Canada: Transportation Watchdog Indicts Railways for Delaying Commodity Freight

A preliminary report from the Canadian Transportation Agency appears to confirm shippers’ complaints about a relatively high number of restrictions on commodities they tried to move by rail through the Vancouver area, CTV news has reported.

Industry groups have accused Canada’s two largest rail companies of “discriminatory treatment” against some commodities, the report notes, highlighting the use of embargoes that temporarily stop traffic at specific loading points or interchanges.

In a statement last week, Canadian Pacific Railway Ltd. chief executive Keith Creel called the investigation’s abrupt launch “irresponsible.” He pointed to record grain shipments and a busier port in recent months as global trade tensions work in Canada’s favour, with a Chinese tariff on U.S. soybeans and retaliatory European tariffs on U.S. corn spurring exports that are more Canadian. Canadian National Railway Co. has cited harsh weather and the complex supply chain that feeds into Canada’s busiest port.

A two-day hearing is slated for next week, with presentations scheduled from both railways and several shipping associations.

Drawing on interviews and data, the report states that some shippers view the railways’ exceptionally high embargo numbers as “an effort to push through the maximum overall volume” at the expense of forestry products and other commodities.

CP imposed no embargoes between October and January for three straight years, then issued three embargoes in the past three months, according to the report. CN issued a combined 20 embargoes during that three-month period in 2017-18 and 2018-19, nearly seven times more than it imposed during the same period in the two prior years. CN shipments of grain, chemicals and containerized loads have mainly gone up over the past four years in the October-to-January period, while forestry product volumes went down 11 per cent, the report shows.

The report also notes that since 2015, shipment volumes in the Lower Mainland have increased 15 per cent during the three-month period for CN, and 19 per cent for CP, straining supply networks as demand for Canadian commodities continues to grow in Asia.

Derek Nighbor, head of the Forest Products Association of Canada, warned the railways this week against playing “commodity whack-a-mole.” He said the embargoes cost the pulp and paper industry $500 million in contract penalties, shipping charges, rebooked routes and storage costs.

Both railways have pointed to congestion problems in the Vancouver area and said they will co-operate with the investigation.

The agency had last Monday said it would investigate possible problems with freight train service issues in the Vancouver area including whether rail companies are fulfilling their obligations. The agency said in a news release Monday that it’s the first time it is using its new authority to launch such an investigation, which will also determine whether there was discriminatory treatment of certain commodities.

Agency chairman Scott Streiner said it will hold public hearings, allowing parties to submit evidence and offer suggestions on how things could be improved. The agency said hearings will be held at the end of January and give railway companies and shipper groups an opportunity to provide evidence.

The Forests Products Association of Canada had said in a release that it welcomes the investigation, adding that rail delays last year cost the forest sector over $500 million.Keith Creel, president and CEO of Canadian Pacific Railway, said in a statement he “takes great exception” to being included in the investigation.

“We have not been made aware of any formal complaints to the CTA relating to our service in Vancouver, nor has the CTA been in touch with us prior to launching this investigation. The fact is that CP has achieved record-setting performance in Vancouver thanks to our talented team of railroaders who work day and night to make it one of the best performing terminals in North America”, he said.

The company says it broke a previous record for carloads of Western Canadian grain and grain products shipped to the Port of Vancouver in a single month in November. CP Rail says it has worked with CN in Vancouver to help ease congestion in Vancouver.

“Are we perfect 100 per cent of the time? No,” said Creel. “When we are not performing to the requisite level of service, I will be the first to step up and acknowledge it. The flip side of that coin is: when we are subject to unsubstantiated action, I will be the first to step up and defend the men and women who make this operation run.”

Canadian National Railway said it will co-operate fully and that the investigation should take into account the full supply chain and dozens of players involved late last year.

“CN acted swiftly and efficiently to serve its customers during this period and played its role in moving record volumes through Vancouver’s complex and multi-commodity supply chain,” the statement said. “During this period, CN moved 10 per cent more freight through Vancouver than last year.”

The agency said it concluded an investigation would be appropriate based on information received from shipper associations and other parties.

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