Railway says service failure penalties ‘not workable’

TORONTO — The general manager for CN operations in Edmonton says a suggestion that railroads be penalized for performance failures is not workable.

Shauntelle Paul told transportation academics at the recent Canadian Transportation Research Forum (CTRF) in Toronto, that rail companies cannot be held responsible for every hiccup that delays the movement of goods.

"The proposal — and I know there are proposals out there — to link penalties to failures, in our minds, is not necessary and it’s really not manageable," she said. "What it would lead to, in our experience, is a source of major disputes."

Paul was part of a panel discussing the federal government’s ongoing Rail Service Review, sharing the stage with transportation consultant Joseph Schulman of CPCS Transcom, and Bob Ballantyne of the Canadian Industrial Transportation Association.

She said penalties would only put everyone in the supply chain in a perpetual defensive posture.

"We’ll all be in a rear-facing administration position, instead of proactive in looking for solutions," she said. "People will be looking to blame someone else or defend themselves in this kind of penalty regime."

Paul gave the example of delays in unloading grain cars at the Port of Metro Vancouver in November 2009. Much of the delay, which subsequently inconvenienced grain elevators in Saskatchewan, was caused by natural events. 

CN is working hard to improve its processes, but
customers still getting accustomed to changes.

Who failed whom is one of the questions that needs to be asked, but you have to get down to the root cause," she said. "On the surface of it, you might say that the railway could not supply cars to the country elevator in Saskatchewan. But in fact, you really have to trace it back to the terminal in Vancouver that couldn’t unload cars because it was raining."

Ballantyne admitted that "reciprocal penalties for service failures" was one of 10 CITA recommendations to the Rail Service Review panel.

"We recognize that, as Shauntelle mentioned, there are many difficulties in trying to set up performance standards that could be used to evaluate who was at fault in any issue involving the railroad and a number of other people in the supply chain," he said. "We do think there would be some value, though, in some ongoing and continuing monitoring of railway service, and consequences for non-performance."

He said the issue of demurrage charges is particularly apt in this regard.

"At the present time, the law allows the railways to apply penalties to other people in the supply chain unilaterally but it does not allow anyone else in the supply chain to issue financial penalties against the railroad or anybody else," he said. "Nobody’s objecting to demurrage as a reasonable way to make sure assets are not used in an inappropriate manner. But why that should necessarily be limited to only one element in the supply chain is not entirely clear."

Ballantyne noted that on shipper surveys conducted in recent years, rail has been consistently at the bottom of the performance scale.

But Paul said CN has been working very hard to improve its processes, with initiatives that started before the Rail Service Review got underway.

The Rail Service Review was launched by Transport Canada in April 2008. In total, it received more than 140 submissions from interested parties.

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