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 (TPA), enacted by the Australian Parliament, addresses the need for regulation in the international liner cargo shipping services market to ensure that such services are provided at internationally competitive rates. This legislation is crucial for maintaining Australia’s international trading performance, particularly for value-added products. The TPA permits ocean carriers to collaborate as ‘conferences’ to stabilise freight rates, but also empowers exporters and importers through designated shipper bodies to negotiate with these conferences. These designated bodies, including the Meat Industry Shippers Association, the South Australian Shipping User Group, the Western Australian Shippers Council Inc, the Australian Horticultural Exporters Association, and the Australian International Movers Association, have been recognised as designated outwards secondary shipper bodies by the Parliamentary Secretary to the Minister for Transport and Regional Services. Their role is to represent the interests of Australian shippers in particular trades or regions, thereby enhancing their negotiating power with shipping conferences. The declarations made under the TPA ensure these associations can continue to fulfil their important function of advocating for Australian shippers in international liner cargo shipping services.
Scope and Application
The Trade Practices Act 1974 (TPA) governs the conduct of international cargo shipping companies that collaborate in conferences to provide joint liner cargo shipping services, which are crucial for Australia’s international trade, particularly for value-added products. Part X of the TPA, concerning international liner cargo shipping, aims to regulate the market conduct of these conferences to ensure that services are provided at internationally competitive rates. This legislation applies to international cargo shipping companies that participate in conferences, as well as to the designated shipper bodies that negotiate with these conferences on behalf of Australian exporters and importers. The geographic reach of this Act is national, encompassing all states and territories of Australia, ensuring that shippers across the country have access to reliable and competitive shipping services. The Act allows for the designation of outwards secondary shipper bodies by the Parliamentary Secretary to the Minister for Transport and Regional Services, who can declare associations that represent specific trade interests to continue their role in negotiating with shipping conferences. The declared associations include the Meat Industry Shippers Association, South Australian Shipping User Group, Western Australian Shippers Council Inc, Australian Horticultural Exporters Association, and Australian International Movers Association. The application of this Act can be extended or restricted through subordinate instruments under the Legislative Instruments Act 2003.
Key Provisions
The Trade Practices Act 1974 (TPA) contains provisions in Part X that regulate the conduct of international liner cargo shipping services, which are regular, scheduled services that carry non-bulk cargoes, primarily in containers (section 10.01). These services are essential for facilitating international trade, especially for value-added products, and the Act aims to ensure that they are provided at competitive rates. The Act permits international cargo shipping companies to collaborate as ‘conferences’ to provide joint services, with agreed freight rates, while also providing exporters and importers with countervailing powers to strengthen their negotiating ability with these conferences (section 10.02). The Minister for Transport and Regional Services has the authority to designate specific associations as outwards secondary shipper bodies, enabling them to negotiate with conferences on behalf of Australian shippers (section 10.03). The current legislative instruments declaring five associations as designated outwards secondary shipper bodies will expire on 31 December 2007, but the Parliamentary Secretary to the Minister for Transport and Regional Services has renewed these declarations to ensure the associations can continue their role.
The obligations imposed by the TPA on the parties it governs include the requirement for shipping lines that are members of a conference to negotiate with designated shipper bodies regarding the liner cargo shipping services they intend to provide (section 10.02). Designated peak shipper bodies deal with matters affecting liner trades as a whole, while designated secondary shipper bodies may be nominated to negotiate with ocean carriers on specific issues, such as matters affecting shippers of a particular commodity or shippers in a particular state or territory (section 10.03). The Minister must declare an association to be a designated outwards secondary shipper body if they are of the opinion that 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 (subsection 10.03(2)). The Act ensures that the interests of Australian shippers are represented in negotiations with conferences, which helps to maintain competitive freight rates.
The TPA does not explicitly outline specific offences, penalties, or civil/criminal consequences for breaches of the provisions in Part X. However, the Act provides for general enforcement mechanisms, including the ability of the Australian Competition and Consumer Commission (ACCC) to investigate and take action against anti-competitive practices, such as price fixing or market allocation, by shipping conferences (section 87). The ACCC can seek injunctions, penalties, and other remedies to address breaches of the Act. Additionally, the courts can impose penalties for breaches of the Act, including fines and imprisonment, although the specific penalties will depend on the nature and severity of the breach. The ACCC and the courts play a crucial role in ensuring compliance with the provisions of the TPA and in enforcing the Act's objectives of promoting competition and protecting the interests of Australian shippers.