The Forest Products Association of Canada (FPAC) said the new Fair Rail Freight Service Act is a step in the right direction in delivering reliability to shippers and imposing a performance standard on the railways.
The federal legislation was tabled in December after years of complaints by rail customers – including those in the forest sector – about inefficient and inadequate service from the railways.
With rail carriers holding a transportation monopoly in many areas of Canada, FPAC president and CEO David Lindsay said often forestry companies don't have any alternatives to ship large volumes of product to customers.
“If the railway is the only supplier, you don’t have much recourse. You can complain all you want but your leverage to get alternative action is difficult.”
The purpose of this legislation is for rail carriers to enter into a stronger, more binding business relationships with shippers.
Should there be a breach, there’s an arbitration process. The bill – C-52 – is expected to be voted into law this spring.
“The business negotiating relationship is imbalanced,” said Lindsay.
The forest industry complaints over the years are varying and wide-ranging, but inconsistent service is the main beef.
For example, a rail carrier can show up late at a mill to pick up a lumber shipment, or arrive with less than the number of cars ordered, and some of those cars may be damaged.
In another instance, Lindsay was told by one CEO about a shipment that sat on a loading dock awaiting rail service to Vancouver.
The shipment, which was heading to a Chinese customer, was to rendezvous with a ship but the train was running behind schedule and didn’t stop at the mill.
The dispatcher offered to pick up the shipment the next week.
Lindsay said the industry's efforts to globally diversify can all go for naught if product can't be moved of places like Timmins in a timely fashion.
“As the market starts to come back, as we open up markets in China, as we’re always looking at new products and retooling and reinvesting, it’s really tough if we don’t have the infrastructure to get our product off the loading dock.”
Opting to ship product over long distances by truck only drives up freight costs, making it tough for Canadian producers to be globally competitive.
“Imagine putting the equivalent of another 500 trucks a week onto Highway 11 to replace railway cars? There are not that many truckers in Northern Ontario.”
Over the 100 years of FPAC's existence, Lindsay said there are numerous clippings and documents outlining the historically tense relationship between railways and forestry companies. “This is not a recent challenge, it’s been urgent for a long, long time.”
FPAC worked with a coalition of manufacturers, mining companies and grain haulers in having strong input into the proposed legislative remedies to handle disputes.
“We’ve been saying this is a good start,” said Lindsay. “It recognizes that mechanism to correct that imbalance that happens between a monopoly supplier and a customer.
But there are some clauses in the legislation that we need to see a bit more detail what they mean and how the legislation will be implemented.”
Canadian National Railway president and CEO Claude Mongeau denounced the bill, stating that is no evidence of performance problems in the system that warrants the government getting involved through regulation.
Mongeau said CN has actually improved service with cooperation agreements to help customers become more competitive.
“This is why I am troubled by the government's decision to introduce service legislation that in inconsistent with the facts underscoring improved rail service.”
While FPAC has pushed for service level agreements, a dispute settlement mechanism, and penalties for non-compliance, it's disappointed that the legislation doesn't cover existing contracts between shippers and the railways.
Some forestry companies may wait years before they can access these measures. Lindsay said the proposed remedy process requires more clarification as well.
FPAC wants a fast arbitration process where a decision is rendered within 30 to 45 days. Lindsay said providing more opportunities for short line rail operators, which are usually more flexible and attuned to small industry needs, is a much larger and more complex policy discussion than the legislation was intended to address.
