Regulated Interswitching

Interswitching involves the transfer of traffic from the lines of one railway company to the lines of another railway company. Where a shipper is served by only one railway, the shipper is entitled to transfer its traffic to another railway at a rate set by the Agency if the shipper's facility (either at origin or at destination) is located any point within a 30 km radius of where the two railways connect.

The point of connection must be an "interchange", that is, a place where loaded and empty railcars may be stored until they are delivered or received by the other railway. CN and CP publish lists of such interchange points on their respective websites (in CP's case as part of its Tariff CPRS 6666).

The applicable interswitching rates have been established by the Agency in the Railway Interswitching Regulations for different "zones" based on track distances between the shipper's facility and the interchange. The regulations specify a rate per car, both for single cars and for 60 car blocks. Regulated interswitching gives a shipper who would ordinarily be dependent on a single rail carrier access to a second railway company, which may offer competitive rates and service.

Where the lines of two railway companies connect but there are no arrangements for interswitching in place, the CTA permits municipal governments or “any other interested person” to apply to the Agency for an interswitching order which will require the railway companies to provide reasonable facilities for the convenient interswitching of traffic in both directions.

Extended Interswitching

A shipper who is outside of the 30 km radius may apply to the Agency for an order that will deem its facility to be within interswitching limits. In dealing with applications for extending interswitching, the Agency has taken into consideration not only the physical proximity of the shipper’s facility to the interchange but also the shipper’s competitive position in relation to any of its competitors in the same region. In one case, the applicant’s facility was located outside interswitching limits while all of its competitors in the region were within interswitching limits. The Agency allowed the extended interswitching application even though the shipper’s facility was 24% of the distance outside the 30 km radius. In another case, where this competitive factor was absent, the Agency refused an extended interswitching order even though the shipper’s facility was only 18% of the distance outside a 30 km radius.

The rate set by the Agency for extended interswitching in any given case must be “commercially fair and reasonable to all parties”. The Agency has generally interpreted this requirement to mean that in setting a rate it must have regard both to the need to preserve competitive access and ensuring that the rail carrier receives fair compensation for providing service as an imposed public duty.

Competitive Line Rate (CLR)

A shipper located beyond the 30-kilometre interswitching limit whose facility is more remote from the nearest interchange may apply to the Agency to set a competitive line rate (CLR) for moving goods over the originating railway to the interchange point, for transfer to another railway. The CLR will be based on applicable interswitching rates and on the revenue the railway company generates by moving the same or substantially similar traffic over similar distances.

In order for a shipper to qualify for a CLR, the following conditions must be met:

• The shipper must be served by only one railway at origin or destination.
• There must be a continuous route from origin to destination operated by two or more carriers.
• There must be an interchange between the local carrier and the connecting carrier.
• The route selected by the shipper must use the nearest interchange in the direction of the traffic.
• The shipper must have reached an agreement with a connecting carrier as to rates and service.

One of the main obstacles to obtaining relief through the CLR remedy is the pre-requisite that the shipper must first reach an agreement with the connecting carrier. A commission established by the federal government in 1992 to review transportation legislation concluded that CN and CP have effectively declined to compete with each other through CLRs, and as a result the provision is largely inoperative in Canada. Where a shipper is able to reach an agreement with a connecting carrier, CLRs may be an option.