Dive Brief:

• Canada's railroad regulator will investigate shipper complaints of discriminatory behavior against certain loads heading for Port Metro Vancouver by the country's two largest railroads. A public hearing on the matter will be held Tuesday, Jan. 29.
• According to shippers, Canadian National (CN) and Canadian Pacific (CP) railroads are prioritizing cargo and rationing space to combat congestion in light of new trade deals with the U.S. and Mexico. The investigation will seek to discover whether the railroads violated their "common carrier obligation" requiring railroads to take on all freight.
• "I take great exception to having our company included in a formal investigation into rail service in the Lower Mainland," said CP President and CEO Keith Creel in a Jan. 14 statement, calling the Canadian Transportation Agency (CTA) probe "irresponsible" as the railroad had not yet been formally notified or asked for participation at the time.

Dive Insight:

Railroads and their customers often have an adversarial relationship since their priorities sometimes compete. Traditionally, shippers have been largely at the mercy of the railroads. But the complaints issued by shippers against CN and CP allege more than inconvenience in a Reuters' investigation.

Shipments of peas, lentils, pulp, paper and other commodities have been intermittently restricted by the railroads in recent months. This causes not just delays, but also penalties when loads miss their ships and traders end up in breach of contract. Industries like forest products and pulp mills lost millions in December alone to such delays, according to Reuters.

Freight embargoes, the mechanism the railroads used to manage congestion, are usually a measure of last resort. The shippers claim CP and CN abused this option.

CN says it moved 10% more freight through Vancouver in December than the previous year and urged the regulator to look at the "full supply chain," it told iPolitics in a statement. In November 2018, CP announced it had broken its previous record for carloads of Western Canadian grain and grain products shipped to the Port of Vancouver in a single month.

Both railroads have pledged to fully comply with the investigation and the stakes are high — especially if the result could trigger more regulation.

"The public hearing will give parties an opportunity to submit evidence as the CTA considers whether railway companies operating in the Vancouver area are fulfilling their service obligations and, if they aren't, what remedies should be ordered," said Scott Streiner, chair and CEO of CTA in a Jan. 14 statement. "We’ll get the investigation done as quickly as possible, but we’ll take the time required to gather all the relevant facts."