The Coalition of Rail Shippers (CRS), representing seventeen industry associations whose members collectively enjoy sales revenues in excess of $231 billion and are responsible for annual exports exceeding $175 billion, is pressing for widespread adoption of Service Level Agreements between the railways and those among their customers who want their relationship with the carriers to be governed by such an Agreement.
Background:
The government convened an independent Rail Service Review Panel in 2008 at the time Bill C-8 was passed, amending the Canada Transportation Act. The Coalition of Rail Shippers (CRS) agreed with the conclusions and recommendations of the Panel and with the government’s implementation plan announced on March 18, 2011. A key item of that plan was the introduction of legislation to provide any shipper who wishes one, the right to a Service Level Agreement (SLA) with its rail freight carrier. It is expected that the use of SLA’s will create a framework that encourages effective and balanced commercial negotiations in a market where, as the Review Panel stated “This railway market power results in an imbalance in the commercial relationships between the railways and other stakeholders”.
Most industrial contracts will include many terms, but as a minimum will state
1. What the seller is selling, i.e. a product specification
2. What the buyer will pay
3. How disputes between the parties will be resolved
Railway tariffs specify what shippers will pay, but not the other two elements.
CRS Recommendations:
1. Implementation of the right to a Service Level Agreement (SLA) that will provide some definition of the service that the railway will supply. (While basic elements like transit time and car supply would generally be included in all SLAs, the details will be different for each shipper depending on the specifics of the traffic).
2. A dispute resolution process, probably arbitration, to obtain a SLA if one cannot be achieved through direct negotiation and the same dispute resolution process to be available to arbitrate the enforcement of an established Agreement.
3. Consequences on the railway for non-performance. Railways now have the right, by law, to unilaterally and arbitrarily impose penalties on shippers for non-performance, i.e. demurrage charges for cars held too long for loading or unloading. Shippers would like the same rights.