Australia: Shipping reforms may not achieve desired results for Australian economy

In brief - Tougher regime for international carriers may not encourage vessels onto the Australian coast

The catch phrase that has accompanied the publication of the draft legislation reads: "Stronger shipping for a stronger economy".

Whilst there seems to be interest in taking advantage of the proposed reforms to register ships under the new International Register, the question remains whether there will be sufficient numbers of vessels registered on the General Register to meet the needs of the coastal trade and whether sufficient numbers of foreign vessels will consider it worthwhile applying for the new temporary licences to meet any shortfall in capacity.

Introducing a tougher regime for international carriers to trade on the Australian coast seems unlikely to lead to a "stronger economy". The new requirements for temporary licences may not encourage foreign vessels onto the Australian coast. There is also a concern that shipping users may be forced to look offshore for the supply of necessary materials rather than retain coastal carriers.

Coastal Trading (Revitalising Australian Shipping) Bill 2012

The package of reforms is contained in draft legislation which has been made available by the Department of Infrastructure and Transport.

The Coastal Trading (Revitalising Australian Shipping) Bill 2012 (Exposure Draft (17 February 2012)), identifies as its objects in s.3 the following:

  • Promoting a viable shipping industry that contributes to the broader Australian economy
  • Facilitating the long term growth of the Australian shipping industry
  • Enhancing the efficiency and reliability of Australian shipping as part of the national transport system
  • Maximising the use of vessels registered in the Australian General Shipping Register and the Australian International Shipping Register in coastal trading

New system for coastal licences

The new system for coastal licences is set out in Part 4 of the Exposure Draft. For a general licence authorising a vessel to be used to engage in coastal trading, it is necessary for it to be registered in the Australian General Shipping Register and the applicant to be the owner, charterer, master or agent of the vessel.

Seafarers employed on the vessel must be Australian citizens or hold a permanent visa, or a temporary visa that does not prohibit the seafarer from performing the work he or she performs on the vessel. Such licences can be granted for up to five years.

Section 28 enables temporary licences to be applied for over a 12 month period by an owner, charterer, master or agent for a vessel. Vessels must registered on the Australian International Shipping Register or under a law of a foreign country. Single voyage permits will therefore cease to exist.

Applications must specify information such as the following: 10 or more voyages to be authorised by the licence, the cargo to be carried and the ports to be utilised.

Holders of general licences may respond after publication of applications for temporary licences and state that, for example, the particular kind of cargo specified in the application could be carried under its general licence. Third parties may also provide comments on such applications.

Unfortunately it may be the case that the proposed new provisions for temporary licences will not encourage vessels onto the Australian coast.

The third category of licences proposed is emergency licences which can be applied for by an owner, charterer, master or agent of the vessel. Vessels to be utilised can be registered under the Australian General Shipping Register, the Australian International Shipping Register or under a law of a foreign country. What constitutes an "emergency" is to be prescribed in the Regulations.

New International Shipping Register to be established

The new International Shipping Register which is to be established under the Shipping Registration Amendment (Australian International Shipping Register) Bill 2012 (Exposure Draft 17 February 2012) will enable ships which are at least 25 metres in tonnage length to be registered if they are Australian owned, wholly owned by Australian residents, operated wholly by Australian residents or are on demise charter to Australian based operators.

It is a condition of registration for such ships, however, that an Australian national or Australian resident is the master or chief mate of the ship and that an Australian national or Australian resident is the chief engineer or first engineer of the ship.

Ships registered on the new International Register are not to be subject to the Fair Work Act 2009 or the Seafarers Rehabilitation and Compensation Act 1992 when the ship is engaged in international trading. (This is to be contracted to the position when the ship is engaged in the coastal trade. The Fair Work Act which now applies to foreign ships carrying domestic freight between Australian ports will continue to apply.)

Ships registered in the International Register must also have policies of insurance or indemnity that insure or indemnify the owner for any liability it has to pay compensation for the death or long term disability suffered by a seafarer as a result of sickness or injury occurring whilst on board the ship when the ship was engaged in international trading and provide a level of insurance or indemnity that is sufficient to cover the amount of compensation that is determined by the Minister for such death or long term disability. Such an amount is to be not less than an ITF standard agreement.

It is anticipated that the International Shipping Register will enter into force on 1 July 2012.

The intention of the reforms may be different to their practical effect

In response to an earlier discussion paper, Shipping Australia was supportive of the objectives set by the government but made the comments:

However, we do not see how restricting the current single voyage permit system under Part VI of the Navigation Act 1912 (Cth) is supportive of those objectives. To the contrary, we believe those particular proposals will undermine their realisation.

In an article in the Australian Financial Review on 15 March 2012, Margie Thomson speculated whether Australian operators will be forced to import vital feedstock rather than continue to produce and ship domestically because of the increase in coastal shipping costs which she forsees. She identified such valuable feedstock as including: "agriculture, building products, cement, fertiliser products, manufactured goods and raw materials, such as minerals".

Whilst the writer supports steps that encourage the acquisition of international shipping tonnage by Australians, it is queried whether introducing a tougher regime for international carriers to trade on the Australian coast will in fact lead to a "stronger economy".

Rather, it has been suggested that it is likely to add greater costs to the carriage of goods around the Australian coast to the detriment of the Australian taxpayer, as well as Australian shippers, including producers and manufacturers.

For more information about trade and transport law please see the website of Colin Biggers & Paisley or contact Stuart Hetherington at

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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