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Report on Business CN Rail breached obligation to provide adequate service to forest product shippers: regulator

Canada’s transportation regulator has rebuked Canadian National Railway Co. for breaching its obligation to provide adequate service to forest product shippers in the Vancouver area in late 2018.

The Canadian Transportation Agency released its ruling Monday after launching an investigation in January. It had received several complaints from freight shippers about CN, Canadian Pacific Railway Ltd. and BNSF Railway Co. halting railway service in Vancouver and B.C.’s Lower Mainland, a region that feeds Canada’s busiest port.

Railway customers, including chemical makers, grain traders and pulp and paper companies, complained the railways improperly refused to move their shipments, leading to lost sales and idled factories. CN said it was forced to stop traffic due to a variety of reasons, including efforts to avoid worsening rail congestion.

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The CTA cleared CP and BNSF – but singled out CN.

“Freight rail service is essential to manufacturers, farmers, importers, shippers, and the Canadian economy,” said Scott Streiner, chief executive officer of the CTA, in a release accompanying the ruling. “Through this investigation, the CTA was able to quickly look into possible issues with rail service in the Vancouver area that were brought to its attention in late 2018 and early 2019. The determination provides all parties with greater clarity on when rail service embargoes are, and are not, lawful."

The investigation focused on the railways’ issuances of embargoes or permits – notices to customers that certain freight will not be moved. CN announced its intention to impose embargoes on wood pulp shipments in September, 2018, several months before congestion appeared in the Vancouver area. The ruling found CN then halted wood pulp shipments in December “rather than making every reasonable effort to deal with those challenges before unilaterally restricting the receipt, carriage, and delivery of traffic.”

CN issued several other embargoes in late 2018 to a range of customers, but the CTA said many of those were justified.

CN issued a statement Monday night that said it intends to take its case to the Federal Court of Appeal. “The sole breach identified by the agency related to CN’s September, 2018, announcement of its intention to regulate the flow of traffic of wood pulp shipments in Vancouver during December, 2018, for the purposes of avoiding congestion. CN maintains that this was an appropriate and necessary measure in the circumstances,” the statement said.

The CTA ordered CN to submit a three-year plan by Aug. 1 on how it will respond to traffic surges in the Vancouver area and provide a list of embargoes issued in the previous year. Additionally, CN was ordered not to refuse shipments unless “factors beyond its control” demand it.

The investigation, the first of its kind under new powers granted to the CTA, included testimony from the railways, customers and shipper associations at hearings in Vancouver. The government said the expanded mandate of the quasi-judicial regulator to investigate rail service problems without formal customer complaints gives the CTA the ability to address many shipper issues at once.

CP told the hearings it met most of its service obligations in the region and blamed CN’s problems for some cases in which it halted traffic.

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