Good morning, sir.
I am the president of the Shipbuilding Association. The association is a relatively new one. It was formed in 1995. It's national in its scope. It goes from coast to coast, and we are primarily interested in shipbuilding, ship repair, and the industrial marine industry in Canada.
Shipbuilding policy in Canada is being crafted by several government departments in what appears to be a somewhat uncoordinated fashion. The government has recently announced a national shipbuilding procurement strategy for its own fleets. This has the promise of being an excellent program, but it is still in its infancy, and non-government ships and the shipbuilders who construct them still need assistance.
Canada is in fast-track negotiations with the European Union. Whatever the result, it will have an effect one way or another on shipbuilding in Canada.
The finance department has just announced a change in tariff policy for some ship types imported into Canada. The association supported this change, provided that changes were made to the government-structured financing facility and the accelerated capital cost allowance. This was not done. This change in tariffs also has the potential to affect free trade negotiations in Europe's favour. Repeated requests for changes to the structured financing facility and the accelerated capital cost allowance have not been acted upon.
Now, an accelerated capital cost allowance is an excellent incentive for Canadian owners who are generating healthy profits to build their vessels in Canada. ACCA, as it's commonly known, allows an owner to write off the capital costs of a new Canadian-built vessel in four years. The value of ACCA is calculated at 10% of the vessel price. Structured financing facility, or SFF, was introduced in 2001 and 2002 to stimulate demand for Canadian-built vessels. It provides interest rate support as an interest rate buy-down of financing used in the acquisition or modification of a Canadian-built vessel or offshore structure.
This support is in the form of a non-repayable contribution. The value of the SFF is nominally 15% of the contract to the shipyard. After taxes, however, that value reduces to 8%. A Canadian owner has a choice between structured financing facility or the accelerated capital cost allowance.
Funding of the SFF program is sporadic. There is presently about $6 million to $7 million in the fund, with no guarantee that there will be anything beyond the end of this fiscal year. The government needs, in our view, to commit $20 million per year to the SFF program for a minimum of five years, with a review of progress at that time before considering further investment.
The SFF, combined with the ACCA, is a very useful program for those small shipbuilders who will not be designated as a centre of excellence under the national shipbuilding procurement strategy. They desperately need this to stimulate commercial construction in Canada.
In conclusion, shipbuilding policy and finance require a whole of government policy framework that must include procurement policies for both government ships and commercial vessels, trade negotiations, tariff policy, and tax and program policy. Critical to small shipbuilding enterprises at this time is an adequately funded structured financing facility that can be combined with the accelerated capital cost allowance to encourage Canadian shipowners to build in Canadian shipyards.
Thank you.