Evidence of meeting #4 for Transport, Infrastructure and Communities in the 39th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was shipper.
A recording is available from Parliament.
10 a.m.
Conservative
Ed Fast Conservative Abbotsford, BC
Since the chair raised the issue, I'll ask: What percentage of your total rail costs do the ancillary charges represent? Do you know that figure, and if not, would you be able to get that figure to this committee?
10 a.m.
Vice-President, Trade and Competitiveness, Forest Products Association of Canada, Coalition of Rail Shippers
We estimate that it adds 14% to 15% to our total rail bill.
10 a.m.
Executive Director, Western Grain Elevator Association, Coalition of Rail Shippers
Ours would be in the same area, I would imagine, perhaps a bit higher.
10 a.m.
Conservative
Ed Fast Conservative Abbotsford, BC
That's surprising, because I believe the testimony we heard from the railways was that it was less than 1%, something along those lines. So it's around 14%, 15%, is that right?
10 a.m.
Executive Director, Western Grain Elevator Association, Coalition of Rail Shippers
I'm going to double-check and get back to you, but I believe that's correct.
10 a.m.
Conservative
Ed Fast Conservative Abbotsford, BC
That's pretty significant.
I want to discuss one other issue that goes back to your discussion, Mr. Ballantyne, on the issue of CDR, commercial dispute resolution. You seem to indicate there were discussions about it, but in the end it was not seen as being a viable way of resolving disputes, and that's why you're supporting legislation that provides for group FOA, final offer arbitration.
In his testimony before this committee, Mr. Patenaude, who was, I believe, representing CN, made the following statement, and I quote:
Many of our customers told us they like the proposal, but they saw no need to sign on at this time as they had no problems with our services. They indicated that if in the future problems arose, they would be interested in using the CDR.
Do you agree with that statement? If not, why not?
10 a.m.
Chairman, Canadian Industrial Transportation Association, Coalition of Rail Shippers
No, I don't agree with that statement. I was here when Mr. Patenaude made that statement. I know him quite well, as a matter of fact. He was very careful that he didn't indicate that any shipper had signed up for it. As I say, I don't know for certain, but as far as I know, no shipper has signed on to their offer of commercial dispute resolution.
I guess the politest way to say it is I would have a difference of opinion with Mr. Patenaude as to whether there are or aren't service problems. There are some statistical things out there that are available, and I will read one to you.
Canadian Transportation & Logistics magazine carries out a buyer trend survey every year of people who buy freight services by all modes. In this year's, they've just published the results. They asked shippers: for what percentage of your current rail shipments do you consider trucking to be a viable option? Forty-one percent of them said that of their rail shipments, zero were likely to be able to be switched to truck, so that shows how dependent a lot of people are on rail. Of those who did make a switch where they diverted traffic from railroad to trucking, 65% said the reason they switched was poor service by the railway.
We at CITA do a survey every year of our members, a benchmarking survey. The independent person who does this survey for us asks people to indicate how they feel about the various modes of transport that they use. We covered air freight, courier, marine, LTL or less than truckload, truckload, intermodal, and rail service generally. In the last three years—we've only been doing this for three years—air freight has come out in the “excellent” category two out of the three years, and rail's come in the “poor” category three out of three years.
There is statistical evidence. We would expect in any service review that is done as announced by the government, as Wade has mentioned, there will be data developed by the shipper community as input to that study.
10:05 a.m.
Conservative
Ed Fast Conservative Abbotsford, BC
I have one last question, if I might, and it has to do with the impact on consumers. You've indicated there are significant costs you are incurring right now that this act will spare you. Do you expect that those cost savings will be passed on to consumers to a significant degree?
10:05 a.m.
Vice-President, Trade and Competitiveness, Forest Products Association of Canada, Coalition of Rail Shippers
To the extent that freight shipments are being made within Canada for Canadian consumers, the answer to that would be yes. The customers of the railways are not monopolies. The customers of the railways are existing in extremely competitive economic circumstances, and any cost savings that are achieved are generally passed on, particularly if they're achieved industry-wide, to consumers just because of the competitive nature of the business.
In our industry, probably between 60% and 80% of our products are exported, depending on the product. So some of those benefits would go to Canada by virtue of being a stronger competitor in export markets and some of the benefits would accrue to Canada by virtue of Canadian consumers paying lower prices.
10:05 a.m.
Conservative
The Chair Conservative Merv Tweed
Thank you.
We'll go to Mr. Maloney, and I'm advised that he's going to share his time with Mr. Bell.
10:05 a.m.
Liberal
John Maloney Liberal Welland, ON
Clause 2 of the act makes provision to increase the notice period for increasing tariffs from 20 days to 30 days. I assume that when you reach an understanding on cost with your customers you build the freight rates into your cost price. It's true that 20 days to 30 days is a 50% increase, but 30 days is, in my opinion, not an awful lot when you have to consider that when you're doing your price structures it may be six months in advance of the cost to your consumers. Do you have any comments? Is this adequate for your purposes? Would you like to see more of a notice period?
10:05 a.m.
Chairman, Canadian Industrial Transportation Association, Coalition of Rail Shippers
I think most shippers are prepared to live with this. Your point is well taken that in a lot of markets a lot of railway customers are in, they have to hold the price for a lot longer than 30 days. There are all kinds of fluctuations in the input costs they have. But as far as I know, most of the shippers are prepared to live with this 30 days, even though there will be times and places when that will cost them some money.
10:10 a.m.
Vice-President, Trade and Competitiveness, Forest Products Association of Canada, Coalition of Rail Shippers
Yes, it's acceptable to us.
10:10 a.m.
Liberal
John Maloney Liberal Welland, ON
I'll move on to another point. When a line is going to be abandoned, or a lease is up, and say a short line doesn't take over, there is a compensation formula to municipalities for, I believe, a three-year period of $10,000 a mile or something. That would have helped the municipality to improve the transportation or road infrastructure, I assume, but over a period of time those roads get beat up pretty badly. Is there something there we could consider that would increase the length of time that railways would be responsible for this, like increased compensation to municipalities? Could you live with that as well?
10:10 a.m.
Chairman, Canadian Industrial Transportation Association, Coalition of Rail Shippers
First of all, and Wade can comment on this, my understanding is that this provision is only for grain-dependent branch lines. It isn't general across the country. It's only in grain-dependent....
10:10 a.m.
Executive Director, Western Grain Elevator Association, Coalition of Rail Shippers
Some grain shippers have complained that there was no notice provided when the railways decided to make that move, so this provision is something that was put in for that reason, and it's something they support. By virtue of the fact that we're supporting the passage of the bill as written, it means that the grain shippers are supporting that provision.
10:10 a.m.
Liberal
Don Bell Liberal North Vancouver, BC
Back to the question of ancillary charges, if I understand, Ms. Morgan, you said in response to a question from the other side that ancillary charges represent about 15% of your total rail charges. I just want to clarify that figure of 15%, and that this portion of your charges are increasing roughly 10% to 15% per year, from the submissions that we have here.
10:10 a.m.
Vice-President, Trade and Competitiveness, Forest Products Association of Canada, Coalition of Rail Shippers
Yes, I think that would be accurate.
10:10 a.m.
Liberal
Don Bell Liberal North Vancouver, BC
Okay. This strikes me that it's a little bit like buying a car where you're quoted a base price of $20,000 and then the question is, do you want an engine, doors, a window? The list you provided seems like that to me.
The other question I was going to ask was about the issue of the track.
Mr. Sobkowich, what is a duopoly versus a dual monopoly? You said there's a difference, and I'd like to know what that is.
10:10 a.m.
Executive Director, Western Grain Elevator Association, Coalition of Rail Shippers
A duopoly is when you have the choice between one or the other, and a dual monopoly is when you have two co-existing monopolies. So if I'm a grain elevator and I'm planted in the middle of Saskatchewan, and I only have CN running up to me, CP is operating in Saskatchewan, but they don't service my elevator.
10:10 a.m.
Conservative
Jeff Watson Conservative Essex, ON
Thank you, Mr. Chair.
Thank you to our witnesses for appearing.
When I come to the commercial dispute resolution process that occurred with the railways, maybe I missed it, but I'm not sure I heard a reason why the process eventually fell apart. In the railways' opinion—and Mr. Ballantyne, if you were here, you probably heard it—they said it's because you wanted the commercial dispute resolution mechanism to apply to their U.S. operations, and they said that they just couldn't tolerate something like that. Do you agree that's the reason why? Or were there other factors or other things that caused this process not to come to fruition?
10:10 a.m.
Chairman, Canadian Industrial Transportation Association, Coalition of Rail Shippers
I would say that was the main reason. The shippers felt that if CN and CP were offering this, they should offer it for each of their entire systems, and that in this instance the border shouldn't make a difference because a lot of the traffic for many of the companies that are represented in the coalition is cross-border traffic. I would assume you, Ms. Morgan, have a lot. Wade probably has some. The fertilizer people do a lot of movement across into the United States, and felt that if they were going to offer it, let's make it for each of their whole systems.
The other thing is there's a lot of traffic that's interchange traffic between railways, whether it's into the United States to other railways, or whether it's between CN and CP or even to other short lines. I will ask my colleagues here.... If I my memory doesn't serve me right on this, they'll correct me, but my recollection is that each of the commercial dispute resolutions CN and CP were offering were only for their own system. In other words, even in Canada, they weren't going to be extended so that if it was an interline move between, say, CN and CP, it would cover that.