Decision No. 664-R-2001

Quashed by Federal Court of Appeal on June 23, 2003, Docket No. A-193-02.

File No. T6650-2

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INTRODUCTION

Effective August 1, 2000, a new statutory maximum revenue entitlement ("revenue cap") regime for the movement of western grain by a prescribed railway company replaced the former rate scale regime for such movements. As a result, the Canada Transportation Act (hereinafter the CTA) requires the Canadian Transportation Agency (hereinafter the Agency) to determine each prescribed railway company's revenue cap annually and to determine whether each cap has been exceeded by the railway company. The legislation sets out the formula to be used by the Agency in its determination of each railway company's revenue cap and lists certain items that are to be considered by the Agency when determining a railway company's grain revenue. If a railway company's statutory grain revenue exceeds its revenue cap, the railway company must pay out the excess amount and penalties, as specified in the Railway Company Pay Out of Excess Revenue for the Movement of Grain Regulations.

Section 150 of the CTA identifies a number of items that are to be included or excluded from a prescribed railway company's grain revenue for the purposes of the revenue cap determination. For this Decision, it is the interpretation of subsection 150(3) of the CTA which is at issue.

Subsection 150(3) of the CTA reads as follows:

For the purposes of this section, a prescribed railway company's revenue for the movement of grain in a crop year shall not include

1. incentives, rebates or any similar reductions paid or allowed by the company;
2. any amount that is earned by the company and that the Agency determines is reasonable to characterize as a performance penalty or as being in respect of demurrage or for the storage of railway cars loaded with grain; or
3. compensation for running rights.

The issue here specifically involves the interpretation of paragraph 150(3)(b) of the CTA above, notably its reference to demurrage and demurrage revenues and its application to the Canadian Pacific Railway Company's (hereinafter CP) revised grain port demurrage rules which took effect on July 1, 2001.

BACKGROUND

The current matter relates to revisions to CP's demurrage rules which were contained in CP Tariff 6666, Item 7090 and which took effect on July 1, 2001. Under these revised rules, two major changes occurred.

The first revision to CP's tariff involved the elimination of what is known in the industry as the "debit and credit" system. When a railway car is not unloaded at port within the given two-day allowance time, penalty days begin to accrue and these days are referred to as "debit days". Thus a debit day accrues for each day beyond the permitted two days for unloading. Prior to CP's revision, if cars were unloaded faster than the two-day allowance time, credit days would have resulted. In any given month, a terminal operator's debit days were reduced by the amount of credit days in order to determine the demurrage charge that was actually due and payable. Under CP's revised demurrage rules, terminal operators are assessed demurrage solely on the basis of debit days as credit days are no longer taken into account.

The second revision involved a new option that was made available to grain shippers. Under this option, grain cars can be held in the Prairies (i.e., east of Keith, Alberta for movements bound for Vancouver, British Columbia, or west of Thunder Bay, Ontario for movements bound for Thunder Bay) at a per-car rate of $25 per day. This rate compares to CP's per-car port demurrage rate of $60 per day.

According to CP, its revised demurrage rules represent an initiative to reduce the unloading delays, congestion and consequent demurrage at port by encouraging railway car storage in the Prairies rather than at port.

CP's revisions to its grain port demurrage rules were issued on June 11, 2001 and took effect on July 1, 2001. While charges relating to grain movements for only one month - the month of July - are impacted within the 2000-2001 crop year, charges for all movements are impacted thereafter. It was recognized that there would be debate in the industry as to whether the amounts earned by CP under its new rules should qualify as demurrage or as revenue under the revenue cap regime and that the increase in grain demurrage charges could be substantial. Hence, the need arose to address this matter.

Consequently, consultations were undertaken by the Agency to assist in determining the nature and extent of the demurrage rule revisions, including operational and revenue impacts. Five parties were consulted: CP, the Western Grain Elevator Association, the Inland Terminal Association of Canada, the Canadian Wheat Board, and the Canadian Specialty Crops Association.

The Agency authorized the release of an Agency staff letter dated September 21, 2001, requesting comments from all of these participants. Their responses were filed with the Agency, copied to other participants and rebuttals were allowed. Following its review of submissions, the Agency concluded that it was necessary to have an additional one-day consultation session with all of the participants in order to clarify a number of issues. This session was held in Winnipeg on November 22, 2001.

Following the Winnipeg meeting, participants were permitted to file additional written submissions, including replies, to any submissions filed by other participants.

ISSUE

Pursuant to paragraph 150(3)(b) of the CTA, the Agency is to determine for each crop year whether any amount that is earned by a railway company is reasonable to characterize as:

1. a performance penalty; or
2. being in respect of demurrage; or
3. for the storage of railway cars loaded with grain.

Participants generally accepted that CP's new demurrage rules are not to be characterized as a performance penalty or as being in respect of storage. Accordingly, the issue to be addressed is whether any amount earned by CP under its new rules can be reasonably characterized as being in respect of demurrage.

POSITIONS OF THE PARTIES

CP

CP argues that the wording of paragraph 150(3)(b) of the CTA grants the Agency a limited jurisdiction - limited to determining whether any amount earned by the company can reasonably be characterized as being in respect of demurrage. CP states that the Agency cannot enter into any investigation or determination of whether the amount earned itself is "reasonable". According to CP, the Agency is limited to determining whether a given policy qualifies as demurrage.

CP agrees that merely calling something "demurrage" does not necessarily make it so for the purposes of paragraph 150(3)(b) of the CTA and that, as such, the amount earned by the company must "in substance" be in respect of demurrage. Thus, if it is called demurrage but is really a payment for something else, it will not be entitled to the "demurrage" exclusion under subsection 150(3) of the CTA.

CP indicates that the Agency cannot look at the effectiveness or reasonableness of the demurrage program of a railway company, and even if the Agency does not think that a demurrage program is "effective, appropriate or reasonable", the Agency must nevertheless exclude all demurrage amounts from revenue under the revenue cap regime.

On this ground, CP indicates that the reasonableness of a demurrage policy itself is not a matter for the Agency but instead is a matter between the railway companies and shippers. According to CP, the law is very clear in delineating what the Agency is empowered to do under subsection 150(3) of the CTA and that by its wording it grants a limited determination power to the Agency rather than a broad grant of powers. Thus, according to CP, the law does not confer jurisdiction on the Agency to determine whether the performance penalty or the terms and conditions of the demurrage or car storage program are reasonable or unreasonable once it has been determined that the program in question can be reasonably characterized as a performance penalty or as being in respect of demurrage or storage.

In support of its position, CP cites a number of cases, one of which was Canadian Pacific Ltd, v. Canada (National Transportation Agency) (F.C.A.) [1992] F.C.J No. 1161 which was an appellate court review of the National Transportation Agency (a predecessor to the Agency) finding relative to a CP demurrage tariff under the Western Grain Transportation Act (hereinafter WGTA). More particularly, CP cites the following passage from this Decision as an appropriate definition of demurrage:

A charge made by the Railways for the detention of a freight car beyond the free time provided for by the applicable special arrangements tariffs and is intended as an inducement to promptly release the freight car, and alternatively, to compensate partially the Railways, should the freight car be detained beyond the free time allowance.

CP states that its new demurrage program falls within the above definition.

At the consultation session held in Winnipeg, CP officials were asked by the Agency whether the definition of demurrage includes an implied requirement of reasonableness of the amounts that become payable under the program. CP answered in the negative. In written comments which followed, CP indicates that demurrage by its nature is nothing more than a combined charge for compensation, an inducement to encourage speedy return of cars to service following unloading and a penalty for failure to unload within the free time allowed. CP adds that there is no requirement for the terms or level of the charges and penalties to meet any particular standard; they simply have to be charges in respect of the detention of cars past the free time allowed.

CP indicates that its demurrage policies which apply to other commodities generally use debits and credits but that this may change in the future and, in any event, it is an approach that may or may not be part of any given demurrage program. According to CP, debits and credits are not a required item under subsection 150(3) of the CTA nor do they form part of any generally-accepted industry definition.

CP also clarifies that demurrage programs could be categorized as either "straight" or "average". The former levies demurrage charges upon each railway car that is held beyond the free time regardless of the unloading record for other cars. Average demurrage, on the other hand, and as the name implies, effectively assesses the average unloading time across a number of cars against the free time, through its recognition of credit days.

In all cases, according to CP, whether to use a straight or a debit and credit/averaging system is a railway company's prerogative subject to shipper/railway company discussions or final offer arbitration action. As such, consideration of debits and credits is outside of the Agency's mandate during any consideration of the demurrage amount referenced under paragraph 150(3)(b) of the CTA.

CP filed a number of exhibits with the Agency during the November 22, 2001 meeting. One exhibit, entitled Canadian Pacific Railway: Presentation to the Canadian Transportation Agency - Demurrage, contained a summary of the history, evolution and current demurrage process. Of particular interest to the Agency were the amounts relating to CP demurrage charges for a 13-month time interval. For the nine months inclusive from October 2000 to June 2001, CP indicates that it had assessed $68,700, or about $7,600 per month on average, in grain port demurrage charges. However, the demurrage charges that were assessed under CP's revised demurrage rules for the four following months (i.e., from July 2001 to October 2001 inclusive) rose to $302,780, or about $75,700 per month on average. This information suggests that a 10-fold increase in grain port demurrage charges had occurred due to CP's revised demurrage rules.

Railway company customers

In these proceedings, the participants, other than CP, can be generally categorized as railway customers. Thus, for example, the Inland Terminal Association of Canada and the Western Grain Elevator Association act as storage facilities for western grain and serve as loading points for railway cars. The Canadian Wheat Board has the sole responsibility for and jurisdiction over selling wheat and barley for human consumption, domestically or for export. The Canadian Special Crops Association represents the producers of specialty crops, such as lentils and peas, who use CP for the rail transportation of their commodities to final destination markets.

Each organization filed separate written submissions with the Agency in these proceedings. Overall, however, their positions are similar.

The customer organizations disagree with CP's view that the Agency is limited to determining only whether a program can reasonably be characterized as being in respect of demurrage and that the Agency cannot consider the effectiveness or the reasonableness of the demurrage program of a railway company under paragraph 150(3)(b) of the CTA. They make reference to Decision No. 114-R-2001 (regarding the interpretation of matters under Division VI, Part III, of the CTA) and note that the Agency did examine the reasonableness of a demurrage program when it found certain aspects of the demurrage policy of the Canadian National Railway Company (hereinafter CN) to be unreasonable. They note that there has been no challenge to the March 16, 2001 Decision.

Under the March 16, 2001 Decision, it was generally noted that following implementation of the revenue cap legislation, both CP and CN had reduced their free allowance time from five days to two days at port. Under both two-day and five-day allowances, the clock did not start ticking until 00.01 hours following the day of car placement or notification of constructive placement. However, effective March 1, 2001, CN further revised its grain demurrage rules so that the clock started immediately after car placement or notification of constructive placement. The Agency ruled that moving from five days to two days was reasonable given that there is no evidence that grain should be treated differently than other commodities which generally have the same two-day allowances. However, the Agency ruled that the two-day allowance period beginning immediately after placement or notification of constructive placement, which provided grain movement with about 12 hours less than for other commodities, was unreasonable, and that it would allocate an appropriate portion of CN's grain demurrage charges as grain revenue under the revenue cap law.

The customers also argue that CP's position is untenable because it would result in CP being the sole arbiter of what is appropriately treated as demurrage. The customers refer to the following general description of demurrage which appeared in the Agency's March 16, 2001 Decision:

Demurrage: is a charge to freight cars, applicable to the shipper, which typically occurs when established time limits are exceeded for the loading or unloading of the cars. It is a penalty which is intended to penalize inefficient activities beyond the carrier's control.

The customers suggest that according to CP's position, CP would be the sole arbiter of what is to be "inefficient". As such, CP could be completely arbitrary in defining "inefficient" by declaring, for example, that unloading a grain car in more than ten seconds is "inefficient" and thus subject to demurrage. The customers also indicate that CP should be required to identify the "inefficient" activities that it is trying to address as part of the revamping of the CP policies. The customers contend that without defining performance standards that would identify "inefficient" activities, it is impossible for customers to achieve efficiency.

The customers argue that demurrage is intended to penalize inefficient activities "beyond the carrier's control". However, they claim that the railway companies indeed have control of a great deal of information that, if shared with customers, would increase port efficiencies. They state that CP is not presently communicating relevant information relating to matters such as rail car spotting, lifting, and intransit and port arrival times. The customers also state that this type of pertinent information was provided regularly to them when western grain moved under the WGTA, as well as following the repeal of the WGTA under the Car Allocation Policy Group.

The customers state that CP imposed its new demurrage rules without consultation and that demurrage charges are in fact both a revenue generator as well as a penalty which is assessed to a shipper. The portion which should be assigned to either the penalty or revenue generation should take into account the railway company's ability and desire to work with the shipper to minimize the occurrence of demurrage. In this respect, customers emphasize that CP has the means to supply shippers with the needed information to permit informed decision-making regarding car management. The customers contend that if this information were supplied, it would minimize demurrage occurrences and, in the absence of such information, a major portion of this demurrage amount should be treated as railway statutory grain revenue.

The customers are of the view that CP's demurrage rule revision which eliminated the allowance for credits was itself unreasonable. They also note that other commodities generally have a debit and credit system, or a detention system that allows for rewards. They note that while the revision was a simple mechanical change for CP when assessing demurrage charges, it could potentially increase CP's demurrage amount, yet offered nothing in return to help the customers try to reduce terminal handling times. The customers further argue that CP was putting nothing in place of the credit system to reward terminal operators for efficient performance and that even if the terminal operator performed well four out of five times, it could still face a heavy demurrage penalty. The customers also argue that if, as CP indicated, only a few shippers or terminal operators are the source of inefficiencies, CP should deal directly with those parties instead of implementing a system-wide change that impacts all parties.

The customers are also critical of CP's second demurrage rule revision which allows for lower rates for cars held in the Prairies. The source of criticism is the lack of available information pertaining to traffic flows which the customers indicate is needed in order to assess the risks of choosing this option.

Finally, the customer organizations question whether CP's new demurrage rules genuinely attempt to promote efficiency.

ANALYSIS AND FINDINGS

The debate here relates to a fundamental issue: What is the scope of the Agency's mandate under paragraph 150(3)(b) of the CTA insofar as demurrage is concerned? The Agency must answer that question before completing its revenue cap determination which, pursuant to subsection 150(6) of the CTA, must be made on or before December 31, 2001 in respect of the last crop year.

Overall, the revenue cap regime is set out in two provisions of the CTA, namely sections 150 and 151. These two provisions guide the Agency in assessing matters which are accepted among industry observers as being among the most complicated in Canada's transportation network.

The Agency finds that these two provisions are general in nature and are remarkably brief. They essentially leave it to the Agency to assess what is, or is not, relevant in its formulation of revenues aside from drawing special attention to certain items. These items, which are identified in subsections 150(3), (4) and (5) of the CTA, deal with specific components of railway revenues and stipulate that some elements are to be included as revenues, some not, and others may or may not be depending on the Agency's assessment of the facts. However, even the items that are worthy of special attention in sections 150 and 151 of the CTA are also general in nature and require Agency assessment or interpretation.

The Agency also acknowledges that these sections were enacted following a lengthy and often acrimonious debate over the Canadian grain handling and transportation system. Everyone in the industry acknowledged that there were significant problems in the system which impede the evolution to an efficient and effective transportation system. During the debate, positions became balkanized. On the one hand, one position advocated the elimination of any and all regulation so that the free market would determine grain industry structure, conduct and performance. Others, on the other hand, advocated continued regulation as the only way to ensure an efficient and effective system.

Sections 150 and 151 of the CTA represent essentially a compromise between these two extremes. While the pre-existing regulation of western grain rates was repealed, representing as it did a fairly detailed form of rate regulation, it was replaced by railway rate freedom, subject to the prescription that in any given crop year the railway company western grain revenues should not exceed a revenue "cap" or maximum, as determined by the Agency.

Therefore, although the direct regulation of specific grain railway transportation rates is gone, regulatory oversight has been retained. It has been retained in order to ensure that grain shippers are not exposed to excessive rate increases for their railway transportation needs. While the railway companies are now free to set their rates, this freedom is not absolute. It is subject to an overriding constraint - that in any given crop year, their total revenues from grain transportation are not to exceed given maximum amounts. If they do, the law requires that the excess be paid out and penalties apply.

This policy was advocated by the Minister of Transport in support of the then proposed law at the time of his submission to the Standing Committee on Transportation during its examination of Bill C-34, An Act to Amend the Canada Transportation Act.

At the time of his appearance before the Committee, the Minister stated, in part, that a revenue cap, in the federal government's view, will promote price flexibility while safeguarding producers from rate increases.

Aside from identifying several specific items referenced above, Parliament has left it entirely up to the Agency to examine and ultimately determine railway company statutory grain revenues.

In order to carry out this task, following the enactment of Bill C-34 in July 2000, the Agency began consultation with the grain handling and transportation industry. The consultation dealt with the interpretation of a wide range of revenue-related matters and concluded with Decision No. 114-R-2001 dated March 16, 2001.

The consultations leading up to the March 16, 2001 Decision addressed, among other matters, a specific issue involving paragraph 150(3)(b) of the CTA which related to certain changes in CN's demurrage rules. In its Decision, and in the context of paragraph 150(3)(b) of the CTA, the Agency effectively found amounts levied under CN's grain demurrage rules to be unreasonable and indicated that it would allocate an appropriate portion of CN's grain demurrage charges to be grain revenue under the revenue cap regime.

In that case, CN had earlier changed its demurrage rules, whereas those changes which have been introduced by CP were implemented subsequent to the issuance of the March 16, 2001 Decision.

Regarding the scope of the Agency's jurisdiction with respect to paragraph 150(3)(b) of the CTA, CP's stated position is that the Agency can only determine whether its program can reasonably be characterized as being in respect of demurrage.

The Agency finds that the wording of paragraph 150(3)(b) of the CTA conveys a greater responsibility on the Agency than that advanced by CP.

If it were the intention of Parliament to restrict the role of the Agency in the manner claimed by CP, the wording of paragraph 150(3)(b) of the CTA would have been much simpler - comparable to that in paragraphs (a) or (c).

Thus, paragraph 150(3)(a) of the CTA provides that statutory grain revenues shall not include incentives, rebates or any similar reduction paid or allowed by the company. Unlike paragraph 150(3)(b), there are no words in paragraph 150(3)(a) of the CTA which require the Agency to first ensure that the incentives, rebates or similar reductions are reasonable to characterize as such.

Similarly, paragraph 150(3)(c) of the CTA provides that compensation for running rights must also be excluded from railway company revenues. Again, there is nothing in this provision which requires the Agency to ensure that this compensation can be reasonably regarded as running rights compensation.

The Agency finds that if Parliament intended that demurrage was to be treated like incentives or rebates or running rights compensation, demurrage earnings would have been placed either in paragraph 150(3)(a) or (c) of the CTA or in a comparable provision.

This distinction is critical. Specifically, if Parliament intended to preclude the Agency from assessing actual demurrage charges, so that all such charges were automatically a revenue exclusion, demurrage would have been referenced in paragraph 150(3)(a) or (c) of the CTA, where there is a standing, non-discretionary exclusion from revenues for the specific items mentioned.

The Agency accepts that it first must ensure that an amount claimed by a railway company is, in fact, in respect of demurrage. In doing so, the Agency must determine whether any amount earned by the railway company is reasonably characterized as being in respect of demurrage. In order to achieve this, the Agency must move beyond the title given to any program and examine its substance, including its terms and conditions, and the effect or likely effect upon implementation.

The first question then is what does the Agency accept as being demurrage. Here, the Agency finds that demurrage is a dual nature program which provides reasonable compensation to the railway companies for the shippers' use of cars for storage and that applies charges (often referred to as penalties) for the detention of a freight car beyond a stated free-time allowance. There is a linkage or relationship between the level of the penalty, or charges, and the infraction. If this relationship becomes disproportionate, the resulting amount becomes unreasonable as it more than compensates the owner of the rolling stock for the downtime in usage of the asset. This "proportionality test", which equates the harm and consequent compensation to the asset owner to the penalty paid by the shipper, is one that has been generally accepted in the transportation industry for years.

Thus for example, Hugo Tiberg, in The Law of Demurrage, 2^nd ed. (London: Stevens & Sons, 1971) at p. 530 states that "demurrage is always a liquidated sum payable for an allowed detention".

Consequently, with respect to "liquidated sums" as a measure of damages sustained by the railway company, adjudicators are to be mindful of the reasonableness of such sums when making determinations on the payment of demurrage as demurrage, in its operation, is not to become undue or punitive.

The Agency has a statutory adjudicatory mandate for the determination of western grain revenues. In this capacity, the Agency accepts the above test and the balance that it demands.

Support for this conclusion lies within the overall thrust of the revenue cap legislation, as confirmed by the statements of the Minister of Transport made to the Standing Committee on Transport. The Agency concludes that it was Parliament's intent with the enactment of a revenue cap regime for western grain to ensure that farmers and shippers were not exposed to escalating railway rates or revenue-generating terms beyond those which could be explained by normal inflationary pressures.

Accordingly, the Agency must be able to undertake such a balancing assessment (on proportionality) for not to do so would leave it entirely to the railway company to decide what constitutes demurrage and therefore statutory grain revenue. This kind of unilateral control over the setting of grain demurrage policies could impair the effectiveness of the revenue cap regime because at the root of this regime is the principle that overall the shippers of western grain should be insulated from unfettered increases in railway freight rates, and by definition, untoward increases in railway grain revenues.

In this case, the available information indicates that the amounts payable under the new CP demurrage rules have become untoward in nature. Following implementation of its new rules and based on the four months of data available since July 1, 2001, CP's demurrage charges have increased 10-fold. They have increased from approximately $7,600 per month to $75,700 per month. Also, this 10-fold increase has occurred at a time when the system has not been plagued by its traditional pressures in the heavy Fall shipping period as volumes and port congestion delays are less than normal. While the per diem amounts have not changed to any significant extent, the removal of the credit portion of the former demurrage program has significantly affected the resulting amounts being assessed by/for terminal operators. The Agency considers this increase to be unreasonable.

The Agency notes the customers' and CP's concerns over the lack of meaningful exchange of logistics information. The Agency encourages the parties to follow through on their respective commitments to develop effective communication mechanisms to address their respective needs in this respect.

CONCLUSION

The Agency finds that within the meaning of paragraph 150(3)(b) of the CTA, it is unreasonable to characterize a portion of the amount to be earned by CP as a result of its new rules as being in respect of demurrage.

This conclusion is based on the Agency's findings that the wording of the statute contemplates an assessment of the reasonableness of overall demurrage charges on western grain movements; that this interpretation is consistent with the overall thrust of the new revenue cap legislation; that there is no language in the statute to show any intention to depart from the industry standard that demurrage charges should act as both compensation and a liquidated sum payable to the railway company and penalty to shippers and that there should be a degree of proportionality between the two; that the demurrage levy payable to CP under the new policy has gone up from about $7,600 to $75,700 per month; and that there is a lack of effective communication between the railway company and its customers that inhibits customers from efficiently managing their railway car usage.

Consequently, the portion of the amount that is earned above that which would have otherwise been earned under the debit and credit system shall not be excluded from the Agency's assessment of statutory grain revenues under sections 150 and 151 of the CTA.

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DISSENTING OPINION TO DECISION NO. 664-R-2001

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Dissenting opinion of Keith Penner

I have read the reasons of my colleagues, Chairman Robson and Member Bennett, and respectfully disagree with their conclusions. Accordingly, I am dissenting in this matter.

I find that while the Maximum Revenue Entitlement provisions under the Canada Transportation Act (hereinafter the CTA) may be brief, and perhaps broadly stated, within these provisions demurrage has received specific recognition and its treatment is very clear.

The provision dealing with demurrage, which is subsection 150(3) of the CTA reads:

For the purposes of this section, a prescribed railway company's revenue for the movement of grain in a crop year shall not include

1. incentives, rebates or any similar reductions paid or allowed by the company;
2. any amount that is earned by the company and that the Agency determines is reasonable to characterize as a performance penalty or as being in respect of demurrage or for the storage of railway cars loaded with grain; or
3. compensation for running rights.

[Emphasis added]

I concur with the majority that the debate here is a fundamental one relating to the Agency's jurisdiction. That is, and as stated by the majority, the question here is: "What is the scope of the Agency's mandate under paragraph 150(3)(b) of the CTA insofar as demurrage is concerned?" It is only after this mandate is determined that the Agency can proceed to the next step which is to examine all revenues, include some and exclude others, and then total all net inclusions.

This total becomes the Agency's determination of a prescribed railway company's revenue for the movement of grain in a crop year. Under subsection 150(6) of the CTA, this determination must be done on or before December 31 of each year for the preceding crop year.

I find that the language of paragraph 150(3)(b) of the CTA is not ambiguous. The provision refers to "any amount" which, absent any kind of other qualification, means just that. There is no language, implicit or otherwise, that makes it mean less than all amounts. Nor is there anything in the provision, or in any of the contiguous provisions, which imports a kind of reasonableness parameter to the quantum of "any amount" or that grants the Agency any role in assessing the propriety or reasonableness of the demurrage amounts that are earned.

Rather, the reference to "reasonableness" in the provision goes only to the existence of the "demurrage" and not to the amounts that may be earned under it.

Thus, the question here is whether a particular demurrage plan, in this case the revised demurrage policy introduced by CP on June 11, 2001, is, in fact, reasonably characterized as "demurrage". If it is, that is the end of the matter for the Agency and any amounts earned as a result of that policy are excluded from CP's statutory revenues. If it is not, any amounts earned under it are to be included as part of the railway company's statutory revenues.

There is no mandate for the Agency that goes beyond this. That is, there is nothing in the statute that somehow extends the Agency's role to determining that even if the policy is, in fact, one of "demurrage", the amounts that become payable under it must also be reasonable. Stated differently, there is nothing that I can see in either the law or in its evolution that somehow permits the Agency to appropriate to itself the task of deciding what is a reasonable amount for a railway company to derive from its demurrage plan.

In my opinion, if Parliament envisioned this kind of role, it would have said so. In such a case, the provision would have expressly stated that the amounts earned by the company must be reasonable in addition to determining that the plan can reasonably be characterized as demurrage. If this were the intention, surely a word other than "any" would have been used in an effort to somehow qualify the amounts so earned.

The information submitted by the participants in these proceedings describes the nature and effect of CP's previous policy and that of its revised demurrage policy. The submissions have been very helpful and are fundamental in determining whether the revised policy is, in fact, one of demurrage, or whether it is something else.

Based upon the information submitted, I am convinced that the revised policy is one of demurrage. In coming to this conclusion I am guided by the industry-accepted definition for demurrage. This is a definition which has been accepted by the participants in this proceeding and endorsed by the predecessors to the Agency. Thus, I adopt the following definition as established by the Federal Court of Appeal in Canadian Pacific Ltd. v. Canada (National Transportation Agency) (F.C.A.) [1992] F.C.J. No. 1161:

[Demurrage:] A charge made by the Railways for the detention of a freight car beyond the free time provided for by the applicable special arrangements tariffs and is intended as an inducement to promptly release the freight car, and alternatively, to compensate partially the Railways, should the freight car be detained beyond the free time allowance.

I have examined the terms and conditions of CP's revised policy including the charges which apply. There is nothing in any of these to distinguish CP's policy from a typical railway industry demurrage program.

Some of the customer organizations have suggested that the amounts that will become payable to CP under the revised policy, in addition to the lack of communication between CP and the shippers which they say inhibits effective planning, makes the policy, either in whole or in part, something other than demurrage. With respect I cannot agree.

Regarding the demurrage charges that may become payable under CP's policy, the information submitted to the Agency shows that per car demurrage rates in North America in the industry generally vary between a low of C$25 to a high of US$75. In the present case, the charges are C$25 east of Keith and C$60 at port terminal. These charges are clearly in line with accepted industry standards.

I also do not find that the absence of debits and credits in the revised plan means that it is not demurrage. The information before the Agency in these proceedings shows that some of the commodities transported by CP do not have debits and credits in the applicable demurrage policies. Further, while demurrage policies can be based upon averaging principles, utilizing as an example debits and credits, demurrage can also be "straight" in the sense that the charges are payable on a per car basis, with no averaging. Thus industry accepts a straight policy as demurrage and this is exactly what the revised CP policy is.

Here, CP's revised policy, like the previous one, incorporates the industry-accepted condition of 48 hours "free time". Counsel for CP suggested at the Winnipeg consultative meeting that CP could change this, and in fact, could change any part of the policy as part of the railway company's prerogative. They stated at that time that if it called it demurrage it was in fact, then, demurrage.

In this respect, I find that demurrage is not demurrage within the meaning of paragraph 150(3)(b) of the CTA simply because a prescribed railway company calls it such. It has to be demurrage in fact before it can qualify as demurrage for the purposes of the revenue cap.

CP's position changed somewhat in its November 29 submission where counsel stated that the choice of which demurrage rules applies, " is a railway prerogative subject ... to shipper/railway company discussions or FOA action". I do not find this entirely to be the case. There are, and there must be, limits to what CP can do.

In this respect, the Agency and its predecessors have gained substantial knowledge of industry demurrage practices over the years and knows what they are. As an example, if a railway company were to eliminate the accepted 48 hour standard and replace it with something far less, I find that, absent exceptional circumstances, this would not represent conventional demurrage. It would be something else.

Overall, I find that this kind of assessment by the Agency is consistent with the view that as a regulator, the Agency's role under the revenue entitlement provisions is one of broad oversight rather than attempting to regulate the day-to-day commercial practices or policies of the railway company.

This kind of broad oversight must be contrasted with the detailed regulation mandate that the Agency has been given in other areas. For example, under the Pilotage Act, R.S.C., 1885, c. P-14, the Agency has been given an express mandate to review pilotage tariffs and to determine whether the charges to be levied under those tariffs are prejudicial to the public interest. There, clear enabling legislation directs the Agency to undertake this kind of inquiry.

There is no comparable language under the CTA dealing with grain demurrage or the revenue cap.

I acknowledge the existence of section 112 which is set out in Division IV of the CTA which states that "A rate or condition of service established by the Agency under this Division must be commercially fair and reasonable to all parties.". However, this provision does not apply to the Agency's determination of the grain revenue cap which is set out in Part III, Division VI of the CTA. Accordingly, it does not import any reasonableness standard into section 150 which is set out in Division VI of the CTA.

For the above reasons, I find that there is no Agency review jurisdiction over the reasonableness of amounts that can be earned by a prescribed railway company under the railway company's demurrage policy. Once the policy itself can be reasonably characterized as being one of demurrage, any amounts earned under it are not statutory grain revenues for the purposes of sections 150 and 151 of the CTA.

In light of the above, it is not necessary for me to examine the reasonableness of the amounts that will be generated under the revised policy. Yet, as several participants before the Agency argued that it was critical that the Agency do so, I will address their arguments.

Upon the repeal of the Western Grain Transportation Act, R.S.C., 1985, c. W-8 in 1995 and the introduction at that time of the regulated grain rate provisions under the National Transportation Act, 1987, R.S.C., 1985, c. 28 (3^rd Supp.), CP acquired the ability to implement demurrage policies. The information brought before the Agency in these proceedings indicates that these early demurrage policies were new and essentially experimental in the grain transportation industry. Overall, they proved unproductive in eliminating railway car congestion and delays at port. In fact, these policies may have exacerbated the back-ups at port by permitting the use of credit days on cars that remained at port for more than the 48 hour "free" limit.

In these circumstances, it is reasonable to expect CP to change its demurrage policies in order to rectify the problems associated with car movements. After all, the grain transportation and handling system in Canada cannot be static. Certainly, retention of the status quo is not an acceptable option and should not serve as any kind of benchmark. The industry must change over time and, if it is to become more efficient, railway company/shipper commercial policies must also change. This is exactly what CP has done and, in so doing, it has not acted unreasonably in setting a new demurrage path that it estimates will improve the system.

This new path is not a "revenue grab" as some participants argue. In fact, it is not a revenue-generating scheme at all. All of the terms and conditions including the amounts payable are reasonable given the enormity (in terms of cost) of the problem CP is trying to eliminate. I find that the purpose of demurrage is to encourage the efficient use of railway cars and thereby improve car cycle times. To put into effect a plan the purpose of which was to raise revenue through the levying of demurrage charges would be counterproductive to the efficient use of railway cars and contrary to the commercial interests of the railway company.

If it is argued that the new system is not working and, therefore, must be a "revenue grab", it must be noted that CP's revised policy is a relatively recent one, having been introduced only 6 months ago. I expect, as the railway company and shippers become more familiar with logistics under the new policy and as communication improves between the two, that shippers and the railway company will be able to manage their car demand/supply systems better. The result will be a more efficient loading/unloading system with a consequent reduction in port congestion and delays.

I also expect that the amounts earned by CP under the revised policy will diminish over time as the railway company and shippers become familiar with the needs and expectations of each other. As such, while the monthly payments are in the neighbourhood of $75,000 per month today, they will likely decrease over time if the new demurrage plan works, as intended. If not, CP has stated that further adjustments to the program will be instituted as it is evolutionary in nature. Any apprehension that the policy is unreasonable on account of these monthly payments should diminish as industry participants become accustomed to it.

For all of the above reasons, I find that the revised CP demurrage policy, as it presently appears in CP Tariff 6666, Item 7090 is entirely in respect of demurrage. The absence of debit and credit days under this policy and the overall amounts that may become earned under it do not make it something other than demurrage.

As such, it qualifies as "demurrage" within the meaning of paragraph 150(3)(b) of the CTA and any revenues earned by CP as a result of this policy should be excluded from the Agency's determination of statutory grain revenues under Division VI, Part III of the CTA.