Marine Safety Management System Regulations: SOR/2024-133

Canada Gazette, Part II, Volume 158, Number 14

Registration
SOR/2024-133 June 17, 2024

CANADA SHIPPING ACT, 2001

P.C. 2024-711 June 17, 2024

Her Excellency the Governor General in Council, on the recommendation of the Minister of Transport, makes the annexed Marine Safety Management System Regulations under paragraphs 35(1)(b), (d)footnote a and (e)footnote b, 35.1(1)(d) to (i)footnote c and (k)footnote c, 120(1)(d) to (g)footnote d, (i), (k) and (m), 150(1)(a), 190(1)(b) and 244(f)footnote e to (h)footnote f of the Canada Shipping Act, 2001 footnote g.

Marine Safety Management System Regulations

Interpretation

Definitions

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

Act
means the Canada Shipping Act, 2001. (Loi)
Class 1 vessel
means a Canadian vessel to which Chapter IX of SOLAS applies. (bâtiments de catégorie 1)
Class 2 vessel
means a Canadian vessel, other than a Class 1 vessel, that
  • (a) is 500 gross tonnage or more; or
  • (b) is certified to carry 50 passengers or more as indicated on the vessel’s safety certificate issued under the Vessel Safety Certificates Regulations and is 24 m in length or more. (bâtiments de catégorie 2)
Class 3 vessel
means a Canadian vessel, other than a Class 1 or 2 vessel, that is 24 m in length or more. (bâtiments de catégorie 3)
Class 4 vessel
means a Canadian vessel, other than a Class 1, 2 or 3 vessel, that
  • (a) is more than 15 gross tonnage; or
  • (b) is 15 gross tonnage or less and is a passenger-carrying vessel or a towboat. (bâtiments de catégorie 4)
Class 5 vessel
means a Canadian vessel, other than a Class 1, 2, 3 or 4 vessel, of 15 gross tonnage or less. (bâtiments de catégorie 5)
ISM Code
means the International Management Code for the Safe Operation of Ships and for Pollution Prevention adopted by the International Maritime Organization by resolution A.741(18). (Code ISM)
Minister
means the Minister of Transport. (ministre)
passenger-carrying vessel
means a vessel that is used to carry one or more passengers. (bâtiment transportant des passagers)
ship manager
means a qualified person who is responsible for managing the shore-based and on-board operations of a vessel. (gestionnaire)
SOLAS
means the International Convention for the Safety of Life at Sea, 1974, and the Protocol of 1988 relating to the Convention. (SOLAS)
towboat
has the same meaning as in section 1 of the Navigation Safety Regulations, 2020. (bâtiment remorqueur)

Safety management system

(2) A safety management system is a structured set of policies and procedures whose purpose is to enable the effective implementation of safety and environmental protection policies.

Documents — as amended from time to time

2 Any reference in these Regulations to a document is a reference to that document as amended from time to time.

Documents incorporated by reference

3 For the purpose of interpreting a document incorporated by reference into these Regulations,

Length and gross tonnage

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

Purpose

Canadian vessels

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

Foreign vessels

(2) These Regulations establish the requirement that the authorized representative of a foreign vessel to which Chapter IX of SOLAS applies and that is in Canadian waters operates the vessel in accordance with the procedures and practices described in a documented safety management system.

General

Application

6 Subject to section 7, these Regulations apply in respect of

Non-application

7 These Regulations do not apply in respect of

Prohibition — foreign vessels subject to SOLAS

8 The authorized representative of a foreign vessel must not operate the vessel in Canadian waters unless

Exchange

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

Endorsement

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

Identification of ship manager

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

[12 to 99 reserved]

PART 1
Class 1 Vessels

Issuance — Documents of Compliance

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

Types of vessels

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

Issuance — safety management certificates

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

Documents on board — master

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

Production of documents

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

Audits and reviews

103 (1) The ship manager of a Class 1 vessel must ensure that an internal audit and management review is carried out in accordance with section 12 of Part A of the ISM Code to verify whether the shore-based and on-board operations of the vessel comply with the procedures and practices described in the safety management system that is referred to in subsection 100(1).

Frequency

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

Disclosure to personnel

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

Corrective action plan

(4) The ship manager must ensure that a corrective action plan to address any deficiency identified during an audit is developed and implemented in a timely manner after the day on which the deficiency is identified.

Content of corrective action plan

(5) The ship manager must ensure that the corrective action plan identifies the cause of any deficiency and specifies a process to rectify it and the actions to be taken to prevent a recurrence.

Results kept and produced

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

Prohibition — authorized representative and ship manager

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

Prohibition — authorized representative, ship manager and master

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

[105 to 199 reserved]

PART 2
Class 2 Vessels

Issuance — Canadian Document of Compliance

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

Types of vessels

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

Implementation

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

Issuance — Canadian Safety Management Certificate

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

Implementation

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

Documents on board — master

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

Production of documents

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

Audits and reviews

203 (1) The ship manager of a Class 2 vessel must ensure that an internal audit and management review is carried out in accordance with section 12 of Part A of the ISM Code to verify whether the shore-based and on-board operations of the vessel comply with the procedures and practices described in the safety management system that is referred to in subsection 200(1).

Frequency

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

Disclosure to personnel

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

Corrective action plan

(4) The ship manager must ensure that a corrective action plan to address any deficiency identified during an audit is developed and implemented in a timely manner after the day on which the deficiency is identified.

Content of corrective action plan

(5) The ship manager must ensure that the corrective action plan identifies the cause of any deficiency and specifies a process to rectify it and the actions to be taken to prevent a recurrence.

Results kept and produced

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

Prohibition — authorized representative and ship manager

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

Prohibition — authorized representative, ship manager and master

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

[205 to 299 reserved]

PART 3
Class 3 Vessels

Issuance — Canadian Document of Compliance

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

Types of vessels

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

Implementation

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

Issuance — Canadian Safety Management Certificate

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

Implementation

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

Documents on board — master

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

Production of documents

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

Audits and reviews

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

Evaluation intervals

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

Disclosure to personnel

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

Corrective action plan

(4) The ship manager must ensure that a corrective action plan to address any deficiency identified during an audit is developed and implemented in a timely manner after the day on which the deficiency is identified.

Content of corrective action plan

(5) The ship manager must ensure that the corrective action plan identifies the cause of any deficiency and specifies a process to rectify it and the actions to be taken to prevent a recurrence.

Results kept and produced

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

Prohibition — authorized representative and ship manager

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

Prohibition — authorized representative, ship manager and master

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

[305 to 399 reserved]

PART 4
Class 4 Vessels

Issuance — Canadian Document of Compliance

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

Types of vessels

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

Implementation

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

Issuance — Canadian Safety Management Certificate

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

Implementation

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

Safety management system

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

Instructions and procedures — paragraph 402(b)

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

Procedures — paragraph 402(e)

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

Evaluations

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

Evaluation intervals

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

Disclosure to personnel

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

Results kept and produced

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

Documents on board — master

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

Production of documents

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

Prohibition — authorized representative and ship manager

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

Prohibition — authorized representative, ship manager and master

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

[408 to 499 reserved]

PART 5
Class 5 Vessels

Safety management system

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

Implementation

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

Instructions and procedures — paragraph (1)(b)

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

Procedures — paragraph (1)(e)

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

Documents on board — master

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

Production of documents

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

Prohibition — authorized representative and ship manager

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

Prohibition — authorized representative, ship manager and master

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

[503 to 599 reserved]

PART 6
Transitional Provisions, Consequential Amendment, Repeal and Coming into Force

Transitional Provisions

Documents — Safety Management Regulations

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

Certificates — Safety Management Regulations

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

Part 2 — passenger-carrying vessels

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

Part 2 — non passenger-carrying vessels

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

Part 3 — passenger-carrying vessels

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

Part 3 — non passenger-carrying vessels

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

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

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

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

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

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

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

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

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

Part 5 — other vessels of 15 gross tonnage or less

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

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

606 Part 12 of the schedule to the Administrative Monetary Penalties and Notices (CSA 2001) Regulations footnote 1 is replaced by the following:

PART 12

Violations of the Marine Safety Management System Regulations
Item

Column 1

Provision of the Marine Safety Management System Regulations

Column 2

Range of Penalties ($)

Column 3

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

Repeal

607 The Safety Management Regulations footnote 2 are repealed.

Coming into Force

Publication

608 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.)

Executive summary

Issues: Canada is obligated, through Chapter IX of the International Convention for the Safety of Life at Sea, 1974 (SOLAS), to require all Canadian vessels subject to SOLAS to have a safety management system (SMS) in place. The former Safety Management Regulations  (SOR/98-348) made under the Canada Shipping Act, 2001 (CSA 2001) gave effect to this commitment under the SOLAS convention; however, SMS only applied to a small portion of the Canadian fleet: only SOLAS vessels were required to have an SMS, creating a disparity with similarly sized non-SOLAS vessels. An SMS is recognized by the International Maritime Organization (IMO) as an effective means for preparing for, and responding to, safety incidents which may occur on-board vessels which improves overall safety culture.

Since 2004, the Transportation Safety Board of Canada (TSB) has put forward recommendations calling on Transport Canada (TC) to implement regulations requiring all commercial operators in the marine industry to have formal safety management processes, and effectively oversee these processes (recommendations M04-01 and M17-02). Further, in 2023, the TSB issued a recommendation to require authorized representatives of tugs of 15 gross tonnage or less to assess the risks present in their operations, including the suitability of their tugs for the specific towing operations they are undertaking (recommendation M23-02), which is a key component of a safety management system.

Description: The Marine Safety Management System Regulations (the Regulations) expand SMS requirements to the majority of Canadian vessels. This regulatory proposal repeals the former Safety Management Regulations and replaces them with the Regulations.

The Regulations divide the Canadian fleet into five classes, each with varying levels of SMS and oversight requirements. The class in which a vessel is placed will be determined by its size, type, and operation. A formal SMS outlines documents and reinforces processes and procedures designed to promote and enable a culture of safety and responsibility as part of the day-to-day operations on a vessel. Responsibility for implementing the SMS will primarily rest with the vessel’s ship manager (i.e. the individual/entity responsible for shore-based and on-board operations), should one be appointed by the vessel’s Authorized Representative (AR) [i.e. the vessel owner]. The ship manager of a vessel will develop, implement, and maintain a documented safety management system that addresses the shore-based and on-board operations of the vessel.

The process for certification of the SMS, and the frequency of inspection, as well as verification of its implementation (e.g. endorsement) for each vessel class will be determined by the Minister of Transport (the Minister), as per authorities granted under sections 16 and 17 of the CSA 2001. The details of the policy and procedures for these elements are described in a Transport Publication 15566, Guide for Canadian Vessels’ Operators for Compliance with the Marine Safety Management System Regulations (MSMSR Guide), which is available to stakeholders on the TC website.

The MSMSR Guide outlines the procedure for ship managers/ARs to submit a documented SMS, demonstrating compliance with the Regulations, to the responsible authority (a Recognized Organization or TC, as applicable) to receive certification for vessels in Classes 1, 2, 3, 4A, and vessels in Class 4B carrying more than 12 passengers. To receive certification for Class 4B vessels, other than those carrying more than 12 passengers, the MSMSR Guide outlines the procedures for ship managers/ARs to submit a Declaration of Initial Compliance to the responsible authority. The responsible authority will be responsible for issuing the certificates. While the Regulations require Class 5 vessels to develop and implement an SMS, they do not require certification.

Ship managers/ARs of vessels in Classes 1 to 3 need to adhere to specific requirements of the International Safety Management (ISM) Code, while those of vessels in Classes 4 and 5 need to follow Canadian requirements as outlined in the Regulations. Functional requirements, fundamental for any formal SMS, will be implemented on-board all vessels to which the Regulations apply.

The Regulations introduce transition periods for coming into compliance with the new SMS requirements, based on the vessel type, operation or length. Vessels in Class 1 are already required to comply with the ISM Code; therefore, there will be no transition period for such vessels. Vessels under Classes 2 to 5 have varying transition periods, up to a maximum of three years after the coming into force date.

Compliance with the Regulations will be enforced through risk-based inspections by marine safety inspectors.

Part 12 of the Schedule to the Administrative Monetary Penalties and Notices (CSA 2001) Regulations is also being amended to introduce new violations and penalties associated with the Regulations.

The Regulations will continue to require that foreign vessels, subject to Chapter IX of SOLAS, have a documented SMS to operate in Canadian waters.

Rationale: The former Safety Management Regulations, published in 1998, applied to approximately 96 vessels in the Canadian fleet. These Regulations apply to approximately 16 000 Canadian vessels, including all commercial passenger vessels, aiming to ensure a larger portion of Canada’s fleet adheres to a higher safety standard. Canada’s approach to applying formal SMS requirements to additional vessels, dependent on their size and type of operation, is consistent with the intent of safety management regulations implemented internationally.

Stakeholders (i.e. the maritime industry, labour unions, seafarers, federal, provincial, municipal governments, etc.) have been consulted on the Regulations, with many expressing support. Details regarding the nature and issuance of certificates, as well as the oversight and accountability of the ship manager/AR, were common themes discussed during consultations.

Vessel owners will incur costs associated with developing and implementing an SMS, as well as complying with the Regulations. The total cost associated with the Regulations is estimated at $100.40 million (present value in 2021 Canadian dollars, discounted to the base year of 2024 at a 7% discount rate) between 2024 and 2035. Of this cost, $94.61 million would be incurred by ARs (businesses and provincial and municipal governments) and the remaining $5.79 million would be incurred by the Government of Canada.

It should be noted that $2.00 million of the total cost is expected to be associated with service fees (prescribed under the Board of Steamship Inspection Scale of Fees) paid by ship managers/ARs to TC for inspection and certification services.

While safety benefits associated with the Regulations are not monetized due to limited data, it is estimated that an annual reduction of 70 (25.6%) marine occurrences would offset the costs. Even though benefits could not be monetized, it is expected that the overall benefits associated with the Regulations will outweigh the monetized costs.

The one-for-one rule applies, as the Regulations will result in an incremental change in administrative burden on business. The annualized administrative burden cost is estimated to be $317,528 (present value in 2012 Canadian dollars, discounted to the base year of 2012 at a 7% discount rate) between 2024 and 2033. The Regulations will also repeal an existing regulation and replace it with a new regulatory title, which results in no net increase or decrease in regulatory titles.

It is expected that 5 209 small businesses will incur costs, which are estimated to be $69.31 million in total.

Issues

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

The Regulations aim to address two main issues:

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

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

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

Outstanding recommendations from the TSB

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

In 2023, the TSB issued a recommendation (M23-02), calling on TC to establish requirements for authorized representatives of tugs of 15 GT or less to assess the risks present in their operations, including the suitability of their tugs for the specific towing operations they are undertaking, which is a key component of a safety management system.

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

Background

International Maritime Organization (IMO) and SOLAS

The IMO is the specialized agency within the United Nations with responsibility for the safety and security of international shipping. The IMO has 175 member states and manages approximately 50 conventions and protocols related to shipping safety and environmental protection. In response to numerous, significant marine accidents, the IMO introduced formal SMS requirements in 1993 through the incorporation of the ISM Code into Chapter IX of SOLAS. As a result, companies that own and operate vessels that are subject to SOLAS (i.e. SOLAS vessels) are required to implement an SMS on-board that is in accordance with the ISM Code.

SOLAS applies to

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

Marine safety occurrences

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

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

Safety management systems and former Safety Management Regulations (SOR/98-348)

A documented SMS is a comprehensive set of procedures, objectives, and responsibilities designed to enable a ship manager to effectively implement a safety and environmental protection policy. An SMS is intended to serve as a mechanism to identify and assess hazards, analyze risks, and implement measures to control and mitigate those risks. In practice, an SMS is a collection of procedures and instructions tailored to reflect the operations on a particular vessel that are followed by both personnel on-board the vessel and on shore. Day to day, an SMS aims to keep a vessel’s operation safe, reduce the risk of accidents, and ensure that there is competent personnel that have effective management systems in place, and the necessary resources, to support the implementation and maintenance of a safe working environment.

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

Under the former Regulations, once an SMS was reviewed and an audit was conducted to verify the requirements, the company would be issued a Document of Compliance (DOC) valid for five years. This DOC would be endorsed annually on completion of a successful audit if the requirements were met. On successful completion of an audit on-board, a vessel would be issued a Safety Management Certificate (SMC) valid for five years that would be endorsed once every five years.

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

Transportation Safety Board

The TSB is an independent agency that advances transportation safety by investigating occurrences in the air, marine, pipeline and rail modes of transportation. In doing so, the TSB serves to identify safety deficiencies, as evidenced by transportation occurrences, and publicly releases recommendations designed to eliminate or reduce such safety deficiencies.

The TSB maintains an evergreen Watchlist which identifies key safety issues that need to be addressed to improve safety across Canada’s transportation sector. The issues identified on this Watchlist are supported by a combination of individual investigation reports and recommendations produced by the TSB.

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

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

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

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

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

Objective

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

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

Description

The Regulations expand formal documented SMS requirements to non-SOLAS vessels using a class structure. Each class has class-specific SMS requirements based on vessel size and type of operation. For larger vessels (Classes 1 to 3), the Regulations align with the ISM Code requirements. For smaller vessels (Classes 4 and 5), the requirements are derived from the ISM Code, leaving out some of the more costly components, while still maintaining critical aspects necessary for ensuring safe operating procedures.

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

The Regulations do not apply to

At prepublication, the proposed Regulations included an exemption for vessels owned or operated by a foreign state and used only in government non-commercial service. This exemption is no longer necessary, as the Regulations were updated after the prepublication and will no longer apply to foreign vessels other than those subject to Chapter IX of SOLAS. This change to the scope of application of the Regulations is described in greater detail below.

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

In order to meet the requirements of the Regulations, a documented SMS must contain

The MSMSR Guide provides further detail on the elements to be contained in an SMS. The MSMSR Guide also outlines the following information that should be included as part of the application to receive a certification:

The MSMSR Guide is available to stakeholders on the TC website, in both official languages.

Ship managers/AR should also ensure that guidelines regarding personnel management practices (i.e. staffing, recruitment) are included in their documented SMS. This would ensure that personnel directly related to safety and risk management have the required qualifications, skills, training, and experience to carry out their duties.

Ship managers/AR of Class 1 and 2 vessels are required to designate a person ashore, as indicated in the ISM Code. A “Designated Person Ashore” provides a link between the company and those on-board a vessel. The responsibility and authority of this individual include monitoring the safety and pollution-prevention aspects of the operation of each vessel and ensuring that resources and shore-based support are applied.

Table 1 below summarizes the requirements for each vessel class.

Table 1: Summary of requirements by vessel class
Vessel Class Definition SMS development and certification requirements
Class 1 SOLAS vessels including those with gross tonnage of 500 or more engaged on an international voyage
  • Develop an SMS that is in compliance with the requirements of Chapter IX of the SOLAS and the ISM Code.
  • Operate the vessel in accordance with a documented SMS.
  • Designate a person, or persons, ashore having direct access to the highest level of management.
  • Maintain SMS documentation, including certification (i.e. maintain SMS records and ensure all documentation remains up to date and reflects any changes in procedures).
  • Evaluate the effectiveness of the SMS, disclose its result to all personnel that have responsibilities with the SMS and take corrective actions to address any deficiencies identified.
Class 2
  • Canadian passenger and non-passenger vessels of 500 gross tonnage or more, not covered under Class 1
    • or
  • Canadian vessels 24 metres in length or more that are certified to carry 50 passengers or more
  • Develop an SMS that is in compliance with Part A of the ISM Code.
  • Operate the vessel in accordance with a documented SMS.
  • Designate a person or persons ashore having direct access to the highest level of management.
  • Maintain SMS documentation, including certification (i.e. maintain SMS records and ensure all documentation remains up to date and reflects any changes in procedures).
  • Evaluate the effectiveness of the SMS, disclose its result to all personnel that have responsibilities with the SMS and take corrective actions to address any deficiencies identified.
Class 3 Canadian passenger and non-passenger vessels of less than 500 gross tonnage, which are 24 metres in length or more, and are not covered under Classes 1 and 2
  • Develop an SMS that is in compliance with Part A of the ISM Code, aside from sections 4 and 12 which outline requirements for a designated person ashore and management reviews, respectively.
  • Operate the vessel in accordance with a documented SMS.
  • Maintain SMS documentation, including certification (i.e. maintain SMS records and ensure all documentation remains up to date and reflects any changes in procedures).
  • Evaluate the effectiveness of the SMS, disclose its result to all personnel that have responsibilities with the SMS and take corrective actions to address any deficiencies identified.
Class 4A Canadian vessels of more than 15 gross tonnage that are not covered in Classes 1 to 3
  • Develop an SMS adapted for the operation of the vessel (i.e. vessel size, type, expected complexity of the operation, etc.).
  • Operate the vessel in accordance with the documented SMS.
  • Maintain SMS documentation, including certification (i.e. maintain SMS records and ensure all documentation remains up to date and reflects any changes in procedures).
  • Evaluate the effectiveness of the SMS, disclose its result to all personnel that have responsibilities with the SMS and take corrective actions to address any deficiencies identified.
Class 4B Canadian passenger vessels up to 15 gross tonnage and towboats up to 15 gross tonnage, not covered under Classes 1 to 3.
  • Develop an SMS adapted for the operation of the vessel (i.e. vessel size, type, expected complexity of the operation, etc.).
  • Operate the vessel in accordance with the documented SMS.
  • Maintain SMS documentation, including certification (i.e. maintain SMS records and ensure all documentation remains up to date and reflects any changes in procedures).
  • Evaluate the effectiveness of the SMS, disclose its result to all personnel that have responsibilities in the SMS and take corrective actions to address any deficiencies identified.
Class 5 Canadian non-passenger vessels up to 15 gross tonnage that are not covered under Classes 1 to 4
  • Develop an SMS adapted for the operation of the vessel (i.e. vessel size, type, expected complexity of the operation, etc.).
  • Operate the vessel in accordance with the documented SMS.
  • Maintain SMS documentation, (i.e. maintain SMS records and ensure all documentation remains up to date and reflects any changes in procedures).

Certification process

The certification process will involve the issuance of Canadian Maritime Documents (CMDs) under the Regulations. The MSMSR Guide outlines the procedures for the verification and certification functions required under the Regulations.

The CMDs include a Canadian Document of Compliance (CDOC) and a Canadian Safety Management Certificate (CSMC). Once issued, these CMDs will be valid for up to five years.

Transport Canada has delegated certain statutory inspections and certification functions to recognized organizations (RO) and made it obligatory for ship managers/ARs of a Canadian registered vessel of 24 metres in length and above to obtain their CMDs from these ROs.

The responsibilities for the issuance and endorsement of CMDs, as well as carrying out inspections and reviewing an SMS, as applicable, will be divided as follows:

While vessels in Class 5 are required to develop an SMS, they are not required to submit it to an RO, nor do they require certification. Verification of SMS implementation will be included when a vessel is inspected.

The cost for certification and inspection will vary by vessel class. Vessels that will be inspected by ROs (i.e. delegated vessels, mainly vessels 24 metres in length or more) will be subject to fees as outlined by the RO.

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

Initial issuance of CMDs

While the Regulations outline the need for ship managers/ARs to submit an application for CDOCs or CSMCs, the MSMSR Guide details the process for the issuance and renewal of these documents. The MSMSR Guide describes the procedures for ship managers/ARs to submit relevant documents to the applicable responsible authority (an RO or TC), in order for the Minister to determine if the ship manager/AR meets all the requirements in the Regulations. Upon confirmation that the requirements are met, a CDOC will be issued. To be issued a CSMC (required for each vessel), all vessels of Classes 2 to 4 will need to have a valid CDOC.

The MSMSR Guide describes the procedures for ship managers/ARs of vessels in Classes 2, 3, 4A, and vessels in Class 4B carrying more than 12 passengers, to submit a documented SMS to the responsible authority. For vessels in Class 4B, other than those carrying more than 12 passengers, the MSMSR Guide describes the procedure to submit a Declaration of Initial Compliance to the responsible authority. Based on these submissions, the Minister will determine if ship managers/ARs meet the requirements of the Regulations requirements. If the Regulations are met, the applicable CMDs will be issued.

For Class 1 vessels, the process for issuance remains unchanged.

Renewal of CMDs

Ship managers/ARs of vessels in Classes 2 and 3, who wish to renew a CMD will be required to ensure that an inspection to verify the implementation of the SMS is conducted by the authority responsible for issuing the CMD. Ship managers/ARs of vessels in Class 4 who wish to renew a CMD will be required to submit a Declaration of Continuous Compliance. The renewal of CMDs for Class 1 vessels remains unchanged. See Table 2 below for more details.

Table 2: Certification process for vessels in Classes 2 to 4
Canadian Maritime Documents Class 2 Class 3 Class 4

Class 4A vessels or;

Class 4B vessels carrying more than 12 passengers

 Class 4B vessels, other than those carrying more than 12 passengers
CDOC Initial application Ship manager/AR to submit a documented SMS for the shore-based and on-board operation of a specific vessel or fleet of vessels.   Ship manager/AR to submit a Declaration of Initial Compliance.
Application for renewal Ship Manager/AR to ensure that the implementation of the SMS is inspected for the shore-based operation. Ship manager/AR to submit a Declaration of Continuous Compliance for the shore-based operation.
CSMC Initial application   Ship manager/AR to hold a valid CDOC and submit an application for a specific CSMC.
Application for renewal Ship manager/AR to ensure that the implementation of the SMS for the on-board operation on a specific vessel is inspected. Ship manager/AR to submit a Declaration of Continuous Compliance for a specific vessel.

Endorsement process

Given their size and operation type, certificates issued to vessels in Classes 2 and 3 will have to be periodically endorsed to remain valid. Certificates for Class 4 vessels will not require periodic endorsement. The schedule for certificate endorsement is outlined in Table 3.

Table 3: Endorsement of certificates schedule, by vessel class
  Class 2 Class 3 Class 4 Class 5
Initial CDOC Annual endorsement
  • 1st endorsement 24 months after issuance
  • 2nd endorsement 36 months after issuance
 No endorsement required N/A
Renewed of CDOC One endorsement between 24 and 36 months after issuance Endorsement at 24 months after issuance No endorsement required N/A
Initial CSMC
  • 1st endorsement at 24 months after issuance
  • 2nd endorsement at 36 months after issuance
 No endorsement required No endorsement required N/A
Renewed CSMC No endorsement required No endorsement required No endorsement required N/A

The MSMSR Guide outlining the procedures for the verification and certification functions required under the Regulations is publicly available on the TC website.

Further details surrounding certification dates and the implementation process are provided in the “Implementation, compliance and enforcement, and service standards” section below.

Compliance

The date by which a vessel will need to be in compliance with the Regulations is determined by a number of factors such as its class and type (i.e. passenger and non-passenger) or length (i.e. up to 7 m or more than 7 m), as well as its certification and registration schedule.

In addition, given the scope of vessels captured under Classes 4 and 5, transitional provisions for compliance of up to three years after the coming into force of the Regulations were put in place. This will ensure ship managers/ARs of vessels in these classes have sufficient time to develop and implement an SMS.

Foreign vessels

The Regulations require that foreign vessels, subject to Chapter IX of SOLAS, hold proper ISM certificates, issued in respect of the vessel by the government of the State whose flag the vessel is entitled to fly, to operate in Canadian waters. This remains unchanged from the former Regulations. These foreign vessels will not have an implementation period as they are already required to have an SMS to operate.

Changes since prepublication in the Canada Gazette, Part I

This approach for foreign vessels differs from what was originally proposed for the Regulations at prepublication in the Canada Gazette, Part I. Previously, it was proposed that all foreign vessels, except those owned or operated by a foreign state and used only in government non-commercial service, would be required to have a documented SMS to operate in Canadian waters. Following prepublication, the decision was made to remove the application of the Regulations to foreign vessels, other than those that are subject to Chapter IX of SOLAS. The rationale for this decision is explained in further detail in the “Consultation” section below.

Administrative monetary penalties

Part 12 of the Schedule to the Administrative Monetary Penalties and Notices (CSA 2001) Regulations is also amended to establish violations and penalties associated with the Regulations. In total, there are 72 new violations and penalties. Ship managers/ARs are prohibited from operating a vessel unless the vessel operates in accordance with the procedures and practices set under the SMS requirements of their applicable class. Compliance timelines for vessels by class and type, as per the transitional provisions, are listed in Table 23 of this document.

Changes since prepublication in the Canada Gazette, Part I

In the Regulatory Impact Analysis Statement published in the Canada Gazette, Part I, it was stated that there would be 74 new violations and penalties introduced to Part 12 of the Schedule to the Administrative Monetary Penalties and Notices (CSA 2001) Regulations. This was an error, as only 73 new violations were being proposed in the Regulations that were prepublished in the Canada Gazette, Part I. Following updates to the Regulations since prepublication, the number of new violations and penalties being introduced has been reduced to 72. This is to reflect the updated scope of the Regulations which no longer apply to foreign vessels, other than those subject to Chapter IX of SOLAS.

Regulatory development

Consultation

SMS pilot project 2009

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

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

Canadian Marine Advisory Council

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

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

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

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

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

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

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

International consultations

Most internationally impacted vessels will be from the United States (U.S.). In a virtual meeting with the U.S. Coast Guard (USCG) held in June 2021, TC discussed the application of the Regulations. Further consultations with the U.S. Coast Guard occurred during the Canada Gazette comment period in fall 2022, which are outlined below.

COVID-19 pandemic

Virtual consultations with stakeholders on the regulatory proposal occurred between 2020 and 2022. During these sessions, stakeholders were presented with enhanced details on the Regulations and were given the opportunity to raise any questions or concerns. Stakeholders did not raise any concerns during any of these sessions specific to the COVID-19 pandemic and the impact it may have on their ability to sustainably implement the Regulations. Comments instead focused on specific details and responsibilities of vessel owners and operators to be in compliance with the new requirements.

Prepublication in the Canada Gazette, Part I

The proposed Regulations were prepublished in the Canada Gazette, Part I, on June 25, 2022, with a 75-day comment period. A total of 15 different stakeholder groups consisting of marine industry organizations, labour unions, pilotage authorities, United States marine industry, and Fisheries and Oceans Canada – Canada Coast Guard (DFO-CCG) submitted comments.

Approximately 80% of commenters were supportive of, or did not oppose, the proposed introduction of SMS requirements. One commenter even commended TC’s efforts to take a leadership role in advancing SMS requirements. While most commenters were supportive, about half of them noted some concerns with specific requirements and/or recommended minor changes to the proposed Regulations. Three stakeholders sought further clarification and/or justification for certain requirements.

Two stakeholders opposed the proposed Regulations, expressing concerns about their compatibility with the United States regime, and noting that the proposed Regulations would result in negative impacts to foreign vessels. Another stakeholder questioned the degree to which the proposed Regulations would actually result in any improvement to safety culture.

As many of the stakeholders shared similar concerns, the issues are grouped together by theme and summarized below.

Cost-benefit analysis

Two stakeholders raised concerns about the accuracy of the estimated costs. One stakeholder felt that the wage rates and time estimated for each activity related to SMS were unrealistic, while the other stakeholder noted that there could be revenue loss due to on-board events such as audits and inspections.

Following these comments, TC re-evaluated the average wage rates for individuals responsible for certain SMS activities (e.g. development, implementation, and maintenance) for each vessel class, and agreed that projected wage rates for individuals responsible for SMS activities for Classes 4 and 5 vessels were below the industry average. As a result, the average wage rate for these employees has been adjusted in the cost-benefit analysis (see “Regulatory analysis” section for detail). However, TC acknowledges that factors related to the actual time and cost of carrying out SMS activities for individual stakeholders could vary. The type of operation within a vessel class and vessel type varies considerably and could affect the level of effort required. A sensitivity analysis was conducted to test uncertainties around key variables (see “Regulatory analysis — Sensitivity analysis” section for detail).

Regarding the loss of revenue due to audit or inspection activities on-board, TC is of the view that an audit or inspection related to the Regulations would not be a singular event: audits and inspections would be conducted in conjunction with other existing oversight activities and, similarly, should be planned to minimize interference with operations. As ship managers already schedule days for oversight activities to be carried out, revenue loss due to the additional audit or inspection activities related to the Regulations is expected to be minimal. Further, it is not anticipated that additional inspection activities related to the Regulations would have any measurable impact on the crew’s ability to carry out their regular activities: TC expects that, should inspection activities for this proposal or other regulations create a conflict with a vessel’s operations, ship managers could reschedule them. These potential impacts are discussed qualitatively in the cost-benefit analysis (See “Regulatory analysis” below for detail).

Oversight and compliance

Stakeholders raised concerns about TC’s existing oversight regime and the availability of resources to provide oversight for these Regulations. Stakeholders also expressed concerns about the risk-based inspection model that is currently used for small vessels. One stakeholder noted that, without an appropriate level of inspection and monitoring, the benefits of the Regulations, especially in the small vessel sector, would be negligible.

Transport Canada acknowledges the concerns of industry regarding the department’s oversight capacity. Oversight and enforcement activities will be coordinated with those that are already being carried out under other regulations, such as the Vessel Safety Certificates Regulations. In addition, oversight and enforcement activities will be supported through a compliance inspection program that covers all regulations, including a Concentrated Inspection Campaign (CIC).footnote 3 Transport Canada will be looking into planning a CIC for the Regulations after their coming into force, similar to the campaign that was carried out in 2021 when the Fishing Vessel Safety Regulations were put into place.

Transport Canada inspectors will undergo training to ensure they are well equipped to monitor and enforce the Regulations. Training for inspectors will take place before new SMS requirements come into force for most vessels. Inspections will be adapted to include the requirements of the Regulations.

In an effort to address the ongoing concerns regarding oversight, TC has committed to evaluating its current oversight regime and is currently undergoing a review of the program as part of the recently renewed Oceans Protection Plan (OPP). The OPP project, Strengthening and Modernizing Canada’s Domestic Vessel Oversight Regime, aims to address growing pressures to expand domestic oversight in Canadian waters, most notably for small vessels such as tugs and fishing vessels. Transport Canada is proposing a review of the entire oversight regime by 2027. Stakeholders will be engaged throughout the project and TC expects to share final results in 2027.

Safety culture

About a third of stakeholders who commented underscored the importance of safety culture in the marine industry and were supportive of TC’s proposed requirements to expand formal SMS requirements to a greater portion of vessels operating in Canadian waters.

Stakeholders raised concerns that the proposed Regulations did not include requirements for crew involvement in the SMS. Stakeholders suggested requiring audits and drills for crew on-board vessels; requiring crew training and familiarization with the SMS procedures; and requiring the participation of a vessel’s health and safety committee in reviews of audits, drills and corrective action.

Transport Canada is committed to supporting and promoting the development of a positive safety culture and continues to work on initiatives to promote safety and security. While not directly required by the Regulations, ship managers/ARs may involve, at their discretion, crew members in the development of their SMS. ARs are required under the CSA 2001 to ensure crew members receive safety training, which may include familiarization with a vessel’s SMS.

Further, the Regulations require that a ship manager/AR develop procedures for review and continuous improvement of the SMS and ensure that the SMS’ effectiveness is evaluated on a regular basis. The Regulations also require that results of the audit and management reviews be disclosed to all personnel that have responsibilities in the SMS to ensure that crew remain aware of any changes to SMS requirements.

In addition to the general requirement under the CSA 2001, training and knowledge requirements for crew on-board vessels are set out in the Marine Personnel Regulations.

The broader issue of marine personnel participation in the vessel’s health and safety is addressed under other regulations, such as those made under the Canada Labour Code, or their equivalents at the provincial level.

One stakeholder voiced a concern that the Regulations, as written, will not enhance the safety of mariners. Another stakeholder expressed doubts about the idea that an SMS will improve safety culture.

No changes were made to the Regulations in response to these comments. Transport Canada strongly believes that an effective SMS can significantly contribute to the development and improvement of a safety culture within an organization. An SMS serves as a framework that promotes proactive safety practices, accountability, open communication, continuous improvement and leadership commitment. By integrating these elements, an SMS can significantly increase safety culture within an organization and create an environment where safety is a shared responsibility and a fundamental aspect of everyday operations.

The belief that an SMS can improve safety culture is supported by the IMO, which initially adopted a resolution [A.596(15)] in 1987, which called on the Maritime Safety Committee to develop guidelines concerning shipboard and shore-based management on certain passenger vessels. The adoption of this resolution came after a number of serious incidents that identified human error and management faults as contributing factors. In the years following, the IMO has continued to adopt resolutions supporting management for the safe operation of ships and pollution prevention, resulting finally in the adoption of the ISM code in 1993, which have informed the requirements in the Regulations. Transport Canada believes that safety management systems introduce important safety practices into the overall transportation sector and, therefore, TC is working to integrate SMS into its safety regimes in all modes of transportation.

Compliance timeline

A reoccurring theme in the comments received during the Canada Gazette, Part I consultation was related to the gradual compliance scheme after the coming into force of the Regulations. Three stakeholders raised concerns about the length of time proposed for compliance after the coming into force, with one stakeholder noting that the extended timeline would allow for unsafe operations to persist until all requirements are in force. These commenters stressed the need for urgent action and faster implementation.

No changes were made to the Regulations in response to these comments. Prior to prepublication in the Canada Gazette, Part I, and following initial concerns raised by stakeholders, TC assessed the feasibility of an earlier implementation date. Transport Canada concluded that an earlier implementation date would not be feasible given the large number of vessels required to comply with the Regulations. As a result, TC chose a timeframe which would require all vessels to comply with the Regulations within a maximum of three years after their publication in the Canada Gazette, Part II, with larger vessels and passenger vessels having to comply within the first two years.

It should be noted that a number of Canadian operators have already implemented a voluntary SMS that mirror the requirements of the ISM Code. Ship managers are encouraged to implement an SMS voluntarily at any time.

Definitions and regulatory text

Two stakeholders requested clearer and broader definitions in the Regulations. The definitions identified in this request included definitions of (i) an SMS; (ii) qualified persons; and (iii) Class 4 vessels. No changes were made to the Regulations in response to these requests. The definitions for “SMS” and “qualified person” in the Regulations are based on the ISM Code and the CSA 2001, respectively. As such, for consistency, these definitions remain unchanged. Transport Canada also intends to keep the definition of Class 4 vessels as written, noting that it is based on vessel size and operation. However, clarification on the definition of Class 4 vessels has been provided in the “Description” section of this Regulatory Impact Analysis Statement (RIAS). It should also be noted that further information on these terms, and others, is provided in the MSMSR Guide.

Another stakeholder pointed out that, since there is no reference to the ISM code in Class 4 requirements, by definition, there is no requirement for employees to be involved or included in the evaluation of the SMS. The stakeholder further recommended that the regulatory text be amended to include a requirement to update the SMS and to only have the most current version available on-board which is regularly reviewed and updated. No changes were made to the Regulations in response to these comments. Transport Canada notes that both the Regulations and the ISM Code call for procedures for internal reviews of the SMS and the disclosure of the outcome of the internal review to all personnel that have responsibilities under the SMS. Furthermore, the Regulations require that the ship managers of vessels in Classes 1 to 4 ensure that evaluations of the SMS are carried out at intervals not exceeding 12 months.

One stakeholder noted that operators of a single or a limited number of Class 3 vessels may only have one or two persons in total involved in shore-based operations, and as a result may have a single individual acting as the internal auditor, the AR and senior management. In these cases, the stakeholder noted that the requirement for management to review feedback from shore-based or on-board personnel would have limited benefit and could create an unnecessary administrative burden as the person submitting feedback may be the same person responsible for reviewing it. To remedy this issue, the stakeholder requested that the requirement for management review of Class 3 vessels with smaller operations be updated to use an evaluation model similar to smaller vessels in Class 4. Requirements for Class 3 and Class 4 vessels were determined based on their size and type of operation. Requirements for larger vessels, such as those in Class 3, were designed to align more closely with the ISM code, and require that internal audits and management reviews be conducted on an annual basis. For smaller vessels, such as those in Class 4, the decision was made to reduce some of the burden, and only require annual evaluations of the SMS and not management reviews. This approach is consistent with how SMS requirements have been structured throughout the Regulations. Transport Canada notes that any feedback received from shore-based or ship-based personnel must be evaluated and, if necessary, incorporated into the SMS, regardless of the class of vessel. Further, while not required, it is anticipated that many Authorized Representatives or ship managers of Class 4 vessels will voluntarily conduct management reviews following an internal evaluation. As such, no changes were made to the Regulations in response to this request.

Lastly, a stakeholder raised a concern about the 30-day corrective action plan to address deficiencies during audits noted in Class 2 vessels. It was noted by the stakeholder that the requirement to generate a formal corrective action plan could significantly increase the workload for the company personnel assigned to managing and updating records. Originally, a 30-day timeframe to commence a corrective action plan was established to provide Ship Managers/ARs what was believed to be a precise and reasonable timeline to begin to address a deficiency. However, in response to this comment, the Regulations have been amended to require a ship manager to ensure that a corrective action to address deficiencies during audits is initiated in a timely manner (as opposed to within 30 days), and that the corrective action prevent a recurrence of the deficiency. This will allow for more flexibility in addressing the requirements and aligns more closely with language in the ISM code which specifies that corrective actions must be commenced in a “timely manner.” In practice, what constitutes a “timely manner” will be agreed upon between the marine inspector and the ship manager/AR.

Application of Regulations (domestic and foreign)

Stakeholders from both Canada and the U.S. raised concerns about the application of the Regulations. DFO-CCG sought clarification about the application of the Regulations to vessels owned and operated by the Government of Canada, despite Chapter IX of SOLAS not applying to these vessels and despite the exemption in the Regulations for vessels owned or operated by a foreign state and used only in government non-commercial service. As Canadian government vessels are subject to certification under the CSA 2001, and are not included in the Regulations Excluding Certain Government Ships from the Application of the Canada Shipping Act, the decision was made to ensure they remain subject to the Regulations. Transport Canada followed up directly with DFO-CCG in November 2023 regarding the above comment, and confirmed that DFO-CCG is satisfied and has no further concerns about the Regulations. As such, no changes to the Regulations were made with respect to vessels owned and operated by the Government of Canada.

One Canadian stakeholder recommended that the Regulations apply to barges that carry any dangerous goods, or oil in any form on deck or in containers on deck. The Regulations do not apply to vessels that do not have a mechanical means of propulsion, and do not carry persons, dangerous chemicals in bulk or oil in bulk on-board. Barges that fit these criteria would not have crew members on-board to implement an SMS. Instead, safety procedures for the barge will need to be included as part of the SMS of the vessel that is towing the barge. As such, no changes to the Regulations were made in response to the suggestion.

Another Canadian stakeholder requested that the Regulations apply to vessel classes with the Marine Vessel classifications (i.e. 12 metres instead of 15 gross tonnes). The stakeholder did not provide a rationale for the request. No changes were made to the Regulations in response to the request since the use of tonnage to classify vessels is consistent with the language used in the CSA 2001 and Regulations made across Canada.

Three U.S. stakeholders submitted feedback on the proposed Regulations. One U.S. stakeholder expressed concerns that adequate consultations were not undertaken on the applicability of the Regulations to foreign vessels with respect to U.S. vessels operating on the Great Lakes. By contrast, a second U.S. stakeholder expressed support for the continued collaboration of TC with U.S. operators and requested that the process for foreign-flagged vessels providing documents of compliance, if applicable, be as straightforward as possible. In addition, this stakeholder proposed that a formal policy be adopted for the U.S.-flagged vessels, under which all compliance documents issued and approved by the U.S. Coast Guard would be accepted.

The third U.S. stakeholder expressed concern regarding the applicability of the Regulations to vessels operating exclusively on the Great Lakes (west of the Anticosti Line). Specifically, the concern was raised that TC did not provide data showing the benefits of applying the Regulations to U.S.-flagged laker vessels. In addition, the stakeholder raised a concern that the Regulations were not developed with existing USCG exemptions or equivalencies in mind, and that it was their belief that the Regulations were not compliant with the existing Boundary Waters Treaty of 1909, which requires Canada to permit free and open navigation for U.S. vessels in the Great Lakes and certain internal waters. While TC remains of the view that the Regulations are consistent with Canada’s obligations under the Boundary Waters Treaty, 1909.

Transport Canada met multiple times with the USCG following prepublication in the Canada Gazette, Part I, to better understand the impact of the Regulations on U.S. vessels. Based on these discussions, a revised approach was developed with respect to the application of the Regulations to foreign vessels, which is detailed further below.

Consultations following prepublication
Consultations with the United States Coast Guard

Transport Canada conducted consultations with the USCG prior to the prepublication of the Regulations in 2021. In these initial discussions, the USCG did not cite any major concerns with the proposed Regulations, noting that many U.S.-flagged vessels already comply with requirements that would be deemed equivalent with the proposed Regulations. Based on these discussions, which TC believed to be conclusive, the proposed Regulations, which were advanced to prepublication in the Canada Gazette, Part I, included SMS requirements for foreign-flagged vessels. Following prepublication, the USCG signalled that, upon further examination of the draft regulatory text, the potential impacts of the proposed Regulations would be more significant than initially believed. In particular, the USCG noted that some U.S.-flagged vessels already have an SMS. However, many that operate on the Great Lakes, or on U.S. domestic voyages through Canadian waterways, such as fishing vessels transiting toward Alaska, do not and, as such, would be significantly impacted by the proposed Regulations. In light of USCG’s concerns, TC conducted several follow-up consultations to gain a better understanding of the existing safety and environmental programs for U.S. vessels as well as the potential impact of the Regulations on U.S. vessels.

In January 2023, TC engaged in further discussions with a stakeholder group representing operators on the Great Lakes, who would be at the greatest risk for a potential competitive disadvantage if foreign vessels were removed from the scope of application. This stakeholder group did not raise concerns with the proposed amendment, noting that their member companies have already implemented SMS. As the Great Lakes are the primary area of concern regarding competitiveness, and risks of Canadian vessels being placed at a competitive disadvantage outside the Great Lakes are minimal (see below), TC did not conduct further consultations.

Following discussions with the USCG, TC agreed that the application of the Regulations to foreign-flagged vessels, other than those that are already subject to Chapter IX of SOLAS, should be removed. This decision was made to avoid layering on additional requirements and costs for U.S. operators, many of whom already have an SMS. For U.S. vessels without SMS, consultations with the U.S. Coast Guard provided sufficient confidence for Transport Canada that these U.S. vessels face regulatory requirements that provide for appropriate marine safety and environmental protection. Transport Canada remains committed to ensuring safety and environmental protection standards are a priority for foreign-flagged vessels operating in Canadian waters and will continue to work closely with the U.S. to identify any potential safety gaps and harmonize requirements as practicable and appropriate.

Impacts to competitiveness

The removal of foreign-flagged vessels from the scope of application of the Regulations means that some Canadian operators operating in shared waters will bear costs that their U.S. counterparts will not. However, the proportion of Canadian operators that will be put at a competitive disadvantage compared to U.S. operators in shared Canadian waters is small. For example, 12 of Canada’s 153 large fishing vessels operate in the high seas. These vessels would be in competition with any other large fishing vessels that are operating in the high seas. Further, Canada only has one large fishing vessel licensed to operate in U.S. waters. This vessel would be in competition with all large U.S. fishing vessels operating in U.S. waters. Canada’s remaining 140 large fishing vessels operate domestically, and are only in competition with one another, and with large U.S. fishing vessels licensed to operate in Canadian waters. On average, only 16 large U.S.-fishing vessels are licensed to operate in Canadian waters per year. For the large Canadian fishing vessels operating domestically in comparison to the large U.S.-fishing vessels licensed to operate in Canada, the impact would be small considering the limited number of U.S. vessels that would be in direct competition with the Canadian vessels.

Among the 13 fishing vessels in the scope of these Regulations that are operating in the high seas (12), or that are licensed to fish in the U.S. (one)., the vast majority are operated to harvest prawns and/or halibut. Based on a 2011 studyfootnote 4 for Fisheries and Oceans Canada, the average annual revenue for a vessel harvesting halibut ranged between $119,049 to $553,366 (adjusted to 2023 Canadian dollars). Similarly, depending on the number of traps used (300 or 500), a vessel harvesting prawns would make an average annual revenue ranging between $454,702 and $716,516 (adjusted to 2023 Canadian dollars). Therefore, averaging the annual revenues across these two species, and assuming each vessel is only harvesting one species, it is estimated that each fishing vessel operating in the high seas has a corresponding annual revenue of $460,908. Based on this estimate, the annualized compliance cost would represent roughly 1%–2% of a vessel’s annual revenue. Note that this estimate is considered the upper-bound value as it assumes that each ship manager/AR operates only one vessel and has not voluntarily implemented any activity required by these Regulations in the baseline scenario.

It is estimated that 14 Class 2 Canadian vessels operating on the Great Lakes (out of a total of 463 Class 2 vessels across Canada), as well as two towing vessels and four barges, would bear costs associated with the Regulations. Out of the 14 Class 2 vessels, 9 have already voluntarily implemented SMS and will only face minimal costs (i.e. certification and some maintenance activities, which would represent only a minor competitiveness impact).footnote 5The 5 remaining Class 2 vessels, as well as the towing vessels and barges, have not voluntarily implemented SMS; however they do not directly compete with foreign-flagged vessels on the Great Lakes, meaning the Regulations will not have an impact on their competitiveness with U.S.-flagged vessels.

To provide further context for the 9 vessels that are in competition in the Great Lakes, based on a 2022 study,footnote 6 Canadian lakers and barges operating in that region made an estimated gross revenue of $1.13 billion in total. Using data recorded in the Vessel Registration Query System (accessed in April 2024), 168 private owners registered 286 tankers, barges, and cargo ships in the provinces of Ontario and Quebec, with one owner having between one and 19 vessels registered. As a result, it is estimated that one vessel owner would make an average annual gross revenue of $6.72 million. Given that a Class 2 ship manager with no current compliance would incur an estimated annualized cost of $2,531 to comply with the Regulations, the compliance cost would represent 0.04% of the estimated annual gross revenue of $6.72 million. This percentage figure should be considered as an overestimate of the relative cost of these Regulations as the total estimated gross revenue has been divided by all classes of ship managers/ARs owning cargo/tanker/barges registered in Ontario and Quebec, including those who have smaller, more localized operations in the region.

As for vessels operating on the coasts, most are already subject to SMS requirements under SOLAS as they are involved in international shipping. That being said, approximately 20 Canadian vessels under 500 gross tonnage (e.g. towboats) will face costs to comply with the Regulations, which will represent a competitive disadvantage with U.S. vessels. However, these competitiveness impacts are expected to be minimal as U.S. towboat operators are required under U.S. law to either implement a towing safety management system or have the U.S. Coast Guard conduct all their inspection activities. While many U.S. towboats have opted for the safety management system option, precise data on the number is not available. Even with the lack of data available, Transport Canada expects the impact on competitiveness for Canada’s large towboats to be small, given the small number of those vessels that would be in direct competition with Canadian vessels.

Canadian cargo vessels that operate exclusively on Canada’s coastal waters, or that carry out trade between two Canadian ports, will not experience competitiveness impacts due to the Coasting Trade Act, which supports Canadian marine interests by reserving the coasting trade of Canada to Canadian registered duty paid vessels, with limited exemptions.

For Canadian passenger vessels primarily operated in Canada and U.S. passenger vessels primarily operated in the U.S., the respective cabotage protection rules continue to apply and ensure that there is no direct competition between Canadian and U.S. passenger vessels. As such, the Regulations will not impact the competitiveness of those passenger vessels.

Based on this analysis, it is estimated that a small proportion of Canadian flagged vessels will bear some costs as a result of the Regulations which will impact their competitiveness. However, the overall impact is expected to be minimal, as the number of U.S. vessels in direct competition with Canadian vessels is limited. The only additional costs that certain vessels, such as certain Class 2 vessels, would bear as a result of the Regulations are those associated with certification and maintenance activities. Further, any impacts on competitiveness must be weighed against the benefits provided by a safety management system, in terms of fewer accidents, reduced risk of injury, and enhanced safety and environmental protection. Transport Canada does not anticipate that the removal of the Regulations’ application to foreign vessels will create a safety risk, because the number of U.S. vessels without voluntary SMS operating in Canadian waters is small relative to Canadian vessels, and most U.S. vessels are already subject to safety requirements in the U.S.

Table 4: Competitive impact on Canadian vessels subject to the Regulations
  Cargo, tanker, bulkers Towboats, barges Passenger vessels Fishing vessels
Great Lakes

Class 2: 9 vessels are expected to face competitiveness impacts; however, the costs are expected to be minimal as the impacted companies have already voluntarily implemented safety management systems.

5 other Class 2 vessels operating in this region have not voluntarily implemented SMS; however they do not directly compete with foreign-flagged vessels on the Great Lakes.

 Class 2: 2 towing vessels and 4 barges that have not voluntarily implemented SMS are expected to be impacted. These vessels are exclusively domestic, therefore no competitiveness impacts are expected. No competitiveness impacts due to the Coasting Trade Act and U.S. Jones Act. None.
Coastal waters No competitiveness impacts due to the Coasting Trade Act Class 2: 20 large towboats are expected to face competitiveness impacts; however, these impacts are expected to be, minimal as many U.S. towboats have voluntarily implemented SMS. No competitiveness impacts due to the Coasting Trade Act and U.S. Jones Act

12 large Canadian fishing vessels operating on the high seas, and one licensed to operate in the U.S., are expected to face competitiveness impacts.

Some competitiveness impacts are also expected between large Canadian fishing vessels and the approximately 16 foreign-flagged vessels licensed to operate in Canadian waters.

The cost to implement an SMS would represent a maximum 1%–2% of the annual revenue of the impacted companies.
Canadian Marine Advisory Council meetings

At the fall 2022 CMAC meeting, TC provided a summary of the comments received during the Canada Gazette, Part I, consultation period and advised that these comments would be taken into consideration for any potential updates to the Regulations prior to publication in the Canada Gazette, Part II.

At the spring 2023 CMAC meeting, TC shared its plans to update the Regulations to address some of the recommendations received in the Canada Gazette, Part I. Transport Canada also provided an overview of the MSMSR Guide for all classes of vessels. Clarity was also provided on the certification process for Class 4 vessels. Specifically, Class 4B vessels that carry up to 12 passengers, and therefore do not hold a safety certificate and are subject to a risk-based oversight approach, do not need to submit an SMS to receive certification. Meanwhile, vessels that do hold safety certificates,footnote 7 including those in Class 4A and Class 4B vessels that carry more than 12 passengers, are subject to a different oversight approach and must submit an SMS to receive certification. Transport Canada also outlined the transitional periods and compliance dates for all vessel classes.

Additional guidance was shared on the steps that ship managers/ARs must take with respect to their documented SMS’ or CMDs should any changes be made to their vessel fleet or the identification of their ship manager. One stakeholder questioned the requirement for CMDs to be reissued following a change to a vessel’s ship manager, noting concerns about the frequency with which this would need to be completed for some operators. Transport Canada explained that CMDs must be reissued upon the change of a ship manager to ensure that there is clear accountability to the correct ship manager in case of a marine accident.

In May 2023, at the request of the Passenger and Commercial Vessel Association (PCVA), TC held an information session to outline the proposed Regulations and provide an opportunity to ask questions. The PCVA did not raise any questions or concerns about the proposed Regulations.

Changes made since prepublication of the Regulations in the Canada Gazette, Part I

In summation, the following changes were made to the Regulations following their publication in the Canada Gazette, Part I:

The RIAS was also updated. For example, wage rates for individuals responsible for certain SMS activities were re-evaluated and readjusted for individuals responsible for Class 4 and Class 5 vessels. In addition, the certification process for each vessel class, as outlined in the MSMSR Guide, was clarified. This included clarifying the process for ship managers/ARs of Class 4B vessels, other than those carrying more than 12 passengers, to submit a Declaration of Initial Compliance, as opposed to a documented SMS, to receive certification.

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

Instrument choice

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

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

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

Regulatory analysis

Changes to the cost-benefit analysis since prepublication in the Canada Gazette, Part I

As previously discussed under “Regulatory development — Consultation” section, TC revised some proposed requirements based on a number of comments from stakeholders. As a result, the cost-benefit analysis was updated as follows:

It should be noted that the update of the average wage rate for individual responsible for SMS requirements for Classes 4 and 5 had the most significant impact on the estimated cost of the Regulations representing an increase of $18.39 million over the analytical period. As a result, the total monetized costs of the Regulations were updated from $75.28 million to $100.40 million (in present value) on stakeholders. Specific changes include the following:

Benefits and costs

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

Ship managers/ARs and various levels of government will incur costs associated with the development, implementation, maintenance, and certification of their SMS. In addition, the Government of Canada will incur costs for reviewing and certifying SMS, and enforcing compliance with the Regulations.footnote 10

The total cost associated with the Regulations is estimated at $100.40 million (present value in 2021 Canadian dollars, discounted to the base year of 2024 at a 7% discount rate) between 2024 and 2035. Of these costs, $85.00 million would be incurred by businesses, $9.61 million by provincial and other levels of government,footnote 11 and $5.79 million by the Government of Canada. It is worth noting that $2.00 million are service fees paid by ship managers/ARs and received by TC for providing services,footnote 12 which would have neutral impact to Canadian society, and therefore the net total cost of this proposal is $98.40 million. While the safety benefits of this proposal have not been monetized due to limited data, a break-even analysis concluded that an annual reduction of 70 (or 25.6%) marine occurrences would result in the benefits offsetting the net costs. Even though benefits could not be monetized, it is expected that the overall qualitative safety benefits would outweigh the monetized costs.

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

Analytical framework

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

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

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

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

The time frame used in the analysis is 12 years from 2024 to 2035, with the year 2024 being when the Regulations will be registered. This time frame captures the maximum compliance transition period of three years after the coming-into-force date of the Regulations.footnote 13

Unless otherwise noted, benefits and costs are estimated in present value using 2021 Canadian dollars, the base year of discounting in 2024, and a 7% discount rate, for the period from 2024 to 2035.

Affected stakeholders

The Regulations will affect Canadian commercial vessels, with a few exceptions. As of January 2021, the total number of affected vessels (i.e. “in-scope” vessels) is 16 143. Table 5 below breaks down these affected vessels by type.

Table 5: Number of in-scope vessels, by vessel type
  Cargo Fishing Tanker Passenger Towboat Workboat Barge table c2 note * Other Total
Class 1 (SOLAS) 30 0 33 2 9 21 0 1 96
Class 2 58 37 4 211 20 52 79 2 463
Class 3 18 91 5 59 143 32 25 0 373
Class 4A 67 25 3 557 380 275 32 0 1 339
Class 4B 0 0 0 3 874 2 070 0 0 0 5 944
Class 5 57 0 1 0 0 7 391 216 263 7 928
Total 230 153 46 4 703 2 622 7 771 352 266 16 143

Table c2 note(s)

Table c2 note *

Self-propelled barges and non-propelled barges carrying carry passengers, crew, dangerous chemicals in bulk, or oil in bulk form.

Return to table c2 note * referrer

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

The 16 143 in-scope vessels are owned by a total of 6 137 businesses and government entities, represented by ship managers/ARs. It is expected that the vast majority of these vessel owners are considered “small businesses” in accordance with the TBS Policy on Limiting Regulatory Burden on Business.footnote 14

Historical data captured in TC’s Vessel Registration Query System demonstrates that the Canadian commercial vessel fleet subject to the Regulations has been stable over the past 10 years, meaning that every year, on average, vessels being registered are balanced by vessels being removed from the registry. Even though newly registered vessels will be subject to the Regulations, historical data did not demonstrate a pattern that could be used to forecast their population, particularly the newly registered vessels belonging to the same business or entity. As a result, in this analysis, newly registered vesselsfootnote 15 are not projected and it is acknowledged that the estimated costs associated with the Regulations could be slightly underestimated.footnote 16

Baseline scenario

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

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

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

Regulatory scenario

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

In addition, an SMS will require review and certification from the responsible authority for vessels in Classes 1 to 4. The MSMSR Guide describes the procedures for ship managers/ARs for vessels in Classes 1, 2, 3, 4A, and vessels in Class 4B carrying more than 12 passengers, to submit their SMS documentation to receive initial certification. For managers/ARs of vessels in Class 4B carrying up to 12 passengers, the MSMSR Guide describes the procedures for submitting a Declaration of Initial Compliance to receive initial certification.

Ship managers/ARs of vessels will need to go through a certification (Classes 1 to 4) and endorsement (Classes 1 to 3) process. The frequency of the endorsement activities for vessels in Classes 1 to 3 is determined by the Minister and described in the MSMSR Guide (see Table 3 for more details). CMDs for all vessel classes will be valid for a period of up to five yearsfootnote 17 before having to be renewed (see Tables 2 and 3 for detail).

Transport Canada will also conduct compliance and enforcement, and risk-based inspection functions on all vessel classes subject to the Regulations. These functions will be determined by the Minister and will be integrated through the existing TC marine oversight program. It is anticipated that any increase in resources as a result of the Regulations will be small,footnote 18 as marine safety inspectors already enforce the requirements of various regulations during activities under the oversight program, including regular periodic inspections and port state control. The majority of SMS inspections will be done during these activities.

Note that Class 1 vessels (i.e. SOLAS vessels) and vessels that have voluntarily implemented an SMS will not be affected (i.e. no additional costs) by the Regulations as they are already in compliance with the requirements.footnote 19

Benefits

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

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

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

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

Safety benefits — Break-even analysis

Due to lack of data, these benefits cannot be quantified or monetized. However, a break-even analysis was conducted,footnote 20 as an alternative approach, to determine how much of a reduction in marine occurrences from in-scope vessels (hereafter in-scope occurrences) would be needed to offset the costs.

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

In-scope occurrences

Historical in-scope occurrences,footnote 21 including their associated fatalities and major injuries, are obtained from the TSB’s Marine Transportation Occurrence Data from January 1995 and characteristics of vessels involved in an occurrence were found in TC’s Vessel Registration Query System. Table 6 shows the annual in-scope occurrences reported between 2008 and 2019.footnote 22 Note that in-scope occurrences exclude those involving vessels already using an SMS on-board (i.e. vessels under Class 1 and voluntarily compliant vessels).

Table 6: Annual in-scope occurrences, 2008 to 2019
Year In-scope vessel occurrences Fatalities Major injuries
2008 225 7 28
2009 178 1 19
2010 188 1 23
2011 141 4 13
2012 182 2 13
2013 205 0 18
2014 210 3 9
2015 221 12 12
2016 294 0 17
2017 316 3 19
2018 298 0 17
2019 297 2 19
Total 2 755 35 207

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

Using the average number of in-scope occurrences between 2014 and 2019,footnote 23 it is projected that the annual in-scope occurrences would be 273 during the analytical time frame (i.e. 2024 to 2035).

Average avoided cost per in-scope occurrence

It is estimated that, on average, an occurrence would involve 0.0127 fatalities (35 fatalities over 2 755 occurrences) and 0.0751 major injuries (207 major injuries over 2 755 occurrences). With this approach, each of the 273 in-scope occurrences projected every year would result in 4 fatalities and 21 major injuries on average. Using the value of a statistical life (VSL) required by TBS (i.e. $8.26 million in 2021 Canadian dollars), and an assumption that the value of a major injury is about 13.42% of the VSL,footnote 24 the average avoided cost per in-scope occurrence is estimated by the average avoided fatalities and major injuries per occurrence. As a result, the averagefootnote 25 avoided cost per in-scope occurrence is estimated to be approximately $188,300.

Break-even reduction of in-scope occurrences

Given that the estimated net total cost of the Regulations is $98.40 million (further explained below), and that the average avoided cost per in-scope occurrence would be $188,300, it was determined that a reduction of 25.6% of in-scope occurrences, which amounts to an average reduction of approximately 70 in-scope occurrences per year, would represent a break-even point, offsetting the estimated net total cost of the Regulations.

Rebalancing cost to Canadian taxpayers

As previously mentioned, the Regulations will, in part, result in a rebalancing of the financial burden from Canadians to the Canadian marine industry. This rebalancing will be represented with the fee that will be paid by ship managers/ARs of vessels to TC for SMS verification and endorsement services provided (see “Cost” section for details). The burden transferred from Canadian taxpayers to the domestic industry would be $2.00 million.

Administrative monetary penalties

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

Costs

The Regulations will impose costs on ship managers/ARs, as they will need to

Ship managers/ARs affected by this proposal include Canadian businesses, provincial and municipal governments, and the Government of Canada. In addition, the Government of Canada will incur costs associated with reviewing and approving documents, certifying an SMS, and enforcing the Regulations. As a result, the total cost was estimated to be $100.40 million, $85.00 million of which would be incurred by businesses, $9.61 million by provincial and other levels of government, and $5.79 million by the Government of Canada. For the purpose of this analysis, costs to the Government of Canada are grouped and presented together.footnote 26

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

In this analysis, it is assumed that ROs are the provider for the certification process for Class 1, 2 and 3 vessels and TC for Class 4 vessels. It is acknowledged that, in practice, the responsible authority for the certification process for some vessels in Classes 2 to 4 may vary (see Description for detail). Therefore, costs to ship managers/ARs and the Government of Canada could be different from those presented in this analysis.

SMS compliance costs

Development of SMS

The Regulations will require that ship managers/ARs of Class 2 and 3 vessels develop an SMS, in accordance with some requirements of the ISM Code, between 2025 and 2026, and ship managers/ARs of Class 4 and 5 vessels develop an SMS, in accordance with specific Canadian requirements, between 2025 and 2026.footnote 13

Ship managers/ARs that manage multiple vessels, under the same class or different classes, will be required to comply by the earliest date of the highest classed vessel. They will need to develop one SMS for the entire fleet in accordance with the required SMS for the highest classed vessel.footnote 27 For example, if a ship manager/AR is responsible for a fleet composed of one Class 2 vessel and several Class 3 and Class 4 vessels, they will only have to develop one SMS in accordance with Class 2 requirements.

The cost of developing an SMS will vary among vessel classes and will be applied at the company level (i.e. costs would not vary according to the number of vessels). Table  7 presents the average cost per ship manager/AR based on TC’s estimation.

Table 7: Cost of developing an SMS per ship manager/AR, by vessel class
Vessel class Time required per ship manager/AR (day) Wage rate table c4 note * ($/day) per ship manager/AR Cost per ship manager/AR ($) Compliance period table c4 note ** Number of affected ship managers/ARs
Class 2 6 $560 $3,360 2025–2026 143
Class 3 6 $342 $2,052 2025–2026 176
Class 4A 3 $279 $837 2025–2026 790
Class 4B 3 $279 $837 2025–2026 3 111
Class 5 2 $279 $558 2026 1 825

Table c4 note(s)

Table c4 note *

Wage rate includes an overhead rate of 25%

Return to table c4 note * referrer

Table c4 note **

Classes are separated by passenger vessels and non-passenger vessels for periods of compliance. As a result, the compliance will be earlier (2025) for a ship manager/AR that owns a passenger vessel. Class 5 will have up to three years to comply following the coming into force of the Regulations. See the "Implementation, compliance and enforcement, and service standards" section for details.

Return to table c4 note ** referrer

Source: Transport Canada

In this analysis, it was assumed that ship managers/ARs of Class 5 vessels would comply with the Regulations in 2026. In total, the one-time cost of developing an SMS is estimated to be $4.50 million, of which $4.21 million would be incurred by business, and $0.29 million by provincial and other levels of government.

SMS certification

The MSMSR Guide describes the procedure for SMS certification for vessels in Classes 2 to 4, other than those in Class 4B carrying up to 12 passengers and towboats, as part of the process for obtaining a CMD. In case of Class 4B vessels carrying up to 12 passengers and towboats, the Declaration of Initial Compliance will need to be reviewed. More specifically, TC will conduct the certification for Class 4 vessels, and ROs will conduct the certification for Class 2 and 3 vessels.footnote 28 Transport Canada expects that an RO will need four days to complete this certification with an average charge of $2,500 per day. Class 5 vessels will not be subject to a formal certification process.

The Minister’s determination that the SMS meets the requirements of the Regulations is demonstrated by the issuance of the CDOC, which will be valid for up to five years and will be reissued for a similar period — subject to ongoing compliance conformity.footnote 29 Table 8 presents the cost to obtain a determination per ship manager/AR, as well as time required by the responsible authority.

Table 8: Cost to ship managers/ARs on SMS certification, by vessel class
Vessel class Responsible authority Time required per responsible authority (day) Average charge by responsible authority table c5 note * ($/day) Cost per ship manager/AR ($) Compliance period Number of affected ship managers/ARs
Class 2 RO 4 $2,500 $10,000 2025–2026 table c5 note ** 143
Class 3 RO 4 $2,500 $10,000 2025–2026 table c5 note ** 176
Class 4A TC 0.25 — N/A table c5 note *** 2025–2026 table c5 note ** 790
Class 4B — Passenger vessels carrying more than 12 passengers TC 0.25 — N/A table c5 note *** 2025 48
Class 4B — Excluding Class 4B passenger vessels carrying more than 12 passengers table c5 note **** TC 0.06 — N/A table c5 note *** 2025–2026 table c5 note ** 3 063

Table c5 note(s)

Table c5 note *

Daily charge includes an overhead rate of 25%.

Return to table c5 note * referrer

Table c5 note **

Classes are separated by passenger vessels and non-passenger vessels for periods of compliance. As a result, the period of compliance will be earlier for passenger vessels, and for others up to a maximum of three years. Classes 2 and 3 will require compliance based on the renewal of safety certificates.

Return to table c5 note ** referrer

Table c5 note ***

Fees will be developed as part of the TC fee modernization initiative.

Return to table c5 note *** referrer

Table c5 note ****

Passenger vessels up to 15 GT, carrying up to 12 passengers and towboats of 15 GT or less.

Return to table c5 note **** referrer

Source: Transport Canada

The one-time cost to ship managers/ARs to obtain a determination on their SMS would be $2.85 million, $2.72 million of which will be incurred by business owners, and $0.13 million by provincial and other levels of government.

Certification process

Following the determination that the SMS meets the requirements of the Regulations, Class 2 and 3 ship managers/ARs will have to ensure that the implementation of the SMS is inspected through a periodic endorsement process for each of their CMDs: the CDOC for the shore-based operation at the company level, and the CSMC for the on-board operation of their vessels. Transport Canada will delegate these activities to ROs. For Class 4 vessels, the determination that the requirements of the Regulations are met will be made by TC, and CMDs issued for this Class will not require periodic endorsement. CMDs for all classes will be valid for up to five years.footnote 17 Tables 2 and 3 provide a summary of the periodic endorsement and reissuance of certificates by class of vessels and by type of certification. Table 9 provides the estimated additional cost to ship managers/ARs to have their certificates issued and endorsed by the responsible authority.

Ship managers/ARs will be required to pay a fee to TC for the certification services with respect to Class 4 vessels. Currently, fees for such certification are set at $100 for initial issuance and renewal (see Tables 1 and 2 for details on issuance frequency). For Classes 4A and 4B, an initial CDOC and CSMC will be issued concurrently upon approval. As additional CSMCs may be issued to ship managers/ARs for individual vessels added to their fleet during a CDOCs validity period, subsequent CDOCs and CSMCs may be issued separately at the appropriate renewal times. It is worth noting that these fees will be reviewed and updated as part of TC’s Fee Modernization initiative.

In total, the cost to vessel owners associated with the certification process would be $5.87 million, of which $5.28  million will be incurred by businesses, and $0.59 million by provincial and other levels of government.

Table 9: Cost of certification process per ship manager/AR, by vessel class
  Responsible authority

Class 2

RO

Class 3

RO

Class 4A

TC table c6 note *

Class 4B

TC table c6 note *
Initial CDOC Cost of issuance $2,500 $2,500 $100 $100
Renewal of CDOC Cost of issuance $1,250 $1,250 $100 $100
Initial CSMC
(per vessel)		 Cost of issuance $1,250 $1,250 $100 $100
Renewal of CSMC
(per vessel)		 Cost of issuance $1,250 $1,250 $100 $100

Table c6 note(s)

Table c6 note *

Fees paid to TC may be reviewed and updated.

Return to table c6 note * referrer

Source: Transport Canada

SMS maintenance activities

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

To estimate the cost of SMS maintenance, Section 4.2 of the IMO’s Revised Guidelines on the Implementation of the International Safety Management (ISM) Code by Companies (PDF) was used as a reference. From this documentation, TC listed nine different tasks/roles, to be performed annually by the ship managers/ARs, which will vary among vessel classes to account for the comprehensiveness of the SMS of each class. Seven of these tasks/roles will be performed at the company level addressing shore-based operations, and the other two will be performed to address individual vessel operations. Table 10 illustrates the annual estimated cost of SMS maintenance for the shore-based operations, by class and activities. These tasks represent the annual activities under the ship manager/AR’s responsibilities regardless of the number of vessels for which they are responsible. Table 10 illustrates the annual cost of SMS maintenance for the vessel operations, by class and activities. These activities will have to be performed annually on each vessel.

The annual cost per ship manager/AR (Table 10) and per vessel (Table 11) is calculated by multiplying the required annual hours per class by the wage rates associated with the ship manager/AR (Table 7). For example, every year, a ship manager/AR that owns/operates a fleet composed of one Class 3 vessel, two Class 4 vessels, and one Class 5 vessel will have to perform the seven activities in accordance with efforts required for Class 3 listed in Table 10, and the two activities in accordance with efforts required for each vessel by class listed in Table 11. It implies that the ship manager/AR would need a total effort of 18.4 days to maintain certifications per year (13.4 days to address activities at the shore-based operations, and 5 days for all of the four vessel operations).

It is estimated that the total cost to ship managers/ARs to maintain certification over the analytical period would be $81.15 million, of which $72.55 million would be incurred by business, and $8.60 million by provincial and other levels of government. It is also worth noting that the estimate of annual daily effort per task takes into consideration potential overlap with other regulatory requirements with which companies already comply.

Table 10: Annual effort and cost of SMS maintenance per ship manager/AR, by vessel class and by activity table c7 note *
Activity Annual effort required (in days)
Class 2 Class 3 Class 4 Class 5
1. Internal evaluation and review of the effectiveness of the SMS 1 1 0.5 0.5
2. Perform document control 1 1 0.5 0.5
3. Review non-conformities and develop action plans including conduct of internal audits 6 6 1.5 1.5
4. Maintain certification 1.2 1.2 0 0
5. Study near-misses and implementation of lessons learned 2 2 0.5 0.5
6. Coordinate management review and meeting 1.2 1.2 0.1 0
7. Update SMS manual 1 1 0.5 0.5
Total annual time required 13.4 13.4 3.7 3.5
Total annual cost per ship manager/AR $7,499 $4,584 $1,033 $977

Table c7 note(s)

Table c7 note *

Ship manager/AR effort level is determined by the highest vessel class for their fleet.

Return to table c7 note * referrer

Source: Transport Canada
Table 11: Annual effort and cost of SMS maintenance per vessel, by vessel class and by activity table c8 note *
Activity Annual effort required per vessel (in days)
Class 2 Class 3 Class 4 Class 5
8. Organize on-board safety meetings 1 1 0.5 0.5
9. Coordinate ship to shore drills 1 1 0.5 0.5
Total annual time required per Vessel 2 2 1 1
Total annual cost per vessel $1,119 $684 $279 $279

Table c8 note(s)

Table c8 note *

Ship manager/AR’s effort level is determined by each vessel in their fleet.

Return to table c8 note * referrer

Source: Transport Canada

Administrative Costs

Submission

The MSMSR Guide outlines the procedures for ship managers/ARs to submit the following documentation to receive certification (also see Table 1):

There will be no submission requirements for Class 5 vessels. This one-time cost will be applied at the ship manager/AR level in the year of compliance specific to the ship manager/AR’s highest vessel class. It is estimated that, regardless of the SMS level, it would take the ship manager/AR 30 minutes, multiplied by their respective wage rate (see Table 7), to assemble and submit the documentation package online or via mail. The total submission cost to ship managers/ARs is estimated to be $72,100, of which $70,500 would be incurred by business owners, and $1,600 by provincial and other levels of government.

SMS certification endorsement for Classes 2 and 3

To maintain their CMDs, ship managers/ARs will need to retrieve documents and provide assistance to responsible authorities as per their endorsement schedule (Table 3). This ongoing cost will follow this schedule, as well as costs described in Table 10 — Item 4: Maintain Certification — and the ship manager/AR’s wage rates in Table 7. The estimated cost per year by ship manager/AR would be between $410 and $672.

The total cost to ship managers/ARs to provide assistance during the certification and oversight activities would be $1.11 million, of which $1.10 million would be incurred by business owners, and $0.06 million by provincial and other levels of government. Note that this amount is already accounted for under the “SMS maintenance activities” section above.

Renewal of CMDs for vessels in Class 4

Ship managers/ARs in Class 4 will be required to submit a Declaration of Continuous Compliance to renew their CMDs with a validity period up to five yearsfootnote 30 (Table 3), which would require an estimated half an hour of their effort. Using the wage rate presented in Table 7, it is estimated that the cost of preparing for and submitting the Declaration of Continuous Compliance would be $184,500, of which $180,500 would be incurred by business owners, and $4,000 by provincial and other levels of government.

Record keeping

All ship managers/ARs of in-scope vessels will be required to organize and keep records of the information developed and produced each year related to the results of their internal audits and management reviews, as part of their responsibilities to maintain their respective SMS. As presented under Item 2: Perform document control in Table 10, it is expected, on average, that ship managers/ARs will take between half a day and up to one day per year to consolidate records to be kept for at least five years and be able to provide them on request. This represents an annual cost of between $140 and $560 per ship manager/AR.footnote 31 The total cost associated with record keeping would be $6.24 million, $5.75 million of which would be incurred by business owners, and $0.49 million by provincial and other levels of government. Note that this amount is already accounted for under the “SMS maintenance activities” section above.

Qualitative cost

Ship managers may incur revenue loss due to periodic oversight activities associated with the Regulations. However, any such loss is expected to minimal because (i) ship managers plan oversight activities in advance to minimize the interference with vessel operations; and (ii) the incremental addition of time required for oversight activities associated with the Regulations (e.g. verifying and reviewing SMS) is anticipated to be very small.

Costs to the Government of Canadafootnote 32

The total costs to the Government of Canada are estimated to be $5.79 million, which are associated with developing and maintaining an SMS on-board Government of Canada-owned vessels, and the review of SMS and certification activities by TC. Costs to the Government of Canada also include training marine safety inspectors at TC and informing the industry of the Regulations.

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

There are 1 889 Government of Canada-owned vesselsfootnote 33 that will be affected by the Regulations. Similar to other ship managers/ARs, affected Government of Canada organizations will need to develop an SMS, submit it for a determination from responsible authorities, receive certifications, maintain and ensure implementation of the SMS, and be subject to the oversight process. In total, the costs to the Government of Canada associated with the regulatory requirements on its vessels are estimated to be $3.58 million.

SMS determination for vessels in Class 4

As previously described, TC will need to review a documented SMS for vessels in Class 4A, as well as those in 4B carrying more than 12 passengers, before issuing a CMD. This would require an inspector (at the TI-07 level) an average of 2 hours to review the documented SMS. For Class 4B vessels carrying up to 12 passengers, TC will review the Declaration of Initial Compliance before issuing CMDs. This would require an inspector (at the TI-07 level) an average of half an hour to review the Statement. Using the wage rate of $77.61 per hour for a TI-07,footnote 34the one-time cost for reviewing the SMS for these vessels would be $0.21 million.

Certification for Class 4

Transport Canada will also need to issue CMDs to vessels in Class 4 following the determination that their SMS meets the requirements of the Regulations. This determination will be made based on the review of the SMS or, as applicable, the Declaration of Initial Compliance. The Declaration of Initial Compliance would confirm to TC that the SMS meets the requirements of the Regulations. It is expected that, on average, an inspector (at TI-07 level) will take one hour each to issue the initial CDOC and CSMC, both of which will be valid for up to five years. To renew the CMDs for all Class 4 vessels, TC will need to review a Statement of Declaration Compliance. On average, an inspector (at TI-07 level) would take half an hour to review the Declaration of Continuous Compliance, and one hour each to reissue the CDOC and the CSMC.

The total cost of issuing and renewing these CMDs is estimated to be $1.94 million.footnote 35

As previously explained, the details of the certification activities will be subject to the Minister’s discretion, as per authorities granted under the CSA 2001.

Training

It is expected that additional training for marine safety inspectors will be required with the implementation of the Regulations. Marine safety inspectors who are currently monitoring in-scope vessels will need familiarization of the Regulations.

A new module to the existing Marine Safety inspection training program has been developed to train inspectors on the Regulations.footnote 36 Similarly, as marine safety inspectors already have the ability to issue penalties for non-compliance based on the Administrative Monetary Penalties and Notices (CSA 2001) Regulations, only one amendment to the associated module in the existing Marine Safety inspection training will be required at no additional cost.

However, marine safety inspectors who will be engaged in the review or certification for the shore-based and on-board operations of vessels subject to Chapter IX of SOLAS will be required to complete an ISM training. This one-time training will be provided by ROs (at a unit cost of $1,300 per person) and, it is expected that two marine safety inspectors per regionfootnote 37 will be required to attend this specific training after the coming into force of the Regulations.

The total training costs for the Government of Canada would be $0.01 million in 2024.

Compliance promotion

Transport Canada has promoted the Regulations over the past few years at national and regional CMAC meetings. Stakeholders will be informed on procedures associated with SMS requirements through existing communication tools, such as Ship Safety Bulletins, updates to the TC website, as well as through regional and national CMAC meetings. As part of this regulatory project, and through consultation, drafts of the MSMSR Guide have been developed to address certification and oversight that will be conducted by TC in accordance with the Regulations. A draft of the MSMSR Guide was shared with stakeholders at the fall 2023 CMAC. Updates made to the draft MSMSR Guide have been shared with stakeholders throughout its development. The final MSMSR Guide is available to stakeholders on the TC website.

The total cost of compliance promotion of the Regulations would be $0.04 million in 2024.

Cost-benefit statement
Table 12: Monetized costs (present value in millions)
Impacted stakeholder Description of cost Base year (2024) Compliance year Other relevant year (2033) Final year (2035) Total (present value) Annualized value
2025 2026
Canadian businesses Development of SMS, verification, and certification $0.00 $2.43 $6.70 $0.05 $0.46 $12.45 $1.57
SMS maintenance activities $0.00 $2.31 $9.35 $5.82 $5.08 $72.55 $9.13
Provincial and other levels of government Development of SMS, verification, and certification $0.00 $0.25 $0.41 $0.00 $0.04 $1.02 $0.13
SMS maintenance activities $0.00 $0.17 $1.12 $0.70 $0.61 $8.60 $1.08
Government of Canada Compliance costs $0.00 $0.01 $0.51 $0.29 $0.26 $3.58 $0.45
SMS verification and certification $0.00 $0.46 $0.53 $0.01 $0.30 $2.15 $0.27
Training, implementation, and promotion $0.06 $0.00 $0.00 $0.00 $0.00 $0.06 $0.01
All stakeholders Total costs $0.06 $5.63 $18.62 $6.86 $6.76 $100.40 $12.64
Table 13: Break even occurrence reduction
Projected number of occurrences per year Average estimated cost per occurrence
(undiscounted)		 Occurrence reduction needed per year to cover the net cost (%) Occurrence reduction needed per year to cover the net cost
273 $188,300 25.6% 70
Table 14: Monetized benefits (present value in millions)
Impacted stakeholder Description of cost Base year (2024) Compliance year Other relevant year (2033) Final year (2035) Total (present value) Annualized value
2025 2026
Transport Canada Cost recovered by TC from SMS verification and endorsement certification fees $0 $0.52 $0.49 $0.00 $0.26 $2.00 $0.25
Table 15: Summary of monetized costs and benefits (present value in millions)
Impacts Base year (2024) Compliance year Other relevant year (2033) Final year (2035) Total (present value) Annualized value
2025 2026
Total Canadian business cost $0.00 $4.74 $16.05 $5.87 $5.55 $85.00 $10.70
Total provincial and other levels of government cost $0.00 $0.42 $1.53 $0.70 $0.65 $9.61 $1.21
Total Government of Canada cost $0.06 $0.47 $1.04 $0.30 $0.56 $5.79 $0.73
Monetized benefits $0.00 $0.52 $0.49 $0.00 $0.26 $2.00 $0.25
Net cost $0.06 $5.11 $18.13 $6.86 $6.50 $98.40 $12.39

Sensitivity analysis

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

SMS maintenance activities

In the central case, it is assumed that ship managers/ARs will have to maintain their SMS certification by establishing tasks and responsibilities associated with their highest respective vessel class. Transport Canada was able to establish an average number of days per year to perform each task (see Tables 10 and 11). These values are used as average figures in the central analysis. For the purpose of the sensitivity analysis, a low level of effort (25% less than average values) and a high level of effort (25% more) were analyzed.

Estimated average avoided cost of an occurrence

The average avoided cost per in-scope occurrence is estimated based on the value of avoided fatalities and major injuries associated with in-scope occurrences. This value, used in the central analysis, is considered a conservative measure as it does not take into consideration other potential avoided costs (e.g. avoided damages to the environment and cargo) due to limited information. For the purpose of this sensitivity analysis, there is an assumption that the estimated avoided cost per occurrence value used in the central analysis (i.e. $188,300) would be increased by 25%.

Analytical time frame

As the compliance period is up to three years after the coming into force date of the Regulations, a 12-year analytical time frame (from 2024 to 2035) was used for the central analysis to fully represent the expected cost over a 10-year time frame on each class of vessels. For the sensitivity analysis, a 20-year time frame is used (from 2024 to 2043).

The resulting sensitivity analysis impact on the total cost value and break-even point are presented in Table 16.

Table 16: Single-variable sensitivity analysis
Variable Net total cost (present value in million) Break-even annual occurrence Break-even annual occurrence (%)
SMS maintenance activities
Low level of effort $77.23 55 20.1%
High level of effort $119.60 85 31.1%
Estimated avoided cost per occurrence
25% higher estimate $98.40 56 20.5%
Analytical time frame
20-year time frame $135.80 70 25.6%

Distributional analysis

The Regulations will affect vessels and their ship managers/ARs across the country. The Pacific and Ontario regions would represent approximately two thirds of the impacted vessels. In terms of the cost, ship managers/ARs registered in these two regions would bear 62.5% of the total cost. Table 17 presents costs to impacted vessels by region.

Table 17: Costs to ship managers/ARs of Canadian flagged vessels, by TC region table 1 note *
Region Number of vessels Total cost (present value in millions)
Atlantic 1 636 $10.17
Ontario 3 713 $23.09
Pacific 6 382 $39.69
Prairies and Northern 1 896 $11.79
Quebec 2 516 $15.65
Total 16 143 $100.40

Table 1 Notes

Table 1 Note footnote *

Numbers may not add up due to rounding.

Return to table 1 note * referrer

Of the 16 143 registered vessels affected by the Regulations, 1 889 are owned by the Government of Canada, while 11 984 are privately owned, and 2 270 are owned by provincial and other levels of government. Table 18 shows a breakdown of the costs to private- and government-owned vessels.

Table 18: Number of affected vessels and costs by affected stakeholder
Ownership Number of vessels Total cost (present value in millions)
Canadian businesses 11 984 $85.00
Provincial and other levels of government 2 270 $9.61
Government of Canada 1 889 $5.79
Total 16 143 $100.40

Small business lens

Based on available information, it was not possible to determine the exact number of small businesses from the 5 606 businessesfootnote 38 that will be affected by the Regulations. As owners of Class 1 vessels and owners of vessels that have voluntarily implemented an SMS already comply with the Regulations, the total number of affected businesses is 5 520.footnote 39 Since the Regulations will apply to a very large spectrum of vessel sizes grouped by class, two different approaches were used to estimate the share of small business: one that classifies business size by the total number of vessels owned, and the other that classifies business size by the relative total gross vessel tonnage that a business owns. Both methods have major limitations if analyzed separately (i.e. looking only at the number of vessels by owner to determine the size of the business might introduce bias), but by combining and analyzing the results of both methods, a high-level trend can be seen. The result suggested that 97% of affected businesses should be considered small businesses. This result mirrors the share obtained by Industry Canada in its report, Key Small Business Statistics — November 2019, which stated that 98.3% of businesses in the transportation and warehousing sector are small businesses.footnote 40

However, this share should not be applied unilaterally to all vessel classes. Class 1, voluntarily compliant owners, and Class 2 are all considered medium-large businesses. For Class 3 vessels, it is estimated that 23 owners are considered medium to large businesses. For Classes 4A, 4B and 5, the share of 97% would be applied to identify the number of small businesses. Table 19 shows the estimated number of small businesses by class.

Table 19: Estimation of small businesses by class
Class Number of affected businesses Estimated share of small businesses Number of small businesses Number of vessels owned by small businesses
Class 2 132 0% 0 0
Class 3 172 87% 149 202 table d9 note *
Class 4A 771 97% 748 1 808
Class 4B 3 048 97% 2 957 5 623
Class 5 1 397 97% 1 355 2 684
Total 5 520 94% 5 209 10 317

Table d9 note(s)

Table d9 note *

23 owners in Class 3 identified as medium-large businesses own 374 vessels.

Return to table d9 note * referrer

Source: Transport Canada

It is estimated that a total of 5 209 small businesses will be impacted by the Regulations. The total cost for these small businesses and their vessels is estimated to be $69.17 million over the analytical time frame. It is important to note, however, that it was not possible to determine with certainty the actual number of small businesses impacted by the Regulations.

In order to minimize the burden on all businesses, transition periods have been included to allow affected stakeholders to time to comply with the new requirements. In order to balance SMS requirements and safety objectives with cost impacts for small vessel owners, the Regulations will use a class approach that is based on vessel type/size, rather than on the size of the business. However, within the small business group, businesses will face different impacts (requiring varying levels of effort) depending on the number of vessels they own and the class associated with each vessel.

Small business lens summary
Table 20: Compliance costs
Activity Annualized value Present value
Development of SMS, verification and certification (in millions) $1.00 $7.97
SMS maintenance activities (in millions) $7.01 $55.64
Total compliance cost (all impacted small businesses, [in millions]) $8.01 $63.61
Total compliance cost per impacted small business ($) $1,538 $12,213
Table 21: Administrative costs
Activity Annualized value Present value
Submission (in millions) $0.03 $0.24
Support Certification (in millions) $0.05 $0.42
Record keeping (in millions) $0.63 $5.04
Total administrative cost (all impacted small businesses, [in millions]) $0.72 $5.70
Total administrative cost per impacted small business ($) $138 $1,094

Table d11 note(s)

Table d11 note *

Numbers may not add to totals due to rounding.

Return to table d11 note * referrer
Table 22: Total compliance and administrative cost
Totals Annualized value Present value
Total compliance cost (in millions) $8.01 $63.61
Total administrative cost (in millions) $0.72 $5.70
Total cost (all impacted small businesses) [in millions] $8.73 $69.31
Cost per impacted small business ($) $1,675 $13,307

One-for-one rule

The one-for-one rule applies, as the Regulations will result in an incremental change in administrative burden on business. The Regulations repeal the former Safety Management Regulations (SOR/98-348) and replace them with a new regulatory title — Marine Safety Management System Regulations — which will result in no net increase or decrease in regulatory titles.

The Regulations will impose administrative requirements on ship managers/ARs related to submission and record keeping activities. Using assumptions and data previously presented, and the methodology developed in the Red Tape Reduction Regulations, it was estimated that ship managers/ARs would incur an annualized administrative cost of $317,528 (present value in 2012 Canadian dollars, discounted to the year 2012 at a 7% discount rate) for a 10-year period between 2024 and 2033. The detailed cost breakdown is as follows:

Regulatory cooperation and alignment

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

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

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

Norway has expanded formal SMS requirements to a greater portion of its domestic fleet under an approach similar to the Regulations. Norway’s Regulations on safety management for small cargo ships, passenger ships and fishing vessels, expand certain requirements of the ISM Code to all non-SOLAS commercial vessels, including passenger, cargo, and fishing vessels.footnote 41 Similar to the Regulations, Norway’s expanded Regulations require these additional vessels to develop and maintain an SMS that is suitable to the nature and type of their operation as opposed to the full requirements of the ISM Code. While Norway does not have in place a mandatory external audit or certification scheme for these vessels, the Norwegian Maritime Authority has the authority to review a company’s SMS through unscheduled supervision and random inspections/audits samplings, similar to the risk-based oversight of vessels captured under Class 5 of the Regulations.

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

While Australia’s regime also uses a class system, their structure differs slightly from the Regulations in that their designation of classes is based on a vessel’s operational area (i.e. offshore, domestic, and restricted areas). All classes of vessels must comply with Australia’s Marine Order 504, which includes fundamental measures drawn from the ISM Code. Class 4 vessels (i.e. domestic commercial vessels) may choose to comply with these measures (alongside additional risk assessment requirements) or follow Part A of the ISM Code.footnote 42 All vessels are required to have a functional SMS in place. While there is no formal audit regime in place, owners are issued an operational certificate, which is valid for a maximum of five years, contingent to a satisfactory annual survey/check by the Australian Marine Safety Authority.

Regarding the U.S., the ISM Code applies to the U.S.-flagged cargo and passenger vessels on international voyages.footnote 43It also must be followed by vessels which apply to join the U.S.’s Alternate Compliance Program. The Alternate Compliance Program is a voluntary inspection process for the U.S.-flagged vessels to obtain a certificate of inspection by complying with international conventions such as SOLAS and the International Convention for the Prevention of Pollution from Ships (MARPOL). The U.S. preceded Canada in introducing regulations for domestic towing vessels through its Towing Safety Management System regulations (46 U.S.C. 3306 in 46 CFR, Subchapter M). By expanding requirements within the Regulations to towboats, Canada will be aligned with the U.S. in this regard.

Strategic environmental assessment

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

The expansion of SMS requirements to a broader range of vessels within the Canadian fleet, including all vessels of 500 gross tonnage or more, aims to reduce the number of accidents in Canada’s waterways.

The ISM Code, on which the Regulations are based, outlines that an SMS should have a safety and environmental-protection policy in place. A formal SMS also requires procedures to be in place to aid in the reporting and analysis of non-conformities, accidents, and hazardous occurrences, with the intent of improving safety and pollution prevention. Water pollutants and other environmental hazards may be avoided with an increased focus on preventing occurrences through a formal SMS.

Gender-based analysis plus

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

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

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

Implementation, compliance and enforcement, and service standards

Transport Canada will apply varying levels of oversight to different classes of vessels, for both shore-based and on-board operations, depending on the vessel’s size and type of operation.

The Regulations set the requirements to obtain a CMD for vessels in Classes 1 to 4. The oversight structure for Class 1 vessels will mirror the ISM Code requirements. The oversight for Classes 2, 3 and 4 will consist of the issuance of CMDs, valid for a period of up to five years, with periodic inspections, verification, or risk-based monitoring depending on vessel class and type. Details on the form and manner in which CMDs will be issued to different classes of vessels are described in the MSMSR Guide. The MSMSR Guide describes the frequency and process for the oversight of on-board and onshore operations for vessels subject to the Regulations. The MSMSR Guide is publicly available to stakeholders on the TC website.

Implementation

Dates for coming into force — Transition periods

The Regulations come into force upon their publication in the Canada Gazette, Part II, subject to certain transitional provisions. Dates for when vessels need to be in compliance with the Regulations will be gradual in order to accommodate the large number of vessels that are subject to the Regulations, as well as to provide enough time for ship managers/ARs to develop and implement the documented SMS (required policies, instructions, and procedures) and to obtain certification from the responsible authority.

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

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

For class 4A passenger vessels and vessels carrying more than 12 passengers in Class 4B, compliance will be required by the first renewal of the vessel’s safety certificate after the first anniversary of the coming into force of the Regulations. To accommodate for the four-year validity of the safety certificate for class 4A non-passenger vessels, compliance will be required by the issuance date (day and month) of the vessel’s safety certificate after the second anniversary of the coming into force of the Regulations.

Class 4B vessels, other than those that carry more than 12 passengers, will be divided into two groups, based on their length. Vessels of more than seven metres in length will be required to comply by the second anniversary of the coming into force, and vessels up to seven metres in length will be required to comply by the third anniversary.

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

Table 23: Transitional provisions for registered vessels
Class Type of vessel End of transition period
1 All No transition
2 Passenger 2nd anniversary of coming into force
Non-passenger 3rd anniversary of coming into force
3 Passenger 2nd anniversary of coming into force
Non-passenger 3rd anniversary of coming into force
4 Passenger vessels over 15 GT 2nd anniversary of coming into force
Non-passenger over 15 GT 3rd anniversary of coming into force
Passenger vessels of 15 GT or less, carrying more than 12 passengers 2nd anniversary of coming into force
Passenger vessels less than 15 GT, carrying up to 12 passengers and towboats of 15 GT or less

2nd anniversary of coming into force (over seven metres in length)

3rd anniversary of coming into force

(up to seven metres in length)
5 All 3rd anniversary of coming into force

There will be no transition period for vessels newly registered after the publication of the Regulations. However, the Regulations will set a period of 6 months for ship managers/ARs of newly registered vessels to implement their SMS.

Communication and outreach activities

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

The MSMSR Guide, which addresses the procedures for the verification and certification functions required under the Regulations, is publicly available on the TC website. Updates to the MSMSR Guide will be shared with stakeholders through standard communication tools, such as the TC website, emails via the CMAC Secretariat, updates at CMAC meetings and Ship Safety Bulletins.

Performance measurement

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

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

Compliance and enforcement

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

Inspections conducted on vessels that currently do not hold safety certificates will be integrated as part of the existing small vessel risk-based monitoring activities. Transport Canada currently performs over 800 annual oversight activities on Canadian vessels that include risk-based inspection activities conducted on smaller Canadian vessels. As enforcement activities for these Regulations are being conducted in conjunction with existing enforcement activities, it is not anticipated that the Regulations will increase annual oversight activities. Transport Canada will incorporate compliance activities for the Regulations into its existing National Oversight Program.

Amendments to Part 12 of the Schedule to the Administrative Monetary Penalties and Notices (CSA 2001) Regulations reflect the new structure of the Regulations and introduce 72 administrative monetary penalties for individual requirements in the Regulations. The penalty amounts have been developed in consideration of the recently increased maximum penalty from $25,000 to a new maximum of $250,000 in the CSA 2001. Of the new administrative monetary penalties (AMPs), 49 are for minor violations, 15 are for medium violations, and 8 are for serious violations.

Under the Administrative Monetary Penalties and Notices (CSA 2001) Regulations, an inspector has the authority to apply a graduated enforcement approach, starting with a warning up to imposing AMPs and/or detaining a vessel (Table 24).

A person or business issued an AMP under the AMPs Regulations may file a request to the Transportation Appeal Tribunal of Canada, to request a review of a notice received.

Table 24: Administrative monetary penalties (AMPs) for Canadian vessels
Gravity of violation Category of violator(s)
Individual (person) Vessel or corporation (person other than an individual)
Range of penalty Number of violations introduced in the Regulations Range of penalty Number of violations introduced in the Regulations
Minor $260 – $1,250 13 $525 – $10,000 36
Medium $1,300 – $6,250 N/A $2,625 – $100,000 15
Serious $2,625 – $12,500 N/A $5,250 – $250,000 8

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

Contact

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