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2002 December Report of the Auditor General of Canada

December 2002 Report—Chapter 11

Exhibit 11.2—How the program works

  • The program starts with a retailer, or in some instances, an individual consumer living in a designated northern community like Iqaluit or Pond Inlet, who wants to purchase an item that is eligible for a subsidy. (Designated communities and eligible products are listed in a food mail program guide from Indian and Northern Affairs Canada on its Web site at http://www.ainc-inac.gc.ca/ps/nap/air/index_e.html
  • The retailer places the order with a wholesaler in the South (for example, Montréal or Edmonton) who has a contract with Canada Post to supply food or eligible products under the food mail program.
  • The wholesaler must deliver the item from his or her warehouse to one of 20 designated Canada Post entry points, which are located at the airports in those communities, for example, Val-d'Or, Happy Valley-Goose Bay, Churchill, or Inuvik. Generally this is done by road or rail. In the case of Val-d'Or, food takes between 5-7 hours by road from Montréal; for Happy Valley-Goose Bay, it takes up to 60 hours from Montréal by road.
  • When the item is delivered to the entry point, there are limitations regarding weight, size, and packaging quality. (These are all described in the food mail program guide.)
  • Canada Post randomly checks the content of packages to be sure that the items are eligible under the program. There are a number of classes of eligible products. While they all receive the same subsidized rate per package, there are three different per-kilogram rates—$0.80, $1.00, and $2.15, depending on the specific product and destination.
  • Canada Post then takes responsibility for delivering the product to one of the 140 final destinations from one of 20 entry points. It guarantees that the item will be delivered to any of these eligible communities in the North within 48 hours for perishables and 72 hours for non-perishable foods.
  • All shipments must be picked up at the airport within 15 minutes of the time that the aircraft arrives. The carrier must notify the retailer or individual person who placed the order when the plane is scheduled or anticipated to arrive.
  • The retailer or individual pays the wholesaler the full cost for the item. This includes the cost of packing the product for delivery, the cost of getting it to the entry point, and the subsidized rate that Canada Post charges for the service.
  • The federal government pays Canada Post the difference between the subsidized rate and the rate that would be charged if there was no subsidy.