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On Friday, the Canadian government released a final report on the Rail Freight Service Review, which was launched in 2008 to address supply chain concerns about freight-rail service.

The review’s first phase involved an analysis to better understand the nature and extent of freight-rail service problems and supply chain best practices, including those affecting shippers, terminal operators, ports and vessel operators. The now completed second phase, led by an independent panel, focused on "extensive consultations" with supply chain stakeholders, government officials said in a prepared statement.

Government officials opted to accept the panel's “commercial approach” and plan to implement the following steps to improve the entire supply chain’s performance:
• initiate a six-month facilitation process with shippers, railroads and other stakeholders to negotiate a “template” service agreement and streamlined commercial dispute resolution process;
• table a proposed bill to provide shippers the right to a service agreement to support commercial measures;
• establish a “Commodity Supply Chain Table,” involving supply chain partners that ship commodities by rail, to address logistical concerns and develop performance metrics to improve competitiveness; and
• perform an in-depth analysis of grain supply chain performance issues, led by Agriculture and Agri-Food Canada and Transport Canada.

“Railways, farmers and all shippers depend on one another for their survival and profitability, and we're making sure they have the tools they need to capture efficiencies and strengthen that partnership," said Gerry Ritz, Minister of Agriculture and Agri-Food.

The Forest Products Association of Canada (FPAC) applauded the government for “moving swiftly and decisively” to address "long-standing service issues" identified by the review panel.

“The government has correctly recognized that there are imbalances in Canada's rail system that negatively impact the livelihoods of rural resource communities," said FPAC President and Chief Executive Officer Avrim Lazar in a prepared statement.

The Chemistry Industry Association of Canada (CIAC) also welcomed the final report.

"The Rail Freight Service Review Panel should be commended for doing an excellent job of identifying the key issues, reflecting stakeholder input, and recommending workable solutions to improve and balance the relationship between railways and their customers," said CIAC President and CEO Richard Paton. "We look forward to working collaboratively with our railway partners to address the panel's recommendations in the coming months.”

However, CN officials expressed “serious concerns” about the final report and disappointment with the government's response.
 
“While CN is pleased that, in releasing the report, the government recognized the importance of a supply chain approach and noted its preference for commercial solutions, CN is concerned that the government's decision to consider tabling legislation could stifle supply chain innovation and Canada's competitiveness in the global marketplace,” they said in a prepared statement.
 
The panel's recommendations are “drifting backward toward more regulation instead of encouraging the current momentum for positive change,” said CN President and CEO Claude Mongeau, adding that the panel failed to recognize the “significant positive change” that has been taking place over the past two years to address key service issues, including improved customer engagement, initiatives to improve the first/last mile of rail movements, and enhanced supply chain efficiency and transparency.

“The Canada Transportation Act already provides extensive safeguards to protect shippers' interests, and we believe a regulatory approach runs the risk of stifling innovation and thwarting the progress that has been achieved in the last two years,” he said. “CN remains fully committed to its strategic agenda of operational and service excellence. Deeper customer engagement is the right way to do business and the best way to help our customers across Canada win in their own end markets.”

Canadian Pacific officials also commended the government for recognizing that commercial principles are the key to improving overall supply chain performance, but cautioned that additional regulation for relationships outside of commercial agreements is “completely unwarranted.”

"Isolating the rail sector will not produce the desired results," said CP President and Chief Executive Officer Fred Green in a prepared statement. "While the report suggests negotiated commercial principles are preferred, I am concerned about the application of some of the recommendations involving regulation. The devil will be in the details. We will work with government to ensure equitable accountability is achieved throughout the supply chain and fosters further gains in service reliability.”