Thank you very much to the committee for having us present today and for listening to the concerns of our industry.
The Canadian Association of Agri-Retailers represents a national voice for the crop input retailers across Canada. We have approximately 960 members across the country.
We have four main critical issues we are concerned about, but we want to address one that's of primary concern to our agri-retail sector today and a top priority. That's the cost of compliance with new and proposed industry and government regulations, specifically in two areas. First is the physical upgrade to retail sites to comply with security and safety regulations for crop input products. This spans a wide area of government sectors, including public safety, agriculture, environment, transport, and health. Second is proposed industry and government amendments to safety and stewardship requirements for anhydrous ammonia, which is more of a specific product. It's a fertilizer our members sell to growers to produce their crops.
On site security and safety upgrades, part of the cost-of-compliance issues relates directly to the future industry and government security standards regulating physical upgrades to retail sites, as well as currently mandated safety standards for crop input products. We believe government and industry have a shared responsibility to Canadians to ensure that safety.
Crop input products like fertilizer are essential to modern agricultural production, but must be secured from terrorists and criminals. These products include ammonium nitrate, which has been and is a possible bomb-making material; and anhydrous ammonia, which is a possible catalyst for crystal meth production. The crop protection products we sell may also cause bodily or environmental harm.
The cost of physical security upgrades can be prohibitive. These include fences, locks, surveillance, guards, etc. All these can be mandatory upgrades under the industry-related ammonia code of practice.
The cost of compliance with government and safety regulations can also be prohibitive. These include proper use guidelines, tracking, training of staff, storage, transport regulations, as well as insurance and liability exposure. We already contribute to the AWSA warehousing regulations, and we are also involved in container recycling programs with manufacturers. They get the bulk containers back from growers and into the system to be reused.
Ultimately, when retailers incur these costs they can try to pass them on, but in a very competitive market it is very difficult to do. If they can pass them on they will end up with the consumer, or they may decide to no longer carry that product, which diminishes competition and puts additional costs on the grower.
Until now the retail sector has met all current regulations, but resources are being strained. Government support is essential to ensure future compliance and avoid economic collapse of some of these operations.
On the issue of ammonia safety, there is the cost of compliance to new and more stringent regulations pertaining to the safe handling and storage of anhydrous ammonia, which is critically important to crop production. Examples of potential new regulations facing retailers include consideration to perform hydrostatic pressure testing of all anhydrous ammonia field tanks. In Canada we have approximately 12,000 tanks currently in service. Another example of regulations that are already forcing retailers to incur additional costs is the reclassification of ammonia. That requires special labelling, and of course training of staff again.
CAAR is working closely with Transport Canada and other industry stakeholders to implement these important regulations, but the cost of compliance with so many regulations has become prohibitive, with no current assistance from industry and government.
Unfortunately, the net consequence is that farmers will be hit indirectly in most cases. Operational closers or retailers may make the decision to not carry a particular product like ammonia, forcing that grower to go farther to acquire it. In the end he may have to change his equipment and move to a product that's available. That could be a dried form, like urea or phosphate, or a liquid. So there are costs to the grower if our operators and dealers no longer carry it. And of course the retailer himself loses revenue on a very legitimate product.
We believe there is a viable solution to these problems. CAAR recognizes the importance of prompt compliance with all security and safety regulations to protect Canadians, but urges the government to help offset the economic strain on the retail sector in this process. CAAR believes the blueprint for a solution has already been established in the form of a government contribution program for security upgrades at designated Canadian ports, whereby government rebates 75% of the approved upgrade cost.
CAAR recommends that a similar type of rebate program be established to assist agri-retail sites to comply with new security and safety regulations. We would be very eager to work with the appropriate departments to define eligible expenses.
In closing, we hope we have clearly defined the single most challenging business issue we face as agri-retailers in our sector. Security and safety regulations are important, but unfortunately come at a high cost of compliance. Agri-retailers implore the government to consider a cost-sharing program that will facilitate prompt compliance without adverse economic effects.
Thank you.