EXPLANATORY STATEMENT
Issued by the authority of
the Parliamentary Secretary to the Minister for Transport and Regional Services
Trade Practices Act 1974
DECLARATION PURSUANT TO SUBSECTION 10.03(1) OF PART X
International liner cargo shipping services are regular, scheduled services that carry non-bulk cargoes, mostly in containers. They are a vital facilitator of international trade and it is crucial for Australia’s international trading performance, especially for value-added products, that liner cargo shipping services are provided at internationally competitive rates.
Part X (International liner cargo shipping) of the Trade Practices Act 1974 (TPA) regulates the market conduct of international cargo shipping companies that collaborate as ‘conferences’ in order to provide joint liner cargo shipping services, often at agreed freight rates. Liner shipping operators have traditionally been permitted by governments around the world to act in concert as ‘conferences’ in order to limit competition and stabilise freight rates. They allow members to: allocate routes; fix prices; manage capacity; offer loyalty agreements; and pool revenue/ losses. The traditional justification for allowing collusive behaviour of this kind is that it prevents destructive competition, which could lead to unsustainable prices below cost, and so market instability, which would impact on the capability of ocean carriers to provide the frequent, reliable services valued by shippers.
Part X had its origins in the late 1920s out of a concern that, despite Australia’s long sea-trade routes, shippers in all states and territories should have access to liner shipping services of good quality (capacity, frequency, reliability, and port range served) at freight rates that are internationally competitive. It is designed to be an effective, low cost, limited intervention regulatory regime.
As well as permitting ocean carriers to work together in conferences, Part X provides exporters and importers with countervailing powers to strengthen their negotiating ability with conferences, through shipper bodies designated by the Minister for that purpose. Part X obligates shipping lines who are members of a conference to negotiate with designated shipper bodies in relation to liner cargo shipping services they intend to provide.
Designated peak shipper bodies deal with matters affecting liner trades as a whole whereas designated secondary shipper bodies may be nominated to negotiate with ocean carriers in relation to, for example, matters affecting shippers of a particular commodity, or shippers in a particular state/ territory. Currently, the designated peak shipper body for outwards trade is the Australian Peak Shippers Association (APSA).
Subsection 10.03(1) of Part X of the TPA authorises the Minister to declare an association to be a designated outwards peak shipper body, provided the Minister is of the opinion that the association represents the interests, in relation to outwards liner cargo shipping services, of Australian shippers generally. Part X of the TPA falls within the portfolio responsibility of the Minister for Transport and Regional Services; this responsibility has been delegated to the Parliamentary Secretary to the Minister for Transport and Regional Services.
APSA was declared to be a designated peak shipper body pursuant to Part X of the TPA on 27 November 1990. By force of the Legislative Instruments Act 2003, the instrument declaring APSA as a secondary shipper body is due to expire on 31 December 2007. APSA has indicated its desire to remain declared as a designated outwards peak shipper body.
APSA meets the criteria for a designated outwards peak shipper body outlined in subsection 10.03(1); it is an association which represents the interests, in relation to outwards liner cargo shipping services, of Australian shippers generally.
Pursuant to subsection 10.03(1) of Part X of the TPA, the Parliamentary Secretary to the Minister for Transport and Regional Services has declared APSA, by legislative instrument, to be a designated outwards peak shipper body. This will, importantly, permit APSA to continue to negotiate with shipping conferences in relation to liner cargo shipping services.