FromJSent: donder 25 oktober 2012 15:16

Subject: CETA: dredging

D n

1 hope the negotiations are going well this week.Apparently, businesses are also becoming aware that we are reaching the endame.We have just now received questions on CETA fr a 1 havepointed out that they are very — very - late with bringing this up, 6TWITf?eFdEIigedTô point out their/ourinterests to you. Their questions relate to the Floating Plant Clause and the Coasting Trade Act, whichthey feel are discriminatory towards foreign dredgers. Please see attached document for moreinformation.

1 have quickly checked the latest CAN Services and lnvestment offer (of July 2012), and can’t seem tofind reservations related to the above mentioned legislation. Can you teN me if the Floating Plant Clauseand the Coasting Trade Act are part of the negotiations?

Thank you so much!

Regards,

«File: CETA Questions.docx»

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Comprehensive Economic and Trade Agreement in relation to dredging in Canada

COMPREHENSIVE ECONOMIC AND TRADE AGREEMENT (CETA)The Cornprehensive Economic and Trade Agreement (CETA) is a proposed free trade and copyrightagreement hetween Canada and the European Union. Canada and the European Union (EU) havecompleted the ninth round of negotiations in September 2012. Canada and the EU are committed tobuilding on the success of negotiations thus far, where significant progress has been made acrossthe board, including the areas of goods, services, investment, government procurement and manyothers.

With a developing market in Canada, mainly driven by oil and gas, is interested to pursuedredging contract5 in Canada. However currently there are restrictions for operating foreign vesselsin Canada. Mainly the following legislations are appllcable:

1. Floating Plant Clause (FPC) by Ministry of Industry Canada2. Coasting Trade Act by Ministry of Transportation Canada

FLOATING PLANT CLAUSE:The Floating Plant Clause (FPC), adopted by the Cabinet in 1930, requires the Government of Canadato issue dredging contracts to contractors that use Canadian-manufactured equipment, or foreignmanufactured equipment on condition that, in the latter case, it has undergone significantmodifications in Canada in order for it to be deemed predominantly Canadian.

The Floating Plant Clause, which Industry Canada is responsible for, requires that any foreign-builtdredge or floating plant that wishes to work on a Government of Canada dredging contract:

1. has to be of Canadian registry at the time an application is presented for consideration;2. the equipment will have been under Canadian ownership for a period of at least one year as

evidenced by Canadian Customs or other such documents; and3. the applicant will need to demonstrate that the equipment has been substantially modified in

Canada resulting Ina predominantly (i.e., majority) Canadian add-on value,

Foreign built, Canadian registered vessels can be used on all other government work, provincialgovernment contracts, including dredging, and private sector contracts, including dredging. Onlyfederal government dredging contracts are affected by the Floating Plant Clause.

COASTING TRADE ACT (CTA):The Coasting Trade Act (1992) supports domestic marine interests by reserving the coasting trade ofCanada to Canadian registered vessels, with limited exemptions. The legislation provides anadministrative process to temporarily import a foreign vessel under a coasting trade license when asuitable Canadian registered vessel is not available, and in the case of the transportation ofpassengers, also when an identical or similar adequate marine service is offered.

Priority to engage in Canada’s coasting trade is given in the following order:

1. Canadian registered, duty paid, vessels;2. Canadian registered, non-duty paid, vessels under license;3. Foreign vessels under license.

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The CTA governs the operation ofvessels in Canadian waters, including Canada’s Continental ShelfZone, or 200 miie limit, whichever is greater.

The CTA limits vessel operations within these waters to Canadian- registered vessels that have beenCanadian-built or duty-paid. Provisions of the Act provide for the temporary entry of vessels,provided that no Canadian registered vessel is available or capable to perform the required tasks.The CTA prioritizes the first right of refusal.

Section 4(1)(c) of the Coasting Trade Act requires that vessels entering Canada for temporaryperiods must pay applicable duty and tax under provisions of the Customs Tariff and Excise Tax Act.

The Carrier Control Section of Canada Customs and the Canadian Transportation Agency administerthe Coasting Trade Act. When a foreign or non-registered duty paid vessel wishes to work in Canada,an application must be submitted to this authority. 1f there are no objections received fromCanadian vessel operators, the application is approved.

Where objections from Canadian vessel owners are received, there is a review process whereby theapplicant and objector file their positions with the Canadian Transportation Agency. This agency willthen make determination as to whether the Canadian vessel is capable and/or available to performthe requested scope of work.

Where the decision favors the Canadian vessel owner, the applicant has no recourse but to registerthe vessel in Canada and pay applicable duty, if required.

A license is required to use a foreign or a Canadian non-duty paid vessel in Canada’s coasting trade.Licenses are issued by the Minister of Public Safety where the Minister is satisfied that:

1. The Canadian Transportation Agency has determined that no Canadian vessel (or Canadian nonduty paid vessel) is suitable and available to perform the activity described in the appflcation;

2. Where the activity described in the application entails the carriage of passengers by vessel, theCanadian Transportation Agency has also determined that an identical or similar adequatemarine service is not available from any person operating one or more Canadian vessels;

3. Arrangements have been made for the payment of the duties and taxes under the CustomsTariff and the Excise Tax Act applicable to the foreign vessel in relation to its temporary use inCanada;

4. All certificates and documents relating to the foreign vessel issued pursuant to shippingconventions to which Canada is a party are valid and in force; and

5. The foreign vessel meets all safety and pollution prevention requirements imposed by any law ofCanada applicable to that foreign vessel.

Where a vessel operates in Canadian waters, the duty rate is 25% of the fair rnarket value for anyvessels from countries of origin with which Canada has no existing trade agreements. For NAFTA andother counties with whom Canada has trade agreements, vessel duty rates may be lower, orassessed at 0%, depending on the country of origin.

QUESTIONS:

1. Is the Floating Plant Act considered under the CETA negotiations? t so, what kind of measures

are negotiated?

2. Is the Coasting Trade Act considered under the CETA negotiations? 1f so, what kind of measures

are negotiated?

3. Under the Coasting Trade Act, vessel operators are required to pay a duty rate of 25% over the

fair market value of the vessel. Our information states that the duty rate depends on the country

of origin and might be assessed at 0% for countries with whom Canada has trade agreements. Is

this 0% duty rate considered under the CETA discussions?