Decision No. 713-R-2003

December 29, 2003

File No. T6650-2

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INTRODUCTION

This Decision provides the Canadian Transportation Agency's (hereinafter the Agency) determinations of the western grain revenue caps, and revenues, for the movement of western grain by prescribed railway companies for crop year 2002-2003. These determinations, which must be completed by December 31, 2003, are necessary to ensure that a prescribed railway company's western grain revenue does not exceed its maximum revenue entitlement, which is referred to as its revenue cap. If a prescribed railway company's revenue exceeds its revenue cap, the 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. There were two prescribed railway companies during the 2002-2003 crop year; the Canadian National Railway Company (hereinafter CN) and the Canadian Pacific Railway Company (hereinafter CP), about which the Agency made its revenue cap determinations.

The Agency's determination of CN's and CP's revenue caps must utilize the formula, the base year statistics, and the volume-related composite price index as defined in section 151 of the Canada Transportation Act (hereinafter the CTA). It also requires CN's and CP's specific tonnage and length of haul statistics for crop year 2002-2003.

The Agency's determination of CN's and CP's western grain revenue complies with the matters contained in subsections 150(3),(4), (5) and (6) of the CTA. It also complies with the findings related to CN and CP demurrage which are discussed in sections 5.0 - 5.2 of this Decision.

AGENCY DECISION

1.0 CN's and CP's western grain traffic statistics for crop year 2002-2003

A western grain movement for a given crop year is defined in section 147 of the CTA. Key terms are as follows:

"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

1. Thunder Bay or Armstrong, Ontario, or
2. 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;

"grain"

means any grain or crop included in Schedule II that is grown in the Western Division, or any product of it included in Schedule II that is processed in the Western Division;

[Note: there are over 50 types of grain defined in Schedule II as eligible grains under the revenue cap. These include the six major grains - wheat, barley, canola, oats, rye and flax.]

"crop year"

means the period beginning on August 1 in any year and ending on July 31 in the next year;

"prescribed railway company"

means the Canadian National Railway Company, the Canadian Pacific Railway Company and any railway company that may be specified in the regulations.

The Agency's determination of CN's and CP's volume and length of haul statistics for western grain movements for crop year 2002-2003 is shown in Table 1 below. This determination was based on detailed traffic submissions by CN and CP. The submissions were audited to ensure that the traffic qualified as western grain movements and that the related revenue, tonnage and mileage statistics were accurate. Compliance testing, on a sample basis, and editing of the railway company's data was performed by Agency staff. A number of minor anomalies were found and corrected.

Table 1

DESTINATION	TONNES MOVED
	CN	CP	TOTAL
AVERAGE LENGTH OF HAUL (MILES)	930	820	869
Vancouver	2,383,051	2,787,125	5,170,176
Prince Rupert	2,170,932	959,404Note 1	3,130,336
Thunder Bay	1,584,832	4,658,141	6,242,973
Eastern Canada	1,121,976	714,382	1,836,358
TOTAL	7,260,791	9,119,052	16,379,843

The above table indicates that 16,379,843 tonnes of western grain were moved in the 2002-2003 crop year. However, the actual figure is 959,404 tonnes less as the volume for the CP-originating traffic to Prince Rupert, for the purpose of establishing revenue caps, must be assigned to both railway companies handling the traffic, i.e. to CN and CP. The 16,379,843 volume figure is about 26 percent lower than the western grain volume for the previous crop year.

The 2002-2003 crop year average length of haul of 869 miles shown in the above table is 27 miles lower than for the previous crop year. However, if the CP-originating traffic that was diverted from Vancouver to Prince Rupert (because of labour disruptions) is excluded, the average length of haul becomes 895 miles, only one mile less than that reported for crop year 2001-2002. Churchill is an eligible western grain destination however, the Churchill-bound movements which took place did not qualify as western grain. The reason is that the CTA requires the carriage of western grain to be by a "prescribed railway company" and the Hudson Bay Railway Company is not a prescribed railway company.

2.0 CN's and CP's western grain revenue caps for crop year 2002-2003

Subsection 151(1) of the CTA states that the following formula is to be used by the Agency in its determination of a prescribed railway company's revenue cap:

[A/B + ( (C-D) x $0.022)] x E x F

where

A

is the company's revenue for the movement of grain in the base year;

B

is the number of tonnes of grain involved in the company's movement of grain in the base year;

C

is the number of miles of the company's average length of haul for the movement of grain in that crop year as determined by the Agency;

D

is the number of miles of the company's average length of haul for the movement of grain in the base year;

E

is the number of tonnes of grain involved in the company's movement of grain in the crop year as determined by the Agency; and

F

is the volume-related composite price index as determined by the Agency.

For CN, in respect of crop year 2002-2003, the values for A, B, C, D, E and F are as follows:

A

= $348,000,000

B

= 12,437,000

C

= 930

D

= 1,045

E

= 7,260,791

F

= 1.0442

The source of CN's values for A, B and D is prescribed by subsection 151(2) of the CTA. As shown earlier in section 1.0 of this Decision, the 2002-2003 crop year values for C and E were 930 miles and 7,260,791 tonnes respectively. The value of 1.0442 for the volume-related composite price index for crop year 2002-2003 was determined by the Agency pursuant to subsection 151(5) of the CTA in Decision No. 202-R-2002 dated April 25, 2002.

Substitution of these CN values into the revenue cap formula results in a CN revenue cap for crop year 2002-2003 of $192,962,489. In other words, after accounting for the actual tonnage and actual length of haul in crop year 2002-2003, CN's revenue cap is $192,962,489.

For CP, in respect of crop year 2002-2003, the values for A, B, C, D, E and F are as follows:

A

= $362,900,000

B

= 13,894,000

C

= 820

D

= 897

E

= 9,119,052

F

= 1.0442

As above, CP's values for A, B and D are derived from subsection 151(3) of the CTA and as shown in section 1.0 of this Decision, the 2002-2003 crop year values for C and E were 820 miles and 9,119,052 tonnes respectively. The value of 1.0442 for the volume-related composite price index for crop year 2002-2003 was provided in Agency Decision No. 202-R-2002 dated April 25, 2002.

Substitution of these CP values into the revenue cap formula results in a CP revenue cap for crop year 2002-2003 of $232,579,428. In other words, after accounting for the actual tonnage and actual length of haul in crop year 2002-2003, CP's revenue cap is $232,579,428.

3.0 Determination of CN's and CP's western grain revenue for crop year 2002-2003

The determination of a prescribed railway company's grain revenue requires many assessments as to what is, or is not, to be included as revenue; and what is, or is not, an allowable reduction to revenue. A partial listing of such matters appears in subsections 150(3), (4), and (5) of the CTA. A more comprehensive listing was established, following consultation with the grain industry, in Decision No. 114-R-2001.

As a brief summary, a prescribed railway company's statutory western grain revenue stems mostly from billings generated by application of rates contained in published tariffs or in confidential contracts applicable to western grain movements. A railway company's statutory grain revenue also includes: a portion of amounts received for ensuring car supply through the car ordering process; amounts received for providing premium service; amounts received for performing interswitching or exchange switching; amounts received for additional switching requested by the shipper; a portion of grain port demurrage charges. A railway company's statutory grain revenue does not include (as non-revenue matters): any amounts paid or allowed for incentives, rebates or any other similar reductions; amounts that are earned which the Agency characterizes as a performance penalty or as being in respect of demurrage or for the storage of railway cars loaded with grain; amounts earned for staging of rail cars in transit; amounts for additional car switching, necessary due to shipper error or failure to meet obligations; and compensation for running rights.

Allowable reductions to a railway company's statutory grain revenue include: the amortized amounts of contributions for the development of grain-related facilities to a grain handling undertaking that is not owned by the company (Industrial Development Fund contributions); and amounts paid or allowed for interswitching or exchange switching. The following matters do not reduce a railway company's statutory grain revenue: amounts paid or allowed as dispatch; amounts paid by railway companies resulting from the discontinuance of grain dependent branch lines; or amounts paid by the railway companies to municipal or district governments as performance penalties.

Taking all of the above into account, the Agency has determined CN's and CP's western grain revenue for crop year 2002-2003 to be: CN = $175,691,837; CP = $225,989,956.

Railway company records relating to western grain revenue were audited by Agency staff. Initial freight revenue, including payments to other railway companies involved with the carriage of grain, were submitted by CN and CP on a per movement basis. Both were verified, on a test basis, against company accounting records and source documents. Numerous onsite visits were also made to CN and CP offices to ensure that all western grain revenue was captured and that revenue exclusions or reductions were appropriate and accurate.

4.0 Comparison of CN's and CP's revenue caps and revenue

The Agency has determined western grain revenue caps and revenue for CN and CP for the crop year 2002-2003 as summarized below. The grain revenue for both railway companies was below their respective revenue cap.

Table 2

CROP YEAR 2002-2003	REVENUE CAP	REVENUE	EXCESS	AMOUNT BELOW REVENUE CAP
CN	$192,962,489	$175,691,837	-	$17,270,652
CP	$232,579,428	$225,989,956	-	$ 6,589,472

Subsection 150(2) of the CTA provides that if a prescribed railway company's revenues, as determined by the Agency, for the movement of grain in a given crop year exceed the company's revenue cap for that year, the company shall pay out the excess amount, and any penalty that may be specified in the regulations. Pursuant to this provision, Privy Council Order No. P.C. 2001-1051 dated June 7, 2001 established the Railway Company Pay Out of Excess Revenue for the Movement of Grain Regulations. According to these Regulations:

• if the Agency concludes that a prescribed railway company's revenues for the movement of grain in a crop year exceed the company's maximum revenue entitlement for that year, the Agency must make a decision or order requiring the company to pay out the excess amount and the applicable penalty;

• the penalty is:

  • 5 percent of the excess amount, if that excess amount is one per cent or less of the company's maximum revenue entitlement; or
  • 15 percent of the excess amount, if that excess amount is more than one per cent of the company's maximum revenue entitlement.
  • the excess amount and the penalty is to be paid to the Western Grains Research Foundation, within 30 days after the date on which it receives the Agency's decision or order.

As CN's and CP's statutory grain revenues fell below their respective revenue caps for the crop year 2002-2003, no penalties or payouts apply.

5.0 CP and CN demurrage revenue

The following sections deal with paragraph 150(3)(b) of the CTA. 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 railway 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 of running rights.

5.1 CP demurrage revenue

In Decision No. 664-R-2001 dated December 21, 2001, the Agency reviewed CP's demurrage program following a switch from an average demurrage program to a straight demurrage program and determined that a portion of the 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 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.

The Agency re-examined this matter and issued its redetermination in Decision No. 667-R-2003 dated December 1, 2003. The Agency found that no portion of CP's grain port demurrage revenue was revenue, under the Western Grain Revenue Cap regime, for crop years 2000-2001 and 2001-2002.

Following a review of CP's demurrage program for crop year 2002-2003, the Agency finds that no portion of CP's grain port demurrage revenue is revenue under the Western Grain Revenue Cap regime for crop year 2002-2003.

5.2 CN demurrage revenue

Background

In Decision No. 114-R-2001 dated March 16, 2001 the Agency reviewed a change in CN's grain port demurrage program which, on average, reduced the total free time allowance for the unloading of cars at port by about 12 hours. The Agency found that there was no evidence to suggest that grain should be treated differently than other commodities and determined the amounts generated by the revised program not to be reasonably characterized as being in respect of demurrage under the Revenue Cap regime. Consequently, the Agency deemed it appropriate to allocate a portion of CN's grain port demurrage revenue to be grain revenue under the Revenue Cap regime. This occurred for crop years 2000-2001 and 2001-2002.

On July 14, 2003, CN was requested to provide demurrage information for crop year 2002-2003 as part of its annual submission that was due on October 3, 2003. In addition to other information, CN was to provide a statement describing its demurrage program (including terms and conditions) for crop year 2002-2003, and identify any revisions to that program which took place within the crop year. If revisions to CN's demurrage program had taken place CN was requested to explain why the amounts earned under the revised program are reasonably characterized as being in respect of demurrage. CN was also invited to provide the Agency with any comments concerning the June 23, 2003 Federal Court of Appeal Decision, Docket No. A-193-02, which dealt with a CP demurrage revenue issue and which provided direction to the Agency on its mandate under paragraph 150(3)(b).

CN provided the Agency with its submission on October 3, 2003. In its submission, CN provided reasons as to why its grain port demurrage revenue for crop year 2002-2003, including the revenue arising out of the reduced free time allowance for unloading of cars at port by about 12 hours, should all be characterized as being in respect of demurrage, and consequently, should be excluded as revenue under the Revenue Cap regime.

In its consideration of this matter, the Agency also sought opinions from the following shipper organizations; the Canadian Wheat Board, the Western Grain Elevator Association (hereinafter the WGEA), the Inland Terminal Association of Canada and the Canadian Specialty Crops Association. A response was received from the WGEA which was then forwarded to CN for final comment. CN submitted its final comments to the Agency in a letter dated November 28, 2003.

Issues, Analysis and Findings

There were a number of issues that arose during the review. They have been grouped into three categories as discussed below.

1. The interpretation of the Agency's mandate under paragraph 150(3)(b) of the CTA.

CN, in its October 3, 2003 submission stated:

CN takes exception with your statement [in the Agency's July 14, 2003 request for information] that "paragraph 150(3)(b) of the CTA enables the Agency to determine if the level of charges or the manner of imposing the charges results in any revenues that are not reasonable to be characterized as demurrage." The Agency is bound by the judicial ruling of the FCA in making its determination of CN demurrage revenue for the 2002/03 crop year. Either it is reasonable to characterize the amounts of port grain demurrage reported as earned by CN as being in respect of "demurrage", or not. The level of charge or the manner of imposing the charge per se is irrelevant.

The WGEA responded that CN's above statement appeared to be in conflict with the Federal Court of Appeal Decision, issued on June 23, 2003. In its November 28, 2003 submission, CN further stated:

The Agency is bound by the judicial ruling of the FCA in making its determination of CN demurrage revenue for the 2002/03 crop year. Either it is reasonable to characterize the amounts of port grain demurrage reported as earned by CN as being in respect of demurrage...

If they qualify as demurrage charges, then 'the level of the charge or the manner of imposing the charge per se is irrelevant.' These remarks are fully consistent with Mr. Rothstein's pronouncement.

The decision of the Federal Court of Appeal issued on June 23, 2003 is clear. Under paragraph 150(3)(b) of the CTA, the Agency's mandate is to only determine whether any amount claimed by the railway company to be in respect of demurrage may reasonably be characterized as being in respect of demurrage. Once these amounts are found to be reasonably characterized as such, the Agency's authority to deal with demurrage is exhausted. The Agency, as confirmed by the Federal Court of Appeal, is not empowered to determine whether the overall demurrage revenues claimed by the railway company to be in respect of demurrage are reasonable or not.

While the mandate of the Agency under paragraph 150(3)(b) of the CTA is only to determine whether an amount claimed by a railway company as being in respect of demurrage can reasonably be characterized as such, it is clear that to achieve that legislative task, the Agency must have regard to the level of charges and the manner of imposing those charges. It is in that context that the Federal Court of Appeal, at paragraph 40 of its June 23, 2003 decision, stated:

Therefore, the Agency may consider the level of charges and the revenues earned from imposition of those charges. However, its mandate is not to determine the reasonableness of the charges or revenues. It 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.

It is CN's position that once an amount claimed as being in respect of demurrage is characterized as demurrage, the level of the charge or the manner of imposing the charge per se becomes irrelevant. However, and as pointed out by WGEA, this is at odds with the Federal Court's finding that the characterization of the amounts claimed by the railway companies as being in respect of demurrage can only be done through the examination of the charges and the manner of imposing those charges.

Consistent with the Federal Court of Appeal decision, the Agency therefore finds that paragraph 150(3)(b) of the CTA enables it to determine, through the examination of the charges and the manner of imposing these charges, whether the amounts claimed by the railway company as being in respect of demurrage, are reasonably characterized as such.

2. The characterization of the amounts claimed by CN to have been earned as demurrage during crop year 2002-2003.

CN asserted that all amounts that it collects as grain port demurrage can be reasonably characterized as being in respect of demurrage because its grain port demurrage program has fundamental characteristics that are consistent with the definition of demurrage, and the terms and conditions of its demurrage program are reasonable in the circumstances of Canadian export grain.

CN noted that the amounts it collects under its grain port demurrage program relate to the detention of a freight car beyond the free time allowed and are intended by CN to be an inducement to promptly release the freight car, and alternatively, to compensate CN partially should the freight car be detained beyond the free time allowance. CN further noted that the level of charges it assessed for grain port demurrage, of $50 per car per day, is reasonable in comparison to industry standard demurrage charges which are currently higher than the rate charged for grain.

As for the terms and conditions of CN's grain port demurrage program, CN noted that it allowed 2.0 days of free time for unloading before charges applied and it utilized an average demurrage program (as compared to a straight demurrage program). CN indicated that most grain cars can be, and often have been, unloaded within the 2.0 days of free allowance time. CN acknowledged that its grain port demurrage program uses a different start time from that used for other commodities (when counting the time for unloading a car): for grain, the clock begins to tick immediately upon placement or notice of constructive placement; whereas, for other similar commodities, the clock does not begin to tick until midnight following placement or notice of constructive placement.

The Agency notes that the characterization of the amounts claimed by a railway company as being in respect of demurrage must be done by examining the railway company's demurrage program as a whole, including the charges and the manner of imposing those charges. Only if the railway company's demurrage program as a whole, including the charges and the manner of imposing those charges, can be characterized as demurrage, then the totality of the amounts earned and claimed by the railway company to be in respect of demurrage are to be excluded from the railway company's revenue under the Revenue Cap regime pursuant to paragraph 150(3)(b) of the CTA. Conversely, if a demurrage program or a portion of a demurrage program, including the charges or the manner of imposing those charges is found to be uncharacteristic of demurrage, then the totality or a portion of the revenues so earned are to be included in the railway company revenue under Division VI, Part III of the CTA.

"Demurrage" was defined by the Federal Court of Appeal in its decision as "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."

What this definition underscores is that while demurrage serves as an inducement for the unloader to promptly release the freight car, the amount collected is to only compensate the railway companies "partially" should the car be detained beyond the free time allowance.

Hence, the level of the per car per day charge - which directly affects the amount of compensation - is of major importance as an inappropriate level of charge could provide more than partial compensation to the railway company. Such levels must then fall outside of the definition of demurrage.

CN noted that the amounts it collects under its grain port demurrage program relate to the detention of a freight car beyond the free time allowed and are intended by CN to be an inducement to promptly release the freight car, and alternatively, to compensate partially CN should the freight car be detained beyond the free time allowance.

CN also noted that the level of charge of $50 per car per penalty day it assessed for grain port demurrage is reasonable in comparison to industry standard demurrage charges. In recent years, CN charged $50 per car per day for other traffic in Canada but as of July 1, 2003, this rate rose to $75 per day. CN noted that CP's per car per day charge for grain was $60.

The Agency acknowledges that a charge of $50 per car per day provided for in CN's grain demurrage program is in line with current industry standards. Accordingly, a charge of $50 per car per day is not uncharacteristic of demurrage.

The manner in which the charges are imposed is equally important to the characterization of a demurrage program. The Agency notes that two of the main terms and conditions of a demurrage program are the free time allowance and the point at which the clock begins to count the free time allowance. These two terms and conditions go hand in hand in determining the total amount of time allowed for the unloading of a car.

With respect to these two terms and conditions, the Agency notes that shortly after the coming into force of the Revenue Cap regime in 2000, the industry moved from an average of 5.5 days for unloading grain; 5.0 days of free time allowance plus an average of 12 additional hours as the clock, for the purposes of counting unloading time, did not begin to start ticking until midnight following car placement (being either actual placement or notification of constructive placement), to an average of 2.5 days; 2.0 days of free time plus the 12 hours for the clock not starting to tick until midnight following.

Effective February 1, 2001 however, CN departed from the industry average of 2.5 days for unloading (2.0 days of free time plus the 12 hours for the clock not starting to tick until midnight following) and reduced the average period for unloading to 2.0 days by making the clock start to tick immediately upon the placement of the car rather than at midnight. It was this revision that led the Agency, in its March 16, 2001 Decision, to determine that CN's grain port demurrage revenues could not all be characterized as being in respect of demurrage, under the Revenue Cap regime.

The question then is to determine whether, for its consideration relating to crop year 2002-2003, there is evidence that compels the Agency to depart from its Decision of March 16, 2001 which found the terms and conditions relating to railway company time for grain port demurrage to be uncharacteristic of demurrage.

CN defended the appropriateness of its 2.0 days total free time allowance by noting that most grain cars can be, and often have been, unloaded within that time. It noted that evidence to this effect can be drawn from demurrage revenue reports submitted to the Agency for crop year 2002-2003 and for prior years. It also noted that grain terminal elevators at Canadian ports, with relatively limited track capacity, receive relatively more traffic than other rail receivers, and generally are switched by CN more times per day than other receivers. CN then discussed a number of changes that took place between 1995 and August 1, 2000, including the reduction in the free time allowance from 5.0 to 2.0 days and noted that CN's grain port demurrage revenue for crop year 2000-2001 declined versus the two previous crop years.

The WGEA noted that when CN reduced the free time allowance from 5.0 to 2.0 days and then changed the clock so that it began ticking immediately, this change did not in any way change the manner in which the cars would be promptly unloaded, yet decreased the terminal's ability to accumulate the full credit days to which it would have otherwise been entitled. The WGEA added that the clock starting to tick immediately discriminated against the grain industry as, for other commodities, the clock did not start to tick until midnight following car placement.

In its response filed with the Agency on November 28, 2003, CN stressed that the differences between grain port demurrage and demurrage for other commodities were designed to suit different circumstances.

The Agency acknowledges that differences in charges or terms and conditions in programs applicable to different traffic types do not automatically render one program uncharacteristic of demurrage. However, if such a difference remains unexplained or unjustified, it could provide sufficient grounds to characterize the revenue earned under that program, or a portion thereof, as not being in respect of demurrage.

In the case at hand, the Agency finds that CN did not provide suitable reasons or explanations as to why grain port demurrage should be allowed one-half day less total unloading time than for other similar commodities. It is common knowledge in the industry that grain trains have been increasing in size and in total gross content weight in recent years and there are a number of physical constraints and factors affecting the minimum time required to unload a steady stream of grain trains. The reduction of the average period for unloading of grain from 2.5 day to 2.0 days fails to accommodate the needs associated with the movement of grain. The Agency concludes that CN's program is not entirely one of demurrage. In arriving at this conclusion, the Agency has taken into consideration the definition of demurrage provided above, and finds that the manner of implementation of these charges, which effectively limits the available time for unloading grain, penalizes grain shippers. It constitutes a term beyond what can reasonably be regarded as an inducement to promptly release railway cars.

CN asserted that most grain cars can be, and often have been, unloaded within a total time allowance of 2.0 days. A study of the CN demurrage information provided to the Agency confirms that most grain cars did not incur demurrage penalty days since the clock revision change came into effect, on February 1, 2001. In considering this argument, however, the given time period, from February 1, 2001 to July 31, 2003, coincides with the lowest volume of grain shipped in decades. Accordingly, this time period and the data flowing from such period is not representative of typical grain movements from year to year.

Overall, the Agency finds it uncharacteristic of demurrage for grain port unloading to have an average one-half day less total time to unload than for other similar commodities. The Agency finds that the amounts that CN collected as grain port demurrage for crop year 2002-2003 can not all reasonably be characterized as being in respect of demurrage. Rather, the additional revenue that CN received as a consequence of the clock beginning to click immediately will be deemed to be revenue for crop year 2002-2003 under the Revenue Cap regime.

3. Other issues raised during the consultation process.

In its October 3, 2003 submission, CN indicated that the reported amounts of grain port demurrage revenues earned by CN are also deemed and treated by various government car providers as "demurrage" under various commercial agreements between CN and these government car providers, which includes the Government of Canada. It noted that CN has regularly paid government car owners a share of "demurrage" earned and collected by CN on grain movements to Canadian ports.

The Agency does not accept CN's argument for two reasons. First, the Agency is aware of the relationship between CN and Transport Canada regarding the administration of the federal government hopper car program. More particularly, the Agency is aware that under the agreement between CN and the federal government regarding the federal government's hopper cars, CN alone establishes its grain demurrage program and CN simply assesses and collects demurrage charges on behalf of the Government of Canada. CN's grain demurrage program is neither reviewed, nor endorsed in any way, by Transport Canada, the administrator of the federal government hopper car program.
Second, and most importantly, is the fact that any demurrage revenues collected by CN on behalf of the federal or provincial governments are not railway revenue subject to the Revenue Cap regime and, therefore, are not subject to paragraph 150(3)(b) of the CTA.

Also, in its submission, the WGEA claimed that Justice Rothstein's interpretation of "lawful" demurrage brings into question the legitimacy of many demurrage charges because, if the demurrage a railway company assesses a shipper must be "caused by the shipper or consignee" (referring to paragraphs 8 and 48 of the Federal Court of Appeal Decision), then the demurrage charge not caused by the shipper or consignee should be questioned by the shipper or consignee as being a lawful charge.

The Federal Court of Appeal Decision of June 23, 2003 makes it clear 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. However, it is not the function of the Agency to determine questions of liability for payment of demurrage assessment. As indicated in paragraph 48 of the Federal Court of Appeal decision of June 23, 2003, "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."