Rail Shippers Looking for More Fairness
For years, rail shippers in Canada have been squeezed into accepting poor rail service because there are essentially only 2 sellers of the service in the marketplace – Canadian National Railway and Canadian Pacific Railway – essentially a monopoly. Poor rail service has included a variety of problems such as: no service agreements, one-sided negotiations in favour of CN and CP, damaged rail cars that are impossible to load, leaking rail cars, cars that require repair en route, and unreliable deliveries, all of which have resulted in significant financial losses to shippers. Following chronic complaints from Canada’s rail customers of poor service, Transport Canada established the Rail Freight Service Review Panel in September 2009. The Panel’s final report was released March 2011, and offers some hope for rail customers, in terms of balancing the playing field. To quote the final report,
“The Panel’s recommendations form a comprehensive package aimed at rebalancing the relationship between the railways and other stakeholders, in particular shippers. The Panel believes improving shippers’ leverage with the railways is the best way to achieve results that more closely resemble those that would be expected from competitive markets. This should lead to a more effective, accountable and reliable rail-based logistics system. The Panel’s recommendations contain the following four key elements: consultation and notification of service changes, implementation of service agreements, establishment of a fair and balanced dispute resolution process, and enhanced performance reporting.”
In follow up to the above, the federal government has promised new regulations in the near future to improve rail service. Transport Canada recently said it remains committed to tabling legislation this fall to give shippers greater recourse in their disputes with CN and CP. The legislation is expected to include shippers’ rights to a service agreement and a process to establish one should negotiations fail.
In a last-ditch attempt to stave off these new regulations, Claude Mongeau, CEO of CN, is threatening that the freight shippers’ push for improved customer service would cause widespread disruption to the railroad business. Mr. Mongeau is absolutely correct. The monopoly enjoyed by CN and CP for far too long is about to be rebalanced a bit to ensure that rail shippers are treated more fairly. The Coalition of Rail Shippers, comprised of 17 industry associations, argues that it simply wants service agreements that are clear and more akin to agreements on shipping rates. Bob Ballantyne, Chairman of the Coalition of Rail Shippers, recently said, “In most situations, the railway doesn’t say explicitly what it’s going to provide in the way of service, either car supply or consistency of transit time or some of those kinds of things. Yet it certainly is explicit in how much the customer will pay. What the shippers are essentially asking for is to get the railways to sit down and explicitly agree to some level of service performance.”