UNREASONABLE ANCILLARY CHARGES, TERMS OR CONDITIONS

Federal railway companies, such as CN and CP, publish tariffs setting out the rates and charges for the various services they provide, together with rules governing the application of such rates and charges. Recent amendments to the Canada Transportation Act empower the Canadian Transportation Agency (the “Agency”) to review and assess the reasonableness of ancillary charges and associated terms and conditions set out in a railway tariff that applies to more than one shipper. If the Agency finds that the charges or conditions are unreasonable, it can establish new charges and conditions, and the railway company must then vary its tariff to reflect the Agency’s Order. The charges and conditions established by the Agency remain in effect for up to one year.

In determining whether a charge, term or condition is unreasonable, the Agency must take into account the following factors:

• the objective of the charges or associated terms and conditions, e.g. discouraging shippers from overloading railway cars
• the industry practice in setting the charges or associated terms and conditions, i.e. whether other railways have the same charges, terms and conditions
• in the case of a complaint relating to the provision of any incidental service, the existence of an effective, adequate and competitive alternative to the provision of that service, e.g., warehousing or weighing
• any other factors the Agency considers relevant

The new charges and conditions established by the Agency must be commercially fair and reasonable to the shippers who are subject to them as well as to the railway company.

A complaint that charges or associated terms and conditions are unreasonable may be made by a shipper who is subject to those charges or conditions. The Agency has the power to combine two or more complaints and deal with them as a single proceeding. Since the application of the ancillary charge or condition to other shippers is one of the factors the Agency must consider in making its decision, there is a good chance that shippers who share similar concerns with respect to the same tariff provision will be able to persuade the Agency to combine their complaints. Alternatively, other shippers who have an interest in the matter may apply to the Agency to participate as interveners.

Complaints must be made in writing to the Secretary of the Agency. A complaint should set out the basis for the complaint and include any supporting information and documentation. The railway company has the right to provide a written answer, and the complainant may file a written reply to the railway’s answer. A copy of each document that is filed with the Agency must be provided to the opposing party.

While the Agency is not required to hear oral evidence from witnesses, it may decide to do so in order to provide other shippers who are subject to the same charges, terms or conditions an opportunity to make presentations to the Agency on the subject.

Transport Canada has indicated that this new remedy is intended to deal with ancillary charges and not line-haul rates. The new legislation does not use this language. It provides for complaints regarding charges “for the movement of traffic” or “for the provision of incidental services” but excludes complaints in respect of “rates for the movement of goods”. In addition, the legislation distinguishes between ancillary charges, terms or conditions related to the movement of traffic and those with the provision of incidental services. The shipper will need to determine into which category the charges, terms or conditions to which the complaint relates belong. This will not always be obvious. The expressions “incidental services”, “charges for the movement of traffic”, and “rates for the movement of goods” are not defined in the Act. As shippers begin to use the new remedy, the Agency will likely be called upon to define the scope of these terms more clearly in response to disputes over whether a particular charge is eligible for review by the Agency or whether the existence of competitive alternatives is relevant in a particular case.

In reaching a decision, the Agency is likely to consider the following questions:

• What triggers the charge complained of?
• Is this something within the control of the shipper, the railway company, a third party?
• What is the objective of the charge or condition complained of?
• Does the charge or condition advance this objective?
• How do the charges or conditions compare with those of other railway companies?
• Does the charge or condition relate to an incidental service?
• If so, what alternatives does the person making the complaint have to obtain the incidental services to which the charges or conditions relate?
• How is the shipper making the complaint affected by the charge or condition?
• How are other shippers affected by it?
• What costs does the railway incur in providing the service to which the charge or condition applies?

In order to address these questions, a complaint should include or be supported by the following:

1. an explanation or illustration of how the charge or condition applies to the shipper’s traffic
   
   This would include a discussion of how the charge is most often triggered and what if any steps the shipper can take to avoid the imposition of the charge. If the complaint is occasioned by a change in the railway’s rules or charges, the application of the new tariff provision should be contrasted with that of the previous version.


2. a discussion of the objective of the charge or condition and whether this objective is advanced by the tariff
   
   In some instances it may be difficult for shippers to obtain reliable information concerning the objective of the charge or condition. In others, a railway company may have included an explanation of their rationale for imposing or changing the charge or condition on their websites or in other informational material sent to shippers. In some instances, for example, charges imposed for weighing at a shipper’s request, the main objective of a charge may be to compensate the railway company for work that is being performed. In other cases, for example failure to use a railway company’s on-line communications platform to submit bills of lading or release cars, the main objective may be to alter shipper behaviour.


3. information regarding how other railway companies handle the charge or condition at issue
   
   Most railway companies now make their tariffs available via the internet. This will enable shippers to compare the tariff provision that is the subject of a complaint with those of other railway companies.


4. information regarding competitive alternatives
   
   If the complaint relates to an incidental service rather than a charge for the movement of traffic, evidence demonstrating that there are no effective, adequate and competitive alternatives will be required.


5. effect of the charge or condition on shippers
   
   The CTA does not require a shipper to demonstrate that the ancillary charge or condition at issue is damaging to its business. A more general description which illustrates the unfairness or unreasonableness of how the charge or condition applies to the shipper or to other shippers should nevertheless be included. The railway company, in its written answer, may question the extent to which the shipper’s business interests are harmed, but the shipper should resist any attempts to have this factor treated as a criterion in the Agency’s determination of the matter.

Depending on the circumstances of the case, evidence in the following areas may also be relevant:

1. railway costs
   
   Where compensation for services rendered is the main objective of a charge, the cost which the railway company actually incurs to provide the service will be relevant. This type of evidence is not readily available to shippers, but there are consultants with expertise in railway costing who can provide an analysis of the costs involved. Costs may also be a relevant consideration in connection with charges designed to alter shipper behaviour. For example, do demurrage charges bear any relation to additional costs incurred by a railway company when the allotted free time for loading or unloading is exceeded or do charges imposed for faxed railcar releases correspond to additional costs incurred by the railway company in connection with this communication?


2. discrimination
   
   If the ancillary charge or condition discriminates unfairly between different shippers or commodities, this should be brought to the Agency’s attention. An example of this would be a demurrage rule that provides for less free time at loading or unloading for some commodities than for others.


3. other forms of unfairness
   
   If the specific shipper conduct that a charge or condition is intended to discourage is limited to a certain industry or commodity group, this may support an argument that the ancillary charge or rule is overly broad, by punishing or imposing onerous conditions on all shippers in order to address problems created by only a few.

The Agency must make a determination within 120 days after receiving a complaint. When a complaint is dealt with entirely in writing, however, it will generally require less time.

The number of participants at particular proceedings will also be a factor affecting its length. A case relating to an ancillary charge that attracts the attention of many segments of the shipper community, may involve several parties and intervenors. The Agency may determine that additional time is required to deal with all relevant evidence and submissions and may request that the parties consent to an extension of the 120 day timeframe.

If the Agency determines that a charge or associated term or condition is unreasonable, it can establish new charges and conditions. The railway company will then be required to amend its tariff accordingly.

The Agency will specify the time during which its order remains in effect, but that time may not exceed one year.

The Agency does not have the ability to order a railway company to reimburse shippers for charges paid that are subsequently found to be unreasonable.

Sample of a complaint letter that can be customized for customer use.

Ancillary-Charges-Sample-Complaint-Letter.doc

These instructions are intended to assist shippers who wish to make a complaint to the Canadian Transportation Agency concerning unreasonable ancillary charges and conditions in using the sample form of letter.

Ancillary-Charges-Instructions-for-Completing-the-Complaint-Letter.pdf

Responding to issues raised in the railway company's answer. While the Canada Transportation Act identifies certain specific criteria for determining whether an ancillary charge or condition is reasonable, it also allows the Agency to consider any other factor it considers relevant.

Ancillary-Charges-Supplementary-Information-for-the-Ancillary-Charge-Complaint-Process.pdf