Thank you for the…

Thank you for the opportunity to submit feedback regarding the proposed Used Tires Regulation (“draft Reg”). While we appreciate the opportunity to provide comment, the timing of the comment period did not necessarily provide adequate time for thorough review and internal consideration of the impacts, since the draft was released just before the holidays, and coincided with comment periods for several other files that are important to retailers. We hope that the Ministry takes these other factors into consideration as it undertakes any future consultations on designated materials.

Costco Wholesale Canada Ltd (“Costco”) has several concerns regarding the draft Reg including: a total absence of the concept of voluntary steward; a lack of clarity regarding whether producers can discharge their obligations to a PRO; extremely burdensome and costly reporting requirements; a lack of definition of tire classes and a general approach to reporting that is based on total weight of tires instead of quantity of tires. Reporting deadlines should be harmonized so that producers only have to engage an independent auditor once a year, instead of on multiple occasions throughout the year to meet the different deadlines. Additionally, depending on the type of audit engagement that is ultimately deemed sufficient, a producer’s audit costs alone may add as much as $0.25 to any prevailing eco-fee. We recommend that companies with internal audit functions should be able to utilize these resources and fulfill any requirement for an independent audit. These internal audit teams are independent, have extensive business knowledge and are less costly, and other provincial stewardship programs also consider them to be acceptable. We also believe the requirements for producers who choose to display an eco-fee will be impossible for retailers to comply with. This would effectively prohibit us from displaying an eco-fee at the point of sale-- an outcome which is entirely counter to the objectives outlined in the government’s own Circular Economy Strategy because it in many ways could reduce the circularity of tire material flows in Ontario.

The largest concern we have regarding this draft Reg is the fact that the concept of voluntary steward is not reflected in it. Without this provision, we will become the “producer” for all Michelin and Pirelli tires that we sell, since these brand holders do not have a place of business in Ontario. To place all of the obligations of a tire manufacturer on a retailer is extremely unfair and burdensome since we have no part in manufacturing tires and have limited expertise in the tire industry, given that tire sales represent a very small part of our business. Quite frankly, as a retailer, we find many of the requirements that we would be subject to as a “producer” unreasonable and extremely onerous. Not only would many of the reporting requirements create unprecedented administrative and cost burdens, but it remains unclear if some of the reporting requirements are even achievable. To that end, it is imperative that the Reg allow a producer to discharge all of their obligations to a PRO. Although that may be the intent of the legislation, such a provision must be made explicit. Considering that there may be thousands of new stewards if the proposed definition of producer is not amended, it is neither efficient nor cost-effective for RPRA to receive data and reports from thousands of organizations. Instead, a handful of PROs should fulfill all obligations on behalf of producers, which will reduce costs to PROs, RPRA, producers and ultimately, consumers.

The Ministry is essentially proposing an entirely new approach to tire diversion in Ontario that will not only significantly increase our cost of doing business, but also impose complicated reporting requirements to what is currently a seamless and very efficient activity. We currently discharge our obligations to Ontario Tire Stewardship and have found working with this IFO to be extremely easy and simple. The Ministry is basically trying to “fix” something that is not broken, and in doing so, is disrupting and burdening the retail industry with an entirely new framework that is not necessary or efficient, especially given the fact that OTS is already achieving close to a 100% diversion rate.

We hope that the Ministry very seriously reviews our feedback below, and takes into consideration the numerous unintended consequences that the requirements set out in the draft Reg will have on retail.

Discharging obligations to a PRO: The draft Regulation does not allow a producer to discharge their obligations to a PRO if they choose to do so. Such a provision is absolutely crucial to reduce the reporting burden to producers and to ensure producers are able to fulfill all of their obligations. As a retailer for example, we do not have the capacity or expertise to launch collection sites in remote regions or smaller municipalities outside our warehouse locations. We would have to rely on a PRO to fulfill this obligation on our behalf. Similarly, there are numerous reporting requirements that could only be fulfilled by the PRO providing data to us, or in some cases, actually causing the PRO to be audited. For these reasons it is imperative and only logical for producers to be able to discharge their obligations to PROs. It will also contribute to a savings in RPRA fees since RPRA would then be receiving data only from a handful of PROs, instead of thousands of producers.

Lack of clarity regarding tire classes: The draft Reg does not provide clarity around the tire reporting categories that will be used under the new framework. We believe the categories currently used by Ontario Tire Stewardship (OTS) should be used; stewards are familiar with the existing approach and it would enable OTS to transfer historical data to RPRA to fulfill registration requirements. We also specifically endorse the use of the passenger tire equivalent concept and would encourage RPRA to adopt this as well. Tires are bought and sold based on the number of tires required, not on the weight of these tires. Instead of requiring producers to report the weight of tires sold, RPRA should use the existing OTS tire categories and implement the passenger tire equivalent concept, should it wish to calculate total weight of tires supplied instead of burdening producers with this extremely time-consuming requirement.

Definition of producer (Section 3b): The draft Regulation does not allow an out of province organization to formally assume the responsibility of their in-province customers, should they choose to do so. Under the existing framework, our largest tire vendor takes responsibility for remitting and reporting their tires that we sell. The current Used Tires Program allows companies not resident in Ontario, that otherwise meet the definition of a Steward, to register and assume the role of Steward, thereby relieving their customers (distributors and retailers) from their obligations. The definition of producer must be amended in the draft Reg to allow these out of province tire producers to assume a producer role and relieve their customers from all producers obligations. If the concept of voluntary steward is not reflected in the definition of producer, the number of stewards will likely double, significantly increasing the cost and complexity of diverting used tires for both RPRA and hundreds, if not thousands, of producers.

The language used to describe what supply situations may trigger a producer obligation are also potentially problematic. In our experience as a retailer, brand holders do not actually "market" tires directly to consumers. They supply tires to distributors and retailers who in turn supply them to consumers. Who is considered the obligated producer? In the existing framework, "supply" language is used and we believe this is more accurate and provides a greater degree of clarity as to who the obligated party is.

Initial Registration (Section 4): The requirement for producers to provide information regarding the total weight of tires supplied since 2014 will be impossible for many producers to comply with. At Costco we sell both automotive tires, and items such as lawn mowers and trailers that are sold with obligated tires, however we do not store information on the weight of any of these tires. Obtaining data regarding the total weight of tires supplied since 2014 would create an extraordinary administrative burden for Costco, and would involve contacting our vendors about thousands of transactions since 2014 and asking if they can provide this level of detail. Furthermore, we were not the steward for any of the automotive tires sold under the current framework so it remains unclear what information the Regulation would even compel us to provide. Would we have to provide data only for tires that we were obligated for, or would we be expected to provide data on tires that we will be obligated for under the new Reg? Moving forward it is also unreasonable to expect us to report weight information because our system is not equipped or designed to hold this type of detail.

Instead of requiring producers to report the total weight of tires supplied since 2014, the number and type of tires (using the existing OTS classification system) should be required, and this information should be obtained from OTS instead of asking hundreds, if not thousands of stewards, to provide it. OTS holds this information in a single repository that can be shared with RPRA, as long as a producer agrees to allow OTS to release their information. Moreover, OTS data has already been independently audited, thereby fulfilling the requirement for an independent audit. If the requirement for an independent audit is retained in the final Reg, what constitutes an “independent audit” must be clearly defined because there are several types of audit activities that could be considered an “independent audit,” each of which provide a different level of assurance and have significantly different costs. Ultimately, tires are purchased by consumers based on the number of tires they require, not on the weight of the tire, and the Regulation should reflect this reality.

Tire Collection Amounts (Section 7): If the draft Reg is approved as presented, Costco would become responsible for hundreds of thousands of tires manufactured by our single largest vendor. Under the existing framework, this vendor is recognized as a voluntary steward and assumes all producer responsibilities for their tires. Forcing retailers to meet collection targets associated with sales of tires from non-resident brand holders (many of whom represent global tire manufacturers), seems to be an unfair and disproportionate burden for retailers.

Furthermore, PRO’s should be able to report on behalf of their producers and the data provided should be based on the number and type of tires supplied, not on the weight of the tires supplied. RPRA can then prepare average tire weights for each type of tire that can then be used to calculate collection obligations. This approach would likely ensure RPRA’s registry contains more reliable and comparable data. It remains unclear what tire categories will exist under the new Reg, but they should be aligned with existing tire categories currently in use by Ontario Tire Stewardship. Again, tires are bought and sold in the market based on the quantity supplied, not on the weight of the tire, and the Regulation should reflect this reality.

Tire Collection Sites (Section 8): The requirements proposed in Section 8(6), 8(7) and 8(8) are extremely onerous. Retailers who are considered the producer for tire brands where the brand holder does not have a place of business in Ontario should not be compelled to have collection sites in regions where they do not have physical stores. For non-retailers, instead of basing the requirement on regions with a population over 1,000, a more prudent approach would instead require that communities with a population over 1,000 have access to a tire collection site or an annual public tire collection event within 30km or some other reasonable distance. In the existing language, producers may have to hold a tire collection event in two very small towns that border each other. It is inefficient and will unnecessarily increase the cost of tire recovery and diversion in Ontario, subsequently resulting in higher eco-fees being passed on to consumers. Additionally, a PRO should be able to relieve its producers of this obligation by fulfilling all requirements regarding tire collection sites.

Resource Recovery Charges (Section 12): In an effort to be transparent with our customers, and to increase awareness of the fact that there are actually eco-fees on tires, we believe that displaying the eco-fee or resource recovery charge, is extremely important. In fact, many of our customers demand this level of transparency and want to know this type of information. Clearly displaying the eco-fee is necessary to explain why a tire may cost more in Ontario than a neighbouring province. For instance, if the eco-fee is $6 in Ontario but only $3 in Quebec where the fee can be displayed, how do we explain this $6 price discrepancy if we can’t display the fee? This may lead consumers in border regions such as Ottawa to shop in Gatineau instead. As a matter of principle, customers should be informed that they have already paid for the proper disposal of a tire when they purchase a new one, so that they are encouraged to return it to an official collection site at the end of its life. If a consumer doesn’t even know they have paid an eco-fee, they may have less incentive to seek out a collection site to properly dispose of the tire.

The requirements described in Section 12 regarding a promotion and education campaign that producers who display an eco-fee must undertake are extremely difficult, if not impossible for any retailer to fulfill. It also remains unclear if the MOECC even has under its purview the ability to regulate consumer pricing information. Although the draft Reg does not explicitly prevent any producer from displaying the eco-fee on a receipt, the unrealistic requirements effectively achieve this. Many retailers sell a wide variety of products and they cannot be reasonably expected to implement several variations of a receipt to account for which body an eco-fee is paid to. There is no room on a receipt to include any details about the eco-fee, or how the fee is used to recover and recycle the tire. If these requirements are passed and expand to other obligated products, how could a retailer fit information on multiple eco-fees on the same receipt? Consumers need to be made aware of the fact that they have already paid for this service, in order to drive collection volumes and create a more circular material flow for tires in Ontario. The Reg needs to enable this type of activity instead of discouraging producers and retailers from communicating the eco-fee. We are open to communicating information about the eco-fee on our website, but the fact remains that we simply do not have enough space to communicate this type of information on a receipt or sign card.

If the Regulation is adopted as presented, clarity needs to be provided regarding who is technically the person responsible for imposing the charge. Is the MOECC ultimately responsible for this charge? Is RPRA? Are tire manufacturers or PROs? If retailers have to indicate that their PRO is responsible, it may be confusing for consumers to see different PROs depending on where they buy their tire or what brand of tire they purchase. What about a scenario where our vendor is the brand holder and is part of one PRO, and we as the producer of some tires join another PRO- would we have to develop the necessary IT capability to display different information on the receipt depending on what brand of tire was sold? RPRA or the MOECC should provide a sample receipt that would meet the requirements of Section 12(1 & 2).

Reporting, Producers (Section 13): In general, we find the reporting requirements outlined in Section 13 to be excessive and believe it will be very difficult, if not impossible, to actually provide a lot of the data that is being required. As previously mentioned, we also believe PRO’s should be able to report on behalf of their producers, and that the total number of units supplied, based on existing OTS tire types should be the data that is collected, instead of the total weight of tires. Should PRO’s not be able to report on behalf of their producers, RPRA would be receiving thousands of reports which only increases RPRA’s administrative costs.

The requirement again for audited interim and annual reports is not warranted and will create an unprecedented administrative and financial burden for producers. If the requirement for audited reports is maintained, clarity should be provided regarding what level of audit engagement would satisfy this requirement must be provided, and audits completed by an organization’s internal audit team should be acceptable.

It seems unreasonable to expect a producer or a PRO to be able to accurately determine what volume of tires was either reused, retreaded or processed, and even more unrealistic to expect a PRO to determine with any degree of accuracy, the weight of recovered materials used to make new products. How would a PRO be able to track Costco’s tires through the supply chain to be able to confidently tell us how only our tires were processed? All of the PRO’s tires would likely be amalgamated and it would be very difficult to follow any producers specific tires throughout the process. Section 13 (3) should be entirely stricken. Is Costco really supposed to be able to provide these figures? We are not tire industry experts and would have to rely on our PRO to provide this data, but it remains unclear if even an expert industry group would be able to provide this level of detail with any degree of accuracy.

Reporting, Tire Collectors (Section 15): It will be very difficult for Costco to track the total number of tires given to each hauler unless future PRO’s implement TreadMarks or a similar system which can track this type of information electronically. From an efficiency perspective, it makes far more sense to have the PRO report this type of data instead of requiring thousands of producers to submit it to RPRA individually. The proposed Reg does not appear to appreciate the cost implications of many of these reporting requirements and amendments should be made to reduce the administrative burden not only to producers, but also to RPRA so that it ultimately results in lower RPRA fees for producers. It would be far less work for RPRA to receive data from a handful of PROs instead of thousands of individual producers. RPRA could also then rely on the internal controls and review processes the PROs have in place to audit their own producers. Since the data RPRA receives from PROs should already have been audited to some extent by the PRO, RPRA would be receiving data that is more complete and accurate, thereby reducing their own costs to review the same information.

Reports, Resource Recovery Charges (Section 18): Section 18 just serves as another disincentive for retailers and producers to educate the public about the fact that tires should be recycled and that the eco-fee they are paying is used to fund this activity. We again reiterate that we find it entirely unacceptable that the Ministry is effectively preventing retailers from an activity which arguably will increase collections and help develop a more circular tire industry by imposing extremely onerous obligations on producers who display an eco-fee.

If this Section is retained as presented, clarity needs to be provided around how this information can even be audited, and the Ministry should also consult with public accounting firms to determine if any of them would be in a position to issue an audit opinion on this type of information. Based on the way the requirements are currently written, it seems as though each individual producer would have to audit their own PRO, because the PRO is ultimately undertaking all activities related to resource recovery on their behalf. This would effectively mean that the PRO would have to be audited by hundreds or thousands of their own producers. A more reasonable approach would simply require the PRO to outline in their annual reports how the charges collected from their members has been used to increase the collection, reuse, recycling and recovery of tires.

Audit Management Systems (Section 20): The requirement for yet another report is again, in our view, unnecessary and also repetitive because most of the information requested in Section 20 will have already been provided in another report. The deadline for this report is also questionable-- all reports that are required to be submitted to the Authority should share the same deadline so that producers can realize some cost savings by having any necessary information reviewed under one audit engagement. Again, we believe the PRO is ultimately performing all activities on behalf of a producer and it should be the PRO that provides this information to RPRA, instead of having hundreds or thousands of producers submit this data.

Thank you for considering our feedback.

Regards, Katherine Larocque

[Original Comment ID: 212202]