Decision No. 1-W-2006

January 3, 2006

File No. W9125/C52/05-02

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APPLICATION

Classic Motor Yachts has applied to the Minister of National Revenue for a licence to operate the service set out in the title. The matter was referred to the Canadian Transportation Agency (hereinafter the Agency) on October 24, 2005.

The Canadian Transportation Agency conducted a search of the relevant portion of the marine industry and a Notice of Coasting Trade Licence Application was issued on October 25, 2005. An objection was filed on November 4, 2005 by Mothership Adventures (hereinafter Mothership). On November 10, 2005, the applicant filed its comments with respect to Mothership's objection. Mothership did not, however, reply to these comments.

ISSUE

Pursuant to subsection 8(1) of the Coasting Trade Act, the issue to be addressed is whether there are suitable Canadian vessels available to provide the proposed service or perform the activities described in the application, and whether identical or similar adequate marine services are available from persons operating Canadian vessels.

POSITIONS OF THE PARTIES

The applicant

At the outset, the applicant explains that it intends to operate the "MY NORTHWIND" as a chartered passenger vessel to attract a new segment of cruise clients to British Columbia waters. The applicant alleges that the "MY NORTHWIND" possesses a unique heritage and a degree of luxury unlike anything that is currently offered on the British Columbia coast.

The applicant proposes to offer 7- to 10-day cruise packages that will begin at 50,000 US$ per week. Gulf Islands tours from Victoria's Inner Harbour will feature the Northwind Challenge Cup that includes several premier golf clubs and the Empress Hotel. The Inside Passage/Central Coast trips would operate out of Port Hardy/Prince Rupert and focus on the natural beauty of the region and its unique wildlife as well as on meetings with local First Nations spiritual guides for spiritual tour seminars at sea. Tours of the Queen Charlotte Islands would also be offered out of Queen Charlotte City focussing on nature and culture with an onboard lecture series. The applicant, in partnership with the Haida, also intends to develop cultural and natural tours of Gwaii Hanaas.

In reply to Mothership's concerns on the financial impact the application would have on existing Canadian vessels' activities, the applicant contends that there remain substantial market/product gaps in the British Columbia cruise industry, leaving plenty of room to provide a product that does not take business away from current operators. The applicant targets a European clientele, and its pricing, at the lower end of its targeted market, is double that of Mothership's for a similar length trip. The products of the cruise/charter industry are clearly differentiated based on factors like vessel size, vintage, quality of built, vessel appointments and price. The applicant claims that the gap between its services and those offered by Mothership will only widen as it builds a reputation for quality in its market segment, similar to what Mothership has done in its market segment.

The applicant is of the opinion that the size of the "MY NORTHWIND" and onboard amenities allows it to provide a substantially different experience that is not available on any vessel currently operating in British Columbia waters. The applicant claims that it could operate out of the United States, but that a coasting trade licence would maximize the benefits to Canadians. It would also add to the product diversity of the British Columbia cruise industry which would bring marketplace recognition and awareness of the British Columbia industry that would benefit all segments of the market.

Mothership

Mothership claims that it does operate a similar adequate marine service on the British Columbia coast, using the "COLUMBIA III", a 68-foot heritage vessel designed and built in British Columbia, which has plied the local waters of British Columbia for the last 50 years. Mothership has been carrying 10 passengers for 6-night eco-tours, with a special emphasis on Native, natural and local history, as well as wildlife viewing. It operates primarily as a mothership for kayak tours and also offers natural history education tours as well as tours focussing on teaching wildlife photography and painting. It has operated in most coastal areas from Victoria to Prince Rupert. The "COLUMBIA III" is an elegant vessel maintained to the highest standards which won the first prize in the 2003 NW Classic Boat Show in Victoria. It charges approximately $30,000 CAD per week during the peak season and has built its reputation on fine dining and excellent guiding, based on an impeccable vessel showcasing the natural beauty of the British Columbia coast.

Mothership stresses that the Agency must take into consideration the financial impact the application would have on the Canadian vessels currently providing a wide range of tourism cruising options and activities, including high-end classic yacht tours which operate in the areas proposed for the "MY NORTHWIND".

ANALYSIS AND FINDINGS

Where the activity described in the application entails the carriage of passengers, the Minister of National Revenue cannot issue a coasting trade licence unless the Agency has determined that no Canadian ship is suitable and available to perform the activity described in the application, and that an identical or similar adequate marine service is not available from any person operating one or more Canadian ships. In the present case, there has been no offer of and no allegation that there would be a suitable Canadian vessel available for the proposed activity. Mothership claimed, however, that it does operate a similar adequate marine service in British Columbia coastal waters, using the "COLUMBIA III".

The applicant proposes to offer charter services that will begin at $50,000 US per week, which it claims is at the lower end of its targeted market. It also plans to offer to a European clientele, cruise packages that will feature golfing activities, focus on wildlife and natural beauty of the region and provide cultural and spiritual tour seminars. Mothership primarily markets kayak eco-tours offering natural history education, as well as tours focussing on teaching wildlife photography and painting, using the elegant heritage vessel "COLUMBIA III" as a mothership for $30,000 CAD per week.

The applicant claims that there is a gap between the services offered by Mothership and those it intends to offer as the products are clearly differentiated based on vessel size, vintage, appointments and price. The applicant also claims that this new service would provide a substantially different experience that is not available on any vessel currently operating in British Columbia waters, bringing recognition and awareness of the British Columbia industry that would benefit all segments of the market. Mothership alleged that there would be a financial impact on a wide range of Canadian vessel operations. However, the Agency notes that no other Canadian vessel operator replied to the notice of application and that Mothership did not file a rebuttal to the applicant's comments.

The Agency is of the opinion that the use of the "MY NORTHWIND", a larger unique vessel, to offer services that are essentially different, to a different targeted market constitutes a distinct activity in itself, and differs from the services offered by Mothership, using the "COLUMBIA III". Therefore, the Agency finds that Mothership does not offer an adequate identical or similar marine service.

DETERMINATION

Based on the above findings, the Agency has determined, pursuant to subsection 8(1) of the Coasting Trade Act, that there is no suitable Canadian ship available to provide the service or perform the activities described in the application, and that there is no identical or similar adequate marine service available from any person operating one or more Canadian ships. This determination will be provided to the Minister of National Revenue for any necessary action as provided for in the Coasting Trade Act.

This Decision does not constitute an authority to commence operations in respect of the service for which application has been made.

Members

• Beaton Tulk
• Guy Delisle
• George Proud