Shipping Australia welcomes most of the positions in today’s (12 December 2022) Container Stevedoring Monitoring Report from the Australian Competition and Consumer Commission. Australian container ports ought to have regulatory oversight We largely agree with the ACCC’s position on Australia’s container ports – they have little to no regulatory oversight, and, given both their pivotal importance to Australia and the fact they are regional monopolies, then, yes, we absolutely agree that Australia’s container ports should be subject to regulatory oversight.
We agree with the ACCC comments that there needs to be a regulatory framework extended over all privatised container ports and that it should extend to all forms of pricing by a port (and not just land rents). We note and support the comments that an industry-specific negotiate-arbitrate model should be implemented at all container ports to assist port users. Benchmarking regime of container ports For the same reasons, we agree with the ACCC that there should be a benchmarking regime set up to monitor the performance of Australian container ports – they’re far too important to the wellbeing of Australians to be operating without scrutiny. We also agree with the ACCC that it is right to benchmark container port performance against international comparators and we assert that the most appropriate comparison is that published by S&P / the World Bank. We note the many criticisms of that report (note: Shipping Australia does not necessarily agree with those criticisms) however, it is the first and only global report of its kind. It is the only international comparator that exists.
We therefore urge all parties to work with S&P / the World Bank to make the global comparative container port performance report the best that it can possibly be. ACCC comments on container hire fees are unreasonable However, we feel that the ACCC’s comments about ongoing hire fees are unreasonable. The starting and end-points here are that ocean shipping containers are the property of ocean shipping companies. Those companies bear the financial burden of having boxes manufactured, having them sent to the right place at the right time, and for keeping them in good repair. Ocean shipping companies have the absolute right to charge a fee for the use of their boxes. Secondly, the Australian economy needs boxes to be returned to shipping companies so that boxes can be re-filled with cargo that the Australian economy needs. Some (but not all) shippers and consignees need to be incentivised to return boxes to their owners. It is well known that some (but not all) shippers view containers as a free gift – take a tour around some of the Pacific Islands and you will see a wide variety of unusual and creative uses to which shipping containers have been put! Other shippers (but not all) like to use containers as a cheap form of storage space. The way to incentivise the shipper community to return boxes is to charge an ongoing hire fee. We note the comments made by the ACCC about incentivisation. There are two sets of incentivization that ought to be borne in mind. Firstly, individual companies may need to be incentivised.
Secondly, the sector as a whole needs to be incentivised. As the Productivity Commission has previously noted, there can be benefits to consumers as a whole if problematic behaviour by a small number of bad actors is deterred. As the Productivity Commission has previously noted, reducing the ability of suppliers to deal with such bad actors can result in changes to the terms and conditions upon which a product is supplied. While Shipping Australia does not discuss the commercial dealings of our members with their customers, we would be wholly unsurprised if the terms and conditions of the supply of a container were to change in response to any restrictions on the ability of ocean shipping companies to charge for the hire of boxes. We also note that transport operators, shippers and consignees have a wide range of ways to avoid ongoing hire fees – they can return boxes in good time (some wait until the last possible moment), trucking companies can avoid competing for business on the basis that they will get the box back in time, trucking companies can change their own terms and conditions of business so that they are not liable for ongoing hire fees, shippers and consignees can buy and operate their own containers, insurance can also be obtained, extra free-time can be bought or requested from ocean carriers.
Expansion of unfair terms law into shipping contracts Shipping Australia is utterly opposed to any proposals to expand unfair terms law into ocean shipping contracts. There are many problems. Just consider jurisdiction. Most container shipping contracts for the import of goods are formed by parties abroad and most of the contract is performed overseas. Export contracts may or not be formed in Australia and are mostly effected overseas. Because of the international nature of ocean shipping, and the difficulties around jurisdiction, Australia signed up to international rules that nearly all governments agreed to, after, literally, hundreds of years of disputes between carriers and shippers over cargo liability.
The current Australian system, which incorporates international law, was set up with cross-party political support because shippers and carriers were fed-up with complex, and expensive, legal disputes. The existing rules put an end to what was described by an independent MP as uncertainty, prolonged litigation, and frequently, injustice. Australia has incorporated international maritime law to put an end to these problems. It should not re-open the door to vanquished problems by putting domestic rules into international law. On a practical note, if Australia were to start chipping away at the international regime, there could be a variety of adverse consequences.
For instance, once the COVID-related supply chain disruption actually became an onoing problem, it could be arguable in court that, from that point on, ocean carriers should have forseen that the disruption would be an ongoing problem. If successful, such an argument would disrupt the nature of insurance for ocean cargo. Insurance cover is available on an agreed basis. If that basis changes, then the nature of the insurance cover will also change. It might become more costly. Or it might become unavailable. If Australia extends unfair contract terms law into ocean shipping then the insurance markets for ocean-carried cargo into / out of Australia will likely change accordingly. It might become more expensive. It might have more – and more adverse – terms and conditions. Some insurers might withdraw cover. More costly and more scarce insurance offered on more adverse terms will make importing and exporting more difficult and expensive. All Australians would pay the price if that were to happen.
On a more local scale, many freight forwarders and cargo interests are small businesses. Cases involving unfair contract terms law can be filed at low cost in the local magistrates’ courts. Contracts for the insurance of international ocean carriage, and the carriage contracts themselves, are notorious for their complexity and specialist nature. This is why Australian cases are heard in the Federal Court by judges who have specialist knowledge. It can be forseen that, if Australian unfair contract terms law is extended into international shipping contracts, there could be an overwhelming tsunami of complex cases that completely swamp the local justice system. All of which will add cost and uncertainty to shipping, which will, ultimately, be borne by shippers. Expansion of unfair terms law into shipping contracts is manifestly bad policy.
Shipping Australia supports the repeal of Part X
Many parties in the Australian supply chain would like to see the end of Part X, which gives an exemption to ocean shipping companies from certain aspects of competition law. Part X is cumbersome and outdated. Competition authorities around the world have repeatedly examined – for decades – such matters as vessel-sharing and have concluded that a block exemption from competition law for ocean shipping is beneficial. They have repeatedly renewed the exemptions that they give to the shipping industry. Shipping Australia therefore urges the Australian authorities to set up a block class exemption from competition law for ocean shipping as is done in other major economies around the world. Shipping Australia’s CEO, Captain Melwyn Noronha, commented: “effective regulation and oversight of our ports is vital as they are so central to the wellbeing of Australians. Accordingly, benchmarking of ports, is, likewise, vital. Scrutiny and benchmarking of the maritime industries is nothing new – ocean shipping has been subject to scrutiny and benchmarking for decades. “However, benchmarking only has value if there is something to benchmark against. Shipping Australia therefore urges policy-makers to ensure that the performance of our ports is benchmarked against other comparable ports. The S&P / World Bank report is the only planet-spanning container performance report that exists. It is written by world-leading trade and transport economists of global standing. Shipping Australia therefore urges all parties to co-op.
Source: Shipping Australia
