Supply Chain News / Risk & Compliance / Ground

Canada Bill Would Give Rail Shippers Rights

Rail shippers would gain right to a service agreement under Canada bill.

January 2, 2013

Denis Lebel, Minister of Transport, Infrastructure and Communities and Gerry Ritz, Minister of Agriculture and Agri-Food introduced the Fair Rail Freight Service Act bill to give companies that ship goods by rail the right to a service agreement with railways. It will also create an arbitration process to establish an agreement when commercial negotiations fail.

“The Harper government is taking action in the interest of all Canadians to enhance the effectiveness, efficiency and reliability of the entire rail freight supply,” Lebel said. “This bill will help shippers maintain and grow their businesses while ensuring that railways can manage an efficient shipping network for everyone.”

This announcement fulfills a key commitment following the recommendations made by the Rail Freight Service Review Panel in 2011. The Panel’s report encouraged the use of bilateral service agreements between shippers and railways as an effective way of bringing more clarity, predictability and reliability to rail service.

Most shippers acknowledge there has been improvement in rail service since the Review began. The new legislative provision builds upon that progress, and will help solidify these gains.

“This bill is good news for Canada’s farmers as it will help ensure all shippers are treated fairly by the railroads,” Ritz said. “We will continue to work on improving the performance of the supply chain for all crops, with an emphasis on innovation, capacity, efficiency and stakeholder collaboration through the Crops Logistics Working Group as we move towards a stronger rail freight supply chain and stronger Canadian economy.”

The new process will create a strong incentive for shippers and railways to negotiate service agreements commercially. If these negotiations are not successful, shippers will be able to trigger a fast and efficient arbitration process with the Canadian Transportation Agency. The goal of the legislation is to encourage railways and shippers to work together, said Transport Canada.

The arbitrator will have the mandate to establish terms and conditions of service based on the shipper’s needs, as well as the railways’ requirement to provide adequate and suitable service to all the other customers. Strong enforcement mechanisms will hold railways accountable for obligations imposed by an arbitrator.

An administrative monetary penalty of up to C$100,000 could be issued by the Canadian Transportation Agency for each violation of an arbitrated service level agreement. This is in addition to other existing remedies in the Act (e.g. Level of Service Complaint) to ensure railways meet their service obligations.

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