costs associated with certified agent participation. Many third-party service providers already meet the requirements of certification (e.g. facility security), and costs would therefore be limited to application costs. An additional 50 to 100 third-party service providers are assumed to become certified agents, and would bear costs similar to those borne by known consignors (excluding cargo packing and chain of custody).

It is expected that certified agent participation costs would be offset by the benefits of participation — the ability to handle secure cargo.

Taking the above compliance elements into consideration, Transport Canada estimates that certified agents would bear costs of $4 million over 10 years.

Transport Canada and other Government agencies

Costs to Transport Canada and other Government agencies are estimated to be $17.5 million over 10 years for inspector training, incremental inspections, the known consignor and certified agent application process and approval, as well as other implementation and administration activities related to known consignor participation.

Distributional impacts

The proposed amendments would provide consignors with the option of becoming known consignors, and third-party service providers with the option of becoming certified agents. As participation in the program would be voluntary, Transport Canada anticipates that significant costs would only be incurred where a compensating benefit would exist. Residual benefits would also accrue to other shippers, due to the systemic reduction in the burden on air carrier and regulated agent screening capacities.

Benefits are expected to be greatest for those shippers who are able to ship cargo as known consignors, and in particular (a) high volume shippers, (b) those shippers whose cargo would be most sensitive to delay or damage if screened by a third party, and (c) those shippers who already meet most of the requirements (e.g. facility security) required for compliance as known consignors (thus reducing the cost of participation). Some shippers (e.g. some low volume shippers) may not find it cost effective to participate as known consignors and may incur a higher per-unit screening cost (than per-unit costs incurred by known consignors), but would nevertheless benefit from a lower cost than under the baseline scenario.

Transport Canada does not anticipate significant regional impacts. Many consignors currently ship cargo on passenger aircraft through a small number of high volume air cargo “gateways” — the Toronto, Vancouver and Montréal (Pierre Elliot Trudeau) airports — and several lower volume airports — Calgary, Ottawa, Edmonton and Halifax. Given the voluntary nature of the program, Transport Canada expects that it would result in a net benefit across regions.

Cost-benefit statement

Costs, Benefits and Distribution		2014	2023	Total (present value)	Annualized
A. Quantified impacts (in dollars) Benefits
Reduction in cargo delays (known consignors)		$8,622,041	$8,222,831	$60,009,083	$8,543,943
Reduction in screening fees (based on $0.20 per kilogram baseline fee) [known consignors and other shippers]		$23,526,364	$44,059,673	$223,160,088	$31,772,976
Total quantified benefits		$32,148,404	$52,282,504	$283,169,172	$40,316,920
Costs
Participation costs (known consignors)		$19,602,558	$8,092,423	$59,793,297	$8,513,220
Certified agent application costs (existing third-party service providers)		$52,423	-	$48,994	$6,976
Other certified agent participation costs		$2,362,477	$269,673	$3,904,958	$555,978
Transport Canada and other government department/agency costs		$2,544,898	$2,475,890	$17,454,111	$2,485,073
Total quantified costs		$24,562,356	$10,837,986	$81,201,360	$11,561,247
Quantified net benefits		$7,586,048	$41,444,517	$201,967,812	$28,755,673
B. Qualitative impacts Benefits
Known consignors	Reduced likelihood of damage due to physical screening by other supply chain participants Liability management (e.g. in the event of unlawful interference with civil aviation) Fewer insurance claims for loss or damage Fewer invalidated guarantees for damaged goods
Certified agents	Ability to handle secure cargo

“One-for-One” Rule

The “One-for-One” Rule does not apply to the proposed amendments. The proposed amendments would only result in administrative costs for those businesses that voluntarily participate in the air cargo supply chain as known consignors. However, given that shippers would still have the option of shipping by air without participating as known consignors (and without incurring administrative costs), voluntary administrative costs associated with participation are not considered administrative burden for the purposes of the “One-for-One” Rule. In any case, Transport Canada has sought to minimize these voluntary administrative costs to those necessary to maintain the integrity of the air cargo supply chain.

Small business lens

There are no additional costs imposed on small businesses as a result of the proposed amendments; therefore, the small business lens does not apply. The proposed amendments would provide all businesses, including small businesses, with the opportunity to screen their own cargo, reducing the need for air carrier or regulated agent screening, which would reduce screening charges, and shipment delays. By reducing the systemic burden on air carrier and regulated agent screening capacities, the proposed amendments would also reduce delays and shipping charges for those small businesses whose full participation does not make sense.

However, consideration has been given to small businesses in the development of the proposed amendments. Industry will be informed and compliance promotion activities will be provided. Outreach sessions were held in cities across the country over the summer and fall of 2013 to help reach out to new stakeholders, including small businesses, and to inform them of how they can be involved in the program.

In addition, all forms and processes and the Web site will be compliant with the common look and feel of Government and forms will be pre-populated with information or data already available to the Department to reduce the time and cost necessary to complete them. If applicants have previously applied to the program, previous validation numbers are required so that Transport Canada can retrieve previously saved information. In addition, online application modules are under development and will be ready upon coming into force of the proposed amendments.

Electronic data collection would be used, including electronic validation and confirmation of receipt of reports where appropriate, with the expansion of the Secure Supply Chain Information Management System (SSCIMS). Consideration has also been given to small businesses in remote areas, with special consideration to those that do not have access to high-speed (broadband) Internet. In such cases, prospective participants may call the Air Cargo Security Support Centre to request that application forms be sent to them by mail. Clients and participants may also call the Support Centre for any assistance they require. The information could be provided via fax and entered in the database by the Department.

Consultation

The consultation process was conducted in two phases, first with current stakeholders, and then with current as well as new stakeholders.

November 2011 to July 2012 (current stakeholders)

Small-scale, preliminary consultations were undertaken to engage the current stakeholder community, which consists of air carriers and approved members of the program and certain member associations such as the Canadian International Freight Forwarders Association Inc. (CIFFA) and the Northern Air Transport Association (NATA). Meetings were also held with other organizations, including the Air Transport Association of Canada (ATAC), the Air Cargo Security Technical Committee, the National Air Cargo Security Training and Awareness Committee (NACSTAC), and the Canadian Trucking Alliance (CTA).

The objectives of this first phase of consultations were to

• identify the extended stakeholder group (including shippers and third-party service providers);
• inform the current stakeholder community about the proposed amendments;
• build the support of the current stakeholder community for the amendments;
• gather relevant information (i.e. for the cost-benefit analysis); and
• gauge the expected reaction of stakeholders to changes to the regulatory landscape.

The proposed policy was very preliminary, but the high-level concept was generally well received. However, Transport Canada did receive a submission from the Canadian International Freight Forwarders Association Inc. (CIFFA) that urged the Department to consider that third-party service providers should be directly regulated by Transport Canada.

The submission was given careful consideration and led to a significant change in policy direction for the program with respect to third-party service providers, which was reflected in the regulatory proposal presented in the second phase of consultations.

July 2012 to October 2012 (current and new stakeholders)

Phase two of the consultations took place with current stakeholders as well as the broader stakeholder community, including shippers, third-party service providers and other interested parties such as airport authorities, freight forwarders and logistics companies involved in the movement of air cargo, including small businesses. The objectives of the second phase of consultations were similar to those of the first.

Meetings were held in Ottawa, Vancouver, Edmonton, Winnipeg, Yellowknife, Calgary, St. John's, Halifax, Toronto, Montréal and Moncton with current and new stakeholders beginning on September 6, 2012, and ending on October 17, 2012.

Consultations were also held online beginning on August 28, 2012. Information was posted on the Transport Canada Web site about the proposed regulatory framework, with comments from the public invited. Few comments were received via this forum.

Transport Canada also reached out to relevant federal departments and agencies through the Air Cargo Interoperability Working Group (ACI-WG) and launched the Air Cargo Security (ACS) Awareness Process in an attempt to identify synergy between federal programs with respect to air cargo and to bring the relevant organizations that are involved in the shipment of goods by air, such as the Department of National Defence, Health Canada, the Royal Canadian Mint and Canada Post, into the Air Cargo Security (ACS) Program. The proposed Regulations were presented to the Air Cargo Interoperability Working Group on September 20, 2012, and were met with a positive reaction.

Throughout the second phase of the consultative process, the proposal was generally very well received. The feedback and questions received focused mainly on operational issues, how the program would take shape and what the role of various stakeholders would be in terms of participating in the handling of secure cargo. For the most part, Transport Canada was able to address issues immediately.

Concerns focused mainly on the following areas:

• Whether Transport Canada would consider equivalencies in terms of background checks for those who are already members of Partners in Protection (PIP) and Customs-Trade Partnership Against Terrorism (C-TPAT) programs;
• Whether foreign companies could apply to be part of the Air Cargo Security Program;
• Cost to businesses;
• How new screening requirements would affect the cost and timely delivery of food shipments heading to remote northern communities;
• The participation of crating / consolidation / pick and pack companies;
• Concern with modal shift to road for domestic customers if security requirements are too onerous;
• The issue of why screening could not be centralized at airports;
• Service standards for becoming a known consignor; and
• Mutual recognition with the United States of Canada's proposed known consignor program.

Most concerns have been addressed and Transport Canada continues to work closely with companies to mitigate any possible impacts and concerns. Among the concerns raised, none have required a change to the regulatory proposal per se.

With respect to Canada's North, Transport Canada has been and will continue to be involved in open dialogues with those stakeholders involved in getting food shipments to northern communities, with a view to finding solutions so that the cost and timely delivery of food to the North are not unduly affected. A northern air carrier working group has been created in order to ensure that Transport Canada is well aware and continues to be aware of the distinct issues affecting northern and remote regions.

With respect to recognizing different credentials, considering that there are differences in mandate for different departments, Transport Canada is committed to avoiding any duplication of administrative burden with other Government departments and is working to find equivalencies between different programs / security requirements, particularly in relation to Canadian-based programs. Such information would be provided to industry as guidance material.

In addition, Transport Canada is also committed to working with companies to determine what their role would be in the secure supply chain and how the proposed amendments would apply to their business.

Regulatory cooperation

Transport Canada is confident that the proposed amendments would further the promotion and pursuit of international cooperation, collaboration, sharing of best practices, and the negotiation of mutual recognition arrangements between key trading partners in order to have in place the best possible Air Cargo Security Program and supporting regulatory framework. Activities currently include

• negotiation of mutual recognition agreements with key trading partners;
• collaboration with international organizations, including the International Civil Aviation Organization (ICAO), the World Customs Organization (WCO) and the International Air Transport Association (IATA); and
• collaboration with various federal departments and agencies.

Canada's key trading partners, including the United States and the European Union, require all cargo destined for their airports to be secure. In its current form, the Air Cargo Security Program is not considered to be equivalent to programs implemented by Canada's international partners. In order to meet international standards, one hundred per cent of cargo must be screened.

Because of Canada's unique geography and industry profile, creating an identical program to those of its international partners is not feasible. However, Transport Canada has consulted with the United Kingdom, the United States and Australia, and feedback has been favourable. Transport Canada endeavours to create a program, supported by regulations, that adopts the best practices of its international partners.

Rationale

The proposed amendments consist of an approach that would align Canada with its international trading partners, create a flexible screening model for the air cargo industry, and benefit Canadians overall, both in terms of the Canadian economy and in terms of security.

As the proposed amendments were being developed, numerous options were considered, including the status quo. The status quo presents the least amount of burden and lowest costs for businesses and the Government. However, it is inconsistent with the main goals of the Air Cargo Security Program and those of our international partners. A secure supply chain and air cargo system cannot be attained and recognized by trade and international partners without implementing robust regulations that would ensure all participants involved in the handling of air cargo are held to the same standards.

Since enhanced screening requirements will soon be in place, thus inevitably increasing costs to those who wish to ship their goods via air cargo, the proposed amendments would establish a flexible system whereby companies could choose, based on their business models, how and where their goods are screened.

Known consignors would benefit from less costly and more reliable cargo security options, while unknown shippers would benefit from the reduced systemic burden on air carrier and regulated agent screening capacities. As this would be a voluntary program, the proposed Regulations would ensure that participation costs would only be incurred where a compensating benefit exists for individual, prospective participants in terms of reduced delays and screening costs. In addition, given that the proposed amendments are largely performance-based, participants will find that they allow flexibility in compliance. It is expected that the proposed Regulations will result in a net benefit to Canadians.

For certified agents, the proposed amendments would bring several advantages, including direct certification by Transport Canada. Certified agents would receive information directly from Transport Canada instead of through third parties and would be directly inspected by Transport Canada. They would gain a portable, marketable credential to present as a company that can reliably handle secure cargo.

Airlines would benefit from more screening taking place further down the secure supply chain, which would reduce bottlenecks from screening cargo at the airport.

The proposed amendments present a direction that raises few significant concerns. During the pre-consultation period, the proposed amendments were well received based on preliminary feedback collected from key stakeholders who are involved and have interests in the air cargo industry. Transport Canada has been mitigating and finding solutions to issues presented by stakeholders and will continue to do so. Based on questions and feedback that have been received, Transport Canada is certain the proposed regulatory framework is flexible enough to accommodate scenarios that have been put forth and different types of stakeholders who wish to participate.

The proposed amendments also aim to maintain the level of security that airlines and their passengers benefit from currently, and will not diminish it in any way.

Implementation, enforcement and service standards

Transport Canada expects that these amendments would come into force 10 months after the day on which they are registered. In the year preceding the coming-into-force date, Transport Canada plans on contacting its list of registered shippers to promote the proposed amendments and outline options for those registered shippers who would be interested in participating in the program. Specific actions at this time may include meeting with prospective participants, answering inquiries, developing and distributing promotional materials, and organizing information sessions to explain the proposed amendments. Transport Canada is also relying on current participants in the Program to help with outreach activities with their clients, who will be the known consignors and certified agents who are targeted as the basis of the proposed Regulations, in terms of their potential screening capabilities or interest in handling secure/screened cargo.

With respect to enforcement, upon successful completion of the registration and application process, Transport Canada would issue to known consignors and certified agents a validation number and a screening designation certificate, under section 4.84 of the Aeronautics Act, which is a Canadian aviation document (CAD) as defined in subsection 3(1) of the Aeronautics Act and which would include conditions relating mainly to the screening or transporting/storing of secure cargo.

These proposed amendments would be enforced through the suspension or cancellation of a Canadian aviation document, through the assessment of monetary penalties under section 7.7 of the Aeronautics Act or through judicial action introduced by way of summary conviction as per section 7.3 of the Aeronautics Act.

Implementation, compliance promotion and enforcement activities would be resourced under existing resource capacity and allocated accordingly within the existing departmental reference level.

Once an application is received, the proposed service standard associated with becoming a known consignor or certified agent is expected to be 190 days. This standard is based on a responsive applicant who submits completed forms with the required information in a timely manner.

Contact

Wendy Nixon
Director
Aviation Security Program Development
Transport Canada
Ottawa, Ontario
K1A 0N5
Email: ACSconsultation-consultationSFA@tc.gc.ca

Air Cargo Security Support Centre
Telephone (toll-free): 1-866-375-7342
Fax: 613-949-8502

PROPOSED REGULATORY TEXT

Notice is given that the Governor in Council, pursuant to sections 4.71 (see footnote a) and 4.9 (see footnote b) and paragraphs 7.6(1)(a) (see footnote c) and (b) (see footnote d) of the Aeronautics Act (see footnote e), proposes to make the annexed Regulations Amending the Canadian Aviation Security Regulations, 2012 and the Designated Provisions Regulations (Air Cargo).

Interested persons may make representations concerning the proposed Regulations within 60 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Wendy Nixon, Director, Aviation Security Program Development, Department of Transport, Place de Ville, Tower B, 112 Kent Street, Ottawa, Ontario K1A 0N5 (tel.: 613-990-1282; fax: 613-949-9199; e-mail: acsconsultation-consultationsfa@tc.gc.ca).

Ottawa, October 23, 2014

JURICA ČAPKUN
Assistant Clerk of the Privy Council

REGULATIONS AMENDING THE CANADIAN AVIATION SECURITY REGULATIONS, 2012 AND THE DESIGNATED PROVISIONS REGULATIONS (AIR CARGO)

CANADIAN AVIATION SECURITY REGULATIONS, 2012

1. Paragraph 2(k) of the Canadian Aviation Security Regulations, 2012 (see footnote 7) is replaced by the following:

• (k) Part 11 deals with air cargo;

2. Section 3 of the Regulations is amended by adding the following in alphabetical order:

“threat item”
« article dangereux »

“threat item” means any of the following goods that are in a shipment of cargo but are not listed on the waybill or other control document for that cargo:

• (a) an explosive substance;
• (b) an incendiary device;
• (c) a component of an explosive device or incendiary device; and
• (d) any other good that could pose a threat to aviation security.

3. Part 11 of the Regulations is replaced by the following:

PART 11

AIR CARGO

OVERVIEW

Overview

668. This Part sets out requirements for cargo on passenger flights and supplements sections 4.85(3) and (4) of the Act.

TRANSPORTING CARGO BY AIR AND TENDERING CARGO FOR TRANSPORTATION BY AIR

Requirement to screen cargo

669. For the purposes of subsection 4.85(3) of the Act, cargo to be transported by an air carrier on a passenger flight must be screened by the air carrier for threat items in accordance with security measures unless the cargo was tendered to the air carrier for transportation by air as secure cargo.

Tendering of secure cargo

670. For the purposes of subsection 4.85(4) of the Act, cargo must not be tendered to an air carrier for transportation by air as secure cargo unless the person tendering the cargo screens the cargo before tendering it in order to verify that

• (a) the cargo was screened for threat items in accordance with security measures;
• (b) access to the cargo was restricted in accordance with sections 675 to 677; and
• (c) the cargo was not tampered with after it was screened for threat items.

Direct tendering of secure cargo

671. A person, other than a person referred to in subsection 4.85(4) of the Act, must not tender cargo to an air carrier for transportation by air as secure cargo unless the person has screened the cargo for threat items in accordance with security measures.

Cargo security form

672. (1) A person must not tender cargo to an air carrier for transportation by air as secure cargo unless the cargo is accompanied by a document, in any paper or electronic format, that is originated by the person who screened the cargo for threat items.

Tendering under section 670

(2) If the cargo is tendered by a person referred to in subsection 4.85(4) of the Act, the document must include

• (a) an air waybill number or the number of a similar control document;
• (b) the person's name;
• (c) the air cargo security program number associated with the person's designation by the Minister, under section 4.84 of the Act;
• (d) the name of the person who screened the cargo for threat items;
• (e) the air cargo security program number associated with the designation by the Minister, under section 4.84 of the Act, of the person referred to in paragraph (d);
• (f) a declaration, by one of the authorized cargo representatives of the person referred to in paragraph (d), that
  • (i) the representative screened the cargo for threat items in accordance with security measures, and
  • (ii) the cargo does not contain any threat items;
• (g) the date on which the screening for threat items took place;
• (h) a declaration, by one of the authorized cargo representatives of the person referred to in paragraph (d), that
  • (i) access to the cargo was restricted in accordance with sections 675 to 677, and
  • (ii) the cargo was not tampered with between the time it was screened for threat items and the time the person ceased to be in possession of it;
• (i) a declaration, by one of the authorized cargo representatives of the person tendering the cargo, that
  • (i) access to the cargo was restricted in accordance with sections 675 to 677, and
  • (ii) the cargo was not tampered with between the time it was received from the person referred to in paragraph (d) and the time of tendering;
• (j) the name and signature of the authorized cargo representative referred to in paragraph (f) and the signature date;
• (k) the name and signature of the authorized cargo representative referred to in paragraph (h) and the signature date; and
• (l) the name and signature of the authorized cargo representative referred to in paragraph (i) and the signature date.

Tendering under section 671

(3) If the cargo is tendered by a person other than a person referred to in subsection 4.85(4) of the Act, the document must include

• (a) an air waybill number or the number of a similar control document;
• (b) the person's name;
• (c) the air cargo security program number associated with the person's designation by the Minister under section 4.84 of the Act;
• (d) a declaration, by one of the person's authorized cargo representatives, that
  • (i) the representative screened the cargo for threat items in accordance with security measures, and
  • (ii) the cargo does not contain any threat items;
• (e) the date on which the screening for threat items took place;
• (f) a declaration, by one of the person's authorized cargo representatives, that
  • (i) access to the cargo was restricted in accordance with sections 675 to 677, and
  • (ii) the cargo was not tampered with between the time it was screened for threat items and the time of tendering;
• (g) the name and signature of the authorized cargo representative referred to in paragraph (d) and the signature date; and
• (h) the name and signature of the authorized cargo representative referred to in paragraph (f) and the signature date.

False declaration and inaccurate information

673. A person must not make a false declaration on a document referred to in section 672 or set out inaccurate information on that document.

SCREENINGS

Authority to screen

674. A person must not screen cargo for the purposes of this Part unless the person is

• (a) a person designated by the Minister under section 4.84 of the Act; or
• (b) an authorized cargo representative of a person designated by the Minister under section 4.84 of the Act.

Screening for threat items

675. (1) If a person screens cargo for threat items so that it may be tendered to an air carrier for transportation by air as secure cargo, the person must

• (a) conduct the screening in accordance with security measures;
• (b) conduct the screening in an area that the person has designated for screenings;
• (c) ensure that, while the screening is being conducted, signs are in place at or near the designated area that say “unauthorized access prohibited”;
• (d) control access to the designated area while the screening is being conducted to ensure that, subject to subsection (2), only the person's authorized cargo representatives have access to the area;
• (e) take measures to detect unauthorized individuals in the designated area while the screening is being conducted;
• (f) ensure that, while the screening is being conducted, individuals other than the person's authorized cargo representatives do not have access to cargo in the designated area; and
• (g) ensure that, while the screening is being conducted, cargo in the designated area is not tampered with.

Authorized access

(2) An individual who is not one of the person's authorized cargo representative is permitted in the designated area if

• (a) the individual is acting in the course of his or her employment and requires access to the designated area while screenings are being conducted;
• (b) the individual has the prior approval of the person's cargo security coordinator;
• (c) the cargo security coordinator or one of the person's authorized cargo representatives verifies the identity of the individual by means of government-issued photo identification provided by the individual; and
• (d) the individual is, while in the designated area, escorted and kept under surveillance by one of the person's authorized cargo representatives who is assigned to that task by the person.

Escort limit

(3) For the purposes of paragraph (2)(d), the person must ensure that the authorized cargo representative does not escort more than ten individuals at one time.

STORAGE AND TRANSPORT REQUIREMENTS

Storage requirements

676. (1) If cargo has been screened so that it may be tendered to an air carrier for transportation by air as secure cargo, a person who stores the cargo must

• (a) store the cargo in an area that the person has designated for that purpose;
• (b) ensure that, while the cargo is stored in the area, signs are in place at or near the designated area that say “unauthorized access prohibited”;
• (c) control access to the designated area while the cargo is stored in the area to ensure that, subject to subsection (2), only the person's authorized cargo representatives have access to the area;
• (d) take measures to detect unauthorized individuals in the designated area while the cargo is stored in the area;
• (e) ensure that, while the cargo is stored in the designated area, individuals other than the person's authorized cargo representatives do not have access to the cargo; and
• (f) ensure that the cargo in the designated area is not tampered with.

Authorized access

(2) An individual who is not one of the person's authorized cargo representatives is permitted in the designated area if

• (a) the individual is acting in the course of his or her employment and requires access to the designated area while cargo that has been screened so that it may be tendered to an air carrier for transportation by air as secure cargo is stored in the area;
• (b) the individual has the prior approval of the person's cargo security coordinator;
• (c) the cargo security coordinator or one of the person's authorized cargo representatives verifies the identity of the individual by means of government-issued photo identification provided by the individual; and
• (d) the individual is, while in the designated area, escorted and kept under surveillance by one of the person's authorized cargo representatives who is assigned to that task by the person.

Escort limit

(3) For the purposes of paragraph (2)(d), the person must ensure that the authorized cargo representative does not escort more than ten individuals at one time.

Transport requirements

677. (1) If cargo has been screened so that it may be tendered to an air carrier for transportation by air as secure cargo, a person who transports the cargo must

• (a) ensure that the cargo is transported by the person's authorized cargo representatives;
• (b) transport the cargo in a conveyance that is secured with tamper-evident technology; and
• (c) ensure that the cargo is not tampered with during transport.

Signs of tampering

(2) If the tamper-evident technology shows signs that conveyance has been tampered with, the person must not tender the cargo to an air carrier for transportation by air as secure cargo unless the cargo is re-screened for threat items in accordance with security measures.

CARGO SECURITY COORDINATORS AND AUTHORIZED CARGO REPRESENTATIVES

Application

678. Sections 679 to 681 apply to the following persons:

• (a) persons who screen cargo for threat items so that it may be tendered to an air carrier for transportation by air as secure cargo;
• (b) persons who store or transport cargo that has been screened so that it may be tendered to an air carrier for transportation by air as secure carg; and
• (c) persons who tender cargo to an air carrier for transportation by air as secure cargo.

Cargo security coordinator — designation

679. (1) A person must designate a cargo security coordinator who is responsible for coordinating and overseeing compliance with the regulatory requirements that apply to the person and for acting as the principal contact between the person and the Minister with respect to aviation security matters.

Cargo security coordinator — restriction

(2) The person must not designate an individual as cargo security coordinator unless that individual is one of the person's authorized cargo representatives and is also a senior manager or a supervisor.

Authorized cargo representative

680. (1) A person must not designate an individual as one of the person's authorized cargo representatives unless the individual

• (a) is employed by the person;
• (b) has a security clearance or, on the basis of a background check conducted by the person's cargo security coordinator, does not pose a risk to aviation security;
• (c) has provided three character references to the person; and
• (d) has been trained in relation to his or her duties as an authorized cargo representative.

Background check

(2) The person must ensure that the background check includes

• (a) a Canadian criminal record check;
• (b) a check of the individual's home addresses for the five years preceding the date of the background check; and
• (c) a check of the individual's work history for the five years preceding the date of the background check.

Canadian criminal record check

681. If a person's authorized cargo representative does not have a security clearance, the person must conduct a Canadian criminal record check on the authorized cargo representative at least once every five years.

REPORTING OF SECURITY INCIDENTS

Reporting of security incidents

682. A person referred to in section 678 must immediately notify the Minister if the person

• (a) detects a threat item in cargo while screening it so that it may be tendered to an air carrier for transport by air as secure cargo;
• (b) detects unauthorized access to cargo in the person's possession that is being screened or has been screened so that it may be tendered to an air carrier for transport by air as secure cargo;
• (c) detects signs of tampering with cargo in the person's possession that is being screened or has been screened fso that it may be tendered to an air carrier for transport by air as secure cargo; or
• (d) becomes aware of any other aviation security incident involving cargo that is or was in the person's possession.

RECORD KEEPING

Cargo security form

683. A person who tenders cargo to an air carrier for transportation by air as secure cargo must keep a copy of the document referred to in subsection 672(1) — or the data set out in that document — for at least 90 days after the day on which the person ceases to be in possession of the cargo.

Training record

684. (1) A person referred to in section 678 must keep a training record, in any paper or electronic format, for each of the person's authorized cargo representatives.

Required information

(2) A training record for an authorized cargo representative must include

• (a) the name of the authorized cargo representative;
• (b) his or her position title;
• (c) the dates on which he or she received training in relation to his or her duties as an authorized cargo representative;
• (d) a description of the duties; and
• (e) the name of the person who provided the training.

Deletion of information

(3) The person may delete information on a training record if the information is more than five years old.

Retention period

(4) If one of the person's authorized cargo representatives ceases to act as an authorized cargo representative, the person must keep the training record for at least 90 days after the day on which the authorized cargo representative ceases to act in that capacity.

Background check record

685. (1) If an individual undergoes a background check for the purposes of paragraph 680(1)(b) and is designated as a person's authorized cargo representative, the person must keep a record in respect of the check that contains

• (a) the name of the individual;
• (b) the date of the check; and
• (c) the name of the cargo security coordinator who conducted the check.

Retention period

(2) If the individual ceases to act as the person's authorized cargo representative, the person must keep the record for at least 90 days after the day on which the authorized cargo representative ceases to act in that capacity.

Ministerial access

686. A person who keeps a document or other record under this Part must make the document or record available to the Minister on reasonable notice given by the Minister.

[687 to 738 reserved]

4. Schedule 4 to the Regulations is amended by adding the following after the reference “Section 545”:

Column 1 Designated Provision	Column 2 Maximum Amount Payable ($) Individual	Column 3 Maximum Amount Payable ($) Corporation
PART 11 — AIR CARGO
Section 671	5,000	25,000
Subsection 672(1)	5,000	25,000
Section 673	5,000	25,000
Section 674	5,000	25,000
Paragraph 675(1)(a)	5,000	25,000
Paragraph 675(1)(b)	5,000	25,000
Paragraph 675(1)(c)	3,000	10,000
Paragraph 675(1)(d)	5,000	25,000
Paragraph 675(1)(e)	5,000	25,000
Paragraph 675(1)(f)	5,000	25,000
Paragraph 675(1)(g)	5,000	25,000
Subsection 675(3)	5,000	25,000
Paragraph 676(1)(a)	5,000	25,000
Paragraph 676(1)(b)	3,000	10,000
Paragraph 676(1)(c)	5,000	25,000
Paragraph 676(1)(d)	5,000	25,000
Paragraph 676(1)(e)	5,000	25,000
Paragraph 676(1)(f)	5,000	25,000
Subsection 676(3)	5,000	25,000
Paragraph 677(1)(a)	5,000	25,000
Paragraph 677(1)(b)	5,000	25,000
Paragraph 677(1)(c)	5,000	25,000
Subsection 677(2)	5,000	25,000
Subsection 679(1)	5,000	25,000
Subsection 679(2)	5,000	25,000
Subsection 680(1)	5,000	25,000
Subsection 680(2)	5,000	25,000
Section 681	5,000	25,000
Section 682	5,000	25,000
Section 683	3,000	10,000
Subsection 684(1)	3,000	10,000
Subsection 684(4)	3,000	10,000
Subsection 685(1)	3,000	10,000
Subsection 685(2)	3,000	10,000
Section 686	5,000	25,000

DESIGNATED PROVISIONS REGULATIONS

5. Schedule 4 to the Designated Provisions Regulations (see footnote 8) is amended by adding the following after item 4:

Item	Column 1 Designated Provision	Column 2 Maximum Amount Payable ($) Individual	Column 3 Maximum Amount Payable ($) Corporation
5.	Subsection 4.85(4)	5,000	25,000

COMING INTO FORCE

6. These Regulations come into force on the day that is ten months after the day on which they are registered.

[44-1-o]