Thank you very much, Mr. Chairman.
Before I begin my formal remarks, I would like to say that of course I'm happy to be here early in this new session, and I want to congratulate you, as well as the two vice-chairs of the committee, for your election. And to the new members and the veterans, I look forward to working with you all.
I'm pleased to appear before the SCOTIC committee today to discuss Bill C-8, which improves the shipper protection provisions of the Canada Transportation Act. These are the provisions that deal with the potential abuse of market power by the railways.
I have with me today Helena Borges, director general of surface transportation policy, and Alain Langlois,
our legal counsel.
Bill C-8 is the reinstated version of the former Bill C-58, which had been referred to this committee before the previous session of Parliament was dissolved. It is the third and final bill amending the Canada Transportation Act. These bills have all been based on extensive consultations dating back to the statutory review of the CTA that took place in 2000 and 2001.
Bill C-3, the International Bridges and Tunnels Act, received royal assent in February of 2007. As well, Bill C-11, which amended provisions related to the Canadian Transportation Agency, air travel, mergers and acquisitions, rail passenger services, railway noise and the grain revenue cap, received royal assent in June of this year.
Bill C-8, by far, is the shortest of the three bills. However, it is extremely important to rail shippers, the hundreds of companies that use railways to ship their goods. This bill is also important for the growth of international trade and the competitiveness of our economy as we experience unprecedented levels of trade with the Asia Pacific region. The bill will provide the regulatory stability that the railways have been seeking, which will, in turn, ensure that much-needed capacity investments are made on the key trade corridors. Improved capacity will help our railway industry and shippers to remain competitive with their counterparts in the United States.
I am sure that most of you have heard many complaints from shippers about railway service and rates. Shippers are looking for stronger statutory remedies to improve their leverage in negotiations with railways. I had very positive feedback from shippers on the former BillC-58. Shippers expressed strong support for it to be reinstated and passed as quickly as possible.
The railways feel that Bill C-8 reintroduces too much unnecessary regulation. I believe that it establishes a better balance between shippers and railways. Passage of the bill will put an end to the extensive debates that have taken place and will provide both sides with regulatory stability.
When I announced tabling of the former BillC-58 on May 30, 2007, I also indicated that the government would conduct a review of railway service to commence within 30 days after the bill is passed. I will speak more on this later.
These two initiatives, BillC-8plus a review of railway service, fulfill an important commitment I made to shippers: that I would address their concerns about railway service and rates.
The CTA is the legislative framework that regulates the economic activities of the railways. The act generally relies on market forces to govern the relationship between shippers and railways. However, as I noted earlier, there are a number of sections that protect shippers from the potential abuse of market power by the railways.
I want to note that the legislative and policy framework for railways in Canada has worked quite well. CP and CN are among the most efficient railways in the world. They both operate networks in the United States and compete quite successfully against their U.S. counterparts. They don't require any operating subsidies from government. Their financial success means they have the capital funds necessary to maintain and expand their infrastructure and to acquire new equipment.
While the framework has worked well, it's not perfect. Transport Canada officials have heard increasing complaints over the last few years about poor railway service and high freight rates. I have heard many similar complaints in my capacity as minister. Also, I know that many members of the previous committee heard from shippers and others, even when the former Bill C-11 was being reviewed by the committee and the House.
These complaints may stem from the strong performance of the Canadian economy and the fact that the supply of transportation services, including rail freight services, has been quite tight relative to demand throughout North America. Railways are of critical importance to many Canadian shippers in domestic, continental, and international markets, especially to shippers of bulk commodities, who often don't have any practical alternatives. Shippers need reasonable access to efficient and reliable service at fair rates.
I believe the time has come to rebalance the legislative framework in favour of shippers.
During the consultative process in the summer of 2006, I encouraged the railways to develop a commercial solution that would complement amendments to the shipper protection provisions. The railways developed a commercial dispute resolution proposal for discussion with shippers. Significant progress was made. Unfortunately, the two sides were unable to reach agreement. I still support a commercial approach, since it would be more expeditious, less costly, and less confrontational than regulatory remedies.
With your permission, I would like to briefly describe the provisions in the bill.
The existing section 27 of the act requires the agency to be satisfied that the shipper would suffer substantial commercial harm before granting a remedy. Shippers have long objected to this test. It is being dropped under BillC-8.
The bill amends the notice that a railway must give for increasing freight rates from 20 days to 30 days. This will provide more time for shippers to make the necessary adjustments to their shipping plans.
There are two new provisions that deal with shippers' concerns about railway freight rates and ancillary charges. I want to clarify the difference between these two terms, since different remedies apply to each.
I'll deal with freight rates first, since it is the easier concept to understand. Freight rates are simple rates applied to the movement of traffic from point A to point B, for example, for moving wheat from Moose Jaw to Vancouver.
When you look at the various rates and charges levied by railways, the payment for freight rates are the big-ticket item. Now, I want to point out that the intended remedy for freight rates is final offer arbitration.
Aside from the rate application applicable to the movement of traffic, railways levy various other charges. These charges can either be levied in relation to the movement of traffic or in relation to the provision of non-typical railway services provided by the railways.
Now, the best example of a charge that may be imposed by a railway in relation to the movement of traffic is demurrage, which is the amount paid when cars are not loaded or unloaded within the free time provided by the railways. Examples of charges that may be imposed in relation to non-typical railway services provided by a railway include car cleaning, weighing, or storing of the cars.
The amounts paid by shippers for the various charges imposed by a railway are less significant than that amount stemming from the applicable rate for the movement of traffic. However these charges have become an issue with shippers over the last few years. Amongst the concern frequently heard is the fact that these charges, or their associated terms and conditions, are unilaterally established by railways and are often unreasonable in light of their purpose.
With respect to these charges, a new provision is being added that will give the agency the authority, upon complaint by one or more shippers, to review such charges and associated terms and conditions that are contained in a tariff of general application. Now, the agency is also given the authority to order the railway to amend the tariff if it finds the charges or associated terms and conditions to be unreasonable.
The bill contains a number of factors to guide the agency. The agency will determine the period of time any revised tariff will be in effect, provided that such a period does not exceed one year.
Shippers were hoping that the issue of charges could be addressed through changes to the final offer arbitration (FOA) provisions. In our view, the agency review approach is more effective. It provides for a “one-stop shop“ to address complaints. The FOA approach could require a number of FOA applications to accomplish the same thing, because FOA decisions are normally limited to the applicants.
The FOA provision is one of the more popular shipper remedies. A shipper can apply to the agency for FOA if the shipper is not satisfied with the railway's freight rates for the movement of traffic or any of the associated terms and conditions. Under FOA, the railway and shipper each make their final offer, and the arbitrator selects one of them without modification. This encourages the two sides to narrow their differences.
Bill C-8 expands the availability of the FOA remedy to a group of shippers. In order to qualify for group FOA...
Editorial Note: technical difficulties