Shipbuilding Industry Assistance Regulations

Regulations Respecting Assistance to Encourage the Construction of Ships and the Improvement of Shipbuilding Performance These Regulations may be cited as the Shipbuilding Industry Assistance Regulations. In these Regulations, application means an application for assistance made pursuant to section 4; (demande) application date, subject to section 9, means in the case of a shipbuilder building a ship to be owned by that shipbuilder, the day on which a completed application form, together with a copy of the plans and specifications of the ship, is received by the Minister, or in any other case, the day on which a completed application form, together with a copy of the contract, is received by the Minister; (date de la demande) approved cost means the approved cost of an eligible ship determined by the Minister pursuant to section 14; (frais approuvés) assistance means a grant made pursuant to section 3 to a shipbuilder in respect of an eligible ship; (aide) building or construction, in respect of a ship, includes the conversion of a ship; (construction) completed, with reference to an eligible ship, means that the ship has been built in Canada and delivered to a shipowner and that a certificate of registry has been issued for that ship under the Canada Shipping Act or that such other form of documentation has been issued for the ship as may be specified in a subsidy agreement; (achèvement) contract means a contract in writing entered into by a shipbuilder for the construction in Canada by the shipbuilder of one or more ships; (contrat) conversion, in respect of a ship, means the work or alterations done to a ship that, in the opinion of the Minister, substantially change its size, function or other characteristics; (transformation) eligible ship means a ship that is declared by the Minister, pursuant to section 6, to be an eligible ship for the purposes of these Regulations; (navire admissible) fishing vessel means a vessel that is intended for use in the catching or trapping of fish for sale; (bateau de pêche) improvement agreement means an agreement in writing entered into between Her Majesty and a shipbuilder pursuant to section 11; (accord d’amélioration) improvement plan means a plan for the improvement of shipyard performance submitted by a shipbuilder pursuant to subsection 10(1); (plan d’amélioration) improvement project means a project that forms a specific element of an improvement plan and whose description, estimated cost and relationship to the strategy of the improvement plan are identified therein; (projet d’amélioration) maximum approved cost means the maximum approved cost of an eligible ship as determined pursuant to subsection 13(1); (coût maximal approuvé) Minister means the Minister of Industry, Trade and Commerce; (ministre) shipbuilder means a company incorporated in Canada that is engaged in the business of building ships in Canada; (constructeur de navires) subsidy agreement means an agreement between the Crown and a shipbuilder pursuant to section 7. (accord de subvention) In accordance with these Regulations, the Minister may, in respect of each eligible ship or each series of eligible ships that, in the opinion of the Minister, are similar, authorize the following assistance: the grant of a subsidy pursuant to section 8; the grant of a contribution pursuant to section 12; or both of the grants referred to in paragraphs (a) and (b). Where a ship is intended to be owned by Her Majesty in right of Canada, no subsidy shall be payable in respect of the construction thereof. An application for assistance shall be submitted to the Minister in the form set out in the schedule together with evidence that the shipbuilder has, in all respects, sufficient resources to complete the ship or ships in respect of which the application is made; evidence that the shipbuilder is able to carry out the construction of the ship without having to over-expand his facilities in relation to anticipated long-term demand; evidence that the construction of the ship will not have a detrimental effect on the long-term competitive status of the shipbuilder or of the Canadian shipbuilding and repair industry; in the case of a ship to be built for a foreign owner, evidence that the construction of the ship will not have a detrimental effect on the continuing availability of facilities to satisfy domestic requirements for ship construction and repair; where the ship is being built by a shipbuilder for a person other than the shipbuilder, a copy of the contract; where the ship is being built by a shipbuilder to be owned by that shipbuilder, a copy of the plans and specifications of the ship; and the information required by the application form. Subject to subsection (2), an application shall be made where the ship is being built by a shipbuilder for a person other than the shipbuilder, within 60 days after the execution of a contract for the construction of the ship in respect of which the application is made, or the commencement of the construction of the ship whichever is the earlier; or where the ship is being built by a shipbuilder for that shipbuilder, within 60 days after the commencement of the construction of the ship in respect of which the application is made. The Minister may extend the time set out in subsection (1) for making an application where, in his opinion, the circumstances of the case require an extension. [Revoked, SOR/85-126, s. 2] The Minister may declare a ship to be an eligible ship if the ship, after completion, will be at least 100 tons gross tonnage if self-propelled, 200 tons gross tonnage if not self-propelled, 50 tons gross tonnage if a tug, or 23 m in overall length if a fishing vessel; the ship is not intended to be used by its owner primarily for personal recreation; and construction of the ship commenced, or a contract for the construction of the ship was executed, prior to July 1, 1985. Where an application submitted pursuant to section 4 by a shipbuilder is approved by the Minister, a subsidy agreement shall be entered into between Her Majesty and the shipbuilder in respect of each eligible ship or each series of eligible ships that, in the opinion of the Minister, are similar. Every subsidy agreement shall prescribe the maximum amount of the subsidy that may be granted under section 8 in respect of the eligible ship; prescribe the maximum amount of the contribution that may be granted under section 12 in respect of the eligible ship; provide for the payment of any subsidy to the shipbuilder of an eligible ship by a lump sum payment following completion of the construction of the ship, or subject to paragraph (d), progress payments not exceeding in the aggregate 85 per cent of the estimated subsidy payable before the ship is completed and the balance of the subsidy in one or more payments after completion of the ship; provide that the lump sum payment of any subsidy under subparagraph (c)(i) or the final payment of any subsidy under subparagraph (c)(ii) shall not be made until, in the opinion of the Minister, all the terms in the subsidy agreement have been complied with; provide that the grant of a contribution payable pursuant to section 12 shall be in respect of moneys expended in accordance with an improvement agreement; provide that the shipbuilder shall use Canadian materials, components, equipment and services in the construction of the eligible ship, and for the improvement of shipyard performance if such materials, components, equipment and services are, in the opinion of the Minister, available and competitive; provide that the shipbuilder shall repay that portion of any contribution granted that exceeds the contribution payable pursuant to section 12; and set out the construction schedule of the ship or ships. Subject to subsection (2), a grant of a subsidy may be paid by Her Majesty to a shipbuilder in respect of a ship in an amount not exceeding 14 per cent of the approved cost of the ship when the application date is before January 1, 1976; 13 per cent of the approved cost of the ship when the application date is after December 31, 1975 and before January 1, 1977; 12 per cent of the approved cost of the ship when the application date is after December 31, 1976 and before January 1, 1978; 11 per cent of the approved cost of the ship when the application date is after December 31, 1977 and before January 1, 1979; 10 per cent of the approved cost of the ship when the application date is after December 31, 1978 and before January 1, 1980; 20 per cent of the approved cost of the ship when the application date is not earlier than March 1, 1977 and not later than June 30, 1980; nine per cent of the approved cost of the ship when the application date is after June 30, 1980 and the application is supported by a contract made before January 7, 1983, or the ship is being built by a shipbuilder for that shipbuilder and construction of the ship commenced before January 7, 1983; and nine per cent of the approved cost of the ship when the ship is completed before July 1, 1985 and where the ship is being built by a shipbuilder for a person other than the shipbuilder, the contract was made after January 6, 1983, or where the ship is being built by a shipbuilder for that shipbuilder, construction commenced after January 6, 1983. Where a shipbuilder or shipowner has received or will receive assistance under the Industrial and Regional Development Program or the Defence Industry Productivity Program in respect of the construction of an eligible ship, the amount of assistance shall be deducted from the approved cost before the calculation of the subsidy payable pursuant to subsection (1). [Revoked, SOR/85-126, s. 4] If the construction schedule does not provide for expeditious commencement of the construction of the eligible ship, commensurate with the shipbuilder’s building program, or if the construction schedule does not provide for completion of the eligible ship within a time that appears reasonable to the Minister, then, for the purposes of section 8, the application date shall be a date as determined by the Minister but the date so determined shall not be earlier than the application date. If the construction schedule of a subsidy agreement made pursuant to these Regulations in respect of an eligible ship is not followed by the shipbuilder and the ship is completed at a date later than that provided in the schedule, for causes not beyond the control of the shipbuilder and the shipowner, the Minister may, in his discretion, for the purposes of calculating the subsidy under section 8, declare the application to have been received at a date that is correspondingly later. A shipbuilder who applies for the grant of a contribution under these Regulations shall submit to the Minister, in a form acceptable to the Minister, a proposed strategic plan for the improvement of his shipyard including market and product assumptions and strategies, and the specific projects that relate to them; on-going improvements relating to safety and technological conditions; a statement as to the expected improvements in capacity, productivity or safety relating to each project; financial statements for the last three fiscal years of the shipbuilder; and a projected balance sheet that reflects the implementation of individual elements of the plan. The projects and improvements referred to in paragraphs (1)(a) and (b) may be undertaken or made by the shipbuilder; or with the approval of the Minister, by a wholly-owned subsidiary of the shipbuilder or, if the shipbuilder itself is a wholly-owned subsidiary, by its parent company. Where an improvement plan is approved by the Minister, an improvement agreement shall be entered into between Her Majesty and the shipbuilder. Every improvement agreement shall identify expenditures proposed and their relationship to the improvement plan; include the terms and conditions in respect of the payment of any grant of a contribution pursuant to section 12; provide that the shipbuilder shall repay that portion of the contribution payable pursuant to section 12 that is in respect of equipment obtained under the improvement agreement and diverted to uses other than those provided in the approved plan, or disposed of by the shipbuilder within five years of its acquisition or such shorter period as may be determined by the Minister; and provide for an audit to be made by the external auditors of the shipbuilder of the cost of the improvement project and for the cost of the improvement project to be verified, at the discretion of the Minister, by a person authorized by the Minister. The Minister may declare an improvement project to be eligible for the grant of a contribution if the improvement project is identified in a current improvement agreement as set out in section 11; any conditions placed on the implementation of the improvement project as specified in the improvement agreement have been met; in the case of an improvement project to commence after the coming into force of this section, the plans for the appropriate improvement project are presented for consideration by the Minister before work on the improvement project begins; the improvement project provides for the use of Canadian materials, components and services when, in the opinion of the Minister, they are available and competitive; and the shipbuilder provides a detailed list of all expenditures necessary for the project, to the satisfaction of the Minister. Subject to subsection (2), a grant of a contribution may be paid by Her Majesty to a shipbuilder in respect of a ship in an amount equal to the lesser of three per cent of the approved cost of the eligible ship; and 50 per cent of the cost of expenditure made by the shipbuilder in accordance with an improvement agreement made pursuant to section 11. The maximum amount of any contribution that may be granted under this section is an amount equal to three per cent of the maximum approved cost. Where a shipbuilder or shipowner has received or will receive financial support from provincial or municipal governments in respect of an expenditure made in accordance with an improvement agreement, the value of such financial support, as determined by the Minister, may be deducted from the cost of the expenditure for the purposes of paragraph 12(1)(b). Subject to subsection (2), the maximum approved cost of an eligible ship to be used in calculating the maximum subsidy and maximum contribution for the purposes of paragraphs 7(2)(a) and (b) shall be where the eligible ship is being built for Her Majesty in right of Canada, the contract price that may be paid to the shipbuilder for that ship; or in all other cases, the quotient obtained by dividing the maximum price set out in the contract by the applicable figure set out in subsection 14(2). From the amounts referred to in paragraphs (1)(a) and (b) there shall be deducted the cost of features that are specified in the subsidy agreement as being, in the opinion of the Minister, not eligible for subsidy; and the cost of any material, components, equipment and services to be obtained outside Canada where, in the opinion of the Minister, the material, components, equipment and services could have been obtained at a competitive cost in Canada. Subject to section 15, for the purpose of calculating the amount of any assistance payable under these Regulations, the approved cost shall be the lesser of the maximum approved cost and where the eligible ship was built for Her Majesty in right of Canada, the amount paid to the shipbuilder for the construction of the ship; where the eligible ship was built by a shipbuilder to be owned by him, the quotient obtained by dividing the capital cost of the ship as entered on the books of the company for income tax purposes by the applicable figure set out in subsection (2); or where the eligible ship is built by a shipbuilder for a person other than a person described in paragraphs (a) or (b), the quotient obtained by dividing the amount paid to the shipbuilder in respect of construction of the ship, including whatever value the Minister may allow for owner-supplied equipment, by the applicable figure set out in subsection (2). For the purposes of subsection (1), the applicable figure set out in this subsection is 0.86, where payment of assistance is to be made under paragraph 8(1)(a); 0.87, where payment of assistance is to be made under paragraph 8(1)(b); 0.88, where payment of assistance is to be made under paragraph 8(1)(c); 0.89, where payment of assistance is to be made under paragraph 8(1)(d); 0.90, where payment of assistance is to be made under paragraph 8(1)(e); 0.80 where payment of assistance is to be made under paragraph 8(1)(f); 0.91 where payment of assistance is to be made under paragraph 8(1)(g); and 0.91 where payment of assistance is to be made under paragraph 8(1)(h). Where subsidy is to be granted to a shipbuilder in respect of a ship, the approved cost for that ship shall be the lesser of the maximum approved cost calculated pursuant to section 13 and the cost of construction of the ship as certified by an audit made by the Audit Services Bureau, Department of Supply and Services. Where a subsidy is not to be granted to a shipbuilder in respect of a ship other than a ship owned by Her Majesty in right of Canada, the approved cost for that ship shall be the lesser of the maximum approved cost calculated pursuant to section 13 and the cost of construction of the ship as certified by an audit made by the external auditors of the shipbuilder. The cost of construction of the ship certified pursuant to subsection (1.1) may be verified, at the discretion of the Minister, by a person authorized by the Minister. The cost of construction of the ship certified pursuant to subsection (1) shall not include the shipbuilder’s profit. For the purpose of calculating the amount of any assistance payable under these Regulations, there shall be deducted from the approved cost in respect of any ship the cost, as set out in the subsidy agreement, of any component or equipment set out in the agreement that was not fitted or installed in the ship, and unless the Minister otherwise directs, any material, component or equipment obtained outside Canada where the agreement specified that the material, component or equipment be made in Canada; any increase in the costs attributable to any change made to the plans or specifications relating to the construction of the ship that are made subsequent to the making of an application in respect of the ship; the cost of any spare parts provided in respect of the ship where, in the opinion of the Minister, the provision of the parts is in excess of those required; the cost of any material, component or equipment that was provided in respect of the construction of the ship that, when provided, was not new; the cost of any supervision by a representative of or on behalf of the shipowner in respect of the construction of the ship; the amounts, specified in the subsidy agreement, that relate to the cost of features of the ship that, in the opinion of the Minister, should by their nature be excluded from the approved cost; the cost of any designs or plans, in respect of the construction of the ship, prepared by a person outside Canada where, in the opinion of the Minister, the designs or plans could have been prepared in Canada at a competitive cost; and the cost of any insurance relating to the ship or its construction, or any interest or other pecuniary charge relating to the financing of the construction of the ship that is paid to a company outside Canada where, in the opinion of the Minister, the insurance or the financing could have been obtained from a company incorporated in Canada at a competitive cost. Notwithstanding any other provision of these Regulations, no contribution may be granted pursuant to these Regulations if the application date is after March 31, 1990; every improvement agreement entered into after the coming into force of this section shall provide that the improvement project shall be completed no later than December 31, 1990 and that no costs incurred after December 31, 1990 shall be eligible whether or not the project has been completed; no contribution may be paid in respect of costs incurred for an improvement project where those costs are claimed after March 31, 1991.