Thank you.
My name is Rick White.
The imbalance in the commercial relationship between the railways and the other stakeholders in the grain supply chain has been fully exposed this crop year negatively affecting producers and to the ultimate detriment of our national economy and our reputation as a reliable supplier of food products.
We agree that the focus on market-driven solutions and longer term statutory frameworks are the preferred solution over temporary market intervention by government. Simply stated, a framework of balanced accountability to drive commercial behaviour in the supply chain will come from two primary sources. The first one is service obligations and the second is contractual relationships.
On the first point, a proper definition of adequate and suitable service in the common carrier obligations contained in the Canada Transportation Act is required. Railway service obligations must meet the transportation needs of the shipper.
Section 113 currently states that the railway will furnish “adequate and suitable accommodation for the receiving and loading of all traffic offered for carriage...”.
Defining adequate and suitable service as that which meets the shipper's needs inherently addresses the capacity issue in a way that is not specified by government edict, and would clarify that the rail service provider is statutorily compelled to do what they need to do in order to carry the traffic presented to them.
This needs to be added to Bill C-30. The current definition is too vague and it requires tightening to leave little room for misinterpretation or legal wrangling.
Now with the current proposed amendments to the Canada Transportation Act, the increased forecasting, supply chain coordination, and reporting are all very positive elements. Capacity planning needs to begin now for the 2014-15 crop year. Input from commodity groups is critical to receive predictive information regarding both near term and longer term production levels in marketing. If required, future shipping requirements made of the railways need to be corridor specific to ensure that product is moving to where it needs to go, as opposed to what is the most expedient to fulfill statutory or regulatory volume obligations.
The proposed extended interswitching limit is a positive action that has the potential to inject increased commercial competition across the west for both grain and other shippers. Expanding system capacity is critical. We need to assure capacity is expanded if we are to, first, meet the needs of all supply chain participants across all commodities, and second, to meet future obligations and capture Canada's export growth market opportunities.
On our second point, there must be explicit provision for the element of reciprocal penalties in service level agreements. CCGA and other shippers have been stating this since the rail freight service review process in 2009. The current contractual framework is extremely weak and practically ineffective. Service level agreements that include the mandatory element of reciprocal penalties for non-performance when service obligations are breached will increase the accountability between parties in the supply chain and hold them financially responsible to each other. Ideally, this will also allow for penalties to flow through to producers, who currently contract their grain with grain companies and receive no consideration when there is a service failure between the grain companies and railways.
The shipping community continues to support that the six amendments presented to government in 2010 by the Coalition of Rail Shippers remain central to effecting meaningful change in the service level agreement mechanism. Those amendments need to be incorporated in this act. The experience this year has clearly demonstrated that the railways operate in a privileged position where statutory common carrier obligations can be skirted as they please, punishing the Canadian agricultural producers, shippers, and ultimately the national economy.
Several implications of this for the grain and oilseed sector are going to be: unprecedented carry-out stocks that will impact the markets for several years to come; a sustained wide basis as grain companies signal producers to hold product; and our greatest fear, a shrinking or loss of international markets and relationships due to the perceived vulnerability and ineffectiveness of the Canadian supply chain.
It is time to re-balance the commercial relationships within the supply chain and increase accountability through meaningful and effective contracts on service and performance. Bill C-30 presents us an opportunity to do just that.
We are committed to working with the government to make sure we capture this opportunity for the benefit of our growers and supply chain participants in all commodities.
We appreciate being here to address the committee this evening and look forward to taking your questions. Thank you.