Inside Logistics

Government promises rail cargo service level agreement template [July/August 2012 print edition]

Consultations with industry concluded

September 10, 2012
by Carolyn Gruske

OTTAWA, Ontario—It’s limbo time for businesses that rely on rail to ship goods and for the railroad companies that handle the cargo.

Both sides of the transportation equation are waiting until the federal government returns from its summer break and tables legislation in the House of Commons to redefine the relationship between those who require transportation services and those who provide them.

The government has promised it will revise the Canada Transportation Act and create a service level agreement template to manage the relationships between rail companies and their customers. But until the document is put before parliament neither side knows exactly what to expect, even though the government did ask for industry input.

The Coalition of Rail Shippers (CRS) was one group that presented its position to government officials including minister of transport, Denis Lebel, and minister of agriculture, Gerry Ritz.
“They follow pretty much from the findings of the Rail Freight Service Review panel,” said CRS chair Bob Ballantyne. “They highlight the issue of market dominance. There are only two sellers in this particular marketplace and there are a number of shippers who are de facto captives to one of the two railroads.

“The shippers essentially want commercial negotiation, but a fundamental principle for commercial negotiations is there has to be a reasonably balanced marketplace. So the shippers are asking for some changes to the legislative framework to act as a surrogate for normal competitive pressures.

“The panel said there needs to be some change in the legislative framework that governs the negotiations between the buyers and the sellers in the rail freight market. That’s what the shippers are asking for.”
The findings Ballantyne mentioned were presented in the Final Report of the Facilitator of the Rail Freight Service Review—or as it is more generally known, the Dinning Report, after facilitator, Jim Dinning.
The report suggests five key changes:

Transport Canada should make a service level agreement template available to rail freight stakeholders as a guide to all parties (including small shippers), as they negotiate a service agreement.
Transport Canada should make the commercial dispute resolution process publicly available for stakeholders to consider and use.

Railways should be encouraged to revise their current dispute resolution processes to address rail service issues to make them consistent with the process described in the report.
Industry should be encouraged to review and update the service agreement template and commercial dispute resolution process as business conditions warrant. These updated tools should be available from industry or government sources.

Transport Canada should monitor the use of the service agreement template and commercial dispute resolution process. Transport Canada should encourage all parties to improve the process as required.
Although it’s impossible to say how well suggestions made by the CRS and other various parties will be incorporated into the new law, Ballantyne believes the process will take everybody’s concerns into account.

“If you ask the railway guys, they will probably give you the same answer: What the bureaucrats at Transport Canada are trying to do is to get as much input from the railways and the shippers to make what they consider to be the most appropriate and balanced assessment of what’s required to enhance Canadian competitiveness on the world stage.”