Australian jobs are being lost across all sectors from retail through to our regional communities and farmers.
Impacts of drought, bushfires and COVID-19 on the Australian economy and the rapidly changing global trade environment are being compounded by an estimated $300M+ in supply chain costs imposed by stevedores at all major sea freight container ports.
Freight & Trade Alliance (FTA) and the Australian Peak Shippers Association (APSA) have campaigned with state governments and the Australian Competition and Consumer Commission (ACCC) outlining that if action is not taken immediately, we jeopardise the competitiveness of our country's quality products in a global market.
ENGAGEMENT WITH THE DEPUTY PM
The need for reform on stevedore-imposed Infrastructure Surcharges (now referred to as Terminal Access Charges) has more recently been elevated to the Federal Government via the Land Transport and Maritime Industry forum chaired by the Hon Michael McCormack - Deputy Prime Minister and Minister for Infrastructure, Transport and Regional Development. As highlighted during these meetings, it is the efficient movement of goods that will play a major role in leading Australia's economic recovery.
| STATUS REPORT – CONTAINER STEVEDORE IMPOSITION OF TERMINAL ACCESS CHARGES | | |
| A detailed submission titled Status Report – Container stevedore Imposition of Terminal Access Charges (Status Report) has been prepared to support focused engagement between the Deputy Prime Minister and a contingent of FTA Importer Reference Group representatives / APSA Committee of Management – refer HERE.
Submitted to government yesterday, 27 May 2020, the Status Report highlights the fact that all businesses face a dilemma of how to deal with unavoidable costs such as rent, infrastructure, labour and power. Those same businesses are then forced to either absorb costs or pass them on to their commercial clients. Similarly, stevedores should be forced to either absorb operating costs or pass these on to their commercial client (shipping lines). Shipping lines then have the choice to absorb costs or pass these onto shippers (exporters, importers and freight forwarders) through negotiated freight rates and associated charges. | | |
RECOMMENDATIONS
Importantly, the Status Report also clearly articulates that a statutory monitoring process to oversee further price increases is NOT the answer. Incremental increases on an already high base would continue the devastating impacts on Australian jobs.
The Status Report makes two recommendations:
- regulation to protect transport operators and shippers by forcing stevedores to cease the practice of administering a Terminal Access Charge; and
- stevedores should be given appropriate notice to adjust commercial modelling allowing negotiations of charges back to shipping lines.
This outcome would allow market forces to take effect. An open and competitive environment will determine appropriate price for services without the need for further government monitoring or intervention.DISAPPOINTING RESPONSE FROM THE VICTORIAN GOVERNMENT
FTA / APSA members will recall correspondence received from the Hon Melissa Horne - (Victorian) Minister for Ports and Freight addressing ongoing concerns about the imposition of Infrastructure Surcharges - extract below:
"In January 2020, when I released the summary of our Port Pricing and Access Review to stakeholders, I advised stakeholders that the Victorian Government was not intending to move towards heavy-handed regulation, but would instead work towards establishing a new Voluntary Port Performance Model for the Port of Melbourne in partnership with all port users. I also said that if voluntary standards didn't improve pricing transparency, it was open to the Victorian Government to consider mandatory standards. DP World's decision runs counter to our commitment to pricing transparency, and points clearly to the need for the new standards we are now developing."
VOLUNTARY PORT OF MELBOURNE PERFORMANCE MODEL (VPPM)
FTA / APSA has since had contact with the Minister's office and Freight Victoria executive seeking interaction and genuine engagement on the new standards. While limited feedback has been received, it is apparent that the Victorian government has had more detailed engagement with the road transport sector who have announced detail of the Voluntary Port of Melbourne Performance Model (VPPM) and a Draft Protocol.
While engagement with the road transport sector is essential, what about the shippers who ultimately pay the bills?
Our understanding of the VPPM is that the stevedores will, on a voluntary basis, provide "transparency" on any increase and to give a prescribed notice period for any change. If this is not achieved on a voluntary basis, then Victorian government may take next steps to regulate obligations to achieve this outcome.
A GIFT TO OUR STEVEDORES ... OTHERS TOO?
A monitoring process to oversee further price increases is NOT the answer – a sentiment that FTA / APSA has consistently expressed in dealings with the Victorian government, departmental representatives, consultants and the Minister herself.
The VPPM will mean that stevedores will continue to receive revenue from the transport sector rather than their commercial client (shipping line) with the net result of simply adding another level of bureaucracy.
You do not have to be Nostradamus to see that empty container parks will also continue ratcheting up their charges on transport operators too – and why not? Stevedores have highlighted that it is a very effective model to collect revenue from parties other than your commercial client. An approach now apparently accepted by the Victorian government.
As for transport operators, yes there are significant cash flow issues. Most also add a margin (understandably as it is probably necessary to survive) resulting in further cascading costs through the supply chain ultimately leading to inflated costs to shippers.
FTA / APSA has overnight and again this morning sought more detail from the Victorian government on this development and will provide further comment once detail comes to hand.
Paul Zalai - Director and Co-Founder, FTA / Secretariat, APSA