September 5, 2019

Regulatory Review
Regulatory Affairs Sector
90 Elgin St, 5th floor
Ottawa ON  K1A 0R4

RCD-DCMR@tbs-sct.gc.ca

 

Re:  Consultation on Regulatory Modernization in Canada

 

In a notice published in the Canada Gazette, Part I on June 26, 2019, the Treasury Board of Canada asked Canadian industries to identify specific areas of legislation that currently prevent regulations from being agile and responsive, while continuing to protect health and safety, and the environment, with regard to:

  1. Targeted Regulatory Reviews (Round 2);
  2. Review of the Red Tape Reduction Act;
  3. Exploring options to legislate changes to regulatory mandates; and
  4. Suggestions for the next annual Regulatory Modernization Bill.

The Canadian Paint Coatings Association (CPCA) would like to provide comments on all of the above items, but will first address the key principles of the federal government’s Policy on Regulatory Development.

Since 1913, the Canadian Paint and Coatings Association (CPCA) has represented Canada’s major paint and coatings manufacturers, and their industry suppliers and distributors in three primary product categories: architectural paints, industrial products and automotive coatings. This represents more than 85 percent of the value of all paint, coatings and adhesives manufacturing in Canada. CPCA members have more than 260 paint manufacturing establishments, representing annual downstream sales of more than $12.3 billion, and employing directly and indirectly 87,000 people. More than 45 percent of the volume of paint sold in Canada is now imported from the United States and a large proportion of the products manufactured here in Canada is done by US-based multinational companies. Hence, the critical need for regulatory alignment for our industry with the US regulatory framework.

Effective September 1, 2018, the federal government’s Policy on Regulatory Development is grounded in four key principles in guiding, managing and reviewing regulation, as follows:

  1. Regulations protect and advance the public interest and support good government:Regulations are justified by a clear rationale in terms of protecting the health, safety, security, social and economic well-being of Canadians, and the environment.
  2. The regulatory process is modern, open and transparent: Regulations, and their related activities, are accessible and understandable, and are created, maintained, and reviewed in an open, transparent, and inclusive way that meaningfully engages the public and stakeholders, including Indigenous peoples, early on.
  3. Regulatory decision-making is evidence-based: Proposals and decisions are based on evidence, robust analysis of costs and benefits, and the assessment of risk, while being open to public scrutiny.
  4. Regulations support a fair and competitive economy: Regulations should aim to support and promote inclusive economic growth, entrepreneurship, and innovation for the benefit of Canadians and businesses. Opportunities for regulatory cooperation and the development of aligned regulations should be considered and implemented wherever possible.

It is to be expected that any future regulations or amendments ensure these basic principles are followed to the letter. Given the growing and debilitating number of federal regulations it is clear this policy has not been effectively implemented, despite the Red Tape Reduction Act, which seems to have been completely ignored. There are currently more than 130,000 regulations at the federal level that is a drag on the economy; Canada has had little direct foreign investment in the last eight quarters; and there is little sign of a re-commitment to the regulatory policy stated above. Despite this CPCA will endeavor to lay out some of our specific concerns, but with modest hope that a renewed regulatory approach will occur any time soon.

CPCA strongly supports the key principles noted above as all of them, if fully embraced, would contribute to economic growth and increased productivity. However, Canada’s remains challenged and productivity has stagnated at less than $10,000/worker as compared with our largest trading partner the United States. At the same time, economic growth is fully dependent on the economic growth in the United States. This is now a more tenuous position as efforts have stalled in forging new trading relationships with countries like China and other large trading blocks. Should the USMCA be approved as expected, Canada and its trading partners will still have to contend with pervasive and persistent regulations negatively impacting trade. Many of those regulations are outdated or somewhat misguided in highly sophisticated, modern, digital economy. If Canada were to fully embrace and operationalize the principles noted in the above regulatory policy it would be prepared for the next decade of change. If not, there will be more economic challenges ahead. However,

 The above regulatory policy will remain on the shelf permanently if government officials are not fully empowered to implement and given a strong mandate to deliver on the key concepts noted in that policy – as underlined above – with respect to economic and business needs.

The federal government’s policy on regulatory development also states specifically that: Any amendments that substantively alter regulations require consultation and may not proceed under the Miscellaneous Amendment Regulations process in cases that substantively alter regulations.” These include those that “significantly alter amendments that significantly alter compliance or administrative costs; and create new regulatory requirements.”  We urge the federal officials to be mindful of these critical concepts in all aspects of regulatory development or reform. If not, there will be no modernization with ‘consultation for the sake of consultation’ remaining the norm in Canada. Checking the box of consultation will leave Canada further behind than it is now.

  1. TARGETED REGULATORY REVIEWS (ROUND 2)

CPCA believes that “Chemical manufacturing’’ should be considered as part of Round 2 of the regulatory modernization review, as it is among the most heavily regulated sector in Canada. Some multinational companies have referred to chemical regulations in Canada like ‘drinking water through a firehose.’  This is not a positive view of the Canadian regulatory environment held by companies with operations in Canada and those shipping raw materials and products to Canada. Viewing such a perception as a badge of honour would be a mistake and most harmful to Canada’s growth and prosperity. Canada may indeed be at the tipping point with respect to the need to address out-dated, and what some of our trading partners have called, misguided regulations. One thing is abundantly clear here and abroad, Canada has to many regulations as confirmed by a recent study done for the Canadian Chamber of Commerce by PwC.

CLEAN TECHNOLOGY

 ‘A clean technology enabler’

Views: Canada’s coatings sector is very much in favour of a regulatory system that would facilitate clean technology innovation, adoption and competitiveness by limiting the number of restrictions or regulatory impediments to any process, product, or chemical that is not fully aligned with other jurisdictions and/or that is unique to Canada. Clearly this would relate to the alignment with our largest trading partner, the United States. In the case of paint and coatings, as with many other sectors, a large volume of product is shipped to Canada from the United States and many of the companies doing business in the coatings sector are US-owned companies with substantial intra-company movement of goods and people. It’s no secret that Canada’s productivity lags that of the United States at approximately $10,000 per worker and new approached are needed to close that gap with new, innovative approaches to technology, which may seem counterintuitive to enhancements to productivity. However, but those enhancements must be made in the new economy and if not, there is little chance that new wealth will be generated in the foreseeable future.

Current and emerging paint technologies: Examples of clean technology in paint products are evident in by the following:

  • products that significantly reduce volatile organic (VOC) emissions, which are precursors to fine particulates and ozone that in turn contributes to climate change;
  • marine products that prevent biocontamination from causing a drag effect for ocean-going ships that would otherwise consume more fossil fuel and emit more CO2 emissions;
  • emerging products such as those that prevent the development of bacteria and viruses in hospital and clinical environments, kill mosquitoes or can help eliminate atmospheric pollution, and many more smart coatings that prevent corrosion and/or degradation of structures and surfaces such as wind turbines, solar cell platforms, etc.

Other benefits of coatings technology:

Environmental Benefits

https://canpaint.com/sustainability/leaders-in-product-stewardship/environmental-benefits-of-coatings/

Product Stewardship

https://canpaint.com/sustainability/leaders-in-product-stewardship/

PaintCare in a Circular Economy

https://canpaint.com/sustainability/leaders-in-product-stewardship/post-consumer-paint-recycling/

https://canpaint.com/sustainability/paint-care/

Paint and coatings are certainly a common denominator to virtually all new clean technologies being developed to enhance performance, while at the same time reducing the overall environmental footprint of those companies using paint and coatings products. As such paint and coatings manufacturing must be viewed as an ‘enabler’ to environmental sustainability for all those industries using them to enhance the lifecycle of their products, to reduce overall operating costs, and to realize efficiencies and utility from coatings products used in their sector. As such the coatings industry in Canada must be supported and sustained over the long-term to reduce the environmental footprint in multiple economic sectors.

Regulatory barriers to clean technology development: CPCA has grave concerns with several legislative and regulatory initiatives being planned beyond 2020, which may act as disincentives to the expansion of clean technology in Canada. These include legislation and regulations that are further discussed below under items 3 & 4 of our comments. For example, the ongoing CEPA Reform will be implemented within the next several years, based on some of the recommendations proposed by the Parliamentary Committee on the Environment and Sustainable Development (ENVI), which have been largely endorsed by the current federal government. These include suggesting a European REACH approach to chemical assessment that places the burden of proof on industry for all substances concern thereby enhancing transparency, but reducing CBI protection. This is being done despite the fact that Canada has been widely applauded for its approach to chemicals management as other countries including the US, Australia, Brazil and others modeling such an approach based on evidenced-bases decision-making focused on risk management. However, the alternate approach being sought by some in Canada may indeed introduce undue regulatory pressure on smaller Canadian-based manufacturers who do not have the ability and resources needed for significant R&D studies or cannot ensure adequate protection for their trade secrets. It may only further delay chemical assessment and thereby potentially place both the environment and human health at further risk than otherwise intended given the long delays experienced in the EU approach. The ENVI Committee recommendations have the further potential to create insurmountable barriers to the manufacturing of competitive products in Canada. It could also restrict the availability of key chemicals for innovating in a wide range of highly performing coatings products and many other finished goods in many sectors. There appears to be a real disconnect between environmental and health policy targets and the Canadian government’s current targets for economic growth, productivity and wealth creation.  Clearly the former now greatly hinders the latter. This current regulatory review of clean technology initiatives must focus on the following:

  • Enhance monitoring of any and all modifications to legislative requirements that may be an impediment to the development of clean technologies;
  • Intensify and expand collaboration among advanced manufacturing superclusters with smaller Canadian-based businesses to further accelerate the development of clean technology for them;
  • Support the development of a talented workforce and leading-edge expertise in Canadian industry via diverse FPT regulatory programs including universities and research centers;
  • Facilitate financial access and support for clean technology start-ups and SMEs as well as related PPPs and international financing sources, while closely monitoring these regulatory programs with respect to their orientation, targets, performance metrics and timing.
  • Prioritize the development of energy efficiency or clean energy and what are already viewed as truly renewable, sustainable and smart technologies in the coatings sector, which have been overlooked to date.

DIGITALIZATION AND TECHNOLOGY NEUTRALITY

‘It is the 21st century!’

Views: CPCA and its members applaud a meaningful review of current legislation that would advance digitalization in the regulatory space as well as introduce new tools that could be used to reduce administrative regulatory burden, enhance intellectual property right, protect confidential business information, as well as optimize trade and regulatory controls or restrictions in the Canadian regulatory landscape, without creating more red tape. Through increased digitalization, the Canadian government would support businesses in adapting to increasing globalization and deal with the growing complexity across supply chains. This could be beneficial with respect to increasing information sharing for new and existing chemicals in commerce, including alternative chemicals and informed substitutions for chemicals of very high concern.

 Current Issues: Recognizing the difficulties expressed by our members in fully grasping Canadian legislative and regulatory requirements CPCA has attempted to address this current information overload via a new digital approach and developed a new digital platform called the Canada CoatingsHUB. This greatly facilitates research related to critical issues in the coatings industry as they relate to specific policy, legislation and regulations specific to the paint and coatings sector in Canada and thereby further promote industry compliance among the membership. While the federal government continues to grapple with better delivery of information in various departments and agencies, industry must continue to move forward and ensure it can access what it needs to be compliant in Canada. If not, there is the grave possibility of government forcing industry into situations of non-compliance due to antiquated delivery systems and out-dated technology solutions. While this dissemination of information has improved at the federal level to some extent, this is still a problem across a number of critical departments and agencies at the federal level.

Regulatory Support: In the context of a global digital economy, all federal and provincial regulations aimed at enhancing access to information, while protecting confidential business information, will help reinforce competition law in Canada and ensure a level-playing field is maintained. However, Big Data projects and related analytical development in this area can inadvertently harm national and global competitiveness and ongoing innovation efforts. While embracing new digitalization business neutrality must rule the day and regulators must refrain from pushing the market toward a particular structure and not pick technological winners or losers in a dynamic digitalized market under the guise of favouring Canadian players. This is important in the context of trade with our key trading partners. It would be important for the government to participate in international forums with respect to a developing harmonized digitalization, especially with our largest trading partner the United States. Regulatory alignment with Canada’s largest trading partner has always been the focus of international trade in this county and should remain so for the foreseeable future. This has become increasingly more difficult to maintain as the US slows the pace of regulatory growth and Canada seems to be on fast-forward with regulations. This must be addressed as it could have negative long-term structural impacts on Canada.

INTERNATIONAL STANDARDS

‘Flexibility in adapting standards’

Views: The incorporation of various international standards should be addressed in federal regulations without necessarily having to go through an extensive and lengthy consultation process prior to those regulatory changes taking effect. Proceeding in such a manner would certainly help save time and reduce barriers to international trade. However, there should be sufficient time allowed for consulting industry prior to fast tracking new standards, with a fulsome cost-benefit impact analysis and the capacity for Canadian industry to smoothly transition to those standards without disrupting existing technology and planned capital investment. There needs to be flexibility with respect to adopting international standards in Canadian regulations rather than accepting holus bolus the approach or regulations in other countries in order to be perceived as a leader in regulations when all they do is hinder productivity growth and wealth creation, two ingredients countries seeking to grow can’t ignore.

Current industry efforts: Recognizing the need for a standardized framework by which manufacturers can evaluate life-cycle impacts of their products, the paint and coatings sector has also developed its own international standards such as several Product Category Rules for architectural coatings (some jointly with NSF) that facilitate Environmental Product Declarations (EPD) by company members for the benefit of the public and the environment. CPCA and ACA (American Coatings Association) have moved forward on the development and adoption of these international standards in concert North American coatings companies. There are also various company performance and ecological standards such as ISO standards that are commonly adopted by CPCA members, as well as various national or international certification programs.

Regulatory support: Without necessarily including existing standards, which undergo their own independent reviews, government should consider their prevalence in certain industries when considering new regulations or new risk management measures such as codes of practice and pollution prevention plans. Standard management practices contribute to the overall reduction of industrial releases and wastes. In this regard many CCME standards developed in the past would need to be updated and further adapted to current international standards and industry practices. The government should also support the regulatory adoption of low-carbon equipment and sustainable processes in various industries by crafting an ‘’innovation standard model” that could be applied across industry sectors.

  1. REVIEW OF THE RED TAPE REDUCTION ACT

‘Time to move on it, really’

 Views on Administrative Burden: Back in 2012, the One-for-One Rule was one of six systemic reforms under the Red Tape Reduction Act and related Action Plan. Canada was the second country in the world to legislate the One-for-One Rule to control regulatory red tape. All regulations have a significant cost for both government and industry. In practice, the number of requirements for businesses has steadily increased between 2014 and 2017, while the government says it has exempted 76 regulations from the One-for-One Rule thereby effectively adding regulatory burden, despite having eliminated 131 regulations leading to minimal cost reductions on an annual budget well in excess of $300 billion. The experience of the paint and coatings sector since 2014 has been that of most sectors in Canada with not one regulation removed. All socio-economic impact analysis of regulations by Health Canada and Environment and Climate Change rarely concluded with a significant socio-economic impact on business. The result was not even removal of one chemical regulation when a new regulation or any additional mandatory restrictions were put into place. Rather, we have seen the number of regulations, related risk assessment decisions, and risk management measures increase along with the ongoing information gathering initiatives increasing significantly. All have placed a tremendous burden on industry prompting one of our biggest multi-national member companies referring the Canadian regulatory environment as being akin to “drinking water from a fire hose.”

As the over-burdening CMP process was in process, industry had to also comply with several major regulatory mandates (i.e. WHMIS 2015 implementation) and multiple decisions and restrictions bening implemented using mandatory and non-mandatory risk management tools (i.e. hundreds of SNAcs – Significant New Activities) followed by many voluntary and mandatory surveys. The Chemicals Management Program (CMP) was an ambitious program covering 4,300 substances in a 5-year period, and by comparison, many more than has been covered by REACH over a longer period of time and a hundred times faster than the USA TSCA reform effort as follows: the risk evaluation of 10 substances over a 2-year period (2017-2019) (risk management to follow) and the 10 per year prioritization step, which led to the identification of 40 more substances (20 high, 20 low) in 2019. This illustrates that since 2006, the Canadian industry has been bombarded with CEPA-related and HPA-related regulatory publications. Virtually all CMP regulations and risk management decisions and published actions have impacted industries significantly, which has included the following: possible removal of some of the highest selling product lines in Canada; increased technical and economic impact studies; significant new investment in R&D; requirements for new product reformulation; increased process enhancement and data collection for government; extensive product testing for the Canadian marketplace related to such things as climate for exterior coatings, etc. All these costs have reduced Canada’s business capacity to innovate and adapt to international standards.

Regulations and risk management measures should only address unacceptable risks that can be proven with strong evidenced-based decision making based on science and not the precautionary principle, which was widely condemned during the creation of CEPA, 1999. It has now become clear that the Post-2020 approach for CMP will likely address larger groups of domestic and non-domestic substances, while seeking to return to many of the chemicals that have already been assessed. The Post-2020 approach cannot rely simply on policy and program approaches to implementing the more challenging recommendations of the ENVI Committee as these were not permitted to move forward by a Parliamentary Committee that brought CEPA, 1999 to life and should not now be done without formal regulatory amendments being made to CEPA, 1999 and the regulatory impacts, good and bad, fully debated by elected officials.

Improved Consideration of Regulatory Burden and Better Accounting Methods: Several times in previous government stakeholder forums CPCA’s chemical supplier members stressed that they must go over a checklist of hundreds different Canadian regulations and restrictions before deciding whether or not they would import one chemical for sale in Canada, which might be used in a wide range of product formulations. And they tell us 95 percent of the time they have to pass up on the business opportunities offered by the chemical because it would be too complex, highly bureaucratic and onerous for their companies to pursue. These regulatory barriers include various import restrictions, permits and licences (i.e. for storage, tankage, etc.) and various acts such as the Transportation of Dangerous Goods Act and Regulations, preparedness for the Environmental Emergency Regulations, CEPA (existing DSL controls, limits of use of some chemicals or bans, possible NSN filing of any new substances with pre-consultation, minerals and metals imports, etc.), HPA (GHS hazard classification and OEL limits), Pest Control Product Act (authorized pesticides/biocides only), Import/Export Lists and tariffs, etc. Not to mention ten times more provincial and territorial laws and regulations also requiring stiff compliance. Any alternative mechanism to alleviate the ‘’cumulative effect’’ of regulatory burden and to simplify the import/export process, such as through digitalization in the regulatory space, could be helpful for Canadian companies willing to invest in new compliant and innovative products or technologies to enhance their overall competitiveness.

CPCA is not suggesting that safety should not be a concern, but that regulations upon regulations do not attract new products to the marketplace in Canada. It used to be that the goal was to attract new companies to the Canadian market, but that is now not an option. The only possibility for growth in the market is new products, but if regulations preclude new product development, then there is nothing left for companies to grow organically. Over the past 10-15 years this has driven increasing consolidation with both large and small companies to satisfy shareholders, but that has diluted competition and driven up product prices. Again, a situation that is not sustainable over the long term and one that has seen manufacturing in the coatings sector leave Canada, while the volume of sales remains the same as they ship products to Canada from facilities in the United States. The volume of imports into Canada, from the US, has increased from 35 percent 12 years ago to more than 50 percent in 2018, with revenues growing at a modest annual rate in that time. We have been told increasing manufacturing costs and regulations are the reasons for the move of production from Canada to the US. One major manufacturer no longer has a single plant in Canada as of two years ago, but revenue in Canada continues to increase.

While the federal government already follows methods of accounting for the regulatory burden that is in line with international best practices recommended by organizations like the OECD, they can still be adapted to the Canadian federal/provincial reality. For example, the RTRA should broaden its scope in order to further consider the entire regulatory burden that the targeted companies must face and not just focus on the narrow scope of the specific regulations being introduced. SMEs represent generally the largest number of companies in Canada and they have to absorb “underestimated” costs disproportionately with respect to the myriad laws, regulations, policies, and guidelines imposed by all orders of government. They cannot simply move to the United States as the larger multinational companies can with existing facilities, but still have to compete with their products shipped to Canada realizing significantly lower margins.

Every time the government enacts new regulatory measures, the cost to SMEs is often manifest by a loss of business, income, jobs and skills, changes in equipment and processes, preparation for audits and inspections, postponement of plans to expand into new markets, etc. and these hard-to-quantify costs (beyond compliance costs) are overlooked by regulators, but are nonetheless very real. Those shipping product to Canada has an immediate advantage over Canadian companies. TBS should consider establishing a cost impact assessment matrix, which would include available baselines for measuring the number of federal and provincial regulatory requirements applicable to all types of SMEs (manufacturing SMEs, retailer SMEs, etc.) by sector (food, chemical, etc.) and their relative ‘’under-estimated’’ costs. A Canadian survey of CIFB small businesses recently pointed out that nearly two thirds of small business owners surveyed felt that excessive government regulations discourage business growth while 68 percent believed excessive regulations significantly reduce productivity. This is probably why Canada’s productivity lags so significantly behind other G7 countries and less than $10,000/worker than their US counterpart.

All regulations are barriers to business in some way and lost opportunities for investment that come at a real cost to Canada’s economy. Canada keeps talking about it, but it now requires action as informed by Nike’s slogan!

With respect to red tape reduction we would respectfully suggest that the federal government consider the following:

  •  Avoid asking for duplicate information from business (i.e. OTR reduction efforts in Ontario that were overlapping with NPRI efforts). CPCA hopes that increased digitalization of government services will ensure some inter-department and multi-jurisdictional collaboration to reduce red tape.
  • Reduce the amount of federal and provincial paperwork, requirements and time that is necessary to obtain certificates of approval or authorization to produce. As compared to the US, the amount of paperwork is so huge for new business plants willing to expand that it is driving manufacturers and investors out of the country. According to the Administrative Burden Baseline that government agencies are required to publish yearly, there are 136,121 requirements imposed on businesses by the federal government alone. Provincial governments indicated 170,140 requirements in British Columbia, 230,000 in Saskatchewan, 386,251 in Ontario and 924,180 requirements in Manitoba. Several Canadian provinces have already begun a regulatory reform effort to reduce red tape.
  • Establish true ‘’regulatory caps’’ and ‘’administrative cost tracking duties’’ for Federal and provincial regulators and set clear objectives or targets for red tape reduction and put in place a definitive plan, as recently done in B.C.

3 & 4. EXPLORING OPTIONS TO LEGISLATE CHANGES TO REGULATORY MANDATES AND SUGGESTIONS FOR THE NEXT ANNUAL REGULATORY MODERNIZATION BILL

 ‘Drinking water from a fire hose!’

There are several pieces of chemical legislation that prohibit the regulatory flexibility and/or experimentation necessary to allow emerging technologies to enter the paint market or to be exported. Below are some suggestions for the 2020 Annual Regulatory Modernization Bill.

CPCA’s mission is to ensure that its manufacturing membership base can continue to grow and innovate, as there has been a continued erosion of the Canadian paint and coatings manufacturing core in Canada over the past two decades, notably because of the excessive regulatory and red tape burden in Canada.

CPCA identified several regulatory irritants and bottlenecks to economic growth, competitiveness and innovation that would require legislative change or realistic suggestions that would ensure future legislative changes would allow for new chemicals and related new technologies to continue to be developed in Canada with fewer regulatory obstacles. Canada has plenty of regulations that stifle paint and coatings manufacturing entrepreneurship and these are not always for the sake of environmental and health protection but due to the fact they are poorly designed and structured. We focused on the major ones for the coatings sector.

  1.  A) AMENDMENT TO SECTION 14.3.1 OF THE HAZARDOUS PRODUCTS ACT REQUIRING TRUE LABEL COPY

The Hazardous Products Act (HPA) requires industry to retain a “true copy of labels’’ for six years. True copy means: a) a real example of the label; b) an electronic mock-up of the original label used to print the label; c) real paper colour photocopy of the label accurately reflecting the true label size; d) real colour photo of the label;  e) digital colour photo (electronic) of the label that must be accessible by the inspector with the applicable instrument provided on site by the supplier; and f)  PDF colour photo (electronic) of the label. The Hazardous Products Regulations technical guidance document included these options, but their implementation in complex supply chains require tremendous resources at significant costs to industry without doing anything to improve worker safety or prevent workplace incidents. Industry representatives of Health Canada’s Current Issues Committee (CIC) have been discussing this major issue with Health Canada officials for almost two years to support the HPA amendment that is necessary to remove this requirement or to find more viable solutions. All of which has been in vain, as it was alleged by labour groups that any guidance cannot suggest any changes whatsoever to the expression “true copy” as it is an “established legal term with significant jurisprudence.” To date there have reached nothing but deadlock and our members are feeling increasing pressure exerted by this requirement which is unique to Canada. Industry associations recently presented a document describing and illustrating all technical issues associated with this requirement to Health Canada representatives so they fully understand the complexity of complying with this requirement. Industry also pointed out the real safety risks associated with this requirement, which require in some instances the use of electric cameras in flammable industrial contexts. Industry respectfully requested Health Canada remove this “true copy label” requirement, which is unique to Canada, from the Hazardous Products Act (HPA) and from the Technical Guidance of the Hazardous Products Regulations. All industry associations represented on the CIC (Common Issues Committee) fully support the removal Section 14.3.1 of the HPA. CPCA would like the Treasury Board to formally consider the HPA as a candidate for the Regulatory Modernization Bill next year, in order to effect the removal of this significant regulatory burden for all Canadian industries. Since the Treasury Board is now committed to addressing Canada’s overall competitiveness, it should also consider removing any useless legislative requirement that force manufacturers to allocate human resources to accomplish unnecessary regulatory tasks and instead focus on more innovative and productive tasks. This requirement does little to address the persistent productivity disparity with the United States with Canada approximately $10,000/worker – on average – less product than workers in the United States.

Cost estimates: For the paint industry alone, this useless true label requirement cost a total of nearly $20 million, while adding zero value in terms of Canadian worker protection and safety. Further it is not fully justified and proven necessary by Health Canada, and not required in any other jurisdiction among all of Canada’s trading partners. Moreover, this cost estimate does not fully take into consideration the loss of productivity and the cost of intellectual property theft  resulting from the electronic dissemination of ‘’true copy labels.’’ The ‘true copy label’ issue should be addressed as quickly as possible by the TBS, to stop hurting Canadian businesses with a counterproductive bureaucratic requirement that adds no value to worker protection.

  1. B) AMENDMENT TO THE PEST CONTROL PRODUCTION ACT TO BETTER ALIGN ANTIMICROBIAL REGISTRATION FOR PRODUCT PRESERVATION AND TREATED ARTICLES POLICY

CPCA has already addressed the Regulatory Cooperation Council in relation to the development of an RCC Joint Work Plan between the Canadian and US governments regarding pest control misalignment. Canadian and U.S. officials continue to recognize the importance of maintaining highly integrated Canadian and U.S. economies (Free Trade Table) as well as establishing key priorities to further enhance alignment between our two countries. A new RCC methodology is also planned for enhancing alignment on both sides of the border as part of the Joint RCC Action Plan. In parallel with this US-Canada joint effort, there is some regulatory modernization that needs to be done to the Pest Control Products Act and regulations. There is currently a persistent lack of alignment between Canada and the United States with respect to the re-evaluation of biocides used as in-can/film preservatives for paint in terms of process, timeline, and allocated resources.

CPCA believes that the PMRA (Pest Management Regulatory Agency) should amend the PCPA for various reasons such as:

  1. i) Misaligned Policy/Requirements for Treated Articles in Canada: At the end of 2018, a guidance or Information Note was published with respect to treated articles to better inform industry of the PCPA requirements as stated in the Act. As a result, the ‘Information Note’ is creating some confusion for industry. Although the PMRA pretends that its policy is aligned with the US and other jurisdictions, it is not what the Note says. This amendment could be part of the 2020 Annual Regulatory Modernization Bill for TBS to further align with the US EPA and drop the actual requirement for Efficacy and Exposure data for allclaims related to registered biocides/pesticides. This would mean amendment to the Act or Guidelines for the Advertising of Pest Control Products (DIR2016-01).
  2. ii) Further details on the issues created by the misaligned policy: US manufacturers often have similar products registered on both sides of the border. However, because PMRA requires ‘Efficacy and Exposure’ data for allclaims, EPA does not have the same requirements and for this reason most registrants do not register all of the uses on their Canadian labels that they do for their US product. For example, if a registrant has one XX product registered in both countries – but due to Canada’s requirement for ‘Efficacy and Exposure’ data, their Canadian labels state: “Preservative against mold and mildew on plastics” and their US label states, “Protects against mold and mildew on plastics such as shower curtains, dish drain boards, cutting boards, commercial plastics such as pipes, panels.” Should one of the treated articles, shower curtain, be treated with XX and states, “Treated with a preservative to prevent mold and mildew build-up,’’ this product would be accepted in the U.S. but not by PMRA inspectors in Canada. In Canada these treated articles would have to submit ‘efficacy data’ to prove it works on the articles in question, and registrants would then have to add ‘shower curtains’ to their Canadian label. This is an impediment to trade that needs to be sorted out sooner than later. There are countless treated articles in multiple industry sectors.

There are also issues with the current wording of the ‘Information Note’ that seems to suggest that any raw materials used for the manufacture of products with biocidal properties (even if not added for that specific purposes) should be registered for that use. CPCA and other industry groups are in contact with PMRA officials to have this situation clarified and the regulation eventually fully reviewed and modernized.

iii) Misaligned PMRA Biocidal Decisions (Ban/Restrictions) and Lack of Adequate Biocide Alternatives in Canada: Another major and unfortunate situation experienced by our sector relates to the fact that some biocides can suddenly be banned in Canada, with no sell-through period for products containing it, even when there is a pending submission made by registrants challenging the ban, and while the same biocides are still authorized in the US for the exact same uses with no foreseen US EPA intent to ban it in future (nor even in the EU). This situation occurred when the PMRA published its final decision to ban OIT (Octhilinone), which took effect on May 31, 2019. OIT is an efficient dry-film preservative used in paint products for which there were no efficient substitute that could readily be identified for use in Canada, while there are possible substitutes authorized in the US only. The PMRA also severely restricted the use of CMIT/MIT at the end of 2018, another essential in-can paint preservative with little consultation and pre-notice given to registrants. Through a cumbersome technical appeal process, both the paint industry and OIT registrants have sought formal consideration of a reversal of the OIT ban and that PMRA also revisit the CMIT/MIT restrictions via the usual Category B submission process per a formal technical submission made by the ACC Biocides Panel. The time delay allowed by the PMRA to produce extensive scientific study results from three important studies was much too short, and the ban took effect before all necessary evidence could be filed by the industry and analyzed by the PMRA. As a result, multinational and local companies had to proceed with a quick elimination of OIT during production, with no feasible alternatives, and had to quickly build up inventories in complex supply chains for the busy summer season. This demonstrates a clear case of non-alignment with the US EPA and a major discrepancy in the evaluation process of a critical biocide used on both sides of the border.

Note that nearly 50 percent of paint sold in Canada today is imported from the United States. And the above situation could be repeated later this year, as the PMRA intends to publish its decision on the re-evaluation of a series of other biocides used in paint and coatings through a special cluster analysis approach (Re-evaluation Note REV2018-02). Earlier information shared by PMRA in 2017 with regard to these biocides indicated that risk assessors were leaning towards possible restrictions or bans for those as well. Should PMRA arrive at similar decision – as did they for OIT and CMIT/MIT – for these remaining preservatives in a few short months, with no similar plans by the US EPA. Our industry will once again be placed at a huge trade disadvantage. As such, the TBS should consider reviewing the current PCPA legislation and related processes to remove any trade irritants, especially given the fact that there is a very narrow selection of biocides left for possible uses in Canada for paint and coatings, with a similar situation in the US and in the EU. This will lead to challenges for effectively protecting the population, not only for paint and coatings but for a wide variety of products such as cosmetics, detergents, cleaners, pharmaceuticals, etc. Without a sufficient selection of functional biocide preservatives to accommodate all types of chemical formulations and related compatibility issues, many products will have challenges such as shipping/transportation limitations, very limited shelf-life and limited performance and durability in the paint films. This will considerably damage the image and economic development of the Canadian manufacturing industry.

Cost estimates: Please note that this one decision on OIT and CMIT/MIT taken almost simultaneously has the potential to impact $1.5 billion in paint production manufactured and/or shipped into Canada. This is of course much larger when one considers the retail impacts sold downstream, generally increased by a factor of three.

  1. iv) Lack of Flexibility in the PCPA Regarding Technical Difficulties for Users to Meet Deadlines: Such an amendment could be part of the 2020 Annual Regulatory Modernization Bill. Indeed, the PCPA has no mechanism in place to provide consent for additional sell-through periods when users express legitimate concerns over technical difficulties in meeting a stop production/stop import deadline for a particular biocide. The 2-year period leading up to the OIT ban proved to be too short for the industry Biocide Panel to submit all study reports challenging the ban. Although the PMRA graciously offered to expedite their review based on the raw data obtained by the deadline, their analysis is still ongoing roughly 3 months later after the ban came into effect, with no formal decision communicated to industry and no sign of relief for industry. This succession of delays in the analysis of industry evidence did not give the users enough time to act and prepare for the ban. The PMRA should be able to agree to a sell-through period in such a situation in order for industry to effectively transition to other in-can biocide preservatives.
  2. v) Amendment of the PCPA to Better Address Situations of Biocide Shortage: Such an amendment could be part of the 2020 Annual Regulatory Modernization Bill to further align with the US EPA. The US EPA and PMRA do not have the same approach in addressing situations of worldwide supply shortages of key biocides. When there is no suitable cost-effective alternative for use by manufacturers/importers, the US EPA can then authorize registrants to temporarily raise the limits of use for certain other registered biocides. This ensures that they can have access to cost-effective alternatives and that all products can remain in commerce. The PMRA has no such mechanism in place and no flexibility in this situation as previous final decisions always stand even when products in commerce are negatively impacted and limited or no alternatives are readily available. This situation requires manufacturers to increase investment in testing for new product formulations, which takes a lot of time and may not even result in products going to market due to such costs or lack of performance. In some cases, companies will cease selling the product in Canada, thereby reducing competitiveness and market growth. This is an untenable situation for Canada if it wishes to grow the economy with more business and increased productivity, while remaining a valued partner under the recently negotiated USMCA.
  3.  vi) Current PMRA Efforts to Reform Its Re-evaluation Regulatory Process as Part of the PCPA: Since December 2018, the PMRA has been engaged with stakeholders in extensive consultations on reforming the re-evaluation process in Canada. The PMRA triggered two substantive consultations regarding the reform of its current new post-market re-evaluation program, for which formal proposals are still expected. CPCA participated in the consultation meetings and provided, among several recommendations, to add a cost impact analysis to any PMRA decisions and restrictions in Canada. The US EPA routinely conducts cost impact assessment but PMRA does not. CPCA also recommended that PMRA form ‘expert panels’ in the risk assessment process; proceed with full and complete consultation with stakeholders (especially users, i.e. manufacturers); increase transparency in risk assessments and risk management measures; respect precise agendas and established timelines; favour more two-way exchanges with industry ‘users’ during the entire review process and not just registrants; and, most importantly, align with the US EPA re-evaluation schedule and/or consideration of joint re-evaluation projects. The latter must ensure full engagement with all affected parties and address potential conflicting decisions leading to bans or use restrictions before p CPCA favours the adoption of biocide “grouping strategies” and “sectoral cluster analyses”.
  4. vii) Amendment of the PMRA Re-evaluation Program to Provide Additional Consultation or Pre-consultation Mechanisms with Users: CPCA and ACA (American Coatings Association) have issued several recommendations as to how the continued variances might be addressed between the US EPA and PMRA on the re-evaluation process and risk assessment methodologies, which will be part of the PCPA amendment. ACA proposed that a regular, bi-annual meeting of key officials at the EPA and PMRA take place to ensure greater alignment review with regards to specific biocides used in the coatings industry. In addition, an industry-government stakeholder group should be established and strictly focus on U.S.-Canadian alignment related to the re-evaluation of active anti-microbial ingredients. This would include pre-consultation, clear direction in terms of a common set of data points, test methods, data gaps and general studies used to facilitate increased alignment. This will prevent unfortunate outcomes for the coatings industry such as the ones noted above.
  5. CHEMICALS MANAGEMENT AND POST-2020 CEPA REFORM

CPCA and ACA are well aware of the continuing emergence of variances in chemical management between the US and Canada, which cause increasing trade challenges. Our common members have already raised many of these issues during our sectoral Paint and Coatings Working Group meetings with officials of Health Canada and Environment and Climate Change Canada officials. Among those are the following:

  1. i) New Substances Notification for CAN and US: Canada has more prescriptive NSN data requirements than the United States.  This process should be further harmonized so that data requirements are the same or have the evaluation process can take place at the same time. This would facilitate the availability of key chemicals that are necessary for the development of innovation and enhance competitiveness among Canadian businesses. An amendment to harmonize the new substance notification process in Canada and the US could be considered as part of the 2020 Annual Regulatory Modernization Bill to further align with the US EPA.
  2. ii) Regulatory Approach to Nanotechnology (Important for the development of innovation and clean technologies): Commercial processes and products that use materials present at the nanoscale are growing rapidly and are increasingly found in coatings, fabrics, cosmetics, electronics, etc. In the US alone, they are present in more than 1,300 commercial products. While nanoscale forms of substances can exhibit essential innovative properties and unique functionalization in products, there is little or not enough research being conducted on their lifecycle impacts and environmental fate. Health Canada has analyzed available information gathering on 53 in-commerce nanomaterials prioritized under CEPA, 1999 and recently presented these results to industry in order to inform the path forward vis-à-vis its assessment and risk management approach. However, this government data sharing shows significant remaining data gaps with respect to the uses and toxicity of the 53 nanomaterials. For our sector alone, 22 of the 53 nanoscale priorities were confirmed to be used in paint products. As there are still many issues to overcome in Canada with respect to the nanomaterial nomenclature (definition), proper chemical identification and hazard classification, our industry is concerned that the development of CMP regulatory assessment report and risk management measures will raise issues with certain product and market uses that can stifle the development or availability of innovative competitive products. Legislative or regulatory changes with respect to nanomaterials should be done through a business lens and international trade consideration. In 2017, the US launched a broader information gathering initiative related to nanomaterials seeking to facilitate innovation while ensuring the safety of the substances. Although Canada and the US both require the pre-manufacture notification for any new nanomaterials and apply limited authorization for the manufacture and use of nanomaterials, which present no unreasonable risks, there are remaining issues such as those shown in i) New Substances Notification that can discourage legitimate uses of nanomaterials in Canada.

 iii) Lack of Harmonization Between CMP Priorities Among Existing Substances and TSCA’s List of Priorities for Risk Evaluation: Our members noted differences in the list of TSCA priorities with respect to the Chemicals Management Plan, that is, the majority of 40 new TSCA priority substances are not found on any of the current CMP 1-2-3 lists or on the rest of the 4,300 priorities and PSL lists. A quick and non-exhaustive search of the 2017-2018 Identification of Risk Assessment Priorities (IRAP) list in Canada (based on all known CAS RNs that are identified online) reveals that none of the TSCA substances appear to be among the IRAP list. Moreover, a majority of substances used in paint and coatings have been identified among the 20 “high priorities” in TSCA’s new list of priorities, as if certain sector formulations were being targeted more than others. The risk assessment of these US (non-Canadian) priorities will eventually lead to risk management actions that will be detrimental to Canadian paint businesses. Meanwhile, multiple limitations and controls have been placed on the use of CMP priority substances since 2006 (a little less than 100 risk management actions) in Canada, many of them having no equivalent in the US. There must be greater alignment regarding North American priorities in the next Post-2020 cycle of the chemicals management program going forward because of the North American Free Trade agreement and the many thousands of chemicals being used and sold on both sides of the border. This current and Post-2020 CMP irritants can be considered in the context of efforts to reduce red tape for industry in Canada.

  1. POTENTIAL ISSUES WITH GHS HARMONIZATION

1) Alignment in Hazard Communication and in Revision 7 of GHS: CPCA would like to see greater alignment amongst the U.S. Occupational Safety and Health Administration (OSHA) and Health Canada in implementing the Globally Harmonized System for Classification & Labeling of Workplace Chemicals (GHS) under the RCC through collaboration on guidance materials and the timelines and requirements for Revision 7 implementation, which would necessitate amendments to the Hazardous Products Regulations and clearer guidance. There could also be more alignment in the provincial and territorial adoption of these changes and any related guidance materials to facilitate national and international trade.

CONCLUSION AND RECOMMENDATIONS

Any decisions in Canada that are not aligned with other jurisdictions can quickly lead to negative impacts such as:

  • Trade disruptions and difficulties in the management of stocks or new products for North American trade
  • Elimination of innovative and added-value products with high penetration in the North American marketplace
  • Reformulation requirements for products with substitutes that are not available or allowed in Canada or are not cost-effective
  • Loss of revenues and jobs due to discontinuation of product lines negatively impacting small- and medium-sized business which dominate the Canadian landscape, including innovative start-ups
  • Creation of a negative image for industry from preventing the availability and use of key chemicals or biocides in Canada, thereby suppressing Canadian competitiveness and sales and the introduction or maintenance of highly performant products in the Canadian marketplace.

Industry wants none of the above negative impacts to become a reality and alter the business plans and conduct of companies doing business in Canada.

RECOMMENDATIONS

 Amendment of the HPA for Section 14.3.1: This amendment could easily take place via the TBS Regulatory Modernization Bill efforts of 2020, as its adoption will benefit productivity/innovation and will have no adverse effect on worker safety and the workplace environment. However, the amendment of HPA should not involve the elimination of the current consumer exemption under the Act, as it has been actively sought from Health Canada by labour organizations and NGOs at the CIC (Current Issues Committee) over the past two years. Despite repeated requests industry made for evidence from Health Canada or labour organizations to identify the risks posed to workers’ health and safety from the daily use of consumer products. To date industry has not received any evidence of true “risks” associated with any consumer products pose to worker health and safety, which can support an evidence-based amendment to the HPA. When formulating consumer products, formulators consider the possibility of chronic exposure to some ingredients. In OSHA, this exemption remains along with a guidance as to how to provide Safety Data Sheets (SDS) and labels for consumer products that are predominantly or can be significantly used in the workplace and not just by the general public. Industry has recommended Health Canada adopt the OSHA approach and not remove the consumer exemption under the Act, which can lead to misinterpretation and confusion in the messaging of two different Acts, the HPA and the prevailing Consumer Chemicals and Containers Regulations, 2001, and so as not to lead to more potential incidents. Ultimately, it is the responsibility of employers to ensure all products used in the workplace are safe, to request Safety Data Sheets, and provide training and adequate ventilation to prevent any undue exposure. Education programs can be developed for those particular workplaces that are more prone to ignore their responsibilities towards their workers.

PCPA and PMRA Policy Amendment: Several aspects of the legislation (treated articles policy) could be clarified in the context of TBS Regulatory Modernization efforts for 2020. As such, it should support harmonization of authorized uses in the US for the same registered biocides/pesticides used in Canada without having to ask for additional registration fees for each use in Canada. As in the US, the amendment should introduce greater flexibility towards users when no technical solution or substitution is available for the current authorized pesticides and when there are challenges related to shortages of key biocides globally. This can be clearly linked to major trade disruption among paint companies both in Canada and the United States, in the order billions of dollars, and could help prevent potentially related health incidents. CPCA understands that the PMRA must make amendments of its own Post-2020 re-evaluation program and timelines, due to the large number of pesticides/biocides under review and the lack of internal resources to do so. It is important that these amendments be better aligned with the US EPA timelines and decisions, including the adoption of a common prioritization approach.

The TBS should closely monitor this initiative as another opportunity to ensure that the ongoing PMRA’s post-market re-evaluation program for key biocides will not have a major negative economic impact on commerce in Canada. For product preservation, CPCA also recommends that the TBS promotes the development of a national funding program with international coordination that would extend joint research and development efforts to develop new, safe biocide alternatives, that can be used in both countries for enhanced product development and competitiveness. The development and use of ingredients such as additives or polymers having biocidal properties should also be encouraged. In the absence of key authorizations and other viable alternatives due to unique bans and restrictions (there are still fewer biocides authorized in Canada than in the US, our major trade partner), the Canadian industry will be uncompetitive and could be subject to severe economic consequences.

Chemicals Management and CEPA Reform: Canada’s regulatory review efforts should closely monitor the ongoing attempts with CEPA reform as current efforts may be misguided and might only serve to add more regulations with little or no benefit. For risk assessment/risk management (RA/RM) of chemicals, we recommend establishing an “expert working group” to provide informed evidence-based advice and data related to the implementation of any future CEPA amendments. Such amendments should promote or maintain aligned practices and harmonized risk evaluations and decisions between the US and Canada beyond 2020. These could address such things as New Substance Notification (NSN) requirements, nanomaterials assessment and management, CBI protection and additional workplace restrictions. This should also be considered in the context of GHS Hazard Communication and GHS revisions in future as all countries are consumed by this debate and at different levels of decision-making.

 Thank you for the opportunity to comment. CPCA and its American counterpart remain available to provide additional information and are hopeful that these recommendations will be fully considered and addressed in the context of Canada’s regulatory modernization review.

Regards,

Gary LeRoux

President & CEO

gleroux@canpaint.com

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