Decision No. 336-R-2016

An Erratum was issued November 4, 2016
November 1, 2016
DETERMINATION by the Canadian Transportation Agency (Agency) on whether the Canadian National Railway Company’s (CN) traffic destined to Thornton Yard, Vancouver Intermodal Terminals (VIT) and traffic forwarded to the Southern Railway of British Columbia (SRY) at New Westminster is an eligible movement under the Maximum Revenue Entitlement (MRE) program.
Case number: 
16-05203

SUMMARY

[1] The Agency considered whether, for the purposes of CN’s MRE program, the carriage of grain traffic by CN to Thornton Yard or to VIT or traffic forwarded to the SRY at New Westminster (collectively the “Traffic”) is subject to the MRE.

[2] In making this determination, the Agency examined the following questions:

  1. Is the Traffic moved by CN to a port in British Columbia?
  2. If so, whether the grain must be transferred onto a vessel, for export, at a port in British Columbia for it to be an eligible movement?

[3] For the reasons set out in this Determination, the Agency finds that:

  1. Traffic delivered to the Thornton Yard and VIT is not moved to a port in British Columbia within the meaning of section 147 of the Canada Transportation Act, S.C., 1996, c. 10, as amended (CTA), and it is thus not eligible traffic subject to the MRE; and,
  2. Traffic delivered to New Westminster is moved by rail to a port in British Columbia, for export by a vessel to a country other than the United States of America and is thus eligible traffic subject to the MRE, whether it is moved to a vessel loading facility by a prescribed or non-prescribed railway company or by any other means.

INTRODUCTION

[4] On December 29, 2015, the Agency issued Decision No. 400-R-2015 (MRE determination), containing its determination on the MRE for crop year 2014-2015. In the MRE determination, the Agency determined that CN’s proposal to exclude the identified traffic was both material and was raised after the April 30, 2015 deadline for consideration in the 2014-2015 crop year.

[5] The Agency, as such, did not make the proposed adjustments in respect of the identified traffic for the purposes of the 2014-2015 MRE determination and deferred its determination pending further consultations and review.

[6] This Decision provides the Agency’s determination on whether the identified traffic is to be considered in establishing the prescribed railway companies’ MRE.

BACKGROUND

[7] The MRE is a statutory limit on the overall revenue that can be earned by CN and the Canadian Pacific Railway Company (CP) for the “movement” of western grain.

[8] Section 147 of the CTA (excerpted below at paragraph 28) contains the definitions relevant to this Determination.

[9] As part of its final submissions for the 2014-2015 MRE determination, CN asked the Agency to remove the Traffic from the final grain traffic database filed by CN. CN asserted that the Traffic should be excluded because it “does not qualify under the tests in the definitions for “movement”, “port in British Columbia” and “export”.

[10] On October 13, 2015, Agency staff advised CN that the proposed adjustment to remove the Traffic might be material changes subject to the deadlines for administering the MRE program and, therefore, might not be considered for the 2014-2015 determination, given the April 30 deadline for proposing material changes.

[11] On October 23, 2015, CN filed written submissions with the Agency indicating its position that the proposed adjustments were routine in nature and thus could be made as part of the Agency’s 2014-2015 MRE determination, without the need for further assessment or consultation.

[12] On November 6, 2015, the Agency issued Decision No. LET-R-69-2015 wherein the Agency found that the removal of the Traffic was not a routine issue and that its resolution required further review. The Agency noted that the Traffic is furthered to a port facility located in the Greater Vancouver area, where it can be loaded onto a vessel for export and that in previous years this traffic has always been included as eligible movements.

[13] The Agency determined that resolving this material issue would require the Agency to interpret the relevant provisions of the CTA having regard to the specific railway operations involved and the effect that such a change would have on other industry stakeholders. As CN had brought the Traffic eligibility issue past the Agency’s established deadline of April 30, 2015 for consideration of material methodological changes and/or interpretation issues, the Agency decided that CN’s proposed adjustment to remove the Traffic would not be made for the purposes of the 2014-2015 MRE determination.

[14] On November 20, 2015, CN filed additional submissions wherein, among other comments, it reiterated its position that the Traffic should be excluded from the MRE.

[15] On December 29, 2015, the Agency issued the MRE determination without removing the Traffic. In that determination, the Agency announced the launch of a staff-led consultation on the issue of the eligibility of the Traffic.

CONSULTATION

[16] On February 4, 2016, the Agency initiated a consultation process seeking the views of interested persons on whether the Traffic is considered an eligible movement that is subject to the MRE.

[17] More specifically, the Agency sought comments on the following three issues:

Issue 1: Are the terms under the definition of “port in British Columbia” referring to specific railway stations, areas in the vicinity of specific railway stations (if so, which area), cities or municipalities, locations; or something else or a combination of the above.

Issue 2: Should the expression “for export” be read to mean that the grain must be exported overseas on vessels directly from the point/area recognized as a port in British Columbia; or ultimately exported on vessels overseas, as long as they are delivered by a prescribed railway company at a port in British Columbia.

Issue 3: If a prescribed railway company carries grain for export to a location determined to be a port in British Columbia, does the subsequent carriage of the traffic by a non-prescribed railway company or by truck to a vessel loading facility affect the eligibility of that traffic under the MRE?

Responses were received from the Alberta Federation of Agriculture, the Canadian Canola Growers Association, the Canadian Federation of Agriculture, CN, CP, Pulse Canada and the Western Grain Elevators Association. A summary of the responses follows:

Alberta Federation of Agriculture

[18] Any interpretation should take into account the intent of the MRE, which is to ensure that grain shippers receive reasonable payment for their services to transport grain for export to market while providing price protection (i.e. a reasonable freight rate) to farmers. Decisions on the most efficient manner to transport the grain to export position, such as whether to unload at a transloading facility, are simply an “efficiency consideration” that should not exclude the movement from the MRE program. To do otherwise could encourage railway companies to manipulate and direct traffic to certain points to maximize revenue at the expense of grain transportation efficiency.

Canadian Canola Growers Association

[19] A purposive reading and interpretation of the CTA is required. Consequently, while the long term development of the Port of (Metro) Vancouver (PMV) has necessitated the location of some port-related facilities at a distance from the actual point of vessel berthing, this should not result in the movement’s exclusion from the MRE. Similarly, for truck drayage, the trucking freight cost is borne by the shipper, and a purposive interpretation of that movement should also be used as it is finishing the “last mile” of the movement. In terms of defining what is meant by port, it should be defined by the boundaries of the PMV.

Canadian Federation of Agriculture

[20] The MRE is intended to help grain shippers receive a reasonable rate for the transportation of grain for export markets and to provide price protection for farmers. Grain companies and not the railway companies determine the final destination of grain shipments, including whether they are for export markets. The mere fact that CN decides to ship grain to a transloading facility in the Greater Vancouver Area before it ultimately is shipped to an export facility should not result in the movement being excluded from the MRE. The fact that CN is raising this issue after so many years of transporting grain on the same logistic route is likely an attempt to reduce its penalty for exceeding its revenue in the 2014-2015 crop year. In addition, Canadian Federation of Agriculture recommends that greater clarity on this issue can be obtained through minor amendments/additions to the CTA confirming the stated approach.

CN

[21] With respect to Issue 1, CN states that the places listed in the definition of “port in British Columbia" are railway stations. At the time each place was designated as a “port in British Columbia”, each place was a railway station located on a railway line in British Columbia. This is consistent with the CTA’s definition of “movement”, which means “carriage … by a prescribed railway company” “over a railway line … to” a prescribed place, which necessitates that the movement be completed by rail. Had Parliament intended any of these prescribed places to be interpreted as a specific city, municipality, location, or broad geographical area, Parliament would have stated so in the CTA. Grain carried by rail to destinations at Thornton Yard, VIT, and Cloverdale, South Westminster, and Annacis Island therefore do not qualify as eligible movements of grain.

[22] With respect to Issue 2, CN states the definitions in the CTA require the Agency to interpret eligible “movement” to include only grain carried by one or the other prescribed railway company over a railway line on a continuous route, commencing at an eligible point of origin where grain is loaded into a rail car, or a container of grain is loaded onto a railcar, and terminating at a point of destination that is a railway station designated as a “port in British Columbia”. “For export” means that, upon delivery to the consignee at a siding connected to the railway line at that station, the grain (or container loaded with grain) is removed from the railcar and “at the same geographical point,” transloaded (if bulk) or transferred (if containerized) to a vessel for shipment from Canada.

[23] With respect to issue 3, CN states that to qualify as a movement of western grain, all rail carriage of grain over a continuous route operated by two railway companies must satisfy all components of the statutory definitions. As such, if the railway company that carries the traffic beyond the point of interchange or transfer to the point of destination is not a prescribed railway company, then all rail carriage of grain over a continuous route operated by the two railway companies does not qualify as a “movement” of western grain. The same principle applies to containerized traffic that is delivered and is brought to the ultimate destination by truck after having been transloaded at a transloading facility. This is consistent with the Agency’s finding that CN’s transfer of grain traffic at an intermediary point (i.e. The Pas), to the Hudson Bay Railway Company, for further transport by rail to Churchill, Manitoba (i.e. a named destination) is not an eligible movement for the purposes of the MRE.

CP

[24] For a grain movement to be eligible, the grain must be i) destined for export, ii) carried by a prescribed railway company iii) over a railway line belonging to the railway company iv) to a port in British Columbia from where, at tidewater it is v) loaded onto and transported by a vessel to ultimate export destination. If the rail portion of a multi modal shipment terminates at a location other than one that is listed as being a port in British Columbia, or if a rail shipment terminates on a non-prescribed railway, then it is not eligible for the MRE. Transloaded or intermodal shipments where the rail terminus is at a defined port in British Columbia would be included in the MRE, unless it can be shown that the grain was for domestic consumption.

Pulse Canada

[25] The MRE provisions are entitled to a fair, large and liberal construction and interpretation as will best ensure the attainment of the object of CTA. Parliament’s intent was to have all grain moved to the Vancouver region, by rail, for eventual export from a Vancouver area port as being entitled to the protection afforded by the MRE, irrespective of whether it requires extra handling by transloading terminals and port container terminals, similar to how these movements have been treated to date. The definition of “port in British Columbia” is, therefore, not meant to define railway stations or particular cities or municipalities, but rather it is intended to define localities or “places” where grain is exported and would capture Thornton Yard, VIT and SRY ongoing traffic.

Western Grain Elevator Association

[26] The MRE is meant to apply to western grain exported offshore and the placement of that grain into containers at some point in the logistics chain for eventual furtherance to an export location should not exclude that traffic from the MRE.

LEGISLATIVE REQUIREMENT

[27] The MRE is a statutory limit on the overall revenue that can be earned by CN and CP for the movement of western grain. This requirement is set out in subsection 150(1)(a) of the CTA, which reads:

150(1) A prescribed railway company’s revenues, as determined by the Agency, for the movement of grain in a crop year may not exceed the company’s maximum revenue entitlement for that year as determined under subsection 151(1). (emphasis added)

[28] Section 147 of the CTA provides the following definitions that apply in determining the movements that are to be reflected in the determination of the prescribed railway companies’ revenue and MRE:

“movement”, in respect of grain, means the carriage of grain by a prescribed railway company over a railway line from a point on any line west of Thunder Bay or Armstrong, Ontario, to

(a) Thunder Bay or Armstrong, Ontario, or

(b) Churchill, Manitoba, or a port in British Columbia for export,

but does not include the carriage of grain to a port in British Columbia for export to the United States for consumption in that country;

“export”, in respect of grain, means shipment by a vessel, as defined in section 2 of the Canada Shipping Act, 2001, to any destination outside Canada and shipment by any other mode of transport to the United States for use of the grain in that country and not for shipment out of that country; and

“port in British Columbia” means Vancouver, North Vancouver, New Westminster, Roberts Bank, Prince Rupert, Ridley Island, Burnaby, Fraser Mills, Fraser Surrey, Fraser Wharves, Lake City, Lulu Island Junction, Port Coquitlam, Port Moody, Steveston, Tilbury and Woodwards Landing.

[29] Based on these definitions, a movement of grain will be eligible movement, that is subject to the MRE, if grain:

  1. is carried by CN or CP over a railway line;
  2. from a point that originates west of Thunder Bay or Armstrong, Ontario;
  3. to Thunder Bay (Ontario) or Armstrong (Ontario) or Churchill (Manitoba) or a port in British Columbia; and,
  4. if delivered to a port on British Columbia, is for export by vessel, except for shipment to the US for consumption in that country.

AGENCY ANALYSIS AND FINDINGS

[30] The two main issues to be addressed in this determination are:

  1. Is the Traffic moved by CN to a port in British Columbia?
  2. If so, whether the grain must be transferred onto a vessel, for export, at a port in British Columbia for it to be an eligible movement?

1. Is the Traffic moved by CN to a port in British Columbia?

[31] The term “port in British Columbia” is defined in the CTA by a list that is introduced by the term “means”, and is not ended with general terms allowing the inclusion of additional items of a similar kind. This definition should therefore be read as a finite list.

Thornton Yard and VIT

[32] Thornton Yard and VIT are not items expressly named in the definition of port in British Columbia. Further, both yards are situated in Surrey, British Columbia, which is also not named as a port in British Columbia. As such, irrespective of whether or not the locations listed as a port in British Columbia refer to railway stations, as put forward by CN and CP, or municipalities, neither Thornton Yard nor VIT would qualify as a port in British Columbia.

[33] Thornton Yard and VIT are both situated within what is commonly understood to be the Vancouver Terminal. While Vancouver is named as a port in British Columbia, there is nothing in the CTA to indicate any intention to capture as large of an area. If such had been the intent, it would not have been necessary to discreetly name North Vancouver, New Westminster, Roberts Bank, Burnaby, and Lulu Island Junction as a “port in British Columbia”, as they are all situated within Vancouver Port Terminal area and including them in the list would, therefore, be redundant.

[34] The Agency therefore finds that the carriage of grain traffic to Thornton Yard and VIT does not constitute an eligible “movement” that is subject to the MRE and, as such, rail movements terminating at these locations will be excluded from the determination of CN’s revenues and MRE. It is not necessary to examine the second issue in respect of this traffic.

New Westminster

[35] New Westminster is expressly listed in the definition of “port in British Columbia”. The Agency therefore finds that the requirement for the grain to be moved by rail to a port in British Columbia is met. The Agency must now examine the second issue of the analysis.

2. Whether the grain must be loaded or transferred onto a vessel, for export, at the same geographic location identified as a port in British Columbia for it to be an eligible movement that is subject to the MRE?

[36] The definition of port in British Columbia was first introduced in legislation in the Western Grain Transportation Act (WGTA). Under the WGTA, that definition served to identify the grain movements that were subject to the regulated rate scale and that were eligible for a government subsidy. Originally, the WGTA’s definition specified the following as a port in British Columbia: Vancouver, North Vancouver, New Westminster, Roberts Bank, Prince Rupert and Ridley Island. The WGTA, however, authorized the Governor-in-Council (GIC) to prescribe “any other place in the province of British Columbia” as a port in British Columbia.

[37] In December 1983, the GIC made the Port Moody, British Columbia Regulations, adding Port Moody to the list. In May 1984, the GIC made the British Columbia Prescribed Ports Regulations (BCPPR), which prescribed nine additional places. In April 1990, the BCPPR was amended to add Port Coquitlam to the list of ports in British Columbia.

[38] The WGTA was repealed in 1995, but the WGTA definition was carried over in the CTA as a list, with the exception that the GIC’s power to prescribe additional places in British Columbia by regulation was removed. As such, what is considered to be a “port in British Columbia” has not changed since 1990.

[39] The Regulatory Impact Assessment Statement (RIAS) that accompanied the 1990 amendment to the BCPPR contained the following explanation about the items listed in the definition of “port in British Columbia”:

The list reflected the locations of facilities that handled eligible grain or grain products at the time. A request has been received to add Port Coquitlam to the list. The list is being amended for this purpose.

The Port Coquitlam facility will primarily be used to put specialty crops from boxcars into containers. The Containers will then be shipped by truck or by rail to Vancouver for export.

[40] Based on this, the Agency concludes that:

  • The word “port” in “port in British Columbia” is not to be given the meaning of a marine port in ordinary language, but must rather be understood as a place where grain is handled;
  • Parliament did not intend for the grain to have to be transferred directly onto a vessel at a port in British Columbia. Had this been the intent, places such as Burnaby and Lake City, which are both landlocked, would not have been designated as ports in British Columbia in the CTA; and,
  • The fact that grain is moved by means other than by rail by a prescribed railway company after it has reached a port in British Columbia does not render the traffic ineligible.

[41] Further, the words used in the definition of “movement” reflect Parliament’s intent that eligible movements be distinguished from non-eligible movements based on the notion that traffic is destined to international markets, as opposed to domestic or North American markets, and not in terms of the location where vessels are loaded. In other words, it is the purpose for which grain was moved that needs to be taken into consideration, not the physical location where vessels are loaded. It would be inconsistent with that intent to disqualify movements on the basis that they are handled by another carrier between a named port in British Columbia and the vessel loading facilities.

[42] CN argues that grain moved by the prescribed railway companies to The Pas (Manitoba), where the grain is forwarded to the Hudson Bay Railway Company (HRBY) for ongoing transportation, by rail, to Churchill (Manitoba), is not considered eligible and that consistent treatment would require traffic forwarded by SRY from New Westminster to be also excluded.

[43] On this matter, the Agency notes that the carriage of grain to Churchill is not an eligible movement because the traffic is only carried by the prescribed railway companies to The Pas, which is not one of the eligible destinations named in the definition of “movement”, i.e. Thunder Bay, Armstrong, Churchill or a port in British Columbia. While the traffic eventually reaches Churchill, it is not carried there by a prescribed railway company. This is in contrast to CN’s traffic to New Westminster, where a prescribed railway company carries the grain to a port in British Columbia (i.e., an eligible destination).

[44] The Agency, therefore, concludes that grain traffic that is carried by a prescribed railway company over a railway line to a port in British Columbia, for the purpose of export, is an eligible movement, regardless of how the grain moves from that point to its ultimate vessel loading position. Specifically, the fact that the grain may be carried by SRY or truck to a vessel loading facility does not render this traffic ineligible under the MRE.

[45] Given that New Westminster is a port in British Columbia and that grain traffic is an eligible movement if it reaches a port in British Columbia, even if it is subsequently transported by some other means to a vessel loading location, grain carried by CN from a point west of Thunder Bay to New Westminster constitutes an eligible movement subject to the MRE.

CONCLUSION

[46] The Agency finds that the carriage of grain by CN or CP to Thornton Yard or VIT is not an eligible movement under the MRE.

[47] The Agency finds that the carriage of grain by CN or CP to New Westminster, a port in British Columbia, is an eligible movement as long as the grain is for export by vessel to any destination other than the United States of America.

[48] The Agency will treat the identified traffic for the 2015-2016 and future MRE determinations consistent with its findings in this Determination.

Member(s)

Scott Streiner
Sam Barone
P. Paul Fitzgerald
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