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
Part X (International liner cargo shipping) of the Trade Practices Act 1974 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.
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 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, legislative instruments made before 1 January 2000 will be automatically repealed on 31 December 2007 unless they are registered with the Federal Register of Legislative Instruments on or before that date. In the light of this, the Department of Transport and Regional Services (DOTARS) conducted a review of all affected shipper bodies currently designated pursuant to section 10.03 of Part X. As a result of that review, it was discovered that the designations of six outwards secondary shipper bodies should be repealed because the associations are either defunct or no longer wish to retain their designation. These associations are outlined below.
Although there is no direct provision in Part X for the repeal of a shipper body’s designation, subsection 33(3) of the Acts Interpretation Act 1901 provides that:
“Where an Act confers a power to make, grant or issue any instrument (including rules, regulations or by-laws) the power shall , unless the contrary intention appears, be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to repeal, rescind, revoke, amend, or vary any such instrument.”
Instruments of repeal have therefore been executed for the following designated outwards secondary shipper bodies:
- the Australian Dried Fruits Shippers’ Association, designated on 9 May 1990, which inquiries indicate to be defunct;
- the Australian Malt Exporters Committee, designated on 9 October 1990, which inquiries indicate to be defunct for Part X purposes;
- the Australian Prawn Promotion Association Ltd, designated on 11 April 1997, which inquiries indicate to be defunct;
- the Dairy Industry Shipping Association, designated on 2 May 1990, which inquiries indicate to be defunct;
- the Australian Onion Association, designated on 3 September 1990: a representative of the Association has advised that it no longer requires designation as an outwards secondary shipper body; and
- the Wool Industry Shipping Group, designated on 17 May 1990: a representative of the Wool Commodity Group Pty Limited advised that the Group no longer requires designation as an outwards secondary shipper body.
It is open to any of the above associations to reapply for designation as outwards secondary shipper bodies pursuant to Part X should they re-establish and/ or wish to be eligible to negotiate with liner conferences in relation to international liner cargo shipping services in the future.
Overview
The Trade Practices Act 1974 was enacted to regulate market conduct in the international liner cargo shipping industry, particularly the activities of shipping conferences that operate in concert to limit competition and stabilise freight rates. This Act was developed to address the gap in regulation of collusive behaviour among shipping companies that had been traditionally allowed by governments to fix prices, manage capacity, and pool revenue or losses to prevent destructive competition and market instability. The Parliament of Australia, through the Minister for Transport and Regional Services, established this regulatory framework to ensure that the interests of both shipping companies and Australian shippers are balanced. The policy objective of the Act is to permit designated shipper bodies to negotiate with shipping conferences on behalf of exporters and importers, thereby strengthening their negotiating position. The Act provides for the designation of peak and secondary shipper bodies to represent specific groups of shippers, ensuring that these bodies can effectively advocate for the interests of their members in dealings with shipping conferences.
Scope and Application
The Trade Practices Act 1974, particularly Part X, governs the conduct of international liner cargo shipping companies that operate as conferences to offer joint shipping services. This legislation applies to shipping companies that collaborate to stabilise freight rates and manage capacity by fixing prices, allocating routes, and pooling revenue or losses. Part X of the Act provides mechanisms for exporters and importers to countervail the power of conferences through designated shipper bodies, which can negotiate on behalf of shippers. The Act allows the Minister for Transport and Regional Services to designate associations as outwards secondary shipper bodies if they represent the interests of Australian shippers in specific trades, commodities, or regions. The Explanatory Statement outlines the repeal of designations for six associations due to their inactivity or withdrawal of interest. These associations can reapply for designation if they re-establish and wish to negotiate with liner conferences in the future. The scope of the Act extends to the entire Commonwealth, influencing the conduct of international liner shipping companies operating in Australia.
Key Provisions
The Trade Practices Act 1974, specifically Part X, regulates the conduct of international cargo shipping companies that collaborate in conferences to offer joint liner cargo shipping services (s 10.01). This regulation is intended to stabilise freight rates and prevent destructive competition (s 10.03). The Act allows the Minister to designate shipper bodies that can negotiate with these conferences on behalf of Australian shippers, including both designated peak shipper bodies, which handle matters affecting liner trades as a whole, and designated secondary shipper bodies, which can negotiate on behalf of shippers of particular commodities or in specific locations (s 10.03). The Minister can designate an association as an outwards secondary shipper body if it represents the interests of Australian shippers in a particular trade or region, or of producers of exported goods, and if such a declaration is considered desirable (s 10.03(2)).
The obligations imposed by the Act require shipping lines that are members of a conference to negotiate with the designated shipper bodies (s 10.03(1)). Shipper bodies designated under the Act must represent the interests of Australian shippers in a particular trade or region, or of producers of exported goods, and must be willing to negotiate with the shipping lines. The shipper bodies must also comply with any terms and conditions set out in their designation. Failure to comply with these obligations could result in legal action by affected parties, and could potentially undermine the stability and reliability of the shipping services provided by the conferences.
Under the Trade Practices Act, there are no explicit offences, penalties, or civil/criminal consequences for failing to comply with the obligations set out in Part X. However, failure to negotiate with designated shipper bodies could lead to legal action, as the shipper bodies have the right to take action against shipping lines that do not comply with their obligations. In addition, the Minister has the power to revoke the designation of a shipper body if it is found to be acting in a manner that is contrary to the interests of Australian shippers (s 10.03(4)). This could result in the loss of the shipper body's ability to negotiate with shipping lines, and could potentially have significant consequences for the shippers it represents.
In summary, Part X of the Trade Practices Act regulates the conduct of international cargo shipping companies that collaborate in conferences to offer joint liner cargo shipping services. The Act allows the Minister to designate shipper bodies that can negotiate with these conferences on behalf of Australian shippers, and imposes obligations on shipping lines to negotiate with the designated shipper bodies. Failure to comply with these obligations could result in legal action, and the Minister has the power to revoke the designation of a shipper body if it is found to be acting in a manner that is contrary to the interests of Australian shippers.