Canada Gazette, Part I, Volume 156, Number 26: Marine Safety Management System Regulations

June 25, 2022

Statutory authority
Canada Shipping Act, 2001

Sponsoring department
Department of Transport

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary

Issues

The CSA 2001 and its regulations establish a legal framework that promotes safety, while also protecting both the marine environment and the health and well-being of individuals who participate in marine transportation and commerce. However, numerous enhancements and updates are needed to ensure that the framework continues to support and advance safety and environmental priorities.

The proposed Regulations aim to address two main issues:

• Existing disparities in safety requirements between Canadian vessels subject to SOLAS and non-SOLAS vessels; and
• Outstanding recommendations from the TSB.

Existing disparities in safety requirements between Canadian vessels subject to SOLAS and similarly sized non-SOLAS vessels

The existing Safety Management Regulations apply only to vessels that are subject to Chapter IX of SOLAS. As SOLAS does not apply to vessels operating solely in Canada’s waters, the Safety Management Regulations cover only a very small portion of the Canadian fleet (less than one percent).

An SMS involves individuals at all levels of an organization and promotes a logical approach to hazard identification and risk mitigation, advancing safety culture as a whole. An SMS is recognized by the IMO as an effective means for preparing for, and responding to, safety incidents which may occur on board vessels. Only Canadian vessels that are subject to Chapter IX of SOLAS are currently required to comply with the ISM Code, which requires them to implement an SMS on board. Conversely, as SOLAS only applies to certain sized vessels on an international voyage, the majority of vessels operating solely in Canadian waters of equal size to SOLAS vessels are not currently required to implement an SMS.

Outstanding recommendations from the TSB

The issue of an SMS has been on the TSB’s Watchlist, an evergreen listing of key safety issues in the transportation sector, since 2010. Specifically, the TSB has called for TC to implement regulations requiring all commercial operators in the marine industry to have formal safety management processes in place, and effectively oversee these processes. Furthermore, the TSB has two outstanding recommendations (recommendations M04-01 and M17-02) calling on TC to expand the implementation of an SMS and formal risk management practices to passenger vessels. The lack of an SMS on foreign vessels operating in Canadian waters has also been identified by the TSB as a safety issue.

Not addressing TSB recommendation or Watchlist items could continue putting passenger vessels at risk if there are no formal safety processes to reduce the risk of fatalities and casualties.

Background

International Maritime Organization (IMO) and SOLAS

The IMO is the specialized agency within the United Nations with responsibility for the safety and security of international shipping. The IMO has 174 member states and manages approximately 50 conventions and protocols related to shipping safety and environmental protection. In response to numerous, significant marine accidents, the IMO introduced formal SMS requirements in 1993, through the incorporation of the ISM Code into Chapter IX of SOLAS. As a result, companies that own and operate vessels that are subject to SOLAS (i.e. SOLAS vessels) are required to implement an SMS on board that is in accordance with the ISM Code.

SOLAS applies to

• Passenger-carrying vessels, engaged on an international voyage; and
• Cargo vessels, such as oil tankers, chemical tankers, gas carriers, bulk carriers, container ships and mobile offshore drilling units of 500 gross tonnage and upwards.

All countries that are signatories to SOLAS have implemented the ISM Code for SOLAS vessels operating under their flag. In addition, many countries (e.g. the United Kingdom, Norway, and Australia) have extended safety management requirements to a greater portion of their non-SOLAS fleet. Canada implemented the ISM Code in 1998 by introducing the existing Safety Management Regulations (SMR) under the previous Canada Shipping Act, applying the ISM Code to all Canadian SOLAS vessels.

Marine safety occurrences

The Canadian Transportation Accident Investigation and Safety Board Act defines a marine safety occurrence as an accident or an incident that results directly from the operation of a ship, where, in the case of an accident, a person is killed or sustains a serious injury. According to the TSB, between 2008 and 2019 there were 2,755 marine safety occurrences involving Canadian vessels that would fall within the scope of the proposed Regulations. Between 2008 and 2019, 35 fatalities and 207 major injuries were recorded in Canadian waters involving Canadian vessels that would be subject to the proposed Regulations.

Fatalities and serious injuries from these accidents and consequences of incidents carry a heavy social cost to Canada. These incidents also often result in some level of damage to the environment, resulting in clean-up efforts being needed at the least, and sustained damage to the environment at worst.

Safety management systems and the current Safety Management Regulations

Safety management systems are comprehensive sets of procedures, objectives, and responsibilities designed to manage safety elements in the workplace. They are intended to serve as a mechanism to lessen accidents and help reduce human error, as well as prepare for, and respond to, emergencies. In practice, an SMS is a collection of procedures and work instructions tailored to reflect what happens on a particular vessel that are followed by personnel on board vessels and on shore, both in routine and emergencies. Day to day, an SMS aims to keep the operation safe, reduce the risk of accidents, and train personnel for emergencies.

The current Regulations apply only to SOLAS vessels and the companies that operate them. Compliance with SOLAS Chapter IX requires that the company develops and implements SMS that meets the requirements of ISM Code.

Once an SMS is reviewed and an audit is conducted to verify the requirements, the company is issued a Document of compliance (DOC) valid for 5 years and this DOC is endorsed annually on completion of a successful audit, if the requirements are met. On successful completion of audit on board, a vessel is issued a Safety management certificate (SMC) valid for 5 years and is endorsed, in other words verified, once every 5 years.

A valid DOC and SMC is evidence that on-shore and on-board operations are functioning as per the documented SMS of the company.

Transportation Safety Board (TSB)

The TSB is an independent agency that advances transportation safety by investigating occurrences in the air, marine, pipeline and rail modes of transportation. In doing so, the TSB serves to identify safety deficiencies, as evidenced by transportation occurrences, and publicly releases recommendations designed to eliminate or reduce such safety deficiencies. The TSB maintains an evergreen Watchlist which identifies key safety issues that need to be addressed to improve safety across Canada’s transportation sector. The issues identified on this Watchlist are supported by a combination of individual investigation reports and recommendations produced by the TSB.

In multiple investigation reports, the TSB has suggested that occurrences could have been prevented, or the number of fatalities and injuries reduced, if stronger risk management processes and safety procedures were in place. Although marine accidents and incidents are generally on the decline in Canada, it is understood that there will always be risks inherent in operating a vessel of any size.

The issue of Safety Management has been a Watchlist item since 2010, with the TSB calling on marine sector operators to manage their safety risks effectively with formal safety management processes in place, and to be able to demonstrate to TC that these processes are effectively identifying and mitigating hazards on board their vessels (i.e. be subject to audits and approvals of procedures).

The TSB has identified unique risks for small passenger vessels (e.g. for tourism), and observed that many small passenger vessel operators may not be aware of the risks associated with the operation of their vessels, or possess the tools and expertise needed to effectively manage those risks. In 2004, the TSB called on TC to ensure that small passenger vessel enterprises have adequate safety measures in place (recommendation M04-01). In response to this recommendation, TC expanded education and outreach activities to small vessel owners, providing them with tools and support to develop voluntary SMS on board their vessels. At the same time, TC began an analysis of its existing Safety Management Regulations to determine the most effective means to expand the scope of SMS requirements to small vessels.

In 2017, the TSB issued another recommendation regarding risk management on passenger vessels, calling on TC to require commercial passenger vessel operators to adopt explicit risk management processes and develop comprehensive guidelines to be used by these operators and TC inspectors to assist in the implementation and oversight of those processes (recommendation M17-02). Given that many passengers on board these vessels are likely to be unfamiliar with marine emergency procedures (unlike the trained crew), the TSB has stated they are especially vulnerable in a marine emergency. In response to this recommendation, TC updated its Concentrated Inspection Campaign checklist for use during statutory and risk-based inspections on passenger vessels.

TC has also been exploring options for expanding requirements for formal safety management systems within the marine industry since 2010. Work during this time has focused on determining how the key safety benefits of SMS can be extended to additional vessels without imposing undue financial or operational hardship on smaller businesses. In particular, analysis and stakeholder engagement focused on determining to what extent the cost and benefits of SMS can be justified for smaller vessel operations.

Objective

The objective of the proposed Regulations is to enhance marine safety culture in day-to-day operations by expanding formal SMS requirements to a greater portion of vessels operating in Canadian waters, while keeping financial impacts on the marine industry manageable. The consistent and appropriate application of an SMS in the marine sector is expected to reduce the likelihood and severity of marine-related accidents and incidents in Canadian waters, resulting in fewer fatalities, serious injuries, and pollution incidents.

Under the proposed Regulations, safety requirements would be harmonized with international safety requirements. While requirements for smaller vessels would not be fully aligned with the ISM Code, they would still require an SMS be in place on board all vessels that outlines risk mitigation measures and appropriately accounts for foreseeable risk. These unique requirements for smaller vessels should address TSB recommendations without applying undue hardship on the industry. This method aligns with approaches taken by other countries which offer similar flexibilities for smaller vessels, applying enhanced safety requirements to these vessels while not forcing them to adhere to some of the more costly elements of the full ISM Code.

Description

The proposed Regulations would address the two main issues by expanding formal SMS requirements to non-SOLAS vessels using a class structure. Each class would have class specific SMS requirements based on vessel size and type of operation. For larger vessels (Classes 1 to 3), the proposed Regulations would fully align with the ISM Code requirements. For smaller vessels (Classes 4 and 5), the requirements would be similar to the ISM Code, leaving out some of the more costly components, while still maintaining critical aspects necessary for ensuring safe operating procedures.

The Canadian fleet would be divided into the following five classes (more detailed information can be found in Table 1):

• Class 1: This class would capture SOLAS vessels including passenger vessels of more than 12 passengers and those vessels of 500 GT or more. The existing Safety Management Regulations apply to SOLAS vessels, and the companies that operate them. No changes to the existing requirements for these vessels would be introduced by the proposed Regulations. Overall, approximately 100 vessels would fall under this class.
• Class 2: This class would capture Canadian passenger and non-passenger vessels of 500 gross tonnage or more not covered under Class 1. Class 2 would also apply to vessels 24 metres in length or more that are certified to carry 50 passengers or more. Approximately 300 vessels would fall under this class.
• Class 3: This class would capture Canadian passenger and non-passenger vessels of less than 500 gross tonnage, which are 24 metres in length or more not covered under Classes 1 and 2. Passenger vessels captured in class 3 would be those certified to carry less than 50 passengers, which are 24 metres in length or more. Approximately 300 vessels would fall under this class.
• Class 4A: This class would capture Canadian passenger vessels certified to carry one passenger or more and non-passenger vessels greater than 15 gross tonnage, not covered under Classes 1 to 3. Approximately 1,300 vessels would fall under this class.
• Class 4B: This class would capture Canadian passenger vessels certified to carry one passenger or more and towboats up to 15 gross tonnage, not covered under Classes 1 to 3. Approximately 5,900 vessels would fall under this class.
• Class 5: This class would capture Canadian non-passenger vessels up to 15 gross tonnage that not covered under Classes 1 to 4. Approximately 7,900 vessels would fall under this class.

The proposed Regulations would not apply to:

• fishing vessels not more than 24.4 metres in length and not more than 150 gross tonnage, as these vessels are already subject to certain safety management requirements in the Fishing Vessel Safety Regulations;
• vessels that do not have mechanical means of propulsion (e.g. barges), except those that carry passengers, crew, dangerous chemicals in bulk, or oil in bulk form. SMS requirements would instead apply to their associated towing vessels;
• human-powered vessels, such as kayaks or canoes;
• vessels that are inflatable and carry persons on an excursion in Canadian waters for remuneration and are subject to the Special-purpose Vessels Regulations, as safety requirements for these vessels are already outlined under those Regulations;
• pleasure craft; or
• vessels owned or operated by a foreign state and used only in government non-commercial service as Chapter IX of SOLAS does not apply to those vessels.

The responsibility for implementing an SMS on board vessels would be with the ship manager/AR of the vessel. The ship manager is a qualified person identified by the AR who is responsible for managing the shore-based and on-board operations of a vessel. The AR, as defined by the CSA 2001, is the owner of the vessel(s); however, they may not have a direct role in the day-to-day operations of the vessel. At times, the AR may share responsibility with ship managers for implementing and monitoring the vessel’s SMS.

Every documented SMS (i.e. recorded, saved, and accessible) would need to include:

• a safety and environmental protection policy;
• instructions and procedures to ensure compliance with provisions of the CSA 2001 and its regulations respecting safe operation of the vessel and protection of the environment;
• defined levels of authority and lines of communication between, and amongst, shore and vessel personnel;
• procedures for reporting accidents and nonconformities;
• procedures to prepare for and respond to emergencies; and
• procedures for internal reviews and audits of the SMS.

Classes 1 and 2 vessels would require a Designated Person Ashore, a requirement of the ISM Code, to provide a link between the company and those on board. The responsibility and authority of this individual is to monitor the safety and pollution-prevention aspects of the operation of each ship and ensure that resources and shore-based support are applied.

Certification, approval, endorsement, maritime documents, and compliance

The certification process would involve the issuance of a Canadian Maritime Document (CMD) under the proposed Regulations. CMDs include a Canadian Document of Compliance (CDOC) and a Canadian Safety Management Certificate (CSMC). Certification processes would vary amongst the classes.

TC and the Recognized Organization (RO) [a classification society that has an authorization agreement with TC to inspect and certify vessels], would share in the responsibilities for inspection and approval of the SMS depending on the class.

The cost for certification and inspection would vary by vessel and size and complexity of operations of the AR. Vessels that would be inspected by ROs (i.e. delegated vessels, mainly vessels 24 metre and length or more) would be subject to fees as outlined by the RO.

The fee structure for all other vessels, where TC would issue the certification, and conduct inspections, are set out in the Board of Steamship Inspection Scale of Fees.

Following an inspection, the CMD would be issued (by an RO or TC) to indicate that the requirements for the issuance of the document are met.

Regarding the endorsement of certificates, the holder of a CMD would follow the schedule outlined in Table 6.

The date by which a vessel would need to be in compliance with the proposed Regulations would be determined by a number of factors such as its class and type (i.e. passenger and non-passenger), as well as its certification and registration schedule. Guidelines would be in place at the time of coming into force outlining the transition periods as to when vessels in different classes would need to be in compliance with the new requirements. Further details surrounding approval and certification dates and processes are provided in the “Implementation, compliance and enforcement, and service standards” section below.

Table 1 – Summary of proposed requirements by vessel class

Vessel Class	Definition	SMS Development and Certification Requirements
Class 1	SOLAS vessels including those with gross tonnage of 500 or more engaged on an international voyage	Comply with SOLAS Chapter IX and the ISM Code Operate the vessel in accordance with a documented SMS Maintain SMS documentation, including certification (i.e. maintain SMS records and ensure all documentation remains up to date and reflects results of audits and reviews, as well as any changes in procedures) Conduct audit and review and take corrective actions to address any deficiencies identified in an audit Assign Designated Person Ashore
Class 2	Gross tonnage of 500 or more or carry 50 passengers or more and 24 metres in length or more	Comply with Part A of the ISM Code Operate the vessel in accordance with a documented SMS Maintain SMS documentation Conduct audit and review and take corrective actions to address any deficiencies identified in an audit Assign Designated Person Ashore
Class 3	24 metres in length or more	Develop an SMS that is in compliance with Part A of the ISM Code, aside from sections 4 and 12 which, outline requirements for a Designated Person Ashore and third-party audits, respectively. Operate the vessel in accordance with a documented SMS Maintain SMS documentation Conduct audit and review and take corrective actions to address any deficiencies identified in an audit
Class 4A	More than 15 gross tonnage	Develop an SMS adapted for the operation of the vessel (i.e. vessel size, type, expected complexity of the operation, etc.) Operate the vessel in accordance with a documented SMS Maintain SMS documentation Evaluate the effectiveness of the SMS
Class 4B	Passenger vessels and Towboats with 15 gross tonnage or less	Develop an SMS adapted for the operation Operate the vessel in accordance with a documented SMS Maintain SMS documentation Evaluate the effectiveness of the SMS
Class 5	15 gross tonnage or less	Develop an SMS adapted for the operation Operate the vessel in accordance with a documented SMS Maintain SMS documentation Evaluate the effectiveness of the SMS

Foreign vessels

The proposed Regulations would require that foreign vessels, except vessels owned or operated by a foreign state and used only in government non-commercial service, have a documented SMS to operate in Canadian waters, which was raised through TSB recommendations. This would ensure that foreign vessels and Canadian vessels are providing an equivalent level of safety and environmental protection. Foreign vessel owners operating in Canadian waters will have an implementation period of up to 12 months after the coming into force. Foreign vessels subject to SOLAS will not have an implementation period as they are already required to have an SMS to operate.

Between 2016 and 2020, 664 foreign vessels that do not have a documented SMS were documented as operating in Canadian waters. These foreign vessels would be affected by the proposed SMS requirement.

The majority (approximately 84%) of these vessels were tugs from the United States (U.S.). The remaining 16% of these vessels were flagged in various countries including Australia, Bahamas, Cameroon, Cape Verde, Cayman Islands, Cook Island, China, Cyprus, France, Gibraltar, Italy, Jamaica, Japan, Marshall Islands, Netherlands, New Caledonia, Norway, Panama, Portugal, Russia, Singapore, Saint Vincent and the Grenadines, Thailand, United Kingdom, Venezuela, and Virgin Islands. Of these, 70% were powered yachts being used for commercial purposes. The remaining impacted vessel types included fishing vessels, merchant vessels, and special purpose vessels.

Administrative monetary penalties

Amendments to Part 12 of the Schedule to the Administrative Monetary Penalties and Notices (CSA 2001) Regulations are also being proposed to establish violations and penalties associated with the proposed Regulations. In total, there would be 74 new violations and penalties. A ship manager/AR would be prohibited from operating a vessel unless the vessel operates in accordance with the procedures and practices required under the SMS requirements of their applicable class. This regulatory proposal would require compliance at the latest respective date for each vessels’ class and type, as per transitional provisions listed in Table 19 of this document.

Consequential amendments and transitional provisions

The proposed Regulations would also include consequential amendments to the Administrative Monetary Penalties and Notices (CSA 2001) Regulations by introducing penalties for individual requirements.

In addition, transitional provisions for compliance of up to three years after the coming into force date of the proposed Regulations would be included to accommodate the large number of vessels that would be subject to the proposed Regulations.

Regulatory development

Consultation

Canadian Marine Advisory Council

Regular consultations have been held through annual national and regional meetings of the Canadian Marine Advisory Council (CMAC) since 2011. CMAC meetings are coordinated and chaired by senior members of TC and are composed of parties, including Indigenous partners, that have a recognized interest in shipping, navigation, and pollution matters.

Consultations at the initial CMAC meetings, starting in the fall of 2011, informed stakeholders of the regulatory proposal’s intent to expand SMS implementation to a larger portion of the Canadian fleet. The regulatory project’s scope, objectives, and framework have been outlined for the last decade, with comments and proposals from stakeholders taken into account. The majority of the comments received from stakeholders addressed the need for a tiered system where larger vessels would require more adherence to the ISM Code than smaller vessels. Various marine sector stakeholders, such as shipping companies, maritime associations, unions, and seafarers who attended these CMAC meetings, have welcomed the initiative and provided positive comments, due to the ongoing calls for increased safety culture in the marine industry. A poor safety culture has been recognized as a contributing factor to safety occurrences in the transportation sector. The TSB placed safety culture deficiencies in marine on their Watchlist in 2010, where it remains to this day. The expansion of scope of safety management regulations has widely been thought to bring about the increased safety culture, the industry and TSB is seeking.

This regulatory proposal was discussed with impacted stakeholders through targeted virtual consultation sessions during the summer and fall of 2020. These online discussions were attended by over 100 industry stakeholders, including the Canadian Ferry Association, the Canadian Passenger Vessel Association, the Passenger and Commercial Vessel Association, the Chamber of Marine Commerce, the Council of Marine Carriers, and other commercial vessel associations, as well as members of labour groups such as the International Transport Workers’ Federation, the International Longshore and Warehouse Union, the Canadian Merchant Service Guild, and the Seafarers International Union of Canada. The Canadian Coast Guard, the Department of National Defence, and the provincial governments of British Columbia and Ontario also participated in these online consultations. A discussion paper outlining the regulatory project was distributed to all CMAC attendees, providing a three-month time frame to submit questions and comments. These sessions provided stakeholders with the opportunity to familiarize themselves with the proposal and ask questions. Questions received focused on the involvement of ROs, the accountability for having an SMS in place, documents of compliance, specific requirements for an SMS, oversight authority, certificate clarifications, regulatory timelines, and the likelihood of third-party auditing. Stakeholders were most concerned with ROs and their capacity to effectively oversee requirements under the proposed Regulations. Stakeholders asked questions, such as whether or not ROs would be authorized to carry out audits, and if additional ROs would be authorized to oversee these requirements in the future.

While the majority of comments received from the impacted stakeholders have been supportive of the proposed approach, several stakeholders have expressed concerns that TC does not have the ability to address oversight, and they are resistant to the idea of risk-based inspections as a form of oversight. Recommendations to include stricter oversight criteria, including detailed regular inspections, unplanned inspections, whistleblower provisions, and mandatory versus risk-based inspections for smaller classed vessels were suggested. TC considered these recommendations but concluded that they would be overly prescriptive, cost prohibitive to implement, and would not result in significantly better safety outcomes. By contrast, the proposed Regulations take a balanced and flexible approach to safety management that is tailored to the relative risks associated with different classes of vessels and their unique operations. Based on a comprehensive analysis of safety risks in the marine sector, TC is confident that taking this flexible, risk-based approach would increase awareness, enhance safety processes and culture, and improve overall marine safety, without imposing undue burden and costs on smaller operators.

The regulatory proposal was presented to the Canadian public at large through Let’s Talk Transportation, TC’s online consultation tool. The most recent consultations were held at virtual National CMAC meetings in November 2020 and April 2021, where the proposed Regulations were presented and discussed. In April and November 2021, a detailed and comprehensive consultation document was circulated to stakeholders in advance of CMAC’s Domestic Vessel Regulatory Oversight Standing Committee. The consultation document included proposed updates to clarify the roles of ship managers/ARs, as well as clarification on endorsement and certification, as suggested in previous consultations.

At the November 2021 CMAC meeting, stakeholders voiced concerns regarding the implementation time frame for the proposed Regulations; many stakeholders felt that the compliance timelines proposed for some classes of vessels (up to four years) were too generous. In light of the concerns, the proposed Regulations have been updated to reduce compliance timelines from four years to three years and to require that all passenger vessels in classes 2, 3, and 4A be in compliance within two years of the coming into force of the proposed Regulations.

In spring 2022, an information newsletter will be circulated to TC’s Indigenous partners to provide them with details about the proposed Regulations and the general proposed timing of when they would be expected to be prepublished in the Canada Gazette.

From 2009 to 2010, a pilot project was conducted, in collaboration with the Council of Marine Carriers, to test the impacts of SMS implementation in a larger portion of the Canadian fleet. Five towing vessel companies agreed to participate in this pilot project, with TC working alongside them to develop safety management guidelines based on the ISM Code.

Despite the fact that the pilot project was conducted more than 10 years ago, it provided some insights that TC still considers relevant to the proposed Regulations. First, each company that participated in the pilot project observed that the implementation of an SMS improved their organizational safety culture and the safety of their operations. Second, the pilot project allowed TC to identify and assess implementation challenges, which can now be proactively addressed and mitigated through guidance documents that TC will publish when the proposed Regulations are brought into force.

International consultations

Most internationally impacted vessels would be from the U.S. In a virtual meeting with the U.S. Coast Guard held in June 2021, TC indicated that any U.S. passenger vessels that have implemented the Passenger Vessel Association Flagship SMS on board, as well as any U.S. towboats that have implemented either a comprehensive towing vessel SMS or voluntary ISM certification, would be considered as meeting Canada’s requirements. The U.S. Coast Guard did not express any major concerns with the regulatory proposal, as most U.S. vessels requirements would be deemed equivalent to the requirements of the proposed Regulations. The regulatory proposal would mainly impact small U.S. passenger vessels operating on the Great Lakes, some of which may not have an equivalent SMS in place. The U.S. Coast Guard and TC will work together in communicating details of the proposed Regulations with these impacted stakeholders.

COVID-19 pandemic

Virtual consultations with stakeholders on the regulatory proposal occurred in 2020 and 2021. Over the course of five consultations during the COVID-19 pandemic, industry was invited to comment on two consultation papers, one presented in the summer of 2020 and the other in April 2021, outlining the proposed Regulations in detail. During the National CMAC meeting held in April 2021, stakeholders were presented with a detailed implementation framework and transition period proposal for the proposed Regulations and were advised in greater detail of the specific requirements a ship manager/AR would need to meet to comply with the proposed Regulations. During these sessions, stakeholders were both presented with enhanced details on the proposed Regulations and given the opportunity to raise any questions or concerns. Stakeholders did not raise any concerns specific to the COVID-19 pandemic and the impact it may have on their ability to sustainably implement the proposed Regulations during any of these sessions. No concerns were raised by stakeholders during these consultations regarding costs of implementing the proposed Regulations in general, with comments instead focused on specific details and responsibilities of vessel owners and operators to be in compliance with the new requirements.

Modern treaty obligations and Indigenous engagement and consultation

In accordance with the Cabinet Directive on the Federal Approach to Modern Treaty Implementation, an analysis was undertaken to determine whether the proposed Regulations are likely to give rise to modern treaty obligations. This assessment examined the geographic scope and subject matter of the regulatory proposal in relation to modern treaties in effect and no modern treaty obligations were identified.

Instrument choice

TC has been encouraging voluntary compliance of the ISM code within the Canadian fleet, for non-SOLAS vessels for over 10 years. To assist operators to comply with SMS requirements, TC has developed Safety Management Systems Guidelines, sample SMS documents and several sample forms and checklists that can be tailored to individual vessels. However, TC has continued to hear from stakeholders demanding more oversight. In addition, the TSB has indicated that voluntary SMS is not mitigating risk sufficiently. Given the limited scope of the existing Safety Management Regulations, as well as the need to specifically address concerns raised by stakeholders and the TSB through its Watchlist and recommendations, a regulatory approach to expand the scope and application of the existing Safety Management Regulations was considered to be the best option.

Stakeholders have continuously voiced their ongoing concerns at CMAC regarding the safety culture in the marine industry and a regulatory approach is required to compel a culture change. The safety cost of continuing in an unregulated, voluntary safety management system environment is too high. In addition, to align with international partners on domestic safety management systems such as Australia, Norway, and the United Kingdom, regulatory intervention is preferred.

In Budget 2018, the Government committed to undertake a regulatory review to support innovation and business investment, which is described in TC’s Regulatory Review Roadmap. As a result, nine marine regulatory amendments were identified as necessary to address safety issues identified by the TSB, and better align Canada with international standards, including the proposed Regulations.

Regulatory analysis

Benefits and costs

The proposed Regulations would require an extended portion of the non-SOLAS Canadian commercial vessels to develop and implement a form of an SMS. These proposed requirements would vary depending on the vessel class. As a result, the proposed Regulations are expected to reduce the likelihood and severity of marine occurrences on these vessels, thereby improving safety and security for crew members and the public, while also reducing damages to the environment and to property.

Ship managers/ARs and various levels of government would incur costs associated with the proposed requirements, with respect to developing and obtaining approval of their SMS documents. Further activities related to the implementation and maintenance of the SMS, as well as obtaining certification and endorsement certificates, would also result in costs for ship managers/ARs. In addition, the Government of Canada would incur costs for issuing SMS approval and certification, endorsing certifications, and enforcing compliance with the proposed Regulations.

The total costs associated with the proposed Regulations are estimated at $75.28 million (present value in 2021 Canadian dollars, discounted to the year 2022 at a 7% discount rate) between 2023 and 2034. Of these costs, $63.85 million would be incurred by businesses, $7.10 million by provincial and other levels of government,^{footnote 3} and $4.33 million by the Government of Canada. It is worth noting that $1.75 million are service fees paid by ship managers/ARs and received by TC for providing services,^{footnote 4} which would have neutral impact to the Canadian society, and therefore the net total cost of this proposal is $73.53 million.

While the safety benefits of this proposal have not been monetized due to limited data, a break-even analysis concluded that an annual reduction of 49 (or 18.0%) marine occurrences would result in the benefits offsetting the net costs. Even though benefits could not be monetized, it is expected that the overall qualitative safety benefits would outweigh the monetized costs.

A detailed cost-benefit analysis report is available upon request.

Analytical framework

The cost-benefit analysis for the proposed Regulations is conducted in accordance with the Treasury Board of Canada Secretariat’s (TBS) Policy on Cost-Benefit Analysis. Costs and benefits that are in scope are those that are attributed to Canadians.^{footnote 5} Where possible, impacts are quantified and monetized, with only the direct costs and benefits for stakeholders being considered in the cost-benefit analysis.

Benefits and costs associated with the proposed Regulations are assessed based on comparing the baseline scenario against the regulatory scenario. The baseline scenario depicts what is likely to happen in the future if the Government of Canada does not implement the proposed Regulations. The regulatory scenario provides information on the intended outcomes of the proposed Regulations. Details of the scenario are further described below.

It is anticipated that the proposed Regulations would reduce marine occurrences, and consequently fatalities, major injuries and/or damages to the environment and property. Due to lack of data, these benefits are not quantified or monetized; however, a break-even analysis was conducted to determine how much of a reduction in marine occurrences would be needed to offset the costs.

It is worth noting that the proposed Regulations would require ship managers/ARs of Classes 2, 3, and 4 not delegated to ROs, to pay service fees to TC for their SMS approval and endorsement. Such fees would recover a portion of costs incurred by TC (e.g. the labour cost of providing services) and would therefore rebalance the cost on Canadian taxpayers. As per TBS’ Policy on Cost-Benefit Analysis, the scope of this analysis is at the societal level, analyzing costs and benefits attributed to Canadians. These service fees paid by ship managers/ARs of Classes 2 to 4 vessels to TC would have a neutral impact on Canadian society.

The time frame used in the analysis is 12 years from 2023 to 2034, with the year 2023 being when the Regulations would be registered. This time frame would capture the delayed coming-into-force date of SMS implementation, which is three years and one day after the publication of the Regulations.^{footnote 6}

Unless otherwise noted, benefits and costs are estimated in present value using 2021 Canadian dollars, the base year of discounting in 2022, and a 7% discount rate, for the period from 2023 to 2034.

Affected stakeholders

The proposed Regulations would affect Canadian commercial vessels, with a few exceptions. The total number of affected vessels (i.e. “in-scope” vessels), which are currently registered with TC, is 16,143. Table 2 below breaks down these affected vessels by type.

Table 2: Number of in-scope vessels, by vessel type

	Cargo	Fishing	Tanker	Passenger	Towboat	Workboat	Barge table b1 note *	Other	Total
Class 1 (SOLAS)	30	0	33	2	9	21	0	1	96
Class 2	58	37	4	211	20	52	79	2	463
Class 3	18	91	5	59	143	32	25	0	373
Class 4A	67	25	3	557	380	275	32	0	1,339
Class 4B	0	0	0	3,874	2,070	0	0	0	5,944
Class 5	57	0	1	0	0	7,391	216	263	7,928
Total	230	153	46	4,703	2,622	7,771	352	266	16,143
Table b1 note(s) Table b1 note * Self-propelled barges and non-propelled barges carrying carry passengers, crew, dangerous chemicals in bulk, or oil in bulk form. Return to table b1 note * referrer

Source: TC’s Vessel Registration Query System (accessed in January 2021) and internal information

The 16,143 in-scope vessels are owned by a total of 6,137 ships managers/ARs. It is expected that the vast majority of these ships managers/ARs are considered “small businesses” in accordance with the TBS’ Policy on Limiting Regulatory Burden on Business.^{footnote 1}

Historical data captured in TC’s Vessel Registration Query System demonstrates that the Canadian commercial vessel fleet subject to the proposed Regulations has been stable over the past 10 years, meaning that every year, on average, vessels being registered is balanced by vessels being removed from the registry. Even though newly registered vessels would be subject to the proposed Regulations, historical data did not demonstrate a pattern that could be used to forecast their population, particularly the newly registered vessels belonging to the same business or entity. As a result, in this analysis, newly registered vessels^{footnote 7} are not projected and it is acknowledged that the estimated costs associated with the proposed Regulations could be slightly underestimated.^{footnote 2}

It is important to note that, if operating in Canadian waters, foreign-flagged vessels to which the proposed Regulations apply and which are not subject to Chapter IX of SOLAS would be required to operate in accordance with a documented SMS that provides a level of safety at least equivalent to that provided by the proposed SMS requirements on a similar Canadian vessel. Since the scope of this analysis is on Canadian vessels in accordance with the Policy on Cost-Benefit Analysis, impacts on foreign vessels are not considered.

Baseline scenario

Under the baseline scenario, the existing Safety Management Regulations require that ship managers/ARs that own and operate Canadian vessels subject to Chapter IX of SOLAS, comply with the ISM Code. More specifically, these ship managers/ARs need to develop and implement an SMS, appoint a Designated Person Ashore responsible for ensuring the proper implementation and maintenance of the SMS and the safety of the vessel, crew, and passengers, and have their SMS and vessels audited and certified on a regularly scheduled basis.

While the existing Safety Management Regulations only apply to ship managers/ARs that own and operate vessels that are subject to Chapter IX of SOLAS, certain companies that own and operate non-SOLAS vessels have voluntarily developed and implemented an SMS on their vessels. A total of 38 ship managers/ARs and 256 vessels have currently voluntarily implemented an SMS.

It is also expected that, under the baseline scenario, the current rate of marine occurrences would continue. The annual average number of occurrences between 2014 and 2019 was 273. In addition, many vessel operators would continue to remain unaware of the risks associated operating their vessels, or now possessing the tools and expertise needed to effectively manage those risks.

Regulatory scenario

Under the regulatory scenario, the proposed Regulations would require ship managers/ARs of all Canadian commercial vessels, with a few exceptions, to develop and implement an SMS based on their class. More specifically, ship managers/ARs of vessels captured under Classes 1 to 3 would develop, implement and maintain an SMS that is based on requirements found in the ISM Code, while those under Classes 4 and 5 would require an SMS based on unique Canadian requirements that are comparable with the ISM Code, but tailored to the operational realities of smaller vessels. The timelines to achieve compliance with the new SMS requirements would vary for each Class and be between one and three years after the coming-into-force date of the proposed Regulations.

In addition, an SMS would require approval and certification, the frequency of which would be left to the Minister to determine and would be developed through policy documents, which would be available to stakeholders prior to the coming into force of the proposed Regulations, in advance of the transitional provisions for most vessels. At this time, the proposed approval and certification would be issued by

• an RO for Classes 1 and 2 vessels;
• an RO for most Class 3 vessels, with some issued by TC; and
• TC for Class 4 vessels.

It should be noted that there would be no approval and certification for Class 5.^{footnote 8}

Ship managers/ARs of vessels (Classes 1 to 4) would need to go through a certification endorsement process. The frequency of the endorsement activities for each vessel class would be determined by the Minister and would be set/communicated to ship managers/ARs at the time a CMD is issued, as per authorities granted under the CSA 2001. For the purpose of this analysis, an example of a certification schedule and associated costs are presented, with the acknowledgement that the actual schedule and costs could vary significantly. More details are provided in the “Costs” section below.

Transport Canada would also conduct compliance and enforcement, and risk-based inspection functions on all classes subject to the proposed Regulations. These functions would be determined by the Minister and would be integrated through the existing TC marine inspection programs. It is anticipated that any increase in resources as a result of the proposed Regulations would be small,^{footnote 9} as marine safety inspectors already enforce the requirements of various regulations during normal periodic inspections and port state control activities, and the majority of SMS verification activities will be done during these inspections.

Note that Class 1 vessels (i.e. SOLAS vessels) and vessels that have voluntarily implemented an SMS would not be affected (i.e. no additional costs) by the proposed Regulations as they are already in compliance with all proposed requirements.

Benefits

It is anticipated that the proposed Regulations would reduce the likelihood and severity of marine occurrences, some of which could involve fatalities, major injuries, pollution, or damage to property, through extending SMS requirements to non-SOLAS vessels.

Alongside reducing the likelihood of specific marine occurrences, the proposed Regulations are also expected to holistically improve safety culture within Canadian marine operations. With enhanced safety standards, the likelihood of human error is reduced, and the crew and operator are better prepared to respond to emergencies should they occur. The proposed Regulations would benefit not only the crew members and passengers by building a safer workplace and increasing transportation safety, but also the Canadian public at large by mitigating the environmental and economic impacts that can occur in the event of an incident (e.g. environmental and property damages, interruptions to emergency services and operations, etc.).

In addition, the proposed amendments to Administrative Monetary Penalties and Notices (CSA 2001) Regulations would deter activities that violate requirements prescribed in the proposed Regulations, and therefore would enhance the safety and security for crew members and Canadians.

Even though these benefits are not monetized, TC believes that the proposed Regulations would be in the public interest as the overall safety benefits would outweigh the monetized costs.

Safety benefits — Break-even analysis

Due to lack of data, these benefits cannot be quantified or monetized. However, a break-even analysis was conducted,^{footnote 10} as an alternative approach, to determine how much of a reduction in marine occurrences from in-scope vessels (hereafter in-scope occurrences) would be needed to offset the costs.

The reduction of in-scope occurrences was derived from dividing the total costs, excluding fees paid to TC, of the proposed Regulations by the average avoided cost per in-scope occurrence. In this analysis, the average avoided cost per in-scope occurrence is estimated based on the value of avoided fatalities and major injuries associated with in-scope occurrences, since other avoided costs (e.g. avoided damages to the vessel, environment and cargo) are not able to be quantified due to limited information. As a result, the average avoided cost per in-scope occurrence described below is considered a conservative measure (i.e. the real average avoided cost per in-scope occurrence is likely higher).

In-scope occurrences

Historical in-scope occurrences, including their associated fatalities and major injuries, are obtained from the TSB’s Marine Transportation Occurrence Data from January 1995 and characteristics of vessels involved in an occurrence were found in TC’s Vessel Registration Query System. Table 3 shows the annual in-scope occurrences reported between 2008 and 2019.^{footnote 11} Note that in-scope occurrences exclude those involving vessels already using an SMS on board (i.e. vessels under Class 1 and voluntarily compliant vessels).

Table 3: Annual in-scope occurrences, 2008 to 2019

Year	In-Scope Vessel Occurrences	Fatalities	Major Injuries
2008	225	7	28
2009	178	1	19
2010	188	1	23
2011	141	4	13
2012	182	2	13
2013	205	0	18
2014	210	3	9
2015	221	12	12
2016	294	0	17
2017	316	3	19
2018	298	0	17
2019	297	2	19
Total	2,755	35	207

Source: TSB’s Marine Transportation Occurrence Data and TC Vessel Registration Query System

Using the average number of in-scope occurrences between 2014 and 2019,^{footnote 12} it is projected that the annual in-scope occurrences would be 273 during the analytical time frame (i.e. 2023 to 2034).

Average avoided cost per in-scope occurrence

It is estimated that, on average, an occurrence would involve 0.0127 fatalities (35 fatalities over 2,755 occurrences) and 0.0751 major injuries (207 major injuries over 2,755 occurrences). With this approach, each of the 273 in-scope occurrences projected every year would result in 4 fatalities and 21 major injuries on average. Using the value of a statistical life (VSL) required by TBS (i.e. $8.26 million in 2021 Canadian dollars), and an assumption that the value of a major injury is about 13.42% of the VSL,^{footnote 13} the average avoided cost per in-scope occurrence is estimated by the average avoided fatalities and major injuries per occurrence. As a result, the average^{footnote 14} avoided cost per in-scope occurrence is estimated to be approximately $188,300.

Break-even reduction of in-scope occurrences

Given that the net total cost of the proposed Regulations would be $73.53 million (further explained below), and that the average avoided cost per in-scope occurrence would be $188,300, it is determined that a reduction of 18.0% of in-scope occurrences, which amounts to an average reduction of approximately 49 in-scope occurrences per year, would break even the total costs and benefits.

Rebalancing cost to Canadian taxpayers

As previously mentioned, the proposed Regulations would, in part, result in a rebalancing of the financial burden from Canadians to the Canadian marine industry. This rebalancing would be represented with the fee that would be paid by ship managers/ARs of vessels to TC for approval and endorsement services provided (see Cost section for details). The burden transferred from Canadian taxpayers to the domestic industry would be $1.75 million.

Administrative monetary penalties

The proposed amendments to the Administrative Monetary Penalties and Notices (CSA 2001) Regulations would provide enforcement officers with the necessary tools required to enable a proportionate response to non-compliance. The ability to issue penalties for non-compliance would also provide enforcement officers with a gradual and standardized approach for accountability. It is anticipated that due to the potential risk associated with receiving a monetary penalty, violators would be incentivized to comply with the proposed Regulations. The increase in compliance will also benefit Canadians by enhancing their safety.

Costs

The proposed Regulations would impose costs on ship managers/ARs, as they would need to develop an SMS, obtain approval and certification of their SMS from authorities, maintain certifications, and be subject to certification endorsement. These ship managers/ARs would include Canadian businesses, provincial and municipal government, and the Government of Canada. In addition, the Government of Canada would incur costs of approving and certifying an SMS for some vessels and enforcing the compliance of the proposed Regulations. As a result, the total costs are estimated to be $75.28 million, $63.85 million of which would be incurred by businesses, $7.10 million by provincial and other levels of government, and $4.33 million by the Government of Canada. For the purpose of this analysis, costs to the Government of Canada are grouped and presented together.

As previously indicated, the proposed Regulations would not affect Class 1 vessels. Ship managers/ARs who have voluntarily implemented an SMS on their vessels under the baseline scenario would not incur additional costs associated with the proposed requirements.

SMS compliance costs

Development of SMS

The proposed Regulations would require that ship managers/ARs of Classes 2 and 3 vessels develop an SMS in accordance with the ISM Code between 2024 and 2025, and vessels in Classes 4 and 5 develop an SMS, with Canadian requirements, by 2026.^{footnote 6}

Ship managers/ARs that own/manage multiple vessels, under the same class or different classes, would be required to comply by the earliest date of the highest classed vessel. They would need to develop one SMS for the entire fleet in accordance with the required SMS for the highest classed vessel.^{footnote 15} For example, if a ship manager/AR is responsible of a fleet composed of one Class 2 vessel and several Class 3 and Class 4 vessels, they would only have to develop one SMS in accordance with Class 2 requirements.

The cost of developing an SMS would vary among vessel classes and would be applied at the company level (i.e. costs would not vary according to the number of vessels). Table 4 presents the average cost per ship manager/AR based on TC’s estimation.

Table 4: Cost of developing an SMS per ship manager/AR

Vessel Class	Time Required per Ship Manager/AR (day)	Responsible Personnel	Wage Rate table b3 note * ($/day)	Cost per Ship Manager/AR ($)	Compliance Period table b3 note **	Number of affected Ship Managers/ARs
Class 2	6	Ship Manager	$560	$3,358	2024-2025	143
Class 3	6	Ship Manager	$342	$2,052	2024-2025	175
Class 4A	3	Ship Manager	$203	$609	2024-2025	787
Class 4B	3	Ship Manager	$203	$609	2024-2025	3,102
Class 5	2	Ship Manager	$203	$406	Up to 2026	1,803
Table b3 note(s) Table b3 note * Wage rate includes an overhead rate of 25% Return to table b3 note * referrer Table b3 note ** Classes are separated by passenger vessels and non-passenger vessels for periods of compliance. As a result, the compliance would be earlier (2024) for a ship manager/AR that owns a passenger vessel. Class 5 would have up to three years to comply following the coming into for proposed Regulations. See Implementation, compliance and enforcement, and service standards section for details. Return to table b3 note ** referrer

Source: Transport Canada

In total, the one-time cost of developing an SMS is estimated to be $3.25 million, of which $3.04 million would be incurred by business, and $207,000 by provincial and other levels of government.

SMS approval

The proposed Regulations would require that an SMS for Classes 2 to 4 vessels be reviewed. More specifically, TC would conduct the review for Class 4 vessels, and delegate the review to ROs for Classes 2 and 3 vessels.^{footnote 16} TC expects that an RO would need four days to complete this review with an average charge of $2,500 per day. Also, note that Class 5 vessels would not be subject to a formal approval process.

Approval of the SMS is demonstrated by the issuance of the CDOC that would be valid for five years and would be reissued for another five years – subject to an ongoing compliance conformity.^{footnote 17} Table 5 presents the cost of approval per vessel owner, as well as time required for TC to approve an SMS.

Table 5: Cost to ship managers/ARs on SMS approval per class

Vessel Class	Time Required per Ship Manager/AR (day)	Responsible Authority	Wage Rate table b4 note * ($/day)	Cost per Ship Manager/AR ($)	Compliance Period	Number of affected Ship Managers/ARs
Class 2	4	RO	$2,500	$10,000	2024-2025 table b4 note **	143
Class 3	4	RO	$2,500	$10,000	2024-2025 table b4 note **	175
Class 4A	0.8	TC	-	N/A table b4 note ***	2024-2025	787
Class 4B	0.4	TC	-	N/A table b4 note ***	2024-2025	3,102
Table b4 note(s) Table b4 note * Wage rate includes an overhead rate of 25% Return to table b4 note * referrer Table b4 note ** Classes are separated by passenger vessels and non-passenger vessels for periods of compliance. As a result, the period of compliance would be earlier for passenger vessels, and for others up to a maximum of three years. Classes 2 and 3 would require compliance based on the renewal of safety certificates. Return to table b4 note ** referrer Table b4 note *** Amounts are based on assumptions and are presented as an example purpose. Fees will be developed as part of the TC fee modernization initiative Return to table b4 note *** referrer

Source: Transport Canada

The one-time cost to ship managers/ARs to have their SMS approved would be $2.66 million, $2.54 million of which would be incurred by business owners, and $121,100 by provincial and other levels of government.

Endorsement of certification

Following the SMS approval, Classes 2 and 3 vessel owners would have to go through a periodic certification endorsement process for each of their certificates: the CDOC at the company level, and the CSMC for each of their vessels. TC would delegate these activities to ROs. For Classes 4A and 4B vessels, certificates would be issued by TC and would be valid for five years. Table 6 provides a summary of the periodic endorsement and reissuance of certificates by class of vessels and by type of certification. Table 7 provides the estimated additional cost to ship managers/ARs to have their certificates issued and endorsed by an RO or TC.

Ship managers/ARs would be required to pay a fee to TC for the certification services with respect to Classes 4A and 4B vessels. Currently, fees for such certification are set at $100 (see Table 7 below for detail). For Classes 4A and 4B, an initial CDOC and CSMC would be issued in concurrence with the approval process. The subsequent CDOC and CSMC would be issued separately at the renewal or within a regular inspection. It is worth noting that these fees would be reviewed and updated as part of the TC fee modernization initiative.

In total, the cost to vessel owners associated with certificate endorsement processes would be $5.47 million, of which $4.93 million would be incurred by businesses, and $536,000 by provincial and other levels of government.

As previously described in the regulatory scenario, details of the endorsement certification activities for each vessel class would be developed through policy documents, and would be subject to the Minister’s discretion, as per authorities granted under the CSA 2001. What is illustrated in this analysis (Tables 6 and 7) is an example of the potential schedule of endorsement certification and its associated cost, based on an existing TC marine monitoring activity program.

Table 6: Endorsement of certificates schedule per ship manager/AR, by class

	Class 2 Endorsement by RO	Class 3 Endorsement by RO	Class 4 Endorsement by TC	Class 5 No certification
Initial CDOC	First endorsement validity 6 months, Second endorsement validity 6 months	First endorsement validity 6 months, Second endorsement validity 24 months Third endorsement validity 30 months	Document valid for 5 years	N/A
Subsequent CDOC	Annually	First endorsement validity 30 months Second endorsement validity 30 months	Renew – valid for 5 years	N/A
Initial CSMC (per vessel)	First endorsement within 12 months Second endorsement validity 24 months Third endorsement validity 24 months	First endorsement within 12 months Second endorsement validity 24 months Third endorsement validity 24 months	Document valid for 5 years	N/A
Subsequent CSMC (per vessel)	First endorsement validity 30 months second endorsement validity 30 months	First endorsement validity 30 months second endorsement validity 30 months	Renew – valid for 5 years	N/A

Source: Transport Canada

Table 7: Endorsement level of effort and cost per ship manager/AR, by class

	Authority	Class 2 RO	Class 3 RO	Class 4A TC table b6 note *	Class 4B TC table b6 note *
Initial CDOC	Cost of issuance	$2,500	$2,500	$100	$100
Subsequent CDOC	Cost of issuance	$1,250	$1,250	$100	$100
Initial CSMC (per vessel)	Cost of issuance	$1,250	$1,250	$100	$100
Subsequent CSMC (per vessel)	Cost of issuance	$1,250	$1,250	$100	$100
Table b6 note(s) Table b6 note * Fees paid to TC may be reviewed and updated Return to table b6 note * referrer

Source: Transport Canada

SMS maintenance activities

To ensure the safety objectives of an SMS are achieved, the proposed Regulations would also require that ship managers/ARs maintain their SMS by establishing tasks and responsibilities associated with their respective SMS. These would include, but are not limited to, verifying and monitoring safety and pollution prevention activities in their daily operations.

To estimate the cost of SMS maintenance, Section 4.2 of the IMO’s Revised Guideline for the Implementation of the International Safety Management (ISM) Code by Companies (PDF) was used as a reference. From this documentation, TC listed nine different tasks/roles, which would vary among vessel classes to account for the comprehensiveness of the SMS of each class. Seven of these tasks/roles would be performed at the company level and the other two would be performed on each vessel by the ship managers/AR annually. Table 8 illustrates the annual estimated cost of SMS maintenance at the company level, by class and activities. These tasks represent the annual activities under the ship manager/AR’s responsibilities regardless of the number of vessels for which it is responsible. Table 9 illustrates the annual cost of SMS maintenance at the vessel level, by class and activities. These activities would have to be performed annually on each vessel.

The annual cost per ship manager/AR (Table 8) and per vessel (Table 9) is calculated by multiplying the required annual hours per class by the wage rates associated to the ship manager/AR (Table 4). For example, every year, a ship manager/AR that owns/operates a fleet composed of one Class 3 vessel, two Class 4 vessels, and one Class 5 vessel would have to perform the seven activities in accordance with efforts required for Class 3 listed in Table 8, and the two activities in accordance with efforts required for each vessel by class listed in Table 9. It implies that the ship manager/AR would need a total effort of 18.4 days to maintain certifications per year (13.4 days of which for activities at the organization level, five (5) days for all of the four vessels).

It is estimated that the total cost to ship managers/ARs to maintain certification over the analytical period would be $61.93 million, of which $53.28 million would be incurred by business, and $6.24 million by provincial and other levels of government. It is also worth noting that the estimate of annual daily effort per task takes into consideration potential overlap with other regulatory requirements with which companies already comply.

Table 8: Annual cost of SMS maintenance per ship manager/AR, by class and activities ^{table b7 note *}

Activities	Annual Effort Required (in days)
	Class 2	Class 3	Class 4	Class 5
1. Evaluate and review the effectiveness of the SMS	1	1	0.5	0.5
2. Perform document control	1	1	0.5	0.5
3. Review nonconformities and develop action plans including conduct of internal audits	6	6	1.5	1.5
4. Coordinate mandatory inspection	1.2	1.2	0.1	0
5. Study near-misses and implementation of lesson learned	2	2	0.5	0.5
6. Coordinate management review and meeting	1.2	1.2	0.1	0
7. Update SMS manual	1	1	0.5	0.5
Total annual time required	13.4	13.4	3.7	3.5
Total annual cost per ship manager/AR	$7,499	$4,584	$752	$711
Table b7 note(s) Table b7 note * Ship manager/AR’s effort level is determined by the highest vessel class for their fleet Return to table b7 note * referrer

Source: Transport Canada

Table 9: Annual cost of SMS maintenance per vessel, by vessel class and activities ^{table b8 note *}

Activities	Annual Effort Required per Vessel (in days)
	Class 2	Class 3	Class 4	Class 5
8. Organize on board safety meetings	1	1	0.5	0.5
9. Coordinate ship to shore drills	1	1	0.5	0.5
Total annual time required per Vessel	2	2	1	1
Total annual cost per vessel	$1,119	$684	$203	$203
Table b8 note(s) Table b8 note * Ship manager/AR’s effort level is determined by each vessel in their fleet Return to table b8 note * referrer

Source: Transport Canada

Administrative costs

Submission

The proposed Regulations would require that ship managers/ARs submit their SMS for approval to an RO (Classes 2 and 3 vessels) or TC (Classes 4A and 4B vessels). There would be no submission requirements for Class 5 vessels. This one-time cost would be applied at the ship managers/ARs level in the year of compliance specific to the ship managers/ARs’ highest vessel class. It is estimated that it would take half an hour by the ship manager/AR regardless of the SMS level multiplied by their respective wage rate (see Table 4), to assemble and submit the documentation package online or via mail. The total submission cost to ship managers/ARs is estimated to be $51,100, of which $49,900 would be incurred by business owners, and $1,200 by provincial and other levels of government.

Support certification endorsement activities

Ship managers/ARs subject to the certification processes would need to retrieve documents and provide assistance to ROs or TC during the certification endorsement activities. This ongoing cost would follow the same verification schedule and costs described in Table 8 – Item 4: Coordinate mandatory inspection. The estimated cost per year by ship manager/AR^{footnote 18} would be between $34 and $672.

The total cost to ship managers/ARs to provide assistance during the certification and oversight activities would be $1.58 million, of which $1.51 million would be incurred by business owners, and $68,500 by provincial and other levels of government. Note that this amount is already accounted for under the SMS Maintenance Activities section above.

Record keeping

All ship managers/ARs of in-scope vessels would be required to organize and keep records of the information developed and produced each year related to the results of the audits and management reviews, as part of their responsibilities to maintain certification with their respective SMS. As presented under Item 2: Perform document control in Table 8, it is expected, on average, that ship managers/ARs would take between half a day and up to one day per year to consolidate records to be kept for at least five years and be able to provide them on request. This represents an annual cost of between $280 and $560 per ship manager/AR.^{footnote 19} The total cost associated with record keeping would be $4.49 million, $4.14 million of which would be incurred by business owners, and $346,700 by provincial and other levels of government. Note that this amount is already accounted for under the SMS Maintenance Activities section above.

Costs to the Government of Canada

The total costs to the Government of Canada are estimated to be $4.33 million, which are associated with developing and maintaining an SMS on board Government of Canada-owned vessels, and the approval of SMS and certification activities by TC. Costs to the Government of Canada also include training marine safety inspectors at TC and informing the industry of the proposed Regulations.

SMS development, approval, certification and maintenance for Government of Canada owned vessels

There are 1,889 Government of Canada-owned vessels that would be affected by the proposed Regulations. Similar to other ship managers/ARs, the Government of Canada would need to develop an SMS, obtain approvals from authorities, receive certifications, maintain SMS activities, and be subject to the oversight process. In total, the costs to the Government of Canada associated with the proposed SMS requirements on its vessels are estimated to be $2.46 million.

SMS approval for Classes 4A and 4B vessels by TC

As previously described, TC would need to approve the SMS for Classes 4A and 4B vessels. This would require, on average, 2 hours per application (a one-time cost) for Classes 4A and 4B vessels, by an employee at the TI-07 level. Using the wage rate of $77.61 per hour for a TI-07^{footnote 20}, the cost for SMS approval would be $466,500.

Certification for Classes 4A and 4B vessels by TC

Transport Canada would also need to issue CMD certificates to Classes 4A and 4B vessels. It is expected that, on average, an inspector (at TI-07 level) would take one (1) hour to perform initial certification issuance, and one (1) hour^{footnote 21} for subsequent certification activities. Each certificate for Classes 4A and 4B vessels would be valid for five years. Therefore, the total cost of certification is estimated to be $1.36 million.

As mentioned under the Regulatory scenario section, the details of the certification activities would be subject to the Minister’s discretion, as per authorities granted under the CSA 2001.

Training

It is expected that additional training for marine safety inspectors would be required with the implementation of the proposed Regulations. All marine safety inspectors who are currently monitoring in-scope vessels would need training on the proposed SMS requirements. This would result in the addition of a new module to the existing Marine Safety Inspection training program. The development of the module and the training of inspectors would be completed before the coming into force of the Regulations.^{footnote 22} Similarly, as marine safety inspectors have already the ability to issue penalties for non-compliance based on the Administrative Monetary Penalties and Notices (CSA 2001) Regulations, only one amendment to the associated module in the existing Marine Safety Inspection training would be required at no additional cost. However, marine safety inspectors who would be engaged in certifying companies and vessels would require ISM training. This one-time training would be provided by ROs (at a unit cost of $1,300 per training session per person) and two marine safety inspectors per region^{footnote 23} would require this specific training during the coming into force year of the proposed Regulations.

The total training costs for the Government of Canada would be $12,150 in 2023.

Implementation / promotion

It is expected that additional effort would be required by TC to implement and promote the proposed Regulations. Stakeholders would be informed on procedures associated with SMS requirements through existing communication tools, such as Ship Safety Bulletins, updates to the TC website, as well as through regional and national CMAC meetings. As part of this regulatory project and through consultation, documents have been developed and made publicly available which addressed certification and oversight that would be conducted by TC in accordance with the proposed Regulations. Policy and procedures would be available to stakeholders on the date of the coming into force of the proposed Regulations and throughout the implementation phases.

The total cost of implementation and promotion of the proposed Regulations would be $42,000 in 2023.

Cost-benefit statement

• Number of years: 12 years from 2023 to 2034
• Base year for costing: 2021
• Present value base year: 2022
• Discount rate: 7%

Table 10: Monetized costs (in $millions)

Impacted stakeholder	Description of cost	Coming into force year (2023)	Compliance year 2024	Compliance year 2025	Other relevant year (2032)	Final year (2034)	Total (present value)	Annualized value
Canadian businesses	Development of SMS, approval, and certification	$0	$2.08	$5.77	$0.09	$0.32	$10.56	$1.33
	SMS Maintenance Activities	$0	$1.73	$6.86	$4.27	$3.73	$53.28	$6.71
Provincial and other levels of government	Development of SMS, approval, and certification	$0	$0.23	$0.32	$0.00	$0.03	$0.87	$0.11
	SMS Maintenance Activities	$0	$0.15	$0.81	$0.51	$0.44	$6.24	$0.79
Government of Canada	Compliance costs	$0	$0.01	$0.35	$0.20	$0.17	$2.46	$0.31
	Approval and certification	$0	$0.31	$0.78	$0.00	$0.13	$1.82	$0.23
	Training, implementation, and promotion	$0.05	$0	$0	$0	$0	$0.05	$0.006
All stakeholders	Total costs	$0.05	$4.51	$14.89	$5.07	$4.82	$75.28	$9.48

Table 11: Break even occurrence reduction

Projected number of occurrences per year	Average estimated cost per occurrence (undiscounted)	Occurrence reduction needed per year to cover cost (%)	Occurrence reduction needed per year to cover the cost
273	$188,300	18.0%	49

Table 12: Monetized benefits (in $millions)

Impacted stakeholder	Description of cost	Coming into force year (2023)	Compliance year 2024	Compliance year 2025	Other relevant year (2032)	Final year (2034)	Total (present value)	Annualized value
Transport Canada	Cost recovered by TC from approval and endorsement certification fees	$0	$0.34	$0.46	$0.00	$0.17	$1.75	$0.22

Table 13: Summary of monetized costs and benefits (in $millions)

Impacts	Coming into force year (2023)	Compliance Year 2024	Compliance Year 2025	Other relevant year (2032)	Final year (2034)	Total (present value)	Annualized value
Total Canadian business cost	$0.00	$3.81	$12.63	$4.36	$4.05	$63.84	$8.04
Total provincial and other levels of government cost	$0.00	$0.38	$1.13	$0.51	$0.47	$7.11	$0.90
Total Government of Canada cost	$0.05	$0.32	$1.13	$0.20	$0.30	$4.33	$0.55
Monetized benefits	$0.00	$0.34	$0.46	$0.00	$0.17	$1.75	$0.22
Net Impact	$0.05	$4.17	$14.43	$5.07	$4.65	$73.53	$9.27

Sensitivity analysis

A sensitivity analysis was conducted to test uncertainties around key variables. The single-variable sensitivity analysis examines how the estimated total cost would change if an assumption around one variable is changed at a time. The following variables were analyzed for the single-variable sensitivity analysis: the cost of maintaining activities of an SMS (level of effort), the estimated average avoided cost of marine occurrence, and analytical time frame.

SMS maintenance activities

In the central case, it is assumed that ship managers/ARs would have to maintain their SMS certification by establishing tasks and responsibilities associated with their highest respective vessel class. TC was able to establish an average number of days per year to perform each task (see Tables 8 and 9). These values are used as average figures in the central analysis. For the purpose of the sensitivity analysis, a low level of effort (25% less than average values) and a high level of effort (25% more) were analyzed.

Estimated average avoided cost of an occurrence

The average avoided cost per in-scope occurrence is estimated based on the value of avoided fatalities and major injuries associated with in-scope occurrences. This value, used in the central analysis, is considered a conservative measure as it does not take into consideration other potential avoided costs (e.g. avoided damages to the environment and cargo) due to limited information. For the purpose of this sensitivity analysis, there is an assumption that the estimated avoided cost per occurrence value used in the central analysis (i.e. $170,000) would be increased by 25%.

Analytical time frame

As the proposed compliance period is up to three years after the coming-into-force date of the proposed Regulations, a 12-year analytical time frame (from 2023 to 2034) was used for the central analysis to fully represent the expected cost over a 10-year time frame on each class. For the sensitivity analysis, a 20-year time frame is used (from 2023 to 2042).

The resulting sensitivity analysis impact on the total cost value and break-even point are presented in Table 14.

Table 14: Single-variable sensitivity analysis

Variable	Net Total Cost (in millions)	Break-even Annual Occurrence	Break-even Annual Occurrence (%)
SMS Maintenance Activities
Low level of effort	$58.05	37	14.2%
High level of effort	$89.02	58	21.8%
Estimated avoided cost per occurrence
25% higher estimate	$73.53	38	14.4%
Analytical time frame
20-year time frame	$100.90	50	19.0%

Distributional analysis

The proposed Regulations would affect vessels and their ship managers/ARs across the country. The Pacific and Ontario regions would represent approximately 50% of the impacted vessels. In terms of the cost, vessels and their ship managers/ARs registered in these two regions would bear 65% of the total cost. Table 15 presents costs to impacted vessels by region.

Table 15: Costs to Canadian flagged vessels, by TC region

Region	Number of vessels	Total cost (in $millions)
Atlantic	1,636	7.63
Ontario	3,713	17.32
Pacific	6,382	29.76
Prairies & Northern	1,896	8.84
Quebec	2,516	11.73
Total	16,143	75.28

Of 16,143 vessels currently registered with and affected by the proposed Regulations, 1,889 are owned by Government of Canada entities, while 11,984 are privately owned, and 2,270 are owned by provincial and other levels of government. Table 16 shows a breakdown of the costs to private- and government-owned vessels.

Table 16: Number of affected vessels and costs by affected stakeholder

Ownership	Number of vessels	Total cost (in $millions)
Canadian businesses	11,984	$63.85
Provincial and other levels of government	2,270	$7.10
Government of Canada	1,889	$4.33
Total	16,143	$75.28

Small business lens

Based on available information, it was not possible to determine the exact number of small businesses from the 5,606 businesses^{footnote 24} that would be impacted by the proposed Regulations. Since the scope of the proposed Regulations would cover a very large spectrum of vessel sizes grouped by class, two different approaches were used to estimate the share of small business: one that classifies business size by their total number of vessels owned, and the other that classifies business size by the relative total gross vessel tonnage that a business owns. Both methods have major limits if analyzed separately (i.e. looking only at number of vessels by owner to determine the size of the business might introduce bias), but by combining and analyzing both methods’ results, a high-level trend could be seen. The result suggested that 97% of affected businesses should be considered small businesses. It mirrors the share obtained by Industry Canada in its report, Key Small Business Statistics – November 2019, which stated that 98.3% of businesses in the transportation and warehousing sector are small businesses.^{footnote 25}

However, this share should not be applied unilaterally to all vessel classes. Class 1, voluntarily compliant owners, and Class 2 are all considered medium-large businesses. For Class 3 vessels, it is estimated that 23 owners are considered medium to large businesses. For Classes 4A, 4B and 5, the share of 97% would be applied to identify the number of small businesses. Table 17 shows the estimated number of small businesses by class.

Table 17: Estimation of small businesses by class

Class	Number of Businesses	Estimated Share of Small Business	Number of Small Businesses	Number of Vessels Owned by Small Businesses
Class 1	53	0%	0	0
Class 2	132	0%	0	0
Class 3	172	87%	149	202 table c8 note *
Class 4A	771	97%	748	1,761
Class 4B	3,048	97%	2,957	5,984
Class 5	1,397	97%	1,355	3,562
Total	5,573	93%	5,209	11,509
Table c8 note(s) Table c8 note * 23 owners in Class 3 identified as medium-large businesses own 374 vessels. Return to table c8 note * referrer

Source: Transport Canada

It was estimated that a total of 5,209 small businesses would be impacted by the proposed Regulations. The total cost for these small businesses and their vessels is estimated to be $51.97 million over the analytical time frame. It is important to note, however, that it was not possible to determine with certainty the true number of small businesses impacted by the proposed Regulations, but efforts were made to provide realistic estimates.

In order to minimize the burden on all businesses, a transition period from the coming into force of the proposed Regulations and the compliance date was included. Also, in order to balance SMS requirements and safety objectives with cost impacts for small vessel owners, the proposed Regulations would use a class approach that is based on vessel type/size, rather than on the size of the business. However, within the small business group, businesses would face different impacts (requiring varying levels of effort) depending on the number of vessels they own and the class associated with each vessel.

Small business lens summary

• Number of small businesses impacted: 5,209
• Number of years: 12 years from 2023 to 2034
• Base year for costing: 2021
• Present value base year: 2022
• Discount rate: 7%

Table 18: Total compliance and administrative costs

Totals	Annualized value	Present value
Total compliance cost ($ millions)	$6.14	$48.77
Total administrative cost ($ millions)	$0.56	$4.42
Total cost (all impacted small businesses) ($ millions)	$6.70	$53.19
Cost per impacted small business ($)	$1,286	$10,212

One-for-one rule

The one-for-one rule applies, as the proposal would result in an incremental change in administrative burden on business. The proposal would also repeal the existing Safety Management Regulations and replaces it with a new regulatory title – Marine Safety Management System Regulations – which would result in no net increase or decrease in regulatory titles.

The proposed Regulations would impose administrative requirements on ship managers/ARs related to submission, endorsement support, and record keeping activities. Using assumptions and data previously presented, and the methodology developed in the Red Tape Reduction Regulations, it is estimated that ship managers/ARs would incur an annualized administrative cost of $293,246 (present value in 2012 Canadian dollars, discounted to the year 2012 at a 7% discount rate) for a 10-year period between 2023 and 2032, or an annualized administrative cost of $31.40 per business. The detailed cost breakdown is as follows:

• Document submission: an annualized cost of $3,000 ($0.32 per business);
• Endorsement support activities: an annualized cost of $77,899 ($8.34 per business), and
• Record keeping activities: an annualized cost of $212,347 ($22.74 per business).

Regulatory cooperation and alignment

This regulatory proposal is not related to any formal commitment to a regulatory cooperation forum. Canada’s approach to applying the ISM Code’s requirements to additional vessels, dependent on their size and type of operation, is generally consistent with the intent of safety management regulations implemented by other flag administrations. While specific flag states may base their methodology for expanding SMS requirements to additional vessels on a variety of factors, Canada’s approach for expanding these requirements to its domestic fleet is primarily based on enhancing safety in the marine industry in the most cost-effective manner, while still aligning with the best practices of other flag states where possible.

Similarities to Canada’s approach for expanding SMS requirements can be found amongst the regulatory regimes of the European Union (EU), Norway, and the United Kingdom. The proposed Regulations also contain similarities with the approaches of Australia and the U.S. but contain differences from these regimes with regard to how the class system is structured and its mandatory applicability to domestic vessels.

The EU has SMS requirements in their regulatory regime which are similar to the requirements of the proposed Regulations. The EU’s Regulations (No. 336/2006) expand SMS requirements beyond vessels engaged on international voyages, to include cargo and passenger vessels engaged exclusively on domestic voyages, which are similar those found in the proposed Regulations.

Norway has expanded formal SMS requirements to a greater portion of its domestic fleet under an approach similar to TC’s proposed Regulations. Norway’s Regulations on safety management for small cargo ships, passenger ships and fishing vessels, expand certain requirements of the ISM Code to all non-SOLAS commercial vessels, including passenger, cargo, and fishing vessels.^{footnote 26}Similar to the proposed Regulations, Norway’s expanded Regulations require these additional vessels to develop and maintain an SMS that is suitable to the nature and type of their operation as opposed to the full requirements of the ISM Code. While Norway does not have in place a mandatory external audit or certification scheme for these vessels, the Norwegian Maritime Authority has the authority to review a company’s SMS through unscheduled supervision and random inspections/audits samplings, similar to the risk-based oversight of vessels captured under Class 5 of the proposed Regulations.

The United Kingdom has developed a Domestic Safety Management code which, similar to the proposed Regulations, divides vessel requirements through a class system. Safety management certificates are required for all passenger and cargo vessels, oil tankers, chemical tankers or gas carriers, and large commercial yachts over 500 gross tonnage.

While Australia’s regime also uses a class system, their structure differs slightly from the proposed Regulations in that their designation of classes is based on a vessel’s operational area (i.e. offshore, domestic, and restricted areas). All classes of vessels must comply with Australia’s Marine Order 504, which includes fundamental measures drawn from the ISM Code. Class 4 vessels (i.e. domestic commercial vessels) may choose to comply with these measures (alongside additional risk assessment requirements) or follow Part A of the ISM Code.^{footnote 27} All vessels are required to have a functional SMS in place. While there is no formal audit regime in place, owners are issued an operational certificate, which is valid for a maximum of five years, contingent to a satisfactory annual survey/check by the Australian Marine Safety Authority.

Regarding the U.S., the ISM Code applies to U.S.-flagged vessels, cargo and passenger, on international voyages.^{footnote 28} It also must be followed by vessels which apply to join the U.S.’s Alternate Compliance Program. The Alternate Compliance Program is a voluntary inspection process for U.S.-flagged vessels to obtain a certificate of inspection by complying with international conventions such as SOLAS and The International Convention for the Prevention of Pollution from Ships (MARPOL). The U.S. preceded Canada in introducing regulations for domestic towing vessels through its Towing Safety Management System regulation (46 U.S.C. 3306 in 46 CFR Subchapter M). By expanding requirements within the proposed Regulations to towboats, Canada will be aligned with the U.S. in this regard.

Foreign-flagged vessels

The proposed Regulations would require that a foreign-flagged vessel, other than those exempted under the proposed Regulations, not subject to Chapter IX of SOLAS, operating in Canadian waters, have in place a documented SMS that provides a level of safety and environmental protection at least equivalent to that provided by the SMS of a Canadian vessel of similar size and operation. Most of the foreign-flagged vessels entering into Canadian waters are already required to be compliant with Chapter IX of SOLAS due to the international nature of their voyage.

Strategic environmental assessment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, and the TC Policy Statement on Strategic Environmental Assessment (2013), the strategic environmental assessment process was followed for this regulatory proposal and a Sustainable Transportation Assessment was completed. No important environmental effects are anticipated as a result of this proposal. The assessment took into account potential effects to the environmental goals and targets of the Federal Sustainable Development Strategy.

The expansion of SMS requirements to a broader range of vessels within the Canadian fleet, including all vessels of 500 gross tonnage or more, aims to reduce the number of accidents in Canada’s waterways. The ISM Code, on which the proposed Regulations are based, outlines that an SMS should have a safety and environmental-protection policy in place. A formal SMS also requires procedures to be in place to aid in the reporting and analysis of non-conformities, accidents and hazardous occurrences, with the intent of improving safety and pollution prevention. Water pollutants and other environmental hazards may be avoided with an increased focus on preventing occurrences through a formal SMS.

Gender-based analysis plus

The proposed Regulations are not expected to result in differential impacts on the basis of identity factors such as gender, race, language, sexuality, etc.

It should be noted that women are significantly underrepresented in the maritime workforce / industry. As such, the proposed Regulations are expected to directly impact more men than women; however, the proposed Regulations are not expected to reinforce or exacerbate the existing disparity in the industry as they relate only to the establishment and application of an SMS for marine vessels.

Regionally, the proposed Regulations would impact the Pacific and Ontario regions more so than any other region. The distribution of the marine industry in these geographic areas is expected as vessel ownership, for the applicable vessels, is highest on the West Coast.

Implementation, compliance and enforcement, and service standards

TC would apply varying levels of oversight to different classes of vessels, for both on board and onshore operations, depending on the vessel’s size and type of operation.

The requirement to obtain a CMD, for certain classes of vessels (Classes 1 to 4) would be included as part of the proposed Regulations. Details on the form and manner in which CMDs would be issued to different classes of vessels would be captured in a procedural document under the authority of section 16 of the CSA 2001. Full details on the frequency and process for the oversight of on board and onshore operations for vessels subject to the proposed Regulations would be outlined for stakeholders and incorporated in a policy document made under the authority of the Minister of Transport. This policy document would come into effect and be made available prior to the coming into force of the proposed Regulations, in advance of the transitional provisions for most vessels. The proposed oversight structure for Class 1 vessels would mirror the ISM Code requirements. The oversight for Classes 2, 3 and 4 would consist of the issuance of CMDs, valid for a period of up to five years, with periodic inspections, verification, or risk-based monitoring depending on vessel class. Associated policy documents would be developed outlining which classes of vessels require CMDs, which would be subject to mandatory inspections or risk-based monitoring, and the frequency of these activities.

Implementation

Dates for coming into force — Transition periods

TC is currently aiming to have the proposed Regulations come into force in 2023. Dates for when vessels would need to be in compliance with the proposed Regulations would be gradual in order to accommodate the large number of vessels that would be subject to the proposed Regulations, as well as to provide enough time for ship managers/ARs to develop and implement the documented SMS (required policies, instructions, and procedures) and to obtain certification from an RO or TC.

Compliance dates would be based on vessel size and type, and the certification and registration schedule of vessels captured under each class. Transition periods between the coming-into-force dates of the proposed Regulations and when vessels in different classes would need to be in compliance with the new requirements would be up to a maximum of three years.

For example, vessels in classes 2 or 3 would be required to be in compliance by the first renewal of the vessel’s safety certificate after the first anniversary of the coming into force for passenger vessels, and after the second anniversary for non-passenger vessels.

For class 4A passenger vessels, compliance would be required by the first renewal of the vessel’s safety certificate after the first anniversary of the coming into force of the proposed Regulations. To accommodate for the four-year validity of the safety certificate for class 4A non-passenger vessels, compliance would be required by the issuance date (day and month) of the vessel’s safety certificate after the second anniversary of the coming into force of the proposed Regulations. Class 4B vessels would be divided into two groups, based on their length. Vessels of more than seven metres in length would be required to comply by the second anniversary of the coming into force, and vessels up to seven metres in length would be required to comply by the third anniversary.

Class 5 vessels would be required to comply by the end of the third anniversary of coming into force.

Table 19: Transitional Provisions for Registered Vessels

Class	Type of vessel	Compliance required by:
1	All	No transition
2	Passenger	2nd Anniversary of coming into force
	Non-Passenger	3rd Anniversary of coming into force
3	Passenger	2nd Anniversary of coming into force
	Non-Passenger	3rd Anniversary of coming into force
4A	Passenger	2nd Anniversary of coming into force
	Non-Passenger	3rd Anniversary of coming into force
4B	Passenger and towboats	2nd Anniversary of coming into force (over seven metres) 3rd Anniversary of coming into force (up to seven metres)
5	All	3rd Anniversary of coming into force

Vessels newly registered after the date of coming into force of the proposed Regulations would have six months to implement an SMS.

Non-SOLAS foreign vessels operating in Canadian waters would be required to comply and would be given a 12-month transition period, from the date of coming into force, to align with the regulation.

Costs to the Government of Canada to implement these proposed Regulations will be managed within existing reference levels.

Communication and outreach activities

Stakeholders would be informed of the policies and procedures associated with the proposed Regulations through standard communication tools, such as Ship Safety Bulletins, updates to the TC website, as well as through regional and national CMAC meetings.

As part of this regulatory project, policy and procedures documents, which provide details on how certification and inspection would be conducted by TC in accordance with the proposed Regulations, would be developed and would be made publicly available prior to the coming into force of the proposed Regulations, in advance of the transitional provisions for most vessels. These documents would indicate the standards on which certification and compliance would be based to meet the requirements of the proposed Regulations. Updates to these documents would be shared with stakeholders regularly at upcoming national CMAC meetings.

Performance measurement

Performance measurement would be done through monitoring the compliance with the proposed Regulations. Depending on the class of vessel, this would be done through risk-based oversight.

Analysis of the number of incidents cited in TSB reports would be used as a method for tracking progress on the uptake of SMS requirements. As part of TC’s oversight system, the number of non-conformities would be tracked to help with assessing the performance of the proposed Regulations.

Compliance and enforcement

Compliance and enforcement of the proposed Regulations would be addressed nationally through the National Oversight Program, which would include periodic inspections and/or risk-based inspections.

Inspections conducted on Classes 4B and 5 vessels would be integrated as part of the existing small vessel risk-based monitoring activities. TC currently performs over 800 annual oversight activities on Canadian vessels that include risk-based inspection activities conducted on smaller Canadian vessels. TC would review the National Oversight Program to incorporate compliance activities for the proposed Regulations.

Amendments to Part 12 of the Schedule to the Administrative Monetary Penalties and Notices (CSA 2001) Regulations are also being proposed to reflect the new structure of the proposed Regulations and to introduce the administrative monetary penalties for individual requirements in the proposed Regulations. The penalty amounts have been developed in consideration of the recently increased maximum penalty from $25,000 to a new maximum of $250,000 in the CSA 2001.

Under the Administrative Monetary Penalties and Notices (CSA 2001) Regulations, an inspector has the authority to apply a graduated enforcement approach, starting with a warning up to imposing administrative monetary penalties (AMPs) and/or detaining a vessel (Table 20). This regulatory proposal would require compliance at the latest respective date for each vessels’ class and type, as per the transitional provisions noted above. A person or business issued an AMP under the AMPs Regulations may file a request to the Transportation Appeal Tribunal of Canada, to request a review of a notice received.

Table 20: Proposed Administrative Monetary Penalties (AMPS) for Canadian Vessels

Category of Violator(s)
Gravity of Violation	Individual (Person)	Vessel or Corporation (Person other than an Individual)	Individual and Vessel or Corporation (Person other than an Individual)
Minor	$260 - $1,250	$525 - $10,000	$260 - $10,000
Medium	$1,300 - $6,250	$2,625 - $100,000	$1,300 - $100,000
Serious	$2,625 - $12,500	$5,250 - $250,000	$2,625 - $250,000

Contact

Manager, Marine Safety Management System Regulations
Marine Safety and Security
Transport Canada
Place de Ville, Tower C
330 Sparks Street
Ottawa, Ontario
K1A 0N5
Email: MSSRegulations-ReglementsSSM@tc.gc.ca
Telephone: 343‑549‑5614

PROPOSED REGULATORY TEXT

Notice is given that the Governor in Council, pursuant to paragraphs 35(1)(b), (d) and (e)^{footnote a}, 35.1(1)(d)^{footnote b} to (i)^{footnote b} and (k)^{footnote b}, 120(1)(d) to (g)^{footnote c}, (i), (k) and (m), 150(1)(a), 190(1)(b) and 244(f)^{footnote d} to (h)^{footnote e} of the Canada Shipping Act, 2001^{footnote f}, proposes to make the annexed Marine Safety Management System Regulations.

Interested persons may make representations concerning the proposed Regulations within 75 days after the date of publication of this notice. All such representations must be submitted online on the Canada Gazette, Part I, or, if submitted by email, post or other format, must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Heidi Craswell, Manager, Legislative, Regulatory and International Affairs, Marine Safety and Security, Department of Transport, Place de Ville, Tower C, 330 Sparks Street, 11^th Floor, Ottawa, Ontario K1A 0N5 (tel.: 343‑549‑5614; email: MSSRegulations-ReglementsSSM@tc.gc.ca).

Ottawa, June 9, 2022

Wendy Nixon
Assistant Clerk of the Privy Council

Marine Safety Management System Regulations

Interpretation

Definitions

1 (1) The following definitions apply in these Regulations.

Act

means the Canada Shipping Act, 2001. (loi)

Class 1 vessel

means a Canadian vessel to which Chapter IX of SOLAS applies. (bâtiments de catégorie 1)

Class 2 vessel

means a Canadian vessel, other than a Class 1 vessel, that

• (a) is 500 gross tonnage or more; or
• (b) is certified to carry 50 passengers or more as indicated on the vessel’s safety certificate issued under the Vessel Safety Certificates Regulations and is 24 m in length or more. (bâtiments de catégorie 2)

Class 3 vessel

means a Canadian vessel, other than a Class 1 or 2 vessel, that is 24 m in length or more. (bâtiments de catégorie 3)

Class 4 vessel

means a Canadian vessel, other than a Class 1, 2 or 3 vessel, that

• (a) is more than 15 gross tonnage; or
• (b) is 15 gross tonnage or less and is
  • (i) a passenger-carrying vessel, or
  • (ii) a towboat. (bâtiments de catégorie 4)

Class 5 vessel

means a Canadian vessel, other than a Class 1, 2, 3 or 4 vessel, of 15 gross tonnage or less. (bâtiments de catégorie 5)

ISM Code

means the International Management Code for the Safe Operation of Ships and for Pollution Prevention adopted by the International Maritime Organization by resolution A.741(18). (Code ISM)

Minister

means the Minister of Transport. (ministre)

passenger-carrying vessel

means a vessel that is used to carry one or more passengers. (bâtiment transportant des passagers)

ship manager

means a qualified person who is responsible for managing the shore-based and on-board operations of a vessel. (gestionnaire)

SOLAS

means the International Convention for the Safety of Life at Sea, 1974, and the Protocol of 1988 relating to the Convention. (SOLAS)

towboat

has the same meaning as in section 1 of the Navigation Safety Regulations, 2020. (bâtiment remorqueur)

Safety management system

(2) A safety management system is a structured set of policies and procedures whose purpose is to enable the ship manager to effectively implement safety and environmental protection policies.

Interpretation

2 (1) For the purpose of interpreting a document incorporated by reference into these Regulations,

• (a) “should” is to be read as “must”;
• (b) “Administration” is to be read as “Minister”;
• (c) “Company” is to be read as “ship manager”;
• (d) “ship” is to be read as “vessel”; and
• (e) “rules and regulations” and “rules, regulations” are to be read as “regulations made under the Act”.

Length and gross tonnage

(2) Any reference in these Regulations to the length or gross tonnage of a vessel is a reference to the length or gross tonnage indicated on the certificate of registry issued to it under the Vessel Registration and Tonnage Regulations.

Incorporation by reference

(3) Any reference in these Regulations to a document is a reference to that document as amended from time to time.

Purpose

Canadian vessels

3 (1) These Regulations establish the requirement that the ship manager of a Class 1, 2, 3, 4 or 5 vessel develop, implement and maintain a documented safety management system that addresses the shore-based and on-board operations of the vessel.

Foreign vessels

(2) These Regulations establish the requirement that the authorized representative of a foreign vessel in Canadian waters to operate the vessel in accordance with the procedures and practices described in a documented safety management system.

General

Application

4 Subject to section 5, these Regulations apply in respect of

• (a) Class 1, 2, 3, 4 and 5 vessels and their shore-based and on-board operations; and
• (b) foreign vessels operating in Canadian waters.

Non-application

5 These Regulations do not apply in respect of

• (a) a vessel subject to the Fishing Vessel Safety Regulations;
• (b) a vessel that does not have a mechanical means of propulsion and does not carry persons, dangerous chemicals in bulk or oil in bulk on board;
• (c) a human-powered vessel;
• (d) a vessel subject to the Special-purpose Vessels Regulations;
• (e) a pleasure craft; or
• (f) a foreign vessel that is owned or operated by the government of a foreign state and that is used exclusively in Government non-commercial service.

Prohibitions — foreign vessels subject to SOLAS

6 (1) The authorized representative of a foreign vessel to which Chapter IX of SOLAS applies must not operate the vessel in Canadian waters unless

• (a) a safety management certificate or interim safety management certificate that was issued in respect of the vessel by the government of the State whose flag the vessel is entitled to fly is kept on board;
• (b) a document of compliance or interim document of compliance that applies to the vessel and was issued by the government of the State whose flag the vessel is entitled to fly is kept on board; and
• (c) the authorized representative ensures that the vessel operates in accordance with the procedures and practices described in the documented safety management system in relation to which the certificate referred to in paragraph (a) and the document referred to in paragraph (b) were issued.

Prohibitions — foreign vessels not subject to SOLAS

(2) The authorized representative of a foreign vessel to which Chapter IX of SOLAS does not apply must not operate the vessel in Canadian waters unless the authorized representative ensures that the vessel operates in accordance with the procedures and practices described in a documented safety management system that provides a level of safety and environmental protection that is at least equivalent to that provided by the safety management system required in respect of a similar Canadian vessel.

Renewal

7 (1) The Minister must, on application by the holder of a Canadian maritime document issued under these Regulations, renew the document if the requirements for the issuance of the document are met and the holder is not in contravention of a provision of these Regulations.

Exchange

(2) The Minister must, on application by the holder of a Canadian Document of Compliance, exchange that document for a Canadian Document of Compliance of another class if the requirements for the issuance of that other Canadian Document of Compliance are met and the holder is not in contravention of a provision of these Regulations.

Endorsement

8 The holder of a Canadian maritime document issued under these Regulations that is valid for more than one year must ensure that

• (a) the shore-based and on-board operations of each vessel to which the document applies are inspected not later than the dates determined by the Minister, as indicated on the document at the time it is issued; and
• (b) the document is endorsed by the Minister following the inspection to indicate that the requirements for the issuance of the document continue to be met.

Identification of ship manager

9 The authorized representative of a Canadian vessel must, on the request of the Minister, identify the ship manager in the form and manner specified by the Minister.

[10 to 99 reserved]

PART 1

Class 1 Vessels

Issuance — Documents of Compliance

100 (1) The Minister must, on application by the ship manager of a Class 1 vessel, issue the following documents to them:

• (a) an Interim Document of Compliance if the Minister determines that the ship manager has developed a documented safety management system and that the requirements of paragraph 14.1 of Part B of the ISM Code are met; and
• (b) a Document of Compliance, if the Minister determines that the ship manager has developed and implemented a documented safety management system that meets the requirements of regulation 4.1 of Chapter IX of SOLAS.

Types of vessels

(2) The Minister must, when issuing a Document of Compliance or an Interim Document of Compliance, specify on the document the types of vessels to which the document applies.

Issuance — Safety Management Certificates

101 The Minister must, on application by a ship manager of a Class 1 vessel, issue the following documents in respect of the vessel to them:

• (a) an Interim Safety Management Certificate, if the Minister determines that the ship manager has developed a documented safety management system and that the requirements of paragraphs 14.2 and 14.4 of Part B of the ISM Code are met; and
• (b) a Safety Management Certificate, if the Minister determines that the vessel operates in accordance with the procedures and practices described in the safety management system and that the system meets the requirements for the issuance of a Document of Compliance under subsection 100(1).

Documents on board — master

102 (1) The master of a Class 1 vessel must ensure that

• (a) the Document of Compliance or Interim Document of Compliance that was issued to the vessel’s ship manager is kept on board;
• (b) the Safety Management Certificate or Interim Safety Management Certificate that was issued in respect of the vessel to the vessel’s ship manager is kept on board; and
• (c) the document in which the safety management system referred to in subsection 100(1) is set out is kept on board.

Production of documents

(2) The ship manager of a Class 1 vessel must ensure that

• (a) the Document of Compliance or Interim Document of Compliance that was issued to them is produced on the request of the Minister;
• (b) the Safety Management Certificate or Interim Safety Management Certificate that was issued in respect of the vessel to the vessel’s ship manager is produced on the request of the Minister; and
• (c) the document in which the safety management system referred to in subsection 100(1) is set out is produced on the request of the Minister.

Audits and reviews

103 (1) The ship manager of a Class 1 vessel must ensure that the audits and management reviews referred to in section 12 of Part A of the ISM Code are carried out to verify whether the shore-based and on-board operations of the vessel that are related to safety and pollution prevention comply with the procedures and practices described in the safety management system referred to in subsection 100(1).

Frequency

(2) The ship manager must ensure that the audits and management reviews are carried out at frequencies determined in accordance with paragraph 12.1 of Part A of the ISM Code.

Disclosure to personnel

(3) The ship manager must ensure that the results of the audits and management reviews for an area of operation are brought to the attention of all personnel that have responsibility in that area.

Corrective action

(4) The ship manager must ensure that a corrective action plan to address deficiencies identified during the audits is initiated within 30 days after the day on which the deficiency is identified.

Content of corrective action plan

(5) The ship manager must ensure that the corrective action plan identifies the root cause of any deficiency and specifies a process to rectify it in a timely manner.

Results kept and produced on request

(6) The ship manager must ensure that the results of the audits and management reviews are

• (a) kept for a period of at least 5 years; and
• (b) produced on the request of the Minister.

Prohibition — authorized representative and ship manager

104 (1) It is prohibited for the authorized representative or ship manager of a Class 1 vessel to operate the vessel, or permit the vessel to be operated, unless the ship manager

• (a) holds a Document of Compliance or an Interim Document of Compliance that applies to the type of vessel;
• (b) holds a Safety Management Certificate or an Interim Safety Management Certificate with respect to the vessel; and
• (c) maintains the safety management system referred to in subsection 100(1).

Prohibition — authorized representative, ship manager and master

(2) It is prohibited for the authorized representative, ship manager or the master of a Class 1 vessel to operate the vessel, or permit the vessel to be operated, unless the vessel is operated in accordance with the procedures and practices described in the safety management system referred to in subsection 100(1).

[105 to 199 reserved]

PART 2

Class 2 Vessels

Issuance — Canadian Document of Compliance

200 (1) The Minister must, on application by a ship manager of a Class 2 vessel, issue a Class 2 Canadian Document of Compliance to them if the Minister determines that the ship manager has developed a documented safety management system that meets the requirements of Part A of the ISM Code.

Types of vessels

(2) The Minister must, when issuing a Class 2 Canadian Document of Compliance, specify on the document the types of vessels to which it applies.

Implementation

(3) The ship manager must ensure that the safety management system is implemented in respect of the shore-based and on-board operations of the vessel within six months after the day on which the Class 2 Canadian Document of Compliance is issued.

Issuance — Canadian Safety Management Certificate

201 (1) The Minister must, on application by a ship manager of a Class 2 vessel, issue a Canadian Safety Management Certificate in respect of the vessel to them if the Minister determines that the ship manager has developed a documented safety management system that meets the requirements of Part A of the ISM Code.

Implementation

(2) The ship manager must ensure that the safety management system is implemented in respect of the on-board operations of the vessel within six months after the day on which the Canadian Safety Management Certificate is issued.

Documents on board — master

202 (1) The master of a Class 2 vessel must ensure that

• (a) the Class 2 Canadian Document of Compliance that was issued to the vessel’s ship manager is kept on board;
• (b) the Canadian Safety Management Certificate that was issued in respect of the vessel to the vessel’s ship manager is kept on board; and
• (c) the document in which the safety management system referred to in subsection 200(1) is set out is kept on board.

Production of documents

(2) The ship manager of a Class 2 vessel must ensure that

• (a) the Class 2 Canadian Document of Compliance that was issued to them is produced on the request of the Minister;
• (b) the Canadian Safety Management Certificate that was issued in respect of the vessel to them is produced on the request of the Minister; and
• (c) the document in which the safety management system referred to in subsection 200(1) is set out is produced on the request of the Minister.

Audits and reviews

203 (1) The ship manager of a Class 2 vessel must ensure that the audits and management reviews referred to in section 12 of Part A of the ISM Code are carried out to verify whether the shore-based and on-board operations of the vessel that are related to safety and pollution prevention comply with the procedures and practices described in the safety management system referred to in subsection 200(1).

Frequency

(2) The ship manager must ensure that the audits and management reviews are carried out at frequencies determined in accordance with paragraph 12.1 of Part A of the ISM Code.

Disclosure to personnel

(3) The ship manager must ensure that the results of the audits and management reviews for an area of operation are brought to the attention of all personnel that have responsibility in that area.

Corrective action

(4) The ship manager must ensure that a corrective action plan to address deficiencies identified during the audits is initiated within 30 days after the day on which the deficiency is identified.

Content of corrective action plan

(5) The ship manager must ensure that the corrective action plan identifies the root cause of any deficiency and specifies a process to rectify it in a timely manner.

Results kept and produced on request

(6) The ship manager must ensure that the results of the audits and management reviews are

• (a) kept for a period of at least 5 years; and
• (b) produced on the request of the Minister.

Prohibition — authorized representative and ship manager

204 (1) It is prohibited for the authorized representative or ship manager of a Class 2 vessel to operate the vessel, or permit the vessel to be operated, unless the ship manager

• (a) holds a Class 2 Canadian Document of Compliance that applies to the type of vessel;
• (b) holds a Canadian Safety Management Certificate with respect to the vessel; and
• (c) maintains the safety management system referred to in subsection 200(1).

Prohibition — authorized representative, ship manager and master

(2) It is prohibited for the authorized representative, ship manager or master of a Class 2 vessel to operate the vessel, or permit the vessel to be operated, after the time limit referred to in subsection 201(2) unless the vessel operates in accordance with the procedures and practices described in the safety management system referred to in subsection 200(1).

[205 to 299 reserved]

PART 3

Class 3 Vessels

Issuance — Canadian Document of Compliance

300 (1) The Minister must, on application by a ship manager of a Class 3 vessel, issue a Class 3 Canadian Document of Compliance to them if the Minister determines that the ship manager has developed a documented safety management system that meets the requirements of Part A of the ISM Code, other than sections 4 and 12.

Types of vessels

(2) The Minister must, when issuing a Class 3 Canadian Document of Compliance, specify on the document the types of vessels to which it applies.

Implementation

(3) The ship manager must ensure that the safety management system is implemented in respect of the shore-based and on-board operations of the vessel within six months after the day on which the Class 3 Canadian Document of Compliance is issued.

Issuance — Canadian Safety Management Certificate

301 (1) The Minister must, on application by a ship manager of a Class 3 vessel, issue a Canadian Safety Management Certificate in respect of the vessel to them if the Minister determines that the ship manager has developed a documented safety management system that meets the requirements of Part A of the ISM Code, other than sections 4 and 12.

Implementation

(2) The ship manager must ensure that the safety management system is implemented in respect of the on-board operations of the vessel within six months after the day on which the Canadian Safety Management Certificate is issued.

Documents on board — master

302 (1) The master of a Class 3 vessel must ensure that

• (a) the Canadian Document of Compliance that was issued to the vessel’s ship manager is kept on board;
• (b) the Canadian Safety Management Certificate that was issued in respect of the vessel to the vessel’s ship manager is kept on board; and
• (c) the document in which the safety management system is set out is kept on board.

Production of documents

(2) The ship manager of a Class 3 vessel must ensure that

• (a) the Canadian Document of Compliance that was issued to them is produced on the request of the Minister;
• (b) the Canadian Safety Management Certificate that was issued in respect of the vessel to them is produced on the request of the Minister; and
• (c) the document in which the safety management system is set out is produced on the request of the Minister.

Audits and reviews

303 (1) The ship manager of a Class 3 vessel must ensure that an internal audit and management review is carried out to verify whether the shore-based and on-board operations of the vessel that are related to safety and pollution prevention comply with the procedures and practices described in the safety management system.

Evaluation intervals

(2) The ship manager must ensure that the audits and management reviews are carried out at intervals not exceeding 12 months.

Disclosure to personnel

(3) The ship manager must ensure that the results of the audits and management reviews for an area of operation are brought to the attention of all personnel that have responsibility in that area.

Corrective action

(4) The ship manager must ensure that a corrective action plan to address deficiencies identified during the audits is initiated within 30 days after the day on which the deficiency is identified.

Content of corrective action plan

(5) The ship manager must ensure that the corrective action plan identifies the root cause of any deficiency and specifies a process to rectify it in a timely manner.

Results kept and produced on request

(6) The ship manager must ensure that the results of the audits and management reviews are

• (a) kept for a period of at least 5 years; and
• (b) produced on the request of the Minister.

Prohibition — authorized representative and ship manager

304 (1) It is prohibited for the authorized representative or ship manager of a Class 3 vessel to operate the vessel, or permit the vessel to be operated, unless the ship manager

• (a) holds a Class 2 or Class 3 Canadian Document of Compliance that applies to the type of vessel;
• (b) holds a Canadian Safety Management Certificate with respect to the vessel; and
• (c) maintains the safety management system referred to in subsection 300(1).

Prohibition — authorized representative, ship manager and master

(2) It is prohibited for the authorized representative, ship manager or master of a Class 3 vessel to operate the vessel, or permit the vessel to be operated, after the time limit referred to in subsection 301(2) unless the vessel operates in accordance with the procedures and practices described in the safety management system referred to in subsection 300(1).

[305 to 399 reserved]

PART 4

Class 4 Vessels

Issuance — Canadian Document of Compliance

400 (1) The Minister must, on application by a ship manager of a Class 4 vessel, issue a Class 4 Canadian Document of Compliance to them if the Minister determines that the ship manager has developed a documented safety management system that meets the requirements set out in sections 402 to 404.

Types of vessels

(2) The Minister must, when issuing a Class 4 Canadian Document of Compliance, specify on the document the types of vessels to which it applies.

Implementation

(3) The ship manager must ensure that the safety management system is implemented in respect of the shore-based and on-board operations of the vessel within six months after the day on which the Class 4 Canadian Document of Compliance is issued.

Issuance — Canadian Safety Management Certificate

401 (1) The Minister must, on application by a ship manager of a Class 4 vessel, issue a Canadian Safety Management Certificate in respect of the vessel to them if the Minister determines that the ship manager has developed a documented safety management system that meets the requirements set out in sections 402 to 404.

Implementation

(2) The ship manager must ensure that the safety management system is implemented in respect of the on-board operations of the vessel within six months after the day on which the Canadian Safety Management Certificate is issued.

Safety management system

402 The ship manager of a Class 4 vessel must develop a documented safety management system that includes

• (a) a safety and environmental protection policy;
• (b) instructions and procedures to ensure compliance with provisions of the Act and its regulations respecting the safe operation of the vessel and the protection of the environment;
• (c) defined levels of authority and lines of communication between, and among, shore-based and on-board personnel;
• (d) procedures for reporting shipping casualties and situations of non-compliance with the requirements of the safety management system ;
• (e) procedures for preparing and responding to emergency situations; and
• (f) procedures for internal reviews of the safety management system.

Instructions and procedures — paragraph 402(b)

403 The instructions and procedures required under paragraph 402(b) must include instructions and procedures for

• (a) equipment inspection, maintenance and testing;
• (b) ensuring the vessel’s seaworthiness and stability;
• (c) voyage planning, safe navigation and handling of the vessel; and
• (d) ensuring safety at sea and preventing human injuries, loss of life and damage to the marine environment and to property.

Procedures — paragraph 402(e)

404 The procedures required under paragraph 402(e) must include procedures for

• (a) preparing for and responding to shipping casualties and personnel accidents;
• (b) dealing with equipment failure;
• (c) responding to pollution incidents; and
• (d) reporting emergency situations.

Evaluations

405 (1) The ship manager of a Class 4 vessel must ensure that the effectiveness of the safety management system is evaluated in accordance with the procedures referred to in paragraph 402(f) to verify whether the shore-based and on-board operations that are related to safety and pollution prevention comply with the procedures and practices described in the safety management system.

Evaluation intervals

(2) The ship manager must ensure that the evaluations are carried out at intervals not exceeding 12 months.

Disclosure to personnel

(3) The ship manager must ensure that the results of the evaluation for an area of operation are brought to the attention of all personnel that have responsibility in that area.

Results kept and produced on request

(4) The ship manager must ensure that the results of the evaluation are

• (a) kept for a period of at least 5 years; and
• (b) produced on the request of the Minister.

Documents on board — master

406 (1) The master of a Class 4 vessel must ensure that

• (a) the Canadian Document of Compliance that was issued to the vessel’s ship manager is kept on board;
• (b) the Canadian Safety Management Certificate that was issued in respect of the vessel to the vessel’s ship manager is kept on board; and
• (c) the document in which the safety management system is set out is kept on board.

Production of documents

(2) The ship manager of a Class 4 vessel must ensure that

• (a) the Canadian Document of Compliance that was issued to them is produced on the request of the Minister;
• (b) the Canadian Safety Management Certificate that was issued in respect of the vessel to them is produced on the request of the Minister; and
• (c) the document in which the safety management system is set out is produced on the request of the Minister.

Prohibition — authorized representative and ship manager

407 (1) It is prohibited for the authorized representative or ship manager of a Class 4 vessel to operate the vessel, or permit the vessel to be operated, unless the ship manager

• (a) holds a Class 2, Class 3 or Class 4 Canadian Document of Compliance that applies to the type of vessel;
• (b) holds a Canadian Safety Management Certificate with respect to the vessel; and
• (c) maintains the safety management system referred to in subsection 400(1).

Prohibition — authorized representative, ship manager and master

(2) It is prohibited for the authorized representative, ship manager or master of a Class 4 vessel to operate the vessel, or permit the vessel to be operated, after the time limit referred to in subsection 401(2) unless the vessel operates in accordance with the procedures and practices described in the safety management system referred to in subsection 400(1).

[408 to 499 reserved]

PART 5

Class 5 Vessels

Safety management system

500 (1) The ship manager of a Class 5 vessel must develop a documented safety management system that includes

• (a) a safety and environmental protection policy;
• (b) instructions and procedures to ensure compliance with provisions of the Act and its Regulations respecting the safe operation of the vessel and the protection of the environment;
• (c) defined levels of authority and lines of communication between, and among, shore-based and on-board personnel;
• (d) procedures for reporting shipping casualties and situations of non-compliance with the requirements of the safety management system;
• (e) procedures to prepare for and respond to emergency situations; and
• (f) procedures for the continuous improvement of the safety management system.

Implementation

(2) The ship manager must ensure that the safety management system is implemented in respect of the shore-based and on-board operations of the vessel within six months after the day on which the vessel is registered.

Instructions and procedures — paragraph (1)(b)

(3) The instructions and procedures required under paragraph (1)(b) must include instructions and procedures for

• (a) equipment inspection, maintenance and testing;
• (b) ensuring the vessel’s seaworthiness and stability;
• (c) voyage planning, safe navigation and handling of the vessel; and
• (d) ensuring safety at sea and preventing human injuries, loss of life and damage to the marine environment and to property.

Procedures — paragraph (1)(e)

(4) The procedures required under paragraph (1)(e) must include procedures for

• (a) preparing for and responding to shipping casualties and personnel accidents;
• (b) dealing with equipment failure;
• (c) responding to pollution incidents; and
• (d) reporting emergency situations.

Documents on board — master

501 (1) The master of a Class 5 vessel must ensure that the document in which the safety management system referred to in subsection 500(1) is set out is kept on board.

Production of documents

(2) The ship manager of a Class 5 vessel must ensure that the document in which the safety management system referred to in subsection 500(1) is set out is produced on the request of the Minister.

Prohibition — authorized representative and ship manager

502 (1) It is prohibited for the authorized representative or ship manager of a Class 5 vessel to operate the vessel, or permit the vessel to be operated, unless the ship manager

• (a) maintains the safety management system referred to in subsection 500(1); and
• (b) ensures that the vessel operates in accordance with the procedures and practices described in the safety management system.

Prohibition — authorized representative, ship manager and master

(2) It is prohibited for the authorized representative, ship manager or master of a Class 5 vessel to operate the vessel, or permit the vessel to be operated, after the applicable time limit referred to in subsection 500(2) unless the vessel operates in accordance with the procedures and practices described in the safety management system referred to in subsection 500(1).

[503 to 599 reserved]

PART 6

Transitional Provisions, Consequential Amendment, Repeal and Coming into Force

Transitional Provisions

Document issued under Safety Management Regulations

600 A Document of Compliance or Interim Document of Compliance issued under the Safety Management Regulations that is valid immediately before these Regulations come into force is deemed to have been issued under these Regulations.

Certificate issued under Safety Management Regulations

601 A Safety Management Certificate or Interim Safety Management Certificate issued under the Safety Management Regulations that is valid immediately before these Regulations come into force is deemed to have been issued under these Regulations.

Part 2 — passenger-carrying vessels

602 (1) Sections 202 to 204 do not apply in respect of a Class 2 vessel that is a passenger-carrying vessel and that was registered or listed under Part 2 of the Canada Shipping Act, 2001 on the day on which these Regulations come into force until the first anniversary of the day on which the vessel’s first safety certificate issued under the Vessel Safety Certificates Regulations is renewed for the first time after the day on which these Regulations come into force.

Part 2 — non-passenger-carrying vessels

(2) Sections 202 to 204 do not apply in respect of a Class 2 vessel that is not a passenger-carrying vessel and that was registered or listed under Part 2 of the Canada Shipping Act, 2001 on the day on which these Regulations come into force until the first anniversary of the day on which the vessel’s first safety certificate issued under the Vessel Safety Certificates Regulations is renewed for the first time after the first anniversary of the day on which these Regulations come into force.

Part 3 — passenger-carrying vessels

603 (1) Sections 302 to 304 do not apply in respect of a Class 3 vessel that is a passenger-carrying vessel and that was registered or listed under Part 2 of the Canada Shipping Act, 2001 on the day on which these Regulations come into force until the first anniversary of the day on which the vessel’s first safety certificate issued under the Vessel Safety Certificates Regulations is renewed for the first time after the day on which these Regulations come into force.

Part 3 — non-passenger-carrying vessels

(2) Sections 302 to 304 do not apply in respect of a Class 3 vessel that is not a passenger-carrying vessel and that was registered or listed under Part 2 of the Canada Shipping Act, 2001 on the day on which these Regulations come into force until the first anniversary of the day on which the vessel’s first safety certificate issued under the Vessel Safety Certificates Regulations is renewed for the first time after the first anniversary of the day on which these Regulations come into force.

Part 4 — passenger-carrying vessels of more than 15 gross tonnage

604 (1) Sections 402 to 407 do not apply in respect of a Class 4 vessel of more than 15 gross tonnage that is a passenger-carrying vessel and that was registered or listed under Part 2 of the Canada Shipping Act, 2001 on the day on which these Regulations come into force until the first anniversary of the day on which the vessel’s first safety certificate issued under the Vessel Safety Certificates Regulations is renewed for the first time after the day on which these Regulations come into force.

Part 4 — non-passenger-carrying vessels of more than 15 gross tonnage

(2) Sections 402 to 407 do not apply in respect of a Class 4 vessel of more than 15 gross tonnage that is not a passenger-carrying vessel and that was registered or listed under Part 2 of the Canada Shipping Act, 2001 on the day on which these Regulations come into force until the first anniversary of the day of issuance of the vessel’s first safety certificate issued under the Vessel Safety Certificates Regulations after the second anniversary of the day on which these Regulations come into force.

Part 4 — certain passenger-carrying vessels of 15 gross tonnage or less

(3) Sections 402 to 407 do not apply in respect of a Class 4 vessel of 15 gross tonnage or less that is a passenger-carrying vessel that carries more than 12 passengers and that was registered or listed under Part 2 of the Canada Shipping Act, 2001 on the day on which these Regulations come into force until the first anniversary of the day on which the vessel’s first safety certificate issued under the Vessel Safety Certificates Regulations is renewed for the first time after the day on which these Regulations come into force.

Part 4 — other passenger-carrying vessels and towboats of 15 gross tonnage or less

(4) Sections 402 to 407 do not apply in respect of a Class 4 vessel of 15 gross tonnage or less that is a towboat or carries 12 passengers or less and that was registered or listed under Part 2 of the Canada Shipping Act, 2001 on the day on which these Regulations come into force until:

• (a) in the case of a vessel with a length of more than 7 m, the first anniversary of the day of issuance of the certificate of registry issued under the Vessel Registration and Tonnage Regulations after the first anniversary of the day on which these Regulations come into force; and
• (b) in the case of a vessel with a length of 7 m or less, the first anniversary of the day of issuance of the certificate of registry issued under the Vessel Registration and Tonnage Regulations after the second anniversary of the day on which these Regulations come into force.
  

Part 5 — other vessels of 15 gross tonnage or less

605 Subsection 500(2) and sections 501 and 502 do not apply in respect of a Class 5 vessel that was registered or listed under Part 2 of the Canada Shipping Act, 2001 on the day on which these Regulations come into force until the third anniversary of the day on which these Regulations come into force.

Foreign vessels not subject to SOLAS

606 Subsection 6(2) does not apply on the day on which these Regulations come into force until the first anniversary of the day on which these Regulations come into force.

Consequential Amendment to the Administrative Monetary Penalties and Notices (CSA 2001) Regulations

607 Part 12 of the schedule to the Administrative Monetary Penalties and Notices (CSA 2001) Regulations ^{footnote 29} is replaced by the following:

PART 12

Violation of the Marine Safety Management System Regulations

Item	Column 1 Provision of the Marine Safety Management System Regulations	Column 2 Range of Penalties ($)	Column 3 Separate Violation for Each Day
1	Paragraph 6(1)(a)	5,250 to 250,000
2	Paragraph 6(1)(b)	5,250 to 250,000
3	Paragraph 6(1)(c)	5,250 to 250,000
4	Subsection 6(2)	5,250 to 250,000
5	Section 9	525 to 10,000
6	Paragraph 102(1)(a)	260 to 1,250
7	Paragraph 102(1)(b)	260 to 1,250
8	Paragraph 102(1)(c)	260 to 1,250
9	Paragraph 102(2)(a)	525 to 10,000
10	Paragraph 102(2)(b)	525 to 10,000
11	Paragraph 102(2)(c)	525 to 10,000
12	Subsection 103(1)	2,625 to 100,000
13	Subsection 103(2)	525 to 10,000
14	Subsection 103(3)	525 to 10,000
15	Subsection 103(4)	525 to 10,000
16	Subsection 103(5)	525 to 10,000
17	Paragraph 103(6)(a)	525 to 10,000
18	Paragraph 103(6)(b)	525 to 10,000
19	Subsection 104(1)	2,625 to 100,000
20	Subsection 104(2)	2,625 to 100,000
21	Subsection 200(2)	5,250 to 250,000
22	Subsection 201(2)	5,250 to 250,000
23	Paragraph 202(1)(a)	260 to 1,250
24	Paragraph 202(1)(b)	260 to 1,250
25	Paragraph 202(1)(c)	260 to 1,250
26	Paragraph 202(2)(a)	525 to 10,000
27	Paragraph 202(2)(b)	525 to 10,000
28	Paragraph 202(2)(c)	525 to 10,000
29	Subsection 203(1)	2,625 to 100,000
30	Subsection 203(2)	525 to 10,000
31	Subsection 203(3)	525 to 10,000
32	Subsection 203(4)	525 to 10,000
33	Subsection 203(5)	525 to 10,000
34	Paragraph 203(6)(a)	525 to 10,000
35	Paragraph 203(6)(b)	525 to 10,000
36	Subsection 204(1)	2,625 to 100,000
37	Subsection 204(2)	2,625 to 100,000
38	Subsection 300(2)	5,250 to 250,000
39	Subsection 301(2)	5,250 to 250,000
40	Paragraph 302(1)(a)	260 to 1,250
41	Paragraph 302(1)(b)	260 to 1,250
42	Paragraph 302(1)(c)	260 to 1,250
43	Paragraph 302(2)(a)	525 to 10,000
44	Paragraph 302(2)(b)	525 to 10,000
45	Paragraph 302(2)(c)	525 to 10,000
46	Subsection 303(1)	2,625 to 100,000
47	Subsection 303(2)	525 to 10,000
48	Subsection 303(3)	525 to 10,000
49	Subsection 303(4)	525 to 10,000
50	Subsection 303(5)	525 to 10,000
51	Paragraph 303(6)(a)	525 to 10,000
52	Paragraph 303(6)(b)	525 to 10,000
53	Subsection 304(1)	2,625 to 100,000
54	Subsection 304(2)	2,625 to 100,000
55	Subsection 401(2)	5,250 to 250,000
56	Subsection 405(1)	2,625 to 100,000
57	Subsection 405(2)	525 to 10,000
58	Subsection 405(3)	525 to 10,000
59	Paragraph 405(4)(a)	525 to 10,000
60	Paragraph 405(4)(b)	525 to 10,000
61	Paragraph 406(1)(a)	260 to 1,250
62	Paragraph 406(1)(b)	260 to 1,250
63	Paragraph 406(1)(c)	260 to 1,250
64	Paragraph 406(2)(a)	525 to 10,000
65	Paragraph 406(2)(b)	525 to 10,000
66	Paragraph 406(2)(c)	525 to 10,000
67	Subsection 407(1)	2,625 to 100,000
68	Subsection 407(2)	2,625 to 100,000
69	Subsection 500(2)	2,625 to 100,000
70	Subsection 501(1)	260 to 1,250
71	Subsection 501(2)	525 to 10,000
72	Subsection 502(1)	2,625 to 100,000
73	Subsection 502(2)	2,625 to 100,000

Repeal

608 The Safety Management Regulations ^{footnote 30} are repealed.

Coming into Force

Publication

609 These Regulations come into force on the day on which they are published in the Canada Gazette, Part II.

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