Now that you’ve heard about the world of OSRA according to my take on the FMC, (Aren’t you glad you’re not working in the USA?) I’m certainly glad I’m not although I sympathise with the plight of my fellow NVOCCs there and abroad who have to post bonds as high as $150,000 U.S. and have to deal with a lot of red tape. So now, let’s look at the situation here in Canada.

As you know the Canadian Shippers Council had lobbied long and hard for SCEA to be abolished ever since its enactment in 1987. They didn’t quite succeed but they did get, in my opinion, some substantial amendments that came into effect in February of this year.

These amendments are Canada’s answer to OSRA. Like OSRA, shipping conferences can still exist in Canada but now shippers can also enter into confidential service contracts with individual carriers for Canadian traffic. This puts Canadian exporters at a better than level playing field against their U.S. competitors and I’ll explain why in a moment.

Previously, service contracts were possible only with the conference as a group and not with individual member lines so a shipper could not get a better deal from one conference carrier than another. Now it’s different. But here also, free market forces mean the big shippers have an edge over the little guys. We cannot escape from the laws of nature.

But there are some differences in the SME area. Like in OSRA, service contracts can be confidential and conference tariffs are no longer filed with the CTA but must be available electronically for public viewing. These tariff rates serve as starting points for a shipper to negotiate his own rate with a carrier of his choice under a “service contract”.

Even though penalties for violations of SCEA have been stiffened under the amendments, they are rarely enforced. This is because the CTA is nothing like the FMC in its policing and enforcement powers. While the FMC’s mandate is to enforce regulations, the CTA’s basic role is to ensure healthy competition. Under the complaint mechanism of the CTA, you have to show how a certain contravention by someone has hurt your business. If there is no pain, there is no claim.

Even among carriers, charges of predatory pricing, which is a penal offence under the Competition Act, are unsavory to make and difficult to prove. I have not heard of anyone crying foul to the CTA that someone else had paid less than the published tariff rate and the carrier being fined or a carrier complaining that the rates quoted by another carrier were below his cost. Compare that to the FMC’s fine of 1.2 million dollars for undercharging published rates! Yes, Canada is a better nation.

The other nice thing about Canada’s SCEA is that there has never been a requirement for freight forwarders or NVOCCs to file rates, be licensed or post bonds, unlike in the United States. They are also not protected from anti-trust immunity so there is total freedom of contract when a shipper deals with a Canadian NVOCC as opposed to American ones.

The SME importer or exporter in Canada can deal with any number of freight forwarders and he can basically call the shots. And believe me, they do it everyday. The Canadian SME shipper, unlike his American counterpart is benefiting from the lowest possible shipping costs because of the unregulated competitive environment of the Canadian freight forwarding industry.

A caution, however: Because the industry is totally unregulated and unbonded, one has to be careful with whom one is dealing with. Not every forwarder is a CIFFA member. There are 150 international freight forwarders within the CIFFA membership each of whom must carry minimum legal liabilty insurance and abide by a strict code of ethics. Every freight forwarder can act as a carrier by issuing a bill of lading to a shipper and charging a negotiated rate, regardless of tariffs and without the need for service contracts.

So there is flexibility and advantages for the Canadian SME exporter over an American exporter. This is particularly true in the area of LCL shipments. Since shipping lines in Canada do not offer LCL service, there are no tariffs filed anywhere at all. In the U.S., shipping lines likewise do not offer LCL service but NVOCCs must file their LCL rates and cannot change them without a notification period.

Under our free market system in Canada, LCL export rates can change daily, even a few times within the same day like the Dow Jones and if fact, they are actually cheaper than domestic trucking rates right now due to the fierce competition.

Just to give you an example, my company as an NVOCC can ship a skid of your cargo from my warehouse in Mississauga all the way to Hong Kong, China or London, England cheaper than you can have it trucked across town to this convention centre. And I’ll proably be asked to do it for less tomorrow. Hard to believe but it’s true. The only way to make any money these days is to show and sell service.

I have given you in a nutshell a comparison between American and Canadian liner shipping in terms of competitive rate mechanisms under OSRA and under SCEA. Freight rates are comparitively lower in Canada than they are in the United States. But the big shippers in the U.S. have far more clout in negotiating service contracts than the big shippers in Canada.

The Canadian SME, in my view, however, has a definite advantage over his U.S. counterpart because of the regulatory environment in Canada. Things could not be better for our SME exporters with the low Canadian dollar these days.

Even for Canadian importers, they could probably compete in the U.S. market across the border with a competitive edge in shipping costs over U.S. importers. And things should only get better for everyone in Canada when global freight rates increase and the gaps spread further.

In my view, life is definitely easier for the Canadian SME logistician with the SCEA amendments compared to his American counterpart under OSRA.

I, for one, am glad that my my small business is based in Canada.

Thank you very much.