INDY Committee Meeting

STANDING COMMITTEE ON INDUSTRY

COMITÉ PERMANENT DE L'INDUSTRIE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, November 17, 1998

• 1529

[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): I'm going to call the meeting to order.

We are now dealing with, pursuant to Standing Order 108(2), a study on information technology: preparedness for year 2000. As members will recall, we've been studying this issue. We issued an interim report back in May and we've had several witnesses update us. They were with us either late last year or early in the spring.

• 1530

We are pleased to have several witnesses with us today. We have the Canadian Coast Guard; the Canadian Shipowners Association; Canadian National; and the Canadian Trucking Alliance. It's my understanding that everyone has an opening statement. I would propose that we go through the opening statements and then we do questions all together, because some questions may be directed, or may be similar, or others may want to answer.

I would propose that we begin with the Canadian Coast Guard. We have Mr. Elliott from the coast guard. I'm not sure if you're making the presentation, or Mr. Clavelle. Is Mr. Forbes here as well?

Mr. William Elliott (Deputy Commissioner, Canadian Coast Guard): Mr. Forbes is with us, but Mr. Clavelle and I will be making the statements.

Would you like me to proceed?

The Chair: I'll turn it over to you for your opening comments.

[Translation]

Mr. William Elliott: Madam Chairperson, committee members, thank you for this opportunity to present an update on the progress the Canadian Coast Guard has made in preparation for the year 2000.

[English]

This is my first appearance before the committee. I understand that my predecessor, Michael Turner, had the opportunity to be here on April 21 of this year.

I'm new to the coast guard, having been appointed deputy commissioner only three weeks ago. In this short period of time, however, I have acquired some appreciation of the importance the coast guard places on the year 2000 challenge and the recognition of the potential impact on the public if we were to encounter a year 2000 failure to any of our critical safety and environmental response functions.

On taking up my new responsibilities, I requested briefings on the most important and active files and issues. The Y2K file was one of my first briefings.

When Mr. Turner appeared before this committee in April, we were still ramping up our year 2000 effort. The committee recommended that our year 2000 efforts be expedited. At that time, faced with the enormity of this very large project, we had neither fully completed our analysis of the required effort nor fully determined the resoures that would be required to ensure our ability to meet our program requirements as a result of Y2K concerns.

[Translation]

I can tell you today that since April, significant progress has been achieved. We recognize that the time remaining—409 days I believe—is limited and that there is much left to do. Today, however, we are confident, but not overconfident, that by maintaining the momentum we have built up, we will continue to be ready, willing and able to deliver the Coast Guard services that Canadians have come to rely on, despite the Y2K challenge.

Let me highlight the concrete achievements and positive progress the Coast Guard has made. The Deputy Minister of Fisheries and Oceans has described the year 2000 as the highest priority departmental activity. The management committee of the department is very committed to Y2K preparedness. This commitment is reflected in senior management directives and CCG accountability contracts. Year 2000 issues are front and centre at all senior management forums.

Project management teams have been put in place within all regional and HQ sectors of the Department of Fisheries and Oceans and all units of the Coast Guard. Teamwork on a national basis is an integral part of the project to ensure proper, consistent and diligent delivery. This includes management and peer reviews of plans, methodologies and procedures.

As well, project management plans are in place across the Coast Guard. Individual managers are actively engaged, and the Coast Guard management board gets status updates as a regular agenda item at our weekly meetings.

[English]

At the working level, the coast guard's traditional “get the job done” philosophy is being applied to year 2000. Asset remediation and contingency planning teams are in place across the coast guard. Our own human resources have been augmented by contracted personnel. A national computerized year 2000 asset database and tracking system is operational. We have prioritized our remediation work based on mission criticality. Assessment of the potential for failure of our critical assets is at an advanced stage and renovations are under way.

Back in April, only about 30 Canadian Coast Guard employees were dedicated to year 2000. At the present time, there are approximately 80 Canadian Coast Guard managers and workers dedicated full time to year 2000, augmented by 65 contractors. And 50 additional people have substantial part-time Y2K responsibilities. Additional coast guard resources are available to be called upon if required, and other DFO year 2000 resources are also supporting our efforts.

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To cover incremental costs of year 2000 work, the Department of Fisheries and Oceans has negotiated a loan of some $24 million from the Treasury Board. Departmental funds are also being applied to non-incremental costs.

The coast guard, like many other organizations, faces many more challenges relating to embedded processors than to software applications. Our present year 2000 inventory contains almost 27,000 items of approximately 8,000 different types. A subset of those are vital to maintain the operation of our mission-critical functions. A few items, currently 133, have been identified as needing to be renovated to make them Y2K compliant. Renovating equipment, as this committee knows, is the process of making changes to our business assets—mobile, land-based, and facilities—to ensure they are Y2K ready.

The Canadian Coast Guard fleet includes 137 major vessels. Most have either primary or secondary search and rescue responsibility. Although most inshore vessels are equipped with electronic navigational aids, they are quite capable of operating without relying on such aids by utilizing more traditional equipment and techniques—compasses and paper charts, for example. The bigger offshore vessels have a higher reliance on electronic systems. We have found, however, that a limited amount of the essential equipment on these vessels needs to be renovated. Where we have identified problems we are moving to renovate as quickly as possible.

We do have concerns about our dependency on many external suppliers and service providers. Fisheries and Oceans and other government departments and agencies with government-wide mission-critical mission functions are taking steps with the help of designated lead agencies to minimize the risk of these dependencies.

[Translation]

Despite all our efforts, a small risk of some year 2000 failures will remain. To cover this risk, contingency plans for critical functions have been developed and preparations are currently being made to test them. Where appropriate this work is being done with our partners. For example, search and rescue plans are being developed closely with National Defence.

[English]

On the wider issue of potential year-2000-caused emergencies, we will also participate fully in the government's broader emergency preparedness activities.

As a result of the considerable progress made since our last appearance, we are now confident we are on the right track in meeting the Y2K challenge. In April the Treasury Board survey of the year 2000 progress on Fisheries and Oceans' government-wide mission-critical functions, all of which reside with the Canadian Coast Guard, gave us a completion rate of 22%. A comparable analysis today would indicate a completion rate of approximately 62%. Our most recent report to Treasury Board applies a more refined metric, which looks at assets that are vital to mission readiness. That report indicates a completion rate for those assets of approximately 74%.

[Translation]

Madame Chairperson, thank you again for the opportunity for my colleagues and I to be here today.

[English]

We would be happy to respond to your questions.

The Chair: Thank you very much, Mr. Elliott.

I'm now going to ask Mr. Donald Morrison, president of the Canadian Shipowners Association, for his opening comments please.

Mr. Donald Morrison (President, Canadian Shipowners Association): Thank you, Madam Chair. Good afternoon, members of the committee.

[Translation]

Good afternoon, ladies and gentlemen.

[English]

This is our first appearance before the committee. Thank you for inviting us here today.

The year 2000 issue is one that affects us all, not just those of us here today but all Canadians. We do recognize the Government of Canada has taken a strong role in raising awareness of this issue and motivating action. In September we participated in a year 2000 session in Toronto hosted by Transport Canada and Minister Collenette, and we note that the initiative of this committee to hold hearings is appreciated.

While the millennium problem is one everyone needs to focus on publicly and privately, it is particularly important to those of us here today with a responsibility for human safety and transportation in industry, and for ensuring the vital role of transportation to the Canadian economy is not disrupted by this perplexing issue.

For those of you who are following my slide-type presentation, I'll simply move now to the second slide and I'll let you know where I am as we go on.

Page 2 of the document you're provided with simply provides our agenda for this afternoon. We'll describe our association, what we are doing about year 2000 awareness, the compliance policy and goals for the association, and the member companies' action plans and some other issues. The short section we have before you on the next page, on the association, serves only to provide perspective on the size and the membership of our fleets, and therefore the scope of the work ahead in our sector. It's no small task.

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As you can see, the rest of the agenda items deal with awareness of the issues among CSA members, the association approach and members' approach to compliance, and where we stand on implementation. We feel some aspects of this are unique to marine shipping, and we hope to capture them for you.

[Translation]

The 11-member Canadian Shipowners Association represents 95 per cent of the cargo vessel fleet under Canadian registry.

The current fleet is comprised of 31 self-unloading vessels, 38 bulk carriers, 9 oil tankers, 11 container vessels and various other ships. Total fleet capacity is 1.5 million tonnes and the average age of vessels in the fleet is 27 years. Most of our members ply international waters, which means that they encounter difficult situations, not only here in Canada but abroad as well.

[English]

The most important thing I've just mentioned has to do with the age of our fleet. The ships are in good shape. They're kept current and they're kept modern, but what we have had to do is marry old technology with new electronics technology. We've done that over the years, from 1975 to date. As many of our ships were built before any significant electronic instrumentation was used, and even though our ships may be at the forefront of technological innovations worldwide, the members have different levels of electronic competence on board ships. This means that no group of ships is alike, so we have to treat them differently as we're trying to solve the Y2K problem.

If you look at slide 4, you'll find that for Y2K awareness, members are active in Y2K compliance plan implementation—and we'll talk about that. Virtually all aspects of shipping are affected. There's no getting away from it.

We've listed a number of critical dates. It's not just January 1, 2000 that's important in our business; it's those other numbers and dates that you see as well.

In terms of tackling Y2K, most of our members began systematic projects in 1996 and 1997. As is the case in the other transportation sectors represented here today, it's an enormous task for our members and it's not complete yet. Electronic processes are prevalent in every segment of the shipping industry. As you heard from the previous speaker, they're everywhere: communications and navigation—for us it affects the radar; global positioning systems; differential global positioning systems; electronic chart systems; and ship-to-shore communications. In terms of vessel operations, it affects simple things like fire alarms and sprinkler systems; more complicated issues like engine management, oil pressure, exhaust controls, etc.; and cargo handling both on board vessels and in the ports that we call at for loading and unloading.

On some ships there may well be more than a hundred chips with calendar functions. Lloyd's Register estimates that 20% to 30% of them are not millennium compliant, so you can start to see the size of the challenge that's facing us.

I won't go through the details of the dates other than simply to say again that January 1, 2000 is important, but so are other dates because of that year being a leap year. What happens on March 1 in this leap year? December 31, 2000 is the 366th day of a leap year in a strange year. What happens at the end of the year because you have those two days? The year after that, are the systems going to be carrying forward enormous data as a result?

On slide 5, we feel year 2000 compliance can only be achieved by working systematically at the problem. We have to have senior management commitment and involvement. Within our association, we do. It's an automatic agenda item at every quarterly board meeting. Within the companies, the same thing happens. The companies do have approved detailed action plans. They have separate projects with their own budget approvals. They have also set up project teams. As associations, we've met with these people. Basically, the information we provide here today comes from these committees on an ongoing basis.

Implementation plans are pretty straightforward. Senior management endorsement is the most important key to success and to continuing our compliance approach. The compliance goals of our members are simple. We have to have the continuation of safe operations, and we have to have assurances that operations of third-party, dependent companies and suppliers are adequate for safe business operations.

In terms of dealing with the coast guard, which supplies many marine services to us, we both have to be assured that we can communicate with each other and can deal with each other on an ongoing basis, without running into the glitch.

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As an example, one of our member companies has been using a six-digit code to track voyages, and only two of the six digits represents the year. A lot of work has been done as a result of the year 2000 issue, and the company's goals now include four-digit codes for all systems for recording dates. We understand that sounds very standard and very normal. When we go back to all of the chips that have to be affected on all of the ships, though, it becomes a very complicated logistics problem, and our operators have broken out systems, whether they're on-ship, onshore, or third-party.

Members are typically well into action plan implementation. The approach is much like that of other corporations we've dealt with and communicated with: identification of the problem; assignment of project resources to it; detailed diagnostics work; reference to suppliers of instrumentation; troubleshooting specific, identified systems; comprehensive testing; and specific action plans for third parties. Throughout the process, detailed tracking and documentation of activity is important.

On the action plan for third parties, as important as the internal work is, it is critical that the third parties we deal with have compliance within their own systems and with our systems. In terms of the actions we've had to undertake, they include communication with all suppliers, and their designation of contacts for the year 2000 issue; assessment of compliance exposure; assessment of testing by third parties; and carrying out independent testing to ensure that we get an objective view. While all our companies can adopt and implement action plans to ensure their own compliance, third-party supplier compliance is more difficult to ensure.

As an example of the processes our companies are following, we're completing full audits of all suppliers and third parties. It runs the full gamut, from operations suppliers such as the coast guard along the St. Lawrence Seaway, to the financial institutions—our banks and insurance companies—and marine supply companies. We're reaching out to contact each one of these to survey their own preparedness. In each case, they're asked to declare their compliance and to designate contacts; outline their own testing procedures; and assist ship operators with independent testing of their own systems.

It's a difficult issue. Compliance costs are difficult to assess, but they're expected to be substantial. Ship survey costs alone are in excess of $15,000 per ship. Consequences can be dramatic if we don't get this straight, though. Our insurance companies, including third-party liability insurance, will be seeking the exercise of due diligence and responsible management with respect to Y2K.

Along that same line, we've had indications that some shipowners in the U.S. have decided to cease operations at some critical periods—i.e., January 1, 2000—because of potential criminal liability, but no Canadian-flagged vessels intend to do this at this time. As a matter of fact, Captain Lanteigne, who is here with me today, has a representative in the U.S. today to meet with our counterparts to discuss this very issue and to share other information.

To summarize, this is a critical issue that is being taken seriously by the Canadian-flagged ship operators. Federal leadership is critical and welcome. It is appropriately focused on awareness, and should remain so. At this time, our association strongly suggests that there is no need for imposed regulatory compliance. This is the position taken by the U.S. government as well.

Today's sessions to increase awareness are critical and must continue. For the marine industry, the project is a substantial one owing to, in our case, the age of the fleet; the way in which on-ship technology has been incorporated in ship operations; the shear number of systems; and the large size of corporate networks that exist nationally and internationally. And while the task is large and complex, it's not insurmountable. We are implementing action plans to deal with the year 2000 problem.

With continued diligence, we're confident that we can identify the problems, assign resources, coordinate with third parties, and pass on information and ensure together a seamless transition into the new millennium.

Madam Chair, thank you for the opportunity to express these comments.

The Chair: Thank you very much, Mr. Morrison.

I'm now going to turn to Canadian National. We have with us Mr. Jim Bright, director of business systems at client services; and Mr. Robert Cantin, the manager of corporate year 2000.

Mr. Bright.

Mr. Jim S. Bright (Director, Client Services—Information Technology, Canadian National Railway Company): Thank you, Madam Chair, members of the committee.

I'm here today on behalf of Fred Grigsby, CN vice-president and CIO. He is unable to be here today, and he sends his sincere regrets. My colleague, Robert Cantin, is the current Y2K manager at CN, and he's here to help with any questions you may have.

CN is again pleased to be here today to share with members of the committee the progress of the initiatives taken at Canadian National Railway with regard to the Y2K project.

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As discussed at our previous appearance before this committee, CN began working on addressing year 2000 compliance in September 1996. In November 1997, complete project responsibility was placed under the control of the chief information officer. Since that time, a steering committee composed of vice-presidents of the various functions throughout the corporation continues to meet monthly, when progress is analysed and any slippage is reported directly to the president and the senior executive.

In addition, the extensive communication program that was developed to ensure all of our employees are aware of and understand CN's progress in this area continues to support the work being carried out by information technology. Specialized bulletin boards on our e-mail network enable employees to find answers to specific year 2000 questions. This is in addition to the department's quarterly newsletters as well as continuous coverage in CN's internal employee magazine, which is sent to every employee across the system.

I would now like to take a few minutes to provide a brief overview of our progress since our last appearance before the committee.

The information technology-supported systems area currently has 95% of its applications converted for compliance, with over 55% of these applications actually executing in their production environments. These include all of our core traffic systems and revenue management systems. The remainder of the workload for this particular initiative is targeted for completion by the end of this year.

As part of the process, some 41 million lines of code underwent either internal or outsource conversion, followed by rigorous internal test factory evaluation. In addition, a code audit is being performed for quality assurance purposes by an independent outside auditing firm.

The exceptions to our year-end targets, and there are very few, are the result of vendor or customer dependency; however, all exceptions are being addressed, monitored closely and followed up on.

On the process control and embedded systems side, over 230 classes of items have been inventoried and assessed. This includes our train control systems, signalling systems, wayside detection equipment, railway/highway crossing and other warning devices, as well as CN's radio network. Also included in this group are building and maintenance facilities, switching yards, shops, locomotives and other specialized work equipment.

Compliance is now a reality for over 60% of these systems, and we are on target for completion of all systems by December 1998.

From the end-user computing perspective, there were almost 1,400 items inventoried and assessed. These include such things as Excel spreadsheets and MS Access databases, to mention a few.

Our initial objective was to complete this workload in 1999; however, we currently have 50% of those items analysed and remedied where required and, as a result, have revised our target so that this particular activity should be fully completed by the end of this year. Exceptions, again, are either vendor related or dependent on our personal computer deployment across the corporation, which I'll talk more about in a few moments.

Another component of our quality assurance process with regard to this particular aspect of our operation is the establishment of a year 2000 user desktop training module, which will be given to all end-users between January and September 1999.

With regard to CN's personal computer inventory, plans are in place and work is now ongoing to ensure compliance in over 11,000 of CN's PCs located across the country. The target for completion of this initiative is July 1999.

On the telephony and telecommunications side, CN is working closely with Bell Canada. CN's own internal year 2000 test network has proven to be extremely useful for early detection of issues, all of which are being addressed as scheduled within the 1998 timeframe. Our main objective is to ensure that Bell Canada's services are ready and tested on time.

As for our customers and partners, over 9,000 letters highlighting our intentions with regard to the necessity for becoming year 2000 compliant were sent out. An assessment of CN's electronic data interchange with our customers and partners has been completed, and the required remedial solutions will be ready for deployment at their individual sites by the end of this year. While the actual deployment is scheduled to occur between now and September 1999, precise timing will be dependent on each customer's requirements.

More than 4,600 letters have also been sent to CN's supplier groups to determine what action plans they have in place to become year 2000 compliant, as well as to identify any products supplied to CN in the past that could be affected by non-compliance. To date, we have received responses from more than one-third of our suppliers. CN supply management, along with our operations group, have identified those critical suppliers who will be closely monitored to ensure their appropriate progress towards compliance.

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The last area I wish to address is the work being done with our joint ventures and subsidiaries such as CN Investment, CN Real Estate, and our consulting arm, CANAC. These major activities are being addressed through CN's year 2000 project and are all on target for completion by year-end 1998. Others are being addressed through regular communications and/or site visits to ensure they are compliant as quickly as possible.

Madam Chair, I hope this very brief submission provides members of the committee with an overview of the work that's being done at CN to ensure that all aspects of our operations are year 2000 compliant. My colleague and I are ready to answer any questions.

The Chair: Thank you very much, Mr. Bright.

We have one last group, the Canadian Trucking Alliance. We have Ms. Michelle LeBlanc, the director of policy and research. Ms. LeBlanc.

Ms. Michelle LeBlanc (Director, Policy and Research, Canadian Trucking Alliance): Thank you, Madam Chair.

This is the first appearance for the Canadian Trucking Alliance as well, and we're delighted to be invited to speak to you today. I apologize for the lack of materials. Events conspired to prevent us from having materials for distribution, but that in no way indicates any lack of respect for this issue, which is a very important one for our industry.

In going over some background material for this presentation, I went through the Auditor General's report that was tabled in May of this year in the House, and it was noteworthy that it did not address road transport at all. In fact, even the interviews with manufacturers, retailers, etc., did not note any issues regarding transportation. Yet the entire economy of Canada or any of the developed nations would grind to a halt without transportation services.

CTA, in the summer, undertook an informal survey of its members. Now, we have 2,000 motor carrier members across Canada from coast to coast, large and small, some of them local and many of them international. The informal survey results were that most of them claimed either to have finished their testing or to be undertaking their testing, and they were confident that there would be no problem at all in their making the transition with their computer and other equipment. Certainly our investigations with the vehicle manufacturers show that they expect their vehicles to be compliant without any problems.

There is a definite difference, however, between our large and small operators in how they responded to our survey. The large companies rely on customized systems and they have really undertaken a lot of effort to address the Y2K problem. However, smaller companies rely on off-the-shelf applications and many of them feel it's not a problem for them. They either plan to replace the off-the-shelf software or they feel it is compliant.

My personal observation is that this is probably something they really ought to look at more carefully. But small companies, especially in the trucking industry, have a lot more pressing issues oftentimes, and it's difficult for them to look ahead a year or two when they're just trying to keep their heads above water.

Now, from my perspective, one of the biggest problems is that many of these companies, even when they do address their year 2000 problems, haven't really thought about contingency planning—what'll happen if for some reason their system doesn't work or a system they rely on doesn't work? The impact of failure on the economy, the failure for trucking to make the transition, is quite large. If trucking fails to make the shift, the repercussions could be devastating to the economy if it is for more than a very short time. However, we're confident that widescale failure is highly unlikely, assuming that the supply chain is ready—supply chain meaning, in our case, not so much vehicle manufacturers but electricity, the custom services in Canada and the U.S, fuel supply, banks and communications. This is a real fear for our members.

• 1600

As for the impact of failure on safety—and I expect this is why road transport is generally not included in a lot of examinations of the year 2000 problem—people don't expect trucks to fall out of the sky on January 1. However, there is an impact on safety from the trucking perspective and it has to do with things outside of our control, such as traffic management systems and the enforcement and emergency services' ability to cope with the year 2000 problem.

Most of the trucking companies, especially smaller ones—and they make up the large majority of trucking operations in Canada; probably about 70% to 80% are smaller, mom-and-pop kinds of operations—survive on an operating ratio of over 95%, and that makes it difficult for them to think a year ahead or two years ahead, about the potential problems they will face then. They are worried about just keeping the business alive. Their more immediate problems that fall perhaps under the area of this committee are things such as the proliferation of U.S. franchise taxes, the Agreement on Internal Trade, the national safety code and so on.

Notwithstanding that, there are certainly a number of recommendations that we would like to see considered, but I'm going to focus on two of them.

One is the need for more recognition of the issues regarding road transport. Practically anything that you can think of in Canada has at some point moved by truck, and it's important to remember that mode whenever we're dealing with any issues that may have an economic impact.

Second is the communications aspect. I think this is a role the government can play, and I think they've been doing a very good job of it, but there's certainly more room for doing this. I don't so much mean communications of the problem because I think that job's been done very well, but I think in the next year there will be a need for communications on the readiness aspect; in other words, the readiness of basic sectors of the economy to cope with the year 2000 problem. I think that would go a long way towards addressing the fears within the country, either of consumers or citizens or of large and small companies, as to the readiness of other sectors they rely on, such as electricity, the banking systems, communications, etc., and I think that communications angle would go a long way towards addressing the fears of the average Canadian.

We wish to thank you very much for inviting us to appear before the industry group today. We would be pleased to entertain any questions you have, either today or at any other point. Thank you.

The Chair: Thank you very much, Ms. LeBlanc.

I'm now going to turn to questions. I'm going to begin with Mr. Lowther, please.

Mr. Eric Lowther (Calgary Centre, Ref.): Thank you, Madam Chair, and thank you to all the witnesses for your candid and straightforward presentations.

I'd like to begin quickly with Mr. Elliott, who is with the Canadian Coast Guard, if I could.

You suggested that 62% of the systems were ready, I think you said—and clarify it if I got this wrong—and that 74% of critical systems were ready, meaning 26% of critical systems are not ready. If we were cutting today, if this was the eve of 2000 today, what would 26% of critical systems not being ready do to the coast guard?

Mr. William Elliott: Maybe first I could clarify that the percentage figures I referred to refer to assets. We really have two categories of assets that we're in the process of identifying and remedying, systems being one of those and electronic assets with embedded chips being the other. As for the functions we're concentrating on that would have been identified as government-wide, mission-critical functions, there are four that fall under the responsibility of the Department of Fisheries, all of which are coast guard functions.

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On the difference between the 62% and 74%, 74% is a measure of the assets that have been identified as vital to the carrying out of those functions. To the extent that there are these vital assets, if we had not either remedied those assets or provided contingency plans to get around to them, it would be a significant problem.

Mr. Eric Lowther: For the sake of time, I have a couple of other quick questions for some of the other witnesses. Thank you, Mr. Elliott; I appreciate that.

To Mr. Morrison and the Shipowners Association, I was a bit surprised at your compliance policy goal and senior management commitment and involvement. I've heard other numbers saying we're past that in Canada, saying we felt we had that for the most part. I thought we weren't seeing that too much any more, but seeing it on there suggested to me that maybe shipowners or the association are a little bit behind the wave on this thing. Maybe you can comment on that.

Also, perhaps you could quickly work into your answer something about the international perspective you may have. We have boats coming to Canadian ports, and there are international ports Canadian ships go to. I see that most of your comments related to Canadian preparedness, and I can't remember hearing much about international considerations.

Mr. Donald Morrison: To answer the first part of your question, this is our first appearance here. I just wanted to assure the group that our senior management groups in all of our companies are committed to this.

I think it's one thing to say you support a program at its beginning, but to keep these programs going you need continuing commitment of senior management and the boards. I'm just here today to say this is happening in our companies. We know it's happening because of our discussions at our own board meetings with our association members.

The reason for my focus on what's happening in Canada is the definition of our association. We represent only those Canadian ships that are registered in Canada, use Canadian crews, and, as an aside, pay Canadian taxes. We have very few Canadian ships of that registry that go to foreign ports other than those that go to the U.S. Those ships are in effect doing the same investigations with the U.S. ports that they're doing with Canadian ports. In other words, they're seeking out all the suppliers they deal with in those ports, the loading equipment, and the port management systems, to ensure that they are third-party compliant with our own systems.

Mr. Eric Lowther: Thank you very much.

My last one is for Madam LeBlanc. You said the infrastructure is key for the trucking association—the power, the gas, all the other things. The bottom line that I got from your presentation was that if those things are there—the larger infrastructures in society that are not really tied to the trucking industry—trucks will roll. That's really the dependency. According to your perceptions, it's not so much the trucking industry itself that has any great liabilities because of 2000, it's the infrastructure around it. Is that an accurate read on what you said?

Ms. Michelle LeBlanc: That's certainly what our survey would indicate. Although I think it's a little more complicated than that, I'm trying to make it as easy as I can in terms of being understood.

The infrastructure that surrounds the trucking industry is probably the more important consideration for us. Having said that, a lot of small companies underestimate the importance of this problem. I hope they'll have time to address it this year, but I do have some concerns about it. However, as far as the large and medium-sized companies are concerned, I'm secure; I'm confident they will make the transition well.

Does that help you understand that a little bit better?

Mr. Eric Lowther: Yes, thank you.

The Chair: Thank you, Mr. Lowther.

Mr. Bellemare, please.

[Translation]

Mr. Eugène Bellemare (Carleton—Gloucester, Lib.): Thank you, Madame Chair.

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[English]

I have a question for all four groups. Do you have a milestone timetable indicating the analysis of and schedules for checking your resources, your budgets, your testing, retesting, auditing and contingency plans? If so, could you supply that to the committee? If you can't, would you tell us why? If not, why not?

The Chair: Do you want to start, Mr. Elliott?

Mr. William Elliott: The short answer is that we do, we can, and we will.

The Chair: Mr. Morrison.

Mr. Donald Morrison: Of the eleven different companies that we have, all of the milestones are different. The larger companies tend to have a more aggressive program. For the smaller companies, their dates are pushed further out because they're not quite as crucial. I think we could provide you with a composite about an order of magnitude of when certain compliance features will be completed, when certain testing is done, and when some real-time testing and contingency planning will be done. We can do that.

The Chair: Ms. LeBlanc.

Ms. Michelle LeBlanc: We represent over 2,000 companies, which makes it a little difficult to provide you with any particular milestone dates. I can give you two sides of that. I can probably give you examples of some of the companies' milestones, examples of some of the large, medium, and small, if that is your wish. The Canadian Trucking Alliance also has an awareness program that we have informally implemented to help our members out, so I would be happy to present that as well, if you'd like.

Mr. Eugène Bellemare: Thank you.

The Chair: Mr. Bright.

Mr. Jim Bright: Yes, we can give you what you want.

Mr. Eugène Bellemare: To the four of you, at this particular juncture in time, what is your greatest concern, and who or what organization gives you the greatest concern? Can you answer that in just a word or two? For example, it could be communications, it could be electricity, or it could be government non-readiness for Y2K compliance. It could be a variety of things. Is there something that is highlighted in that particular problem in your industry? Can I start with Mr. Elliott?

Mr. William Elliott: I would say it's our external dependencies. One major area would particularly relate to communications, including the public telephone systems, the supply of electricity, satellites, etc. I don't list those as ones we're most concerned about with respect to our assessment of a measurement of the risk associated with the occurrence of a failure, but failures in those systems certainly are a major concern to us.

Mr. Eugène Bellemare: Mr. Morrison.

Mr. Donald Morrison: I would just reiterate those comments, and say our major concern will be that somehow we miss something in dealing with a third party, in dealing with a supplier, in dealing with someone who is providing us either with navigation communication services, loading equipment, or whatever. Our companies are confident they're going to be able to dig out all of their own problems, but they do have concerns, which is why they're spending so much time with third parties. So I guess the two major concerns would be communications and navigation services.

Mr. Eugène Bellemare: Madame LeBlanc.

Ms. Michelle LeBlanc: I'm of three minds on that one. First, we won't go very far if our customers as a whole aren't ready. In other words, if General Motors isn't compliant on January 1, they can't receive anything and they can't ship anything out, so we will have no reason for existence. Transportation is simply a medium.

My second mind tells me that if I have a truck on the road on January 1 and the fuel system goes down, the truck will stop at some point and won't go any further. So the fuel system is really our dependency.

Having lived through the ice storm last year, though, I'm pretty sure the electricity will be the biggest drawback in any case. The trucks may continue to roll, but I suspect even the fuel pumps won't work if the electricity is not working.

• 1615

The Chair: Mr. Bright.

Mr. Jim Bright: I would have to agree. You don't have control over any external contacts you have with suppliers or customers, other railroads or business partners, so it makes you worry. They're not on your timeline either. That's what we're worried about. There's also just the sheer size of the railroad infrastructure and the safety sensitivity of some of the systems. So we're testing and testing again.

Mr. Eugène Bellemare: Thank you.

I gather you have written to all your suppliers.

The Chair: Mr. Bellemare, we have to move on now.

Mr. Eugène Bellemare: Thank you.

[Translation]

Mr. Antoine Dubé (Lévis-et-Chutes-de-la-Chaudière, BQ): In fact, these four groups of witnesses represent different companies.

The representatives of the Canadian Shipowners Association and of the Canadian Trucking Alliance are in a situation where some of their members... perhaps it's easier for shipowners because there are fewer of them, but it's more difficult for the Alliance members. I have question for both groups. It's not the activities of your associations that interest me, but rather the relationship you have with your members to ensure that they are prepared to meet the Y2K challenge.

Mr. Donald Morrison: As I pointed out, this item is on the agenda of every management committee meeting. Once or twice a week, we contact our member groups to see how they are getting along, because we realized that at some point, a committee like yours would be asking us to report on our Y2K preparedness.

I think we can manage to convince them by communicating with them. We can't force them into action, but without proper planning, their livelihood could be in jeopardy. They don't want to lose their business. They are doing everything they can. Sometimes, they ask for our help with planning. However, I think the best way for us to keep up-to-date on what they are doing is by keeping the lines of communication open.

Mr. Antoine Dubé: And what about the Canadian Trucking Alliance?

Ms. Michelle LeBlanc: I agree with Mr. Morrison. We see the same thing happening within our association. The companies that we represent have often made it very clear to us that they don't want us to stick our noses in their business. They maintain that this is their responsibility and they will deal with it.

We believe that we have two roles to play: first, we can request a sector status report on a regular basis so that we can intervene if necessary and alert people if the problem reaches a critical point; secondly, through communication, as Mr. Morrison mentioned, we can keep them informed of our actions, make them aware of the problems and so forth. These are two of the things we can do.

Mr. Antoine Dubé: The Canadian Shipowners Association and the Coast Guard are both represented here. Surely you are in touch with one another and discuss plans to address the year 2000 problem. Do these two groups have any specific expectations vis-à-vis one another as far as the year 2000 problem is concerned, unless of course they have hammered out some agreements?

Mr. Jacques E. Clavelle (Director General, Technical and Operational Services Branch, Canadian Coast Guard): Our approach is to exchange information. We make sure that we share our concerns regarding the Y2K problem. We did so two weeks ago during the meeting of the National Advisory Council of the Coast Guard. Further meetings are also scheduled to continue our discussions.

• 1620

With respect to our activities and operations, when the year 2000 arrives, we will continue to exchange information and to consult on appropriate emergency plans, for example, on ways of operating our vessels and communications systems.

Mr. Antoine Dubé: Do you communicate directly with the shipowners themselves, or do you go through your association?

Mr. Jacques Clavelle: We have held discussions within the framework of the association, but also within the framework of the advisory board. It is composed of all stakeholders in the shipping industry, from pleasure craft operators to commercial fishermen. We have explained the problem in detail to them. We circulate an information bulletin throughout the industry to advise people of how we are dealing with the problem.

Mr. Donald Morrison: As far as operations are concerned, some of our member groups have regular daily contacts with Coast Guard officers regarding navigation, communications, dredging and other operations. They exchange information on activities scheduled for the coming summer or fall.

Mr. Antoine Dubé: May I ask one final question?

The Chair: Later perhaps.

Mr. Antoine Dubé: Fine, I'll wait for the second round.

The Chair: Ms. Jennings is up next.

Ms. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): I have several questions. I will list them all and you can answer the ones that apply to your particular sector of activity. My first two questions, however, are for the Deputy Commissioner whom I would like to congratulate on his recent appointment.

You mentioned a completion rate of 74 per cent. When do you expect to reach a 100 per cent completion rate? Are you referring to Canadian Coast Guard mission-critical functions?

Secondly, how well do you control your embedded processors? If you do not control these systems well, what emergency plans have you drawn up?

I will now ask my other questions which are of a more general nature.

Have you identified critical dates for each of your particular sectors? I would imagine that you are far enough along in your year 2000 work to know whether your sector faces a number of critical dates and to ascertain the seriousness of the situation.

Secondly, where do you stand in comparison to your foreign competitors, if you have any? Do you know where they are in their year 2000 work? Are you ahead of them, at the same stage or rushing to catch up? If you are further along in your work, have you considered whether or not this gives you an advantage from a commercial standpoint?

[English]

The Chair: I'm going to have to stop you here. It's going to take us a while to get through everyone just on those two questions.

Ms. Marlene Jennings: Okay.

The Chair: We'll see how the time goes.

Ms. Marlene Jennings: I can't have another one?

The Chair: Is it short?

Ms. Marlene Jennings: Okay. I'll leave it at that.

The Chair: Mr. Elliott.

Mr. William Elliott: In response to your first question or perhaps the first part of your first question, with respect to assets that have been identified as vital to government-wide mission-critical functions, our client is to have the work on those completed by this year end, December 31, 1998. Other assets related to those functions may take a little longer—March 31, 1999.

Ms. Marlene Jennings: Processors, embedded chips.

• 1625

[Translation]

Mr. Jacques Clavelle: Embedded processors pose the biggest problem for the Coast Guard. Nearly 88 per cent of our systems have embedded processors.

The method used by the Coast Guard to identify those systems likely to pose some problems—and there are many of them—delayed our progress initially. However, we are progressing much more quickly today. I feel that we have made tremendous progress.

We have acquired a certain expertise as a result of the work we have done. Some consultants who work for other companies have seen for themselves how we did our inventory, how we evaluated system weaknesses and possible impacts and how we drafted our emergency plans. They are confident that we have found the right approach and a rather interesting one to boot.

Ms. Marlene Jennings: Excellent. My congratulations.

[English]

The Chair: Mr. Morrison.

Mr. Donald Morrison: In terms of the critical dates, looking at the plans of our members I would say we have two critical times. The first critical time is the summer of 1999, when most companies hope to have their new systems in place so they can be tested and tried, and people can continue to be educated and taught new systems or new systems' approach until the fall. It's really to get the ability to run real-time tests with the new equipment and prepare contingency plans, and then to have people prepared to be able to use the systems by late fall 1999, waiting for the critical day.

Ms. Marlene Jennings: Your competition outside of Canada...?

Mr. Donald Morrison: I guess we can talk about the foreign ships. I would make two comparisons. It's generally well known that the Canadian ships, whether it's in terms of electronics or other mechanical equipment, are superior to the foreign vessels that come into Canada. We also feel we're much better equipped electronically and will be much better prepared for tackling the bug than the foreign vessels.

The Canadian fleet is recognized as being at the forefront of technology in any case. We've had to do that in order to continue to compete with the American ships and the overseas vessels. There's no question in our minds that superiority will continue and will result in us being better prepared for 2000 than the others.

Ms. Marlene Jennings: It will be commercially advantageous.

Mr. Donald Morrison: Hopefully it will turn into an economic bonus for us.

Ms. Marlene Jennings: Okay, let's hear about trucking and then the CN.

Ms. Michelle LeBlanc: Thank you. On the two issues you asked the general questions, the critical dates in our case vary from company to company, naturally, but I would echo what Mr. Morrison indicated. When the real-time systems come on-line, which will probably be in the spring and summer of 1999, that's really when we'll find out or separate the wheat from the chaff. Some of them will already have faced a critical date in January, the year before 2000, when some of their systems will flip over. So we'll have a small test there and again in March. Those will be some of the critical dates.

In terms of the status versus the U.S. trucking companies, I don't have any hard data, so it would be speculative at this point. However, I do believe we're comparable. They have many more, much larger companies than we have in Canada, so generally speaking they will probably be slightly more prepared than ours, but on the whole I believe it's comparable.

The Chair: Mr. Bright.

Mr. Jim Bright: I guess overall we're slightly ahead of the other railroads in North America, which may equate to a slightly lower total cost because we got in earlier. We started testing with our member roads September 1 between all the railroads, and we should be finished hopefully in June 1999, which becomes a critical date, as was mentioned.

• 1630

In terms of a competitive advantage, once we get off the CN lines, if their railroad isn't working, we're not going to put our trains on it either. We never really contemplated this as a competitive advantage; it was more about survival.

Ms. Marlene Jennings: That's strategic alliance. Say they're not ready but we're ready. There's the possibility of a strategic alliance with another means of transportation in order to continue to maintain your competitive advantage. This is instead of having your traffic simply stop because they're not ready.

Mr. Robert Cantin (Manager, Corporate Year 2000, Canadian National Railway Company): As for alliances, right now I'm dealing closely with, for example, Illinois Central, through which a lot of our traffic goes. We're actually exchanging ideas very closely. They're going to be on target with us. That's true for them and a few of the majors, so I wouldn't see this as an issue for us.

Actually, we had some minor discussions with our legal department in marketing. They were looking at this as a competitive advantage, but that's still in the works right now. We're waiting to see what 1999 will bring us. But we and our major partners are going to be ready.

Mr. Jim Bright: We do know that the IC, which we've taken over, is going to be year 2000 compliant at the same time we are.

The Chair: Thank you, Madam Jennings.

Mr. Lowther.

Mr. Eric Lowther: Thank you.

It seems to me in listening to all the witnesses that with maybe the exception of the larger ships and maybe some aspects of the CN line, if you were all assured of having power and communications—I would include satellite navigation communications in that—a big piece, if not 80%, of this 2000 spectre would kind of dissolve so that it wouldn't be that big of an issue.

I'm trying to get a bit of a grasp on this with these industries we're seeing before us. Is it fair to say that a big part of this is power and communications, including satellites? If you had that, you're over halfway there. Is that true?

Mr. Donald Morrison: Do we include in power the ability of banks to do billings and receive? I'm not being facetious. The financial part of it in terms of manifests and everything is done on computers now. It's being done remotely, electronically, by banks. We also need that to function. That's an example.

It's so pervasive that I guess we wouldn't want to put a figure on how we're going to deal with that or what percentage of our third-party contacts will be prepared. I guess if we had the banks and the ability to get fuel, and if the ports and all of their loading and unloading systems were compliant, and if we had navigation systems, then yes, we would be in good shape.

Mr. Eric Lowther: There's a tremendous number of “ifs” in all that, as always with this issue. Maybe someone else would like to talk to that.

Would we be getting a different answer or presentation from you today if you were not in the least bit concerned about any liability issues? Is the liability spectre holding you back from sharing openly with us, being more positive, saying you're further along than you are, or whatever? Are you couching your comments a bit, for fear that if you come on strong in this committee, and somebody finds out about it, you could be liable later? How much of that is holding you back? Is any of it doing that? These are totally unfair questions, but that's why they invited me to this committee.

Mr. William Elliott: With respect to the Canadian Coast Guard, I don't think that's a factor at all with respect to the presentation we've given.

I can't tell you that liability issues are of no concern to us at all, but our primary concern is the safe operation of ships and our ability to respond to environmental problems.

• 1635

I think that by addressing our primary concerns, we're also addressing any potential liability. But we're certainly not hesitant to be frank with the committee based on our concerns about liability.

Mr. Eric Lowther: Is power and satellite communication half of your battle? If you had that, would you be halfway there?

Mr. William Elliott: If we had communications, that would be a big part of the way there. We're quite confident we'll be able to operate our own ships.

Mr. Eric Lowther: Okay.

The Chair: Does anyone else want to answer that? Ms. Leblanc?

Ms. Michelle Leblanc: I would just like to answer the first question you asked. I'm not sure we would be halfway there. Again, Mr. Morrison, when it comes to finances, that's absolutely right on the money. Again, there's the question of the customer base. If the manufacturers can't manufacture, we've got nothing to transport, so we might as well leave the vehicles in the dock.

As for your second question, which was the liability issue, I remarked that on October 1, the U.S. House of Representatives passed a bill to limit liability. They passed it unanimously, which must be pretty rare for them.

But I don't think this is what's holding back trucking companies from being honest or not as to their readiness for 2000. I suspect a lot of it is just that you have so many suppliers and so many other people on which you base your livelihood and your ability to prepare that it's far too difficult to assess that, at least at this point. Everybody is hedging their bets. They don't want to announce that they're entirely ready if there might be one embedded chip somewhere that will bring the whole house of cards down.

The Chair: Is there anybody else? Mr. Lowther?

Mr. Eric Lowther: I'm just going to press the CN group just a bit, if I could.

I actually had a town hall meeting on this issue earlier this month. I remember a couple of people brought up the point that if we don't have power, the trains will not run. Their issue was that we had to have power. This was sort of a priority. I'm not getting that read from the group here. It's sort of yes, that would be nice, but is it a priority—we're not sure.

What about from the trains side of things? You have the locomotives and all the other good things that go on with trains. But power, I would think, with signalling and all the rest of it—

Mr. Jim Bright: Do you mean electrical power?

Mr. Eric Lowther: I mean electrical power.

Mr. Jim Bright: We talk of the power of locomotives, so I get confused.

Mr. Eric Lowther: It's electrical power.

Mr. Jim Bright: Electrical power would certainly help. Our waybilling system basically runs the train through the yards. But as soon as our system goes down, we stop the train.

Mr. Eric Lowther: What system is that?

Mr. Jim Bright: It is called the service reliability system, SRS.

Mr. Eric Lowther: What does it—

Mr. Jim Bright: We also have all of our signalling systems, which are electrical. We have a backup system that allows us to run in dark territories.

We couldn't keep up with the volumes we're moving right now. I don't know what we would be moving. Pick a number. It might be a third of what we would normally move. Then the financial aspect would kick in. Power would be nice, communication would be nice, but I don't think that's enough.

The Chair: Thank you, Mr. Lowther.

Mr. Murray, please.

Mr. Ian Murray (Lanark—Carleton, Lib.): Thank you, Madam Chair.

My questions are for those of you involved in the transportation of goods. First of all, have you had any indication from any of your customers that they'll be wanting to be involved in stockpiling inventories? So you might see a spike up in demand in the third or fourth quarter next year in anticipation of this problem. Is that a possibility?

Ms. Marlene Jennings: Don't all jump in at one time.

Mr. Jim Bright: We're already identifying our components in order of what's critical to make sure that we don't run out of key components that would stop us from running the trains.

Mr. Ian Murray: What about in terms of your customers who depend on you for the transportation of goods? I was asking about those people rather than about what you need to run your business. Do you sense we'll have warehouses across Canada and the United States filling up with non-perishables well before the end of next year just because some people are anticipating this problem, then a huge demand for transportation, and then perhaps a rapid drop-off a number of months after January 1, 1999?

• 1640

Mr. Robert Cantin: We haven't been approached yet to serve customers in that way, but there have been some discussions to get ready for this. It hasn't been discussed seriously because we haven't been approached yet by any customers.

Mr. Ian Murray: No one else has had any experience?

Mr. Donald Morrison: It hasn't been a priority item with us yet. I think some of our members have had discussions among themselves as to how they would handle that if it happened, but they're only looking at it as a contingency item. It's not a fact yet.

Mr. Ian Murray: A far more significant question has to do with border-crossing in Canada and the United States, because all of you are involved with shipping goods back and forth. How dependent on technology are the customs offices in both Canada and the United States? Can you foresee massive traffic jams, whether they're trucks, trains, or even ships trying to get into ports or across the border? Is that something you anticipate?

Maybe it's unfair to ask you this, because you can't speak for the U.S. or Canadian customs services on how up to date they are.

The Chair: Ms. LeBlanc.

Ms. Michelle LeBlanc: I know that air has a different perspective on this, but for trucks, my sense is we'll be running all over the place, including crossing the border on January 1, 2000. Our discussions with Revenue Canada have been quite profound. They're preparing both on the customs side and certainly on the revenue side, the income tax side, to be prepared on January 1, 2000. So we're pretty confident they'll be there. They're already testing their systems and expect to have real time in place at that point.

Having said that, if it fails on either side of the border, a five-minute backlog of one truck translates into a 17-hour backlog after a few hours. It's considerable. I believe the numbers are probably similar with trains, in terms of the number of wagons or whatever you call them, wagons in French. But with trucks, one truck crosses the border every three seconds, I think. So you don't want to have too long a backlog.

The Chair: Mr. Morrison.

Mr. Donald Morrison: In our case it's not quite as critical or crucial, inasmuch as by January the seaway will be closed and closing. And with our business, even though it occurs in the upper lakes and the river, the Canada-U.S. communications are not quite the same. It's not quite the same requirement.

Mr. Ian Murray: Thanks. That's all I had.

The Chair: Thank you, Mr. Murray.

[Translation]

Do you have another question, Mr. Dubé?

Mr. Antoine Dubé: I do. It's directed to Mr. Morrison. You stated that the average age of the vessels belonging to the members of your association was 27 years. I take that to mean there are newer as well as older vessels in your fleet. How old is the oldest vessel?

[English]

Mr. Donald Morrison: That's an interesting question.

Having been reworked and reconfigured, they can be 30 and 35 years old. We have to remember these vessels are working generally in the Great Lakes and St. Lawrence system.

[Translation]

Saltwater is harder on ships than freshwater.

[English]

The systems don't get the same wear. We also like to think that because of the professionalism of our masters and crews, the vessels are very well looked after. They can go into the thirties with much care.

[Translation]

Mr. Antoine Dubé: When you spoke about the average age of vessels, you indicated that although the average was relatively high, the computer equipment on-board was much newer. However, not all ships have been modernized to the same extent. What kind of variations are we likely to encounter?

Mr. Donald Morrison: To meet navigational requirements, communications equipment must be fairly modern. Most computer equipment is about the same age. When Coast Guard systems such as the global positioning system or GPS system for satellites require special equipment, then it must be purchased.

There may be slight variations, but they are relatively minor, in my opinion.

• 1645

Mr. Antoine Dubé: I wasn't trying to put you on the spot. Far from it. As you know, my riding is home to a shipyard and I am very concerned about its future. I am interested in all facets of the shipping industry. However, because this industry has been around for many years, it is often looked upon as outdated. I'm getting to my question. Could you tell us a little about the sophisticated equipment now found on ships?

Perhaps the Coast Guard representatives could also address that issue.

Mr. Donald Morrison: With your permission, I'd like to ask Capt. Lanteigne to help me answer that question. He is truly quite knowledgeable about this subject.

Capt. Réjean Lanteigne (Vice-President, Operations, Canadian Shipowners Association): Good afternoon, members of the committee. To respond more specifically to your question regarding the average age of our vessels, nearly 80 per cent of them were built between 1967 and 1972, at a time when a program to finance shipbuilding was in place. The Seaway had been expanded and as a result, we needed to have bigger ships. The average age is therefore 27 and it corresponds to a very specific era during the past thirty years.

It was during the 1990s that we really began outfitting our vessels with electronic equipment, with land-based systems adapted to the shipping industry. For example, we brought in the GPS system, an American satellite guidance system developed by the U.S. Air Force and once used only for military purposes. It is now available for commercial use.

Mr. Antoine Dubé: What year was that?

Capt. Réjean Lanteigne: In 1990. The system became available for commercial use in 1989-1990. Land and military GPS systems were made available for commercial shipping.

Once this electronic system became available, radical changes were made on board our vessels. We brought in radars, navigational and communications systems, electronic and maintenance maps and so forth. Everything started with the GPS system in 1989-1990.

As Mr. Morrison mentioned, once this occurred, Canadian shipowners invested substantial sums of money in upgrading their vessels to ensure navigational safety and more particularly, to increase fleet productivity.

One of the ways of making our fleet more viable was to reduce the size of our crews and to reduce transit time. By bringing in this new navigational system, we were able to operate when conditions were less favourable, that is during icy conditions, at night and in the fog. This improved our productivity considerably.

Mr. Antoine Dubé: I would imagine that there are also fewer accidents.

Capt. Réjean Lanteigne: That was a natural byproduct. Since 1989-1990, we have cut our accident rate by 75 to 80 per cent. Our insurance premiums have also dropped considerably over the years.

Mr. Antoine Dubé: This is testimony to the importance of the systems and of some of the dates that you mentioned. I was already aware of some significant dates, such as September 9. Mr. Morrison referred to August 22. No one else has mentioned that date.

Mr. Donald Morrison: It has to do with the GPS. We are confident that the problem has already been resolved, but we will only really know if that's the case on that particular date, that is if the Americans have been able to update their satellite system.

Mr. Antoine Dubé: I understand. I have no further questions.

The Chair: Thank you very much, Mr. Dubé. Please go ahead, Mr. Bellemare.

Mr. Eugène Bellemare: I would like to you discuss the subject of litigation. I would imagine that everyone is being cautious for fear being sued if some information is wrongfully imparted. I would imagine that this is also a concern of yours. Perhaps I don't even need to ask you that.

• 1650

[English]

I have with me the good Samaritan law adopted by the U.S. Congress. It's the Year 2000 Readiness Disclosure Act in the U.S. Congress, which Ms. LeBlanc alluded to, saying it passed in a very short period unanimously. We don't have such a thing in Canada.

I have here a second paper, which I got from the U.K., a paper prepared to warn businesses they are not immune to lawsuits from the United States if they do business with the United States. This law, which became law on October 19, 1998, gives a date, I believe, a deadline of December 3, 1998, for action to be taken by the countries to get into an agreement with the U.S., or to pass laws to protect their businesses, their enterprises.

Do you feel we should have a fast-track bill that would become law and would protect you from declaring information—giving information out—as people ask you, “Are you Y2K ready?” For example, regarding your suppliers, I've noticed some of you have said, “A third have answered us, and we've been writing letters to them asking for information as to their Y2K compliance”. I don't remember which of you said one third, but I would assume that across the board that could be a general figure.

I also make another assumption that the resistance on the part of the two-thirds would most likely be the question of litigation. Do you feel we should have such a law, a good Samaritan law, that would protect either you or third parties, for example suppliers, from litigation because they've declared where they are on the Y2K compliance?

The Chair: Mr. Morrison.

Mr. Donald Morrison: If I could come at it from another angle, at the transportation conference we were at in Toronto in September, I think the majority feeling was that legislation, written legal commitment from suppliers, or declarations of confirmation of compliance would not necessarily help. They would not necessarily be the elements that would ensure we're going to have a seamless transition, and they would not ensure there would be less litigation after January 1, 2000.

I think most businesses feel, at this time, their own best efforts and their own due diligence will result in as much success as some force-feeding in the way in which people have to confirm compliance, the way in which they can litigate. I'm not saying it's not worth spending more time at it, and within our association it's probably the area we have spent the least amount of time on—the question we're perhaps the least prepared to answer. But ours is such an international business that at this time we are suggesting we continue going in the direction we're going in.

At one time, in the States—and I'm not fully cognizant of everything that's happened—if American companies had been liable for accidents, they would have been criminally liable. I think their recent legislation is to protect them from that somewhat. In Canada that hasn't been the case, at least yet.

• 1655

I'll just leave it at that right now.

[Translation]

Mr. Eugène Bellemare: And the other witnesses?

[English]

Mr. Donald Morrison: It's a tough question.

The Chair: Ms. LeBlanc, do you have anything to add?

Mr. Eugène Bellemare: Madam Chair, I'm a bit concerned about that answer. If in the U.K. they really feel concerned about different businesses being sued—this is not in the United States, but an American company who feels affected—in going to the U.S., and they also state Europe here, and launched a lawsuit in either the U.K. or Europe, then these companies would not be protected, because their own laws would expose them to lawsuits. Therefore, the U.K. wants to react quickly, before December 3, to pass laws that would protect people in providing information regarding their readiness for Y2K.

If Europe is concerned, as for us who are glued to the United States, some of us—you people—could, in more ways than one, really be exposed to lawsuits. The Americans have a reputation for being crazy for litigation. Say they know they can come into Canada and use Canadian laws to sue you for Y2K non-compliance because they were affected in one way or another. I'm surprised at your answer, Mr. Morrison. Wouldn't you want the federal government to institute a law whereby if people do provide information...?

Say for example the electric company said they were going to by Y2K compliant on these conditions, and on this date they won't be compliant on this or that. They may not provide you with that information, because they're opening themselves—they would be opening their books—to all the lawyers who want to have a heyday in suing companies. They want to keep everything secret. I'm using hydro as an example, but it's just off the cuff. We could use other examples.

Mr. Donald Morrison: It's obviously worth consideration. I think the difficulty the industry has had is about when such legislation would end. Would it have a termination date? If something happens three months, six months, nine months down the line, would it still—

Mr. Eugène Bellemare: There could be a sunset clause.

Mr. Donald Morrison: Yes, we'd have a sunset clause. Is it still appropriate to use that?

The feeling of the companies to date has been that there has not been an appropriate way to address this that is less onerous than tackling it the way we've been tackling it. But it certainly does bear further consideration. As I said, we feel that way at this time, but it's also perhaps the area in which we have the least information.

The Chair: Mr. Bellemare, do you have other questions?

Mr. Eugène Bellemare: Oh, yes.

The Chair: Briefly, please.

Mr. Eugène Bellemare: Are you relying totally on the Canadian phrase “due diligence” in legal terms? If you proceed with due diligence, then you're protected, as opposed to being proactive and having a good Samaritan law.

Mr. Donald Morrison: I wouldn't put it that way. We have to some degree been advised on this. The feeling—this was not just from our industry, but from the other industries present—was that there is no better system. We're not saying this is a good system—in effect, it's a laissez-faire approach. But we haven't been able to identify a real protection or a real way to find out if people really are compliant and telling the truth. I don't know where it ends.

The Chair: Mr. Bellemare.

Mr. Eugène Bellemare: This is to the coast guard. You said you found 27,000 embedded processes or embedded chips. Of these 27,000 items, if I heard you right, only 133 were found to be non-compliant. Did I hear you right? Did I hear that only 133 were found to be non-compliant?

• 1700

Mr. William Elliott: Yes, but I would have to add that we've not finalized our examination of all our assets. Of the assets that we have examined to date, we have only identified 133 that need to be remediated.

Mr. Eugène Bellemare: I have a problem here, Madame Chair.

The Chair: This is your last question, please.

Mr. Eugène Bellemare: For all industry across Canada in general, the average non-compliancy for embedded chips after testing is about 10% to 15%. About an hour ago, the Canadian Shipowners Association said 20% to 30% of their ships are non-compliant. Now you're saying 133 are not compliant at the coast guard. Isn't that a bit of a dreamworld figure?

Mr. William Elliott: I'm sure the answer to that question is no, but just give me a moment to elaborate, if you would. My colleague should be able to help us.

Mr. Fred Forbes (Director, Year 2000 Implementation, Canadian Coast Guard): Madam Chair, when you talk about the percentage of assets that might be non-compliant, there are a lot of figures thrown around in the media, and I think you have to be somewhat wary of what those percentages are related to.

Mr. Eugène Bellemare: Mission-critical embedded chips.

Mr. Fred Forbes: Yes, embedded chips, but in terms of the baseline number you're dealing with, we have 27,000 pieces of equipment. When we did a susceptibility analysis, a large percentage of those were not susceptible to the year 2000 problem, so they should be eliminated from the count. When you then do other parts of the triage, you come down to a figure that is more representative of the percentage. With our government-wide vital assets, we've found that 3,169 that are actually susceptible. Of those 3,169, we have found 133 that are non-compliant. If you do the math on that, I think it does come out to about 4%. To me, that is a lot closer to the number we have tended to consider as being reasonable, that being somewhere between 5% and 10% of embedded processors having a problem.

Although the number seems small, I don't believe it is unbelievable. We have looked at that number and have said it is a small number, and we have asked ourselves whether we need to go back to make sure that we've assessed things properly. Just lately we did exactly that. We have five regions in the coast guard all doing assessments on inventory. We brought them all together and had a peer review of what they were doing to ensure that the numbers we were getting were in fact accurate and believable, and that's what we have come up with so far.

Mr. Eugène Bellemare: May I ask a final question, Madame Chair? It's short.

The Chair: Go ahead, but just a question, not a statement.

[Translation]

Mr. Eugène Bellemare: Thank you very much.

[English]

Should any area in Canada be in difficulty due to electrical shortages, hydro problems or whatever, do you all have contingency plans whereby you could assist certain municipalities with your generators from your boats or ships in the case of the coast guard, or private ships, trucks, or the CN, for example? I know the CN did that during the ice storm.

The Chair: Let's start with CN. Mr. Bright.

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Mr. Jim Bright: At this point, I don't think we have any formal plans to do that, to be quite honest.

The Chair: Ms. LeBlanc.

Ms. Michelle LeBlanc: We haven't been asked, but assuming that we're running at that time, we will act as we did with the ice storm and any other relief operation. We make ourselves available as much as possible.

The Chair: Mr. Morrison.

Mr. Donald Morrison: Our companies don't have formal plans, but we know it has been discussed because of the preparation to do that during the ice storm, especially along the south shore of Montreal last January.

The Chair: Mr. Elliott.

Mr. William Elliott: We're working with the national emergency preparedness folks. Some consideration has been given to the possibility of using our ships for power generation, but those deliberations are incomplete.

The Chair: Thanks, Mr. Bellemare.

Mr. Morrison, we know you'll probably be tested first with the GPS—and this applies to the coast guard as well. Hopefully that will go smoothly on August 22, and hopefully we'll get some nods of approval or some positive signs thereafter.

We thank you for being willing to share with us your preparedness, and we hope you have been legally able to be as up front as you possibly could be. We know you'll all do your best to be ready, because our economy depends on our transportation methods. Our small and medium-sized businesses won't function if you're not functioning. We also know the coast guard will be there with contingency plans.

We appreciate your progress, and we thank you all for being with us today.

The meeting is adjourned.