Shipbuilding Industry Assistance Regulations (C.R.C., c. 348)

Deferred Application Date

• 9 (1) If the construction schedule does not provide for expeditious commencement of the construction of the eligible ship, commensurate with the shipbuilder’s building program, or if the construction schedule does not provide for completion of the eligible ship within a time that appears reasonable to the Minister, then, for the purposes of section 8, the application date shall be a date as determined by the Minister but the date so determined shall not be earlier than the application date.

• (2) If the construction schedule of a subsidy agreement made pursuant to these Regulations in respect of an eligible ship is not followed by the shipbuilder and the ship is completed at a date later than that provided in the schedule, for causes not beyond the control of the shipbuilder and the shipowner, the Minister may, in his discretion, for the purposes of calculating the subsidy under section 8, declare the application to have been received at a date that is correspondingly later.

Improvement Plan

• 10 (1) A shipbuilder who applies for the grant of a contribution under these Regulations shall submit to the Minister, in a form acceptable to the Minister, a proposed strategic plan for the improvement of his shipyard including

  • (a) market and product assumptions and strategies, and the specific projects that relate to them;

  • (b) on-going improvements relating to safety and technological conditions;

  • (c) a statement as to the expected improvements in capacity, productivity or safety relating to each project;

  • (d) financial statements for the last three fiscal years of the shipbuilder; and

  • (e) a projected balance sheet that reflects the implementation of individual elements of the plan.

• (2) The projects and improvements referred to in paragraphs (1)(a) and (b) may be undertaken or made

  • (a) by the shipbuilder; or

  • (b) with the approval of the Minister, by a wholly-owned subsidiary of the shipbuilder or, if the shipbuilder itself is a wholly-owned subsidiary, by its parent company.

Improvement Agreement

• 11 (1) Where an improvement plan is approved by the Minister, an improvement agreement shall be entered into between Her Majesty and the shipbuilder.

• (2) Every improvement agreement shall

  • (a) identify expenditures proposed and their relationship to the improvement plan;

  • (b) include the terms and conditions in respect of the payment of any grant of a contribution pursuant to section 12;

  • (c) provide that the shipbuilder shall repay that portion of the contribution payable pursuant to section 12 that is in respect of equipment obtained under the improvement agreement and

    • (i) diverted to uses other than those provided in the approved plan, or

    • (ii) disposed of by the shipbuilder

    within five years of its acquisition or such shorter period as may be determined by the Minister; and

  • (d) provide for an audit to be made by the external auditors of the shipbuilder of the cost of the improvement project and for the cost of the improvement project to be verified, at the discretion of the Minister, by a person authorized by the Minister.

11.1 The Minister may declare an improvement project to be eligible for the grant of a contribution if

• (a) the improvement project is identified in a current improvement agreement as set out in section 11;

• (b) any conditions placed on the implementation of the improvement project as specified in the improvement agreement have been met;

• (c) in the case of an improvement project to commence after the coming into force of this section, the plans for the appropriate improvement project are presented for consideration by the Minister before work on the improvement project begins;

• (d) the improvement project provides for the use of Canadian materials, components and services when, in the opinion of the Minister, they are available and competitive; and

• (e) the shipbuilder provides a detailed list of all expenditures necessary for the project, to the satisfaction of the Minister.

Contribution Payable

• 12 (1) Subject to subsection (2), a grant of a contribution may be paid by Her Majesty to a shipbuilder in respect of a ship in an amount equal to the lesser of

  • (a) three per cent of the approved cost of the eligible ship; and

  • (b) 50 per cent of the cost of expenditure made by the shipbuilder in accordance with an improvement agreement made pursuant to section 11.

• (2) The maximum amount of any contribution that may be granted under this section is an amount equal to three per cent of the maximum approved cost.

• (3) Where a shipbuilder or shipowner has received or will receive financial support from provincial or municipal governments in respect of an expenditure made in accordance with an improvement agreement, the value of such financial support, as determined by the Minister, may be deducted from the cost of the expenditure for the purposes of paragraph 12(1)(b).

Maximum Approved Cost

• 13 (1) Subject to subsection (2), the maximum approved cost of an eligible ship to be used in calculating the maximum subsidy and maximum contribution for the purposes of paragraphs 7(2)(a) and (b) shall be

  • (a) where the eligible ship is being built for Her Majesty in right of Canada, the contract price that may be paid to the shipbuilder for that ship; or

  • (b) in all other cases, the quotient obtained by dividing the maximum price set out in the contract by the applicable figure set out in subsection 14(2).

• (2) From the amounts referred to in paragraphs (1)(a) and (b) there shall be deducted

  • (a) the cost of features that are specified in the subsidy agreement as being, in the opinion of the Minister, not eligible for subsidy; and

  • (b) the cost of any material, components, equipment and services to be obtained outside Canada where, in the opinion of the Minister, the material, components, equipment and services could have been obtained at a competitive cost in Canada.

Approved Cost

• 14 (1) Subject to section 15, for the purpose of calculating the amount of any assistance payable under these Regulations, the approved cost shall be the lesser of the maximum approved cost and

  • (a) where the eligible ship was built for Her Majesty in right of Canada, the amount paid to the shipbuilder for the construction of the ship;

  • (b) where the eligible ship was built by a shipbuilder to be owned by him, the quotient obtained by dividing the capital cost of the ship as entered on the books of the company for income tax purposes by the applicable figure set out in subsection (2); or

  • (c) where the eligible ship is built by a shipbuilder for a person other than a person described in paragraphs (a) or (b), the quotient obtained by dividing the amount paid to the shipbuilder in respect of construction of the ship, including whatever value the Minister may allow for owner-supplied equipment, by the applicable figure set out in subsection (2).

• (2) For the purposes of subsection (1), the applicable figure set out in this subsection is

  • (a) 0.86, where payment of assistance is to be made under paragraph 8(1)(a);

  • (b) 0.87, where payment of assistance is to be made under paragraph 8(1)(b);

  • (c) 0.88, where payment of assistance is to be made under paragraph 8(1)(c);

  • (d) 0.89, where payment of assistance is to be made under paragraph 8(1)(d);

  • (e) 0.90, where payment of assistance is to be made under paragraph 8(1)(e);

  • (f) 0.80 where payment of assistance is to be made under paragraph 8(1)(f);

  • (g) 0.91 where payment of assistance is to be made under paragraph 8(1)(g); and

  • (h) 0.91 where payment of assistance is to be made under paragraph 8(1)(h).

• 15 (1) Where subsidy is to be granted to a shipbuilder in respect of a ship, the approved cost for that ship shall be the lesser of the maximum approved cost calculated pursuant to section 13 and the cost of construction of the ship as certified by an audit made by the Audit Services Bureau, Department of Supply and Services.

• (1.1) Where a subsidy is not to be granted to a shipbuilder in respect of a ship other than a ship owned by Her Majesty in right of Canada, the approved cost for that ship shall be the lesser of the maximum approved cost calculated pursuant to section 13 and the cost of construction of the ship as certified by an audit made by the external auditors of the shipbuilder.

• (1.2) The cost of construction of the ship certified pursuant to subsection (1.1) may be verified, at the discretion of the Minister, by a person authorized by the Minister.

• (2) The cost of construction of the ship certified pursuant to subsection (1) shall not include the shipbuilder’s profit.

16 For the purpose of calculating the amount of any assistance payable under these Regulations, there shall be deducted from the approved cost in respect of any ship

• (a) the cost, as set out in the subsidy agreement, of

  • (i) any component or equipment set out in the agreement that was not fitted or installed in the ship, and

  • (ii) unless the Minister otherwise directs, any material, component or equipment obtained outside Canada where the agreement specified that the material, component or equipment be made in Canada;

• (b) any increase in the costs attributable to any change made to the plans or specifications relating to the construction of the ship that are made subsequent to the making of an application in respect of the ship;

• (c) the cost of any spare parts provided in respect of the ship where, in the opinion of the Minister, the provision of the parts is in excess of those required;

• (d) the cost of any material, component or equipment that was provided in respect of the construction of the ship that, when provided, was not new;

• (e) the cost of any supervision by a representative of or on behalf of the shipowner in respect of the construction of the ship;

• (f) the amounts, specified in the subsidy agreement, that relate to the cost of features of the ship that, in the opinion of the Minister, should by their nature be excluded from the approved cost;

• (g) the cost of any designs or plans, in respect of the construction of the ship, prepared by a person outside Canada where, in the opinion of the Minister, the designs or plans could have been prepared in Canada at a competitive cost; and

• (h) the cost of

  • (i) any insurance relating to the ship or its construction, or

  • (ii) any interest or other pecuniary charge relating to the financing of the construction of the ship

  that is paid to a company outside Canada where, in the opinion of the Minister, the insurance or the financing could have been obtained from a company incorporated in Canada at a competitive cost.

Expiry Dates

17 Notwithstanding any other provision of these Regulations,

• (a) no contribution may be granted pursuant to these Regulations if the application date is after March 31, 1990;

• (b) every improvement agreement entered into after the coming into force of this section shall provide that the improvement project shall be completed no later than December 31, 1990 and that no costs incurred after December 31, 1990 shall be eligible whether or not the project has been completed;

• (c) no contribution may be paid in respect of costs incurred for an improvement project where those costs are claimed after March 31, 1991.