REGINA – The Saskatchewan Association of Rural Municipalities is worried farmers will have to pay the bill when others are tardy using rail cars.
But Canadian National Rail spokesperson Jim Feeny said the new demurrage system scheduled to take effect Aug.1 should not affect the average producer.
Under the new system, hopper cars will have five days to unload once they reach their destinations. If it takes longer, companies will be penalized. If the unload is less than five days, they will receive a credit.
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If penalties outweigh credits, the demurrage will be charged to the shipper, which generally is a grain company. Producers would only be charged demurrage on producer cars on which the producer-shipper has control over the unloading time, Feeny said.
At a press conference held just hours after SARM received the new regulations, SARM president Sinclair Harrison admitted he did not know how the demurrage system would work, but said he feared producers would be on the hook for the charges.
“We’ve had no producer input … and it appears that producers are going to be paying the bill in many cases and have absolutely no control,” he said. “A review process is imperative and a dispute settlement mechanism very important. We have no way of telling as producers who is at fault at the other end of the line.”
Feeny said there is no specific dispute settlement mechanism set out in the regulations, but “there are always negotiations” because “it’s part of the normal commercial relationship with companies.”
Feeny stressed the new demurrage system had been worked out in consultations with all shipper groups, including the western producer car group, so it should not be a surprise to shippers.
He said the demurrage charges are aimed at shippers who purposely “use hopper cars to store product at a destination until a ship showed up.”
Money from the demurrage charges goes to the owner of the rail cars, which is usually a government, so the charges should not be seen as a cash grab by the railways, said Feeny.
Harrison said the railways have always had the power to levy demurrage charges, but have not done so before.
But Feeny said because of the Western Grain Transportation Act, the railways were prevented from charging demurrage on grain shipments to port. With the end of the WGTA coming Aug. 1, the railways can now charge demurrage on grains as they do on most other commodities they carry.
Encourage efficiency
Harrison said SARM supports the use of demurrage to encourage efficient use of rail cars, but he wants to ensure producers won’t have to pay for inefficient shippers.
Feeny said he can’t see that becoming a major issue to farmers because they generally won’t be charged the demurrage, but he understands why producers are worried about the post-WGTA rail system.
“It’s a new environment and a lot of new things are going to be happening,” Feeny said. “It’s something we’re going to have to find our way through.”
