Commodity shippers unite | Railways not open to changing status quo
MONTREAL — Grain exporters have forged a tight bond with shippers of other commodities in the face of what they see as continued defiance from the railways and betrayal by a federal facilitator.
Representatives of the forestry, mining and automotive sectors were on hand at the Canadian Special Crops Association’s annual convention held June 25-28 in Montreal to express their condemnation of a report issued by a federally appointed facilitator attempting to iron out service problems between the railways and their customers.
Greg Cherewyk, executive director of the Canadian Special Crops Association, said the goal of the federal negotiations was to develop service level agreements and dispute resolution templates.
Read Also
European wheat production makes big recovery
EU crop prospects are vastly improved, which could mean fewer canola and durum imports from Canada.
“To sum it all up, at the end of the process we don’t have either one,” he said.
Shippers said the railways were intransigent throughout the process, he added, and federal facilitator Jim Dinning seemed to think rail customers were asking for the moon.
Steve Godsmark, manager of logistics with Volkswagen Group Canada Inc., said it was immediately evident that the railways fundamentally disagreed with the federal government’s 2011 Rail Freight Service Review report, which found that market power in the rail industry has led to an imbalance in the commercial relationship with shippers.
“It almost seemed that right from day one their attitude was that they wanted to maintain the status quo. They weren’t really open to making any sweeping changes,” he said.
Mark Thomson, general manager of transportation with West Fraser Timber Co. Ltd., was similarly taken aback by the carriers’ attitude.
“At the very first meeting, the railways came in and said, ‘we will not accept anything that is mandated. If that’s the case, the meetings are over,’ ” he said.
Geoff Cowell, director of distribution for Norfalco Sales Inc., a division of Xstrata Canada Corp., said a service template needs to include a description of the service that a customer is buying.
“They were unwilling to make commitments on that,” he said.
When it became clear the parties were not going to reach agreement on the major issues, the shippers wrote a letter expressing opposition to the tiered service approach being promoted by the railways.
“Ultimately, it was pretty disappointing to see that in the final report,” said Thomson.
Cherewyk said the role of a facilitator should be to help two parties come to an agreement.
“We felt (Dinning) overstepped his boundaries and went into arbitrator mode and actually picked one of the offers that shippers in writing flat out rejected,” he said.
Cherewyk said Dinning’s report leaves the impression that shippers were being unreasonable in what they were asking to receive from the railways.
Godsmark said they simply requested what any customer would ask of any service provider.
“We want them to clearly say what they’re going to give us and then come through on it,” he said.
They want the railways to commit to a reasonable range of days to get a product to port and consequences for exceeding that range.
Brad Johnston, general manager of marketing and logistics with Teck Coal Ltd., which loads 750 rail cars a day, said the process did achieve an unprecedented level of alignment and collaboration in the shipping community.
Thirty-eight representatives of that community met for two days following the Dinning report.
“We’ve agreed to move on,” said Cherewyk.
“So while we were frustrated with the process and not particularly pleased with the report, we’re moving forward.”
The group has identified six core principles it wants to see enshrined in pending rail service legislation and has had lawyers draft specific language that could be used by Transport Canada in developing the bill.
Cherewyk said the facilitator process highlights the importance of legislation.
“It has a role because one of the parties has the power to say ‘absolutely no’ and then the discussion ends,” he said.
Shippers say the Dinning report is an irrelevant document that is in the rearview mirror.
However, federal agriculture minister Gerry Ritz, who recently met with shippers, said the government will use the report when developing rail service legislation that will likely be introduced this fall.
“It think it gives us a good foundation to start from,” he told reporters after delivering a speech at the convention. He expects further lobbying from both sides as government formulates the legislation.
“The railways will make arguments for status quo and the shippers are all making arguments that would see a new generation, a new idea come forward in the way freight is handled,” said Ritz.
He thought Dinning did an admirable job, considering the contentious nature of the issue.
“He was hired to try and build consensus starting at zero,” Ritz said. “It’s not a 100-yard dash. This is a long run.”
Shippers said there has been some improvement in rail service, particularly from Canadian National Railway, since the “24 dark months” between 2006 and 2008 that prompted calls for the review.
“They listen now before they say ‘no,’ ” said Marc Leblanc, corporate manager of logistics with Tembec, a shipper of specialty pulp products.
However, they are concerned that Canadian Pacific Railway has hired former CN head Hunter Harrison as its chief executive officer. They say Harrison’s zeal for cost cutting at CN led to abysmal customer service.
They also say there is no way to ensure the improvements that have been made in customer service will last without meaningful legislation to ensure that happens.
