CTA Questions Freight Rate Legality – for Sep. 2, 2010

OTTAWA

The Canadian Transportation Agency plans to delve into railway freight charges known as limited distribution tariffs (LDTs). It hopes to render an opinion on them by next February.

The issue is whether LDTs “reflect an agreement between the parties such that they can properly be viewed as contracts between the parties or if they are issued in the same manner as tariffs,” says Geoff Hare, chairman and CEO in a letter to the railways and shipper groups.

The Canada Transportation Act allows public tariffs and confidential contracts between shippers and carriers, he notes. The legislation doesn’t provide for LDTs but they have become an important issue as their use “becomes more widespread in the shipment of all types of commodities by rail.”

The debate began in 2008 when transportation consultant Tom Maville asked CN for copies of LDTs on behalf of a client.CN refused and Maville took the issue to the CTA. In January 2009, the agency dismissed his bid.

It said that while LDTs aren’t covered in legislation, “this may simply be an example where legislation does not keep pace with industry practice and insofar as they are consistent with legislative intent, perhaps they should be accepted mechanisms to initiate traffic movements.”

The Federal Court of Appeal upheld the CTA’s ruling later in the year.

“For some unknown reason, the agency has, however, now some months later, decided to investigate this whole matter respecting LDTs,” Maville says. “It is interesting here to note that similar issues have arisen lately in the United States where shippers and regulators are questioning the legal status of LDTs relative to published freight tariffs and confidential contracts – in other words – which are they and how should they be regulated?”

Maville says that LDTs should be governed by the CTA’s tariff provisions and regulations, which require them to be published and available for public inspection on demand.

The consultation will be headed by John Corey, manager of rail investigations. In September, a discussion paper on the issue will be posted on the CTA’s website www.otc-cta.gc.ca. Views on the paper will be collected during the fall.

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