The Australian shipping industry
This chapter examines the overall shipping industry in Australia, and
the various reviews and reforms that have recently been announced that will
examine, in part, the role of coastal shipping in Australia.
Further commentary is provided on the Government's response to the
committee's interim report, particularly regarding the Government position that
no further reviews into the maritime industry are necessary, as they would be
'unlikely to change the current decline of the Australian shipping industry'.
Current shipping industry
A number of issues have been raised with the current status of the
Australian shipping industry. It has been argued that Australia is not using
its port and shipping infrastructure as effectively as it could, and that:
freight volumes domestically and internationally have been
growing rapidly, but a larger and larger share of this freight is being
transported in trucks and trains, adding to Australia's congestion
problems...Increased congestion on our vast oceans shouldn't be a costly problem,
but road and rail congestion, which weighs increasingly on Australians' quality
of life, certainly is.
While FOC vessels may have an impact on the Australian shipping
industry, economic conditions also play a major role in the viability of the
shipping industry. The industry has an 'inherent inflexibility in responding to
changing economic conditions' and is 'subject to the vagaries of international
trade'. It has been reported that demand for shipping fell following the global
financial crisis. However, this fall in demand was accompanied by advances in
technology and the development of 'mega-ships', thus reducing the need for
In Australia, this reliance on larger vessels is reflected by the fact
that in 2016, the growth in cargo volumes was 'typically being delivered by a
combination of more port visits and larger ships'.
Decline in general licences
A 2016 review by the Strategic Marine Group (SMG) of commodity shipping
along the Australian east coast found that prominent businesses were using
loopholes in the CT Act. The review found that the current legislative
environment entrenches 'foreign control of Australia's maritime supply chain',
and moves economic benefits off-shore.
SMG found that there was a sufficient volume of coastal commodity
movements to justify the use of dedicated Australian vessels, with an average
of 163 voyages conducted per month on the east coast, using temporary
licences. The number of general licences being issued was declining, and
foreign‑flagged and crewed ships were 'being introduced on a
quasi-permanent basis'. The review determined that general licences were
declining due to a number of factors, including:
the financial costs associated with using Australian crews;
the cost to shipping companies of infrastructure in and around
ports, especially when compared with the lower cost of infrastructure access
for road and rail transport;
shipping no longer being a mainstream business, given structural
changes in Australian industries such as steel and sugar;
insufficient capital for Australian ship owners to acquire ships
that would challenge foreign vessel use; and
little incentive for ship owners to utilise general licences.
The review concluded that Australian shipping could be revitalised, but
it would require bipartisan political support and the correct policy settings,
including legislation to make Australian international shipping more
A bipartisan approach has also been supported by Maritime Industry
Australia (MIA), which argued that 'industry is frustrated by the way
legislation may change each time there is a change of government'.
Both the MIA and Shipping Australia have stated that the 2012
legislative amendments, including the CT Act, have increased administrative
complexity and that 'not only are foreign vessels not trading on Australian
routes, but there has not been any movement of Australian ships to enter the
field'. The need to pay Australian wages to foreign crew under certain
circumstances was seen as 'a major disincentive' to foreign vessels moving
cargo between Australian ports.
A number of concerns have been raised about the global risk FOC vessels
present to the environment.
With regards to carbon emissions, reports have argued that without
regulation, over the next 30 years emissions from shipping will rise to nearly
17 per cent of the world's total, and shipping:
which carries much of the
world’s goods, is the only economic sector not now subject to any treaty on
climate change, country-by-country emissions controls or reduction targets of
any kind – even though it emits around 3‑4% of global gas emissions and
has a carbon footprint the size of Germany’s.
Reducing the impact of FOC vessels on the environment is particularly
problematic. Developing countries operating less‑restrictive FOC
registries receive substantial financial benefit from offering less regulatory
control. A number of shipping‑dependent countries operating FOC schemes
have been pressured to 'water down, delay or dismiss action on reducing
pollution or emissions'.
WWF‑Australia submitted to the committee that ships operating in
Australian waters should adhere to the highest standards:
Key aspects of acceptable environmental standards for
shipping include a range of measures starting with the seaworthiness of ships
and the seamanship of crews through to compulsory pilotage, adequate
navigational aids such as electronic charts and vessel management systems, and
adequate portside waste reception facilities. All these measures must be
supported by an effective regulatory, compliance and enforcement regime such as
the port state control measures undertaken by inspectors from the Australian
Maritime Safety Authority.
It was also argued by WWF‑Australia that the use of crews with
little to no experience with Australian coastal conditions increases the
likelihood of groundings and other environmental shipping incidents, but this
risk could be reduced by employing local, appropriately trained pilots.
DIRD advised the committee that, given Australia's dependence on sea
transport and port operations, it was at continual risk of pollution to the
marine environment. Australia is a party to a number of IMO conventions dealing
specifically with ship‑related marine pollution, including the
International Convention for the Prevention of Pollution from Ships and several
conventions addressing oil pollution and damage.
National transport strategies
A number of opinions have been expressed on the necessary steps needed
to reinvigorate and support the Australian shipping industry. Differences in
stakeholder opinions, depending on their role in the industry, will continue to
make any meaningful progress in improving the industry challenging.
As was canvassed in the committee's interim report, a number of
stakeholders have argued for stricter cabotage provisions in Australia.
However other stakeholders, such as shipping owners and their representatives,
argue for a lessening of the restrictions and administrative burdens put in
place with the CT Act in 2012.
National freight and supply chain
On 24 November 2016, the government announced the development of a
national freight and supply chain strategy. The strategy will be developed
after an independent inquiry examines ways to improve productivity and
efficiency in the Australian freight supply chain. The inquiry, due for final
reporting in March 2018, will then inform the development of the strategy.
Following the announcement of the strategy, the Minister for
Infrastructure and Transport, the Hon Darren Chester MP, noted the importance
of the Australian shipping sector to the economy. He highlighted that
containerised port freight was forecast to double while non‑containerised
freight would grow by three quarters over the next 14 years. The Minister
stated that the national strategy would look at the whole supply chain, and
would therefore include ports and shipping together with other transport modes.
The Minister went on to argue that coastal shipping reform would be
progressed, to implement a 'regulatory regime which prioritises safe shipping
and the protection of our unique marine environment'. Minister Chester stated
he had consulted with shippers, shipping representatives and maritime unions,
to ensure collaborative approaches between government and key stakeholders in
delivering benefits to the maritime sector.
The committee encourages the inquiry into the national freight and
supply chain strategy to consider the important role that Australian shipping
plays in the freight supply chain. Ensuring the viability of the sector and
those it employs will require the government to consider the vital functions of
Australian shipping alongside terrestrial modes of transport, and the danger
that FOC vessels pose to both workers and the supply chain.
Coastal shipping reform
On 21 March 2017, the Minister for Infrastructure and Transport, the Hon
Darren Chester MP, announced possible reforms to coastal shipping. The Minister
noted that approximately 15 per cent of Australia's domestic freight
is moved by ship, 'but with Australia's extensive coastline and broad network
of ports, there is the potential for shipping to play a larger role in the
national freight task'.
The Minister stated that the aim of the reforms was to ensure that
shipping had an increasing role in the national freight network, and to reduce
the regulatory burdens and administrative issues currently being experienced by
shipping companies and local businesses.
A discussion paper was released, seeking comment from stakeholders on
the key amendment proposals. The reforms will seek to address issues around the
temporary licence scheme, and will consider removal of the five voyage minimum
requirement for a temporary licence, among other things. The discussion paper
also highlights potential seafarer training initiative options.
In supporting the implementation of an effective coastal shipping
industry in Australia, Shipping Australia argued for the removal of the five‑voyage
minimum required for temporary licences, but also called for the removal of
'the application of the Fair Work Act to coastal freight'.
Removal of the five voyage minimum requirement for temporary licences
will likely be welcomed by a number of industry stakeholders, who have
previously argued that this requirement was overly burdensome on industry and
restrictive to competition. However, the committee notes that removal of the five
voyage minimum would likely further increase the presence of FOC vessels in
Australian waters. With no minimum requirements, FOC vessels could sporadically
trade along the Australian coast, with minimal oversight.
Removing the five voyage minimum would also make it increasingly harder
for appropriate wages to be paid to foreign crews, who currently should receive
Australian wages from the third voyage in Australian waters onwards, if the
voyages occurred within a 12‑month period. With no minimum voyage number,
there may be less oversight of vessels and more opportunity for the
exploitation of foreign workers in Australian territory. This would also place
a further burden on the work of Australia's regulatory and oversight bodies,
such as the FWO, to ensure that seafarers in Australian waters are treated
adequately and paid legal wage rates.
If the minimum voyage requirement is removed, it would be necessary for
the government to implement other reforms to address the issues around
regulatory oversight and the potential for foreign crew exploitation.
As part of the introduction of the CT Act and the 'Stronger Shipping for
a Stronger Economy' package, in 2012 the Hon Anthony Albanese MP, Minister for
Infrastructure and Transport, proposed the establishment of the Maritime
Workforce Development Forum (Forum), to 'progress key maritime skills and
The Forum was subsequently established and made recommendations in 2013
in relation to maritime crew training. A package of $5 million was allocated
for training incentives and standards, census of the workforce and models to
identify future training requirements. The funding allocation was recognition
that '47 per cent of our seafarer workforce is aged 50 years or
The Forum included 'eight private sector representatives covering rail,
ports, shipping, engineering and logistics as well as representatives of the
Royal Australian Navy and two union representatives'. However, in 2013 the
Forum was disbanded, thereby removing a key advisory body for government on
issues of maritime employment and training, diversification of the skill base,
and efficient port usage.
The committee holds the view that any development of policy for the
reinvigoration of the Australian shipping industry must involve key industry
participants. There were claims that in the development of the Shipping
Legislation Amendment Bill 2015, which sought to make broad changes to shipping
regulation, there was a lack of industry consultation.
The current Minister has committed to continued engagement with the
shipping industry in the development of the national freight and supply chain
strategy, and groups that represent a broad range of perspectives would help
facilitate that consultation.
To improve consultation, it would be beneficial to reconvene the Forum,
or a similar entity, to provide advice to government in the development of any
further proposed legislative changes and prior to any new policy announcements.
The committee recommends the re-establishment of the Maritime Workforce
Development Forum, or a similar advisory body. The advisory group would comprise
a variety of key maritime industry stakeholders and provide advice to
government on new Australian shipping policies and workforce development and
To ensure the viability of the shipping sector, Australian ports must
have the infrastructure to accommodate a variety of vessels and cargo, as ship
structures change and develop. The need for appropriate port and landside
infrastructure and berth availability was identified by the 2008 shipping
inquiry, which recommended the creation of a national port development plan, to
help direct funding to critical port projects and enable potential growth in
The development of appropriate port infrastructure will present
challenges to the industry, especially in light of declining investment in
Australian‑flagged vessels. The former chief executive of Ports
Australia, Mr David Anderson, noted the need for integrated planning around
port and freight precincts, and particularly for the maintenance and protection
of shipping channels. Mr Anderson argued that:
If shippers cannot access vessels that are optimal for the
task, or vessels cannot be fully loaded, or port managers cannot use berths or
tugs effectively because unnecessary restrictions are placed on dredging
activity, then the implications for the cost of our trades is readily
apparent...shipping channels do not occupy the place they deserve on the public
However, the discussion paper released for the inquiry into the national
freight and supply chain priorities notes that port dredging to accommodate
larger ships will introduce a number of environmental concerns. Additionally,
larger ships will also 'create greater peaks in demand for landside
infrastructure around already congested ports'.
Government response to interim report – maritime sector reviews
In its response to the committee's interim report, the Government
highlighted a number of reviews already conducted into Australia's maritime
industry, in support of its position that no further reviews into the maritime
sector were necessary.
The reviews listed by the government in its response included the:
Strengthening Economic Relations between Australia and New
Zealand report by the Productivity Commission, completed in December 2012;
Tasmanian Shipping and Freight inquiry report by the Productivity
Commission, completed in March 2014;
Competition Policy Review (the Harper review) completed in March
Regulation of Australian Agriculture inquiry report by the
Productivity Commission, completed in March 2017.
These reports all briefly discuss Australian coastal shipping in some
way. The reports present a consensus view that the coastal shipping reforms of
2012, and the preference for Australian-flagged vessels to undertake domestic
voyages, has increased regulation and costs, increased administrative burdens,
and restricted competition.
However, beyond coastal shipping reform, it appears to the committee
that the reviews into the maritime sector identified by the government response
do not directly address the issues raised by this committee in its interim
report, specifically issues around the diminishing Australian shipping
industry, loss of jobs for Australian workers, mistreatment of foreign workers,
and the serious border security and environmental risks presented by FOC
In stating that further reviews would be 'unlikely to change the current
decline in the Australian shipping industry', the government response fails to
recognise that there are ongoing issues with the Australian maritime sector
that have not been addressed. While proposed amendments to shipping legislation
in 2015 attempted to make improvements regarding coastal shipping regulation,
it did so at a cost to Australian jobs and local businesses, and seafarer
Summary and recommendations
The issues with FOC vessels operating in Australian and international
waters are considerable, and it is going to take a concerted global effort to
address these concerns. The prevailing international business environment has a
preference for cheap labour and the payment of no or minimal tax, with both
conditions supported by many FOC arrangements.
The lack of a genuine link between a ship's flag and the owner of a
vessel presents real challenges internationally in terms of accountability and
assessment of risk. The reduced transparency that comes from using FOC
registration may present a business benefit to ship owners and operators, but
it greatly decreases the ability of national authorities to verify who is
entering the country, and therefore to determine threats to national security.
While Australia should take the steps necessary to protect its coastal
shipping industry and the people it employs, until there is an international
approach to address the deficiencies in FOC shipping, and enforce international
conventions and regulatory oversight, it will remain an uphill battle.
The committee maintains the position put forward in its interim report
that shipping plays an essential role in Australia's national transport
infrastructure framework, and that the increasing occurrence of FOC vessels
operating in and around Australia will continue to be detrimental to the local
shipping industry, and place Australia at a competitive disadvantage.
It is clear that FOC vessels present numerous risks to seafarer safety
and wellbeing. The case studies presented in this report are not exhaustive,
yet demonstrate these risks. This is in addition to the considerable job losses
experienced by local crew members, who are being replaced by foreign workers at
an alarming rate. The replacement of Australian workers with foreign crew will
continue to deplete the maritime skills base in Australia, and make it harder
to reinvigorate the industry in the future.
The committee argues that reduced costs in shipping should not be sought
by paying inappropriate wages to foreign crew. If a business is endeavouring to
reduce its overhead and increase its profits, it should not be through the
payment of wages that do not meet Australia's minimum wage standards.
It is unacceptable that seafarers are disappearing and dying in
Australian waters, and that no one is held to account for these events. The
case of the MV Sage Sagittarius highlighted how FOC vessels can operate
with a workplace environment of bullying and harassment, with tragic results.
While the Coronial Inquest determined that both Hector Collado and Cesar Llanto
died as a result of foul play, no one has been charged with their deaths, and
this is unlikely to change.
The committee acknowledges the improvements made in addressing security
risks at sea, with the combination of immigration and border protection processes
two years ago when DIBP came into effect. The committee was given assurances
that the events of 2012 concerning Captain Salas would not now occur, given the
processes and notification systems currently in place.
The tightened parameters around MCVs have seen a considerable increase
in rejected MVC applications over the last year, providing some level of
comfort to the committee that risks to Australia's border security from FOC
vessels are being addressed. The implementation of APP on cargo ships will
further assist DIBP in better assessing the risks of foreign crew.
Yet, the lack of an Australian‑flagged fleet means that dangerous
goods such as ammonium nitrate continue to be transported to Australia by FOC
and other foreign vessels. It is imperative that immigration and border
protection processes remain robust in light of the risks that these goods
present to Australian ports.
Government response to the interim
The committee is particularly concerned that the government response did
not indicate any way forward for ensuring the future viability of the
Australian shipping industry, and the employment of Australian seafarers.
The committee takes the view that, by not agreeing to review the current
state of the maritime sector in Australia, the government is failing to address
the serious security, economic, human rights and environmental vulnerabilities
in the sector that were identified by the interim report.
The reviews highlighted by the government response were not specific to
the maritime sector but rather focus on other topics where shipping, while
relevant to the matters being considered, had ancillary importance to the main
issues being discussed.
There has been no comprehensive, whole‑of‑government review
into the potential economic, security and environment risks posed by FOC
vessels and their crew, in the modern maritime industry setting. As has been
shown by the evidence provided to this inquiry, these remain very real and
current risks to our nation.
In its interim report, the committee's recommendations also advocated
for reduced red tape for vessel and port operators, through a harmonisation of
national shipping operations, and consultation with industry to identify shared
objectives for the future of the maritime sector.
The committee again calls on the government to give serious
consideration to FOC vessels and their interactions with Australian coastal
shipping. The committee maintains that these vessels present serious security
risks to the Australian coast, which need to be properly addressed.
The committee recommends that the Australian Government undertake a
focussed and targeted review of the Australian maritime industry, with a view
to growing and supporting the Australian maritime industry and developing
policies that appropriately manage the operation of flag of convenience vessels
in Australian waters.
The committee recommends that the Australian Government undertake a comprehensive
whole‑of‑government review into the potential economic, security
and environmental risks presented by flag of convenience vessels and foreign
Senator Glenn Sterle
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