Letter Decision No. LET-A-97-2012

July 3, 2012

Present complaints filed by Queen’s University and Public Health Agency of Canada - certain revisions to Rule 109(C)(5) of Air Canada (International Cargo Tariff)

File No.: 
M 4120-3/12-00144

Introduction

Present complaints filed by Queen’s University and Public Health Agency of Canada

On November 22, 2011, Air Canada filed with the Canadian Transportation Agency (Agency) certain revisions to Rule 109(C)(5) of its Canadian Cargo International Rules and Rates NTA(A) No. 246 Tariff  and Rule 19(A)(3)(e) of Air Canada’s Air Freight Rules Tariff NTA(A) No. 268 (International Cargo Tariff), with an effective date of January 10, 2012. Air carriers are not required to file their domestic tariffs with the Agency.

Subsequent to Air Canada’s filing of  its International Cargo Tariff amendments with the Agency, the Agency received complaints from Steven N. Liss, PhD, Vice Principal (Research), Queen’s University, and the Public Health Agency of Canada (PHAC), alleging that Air Canada’s proposed tariff revisions are “unreasonable or unduly discriminatory,” pursuant to subsection 67.2(1) of the Canada Transportation Act, S.C., 1996, c.10 (CTA), and “unjust, unreasonable and unjustly discriminatory” pursuant to section 111 of the Air Transportation Regulations, SOR/88-58, as amended (ATR).

The Agency also received numerous submissions from other parties who were interested in the matter, and subsequently were granted intervener status. They include the British Union for the Abolition of Vivisection (BUAV), the Humane Society International/Canada (HSIC) and the Primate Research Centre and Wildlife Reserve of Barbados (PRCB). As interveners, these organizations are parties of record in this matter and as such, have the opportunity to intervene or support arguments presented. The Agency also granted interested person status to 24 other individuals and organizations who indicated an interest in this matter. While the interested persons are not given intervener rights, their comments were placed on the record and were provided to the parties of record (Queen’s University, PHAC, Air Canada, BUAV, HSIC and PRCB).

In Decision No. LET-A-4-2012, the Agency, pursuant to paragraph 113(a) of the ATR, suspended Air Canada’s International Cargo Tariff revisions pending completion of the Agency’s investigation into this matter. Decision No. LET-A-4-2012 further required Air Canada to refile the International Cargo Tariff provisions which were in effect prior to the filing date of November 22, 2011. Regarding Air Canada’s Domestic Tariff, the Agency noted in that decision that pending its determination of the matter, the Agency does not have jurisdiction to suspend terms and conditions of carriage applicable to domestic service.

Previous complaint filed by PRCB

In a previous complaint filed by PRCB on September 30, 1996, PRCB alleged that Air Canada had refused to carry monkeys from Barbados to Canada, and that this refusal was inconsistent with Air Canada’s tariff and contrary to regulations and legislation. In its response to this previous complaint, Air Canada asserted that it was current industry practice to prohibit the carriage of goods which may be considered a nuisance or the transportation of which might be considered offensive to passengers. Air Canada submitted that it had the right to refuse to carry certain goods by virtue of a provision appearing in its International Cargo Tariff, which provided that cargo will be accepted only if it is not likely to cause annoyance to passengers.

The Agency found in Decision No. 10-A-1998 that the term “annoyance,” as used in Rule 105(D) of Air Canada’s International Cargo Tariff, referred to a physical context, such as noise or odour. The Agency further found that no evidence had been presented that would indicate that the carriage of monkeys destined for research or vivisection caused an annoyance of this kind to passengers. The Agency therefore concluded that Air Canada had contravened subsection 110(4) of the ATR by not applying the terms and conditions of carriage specified in its tariff. This decision did not impose on Air Canada a requirement to carry non-human primates for the purpose of research or vivisection, the decision only ruled on an inappropriate application of Air Canada’s tariff.

In its response to Decision No. LET-A-46-2012, filed in relation to the present complaint, Air Canada refers to the Agency’s ruling in the previous complaint as detailed above. Specifically, Air Canada refers to the Agency’s finding that there was no evidence that the persons, who complained to Air Canada, were passengers or potential passengers. As such, Air Canada states that, in Decision No. 10-A-1998, the Agency concluded that Air Canada had contravened subsection 110(4) of the ATR by not adopting the terms and conditions specified in its tariff and refusing to accept for carriage non-human primates destined for vivisection.

The Agency  points out that the facts in the Decision No. 10-A-1998 were different than those in the present complaint, as the proposed modification to Air Canada’s International Cargo Tariff  clearly states its objective of refusing carriage of non-human primates shipped for laboratory research and/or experimental purposes. The issue presently before the Agency is not whether or not Air Canada has properly applied the terms and conditions of its tariff, but  rather, whether to disallow Air Canada’s proposed modifications to its tariff on the basis that it is “unreasonable” or “unduly discriminatory.”

Current stage of the proceedings

In Decision No. LET-A-46-2012, the Agency exercised its jurisdiction under section 21 of the Canadian Transportation Agency General Rules, to formulate issues to be examined as part of a proceeding. In that regard, the Agency invited the parties of record to comment on whether or not carriers like Air Canada have a legal obligation to transport cargo as and when required by shippers. The submissions referenced below were filed in response to that Decision.

Legislation

The Agency notes that the complainants in this matter allege that Air Canada’s proposed tariff changes are “unreasonable or unduly discriminatory” pursuant to subsection 67.2(1) of the CTA, and “unjust, unreasonable and unjustly discriminatory” pursuant to section 111 of the ATR.

Subsection 67.2(1) of the CTA, which applies to domestic carriage, states that:

67.2 (1) If, on complaint in writing to the Agency by any person, the Agency finds that the holder of a domestic licence has applied terms or conditions of carriage applicable to the domestic service it offers that are unreasonable or unduly discriminatory, the Agency may suspend or disallow those terms or conditions and substitute other terms or conditions in their place.

Section 111 of the ATR, which applies to international carriage, states that:

111. (1) All tolls and terms and conditions of carriage, including free and reduced rate transportation, that are established by an air carrier shall be just and reasonable and shall, under substantially similar circumstances and conditions and with respect to all traffic of the same description, be applied equally to all that traffic.

(2) No air carrier shall, in respect of tolls or the terms and conditions of carriage,

(a) Make any unjust discrimination against any person or other air carrier;

(b) Give any undue or unreasonable preference or advantage to or in favour of any person or other air carrier in any respect whatever; or

(c) Subject any person or other air carrier or any description of traffic to any undue or unreasonable prejudice or disadvantage in any respect whatever.

The Agency notes that while the terminology used in subsection 67.2(1) of the CTA and section 111 of the ATR is not identical, this terminology broadly refers to the issue of unreasonable or unjust discrimination. Therefore, the words “unjust discrimination” and “undue or unreasonable prejudice” used in section 111 of the ATR encompass and capture the meaning of the terms used in subsection 67.2(1) of the ATR.

In order to address this matter in an efficient manner, the Agency will consider this matter pursuant to section 111 of the ATR; however, the Agency’s findings will be equally applicable to Air Canada’s International Cargo Tariff and its Domestic Tariff.

Legal obligation to transport cargo

Positions of the parties

In its response to Decision No. LET-A-46-2012, Air Canada states that, based on the wording of subsection 110(4) and section 122 of the ATR and as a holder of an international scheduled licence, it must accept a shipment when presented by a shipper provided that the applicable tariffs have been paid, unless the carrier’s tariff discloses that the type of shipment will be refused.

Air Canada further submits that unless it has a tariff in place clearly stating its policy with respect to refusal to transport a specific good, it must transport all goods when presented by shippers as long as the following conditions are satisfied:

a) There is capacity on the flight;

b) The shipment is properly packaged to sustain travel;

c) The animals are carried in accordance with the approved standards and have cleared all veterinary and customs requirements;

d) The shipper pays the appropriate charges and fees; and,

e) The shipper delivers the shipments on time.

PHAC is of the view that Air Canada, as a common carrier, has a duty to accept cargo as and when presented providing that the shipper pays the “fare” for the service and accepts the carrier’s terms of carriage. PHAC indicates that the “fare” and terms and conditions of carriage must be set in the tariff which must comply with the various legislative requirements.

Queen’s University submits that air carriers have a legal obligation not to set terms and conditions of carriage which would result in certain cargo not being accepted if doing so would violate the goals and objectives of the national transportation policy (NTP) or be unreasonable or unduly discriminatory, which terms should be interpreted in the context of the NTP, section 111 of the ATR and the Agency’s past decisions.

Queen’s University also submits that section 111 of the ATR imposes specific statutory obligations on air carriers with regard to cargo, the violation of which would lead to an unreasonable term or condition of carriage. Queen’s University points out that subsection 111(1) of the ATR obligates air carrier to treat all cargo of the same description equally and that in stating that an air carrier may not subject any “description of traffic to any undue or unreasonable prejudice or disadvantage whatsoever,” paragraph 111(2)(c) of the ATR imposes additional restrictions on an air carrier’s right to refuse cargo.

HSIC contends that, subject to the CTA, the ATR and the respective airline’s tariff, an airline that is a private entity, such as Air Canada, is under no obligation to transport cargo as and when presented by shippers, in all circumstances. HSIC submits that there are no applicable restraints under the CTA and the ATR that in any way prohibit Air Canada from implementing the proposed tariff.

PCRB states that air carriers such as Air Canada have an obligation to transport cargo as and when presented by shippers in the circumstances set out in their tariffs which must be based on relevant considerations and comply with the applicable legislation.

BUAV submits that air carriers such as Air Canada do not have an absolute obligation to transport cargo as and when presented by shippers. They have an obligation to transport cargo in the circumstances set out in their tariffs, and those tariffs must comply with the legislation.

Analysis and findings

Based on the above submissions, there appears to be an agreement that carriers (such as Air Canada) do not have an absolute obligation to carry any cargo, whenever presented; rather carriers must apply the conditions set out in their tariffs, and those tariffs must comply with the regulations (for example, section 111 of the ATR). Furthermore, none of the parties of record have contested Air Canada’s position that unless it has a tariff in place clearly stating its policy with respect to refusal to transport a specific good, it must transport all goods when presented by shippers as long as conditions related to capacity, packaging, custom clearance, paying the fee and delivering shipments on time are satisfied.

The Agency notes that section 122 of the ATR requires an air carrier to clearly state in its tariff the terms and conditions of carriage respecting prescribed matters, such as the air carrier’s policy concerning its refusal to transport passengers or goods.

Therefore, the Agency is of the opinion that an air carrier’s obligation to carry cargo may be subject to limitations, including a refusal of carriage of cargo, according to terms and conditions that are clearly stated in its tariff. However, an air carrier’s tariff must comply with the requirements of the regulations, including that it be reasonable and not unjustly discriminatory.

Reasonableness and unjust discrimination in relation to cargo

Position of the parties

PHAC argues that Air Canada’s proposed tariff is unreasonable and unjustly discriminatory and is not consistent with the objectives of the NTP to “serve the needs of its users, advance the well‑being of Canadians and enable competitiveness and economic growth in both urban and rural areas throughout Canada.”  PHAC further argues that the tariff will negatively affect the health and well-being of Canadians due to the impact it will have on necessary medical research and therefore should be considered unreasonable because it is contrary to a fundamental principle of the NTP. Queen’s University argues that the first step in the Agency’s analysis of a tariff which restricts certain cargo is to determine whether the restriction is consistent with the fundamental principles set out in the NTP. Queen’s University further states that if the terms and conditions are not consistent with the NTP, the analysis stops there; the tariff will be unreasonable.

HSIC contradicts Queen’s University position. HSIC states that the NTP is not a legal obligation; rather, it is a legal declaration of purpose. HSIC further points out that section 67.2 of the CTA and section 111 of the ATR clearly state the applicable requirements that a tariff must adhere to, and furthermore, that the NTP does not state that these principles are to be used in the interpretation or the implementation of the CTA or the ATR, or any portion thereof. In its response, BUAV supports HSIC’s view and adds that the policy can only have relevance to the present case in the most general sense. BUAV states that the NTP is a declaration of strategic objectives of Canada’s transportation policy, in those areas where the writ of the federal government runs.

Analysis and findings

In addressing these submissions, the Agency first notes that the NTP is a statement of policy not the source of specific legal obligations. As was stated by the Federal Court of Appeal, in Ferroequus Railway Company Limited v. Canadian National Railway and the Canadian Transportation Agency 2003 FCA 454:

[22] [...,]  since the Policy expresses the often competing considerations that the Agency must balance when making a particular decision, it inevitably operates at a level of some generality and does no more than guide and structure the Agency’s exercise of discretion   in any given fact situation. Thus, it imposes a relatively soft legal limit on the Agency’s exercise of power, in the sense that it will rarely dictate a particular result in any particular case.

The NTP states that a “...competitive, economic and efficient national transportation system that meets the highest practicable safety and security standards and contributes to a sustainable environment and makes the best use of all modes of transportation at the lowest total cost is essential to serve the needs of its users, advance the well-being of Canadians and enable competitiveness and economic growth in both urban and rural areas throughout Canada.”

The NTP then recognizes that:

Those objectives are most likely to be achieved when

(a) competition and market forces, both within and among the various modes of transportation, are the prime agents in providing viable and effective transportation services;

(b) regulation and strategic public intervention are used to achieve economic, safety, security, environmental or social outcomes that cannot be achieved satisfactorily by competition and market forces and do not unduly favour, or reduce the inherent advantages of, any particular mode of transportation; [...]

In the Agency’s opinion, the NTP does not provide broad authority to assess how the general health and well-being of Canadians may be impacted by Air Canada’s tariff. Instead, the NTP recognizes the role that matters including competition and market forces, both within and among the various modes of transportation, play in providing viable and effective transportation services. While the NTP recognizes the need for regulation and public intervention where satisfactory economic, safety, security, environmental and social outcomes are not achieved, in the Agency’s opinion, the Agency cannot be called upon in the context of the CTA to decide between the harm that Air Canada’s tariff would potentially cause to animal research on the one hand with its benefits to the campaign against the use of non-human primates in medical research on the other. Nor would such an assessment be consistent with the Agency’s role as an administrative body that adjudicates commercial and consumer transportation-related disputes and as an economic regulator.

In considering the reasonableness of an air tariff, the Agency has, in past decisions, recognized the need to balance the competing interests of passengers on one hand and the air carrier on the other. In Decision No. 666-C-A-2001, the Agency considered whether Air Canada’s denied boarding policy applicable to transportation between points in Canada was unreasonable within the meaning of subsection 67.2(1) of the CTA. The Agency stated:

The Agency is, therefore, of the opinion that, in order to determine whether a term or condition of carriage applied by a domestic carrier is “unreasonable” within the meaning of subsection 67.2(1) of the CTA, a balance must be struck between the rights of the passengers to be subject to reasonable terms and conditions of carriage, and the particular air carrier’s statutory, commercial and operational obligations.

More recently, in Decision No. 287-C-A-2009 the Agency applied these tests in addressing a complaint involving the reasonableness of Air Canada’s proposed discontinuation of the carriage of pets and their kennels, weighing less than 70 lbs, as checked baggage. The Agency stated:

The test established by the Agency in Decision No. 666-C-A-2001 requires that when determining whether a term or condition of carriage is “unreasonable” within the meaning of subsection 67.2(1) of the CTA and section 111 of the ATR, a balance must be struck between the rights of passengers to be subject to reasonable terms and conditions of carriage, and the particular air carrier’s statutory, commercial and operational obligations.

The terms and conditions of carriage are set by an air carrier unilaterally without any input from future passengers. The air carrier sets its terms and conditions of carriage on the basis of its own interests, which may have their basis in statutory or purely commercial requirements. There is no presumption that a tariff is reasonable. Therefore, a mere declaration or submission by the carrier that a term or condition of carriage is preferable is not sufficient to lead to a determination that the term or condition of carriage   is reasonable.

The Agency notes that the present complaint involves facts that are different than the above cases. Air Canada’s proposed modification is to its International Cargo Tariff . It does not affect passengers or their baggage. The objective of protecting the travelling public against the unilateral imposition by air carriers of unreasonable terms and conditions is not applicable in the context of air cargo.

The Agency is of the opinion that it must consider whether such a tariff is “unreasonable” or “unjustly discriminatory” in the specific context of the transportation of air cargo. The Agency’s assessment of the “reasonableness” of an air cargo tariff, or whether it is “unjustly discriminatory”, must include a consideration of the reason for the tariff, and the extent to which it results from a business decision by Air Canada. The Agency must also consider Air Canada’s competitive environment, industry practices and the additional service options available to Air Canada’s customers. The Agency also recognizes that there are several operational and legislative reasons why an air carrier may impose terms and conditions as well as restrictions on the carriage of air cargo. On the other hand, the Agency recognizes provisions of international agreements that pertain to air cargo, as well as the fact that shippers are entitled to protection against unreasonable, that is, decisions that are made without a rational basis.

Therefore, in considering whether Air Canada’s tariff is reasonable, the Agency will balance the rights of a shipper with the statutory, commercial and operational obligations of an air carrier. This consideration will include matters such as:  the rationale behind the proposed air cargo tariff provision, industry practices in regard to the shipment of the same cargo in similar circumstances, the applicable provisions of international instruments to which Canada is a party, an air carrier’s operational requirements and applicable legislative or regulatory provisions relating to safety or security.

With respect to the consideration of whether or not Air Canada’s tariff is “unjustly discriminatory,” in Decision No. 666-C-A-2001, the Agency determined that the assessment of whether or not a tariff is “unduly discriminatory” is a two step process. The Agency stated:

While the Agency acknowledges that discrimination may result from a term or condition of carriage which applies equally to all passengers, in order to constitute discrimination, it must be demonstrated that a burden, obligation, or disadvantage has been imposed on one person or group which is not imposed on others.

In determining whether discrimination is “unjust” the Agency stated:

The Agency is therefore of the opinion that in determining whether a term or condition of carriage applied by a carrier is “unduly discriminatory” within the meaning of subsection  67.2(1) of the CTA or “unjustly discriminatory” within the meaning of section 111 of the ATR, it must adopt a contextual approach which balances the rights of the travelling public not to be subject to terms and conditions of carriage that are discriminatory, with the statutory, operational and commercial obligations of air carriers operating in Canada. This position is also in harmony with the national transportation policy found in section 5 of the CTA.

The Agency must first determine whether the term or condition of carriage applied is “discriminatory.” If the Agency finds that the term or condition of carriage applied by the domestic carrier is “discriminatory”, the Agency must then determine whether such discrimination is “unjust” in consideration of the statutory, commercial and operational reasons that led to the tariff.

In assessing whether Air Canada’s tariff is “unduly discriminatory” the Agency must also consider the commercial context of the transportation of air cargo and the fact that a refusal to carry certain cargo may result from a legitimate business decision.

When balancing the shippers’ rights against the carrier’s obligations, the Agency must consider the whole of the evidence and the submissions presented by both parties and make a determination on the reasonableness or unreasonableness of the term or condition of carriage, or whether the tariff is “unjustly discriminatory” based on which party has presented the more compelling and persuasive case.

Parties invited to provide submissions on reasonableness and unjust discrimination in relation to cargo

In light of the Agency’s interpretation of the factors that should be considered when assessing whether the terms and conditions established by a carrier in relation to the carriage of cargo are “unjust and unreasonable” and “unjustly discriminatory,” the Agency invites parties to file further submissions in this matter. Parties are given 30 days to file submissions, with a copy served to the parties receiving this letter. All parties will then have 15 days to comment on any submissions filed, after which pleadings will be considered closed in this matter.

Member(s)

  • Geoffrey C. Hare
  • J. Mark MacKeigan
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