Relations between Canada’s Class 1 railways and the multitude of Canadian shippers who rely on them for cost effective transportation have been filled with acrimony for years now, to the detriment of both. Shippers have had to endure service disruptions and angry customers due to service issues. Railways have likely missed out on more sizeable gains into new markets because shippers didn’t trust them. It has also likely been harder for the railways to combat inefficient practices because shippers didn’t want to play along. One is more likely to want to play nice with a friend than someone perceived as an adversary.
There are developments I’ve seen of late that I’m hopeful will go a long way towards improving the situation.
The first involves a decision just reached on the legislative front which addresses shipper frustrations in dealing with railway penalties or ancillary charges they consider unfair. Back in 2008, a provision was added to the Canada Transportation Act, which, for the first time, allowed shippers to file complaints to the Canadian Transportation Agency when they found themselves at odds with their railway service providers over such charges. It was a big deal because for some shippers such charges amounted to millions annually.
It was a big deal with a short party.
When the first complaint was filed, the Canadian Transportation Agency refused to rule on it. It argued that a confidential contract was in place between the shipper and the railway and so it didn’t have the mandate to pry. That prevented other shippers locked into contracts but with similar complaints from taking their cases to the Agency. Seeing the broad implications of such a decision (most medium and large shippers ship under confidential contract), the Canadian Industrial Transportation Association (CITA) upped the ante by taking the matter to the Cabinet of the Canadian government, asking that the Agency be ordered to make a ruling on the complaint. The Cabinet agreed. But as has often been the case in shipper-railway relations of late, that didn’t end it. CN asked for a judicial review of the Cabinet decision. The Federal Court agreed with CN’s position and disallowed the Cabinet decision.
Undaunted, the CITA upped the ante yet again, appealing that decision to a higher court. At the start of November, the Federal Court of Appeal overturned the lower court’s decision and restored the Cabinet decision.
Unless CN or CP want to head back to court (if further appeal is even allowed) this means shippers are now free to file complaints on penalty and ancillary charges even if a confidential contract is in place.
So we should have peace on that front, with the Agency able to step in when necessary to handle disputes.
The second development that will help broker a peace is Ottawa’s stated plan to pass legislation to better manage the relationships between rail companies and their customers. Shippers have been pushing hard for mandated service level agreements to give them more negotiating power, particularly when they have only one choice for a rail carrier. The railways don’t want Ottawa interfering and believe the current system is working well enough.
Either way, if Ottawa sticks to its promise (and our sources say that it will) we will see the proposed legislation before the year is over. Once passed, that too should help reduce the bickering.
As important as these two developments are, I’m more enthused about the third: the changing attitude among the nation’s Class 1 railway over the past year. Their top executives are singing a different tune. Readily acknowledging they were inward focused for much of the past two decades as they tried to tackle financial difficulties and control internal costs, they say they now need a more outward focus. As Jean Jacques Ruest, executive vice president & chief marketing officer, CN Rail, told CITT’s recent Reposition 2012 conference in Halifax: “Rail needs to address better service. It’s not the cost of the service; it’s if we can provide a service the customer can live with…We need to be more innovative and creative with our services.”
If these words ring true, we can finally look forward to a more collaborative relationship between Canada’s railways and the shippers who depend on them.
And I doubt either side will miss the bickering and acrimony of the past two decades.