PMRA proposes hefty hike in pesticide cost recovery fees

Wednesday, April 9, 2014

by SUSAN MANN

The pesticide cost recovery fee increases proposed by Health Canada’s Pest Management Regulatory Agency in its recently released consultation document are significant, says a spokesman for CropLife Canada.

But pesticide manufacturers have been preparing for fee increases “because like the document says, the fees haven’t changed since 1997, so they haven’t kept up with inflation or with the complexity of the regulatory package,” says Pierre Petelle, vice president of chemistry for CropLife, the pesticide industry’s trade association. The group has been consulted informally on proposed fee increases “just to get a sense of where things should go.”

CropLife Canada hasn’t yet filed a submission in response to the Pest Management Regulatory Agency (PMRA) proposal. “We’re consulting with our members and we’ll have a submission ready by the deadline,” Petelle says.

Stakeholders have until April 28 to comment on the proposal.

The proposed fees are “substantial but when you look at the costs of developing the active ingredient and the studies and data required, which can be hundreds of millions of dollars, the application and regulatory fees aren’t things that are limiting factors” for pesticide manufacturers, he says. The manufacturers consider it more critical that the regulatory system be timely and predictable rather than “what the actual dollar figure is for the fees.”

Craig Hunter, Ontario Fruit and Vegetable Growers Association crop protection and research specialist, says every one of the costs mentioned by PMRA in its consultation document are “flow-through costs,” and they all end up being paid for by a farmer. “Companies don’t absorb them out of their profit base. They just add it to the cost of the product.”

Another factor is horticultural farmers are price takers with prices being set internationally. “We will absorb those costs out of our bottom line.”

Hunter says he doesn’t know yet how much pesticide prices will increase due to the government proposal for increased cost recovery fees. But minor use products will still have a very low fee, as it should have, he explains. “Nothing should interfere with the minor use registration process.”

The PMRA says in its consultation document as long as the fee increases don’t deter companies from applying for or maintaining product registrations, “the primary impact would be to shift a portion of the costs of the product registration process” to the private sector from federal taxpayers. The shift could increase costs for companies wanting to register their pesticide products, distributors, growers and consumers, who buy products that benefit from pesticide use, but “it would not in and of itself represent a net cost to society; it would simply represent a redistribution of costs already being incurred,” the document says.

But Hunter says the public should pay a greater portion of the fees because the work the PMRA is doing protects the health and safety of Canadians and their environment.

There are about 30 domestic products for every commercial, agricultural product, he says. These small products, such as Raid, could be made to pay a higher regulatory charge annually and that would offset some of the PMRA’s costs in other areas.

The annual regulatory charge, formerly called maintenance fees, is being increased to $3,600 per product annually from $2,690.  This is where the public could pay more of the costs if the regulatory charge was set at $10,000 annually, for example, he says.

The PMRA also listed some examples of proposed fees using a few typical applications:

• New technical grade active ingredient for food use goes to $190,718 from $147,551.
• New end use product for a food use (field crop) goes to $121,004 from $81,281.
• A new end use product for a food use (greenhouse) goes to $41,042 from $39,466.
• A change in formulation type goes to $3,846 from $1,434.
• A change in application method drops to $7,253 from $10,910.
• Adding a new pest on an end-use product label goes to $2,093 from $1,168.

The PMRA says in its document its preliminary analysis of the proposed fee changes is that the potential impact would be quite small. For example, if pesticide manufacturers absorbed the fee increases rather than hiking prices, their net revenues would go down by about 0.86 per cent. Similarly if distributors absorbed the full impact of regulatory fee increases, their net revenues would do down by 2.9 per cent, while if distributors raised prices pest control products would go up 0.1 per cent. If growers absorbed pesticide price increases without increasing crop prices, their net income would decline by less than 0.1 per cent, the document says. BF