OTTAWA, ONTARIO, CANADA — Canada’s Agriculture Minister Gerry Ritz and Transport Minister Lisa Raitt on March 26 introduced the Fair Rail for Grain Farmers Act, in attempts to move the nation’s record grain crop faster and more efficiently.
"This legislation creates the necessary tools to help ensure Canadian shippers have access to a world-class logistics system that gets their commodities to market in a predictable and timely way," said Minister Ritz. "Farmers and our economy need a system that works today and tomorrow, with the capacity to move what is grown."
The legislation amends the Canada Transportation Act and the Canada Grain Act. The ministers said the changes would:
• Increase supply chain transparency;
• Strengthen contracts between producers and shippers; and,
• Help ensure the entire grain handling and transportation system is working efficiently at the top of its capacity.
Going forward, railways will be required to deliver more timely data on grain movements to better monitor the overall performance of the supply chain. The Canadian Transportation Agency will also gather information from all grain supply chain partners on shipping capacities and plans prior to each new crop year, and will advise the Minister of Transport whether specific grain volumes should be mandated for the coming year.
Furthermore, the government will accelerate the review of the Canada Transportation Act with a view to further improving Canada's grain handling system over the long term in order to achieve improved capacity, predictability, planning and accountability for all parties in the supply chain.
CN said it was disturbed by the legislation, which it said introduces heavy-handed regulatory intrusion into rail grain transportation. It was particularly disturbed by proposed interswitching changes that it said could undermine rail viability, investment and harm the Canadian economy.
“CN is disturbed that the government has decided to punish railways with re-regulation for an outsized crop and winter conditions totally beyond their control,” said Claude Mongeau, CN president and chief executive officer. “The legislation does not address the root cause of the current grain situation and will do little to move more grain, now or in the future. We also have deep concerns about the potential consequences of the government’s proposed new interswitching rules.”
Interswitching involves the transfer of traffic from the lines of one railway to the lines of another railway. Currently, where a shipper is served by only one railway, the shipper is entitled to transfer its traffic to another railway at a regulated rate set by the Canadian Transportation Agency if the shipper's facility (either at origin or at destination) is located any point within a 30-kilometer radius of where the two railways connect.
“The government is opening the door to extended interswitching limits for specific regions or goods without any due process to assess the potential consequences for railways and the Canadian economy,” Mongeau said. “This action could hit Canada’s railways by opening their business to unfair poaching by U.S. railways without any reciprocity. Beyond causing financial harm to CN, it could drain traffic away from Canadian ports and cause the loss of jobs, reduce investment and undermine tax revenues across Canada.”
In addition, the legislation would give the Canadian Transportation Agency a highly intrusive role in railway operating matters in arbitrating service-level agreements for specific shippers, with the potential to cause costly inefficiencies in the system.
Mongeau said the ministers’ action represents a missed opportunity to take an even-handed approach and encourage supply chain collaboration. Instead, they decided to subject railways to an unnecessary layer of reporting, oversight and regulation that can only result in greater rigidity in the supply chain and undermine innovation.
“If the government is going to go through with this legislation, we urge it to also subject grain elevator companies to greater regulatory oversight in order to ensure proper coordination and adequate resource allocation, with a view to creating surge capacity when crops are more sizable than the norm.”
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