Dredging services in Canada's coasting trade

Learn how the rules for foreign vessels providing private and federally procured dredging services are changing under amendments to the Coasting Trade Act (CTA). The amendments take effect when the Canada-European Union (EU) Comprehensive Economic and Trade Agreement (CETA) enters into force in 2017.

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New sections in the Coasting Trade Act

Private dredging contracts

As per new subsection 3(2.2) of the CTA, dredging activities carried out by a ship described below do not require a coasting trade licence:

  • a non-duty paid ship whose owner is a Canadian entity or an European Union (EU) entity
  • a foreign ship that is registered in the first, or domestic, register of a member state of the European Union and whose owner is a Canadian entity, an EU entity or an entity that is under Canadian or European control
  • a foreign ship that is registered in a second, or international, register of a member state of the European Union and whose owner is a Canadian entity, an EU entity or an entity under Canadian or European control, and
  • a foreign ship that is registered in a register other than the Canadian Register of Vessels or a register referred to in paragraph (b) or (c), and whose owner is a Canadian entity or an EU entity

Federally procured dredging contracts

Coasting trade licence

As per new subsection 5.1 (1) of the CTA:

  • Activities that are provided under an Agreement with Her Majesty in right of Canada or an entity listed in Annex 19-1 of the Government Procurement Chapter of the CETA will still require a coasting trade licence.

Total value of a contract

As per new subsection 5.1 (2) of the CTA:

  • CETA results in changes for federally procured dredging services provided by Canadian or EU registered vessels for construction contracts equal to or of greater value than the Canadian dollar value of $5 million Special Drawing Rights of the International Monetary Fund (currently valued at $8.5 million Canadian). The Canadian dollar value is determined by the Minister of International Trade and amended every two years.
  • In these cases, non-duty paid vessels or vessels registered in the EU that are undertaking activities provided under an Agreement with Her Majesty in right of Canada or an entity listed in Annex 19-1 of the Government Procurement Chapter of the CETA may be permitted to obtain a coasting trade licence without consideration of the availability of a suitable Canadian registered vessel. This means that the Canadian Transportation Agency will no longer make determinations required under paragraphs 5(a) and 4(1) (a) of the CTA and the Minister of Public Safety does not require this determination to issue a coasting trade licence in such circumstances.

Control

As per new subsection 3 (7) of the CTA:

For the purposes of the application of the CTA, an entity is under Canadian or EU control:

  • (a) in the case of a third party entity that is a corporation, if the securities of the corporation to which are attached more than 50% of the votes that may be cast to elect directors of the corporation are directly or indirectly held, otherwise than through a subsidiary or by way of security only, by or for the benefit of any of, or any combination of, the following individuals:
    • (i) a Canadian citizen,
    • (ii) a permanent resident as defined in subsection 2(1) of the Immigration and Refugee Protection Act, or
    • (iii) a national of a member state of the EU, or
  • (b) in the case of a third party entity that is a trust, partnership, joint venture or other association, if an individual, or any combination of individuals, described in any of subparagraphs (a) (i) to (iii) holds, directly or indirectly, but not through a subsidiary, an interest in the trust, partnership, joint venture or other association that entitles the individual or combination of individuals to receive more than 50% of its profits or more than 50% of its assets on dissolution

Third party entity

As per new subsection 3 (8) of the CTA:

  • The CTA defines “third party entity” as (a) a corporation, other than a Canadian or EU entity that is not incorporated under the law of the United States; or (b) a trust, partnership, joint venture or other association, other than a Canadian or EU entity that is not formed under the law of the United States.
  • Third party entities located outside the United States that are owned or controlled by Canadian or EU nationals of the EU may provide dredging services under private contracts, but only when using vessels registered in an EU Member State and flying the flag of an EU Member State.

Amendments explained

Private dredging contracts

Amendments to the CTA remove the requirement to obtain a coasting trade licence for certain vessels for dredging services under private contracts. The vessels must be owned by Canadian or EU entities, including EU entities located outside the EU, where:

  • EU entities located in an EU member state may use vessels of any registry
  • EU entities located outside an EU member state, that are owned or controlled by nationals of the EU or Canada, must use EU-registered vessels

Federally procured dredging contracts

All foreign and non-duty paid vessels providing federally procured dredging services will continue to require a coasting trade licence. A coasting trade licence will continue to be required for federally procured dredging services with a contract value below the government procurement threshold of $8.5 million Canadian for construction services when using foreign vessels and non-duty paid vessels. A licence will only be granted if there is no suitable Canadian registered duty paid or non-paid vessel available to provide the service or perform the activity.

There are no changes in procurement practices below the government procurement threshold of $8.5 million Canadian for dredging services and/or dredging services included in construction services. Only Canadian registered and manufactured vessels or vessels that have been substantially modified in Canada, resulting in a predominantly Canadian added-on value and pre-qualified, may provide federally procured dredging services.

A vessel not built in Canada must obtain a certificate of qualification from the federal government to be certified, and must meet the following criteria:

  • substantially modified in Canada to the extent it has predominantly Canadian equipment (including add-on value)
  • registered in Canada, and
  • Canadian-owned for at least 1 year

At or above the government procurement threshold for construction services currently valued at $8.5 million Canadian, CETA changes procurement practices for dredging services and dredging services incidental to construction services.

A coasting trade licence will continue to be required for federally procured dredging services when using foreign vessels and non-duty paid vessels. However, at or above the $8.5 million threshold value, the requirement that a suitable Canadian registered duty paid or non-duty paid vessel not be available will be waived for EU companies or Canadian companies using EU registered vessels.

The vessel used for federally procured dredging services at or above the government procurement threshold must be:

  • registered in Canada, or
  • registered in an EU member state and granted a temporary licence under the Coasting Trade Act
    • The granting of this temporary licence will not be subject to the condition that no suitable Canadian duty or non-duty paid vessel be available

It must also be:

  • of Canadian or EU make or manufacture, or
  • predominantly modified in Canada or the EU and owned by a person located in Canada or the EU for at least a year before the bidder submitted the tender.Footnote *

Contact Innovation, Science and Economic Development Canada for information on how to obtain this certificate.

Application

The CTA defines cabotage as the engaging, by ship, in any commercial marine activity in Canadian waters and in matters above the continental shelf for any commercial marine activity related to the exploration, exploitation or transportation of the mineral or non-living natural resources of the continental shelf of Canada. All dredging activities in Canadian waters, or above the continental shelf, meet this definition of cabotage and are therefore subject to the provisions of the CTA.

All Canadian laws that impose safety or pollution prevention requirements apply to foreign vessels even if they are exempt from the requirement to obtain a coasting trade licence.

Read our list of coasting trade terminology and definitions.

Advance notification

Canadian, EU and third-party entities are required to give notice before providing private dredging services and federally procured dredging services in Canada without a licence:

Contact Transport Canada’s Domestic Marine Policy Group

Email: tc.coastingtrade-cabotage.tc@tc.gc.ca

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