Cabotage In New Zealand And Australia - A World Of Difference Between Neighbours?

Legal News & Analysis – Asia Pacific - New Zealand – Shipping Maritime & Aviation

  • 15 July, 2015

  • New Zealand (NZ) is a relatively small nation by traditional measures. With a total land mass of just 263,000 square kilometres, a population of around 4.5 million and GDP of around $240 billion, the nation is considerably smaller than its closest neighbour, and largest trading partner, Australia. However, notwithstanding its relatively small size, NZ is a significant player in the Asia Pacific maritime sector and is rapidly developing into a major transhipment hub in the South Pacific. In the year ended December 2014:

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  • 37.7 million tonnes was of product was exported out of NZ sea ports; and 21.3 million tonnes of product was imported into NZ sea ports, with a combined value of more than $87.7 billion.

     

  • Whilst imports and exports make up the majority of total loads/discharges, NZ sea ports continue to process a significant volume of transhipped/re-exported goods – predominantly through Port Taranaki (of which 90% of total goods moved in 2014 comprised transhipped goods) and Port Nelson (of which 40% of total goods moved in 2014 comprised transhipped goods).

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    This most recent annual data collected by the NZ Ministry of Transport silences any doubt that NZ's tenacious shipping industry is in robust health. If current trends continue, one would expect to see the level of activity in NZ sea ports increase in the short to medium term.

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  • As is the case in Australia, coastal shipping is an integral component of NZ's domestic freight tasks. However, in contrast to Australia's present cabotage laws, NZ has taken a fairly modest approach to the regulation of coastal shipping.

     

    To what extent is coastal shipping regulated in NZ?

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    In short, not much. NZ coastal shipping is regulated in the main under Section 198 of the Marine Transport Act 1994 (NZ) and related provisions of the NZ Ship Registration Act.  The terms of Section 198 are limited in scope and are flexible in design, following a move to a more liberalised approach to a range of public policy areas in the 1990’s.

     

    In summary, Section 198 restricts access to coastal trade to:

  • - NZ ships; 

  • - foreign ships on demise charter to a NZ based operator;

  • - or a foreign ship that is passing through NZ waters while on a continuous journey from a foreign port to another foreign port, and is stopping in NZ to load or unload international cargo.

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    How does the approach in NZ compare to Australia's current and proposed cabotage laws?

     

  • Notwithstanding the geographic proximity and close trading relationship, there are key differences between the NZ approach, the current Australian position under the Coastal Trading (Revitalising Australian Shipping) Act 2012 (The Act) and the Government's proposed laws for coastal shipping (as set out in the Shipping Legislation Amendment Bill 2015).

     

    The table below sets out the key differences between the three regimes.

AREA OF REGULATION CURRENT AUSTRALIAN POSITION AUSTRALIAN POSITION IF PROPOSED LAWS ARE ENACTED CURRENT NZ APPROACH
Permits The Act replaced the relatively simple system of licenses and permits under the Navigation Act with a three-tier licensing regime comprising general licencestemporary licences and emergency licences Single permit system Nil
Eligibility
  • general licence (GL) is available to Australian flagged ships registered on the Australian General Shipping Register and foreign registered ships intending to transition to Australian registration within 5 years
  • temporary licence (TL) is available to foreign-flagged ships and to ships entered on the Australian International Shipping Register. Applicants for a TL can only make one application in any 12-month period and are subject to a number of other very onerous requirements
  • An emergency licence permits the licence holder to engage in coastal trading for no more than 30 days and is intended to respond to national emergencies such as cyclones, earthquakes and bushfires
  • A Coastal Shipping Permit (Permit) will be available to both Australian and foreign registered ships
  • The owner of a vessel, or a person/ company who has day to day responsibility for the management of a vessel, will be eligible to apply for a Permit. Only one Permit can be issued to a vessel at any point in time
  • Applications for a Permit will need to include evidence that the applicant can apply for a Permit (e.g. proof of ownership or day to day management of the vessel), a copy of the registration certificate for the vessel (including a translation if the registration certificate is not in English) and the application fee
  • Permit holders will be able to apply to transfer the Permit if the ownership or management of the vessel changes during a Permit period

Section 198 (1) of theMarine Transport Act 1994 (NZ) provides that the following vessels are eligible to carry coastal cargo:

  • NZ registered ships;
  • foreign ships on demise charter to an NZ based operator who employs or engages a crew to work on board the ship under an employment agreement or contract for services governed by NZ law;
  • a foreign ship;
    • that is passing through NZ waters while on a continuous journey from a foreign port to another foreign port; and
    • is stopping in NZ to load or unload international cargo; and
    • whose carriage of coastal cargo is incidental in relation to the carriage of its international cargo

If there are no NZ ships or foreign ships on demise charter available to carry coastal cargo, the Minister may authorise the carrying of coastal cargo on such conditions as the Minister considers appropriate (including any conditions relating to occupational health and safety)

Key additional requirements
  • Ships holding a GL have unrestricted access to coastal trades for a period of up to 5 years provided they comply with prescribed obligations including that they:
    • employ Australian residents;
    • pay crew wages at Australian award rates;
  • Ships holding a TLare:
    • restricted to a nominated coastal trade (passengers or cargo) for a specified number of authorised voyages over a 12 month period; and
    • able to hire foreign crew, subject to complying with some Australian employment conditions
  • Ships holding an EL are able to hire foreign crew, subject to complying with some of Australia's labour laws
  • Senior Australian crew - any vessel that undertakes more than 183 days of coastal trading in a 12 month Permit period will be required to employ a master or chief mate and a chief engineer or first engineer that is an Australian citizen or permanent resident, or holds an appropriate visa
  • Wages and conditions – if a foreign ship engages predominately in international trading (that is, for less than 183 days of Australian coastal trading in a 12 month Permit period) their existing on-board work place arrangements will apply

Section 198 (1A) provides that a foreign ship that is not on demise charter to a NZ based operator may only load and unload coastal cargo:

  • at an NZ port at which it loads or unloads international cargo; or
  • at an NZ port it is scheduled to pass in the course of its continuous journey
Reporting
  • Ships holding a GL must comply with annual mandatory reporting requirements (concerning matters such as the type of cargo carried and the ports at which cargo is loaded and unloaded)
  • Ships holding a TL are subject to mandatory reporting requirements at the end of any voyage undertaken during the period of the licence
  • Ships holding an EL must comply with mandatory reporting of prescribed information within a specified period at the end of the period of the licence
The holder of a permit will be required to report on voyages under taken at 6-monthly intervals, or more frequently if directed by the Minister No reporting requirement

What will the future hold for coastal shipping in NZ?

As will be apparent from the above table, NZ's cabotage laws are in contrast to the bureaucratic and inflexible laws that shippers and carriers presently endure in Australia.

 

Whilst there are some industry stakeholders in NZ calling for the re-introduction of tighter regulation (most significantly after the Rena incident in 2012, to ensure appropriate safety and environmental protection) these suggestions have, so far, not led to any formal commitment to review the current regime

.Clyde & Co

For further information, please contact:

 

Maurice Thompson, Clyde & Co

maurice.thompson@clydeco.com