Transport Committee on Sept. 13th, 2017

[Sean Fraser, Liberal, Central Nova, NS]

Thank you very much.

I'll start with Ms. Kancens and the marine transportation issue. One of the things that I'm trying to wrap my head around now is that most of these things have a bit of a trade-off, and I think it's helpful to know that it's not on a commercial basis that we're talking. Really it's about fluidity of trade.

Where these empty containers are being shipped or trucked now, I assume that they are required to hire a Canadian trucking company or rail line to move these empty containers. Is that right?

[Karen Kancens]

Yes.

[Sean Fraser, Liberal, Central Nova, NS]

Has any economic impact assessment been done that measures the input to the Canadian economy that these European container owners are putting into the Canadian transportation system versus what would actually be achieved by a more effective and efficient transportation system by allowing businesses to ship reliably?

[Karen Kancens]

Just as a point of clarification, you mentioned “European”. I want to be sure that we take this out of the CETA context.

[Sean Fraser, Liberal, Central Nova, NS]

Sure.

[Karen Kancens]

This is about empty-container repositioning on a Canada-wide basis. It's not part of the CETA trade agreement.

In the context we're looking at this, with Bill C-49, I would caution perhaps that when we talk about the costs of repositioning empty containers, the costs are not only financial. Yes, you will always have an extra financial cost, especially when you're using truck or rail, but there are other costs.

Let's say you're a shipowner and you're doing a regular service from Montreal to Halifax. You have a pile of empty containers at Montreal and you have a customer in Halifax who needs 300 containers for export. Your ship is going from Montreal to Halifax in any case. It's part of your regular run. Right now you can't load those empty containers on your own ship. You have to put them on rail or you have to import them. If you're putting them on rail, you're subjecting those containers to additional moves. They're not just going from the port to the ship. They're going to the rail yard and they're being put on the railcars. There are more moves. There is more handling of the container. Yes, of course you have your additional external cost associated with the rail movement, but you also have logistical delays. Your containers are being moved at the convenience of the railway, not at the convenience of the carrier and of the exporter. You're adding elements to the chain, which are costs, yes, but there are also other elements in the form of time, in the form of additional moves.

By the way, the railways would much rather not haul empties, because they generate more revenue hauling laden containers. You're making what could and should be a very simple logistical process a lot more complicated than it needs to be, and you're adding a lot of trade-chain impediments along the way, so I would caution you to maybe not think of it only in terms of costs.

[Sean Fraser, Liberal, Central Nova, NS]

I certainly don't. My inclination is to accept that the benefits from efficiency and the opportunity costs that you just laid out favour the logistical efficiencies that you're describing.

Right now, if there is an increased cost, presumably to the producer, or the importer or exporter here, are they paying the additional costs of moving these empty containers? Is the buck passed down to a Canadian company somewhere along the line?

[Karen Kancens]

You know, a lot of things go into the exporter's final transportation costs, so it's often difficult to isolate what the specific cost elements are. But yes, there is no question that if your carrier is paying additional costs to reposition those empties, especially if they're not internalized and they're using an external provider such as the railway, those costs will in some way be passed to the exporter. Can I quantify them? No. But certainly there is a cost that will go to the exporter that they wouldn't encounter if the empties were being repositioned on the carrier's own ship.

[Sean Fraser, Liberal, Central Nova, NS]

In an era when we're seeking to embrace trade, when we know that globalization is happening whether we like it or not, I take it that your opinion is that by implementing this change, we'll allow Canadian businesses, particularly in the import and export business, to create more jobs and all the good things that come with it.

[Karen Kancens]

I don't know that I'm going to go that far. Ultimately, yes, but I look at it this way. Right now we see the greatest lack of empty containers in Halifax. On the east coast of Canada, they particularly need refrigerated containers to load agri-food and seafood. If that exporter doesn't have access to empty containers to load his exports, it's a potential lost business opportunity if the empties can't get there on time. If they are coming via another mode, there is an additional cost.

Is it going to create additional jobs for the Canadian economy? I think you could make that argument for any initiative. Certainly it's going to help that exporter in Halifax who needs the containers to be able to conclude a deal with his customer overseas.

[Sean Fraser, Liberal, Central Nova, NS]

You're playing to my biases—the lobster fishery and a port in my own riding. I do appreciate it.

With respect to the specific change that you've discussed about ownership versus who has an interest in this sort of partnership, if we don't make this change, what will be the fallout? Will you still see things moving by rail and truck inefficiently, or will you see empty containers sitting in ports for a few extra weeks?

[Karen Kancens]

Again, to be clear, for the change we are asking for, whether it's accomplished legislatively or whether it's accomplished through additional guidance from Transport Canada, we have the amendment in clause 70. That will allow the repositioning of empty containers by foreign-flag ships. We're worried, though, that it's not clear that all of the partners in a vessel-sharing agreement would be able to reposition their empties, because you have the question of ownership to be eligible to do so. The worry is not that carriers won't be able to reposition their empty containers; it's that in a vessel-sharing agreement, not all of them would be able to do it.

[Sean Fraser, Liberal, Central Nova, NS]

That's right, and—

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Fraser. Your time is up.

Mr. Shields.

[Martin Shields, Conservative, Bow River, AB]

Thank you, Madam Chair. I appreciate the information from the witnesses and their expertise this morning.

There was one thing that popped out from the Mining Association. It was the arbitration piece. You mentioned that many times you have requested and they have failed to meet with you. Do you have any information or sense of how many requests you made, and how many denials there have been percentage-wise? Do you have any idea?

[Pierre Gratton]

First of all, I would say that most can't get that far, but those who do actually go to arbitration, those who have the resources and the capacity to do so—

[Martin Shields, Conservative, Bow River, AB]

That's where I was going next.

[Pierre Gratton]

Right, and this is one of them.

[Brad Johnston]

The question you're asking refers to the final offer arbitration process—

[Martin Shields, Conservative, Bow River, AB]

Yes.

[Brad Johnston]

—which in itself is an expensive and difficult process for a shipper to undertake. Nevertheless, specifically answering your question, I have knowledge of.... They're confidential processes so I'll talk only about ones I've been involved in. I can't talk about when or the content, but I guess I can talk about what didn't happen. In 50% of cases that I'm aware of currently, railways did not co-operate in seeking a costing determination from the agency. I am aware that the percentage is increasing over time.

[Martin Shields, Conservative, Bow River, AB]

You can't even get into the game, basically, or to state your case 50% of the time.

[Brad Johnston]

No, that's not correct. We can launch a final offer arbitration under certain circumstances. That's the choice of the shipper. What we're talking about is seeking an expert costing determination from the agency to inform the arbitration and the arbitrator as to whether the position of either the shipper or the railway is reasonable or unreasonable. It is our view that there's no legitimate reason to deny or not co-operate in a request for a costing determination from the agency. When the railway does it, it's only for the purpose of frustrating the process. Our ask is that this hole be closed in the legislation.

[Martin Shields, Conservative, Bow River, AB]

How much is it? You're a big operator. Would you identify a cost for this process for you? You're saying most can't.

[Brad Johnston]

A final offer arbitration process would cost a shipper like Teck in the millions of dollars to undertake. It's expensive and it's time-consuming, but it is the one remedy that we have and it's one that we want to ensure that the legitimacy of is maintained.