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Supply Chain News: Three Federal Maritime Commissioners ask STB to Stop Kansas City Southern Takeover


Allege Canadian Pacific Railway will Divert Containers from US to Canadian Ports

June 28, 2022

It’s not over until it’s over.

In September 2021, Canada Pacific emerged as the winner in a fierce battle with a Canadian National for the Kansas City Southern railroad.

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The web site noted that Canadian ports are heavily subsidized by the federal government, which makes them cheaper for importers and exporters.

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In what may be seen as ironic given news last week, Kansas City Southern had earlier in 2021 terminated a $30 billion deal with Canadian National Railway Co. that had run aground after US regulators at the Surface Transportation Board (STB) rejected a provision crucial to the deal.

Now, the STB is being asked to stop the Canadian Pacific acquisition by three members of another US transportation sector regulatory body.

The deal if allowed to move forward would create the only railroad connecting Canada, Mexico and the United States. It also would be the first major railroad merger in more than 25 years.

But last week, three of the five members of the Federal Maritime Commission, (FMC) which regulates ocean shipping, asked the STB to reject Canadian Pacific Railway move.

Commissioners Carl Bentzel, Louis Sola and Max Vekich sent formal written comments to the STB listing concerns the merger might divert intermodal traffic from US ports to Canadian sites.

The three commissioners, however, made it clear that their views are their own and not the official position of the FMC.

“In our view, the proposed consolidation does not ensure that the anticompetitive effects of the transaction outweigh the public interest in meeting significant needs,” the commissioners wrote in the filing, which was obtained by Transport Topics magazine. “Specifically, the proposed merger will adversely impact U.S. ports and the primarily US-based intermodal railway systems that serve our ports, and would disproportionately benefit Canadian ports and the primarily Canadian-based intermodal railway systems that service Canadian ports for transportation of US-bound cargo.”

Canadian ports, especially Vancouver and Prince Rupert in British Columbia, have been gaining market share for containerized traffic that’s ultimately bound for points in the US Now Canadian National and Canadian Pacific are aiming to divert some US East Coast port traffic to Halifax, Nova Scotia, and Saint John, New Brunswick.

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The CP-KCS merger, the three FMS commissioners argued, will do more harm than good by diverting business away from US ports, hurting port and port-related jobs. “Such economic losses will be far greater than any economic gain that might ensue as a result of a consolidation of the railroad systems of CP and KCS,” they wrote.

The web site noted that Canadian ports are heavily subsidized by the federal government, which makes them cheaper for importers and exporters, particularly for cargo bound for the US Midwest. As a result, the Canadian ports have gained share from US ports.

“The Canadian Pacific-Kansas City Southern proposed merger expansion is explicitly aimed at continuing to build on policies to use Canadian ports and Canadian railroads to carry US-destined cargo,” the commissioners also wrote.

For several months the STB has been receiving comments on the proposed merger from various stakeholders on the deal, as is the process. Canadian Pacific execs have said they believe a final decision will come in early 2023.

Any thoughts on the commisioners' letter to tHe ST? Let us know your at the Feedback section below.




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