INF/MSME/W/13  
 
14 October 2019  
(19-6640) Page: 1/3 
  Original: English  
 
INFORMAL WORKING GRO UP ON MSMES  
SMALL BUSINESS LENS  
Communication from Canada  
The following communication, dated 14 October  2019, is being circulated at the request of the 
delegation of Canada.  
 
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1  INTRODUCTION  
During the MSME Working Group meeting of 22 February 2019, Canada made a presentation on its 
regulatory small business lens. One of the questions raised during the discussion afterwards asked 
if there had been any studies done on the effect of the lens. While there has not been any recent 
report or evaluation of the lens as its application has changed with the introduction of Canada’s new 
Cabinet Directive  on Regulation, information is provided below in relation to Canadian regulatory 
reports from past years that include data on the implementation of the small business lens. In 
addition, some specific examples of the results of the application of the lens a re included.  
 
To recall, the small business lens requires federal regulators to identify and take into account the 
needs of small businesses when designing regulations. The lens applies to all new regulations or 
regulatory amendments made by ministers and the Governor in Council (GIC) and considers the 
direct compliance and administrative costs imposed on small businesses. In considering these 
administrative and compliance costs, regulators are encouraged to provide alternative compliance 
and/or administrat ive options for small business, where appropriate. If no alternative is provided, 
the regulator must provide an explanation in the Regulatory Impact Analysis Statement (RIAS) as 
to why such options were not appropriate.  
 
2  BACKGROUND  
The lens was first intro duced on 1 February 2012 as a requirement under the Cabinet Directive on 
Regulatory Management. It applied to regulatory changes (new regulations and regulatory 
amendments) that impacted small business and that had nationwide cost impacts of over 
US$1 million annually. It also applied to proposals with nationwide cost impacts of under 
US$1 million annually where costs on small businesses where disproportionately high (e.g., high 
costs for a few small businesses); application of the lens was determined on a case-by-case basis 
for such proposals.  
 
Information on the application of the lens was reported publicly as part of annual reports on the 
implementation of the Red Tape Reduction Action Plan. There were no instances of the lens being 
applied in the 2012 -2013 fiscal year. The lens was featured in the annual Scorecard report in 
2013-2014 and 2014 -2015, and the Annual Report in 2015 -2016. In 2016 -2017 the approach to 
reporting shifted to a report to Parliament that focused on the one -for-one rule and cost -benefit 
analysis; other requirements under the Cabinet Directive on Regulatory Management, including the 
small business lens, were not included in the report to Parliament.  
 
Under the original design of the lens, regulators were required to set out their initi al regulatory 
design, as well as an alternative, less burdensome "flexible " option in the RIAS. Costs for both the INF/MSME/W/13  
 
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  initial and flexible options were also disclosed, and the difference was expressed as cost savings to 
small businesses. If the less burdensom e option was not adopted, the onus would be on the regulator 
to explain why in the final RIAS. Regulators were also required to complete a 20 -point checklist 
intended to demonstrate the effort taken to limit the burden on small business.  
 
In its first six years of implementation (2012 -2013 to 2017 -2018), the lens was triggered a total of 
30 times. This relatively low frequency was the result of a number of factors:  
 
• The lens applied only to initiatives with national annual costs greater than US$1 million, o f 
which there are approximately 20 per year; most of the regulations that triggered the lens 
were below this threshold but with disproportionate impacts on small businesses.  
• The lens did not apply to regulations that would reduce costs for small businesses . 
3  CURRENT STATUS  
On 1 September 2018, the Cabinet Directive on Regulation came into effect, replacing the Cabinet 
Directive on Regulatory Management as the policy for the regulation -making process. Under the new 
Directive, the Policy on Limiting Regulatory Burden on Business was introduced, setting out the 
requirements for the one -for-one rule and the small business lens.  
 
Under the new Directive and Policy, the overarching purpose of the lens did not change, though a 
number of adjustments were ma de to its scope and design:  
 
• The scope of the lens was expanded to include all GIC and ministerial regulations, with no 
threshold based on the total cost impacts of the proposal.  
• Proposals that result in a net benefit to small business will be captured, se rving to illustrate 
regulators’ efforts to improve the regulatory environment.  
• Analytical requirements were aligned with the cost -benefit analysis, meaning that monetized 
analysis are required for proposals with significant costs (> US$1 million per year) a nd 
qualitative analysis for proposals with lower costs.  
• The analytical design was simplified by eliminating the initial and flexible option requirements. 
Instead, regulators are required to identify the cost impacts on small business and explain 
how they h ave mitigated these impacts.  
• Regulators are still encouraged to provide additional flexibility to small businesses, and an 
explanation is required if flexibility is not appropriate.  
• The 20 -point checklist, which included several elements not related to the  lens, has been 
eliminated as a formal requirement, but has been streamlined and provided to regulators as 
an optional tool . 
The new approach and design of the lens will mean a significant increase in the frequency of its use, 
resulting in a systematic con sideration of small business impacts in the regulatory process and 
transforming it into a true policy lens.  
 
4  EXAMPLES OF THE APPL ICATION OF THE LENS  
Livestock traceability is important for consumer safety and industry competitiveness. The Canadian 
Food Ins pection Agency's (CFIA's) Regulations Amending the Health of Animals Regulations  requires 
pig farmers to keep records and report movements of pigs, from birth or import to slaughter or 
export. The application of the lens resulted in a regulatory change tha t helps protect the safety of 
Canada's food system, while considering the needs of small businesses. Following analysis and 
consultation, a flexible option was chosen. Instead of a traceability system based on individual pig 
identification and tagging (wit h an estimated total annualized cost to business of nearly 
US$77 million, or US$13,079 per business), CFIA adopted a system based on group/drove 
identification and movement reporting, which substantially reduced projected costs to business. This INF/MSME/W/13  
 
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  system is estimated to have an annualized cost of US$1.6 million, or US$295 per business for over 
5,000 small businesses nationwide, a US$75-million annual saving.  
 
The Regulations Amending the Maple Products Regulations  give small federally registered maple 
syrup e stablishments two years to gradually implement new regulatory requirements. They can 
either follow the current grading system or the new grading system, and they have time to buy and 
install new equipment and change labels to comply with the new requiremen ts. As a result, 204  small 
businesses are expected to avoid US$227,000 in potential administrative and compliance burden 
over the next 10 years.  
 
Sensitivity to small business must not compromise the protection of health and safety or the 
environment. Some times, adopting a less burdensome, more flexible approach is not appropriate. 
In such situations, the regulator explains why this is the case in the published Regulatory Impact 
Analysis Statement. For example, in the proposed Order Amending the Schedule to  the Tobacco Act , 
Health Canada considered and rejected delayed implementation of new restrictions on flavoured 
tobacco products targeted to youth. While a delay would have given smaller tobacco distributors 
time to clear inventories of product, the depart ment demonstrated that delayed implementation ran 
counter to the health protection objectives of the amendment.  
 
In some instances, regulators are taking extra steps to lower burden on small businesses even if the 
lens does not apply; they do this simply a s a matter of good regulatory practice. For example, 
through the Regulations Amending the Seeds Regulations , the Canadian Food Inspection Agency 
reduced administrative and compliance costs for 29 small businesses by removing certain 
unnecessary recordkeepi ng, reporting and reviewing requirements, as well as pre -registration 
testing. The amendment spares businesses US$114,426 in new burden per year, or about US$4,000 
annually per stakeholder, representing a present value of US$803,682 over 10 years.  
 
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