While the Canadian government has made inroads regarding the collection of additional freight rail data metrics and the preservation of interswitching, Transport Canada could go a few steps further in regulating better service in Canada, rail shippers told FreightWaves.
How Canada addresses rail service and data collection metrics can be significant for both American and Canadian shippers and the railways themselves because operations can often cross borders. From a safety perspective, both countries also like to harmonize their regulations as well.
A comparison of the regulations governing rail transportation for grain in the U.S. versus Canada is available on the U.S. Department of Agriculture website.
“Despite their similarities, railroads in each country operate in very different regulatory environments. This is a product of different geographies, historical developments, shipper pressures, policymaker philosophies and other factors,” said the paper on the USDA website, entitled “Parallel or Converging? A Comparative Analysis of the Grain Handling and Rail Transportation Systems in Canada and the United States.”
“In recent years, regulators in both countries have increasingly looked across the border for insight and ways to improve outcomes for railroads and shippers.”
Data collection off to good start, but more data would be better
Transport Canada in January said the Canadian government approved amendments to the transportation information regulations that would require major railways to supply additional freight rail data, including waybill information — such as origin, destination and weight — and traffic data — such as the number of carloads, goods and car types.
This data will be published weekly on the Canadian government’s Transportation and Information Hub “to provide Canadians with a better picture of end-to-end freight rail performance,” according to a Jan. 9 news release. The modifications become effective April 4 and include data pertaining to certain first-mile and last-mile metrics. Plus, the railways must also report the number of operating employees available to move traffic.
These amendments are a step forward to existing information that’s already being collected, rail shippers told FreightWaves.
“The real sort of advantage to having more of this granular information about the railways’ performance and their operations is that it gives us a better line of sight,” said Joel Neuheimer, vice president at the Forest Products Association of Canada (FPAC). Neuheimer, who manages transportation issues for FPAC, says the process of looking at whether Transport Canada should collect additional rail data began several years ago, with the trade group submitting its first comments on the issue in 2018.
“We just don’t have any line of sight on … just how much capacity they have when it comes to different kinds of rail cars — be it box cars or center beams — or how many locomotives are available,” Neuheimer said. “So, this is going to help with managing your risks.”
Neuheimer also maintains this will also help shippers with the ability to manage their supply chains better because they will have a better glimpse into what sort of rail capacity is available.
Furthermore, the data will differentiate commodities even further, so it’s not just “forest products” but lumber versus pulp and paper products, according to Neuheimer.
For Greg Northey, vice president of corporate affairs at Pulse Canada, the recommendations show the government understands there is a need to promote railway competition. Pulse Canada, a trade group, describes pulses as edible seeds from the legume family, such as beans, peas, chickpeas and lentils.
“The positives are that within the regulatory language … they clearly identified that there’s not really the kind of competitive market pressure that drives sharing of information on a voluntary basis,” Northey said.
Presenting the data so it reflects the commodities more accurately also helps pulse producers, Northey said. For instance, canola products used to be just one category, but now there is canola meal and canola oil.
But there are still areas the new amendments didn’t address, such as how to overcome any limits to data collection so that it’s more meaningful, he said.
“I think there’s some fundamental limitations to the approach here,” Northey said. “The data is not built from raw data that then is transformed by Transport Canada or a regulator into metrics. The final metrics themselves come from the railways, which is fundamentally a bit limiting because then, when you layer on the fact that they have to keep it at a very high level, you’re just naturally kind of limited by how deeply you can go into the kind of supply chain information that would really drive by far the best outcomes for the users of the system.
“[That said,] within that limitation, I think they’ve taken it as far as they could. And so they fall short, but it’s still a good direction. Any further information is positive.”
Some examples of data from a more granular level that Northey would have liked to see are more details about service metrics by subdivisions.
Actually, the wish for more data at the subdivision level was one of the recommendations by shipper attorneys at McMillan LLP, according to a Jan. 16 bulletin about the new amendments. The attorneys also said data on railway capacity metrics station by station and data regarding unit train and solid train types would also have been helpful.
“These recommendations simply [would] require railways to collect and disclose information within their control to allow shippers to make better operating and infrastructure investment decisions and policymakers to better assess when regulatory intervention is necessary to address the shortfalls identified by the [Canadian] National Supply Chain Task Force,” McMillan attorneys Ryan Gallagher, Francois Tougas and Lucia Stuhldreier said the bulletin.
Meanwhile, Wade Sobkowich, executive director for the Western Grain Elevator Association (WGEA), said his main concern was the data collection would not measure car order fulfillment on a week-to-week basis.
In a February 2021 letter to Transport Canada, WGEA via Sobkowich said it supported the concept of independent performance measurement and auditability of performance data at a granular level.
“Order fulfillment is a critical measure of railway performance for industry sectors like grain that rely on the supply of railway owned or leased rail cars to move their products to market,” WGEA’s letter said. “We believe that this metric provides the clearest view of performance that freight shippers who depend on railway supplied equipment are receiving week in and week out.”
Shippers want government to modify long-haul interswitching
Although not part of January’s freight rail data collection announcement, Canadian rail shippers have also brought up a need for its government to address long-haul interswitching.
They also understand that both the collection of freight rail data and interswitching programs seek to improve rail service to shippers.
Interswitching is when shippers seek access to a railway via the one they normally use. The concept is similar to reciprocal switching in the U.S., and shippers can seek interswitching within a 30-kilometer radius of an interchange.
Long-haul interswitching occurs when shippers seek interswitching beyond those 30 kilometers, according to the Canadian Transportation Agency (CTA). Shippers must also apply for a long-haul interswitching order, with the government setting the rate, according to a May 2017 McMillan bulletin. CTA says if there is a disagreement with the local rail carrier on the long-haul interswitching service terms or rate, then CTA may settle the disagreement.
But some shippers have said the current format of long-haul interswitching doesn’t help them because it fails to do enough to encourage competition.
Northey said the barriers for shippers to use long-haul interswitching are “extremely high” and unlike the previous, temporary measure the Canadian government implemented before 2018 that enabled shippers to pursue long-haul interswitching without having to go to the government or to the regulator and applying to use the program.
According to a November 2022 McMillan bulletin, that temporary measure via the Fair Rail for Grain Farmers Act called for expanding the radius for interswitching for all commodities from 30 kilometers to 160 in Saskatchewan, Alberta and Manitoba. The Parliament of Canada eliminated the expanded limit in 2017, shortly before the May 2018 passage of the Canada Transportation Act, and replaced it eventually with the current long-haul interswitching program.
“There was a lot of optimism about long-haul interswitching being a powerful tool to try to help shippers, but it just really hasn’t worked out,” Neuheimer said. “And the main reason why is because, quite frankly, the railways just aren’t interested in competing.”
FPAC had said in August that long-haul interswitching uses a methodology that produces an average captive rate rather than a truly competitive one for shippers.
“[Long-haul interswitching (LHI)] has served as a useful tool for rail carriers in arguing that a complainant shipper looking to access a remedy like final offer arbitration has access to alternative remedies — when, in fact, access to LHI offers no meaningful advantages,” FPAC said. “For that reason, FPAC believes that the repeal of LHI would be more useful to shippers than attempting to modify the remedy.”
Sobkowich agreed with Neuheimer’s assessment: “The WGEA shares FPAC’s concerns about long-haul interswitching. LHI is not a useful provision, and I do not believe it has ever been used by any shipper in Canada since it passed into law in 2018. It should be replaced with extended interswitching, which is a competitive access provision.”
The amendments on the freight rail data collection and discussion about long-haul interswitching are related to recommendations from Canada’s National Supply Chain Task Force, which the government convened in spring 2022. The task force released a report in October that includes those recommendations.
The task force’s recommendations for long-haul interswitching included expanding the 30-kilometer distance. The switch-zone rates would also be mileage based and set annually by CTA.
Future of Supply Chain
JUNE 21-22, 2023 • CLEVELAND, OH • IN-PERSON EVENT
The greatest minds in the transportation, logistics and supply chain industries will share insights, predict future trends and showcase emerging technology the FreightWaves way–with engaging discussions, rapid-fire demos, interactive sponsor kiosks and more.