Red Cards For Shippers Beckon

The following opinion piece on shipowners protesting paying minimum rates to seafarers working on our coastal highways was published in the latest edition of DCN/Lloyds List

The World Cup was somewhat marred by the professional "dives" of players, with the intent to melodramatically inflict a referee's red card on an innocent opposition player. But imagine if a team not getting its way collectively put hands on heads and refused to play. Hard to believe but that's exactly what international shipping companies are being urged to do in a protest against the Fair Work Act. Red cards beckon.

This is more than a dummy spit. It's an organised campaign led by Shipping Australia (SA), which represents many foreign shipping owners serving the Australian market where those companies are being asked to avoid the new laws and boycott coastal services, to withdraw services. SA has made representations to Prime Minister Julia Gillard (in her previous role as Deputy PM and Minister for Education Employment and Workplace Relations), and have enlisted foreign shipping companies and Australian users of the shipping services, like the Tasmanian vegetable producer Simplot, in the campaign.

A few facts. From 1 January 2010, the Fair Work Act (essentially the 10 National Employment Standards) applies to permit ships (with minor exceptions) and licensed ships voyaging in the Territorial Sea, but also out to the Exclusive Economic Zone. And from1 January 2011, employers of crews on applicable international permit vessels will be required to provide at least the minimum entitlements provided in Part B of the modernised Seagoing Award, which essentially mirrors the rates in ITF agreements that apply worldwide.

So the change that currently exists for permit ships is the application of the FW Act from 1 January 2010 results in no discernable cost increase for foreign shipowners undertaking a permit voyage, with the possible exception of the occasional public holiday that might fall while the foreign seafarer was in Australian waters on a vessel issued with a permit.

Any cost increases or withdrawals from service at this stage must be considered a considered political exercise - an element of price gouging. It appears the deadline SA is now pushing for vessels to exit the coastal trade is 1 July 2010.  SA is no doubt looking to find traction before the looming federal election.  

Of course, reasonable freight cost adjustments to recognise obligations under the FW Act are justified. Higher freight rates also make it more attractive for a domestic shipping operator to consider investing in a licensed ship to participate in the domestic trade. 

So what effect will Part B of the Award have come 2011?

The answer is that it can still be considered marginal to foreign operators' costs. If set against the importance of securing dedicated and sustainable coastal services securing certainty in scheduling and cover from volatile freight rates in the international industry, the benefits to shippers and the national interest is huge.

The Maritime Union believes there are good grounds for the Australian Competition & Consumer Commission (ACCC) to investigate the collective behaviour of international shipping lines that have recently announced they intend to exit the coastal trades. There is also a good argument for SA to be joined in that investigation to assess if it has also breached the Competition and Consumer Act 2010 (CCA) formerly the Trade Practices Act by encouraging its member companies to act in a concerted manner.

Collective withdrawal of service offerings by international liner shipping companies would seem to the MUA to constitute an abuse of the privilege granted by the CCA. Where shipping companies are threatening to boycott a market, there are strong arguments that their special status is being abused. 

At a time when the Federal Government is finalising a package to revitalise Australian shipping - through fiscal and other incentives and reforms - the Fair Work Act and labour reforms are an essential part of the mix. The net result will open up opportunities for operators who wish to invest in Australian licensed ships, which is precisely the policy objective of shipping reform

Overseas shipowners should consider playing a supportive role and not attempting to scuttle things to feed their self interest. Bad look, bad attitude. Regulators should consider red cards for those who stand in the way.