The Canadian Grain Commission wants to put the “direct” back into
direct hits.
The commission announced new rules last week designed to ensure that
grain shipped under the direct hit program goes straight from rail cars
to vessels.
Too often that grain ended up stored in terminal elevators just like
regular shipments.
“The idea is to return to the original intent of direct hits,” said Jim
Stewart, director of industry services for the commission.
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The new rules will put more pressure on shippers to make sure they have
all the transportation logistics arranged before undertaking a direct
hit.
But grain handlers say that will increase the costs of direct hits and
may be a disincentive to using the cost-saving alternative.
“There is some money to be saved if you can do a direct hit because
some of the elevation charges are not there,” said Ed Guest of the
Western Grain Elevator Association. “But you have some pretty big risks
and the risks just got a little bigger.”
Direct hit shipments mean putting trains together at inland terminals,
shipping to export position and unloading directly into an arriving
vessel. Not only are terminal handling fees avoided, but the rail cars
are returned to the country more quickly, thus reducing overall rail
costs.
In the 2000-01 crop year there were 110 direct hit shipments to
Vancouver and 21 to Thunder Bay. About halfway through the current crop
year there have been 47 direct hits at Vancouver and four at Thunder
Bay.
The new regulations, which go into effect at the beginning of the next
crop year Aug. 1, specifically state that grain destined for direct hit
shipments cannot be stored in licensed terminal handling facilities.
Under the previous policy, direct hit grain could be diverted into a
terminal for 20 days of unregistered storage at no charge to the
shipper. The idea was to provide a buffer in cases where a vessel was
late arriving to pick up the grain.
The policy also allowed grain in regular registered storage in the
terminals to be used to fill a direct hit vessel if loaded rail cars
were late arriving from the country.
In both scenarios, the shipper could avoid demurrage charges.
However, Stewart said that not only eroded the original concept of
direct hits, but also made it difficult for the commission to maintain
proper records of grain movement in and out of the terminals.
“It became very confusing for the commission to track since it was
unregistered storage.”
He added the commission will provide exemptions and allow grain to go
into unregistered storage on a case-by-case basis, for things like
inclement weather or unavoidable vessel delays. However, shippers will
have to pay a monitoring fee and any stocks left in the elevator after
the vessel is loaded will have to go into registered storage.
Guest doesn’t think the original intent of direct hits is undermined by
putting grain into unregistered storage for 20 days or allowing
shippers to top up a vessel from regular terminal stocks to avoid
demurrage charges.
“I just don’t particularly understand why they’re doing it, especially
if that can mean higher costs,” he said.
The notion of case-by-case exemptions provides little comfort, he
added: “There is uncertainty and if they turn you down it costs you
money.”
Under the new rules, direct hit grain must be officially inspected and
weighed as it’s loaded into the vessel.
Previously shippers could choose from three options for official
inspection and weighing: when the grain was loaded into rail cars at
the country elevator, when it was unloaded from the rail cars at the
terminal or when it was loaded into the vessel.
Guest said he doesn’t understand why the official inspection and
weighing can’t be done at the country elevator.
“If the buyer and the seller can agree on a commercial basis that a
country inspection is OK, then it should be OK,” he said. “Why does the
CGC have to be involved?”
Stewart said he doesn’t think the changes will be a disincentive to the
use of direct hits.
“All we’ve tried to do is bring everything together into one simple
policy which is standard across the board,” he said.
