Decision No. 667-R-2003

File No. T6650-7-2

In Decision No. 664-R-2001 dated December 21, 2001, the Canadian Transportation Agency (hereinafter the Agency) determined that a portion of the Canadian Pacific Railway Company's (hereinafter CP) grain port demurrage revenue was unreasonable and, therefore, deemed it to be revenue under the Western Grain Revenue Cap regime.

On June 23, 2003, the Federal Court of Appeal, in Docket No. A-193-02, quashed Decision No. 664-R-2001 and found that the Agency's mandate under paragraph 150(3)(b) of the Canada Transportation Act (hereinafter the CTA) is to determine if the level of charges or the manner of imposing the charges indicates that any part of the revenues arising therefrom is not reasonable to be characterized as being in respect of demurrage. The matter was thus remitted to the Agency for redetermination.

In its redetermination of this matter, the Agency sought opinions from CP and the following shipper organizations (hereinafter the shippers); the Canadian Wheat Board (hereinafter CWB), the Western Grain Elevator Association (hereinafter WGEA), the Inland Terminal Association of Canada (hereinafter ITAC) and the Canadian Specialty Crops Association (hereinafter CSCA). Responses were received from CP, CWB, WGEA and ITAC.

CP asserted that its grain port demurrage programs that were in place for crop years 2000-2001 and 2001-2002 must be characterized as demurrage as the demurrage tariff definitions, terms and conditions, level of charges and applicability are all characteristic of demurrage.

In answer to CP's submission, the shippers asserted that amounts assessed by CP, where the delay in loading or unloading was the fault of the railway company, are not demurrage as per the definition provided by the Federal Court of Appeal. The shippers also asserted that the Agency must afford them the opportunity to offer evidence of instances in which they were not responsible for the delay but were assessed demurrage by CP.

While the Agency agrees with the shippers that demurrage should not be levied when the railway company causes the detention of the car beyond the free time allowed for loading or unloading, it is not the function of the Agency to determine questions of liability for payment of demurrage assessment. As mentioned by the Federal Court of Appeal in its June 23, 2003 Decision "if there is a dispute over fault, that is to be determined between the parties or, if necessary, by the Court. It is not a matter that is relevant under paragraph 150(3)(b) of the CTA".

CWB stated that a 10-fold increase in amounts assessed by CP following its switch from an average demurrage program to a straight demurrage program, combined with a reduction to its multi-car block incentives when port demurrage charges are triggered, was an extreme charge for the detention of cars and consequently, a portion of the demurrage revenues should not be characterized as demurrage.

However, according to the Federal Court of Appeal, the Agency was not empowered to determine under paragraph 150(3)(b) of the CTA the reasonableness of the overall amounts earned by CP following its change in its demurrage program.

As for CP's reduction to its multi-car block incentives when grain cars are not unloaded and released within the 48-hour period allowed, the Agency finds that the conditions associated with CP's multi-car block incentive rate program are unrelated to the Agency's determination, in paragraph 150(3)(b) of the CTA, as to whether certain amounts earned by a railway company may be reasonably characterized by the Agency as being in respect of demurrage. In any event, any revenue resulting from the cancellation of, or reduction to, incentives is deemed to be revenue under the Revenue Cap regime.

CWB maintained that the CP level of charges applied to demurrage days (currently $60 per car per day) may not be commercially competitive as one does not have access to commercial contracts to confirm that the grain demurrage rates are not extreme.

However, the Federal Court of Appeal's Decision implies that the $60 per day per car level of charge for demurrage is not excessive.

Given the above and given the information that CP provided on the level of charges applicable to demurrage penalty days, the Agency finds that there is no further requirement, at this time, to review CP's commercial contracts for grain. However, the Agency is reserving judgement as to the need to compel CP to provide access to commercial contract information for grain for future cases where facts and circumstances may warrant such access.

In light of the foregoing, the Agency finds that no portion of CP's grain port demurrage revenue is revenue, under the Western Grain Revenue Cap regime, for crop years 2000-2001 and 2001-2002.

In view of the Federal Court of Appeal's Decision and based on the above findings, the CP revenue figure shown in Table 2 of Agency Decision No. 669-R-2001 is revised from $363,323,473 to $363,306,073 and the Amount Below the Revenue Cap is revised from $2,685,964 to $2,703,364.

Further, the CP revenue figure shown in Table 2 of Agency Decision No. 670-R-2002 is revised from $277,873,748 to $277,828,600 and the Amount Below the Revenue Cap is revised from $8,688,729 to $8,733,877.