International Trade Committee on Oct. 7th, 2022

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you, Madam Chair.

Thank you to the witnesses, and good afternoon to my fellow members.

I'm not sure who should answer this question, so I urge anyone who wants to answer to go ahead and do so.

As a member for Quebec, I obviously want to focus on the consequences for Quebec, specifically the port of Montreal, the second-largest in Canada.

It's a fact that port congestion and import container dwell times in the Vancouver and Prince Rupert ports forced CN to establish relief container yards in Toronto and Montreal.

I'd like someone to speak to that in more detail, especially the potential repercussions.

[Mark Hemmes]

I have to answer in English. My apologies.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Don't worry. We have interpretation services.

[Mark Hemmes]

It's interesting. I can only speak from the grain industry perspective for Montreal, but whereas we saw these huge decreases in the amount of export traffic through Vancouver and Prince Rupert, we stayed pretty much even through the Port of Montreal. That effect of having to rush empties out through the west coast wasn't nearly as severe in the Port of Montreal.

That said, as Masoud pointed out earlier, a lot of the traffic that's going into eastern Canada, especially from Asia-Pacific nations, does flow through the west coast. From that perspective, I know that a lot of warehouse space in Montreal and Toronto has now been taken up with goods, as people are now buying product far, far further into the future to satisfy future demand than they would have previously. That has caused increases in costs related to transportation and inventory.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Great. Thank you.

Do you feel comfortable commenting on the relief container yards in Toronto and Montreal?

[Mark Hemmes]

I think just about every city in Canada as well as the United States has had to make room for empty containers, because there isn't the capacity to move them in or, for that matter, bring in product that's loaded. They're just trying to get the cycle back into a synchronous move.

I think part of the biggest problem in the supply chain today was the pandemic and then what happened after that. The entire supply chain lost the balanced cycle of equipment between origin and destination. That's what we're suffering through right now. I think it's going to take another couple of years to bring it back into balance. Those emergency storage areas will probably have to continue to be in place for at least another year and a half, or maybe two years. That's my understanding from the people I talk to in the business.

[Murad Al-Katib]

I would add that in our case, if we hadn't had the Port of Montreal, we would have been in big trouble. We took containers that were destined to go back west, reversed course and took them east. On the export side, we serviced Europe, North Africa and the Middle East from Montreal. We saw a dramatic shift in our volume from, let's say, 60% west coast export to probably 60% Montreal export.

Again, part of the strategy that we need to employ as a country is to use all of our ports. Vancouver, Prince Rupert, Montreal and Halifax are going to be very important on the container side.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you for that information.

To deal with these issues, CN implemented shuttle fees and reduced the number of rail storage free days. For example, for CN Valleyfield, the fee is $500. The shuttle fees vary.

Does that impact your sectors?

[Murad Al-Katib]

Ancillary charges are massive parts of our cost base. With the disruption in the supply chain and pricing variability, all of those ancillary charges also went up dramatically. The ancillary charges are now at a point where sometimes they're as much as what we used to pay for containers. It's quite an alarming additional cost.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll move on to Mr. Masse, please.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Madam Chair.

Thank you to the witnesses for presenting here today, and thank you to the committee for looking into this.

I did a short inventory of some of the challenges. The first time I ran into this was when I first toured the Port of Vancouver because of the removal of detector dogs. They would bring out a CBSA officer with a dog and clear a ship in three hours. They were getting rid of that, and it would sometimes take three days to get a ship done by hand without a dog.

We've heard testimony that there are issues with shipping containers. There are issues for the rail system itself. We also have a lack of infrastructure. We have a lack of competition, it appears, or at least a competitive spirit. We have a shortage of labour. I mean, it feels like we're trying to straighten out a plate of spaghetti. There are so many things that are taking place. How do we find a vehicle to get this taken more seriously?

We had in the past a white paper on rail. It actually led to a lot of condemnation of CP and CN, because they were described by some as having a culture of fear and intimidation in the workforce. That led to some changes. However, I'm wondering whether or not we need some other type of route to combine some of these things, especially given the testimony we've had about international behaviour and the data that's missing.

I'd like to ask all the witnesses for their input on this. Do you have any practical solutions for this committee going forward? We want to make some recommendations, as Mr. Sheehan has identified, and I'm looking to see if we can scope that down.

Maybe I'll start with Mr. Negad, my friend from Windsor. I'll give preference to the local.

[Masoud Negad]

I agree that when we look at the supply chain, as was already pointed out, it's never one component. It's not just the port or significant impact by rail. Whether it's their equipment or it's labour—and those things have already been pointed out as well—everything that's happening, as in our case in Brampton, is multiplied by challenges with labour. Drayage companies have to wait for a container for over 10 hours to pick up a can, and that's just too extended a time. A lot of people are even getting out of the drayage business because it just doesn't pay.

As was suggested, it makes sense to perhaps start with a whiteboard, look at all of these challenges and then ask what is practical. Take each one of them, look at the root cause and get to the base of it. Is labour the biggest issue? Are the physical cans the bigger issue? Is the space the bigger issue? Is the port the biggest issue? Is it all of the above? Perhaps that's the long-term strategy for Canada: What's most important, where do we start and how do we take this in pieces and deal with it?

[Brian Masse, NDP, Windsor West, ON]

Thank you.

Go ahead, Mr. Al-Katib.

[Murad Al-Katib]

Mr. Masse, I would say that very key, in my mind, is an analysis of the infrastructure gap we have. Again, land and apron space at the ports are at a great premium. We need to ensure that we have infrastructure inland to handle containers and intermodal.

As Mr. Hemmes mentioned, the percentage of containerization in the grains sector has risen from 4% to 10%. We expect that this will go to millions of additional tonnes. We need the infrastructure plan to be, as I say, a long-term solution. We need to better plan our port infrastructure and our railway connectivity to inland locations. Railways today are still going through the middle of our cities. These are all inefficient. Long-term solutions need to be implemented to ensure that we have a modern trade infrastructure.

As we look at inland ports, we need to have apron space available. We need them to be efficient in and out so we can minimize waiting times for pickups, drop-offs and refills, and then can get those containers back on. If we don't do that, at some point we won't be efficient and the steamship lines will never stop here.

[Brian Masse, NDP, Windsor West, ON]

Before I go to you, Mr. Hemmes, I'll quickly give credit to Allan Rock, the industry minister back in 2002-03. We did the same with the auto sector. We created a red light for the worst things, a caution light for things that were up in the air and then a green light for good stuff. It was almost like an entire inventory of the problems across the board, from building a car to selling a car. Perhaps that might be a way to go. That was Mr. Rock's initiative, for which he deserves credit.

Go ahead, Mr. Hemmes, and I know I'm out of time.

[Mark Hemmes]

Very quickly, I agree with what Murad had to say.

I would also point to the fact that in just the last couple of days, the supply chain task force released their report. If you haven't read it, I would encourage you to read it, because they were pretty broad in what they looked at, and I think a lot of the ideas they put forward in there would address a lot of the process-type issues.

The infrastructure side of it is absolutely a part of it, and I don't think we've looked at things closely enough to point to where we should start, as right now we're still almost in a panic mode and we're trying to fix everything at the same time. I think you have to go back to this point of where you start with something like this, and if you fix one thing, it's going to be a case of whack-a-mole, to be quite frank.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Masse.

Mr. Lewis, you have five minutes.

[Chris Lewis, Conservative, Essex, ON]

Thank you, Madam Chair, and thank you to all the witnesses.

Unfortunately, this is kind of a gloomy Friday, so to speak, with regard to some of the testimony. Although it's fantastic, true testimony, it's gloomy, quite frankly.

We heard that just a few years ago a container used to cost $3,000 to ship, and that at the peak it was $23,000 to ship a container. There is one taxpayer and one final end-user, and it is each and every Canadian. I don't know if it's price gouging. I don't know what it is, but it seems pretty wild. It's no wonder that Canadians can't make ends meet.

The discussion is not about just building more containers. That's not going to solve the problem. This is very much a shipping issue, and I understand it from that aspect.

I'm fortunate to have visited ADM, a shipping company specifically for grain, right in the Windsor-Essex area. The majority of their shipments of grain go to the United States, which is, of course, our greatest trading partner. I've met with them. They sit right next to the Windsor Port Authority, and I've visited them as well. I understand the whole rail side of things. Ironically, as I've said a million times, if you can find it in Canada, you'll find it in Essex.

I want to speak very quickly to Mr. Sheehan.

I really appreciate you bringing up the labour aspect of this, sir. As the shadow minister for labour, I have been in direct contact with a lot of the unions on both the east and west coasts. I do realize that hours differ from coast to coast with regard to how many hours they can work compared to how many hours they can have off.

Mr. Hemmes, you mentioned that the third-worst port in the world is Vancouver. I'm going to say that's the bad news. Actually, no, I would have to say that's the good news, because we also have the Toronto airport, which was deemed the worst airport in the world. I think it's now number two. Perhaps the Vancouver port isn't as bad as we think it is.

Mr. Negad, could you tell me what we can do going forward? If we had a magic wand today, what would be the answer? What's the immediate answer to relieve some of this pain?

[Masoud Negad]

I think we have sort of answered that. I think the suggestion of looking at the infrastructure is definitely a good one. There is also the whole supply chain system, which has been suggested as a way to look at what's happening with the rails and what opportunities, if any, we have with labour at this point.

I think getting more involved as a government is the best thing we can do, not just sitting back and letting the private sector drive this wherever it may go. Canada needs help. The supply chain systems need a lot of help and support. Getting involved, doing the proper studies and addressing key opportunities would be the way to start.

[Chris Lewis, Conservative, Essex, ON]

Thank you, Mr. Negad.

Mr. Hemmes, let's think a bit outside the box. What can Canada do with other countries so that we are the leader and not the follower? I'm trying to think big and global. Is there a way that we can be the shipping corridor so that we're not relying on the United States or Asia? We can be the destination. Do you have any thoughts on that, sir?

[Mark Hemmes]

I would hearken back to the comment about the Port of Vancouver being the third-worst port. I don't think we have that bad a system right now, especially on the port side. It was a victim—I hate to use that word—of the circumstances of the time. It was probably, in fact, a very efficient port, but because of the backlog, the pandemic and all the things that happened, the whole west coast of North America was inundated with containers in a fashion that we've never seen or experienced before.

I would also point to Murad's suggestion that we have to become more reliant on moving the containers out of the ports faster than we do today. That's an effort of coordination with the railways. I think that could be a point of focus. Get those containers away from the port as soon as you possibly can.

Some of the success seen at the Port of Los Angeles, for example, is from doing that. Burlington Northern recently announced that they're going to build a huge facility in Barstow, California, that does exactly that. They're going to take the containers directly off the ships and run them out to Barstow. That's where they're going to make up their trains, rather than doing it like we do in Canada, which is essentially making up the trains right on the container terminal stock. That is probably one of the biggest drawbacks that we have right now.

If you could start taking those containers away—

[The Chair, Liberal, Judy Sgro]

I'm sorry, Mr. Lewis. Your time is up.

[Chris Lewis, Conservative, Essex, ON]

Thank you, Chair.

[The Chair, Liberal, Judy Sgro]

We'll move on to Mr. Virani, please, for five minutes.

[Arif Virani, Liberal, Parkdale—High Park, ON]

Thank you very much, Madam Chair.

I'm curious to hear the end of that answer, Mr. Hemmes. I'll say to you that I was quite taken by some of the earlier testimony. I think it was Mr. Al-Katib who said something to the effect that it was so congested on the west coast that they were diverting more of their exports east, toward Halifax and Montreal.

Mr. Hemmes, can you finish your point about the change in the location where you're loading up the train and how that change is working in and around the Los Angeles area? How might that apply on Canada's west coast?

It's over to you, Mr. Hemmes.