Presentation Name | August 2012

SAFC Conference 2015Presented by Ian Maitland

The Bill The Shipping Legislation Amendment Bill 2015 (the Bill) amends the Coastal

Trading (Revitalising Australian Shipping) Act 2012, the Shipping Registration Act

1981 and further consequential amendments.

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Progress of the Bill

• The Bill was introduced and read a second time by the House of Representatives on 25 June 2015

• It was referred to the Senate Rural and Regional Affairs and Transport Legislation Committee on 25 June 2015 whose report is due on 12 October 2015. Industry submissions to the committee were required by 7 August

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Why Reform?

• The cost of Australian domestic shipping is uncompetitive globally

• Example in the second readings speech is that the cost of shipping of dry cargo from Melbourne to Brisbane is the same as shipping it from Melbourne to Singapore. It is cheaper to ship sugar from Thailand to Australia than it is to ship Australian sugar around our own coastline

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Reform Objectives

• Simplified permit system to reduce cost of business and enhance competitive international shipping services

• More affordable freight costs and greater choice between shipping companies

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Key Proposed Changes

1. Points of difference between Australian and foreign vessels is now limited

2. Increase in opportunity for foreign owned vessels

3. No need to negotiate with Australian vessel operators

4. Reduced paperwork

5. Concerns that the crewing and wage requirements for foreign vessels which engage in coastal trading less than 183 days will create a ‘race to the bottom’

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Changes at a Glance

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WHAT'S OUT WHAT'S IN

Permit System

3 tiered licence system Single permit system

Access

Unrestricted access for Australian vessels with General

Licence only.

Temporary Licence Restricted access, negotiation with

general Licence holders required

Unrestricted access to all vessels Australian and foreign –

no negotiation required

Duration

5 years general licence Australian vessels

12 months temporary licence foreign vessels

All vessels 12 months

Voyages

Temporary Licence requires at least 5 voyages to be

nominated at time of application. Permit limited to those

nominated voyages

Unrestricted

No requirement to nominate voyages at time of application

Cont.

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What's Out What's In

Crewing/Wages Requirements

General LicenceAustralian crew, Australian wage conditions

Temporary Licence Minimum rages set out in part B of Seagoing Industry Award 2010

Foreign VesselsIf coastal trading >183 days(“Top 2” Australian requirement) All crew must be paid minimum wages set out in Part B of Seagoing Industry Award 2010

If coastal trading <183 daysExisting international on board arrangements will apply

Reporting

Temporary Licence requires voyage reports to be issued after each voyage

“This is a framework that fosters an environment where industry can make the most of domestic and international opportunities and be responsive to changing patterns of demand”

2 standard reports per permit year

Minister can request an interim report

Importation

Uncertainty as to if or when vessels are imported for customs purposes and customs duty payable

No importation/customs duty payable when:Dry docking Moving liquid fuel products offshore to mainland

Docking

Time in dry dock counts towards coastal trading period

Changes to the Shipping Registration Act

• The Bill simplifies and streamlines the requirements for ships wishing to join the Australian International Shipping Register (AISR)

• For instance, a ship on the AISR would no longer have to be predominantly engaged in international trade and would instead be required to spend at least 90 days per year engaged in international trading. If the ship does not comply with this requirement its registration can be cancelled

• The Bill also provides a collective agreement that may be made with the Seafarers Bargaining Unit

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Four Options Examined during Policy Development Process These four alternate policy options were canvassed:

• Remove all regulation of access to coastal trading

(In practice the explanatory memo says this would significantly increase the difficulty for foreign ships to compete in the coastal trading market)

• Remove all regulation of access to coastal trading

(Modelling agreed by the Office of Best Practice Regulation controls this option would have an economic benefit of $786.2 million)

• Continue to regulate coastal trade, but minimise industry burden and cost

• Reduced regulatory burden with provisions to retain skills and provide minimum protection for seafarers on foreign vessels engaged predominantly in coastal shipping

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Decision

• During development and examination of options extensive consultation was undertaken with industry skate holders, representative groups and other interested parties. The consultation process included the publication of an options paper

• Option 4 was the preferred option. The executive say it will significantly reduce industry costs on burden and remove impediments to foreign ships seeking to access Australian coasts

• Option 4 did not return the projected highest net economic benefit when compared with other policy options but was chosen to:

• Reduce industry costs and burdens

• Balance interest by ensuring Australian workplace conditions applied to crew working on foreign ships engaged in more than 183 days of coastal trading

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Transitional Provisions

The Bill includes the number of transitional provisions.

During the transition period, Part 4 of the current act continues in force subject to the

notifications below:

1. All licences issued under the old regime will continue until the end of the transition period, even if the licence is to due to expire during the transition period

2. Applicants continue to be able to apply for a temporary licence during the transition period

3. To avoid delays in issuing licences under the current licensing framework:

• General licence holders and third parties will not be consulted on temporary licence application or an application to appear in mattes authorised by temporary licence during the transition period

• General licence holders will not be able to submit a notice and response to temporary licence applications or new matter variation application

• All matters authorised by temporary licence may be varied

• The reporting requirements imposed on all licence holders under the old regime continue to voyages undertaking before the end of the transition period

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Summary/Impacts • The Bill will effect a wide range of stakeholders including foreign operators, the shipping

industry repairers (limited coastal trips for maintenance will be unrestricted), vessels engaging in the domestic economy of Australia (under previous legislation it was unclear if the vessel would be exempt from importation to Australia).

• Under the Bill, the vessel owners with a permit are clearly not at risk of vessel importation as an unintended consequence of carrying out coastal shipping.

• Seafarers may apply to the Federal Court or Federal Circuit Court to recover wages mandated to them under a parity condition. Charterers have more flexibility as to cargo volume and schedules.

• Coastal shipping remains regulated and controlled but the regime under the Bill in its current form is simpler and is only triggered by relatively prolonged coastal shipping activity. Thus, the regime should be simpler to administer.

• Possible impacts – Australian fleet may comprise of relatively fewer, smaller, specialised vessels (that is a suggested impact outlined in "Coastal Shipping Reform – Senate to consider the Blue Highway" article by Norton Rose, dated 29 July 2015).

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Ian Maitland PartnerWallmans Lawyers

L5, 400 King William St, Adelaide SA 5000 (08) 8235 3000 wallmans.com.au