Canada Gazette, Part I, Volume 156, Number 25: Regulations Amending the Canadian Aviation Regulations (Part I — 104, Aeronautical Product Approvals)

June 18, 2022

Statutory authority
Aeronautics Act

Sponsoring department
Department of Transport

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary

Issues

The current charge regime in section 104 of the CARs and in its associated Schedule V, respecting approvals for aeronautical products, has not been revised since 1998 and is no longe reflective of the more complex work required by TC employees and/or TC delegates to approve technologically advanced aeronautical products. Moreover, the current regime has not been adjusted for inflation on a regular basis, failing to reflect the increasing labour costs that these services require. As a result, existing charges recover only a small proportion of the cost of providing reviews and approvals.

New technologies (e.g. integrated systems, advanced pro, increased automation) and increased software complexity are making the approval process for aeronautical products more complex and time-consuming, requiring a wider skillset and greater depth of knowledge to review and often exceeding the number of hours that can be recovered through charges under the current regime. The existing structure requires Canadian taxpayers to pay a greater portion of the costs associated with activities that directly benefit private companies or individuals. Data from fiscal years 2017-18 to 2019-20 indicate that on average industry paid only about 4% of the costs associated with aeronautical product reviews and approvals.

Background

Aeronautical product approvals

TC, on behalf of the Minister of Transport, is responsible for the approval of aeronautical product designs. Approval of these product designs is one step in the process necessary for an aircraft to receive flight authority. Flight authority confirms that an aircraft is in compliance with the applicable type design;^{footnote 3} and that it is fit and safe for flight. To receive flight authority, an aircraft’s overall design and its major aeronautical components must be approved, indicating they meet design standards set by the International Civil Aviation Organization (ICAO). In Canada, these design standards are incorporated by reference in the CARs.

TC issues initial approval documents for aeronautical products to Canadian-based companies and facilitates the issuance of approval documents to Canadian companies in foreign jurisdictions, allowing these companies to sell their products abroad. TC also issues approval documents to foreign companies wishing to sell their products for use in Canada.

As outlined in section 4.4 of the Aeronautics Act, the Governor in Council may make regulations imposing charges in respect of the issuance, renewal, amendment or endorsement of any document issued or to be issued under this Part of the Act provided by or on behalf of the Minister of Transport. Section 104 of the CARs, and its associated Schedule V, lists the document or preparatory action for which a charge related to aeronautical product approvals can be imposed and the corresponding charge.

Existing charges

The existing charge regime in Schedule V of section 104 of the CARs consists of 104 design approval items, where 66 items are charged at an hourly rate and 38 items are charged at fixed rates. TC also provides approvals for projects that have no charges under the existing charge regime (such as post-certification changes to approved designs). These post-certification activities have been identified as projects that require the most effort (in terms of time resources) among approval projects.

The hourly charge was $40 per hour in fiscal year 2020-21^{footnote 4}. Items subject to the hourly charge also have a hard charge cap, which is the maximum amount that can be charged over the life of a project. Once an hourly project has reached the imposed charge cap, no further revenue can be collected for that approval project, even if work is ongoing. The existing hard cap varies depending on the product and approval type. For example, balloons or aircraft components such as propellers have lower caps, while the highest caps are for large, transport category aeroplanes. The hard cap fees range from a low of $3,662 to a high of $504,680. Charges for items under the fixed structure also vary depending on the products and certification type and range from $180 to $2,455 per project.

Fee modernization

Fee modernization is an emerging priority across the entire Government of Canada, as evidenced by the introduction of the Service Fees Act (SFA) in Budget 2017. The SFA signals that the Government is open to departments and agencies updating the fees they charge for products and services.

The modernization of TC’s fee regime is a key component of the department’s transformation plan. The department’s cost recovery framework will be updated in consultation with stakeholders to provide more predictable service to industry, ensure the sustainability of TC services, and ensure that those who benefit pay an appropriate share of costs.

The current charges set out in the CARs have not been updated in over 20 years and are no longer reflective of the aeronautical products industry. Over this period, aeronautical product reviews and approvals have become more time consuming as technological changes have significantly increased the complexity of products. Currently, existing fees recover approximately 4% of the total cost of providing aeronautical product reviews and approvals. The rest of the cost is absorbed by Canadian taxpayers. Meanwhile, the majority of the benefits from these services go directly to the aeronautical products industry.

Proposed amendments

The proposed amendments to section 104 of the CARs and its associated Schedule V would update the aeronautical products charge structure by implementing charges that are more reflective of the resource investment spent by TC on aeronautical product reviews and approvals. The proposed amendments are the first of a number of amendments that would eventually update all the schedules of section 104 of the CARs. The modernization of the aeronautical product approval charge structure is part of a broader plan to modernize the fee/charge regimes throughout TC.

Service Fees Act

A modernized cost recovery regime for aeronautical products would be consistent with the principles underlying the Service Fees Act, which represents the Government’s commitment to modernizing its services and delivering value to Canadians by establishing service standards, remitting a portion of fees paid to clients when service standards are not met, adjusting fees annually by the consumer price index, and making the results public through annual reporting. The modernized regime also aligns with the goals of Transportation 2030: A Strategic Plan for the Future of Transportation in Canada, a modernization initiative championed by the Minister of Transport.

Low-Materiality Fees Regulations

All proposed fixed fees are $151 or above and the hybrid and hourly fees are fees set by formula. Therefore, the proposed new and amended fees are not considered low-materiality per the criteria outlined in the Low-Materiality Fees Regulations. Remissions and annual Consumer Price Indexation per the SFA will apply to all fees.

Directive on Charging and Special Financial Authorities

The proposed charges also adhere to the requirements of the Directive on Charging and Special Financial Authorities (Directive), which, among other things, outlines management practices and controls to ensure that charging practices for services are consistent across government and that amounts charged respect legislative limits. In accordance with the Directive, TC developed and published a fee proposal and held public consultations in the fall of 2018.

Objective

The modernization of section 104 of the CARs and its associated Schedule V would better reflect the true cost of aeronautical product reviews and approvals that TC provides. By implementing a modern charge regime that requires the beneficiaries to pay a greater portion of the costs for these activities, TC would promote a more equitable balance between the financial burden borne by service recipients and by Canadians. With a modernized charge regime that adjusts for inflation, TC could address future growth in demand and continue to meet its service standards to keep up with the increasing complexity of aeronautical product reviews and approvals due to technology development.

Description

The proposed amendments would update and modernize the charge structure and the recovery of travel expenses and overtime for the processing of applications under section 104 of the CARs. Under the proposed amendments, the existing hourly and fixed charge structure would be updated, and a new hybrid^{footnote 5} charge structure would be introduced. New items would also be introduced into the structure. Items such as post-certification activities, which have been identified as effort-intensive, would become cost-recoverable. Overall, 96 fees would be repealed and replaced by 84 new fees, and 8 would be amended.

In accordance with the Service Fee Act, the proposed charges would be indexed annually, based on the applicable Consumer Price Index published by Statistics Canada. The inflation-adjusted charge levels and the date they come into effect would be published in TC’s Fees Report, which is tabled in Parliament, and will be made available on TC’s website.

The proposed changes would increase the overall cost recovery rate for aeronautical product reviews and approvals from approximately 4% to 22%.

Methodology

TC developed a cost estimating model which follows the principles of activity-based costing to assign costs to Schedule V activities based on their use of resources. Expenditure details and time-tracked data was analyzed to determine the resource consumption and level of effort needed to perform each activity. Multiple years of data were reviewed to ensure the reliability and validity of the cost estimate. In the 2018 fee proposal, data spanning three fiscal years, 2014-15 to 2016-17, was reviewed to ensure the reliability and validity of the cost estimate. Another analysis using data spanning three fiscal years pre-COVID pandemic, 2017-18 to 2019-20, was reviewed to ensure the initial cost estimates were still reliable and valid. The hourly cost increased from $263 to $271. The increase was mainly due to inflation and a change in the direct full-time employee hours worked.

The overall increase had a minimal impact on the cost recovery rates (a decrease from 40% to 39%); therefore, TC did not adjust any proposed fees. The methodology and rationale were established in the previously consulted fee proposal, and further validated, adjusted, and refined after additional consultation sessions with stakeholders.

Direct costs such as salaries and operating and maintenance costs are the largest contributors to the Schedule V cost estimate. Other elements include program support costs, corporate internal services (e.g. human resources, finance, information technology), and associated costs such as employee benefit plans and accommodation costs.

Two material assumptions were made during the cost exercise:

1. tracked hours as recorded in the Standardized Cost Recovery and Activity Monitoring System (SCRAM), a time-tracking system, are fairly representative of resource consumption by activity or service; and
2. the average program cost between fiscal years 2017-18 and 2019-20 is representative of the future ongoing cost of delivering the program.

The data used in the preparation of the cost estimate were reconcilable, objective, cleansed of outliers and subjected to a sensitivity analysis. The applied methodologies and assumptions, developed through close collaboration between TC Corporate Services costing experts and Civil Aviation subject matter experts, are well documented, and adhere to the Treasury Board of Canada Secretariat (TBS) Guide to Cost Estimating and follow TC’s internal Cost Recovery Costing Policy. The generated cost estimates are considered reasonable.^{footnote 6}

The cost per hour for performing activities under Schedule V of the CARs was calculated to be $271. TC has decided to charge an hourly fee of $105 (39% of the total cost of $271) for aeronautical product reviews and approvals. The proposed $105 hourly fee strikes the right balance between the user-pay principle and the ability of industry to pay. This allows for the continued support of innovation in the Canadian aerospace industry by ensuring that TC can continue providing the level of service that industry expects, while charging reasonable fees that do not discourage the adoption of new technologies. Charges would include any preparatory actions taken to issue, renew, amend, or endorse a document outlined in Schedule V, whether or not the document is actually issued, renewed, amended, or endorsed.

TC is proposing the following changes to section 104 of the CARs and its associated Schedule V.

1. Adjust hourly charges

The hourly rate would increase from $40 to $105, for activities in respect of the issuance, renewal, amendment or endorsement of any document related to an aeronautical product approval. The hourly charges would not exceed the annual maximum, if applicable, specified in either Column A or B of Table 1. Table 1 below represents the proposed annual maximum hours (and dollar equivalent) for approval processes that would be charged hourly rates. The annual maximums, which would be listed in hours in the CARs, would be calculated from April 1 in one year to March 31 in the following year. Column A lists annual maximums for service requests related to initial design approvals, and Column B lists annual maximums for the approval of a change to an existing design, based on product type.

Table 1: Proposed annual maximums for hourly activities

Product Type	ANNUAL MAXIMUMS
	COLUMN A (Initial design approvals)		COLUMN B (Approval of a change to an existing design)
	In hours	$ equivalent	In hours	$ equivalent
Transport Category Aeroplane of 150,000 kg or more	16,610	$1,744,050	6,644	$697,620
Transport Category Aeroplane Under 150,000 kg	14,170	$1,487,850	5,668	$595,140
Level 4 Normal Category Aeroplane	4,770	$500,850	1,880	$197,400
Level 3 Normal Category Aeroplane	3,600	$378,000	1,500	$157,500
Level 2 Normal Category Aeroplane	2,440	$256,200	976	$102,480
Level 1 Normal Category Aeroplane	1,170	$122,850	468	$49,140
Transport Category Rotorcraft	4,300	$451,500	1,720	$180,600
Normal Category Rotorcraft	3,310	$347,550	1,324	$139,020
Airships	360	$37,800	190	$19,950
Balloons	70	$7,350	30	$3,150
Engines – Turbine	1,530	$160,650	612	$64,260
Engines – Reciprocating	340	$35,700	136	$14,280
Propellers	120	$12,600	48	$5,040
Gliders or powered gliders	880	$92,400	360	$37,800
CAN-TSO table a1 note a for an APU table a1 note b	1,530	$160,650	1,530	$160,650
Table a1 note(s) Table a1 note a CAN-TSO means a Canadian Technical Standard Order which is a standard of airworthiness for an appliance or part. Return to table a1 note a referrer Table a1 note b APU means an Auxiliary Power Unit (APU). An APU is any power unit that delivers power or compressed air, or both, and that is not intended for direct propulsion of an aircraft. Return to table a1 note b referrer

2. Adjust fixed charge structure

The existing 38 fixed charges, related to the processing of type design changes and design approvals for appliances, parts, and repairs, range from $180 to $2,455. The proposed 15 fixed charges range from $151 to $3,544. Fixed fee activities are most often requested by small business owners, and TC determined that setting a fee with a high cost-recovery rate could be detrimental to these businesses as many would decrease their profit margins to stay competitive. Considering the economic context, the proposed fees had cost recovery rates between five and 20 percent. To limit the fee increases and mitigate the impact on stakeholders, TC decided that activities that cost over $50,000 would have lower-cost recovery rates and thus lower fees. Additionally, TC decided that activities that cost less than $10,000 would generally have slightly higher cost recovery rates, yet still lower fees than those of the high-cost activities. The result of this approach is substantively lower fees for high-cost activities and continued low fees for low-cost activities. This tailored approach allows TC to reduce the impact of fees for both high and low-cost activities, especially when considering smaller businesses that operate in this sector.

TC does not have enough personnel to meet the demand of all certification activities. The Minister of Transport authorizes individuals and organizations to work on behalf of the Minister, as delegates, to issue certain approvals. Since the delegates support the Minister in performing the certification activities, TC decided to decrease the fixed charge for repair designs and amended repair designs approved by delegates, from the original charge of $180 to a proposed charge of $151. This decrease takes into consideration what TC delegates can reasonably charge their clients to repair their aircraft and addresses small business concerns. TC also proposed a ceiling of two and a half times the current fee for other activities requested by TC delegates, to encourage potential TC clients to consider requesting services from small business owners at a lower price, rather than requesting TC to perform those same activities as TC does not have the capacity to action all service requests.

3. Introduce hybrid charge structure

The proposed amendments would introduce a hybrid charge structure for the issuance, renewal, amendment or endorsement of a supplemental type certificate^{footnote 7} or Canadian Technical Standard Order. For these items, the applicant would pay a fixed charge for the first 300 hours. If the application requires more than 300 hours to issue the relevant design approval document, the applicant would be charged $105/hour for every hour an employee of the Department of Transport invests in the processing of the application beyond the threshold. However, the hourly charge would not exceed the annual maximum amount. The annual maximum is calculated from April 1 of one year to March 31 of the following year. The maximum amount a client could pay for hybrid charges would be the fixed charge plus the annual maximum amount.

TC determined that a fixed charge for the first 300 hours was the best way to ensure that costs are predictable and reasonable for small businesses, while allowing the Department to recuperate costs for the small number of projects from larger businesses that require more time. According to TC subject matter experts, roughly 95% of projects are expected to remain below the 300-hour threshold. The hybrid approach is necessary because there have been projects that have required thousands of hours, essentially costing TC (and by extension, Canadian taxpayers) millions of dollars to perform these activities.

4. Add new hourly, fixed and hybrid activities to the charge structure

The proposed amendments would also add charges that would enable TC to charge for amending documents due to administrative changes, issuing alternative means of compliance (AMOC) letters, post-certification reviews, assisting clients with formal applications, and the validation of foreign supplemental type certificates so that the aeronautical design approvals by foreign authorities can be sold in Canada. These items are not part of the existing charge regime. Currently, TC absorbs the costs associated with these activities.

5. Travel and overtime related to the processing of applications

Currently, travel and overtime are only charged when an employee must travel outside of Canada. Travel expenses include transportation, lodging, meal, and incidental expenses, as calculated in accordance with the rates set out in the National Joint Council Travel Directive. Overtime is charged in accordance with the rates set out in employees’ collective agreements. Travel outside of Canada would continue to be recovered on a one-for-one basis. Travel and overtime inside Canada would be recovered under exceptional circumstances such as unplanned, unexpected or urgent travel requests from the client. For example, a client would be expected to pay if they requested a change to the travel arrangements, and the costs of the new travel arrangements were more expensive, or if travel is required for a reason that is substantially similar to a previous travel arrangement (e.g. to redo a test that a client was not sufficiently prepared for during a previous visit).

Additional cost recovery

As per subsection 4.401(1) of the Aeronautics Act, TC can enter into an agreement with an entity “respecting any matter for which a regulation made under subsection 4.4(1) or (2) could impose a charge”. TC is currently using this provision to recover in-Canada travel and overtime costs, on an ad hoc basis, in relation to the processing of an application, for exceptional circumstances. TC also intends to use this provision to enter into an agreement with an entity to perform an approval for an aeronautical product not listed in the current regulations. Once the proposed amendments come into force, TC would cease to use the provision for the previously stated purposes as they will be incorporated into the regulations. TC has not contemplated any other uses for this provision.

Regulatory development

Consultation

TC has engaged with the aerospace industry many times since 2014 to seek feedback concerning charge modernization.

In 2018, TC engaged with stakeholders to inform them that TC was in the process of developing an Aeronautical Product Approvals Fee Proposal. A general presentation was made to stakeholders at the plenary session of the Canadian Aviation Regulation Advisory Council (CARAC) meeting in February 2018. This presentation outlined the broad goals and timeframes associated with the initiative, and time was allotted following the presentation for stakeholders to ask questions.

Between March 2018 and May 2018, TC held five Preliminary Engagement sessions with different industry stakeholders both large and small, as well as with some of the trade associations representing members of the aerospace sector. These sessions presented some of the concepts TC was considering including in the Fee Proposal.

TC solicited feedback on the following topics:

• Eliminating the hard charge cap;
• Introducing hybrid charges;
• Introducing new charges for activities currently performed free of charge;
• Developing new and amended service standards; and
• Identifying irritants or parts of the aircraft certification process that, if addressed, would positively impact their relationship with TC. The topics discussed under this theme were not limited to areas directly impacted by the charge modernization initiative.

TC received feedback during these sessions and via written comments provided by participants. In general, the Original Equipment Manufacturers (OEM) community accepted the need for TC to raise its service charges, recognizing that the Department has not done so in two decades. Their primary concern was the lack of cost certainty arising from the proposed elimination of the hard charge cap. They recognized that the hard charge cap was negatively impacting TC’s ability to recover costs for activities performed, however, the issue of concern was that without the hard charge cap, industry faced unknown costs for certification projects. Moreover, industry noted that budgeting for an uncapped environment would be extremely difficult, given that the level of involvement on the part of TC can vary significantly from project to project, and from year to year over the lifetime of a single project. The OEMs requested that TC consider some other means of providing cost certainty and predictability.

Feedback received from smaller industry participants focused on the aspects of the charge modernization that were most important to delegates and other companies accessing the current fixed and proposed hybrid charges. These stakeholders were concerned about rising charges in a competitive landscape where many of their direct competitors, located in the US, are not subject to charges, and where several products previously certified in the U.S. were accepted in Canada without the application of charges due to the existence of bilateral agreements between TC and the United States Federal Aviation Administration (U.S. FAA).

Both groups of stakeholders pointed out the need for more guidance and explanatory materials that would help them understand the application of the proposed new charges (such as the pre-application consultation charges or charges for post-certification modifications), and for more refinement of the proposed 300-hour threshold for hybrid charges.

Stakeholders also expressed a desire to receive notification well before one of the proposed hybrid charge hours reaches the level of effort threshold (i.e. once 80% of the hours below the threshold had been used). TC agreed to pursue this suggestion. While the majority of projects are not expected to reach this threshold, TC is working on options to notify clients once they are approaching the limit of the fixed fee. Once an approach has been finalized, information about this approach will be made available to stakeholders in TC policy.

The Fee Modernization Proposal, which was duly prepared in accordance with the Directive on Charging and Special Financial Authorities, was posted on the TC “Let’s Talk Fee Modernization” web page for a 45-day comment period from September 6 to October 19, 2018. TC received four formal submissions and several direct replies on the Let’s Talk page. These comments were consistent with the feedback received during consultations that took place in spring 2018.

Following the close of the Let’s Talk comment period, TC held a one-day workshop with the largest members of the Canadian industry to discuss their concerns around how the elimination of hard charge caps, and the introduction of hybrid charges, would remove the predictability associated with charges. Industry indicated that they would expect better service levels for the increased charges.

TC has considered the stakeholder comments that have been received to date and has made some adjustments to the Fee Modernization Proposal as a result:

• Annual maximums for hourly fees, by product categories proposed by stakeholders, have been included in the proposed charge structure to provide greater predictability to industry regarding the applicable charges.
• An hourly charge, without an annual maximum, was added for novel aeronautical products that do not fit within one of the items outlined in Schedule V.
• Hybrid charges include a maximum number of additional hours per year that could be charged to provide greater predictability.
• A planned charge for post-certification approval of part designs and repairs designs was removed.
• The charge for the approval of a change to an existing type design already approved under a supplemental type certificate was changed from a hybrid charge to a fixed charge and reduced from $1,323 to $550 to incentivize small businesses.
• The charges for part design approval and repair design approval are now fixed charges instead of hybrid charges to ensure greater predictability.
• The repair designs approvals by delegates were changed from hybrid charges to fixed charges and reduced from $550 to $151 to incentivize small businesses.
• The charges for assisting clients seeking foreign validation of previously approved Canadian type certificates and supplemental type certificates were removed to avoid disincentivizing the industry and to support the competitiveness of Canadian businesses.

Furthermore, TC intends to modernize its IT systems to facilitate the administrative steps of service delivery, including creating service requests for activities with or without charges, transferring large files, and generating invoices, to improve the user experience. The system would also incorporate time tracking, and service performance measurement which are currently tracked separately. To date, TC has invested roughly $900,000 into the modernization of its IT systems for aeronautical product approvals. TC began piloting the new system with a limited group in spring 2022. Full deployment, including external components of the system, is planned to occur at the same time as the coming into force of the proposed regulations. TC is also updating and creating web pages to provide applicants with more information to improve the quality of application submissions which could lead to better service levels. The updated web pages would directly link clients to the new platform where they would be able to create an online account to submit service requests.

TC has continued to hold informal discussions with stakeholders since 2018, keeping them up to date on the adjustments to the proposal and seeking additional feedback.

COVID-19 pandemic

In April 2020, TC informed stakeholders that, in light of the COVID-19 pandemic, it would delay the implementation of the proposal. TC was originally aiming to have the proposed amendments prepublished in 2020. Stakeholders were supportive of delaying the implementation of the proposal. Throughout 2020 and 2021, TC periodically provided updates to stakeholders about its intention to seek prepublication of the proposed amendments in the Canada Gazette, Part I, in the spring of 2022. No concerns were raised.

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 amendment is likely to give rise to modern treaty obligations. No modern treaty obligations were identified.

Instrument choice

The Government of Canada promotes a balanced approach to financing Government programs, whereby those who receive and/or benefit from program services should pay a reasonable share of the costs for those services. Currently, nearly all the costs of providing aeronautical product reviews and approvals are borne by Canadian taxpayers. While TC currently charges fees for aeronautical product approvals, the charges have not changed in approximately 20 years and only cover a small fraction of the cost of providing these services.

The charges for aeronautical product approvals need to be increased to ensure that costs for providing such reviews and approvals are rebalanced more equitably between Canadian taxpayers and the companies that benefit.

Charges must be set in regulations using the regulatory authorities provided under the Aeronautics Act. Therefore, to amend existing charges and introduce new ones, regulatory amendments are necessary. No other options were considered.

Regulatory analysis

The proposed changes to section 104 of the CARs and its corresponding Schedule V would increase the portion of approval activities cost being paid by the aerospace industry. The total incremental cost to industry would be $29.17 million over a 10-year period from 2023 to 2032. This includes incremental cost to domestic ($19.66 million) and foreign industries ($9.51 million).

The incremental costs to the aerospace industry would be used to recover the costs incurred by TC to perform approval activities, reducing the burden on Canadian taxpayers. For this reason, the incremental cost to the aerospace industry would be equal to the cost recovery amount received by TC.

Benefits and costs

Analytical framework

Benefits and costs associated with the proposed amendments are assessed based on comparing the baseline scenario against the regulatory scenario. The baseline scenario assumes no change to the current cost structure or changes to the fees charged. For example, it forecast the costs with an hourly charge of $40 for hourly rates and a range of $180 to $2,455 for fixed rate with no hybrid fees in place. The baseline scenario also only considers travel and overtime costs outside of Canada, with no provision for inside Canada expenses. As will be demonstrated, the regulatory scenario provides information on the expected outcomes of the proposed amendments.

The proposed amendments would result in a greater portion of the costs for approval activities being borne by the users of approval activities. Both the domestic and foreign aerospace industry stakeholders would be affected, with the domestic industry bearing a greater portion of these costs. Following TBS’s Cost-Benefit Analysis Guide (PDF), the scope of this analysis is at the societal level, analyzing costs and benefits to Canadians.^{footnote 8} Due to the cost recovery nature of this initiative, the incremental costs to domestic stakeholders represent a shift of cost-burden from Canadians (represented by TC) to the Canadian aerospace industry. Incremental costs to foreign stakeholders would represent a net increase in the cost recovered by TC (since these costs would not be borne by Canadians). As such, costs to domestic companies would have a neutral impact on the Canadian society, while costs to foreign companies are considered a benefit to Canadians.

This analysis estimated the impact of the proposed amendments over a 10-year period from 2023 to 2032. Unless otherwise stated, all costs are in present values, discounted to 2021 at a 7% discount rate.

Affected stakeholders

Users of these approval activities include both domestic and foreign stakeholders within the aerospace industry: Canadian companies that apply for product reviews and approvals in Canada, Canadian companies that require TC’s assistance to obtain approvals abroad, and foreign companies that apply for product approval in Canada.

Historical data suggests that users of hourly approvals are large aircraft and engine manufacturing companies, both domestic and foreign based. Users of fixed approvals represent a variety of domestic and foreign companies, ranging from large air carriers and aircraft manufacturers to small telecommunications and product repair businesses. The impact on different areas of the aerospace industry is discussed in the ‘‘Distributional analysis’’ and ‘‘Small business lens’’ sections below.

The proposed amendments would not expand aeronautical product approval activities; therefore, it would not require an increase in resource investment in terms of hiring or facility expansions for the government. While there have been some expenditures to modernize the administrative system, these expenditures have occurred before the registration of these amendments and as such they are considered sunk costs and excluded from the analysis.

Data and methodology

Activities that fall under Schedule V of section 104 of the CARs are monitored in TC’s SCRAM for time tracking and cost recovery purposes. Technical specialists log their hourly inputs per project and identify whether the tasks performed for the activities are cost-recoverable or not. To estimate incremental changes from the proposed amendments, SCRAM data are used to forecast future demand for aeronautical product approval activities. To forecast future expenses, the average value of past SCRAM data was derived and applied to all future years. These values were then multiplied by the respective proposed costs and subsequently discounted. As such, values such as the number of projects and/or hours are derived from taking the average of historical SCRAM data.

Furthermore, in addition to the SCRAM data, to forecast future travel expenses and overtime hours related to section 104 of the CARs, financial activities from TC’s Financial System Database (Oracle Financials) and TC’s Salary Management System are used in similar fashion. The historical mean was derived and applied to the new proposed costs.

The information and methodology pertaining to the model development were shared, refined, and validated in consultation with stakeholders.

Hourly projects

For hourly charges, the number of hours spent per project was estimated based on a seven-year annual average (from fiscal years 2014 to 2020) using the SCRAM data. Given that there is a hard cap on hours for such projects,^{footnote 9} if the estimated hours for an item exceed the required maximum hours, then the maximum hours are applied to the projects. The domestic and foreign industries are responsible for all the costs until reaching the specified cost cap. The cost of any additional expenditure exceeding the cap will be covered by TC.

Fixed projects

For fixed charges, a similar approach was used to forecast the annual number of projects per item. The annual average number from fiscal years 2013 to 2020 in SCRAM was used to forecast future projects. Wherever SCRAM data was not available, projection was derived based on analysis from TC’s aeronautical product approval subject-matter experts.

Hybrid projects

To forecast the future number of projects per hybrid charge, the methodology for fixed charges was used.

To take into account the 300-hour threshold that would apply to hybrid charge items, subject-matter expert analysis was used. The analysis assumed that 95% of the hybrid projects would not reach the set threshold and 5% of projects would pass the threshold. The estimated number of hours that each project would require beyond the threshold was calculated using averages for both hourly and fixed charges.

Overtime and travel expenses

Overtime and travel expenses were estimated using TC’s Financial and Salary Management Systems Databases. To estimate future expenses related to these activities, annual averages from fiscal years 2014 to 2020 were used. The recovery of overtime and travel costs incurred under exceptional circumstances in Canada would be new to the regulation. Currently, these expenses are recovered on an ad hoc basis under contracts between the clients and TC.

Costs

The costs are presented in two ways: by charge type, and by industry type. The charge type includes the breakdown under the proposed section 104 and Schedule V: hourly charges; fixed charges; hybrid charges; and travel and overtime expenses. Table 2 presents the proposed changes and their corresponding incremental costs.

Costs are also presented by industry type (i.e. domestic and foreign industries). It is important to make the distinction of costs by industry since they each represent a different outcome for Canadian society. See Table 3 for the total cost for each industry, per charge type.

Costs by charge type

The incremental costs to industry are derived from proposed changes to section 104 of the CARs and its corresponding Schedule V, including service charges for new items, a new hybrid charge structure, and increases to existing service charges. Table 2 presents proposed changes per charge structure.

Table 2: Changes to charge structure under section 104 and Schedule V

Charge Type	Proposed Changes	Incremental Cost
Hourly	Hourly charge would increase from $40 to $105. Hourly charge would be adjusted annually for inflation. The annual maximums would range from $7,350 to $1,744,050 (as listed in Table 1).	$21.69M
Fixed	Baseline charges range from $180 to $2,455. Proposed charges would range from $151 to $3,544. Fixed charges of $151 or more would be adjusted for inflation annually.	$1.14M
Hybrid	Established fixed charges until 300 hours of service per project is reached. Fixed charges would range from $550 to $3,174. If the 300-hour threshold is reached, hourly structure applies to subsequent hours. The annual hours of service after the 300-hour threshold is reached shall not exceed the specified annual maximum.	$4.68M
Travel and Overtime	In-Canada travel and overtime expenses under unexpected or exceptional circumstances would be cost-recoverable.	$1.66M
TOTAL COST		$29.17M

As presented in Table 2, the changes to the hourly charges represent the largest portion of the incremental costs, accounting for approximately 74% of total incremental costs. This is mainly due to a significant increase to the hourly charge, and the introduction of annual maximums, rather than the current maximum charges for a project. The newly introduced hybrid charges represent 16% of the total incremental costs, while fixed, and overtime/travel charges represent 4% and 6% of the total costs, respectively.

Costs by industry

The domestic aerospace industry would be the most impacted by the proposed amendments, as they represent a greater portion of users of aeronautical product approval activities in Canada.

Costs to domestic aerospace industry

The proposed amendments would result in incremental costs to domestic industry of $19.66 million, or approximately 67% of the total costs to industry. As presented in Table 3, domestic stakeholders would be impacted the most by the proposed changes to the hourly charge structure.

Costs to foreign aerospace industry

The foreign industry is estimated to bear $9.51 million in costs, or approximately 33% of the total costs. As presented in Table 3, changes to the hourly charge structure also represent the majority of incremental costs for foreign stakeholders. It is important to note that the cost-benefit analysis (CBA) only considers costs to Canadians. For the purposes of the CBA, impacts on foreign entities are not included. Therefore, any charges to foreign entities are considered as a net benefit for Canada.^{footnote 10}

Table 3: Incremental costs for domestic and foreign industry by charge type (Present value in millions, 2021$)

Stakeholder Type	Hourly Charges	Fixed Charges	Hybrid Charges	Travel and& Overtime	TOTAL
Domestic	$14.74	$0.56	$3.03	$1.33	$19.66
Foreign	$6.95	$0.58	$1.65	$0.33	$9.51
TOTAL	$21.69	$1.14	$4.68	$1.66	$29.17

Benefits

As previously stated, the proposed amendments would result in a shift of cost burden from Canadians to the aerospace industry. The incremental cost recovery from the proposed amendment would be $29.17 million.

Costs to the foreign aerospace industry would result in a net cost recovery to Canadians of $9.51 million. The cost to foreign industry would be incurred by non-Canadians, therefore, the transfer of burden from Canadian taxpayers to the foreign industry would be considered a net increase in cost recovery, and a benefit to Canadians at the societal level.

Consolidated cost-benefit statement

The proposed amendments would result in a shift of cost burden from Canadians to the aerospace industry. The incremental impact from the proposed changes consists of the total cost recovery by TC minus incremental costs to domestic industry. As such, the present value benefit would be $9.51 million in a 10-year analytical period from 2023 to 2032.

Table 4: Cost-benefit statement (Present value in millions, 2021$)

	Implementation year: 2023	Final year: 2032	Total: 10 years	Annualized Total
MONETIZED IMPACTS Cost to Canadian Industry
Cost to domestic industry	$2.61	$1.42	$19.66	$2.8
TC Cost Recovery
Cost recovery from domestic industry	$2.61	$1.42	$19.66	$2.8
Cost recovery from foreign industry	$1.27	$0.69	$9.51	$1.35
Total cost recovery	$3.88	$2.11	$29.17	$4.15
Incremental Impact
Net Benefit (Total Cost Recovery Minus Cost to Domestic Industry)	$1.27	$0.69	$9.51	$1.35

Sensitivity analysis

As previously described, a number of assumptions have been made to estimate the costs of the proposed amendments. To address the effect of uncertainty and variability on these assumptions, a sensitivity analysis is conducted, where variables are assigned different values, and outcomes are re-evaluated. A sensitivity analysis was performed on the following variables: future demand for aeronautical product approval; analytical timeframe; and discount rates.

Demand for aeronautical product approval

To account for uncertainty in the demand for aeronautical products, three demand scenarios are estimated. The central scenario represents the most probable case, where demand for aeronautical products would continue at the annual average demand, based on historical data. The low scenario represents a case where demand for aeronautical products would be 30% lower than the estimated annual average, and a high scenario represents a case where demand would be 30% higher than the estimated annual average. The results of this sensitivity analysis are presented in Table 5.

Analytical timeframe

In the central scenario, the analytical timeframe is a 10-year planning horizon from 2023 to 2032. Table 5 presents the total costs in 15- and 20-year planning horizons.

Discount rates

The central analysis used a 7% discount rate as recommended by TBS. For the purpose of the sensitivity analysis, Table 5 presents the results should a 3% discount rate have been used, as well as a 10% discount rate.

Table 5: Total cost under different sensitivity (Present value in millions, 2021$)

Demand for Approval Activities
Low (-30%)	$20.42
Mid (Central)	$29.17
High (+30%)	$37.92
Analytical Timeframe
15 years	$37.82
20 years	$44
Discount Rates
3%	$36.8
10%	$24.82

Distributional analysis

The aerospace industry is composed of a broad range of industry sectors. Aircraft manufacturing is a complex and labour-intensive process that involves not only a significant number of large and small aircraft parts, but also extensive design and testing components. Although manufacturers of aircraft and aircraft parts would be the most impacted by the proposed amendments, there are other sectors (inside and outside the aerospace industry) that would be affected by these proposed changes. Table 6 presents costs by industry sectors for domestic and foreign stakeholders.

Table 6: Total cost by industry sector (Present value in millions, 2021$)

Industry Category	Domestic Industry	Foreign Industry	Total Costs	Percentage of Costs
Air carriers and charter services	$2.15	$0.17	$2.32	7.95%
Manufacturers of aircraft and aircraft parts	$15.25	$8.80	$24.05	82.45%
Aircraft overhaul, design and repair	$1.59	$0.37	$1.96	6.71%
Government entities	$0.16	$0.01	$0.17	0.57%
Other (non-aerospace industry)	$0.40	$0.13	$0.53	1.81%
Flight training services	$0.11	$0.04	$0.15	0.52%
TOTAL	$19.66	$9.51	$29.17	100.00%

As presented above, when combining the domestic and foreign industries, the aircraft manufacturing sector would bear the highest portion of the costs (82.45%), followed by air carriers and charters (7.95%), and those involved in overhaul, design and repair (6.71%). The rest of the industries combined would incur approximately 2.89% of the total costs.

Cost-benefit statement (mandatory for significant-cost-impact proposals)

• Number of years: 10 (2023 to 2032)
• Base year for costing: 2023
• Present value base year: 2021
• Discount rate: 7%

Monetized costs (in millions)

Impacted stakeholder	Description of cost	Base year	Final year	Total (present value)	Annualized value
Domestic Industry	Air Carriers and Charter Services	$0.29	$0.16	$2.15	$0.31
	Aircraft and Aircraft Parts Manufacturers	$2.03	$1.10	$15.25	$2.17
	Aircraft Engineering, Design and Maintenance Services	$0.21	$0.12	$1.59	$0.23
Government	Government and Monitoring Entities	$0.02	$0.01	$0.16	$0.02
Other Stakeholders	Other (Individuals, non-aerospace Industry)	$0.05	$0.03	$0.40	$0.06
Domestic Industry	Training Services	$0.01	$0.01	$0.11	$0.02
Foreign Aeronautical Stakeholders	Foreign manufacturers, servicing, training, and monitoring entities	$1.27	$0.69	$9.51	$1.35
All Stakeholders	Total Costs	$3.88	$2.11	$29.17	$4.15

Monetized benefits (in millions)

Impacted stakeholder	Description of Benefits	Base year	Final year	Total (present value)	Annualized value
Government	Government Total Cost Recovery	$1.27	$0.69	$9.51	$1.35

Summary of monetized costs and benefits (in millions)

Impacts	Base year	Final year	Total (present value)	Annualized value
Total costs	$3.88	$2.11	$29.17	$4.15
Total benefits	$1.27	$0.69	$9.51	$1.35
NET IMPACT	−$2.62	−$1.42	−$19.66	−$2.80

Small business lens

Analysis under the small business lens concluded that there would be impacts on small businesses associated with the proposal.

To estimate the cost to domestic small businesses, a comprehensive analysis of recorded company data for each charge type was performed to determine which affected stakeholder would be considered a small business. The analysis suggested that 280 domestic small businesses (45% of affected stakeholders) would be impacted by the changes to fixed, hybrid, and/or travel charges. None of the stakeholders that are expected to use hourly service were determined to be small businesses. Table 7 presents the total anticipated cost per charge type to domestic small businesses.

The changes to the fixed charges and the introduction of hybrid charges would result in an incremental cost to small businesses of $2.92 million over the 10-year analytical period (10% of total cost, and 14.9% of costs to domestic stakeholders).

As discussed in the “Costs by Charge Type” section, 74% ($21.69 million) of the incremental cost from this proposal are attributed to changes to hourly charges, and all of the hourly charge costs will be incurred by large businesses. Since small businesses represent a significant portion of users of fixed, hybrid, and overtime and travel activities, TC has made an effort to keep the charge increase to these activities at a minimum. As an example, the introduction of the hybrid charge would keep the increases to the fixed charge portion of the projects to a minimum but would allow TC to charge an hourly rate when a project requires extraordinary time investment on the part of TC. The charges are designed to recover TC costs, which do not change depending on the size of the business making the request. As such, no discounts or other accommodations were provided for small businesses.

Table 7: Small business lens summary (in millions)

• Number of small businesses impacted: 280
• Number of years: 10 (2023 to 2032)
• Base year for costing: 2023
• Present value base year: 2021
• Discount rate: 7%

Activity	Annualized value	Present value
Hourly	$0	$0
Fixed	$0.05	$0.32
Hybrid	$0.25	$1.74
Travel and overtime	$0.12	$0.86
Total compliance cost	$0.42	$2.92

One-for-one rule

The one-for-one rule does not apply as there would be no incremental change in administrative burden on business. For the purposes of the rule, charges and fees do not meet the definition of administrative burden.

Regulatory cooperation and alignment

These proposed amendments are not related to a work plan or commitment under a formal regulatory cooperation forum. The proposed amendments set out charges based on the Canadian specific regulatory framework.

Alignment with other Civil Aviation Authorities (CAA)

For an organization to sell their aeronautical products, they must obtain approval from the jurisdiction in which they operate. If they’d like to sell their products in another country, they must apply for a foreign validation from the responsible jurisdiction or civil aviation authority of the country. Foreign validations tend to take less time than the initial validation as it is mostly a verification exercise which mostly involves reviewing the documentation of the jurisdiction that provided the original approval. For this reason, for organizations that sell aeronautical products, the total charges for a foreign validation in comparison to the original validation will be less expensive for the client.

Other jurisdictions have adopted a variety of approaches to cost recovery related to aeronautical product approvals. Like Canada, most of the jurisdictions reviewed have adopted a mixture of fixed and hourly fees for performing certification activities:

• The European Union, represented by the European Aviation Safety Agency (EASA), charges a flat fee which ranges from €1,800 ($2,579^{footnote 11} CAD) for an aircraft propeller to €2,055,230 ($2,944,734 CAD) for a large aircraft
• Australia’s Civil Aviation Safety Authority charges an hourly fee of $160 AUD ($147 CAD)
• New Zealand’s Civil Aviation Authority charges $284 NZD ($243 CAD) per hour
• The United States’ Federal Aviation Administration (FAA) does not charge for its certification activities

The most important comparators are the Europe Union and the United States (US). Members of the aerospace industry, particularly large, Original Equipment Manufacturers (OEMs), also want their products certified in the US and the European Union, as these represent significant markets for aeronautical products. The willingness of these companies to pay the significantly higher fees charged by EASA indicates that these companies could afford to pay a much higher hourly fee than the current $40 per hour charged by TC. It is important to note that the Canadian marketplace is a fraction of the size of the European Union. Consequently, companies lack the same economic incentives to accept and pay high fees in Canada, as the Canadian marketplace offers fewer opportunities to commercialize their goods.

Moreover, the FAA tends to have longer wait times to receive approvals than Canada but the fact that the US does not charge fees for certification activities is a counterbalancing factor that must be taken into consideration when revising Canadian fees. The geographical proximity of the US market means that the lack of US fees carries more weight than the willingness of companies to pay the relatively high fees charged by EASA.

Considering how the aforementioned CAAs provide their services, TC has maintained the mixture of fixed and hourly fees and was cautious to avoid raising fees so much that companies that operate in both Canada and the US would seek certification through the FAA rather than TC.

Strategic environmental assessment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required.

Gender-based analysis plus (GBA+)

The proposed amendments, which deal entirely with charges for activities performed for businesses in the aviation sector, are not expected to result in any differential impacts on the basis of identity factors, such as gender, race, sex, age, ethnicity, culture, religion, language, etc.

Implementation, compliance and enforcement, and service standards

Implementation

TC aims for the proposed amendments to come into force on April 1, 2023. An April 1 start date coincides with the start of a new fiscal year, Consumer Price Indexing annual anniversary date, as stated in the SFA, the proposed annual maximum timeframes, and will simplify IT system management as well SFA reporting.

In the case of a fixed charge service request that is in progress but not completed before April 1, 2023, the charge that was applicable at the time the service was requested is payable. In the case of hourly charges, the new hourly rate will be payable, and the number of hours spent on the activity is reset to zero as of April 1, 2023. In the case of hybrid charges, the fixed portion of the charge that was applicable at the time the service was requested is payable and the number of hours spent on the activity is reset to zero as of April 1, 2023.

TC considered phasing in fees; however, the department has delayed the planned implementation of the proposed fees by multiple years thereby providing stakeholder and industry time to prepare for the increases. TC also believes that the proposed fees are appropriate for the affected stakeholders based on the analyses and consultations performed to determine the fees.

Compliance and enforcement

Applicants would be required to submit payment for fixed charges and the first part of the hybrid charges with their application. Payments can be made by credit card, debit card, wire transfer, or direct deposits, and options exist to submit payments online or by telephone. Hourly charges will be invoiced to the applicant every two months. If invoices are not paid within 30 days, daily interest will be incurred. In cases of non-payment, TC has the option to pursue the debt in any court of competent jurisdiction as per subsection 4.4(4) of the Aeronautics Act.

Service standards

Service standards already exist for aeronautical product approvals^{footnote 12}. These service standards have been reviewed to ensure that they continue to be accurate and new service standards have been developed and were published in the fee proposal. There have been some minor changes to the service standards. Table 8 outlines the service standards by item number and description. As per the SFA, if a service standard is not met, TC will remit a portion of the fees paid by that client.

Table 8: Service Standards by Charge

Item	Charge	Service Standard
1	Initial or amended type certificate following a streamlined type design examination of any aeronautical product that are the responsibility of an airworthiness authority other than the Department of Transport	TC will acknowledge receipt of the application and provide the applicant with the name of the responsible designated contact, the project number assigned to the file and the fee information, within 30 business days of receiving an application.
2	Approval of a change to an existing type design approved under a supplemental type certificate, that does not result in the issuance of amended supplemental type certificate	TC will acknowledge receipt of the application and provide the applicant with the name of the responsible designated contact, the project number assigned to the file and the fee information, within 30 business days of receiving an application.
3a	Amended design approval document approved by an employee of the Department of Transport: supplemental type certificate	TC will acknowledge receipt of the application and provide the applicant with the name of the responsible designated contact, the project number assigned to the file and the fee information, within 30 business days of receiving an application.
3b	Amended design approval document approved by an employee of the Department of Transport: supplemental type certificate (single or several product serial number(s))	TC will acknowledge receipt of the application and provide the applicant with the name of the responsible designated contact, the project number assigned to the file and the fee information, within 30 business days of receiving an application.
4	Amended design approval document for a supplemental type certificate (single or several product serial number(s)) associated with modifications to a type design approved by a delegate of the Department of Transport	TC will establish the initial certification basis, pursuant to the Canadian Aviation Regulations, within 120 business days of being satisfied that all necessary regulatory and design standard requirements for the product’s type design have been identified.
5	Validation of a foreign supplemental type certificate intended to secure Canadian acceptance of the foreign supplemental type certificate	TC will establish the initial certification basis, pursuant to the Canadian Aviation Regulations, within 120 business days of being satisfied that all necessary regulatory and design standard requirements for the product’s type design have been identified.
6a	Repair design approval (repair design) issued by an employee of the Department of Transport	TC will establish the initial certification basis, pursuant to the Canadian Aviation Regulations, within 120 business days of being satisfied that all necessary regulatory and design standard requirements for the product’s type design have been identified.
6b	Repair design approval (repair process) issued by an employee of the Department of Transport	TC will establish the initial certification basis, pursuant to the Canadian Aviation Regulations, within 120 business days of being satisfied that all necessary regulatory and design standard requirements for the product’s type design have been identified.
6c	Part design approval issued by an employee of the Department of Transport	TC will establish the initial certification basis, pursuant to the Canadian Aviation Regulations, within 120 business days of being satisfied that all necessary regulatory and design standard requirements for the product’s type design have been identified.
7	Amended repair design approval, approved by an employee of the Department of Transport, to record a repair	TC will establish the initial certification basis, pursuant to the Canadian Aviation Regulations, within 120 business days of being satisfied that all necessary regulatory and design standard requirements for the product’s type design have been identified.
8	Repair design approval or amended repair design approval, approved by a delegate of the Department of Transport, to record a repair	TC will establish the initial certification basis, pursuant to the Canadian Aviation Regulations, within 120 business days of being satisfied that all necessary regulatory and design standard requirements for the product’s type design have been identified.
9	Amended part design approval, approved by an employee of the Department of Transport	TC will establish the initial certification basis, pursuant to the Canadian Aviation Regulations, within 120 business days of being satisfied that all necessary regulatory and design standard requirements for the product’s type design have been identified.
10	Administrative change to any document for which a charge is payable under Schedule V	TC will issue the document within 30 business days after accepting the request.
11	Ministerial exemption under subsection 605.84(3)	TC will issue the document within 60 business days after accepting the request.
12	Alternative means of compliance under subsection 605.84(4)	TC will issue the document within 60 business days after accepting the request.
13	Initial type certificate for aeronautical products that are a) the responsibility of the Department of Transport or b) an airworthiness authority other than the Department of Transport	(a) TC will issue a design approval document within 60 business days after accepting the applicant’s declaration attesting to the demonstration of conformity made pursuant to sub-paragraph 521.33(b) of the Canadian Aviation Regulations. (b) TC will establish the initial certification basis, pursuant to the Canadian Aviation Regulations, within 120 business days of being satisfied that all necessary regulatory and design standard requirements for the product’s type design have been identified.
14	Approvals of all changes in the same year to an existing type design approved under a type certificate for aeronautical products that are the responsibility of the Department of Transport or an airworthiness authority other than the Department of Transport	TC will acknowledge receipt of the application and provide the applicant with the name of the responsible designated contact, the project number assigned to the file and the fee information, within 30 business days of receiving an application.
15	Initial type certificate in respect of an aeronautical product other than one listed in item 13	TC will acknowledge receipt of the application and provide the applicant with the name of the responsible designated contact, the project number assigned to the file and the fee information, within 30 business days of receiving an application.
16	Initial or amended Canadian Technical Standard Order (CAN–TSO) design approval for an Auxiliary Power Unit	TC will acknowledge receipt of the application and provide the applicant with the name of the responsible designated contact, the project number assigned to the file and the fee information, within 30 business days of receiving an application.
17	Assistance provided by an employee of the Department of Transport related to a preparation of an application for certification, whether or not a formal application results	TC will acknowledge receipt of the application and provide the applicant with the name of the responsible designated contact, the project number assigned to the file and the fee information, within 30 business days of receiving an application.
18	Supplemental type certificate approved by an employee of the Department of Transport	TC will acknowledge receipt of the application and provide the applicant with the name of the responsible designated contact, the project number assigned to the file and the fee information, within 30 business days of receiving an application.
19	Supplemental type certificate (single product serial number) approved by an employee of the Department of Transport	TC will acknowledge receipt of the application and provide the applicant with the name of the responsible designated contact, the project number assigned to the file and the fee information, within 30 business days of receiving an application.
20	Supplemental type certificate (several product serial numbers) approved by an employee of the Department of Transport	TC will acknowledge receipt of the application and provide the applicant with the name of the responsible designated contact, the project number assigned to the file and the fee information, within 30 business days of receiving an application.
21	Supplemental type certificate (single or several product serial number(s)) approved by a delegate of the Department of Transport	TC will establish the initial certification basis, pursuant to the Canadian Aviation Regulations, within 120 business days of being satisfied that all necessary regulatory and design standard requirements for the product’s type design have been identified.
22	Validation of a foreign supplemental type certificate intended to secure the issuance of a Canadian supplemental type certificate	TC will acknowledge receipt of the application and provide the applicant with the name of the responsible designated contact, the project number assigned to the file and the fee information, within 30 business days of receiving an application.
23	Initial Canadian Technical Standard Order (CAN–TSO) design approval for an appliance or part other than an auxiliary power unit	TC will acknowledge receipt of the application and provide the applicant with the name of the responsible designated contact, the project number assigned to the file and the fee information, within 30 business days of receiving an application.
24	Amended Canadian Technical Standard Order (CAN–TSO) design approval for an appliance or part other than auxiliary power unit	TC will acknowledge receipt of the application and provide the applicant with the name of the responsible designated contact, the project number assigned to the file and the fee information, within 30 business days of receiving an application.

Contact

Chief, Regulatory Development, Civil Aviation
Safety and Security, Transport Canada
Place de Ville, Tower C, Ottawa, Ontario K1A 0N5
Telephone: (613) 990‑1184 or 1‑800‑305‑2059
Fax: (613) 990‑1198
Email: carrac@tc.gc.ca
Web: www.tc.gc.ca

PROPOSED REGULATORY TEXT

Notice is given that the Governor in Council, pursuant to subsection 4.4(2)^{footnote a} of the Aeronautics Act ^{footnote b}, proposes to make the annexed Regulations Amending the Canadian Aviation Regulations (Part I — 104, Aeronautical Product Approvals).

Interested persons may make representations concerning the proposed Regulations within 70 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to the Chief, Regulatory Development (AARK), Civil Aviation, Safety and Security Group, Department of Transport, Place de Ville, Tower C, 330 Sparks Street, Ottawa, Ontario K1A 0N5 (tel.: 613‑993‑7284 or 1‑800‑305‑2059; fax: 613‑990‑1198; website: www.tc.gc.ca).

Ottawa, June 9, 2022

Wendy Nixon
Assistant Clerk of the Privy Council

Regulations Amending the Canadian Aviation Regulations (Part I — 104, Aeronautical Product Approvals)

Amendments

1 Sections 104.01 to 104.04 of the Canadian Aviation Regulations ^{footnote 13} are replaced by the following:

Preparatory Actions

104.01 The charge for preparatory actions in respect of the issuance, renewal, amendment or endorsement of a document referred to in column I of Schedules I to VII to this Subpart is payable, whether or not the document is issued, renewed, amended or endorsed, and is calculated in accordance with sections 104.02, 104.03 and 104.04, as applicable.

Charges — Schedules I to IV, VI and VII

104.02 The charge imposed in respect of the issuance, renewal, amendment or endorsement or, in the case of a medical certificate, the processing of a document referred to in column I of Schedules I to IV, VI and VII to this Subpart is the charge set out in column II.

Charges — Schedule V

104.03 (1) The charge imposed in respect of an action or in respect of the issuance, renewal, amendment or endorsement of a document referred to in column I of Part I of Schedule V to this Subpart is the charge set out in column II.

(2) The charge imposed in respect of an action or in respect of the issuance, renewal, amendment or endorsement of a document referred to in column I of Part II of Schedule V to this Subpart is the amount calculated on the basis of $105 per hour for each employee of the Department of Transport assigned to the processing of the application, to a maximum number of hours as set out in column III.

(3) The charge imposed in respect of an action or in respect of the issuance, renewal, amendment or endorsement of a document referred to in column I of Part III of Schedule V to this Subpart is the amount calculated by adding

• (a) the charge set out in column II for the first 300 hours of duty time for the employees of the Department of Transport assigned to the processing of the application; and
• (b) once 300 hours has been reached, the charge calculated on the basis of $105 per hour for each additional hour spent by an employee of the Department of Transport on the processing of the application, to a maximum number of hours as set out in column III.

(4) For the purposes of subsections (2) and (3), the maximum numbers of hours set out in column III of Schedule V is calculated for the period beginning on April 1 in one year and ending on March 31 in the next year.

Processing of Applications — Additional Rates

104.04 (1) When an employee of the Department of Transport must travel within Canada under circumstances referred to in subsection (2), or outside of Canada, to process an application for the issuance, renewal, amendment or endorsement of a document, the following charges are payable:

• (a) an amount equivalent to overtime expenses, as calculated in accordance with the appropriate collective agreement, for performing the service or travelling to perform the service when the total duty time for the day exceeds the employee’s normal duty time; and
• (b) an amount equivalent to the transportation, lodging, meal and incidental expenses incurred by the employee, as calculated in accordance with the rates set out in the National Joint Council Travel Directive.

(2) For the purposes of subsection (1), a charge is payable when an employee of the Department of Transport must travel within Canada under the following circumstances:

• (a) the travel is related to previous travel and is undertaken at the request of the applicant or for any reason that arises exclusively from the applicant; and
• (b) at the request of the applicant, the travel is undertaken by an employee of the Department of Transport who would not otherwise be available under Department of Transport policy.

(3) If travel arrangements are changed at the request of the applicant, the following charges are payable:

• (a) an amount equivalent to any increase in the cost of the travel arrangements, including cancellation or change fees;
• (b) an amount equivalent to overtime expenses incurred as a result of the change in travel arrangements, as calculated in accordance with the appropriate collective agreement, for performing the service or travelling to perform the service when the total duty time for the day exceeds an employee’s normal duty time; and
• (c) an amount equivalent to the transportation, lodging, meal and incidental expenses incurred by the employee as a result of the change in travel arrangements, as calculated in accordance with the rates set out in the National Joint Council Travel Directive.

(4) Hours charged under paragraphs (1)(a) and (3)(b) do not count towards the annual maximum number of hours referred to in subsections 104.03(2) and (3).

(5) The Minister shall provide an estimate of the expenses upon request by the applicant.

2 The Regulations are amended by adding the following after section 104.05:

Payment — 30 Days

3 (1) The portion of section 104.06 of the Regulations before paragraph (a) is replaced by the following:

104.06 A charge is payable in Canadian dollars within 30 days after the date indicated on each invoice presented by the Minister, in the case of a charge imposed in respect of the following:

(2) Paragraphs 104.06(b) and (c) of the Regulations are replaced by the following:

• (b) an action or a document referred to in subsection 104.03(2) or (3); and
• (c) the charges referred to in section 104.04.

4 Section 104.07 of the Regulations is replaced by the following:

104.07 (1) In the case of a service that was commenced but not completed before April 1, 2023, the charge imposed as of April 1, 2023 in respect of an action or in respect of the issuance, renewal, amendment or endorsement of a document referred to in column I of

• (a) Part I of Schedule V to this Subpart is the amount payable under section 104.04;
• (b) Part II of Schedule V to this Subpart is the amount payable under subsection 104.03(2), in addition to any amount payable under section 104.04; and
• (c) Part III of Schedule V to this Subpart is the amount payable under paragraph 104.03(3)(b) where, for the purposes of calculating the total number of hours spent on the service, the number of hours spent is reset to zero as of April 1, 2023, in addition to any amount payable under section 104.04.

(2) For greater certainty, the charge imposed under subsection (1) is in addition to all charges payable under these Regulations as they read immediately before April 1, 2023.

5 The references following the headings to Schedules I to III to Subpart 4 of Part I of the Regulations are replaced by “(Sections 104.01 and 104.02)”.

6 The reference following the heading to Schedule IV to Subpart 4 of Part I of the Regulations is replaced by the following:

(Sections 104.01 and 104.02 and paragraph 104.06(a))

7 Schedule V to Subpart 4 of Part I of the Regulations is replaced by the following:

SCHEDULE V

(Sections 104.01 and 104.03 and subsection 104.07(1))

Aeronautical Product Approvals

PART I

Fixed Charge

Item	Column I Document or Action in Respect of Which a Charge Is Imposed	Column II Charge ($)	Column III Maximum Number of Hours per Year
1	Initial or amended type certificate following a streamlined type design examination of any aeronautical product listed in item 13 that is the responsibility of an airworthiness authority other than the Department of Transport	3,544
2	Approval of a change to an existing type design approved under a supplemental type certificate that does not result in the issuance of an amended supplemental type certificate	550
3	One of the following amended design approval documents approved by an employee of the Department of Transport:
	(a) supplemental type certificate	1,587
	(b) supplemental type certificate (single or several product serial number(s))	1,323
4	Amended design approval document for a supplemental type certificate (single or several product serial number(s)) associated with a modification to a type design approved by a delegate of the Department of Transport	450
5	Validation of a foreign supplemental type certificate intended to secure Canadian acceptance of the foreign supplemental type certificate	573
6	One of the following documents when issued by an employee of the Department of Transport:
	(a) repair design approval (repair design)	955
	(b) repair design approval (repair process)	1,273
	(c) part design approval	2,645
7	Amended repair design approval, approved by an employee of the Department of Transport, to record a repair	573
8	Repair design approval or amended repair design approval, approved by a delegate of the Department of Transport, to record a repair	151
9	Amended part design approval, approved by an employee of the Department of Transport	1,323
10	Administrative change to any document for which a charge is payable under this Schedule	158
11	Ministerial exemption under subsection 605.84(3)	595
12	Alternative means of compliance under subsection 605.84(4)	595

PART II

Hourly Charge

Item	Column I Document or Action in Respect of Which a Charge Is Imposed	Column II Charge ($)	Column III Maximum Number of Hours per Year
13	Initial type certificate for aeronautical products that are the responsibility of the Department of Transport or an airworthiness authority other than the Department of Transport, in respect of
	(a) transport category aeroplanes of 150 000 kg or more		16,610
	(b) transport category aeroplanes under 150 000 kg		14,170
	(c) Level 4 normal category aeroplanes with passenger seating configurations of 10 to 19		4,770
	(d) Level 3 normal category aeroplanes with passenger seating configurations of seven to nine		3,600
	(e) Level 2 normal category aeroplanes with passenger seating configurations of two to six		2,440
	(f) Level 1 normal category aeroplanes with passenger seating configurations of no more than one		1,170
	(g) normal category rotorcraft		3,310
	(h) transport category rotorcraft		4,300
	(i) airships		360
	(j) balloons		70
	(k) engines — turbine		1,530
	(l) engines — reciprocating		340
	(m) propellers		120
	(n) gliders or powered gliders		880
14	Approvals of all changes in the same year to an existing type design approved under a type certificate for aeronautical products that are the responsibility of the Department of Transport or an airworthiness authority other than the Department of Transport, in respect of
	(a) transport category aeroplanes of 150 000 kg or more		6,644
	(b) transport category aeroplanes under 150 000 kg		5,668
	(c) Level 4 normal category aeroplanes with passenger seating configurations of 10 to 19		1,880
	(d) Level 3 normal category aeroplanes with passenger seating configurations of seven to nine		1,500
	(e) Level 2 normal category aeroplanes with passenger seating configurations of two to six		976
	(f) Level 1 normal category aeroplanes with passenger seating configurations of no more than one		468
	(g) normal category rotorcraft		1,324
	(h) transport category rotorcraft		1,720
	(i) airships		190
	(j) balloons		30
	(k) engines — turbine		612
	(l) engines — reciprocating		136
	(m) propellers		48
	(n) gliders or powered gliders		360
15	Initial type certificate in respect of an aeronautical product other than one listed in item 13		n/a
16	Initial or amended Canadian Technical Standard Order (CAN-TSO) design approval for an auxiliary power unit		1,530
17	Assistance provided by an employee of the Department of Transport related to the preparation of an application for certification, whether or not a formal application results		n/a

PART III

Hybrid Charge

Item	Column I Document or Action in Respect of Which a Charge Is Imposed	Column II Charge ($)	Column III Maximum Number of Additional Hours per Year
18	Supplemental type certificate approved by an employee of the Department of Transport, in respect of
	(a) transport category aeroplanes of 150 000 kg or more	3,174	4,680
	(b) transport category aeroplanes under 150 000 kg	3,174	2,810
	(c) Level 4 normal category aeroplanes with passenger seating configurations of 10 to 19	3,174	1,880
	(d) Level 3 normal category aeroplanes with passenger seating configurations of seven to nine	3,174	1,500
	(e) Level 2 normal category aeroplanes with passenger seating configurations of two to six	3,174	710
	(f) Level 1 normal category aeroplanes with passenger seating configurations of no more than one	3,174	320
	(g) normal category rotorcraft	3,174	890
	(h) transport category rotorcraft	3,174	1,410
	(i) airships	3,174	190
	(j) balloons	3,174	30
	(k) engines — turbine	3,174	1,530
	(l) engines — reciprocating	3,174	100
	(m) propellers	3,174	30
	(n) gliders or powered gliders	3,174	240
19	Supplemental type certificate (single product serial number) approved by an employee of the Department of Transport, in respect of
	(a) transport category aeroplanes of 150 000 kg or more	1,323	4,680
	(b) transport category aeroplanes under 150 000 kg	1,323	2,810
	(c) Level 4 normal category aeroplanes with passenger seating configurations of 10 to 19	1,323	1,880
	(d) Level 3 normal category aeroplanes with passenger seating configurations of seven to nine	1,323	1,500
	(e) Level 2 normal category aeroplanes with passenger seating configurations of two to six	1,323	710
	(f) Level 1 normal category aeroplanes with passenger seating configurations of no more than one	1,323	320
	(g) normal category rotorcraft	1,323	890
	(h) transport category rotorcraft	1,323	1,410
	(i) airships	1,323	190
	(j) balloons	1,323	30
	(k) engines — turbine	1,323	1,530
	(l) engines — reciprocating	1,323	100
	(m) propellers	1,323	30
	(n) gliders or powered gliders	1,323	240
20	Supplemental type certificate (several product serial numbers) approved by an employee of the Department of Transport, in respect of
	(a) transport category aeroplanes of 150 000 kg or more	2,645	4,680
	(b) transport category aeroplanes under 150 000 kg	2,645	2,810
	(c) Level 4 normal category aeroplanes with passenger seating configurations of 10 to 19	2,645	1,880
	(d) Level 3 normal category aeroplanes with passenger seating configurations of seven to nine	2,645	1,500
	(e) Level 2 normal category aeroplanes with passenger seating configurations of two to six	2,645	710
	(f) Level 1 normal category aeroplanes with passenger seating configurations of no more than one	2,645	320
	(g) normal category rotorcraft	2,645	890
	(h) transport category rotorcraft	2,645	1,410
	(i) airships	2,645	190
	(j) balloons	2,645	30
	(k) engines — turbine	2,645	1,530
	(l) engines — reciprocating	2,645	100
	(m) propellers	2,645	30
	(n) gliders or powered gliders	2,645	240
21	Supplemental type certificate (single or several product serial number(s)) approved by a delegate of the Department of Transport, in respect of
	(a) transport category aeroplanes of 150 000 kg or more	550	4,680
	(b) transport category aeroplanes under 150 000 kg	550	2,810
	(c) Level 4 normal category aeroplanes with passenger seating configurations of 10 to 19	550	1,880
	(d) Level 3 normal category aeroplanes with passenger seating configurations of seven to nine	550	1,500
	(e) Level 2 normal category aeroplanes with passenger seating configurations of two to six	550	710
	(f) Level 1 normal category aeroplanes with passenger seating configurations of no more than one	550	320
	(g) normal category rotorcraft	550	890
	(h) transport category rotorcraft	550	1,410
	(i) airships	550	190
	(j) balloons	550	30
	(k) engines — turbine	550	1,530
	(l) engines — reciprocating	550	100
	(m) propellers	550	30
	(n) gliders or powered gliders	550	240
22	Validation of a foreign supplemental type certificate intended to secure the issuance of a Canadian supplemental type certificate, in respect of
	(a) transport category aeroplanes of 150 000 kg or more	2,381	4,680
	(b) transport category aeroplanes under 150 000 kg	2,381	2,810
	(c) Level 4 normal category aeroplanes with passenger seating configurations of 10 to 19	2,381	1,880
	(d) Level 3 normal category aeroplanes with passenger seating configurations of seven to nine	2,381	1,500
	(e) Level 2 normal category aeroplanes with passenger seating configurations of two to six	2,381	710
	(f) Level 1 normal category aeroplanes with passenger seating configurations of no more than one	2,381	320
	(g) normal category rotorcraft	2,381	890
	(h) transport category rotorcraft	2,381	1,410
	(i) airships	2,381	190
	(j) balloons	2,381	30
	(k) engines — turbine	2,381	1,530
	(l) engines — reciprocating	2,381	100
	(m) propellers	2,381	30
	(n) gliders or powered gliders	2,381	240
23	Initial Canadian Technical Standard Order (CAN–TSO) design approval for an appliance or part other than an auxiliary power unit	2,645	200
24	Amended Canadian Technical Standard Order (CAN–TSO) design approval for an appliance or part other than an auxiliary power unit	1,323	200

8 The references following the headings to Schedules VI and VII to Subpart 4 of Part I of the Regulations are replaced by “(Sections 104.01 and 104.02)”.

Coming into Force

9 These Regulations come into force on April 1, 2023.