Diana Cafazzo is a lawyer at the Toronto law firm of McMillan Binch and a member of the firm’s KNOWlaw Group.

It’s become common to hear the refrain that we should be abandoning any notion of regulating ‘Canadian content’ in this new borderless, high-speed world.

Whether or not you agree, for the time being the producers and broadcasters of television programming in Canada still need to understand the rules for what makes a program ‘Canadian.’

And these rules are changing. In March of this year, the crtc announced its new requirements for what qualifies as a ‘Canadian Program.’ A few weeks later, cavco issued a consultation paper to obtain feedback on its proposals to revamp its rules. Both these developments are important.

Canada’s many

Cancon rules

Figuring out what makes a program ‘Canadian’ has never been easy. There are two main Canadian content ‘certification’ systems – one run by cavco and one separately administered by the crtc.

To make life more complex, many of the funding agencies and programs (including the Licence Fee Program of the Canadian Television Fund, Telefilm Canada, various other funds and provincial bodies and tax credit authorities) piggyback on one or both of these systems by adopting their rules, often adding their own extra rules and exceptions.

So when cavco or the crtc changes its Canadian content rules, the effect multiplies as the changes ripple through the other funding agencies and programs.

CAVCO vs. CRTC

While most producers are familiar with the cavco rules for Canadian content, many producers are completely unaware that for many years the crtc has also administered a set of rules under which a program can be certified as Canadian.

The two systems exist to serve different policy rationales. cavco’s job is to determine which film and television programs should qualify for the Canadian Film or Video Production Tax Credit given by the Income Tax Act. The crtc’s role is to figure out which programs should be considered Canadian for various purposes under the Broadcasting Act, including which programs Canadian broadcasters are allowed to count towards their Canadian content requirements.

Certification under the two systems is not completely interchangeable. The crtc automatically recognizes a program certified by cavco, but the reverse isn’t true. This is largely because the cavco system has traditionally been somewhat more rigorous.

The results of certification under the crtc system won’t get you all of the same benefits as cavco certification. For instance, crtc certification won’t get you the cfvptc tax credit, and won’t make your program eligible for the benefits granted by the provincial tax authorities and other funding agencies that accept only cavco certification.

It can, however, make your production more valuable and attractive to potential Canadian broadcasters, and it may make it possible for you to use certain forms of non-Canadian financing that aren’t available under the cavco rules. It’s also possible to combine crtc certification with the ‘service’ tax credits (although there is a vocal contingent that opposes this combination).

So, in some cases, the crtc certification can be of significant benefit and may put a program firmly on the road towards being financed.

The new CRTC rules

The crtc’s rules have always been structurally similar to cavco’s, but there have always been some significant differences. The recent changes announced by the crtc have harmonized the two systems to an even greater degree, but the crtc has preserved some distinctions and added a few new ones.

The full details of the crtc’s new definition of what constitutes a Canadian program can be found in Public Notice CRTC 2000-42 ‘Certification for Canadian Programs – a Revised Approach’ (www.crtc.gc.ca). Here are some of the key remaining differences from the current cavco rules:

* More genres acceptable: The genres that are eligible for certification remain much broader than those accepted by cavco. The only genres excluded by the crtc are: infomercials and other forms of advertising material, public service announcements, promotional and corporate videos/films (such as those produced by groups and businesses for public relations reasons, recruitment, etc.) and pornography.

Unlike cavco, current events, public affairs programs, talk shows, game shows, and sports events are all eligible. With the increasing attractiveness of some of these genres to broadcasters as a result of their new crtc ‘priority programming’ obligations, this distinction has become much more important than it was in the past.

* The flexibility of coventures: In addition to certifying programs under its regular rules and issuing ‘c numbers’ to these productions, the crtc has always had the ability to award ‘special recognition’ or an ‘sr number’ to productions it calls ‘coventures.’

These are basically international coproductions that aren’t treaty coproductions – including coproductions with producers from a foreign country that does not have a film or television treaty with Canada (e.g. the u.s.) or coproductions with a producer from a treaty country where the production doesn’t qualify under the treaty.

These rules can be very attractive to some Canadian productions since they permit non-Canadians to have much more in the way of ownership, control and financial participation than do the strict cavco rules.

While some have complained that these rules permit programs that are not ‘truly’ Canadian to be certified for broadcast purposes, others welcome the financing flexibility these rules provide.

The crtc has decided that it will continue awarding recognition to these coventures. It has eliminated the requirement that the Canadian producer have an ‘equity position’ in the production, but has toughened its requirement that the Canadian producer have an entitlement to ‘profit sharing.’

Beginning on Sept. 1, the Canadian production company must retain a financial participation position of at least 25%, and a 25% share of profits. These figures rise to 50% starting on Sept. 1, 2001.

* Foreign executive producers and writers: While the crtc rules set out above seem to be ‘softer’ than the current cavco rules, in other ways the crtc has made some of its requirements tighter than cavco.

It limits the duties of foreign executive producers to ‘non-creative, non production-related functions’ (a rule that doesn’t appear in cavco’s written requirements, but which cavco has said is its position) and their role on set ‘solely to that of observers.’

The crtc will also not grant courtesy executive producer credits to foreign writers.

* Ownership, distribution and revenue: While the new rules are firm on issues of Canadian control, they are remarkably silent on the issues of ownership, control of distribution and entitlement to revenue – especially in the regular stream of ‘c number’ certification.

Since a great number of cavco’s rules deal with these issues, these differences between the two systems can be very important to a particular production and should be studied carefully.

Changes coming to CAVCO’s rules

Following the announcement in the February federal budget that the government intended to review the rules regarding the federal tax credit with the goal of streamlining the process for obtaining the credit, cavco issued its consultation document to the industry for comments, asking for comments to be delivered no later than May 31.

The consultation document is broad in scope and raises for discussion many Canadian content issues. For example, cavco states that its intention is to strengthen its screenwriter criteria so that ‘all individuals engaged in developing the screenplay or the series bible, from the outline or treatment through various drafts and dialogue polishes to the final shooting script, as well as any subsequent script editing and consulting, must be Canadian.’

It also proposes to follow the crtc’s lead by eliminating the executive producer exemption for any non-Canadian screenwriter, and goes on to say that it is proposing to disallow the use of non-Canadian show runners.

The consultation document also sought feedback on the complex issues of ownership, copyright, control of commercial exploitation and participation in revenues.

Whatever the results of this industry consultation, the impact will be significant for producers of ‘Cancon’ programming, and it may be even more important to understand the two systems.

It’s also a good bet that, for as long as the crtc remains involved in the regulation of Canadian television programming, there will continue to be two systems to deal with the different policy concerns addressed by the two regimes.

So stay tuned.

(This article contains general comments only. It is not intended to be exhaustive and should not be considered as advice in any particular situation.)