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Thursday, April 15, 2010

Federal Court of Appeal rules on revenue cap for CN for movement of western grain

The Federal Court of Appeal has ruled on an appeal by Canadian National Railway Company (CN) of a Canadian Transportation Agency (CTA) decision related to the calculation of CNR's revenue cap for crop year 2007-08.  Revenue earned in a crop year by prescribed railway companies for the movement of western grain is subject to a cap. The CTA determines a prescribed railway company’s revenue for a crop year and whether it exceeds the revenue cap. CN, a prescribed railway company, said that the CTA wrongly included certain items in its revenue; the inclusion of an item in a railway company’s revenue pushes it closer to the cap.

CN appealed the decision of the CTA (Decision No. 628-R-2008), dated December 30, 2008, and a decision in a confidential letter of the same date (File Nos. T6650-2 and T6650-7-7), in respect of the crop year 2007-08. CN’s principal submissions were that the CTA erred in law or jurisdiction by including the following three items in its revenue cap calculation:
a. earnings from carrying American-grown grain from the U.S.-Canada border to ports in British Columbia for export to third countries, without entering the Canadian market. CN says that this grain is not “imported into Canada” within the meaning of the Canada Transportation Act, S.C. 1996, c. 10, section 147 (“Act”);

b. earnings from lifting grain-carrying containers from a truck onto a flat-bed rail car and vice versa. CN says that this is not the “carriage of grain … over a railway line” within the meaning of section 147; and

c. a sum paid by [a shipper] to CN under a penalty clause in their contract of carriage for failing to ship the promised amount of grain. CN says that this sum was reasonably characterized as a performance penalty and should have been excluded under paragraph 150(3)(b).
The third issue was already resolved in CN's favour based on an earlier decision in another case.  However, the Federal Court of Appeal decided that the CTA's other two determinations were not unreasaonable and, therefore, should stand. 

Read the Federal Court of Canada decision at: CNR v. Canadian Transportation Agency.