The Current Law and the Provisions of the Bill
The Coastal Trading (Revitalising Australian Shipping) Act 2012
Coastal shipping in Australia is currently regulated under the Coastal
Trading (Revitalising Australian Shipping) Act 2012 (the CTA), which
commenced on 1 July 2012. The objects of the CTA include: the promotion of, and
facilitating the long term growth of, a viable shipping industry that
contributes to the broader Australian economy; enhancing the efficiency and
reliability of Australian shipping; maximising the use of Australian flagged
vessels; promoting competition in coastal trading; and ensuring the efficient
movement of passengers and cargo between Australian ports.
The Committee was told that it was not clear whether the Act was
attempting to benefit Australian ships or Australian industry, and that this
lack of clarity had led to a significant amount of litigation by a number of
companies in relation to the CTA.
The CTA seeks to reconcile these 'somewhat inconsistent'
objects by creating a tiered licensing system which provides an advantage to
Australian ships by allowing them unrestricted access to coastal trade, along
with the opportunity to compete for voyages proposed to be conducted by foreign
The CTA licensing system
Four types of licence are available under the CTA framework: general
licences, transitional general licences, temporary licences and emergency
General licences are available to vessels on the Australian
General Shipping Register, and provide unrestricted access to engage in coastal
trading in Australian waters for five years. Each seafarer working on a general
licence vessel must be an Australian citizen or permanent resident or hold a
visa with appropriate work rights.
Transitional general licences are intended to assist ships
operating under the former arrangements under Part VI of the Navigation Act
1912 to transition to Australian registration. They are issued for a period
of five years and afford the ship to which they are issued the same rights as a
general licence. They are intended to expire in 2017.
Temporary licences may be granted to a shipper, or the owner,
charterer, master or agent of Australian or foreign-registered vessels. They provide
restricted access to engage in a minimum of five specific coastal
trading voyages over a 12 month period, with a licence being required for each
end-to-end cargo movement conducted by the ship. A total of 677 temporary
licences have so far been granted over a two-year period.
Temporary Licences can be varied after they are issued, to either add
additional voyages (in minimum groups of five) or to amend the details of
already authorised voyages (eg, to vary departure or arrival dates.
Information about each application for a temporary licence is provided
to all general licence holders, who are permitted to provide a 'notice in
response' that a general licensed vessel is available to conduct any or all of
the notified voyages. A 'notice in response' triggers a mandatory consultation
process between the shipper and all interested general licence holders which
may be arbitrated by the Department. Third parties who would be directly
affected if an application were granted must also be notified, and may give the
Minister written comments on each temporary licence application.
A decision is made by the Minister (or a delegate) and, if issued, a temporary
licence must specify a number of things.
Emergency licences may be granted, for a period of no more than
30 days, to a shipper, or the owner, charterer, master or agent of a vessel, to
respond to significant national emergencies. The licence allows an applicant to
respond to a specific emergency of a kind identified in the regulations. The
regulations specify various types of natural disaster (eg cyclones,
earthquakes, floods, thunderstorms, tsunamis and wildfires) which endanger, or
threaten to endanger, life, property or the environment, and which require a
significant and coordinated response.
An applicant must provide details of each aspect of the intended voyages
including the reasons why the voyages cannot be undertaken by a vessel
authorised under a general licence.
In summary, the CTA does not seek to exclude the involvement of
foreign-flagged ships from domestic coastal shipping, but sets up 'a form of
mediated competition between the remnant Australian flag fleet and the almost
infinite pool of foreign flagged ships around the world.'
The Australian International
The CTA package also included the Shipping Registration Amendment
(Australian International Shipping Register) Act 2012, which established
the Australian International Shipping Register (AISR) 'to provide a competitive
registration alternative for Australian shipowners and operators who
predominantly engage in international trades'.
Ships registered on the AISR are eligible for income tax exemption and other
One submitter told the Committee that the creation of the AISR was met
with incredulity by many shipping practitioners, who saw it 'as a self-deluding
aggrandisement by a Nation with one of the smallest National ship registries in
Despite what appear to be generous tax incentives, there are currently no
ships registered on the AISR. The Committee was given one reason for this
apparent lack of interest in the AISR – that 'exposure to Australian crewing,
in any number, has and remains a major detraction due to high cost penalty, and
perceived unionised industrial reputation.
The National Farmers' Federation offered another related reason:
One feature of the AISR Act that has
attracted little comment since its inception is the requirement for any ship
seeking registration on the AISR to have a collective agreement with the
‘seafarer’s bargaining unit’ comprised of relevant maritime unions. This is in
lieu of the application of the Fair Work Act 2009. The requirement to
bargain with all relevant maritime unions and the absence of any alternative
(such as negotiating directly with the seafarers) is likely to have operated as
a deterrent to registration.
framework requires the making of the ‘bargain’ for those who seek access to the
AISR and in doing so, extinguishes the element of choice in relation to employers.
This is because any perceived advantages flowing from the disapplication of the
Fair Work Act are immediately offset by the position of veto held by the
seafarers’ bargaining unit; refusal to accede to the demands made on behalf of
seafarers will mean the conditions for registration on the AISR cannot be met.
In other words, access to the AISR is available on a ‘take it or leave it’
basis with seafarer conditions set by maritime unions and paid for by those
responsible for the costs of labour. This provision is highly unusual as a
feature of the Australian federal law and should be repealed.
The Australian Institute of Marine and Power Engineers told the
Committee that one operator had applied to register a ship – Pioneer
– on the AISR, but the application did not proceed because of a veto by the
Maritime Union of Australia. The exercise of the veto resulted in the ship –
which trades internationally, carrying Australian sugar to Asian ports, and
coastally within Australia under temporary licences – being reflagged to the Hong
Kong flag and operating with a mixed crew of senior Australian officers with the
remaining crew being foreign.
It was also put to the Committee that the AISR has been a failure
because most, if not all Australian exports, including major commodity trades
such as iron ore, coal and grains, are sold at the Australian wharf and the
international transport task is in the hands of the foreign buyer.
The CTA and Australian wages
Historically, foreign flagged ships operating domestically under permits
issued under the previous Navigation Act 1912 (Navigation Act) were
generally not covered by Australian labour laws. In 2010, the Fair Work Act
2009 was applied to certain foreign-flagged vessels operating in Australian
waters and engaged in coastal trading. Following the introduction of the CTA,
consequential amendments were made to the Fair Work Regulations 2009 to
maintain the alignment of the Fair Work Act to crew on ships (both Australian
and foreign flagged ships) engaged in coastal shipping if the ships are operating
under a general, transitional general or emergency licence under the CTA, or
are operating under a temporary licence and have made at least two other
voyages under a temporary licence in the previous 12 months.
Australia Pty Ltd observed in its submission 'no other maritime nation requires
foreign seafarers on foreign vessels operating within their coastal waters to
be paid in accord with national labour agreements.'
Vessels which exceed 5000 gross tonnes, and which are capable of a speed
of at least 15 knots, and which are capable of carrying at least 100
passengers, and which are utilised wholly or primarily for carrying passengers
between any Australian ports, except between Victoria and Tasmania, are
specifically exempted by legislative instrument from the operation of the CTA.
Practical difficulties with
Incitec Pivot Ltd (IPL) pointed out that the CTA contains an underlying
assumption that the business conducted by a charterer is predictable and,
accordingly, that vessel movements can be planned well in advance.
However, some users of coastal shipping services operate in a competitive
environment with inherent demand variability. It provided the following example
of the practical operation of temporary licences under the CTA.
In 2015 IPL chartered a ship to carry quantities of an ammonium sulphate
fertiliser used in pasture, canola, cotton and vegetables from a manufacturing
plant in Brisbane to distribution centres in Geelong and Adelaide, determined
by IPL’s demand planning process. The original temporary licences (a separate
licence being required for each port-to-port trip) for this voyage stated that
IPL would despatch 2000 tonnes at Geelong and 5000 tonnes at Adelaide.
In the time that the licence was applied for and then approved, and the
ship chartered, there was a change in the demand for the fertiliser – which was
itself not unusual as weather plays a significant role in demand, and access to
fertiliser to take advantage of preferential seasonal conditions is important.
Geelong required an additional 2000 tonnes of fertiliser. Despite the ship
being at the Geelong port, and despite the fertiliser being available on the
ship, only an additional 400 tonnes was able to be unloaded due to the
tolerance limits on the licence within the Act. There was no ability to make
changes to the licences (more than one would need to be amended) as no
amendments can be made on weekends or outside business hours. Additionally,
given the time taken to have amendments approved, it was not practical or
economical to have a ship wait for a licence to be applied for an approved.
As a result the ship sailed from Geelong carrying the additional tonnes
of fertiliser to Adelaide. Once it had arrived in Adelaide, the additional
fertiliser that was still needed by customers and farmers in Geelong had to be
loaded onto trucks to be taken back to Geelong. The cost of this was an
additional $75,000. It also placed an additional 40 B-Double trucks onto the
road between Adelaide and Geelong.
The National Farmers' Federation also described some of the vagaries of
Applicants for a temporary licence
must specify, in some detail, at least five future voyages to be undertaken.
Details provided about proposed voyages, including the number of voyages, the
kinds and volume of cargo or number of passengers and ports of loading and
disembarkation, effectively set the parameters of the licence to engage in the
coastal trade and cannot change unless formally varied.
information is made publicly available and provided to holders of general
licences, who then have the right to nominate to undertake the authorised
voyages. This process means that a temporary licence applicant and its
customers have no right to choose who they contract with to deliver the freight
services they require. A third party can take over their contracted voyage,
without any obligation to meet the agreed terms. For example, initial
contracting parties might agree on a price of $20 per tonne. A third party them
nominates to undertake the voyage, ships the contracted goods at a price of $25
per tonne, and leaves the initial parties to work out the difference. In this
respect, the process is unique: it encourages unrelated third parties to impose
their own commercial imperatives on the contractual arrangements of others. It
acts as a disincentive to contract before permits are issued, results in delays
in the grant of applications, and increases costs.
Administrative delays were a major concern for the Australian Institute
of Petroleum, which said that the CTA procedures involved delays of up to 15
days for an initial temporary licence, and a further seven to nine days for
approvals of new voyages or variations to voyages, with additional delays for
public holidays: 'these delays are unacceptable in a complex supply chain such
as that for delivery of fuel to the Australian market, particularly when there
are no Australian registered vessels available to 'contest' these voyages.'
Even the Maritime Union of Australia (which does not support the bill)
noted that the three years since the commencement of the CTA had shown 'a need
for some streamlining and additional commerciality in its administration' and
that the Act was 'not as effective as we would like.'
Main provisions of the Shipping Legislation Amendment Bill 2015
The Shipping Legislation Amendment Bill (the bill) seeks to overcome
many of the above administrative procedures under the CTA, which have been
characterised as 'cumbersome, bureaucratic, impractical, uncertain, costly and
heavily weighted in favour of local ships'.
In summary, the bill:
redefines, simplifies and redirects the focus of the objects of
the legislation which are: to provide a framework for coastal shipping that
fosters a competitive coastal shipping services industry that supports the
Australian economy and maximises the use of available shipping capacity on the
repeals the CTA's tiered licence system, replacing it with a
single 'coastal shipping permit' that will be available to both Australian and
Ships operating under a permit will be permitted to engage in unlimited
transport of passengers and goods on the Australian coast for a 12 month permit
provides that applications and variations must be decided within
10 business days;
grants permits in respect of a vessel rather than a voyage;
provides that a coastal shipping permit will also protect vessels
from being deemed to have been imported under the Customs Act;
proposes to cover ships engaged in the carriage of petroleum
products from offshore facilities to the mainland and ships engaged in dry
provides that ships engaged predominantly in coastal shipping (ie
for more than 183 days in a 12 month period) will be required to adhere to
minimum Australian crew numbers, mirroring those for ships registered on the
Australian International Shipping Register (ie they will be required to employ
a Master or Chief Mate and a Chief Engineer or First Engineer who is an
Australian citizen, Australian resident, or holds an appropriate visa,
prescribed in the rules, and will be subject to domestic workplace relations
provides that ships engaged predominantly in international
trading (ie undertake less than 183 days of Australian coastal trading in a 12
month period) will be subject to their existing workplace arrangements;
provides that, if a foreign ship declares an intention not to
trade predominantly on the coast, but then trades predominantly on the coast,
it will be required to pay Australian wages for the entire permit period;
greatly simplifies reporting requirements for permit holders – a
permit holder would be required to report on voyages undertaken at six-monthly
intervals, or more frequently if directed by the Minister, replacing the
existing system of pre-voyage notification at least two days before the actual
loading date and post-voyage reporting within 10 days after the end of a voyage..
In his Second Reading Speech, the Minister stated that the bill 'recognises
that shipping operates in a global context, and the framework it contains seeks
to ensure that Australian businesses and industries can take maximum advantage
of the opportunities created by global connectivity.'
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