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Grain elevators as ‘works for the general advantage of Canada’

Another regulatory wrinkle with an interesting history

While the “no mixing” rule has long been discarded, a legacy still remains in the form of the 1925 Government of Canada declaration that elevators are “works in the general advantage of Canada.”

This declaration is still in force and sometimes rears its head causing bureaucrats, farmers and others in the grain trade to scratch their heads as to how this rule came about and what it means to the issue at hand. While the ink-stained wretches who write for the Manitoba Agricultural Museum can not address what this rule means in relation to current and future issues, we can cast some light, however dim, on how this ruling came about.

Readers will remember that the “no mixing” rule meant that when grain was graded it was to be stored in bins with only grain of that grade. No other grades of that grain were allowed to be mixed into these bins. This rule was in force during the early days of the western Canadian grain trade, finally disappearing in the 1940s.

Towards the end of the First World War, rumours began to circulate among farmers that the public terminals at the lakehead were making large profits from grain surpluses. The farmers believed that the only way the public terminals could make this sort of money was from violating the rules governing the terminals which included the no mixing rule. The farmers were not pleased with this development and the discontent grew to the point that the Government of Canada investigated the issue.

The investigation revealed that an important source of income for public terminals was “overages” in grain grades, that is after the port terminal had returned grain in terms of tonnage and proper grade to those people and companies that had shipped grain into the port terminal, the port terminal was still in possession of a significant tonnage of grain.

These overages occurred chiefly in the higher grades of wheat. Further investigation pointed out that the chief source of overages was the result of the dockage assigned to the grain as a result of “rounding up.” For example, when inspected, a carload of grain might reveal foreign matter from two to three per cent but the inspector would assign dockage of three per cent. While a small difference on a carload, over the hundreds of thousands of tons of this grade of grain that a port terminal may handle in a year, the difference would come out to a significant tonnage. And while the percentage of dockage assigned to a car was calculated to eliminate all foreign matter, it was known that the grain left the port terminal with a small percentage of dust or foreign matter even though the grain was deemed as commercially clean. Again, while a small difference, over the many tonnes of grain shipped out, the tonnage involved became a significant amount so adding to the overages.

As to why the higher grades of wheat consistently showed overages, this came about as carloads of higher grades of wheat were consistently assigned a dockage of one per cent when in fact the dockage was usually much less in these grades.

Investigation also showed further sources of overages came from shrinkage and from the recovery of grain from the screenings which were paid to the public terminals in lieu of charges for the service of cleaning grain unloaded into the public terminal.

While the government accepted the port terminals’ contention that overages were a normal, if accidental, result of normal operations, the Canada Grain Act was amended in 1919 to require the public port terminals to take stock of the quantity of each grade of grain in the terminal in August of every year. If, in any crop year, the surplus of grain was found to be in excess of one-quarter of one per cent of the gross amount of the grain received by the port terminal during the crop year, then the surplus was to be sold annually by the Board of Grain Commissioners, with the proceeds to be paid to the board and applied to the cost of administering the Canada Grain Act.

The validity of this amendment was soon challenged by a port terminal which had produced an overage that was in excess. This overage was sold by the board with the monies realized applied to board expenses. The port terminal took its case all the way to the Exchequer Court of Canada, pointing out that it had delivered to the owners of grain all grain inspected and weighed into their terminal so extinguishing the right and title of all persons in both the grain and screenings. So the remainder, represented by the overage, was the port terminal’s property. The port terminal held that the title to this grain could not be taken from the company by any legislation enacted by the Government of Canada.

The Exchequer Court of Canada judge, after hearing the arguments of both sides, held that the 1919 amendment was obviously meant to limit the amount and value of the grain surpluses earned in a crop year and was an attempt by the Government of Canada to regulate profits by public terminals. This attempt was in conflict with property and civil rights powers assigned to the provinces. So the judge dismissed the case against the public terminal as the 1919 amendment was not within the powers of parliament. The government then appealed this ruling to the Supreme Court which agreed with the Exchequer Court. The government then appealed to the Privy Council.

However, Justice Duff of the Supreme Court, in his opinion on the appeal to this court, pointed out that the Government of Canada could acquire authority to regulate a local work, such as a public port terminal, by declaring elevators as a work for the general advantage of Canada. An amendment to the Canada Grain Act in 1925 contained this declaration along with a re-enactment of how overages in port public terminals were to be treated. When the appeal to the Privy Council came up for hearing, the case was not argued as the appeal dealt with legislation that had been replaced by the 1925 amendments. The 1925 amendment was not challenged in court.

While the case dealt with public port terminals and this class of terminal is now extinct, the 1925 declaration remains in force and firmly places elevators, both port and country, within the power of the Government of Canada to regulate.

The Manitoba Agricultural Museum is open year round and operates a website which can provide visitors with information on the museum and the Threshermen’s Reunion, including location and hours of operation.

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