Transport Committee on Nov. 29th, 2007

[Marta Morgan]

I think it goes back to the explanation Bob gave earlier today. In urban areas, for example, there is often competition between the two, CN and CP. But for us, our mills are located in rural communities, in communities where only one of the two rail companies is present, either CN or CP. Normally, CN serves our industry. So there is a real urban- rural division in Canada. Recently, when we did our overview, all of our mills told us that 90% of them had no other rail service and that the distances were too long for trucking services to be economically viable.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Perfect. Thank you.

[The Chair, Conservative, Merv Tweed]

Mr. Masse.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

You gave a list of auxiliary charges that would make a banker blush. What I'd like to know is did those fees come in as other fees did a straight-out drop or depress, or did they sit...? What's the history of those fees? Are they relatively new in the last three years, four years, or ten years? What has been the history?

[Robert Ballantyne]

I think demurrage has been around probably for a hundred years. Some of the other ones are fairly new. The fuel surcharge is fairly recent, just when the crude oil prices started to become quite volatile. So that's a fairly recent charge.

Things like the charge for submitting a paper bill of lading are quite new. There the railway is saying to its customers they want to go to electronic data interchange. And that's fine; we all like the idea of electronic data interchange. But the railways are in a position where they can tell their customers to do electronic data interchange, otherwise they're going to pay extra. Not very many other businesses can do that.

I would say a lot of these are fairly new. Some of them have been around for a long time. Weighing of cars, storage of cars, some of those things have been around for a long time.

[Brian Masse, NDP, Windsor West, ON]

What about the new charges the U.S. is imposing unilaterally, like the Bioterrorism Act? I think it's $750 per railcar, if I'm correct. Who's eating that cost right now? Is it being passed on directly to you, or to the railway? They would have to pay it, I assume, under the current structure, but is that then being moved toward you?

[Robert Ballantyne]

I'm not absolutely certain of that. I'd have to check with some of my members, but I'll venture a guess that it is being passed on. That charge has been applied to virtually all modes. The truckers pay it, the railways pay it, the marine, and if you're a passenger flying on an airplane to the United States, you pay it too.

[Brian Masse, NDP, Windsor West, ON]

Yes, it's a grab. It's ridiculous, because some Chilean peach is seen as a security threat.

[Robert Ballantyne]

The counterpart in the United States to our association is the NIT League, the National Industrial Transportation League, and we lobbied jointly with the NIT League against that charge. We were unsuccessful, but we did that jointly. We had good support from the U.S. shipper community on that.

[Brian Masse, NDP, Windsor West, ON]

Yes, we failed on that too.

Quickly, Mr. Chair, to the researchers, could I request a list of those charges from both organizations? I think there's a discrepancy between what we're getting as testimony in terms of the true content and the value of them percentage-wise, and perhaps we could have that information.

Thank you, Mr. Chair.

[The Chair, Conservative, Merv Tweed]

Yes.

I can advise the committee that at the end of the last meeting a motion by Mr. Jean was for information on the amount of money the railroads derive from ancillary charges, and what percentage this makes up, versus the revenue they derive from freight rates, and also the top 20 ancillary charges. We've asked that of the rail companies, and we would ask the shippers if they would kindly provide, through the chair, the same information.

Mr. Jean.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Thank you very much, Mr. Chair.

First of all, let me say I'm astonished the NDP is arguing against another tax, but it was a pleasure to see.

Mr. Ballantyne, you were here last time, and I want to give you the opportunity, as well as Ms. Morgan and Mr. Sobkowich, to answer this question. I posed it to the railway but I didn't really receive an answer. I'm going to read it verbatim.

Let's say we have a farmer in western Canada—and this would obviously apply to loggers or whoever else—and this is a major complaint I've heard: they arrange for the cars to come, maybe six cars to come to load their product. On a Monday, they have a group of individuals there ready to load the car, maybe ten people or so. They're all ready to go, they're at the railroad waiting, and the cars don't show up. Nobody calls from the railroad, nobody tells them anything. They don't show up, not Monday, not Tuesday, maybe Thursday, maybe Friday, maybe even the next week. The shippers are expected to have these people on call, ready to go, to load the product into the cars.

Then, finally, when the railcars come, the shipment is late to the boats. A boat has been waiting for the shipment, or some other transportation mode has been waiting. The farmer or the shipper has to go to tremendous costs, and sometimes the cost, I've been told, is over and above any profit they would make--indeed, even sometimes over and above the cost of the product itself. It would be cheaper for them to just dump it.

I have heard this, and I know this is second-hand information, but I've heard it from a lot of people in different parts of the country. So my question to you is this: Does the railroad pay the shipper for the staff for those four or five days they're waiting and they receive no call? Does the railroad pay the shipper for any lost revenue and any delay? Does the railroad pay for the ship waiting for their product to be delivered? Does the railroad pay for any late shipments? Is there any payment by the railroad?

[Wade Sobkowich]

No, there isn't.

You're talking about grain, so maybe I can just talk about it briefly.

You've described it perfectly. What happens is that the grain shippers will put in an order for cars. Let's just pick a number, let's say 7,000 cars in a given week, all for grain shippers. The railways will come back and say that they can't give 7,000, but they'll give half of that, and they'll bring them on Tuesday. So now the company's been rationed back to half the number of cars it needs.

Then Tuesday comes around, and they have the elevator staff there. I don't know if people appreciate what it takes to build a train, but you have to dedicate your staff to that for that particular day. So the company will have shut down farmer deliveries to that particular station for that day. Maybe they wanted to have those cars previously inspected so they can be certain of the grade of grain going into the cars. So they have the Canadian Grain Commission there, which they are paying.

Tuesday comes, and the cars don't show up. There's been no communication in advance. Somebody contacts the railway, and they say, “Oh yeah, they're coming tomorrow”. So you do the same thing the next day. You shut down farmer deliveries. Now you've lost two days of farmer deliveries, and you've paid the CGC for two days, and you've paid your staff for sitting around for two days.

The cars don't show up on Wednesday. Maybe they show up on Thursday. So they show up. Now you have 24 hours to load those cars, otherwise you don't get your rail incentive. There's a discipline imposed on the grain company to make sure it adheres to the timeline. They have to load those cars quickly. Twenty-four hours seems like a long time to load 100 railcars, but if you do the math, it's about 14 minutes a car, and that includes repositioning and everything like that. It's not a lot of time.

They load the cars, and now the cars are going. A company will plan its logistics so that the cars are not arriving at a destination or at a terminal elevator on top of each other, creating bunching. And they'll also plan to meet a vessel. So now the train is going at a time when you didn't plan for the train to actually arrive at the terminal. And maybe the terminal elevator was sitting around for a few days without any cars to unload, and all of a sudden it gets a glut.

Perhaps it has missed a vessel. Perhaps you've been paying $25,000 a day in vessel demurrage to hold that vessel while waiting for that trainload of canola to arrive.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

I do want an answer from Ms. Morgan, as well.

[Wade Sobkowich]

Sure, I'll get to the point.

You pay all these extra costs. To add insult to injury, you're paying demurrage, because the cars were bunched at the terminal elevator. And the railways do not pay any of those. They do not compensate the shipper for any of those added costs.

[Marta Morgan]

I have a fairly brief answer: no, no, and no. The railways do not compensate the shippers for any additional costs.

In our industry, one of the things that's been happening, particularly in the solid wood industry, is that reliability of service is becoming more and more important.

We think about a product like lumber as a commodity product. When our companies are selling to customers like Home Depot, for example, Home Depot wants them to bring in the lumber, stock the shelves, manage the inventory, and know when they are empty. The cost of unreliable service begins at the mill, but it extends right the way through to the end of the shipment in ways that it probably didn't just ten years ago.

[Robert Ballantyne]

Certainly, for our membership, it is the same. The answers are no, no, and no.

Mr. Shannon, when he was here from CP the other day, alluded to the fact that in some cases, there are contracts. There are still some confidential contracts between shippers and railways. There may be some instances whereby the railway has some financial penalty, but I would guess that they're very few and far between now, and probably less than they've ever been since confidential contracts came in in 1987.

[The Chair, Conservative, Merv Tweed]

Seeing no more questions, I would like to thank our guests today for your information and input into Bill C-8.

I do want to advise the committee that on Tuesday we will be doing clause-by-clause. If you have any amendments, I would appreciate it if they're submitted to Madame Ouellette by noon today so they can be distributed to the membership and dealt with.

On Thursday of next week, we're going to go to the CP Rail review. That's the final piece of the puzzle for Mr. Bell. I'll announce more next Tuesday and Thursday. Thank you.

The meeting is adjourned.