Background
1.1
When the former Government took office in 2007, the Australian shipping
industry was in decline. Under the Howard Government (1996 to 2007), the number
of Australian‐flagged
vessels fell from 55 in 1996 to 21 in 2007, with only four operating on
international routes.
1.2
In accordance with its Stronger Shipping for a Stronger Economy
election policy statement, the former Government introduced into the Parliament
the Coastal Trading (Revitalising Australian Shipping) Bill 2012 and a
package of related bills[1]
designed to revitalise the Australian shipping industry.
1.3
The legislation created a standalone regulatory framework for
vessels trading around the Australian coastline. Previously, all vessels
engaged in such activities, irrespective of flag and crew nationality, were
regulated by the Navigation Act 1912.
1.4
The legislation was the culmination of
a four year process which involved a parliamentary inquiry and repeated rounds
of consultation with industry, unions and other key stakeholders.
1.5
A key objective of the legislation was to facilitate the long term
growth of the Australian shipping industry by 'levelling the playing field' and
providing the industry with a stable fiscal and regulatory regime, one that
would encourage greater investment and promote international competitiveness.
1.6
The legislation does not preclude the use of foreign vessels. To the
contrary, it permits the use of a foreign vessel where a suitable Australian
vessel isn't available to carry cargo or passengers, so long as they pay
Australian-level wages on domestic sectors.
1.7
In addition to a new licensing regime, the former Government’s reforms
included taxation incentives for flagging ships in Australia and to encourage
the employment of Australian seafarers; a new second (or international)
register with tax benefits for vessels engaged predominately in the
international trade; and a maritime skills development package.
1.8
The legislation passed the Parliament on 18 June 2012, and became law on
1 July 2012. In both the House and the Senate, the Federal Coalition
voted against Labor's new laws.
Current Government's approach (since 2013)
1.9
From the outset, the current Government has been determined to
substantially alter the 2012 legislation, arguing as they did in a two-page
dissenting report from the House Standing Committee on Infrastructure and
Communications that it was "likely to significantly increase costs to
users of coastal shipping" and "the objective of revitalising the
Australian shipping industry is unlikely to be achieved."[2]
1.10
On 25 June 2015, the Government tabled its Shipping Legislation
Amendment Bill 2015. The Bill sought to repeal the Coastal Trading
(Revitalising Australian Shipping) Act 2012 and deregulate the Australian
domestic shipping industry.
1.11
The Bill would have removed the preference for Australian‐flagged and crewed
vessels, and replaced the three-tiered licensing regime with a single permit
system that granted access to vessels of any nationality to work the Australian
coastline for a twelve month period. It would have also significantly extended
the period of exemption from domestic wage standards for foreign vessels.
1.12
The Bill passed the House on 14 October 2015.
1.13
However, on 26 November 2015 the Senate declined to give it a second
reading, noting:
-
the official modelling attached to the Bill forecasted that 93 per cent
of seafarer jobs on Australian vessels would be lost under the legislation and
88 per cent of the Bill’s "deregulatory savings" would come from
replacing Australian wage standards with third world wage standards; and
-
evidence given before a Senate inquiry that senior officials from the
Department of Infrastructure and Regional Development had advised Mr Bill
Milby of North Star Cruises that for his company to remain competitive under
the proposed legislation, he should reflag his vessels to a foreign State, sack
his Australian crew and hire a foreign crew on cheap foreign wages.
1.14
Despite the failure to repeal the 2012 legislation, the continuing
uncertainty surrounding its longevity has deterred investment in Australian
flagged vessels and the Australian merchant fleet has continued to shrink. Since
the 2013 election, 12 vessels have been reflagged to a foreign State.
Issues raised by the Bill
1.15
The Bill now before the Parliament represents the Government's second
attempt to wind back the 2012 coastal trading reforms.
Inadequate consultation with
industry
1.16
Compared to the extensive consultative process which was undertaken
prior to the introduction of the 2012 reforms, the consultation associated with
the preparation of this Bill was negligible:
-
On 21 March 2017, the Minister released the Coastal Shipping Reforms
Discussion Paper seeking stakeholder views on a range of proposed legislative
amendments and proposed seafarer training initiatives. A total of 67
submissions were received by the closing date (12 May 2017).
-
On 20 April 2016, the Minister held one face-on-face meeting with
each of the maritime unions (i.e. Maritime Union of Australia, the Australian
Maritime Officers Union and the Australian Institute of Marine Power Engineers). The
discussions centred on the importance of Australia maintaining a skilled
maritime workforce.
-
On 27 April 2016, the Minister hosted two meetings, one attended
by users of coastal shipping and the other by stakeholders with passenger
shipping interests. The entities consulted in these sessions were:
-
Minerals Council of Australia;
-
Cement Industry Federation;
-
National Farmers Federation;
-
Australian Industry Group;
-
Australia Aluminium Council;
-
Rio Tinto Marine;
-
DP World;
-
Gypsum Resources Australia Representative;
-
Incitec Pivot;
-
Business Council of Australia;
-
Superyacht World;
-
Tourism & Transport Forum;
-
Carnival Australia; and
-
Ocean Alliance NSW.
1.17
Notably, Maritime Industry Australia Ltd (MIAL) – the major peak body
that represents Australian-based shipping operators and other Australian-based
maritime businesses – nor any of its members (with the exception of Carnival
Australia), were invited to participate in either of the meetings hosted by the
Minister on 27 April 2016.
1.18
Lastly, no draft of the Bill was circulated publicly for feedback prior
to its tabling in the Parliament on 13 September 2017. By comparison, the 2012
legislation was subjected to two rounds of exposure drafts.
Failure to build bipartisanship
1.19
On repeated occasions prior to tabling the Bill, the Minister
acknowledged the industry's desire for policy stability and long term
investment certainty, and committed himself to building bipartisan support for
the changes he would end up bringing forward.
1.20
On 26 April 2017, the Minister told a Shipping Australia luncheon:
One final and important point – I want to see change as much
as you do, and I am acutely aware of the need to work towards a reform agenda
in a bipartisan...
1.21
In the foreword to his own discussion paper, the Minister wrote:
Another key message from my recent stakeholder consultations
is that regulatory certainty, ideally bipartisanship, is essential for
investment to be made in the industry and for users of coastal shipping
services to plan and invest on the basis that they will rely on coastal
shipping services to transport domestic freight.
1.22
However, at no stage before or after the release of the Discussion Paper
was the Opposition consulted about the merits or otherwise of possible
amendments to the existing legislation. Nor was it given a briefing on the
final version of the Bill before it was tabled in the Parliament.
Deregulation by the 'back door'
1.23
The claim that the Bill "does not propose substantial changes to
the current coastal trading regime" is false. [3]
1.24
There are two sets of amendments which are particularly problematic.
Amendments to the tolerance
provisions
1.25
The current Act establishes acceptable tolerance limits for TL voyages,
being +/-20 per cent for the nominated cargo/passenger volumes and +/- five
days for the authorised loading date, without the shipper needing to seek a
variation to their existing TL. If sought, a variation must be approved or
rejected by the Minister within two business days.
1.26
The Bill proposes to increase the volume
tolerance limits to 200 per cent more or 100 per cent less. It also
proposes a loading window tolerance of 30 days either side of the authorised
date.
Implications
1.27
These changes would further deregulate what is already one of the
world’s most liberal coastal trading regimes.
1.28
The proposed amendments would make it almost impossible for a GL (Australian-flagged)
vessel to contest work because their owner/operator would never know the actual
volume or the precise loading date. As the Australian Institute of Marine and
Power Engineers (AIMPE) put it in its submission responding to the Discussion
Paper:
The ultimate voyage carried out may bear no resemblance to
the original voyage for which the Temporary License was granted.
1.29
In its submission to this inquiry AIMPE was even more blunt. The
proposed amendment to the tolerance provisions:
...would be welcomed by foreign flag ship operators however it
would make it much easier for foreign ship operators to exploit the system and
could be far more easily manipulated. AIMPE strongly opposes this change to
further open the coastal trading industry to foreign ships with foreign crews
under temporary licences.[4]
1.30
According to Maritime Industry Australia Ltd (MIAL):
The integrity of the current structure of the regime is
supported by meaningful tolerance provisions. ... Changes to the tolerance
provisions in both time and cargo/passenger volume will have the effect of
undermining the licensing regime.[5]
1.31
This is a view echoed by the Maritime Union of Australia (MUA):
The consequence of enacting ... [the proposed changes to the
tolerance provisions] would be that it would be commercially impossible for an
Australian vessel to contest for cargo, as the owner/operator would never know
the actual cargo or passenger volume and/or the precise loading date. If
enacted, this will undercut and decimate the ability for Australian workers on
Australian ships to compete to earn a living in their own country.[6]
1.32
Operators of vessels involved in the coastal trade have also expressed
concern about changes to the tolerance limits, including CSL which currently
owns three Australian-flagged vessels operating around the coastline.[7]
According to another, ANL:
...the current date tolerance seems reasonable.[8]
1.33
Lastly, True North Adventure Cruises, the operator of tourism vessels
off north-west Western Australia, has warned that the proposed changes to the
tolerance limits would allow shippers and foreign operators to 'game' the
system:
This amendment would allow foreign applicants for temporary
licences to apply for a greater number of licences and then only operate when
they have “SOLD” passenger places in their vessel e.g. a foreign small cruise
vessel could apply for 100 temporary passenger voyage licenses to cruise Sydney
Harbour (or the Great Barrier Reef, or the Kimberley’s) then park their vessel
at the relevant jetty and sell their product using the foreign vessel with
foreign crews, competing directly with an existing Australian owned, operated
and crewed vessel.
Streamlining the TL variation
process
1.34
Currently, there are two types of licence variations to an existing TL –
'authorised matters' (a change to a loading date or volume on an existing
planned voyage) and ‘new matters’ (authorising an entirely new voyage on an
existing TL).
1.35
In the name of 'streamlining', the Bill proposes replacing the two types
of licence variations with a single TL variation provision.
Implications
1.36
Reclassifying the addition of a new voyage to
an existing TL from a 'new matter' to an 'authorised matter' would halve
the time available to a GL holder (i.e. the operator of an Australian-flagged
vessel) to apply for that new voyage from the current two days to just 24
hours. Simply put, this would make it more difficult for Australian vessel
owners/operators to compete for work.
1.37
According to Maritime Industry Australia Ltd (MIAL):
This proposed change undermines the position of GL holder as
for new voyages they will only have one day to respond to a TL application
rather than the current 2 days.[9]
1.38
In his second reading speech (13 September 2017) the Minister assured
the Parliament that the Bill "makes amendments to the existing regulatory
regime, rather than fundamentally restructuring it".
1.39
However, the analysis above confirms that not to be the case.
1.40
According to MIAL:
...there is nothing in the Bill to assist Australian shipowners
compete with foreign ships that have all but unfettered access to coastal
trades. We held low expectations on that front and unfortunately haven’t been
disappointed there.[10]
1.41
To be sure, the Regulation Impact Statement is explicit about the Bill's
goal of increasing the presence of foreign vessels around the Australian
coastline:
...the current framework makes it unattractive for foreign
ships to enter the coastal trading sector. ... These amendments ... will remove the
barriers that currently face many foreign flagged vessels under the current
system.[11]
1.42
Not only is the Australian maritime industry concerned the Bill will
tilt the playing field further in favour of foreign operators, but other
transport modes are equally concerned that it will put them at a competitive
disadvantage. In particular, the Freight on Rail Group wrote in their
submission in response to the Discussion Paper:
...the proposed amendments have the potential to introduce an
unreasonable competitive advantage to foreign ships that may choose to compete
in the domestic freight market. This unreasonable competitive advantage arises
as the proposed amendments allow foreign shippers to compete in the domestic
freight market against land freight transport operators that have to comply
with all laws and regulations. In particular, exemptions would allow foreign
ships to incur substantially lower wages, conditions and associated workplace
relations costs when compared to rail, road and Australian-based coastal
shipping companies.[12]
Conclusion
1.43
For sound economic, environmental and national security reasons,
Australia needs a strong and growing merchant fleet of its own. Our long term
national interest demands nothing less.
1.44
However, the Bill currently before the
Parliament will only accelerate the industry’s decline, eventually
consigning Australia’s status as a proud maritime nation to the history pages.
That would be an unbelievable development given we are an island continent, almost all of our imports and exports are transported in
the hull of ships, and even more significantly, a tenth of global sea trade
flows through our ports.
1.45
Accordingly we recommend the Bill be opposed in its entirety.
Senator Glenn Sterle Senator
Malarndirri McCarthy
Deputy Chair Senator
for the Northern Territory
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