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Home » EGS (ASIA) LTD. (EGS) – COASTING TRADE LICENCE

EGS (ASIA) LTD. (EGS) – COASTING TRADE LICENCE

(AGENPARL) – CANADA, mar 04 agosto 2020

SUMMARY

[1] Under the Act, the Minister of Public Safety and Emergency Preparedness (Minister) may issue a coasting trade licence authorizing a foreign ship or a non-duty paid ship to conduct a commercial activity in Canadian waters for a maximum period of 12 months. Before the licence can be issued, the Canadian Transportation Agency (Agency) must determine that there is no suitable Canadian ship or non-duty paid ship available to perform the activity described in the application.

[2] EGS applied simultaneously to the Agency and the Minister for a licence to use the “R/V BOLD EXPLORER”, a survey ship registered in Vanuatu.

[3] IT International Telecom Canada Inc. (ITT) filed an objection to the application with the Agency and offered the “C.T. IT INTEGRITY” to perform the activity described in the application.

[4] The Agency finds, pursuant to subsection 8(1) of the Act, that there is no suitable Canadian ship or non-duty paid ship available to perform the activity described in the application.

BACKGROUND

[5] On June 12, 2020, EGS applied, through its Canadian representative, for temporary admission to the coasting trade of Canada of the “R/V BOLD EXPLORER”, a survey ship registered in Vanuatu, to survey the route of an undersea cable in the Strait of Juan De Fuca, Alberni Inlet, Trevor Channel and the approaches to Vancouver Island.

[6] The activity would start on or about July 28, 2020, and end on or about August 28, 2020.

[7] On June 12, 2020, Agency staff gave notice of the application to the Canadian marine industry.

[8] On June 25, 2020, ITT filed an objection to the application and offered the “C.S. IT INTEGRITY” to perform the activity described in the application. On July 3, 2020, EGS filed its answer to the offer.

[9] On July 6, 2020, ITT filed a request for an extension to file its reply; EGS objected to the extension; and the Agency issued a Decision to deny the extension request.

[10] On July 7, 2020, ITT filed its reply.

[11] By Decision No. LET-W-51-2020 dated July 14, 2020, the Agency determined that it required additional information from the parties to be able to carry out a thorough assessment of whether, on a balance of probabilities, a Canadian ship is available and suitable to perform the activity. The Agency provided EGS and ITT with two business days to file the required information and one business day to file their comments on the other party’s additional information. The Agency also stated that it would not allow any further submissions from either party after they filed their comments on July 17, 2020, and would not hear any new arguments.

[12] On July 16, 2020, EGS and ITT filed their supplemental responses; and on July 17, 2020, both parties filed their comments with the Agency.

[13] On July 19, 2020, ITT requested that the Agency accept an attachment that it stated it meant to include in its supplemental response.

[14] On July 20, 2020, EGS took no position on whether the Agency should accept ITT’s late submission. However, it stated that if the Agency were to accept the late submission, EGS should be permitted to make submissions as to the impact, if any, of the document submitted.

PRELIMINARY MATTER

ITT’s July 19, 2020, submission

[15] In respect of ITT’s late submission, the Agency finds that ITT had sufficient opportunity to file its evidence within the time frame specified in Decision No. LET-W-51-2020. As such, ITT’s July 19, 2020 submission will not form part of the public record and will not be considered by the Agency in making its determination.

ISSUE

[16] Is there a suitable Canadian ship available to perform the activity described in the application?

LEGISLATIVE CONTEXT

[17] When an application is made for a coasting trade licence to authorize a foreign ship or a non-duty paid ship to conduct a commercial activity in Canadian waters, the Agency is responsible under the Act for determining whether there is a suitable Canadian ship available to provide the service or perform the activity described in the application. The Act recognizes the interests of Canadian ship operators by permitting foreign ships to be used in Canadian waters only when no suitable Canadian ship or non-duty paid ship is available to provide the service or perform the proposed activity.

[18] The Agency must determine whether, on a balance of probabilities, there is a suitable Canadian ship available to perform the activity.

[19] In carrying out its responsibilities, the Agency relies upon the applicant to provide detailed information about all relevant facts and circumstances that are pertinent to the service or proposed activity, and on the foreign ship to be used.

[20] The Agency also relies upon Canadian offerors to provide detailed information about the offered ship and how a Canadian ship that has been offered would be able to meet the requirements, as described by the applicant.

[21] The Agency’s process is set out in the Canadian Transportation Agency Guidelines Respecting Coasting Trade Licence Applications (Guidelines).

POSITIONS OF THE PARTIES

EGS

[22] In its application, EGS states that the activity start and end dates, approximately July 28, 2020, to approximately August 28, 2020, are not flexible due to contractual requirements and prevailing weather conditions in the area of operations.

[23] In its answer, EGS submits that its client, NEC Corporation (NEC), has advised that the survey data resulting from the activity must be provided to the cable manufacturing facility by mid-August so that the manufacturer can commence cable design for the project. The activity is a component of, and will provide critical support to, a broader project to provide low latency fibre optic telecommunication connectivity and essential interconnectivity between newly established data centres in Canada and Asia. EGS adds that the marine route survey completion on or before August 2020, in Canadian waters, is essential to complete the project on time, in terms of overall project task sequence. The project will be the first fibre optic telecommunications cable system landing on Canada’s West Coast and will have a positive impact on Canada’s domestic and international broadband capability.

[24] EGS indicates that ITT concedes that its offered ship is not Canadian-registered and that evidence from Transport Canada, the authority responsible for the registration of Canadian ships, will be necessary to confirm, with a high degree of certitude, that the ship offered will be Canadian flagged at the time of the activity described in the application. It refers to paragraphs 27 and 28 of the Agency’s Decision No. 107-W-2004 dated March 10, 2004, where the Agency addressed a similar situation of a ship owner offering a foreign-flagged ship on a prospective basis. The mere statement that its ship will be Canadian at the time of the activity is insufficient and, EGS adds, ITT has a heavy evidentiary burden to prove its assertion.

[25] EGS filed an e-mail dated June 23, 2020, from Mr. Graham Curren, representative of ITT, to Eric Roach of EGS Americas Inc. indicating that ITT believed that “on the current schedule the IT INTEGRITY would be available for work August 10 to 15.” EGS expresses serious doubts as to the accuracy of ITT’s estimate to deliver the ship offered to Vancouver under Canadian flag, sometime between August 10 and August 15, 2020, given that the offered ship is currently located in Halifax, under Barbados flag.

[26] In addition, EGS understands that before the offered ship can begin the activity, it will need to be outfitted with a variety of equipment that will require inspection and approval by Transport Canada inspectors and Classification Society surveyors; all of which could cause further delays for the offered ship. EGS submits that ITT has not shown with any degree of certainty that it can complete the activity by around August 28, 2020.

[27] EGS states, in its supplemental response, that while it is technically possible to complete the work in spring 2021, it is not feasible as such a delay would likely have a “catastrophic effect” on NEC’s ability to complete the trans-Pacific cable project. This is because NEC requires the Canadian survey data by the end of August 2020 in order to: (a) obtain the necessary Canadian international submarine cable licence under the Telecommunications Act, SC 1993, c 38; and (b) maintain its place in the cable manufacturer’s queue.

[28] In its comments to ITT’s supplemental response, EGS maintains that it is clear that the offered ship will not be Canadian flagged at the start of the activity, nor outfitted and available to complete the activity within the time stated in the application. ITT has not provided any confirmation on the status of registration from Transport Canada’s Vessel Registration, which EGS states is the only entity with authority to issue a Canadian Certificate of Registry. EGS further argues that the assertions from ITT’s lawyers (Metcalf & Company) and Det Norske Veritas (Canada) Ltd. (DNV GL), whether they are acting as a Recognized Organization or a class surveyor, are from paid service providers retained by ITT and do not constitute evidence from Transport Canada. EGS points out that Metcalf & Company are in possession of an e-mail from Transport Canada’s Canadian Register of Vessels but that ITT has excluded this e-mail from its response to the Agency.

[29] EGS submits that both DNV GL and Metcalf & Company assert that the offered ship can be re-flagged by July 31, 2020, which corresponds with the start date stated in its application. However, ITT makes it clear that the offered ship will not be Canadian flagged until August 25, 2020, at the very earliest, as the ship must first arrive in port in British Columbia where it will then be required to obtain the Deletion Certificate from the Barbados registry. EGS maintains that these assertions as to the completion of the Canadian registration appear to be best-case scenarios, downplaying any possibility of technical, regulatory or other delays. EGS points out that ITT’s own schedule has already shifted by approximately two weeks, from the offered ship being available in British Columbia on “August 10-15” to being available on August 26, 2020.

[30] EGS has a concern with ITT’s reply, where ITT submits that it “is currently completing its fitting out…”. EGS states that it fails to conceive how all of the equipment can be installed, commissioned and approved within the time frame that ITT has suggested, and maintains that ITT has not provided satisfactory evidence of what equipment is onboard or remains to be installed.

[31] EGS states that according to the “IT Integrity’s Schedule” (Itinerary), which is included as Attachment 2 to ITT’s supplemental response, ITT cannot complete the work until September 5, 2020, as it has assumed a ten-day schedule for the activity. By contrast, EGS estimates approximately 14 working days to complete the work and has allowed an additional 14-day contingency to allow for delays. EGS calculates that by allowing ITT a working time of 14 days, plus an optimistic contingency time of seven days, the completion of the work using ITT’s Itinerary moves to September 16, 2020, well beyond the completion date stated in the application.

[32] EGS points out that ITT’s Itinerary has assumed no delays due to the reflagging process, which includes obtaining the Deletion Certificate from the Barbados registry; issuing a Canadian Certificate of Registry; completing the change of flag survey, as well as the Marine Technical Review Board’s (MTRB) process given that ITT is seeking to exempt the offered ship from certain regulatory requirements; the issuance of Canadian trading certificates, or any of the other Canadian regulatory permits and approvals necessary to operate a Canadian ship; ITT’s project in Honduras; transiting through the Panama Canal; and outfitting the offered ship for the work. As well, ITT’s schedule does not appear to allow for any necessary class approvals for the installed equipment.

[33] Even if there are no delays whatsoever, EGS maintains that the offered ship will not be Canadian flagged at the time that the work stated in the application is to take place and cannot start the work until the period stated in the application has nearly ended. In these circumstances, EGS asserts that the Agency cannot conclude that there is a Canadian ship available.

ITT

[34] In its objection, ITT states that it “will have a suitable Canadian vessel available” to perform the scope of work outlined in the application. As part of its offer, it includes a specification sheet for the “C.T. IT INTEGRITY”, under the flag of Barbados, as well as a “survey package comparison” addressing the special requirements for the activity. ITT states that the ship will be Canadian flagged by the timing of this work.

[35] In its reply, ITT states that the actual time to transition a ship from foreign flag to Canadian flag is a matter of a few days on arrival in Canada. The COVID-19 situation caused some delays to this process from March to the latter part of May but did not impact its timeline. It advises that DNV GL, the class society for the offered ship, along with Metcalf & Company, have been involved in the flag transition process since February 2020 when they performed the first inspection in regard to the ship’s compliance to Canadian regulations.

[36] ITT adds that the offered ship brought to Halifax is currently completing its fitting out for cable survey activity prior to departing for Honduras; and meets all of EGS’ survey equipment and facility requirements. ITT indicates that the requirement for onboard processing is a new requirement that could be met, but that EGS had not made ITT aware of this requirement prior to EGS’ answer to its offer. It submits that there will be no outfitting impact to stated timelines.

[37] ITT indicates that the letter from NEC is broad and does not back up EGS’ statements requiring completion of the work by mid-August. ITT maintains that it will have a suitable Canadian ship available to complete EGS’ indicated requirements within August 2020.

[38] In support of the offered ship’s Canadian registration, ITT includes Attachment 1 to its reply: an e-mail dated July 7, 2020, from DNV GL to Mr. Graham Curren of Taut Solutions Ltd., representing IT. In the e-mail, DNV GL states, in part, the following:

[t]o complete the change of flag (or DSIP Enrollment) of the IT Integrity would take a further 3-4 weeks. We… have completed the gap assessment on the vessel along with other associated work, therefore the only remaining scope is to submit the MTRB Exemption Applications and Project Description to Transport Canada which will be completed by the end of this week. As discussed this timetable gives us no concerns in meeting the requested end of project date of July 31st.

[39] ITT also includes Attachment 2 to its reply, a letter dated July 6, 2020, from Metcalf & Company to ITT that states, in part, that “[w]e estimate that the Vessel can be fully transferred under Canadian flag within one to two weeks’ notice.”

[40] In its supplemental response, ITT indicates that since July 14, 2020, the offered ship is berthed in Halifax; the offered ship has flexibility in the schedule of work despite the contract in Honduras; and it was decided that rather than to sail as originally envisaged during discussions with EGS, ITT would wait for further information to ensure that all of the right equipment is installed to meet the requirements. ITT explains that the scope of work in Honduras is coming to an end.

[41] ITT explains that its itinerary includes the sail to Honduras upon completion of securing all the equipment onboard the offered ship, which will occur on July 17, 2020. The offered ship then completes the work in Honduras; sails to Port Alberni, British Columbia; completes the change of flag and the registering of the ship; and then completes the EGS survey work. ITT further explains that the sailing time is based on the normal cruising speed of 11 knots, but the ship is capable of cruising at 13 knots. If required, the scheduled arrival in Port Alberni can be improved by 5 days, allowing for the completion of the route survey in Canadian waters by the end of August 2020.

[42] In support of the offered ship’s Canadian registration, ITT includes Schedule A, entitled “Canadian Register of Ships – Required Documents”, that lists the documents and provides the “date received by the Canadian Register of Ships”. As well, ITT includes Attachment 4: an e-mail dated July 16, 2020, from DNV GL to Mr. Curren. ITT states that DNV GL is acting for Transport Canada in the delegation to class for the flagging of the “C.T. IT INTEGRITY” to the Canadian registry and considers the e-mail from DNV GL to act as a status of this process for Transport Canada. DNV GL’s e-mail reconfirms that it can “see no reason why the scheduled change of flag occurring by July 31, 2020, or the first Canadian port of call thereafter cannot be achieved.”

[43] ITT explains that Attachment 5, a letter dated July 16, 2020, from Metcalf & Company to ITT, states that the steps required to achieve Canadian flag have very nearly been completed with only two steps remaining, those being the deletion from the Barbados registry once the offered ship arrives in Port Alberni, British Columbia, and the survey to be performed by DNV GL for the trading certificates.

[44] With respect to providing information on the status of approvals from Transport Canada inspectors and the Classification Society surveyors, ITT submits that this would be a normal operation within the class approved design of the offered ship and no abnormal structural changes are being made that impact the original design intent, or class of the ship. As a result, no inspections or additional certification is required.

[45] In its comments to EGS’ supplemental response, ITT states that there is flexibility in the period of time requested by EGS for a coasting trade licence; that ITT has been involved in a cable route survey during October in the very same area and experienced no weather delays; that the cable route surveys in that area can be carried out in September and October; that it could perform the survey in an estimated 10 class-approved design days; and that EGS’ response is dramatic in that it states that it would have a “catastrophic effect” for their client to complete the trans-Pacific cable project due to the need to obtain the international submarine cable licence.

ANALYSIS AND FINDINGS

[46] There are three questions that need to be addressed by the Agency in the present case:

  1. Will the offered ship, the “C.T. IT INTEGRITY”, be Canadian registered at the time that the activity is to be performed?
  2. If in the affirmative, will the ship offered be suitable to perform the activity described in the application?
  3. If in the affirmative, will the ship offered be available to perform the activity described in the application?

Canadian registered

[47] An offeror to a coasting trade application is not restricted to only offer a ship that is Canadian registered. It may offer a ship that will be Canadian registered by the time the activity is to take place. However, the Agency can only make a finding that there is a such a ship available if the evidence filed by the offeror clearly demonstrates that the ship offered will indeed be Canadian registered by the time the activity is to take place.

[48] Section 3.4.1 of the Guidelines specifically address this issue as follows:

3.4.1 Canadian-registered

57. It is the responsibility of the offeror to provide evidence that the offered ship is Canadian-registered. Satisfactory evidence of the Canadian-registered status of an offered ship is its name and proof that it is currently registered in the Transport Canada Register of Vessels database.

58. If the offered ship is a foreign ship that is undergoing a process of becoming a registered Canadian ship, an offeror must provide evidence that the offered ship will be registered by the time the proposed activity is to be performed.

59. Failure by the offeror to file evidence to demonstrate that the offered ship is a Canadian-registered ship, or will become a Canadian-registered ship by the time the proposed activity is to take place, will result in the Agency concluding that there is no Canadian registered ship available for the proposed activity.

[49] The Agency has considered all of the evidence submitted by the parties, including the evidence filed in ITT’s submissions, to assess whether it allows the Agency to conclude that the offered ship will be Canadian registered as of the date of the activity described in the application.

[50] Specifically, in its objection, ITT did not provide evidence that the offered ship will be Canadian registered by the time that the proposed activity is to be performed. Instead, the objection simply states the following: “Flag: Barbados, but vessel is imported into Canada with duty paid and is completing the Canadian flag process. She will be Canadian flagged by the timing of this work.”

[51] Despite EGS’ reference, in its answer, to the Agency’s Decision No. 107-W-2004, wherein the Agency set out that the evidence that it determined was necessary from an objector offering a foreign ship, ITT, in its reply, again submits that the offered ship “will be Canadian flagged, fully imported and duty paid prior to commencing this work in Canadian waters.” Instead of offering evidence from Transport Canada as to the progress of the Canadian registration of the offered ship, ITT states that “due to time constraints placed upon [it], [it] will rely on the [Agency] to indicating if [it] feel[s] [it] need[s] more information in this area.” ITT also provides the July 7, 2020 e-mail from DNV GL that will be addressed later.

[52] As a result, in Decision No. LET-W-51-2020, the Agency requested, among other things, that ITT: 1) describe all of the outstanding steps that need to be completed in order for the offered ship to be Canadian registered, including the timelines by when they were or will be initiated and will be completed; 2) provide a written confirmation from Transport Canada asserting the status of the application with a date to obtain the Canadian Certificate of Registry for the offered ship; and 3) provide an itinerary for the offered ship, with departure, stops and arrival, to reposition the ship from its current location to be in position to carry out the activity in British Columbia.

[53] In examining the supplemental response from ITT, the Agency finds that ITT’s statements are contradictory on material points to the other information that it has provided. For example, in its latest response, ITT submits that the offered ship could be Canadian registered on August 25, 2020. Mr. Curren explains that a prerequisite to the issuance of a Canadian Certificate of Registry is the deletion from the Barbados registry which can only occur once the offered ship arrives in Port Alberni, British Columbia. ITT’s supplemental response also includes the offered ship’s Itinerary showing that ITT expects the Canadian flag process to be finalized on August 25, 2020, two days after the ship arrives in port. During those same two days, the Itinerary indicates that ITT will prepare the survey equipment and personnel, and it plans for another day to undertake calibrations prior to starting the activity of August 26, 2020. This contradicts the previous statements made by DNV GL and Metcalf & Company in their correspondence of July 7 and 6, 2020, respectively, that the offered ship can be Canadian flagged by July 31, 2020. It is also contrary to the June 23, 2020 e-mail from Mr. Curren to EGS Americas Inc., in which the offered ship was said to be available in Vancouver for work on August 10 to 15, 2020. Lastly, it is inconsistent with ITT’s reply when it stated that “[w]ith planning and some Activity carried out prior to a vessel’s arrival in Canada the actual time to transition a vessel from foreign flag to Canadian flag is a matter of a few days on arrival in Canada.”

[54] The Agency notes that ITT provides a further scenario in its supplemental response that ITT anticipates would allow it to meet the activity period of end of August. This scenario assumes an even tighter schedule as ITT would be voyaging above normal cruising speed.

[55] The Agency further questions ITT’s Itinerary and related time estimations for the Canadian registration of the offered ship. For example, ITT seeks to exempt the offered ship from what EGS refers to as “certain unspecified regulatory requirements”, that must be obtained from the MTRB. In DNV GL’s July 7, 2020 e-mail, ITT states that the MTRB Exemption Applications and Project Description to Transport Canada would be completed “by the end of this week”—that being by July 10, 2020. In DNV GL’s e-mail of July 16, 2020, the MTRB applications still have not been filed as DNV GL states that “[o]nce the MTRB applications are submitted, the Change of Flag survey can occur at any time….” The same e-mail states that an opening meeting is planned for the week of July 20,2020, where all potential exemptions will be discussed before final applications are submitted to Transport Canada for approval.

[56] As a result, the Agency concurs with EGS that there is a possibility of unanticipated regulatory, technical or other delays, whether they relate to the Canadian registration of the offered ship, the offered ship’s current contract work in Honduras, or delays related to the outfitting of the offered ship. These delays would be in addition to the delays from ITT’s original estimate of “August 10 to 15”, extending it to August 26, 2020.

[57] With respect to the timing, the Agency further notes that the e-mails filed by EGS in its answer indicate that EGS and ITT were in discussions about the activity as early as June 18, 2020. However, ITT only recently filed certain documentation required to register the ship as Canadian, and significantly after it had filed its Application of Registry with Transport Canada on May 12, 2020, and the Statement of Qualification form, to prove eligibility to be a registered owner, on June 10, 2020. Specifically, “Schedule A” of ITT’s supplemental response shows that the documents that ITT indicates were remaining were not filed with Transport Canada until July 8, July 15 and July 16, 2020.

[58] In terms of the evidence that the Agency requested that ITT provide from Transport Canada, ITT maintains that DNV GL’s e-mail of July 16, 2020, is evidence providing the “status of this process for Transport Canada” given that DNV GL is acting for Transport Canada in the delegation to class for the flagging of the offered ship to the Canadian registry. The Agency further notes that ITT, through the letter from Metcalf & Company dated July 16, 2020, is in possession of two e-mails from Transport Canada’s Canadian Register of Vessels dated July 15 and July 16, 2020, that relate to the status of ITT’s application but did not file them in its supplemental response to the Agency.

[59] The Agency concurs with EGS that DNV GL’s e-mail does not constitute evidence from Transport Canada. DNV GL is a Recognized Organization by Transport Canada to complete the Delegate Statutory Inspection Program (DSIP) of certain ships on behalf of Transport Canada. DN VGL has the authority from Transport Canada through the DSIP to inspect and certify ships, which is one of the requirements to operate as a Canadian-registered ship. However, a Recognized Organization does not have the authority to issue the Canadian Certificate of Registry nor the oversight over Transport Canada’s Canadian Register of Vessels.

[60] Lastly, while ITT argues that the activity period is flexible, the Agency is of the opinion that EGS has adequately addressed why the period of on and around July 28 to on and around August 28, 2020, is necessary and cannot be postponed until some future date that ITT is not in a position to commit to. EGS has satisfied the Agency that the data from the activity is a crucial component for NEC’s regulatory licence under the Telecommunications Act in respect of the trans-Pacific submarine cable and allows NEC to maintain its place in the cable manufacturer’s queue. As recognized in Decision No. 500-W-2002 and Decision No. 285-W-2007, while the Act should not be interpreted in a way that allows applicants to impose artificial conditions on the activities described in their applications, the Agency recognizes that restrictions such as deadlines for completion of the work and specific mandatory equipment are often legitimate requirements for the task that needs to be completed. The Agency believes this is such a case.

Determination

[61] Based on the evidence filed, the Agency is unable to conclude that the offered ship will be Canadian registered as of the date of the activity indicated in the application. In light of the foregoing, the Agency finds, pursuant to subsection 8(1) of the Act, that there is no suitable Canadian ship or non-duty paid ship available to perform the activity described in the application.

[62] As a result of this determination, the Agency will not pursue the other questions.

Fonte/Source: http://www.otc-cta.gc.ca/node/569478

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