Bill C-49 (Historical)

Transportation Modernization Act

An Act to amend the Canada Transportation Act and other Acts respecting transportation and to make related and consequential amendments to other Acts

This enactment amends the Canada Transportation Act in respect of air transportation and railway transportation.
With respect to air transportation, it amends the Canada Transportation Act to require the Canadian Transportation Agency to make regulations establishing a new air passenger rights regime and to authorize the Governor in Council to make regulations requiring air carriers and other persons providing services in relation to air transportation to report on different aspects of their performance with respect to passenger experience or quality of service. It amends the definition of Canadian in that Act in order to raise the threshold of voting interests in an air carrier that may be owned and controlled by non-Canadians while retaining its Canadian status, while also establishing specific limits related to such interests. It also amends that Act to create a new process for the review and authorization of arrangements involving two or more transportation undertakings providing air services to take into account considerations respecting competition and broader considerations respecting public interest.
With respect to railway transportation, it amends the Act to, among other things,
(a) provide that the Canadian Transportation Agency will offer information and informal dispute resolution services;
(b) expand the Governor in Council’s powers to make regulations requiring major railway companies to provide to the Minister of Transport and the Agency information relating to rates, service and performance;
(c) repeal provisions of the Act dealing with insolvent railway companies in order to allow the laws of general application respecting bankruptcy and insolvency to apply to those companies;
(d) clarify the factors that must be applied in determining whether railway companies are fulfilling their service obligations;
(e) shorten the period within which a level of service complaint is to be adjudicated by the Agency;
(f) enable shippers to obtain terms in their contracts dealing with amounts to be paid in relation to a failure to comply with conditions related to railway companies’ service obligations;
(g) require the Agency to set the interswitching rate annually;
(h) create a new remedy for shippers who have access to the lines of only one railway company at the point of origin or destination of the movement of traffic in circumstances where interswitching is not available;
(i) change the process for the transfer and discontinuance of railway lines to, among other things, require railway companies to make certain information available to the Minister and the public and establish a remedy for non-compliance with the process;
(j) change provisions respecting the maximum revenue entitlement for the movement of Western grain and require certain railway companies to provide to the Minister and the public information respecting the movement of grain; and
(k) change provisions respecting the final offer arbitration process by, among other things, increasing the maximum amount for the summary process to $2 million and by making a decision of an arbitrator applicable for a period requested by the shipper of up to two years.
It amends the CN Commercialization Act to increase the maximum proportion of voting shares of the Canadian National Railway Company that can be held by any one person to 25%.
It amends the Railway Safety Act to prohibit a railway company from operating railway equipment and a local railway company from operating railway equipment on a railway unless the equipment is fitted with the prescribed recording instruments and the company, in the prescribed manner and circumstances, records the prescribed information using those instruments, collects the information that it records and preserves the information that it collects. This enactment also specifies the circumstances in which the prescribed information that is recorded can be used and communicated by companies, the Minister of Transport and railway safety inspectors.
It amends the Canadian Transportation Accident Investigation and Safety Board Act to allow the use or communication of an on-board recording, as defined in subsection 28(1) of that Act, if that use or communication is expressly authorized under the Aeronautics Act, the National Energy Board Act, the Railway Safety Act or the Canada Shipping Act, 2001.
It amends the Canadian Air Transport Security Authority Act to authorize the Canadian Air Transport Security Authority to enter into agreements for the delivery of screening services on a cost-recovery basis.
It amends the Coasting Trade Act to enable repositioning of empty containers by ships registered in any register. These amendments are conditional on Bill C-30, introduced in the 1st session of the 42nd Parliament and entitled the Canada–European Union Comprehensive Economic and Trade Agreement Implementation Act, receiving royal assent and sections 91 to 94 of that Act coming into force.
It amends the Canada Marine Act to permit port authorities and their wholly-owned subsidiaries to receive loans and loan guarantees from the Canada Infrastructure Bank. These amendments are conditional on Bill C-44, introduced in the 1st session of the 42nd Parliament and entitled the Budget Implementation Act, 2017, No. 1, receiving royal assent.
Finally, it makes related and consequential amendments to the Bankruptcy and Insolvency Act, the Competition Act, the Companies’ Creditors Arrangement Act, the Air Canada Public Participation Act, the Budget Implementation Act, 2009 and the Fair Rail for Grain Farmers Act.

[Vance Badawey, Liberal, Niagara Centre, ON]

Thank you, Madam Chair.

I have to say as well, thank you, folks, for coming out today. You represent the “how” of executing trade quota strategies. I again want to thank you for that, for being here, but as well for the future efforts you guys are going to participate in to really ensure that those strategies are put in place and executed.

Mr. Given, you answered the first question I was going to ask, and that was on labour conditions. I've always looked at things under a triple bottom line lens: economic, environmental, and social. In your opening dialogue you talked about the economics of this issue. You talked about, to some extent, the environmental side of it as it relates to an integrated transportation network that includes shipping, which of course is the most environmentally friendly mode of transport. The last part was social and labour, and of course you touched on that.

The next part I want to touch on, the question to all of you, is how then the dollars follow the strategy. Currently, as part of Bill C-49, we are looking at positioning Canadian ports to be allowed to access the Canada infrastructure bank, which includes financial instruments to help fund expansion, sustainable infrastructure projects—somewhat the business you're in, Ms. Clark—to ensure that dredging occurs in those areas that need to be expanded upon for bigger vessels with a lot more draught needed. Do you feel that this will be of assistance to Canadian ports being more competitive? That's my first question.

I want to expand my question to also include, not just Canadian ports, but the world of ports. There's an anomaly that we call the St. Lawrence Seaway. I say anomaly because, at least in my part of the world, the Welland Canal, albeit a port, is not technically considered a port.

To some extent, when it comes to its management of asset, in my opinion, it's not up to par, not being abided by. Therefore my question is, when you take all of that into consideration as part of the whole network, do you think, firstly, that under Bill C-49 it is appropriate to have those dollars available to the Canada infrastructure bank? Secondly, is it appropriate to have investment dollars at the ready to expand the St. Lawrence as well as the Welland Canal?

[Martin Fournier]

At the beginning, when we heard what was included in the economic agreement with Europe, one of our concerns was that it was going to open a crack in the Coasting Trade Act. We were afraid that the crack would grow bigger. Bill C-49 shows that our fears were justified, because we are told that opening the Coastal Trade Act to the shipping of empty containers does not just apply to European vessels, but also to vessels of all flags.

So we can already see the crack getting bigger. What is coming next? We do not know, but we are expecting other demands along those lines that will widen even more the scope of the concessions that have been made as part of the agreement with Europe.

[Martin Fournier]

No, we were not consulted about Bill C-49.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Would anybody else like to provide an answer?

No? Okay.

I thought I heard one of you say that you had received assurances that the Coasting Trade Act would not be amended during the review of the Canada Transportation Act. Were you consulted, then, on the amendments that you see in Bill C-49?

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you very much, Madam Chair.

I want to thank our witnesses for joining us today. It is good to turn our attention to another part of Bill C-49 which sees the Coasting Trade Act amended.

I have a couple of questions. They're probably broad questions that any one of you could answer. The first is, can you identify for this committee how Bill C-49 goes further than Bill C-30?

[Martin Fournier, Executive Director, St. Lawrence Shipoperators]

Madam Chair, ladies and gentlemen members of the committee, thank you for giving us an opportunity to share our comments and concerns with respect to Bill C-49, and more specifically the amendments proposed to the Coasting Trade Act.

I will introduce myself. I am Martin Fournier, Executive Director of St. Lawrence Shipoperators, an association whose mission is to represent and promote the interests of Canadian ship operators in order to support their growth and ensure the development of shipping on the St. Lawrence River.

St. Lawrence Shipoperators consists of 15 members—15 Canadian ship operators that have a fleet of more than 130 vessels that employ Canadian sailors. The fleet navigates the St. Lawrence River, the Great Lakes and the east coast, in addition to serving the Atlantic and Arctic provinces. Our members provide thousands of people with quality jobs and generate significant economic spinoffs in Canada.

According to a study carried out by the Council of Canadian Academies, the Canadian shipping industry employs between 78,000 and 99,000 individuals and generates between $3.7 billion and $4.6 billion in employment income. Just the activities of the inland fleet, which operates on the St. Lawrence River and in the Great Lakes—the area generally covered by our members—create more than 44,000 direct jobs and generate more than $2 billion in provincial and federal revenues. Therefore, the domestic marine industry plays a a key role in the competitiveness and prosperity of Canada and of the entire North American economy.

It is important to point out that marine transport operations between various Canadian ports are covered under the Coasting Trade Act, whose aims include supporting domestic marine interests by reserving the coasting trade of Canada to Canadian registered vessels. That information comes directly from Transport Canada's website. Among other things, the act stipulates that transportation between two Canadian ports must be provided by Canadian-flagged vessels with Canadian crews.

In the United States, since 1920, the Merchant Marine Act, better known as the Jones Act, has been protecting the U.S. domestic marine industry by ensuring that coasting trade is handled by U.S.-built vessels that are U.S.-flagged and U.S.-owned, and are operated by U.S. crews. Many other countries around the world, including European countries, have laws that protect their market.

It should be noted that, during the negotiations that led to the economic agreement with Europe, countries of the European Union did not open their market to Canadian ship operators. Only Canada agreed to concede a portion of its market, with no reciprocity.

When a country opens its market to foreign partners that do not operate based on the same rules and are not subject to the same requirements as Canadian ship operators with Canadian-flagged vessels, that favours foreign ship operators at the expense of the very competitiveness of our ship operators and domestic interests.

According to a study carried out in 2015 by Ernst & Young and Innovation maritime, the crew costs for European vessels authorized to operate in Canadian waters under the economic agreement represent only 30% of the costs of a Canadian crew. The wage gap between Canadian crews and crews from other countries, including those provided for under Bill C-49, will be even larger.

This is the second time in less than a year that amendments have been proposed to the Coasting Trade Act. The first time was under Bill C-30, which concerns the implementation of the economic agreement with Europe. The second time was through this bill, which makes certain concessions for the European Union that are criticized by the domestic marine industry.

Canada must also take action to protect its marine industry and refuse to give up its market to foreign companies. This is a matter of the vitality and sustainability of Canada's domestic shipping industry.

I want to mention that, during the latest electoral campaign, the Liberal Party wrote to us that it had no intention of amending the Coasting Trade Act and even recognized the importance of the act for the market. St. Lawrence Shipoperators feels that free trade agreements generally benefit the Canadian economy and supports Canada's efforts to increase trade and the competitiveness of its economy. However, we are concerned about the consequences of loopholes in the Coasting Trade Act and concessions made in trade agreement negotiations that affect the domestic marine sector.

St. Lawrence Shipoperators and its members, as well as a number of stakeholders and industry representatives that participated in the work of the industry-government working group on the implementation of the economic agreement, have repeatedly expressed their concern with regard to the system's effectiveness and the measures currently in place to monitor and effectively control foreign vessels' coasting trade activities. Many examples and situations justify those concerns. The addition of new coasting trade activities in the economic agreement or any further opening of the Coasting Trade Act is of little comfort in that regard.

We have requested the establishment of an oversight system on a number of occasions. The request was also made to the Standing Senate Committee on Foreign Affairs and International Trade, which studied Bill C-30. There was even a recommendation to that effect.

So it is essential that an oversight system be established and that it include all the government departments and agencies involved, meaning Transport Canada, the Canada Border Services Agency, the Canadian Transportation Agency, Immigration, Refugees and Citizenship Canada, and Employment and Social Development Canada.

St. Lawrence Shipoperators has always been opposed to any opening of the Coasting Trade Act that would allow foreign vessels to transport cargo between two Canadian ports. Unfortunately, we are witnessing a gradual erosion of the act.

This market is reserved for Canadian vessels that, pursuant to regulatory requirements and Canadian standards, are designed, built and refined to handle the numerous challenges of navigation in Canadian waters and waterways. With their adherence to those standards, some of the highest in the world, Canadian vessels are making navigation safe and protecting the environment. These national vessels are operated by crews that are solely and exclusively composed of Canadian mariners, who are among the best qualified and best trained in the world. They are knowledgeable of and experienced in navigation in Canadian waters and they are aware of the challenges inherent in sailing here. Reaching those high standards ensures greater safety and respect for the environment. But that comes with significant operating costs that Canadian shipowners must bear, unlike many other foreign owners.

The particular circumstances of the Great Lakes and the St. Lawrence Seaway, economically and in terms of both maritime and environmental safety, requires that the protection measures, of which the Coasting Trade Act is part, must be maintained.

So it is important to preserve maritime jobs and the expertise that has been built in Canada over centuries. Opening the Coasting Trade Act is risking the loss of priceless knowledge and economic wealth that is of direct benefit to companies and workers here.

For those reasons, St. Lawrence Shipoperators and its members oppose any opening of the Coasting Trade Act and any change to it. We are asking for a single body to control and oversee cabotage activities to be conducted in Canadian waters by foreign vessels.

Thank you.

[Sarah Clark, Chief Executive Officer, Fraser River Pile & Dredge (GP) Inc.]

Thank you.

Good afternoon. My name is Sarah Clark, and I serve as president and chief executive officer of Fraser River Pile & Dredge, located in Vancouver, British Columbia. Our company proudly conducts dredging operations in B.C. and across the country. I would like to thank the chair and the honourable members of the committee for hearing us today.

I'm actually here to speak to you on behalf of a coalition of dredging companies that operate from coast to coast. I'm going to share my time today with my friend and colleague Jean-Philippe Brunet, the executive vice-president of corporate and legal affairs for Ocean group of Quebec. We sincerely thank you for the opportunity to present our views on the consequences of amending the Coasting Trade Act as outlined in Bill C-49. For us, this is a fresh opportunity to be heard on the impacts of the amendments to the Coasting Trade Act, an opportunity we previously had in respect to amendments to the same act, under Bill C-30, the Canada-E.U. comprehensive economic trade agreement implementation act.

To be very clear from the onset, the Canadian dredgers are eager to compete in a marketplace fuelled by healthy trade relationships. We simply ask that we continue to compete on a level playing field, where risks and opportunities are equal for all. Unfortunately, CETA was a bad deal for Canadian dredgers. There's no reciprocity for us in the European market, but there's streamlined access for Europeans in the Canadian market. We therefore submit that Bill C-49 represents an ideal opportunity to address this inequity and provide workable policy solutions.

Let me say a few words about the dredging industry in Canada and the critical role it plays for Canada as a maritime and trading nation. Ours is a geographically expansive country that relies on a complex transportation network to move people and goods. As stated by Minister Garneau on May 16 of this year, Canadians rely on the economically viable modes of transportation to travel and move commodities within the country, across the border, and to our ports for overseas shipments. At his announcement regarding the trade and transportation corridors initiative on July 4, Minister Garneau highlighted the digging of deepwater ports as being critical to the development of Canada's north, underscoring the essential role dredging plays in the creation and maintenance of our transportation network and, as a result, our national and economic sovereignty.

Opening routes to Canadian and international shipping vessels brings consumer goods to Canadian markets and takes our export products around the world. Without dredging, ports in major cities across the country would be inaccessible to global trade and transportation. Industry operations, both coastal and inland, would not be able to function. The companies that comprise our coalition actively comply with rigorous government regulations concerning labour, environmental protection, safety, and operating standards while regularly submitting to routine major inspections that are amongst the most rigorous in the world. Canadian dredging companies also provide well-paid, middle-class salaries, which in turn fuel local economies across the country.

We are here with you today to do our part to ensure that the Canadian dredging industry is provided a level playing field on which to compete sustainably and responsibly, to create more jobs, and to continue to contribute practically to Canada's economic success. Unfortunately, these important goals have been put at some risk by the effect of the proposed amendments to the Coasting Trade Act contained in Bill C-49. Proposals in Bill C-49 are of course contingent upon the coming into force of elements of Bill C-30 on September 21, 2017. We understand that the spirit of CETA reflects the wishes of both governing bodies and peoples to create better economic ties and a more prosperous future. We support the government's effort to expand trade and to make our economy as vibrant as possible. At the same time, we wish again to express our concerns about the negative impact. We believe the amendments to the Coasting Trade Act contained in Bill C-30 unfairly advantage foreign dredging companies at the expense of Canadian firms, Canadian workers, and ultimately, Canada's transportation infrastructure. Bill C-49 builds on a foundation laid by Bill C-30 that is highly problematic for Canadian dredgers.

As I've said, we are fully prepared to compete. We do so every day in our industry, both in Canada and abroad. Under CETA, there was no negotiated reciprocity for our industry.

CETA opens up the Canadian market to European firms while keeping the European market closed to Canadian dredging firms. This would normally be considered an unpleasant by-product of doing business in the global market, but several factors intervene to create a situation where non-Canadian firms could gain a structural and market advantage over Canadian firms. If a level playing field is not created and maintained, Canadian dredging companies will face structural disadvantages when bidding on contracts, as we pay market rates and benefits that reflect the skills of our crew members in Canada.

For example, foreign crews are typically compensated at about a third or less of the rates we pay. In 2015, the average monthly salary for a chief engineer on a Canadian vessel was $15,000 U.S., while the same position on a Dutch crew was about $7,000 U.S. As salaries represent about one-third of our vessel's operating costs, non-Canadian companies will operate at a significant advantage over Canadian companies, leaving Canadian seafarers out of work. In this scenario, the playing field is inherently uneven, to the detriment of Canadian companies, and, ultimately, to our employees and their families.

Prior to Bill C-30, foreign-flagged vessels were required via the Coasting Trade Act to obtain a coasting trade licence. Jim outlined that process very well in his presentation, which would include paying duties, and following shipping conventions, worker visa requirements, and employment standards. However, even that structure faced monitoring and enforcement challenges. Under CETA, non-Canadian dredgers will have greater access to our waters, and therefore greater opportunity for non-compliance.

Before making our key recommendations, I will now ask my colleague, Jean-Philippe Brunet, to say a few words about Quebec in particular.

[James Given, President, Seafarers' International Union of Canada]

Thank you very much, Madam Chair. Thank you for having us here today, members of the committee.

My name is Jim Given. I am the president of Seafarers' International Union, and I'm also chair of the Cabotage Task Force worldwide for the International Transport Workers' Federation. .

The SIU is concerned about the proposed amendments to the Coasting Trade Act that build upon amendments to the act put forward through the CETA implementation bill, Bill C-30. They will allow, for the first time, foreign vessels to engage in maritime cabotage without first having to obtain a coasting trade waiver.

The Coasting Trade Act requires that no foreign ship or non-duty ship engage in cabotage without a licence. The broad definition of coasting trade under the act means that maritime activity of a commercial nature in Canadian waters is restricted to Canadian-flagged vessels, including the carriage of goods and passengers by ship from one place in Canada to another. Under the current system, a foreign ship may be imported into Canada to engage in coasting trade if the Canadian Transportation Agency, on application, determines that no available or suitable Canadian-flagged or Canadian-crewed vessel can be used for the required operation.

Changes to the Coasting Trade Act by Bill C-30 will now allow foreign ships owned by European Union citizens or flagged by a European Union member state to engage in the following cabotage activities without a coasting trade waiver: transporting empty containers between two Canadian ports, dredging activities, and the carriage of goods between the ports of Halifax and Montreal as one leg of the importation or exportation of goods to or from Canada.

In addition, subclause 70(1) of Bill C-49 would further amend the Coasting Trade Act to allow any foreign vessel, regardless of flag, to perform the repositioning of empty containers between Canadian ports without obtaining a coasting trade licence.

As a labour union that represents Canadian seafarers working in the Canadian seafaring industry, the SIU cannot support these amendments, because they actively undermine legislation in place to support the domestic Canadian maritime industry and Canadian shipowners.

We strongly support maintaining the current coasting trade waiver system, which already includes a waiver system for foreign vessels. This method ensures the fair practice of giving Canadian shipowners who employ Canadian seafarers the first right of refusal for any available work.

The SIU has previously stated that giving away cabotage rights to the European Union through CETA was an unnecessary concession that has the potential to cause harm to the Canadian seafaring industry.

Canada already has a liberalized version of maritime cabotage, and further relaxation of these restrictions, specifically those involving dredging and feeder services between Canadian ports, does not benefit Canadian shipowners or Canadian seafarers who depend on competitive Canadian labour and domestic market trade for their livelihoods.

Further to these issues are the specific concessions allowing both first and second registry vessels to gain access to the Canadian market. As announced by Minister Garneau, the proposed amendment to allow the movement of empty containers by any vessel, regardless of flag, was done at the request of one shipping federation in Canada, which represents very few or no Canadian-flagged shipping operators. While the SIU does not speak on behalf of Canadian shipowners, it is troublesome to us and our membership that the majority of proposals and concerns from Canadian shipowners and Canadian seafarers appear to have been ignored in favour of one organization representing global shipping agents in Canada.

The domestic maritime industry is a source of direct and indirect employment for over 100,000 Canadians. When discussing global shipping, it is important to distinguish that the Canadian vessel registry, or Canadian first registry, is much more advanced in terms of working conditions and requirements than the majority of global maritime flag states. Global shipping is a highly unregulated industry and one that has seen deteriorating labour and wage conditions define it increasingly over the years. For example, some first registries, and many second registries, are qualified by the ITF, the International Transport Workers' Federation, as being flag of convenience vessels. What this translates to is an underpaid and under-represented work force of mostly third world seafarers who work in an unsafe and unregulated industry with few to no working regulations in place.

In Canada, a maritime accident involving an FOC vessel could lead to months or even years of trying to track down the true owner just to begin the process of seeking compensation, which we know, through experience, is never actually achieved.

Second vessel registries are so under-regulated that a vessel registered in a second registry of an EU country is not even permitted to operate cabotage inside its own flag state. Allowing second registered vessels to operate cabotage inside another country's domestic market is not a common practice and not one Canada should be responsible for initiating.

This is a major global issue that has yet to be dealt with in a sufficient and acceptable way to secure the safety and well-being of all seafarers. To allow this sort of shipping to take place, unrestricted, inside Canada’s domestic maritime industry would be unprecedented. The SIU of Canada is actively involved in securing the rights of all seafarers working in Canada. We will work diligently to ensure that any foreign vessel brought into Canada to operate in Canadian cabotage is in compliance with federal standards of labour, and ensure that foreign crews are being paid the prevailing industry wage and being protected as stipulated by the temporary foreign worker program.

We remain concerned about oversight when it comes to foreign vessels operating in Canada. Establishing an effective monitoring and enforcement regime will be essential to ensure full compliance with the conditions and requirements of the new market access provisions of the Coasting Trade Act. In order for Canadian domestic stakeholders to remain competitive, there must be a system to ensure that foreign operators are strictly adhering to Canadian rules and standards, including labour standards and prevailing wage conditions for the crew, and not flag state law.

Again, the SIU's priority is to ensure that Canadian workers have opportunities for employment in the Canadian maritime industy. We believe the proposed amendments to the Coasting Trade Act contained in Bill C-49 undermine the importance of maintaining cabotage restrictions in place to protect Canadian maritime transportation, strengthen commercial trade, and maintain a qualified pool of domestic maritime workers. While securing employment opportunities for Canadian seafarers remains the primary mandate for the SIU, we also have a responsibility to ensure that all seafarers, both domestic and foreign, are properly treated. Canadian seafarers have an international reputation for being the most well-trained and highly qualified maritime workers in the world. As such, Canadian seafarers and Canadian vessel operators should reserve the right to retain the first opportunity to engage in any domestic maritime operations prior to permitting access to foreign operators.

We remain committed to working with our partners in government in order to establish a workable and acceptable solution to the growing amount of trade in Canadian ports. We believe Canada’s international trade ambitions can be achieved while supporting a strong domestic shipping policy that does not facilitate unrestricted market access to foreign vessel operators. Without a strong Canadian domestic fleet crewed and operated by Canadians, our country would be dependent on foreign shipping companies to move goods to, from, and within Canada, with no commitment to uninterrupted service.

On behalf of the Seafarers’ International Union, we once again thank the committee for having us here. I will close by saying that this is a very welcome change to be sitting at this table in front of the committee. We thank you for that.

[The Chair, Liberal, Judy Sgro]

Could all the members please take their seats? Thank you very much.

Welcome to our next witnesses. We will very much appreciate listening to you and having your very helpful comments, I hope, on Bill C-49.

We will open the floor with the Seafarers' International Union of Canada. Mr. Given, would you like to start off?

[Robert Aubin, NDP, Trois-Rivières, QC]

Thank you, Madam Chair.

I would like to continue the conversation with Mr. Tougas.

It seems to me that you quietly debunked a myth, in your opening remarks, and I want to make sure that I have understood correctly.

You say that we are not in a process of harmonizing the U.S. system and the Canadian system. At most, Bill C-49 helps us compare ourselves to what is being done in the United States, and my understanding is that this is not really beneficial.

Is that the idea behind what you said?

[Robert Aubin, NDP, Trois-Rivières, QC]

Yes, it does. Thank you.

On a different note, you would really have to be psychic to know what recommendations will be unanimously supported in this committee over the next few weeks. There are many proposals on the table. Nearly everyone agrees that the legislation should be reviewed on a regular basis. Some have suggested that this be done every two years, and others, every four years.

I would like to rephrase the question. Once Bill C-49 has been passed, regardless of the amendments made to it, how much time do you think will be needed to measure its effectiveness? In other words, should the first review of the legislation be done after a year, two years, three years or four years? Then, we could establish the cycle.

[Robert Aubin, NDP, Trois-Rivières, QC]

Thank you, Madam Chair.

I thank the witnesses for joining us.

I would like to begin the conversation with Mr. Harrison.

In your opening remarks, you provided us with a new perspective. For a few days, we have been hearing many producers of grain and ore complain about railway companies. People are saying that those types of productions are growing, that they are trying to export more to international markets and grow the economy. This afternoon, you are bringing us the notion of just-in-time production, the concept involving smaller productions. You are saying that most mills are not equipped to receive many cars.

Does Bill C-49 provide any benefits for you? I will let you tell me, but I am under the impression that railway companies would perhaps have to offer you different treatment than the one large productions get. Am I mistaken?

[François Tougas, Lawyer, McMillan LLP, As an Individual]

Thank you for the invitation to appear before the committee today.

I should start by commending the members for their non-partisan approach to this bill, as well as for their fortitude, doing this all week long, and the hours that you're maintaining.

I'm here in my capacity as counsel to shippers, railways, governments, intermediaries, and investors in the areas of rail law and policy. My credentials are attached to my formal submissions.

I should say also that my comments today are informed by more than 60 negotiations and processes with the Canadian National Railway Company and Canadian Pacific. I'm speaking from the position of having seen these negotiations and processes among different categories of commodities as well as railways. Transport Canada consulted with me extensively in the run-up to Bill C-49. Unfortunately, Bill C-49 leaves many shippers without access to a viable remedy. While I have many things to say about the act and the bill, I'm going to confine my remarks today to two areas in particular on data disclosure and rail service, and I'm also going to try to address some points that have arisen since the beginning of the week.

My first point is on costing data. Bill C-49 looks to gather some data similar to that available in the United States. However, the bill will not change the fact that data about CN and CP is much more readily available to shippers in the States than to shippers in Canada. Shippers in the States have access to detailed rail costing data to calculate a carrier's costs of transporting goods, without invoking a proceeding before the U.S. Surface Transportation Board.

Rail carriers in the States are required to report detailed financial and statistical data, which is available publicly on the STB website. CN and CP must provide these reports to the STB too, but Canada does not require it, so shippers in Canada are at a considerable disadvantage in relation to their U.S. counterparts. The STB established the uniform rail costing system, URCS, to “provide the railroad industry and shipper community with a standardized costing model [that can be] used by parties to submit cost evidence before the Board.” Shippers can, by this and yet other means, assess the freight rate competitiveness of CP's and CN's American operations, but not their Canadian operations.

In Canada, the only situation in which a shipper can get rail cost data is in the confidential final offer arbitration, FOA, process. FOA has become increasingly difficult to use for a number of reasons. As you've heard already from other witnesses, an FOA arbitrator has the right, under the act as it presently stands, to get information from the agency but generally will not do so without first getting that class I rail carrier's consent. That's the problem that I think you have an opportunity to fix. CN and CP can merely refuse to consent, leaving the arbitrator in such cases without a critical piece of evidence to make a final offer selection between the shipper's offer and a carrier's offer. In this manner, CN and CP can neuter the FOA process, making it less available and less viable.

While shippers in Canada should have access to the same quantity and quality of information available to the shippers using CN and CP services in the States, for now, I'm advocating something simpler; just require CN and CP to co-operate with the agency in providing the cost of shipments that are submitted to final offer arbitration. I have some recommended language there before you. This committee is already amending subsection 161(2), so this would be the addition of a paragraph (f). It would just add one more item to the list of items that a shipper has to submit to start a final offer arbitration. With this amendment to the act, the FOA process has a better chance of avoiding disputes, reaching good conclusions, and satisfying the parties.

I'll move on to performance data. Railway performance data is also not available in Canada. Bill C-49 proposes to compel the disclosure of a subset of certain U.S. information. As a result, U.S. shippers will end up with more data about CN's and CP's operations than shippers in Canada. Ideally, each class I rail carrier would submit all data from every waybill, including the information required by proposed subsection 76(2), which is dedicated right now just to the LHI remedy.

This information is readily accessible to the rail carriers in real time and is easily transferable. That would allow any so-inclined shipper in Canada to assess the extent to which a rail carrier is providing adequate and suitable accommodation for its traffic without having to resort to a legal process, which is what is required right now.

Currently the agency and arbitrators must determine service cases in the absence of performance data. The creation of a database and publication of all waybill and clause 76 information would settle or eliminate many disputes. However, I propose something more modest. I propose three things. First, give the agency the authority and the obligation, as it has for other parts of the act, to make regulations in this area, given its wide-ranging expertise. Second, require service performance information for publication for each rail line or subdivision. System-wide data as presently contemplated by Bill C-49 will do nothing to identify service failures in any region or corridor, much less those faced by any shipper. Third, Bill C-49 seeks to limit commodity information. I've added paragraph (11) to current subclause 77(2)—you can see the language before you—to require each class I rail carrier to report their service performance in respect of 23 commodity groups, just as is required by the STB of CN and CP in the United States—no difference.

Moving on to service levels, both the level of service complaint remedy and the SLA process were designed, along with the statutory service obligations, to compel railways to do things they would not otherwise do. The agency has done an admirable job of determining the circumstances in which it will determine whether a rail carrier has fulfilled its statutory service obligations. This is not a system that needs any further inclination toward rail carriers, which have been performing very, very well financially. Only the most egregious rail carrier conduct gets attention from shippers, which are otherwise prone to sole-service providers and very reluctant to bring proceedings.

Personally, I would not have amended the LOS provisions, but if it must be done, I'd make a few changes—three of them, in fact.

First, I'd change the opening words of proposed subsection 116(1.2), as presently contemplated in Bill C-49, to reverse the logic. Right now, it doesn't say what happens if a rail carrier doesn't provide the highest level of service they can provide. I would reverse the finding requirement so that the level of service is no less than the highest that can be reasonably provided in the circumstances.

Second, Bill C-49 would require the agency, in both the LOS and the SLA process, to consider the rail carrier's requirements and restrictions, which are all outside the control of the shipper and well within the control of the rail carrier. For example, a rail carrier decides how many locomotives to acquire, whether to terminate thousands of employees, eliminate or reduce service, limit infrastructure, or invest in technologies. It is entirely inappropriate for the agency to have to determine whether a shipper should receive a portion of the capacity that has been restricted by decisions of a rail carrier. I would strike the offending provisions entirely, just as you have it before you there.

Third, Bill C-49 imposes an obligation on an arbitrator to render decisions in a balanced way. Now, I would have thought they were already doing that. They enjoy a reputation for fairness and impartiality, and they have enjoyed deference from the appellate courts. Arbitrators are rarely appealed. There's no need for such a provision. The SLA process exists precisely because a rail carrier will not provide what the shipper requires. If it turns out, upon examination, that a shipper doesn't require the service it seeks, the shipper won't get it. That's what the agency will decide. I would strike that proposal altogether.

I've been asked a few times, and contemplated that this would arise, which one of these I would take if I could only take one. Well, it may be that the LHI provisions, if they're amended in accordance with the requests of various parties who've appeared before you, will be helpful to some people. But for sure I would make sure that my priority one amendment is made—that is, demand and require of a railway that it provide its consent to a rail carrier costing demand by the shipper in the FOA process.

Finally, we should return to a periodic review of the act. I would recommend at least every four years. I heard Mr. Emerson say two, and I'd be content with that too.

Thank you very much.

[Steve Pratte, Policy Manager, Canadian Canola Growers Association]

Thank you.

Just very briefly, Bill C-49 attempts to address several long-standing issues in the rail transportation marketplace. You've heard from grain sector representatives, including grain shippers and farm groups, yesterday and this morning, regarding their perspectives on various commercial and legal aspects of the bill, including around reciprocal penalties, long-haul interswitching, and other elements. You've clearly heard from witnesses in other sectors that Canadian class I railways are in monopoly positions. Most grain shippers are served by only one carrier and are subject to monopolistic pricing and service strategies.

The grain sector, from farm groups through the value chain to exporters, has been consistent in its discussions with government since the 2013-14 transportation crisis, and there's been a consistent message. Canada must address the fundamental problem of railway market power and the resulting lack of competitive forces in the rail marketplace. In our view, the government has a clear role to establish a regulatory structure that strikes a measured and appropriate balance and, to the greatest extent possible, creates the market-like forces that do not exist, which in theory should create more market-responsive behaviours of all participants.

This is the reality, a long-standing fact that has led to over a century of government intervention to varying degrees in this sector. Bill C-49 is the current approach before us to bring a more commercially oriented accountability into this historically imbalanced relationship. Bill C-49 appears to make progress in several areas towards this goal, and does reflect a consideration of what Canadian rail shippers and the grain industry have been telling successive governments for years about the core imbalanced relationship between shipper and railway. For that, we thank you.

In our view, the true impact and success of this bill and the measure of its intended public policy outcomes will only really become apparent and known once the shipping community attempts to access and use the remedies and processes this bill will initiate. As Bill C-49 was designed to balance two competing interests—that of the shipper and that of the rail service provider—a true measure of success will likely take several years to fully gauge and appreciate.

In closing, two areas that CCGA would like to briefly highlight, from a farmer's perspective, are the themes of transparency and long-term investment, specifically as they relate to data disclosure and the economic regulatory environment of grain transport in Canada.

One element of Bill C-49 that is of particular importance to farmers is the issue of transparency.

The publication of new railway service data, received by the minister of transport or the Canadian Transportation Agency, is important not only for stakeholders and analysts monitoring the functioning of the grain handling and transportation system but also for government itself—for the twin functions of on-going monitoring and assessment of the system, and when required, the ability to develop prudent public policy and advice to the minister in times of need.

This new information, in conjunction with the comprehensive reporting of the existing grain monitor program, will provide farmers with valuable insights into the performance of the system. As the bill currently reads, clauses 51.1, 77(5), and 98(7) specify timelines associated with this reporting. CCGA would respectfully submit that these timelines are too lengthy and that consideration should be given to shortening them.

In addition, the new proposed annual railway reports to the minister at the beginning of each crop year, contained in clause 151.01, are very positive. CCGA would respectfully submit that the minister of transport consult with the minister of agriculture as to what those reports could specifically contain to be of greatest utility to both government and grain stakeholders.

Lastly, modernizing the economic regulatory environment to stimulate investment, such as the suite of actions aimed at the maximum revenue entitlement, is well intentioned.

One of these policy objectives is to spur investment in grain hopper car replacement by the railways through the calculation of the annual volume related composite price index, as effected by clause 151(4).

CCGA would submit that consideration should be given to having the Canadian Transportation Agency closely monitor these actions and, during its annual administration of the MRE, include a summary comment within its determination.

We appreciate being here to address the committee this afternoon, and we do look forward to the question period.

[Jack Froese, President, Canadian Canola Growers Association]

Good afternoon, Madam Chair and members of this committee.

I am Jack Froese, the president of the Canadian Canola Growers Association. I farm at Winkler, Manitoba. Thank you for inviting me here today to speak with you about Bill C-49, the transportation modernization act.

CCGA is a national association governed by a board of farmer directors who represent the voice of Canada's 43,000 canola farmers from Ontario west to British Columbia. In any given year, over 90% of Canadian canola, in the form of raw seed or the processed products of canola oil or canola meal, is ultimately destined for export markets in more than 50 countries. We are the world's largest exporter of this highly valued oilseed.

Canola farmers critically rely on rail transportation to move our products to customers and keep those products price-competitive within the global oilseed market. Farmers occupy a unique position in this grain supply chain, and that is what fundamentally differentiates this supply chain from other commodities. Farmers are not the legal shippers, but we bear the cost of transport as it is reflected in the price we are offered for our products from the buyers of our grains and oilseeds, who are the shippers.

Simply put, farmers do not book the train or the boat, but they pay for it. Transportation and logistics costs, whatever they might be at a point in time, are passed back and paid for by the farmer.

Farmers independently strive to maximize both the quantity and quality of their production each year. Once harvested, they sell their grain into the system, based on their particular marketing plan, with the overall goal of capturing the highest possible prices at a given time in a dynamic and ever-fluctuating global commodity market.

Transportation of grain is one of several commercial elements that directly affect the price offered to farmers in the country. When issues arise in the supply chain, the price that farmers receive for their grain can drop even at times when commodity prices might be high in the global marketplace.

In periods of prolonged disruptions, space in grain elevators becomes full and grain companies stop buying grain and accepting deliveries. This can occur even when the farmer has an existing contract for delivery, seriously affecting farmers' ability to cash flow their operations. This is a major reason that western Canadian farmers have such an interest in transportation. It directly affects personal farmer income, and beyond that, they critically rely on the service of Canada's railways to move grain to export position. We have no alternative.

It is a complex system, transporting western Canadian grains an average distance of 1,520 kilometres from the Prairies to tidewater, but we need to make it work to the benefit of all parties and the broader national economy as a whole.

The competitiveness and reliability of the canola industry, which currently contributes over $26 billion annually to the Canadian economy, is highly dependent on this supply chain providing timely, efficient, and reliable service. In terms of direct impact on Canadian farmers, canola has been the number one source of farm revenue from crops every year for over a decade. It is a major contributor to grain farmers' profitability.

The 2016-17 crop year that just passed at the end of July set new record levels of canola exports and domestic value-added processing. Strong performance by the railways absolutely supported this achievement. Overall, it was a banner year for railway movement of grain and its products.

That stated, we need to remain future-oriented when we consider public policy changes. The last several years of reasonably good overall total movement and relative fluidity of the supply chain should not lessen our focus on seeking to improve, as fundamental issues still exist beneath the short-term positive headlines.

Spring 2017 saw a record level of canola planted in Canada, the largest single field crop in the country, for the first time surpassing wheat. The most recent, late August, government estimates of production for this fall is 18.2 million tonnes, down slightly from last year due to challenging weather, but still surpassing the five-year average by over one million tonnes.

We are an optimistic and goal-oriented industry with a record of achieving success. When we look forward to 2025, we see demand for our products rising further, both domestically and internationally. In this future, rail transportation will be even more important as our industry strives to reach our strategic goal of Canadian farmers sustainably producing 26 million tonnes of canola every year.

To support this, Canadian farmers and the industry will need an effective and responsive rail transportation system, not just for transportation of the current crop sizes but for those of the future. Moreover, farmers will not be able to capitalize on the opportunities from Canada's existing and future trade agreements without a reliable and efficient rail system that grain shippers and our global customers have confidence in. That is a key point: with such a strong reliance on exports, we do need to remain cognizant of the customer service aspect of our export orientation in the agricultural sector.

Canadian canola and other grains are well known for their quality characteristics and sustainable supply, which are market differentiators. But at the end of the day, they remain fungible commodities, and alternatives exist. The reliability of our transportation system affects buyers' confidence in the global Canadian brand. We know, because we hear directly about it.

For the remaining comments, I'll defer to Steve Pratte.