Canadian National's Paul M. Tellier Urges Level Playing Field, Better Customs Procedures to Help Railroads Reduce Highway Congestion at Canada-United States Border Points.

Business Editors

BUFFALO, N.Y.--(BUSINESS WIRE)--June 26, 2001

Railroads such as Canadian National (NYSE:CNI) (TSE:CNR.) can play a bigger role in easing highway congestion at Canada-United States border crossings, but they need more government cooperation to do the job, says CN President and Chief Executive Officer Paul M. Tellier.

Tellier said CN's ability to make strides in reducing transborder highway congestion - last year it moved the equivalent of 240,000 long-haul truckloads of freight between New York and Ontario - is being hampered by discriminatory tax policies in Canada and cumbersome United States customs procedures.

Something must be done, Tellier told the New York-Ontario Economic Summit here, because highway congestion is wasting huge resources. In a single year alone, for example, drivers wait the equivalent of 425 years to clear customs between Canada and the United States. But just when railroads are ready to offer greater road relief, he said, a new U.S. customs policy is sometimes substantially delaying CN's transborder freight trains.

Tellier said CN is well positioned to relieve highway congestion because of the efficiency of its scheduled services and breadth of its Canada-U.S. network reaching three coasts. Already 52 per cent of CN's revenue comes from cross-border or domestic U.S. traffic, and its transborder freight business is ready to rise again because of two recent initiatives:

-- The proposed acquisition of Wisconsin Central Transportation Corporation,
which would improve the efficiency of CN's NAFTA network between Western Canada
and the U.S;

-- A new CN-CSX Intermodal marketing agreement offering shippers highly
truck-competitive, five-day service for coast-to-coast intermodal traffic
moving between Vancouver, B.C., and New York (Kearny, N.J.) Other key lanes
include Toronto-Florida (four days) and Toronto-New York (two days). These new
services will move over the Buffalo gateway.

"We could do more if the playing field between trucks and trains was level," Tellier said. Taxes on rail inputs - fuel, material, equipment purchases and railroad rights-of-ways - are 50 per cent higher in Canada than in the U.S. In addition, Canadian railroads pay heavier taxes than Canadian and U.S. truckers.

Tellier said another problem is U.S. Customs' move to adopt a system of enforced customs compliance, in place of informed compliance. This recent practice is interrupting the flow of CN's Canada-U.S. traffic. U.S. Customs officers stop CN's high-speed intermodal trains so inspectors can examine specific containers. The result is service and scheduling disruptions that can affect as many as 40 trains per day in busy cross-border rail corridors.

"There has to be a better way, and there is," Tellier said, setting out a four-step customs proposal:

-- Harmonization of Canada and U.S. customs computer systems so

that there is a single reporting requirement that would allow

information to be shared by officials on both sides of the

border;

-- Customs pre-clearance for all freight carriers having a proven

record of customs compliance - a return to voluntary

compliance;

-- Customs inspections of shipments at destination, rather than

at border points, when this practice is more efficient;

-- Adoption of a "North American" customs perimeter for all

offshore shipments reaching the continent, no matter what

their origin or destination, with a single customs agency

doing inspections. This would allow for a more seamless

movement of goods across the Canada-U.S. border.

Canadian National Railway Company spans Canada and mid-America, from the Atlantic and Pacific oceans, to the Gulf of Mexico, serving the ports of Vancouver, Prince Rupert, B.C., Montreal, Halifax, New Orleans, and Mobile, Ala., and the key cities of Toronto, Buffalo, Chicago, Detroit, Memphis, St. Louis, and Jackson, Miss., with connections to all points in North America.