Canadian Shipper


2020 Outlook

Our industry experts take a look at the year past and the year ahead into the future of transportation in the supply chain in Canada.



Transport Canada announced ELDs to be required by 2021

By James Menzies

Canada’s long-awaited electronic logging device (ELD) rule has been published, which the Canadian Trucking Alliance (CTA) says will catapult Canada ahead of the U.S. in terms of safety and compliance.

The made-in-Canada regulation requires third-party device certification, something the U.S. did not pursue, and a detail the Canadian trucking industry lobbied to have included. In the U.S., devices are self-certified, which has led to the arrival in the market of ELDs that can be modified or tampered with.

By June 2021, third-party-certified ELDs will have to be used by all truck drivers currently required to maintain a logbook. The announcement was greeted with enthusiasm by industry associations.

“The vast majority of our companies and drivers in our industry fully comply with hours-of-service rules, but, undoubtedly, the implementation of tamper-proof, third-party ELD devices will further enhance safety and help ensure all drivers and companies hold themselves to the highest levels of compliance,” said CTA chairman Scott Smith.

The hours-of-service rules themselves will not be changed; they’ll simply have to be recorded using an ELD.

“Third-party certification of ELDs is critical for hours-of-service compliance and fatigue management as the technology behind ELD devices is key to ensuring drivers and companies follow their work-rest cycles,” said Stephen Laskowski, CTA president. “As we learned from the previous era of paper logbooks, the non-compliant segment of our industry, while a minority, have a history of finding workarounds of the rules. We must ensure that there are no gaps or opportunities to manipulate the technology and that compliance is the only option.”

The final rule also accelerates the implementation timeframe, from the initially proposed four years, to two. But unlike in the U.S., existing automatic on-board recording devices will not be grandfathered.

That worries Mike Millian, head of the Private Motor Truck Council of Canada (PMTC).

“The PMTC is in agreement with the two-year compliance date attached to the posting, however we do have concerns with the removal of the grandfather clause that was posted in Canada Gazette 1,” said Millian.

“The removal of the grandfather clause may actually place fleets who implemented devices years prior to a mandate, in a worse position that those who did nothing. These fleets will have to work with their supplier and hope that the device they purchased can be updated to be third-party-certified, or replaced with new devices. As a certifying body has yet to be determined, they may have to wait to find out the status of their device, which reduces their lead time to plan a transition if their current device is not certified. That can be problematic and time-consuming if the device is integrated into back office systems.”

On the two-year implementation period, Transport Minister Marc Garneau said: “The two-year implementation period may seem quick for some truck owners, but I want to reassure you that this period will allow them time to set up and install the devices. In doing this we are looking to reduce truck and bus crashes due to fatigue.”

But despite concerns about the removal of a grandfather clause, Millian welcomed the rule.

“The PMTC is very pleased that Transport Canada has posted this regulation in Gazette 2 and has moved this file into the regulations. This file has been in the works for many years, and it is good to see it finally see the light of day,” he said. “We are also thrilled to see that Transport Canada listened to industry and is making third-party certification of devices mandatory, and not going down the same self-certification mandate that is causing many problems south of the border. This is a huge step in ensuring devices are actually compliant and will have the desired effect of improving compliance with hours-of-service regulations.” The CTA’s Laskowski noted the requirement for third-party certification meant the grandfather clause had to go.

“It became very clear that there were challenges in the self-certification world,” he said. “How can we have grandfathering of non-third-party-certified devices? We were originally asking for 24 months plus grandfathering.”

The CTA has hosted several meetings with more than a half dozen device suppliers since January 2018.

It says it will be embarking on an education campaign to ensure the industry is ready for the mandate. It is also working with ELD manufacturers and suppliers to ensure they are aware of their requirements to become third-party-certified.



The good and the bad of rail improvements

By Carroll McCormick

CN is spending record amounts on capital projects and maintenance. Two short lines in Western Canada got their very first taste of federal grants for upgrades. But Huron Central Railway is again pounding the streets in search of long-term stable funding.

CN is outdoing itself this year with its $3.9 billion capital expenditure (CAPEX) plan. Its ambitions range from increasing capacity in Nova Scotia, maintenance work on bridges, culverts, signal systems and track in New Brunswick, to rebuilding a rail bridge over the Steen River in Alberta. In Manitoba and Saskatchewan, for example, CN is adding train sidings and double tracks. CN is adding a new train passing siding in Port Edward and increasing capacity at the Port of Vancouver. Rail replacements and hundreds of thousands of new railroad ties are part of the maintenance plan.

In what borders on the remarkable, considering the historic, overall indifference that federal governments have shown short lines, this year Great Sandhills Railway in Saskatchewan and Forty Mile Rail in Alberta received a total of $16.6 million in matching funds from the federal government for track work.

“Before this we’ve never received a dime of federal funding for our member short lines. Transport Canada now has a staff that has the funding of short line railways as one of their responsibilities. They have come to Saskatchewan, toured our short lines, come to our meetings. None of that has happened before,” says Allison Field, director of communications and government relations, Western Canadian Short Line Railway Association.

Unfortunately, such largess was not extended to Genesee & Wyoming for its Huron Central Railway line between Sudbury and Sault Ste. Marie. Last year it managed to wring some money out of the Ontario government to keep the line running till roughly the end of 2019, but now it’s déjà vu all over again, as baseball great Yogi Berra is said to have exclaimed.

“Unfortunately, despite continuous efforts on HCRY’s part to work with both levels of government to secure funding to support the railway’s long-term business plan, the only help provided so far was the $980,000 emergency fund given by the government of Ontario last fall. This funding allowed HCRY to make some emergency repairs to keep operations going throughout 2019, while we worked with governments to find a longer-term solution. We are hopeful that we will be able to lock in serious funding commitments as the Federal campaign unfolds,” says Claudine Bois, executive assistant and communication advisor, Genesee & Wyoming Canada Inc.

And while it has not yet reached the construction stage, the Alaska to Alberta Railway Development Corporation (A2A) continues to make progress toward its goal to build a 2,400 kilometre railroad connecting the Alaska Railroad, and its four-port ocean access in southcentral Alaska, with Alberta, via the Yukon and Northwest Territories. “We are in the process of narrowing down a 10-kilometre planning corridor to a couple hundred feet, with aerial surveys and ground [work], later in 2019 and 2020,” says Mead Treadwell, A2A’s COO. “We are heading to a more detailed project description, based on those surveys, to share with First Nations, other landowners and regulators.”

Breach of service

This year, using the new “own motion” provision in the Transportation Modernization Act (Bill C-49), the Canadian Transportation Agency (CTA) determined that CN breached its level of service obligations in the Vancouver area last winter to wood pulp shippers by “unilaterally restricting the transportation of the shippers’ traffic.”

The ruling is significant. “The new provision in C-49 gave the CTA new power to make investigations under its own initiative, and the very first time it was used was in the service problem in the Vancouver area last winter: the embargo and rationing of access, especially for forest products,” says Robert Ballantyne, president of the Freight Management Association of Canada.

“If the agency sees a broad problem, the own motion investigation does not require that a shipper file a complaint. The shipper community feels that it may distance them from potential retaliation, because a formal complaint by a shipper is not necessary under this new process,” Ballantyne adds.

CN is appealing the ruling. What the Federal Court of Appeal decides, possibly only next year, will have implications for this new provision, Ballantyne explains. “One thing that is a bit worrisome is that if the Federal Court of Appeal decides in favour of CN, it may be difficult for the Agency to use this provision again. FMA wants to get across that the jurisprudence that comes out of this appeal [should] not put roadblocks in front of this provision, to make it more difficult to use it in the future.”



The Amazon effect continues to disrupt

By Ian Putzger

Notwithstanding the continuing growth it produced, 2019 has been a disruptive year in the courier and express segment, as the wobbles of FedEx illustrate. Not surprisingly, Amazon has been a major instigator of disruption again with several steps this year.

The most recent move was the order for 100,000 electric delivery vans announcement in September. Imtiaz Kermali, vice-president sales and marketing at eShipper views this as massive push into the final mile arena. “That’s a key concern for anybody in the industry,” he comments.

Earlier this year Amazon raised the bar with the announcement that it would slash the transit window for free delivery of goods ordered by Prime customers to next day. Most pundits expect this to become the new norm for e-commerce deliveries, which is bound to result in casualties in the market.

“The biggest challenge for the courier and express industry in Canada will be keeping up with anticipated demand and meeting faster delivery times,” comments Paul Steiner, vice-president of strategic analysis at logistics spend consulting firm Spend Management Experts.

Chris Spanjaard, senior vice-president and COO of Purolator, points out that parts of the B2B segment are moving in the same direction.

“In these industries, B2B needs are closely mirroring B2C needs, which means businesses are wanting more visibility, speed and direct-to-home or direct-to-site delivery. Supporting healthcare customers, for example, with more direct-to-home delivery options and tailored support during peak periods will be increasingly important,” he remarks.

eShipper is looking to boost its warehouse footprint beyond its current facilities in Toronto and Vancouver to Montreal and Calgary in order to allow next-day service at a reasonable cost level, says Mo Datoo, director of strategy and partnerships.

The balancing act between service levels and cost containment is going to be one of the key battles for the industry. Dominic Porporino, president of UPS Canada, describes efficiency and leveraging scale to reduce procurement and operating costs as one of the major challenges for operators in 2020.

Automation is a vital element in this. UPS is in the process of automating facilities in Montreal and Caledon.

Employee safety is another issue, particularly for delivery drivers, notes Spanjaard.

“We’re rolling out an industry leading health and safety management system for our people, with advanced training, to make sure our people stay safe at every delivery point,” he says.

Purolator, which announced a $1 billion growth and investment plan in June, is blazing a trail in Canada with the implementation of seven-days-a-week service in four major markets. South of the border FedEx and UPS have announced similar plans to kick off at the end of the 2019 peak shipping season.

While this shift should boost utilization and bring greater flexibility for operators, it also brings further cost pressure. “Extending an operation to seven days a week adds costs, particularly staffing. We must ensure that the added costs allow us to remain cost-competitive,” remarks Porporino.

Regardless of the rate of acceleration of deliveries, e-commerce is set to keep growing. Steiner says that the outlook for B2B as well as B2C growth in Canada for 2020 is positive, although the momentum should be weaker than in 2019.

One impulse for additional growth should come from the USMCA agreement replacing NAFTA (once it has been ratified), as this should raise the de minimis threshold for goods imported into Canada from $20 to $40 a d day, and express shipments valued under $150 can be imported duty-free, although they will still be subject to sales tax, Steiner points out.

“Ratifying the USMCA and other trade agreements will provide customers and businesses with more certainty and confidence to invest in Canada and North America. This certainty is important and helps solidify long-term business planning,” comments Spanjaard.

Increasingly firms are looking further afield, both for inbound and outbound traffic, remarks Kermali. “The international market is becoming very popular with young entrepreneurs. They don’t look just at Canada and/or the U.S.,” he says.

Faced with a slowdown in regular airfreight, airlines will be happy to take on more e-commerce (despite less than stellar margins). There are no signs of capacity bottlenecks at this point, but in the domestic arena concerns have come up after Amazon and Cargojet signed a strategic agreement under which the former can acquire up to 14.9 per cent of variable voting shares in Canada’s largest cargo airline. Observers and customers are worried that Amazon could hog most of the lift on Cargojet, leaving others scrambling to move their traffic. The airline has dismissed such fears, but worries are lingering.



Slowdown means shifting sourcing patterns

By Ian Putzger

After two years of rampant growth the air cargo sector shifted down a gear or two in 2019.

Buoyed by e-commerce, Cargojet has still enjoyed rising volume and revenue, but the other sectors have softened. Interline traffic from Asia over Vancouver was down 20 per cent year-on-year in September.

Gary Vince, head of air freight Canada at DHL Global Forwarding, notes that anticipated challenges finding capacity have not materialized.

Shippers have changed their approach in order to keep costs down, observes Chris Matthews, COO and president of Rodair International. “We’ve seen an increase in ocean traffic and a decrease in air cargo. And we see a lot more consolidations,” he adds.

Uncertainty over global economic development and barriers to trade has affected demand, as companies have adopted a wait-and-see stance. At the same time, some are moving to shift sourcing patterns. Imports from China have slowed, while traffic from Southeast Asian countries like Vietnam has increased, says Matthews.

Some forwarders are leveraging networks to respond to shifting trade flows and emerging lanes. “Our networks have been a big help to us. We get a lot of business back and forth and also sales leads,” says Sandra Faraj, vice-president of AGO Transportation.

At Rodair Matthew is looking forward to the company’s marriage with Rhenus Logistics, which will open up new network opportunities and client introduction.

An improvement in the market is not expected for some time. “I don’t think it’s going to get better before the second quarter of next year,” comments Tim Strauss, vice-president cargo at Air Canada.

For DHL the slowdown in general cargo has reinforced the focus of stalwarts like the healthcare and aerospace sectors. “We continued to do what we do best,” says Vince. “Our market share has grown.”

Edmonton International Airport is also jockeying for a role in pharmaceutical flows. The emergence of a rapidly expanding cluster of pharmaceutical firms in the area has prompted a push for CEIV certification. According to Alex Lowe, the airport’s cargo development manager, this should be completed before the end of the year.

Edmonton has also benefited from the legalization of recreational use of cannabis, which has created a new shooting star for air cargo, according to Matthews. However, the bulk of cannabis production at the 800,000 square-foot facility of Aurora Sky at the airport is medical grade shipped to international destinations. There is strong demand in markets like Europe, Australia and the U.S., Lowe says.

For many players e-commerce has been the main engine for growth. “E-commerce has changed our business model,” remarks Jamie Porteous, executive vice-president of Cargojet.

E-commerce also offers promising openings for Canadian airports, says Stan Wraight, president and CEO of Strategic Aviation Solutions International, the only major Canadian-based and owned airport consultancy. Besides the Canadian market, an airport can target e-commerce flows to the U.S., he argues.

“There are only five U.S. airports designated to clear U.S. mail inbound. They are all congested. This is a tremendous opportunity for a Canadian airport,” he comments

Airports are ramping up for future growth. In response to a surge in seafood traffic to China Halifax International Airport has started work on a new cargo complex that includes an extended cargo ramp and three buildings of about 50,000 square feet each. The first of these, which is slated for completion in early 2021, should have more than 10,000 square feet of cooler space, says Glen Boone, director of cargo and real estate development.

Edmonton opened a cargo facility with a large cooler last year to support perishables traffic, particularly fresh meat. At the moment Aurora Sky is building a second facility with a footprint of 400,000 square feet at the airport. This will be the cannabis producer’s international distribution center, says Lowe.

Air Canada Cargo is due to open a new cargo facility at Edmonton. Elsewhere the carrier is looking to boost capacity without increasing its footprint.

“We’re putting $50 million into our Toronto hub now. This includes putting in a new material handling system and adding about 30 per cent more ETV capacity,” says Strauss.

“We’re also spending significantly at Vancouver and Chicago,” he adds.

Air Canada Cargo is one year into a three-year review of how it operates. “We win in operations, not in the air. Everybody flies at the same speed,” says Strauss.

His outfit has been among the first batch of companies involved in ‘SCALE AI’, a supercluster supported by the federal government. Initial trials have been successful

“We’ll start to roll out AI. This gives us six to eight per cent more capacity in high demand lanes,” says Strauss.



Global seafarer shortage felt in Canada

By Leo Ryan

If any proof were needed that Canada is impacted by the serious manpower shortage confronting the global shipping industry, it was supplied in striking fashion shortly after Quebec City’s Groupe Desgagnés last June held an inauguration ceremony for two leading-edge polar class duel fuel petroleum-chemical tankers built in Turkey. They represented the completion of an investment plan of $200 million launched in 2015.

But one of the two state-of-the-art vessels, the Rossi A. Desgagnés could not rapidly begin trading, as hoped, simply because the shipping line was unable to find an available captain with the required certificate approved by Transport Canada. Such certificates are a pre-requisite for officers seeking to work for Canadian-flag operators. Foreign nationals must also prove permanent residence in Canada. And the process can drag on for long periods to obtain recognition of certificates accorded by training colleges in foreign countries, including France and England.

So for several weeks, a ship that cost $50 million to build sat idle on the Quebec harbourfront. No cash coming in from customers for the owner shouldering not only the financing costs, maintenance costs and port charges, but also potential costs for maintaining crew on stand-by.  An industry source estimated the operational losses up to $20,000 a day.

Commenting on this specific occurrence at the time, Martin Fournier, general manager of the St. Lawrence Shipoperators, said the manpower shortage is affecting the whole maritime industry. “In recent years,” he told Montreal’s La Presse newspaper, “shipowners have been engaging in gymnastic maneuvers to keep their vessels in operation. Not because they lack contracts but because of the shortage. The lack of superior officers (captains, first mates, chief engineers, etc.) is really preoccupying.”

Moreover, senior executives of Great Lakes carriers in Canada have become increasingly vocal in complaining that some of their captains are being “poached” by pilot corporations offering higher salaries.

Globally speaking, the latest manpower report by BIMCO and the International Chamber of Shipping (ICS) put the current shortfall at about 16,500 officers and warned there will be a need for an additional 147,500 officers by 2025 to service the world merchant fleet. Another study by the Ocean Policy Research Foundation anticipates a shortage of 364,000 seafarers by 2050. There are over 50,000 merchant ships trading internationally that are served by an estimated 1,647.000 seafarers of which 774,000 are officers.

Whereas the global supply of officers is forecast to increase steadily, this is predicted to be outpaced by rising demand. Some categories are in especially short supply, including engineer officers at management level and officers for such specialized ships as chemical and LNG carriers. The report suggests that in the past five years the industry has made progress in increasing recruitment and training levels. But it warns that unless training levels are boosted significantly, the growth in demand for seafarers could generate a major shortage in the supply of seafarers.

ICS secretary general Peter Hinchliffe is not alone among marine industry officials and stakeholders in calling for greater efforts to promote careers at sea.

Indeed, the industry offers pretty attractive good-paying jobs. Typical deckhands in Canada start off at $60,000 to $80,000, depending on the vessel. For second mates, it can reach $120,000. And much higher still for first mates and masters.

In an interview, Phillip Nelson, president of the Vancouver-based Council of Marine Carriers (CMC), said “CMC member companies are acutely aware of the shortage of qualified mariners to fill vacancies of Master and Mate positions as senior personnel moves on to retirement or choose other career routes.”

He explained that tug companies are not yet experiencing too much difficulty in obtaining people to fill entry level positions, but the situation will change in the future as it becomes more and more difficult to attract mariners prepared to be away from home several weeks at a time. Alluding apparently to such sectors as trucking, Nelson remarked that other industries are also realizing that recruitment is becoming an issue. To encourage new entrants, the CMC is looking at establishing a marine apprenticeship which would provide free funding for the required schooling and seagoing assignments.

In a related development, the Seafarers’ International Union (SIU) of Canada initiated a “Be A Seafarer” recruitment campaign in 2018 aimed at promoting seafaring careers for younger generations of Canadians amidst a manpower shortage and aging membership. “The SIU offered free education to select applicants of our programs and a guaranteed job upon completion of the proper marine course,” indicated Patrice Caron, SIU executive vice president.

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