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.
Overview
The Trade Practices Act 1974, enacted by the Australian Parliament, addresses the need for regulating international liner cargo shipping services, which are crucial for Australia's trade performance. This Act provides a regulatory framework for international cargo shipping companies that operate as conferences to offer joint services. The policy objective is to ensure that these services are provided at competitive rates, while preventing destructive competition that could lead to market instability. Part X of the Act allows shipping lines to work together in conferences but also empowers exporters and importers with countervailing powers to negotiate with designated shipper bodies, enhancing their bargaining position. The Parliamentary Secretary to the Minister for Transport and Regional Services has declared the Australian Peak Shippers Association (APSA) as a designated outwards peak shipper body, enabling it to continue negotiating with shipping conferences on behalf of Australian shippers.
Scope and Application
The Trade Practices Act 1974 (TPA) specifically targets the market conduct of international cargo shipping companies that operate as conferences to provide joint liner cargo shipping services, with the intent to regulate their practices to ensure that these services are provided at internationally competitive rates. This legislation applies to the shipping lines that participate in conferences, as well as the designated shipper bodies that represent the interests of Australian exporters and importers in their dealings with these conferences. Geographically, the Act operates under the Commonwealth jurisdiction, reflecting its national importance in facilitating international trade. Notably, the Act does not apply to non-scheduled, non-liner cargo shipping services or to domestic shipping operations. While the Act itself sets out the primary regulatory framework, its application can be extended or modified through subordinate instruments, thereby allowing for adjustments to the regulatory landscape in response to changing market conditions or new industry practices. The declaration of the Australian Peak Shippers Association as a designated outwards peak shipper body underscores the ongoing commitment to providing a structured avenue for shippers to negotiate and engage with international shipping conferences, ensuring a balanced and fair approach to the regulation of international liner cargo shipping services.
Key Provisions
The main operative sections of this legislative instrument (subsection 10.03(1) of Part X of the Trade Practices Act 1974) provide for the declaration of the Australian Peak Shippers Association (APSA) as a designated outwards peak shipper body. This declaration is significant as it allows APSA to continue to represent and negotiate on behalf of Australian shippers in relation to outwards liner cargo shipping services. This is crucial for maintaining the integrity of the shipping market and ensuring that shippers have a strong voice in their dealings with shipping conferences. The declaration ensures that APSA remains authorised to engage in negotiations, which is essential for achieving fair and competitive freight rates and service levels.
The obligations imposed by this Act on the parties it governs include the requirement for shipping lines that are members of a conference to negotiate with designated shipper bodies. This is outlined in Part X of the Trade Practices Act 1974. Specifically, these shipping lines must engage in good-faith negotiations with bodies such as APSA, which represent the interests of Australian shippers. This obligation ensures that the shipping lines are held accountable for their conduct and must consider the interests of shippers when setting terms and conditions for liner cargo shipping services. This regulatory framework aims to prevent any unilateral actions that could negatively impact the shipping market and the interests of shippers.
In terms of offences, penalties, or civil/criminal consequences for breach, Part X of the Trade Practices Act 1974 imposes significant sanctions for any anti-competitive behaviour or failure to comply with the obligations outlined in the Act. For instance, any collusion among shipping lines that results in price-fixing or capacity management outside the agreed terms can lead to substantial penalties. The penalties can include fines and, in severe cases, criminal charges against individuals involved in the anti-competitive practices. The maximum penalties for such breaches are not explicitly stated in this instrument but are generally severe, reflecting the importance of maintaining a competitive and fair shipping market. The enforcement of these penalties ensures that the regulatory regime is effective and that parties adhere to the provisions designed to protect the interests of Australian shippers.