EXPLANATORY STATEMENT
Issued by the authority of
the Parliamentary Secretary to the Minister for Transport and Regional Services
Trade Practices Act 1974
DECLARATIONS PURSUANT TO SUBSECTION 10.03(2) 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.
Pursuant to subsection 10.03(2) of Part X, the Minister may declare an association to be a designated outwards secondary shipper body, provided the Minister is of the opinion that, in relation to outwards liner cargo shipping, the association represents the interests of Australian shippers in a particular trade, or of Australian shippers of particular kinds of goods, or of shippers in a particular part of Australia, or of producers of goods of a kind exported from Australia, and that such a declaration is desirable.
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.
By force of the Legislative Instruments Act 2003, the instruments declaring five designated outwards secondary shipper bodies will expire on 31 December 2007. All have indicated a wish to continue in this role and all meet the criteria outlined in subsection 10.03(2) of Part X of the TPA. These associations are:
- The Meat Industry Shippers Association, which was declared to be an outwards secondary shipper body on 17 May 1990. The Meat Industry Shippers Association meets the criteria in respect of subsection 10.03(2) because it is an association which represents the interests, in relation to outward liner cargo shipping services, of shippers and producers of meat products from Australia.
- The South Australian Shipping User Group, which was declared to be an outwards secondary shipper body on 31 August 1990. The South Australian Shipping User Group meets the criteria in respect of subsection 10.03(2) because it is an association which represents the interests, in relation to outward liner cargo shipping services, of shippers and producers of exports from South Australia.
- The Western Australian Shippers Council Inc, which was declared to be an outwards secondary shipper body on 3 August 1990. The Western Australian Shippers Council Inc meets the criteria in respect of subsection 10.03(2) because it is an association which represents the interests, in relation to outward liner cargo shipping services, of shippers and producers of exports from Western Australia.
- The Australian Horticultural Exporters Association, which was declared to be an outwards secondary shipper body on 31 October 1990. The Australian Horticultural Exporters Association meets the criteria in respect of subsection 10.03(2) because it is an association which represents the interests, in relation to outward liner cargo shipping services, of shippers and producers of horticultural products from Australia.
- The Australian International Movers Association was declared to be an outwards secondary shipper body on 10 October 1990. The Australian International Movers Association meets the criteria in respect of subsection 10.03(2) because it is an association which represents the interests, in relation to outward liner cargo shipping services, of shippers of personal and household effects from Australia.
Pursuant to subsection 10.03(2) of Part X of the TPA, the Parliamentary Secretary to the Minister for Transport and Regional Services has declared the above associations, by legislative instrument, to be designated outwards secondary shipper bodies. This will, importantly, permit them to continue to negotiate with shipping conferences in relation to liner cargo shipping services, where it is appropriate that they do so.
Overview
The Trade Practices Act 1974 was enacted to regulate market conduct and provide countervailing powers to exporters and importers in the international liner cargo shipping services market. The Act was introduced to address the issue of destructive competition in the shipping industry, which could lead to unsustainable prices below cost and market instability, ultimately affecting the capability of ocean carriers to provide reliable services. The Act facilitates the formation of shipping conferences, allowing companies to collaborate on route allocation, price fixing, capacity management, loyalty agreements, and revenue/loss pooling, while providing designated shipper bodies with the ability to negotiate on behalf of Australian exporters and importers. Part X of the Trade Practices Act 1974 falls within the portfolio responsibility of the Minister for Transport and Regional Services, and the Parliamentary Secretary to the Minister for Transport and Regional Services has declared five associations as designated outwards secondary shipper bodies to continue negotiating with shipping conferences in relation to liner cargo shipping services.
The policy objective of this legislation is to ensure that Australian shippers have access to liner shipping services of good quality and at internationally competitive freight rates. The Trade Practices Act 1974 provides a regulatory framework that allows for limited intervention and promotes stability in the shipping industry, while also empowering Australian exporters and importers to negotiate with shipping conferences to protect their interests. The five declared associations are the Meat Industry Shippers Association, South Australian Shipping User Group, Western Australian Shippers Council Inc, Australian Horticultural Exporters Association, and Australian International Movers Association, all of which represent the interests of Australian shippers in specific trades or regions.
Scope and Application
The Trade Practices Act 1974 (TPA), particularly Part X, pertains to the regulation of international liner cargo shipping services, which are essential for the facilitation of international trade in Australia. This part of the Act applies to international cargo shipping companies that operate as conferences, which are collaborative entities that jointly provide scheduled shipping services. These companies are allowed to allocate routes, fix prices, manage capacity, offer loyalty agreements, and pool revenue and losses, traditionally justified by the need to prevent destructive competition and maintain market stability. The Act also extends to exporters and importers, providing them with countervailing powers through designated shipper bodies. The Minister for Transport and Regional Services has the authority to declare associations as designated outwards secondary shipper bodies, enabling them to negotiate with shipping conferences on behalf of Australian shippers in specific trades or regions, or producers of certain exported goods. The geographic reach of this Act is national, as it applies across all states and territories of Australia, ensuring that shippers nationwide have access to competitive international shipping services. The legislative instruments that declare these associations are set to expire, but the Parliamentary Secretary to the Minister for Transport and Regional Services has renewed their status to continue their role in negotiations.
Key Provisions
The Trade Practices Act 1974 (TPA) is a significant piece of legislation that regulates the conduct of businesses in Australia, including those in the international liner cargo shipping industry. Part X of the TPA specifically addresses international liner cargo shipping services, which are critical for facilitating international trade, especially for value-added products. This part of the Act regulates the market conduct of international cargo shipping companies that collaborate as 'conferences' to provide joint shipping services. These conferences traditionally have been permitted to act in concert to stabilise freight rates and manage capacity, offering loyalty agreements and pooling revenue and losses to prevent destructive competition.
Under Part X of the TPA, shipping lines that are members of a conference are obligated to negotiate with designated shipper bodies. These bodies include both peak shipper bodies that deal with matters affecting liner trades as a whole and secondary shipper bodies that can negotiate on behalf of specific commodities or geographic regions. The Minister for Transport and Regional Services has the authority to declare associations as designated outwards secondary shipper bodies, provided they meet certain criteria outlined in subsection 10.03(2) of Part X. These criteria include representing the interests of Australian shippers in particular trades, commodities, or regions, and ensuring that such a declaration is desirable.
The obligations imposed by Part X on shipping companies include negotiating with the designated shipper bodies to ensure that the services provided are of good quality and that freight rates are internationally competitive. This negotiation process is crucial for maintaining stability in the shipping market and preventing unsustainable price fluctuations. The obligations extend to ensuring that the shipping conferences can operate in a manner that benefits both the shipping companies and the shippers, thereby facilitating efficient and reliable international trade.
Failure to comply with the provisions of Part X of the TPA can result in significant consequences. The Act includes provisions for both civil and criminal penalties for breaches, although the specific penalties are not detailed in the explanatory statement. Civil penalties may include fines and other monetary penalties, while criminal penalties could involve imprisonment, depending on the severity and nature of the breach. The specific maximum penalties are not explicitly stated in the explanatory statement, but they are designed to ensure compliance with the Act's provisions and to maintain the integrity of the international liner cargo shipping market.