Railway Association of Canada

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Railway Association of Canada

• Border Rail Challenges Improved Integration to
  Foster North American Security and Trade
• Presentation to the Canada U.S. Transportation
  Border Working Group Meeting
• Vancouver, BC
• December 5th , 2002

www.railcan.ca
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OUTLINE

• About the RAC
• Trade and Rail
• The Border Policy Context
• The Border Markets and Challenges
• What Rail Offers
• Rail Solutions Intermodal and Border Initiatives
• Rail Can Do More 20/20 Vision
• Conlusions for the Border

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ABOUT THE RAC

• We are the Canadian Rail Industry 57 members
• Represents virtually all Railways operating in
  Canada today
• Class 1s (CN and CPR)
• Short lines
• Inter-city Passenger (VIA)
• Commuter
• Tourist
• Together members carry
• 4.2 million carloads annually
• 1.7 million containers and trailers
• 51 million commuters, inter-city and tourist
  train travelers

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ABOUT THE RAC - CANADA

• The industry operates close to 50,000 kilometres
  of track and employs 41,000 peopleanother 50,000
  employed in supply industry in many communities
• 10 billion contribution to the economy
• Over 60 of Canadas goods moving by surface
  (ton-kms) depend on rail to reach their market
• 300 million tonnes of rail freight are originated
  every year equivalent to over 18 million
  truckloads
• Considerable deregulation since 1987 with very
  positive results

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CANADA - A TRADE DEPENDENT NATION

• Over 40 of GDP comes from exports. Highest in
  G-8. Rail moves about half.
• NAFTA volumes, now massive, were growing at 10
  per year until 2001
• Ports of Vancouver, Montreal and Halifax key for
  international trade (vital to North American
  economy) in Canada
• Numerous Canadian industries are consolidating
  and integrating into a continental structure
  under NAFTA
• Canada is a convenient entry point for others
  looking to access the growing NAFTA marketplace

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THE BORDER POLICY CONTEXTcontd

• Transportation Systems are becoming globally
  seamless and logistics and new e-technologies,
  are changing conduct of business
• Customers look at overall efficiency, cost and
  reliability of transparent integrated supply
  chains increasing
• importance of J-I-T and intermodal deliveries
• Efficient and cost-effective border is critical

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THE BORDER MARKETS AND RAIL ROLE

• Canada is leading export market for 38 US states,
  and with NAFTA, a North American rail industry is
  emerging.
• Over 1.5 billion of goods traded daily with the
  US
• From 1992 to 1999, exports to the US rose from
  77 to 86 of Canadian total
• Rail handles a significant share of surface
  traffic across the border Ontario Corridors
  handle 65 of all Canada/US trade by value, and
  80 of US-destined rail traffic moves through
  Ontario gateways

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CANADIAN EXPORT CARRIERS
Truck Rail Surface Export Share to the
US Volume 1999
Rail 44
Truck 56
Source Transport Canada
CN AND CPR ARE TRULY NORTH AMERICAN COMPANIES
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THE BORDER CHALLENGES

• Outcomes
• Events of September 11th have underlined
  security and impact of U.S. response on Canada
• Economic slow-down was exacerbated, but Canadian
  domestic economy has rebounded
• Canadian exports to U.S. declined 7.8 Billion
  in 2001 most decline was by truck and air
• Careful control and processing of individuals
  crossing borders
• Need for new spending by governments (Federal
  Budget and 30 Point Border Accord)

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THE BORDER CHALLENGES

• Competitive implications
• With US/Cda trade barriers having fallen,
  competition faced by railways intensified through
  the 90s
• - Modal and product sourcing competition has
  
• intensified
• - Transport regulations in Canada have given
  shippers wider access to competing
  railways
• - While Canadian railways have dramatically
  improved their productivity, U.S. gains
  even better
• U.S. Budget proposing more for transport security
  while cutting highways (-26) intent is better
  use of existing road and rail integration (TEA-21
  reauthorization) in U.S.

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THE BORDER CHALLENGES

• Additional, emerging implications
• Risk of significant tightening of US security
  posture at Canadian border U.S. Customs
  threatening to step up rail inspections at border
  (vs. secure, inland terminals where service
  delays would be minimal)
• Long term Canadian economic performance closely
  tied to border efficiency potential for
  disinvestment
• Tremendous pressures on key corridors massive
  spending on roads required (infrastructure costs
  to governments)
• Commensurate congestion, land use, gas
  consumption and emission concerns growing
• Business as Usual not sustainable

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WHAT RAIL OFFERS

• Dedicated, private and controlled corridors, own
  police service
• Small, professional and stable workforce for
  volumes handled
• User pay mini reliance on publicly funded
  highways
• Environmental sustainability
• Most cost effective mode over longer
  distance/rail is also moving into shorter haul
  movements
• Safe mode of transport for people and goods
• New scheduled just-in-time service

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WHAT RAIL OFFERS (Contd)

• Transborder rail operations were not affected by
  interruptions and/or long delays at the border
  after the September 11 attacks on the United
  States. Streamlined, electronic exchange of rail
  traffic information occurs before arrival at
  border locations. Such a comparative advantage
  may explain the uninterrupted flow of transborder
  traffic and, also, the slight increase in
  Canadas rail trade with the United States
  observed from October to November of 2001
  compared with 2000.
• (Transport Canada annual report 2001, p.119)

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CANADIAN TRADE WITH U.S. BY RAIL CONTINUED TO
GROW IN 2001
Data source Transport Canada annual report
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A RAIL NETWORK PARALLEL TO HIGHWAY SYSTEM
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RAIL SOLUTIONS INTERMODAL

• Railways have made major investments in
  infrastructure and intermodal systems
• New technology and market-based innovations being
  tested and introduced to shift over truck traffic
• New fuel-efficient locomotives and innovative
  rolling stock (e.g. double stack container cars
  constructed Sarnia tunnel, proposed tunnels in
  Detroit and Vancouver)
• Short line railways have attracted traffic off
  the roads for short hauls and as
  feeders/distributors to the main line and
  transborder rail systems
• Trucks have short haul service advantage, but
  face driver turnover/shortage and road congestion

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RAIL SOLUTIONS INTERMODAL (contd)

• Benefits
• Promote greater use of existing rail capacity as
  an alternative to costly expansion of highways
• A train can take up to 280 trucks or 1000 cars
  off the roads
• Address public objectives for environment, fuel
  conservation, safety and land use
• Railways are up to 5 times more fuel efficient
  than trucks and generate significantly less
  pollution
• Encourage the most efficient transportation
  output through a combination of modes help
  truckers address their challenges
• Bottom line reduced, travel time, shipping and
  goods transfer costs

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RAIL SOLUTIONS BORDER INTIATIVES

• Electronic commerce
• Significant investment in information technology
• Automated customs transactions and pre-filing
  systems in place for the vast majority of rail
  traffic improved customer service
• What else can be done? Better alignment of
  customs policies needed, including
• 1) Canada U.S. external border for uniform
  
• inspection and security clearance of
  containers
• 2) Customs inspections of shipments at
  destination or
• origin terminals away from border
• 3) Integrate systems to link Cdn and U.S. customs
  
• computer and data systems
• 4) Pre-qualify low risk customers and their
• commodities
• Customs needs to adhere to Border Accord approach
  of separating high risk traffic from low
  consistent with equitable treatment across all
  modes

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BORDER INTIATIVES - INLAND

• A rail pre-screening system is needed for inland
  processing to complement external border
• 100 VACIS screening (a tool with some
  limitations) at border will create serious
  safety, service delays and local disruption risks
• Vast majority of domestic rail traffic includes
  BIG THREE auto companies, petro-chemicals, forest
  products and some other bulk these are C-TPAT
  companies with low risk cargo
• Targeting and examination of high-risk shipments
  should be performed at key rail hub sites plan
  incorporates risk targeting, VACIS screening and
  comprehensive supply chain security (CSI
  principles)
• Rail industry recently commended by U.S. agencies
  for being one of first to develop a detailed
  security management plan CN and CPR are
• C-TPAT and PIP registered

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RAIL CAN DO MORE 20/20 VISION

• Leave a smaller environmental footprint
• Use parallel network to lessen highway congestion
  and land use consumption expand system of hub
  and spoke transfer terminals
• Facilitate N/S trade through dedicated corridors
  into the US which can lessen bottlenecks at
  border crossings
• Trade advantage of primarily privately funded and
  maintained networks with complementary government
  funding

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RAIL CAN DO MORE 20/20 VISION

• What are other ways for Canada to achieve
  increased modal balance? Policy changes include
• Tax harmonization/equity
• Introduce innovative approaches to promote
  environmental sustainability and efficiency, such
  as incentives to use intermodal
• Develop and implement a comprehensive national
  Surface Transportation Policy think
  transportation solutions not just road-building

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CONCLUSIONS FOR THE BORDER

• Trade is critical to Canadas economic
  performance especially Canada/U.S. and
  harmonization more important than ever
• Trade success with the US requires
• - pro-competitive investments
• - elimination of economic distortions
• - streamlined regulation
• - overall efficiency in transportation
  networks
• Border security must be enhanced yet trade must
  continue to flow, more smoothly if possible
  (increase alignment of customs policies)
• Intermodal key to medium/long haul traffic,
  improved border efficiency and congestion, and
  meeting environmental goals
• Rail can help solve some challenges facing other
  transport sectors
• and can help governments to reduce their public
  costs and liabilities
• Canada needs 20/20 Vision to promote, invest in,
  and build a competitive system