The Port of Vancouver, British Columbia, is helping lead a charge among Canadian ports and shippers frustrated by a lack of competition they say leaves them with inadequate intermodal rail service.
It’s a familiar story among captive shippers in the U.S. whose pleas may be answered in Washington this year in the form of rail reform.
In Canada, international cargo dominates the rail industry — 80 percent of rail freight is imported from or exported to the U.S. or overseas, through west coast ports such as Vancouver and Prince Rupert, Atlantic ports such as Halifax and Montreal, or through the U.S. Midwest. Canadian agriculture, forest products, coal and automobile shippers, many of them landlocked, are at the mercy of the two national railroads — Canadian Pacific and Canadian National — to deliver their cargo to and from key international conduits.
Shippers, ports and terminal operators are expressing their dissatisfaction in comments to a federally appointed three-member panel as part of a Rail Freight Service Review. For Port Metro Vancouver, the nation’s largest port, the carriers’ unreliable and inconsistent railcar availability and switching operations are hurting its competitiveness with U.S. West Coast ports. It says 84 percent of users and stakeholders surveyed are dissatisfied or very dissatisfied. On the Atlantic Coast, the Halifax Port Authority says its ability to serve the U.S. Midwest and central Canada is hurt by its only railway. CN fails to provide railcars when needed and has cut daily service from two trains each way to one, the port authority says — and that’s even with a new performance-standards agreement between the port and CN. The Canadian Industrial Transportation Association, which represents 120 of Canada’s largest shippers, says CN and CP wield incredible power over customers because the railroads hold 94 percent of Canada’s rail freight market by value. Railcars arrive late, yet the carriers impose fines for shippers not loading or unloading cars fast enough, CITA says. “The bargaining power between the buyers and sellers in this market is severely out of balance,” it said.
And the Coalition of Rail Shippers, a companion body to CITA whose members represent more than 80 percent of CN and CP revenue, is calling for performance standards for the railways and for penalties to be levied just as the railways charge demurrage to the shippers.
CN and CP defend their services, saying they are not only very good, but also becoming more customer-friendly. Indeed, 90 percent of the time, the railroads’ service is generally accepted to be reasonable and even excellent.
The review — out of which an interim report, including a possible call for further action, could come by the end of the year — was part of a promise by the federal government when 2008’s revised Canadian Transportation Act only partly satisfied customer concerns over rail deregulation. Pressure has mounted since then because shippers say resolving disputes through the federal Canadian Transportation Agency is time-consuming, costly and stacked against them.
It’s the same argument captive shippers in the U.S. make against the Surface Transportation Board, the subject of possible reform legislation led by Sen. Jay Rockefeller, D-W.Va., that could rewrite federal law on competition and pricing power that has governed railroads since deregulation in 1980.
As in the U.S., Canadian shippers, ports and even railroads are calling for a dispute-resolution process that works. Their versions of what that would be, however, are very different.
For the railroads, the process would include an agreement with stakeholders on performance benchmarks for all. Complaints would go to mandatory mediation and arbitration on customer demand, but arbitrators would rule on what shippers see as narrow grounds, and fines against the railroads wouldn’t exist.
The shippers and ports want the CTA involved closely, with binding arbitration as in limited cases now but also with a full set of railway-performance standards that, if not met, would be subject to penalties and fines.
For shippers, their biggest complaint is the “conveyor belt” service CN and CP have instituted, with provision of railcars on a weekly or monthly basis, rather than on the days the customer needs them, leading to long dwell times on the docks and slow switching at railyards.
Shippers note just how captive they are to only two national railways and, in many parts of Canada — including the ports of Halifax, Prince Rupert and elsewhere — to just one. “Railway attitude to captive shippers manifests itself in . . . car supply, on-time delivery of both loads and empties, consistent travel times (pickup to delivery), and pricing,” CITA said in its filing.
Lacking effective competition, “some form of regulatory constraint on railway freedom is needed.” CN counters that Canada’s regulatory regime “is extremely robust and sufficient to protect shipper prerogatives.” It supports benchmarks for rail transit times and other service -- such a system recently was installed at Halifax, and CN is seeking agreement with other ports and terminals -- although without penalties or dispute procedure. Penalties against the railways would be impossible to determine fairly, CN said, because “failures often happen because vessels are late or waterfront terminals are clogged.”
Bunching-up of containers on docks and at inland terminals often results because others in the supply chain don’t operate as the railways do, 24 hours a day, seven days a week -- a standard railway position. Operating around the clock would impose only “minimal costs” on importers, exporters and terminal operators, CN said.
CN concedes there are “a number of areas ripe for improvement” in its services picking up and delivering cargo. It has been improving and promises to do more, but steamship lines, terminals and shippers also must step up, must somehow reduce bunching of ships in harbor, operate 24/7, load and unload faster.
Fred Green, CP’s CEO, makes a similar pitch for “working accords” on performance standards with supply chain partners, though his filing makes no mention of penalties. He would require that 24/7 operations “be the standard business practice” in the supply chain.
Green and his CN counterpart, Claude Mongeau, agree there is competition in the chain, with steamship companies free to call where they will, and with trucking and short-line rail hauls providing alternatives. “No new regulation is required,” CP said.
Port Metro Vancouver wants all stakeholders to agree to service benchmarks and a new dispute-resolution process, but if that fails, new regulation should be considered. Its biggest complaint is “a lack of consistent and reliable day-to-day, week-to-week and month-to-month rail service.”
Terminal Systems, the terminal operator for container terminals Deltaport and Vanterm, said the biggest problem is a “chronic undersupply of railcar equipment (which) imposes costs and uncertainty on supply chain partners and customers whose cargo values and investments . . . far outweigh those of the railways.”
And, despite its new performance-standards agreement with CN, the Halifax Port Authority wants the federal government to “establish a system of ongoing monitoring of service and rate levels,” to strengthen complaint provisions in law, and to provide for penalties on the railways.
CN’s sole service to the U.S. Midwest and central Canada, providing fixed daily capacity and not capacity as needed, has limited the containers carried and reduced the supply of empty intermodal cars, the port authority said.
Not everyone is unhappy with the railroads.
In a two-page letter to the review panel, Don Krusel, president of the Port of Prince Rupert, with its new container facility serving the U.S. Midwest through a single CN line running 2,530 miles to Chicago, said, “Our experience has been extremely positive and truly reflective of CN Rail’s recognition that the North American transportation industry is incredibly competitive” and shippers can go elsewhere than Prince Rupert if they choose.
Courtney Tower can be contacted at email@example.com.