In Australia, 70 to 80 per cent of wheat produced annually is exported overseas 1, and it is estimated that port costs account for one third of supply chain costs 2. Currently, there are four port terminal access operators which are vertically integrated in the industry 3 and as a consequence, they must pass an "access test" in order to export wheat. Criticism of the current access arrangement for ports has centered around transparency 4 and increasing costs associated with port services. 5
On 3 June 2014, the Federal Government called for submissions in relation to the Exposure Draft of the Competition and Consumer (Industry Code – Port Terminal Access (Bulk Wheat))Regulation 2014 (Draft Code) and the related Regulation Impact Statement.
The Draft Code proposed changes to the regulation of port terminal access for the export of bulk wheat.Submissions closed on 24 June 2014. The Department of Agriculture received a total of 24 submissions from a range of stakeholders.
The Government has until 1 October 2014 to introduce a new port access scheme. In the absence of a new scheme, the current arrangement will remain in place.
Current regulatory regime
The port operators which are subject to the access test, must give an undertaking to the Australian Competition and Consumer Commission (ACCC) as a condition of export. 6 The kinds of undertakings given include that the port terminal operator will:
- not discriminate or hinder access in the provision of port terminal services
- negotiate in good faith
- have clear port loading protocols.
Port terminal operators without an associated wheat export business are not subject to the same requirements. All port terminal operators therefore do not operate under the same level of regulation. Consequently, there may be varying levels of regulation applying to operators exporting bulk wheat from the same port.
Suggested regulatory Regime under the Regulation Impact Statement
The Regulation Impact Statement provided four options for Stakeholders to consider:
Option 1 - To continue with the current arrangements in place under the Wheat Export Marketing Act 2008 (Cth) (Act)
Option 2 - To introduce a mandatory code of conduct that would apply in all respects equally to port terminal operators and port terminal operators with wheat export businesses alike
Option 3 - To introduce a mandatory code of conduct that will have tiered application, with lower lever compliance for port terminal operators without associated wheat export businesses
Option 4 - To repeal the Act and allow the bulk wheat export port access arrangements to be subject to normal competition law only.
The Draft Code prepared was drafted on the basis of Option 3. Under this option, all port terminal service providers will be required to:7
- deal with exporters in good faith
- publish and make available a loading statement which would include the ship details, exporter details, quantity and type of grain etc
- publish policies and procedures for managing demand for port terminal services, including the nomination and acceptance of ships to be loaded.
Port terminal operators that are associated with a wheat export business will be considered a 'Tier One Service Provider'. Tier One Service Providers will be subject to further loading protocols, unless they are given an exemption by the ACCC. The ACCC will have the power to determine that a Tier One Service Provider is exempt based upon the satisfaction of certain objective criteria. The criteria has not yet been finalised but at this stage it appears that the focus will be on what is in the interests of business, wider society and exporters, and investment. 8
For exporters, the implementation of the Draft Code would set a new framework for engaging in negotiations with port terminal operators with an associated wheat export business.
Where to from here
The Government is yet to give an indication of its intention following receipt of submissions. As there is little over a month before the deadline for the introduction of a new scheme, Holding Redlich's Agribusiness& Rural Industries Group will be closely following the progress of the proposed changes to the regulation of the bulk wheat export industry and will report on any developments as they arise.
1ABARES, Agricultural Statistics 2013; crop
year (1 October – 30 September),2014
2Stretch, Tamara, Carter, Chris and Kingwell, Ross "The cost of Australia's bulk grain export supply chains" Australian Export Grains Innovation Centre, January 2014.
3That is, they own or operate the port and also carry out the business of exporting bulk wheat.
4 Hon Barnaby Joyce, Minister for Agriculture "Better Regulation to bulk up wheat exports" (3 June 2014), www.maff.gov.au accessed 18 August 2014.
5Department of Agriculture "Mandatory Port Access Code of Conduct for Grain Export Terminals" (17 July 2014) www.daff.gov.au accessed 18 August 2014.
6 Wheat Export Marketing Act 2008 (Cth), Part 2, Division 8
7Exposure Draft, Competition and Consumer (Industry Code – Port Terminal Access (Bulk Wheat)) Regulation 2014, clauses 6 to 8
8 Department of Agriculture, Mandatory Port Access Code of Conduct for Grain Export Terminals Exposure Draft Consultation Paper, Canberra, June 2014
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