the provincial governments have jurisdiction over carriers that operate
strictly within the province (local trucking). They are also responsible
for highway safety in general, on-road enforcement, and the licensing of
commercial vehicles and drivers. Regulatory Reform
A significant influence on regulatory reform in Canada was the
deregulation of the US trucking industry in 1980. The differences between
the Canadian and US trucking regimes became a source of discord between
the two countries, particularly because a substantial number of Canadian
carriers were able to obtain US federal licences while market entry
remained highly regulated in Canada. The issue was resolved by the signing
of the Brock-Gotlieb Agreement and the November 1982 creation of the
Canada-USA Motor Carrier Consultative Mechanism, a body that continues to
meet about once a year. The Canadian response to these developments varied
by province. Several provincial governments embarked on a thorough
examination of their trucking legislation; most moved toward a relaxation
of the existing rules.
The central issues underlying discussions of reform at the
federal-provincial levels were the nature and timing of reform of the
requirements imposed by the government on companies wishing to enter the
market. In February 1985, the federal and provincial governments signed a
memorandum of understanding in which they agreed to reverse the burden of
proof in entry cases as a first step toward reform and to study the
potential effects of proceeding to complete elimination of economic
controls. At the same time, those provinces still regulating
extra-provincial tariffs agreed to eliminate such controls.
The federal government articulated its position on motor carrier reform
in the 1985 white paper "Freedom to Move." Building on the
memorandum of understanding, this document set the elimination of economic
control of the trucking industry as the final goal of the reform process.
The principles set out in the memorandum of understanding and the white
paper formed the basis for the new Motor Vehicle Transport Act,
1987.
The revised MVTA made fundamental changes in the manner in which the
commercial trucking industry is regulated. Before Jan. 1, 1988, the entry
of trucking firms into the Canadian market was governed by an economic
entry test. The new act lessened the severity of this test but added a
fitness test based on the carrier's safety performance. After a five-year
transition period, which ended in 1992, the economic entry test
disappeared altogether, leaving fitness as the only criterion for entry
into the market.
The new MVTA also gave the federal government the power to regulate the
safe operation of all federal motor carriers.
New Policy Developments
Motor Vehicle Transport Act
The revised MVTA dismantled the existing system of economic regulation
and replaced it with a safety-based regulatory system. It retains some of
the main components of economic control, including the requirement to
obtain both a for-hire licence and a licence for each province in which a
carrier operates. Its safety provisions are limited in scope, however, and
its carrier fitness provisions apply exclusively to for-hire truck
carriers, focusing on entry into the industry rather than on continuing
fitness.
The regulators have agreed to replace the traditional economic licence
with a safety rating certificate issued by the base jurisdiction.
Transport Canada is considering changes to the Act to focus it on the
safety rating system; consultations with the provinces on possible changes
were undertaken in 1996.
NAFTA
The North American Free Trade Agreement (NAFTA) is a historic accord
governing the largest trilateral trade relationship in the world. The
agreement seeks to liberalize trade between Canada, Mexico and the United
States and to gradually eliminate tariffs and other trade barriers. It
also opens up the three countries' markets by ensuring that future laws
will not create barriers to business.
The agreement established deadlines for harmonization of land transport
standards. The NAFTA countries set up trilateral mechanisms to address the
need for standards harmonization and to facilitate commerce by surface
transportation. Transport Canada leads the Canadian delegation, supported
by the Department of Foreign Affairs and International Trade and
provincial representatives. Transport Canada also established a
government-industry advisory group to develop Canadian negotiating
positions.
Notable progress has been made in the harmonization of commercial
drivers' licences through mutual recognition of existing bilateral
mechanisms, driver medical standards and the equivalency of the hazardous
materials endorsement on commercial drivers' licences in the three
countries. Nonetheless, several key areas - such as vehicle weight and
dimension standards - remain unresolved.
To facilitate implementation of NAFTA transport provisions,
consultations are also ongoing among officials of the three countries
under the auspices of the Transportation Consultative Group. Issues on the
table include operating requirements, insurance, vehicle registration,
border clearance proced-ures and electronic exchange of driver and
licensing information.
NAFTA land transportation issues are also under discussion at the
ministerial level. In September 1996, Transport ministers from the three
countries endorsed a proposal to establish a trinational motor carrier
safety assessment process under the auspices of the Land Transportation
Standards Subcommittee.
The NAFTA agreement set a timetable for truck carrier access to Mexico
and for access to the United States by Mexican carriers. In December 1995,
the agreement provided for access to the Mexican border states for
Canadian and US carriers and for access to the American border states for
Mexican carriers. The US was also to allow Mexican truck carriers transit
through the rest of the United States to reach Canada. This initial stage
of border access did not proceed smoothly, and the impasse between the US
and Mexico is still under discussion. Full liberalization of access for
trucking in the US and Mexico is scheduled for Jan. 1, 2000.
Internal Trade and National Harmonization
Canada has long had the mechanisms in place to develop and harmonize
national motor carrier standards and regulations. The National Safety Code
for motor carriers, for example, was developed by federal and provincial
officials and stakeholder representatives and approved by the federal and
provincial transportation ministers.
The internal trade negotiations (1992-94) provided additional impetus
for harmonization through the general and specific commitments included in
the transportation chapter of the Agreement on Internal Trade (signed
1994, in force from July 1, 1995). Besides a general commitment to
harmonize both standards and regulations, the chapter contained specific
commitments to, among other things, implement national motor carrier
safety standards, set uniform vehicle weight and dimension limits and
complete the deregulation of the trucking industry.
The federal and provincial transportation ministers are responsible for
the implementation of the internal trade commitments, for regularly
reviewing measures that are exempted from the provisions of the agreement
and for resolving disputes over measures affecting internal trade in
transportation services. The first annual report on sectoral progress
(October 1996) outlined significant progress in the implementation of the
various commitments.
Source: Statistics Canada, Cat. 53-222-XPB; Fred Nix, March 1996;
Statistics Canada special study: Couriers in Canada: An Industry Profile
April 1993, A. Mathieson & J. Leduc.
Carrier Services
Overview
There are an estimated 450,000 trucks that haul freight commercially
(excluding utility and government trucks). It is these vehicles that form
the focus of this review.
The trucking industry can be div-ided into three major categories:
for-hire, courier and private. In total, trucking services were estimated
at $29 billion in 1994 (see Figure 8-1).
A number of other trucking operations exist that are not classified as
either for-hire, courier or private trucking. These include a large number
of farm trucks, government trucks (snow removal, garbage pickup) and a
wide assortment of other trucks (service vehicles, utility vehicles).
There is little data available on this sector; however, a conservative
estimate of its value would be $4 billion annually. note 1
The scope of the industry is extensive, a function of the extent of the
North American road network, the extremely adaptable nature of trucking
compared to other modes, the flexibility of pricing, and the wide choice
of service obtainable from thousands of companies, both in general and
specific trucking markets.
For-Hire Trucking
For-hire truckers carry freight for a fee and are major providers of
freight transportation services in the trucking sector and across all
modes. Revenues reached $12.9 billion in 1994.
There are two main categories of for-hire trucking: less-than-truckload
(LTL) carriers and truckload (TL) carriers. LTL carriers typically pick up
small shipments that are then sorted and combined with other shippers'
freight and dispatched as a full truckload to another terminal, where
individual shipments are further sorted for local delivery. Truckload
carriers, on the other hand, typically move full loads from the shipper's
location to a single destination. Specialized haulage includes liquid and
dry bulk, flat-bed and auto-haulers.
For-hire carriers can be further differentiated according to
intra-provincial and extra-provincial carriage. Intra-provincial trucking
companies operate exclusively within provincial jurisdictions;
extra-provincial carriers are those trucking companies that operate beyond
provincial and national boundaries (although a substantial part of the
freight moved by extra-provincial carriers remains within a province).
The international segment of for-hire trucking is experiencing the
fastest growth: revenues jumped from $1.6 billion (17 per cent of for-hire
revenue) in 1988 to almost $2.8 billion (22 per cent) in 1994.
Couriers
Specializing in the transportation of small packages, couriers use
cars, vans and small trucks. Operators in this category often combine
transportation modes to provide their services; they include inter-city
bus companies, air cargo operators and LTL truck operators in their
number. A 1990 estimate set their annual revenues at $2.1 billion. note 2 Couriers often
consolidate shipments and move them between hubs by truck or by air.
Private Trucking
Private carriers are businesses that maintain a fleet of trucks and
trailers for the purpose of carrying their own goods. However, many
private carriers are also licensed to carry goods for other users in much
the same manner as a for-hire carrier.
Private fleets are an integral part of a company's distribution system
and provide a logistical support service to the companies that own them.
They may use dedicated company drivers, leased drivers or owner-operators.
Private carriers tend to operate over shorter distances (under 100
kilo-metres) than do for-hire operators. For distances between 100 and 500
kilometres, for-hire truckers are more efficient overall, as they have
significantly higher load factors. For distances greater than 500
kilometres, both for-hire and private carriers operate in a similar manner
- both use tractor trailers and carry similar loads - but private carriers
constitute only about 10 per cent of this market.
In light of the conditions prevailing in a deregulated trucking
environment (improved services and highly competitive rates available from
for-hire carriers), some shippers have attempted to lower their
transportation costs by shifting traffic from their own fleets to for-hire
carriers. Other shippers have improved productivity in their private fleet
by offering for-hire services to other shippers. In shipper surveys
conducted during the early 1990s, it was noted that about half of those
who owned or leased a private fleet of trucks reported having obtained a
licence to provide for-hire services. note
3
Private trucking is prominent in the retail-wholesale sector, the food
and beverage sector, the construction- mining sector, the petroleum-bulk
sector, in the government and utilities sectors and in logging.
The true size of the private trucking sector is speculative, since
surveys do not fully capture the multitude of small private trucking
operations, particularly in and around urban centres. However, a recent
study estimated the value of this sector conservatively at approximately
$14 billion. note 4
Foreign Control
The level of foreign control and ownership of corporations conducting
business in Canada is monitored by Industry Canada based on a mandate from
the Corporations and Labour Unions Returns Act (CALURA). Statistics
Canada annually collects and publishes ownership information on
corporations that do business in Canada or are incorporated under a
federal or provincial law. This survey includes corporations with gross
revenues exceeding $15 million, assets exceeding $10 million, or debt or
equity owing to non-residents exceeding $200,000. The last criterion
ensures that the majority of large for-hire carriers (estimated at 98 per
cent) are included in the survey.
The extent of foreign control over trucking has fluctuated since 1988:
the percentage of foreign-controlled assets has ranged from eight per cent
to 14 per cent and the percentage of foreign-controlled operating revenues
from seven per cent to 10 per cent (see Figure
8-2).
Overall, foreign control is slightly higher in the trucking industry
than in all transport modes combined. However, it is significantly lower
than foreign control in Canadian industry overall, which is in the 20 per
cent range for assets and between 25 per cent and 28 per cent for
operating revenues (see Figure 8-3).
Alliances, Mergers and Acquisitions
Alliances between Canadian carriers are taking place to expand service
both within and between provinces and to other regions. Many have
strengthened their positions by merging with or acquiring other carriers.
Canadian carriers are also increasingly moving into the US market by
forming partnerships with US-based carriers. These alliances not only
expand the carriers' markets, they redefine the way carriers do business
by allowing them to offer such services as overnight, next-day and
second-day delivery over a much broader territory. In some cases, the
companies integrate their information systems and share invoicing and
inventory control.
Concentration of Carriers
Changes have occurred in the degree of concentration in the Canadian
for-hire trucking industry. The relative importance of revenues of
carriers earning $25 million or more to total industry revenues, has
decreased every year - from 40.3 per cent in 1990 to 32.3 per cent in 1994
(see Figure 8-4). This indicates that
the industry is becoming less concentrated.
Equipment
Canadian Class 8 Truck Sales
Although the numbers are not yet available, heavy truck sales in Canada
are expected to decline approximately 25 per cent in 1996, to about
17,000. One reason for this is that many carriers have already renewed
their fleets during the past three years. Industry analysts forecast that
heavy truck sales will level out at around 16,000 annually in 1997 and
1998 (see Figure 8-5).
Vehicle Registrations
There is very little historical data available on the number of heavy
vehicles registered in Canada. Current registration data indicates that as
of September 1996, there were just over 300,000 Class 8 trucks registered.
Table 8-1 shows the statistics by
province.
Industry Entry/Exit
The number of Canadian carriers with US operations has expanded
considerably since deregulation. The number of Interstate Commerce
Commission (ICC) applications by Canadian carriers peaked in 1992 at
approximately 1,600, then dropped to slightly more than 1,400 in 1993. US
carriers holding operating authority in Canada steadily increased each
year between 1990 and 1993.
The traditional relationship between the trucking industry and the
overall economy holds true with respect to bankruptcies. Figure 8-6 tracks this close dependence.
Bankruptcies dropped rapidly between 1992 and 1994, then stabil-ized in
1995. However, the number of bankruptcies in the first half of 1996
suggests that a small increase for the year is likely.
Bankruptcies or other exits from the trucking industry do not have a
significant impact on the provision of freight services. In 1994,
bankruptcies in trucking accounted for only 0.8 per cent of total industry
revenues and 0.3 per cent of the total value of assets. Carrier
withdrawals from the market occur mainly through mergers and acquisitions.
Traffic
Regional Distribution
Over the past five years, domestic traffic has not provided a strong
impetus to trucking output. As Figure 8-7
illustrates, domestic traffic was substantially unchanged between 1990 and
1994, then rose eight per cent in 1995. Measured on the basis of carrier
domicile, the largest province, Ontario, lost ground and is only now
beginning to recover. Quebec has followed a similar path, though the other
regions have been more or less stable.
Transborder traffic, on the other hand, has increased significantly. In
1995, Canada-based trucking companies moved more than 43 million tonnes of
freight across the Canada-US border - an increase of 29 per cent over
1994.
With north-south traffic steadily on the rise, east-west traffic has
lost some of its market dominance. For-hire trucking traffic increased by
56 per cent overall between 1991 and 1995 to 110 billion tonne-kilometres
from 71 billion. This surge was led by the increase in international
for-hire traffic, which nearly doubled, to 44 billion tonne-kilometres.
Although domestic traffic also increased 38 per cent - to 65.8 billion
tonne-kilometres from 47.7 billion during this period - its share
decreased by eight points, while the international share increased by the
same amount. Table 8-2 provides details
by sector. Although traffic volumes involving the US Southern and Western
regions have increased substantially, traffic to the US Northeast and
Central regions is still the heaviest overall, with by far the largest
flow to and from Michigan and Illinois. Shipments originating in Ontario
accounted for almost half the total southbound tonnage.
Transborder Revenue
As noted earlier, the international trucking market has enjoyed
increasing strength in recent years. The fastest growing area in for-hire
trucking has been the transborder component (see Figure 8-8). Domestic trucking revenues
have grown to $8.8 billion in 1995 from $7.6 billion in 1988, an annual
growth rate of three per cent. Transborder revenues, on the other hand,
have grown to $3.1 billion from $1.6 billion, an annual growth rate of 11
per cent.
Canada-US Trade
The shipment of goods between Canada and the United States has become
the major growth component of the Canadian trucking industry, aided
substantially by the lower Canadian dollar.
Exports. Export trade between Canada and the United States for
fiscal 1995/96 was valued at $199 billion, of which trucking accounted for
$112 billion, or 56 per cent.
Source: Statistics Canada, Origin and Destination Survey
Exports to the US increased by 5.6 per cent over the previous year for
all modes and by 5.7 per cent for trucking.
The major commodities moved by truck to the US include motor vehicles
and parts (passenger cars and chassis, trucks, truck tractors and truck
chassis) and fabricated materials (newsprint, chemical products, plastics,
fabricated metal). Table 8-3 provides
details.
Imports. Imports from the US in 1995/96 were valued at $151
billion, an increase of 3.4 per cent over the previous year. The trucking
sector accounted for $121 billion of this amount, up by two per cent from
the previous year. At 80 per cent, the proportion moved by truck is much
greater than all other modes combined.
The primary commodities imported from the US are of the same
classification as those exported - motor vehicles and parts, and
fabricated materials (see Table 8-4).
However, these make up a smaller proportion of imports overall, with
consumer goods like electronic equipment (such as computers and
televisions) and industrial equipment also in evidence. Table 8-5 shows the value of Canada-US
shipments in 1995/96.
Canada-Mexico
Trade between Canada and Mexico was valued at $6.6 billion in fiscal
1995/96, an increase of 11.1 per cent over the previous year. Of that, the
share moved by truck was valued at $3.8 billion, an increase of 10 per
cent over 1994/95 (see Table 8-8 for
details).
Exports. Canada-Mexico export trade has been consistently less
than one per cent of Canada's total exports. Total Canadian exports to
Mexico in 1995/96 were valued at $1.1 billion, of which trucking accounted
for $404 million, an increase of 14.2 per cent over 1994/95 (see Table 8-6 for details).
Imports.Imports from Mexico to Canada have been increasing
steadily since 1988. Total imports from Mexico reached $5.5 billion in
1995/96, an increase of 14 per cent over 1994/95. Trucking accounts for 61
per cent of the commodities moved, followed by rail at 31 per cent.
By far the largest share of imports by truck consisted of motor
vehicles and parts at 57 per cent; electronic equipment was next at 19 per
cent (see Table 8-7 for details).
