RED ENSIGN CAMPAIGN
Shipping Reform
Regulatory issues
Scope
The scope of the proposed shipping reform measures is proposed to be limited to trading ships over 500 GRT. AIMPE is of the view that the traditional trading ship sector should be seen as part of the whole maritime industry. The maritime industry is made up of numerous sectors including offshore oil and gas, towage, dredging, fishing, aquaculture, cruise ships and vessels contracted for research and patrol functions.
Maritime reform should apply to the whole of the industry not just to the shipping sector. AIMPE submits that all commercial vessels should be included in the package of measures to be implemented.
That is, all commercial vessels operating within Australia’s Exclusive Economic Zone should be required to be registered – obviously this excludes vessels engaged in international trade. Government vessels and vessels chartered to Government should also be required to be registered so that all international convention standards are applied to these vessels as well as other commercial vessels. Where sector specific arrangements are required they should be clear and explicit and should apply nationally.
AIMPE has previously submitted that the ships in the trading fleet and the vessels in the offshore oil and gas fleet are increasingly foreign flag. This trend is also developing in other sectors of the maritime industry. The logical regulatory response is for all commercial vessels to be treated in a similar fashion to each other. The notion that trading ships are different in their exposure to foreign competition ignores the real world trends.
General Licence
AIMPE acknowledges and endorses the stated position in the Discussion Paper that a vessel with a general licence will be required to be operated by an Australian company and crewed by Australian seafarers. Perhaps a minor modification is required to this position in that there may be some circumstances where the operator is an Australian entity other than a company.
AIMPE does not agree with the concept that foreign flagged vessels would be allowed to retain their existing licence. It should be a prerequisite for the application for a licence that the vessel be an Australian Flag vessel (i.e. a vessel registered on the Australian Shipping Register). For current licensed vessel operators who are not immediately able to comply with the engagement of Australian seafarers, the Temporary Licence, or Transitional Licence should be made available.
Again it is submitted that all vessel operators should be required to hold a current licence to operate the particular vessel. This should apply to all sectors of the maritime industry – not just to the trading ship sector.
It is noted and agreed that s.8AA Navigation Act declarations will no longer be necessary once a single maritime jurisdiction is legislated.
Regarding the elimination of employment related provisions from the Navigation Act, the proviso here is that the requirements of the Maritime Labour Convention 2006 will still need to be delivered. These include wages, hours of work and hours of rest and leave entitlements – all of which are dealt with by the Fair Work Act and the modern awards made for each sector of the maritime industry. However they also include issues such as medical certificates, training and qualifications, manning levels, accommodation, repatriation, food and catering, medical care on board and ashore and other issues currently covered by the Navigation Act and regulations (Marine Orders). It is noted that the Seafarers Rehabilitation and Compensation Act and the Occupational Health and Safety (Maritime Industry) Act do address some of the elements of the MLC. However there are for instance non-compensable illnesses which are not covered by the Seacare legislation but which are MLC obligations.
AIMPE agrees and supports the proposal that licensed vessels will need to be registered under the Shipping Registration Act. AIMPE suggests that the Shipping Registration Act should be divided into a commercial vessels division and a non-commercial vessel division. There are many thousands of vessels currently on the Register which are non-commercial e.g. private yachts. AIMPE also supports and endorses the requirement that commercial vessels be subject to all relevant Australian legislation.
Temporary Licences
The new concept of a Temporary Licence is one which causes AIMPE great concern. It appears that the Temporary Licence could become a mere substitute for the permits (SVPs and CVPs) which have been so exploited and abused in the past 15 years.
Without a defined end date to this concept it may well follow the same evolution that the permits did – small in number and impact at first but growing to dominate the industry over time. AIMPE suggests that a Transitional Licence should be available for the first three years after the legislation is promulgated. Each Transitional Licence should have a term of 12 months. The latest expiry date of Transitional Licences should be the end of the third year following promulgation. After that date there should be no more Temporary Licences but only Emergency Permits.
The first ground identified as the basis of the temporary licences is to prove potential shipping markets. It is important to recognise that it is the whole market or trade that should be examined not just individual vessels in the trade when assessing whether a trade is sufficient to support Australian flag vessels attracting tonnage tax concessions. Some trades have demonstrated reliance on specific ships – this is especially the case in the instance of small parcel sizes [denoting small shore-side storage capacity]. Other trades have seen the deployment of a multiplicity of vessels using SVPs on the coast. These vessels may also be on the coast as a result of a previous or a prospective cargo from or to an overseas port.
Additionally it has to be recognised that certain vessels possess the flexibility to enable them to carry many different cargoes. Thus a base-load cargo in one direction could be supplemented by a part-load backhaul cargo. Or an occasional cargo could help re-position a ship in preparation for a regular one way cargo. These were strategies that were well known to BHP Transport, Howard Smith Industries and ANL in the 1980s and 1990s.
The action by the Minister in 2008 in deciding to make weekly permit data available, and subsequently weekly cargo data, has meant that there is a mine of information already available in the public domain upon which to base an assessment of the patterns of trade which have been carried by SVP and CVP vessels. Of course the Department has over 15 years of data of the permit system which has been analysed from time to time by the Bureau of Infrastructure, Transport and Regional Economics and its predecessors. One flaw in the BITRE data is that it appears to analyse Federal Permits data without reference to the Restricted User Flag data available from Queensland. The RUF is in effect an intra-State permit solely for the state of Queensland. There are two trades which are particularly reliant on RUFs – bauxite and LPG.
Single Voyage Permits
AIMPE notes that the Discussion Paper for the Regulatory Reference Group indicates that the Single Voyage Permits will be eliminated by the reform package. AIMPE applauds this step. SVPs have been exploited to the extent that there are many trades which have become entirely dependent on the routine grant of permits. The business model for these trades has been predicated on permit ships and their cost structures. Soda ash, gypsum, alumina, manganese and fertilizer are bulk products in this category. Trades which are partially dependent on permits include cement, iron ore, coke, coal, crude oil, petroleum product and bauxite (technically Qld. RUFs not Federal SVPs).
Continuous Voyage Permits
AIMPE notes that the Discussion Paper for the Regulatory Reference Group indicates that the Continuous Voyage Permits will be eliminated by the reform package. AIMPE applauds this step. CVPs have been a cheap way to avoid Australian regulatory control while operating as serial participants in the coasting trade. A number of containership operators have been regular users of CVPs. In fact advertised coastal shipping services for some containerlines (including ANL) are dependent upon routine CVP renewals. The abolition of CVPs will create an issue for these containership operators. The Pan Shipping experiment of 2006 showed that the foreign containership operators will react to defend their market in the coastal shipping sector. At that time 5 foreign flag foreign crew ships were the subject of applications for licences. The practical effect was that most of the crews (ratings and junior officers) received supplementary payments to bring them up to minimum award rates of pay as required by the Navigation Act for licensed vessels. The Fair Work Act has led to the introduction of the Seagoing Industry Award 2010 with a two-tier pay structure. Part A applies to all vessels not granted a permit while Part B applies to permit vessels. Part A rates are expressed as aggregate annual salaries whereas Part B rates are weekly rates for ordinary time eight hours per day Monday to Friday. The 35% - 40% pay differential can be made up by overtime worked however the really big difference is in leave entitlements. Under Part A Australian leave of 0.926 days for each day worked applies whereas under Part B the leave is 8 days for each completed month which equates to 0.267 days for each day worked. A marked difference.
Emergency Permits
The concept of an Emergency Permit is one that is new to the discussion paper for the Regulatory Reference Group. For the concept not to be debased or abused a clear definition of the emergency circumstance will need to be drafted. For instance a town or city which relies on coastal shipping for its petroleum supply would regard it as an emergency if it was on the verge of running out of fuel. However if this happens on a routine basis then it is obvious that the oil industry has not put in place adequate shipping resources to supply all of its customers. In these circumstances there are two options – obtain more shipping capacity and bring it under the Australian flag/licence or import direct from overseas (most likely Singapore). This fuel supply problem is not unrelated to the question of domestic refining capacity and its relationship to domestic demand. Already many ports in northern Australia are supplied from Singapore not from southern ports and the cost of fuel in these northern towns is far higher than in the southern metropolitan areas.
Australian International Shipping Register
AIMPE has long supported the establishment of a second register for Australia’s international trades. Many nations with major trading interests have established second registers to enable the retention of their maritime business clusters. To be successful the Australian International Shipping Register will need to be responsive to the demands of potential users. With huge tonnages of exports and large numbers of vessels visiting Australian ports on a regular basis there is a reasonable basis for the expectation that with even a small percentage of the total number of vessels available, the AISR could attract 50 -80 vessels in its first years of operation.
The proposal is for the two senior officers to be Australian. This may cause some logistical difficulties initially as there is a shortage of skilled officers in Australia at the moment. If the AISR vessels are to receive the tonnage tax benefits then it is only to be expected that the mandatory training requirement will apply. In these circumstances it will be an important task for the senior officers to ensure that the Australian trainees are properly trained.
Martin Byrne
Stronger Shipping for a Stronger Economy - media release from Minister Albanese.
Stronger Shipping for a Stronger Economy is the most significant reform in our maritime history.
As an island nation, the maritime sector is the cornerstone of Australia’s transport industry. Safe, efficient, environmentally sustainable maritime operations are critical to improving our national productivity and maintaining our enviable reputation in regard to environmental management, marine safety and security.
Movement of cargo on the ‘blue highway’ provides an environmentally sustainable transport choice and eases congestion on the road system. Around 25 per cent of the domestic freight task (on a tonne kilometre basis) is carried by ships. Over the last 15 years, the amount of this cargo carried by foreign vessels, employing foreign crews has increased from 6 per cent to 30 per cent.
More than 99 per cent of Australia s international trade is carried by ships, yet only 0.5 per cent of our export trade is carried on Australian flagged vessels.
This is a lost economic opportunity.
Lack of action has disadvantaged the Australian shipping industry and led to the current state of decline. This decline can be measured by:
¯ decreased ship numbers – since 1996, the number of Australian registered trading vessels have more than halved from 55 to 22;
¯ crew numbers – employment on Australian registered trading vessels has reduced from 2,400 to 1,300 over the same period;
¯ average age of fleet – the average age of Australian vessels is 19 years, compared to a global average of 12 years. Newer ships are safer and more efficient.
Australia’s competitor nations have responded decisively to implement fiscal and regulatory arrangements to foster the growth of their shipping industries. In the most global of industries, the Australian Government’s policy settings must provide an internationally competitive investment environment.
Stronger Shipping for a Stronger Economy delivers a reform package that positions the Australian shipping industry to take advantage of the opportunities provided by our burgeoning export market and increased domestic transport task.
The shipping package comprises four key elements:
¯ tax reforms to remove barriers to investment in Australian shipping and to foster the global competitiveness of the shipping industry;
¯ a strengthened and simplified regulatory framework with a transparent licensing regime supported by clearly stated objectives;
¯ the establishment of an Australian International Shipping Register (AISR) to encourage Australian companies to participate in the international trades; and
¯ establishment of a Maritime Workforce Development Forum to progress key maritime skills and training priorities.
Tax Reforms
The centrepiece of the tax package is the introduction of a tax exemption regime for Australian ship operators, which delivers an effective tax rate of zero on the qualifying elements of corporate income tax. This will ensure that they are competitive with foreign owned and subsidised shipping.
The tax exemption will offer an inclusive approach to defining those activities that qualify for the tax exemption, ensuring our tax regime is competitive with the UK, Singapore and other jurisdictions. To get the benefit of this tax exemption, Australian shipping companies will have to make a 10 year ‘lock in’ commitment to being Australian registered ships and meeting Australian maritime safety conditions.
Access to the tax exemption is also contingent on meeting a minimum training requirement; ensuring that industry plays its part in securing a stable maritime skills base.
Other components of the tax regime for Australian shipping include:
¯ a tax scheme combining a reduction in the depreciation period from 20 to 10 years, a balancing charge deferral, and relaxed capital gains tax (CGT) provisions if CGT applies, commonly called roll-over relief;
¯ exemption from Royalty Withholding Tax liability for foreign owners of vessels where the vessel is leased under a bareboat charter to an Australian company; and
¯ ensuring Australians can work in international seafaring by providing a seafarers’ tax concession for resident employers of Australian resident seafarers, who spent 91 days or more on international voyages on qualifying vessels in an income year.
Consistent with the Australian Government’s objectives to increase the size of the national fleet, registration on the Australian primary or international shipping register will be a pre-requisite for access to these tax incentives.
Licensing Regime
It is important that Australian coastal shipping is competitive and that shippers can access foreign registered vessels where Australian registered ships cannot service their trades. The new licensing regime will support Australian shipping while establishing clear boundaries around the necessary role of foreign vessels in our coastal trade. Licensing requirements and conditions will be clearly established in legislation to provide certainty and clarity to all industry operators.
The new framework will comprise a three tier licensing regime:
¯ a General Licence will provide Australian flagged vessels with unrestricted access to the coastal trades for a period of up to five years at a time. Most of these vessels will also be eligible for the tax incentives;
¯ a Temporary Licence will enable foreign flagged vessels to operate in the coastal trades, subject to time, trade and/or voyage conditions. These licences will be available for a period of up to 12 months;
¯ an Emergency Licence limited to cargo or passenger movements in emergency situations only such as a natural disaster or other critical emergency.
Supporting this regime, will be new reporting and publishing arrangements, which will improve transparency in the operation of the regulatory processes. For the first time, Australian registered vessels and all industry operators will have the information necessary to inform their business decisions.
Existing foreign-registered vessels will have five years to transition to Australian registration.
Australian International Shipping Register
Establishing an Australian International Shipping Register (AISR) will provide a competitive alternative for Australian ship owners and operators to registering overseas.
Key features of the AISR include:
¯ access to the tax exemption and other tax incentives;
¯ mixed crewing arrangements enabling employment of foreign seafarers at internationally competitive rates and conditions, consistent with the Maritime Labour Convention and other international labour treaties;
¯ requirement for a minimum of two Australian seafarers, preferably in the positions of Master and Chief Engineer;
¯ workers compensation arrangements consistent with Maritime Labour Convention requirements; and
¯ application of the same maritime safety, environmental and occupational health and safety standards as apply to primary Australian register vessels.
The AISR will address the cost disadvantages currently experienced by Australian companies operating in the global shipping market, while maintaining high safety and environmental standards.
Maritime Workforce Development Forum
The maritime industry is confronting a dual challenge; an ageing workforce and an increase in shipping volumes, requiring more seafarers, safety professionals, harbour masters and pilots to ensure Australia s maritime safety and environmental standards are maintained. Securing a long term skills base is essential to a viable Australian shipping industry.
The Maritime Workforce Development Forum, comprising experienced representatives from across the maritime and skills industries and unions will work with the Australian Government to improve skills outcomes. In undertaking its work, the Forum will work closely with the proposed National Workforce and Productivity Agency.
The Minister's speech launching the Shipping Reform policy is available here.  speech by Minister 9 September 2011. (150.66 KB)
View the bumper sticker here bumpersticker (152.73 KB)
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