Regulations Amending the Motor Vehicle Safety Regulations (Vehicle Exemptions): SOR/2023-222

Canada Gazette, Part II, Volume 157, Number 23

Registration
SOR/2023-222 October 20, 2023

MOTOR VEHICLE SAFETY ACT

P.C. 2023-1051 October 20, 2023

Her Excellency the Governor General in Council, on the recommendation of the Minister of Transport, under subsections 5(1)footnote a, 9(1)footnote b and 11(1)footnote c of the Motor Vehicle Safety Act footnote d, makes the annexed Regulations Amending the Motor Vehicle Safety Regulations (Vehicle Exemptions).

Regulations Amending the Motor Vehicle Safety Regulations (Vehicle Exemptions)

Amendments

1 Subsection 6(11) of the Motor Vehicle Safety Regulations footnote 1 is replaced by the following:

(11) In the case of a model of vehicle in respect of which the Minister has made an exemption order under section 9 of the Act, the compliance label or information label, as the case may be, must also display the words “Exemption/Dispense [indicate here the identifier set out in the exemption order]”.

2 (1) The portion of subsection 13(1) of the English version of the Regulations before paragraph (a) is replaced by the following:

13 (1) Any company applying for an exemption pursuant to section 9 of the Act must submit in writing to the Minister

(2) Subsection 13(2) of the Regulations is repealed.

(3) The portion of subsection 13(3) of the Regulations before paragraph (a) is replaced by the following:

(3) If the basis of an application for exemption is the development of new safety features that are equivalent to or superior to those that conform to the prescribed standards, the applicant must include in the submission to the Minister

(4) The portion of subsection 13(4) of the Regulations before paragraph (a) is replaced by the following:

(4) If the basis of an application for exemption is the development of new kinds of vehicles, technologies, vehicle systems or components, the applicant must include in the submission to the Minister

(5) Subsection 13(5) of the Regulations is replaced by the following:

(5) If the Minister has made an exemption order under section 9 of the Act for a model of vehicle, the company must apply to every vehicle of that model a label that displays the following:

(6) The label must be securely applied to the windshield or a side window of the vehicle. However, in the case of a vehicle without a windshield or side windows or with windshield or side window surfaces that are too small for the label to be applied, the label must be securely applied in a readily accessible location and in such a manner that it is easily readable from outside the vehicle without moving any part of the vehicle.

Coming into Force

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

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

Regulatory amendments to the Motor Vehicle Safety Regulations (MVSR) are needed to ensure alignment with amendments to section 9 (Vehicle Exemptions) of the Motor Vehicle Safety Act (MVSA), which were brought into force on March 1, 2018.

New motor vehicles that are subject to the MVSA must meet applicable safety standards prescribed in the MVSR unless they are specifically granted an exemption from one or more standards. When an exemption is granted, the manufacturer or importer of the vehicle needs to provide information about the exemption in two separate locations on each exempted vehicle: on the permanently mounted compliance label (or information label) and on a temporary window label. Together, the labels (exemption labelling) can help consumers and other vehicle users understand which safety standards the vehicle does not meet.

To date, there have been relatively few exemptions granted from prescribed safety standards. Based on technological advancements, as well as precedents in other jurisdictions, Transport Canada (TC) anticipates that the number and nature of applications for exemption will increase in the future, as will the number of exemptions granted. Such increases are expected to result in practical challenges. For example, the display space available on compliance labels to list the exempted standards is limited. In addition, more flexibility is needed for the temporary labels, which under existing requirements must be securely applied to the windshield or side windows. Since some motor vehicles, e.g. motorcycles, don’t have a windshield or side windows, it is not possible to meet this requirement.

The Regulations Amending the Motor Vehicle Safety Regulations (Vehicle Exemptions) [the Regulations] provide a more compact, more practical exemption-marking requirement on the compliance label or information label and provide alternatives for vehicle models that lack a windshield, side window, or a sufficient glazed surface area to act as a mounting surface for the temporary label.

Background

The MVSR set out the motor vehicle safety standards that must be met by prescribed classes of vehicles. Companies that manufacture or import motor vehicles must certify that their vehicles meet these safety standards. As part of this self-certification, under section 6 of the MVSR, manufacturers are required to apply compliance labels to each vehicle they manufacture to indicate that the vehicle complies with all of the applicable motor vehicle safety standards. The compliance label also displays important information about the manufacturer and the vehicle.

The MVSA creates an exemption scheme. An exemption would relieve a company from the obligation to ensure that a vehicle meets prescribed standards, provided that certain conditions are satisfied. Until recently, the Governor in Council (GIC) held the authority to grant such exemptions. The GIC could issue an exemption if the GIC was convinced that conformity with any prescribed standard would create financial hardship for the company; impede the development of new safety features; or impede the development of new kinds of vehicles, vehicle systems or components. The exemption authority provided the GIC with the power to exempt specific vehicle models from one or more motor vehicle safety standards. An exemption would not have been granted if the exemption would have substantially diminished the safe performance of the model or if the company applying for the exemption had not attempted in good faith to bring the model into conformity with all prescribed standards applicable to it. In addition, an exemption from a safety standard on the basis of substantial financial hardship was limited to small companies.

To date, there have been relatively few granted exemptions from prescribed safety standards. Since the early 1970s, only nine exemptions have been granted, and very few vehicles have been the subject of these exemptions. While about 75 million new vehicles have been sold in Canada since January 1970, only 20 vehicle models (approximately 5 000 vehicles) have been the subject of granted exemptions.

The MVSA and its regulations were originally intended for conventional vehicles, controlled solely by human drivers. With rapid technological change, and the advent of vehicles with increasing levels of automation, it is expected that exemptions from prescribed standards will become increasingly necessary, including to support the development of new kinds of vehicle technologies. Exemptions allow companies more flexibility to develop and implement advanced technologies while giving TC the opportunity to understand the technologies, gather appropriate data and, as appropriate, update the current standards, and/or develop new safety regulations. Given the increasingly complex nature of emerging vehicle technologies, it is anticipated that companies will not just start to make more applications for exemptions generally, but that they will also start to apply for exemptions from multiple safety standards per vehicle model.

Prior to these Regulations, when an exemption was granted, the MVSR required that both the compliance label and the temporary window label include information regarding the exemption. The space available on vehicles to affix the compliance label (as defined in sections 6 and 7 of the MVSR) is generally very limited, so long lists of numbers and titles of exempted safety standards might need to fit in a very small portion of the compliance label. If a stakeholder were granted exemptions from many prescribed standards, it would have been challenging to find sufficient space for such a specification on the compliance label. This could have created various problems, not only for vehicle users who needed to extract the information that is important to them from the labels, but also for companies who needed to design and install these labels.

Some vehicles (such as motorcycles or, potentially in the future, automated vehicles) may either not have enough windshield or side window space for their temporary labels or may not have any windshield or side windows at all. In such a case, it would not have been possible to meet the temporary label requirement.

These reflections, among several others, were part of a comprehensive review of the MVSA that led to the development of Bill S-2, An Act to amend the Motor Vehicle Safety Act and to make a consequential amendment to another Act. Among other things, Bill S-2 amended section 9 (Vehicle Exemptions) of the MVSA in several ways:

An exemption will only apply to the model of vehicle specified in the exemption order.

Objective

The first objective of this regulatory initiative updates the exemption provisions of the MVSR to align them with the exemption updates made to the MVSA as part of Bill S-2.

The second objective of this initiative makes it easier for companies to fit exemption information on the compliance label and to label exempted vehicles within the designated on-vehicle locations.

Description

As a result of Bill S-2 and the new exemption process, certain provisions of the MVSR need to be amended. Each of the amendments included in the Regulations is discussed below.

MVSR, subsection 6(11)

The Regulations update the MVSR to indicate that the Minister makes exemption orders, instead of the GIC.

In addition, fewer details will be required on the compliance label or information label. Previously, the compliance label had to specify, in both official languages, the number and title of the standard in respect of which the exemption had been granted and the short title of the exemption order. To save space on the compliance label, the Regulations specify that only the words “Exemption/Dispense” followed by an identifier for the exemption order are required.

For example, if a company were to apply for an exemption from the Canada Motor Vehicle Safety Standard (CMVSS) 126 prior to this amendment, the compliance label would need to be in both official languages, and would have read as follows:

With this amendment in place, fewer details are required, and the company only needs to specify the following:

This shortened title becomes even more beneficial when multiple exemptions have been granted and there is limited space for them to be affixed.

MVSR, subsection 13(2)

Subsection 13(2) outlines the requirements for making an application for exemption based on substantial financial hardship. The Regulations repeal subsection 13(2) to ensure consistency with the MVSA, as the financial hardship provisions in the MVSA were repealed under Bill S-2.

MVSR, subsection 13(3)

Bill S-2 changed the basis on which an application for an exemption can be made to support the development of new safety features that are equivalent to or superior to those that conform to prescribed standards. The Regulations update the wording in subsection 13(3) to ensure consistency with the wording in section 9 (Vehicle Exemptions) of the MVSA.

MVSR, subsection 13(4)

Bill S-2 changed the basis on which an application for an exemption can be made to support the development of new kinds of vehicles, technologies, vehicle systems or components. The Regulations update the wording in subsection 13(4) to ensure consistency with the wording in section 9 (Vehicle Exemptions) of the MVSA.

MVSR, subsection 13(5)

The Regulations update the wording in subsection 13(5) to indicate that the Minister makes exemption orders instead of the GIC.

In addition, previously, when an exemption order was made, subsection 13(5) specified that a label shall be securely applied by the company to the windshield or side window of every vehicle of that model, specifying

The Regulations stipulate that, in the case of a vehicle with limited windshield or side window surfaces (or without a windshield or side windows), the label will need to be securely applied to any readily accessible and visible external surface, in such a manner that it is easily readable from outside the vehicle without moving any part of the vehicle.

Regulatory development

Consultation

TC informs the automotive industry, public safety organizations, and the general public whenever changes are planned to the MVSR. This is done, in part, through the publication of TC’s Departmental Forward Regulatory Plan. These regulatory plans give stakeholders advance notice of the Department’s planned regulatory agenda and provide the opportunity to comment on the proposed changes. TC also consults regularly, in face-to-face meetings or teleconferences, with the automotive industry, public safety organizations, the provinces, and the territories.

Consultations prior to prepublication in the Canada Gazette, Part I

Since Bill S-2 changed the exemption provisions in the MVSA, TC started the process of updating the MVSR accordingly. This process began in October 2018 with the circulation of a draft exemptions policy proposal among industry stakeholders to gather preliminary feedback, which was used to develop a new exemption process document. Based on feedback from industry, the exemption process was refined and is available on the TC website as the Process for Seeking Exemptions from Canada Motor Vehicle Safety Standards.

The proposed amendments to the MVSR were included in the Departmental Forward Regulatory Plan and were discussed at multiple meetings with stakeholders leading up to the public consultation on TC’s “Let’s Talk Transportation” web page titled “Updating the requirements for exemption labelling.” The consultation was open and available to anyone with Internet access from December 1, 2020, to January 31, 2021. Notification of the online consultation was emailed to those on TC’s Road Safety stakeholder list, which includes

The consultation asked stakeholders for feedback on three questions, while also being open to comments about general issues related to exemption labelling:

  1. What exemption information should be included on the compliance label, and how? Should the compliance label still include a full list, in both official languages, of the numbers and titles of the exempted safety standards?
  2. Should the compliance label include the list of exempted safety standards if the list can only be read by a machine (like a Quick Response [QR] code)? If so, how could this information be made available to consumers?
  3. Are there any other locations for the temporary label other than the windshield or side window?

Three industry groups provided comments. The groups were generally in favour of maintaining regulatory alignment with the United States (U.S.) and urged maximum regulatory flexibility to accommodate future information display technologies and innovative ways of meeting the labelling requirements in the MVSR.

One stakeholder provided TC with feedback on the three consultation questions. The stakeholder’s key messages were the following: reduce the minimum content requirement and provide manufacturers with flexibility on the information they might wish to add to the limited space available on the existing labels. The stakeholder liked the general concept of machine-readable labels but questioned if users from the general public would be able to make use of lists of safety standards. Merely knowing a list of numbers of safety standards may not be enough information, and the users would need to refer to website information to fully understand the safety standards.

A second stakeholder began by defining three guiding principles for the compliance and temporary labels. The first one was a compact, readable compliance label optimized for efficiency. The second one was for label design and placement for the permanent compliance label, which should meet four primary objectives for the consumer: conspicuity, readability, comprehension, and accessibility. The third and final guiding principle was to provide flexibility for the potential implementation of future information technology solutions. This stakeholder also indicated that they would support QR codes as an option for exemption labelling, but such an option would rely on TC taking on the QR code generation and management.

A third stakeholder informed TC that they favoured alignment between Canada and the U.S., and that TC should avoid prescriptive requirements and take a flexible approach. They were in favour of the publication of exemption order information on the TC website. In response to the questions on the informal consultation, they noted that exemption information on the compliance label should be compact and simple. They were in favour of using a QR code or similar means to link the user to the relevant areas of TC’s website. As for the temporary label locations, they asked for maximum flexibility in both location and format.

TC took all comments into consideration during the development of the Regulations. Based on the diverse comments received, TC endeavoured to propose the simplest, smallest exemption labelling solution that would give manufacturers maximum flexibility to add other features (such as machine-readable labels) that they can best program for their individual needs.

TC reconciled stakeholder desires to have maximum flexibility and to have the opportunity to use machine-readable labels with the concern that the basic information set for exemption labelling should be human readable. In light of this, TC proposed a smaller, reduced minimum information set on the compliance label. This information would indicate in both official languages that an exemption has been granted and would identify the exemption by a unique alphanumeric code that would be provided by TC in the exemption order. This unique alphanumeric code would be consistent with exemption identification practices in the other TC modes (aviation, marine, rail), but would also provide sufficient differentiation to make it clear that it is a motor vehicle exemption.

Under this flexible, space-efficient approach, vehicle manufacturers would be free to implement any digital display solution (machine-readable label) they choose. They would remain solely responsible for the implementation and management of such solutions. TC is of the opinion that this approach provides maximum flexibility to cater to the evolution of machine-readable label technologies. The non-prescriptive nature of this approach means that a future regulatory amendment would not be needed to change digital display solutions as they evolve.

Subsection 9(3) [Vehicle Exemptions — Publication] of the MVSA states the following: “Each exemption order must, as soon as feasible, be published through the Internet or by any other means that the Minister considers appropriate.” At the choice of the vehicle manufacturer, the aforementioned unique alphanumeric code could then be linked to the information published under subsection 9(3) of the MVSA in any digital solution the manufacturer chooses.

One stakeholder advocated for common (compliance or certification) labelling within the North American market. TC’s response was that different North American national compliance labels and certification labels must fulfill many requirements not related to exemptions. Their characteristics are defined by different national regulations and, among other things, they must display statements identifying conformity with national motor vehicle safety standards. Creating a common compliance (certification) label for North America would potentially require regulatory changes in all the relevant countries. As a result, common North American labelling was not pursued.

Some stakeholders felt that a reduction in compliance label text would not properly convey information about a granted exemption. They expressed the concern that with such sparse information, consumers would not understand the regulatory exemption information, even if the label listed the numbers of the exempted standards as a minimum. TC is of the opinion that the published exemption order would provide much of the additional information that vehicle manufacturers could reference with the technology of their choice. Vehicle users would be able to readily locate the published information.

One stakeholder proposed a symbolic method to identify an exemption on the compliance label. TC has considered various ways of including symbols on the compliance label that clearly and unequivocally identify a granted exemption. Compliance labels serve many purposes other than identifying exemptions and, due to their size and information density, attempts at adding symbols or amending existing symbols could create conflicts with other functions. Furthermore, TC felt that the proposed compact exemption identifier would, indeed, provide a symbolic identification of a granted exemption. Manufacturers could also voluntarily provide additional information in the owner’s manual, whether this is made available digitally or as printed matter.

As for the temporary label, stakeholders generally commented on their preference for other or novel locations, and wider choices of ways to display the information required by subsection 13(5) of the MVSR. TC believes that the Regulations offer a practical solution that will respond to stakeholder comments.

Prepublication in the Canada Gazette, Part I

The Regulations were prepublished in the Canada Gazette, Part I, on May 7, 2022, followed by a consultation period of 75 days. Comments were received from three stakeholder groups during this time. All three stakeholders, from three separate industry associations, confirmed their support for the Regulations.

One stakeholder further advocated for common (compliance or certification) labelling within the North American market. As previously noted, TC’s response is that different North American national compliance labels and certification labels must fulfill many requirements not related to exemptions. Their characteristics are defined by different national regulations and, among other things, they must display statements identifying conformity with national motor vehicle safety standards. Creating a common compliance (certification) label for North America would potentially require regulatory changes in all the relevant countries. As a result, common North American labelling was not pursued.

The stakeholder also suggested that, for clarity and transparency, TC should consider establishing service standards for processing requests for exemptions from CMVSS. TC acknowledges that, while service standards are important, a service standard cannot be applied for exemption requests due to the varying complexities and the number of exemptions that a company could request. Instead, the process for requesting an exemption from a CMVSS has been shared with the industry and is publicly available on TC’s external website. Additionally, the Regulations specifically amend label requirements; they do not amend or address the existing process for requesting exemptions. Consequently, the establishment of service standards was not considered to be within the scope of the amendments.

Further to the comments received, no changes were deemed necessary to the amendments to the Regulations as proposed and they remain unchanged from prepublication.

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 regulatory initiative is likely to give rise to modern treaty obligations. This assessment examined the geographic scope and subject matter of the initiative in relation to modern treaties in effect, and no modern treaty obligations were identified.

Instrument choice

The Regulations are needed to bring the vehicle exemption provisions of the MVSR into conformity with the amendments made to section 9 (Vehicle Exemptions) of the MVSA as a result of Bill S-2.

Non-regulatory options would not have been sufficient, as the previous requirements in the MVSR with respect to vehicle exemptions would have remained in place. For example, without the amendment to subsection 6(11), it would have appeared that the GIC — not the Minister — would continue to be responsible for making exemption orders pursuant to section 9 of the MVSA. Likewise, the exemption marking requirements on compliance and information labels would have remained unchanged. Similarly, non-regulatory options would not have been sufficient to ensure that stakeholders were in compliance with the vehicle exemption requirements of both the MVSA and the MVSR, as some of the previous MVSR vehicle exemption provisions no longer conformed to the limits authorized under the MVSA. Therefore, non-regulatory options were not considered.

Regulatory analysis

In accordance with the Treasury Board Secretariat Cost-Benefit Analysis Guide, this analysis estimates the impacts of the Regulations on Canadians over a 10-year period, from 2023 to 2032.

Affected stakeholders

The Regulations affect “companies,” as defined by the MVSA, including motor vehicle manufacturers, importers, and distributors. While it is estimated that approximately 1 400 stakeholders in Canada will be affected, it is not possible to estimate the number of stakeholders outside of Canada that may be interested in applying for an exemption in the future.

Companies that build or import motor vehicles must certify that their vehicles meet all applicable vehicle safety standards. A granted exemption would reduce the list of applicable safety standards for a vehicle model. Over the past 20 years, only two exemptions were granted. Based on this information, it is predicted that few exemptions would be issued to companies in the future. However, given the rapid advancements in automotive technologies, it is possible that the number of exemptions issued may increase.

The general Canadian population may wish to obtain information relating to an exemption that has been granted, which would be made publicly available in accordance with subsection 9(3) of the MVSA.

Benefits and costs

The Regulations are expected to simplify and facilitate compliance with labelling requirements for vehicle manufacturing or importing companies that are granted exemptions.

The Regulations require fewer details on the compliance label or information label. To save space on the compliance label, only the words “Exemption/Dispense” followed by an identifier for the exemption order will be required. This will decrease the burden on business in that it will make it easier for companies to fit exemption information on the compliance label or information label applied to the vehicle. It will also create a time savings due to a decrease in text that will need to be prepared.

Vehicle manufacturers are expected to assume minimal incremental costs (time) for existing resources to redesign labels. The minimal costs associated with redesigning labels are expected to be offset by the benefits mentioned above.

Small business lens

Analysis under the small business lens concluded that the Regulations are not expected to impact small businesses.

Over the past 20 years, no small business has applied for an exemption. Given this information, for the 10-year forecasting horizon, it is projected that this trend will persist. However, if a small business were to apply for an exemption, it would be subject to the same conditions as all other applicants. As the Regulations are not expected to impact small businesses, no specific flexibilities were developed for small businesses.

One-for-one rule

The one-for-one rule does not apply, as the Regulations are not expected to result in an incremental change in administrative burden on businesses.

Regulatory cooperation and alignment

In accordance with the Cabinet Directive on Regulation and the Policy on Regulatory Development, an analysis was undertaken to identify regulatory approaches being used in other international jurisdictions to determine where regulatory cooperation or alignment may be possible, while meeting the desired public policy objective. This analysis focused, in particular, on regulations in place or under development for adoption in the United States. Canada’s long-standing practice has been to consider alignment with U.S. regulatory approaches where they are compatible with Canadian requirements, given the integrated nature of the North American automotive market and manufacturing platform.

The analysis reviewed existing formal regulatory cooperation initiatives, specifically the Canada–U.S. Regulatory Cooperation Council, the Canada–European Union Regulatory Cooperation Forum and the federal-provincial-territorial Regulatory Reconciliation and Cooperation Table. The Regulations are not part of the current or future work plans for these initiatives.

Canada’s exemption labelling practices have always been closely aligned with those of the U.S. and will remain aligned under the Regulations. In both countries, exemption labels will be human readable and include a unique exemption identifier. When comparing the Canadian approach under the Regulations to exemption labelling with the current U.S. exemptions labelling requirements, it should be noted that the U.S. certification label requirement is for a unilingual list of exempted standards as well as an exemption identifier. The U.S. is aware of the amendments to the MVSR and has not expressed any concerns about Canada’s approach.

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 Regulations align exemption labelling requirements with the most recent (2018) amendments to the MVSA’s vehicle exemptions section. The goal is to provide flexibility for companies to display exemption information on exempted vehicles, as well as for members of the public to obtain information about the exemption.

The Regulations are not expected to disproportionately impact any group of persons on the basis of identity factors such as gender, race, ethnicity, sexuality, religion, or age. Moreover, during consultations with stakeholders, no concerns were raised about disproportionate impacts based on identity factors.

Implementation, compliance and enforcement, and service standards

Implementation

The Regulations come into force on the day on which they are published in Part II of the Canada Gazette. Should an exemption be granted after that date, the manufacturer or importer of the vehicle would be able to take advantage of the more compact, more practical exemption marking requirement on the compliance label or information label. Further, the Regulations provide flexibility to companies about where they can mount temporary labels on vehicles that do not have a windshield or side window, such as motorcycles.

Compliance and enforcement

Companies would be responsible for ensuring compliance with the exemption labelling requirements of the MVSA and the MSVR. Compliance is verified through oversight inspections carried out by TC. Since the main goal of oversight is to bring a stakeholder into compliance, a range of compliance and enforcement tools are available depending on the severity and frequency of non-compliance incidents. This includes working with stakeholders on means to comply with requirements through awareness and education, which may include guidance material and outreach activities with stakeholders. Any person or company that contravenes a provision of the MVSA or its regulations and is found guilty of an offence would be liable to the applicable penalty set out in the MVSA. In the case of a person found guilty of an offence punishable on summary conviction, the person would be liable to a fine of not more than $4,000 or to imprisonment for a term of not more than six months, or to both. A person found guilty of an indictable offence would be liable to a fine of not more than $20,000 or to imprisonment for a term of not more than two years, or to both. In the case of a company found guilty of an offence punishable on summary conviction, the company would be liable to a fine of not more than $200,000. A company found guilty of an indictable offence would be liable to a fine of not more than $2 million.

Contact

Eddy Merhej
Junior Regulatory Development Engineer
Standards and Regulations
Multi-Modal and Road Safety Programs
Transport Canada
330 Sparks Street
Ottawa, Ontario
K1A 0N5
Email: RegulationsClerk-ASFB-Commisauxreglements@tc.gc.ca