Regulation of temporary licences
The majority of the evidence received from submitters has been directed
towards the Coastal Trading (Revitalising Australian Shipping) Bill 2012 (CT
bill). In particular, submitters have expressed concerns on the operation of
temporary licences (TLs). This is consistent with evidence received by both the
House of Representative's transport committee inquiry undertaken in 2008 and
the government's recent consultation on the reforms.
Evidence relating to the operation of the proposed licensing regime and TLs
will be discussed in this chapter and the following one. This chapter will
- the voyage details required for temporary licence applications
and variations; and
- the minimum five voyage requirement for temporary licence
applications and variations.
The Explanatory Memorandum (EM) to the CT bill acknowledged that
industry had expressed a range of concerns on the application process for a TL
and that as a result a number of models for the process were discussed with
industry. The EM explained that the CT bill is intended to balance these needs
and those of general licence (GL) vessels:
The provisions of the Bill are designed to balance the needs
and priorities of these businesses and industries whilst providing ample
opportunity for general licence holders to nominate to carry passengers or
cargo that would otherwise be carried by either foreign-registered vessels or
vessels registered on the Australian International Shipping Register.
Submitters' views on the current
A number of submitters expressed satisfaction with the level of
flexibility provided in the current permit system.
BP Australia commented:
BP operates Australian-licensed vessels supplemented with the
use of Single Voyage Permits (SVPs). The resulting flexibility is a key enabler
for the Australian hydrocarbon shipping sector to ensure continuity of physical
supply of fuel across Australia and to optimise the performance of our
Australian refineries and terminal infrastructure.
The Minerals Council of Australia highlighted that minerals industry
suppliers and customers are responsible for up to half of the bulk cargo (other
than containers or break bulk) moved around Australia. The council commented:
Companies use a variety of shipping arrangements: some use
Australian-flagged and Australian-licensed vessels; others use occasional,
foreign-licensed vessels on limited permits. This mix of types of vessel is
critical for creating competition and providing for flexibility.
The Australian Logistics Council highlighted that the current permit
system has provided benefits to shippers through having easy-access to foreign
vessels undertaking triangular voyages which include an Australian coastal leg:
This freight carrying capacity has led, amongst other things,
to keeping a downward pressure on prices, particularly with regards to the
carriage of freight between the eastern seaboard and Fremantle.
The National Bulk Commodities Group argued that the current permit
system provides choice and availability in the supply chain:
Transport logistics is extremely sensitive to a supply chain,
which is dependent on a service that is both competitive and reliable. These
attributes explain why Australian dry bulk shipping users are supportive of the
Permit system whereby competitive tension is maintained through choice and
availability. Turning the clock back to an era where dry bulk shippers are
deprived of competitive options and reliability is seen as a retrograde step.
In contrast, the Maritime Union of Australia argued that the current
licensing regime is ineffective and lacks transparency:
The permit system, until about 10, 12 or 15 years ago, was a
reasonable mechanism to get the balance right...
...the permit system basically was disintegrated in terms of
its application and it became a laissez-faire approach to the awarding of
permits. There was no transparency and there was no direct connection between
the awarding of permits and the nurturing of the domestic industry. In fact, it
was actively used over an infamous period of 10 years when really with permits
the exception then dominated the rule, and in fact with investment in the
Australian shipping industry we went from a shipping industry that had one of
the youngest fleets—on average about six or seven years—to one of the oldest
fleets, where we now have these creaky old ships floating around the place that
are 20 to 25 years old.
So effectively industry policy that had been longstanding for
generations in this country had been undermined by what I would say was a
negligent approach to the issuing of permits. There was no transparency. There
was no ability for the Australian shipowner to position their ships to their
own advantage. There was no effective notice given for where parcels of cargo
would be moved. There was an ability to nominate the size of the cargo and say,
'We will only carry that size of cargo, and the Australian ships aren't the right
So effectively, by the use of permits, they bypassed an
existing fleet that was efficient.
The Hon. Anthony Albanese, MP, Minister for Infrastructure and
Transport, recognised these flaws in the current permit system when he
announced the reforms:
It is important that Australian coastal shipping is
competitive and that shippers can make use of foreign-registered vessels when
Australian ships are not available.
But the current permit system is broken. It creates
uncertainty and serves as a disincentive to capital investment. Permits are too
easy to obtain.
The alleged policy objectives are observed in the breach. It
is not clear what permits are being issued and for what trade. The rules aren’t
clear and are not set out in legislation. There are no incentives to encourage
a long-term commitment to working the Australian coast.
Reforms I am announcing today provide clarity and
transparency to shippers and operators and enable them to plan long-term. The
new licensing regime will support Australian shipping and set clear boundaries
around the necessary role of foreign vessels in our coastal trade.
Licensing requirements and conditions will be set clearly in
legislation, giving certainty and clarity to all operators.
Temporary licence applications and variations
Some submitters argued that, in contrast to the present regime, the
proposed three tier licensing regime was restrictive and impractical. Key
issues with the licensing regime were directed towards TL applications and
variations and included concerns that:
- any requirement for a TL applicant to forecast the number of
voyages and the types of cargo are impractical and do not allow for adequate
- the requirement to have a minimum of five voyages for a TL
application is unworkable and discriminates against smaller shippers (cargo
- the requirement to have a minimum of five voyages when seeking to
increase the number of voyages on a TL is impractical.
Voyage details required for a
Subclause 28(2) and subclause 51(2) outline the details required for a
TL application and a TL variation respectively:
(2) The application must be in writing and specify the
(a) the number of voyages, which
must be 5 or more, to be authorised by the licence;
(b) the expected loading dates;
(c) the number of passengers
expected to be carried (if any);
(d) the kinds and volume of cargo
expected to be carried (if any);
(e) the type and size, or type and
capacity, of the vessel to be used to carry the passengers or cargo (if known);
(f) the ports at which the passengers
or cargo are expected to be taken on board;
(g) the ports at which the passengers
are expected to disembark or the cargo is expected to be unloaded;
(h) such other information as is
prescribed by the regulations.
Note: The Minister may ask the applicant to provide further
information, see section 77.
Shipping Australia argued 'it is impossible to forecast the movement of
such cargoes' and questions how 'information can be provided over a twelve month
period when significant volumes of cargo come up for carriage at short notice'.
Wallenius Wilhelmsen Logistics considered that the requirement to
forecast the movement of cargoes will lead to the termination of services by
international carriers and stated that '[i]t is completely impractical to
provide this data with certainty and the Bill needs to be re drafted to reflect
the realities of international and coastal markets'.
Australian Shipping Consultants also opposed the requirement and
highlighted that these projections are likely to be the subject of variation,
which would be a time consuming process. It argued that these variations would
be contrary to the 'much heralded outcome of "greater transparency and
recording of data"'.
The Fertiliser Industry Federation of Australia informed the committee
of the difficulties its industry would face with the requirement and the flexibility
that is required for its seasonal industry:
We have problems with seasonality and unpredictability in the
fertiliser industry, so it is not just about cost but also about availability.
Approximately 55 per cent of our product is sold in four months of the year. It
is very difficult to get regular shipping which would suit an Australian
coastal vessel so the availability of foreign vessels is important in providing
the capacity at times when it is needed, so it is for a short period. The other
issue is that it is very common for us to reschedule shipping in all sorts of
ways. If we get an early break in Victoria and we empty the sheds in Melbourne
and we organise a vessel to go there, but if it suddenly pours with rain the
farmers stop picking it up. The vessel has to go to Adelaide instead because
there is no space in Melbourne, and you then have to book another vessel for
two weeks later to resupply Melbourne when it starts to dry out again. So
shipping decisions are being made on an almost daily, and certainly weekly,
basis. There is a difficulty in trying to predict ahead, and the initial
proposal for your five voyages 12 months ahead is going to be difficult or
impossible for our industry to meet.
From the fertiliser industry's perspective, it [the licensing
regime] would need to be as flexible as the existing system in terms of time
frames because that is why it is critical for us.
Ports Australia noted that shipping companies involved in container
trades may adjust to the regime more readily, however it highlighted the bulk
trades may encounter more difficulties to accurately predict its trade over an
We believe therefore that a first tier issue is the
effectiveness of the temporary licence system and that its success or otherwise
will lie very much in the timeliness and responsiveness the regime
demonstrates. At first glance the complexity and perhaps the draconian nature
of the reporting requirements inherent in the coastal licensing permit system
is an issue. Our engagement with the shipping industry on this matter has drawn
a mixed response but generally it is fair to say that the response to us has
been that shipping companies involved in the container trades may be able to
adjust to these requirements over time but that shipping lines and shippers
involved in the bulk trades will find it more difficult to predict precisely
their cargoes in advance given spot market and seasonal conditions.
While we see it as appropriate to leave it to the more expert
opinion of representatives of the shipping industry to suggest how the
legislation might be tweaked to make it more workable it is imperative in our
view that if the regime is to respond appropriately to the commercial realities
of the coastal trades including the container trades (particularly east/west)
then it is important to have fast turnaround times and to avoid the risk of the
regulators being bogged down in subjective argument about national interest and
what, at this juncture, constitutes the long term interests of Australian
In concurrence with this observation, ANL Container Line who are
currently one of the largest users of SVPs and CVPs stated:
We move a lot of cargo around the coast at the moment for a
large number of clients. If you think of a container load, we are moving
container loads in the hundreds during the week. Each one of those has one
client attached to it, so it is not a bulk cargo, such as in some of the other
...we support the package of bills. We think it is good that
the government is doing something. The industry as a whole has really lacked
any government sponsorship or any government interest over the years, and we
have finally got a government that actually is taking an interest in the sector
and realising that, as an island continent and a shipping nation, we need to
have a maritime policy. You cannot be an island continent with, as Paddy
Crumlin said, the fourth largest shipping task in the world and not have a
maritime policy. To date we really have not had that, until this package of
bills has come forward.
The Australian Shipowners Association (ASA) represents 'companies whose
primary business is to provide sea transport services to the freight market as
well as companies whose shipping operations form an element of their supply
chain, hence some of ASA’s [m]embers are very large cargo interests' and are
active in both domestic and international trade routes under both Australian
and foreign-flagged vessels. The ASA submission noted that on matters of
controversy among members, it had opted to represent the views of the
shipowner, as distinct from the shipper or cargo interest.
The ASA expressed support for the enhanced transparency in the new
licensing regime to allow for GL vessels to nominate for trade.
It acknowledged, however, that there is an increase in administration within
the proposed regime for both industry and the responsible department. It argued
that '[m]atters resulting in excessive "red tape" for no demonstrable
benefit should be reviewed to remove onerous and unproductive requirements':
The timeframe of the TL application (12 months) could make
the provision of data for that entire period little more than a "best
guess" and, in many circumstances, is unlikely to resemble the actual
voyages required. This is due to the unknown nature of many shipping movements.
The result will be a raft of variations being sought to the originally provided
"voyage" requirements, which will trigger the process of review by
General Licence (GL) holders. In total, this process would increase the
administration required in order to undertake a voyage with a non-GL ship from
that required under the existing legislation/permit regime. Such unproductive
red tape must be avoided. It is understood that one means of mitigating this
provided for under the Bill is to initially only apply for voyages that are
known and to apply for variations to add voyages at later stages.
Following comments from industry during the consultation period an
'acceptable tolerance limit' was included for the projected volume of cargo or
passengers on a TL vessel, as well as for loading dates. 'Acceptable tolerance
limits' are defined in clause 6 of the CT bill. The EM outlined:
In relation to a cargo, the acceptable tolerance limit is
plus or minus 20% of the volume of cargo authorised to be carried on a vessel
under a temporary licence. In relation to passengers, the acceptable tolerance
limit is plus or minus 20% of the passengers authorised to be carried on a
vessel under a temporary licence.
In relation to a loading date, the acceptable tolerance limit
is five days before or after the loading date authorised under a temporary
licence. While current arrangements provide for a tolerance in regard to the
sailing date, this Bill uses the loading date. This is consistent with industry
advice that the loading date may in certain circumstances be more critical to
the ongoing management of operations (clearing a stockpile/empty storage tanks
etc), including upstream production.
Clause 37 (issue of temporary licence) and clause 48 (issue of varied
temporary licence) both allow for acceptable tolerance limits.
Balancing freight needs with
General Licence nominations
The Department of Infrastructure and Transport (the department) informed
the committee that the coastal trading bill is intended to strike a balance
between recognising the freight needs around the coastline, as well as allowing
for GL holders to nominate for trade:
...what we have tried to do with that bill is to ensure that
there is a balance struck in terms of giving Australian general licence holders
the opportunity to nominate to be able to carry cargo, but the arrangements for
temporary licences also recognise that freight needs to move and it needs to
move in a timely fashion. We have ensured that there is a balance in terms of
keeping that freight moving but having a more visible and transparent process
for operators to be able to put their hands up and compete for that work...
In fact, having sat through the large number of consultations
on these reforms and trying to develop this legislation with industry, the
department can be left in no doubt about the importance of ensuring that
freight continues to move and the requirements of shippers. That is very clear
to the department and it has probably made this aspect of the reform the most
contentious in terms of trying to work with the industry to reach a final
position to put to government. Industry has made that view very, very clearly
known to us and we have taken it into account, having regard also to the government's
intent of trying to ensure that there is a better process than currently exists
for Australian vessels to be able to compete for cargo.
The department clarified that while a TL was valid for 12 months,
applicants were not expected to forecast the detail of every voyage for the
duration of the licence. The department explained to the committee that it had
allowed for flexibility in TL applications and variations within the 12 month
Ms Gosling: ...I just want to be clear. I do not want
to leave the committee with an impression that an operator has to see 12 months
out. The licence is issued for a 12-month period, but the operator can come
back as their voyages are known, as it suits them. They do not have to
anticipate. This was a key change from bill 1 to bill 2. They no longer have to
anticipate their voyages 12 months out. They have to have a minimum of five,
but they could come back on a monthly basis if that suits them as the detail of
those voyages are known to them, in terms of going for the next suite of
Senator BUSHBY: So they just have to undertake that
they will do five voyages?
Ms Gosling: Yes.
Senator BUSHBY: They do not have to provide details
until they know what they are?
Ms Gosling: They have to provide enough information to
ensure that a general licence holder could seriously compete for that cargo,
but they do not have to anticipate on 1 July what they are moving [the
following year] on 30 June.
Minimum of five voyages for
applications and voyage variations
As discussed above, paragraph 28(2)(a) and paragraph 51(2)(a) of the CT bill
outlines that a TL application and variation of additional voyages must include
the detail of a minimum of five voyages. The department outlined the policy
intent for this requirement:
These provisions seek to address the long standing concerns
that the permit system, specifically SVPs, have enabled foreign registered and
crewed ships to operate in the Australian coastal trade almost without
restriction. As noted earlier in this submission, this has facilitated the long
term decline of the Australian shipping industry.
Although a TL will continue to allow foreign ships to be used
to engage in coastal trading, it is not simply a permit re-badged. Industry
participants will have greater visibility of what voyages these vessels are
undertaking. Currently, SVPs are issued without any regard to what previous
voyages the same vessel may have undertaken, or whether these vessels are undertaking
regular scheduled services that could be supported by an Australian licensed vessel.
The CT Bill provides for a more rigorous application process
for a TL. Authorising the number of voyages also makes the role of foreign
registered vessels in the domestic trade more transparent.
Australian Shipping Consultants, however, deemed the requirement of a
minimum of five voyages for TL applications and variations as 'wholly
inappropriate and unworkable in practice'.
Shipping Australia also raised concern with the requirement and argued that it
discriminates against smaller coastal shippers who may have a limited number of
voyages per year.
Shipping Australia recommended that the provision be removed entirely,
or alternatively, that the parameters for the information required be more
general than those specified in the CT bill and that variations should be
permissible on a single voyage basis:
...the criteria for the original application of the temporary
licence [should] be based on best endeavours and the provision of full
information, (where known). The temporary licence should be varied for one off
voyages on the basis of new information.
Shipping Australia argued it would like to see the minimum voyage
requirement completely removed from the bill but stated 'our emphasis would be
on the variation'.
Caltex also argued that a minimum voyage requirement 'is not practical
or reasonable' and recommended that the minimum number of five voyages per TL
be removed from the CT bill:
The only way for these shippers to obtain a TL would be to
include "bogus" or "fictitious" voyages in their
applications so that they meet the minimum voyage requirement. This places needless
administrative burden on the applicant as well as the Department for, what
would seem, no benefit. This also goes against one of the aims of the shipping
reform package to increase transparency and enhance the efficiency of the
Australian shipping industry.
Clearly the intent of the minimum voyage requirement is to
allow GL holders to determine if they want to nominate to carry cargo outlined
in a TL application. However, if this requirement forces TL applicants to
include inaccurate or "fictitious" voyages then the intended outcome
of this requirement will not be achieved.
The government cannot expect accurate information when the
needs of industry have not been adequately taken into consideration and
unnecessary requirements are imposed in the Bill, such as requiring details of
coastal movements 12 months in advance and the minimum voyage requirement. This
places applicants in a difficult and untenable position.
Clause 42 of the CT bill outlines that a breach of TL conditions,
however, is subject to civil penalties of 50 units for an individual and 250
units for a body corporate. In addition, clause 59 states that '[i]f the
Minister believes on reasonable grounds that a condition of a temporary licence
has been contravened' the Minister can issue a written notice and following
this, if deemed appropriate, cancel a licence. Clause 63 details items that
would be considered for an alleged inappropriate use of a TL. Where it is
deemed a TL has been used inappropriately it can be cancelled.
The department informed the committee that the views of industry
participants had been considered and the minimum voyage requirement had been
The first exposure draft of the CT Bill provided for a
minimum of 10 voyages, however, following industry consultations and
feedback, the minimum was lowered to five. This has received general support
Stakeholders who currently operate under one or more, but
less than five, permits will be impacted by this requirement in the CT Bill;
based on 2010–11 data, up to 15 operators are likely to be affected. It is
expected that there will be a need for these stakeholders to revise their
business operations to adapt to the requirements of the new legislation.
The department emphasised the small number of operators likely to be
affected and informed the committee that three percent of permits over the last
12 months were issued to companies that used five or fewer permits over
We are talking about a small number of operators, but we
understand that it is important to their business models. They want to
understand what the changes will mean for them. We are happy to continue
working through with them in terms of how they will be able to make this system
work for them. We have been doing that and we will continue with that industry
consultation as we go through the implementation details of the new changes.
One option for them would be that they may be able to have
some arrangement with a general licence holder and that would give effect to
the sort of overall object of the government's reform in having greater use of
general licence holders of Australian vessels. Another option that may be
available to them is to work with an agent to see whether they can access
temporary licence approval that another operator has already secured. But we
are certainly happy to continue to work through those options with that small
number of operators who have a requirement for a small number of voyages over a
The ASA informed the committee that any removal of the minimum voyage
requirement was unlikely to deter potential investment in two Australian
vessels operating in the Bass Strait. Ms Lloyd, Executive Director of the ASA
asserted that 'as long as the overall premise is that a GL holder is advised
every time there is a variation and has an opportunity to reply, that would
meet the needs of that particular shipping company'.
The ASA further clarified this position with the committee:
...the five is a reasonably arbitrary figure and...we have
never been particularly sold on the concept of having a number. Whether it is
five or 10 or 20 or two, we do not understand the policy intent of requiring a
set number of voyages.
I think that, in many ways, the 12-month issue and the
five-voyage issue are quite mutually exclusive in that with the 12-month permit
you are really putting your hand up to play the game, so to speak, and then you
apply for voyages. You will only ever get approval for voyages that you know
all the detail about and for many, many operators that is not going to be a
full 12 months worth. What the bill is suggesting, I suppose, is that you
should know for at least the next five. Maybe that works in some circumstances,
maybe it does not. We are saying that we do not really think it will help the
Australian shipping industry by confining it to five voyages.
The committee acknowledges the efforts made by the department to adjust
the 'tolerance levels' in the CT bill for temporary licence (TL) applicants
projecting the volume levels and loading dates for voyages specified in TL
applications and variations. The committee commends this approach and the
consideration given to members of the industry during the consultation of the
The committee also notes comments from the department that members of
industry are not expected to forecast cargo movement and volume for the full 12 month
duration of a TL. Members of industry can include the details of voyages that
are known, and variations thereafter will be accommodated.
The committee recognises that industry's views on the minimum voyage
requirement were taken into consideration during the consultation process. This
resulted in the minimum voyage requirement being reduced from 10 to five. The
committee is concerned however, that the inclusion of a minimum voyage
requirement may encourage details of 'falsified' voyages in TL applications and
variations. This would compromise the objective to enhance transparency and assist
GLs to nominate for trade. Further, it may well result in an unnecessary
increase in variations to the detail of TL applications. This would be
burdensome to the ship operator, shipping industries and the department.
The committee notes the arguments that a number of stakeholders will be
adversely impacted by this requirement and recommends that the department
re-examine these legitimate complaints from industries reliant on coastal shipping,
as well as those of the ship owners, to establish whether the minimum voyage
requirement is necessary to improve transparency arrangements.
The committee commends the policy intention which is 'designed to
balance the needs and priorities of these businesses and industries whilst
providing ample opportunity for GLs to nominate to carry passengers or cargo
that would otherwise be carried by either foreign-registered vessels or vessels
registered on the Australian International Shipping Register'.
However, the committee advises the department to consult more widely,
and in greater detail, to determine whether a minimum voyage requirement for TL
applications and variations is superfluous to other transparency measures
outlined in the CT bill to allow GLs to nominate for coastal trade.
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