Evidence of meeting #62 for Transport, Infrastructure and Communities in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was customers.
A recording is available from Parliament.
Executive Vice-President, Corporate Services and Chief Legal Officer, Canadian National
Absolutely.
Vice-President, Government Affairs, Law and Risk Management, Canadian Pacific Railway
Can I just add a quick comment?
I'll take it up one level. I think you have the right perspective in thinking about this in terms of the market. I agree with what's been said, but the only comment I would add is to think about the global marketplace that we're operating in and what has been going on over the last seven or eight years.
There are a number of examples I could use, but I'll talk about the Asia-Pacific environment and what we were faced with in terms of the growth of exports from Asia into North America and our capability to handle that kind of volume increase starting in the mid-2000s.
That was an eye-opener for a lot of people. The way we were able to do it, apart from the investments I talked about, was with the kind of collaboration we saw. Governments were a big part of this, whether it was the federal government or governments in western Canada, as well as communities, ports, and terminals. People came together to respond to that, but it was market driven. We were either going to be able to compete for that business on the west coast or U.S. ports were going to get it. That was the issue.
Conservative
Conservative
Joe Daniel Conservative Don Valley East, ON
Thank you, Chair.
Thank you for coming here. I apologize, as I'm not as familiar with all of these things here, so my questions may be a little naive. But let's see where we go with that.
Clearly, we've had a lot of responses from shippers about this bill, and that's why this bill has come about. But you've painted a picture that seems to be completely opposite to theirs, that everybody's happy, things are going well, etc. Why is there such a big contrast?
President and Chief Executive Officer, Railway Association of Canada
If you were to talk to most of the customers of the railways, you'd find that they would acknowledge that service has improved. I'm not saying that if we were sitting here five years ago, I wouldn't have an argument. But over the five years service has improved, and I provided some evidence of that in my opening statement, with third-party surveys that confirm that.
Conservative
Joe Daniel Conservative Don Valley East, ON
You also quoted a lot of statistics of all of that. Are they available, or have you made them available?
President and Chief Executive Officer, Railway Association of Canada
Yes, sure, they'll be on the record. Anything you want, statistics-wise—
Conservative
Joe Daniel Conservative Don Valley East, ON
Yes, but you quoted various reports and things like that. Have we seen them?
President and Chief Executive Officer, Railway Association of Canada
Yes, like freight rates, for example, they are available. We'd happily provide it. The RBC survey, yes....
Conservative
Joe Daniel Conservative Don Valley East, ON
When you have so many shippers who have asked you for service agreements, are you able to actually negotiate with all of them and get service contracts with anybody who wants one?
General Manager, Service Delivery, Canadian National Railway Company
Yes, we've been able to negotiate with anybody who's come forward and wanted a service level agreement with us. So that has not been an issue.
Conservative
General Manager, Service Delivery, Canadian National Railway Company
We have all of the ports that are under a service level agreement, and in terms of customers, I'd say around 55% of our revenues are covered by a service level agreement.
Executive Vice-President, Corporate Services and Chief Legal Officer, Canadian National
And we've reached out to access smaller customers. Obviously, there's enough of a challenge for some of our smaller customers. Last year we reached out on two occasions to almost 1,500 of the smaller customers in Canada—I'm talking about CN here—inviting them to contact us and sit down and negotiate a level of service agreement. A lot of those customers don't want agreements; they want their goods moved. They say to us, don't spend time negotiating a level of service, just move my goods for me and I'll be a happy camper. But the idea is to make sure it's available to them. And in that context, when you have a level of service agreement with a small customer, we'll also have a commercial dispute resolution clause in case there's an issue between the customer and us. You can appreciate that smaller customers don't want to go to court; they don't want to spend time going back and forth in a court of law debating damages, or asking whether they got their box moved or not. That's something we pushed on quite a bit and we have not got as much take-up as we'd like, but we're not going to stop pursuing it, because there's real value there for us in doing that with our customers.
Director, Government Affairs, Law and Risk Management, Canadian Pacific Railway
We have 2,500 agreements at CP right now with commercial dispute resolution embedded in them. So all our new agreements have commercial dispute resolution.
Conservative
Joe Daniel Conservative Don Valley East, ON
I'll come to your network. It's obviously quite a complex network with all of the different lines, etc., but I think we heard from some witnesses last week that there are groups you are dealing with that are government-associated. So, for example, there are people who are unloading your freight and they give you a particular rate for that. How many of these sorts of organizations are you interacting with that you don't control and that can have an impact your network, basically?
President and Chief Executing Officer, Cando Contracting Limited
The list is pretty long. If you think about various types of shipments, they're all a bit different. Somebody has been talking about grain. You have to get the grain to an elevator and that usually happens via truck. Then the elevator has to get it to us and so you're also interacting there at that level, and sometimes a short line is doing it as well or is in the middle of that process. Then you have to get it to the port, but in our case a lot of it would go to either Vancouver or Thunder Bay, as an example. Then when you get there, you have to unload the grain, so there's an elevator—
Conservative
President and Chief Executing Officer, Cando Contracting Limited
No, that's correct. There are all kinds of issues that can come up there as well. Then, ultimately, it has to get into a vessel. For example, if it's at the port of Vancouver for export to Asia, something that we're heavily involved in, you have vessels to interact with as well. So there are a lot of moving pieces.
Vice-President, Government Affairs, Law and Risk Management, Canadian Pacific Railway
One aspect of it too is the fact that there are different types of grain. Back over the years they sent the wrong grain to the ports. The ships didn't want it. Now you have a real problem because it backlogs everything. That's why demurrage...there's rolling storage.
Conservative
Joe Daniel Conservative Don Valley East, ON
The performance of your network is dependent on these loadings and unloadings, over which you have no control.
General Manager, Service Delivery, Canadian National Railway Company
Absolutely.
Executive Vice-President, Corporate Services and Chief Legal Officer, Canadian National
You can't get the grain onto the ships coming into port. You can get the grain to the grain elevator and they're ready to unload and you can't blame them if the ship's just not there. So we end up waiting for the ship and the unloaders are ready. Again, our competitive advantage in Canada depends on the strength of our supply chain network. The weak link will make us all suffer. There's no doubt about that.
Conservative
Joe Daniel Conservative Don Valley East, ON
So what other areas of risk are there that you don't control that actually determine the performance and efficiency of your network?
