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Overseas cargo shipping legislation review - Report by Department of Transport, October 1977


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The Parliament of the Commonwealth of Australia

OVERSEAS CARGO SHIPPING LEGISLATION

Report by Department of Transport

October 1977

Presented by command 24 M ay 1978 Ordered to be printed 9 June 1978

Parliamentary Paper No. 163/1978

Department of Transport

Report on a review of

Overseas Cargo Shipping Legislation

Australian Government Publishing Service

Canberra 1978

© Commonwealth of Australia 1978

Printed by Watson Ferguson & Co., Brisbane

CONTENTS

Page

SUMMARY AND RECOMMENDATIONS xi

CHAPTER 1 INTRODUCTION 1

1.1 Scope of the review 1

1.2 Study group 1

1.3 Need for the review 1

1.4 Conduct of the review 1

1.8 Outline of the Report 2

CHAPTER 2 THE LINER CARGO SHIPPING INDUSTRY 4

2.5 Liner Conferences 4

2.10 Developments in Liner Shipping 5

2.16 North American trades 6

2.18 East Asian trades 6

2.20 UK/Europe trades 6

2.23 Trades Served 7

2.31 Freight Rate Practices 9

2.38 Australian Flag Liner Shipping 10

2.39 Australian Interests 10

2.41 Shippers’ Organisations 11

2.46 Australian Shippers’ Council (ASC) 11

2.48 Objectives of the ASC 12

2.49 Developments in membership 12

2.52 Representation on the ASC 13

2.54 Role of sub-committees 13

2.55 The ASC executive staff 13

2.56 Sources of ASC finance 13

CHAPTER 3 CONFERENCES AND THE INTERESTS OF SHIPPERS AND SHIPOWNERS 15

3.3 The Concept of Efficiency 15

3.6 The Common Interests of Shippers and Liner Cargo Shipowners 16

3.9 The Case for Conferences in Liner Shipping 16

3.19 The Protection of Shippers’ Interests in General 18

3.24 The Case for Differential Freight Rates 19

3.36 Freight Rate Determination 22

3.38 Carrier competition 22

3.39 Market competition 22

3.40 Cost reduction 22

3.41 Other arguments of shippers 23

3.42 Negotiation of rates 23

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3.45 The Role of Commercial Negotiations between Shippers and Conferences 23

3.48 Government Intervention 24

CHAPTER 4 PRESENT LEGISLATION 27

4.5 Trade Practices Act 1965 27

4.8 Shipowners’ views 28

4.11 Shippers’ views 28

4.12 Departmental views 28

4.18 Inter-Departmental Committee 1966 29

4.22 Objectives of present legislation 30

4.28 Provisions of Part X of the Trade Practices Act 31

4.28 Exemption of agreements 31

4.29 Undertakings 31

4.33 Powers of the Governor-General 32

4.38 · Trade Practices Tribunal inquiries 32

4.39 · Ancillary provisions 33

4.40 · Clerk of Shipping Agreements 33

4.41 The Practical Operation of Part X 33

4.41 · Exemption from Part IV 33

4.43 · Inwards conferences 33

4.45 e Undertakings 33

4.47 e Australian national shipping 34

4.48 · Local agents 34

4.49 e Filing of agreements 34

4.51 · Negotiations 35

4.53 · Provision of information 35

4.55 · Representative of the Minister 35

4.58 The Trade Practices Tribunal 36

4.64 Value of negotiations 37

4.66 “Efficient, economical and adequate” 37

4.67 What Part X Does Not Do 37

CHAPTER 5 CONTROL OF CONFERENCE AGREEMENTS AND PRACTICES 39

5.4 Restrictive Trade Practices and Liner Shipping 39

5.5 Contracts, arrangements or undertakings affecting com­ petition 39

5.7 Monopolisation practices 40

5.12 Exclusive dealing arrangements 41

5.16 Mergers 41

5.17 Boycotts 41

5.18 Summary of the applicability of Part IV 41

5.19 Government Responsibility in Respect to Conferences 42

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5.21 Control of Conference agreements 42

5.22 Exemption from restraint of trade regulations 42

5.25 Conference agreements to be public documents 43

5.34 The right of independent rate action by Conference members 44

5.44 Control of shipowners’ practices pursuant to Conference agreements 46

5.47 The control of entry into closed Conferences 47

5.50 The filing of information in Australia 47

5.52 Ensuring effective negotiation of rates and service matters 48 5.59 Shipper/Carrier rate agreements 49

5.68 Monitoring the efficiency of liner services 50

5.73 Inward Shipping 51

5.75 The economics of round voyage analysis 51

5.79 Control of inward Conferences 51

5.84 Government Intervention 53

5.86 Efficiency criterion for Government intervention 53 5.91 Research and the efficiency criterion 54

5.97 Government powers 55

5.107 Summary and General Conclusions 57

CHAPTER 6 NON-CONFERENCE SERVICES 58

6.3 Issues on Routes Without Conference Agreements 58 6.4 Single line routes 58

6.10 Multiple-type non-conference routes 59

6.12 Lines in Competition with Conferences 59

6.19 Non-Liner Shipping 60

CHAPTER 7 THE ROLE OF ANL 61

7.2 Relevance of Costs 61

7.3 Contribution to Efficiency 61

7.9 Right of Entry into Overseas Cargo Shipping 62

CHAPTER 8 SHIPPER/CARRIER NEGOTIATIONS OF RATES AND SERVICE CONDITIONS 63

8.3 General Issues in the Working of Commercial Negotiations 63 8.8 Reliance on commercial negotiations 64

8.15 Legislation for collective action in negotiations 65

8.20 The case for collective action 66

8.34 Concerns about non-collective negotiations 68

8.42 Conference rate proposals and commercial negotiations 70 8.50 The Record of the Australian Shippers’ Council 71

8.51 Research work of the ASC 71

8.62 The work of the ASC in negotiations 73

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8.83 Some implications of the Revised Emphasis in Negotiations 77 8.84 Future research requirements 77

8.88 The position of small shippers 77

8.89 Conflicts of interest 78

CHAPTER 9 FINANCING AND LONG TERM DEVELOPMENT OF THE ASC 79

9.3 Operating Difficulties of the ASC 79

9.4 Sources and use of funds 79

9.8 The Objectives and Methods of the Australian Shippers’ Council 81

9.14 Powers of the ASC 82

9.21 Indemnity of the ASC 84

9.25 Organisation of the ASC 84

9.28 Expectations held for the performance of the ASC 85

9.31 Effectiveness of shipowners in rate making 85

9.35 Organisational Development 86

9.36 Research capacity 86

9.40 The Secretariat 86

9.43 Approach to negotiations 87

9.45 Other possible arrangements 87

9.53 Level of ASC Financial Requirements 89

9.56 Long term finance 89

9.63 A levy on liner cargo 90

CHAPTER 10 MINISTERIAL POWERS AND DEPARTMENTAL FUNCTIONS 93

10.3 Ministerial Powers 93

10.15 Departmental Functions 95

10.19 Shipping investigation units 96

10.22 Streamlining of Administrative Arrangements 96

CHAPTER 11 SETTLEMENT OF DISPUTES AND PROVISION OF PENALTIES 98

11.3 British Merchant Shipping Act 1974 98

11.5 Effectiveness of the British legislation 98

11.7 United States Shipping Act 1916 99

11.13 Effectiveness of the USA legislation 99

11.18 Trade Practices Act Part X 100

11.26 Effectiveness of the penal provisions of the Act 101 11.30 Suggested New Provisions 102

11.36 Suggested Penal Provisions 103

11.51 Flag Discrimination 104

11.53 USA legislation 105

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11.55 British legislation 105

11.58 Japanese legislation 106

11.62 Other national laws 106

11.68 Conclusion 107

CHAPTER 12 INTERNATIONAL POLICIES AND PRACTICES 108

12.12 Australia’s International Shipping Policies 109

12.16 Australia’s International and Bilateral Commitments 110 12.16 OECD Invisibles Code 110

12.17 Exchanges with respect to Part X of the Trade Practices Act 110

12.18 The Basic Treaty of Friendship and Co-operation be­ tween Australia and Japan 110

12.19 UN Convention on a Code of Conduct for Liner Conferences 110

12.23 Implications of Recommendations of this Report 111 12.86 Conclusions 118

Page

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APPENDIXES

Appendix Table Page

I STATEMENT BY THE MINISTER FOR TRANSPORT 123

II TRADE PRACTICES ACT 1974—PART X 124

HI LINER SHIPPING SERVICES

1 Conferences with Agreements Filed Pursuant to Part X of the Act 138

2 Non-Agreement Conferences with Arrangements Filed Pursuant to Part X of the Act 141

3 Independent Liner Shipping Services Operating in Outward Trades 142

IV LINER SHIPPING TRADE

1 Outward Overseas Shipping Cargo by Type of Service 1971- 72 to 1974-75 143

2 Outward Overseas Shipping Cargo by Cargo Type 1971-72 to 1974-75 143

3 Inward and Outward Overseas Cargo by Broad Geographic Areas 1975-76 144

4 Liner Cargo Loaded in Australia for Overseas by Geog­ raphic Areas and Countries 1972-73 to 1975-76 145 5 Cargo Loaded in Australia for Overseas by State of

Shipment and by Type of Service 1975-76 145

6 Overseas Cargo Discharged in Australia by State of Discharge and by Type of Service 1975-76 146

7 Liner Cargo Loaded in Australia for Overseas by States 1972- 73 to 1975-76 146

8 Liner Cargo from Overseas Discharged in Australia by States 1972-73 to 1975-76 147

9 Liner Cargo Loaded in Australia for Overseas by Major Commodities 1974-75 147

V FREIGHT RATE MOVEMENTS IN MAJOR LINER

TRADES 1971 TO 1977

1 Australia to UK/Europe 148

2 Australia to Japan 149

3 Australia to North America 150

4 Australia to New Zealand 151

VI AUSTRALIAN SHIPPERS’ COUNCIL

Member Organisations 152

Constitution 153

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Appendix Table Page

VII FLAG PROTECTION LEGISLATION 169

United Kingdom Legislation 172

United States Legislation 173

Japanese Legislation

VIII U.N.C.T.A.D. CODE OF CONDUCT FOR 177

LINER CONFERENCES

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SUMMARY AND RECOMMENDATIONS

1. Australia continues to depend heavily upon efficient liner cargo shipping services for movement of both inward and outward cargo. These services have undergone significant changes in technology and organisation since the drafting of the shipping

provisions in Part X of the Trade Practices Act. Shipper bodies now exist in many countries and since 1972 the Australian Shippers’ Council (ASC) has been the one designated shipper body under Part X, to negotiate with shipowners. (Paras 2.23. 2.24, 2.42, 2.47).

2. For convenience, recommendations have been made for amendments to Part X of the Act, but these could equally be incorporated in a separate Overseas Shipping Act to replace Part X.

Conferences and Interests of Shippers and Shipowners 3. The Conference system is generally supported by shippers and governments. Policy and legislation must reflect the benefits and costs of the Conference system so that it works to ensure efficient liner services to the mutual benefit of shippers and

shipowners. The concept of efficiency is fundamental. It is recommended that the word “efficient” replace the term “efficient, economical and adequate” where it presently appears in Part X, and that an efficient liner service on a route be defined as one in which the right ships for the right trade are well managed, and the ships and methods o f operation provide a frequency and quality o f service at rates consistent with the value o f service to the shippers, while enabling shipowner( s) to earn a reasonable rate o f return in

the long run. (Para 3.4).

4. A common argument for Conferences is that, without them, the nature of liner shipping would lead to uneconomic competition and the breakdown of desirable scheduled services. Such rate competition between lines is not likely to cause the demise of all liner shipping, but, if such competition is able to occur at any time, it causes an

uneconomically low level of service. Support for the Conference system does not mean that competitive pressures in shipping are undesirable. The role of competition, however, in the maintenance of efficient liner services is complex. An advantage of a closed Conference system is that it provides an opportunity for lines to rationalise

services so as to provide a desired level of service at a minimum of cost. The most important reason for Conferences is the need to facilitate economies of scale of vessels consistent with the value of frequency of service. (Paras 3.10, 3.18).

5. Differential pricing is justified by economies of scale in ship building and operation. It is necessary also because of the joint cost nature of inward and outward services, and due to the presence of surplus shipping capacity from time to time. However in the complex and dynamic world of shipping such pricing makes the

establishment of reasonable prices related to efficiency difficult. (Paras 3.25 to 3.35).

6. When negotiating freight rates shippers’ arguments may be related to carrier competition, market competition, cost reductions, and other arguments appealing to the carrier’s “good-will”. The most effective arguments are based on alternatives available to shippers and to which it is in the interest of the Conference to respond.

Negotiations are necessary to the adjustment of rates to dynamic market conditions because shipowners must rely heavily on shipper representations to recognise the needs. (Paras 3.37 to 3.43).

7. The case for government intervention in the determination of the terms and conditions of liner shipping services is based on the concern of government for the efficiency of those services. Purposes of intervention are to ensure that monopoly powers are not used to produce unreasonably high profits or allowed to dull

innovation and responsiveness to commercial forces, and to ensure the reasonableness of commercial responses. Recognition of the two purposes of intervention is vital. Rate-of-return regulation is not feasible in international shipping but monitoring of profitability and responsiveness is essential. The Government relies upon the ASC to assist it to ensure the efficiency of liner services. In order to improve the functioning of commercial processes and minimise government intervention it is necessary for the

Government to strengthen the position of shippers. (Paras 3.48 to 3.54).

Present Legislation 8. The main provisions of Part X of the Trade Practices Act recognise Conferences by exempting them from the general provisions of the Trade Practices Act, and seek to regulate and control them in the public interest. They do this by providing for undertakings to be required from shipowners to negiotate with a designated shipper body, and by providing for disapproval of a Conference agreement if there is not due regard to the need for services to be efficient, economical and adequate. (Para 4.27). The legal requirements, as far as they go, have worked reasonably well but are lacking in provisions which can be readily invoked to ensure compliance. Legal opinion seems, to favour the view that inwards Conferences are not exempt from Part X of the Trade Practices Act and this could pose problems. (Para 4.44). Experience has shown that more information is received under commercial negotiations than could be hoped to be obtained by direct government regulation (Para 4.53). There appears to be general agreement that the presence of a Departmental officer has frequently been instrumental in assisting the parties to negotiations. (Para 4.55).

9. There has been only one shipping inquiry by the Trade Practices Tribunal. The requirement for a Trade Practices Tribunal inquiry before a Conference agreement may be disallowed is too unwieldly to allow for effective control of shipping Conferences under relatively fluid trading conditions. A simpler, cheaper, and quicker procedure is needed. If an inquiry is needed, an ad hoc inquiry by a person(s) selected by the Minister for that (those) person(s) initial comprehension of the problems should

readily provide effective advice to the Minister. Examination of the Tribunal’s conclusions on the criteria of “efficient, economical and adequate” suggests that more precisely defined criteria are desirable to assist shipowners, shippers, the Minister and the administering Department in actions and proceedings pursuant to the Act. (Paras 4.58 to 4.66).

Control of Conference Agreements and Practices 10. Responsibilities of government for control of Conference agreements and practices as laid down in the Act are generally correct, but must be made more explicit and the capability of government to rule on shipping matters increased. (Paras 5.107, 5.109).

11. It is recommended that while shipowners should be exemptedfrom section 45 o f the Trade Practices Act in respect o f shipper agreements, arrangements and understandings, they should be required to file details o f these and their going into effect should be subject to revised provisions o f the Act. (Para 5.6).

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12. It is recommended that shipowners be exempted from section 46 but that use o f a “fighting ship” either separately or in conjunction with any other carrier, through agreement or otherwise, be made illegal. (Para 5.11).

13. It is recommended that shipowners be exemptedfrom section 47 subject to the power of the Minister, following upon compulsory consultations with shipowners concerned, to make an order invalidating loyalty contracts on a route in whole or in part when shipowners are taking undue advantage o f the power they may have on that route. (Para

5.15).

14. It is recommended that shipowners be exempted from section 45 D. (Para 5.17).

15. Not every section of Part IV of the Act is applicable to shipping but the present exemption from Part IV as a whole is appropriate with the qualifications contained in the recommendations on sections 45, 46 and 47. (Para 5.18).

16. Consideration of Part IV led to the conclusion that the exemption of shipowners should be accompanied by additional provisions relating to the filing of agreements. (Para 5.21).

17. It is recommended that a contract, arrangement or understanding to which two or more shipowners are parties, o f a type referred to in section 45 o f the Act, and including any o f the features described in section 113, be deemed to be disapproved and the parties thereto restrained in accordance with provisions in section 124 until the contract,

arrangement or understanding has been filed and has met other provisions to be set down in Part X o f the Act. (Para 5.22).

18. To deal with the situation where it is believed that an agreement has not been filed, or for that matter where it is believed that there has been any breach of Part X, it is recommended that a provision similar to section 155, giving power to require production o f documents and powers o f search and discovery, be included in Part X with the

“Minister or officer acting on his behalf ” exercising the authority thereby given. (Para 5.24).

19. Availability of basic Conference agreements to the public is desirable and it is recommended that agreements between shipowners coming under section 113 o f the Act, be filed with the Clerk (Director) o f Shipping Agreements and, with exceptions approved by the Minister for Transport, be held open for inspection by the public and copies be

made available to the public under terms and conditions established by the Minister. It is also recommended, that the procedures forfiling agreements permit Conference members to request the Minister for Transport to allow certain provisions o f agreements to remain confidential. Information on the number and general type o f agreements allowed to

remain confidential should be reported by the Minister annually. (Paras 5.32, 5.33).

20. Permitting Conferences allows the role of competition to be suppressed in the interests of the rationalisation of liner services. Not all practices of shipowners can be prescribed to guarantee an efficient response to the complex and dynamic conditions of world markets. Some inefficiencies which may occur could be avoided by shipowners, party to Conference agreements retaining the right to independent rate action. It is

recommended that subject to exemptions granted by the Minister in respect o f Conferences with effective cargo, revenue, or profit pooling arrangements between members, Conference agreements be required to grant members lines the right to take independent rate action after giving due notice to parties to the Conference agreement.

(Para 5.34).

21. The Government must retain general powers in respect of Conference agreements. This reserve power should rest on the power of the Minister to disapprove

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a Conference agreement. It is recommended that the provisions in section 123 and 129 be retained but that “Minister” be substituted for “Governor-General” and ζ/ζαί references to the Tribunal be deleted. (Para 5.46).

22. It is not appropriate for the right to control entry into a closed conference to rest solely with existing member lines. A new member, even though rejected by existing lines, may be desirable for the trade for many reasons. It is recommended that where the entry o f a new line into a closed Conference is rejected by the Conference members but supported by the Australian Shippers’ ’ Council the Minister undertake an inquiry into the matter (Para 5.49).

23. It is recommended that shipowners providing liner services to or from Australia be required to maintain, and to make available to the Minister on request, appropriate records in Australia. (Para 5.51).

24. The requirement that conferences negotiate with the ASC establishes the minimum level of negotiations but should not preclude other negotiations being carried on, if in the commercial interests of shippers and the lines or Conference involved. However, it is desirable to provide for and to encourage conduct of negotiations through a national organisation, while ensuring that negotiations

separate from the ASC may be conducted when warranted. It is also desirable to provide the Minister with authority to prevent rate and service conditions being negotiated by major sectors of a trade to the detriment of shippers in general. The chance of errors or diseconomies is sufficiently great to warrant direct government

control of the results. ;

25. It is recommended that a requirement o f Conference members to negotiate with the designated shipper body be retained as set down in section 122 o f the Act but that a clause be added to establish that other negotiations may be conducted also, subject to the following conditions: Conference members must advise the Ministerfor Transport o f their

intention to negotiate with shippers separately from the designated shipper body where a significant proportion o f the outward cargo in a trade route would be effected: if the basis for separate negotiation is likely to have a material effect on the efficiency o f services offered, the Minister shall be so informed any resulting agreement shall not come into

effect until the Minister for Transport is satisfied that implementation o f the agreement is in the national interest. (Para 5.54).

26. Policing the operation of dual rate shipper/carrier contracts is not a matter which can be dealt with effectively by government regulation. To the extent that problems exist they would be dealt with best through the ASC (Para 5.67).

27. The responsibility of the Government for liner shipping requires it to monitor the general efficiency of liner services. It is recommended that Conference members and the designated shipper body be required to report separately and annually to the Minister for Transport on the state o f liner shipping capacity in the past year and their expectations for

the coming year. (Para 5.69).

28. Economic studies of liner shipping are important. The understanding gained from analyses of the relationships between the level of service, and variability of cargo volumes and costs is extremely valuable. While major studies are not warranted on all trade routes it is recommended that resources be devoted to a program o f computer based studies o f the economics o f liner services on major routes.

29. It is doubtful whether inward liner shipping Conferences are exempt from Part IV of the Act and it is recommended that this uncertainty be removed. (Para 5.73).

30. As a practical matter it seems neither necessary nor feasible for Australia to extend its influence significantly over the organisation and practices of inwards

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Conferences. It is recommended, however, that shipowners party to inwards Conference agreements be required to file those agreements with the Clerk (Director) o f Shipping Agreements and to keep records o f inward cargoes and schedules in Australia. It is also recommended that agreements filed should be held as public documents except for those parts granted a confidential status in the same way as outward agreements. (Para 5.80).

31. Some of the issues associated with the use of round-voyage data arise from a misunderstanding of its appropriate use. Comparisons of inward and outward conditions have no relevance for rate making beyond implications of capacity and total profitability. The requirement for round-voyage data is for sufficient data to be provided to enable the reasonableness of capacity to be assessed and for assurance to

be gained that overall profits are not excessive. It is reasonable to conclude that sufficient knowledge of the utilisation and profitability of Conference services can be maintained in Australia for the effective working of Australian shipping policy. (Paras 5.75 and 5.78).

32. In theory the efficiency of a service could be subject to precise measurement but in practice it is a matter of judgement. The application of the efficiency criterion to Conferences by Government is particularly difficult. Judgements must take into account variations in factors which have taken place in the past and may take place in

the future. The inability to apply explicit constraints on rates-of-return makes clear the importance of multi-faceted research into the operation of liner services. The difficulty of measuring efficiency increases the need for efforts to monitor efficiency when international cartels are permitted to affect business in Australia. A research program

should provide the rationale for intervention, recommended courses of action and a statement of expected consequences. (Paras 5.86 to 5.96).

33. No need is evident for establishment of an organisation for importers to negotiate freight rates collectively. However, the Minister for Transport should continue to advise and assist importers in their dealings with Conferences. (Para 5.81).

Non-Conference Services 34. In addition to recommedations in Chapter 4 which apply equally to shipowners operating as Conferences and those operating otherwise, amendments to Part X are recommended in relation to provision for non-conference services. (Para 6.1).

35. It is recommended that section 112 be appropriately amended to extend the exemption from Part IV, presently applicable only to Conference agreements, to individual shipowners acting in accordance with Division 4 o f Part X but making it clear that those individual shipowners are subject in all respects to Part Xprovisions. This is needed to remove confusion which presently exists as to whether individual shipowners are

subject to Part IV or to Part X. It is also recommended that section 129 be amended to delete any references to the Tribunal and to substitute “Minister” for “Governor- GeneraP’, to be consistent with other conclusions and recommendations. (Para 6.6). 36. In circumstances where a minor trade route is not being efficiently served by a carrier, unresponsive sanctions of Division 4 of Part X, it is appropriate for the

Government to consider the desirabiity of developing a competitive service by the Australian National Line. (Para 6.8).

37. Unusual circumstances exist in the Trans-Tasman trade. The most appropriate way for the ASC to deal with any difference of view with the operating company is to put its point of view to New Zealand authorities who exercise approval of freight rates in this trade. If there are matters which cannot be so resolved, consideration could be

given to discussions between relevant Australian and New Zealand officers. (Para 6.9).

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38. The issue of the influence of government subsidised lines on the viability of commercially based services is likely to become more and not less significant in the future. It is recommended that the Government have powers to intervene where the competition o f a line expanding significantly in a trade is not based on sound commercial practices. It is also recommended that legislation along the lines o f section 14 o f the

United Kingdom Merchant Shipping Act be adopted (Paras 6.15 to 6.18).

The Role of the ANL 39. ANL may assist more efficient overseas liner cargo shipping in four ways. These are, direct influence within a Conference or meeting special shipping needs not catered for by a Conference; the threat of ANL entry in a trade; through the continued encouragement of innovation; and the provision of government with a closer insight into costs and conditions of operating in overseas shipping. If national policy towards negiotation of terms and conditions of outwards liner cargo shipping favours a collective approach, it would be consistent for ANL to work for efficiency from within Conferences (Para 7.3 to 7.8).

40. It is consistent with conclusions of this Report that ANL should be seen as a part of the overall Government policy for securing efficient overseas liner cargo shipping and for legislation to continue to protect rights of participation of efficient Australian flag operators into overseas trades. (Para 7.10).

Shipper/Carrier Negotiations 41. Because of major disadvantages with the Australian Government attempting to regulate rate and service matters it is appropriate that primarily, reliance should continue to be placed on commercial negotiations to resolve matters between shippers and shipowners. There is little support for introduction of direct regulation over shipping rates and services. (Paras 8.12 to 8.14).

42. The expression of dissatisfaction with the negotiations of the ASC and statutory marketing authorities raises vital issues to be considered against the general case for collective action. Shippers face greater difficulties than shipowners in negotiating shipping arrangements collectively but their need for doing so is strong. Their difficulties emanate from the great diversity of conditions and requirements for the transport of heterogeneous commodities, from the varied needs of shippers in a range

of ports served by a Conference and from their dispersal geographically. (Para 8.21).

43. While a diversity of shippers’ positions does not prevent a centralised approach to negotiations, it does suggest that to compel all negotiations to always take place i through a central agency would not always be appropriate to the circumstances. The

degree of centralisation in negotiations can only be a matter of judgement. It may well change from time to time. A level of decentralisation may be appropriate either on the basis of commodity considerations or regional groupings. (Paras 8.32 to 8.33).

44. Concern may be voiced for the effects of non-collective negotiations on other shippers. Only consideration on a case by case basis can determine the effectiveness of J shippers in carrying out negotiations with Conference members. A rate concession i gained because of cost savings should always be beneficial. A concession to enable j expansion of traffic should result in improved utilisation. A concession necessary to

enable a shipper to continue to export is better for the shipowner, the shipper involved and other shippers than complete loss of the traffic. Similarly all shippers are better ; off if the Conference can meet the competition of alternative carriers for specific cargoes rather than lose the traffic. (Para 8.36). |

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45. The answer is unlikely to be clear cut to the question of how far negotiations of rates and service conditions can be accomplished through a collective organisation such as the ASC. Generally consideration would suggest that at times negotiations may be completed successfully within a single collective system. At other times more

flexibility or even decentralisation may be inevitable. (Para 8.41).

46. The organisation required of shippers for negotiations is influenced by the manner in which rate proposals are brought forward. Conference members characteristically propose across-the-board increases. The expectation of Conference members is that shippers faced with new conditions and market competition or having available alternative carriers, will approach Conference members for concessions. If many shippers present different cases the across-the-board approach to introducing

rate changes would not be achieving its object. A major conclusion to be drawn is that Conference members favour a centralised approach by shippers as all or most shippers are faced with the same or similar rate increases at the same time. (Paras 8.42 to 8.46).

47. The ASC acts both as an agency for monitoring the efficiency of Conference shipping and as the designated body for negotiating specific rate and service conditions. No clear cut division is possible and fusion of the roles may well have caused difficulties in the working of the ASC. (Para 8.50).

48. In freight rate negotiations the ASC has concerned itself with costs and revenues for the total service and has not, in general, sought to establish the equitability of the differentials between commodity rates. It is suggested that it should be more concerned with the development of negotiating strategies based on market and carrier

competition. (Para 8.58).

49. Shipper/carrier negotiations require the performance of considerable research. The ASC has recognised the need in relation to revenues and costs. Overall no significant criticism of the ASC seems warranted in its work to monitor Conference costs. (Paras 8.51 to 8.56).

50. The uniform approach to adjustments to Conference rate proposals not only makes preparation of documented market and carrier competitive arguments difficult but encourages, and the ASC constitution provides for, individual members to take their special cases to Conferences separately. At least some ASC members recognise

the limitations and the need to try to develop negotiating positions which take greater account of market and carrier competitive arguments. Shippers with special competitive conditions have had to develop their arguments individually outside the ASC and this has weakened the ASC’s potential for collective bargaining. (Paras 8.67

to 8.68).

51. Some regional considerations have been dealt with inadequately in the past. However conditions of membership have not been agreed upon which will allow representative State shipper bodies to become members of the ASC. Their admission and related amendments to the ASC constitution are endorsed as the most effective

way available of giving a better voice to regional concerns within the ASC and of providing better understanding between the ASC and individual shippers. (Para 8.70).

52. In spite of the conclusion that the ASC has been effective to some extent, some shippers and commodity marketing authorities are dissatisfied with the working of the ASC. This is an indication that all is not well. The working of the ASC has not come up to expectation but this is in part because the expectations about the desirable level of

centralisation of negotiations and uniformity of results across commodities and regions have been wrong. It is not surprising that some negotiations would be held outside the ASC as long as the ASC adhered to a uniform approach. When separate negotiations

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are conducted, it is not very productive to compare the results of the separate bodies with the results achieved by the ASC. Separate negotiations may merely be an appropriate recognition of the uniqueness of shipper requirements and/or shipping conditions. What is important is to ensure that separate negotiations are conducted for reasons of more effective negotiation and not because of personality conflicts or ambitions of officers of different organisations. (Paras 8.77 to 8.79).

53. The high inflation of the 1970’s and the repeatedly changing conditions in commodity markets have given rise to dissatisfaction among shippers. General recognition of the importance of competitive conditions as they affect commodities and regions, provides the basis on which re-organisation of the ASC can proceed to

enable better use of collective negotiation in the future. (Para 8.82).

54. Research carried out in the preparation of negotiating positions may go some way to countering criticisms by shipowners that only Conferences provide detailed information. However, there is no more prospect of, and less justification for, shippers presenting data showing the explicit profitability of their businesses than of

Conferences providing information on the profitability of their services on a round- voyage basis. (Para 8.86).

55. Shipper bodies with many diversified members must give more attention to the education of their members concerning transport to overseas markets and must encourage them to draw attention to failures of shipowners to deal reasonably with their cases. (Para 8.88).

56. Commercial negotiations must come to finality but in the end it is shipowners who must have the responsibility of setting freight rates. In that context neither special provisions for arbitration nor conciliation of differences between shippers and shipowners at the end of negotiations is recommended. (Para 8.90).

57. The conduct of negotiations on the basis of efficiency of Conference practices and the competitive forces to which they must respond is consistent with economic principles, with the policy of Government to rely on commercial forces and with the new views of the ASC. (Para 8.91).

Financing and Long Term Development of the ASC 58. Changes in the organisation and attitudes in the ASC are expected to enable it to utilise in negotiations the competitive forces affecting rates. This approach is practical whereas the establishment of a cargo authority responsible for the routeing of Australian exports and, therefore, possessing the negotiating powers itself, is obviously

impractical. It is not considered necessary, desirable or practical to provide the ASC with a power to prescribe maximum rates. (Paras 9.19 to 9.20).

59. It is recommended that amendments to Part X o f the Trade Practices Act include an appropriate provision, consistent with Commonwealth legal policy, to indemnify the Australian Shippers' Council, its members or employees from claims against them by persons who consider that they have been disadvantaged as a result o f an action by the

Council. (Para 9.24).

60. Better results from ASC negotiations may have been achievable in a more harmonious environment but to have seen this as a major source of concern has not been reasonable. A number of weaknesses in the functioning of the ASC have been discussed but it should be added that incorrect and unreasonable expectations for the achievement of the ASC have made the effectiveness of the organisation look worse than it is. (Para 9.30).

xviii

61. It is recommended that subject to the availability o f adequate finance the organisation o f the Secretariat o f the Australian Shippers’ Council be geared to give adequate support to the conduct o f negotiations taking into account the negotiating considerations dealt with in Chapter 8 and that the Australian Shippers’ Council be

encouraged to consider its future management accordingly. (Para 9.42).

62. Provided that the ASC can be relied upon to function reasonably effectively in relation to negotiation of freight rates, encouragement of efficiency of liner shipping and negotiation downwards of “cartel” profit levels, few government powers and little government intervention should be necessary. The commercial approach has been

reasonably successful to date and proposals being considered by the ASC should enable commercial resolution of problems. However, if there were lack of confidence that the ASC could more effectively, than in the past, pursue questions of differential freight rates, consideration would have to be given to alternatives. If the principal task

being performed is on behalf of government, and government is funding the shipper body, a greater degree of Ministerial control could be considered desirable. Subject to appropriate legislation being introduced the Government could appoint the President of the ASC; it might appoint an Executive Director and/or provide the ASC

secretariat. Two other alternatives are, establishment of the designated shipper body as a statutory body with membership appointed by the Minister; or establishment of a Shipping Tribunal to investigate and make recommendations upon shipping freight rates and services. The second alternative of a shipping tribunal is the less attractive. Neither alternative approach could provide effectively for collective bargaining of

differential freight rate adjustments. It is recommended that the Australian Shippers’ Council be given the opportunity to develop its own solutions. (Paras 9.46 to 9.51).

63. Future funding of the ASC might be assessed on the basis of past expenditures and these have been moderate in relation to the task performed. If adequate research is to be pursued in the future and suitable research staff and a professional negotiator are to be retained, expenditure must increase significantly. It must be recognised that there

are limiting factors which will prevent the ASC from being entirely self-financing. It is recommended that the most appropriate way to provide for the Australian Shippers Council s future requirements for funding is to introduce legislation to provide for a levy on liner cargo exports coupled with a direct Government grant and a small membership

subscription. (Paras 9.54, 9.59, 9.62 and 9.73).

64. The present practice of tabling the ASC’s Annual Report should be continued and the Annual Report should contain appropriate financial statements. (Para 9.74).

65. It is recommended that if the principle o f a levy on liner cargo exports is adopted, more detailed estimates o f future requirements be developed with the Australian Shippers’ Councils assistance and that the appropriate amount o f the levy be determined accordingly.

Ministerial Powers and Departmental Functions 66. Recommendations regarding the extensions of control over Conference agreements and operations and other non-conference operations call for a number of separate extensions of the power of the Minister. These powers include the power of

disapproval of a Conference agreement; entry of a new line supported by the ASC into a Conference; exemption of Conference agreements from public availability; the requirement that a Conference agreement provide for independent rate action; approval before any agreement resulting from negotiations separate from the ASC can be brought into effect; suspension of a loyalty contract in whole or in part. Power is also

xix

needed for the Minister to investigate the apparent use of “fighting ships” and to order the operator to desist subject to prohibition of loading of cargo by the vessel. (Paras 10.4 to 10.11).

67. Appropriate provision should be made through regulation making powers to specify appropriate information to be kept in Australia and to be supplied to the Minister. (Para 10.12).

68. Adoption of legislation similar to U.K. legislation in relation to discriminatory actions of foreign government subsidised shipping would give the Minister powers to seek information and make appropriate orders. (Para 10.13).

69. Adoption of the proposal for a levy to fund the ASC would require the Minister’s approval of the amount of the levy and drawings from the fund. (Para 10.14).

70. It is recommended that sections 122 and 128 be amended to require information provided to the designated shipper body to be provided also to the officer designated by the Minister or his deputy present at negotiations. (Para 10.17).

71. It is recommended that consideration be given to development o f a shipping investigation unit along the lines suggested by the UNCTAD Secretariat, within the Department o f Transport, to strengthen and supplement the current level o f investigation. (Para 10.21).

72. It is recommended that Part X be amended so as to allow appointments to an Office o f Director o f Shipping Agreements, and ofpersons temporarily filling the position, in the normal way. (Para 10.24). ;

73. It is recommended that the secrecy provisions o f Part X be repealed or that they be modified to permit access by Departmental officers to the records o f the Clerk (Director) o f Shipping Agreements. (Para 10.25).

74. It is recommended that provision o f information to a party who has ceased to be a party to a Conference agreement be limited to information which would have been available during the period that he was a party to the agreement. (Para 10.26).

75. It is recommended that provision be made for an appropriate monetary penalty to enforce notification o f agencies and addresses, and changes thereto, fo r the purpose o f serving notices under the Act. (Para 10.27).

76. It is recommended that there be provision for regular advice o f details offreight rate variations to the Department o f Transport. (Para 10.28).

77. It is recommended that provisions be made to bridge the period from when undertakings cease to be effective until a new undertaking can be obtained from a shipowner; that provision be made for delegation o f Ministerial power to allow an extension o f time for the provision o f undertakings; and that consideration be given to

requiring the provision o f undertakings to the Department on behalf o f the Minister. (Para 10.29).

Disputes and Penalties 78. There is need to make specific provision in the nature of fines, for specified offences. (Para 11.29).

79. Parties to a disapproved Conference agreement should be bound, as at present, to refrain from anti-competitive behaviour and declared shipowners should continue to be subject to the same restraint. (Para 11.33).

i : :

80. Appropriate penalties by way of a fine should be provided for failure to file copies of agreements; failure to maintain agents and addresses for service of notices; failure to

maintain appropriate information in Australia; for the use of fighting ships; failure to provide undertakings; failure to comply with those undertakings, and other matters covered by Chapter 11. (Paras 11.36 to 11.49).

81. Implementation of the recommendations of the Report would require, in addition to a system of fines, power of the Minister to disapprove a Conference agreement and “declaration” of shipowners. In addition the Minister should be empowered to deny the right of “fighting ships” entry into Australian ports for trading

purposes. (Paras 11.36 to 11.47).

82. Repeal of sections 132 to 139 would be required if the recommendations to adopt alternatives to Tribunal inquiries is adopted. (Para 11.48).

83. Provision for civil remedies for damages should be retained in essence but amended to refer to acts in contravention of the provisions of Part X. (Para 11.50).

International Policies and Practices 84. Exchanges between Australia and certain OECD countries seem to place Australia under a possible obligation to give them the opportunity to discuss proposed changes to shipping legislation. The recommendations contained in this Report,

however, do not lead to conflict with international obligations. (Para 12.96).

85. Provisions of the UN Convention for a code of Conduct for Liner Conferences differ in significant respects from the recommendations of this Report, coupled with existing provisions of Part X of the Trade Practices Act. There are questions which can be resolved only be detailed joint study by the Department of Transport and the

Attorney-General’s Department. (Para 12.97).

xxi

CHAPTER 1

INTRODUCTION

1.1 On 17 March 1977, the Minister for Transport, the Hon. P. J. Nixon, M.P., announced the establishment of a Department of Transport study group to review Australia’s Overseas Cargo Shipping Legislation. The review was to cover the operation of Part X of the Trade Practices Act, possible future legislative arrangements

and the role and long term financing of the Australian Shippers’ Council (ASC). International developments in the field of shipping policy were to be taken into account. The Minister’s press statement is at Appendix I.

1.2 This report has been prepared accordingly by a Department of Transport study group with the assistance of Professor Trevor D. Heaver acting as advisor to the Department. Professor Heaver is currently Professor of Transportation and Chairman

of the Division of Transportation, in the Faculty of Commerce, University of British Cc’umbia, Canada. He is the author of many publications on transport including works on shipping. He has acted also as consultant to Provincial and Federal Governments in Canada, to shippers and to carriers including the Canadian National

and Canadian Pacific Railways.

1.3 It is more than a decade since the provisions of Part X of the Trade Practices Act were formulated. In that time there have been significant developments in the technology of shipping and in the organisation of shipping companies. In addition there has been a considerable shift in world-wide attitudes to government intervention

in shipping matters. It would be surprising if, in relation to the complexities and challenges of ocean shipping and its relationships with governments and shippers, there were not some desirable improvements to legislation, administrative arrange­ ments, conduct of negotiations, and related activities.

1.4 The Australian Shippers’ Council became the single designated shipper body under Part X following amendment of the Trade Practices Act in 1972. Its operation over almost five years suggested the desirability of a review of the ASC’s role in relation

to the requirements of Part X and the fulfilment of Government policy. This was made more apparent by the fact that unusual stresses and strains have accompanied a period of unprecedented inflation and considerable fluctuation in volumes and market prices of liner shipping cargoes. Inflation also had brought to light a problem of adequate and

continuing finance for the ASC.

1.5 Early in the conduct of this study it became clear that adequate consideration could not be given to all the possible subject matters which might be suggested in the Minister’s announcement. The study has therefore been confined to consideration of

those matters insofar as they are relevant to liner cargo shipping. Among the matters which could not be studied are bulk shipping and tanker shipping; multimodal transport organisation, documentation, and liabilities; the draft Convention on the Carriage of Goods by Sea; and land based cost areas in terminals and depots,

stevedoring and transport to ship’s side. Some of these matters have been the subject of recent public inquiry, are the subject of international discussions, or have been referred to the Bureau of Transport Economics for study; e.g. centralisation of liner cargo.

1.6 In the preparation of this Report, consideration has been given to views expressed by representatives of shippers and shipowners. Although no formal procedures were adopted for hearings, discussions took place with a wide cross-section

of interested parties. These included representatives of member lines of shipping

1

Conferences, the Australian National Line, the Australian Chamber of Shipping, the Australian Shippers’ Council, the Western Australian Shippers’ Advisory Council and various statutory marketing authorities. A number of reports and other written references were also considered.

1.7 Written comments from the Australian Chamber of Shipping and individual shipping Conferences generally expressed satisfaction with existing legislation and a preference for amendment of Part X, rather than introduction of separate legislation attempting detailed coverage of all possible aspects of overseas shipping. Advantages were seen in having the ASC with which to negotiate and to discuss freight rates and

other aspects of liner shipping. A common concern was to see the ASC negotiating on behalf of all exporters with every exporter bound by whatever agreement is reached. There was general dissatisfaction with the present arrangements whereby individual groups of shippers, acting in accordance with the ASC’s constitution, seek to negotiate

separately from the regular negotiations between the ASC and shipping lines. Conferences were able to make broad observations only, because of the scope of the study. There was a general desire on their part to be given an early opportunity to make a detailed study and comment on any proposed legislation prior to drafting.

1.8 The ASC already had studies under way regarding its future development and funding. These matters are taken up in the Report.

1.9 Chapters 2 to 4 of the Report provide a background against which various issues might be considered. Chapter 2 describes Australian liner shipping services, the task which they perform, and presents background on the ASC. Chapter 3 considers th e; benefits and disadvantages of Conferences, their relationship with shippers, the concept of “efficiency”, the case for differential freight rates, essential features of

freight rate determination, the role of commercial negotiations, and the purpose of Government intervention. Chapter 4 reviews the present legislation, its origins and objectives and the way it has operated in practice.

1.10 Against this background and the recommended definition of an “efficient liner service", Chapters 5 to 9 consider the main issues which emerge in the study. Chapter 5 reviews the control of Conference agreements and practices, and recommends additional measures for control of Conferences in the interests of greater efficiency. It also discusses the position of inward liner shipping Conferences, government powers, and research needs. Chapters 6 and 7 respectively deal briefly with non-conference shipping and the role of the ANL.

1.11 Chapter 8 considers the important question of shipper/carrier negotiation of rates and service conditions. The purpose and effectiveness of collective negotiation are reviewed. Conclusions are reached on the basis of negotiations, the distinction between negotiation of shipper rates and the “regulatory” purpose of seeking greater efficiency. Regional needs are taken into account. Chapter 9 develops consideration of these questions in terms of the organisation, research and funding of the ASC.

1.12 Further questions of Ministerial powers and Departmental functions which follow on from those earlier chapters are discussed in Chapter 10. Questions related to settlement of disputes and a revised approach to the question of penalties are raised in Chapter 11.

1.13 Conclusions and recommendations having been reached in regard to Australia’s needs for efficient outward liner cargo shipping, the Report in Chapter 12 considers international policies and practices. In particular the implications of those conclusions and recommendations for consideration of accession to and implementation of the UN Convention on a Code of Conduct for Liner Conferences are discussed in detail.

2

1.14 Throughout the study it has been borne in mind that it may be desired to seek the repeal of Part X and the enactment of equivalent provisions in an Overseas Shipping Act. However, as a matter of convenience, this Report has been phrased in terms of deficiencies of, and suggested changes to, Part X. In every instance it is believed that the

suggested provisions could be adopted equally in the context of the separate Act.

1.15 Throughout the Report, the ASC has been regarded as synonymous with the “designated shipper body” and, where appropriate, references to the ASC should be so interpreted.

3

CHAPTER 2

THE LINER CARGO SHIPPING INDUSTRY

2.1 In reviewing Australia’s overseas cargo shipping legislation, its operation and the role and long term financing of the ASC, it is first necessary to describe the type and extent of shipping with which this Report is concerned. This chapter also contains explanatory paragraphs regarding the ASC and other shippers’ organisations.

2.2 Different sources describe different types of overseas cargo shipping in different ways but for the purpose of this Report the distinction is made only between liner, tramp, bulk and tanker shipping. Liner shipping is characterised by scheduled services from named ports to named ports at determined rates of freight, lifting within reasonable limits, all types and quantities of cargoes offered. For practical considerations liner vessels can be considered as being confined mainly to lifting general cargo. In the outwards trades from Australia this includes both low-value/low- volume and higher-value but lower-volume cargoes. In the inwards liner trades manufactures predominate and cargo mainly comprises high-value/low-volume goods.

2.3 Liner shipping is readily distinguishable from tankers which lift liquid cargoes only, and from bulk shipping which in general serves the carriage of high-volume/low- value homogeneous cargoes in large quantities between single ports. Liners are not so easily distinguishable from tramp vessels which lift general cargoes wherever offering. Tramps are not now common but can generally be distinguished by the irregular nature of their services.

2.4 While there is nothing in Part X of the Trade Practices Act to limit its operation to liner cargo shipping, it is clear from the Second Reading Speech on introduction of the Trade Practices Bill 1966(1) that the concern of the Government was to provide for the regulation and control of liner shipping and liner shipping Conferences in particular. Consideration of the operation of Part X of the Act is therefore directed primarily

towards the operations of liner services.

Liner conferences 2.5 It is usual when two or more liner shipowners operate in a trade for them to associate as a shipping Conference. The resulting Conference agreements normally include provisions for sharing the trade, such provision sometimes being coupled with rationalisation of sailing schedules and/or pooling arrangements covering part or most of the cargo offering. The feature common to all Conference arrangements, but not necessarily to every Conference agreement, is provision for the fixing of common freight rates to be charged for most categories of cargo carried.

2.6 Liner shipping services in the Australian trades are dominated by such Conferences. If considered in terms of agreements and arrangements, written and oral, there are eighteen basic Conference agreements and arrangements filed with the Clerk of Shipping Agreements. There are however also a number of non-conference services operating in trades served by Conferences. Lists of both the Conferences and individual lines concerned are shown in Appendix III.

2.7 There are two basic types of Conference operating in the Australian trades. The biggest and strongest of these are closed Conferences operating with some degree of pooling of revenue or cargo and with a large degree of self regulation of the amount of 1 1 1

111 Speech by the Hon B. M. Snedden, “Parliamentary Debates” 20 April 1966.

4

capacity provided. They provide a high degree of modernisation and planning for the trade routes served. The term ‘closed’ Conference indicates that membership is closed to new entrants without the agreement of existing members. The other basic type of Conference, in the Australian trades is, the ‘open’ Conference, is found only in trades

between Australia and North America. These are open to new entrants in accordance with the law of the USA which compels the admission of any applicant subject to minimum specified criteria.111

2.8 A few of the Conferences serving Australia’s trades are very small and, in practice, some areas served by those Conferences may receive calls by only one shipping line or there may be such loose arrangements that the operations of a Conference may be scarcely distinguishable from those of a non-conference service.

2.9 Non-conference services may operate either in competition with Conferences, or, more usually, may serve minor trade routes in respect of which there are no Conference agreements. Whether or not competing with a Conference, those services frequently meet specific shipper requirements. There is some fluctuation in services and operators

in these minor trades and in the presence of competition.

Developments in liner Shipping 2.10 The current provisions of Part X of the Trade Practices Act, with the exception of provision for one designated shipper body to cover all trades, were drafted in the mid-1960’s. Since that time the organisation and technology employed in Australia’s liner shipping services have changed significantly.

2.11 By the mid-1960’s these changes were becoming evident, with larger and more sophisticated vessels being placed in the Australian trades. Cargo handling techniques were still conventional lift on-lift off (lo-lo), but vessels with larger hatches and Scandia type vessels with more than one hatch placed across the main holds and sideloading ports were being introduced in the European trades. 2.12 In 1969 the first fully containerised ships commenced services to Australia from

Europe, the East Coast of North America and Japan. In 1971 the first LASH vessels were introduced on the West Coast of North America (WCNA) route. Roll-on/roll-off (ro-ro) carriers were introduced in the New Zealand trade in 1968, on the Japan route in 1969 and to Europe and West Coast North America in 1971.

2.13 In other trades, change has been more gradual with conventional vessels adapting to carrying containers, initially on deck and then in specially converted holds. The change-over is still in progress with the Persian Gulf/Arabian States trades, South East Asia, Papua New Guinea, the Pacific Islands and Central America all becoming

containerised to differing degrees in the past year. Trade to South and East Africa, India and South America continues to be served by vessels employing conventional or unit load techniques.

2.14 Shipping lines themselves have been undergoing changes in organisation concurrently with the introduction of new shipping technology and in a changing general climate of attitudes of Governments to regulation of shipping. The large investment needed for financing the new sophisticated vessels was beyond the

capability of many lines who have as a result grouped themselves into consortia and, by contributing to a common pool of resources, gained entitlement to space on each other’s vessels. This method of rationalisation has enabled shippers to retain the benefits of frequent and efficient services and at the same time has enabled shipping

lines to remain competitive.

Code of Federal Regulations: 46—Shipping. U.S. Government Printing Office 1974. Part 523.

5

2.15 In general, non-conference lines continue to provide conventional services, possibly with some capacity to handle containers. Several operators, however, are now able to provide full container services particularly to South-East and East Asia and from West Coast North America.

North American trades 2.16 In 1966 about forty-five conventional vessels of approximately 12,000 dwt were employed in the North American trades. Those vessels, and particularly the ones serving the East Coast, had a large reefer capacity. Today about thirty vessels of various types service the same trades. LASH vessels of approximately 30,000 dwt and ro-ro vessels of 20,000 dwt are complemented by smaller conventional and part and full-container vessels on the trade route to the West Coast. On the East Coast, full and semi-container ships of up to 26,000 dwt provide the basic service while fully refrigerated conventional vessels continue to provide additional services.

2.17 Consortium groupings do not dominate in these trades. However, while in 1966 five separate lines offered conference services to the West Coast and seven to the East Coast, the Associated Container Transportation (Australia) “ACT(A)” group has since joined with the Australian National Line (ANL) to provide the PACE service to the East Coast, and the PAD Line serving the West Coast, has Swedish, British and Australian members.

East Asian trades 2.18 In the mid-1960’s there were about seven lines, having forty vessels of about 8,000 dwt, serving the trade to East Asia and Japan. Consortia are now dominant in these trades with the Anglo-Dutch consortium Asia Australia Express Ltd (AAE) trading to East Asia and the Anglo-Swedish grouping in the Australia Japan Container Line (AJCL) trading to Japan. An integrated service by ANL, AAE and Orient Overseas Container Line (OOCL) now provides a seven vessel ro-ro and full container service to East Asia, while ANL and major Japanese lines provide a four vessel ro-ro service to Japan, the Eastern Searoad Service (ESS). The same Japanese lines with the exception of the ‘K ’ line participate with AJCL in providing a full container service.

2.19 Conventional and semi-container vessels continue to provide a service from Western Australia to Japan, but a new additional service, ANRO, has commenced operations from main Australian ports including Fremantle to S.E. Asia, using combination ro-ro/lo-lo vessels.

UK/Europe trade 2.20 In the mid-1960’s there were twenty-one individual shipping companies in the Australia/UK-Continent Shipping Conference, but by 1977 that number had been reduced to nine operators offering regular services. In 1966 there were about ninety conventional vessels of around 10,000 dwt in the trade, mostly having dry and reefer capacity; today there are about forty vessels of up to 35,000 dwt, offering mainly full container and ro-ro services, and some supplementary conventional vessels.

Concurrently with these changes in vessel type the principal regular Australian ports of call have been reduced from six to three and voyage times from a typical 160 days to an average of eighty-one days.

2.21 Mergers between national lines and rationalisation of sailing have resulted in consortia such as Associated Container Transportation (Aust) Pty Ltd (ACTA), Overseas Containers Ltd (OCL), and Scandinavian Australian Carriers (Scan

6

Austral). In 1966 five continental lines agreed to provide an integrated service to Australia, to be known as Seabridge and together with OCL now form the Australia New Zealand Europe Container Service. ANL in association with ACTA provides an

independent service.

2.22 The effect of these technological and organisational changes has been both to limit the degree of competition within Conferences and to facilitate rationalisation of services, through reducing the amount of time vessels spend in port, voyage times and the total number of vessels required. The process of rationalisation has been further

enhanced through slot charters between Conference members. The traditional problem of over-tonnaging may well be replaced in some trades in the future by one of occasional under-tonnaging resulting from the high capital costs of these new ships and ancillary facilities.

Trades served 2.23 The latest available statistics enabling comparison of quantities and values of outward overseas cargo movements are for the financial year 1974/75. In that year liner vessels carried approximately 6 million tonnes of outward cargo valued at $3400m.

These figures represent only 3.7% of the quantity of outward shipping cargo in that year but 40.7% of the total value. By comparison tramps and bulkships carried 92.7% by weight or 55.5% by value. Outwards overseas cargo in 1974/75 by type of ship is itemised in Table 1.

TABLE 1

OUTWARD OVERSEAS CARGO 1974/75

Gross weight Value

Ό00 Tonnes

Per cent of Total

$'000 Per cent

Of

Total

Liners 6,228 3.7 3,391,992 40.7

Tramps/bulkships 156,971 92.7 4,624,010 55.5

Tankers 6,138 3.6 313,958 3.8

All vessels 169,337 100 8,329,890 100

Source: Australian Bureau of Statistics—Outwards Overseas Cargo 1974/75 (Reference No. 14.16).

2.24 The significance to Australia of the value of liner cargo exports diminished only slightly between 1972/73 and 1974/75 from $3770m to $3400m. In quantity terms tonnages also varied only slightly from 6.7 million tonnes to 6.2 million tonnes. However, in percentage terms in relation to total outwards shipping cargo, outwards

liner cargo diminished from 5% of total volume and 63.1% of value to 3.7% of volume and 40.7% of value. Further details are contained in Appendix IV Tables 1 and 2.

2.25 A reverse trend is evident over the period 1971/72 to 1975/76 in inwards liner cargo. Linei cargo landed from overseas amounted to about two million tonnes plus five million cubic metres (m3) in 1972/73. It increased to 2.4 million tonnes and six million m3 in 1973/74 and has since declined to 2.4 million tonnes and 5.5 million m3 in

1975/76. Details are shown in Table 2.

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TABLE 2

SHIPPING CARGO LANDED IN AUSTRALIA FROM OVERSEAS

1972/73 1973/74 1974/75 1975/76

’000 tonnes

Ό00 m3

wo tonnes

’000 m3

Ό00 tonnes

’000 m3

’000 tonnes

’000 m3

Liners Other

1,972 5,090 2,394 6,012 2,229 5,679 2,407 5,459

Vessels 18,195 994 20,661 1,629 19,663 2,350 17,311 1,71V

Total 20,167 6,084 23,055 7,641 21,893 8,029 19,718 7,170

Source: Australian Bureau of Statistics—Overseas and Coastal Shipping 1975/76 (Reference No. 14.10).to

2.26 There is some imbalance in weight/volume terms between inwards and outwards liner cargo, the imbalance in favour of imports in 1974/75 being approximately 11%. This imbalance has ranged in recent years from about .16% in favour of exports in 1972/73 to 13% in favour of imports in 1973/74. It varies from trade to trade but recently the imbalance in favour of imports has existed in the North American, European, East Asian and New Zealand trades which together represented 88% of liner imports and 67% of liner exports in 1975/76. Further details together with data indicating downward trends in liner cargo movements in certain trades and upward trends in others are shown in Appendix IV Tables 3 and 4.

2.27 There are variations in the imbalance betwen imports and exports when looked at on a State basis. Liner imports exceed liner exports in New South Wales and Victoria but liner exports far exceed liner imports in other States, the ratio being almost 2:1 in Western Australia. Further figures are given in Appendix IV Tables 5 and 6 and figures

indicating the trend in liner cargo movements on a State basis in Appendix IV Tables 7 and 8.

2.28 The significance of the different quantities of individual commodities carried in each trade, e.g. meat to ECNA and wool to Europe are demonstrated in Appendix IV Table 9. These variations are of importance because of the resulting differences in shipping requirements. They are also of importance because of the influence which any one particular commodity may be able to exert over freight rates and shipping services in any particular trade. There is also the possibility of a commodity with a dominant interest in one trade being able to use its importance in that trade to influence shipowners who operate in more than one trade to give that commodity favourable treatment, even where only small quantities are shipped.

2.29 The imbalance of inwards and outwards liner cargo movements in Australia’s overseas trades is characteristic of two-way general cargo transportation between most countries, and especially between those producing rural exports and those producing manufactured exports, which have differing values per unit volume. Its significance lies, in terms of shipping efficiency, in the difficulty of minimising the amount of vacant space on ships in any one particular direction and also the difficulty of overcoming the same problem, for various reasons, through triangular type shipping movements.

111 Statistics contained in ABS publications 14.16—Outwards Overseas Cargo and 14.10—Overseas and Coastal Shipping cannot be directly compared. The former are derived from information contained in export entries submitted by exporters or their agents while the latter are compiled from returns submitted by shipping companies and their representatives. It should also be noted that in ABS 14.10, cargo is recorded either in terms of units of weight or measurement, depending on the basis on which freight is charged. The aggregates for weight and measurement cannot be added to a figure for total cargo because they are unlike quantities and comparisons of total cargo between ports, trade routes or periods of time could be affected by variation in the cargo mix and on the basis on which freight is charged.

8

2.30 Terms of shipment are also of significance to Australia’s trade as f.o.b. sales place the contractual power in negotiating freight rates and services in the hands of overseas buyers. Those buyers’ concern with rates is likely to be less than that of producers and exporter interests in Australia who may have to bear part or all of the

cost of inefficiencies in shipping passed on to them by the overseas buyer. Statistics, however, are not currently available to quantify the terms of shipment and their effect on the various trades. Indeed the analysis of cargo movements generally is constrained by the limited availability of statistics concerning shipping.

Freight rate practices 2.31 Some shipping Conferences carry very large numbers of different categories of goods and employ a corresponding price class structure in their freight schedules. In the case of the Australia to Europe Conference, forty-four price classes are listed for

container vessels and a further forty-four for conventional vessels. Other Conferences structure their rates on an individual basis with the number of rates being quite large. The resuh is a considerable degree of price differentiation. This is illustrated in Table 3

which deals only with general contract goods carried by three outwards Conferences.

TABLE 3

CONFERENCE FREIGHT RATES

Conference Price

Classes

Separate prices

Number of commodities itemised

Commodities per price/ price class

Ratio top/bottom prices

Australia to Europe 44 979 22.3 7.2:1

Australia-Northbound 76 225 3.0 6.5:1

Australia- Singapore/ West Malaysia 169 541 3.2 5.5:1

2.32 If all the commodities carried by Conferences are considered, an even wider differentiation can be seen, as there may be separate contract categories for such items as canned and dried fruit, wool, close-weight cargo, and refrigerated cargoes. There may also be non-contract prices for such items as cereals, bulk liquids, timber, livestock

and mail. To further complicate the rate schedules distinction is also drawn between rates set on a weight and a volume basis, it being usual for the rate applied to a particular item to be that which is most advantageous to the shipowner. However a cargo, e.g. wool, may occupy a large volume but may have succeeded in obtaining a

freight rate on a weight basis. This rate may appear to be very high on a per tonne basis but may in fact represent a relatively low freight rate considering the space occupied. Exceptions to general rate increases and concessional rates may be given where trade conditions dictate and are usually granted for stated periods such as ninety days or one

year. Conferences generally impose rate increases annually or more frequently on an across-the-board percentage basis.

2.33 In addition to scheduled rates shipowners may impose specific charges known as “ additionals” . These are not uniform across schedules or between Conferences and in some cases charges are incorporated in basic freight rates. Examples are charges for servicing out-ports; for trans-shipment; for port congestion; for handling long lengths,

heavy lifts, or valuable cargo; for tank cleaning; for livestock and for other special cargoes; and charges may be levied for less than full container loads. On the other hand

9

allowances may be made for items such as the filling of containers by shippers. Such charges and credits are too extensive and vary too much between Conferences to enable an accurate listing.

2.34 In contracts with shippers, commonly known as shipper rate agreements, Conferences may specify a contract rate which is less than the non-contract rate. The difference is likely to be around 10%. These so called “dual rate contracts” bind exporter signatories to the use of Conference vessels. There is little evidence, but a

widely held view, that the contract rate is not always limited to signatories of dual rate contracts. This view is backed-up by the belief that exporters of large quantities of cargo are able to secure the contract rate without the binding commitment to use only Conference vessels.

2.35 A number of Conferences permit minimum quantities of specified cargoes to be shipped at “open rates” . These rates are negotiable between the shipowner and the shipper, the only effective restriction b e in g a requirement that the s h i p p in g lin e advise the Conference when the agreement is made. They generally apply to cargoes which can be shipped on bulk ships which have more widely fluctuating rates than liner shipping.

2.36 Movements in freight rates for four of the major conferences operating out of Australia are shown in Appendix V.

2.37 The significance of these rate practices is that different cargo shippers pay according to what the traffic will bear. If each shipper paid only according to the space he used and in the absence of an intermediary such as a freight forwarder imposing differential charges, it is probable that exports would be lost and that some shippers would leave the export business. Because of the differentials between freight charges paid by shippers, across-the-board freight rate increases have an impact which while

being proportional to existing charges, imposes a range of actual monetary increases. If increases were to be imposed as a flat monetary rate there would be an opposite effect which would represent an unduly high proportional increase for some exporters. Conferences do, however, negotiate individual rates in some circumstances,, which

tends to mitigate the effects of the across-the-board increases.

Austalian flag liner shipping 2.38 Following the sale of the “James Cook” by the Flinders Shipping Company to ANL in 1975, ANL is now the sole Australian flag operator in Australia’s overseas liner trades. The Line operates two cellular container ships in the UK/Europe trade;

one cellular container ship in the East Coast North America trade; two hybrid vehicle deck/cellular container vessels in the Japan trade; and two vehicle deck ships in the East Asia trade. ANL is also having a vehicle deck ship built to operate in the Singapore-West Malaysian trade. All of these vessels operate within Conferences serving the areas named.

Australian interests 2.39 Obviously the involvement of the Australian National Line in overseas liner trades gives Australia an interest in liner shipping. However, the number of vessels operated by ANL is very small compared with the total number of ships in overseas trades. In 1974/75 Australian flag vessels lifted only 4.9% of cargoes carried in all of Australia’s overseas liner trades. They lifted 6.2% of liner import cargoes and 3.3% of liner export cargoes.

2.40 Australia’s principal interests are therefore those of a shipper nation rather than of a maritime nation. This is an important consideration in the attitude which should

10

be taken towards the operation of all foreign shipping lines serving Australia’s trades. It is consistent with the shipper interest that the most efficient and economic liner shipping services be encouraged and that an element of competition consistent with

efficient operations be preserved.

Shippers’ Organisations 2.41 Shippers’ councils or equivalent organisations exist with varying degrees of activity in more than fifty countries. Some twenty of these are in developed market- economy countries and the remainder in developing countries or territories. Of those

councils about forty could be classed as active organisations/11

2.42 An indication of the importance attaching to Shippers’ councils is given by shipping statistics published by UNCTAD* (2) for 1973 which show that liner cargo and minor bulk commodities (which could not be statistically separated) loaded by countries with active shippers’ councils or equivalent organisations comprised 67.3%

of the total liner loadings, 53.8% being developed market-economy countries, including Australia. Those totals exclude loadings by the socialist countries and countries with alternative monitoring arrangements (USA, Brazil and Sri Lanka). Countries with no overall monitoring arrangements loaded only 11.9% of the total.

2.43 The structures of shippers’ organisations vary considerably. The majority, about thirty five, consist of shippers’ councils formed within the private sector, although frequently having State producer or marketing boards as members— Australia falls in this category. In the remaining countries government influence is

stronger; six developing countries have established shippers’ councils within government ministries or agencies. New Zealand and South Africa while not having councils in the formal sense have, respectively, a small group of producer boards acting with some degree of co-operation and a shipping board to consult with Conferences.

2.44 Alternative organisations to shippers’ councils are found in some other countries. In Brazil a State regulatory agency (SUNAMAM), which superseded the previously existing shippers’ council approves freight rates and related issues. In the United States similar approval is required (by the Federal Maritime Commission). It is

of interest that in the USA the reverse to the Brazilian situation exists in that consideration has been given by private interests to creating a shippers’ council,(3) but its role has yet to be defined.

2.45 A further type of organisation exists in Sri Lanka which has designated a State agency, the Central Freight Bureau, to act as the sole representative of shippers in dealing with shipowners. In that country a shippers’ council continues to exist but has no power to negotiate; its function is restricted to providing a channel for its members

to consult with the agency.

AUSTRALIAN SHIPPERS’ COUNCIL

2.46 The Australian Shippers’ Council was established on 30 August 1972 following a survey conducted under the auspices of the Australian Chambers of Commerce Export Council. The Restrictive Trade Practices Act 1971 was amended in the same year to enable the Minister to designate one shipper body for all trades.

ω The Effectiveness of Shippers’ Organisations. Report by the UNCTAD Secretariat TD/B/C4/154 Nov. 1976. ,2) Ibid P6. (3) Agman R. S. Competition, Rationalisation, and United States Shipping Policy. J o u r n a l o f M a r i l i m e L a w a n d C o m m e r c e October 1976.

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2.47 Australian shipper associations which existed prior to establishment of the ASC phased their activities into the Council as their work programmes permitted. Their assets and liabilities were transferred to the ASC. These associations were the Australia

to Europe Shippers’ Association; the Singapore and West Malaysia Shippers’ Association; The Combined North America Shippers’ Association (The Australia East Coast USA Shippers’ Association; the Australian West Coast North America Shippers’ Association and The Australia Canada Shippers’ Association); and the

Australian General Cargo Shippers’ Committee.

Objectives of the ASC 2.48 The objectives of the ASC as defined in its constitution are set out in its annual reports. The more significant of these objectives are to represent the interests of shippers, producers and commodity groups; to secure the greatest possible co­ operation between them; to negotiate with shipowners and others with regard to arrangements for, and the terms and conditions applicable to, overseas cargo shipping; and to secure efficient, economical and adequate shipping services. The ASC constitution is at Appendix VI.

Developments in Membership 2.49 The First Annual Report of the ASC shows that membership at the end of June 1973 comprised twenty-nine national exporter bodies with forty-one nominated representatives. The Council executive consisted of a president, two vice-presidents, a treasurer and five other member nominees. A complete list of current membership is

attached at Appendix VI to this report. It is noted however, that the following organisations which were members of the Council initially have since resigned: Australian Apple and Pear Shippers’ Association* Australian Canners’ Association*

Australian Citrus Growers’ Federation* Australian Wool and Meat Producers’ Federation* and as from 11 October 1977 resignations for the following organisations will become effective Sheepskin Export Packers’ Association of Australia Australian Meat Exporters’ Federal Council Australian Hide, Skin and Leather Exporters’ Association. The following members have joined the Council since its formation: Victorian Maltsters’ Association Australian Wool Corporation. (From 1.7.1977) and as from 11 October 1977 Australian Abattoir Export Products Association. 2.50 The end result has been a reduction in the, membership of the Council from twenty-nine national exporter bodies to twenty-six, and a reduction from forty-one nominated representatives to thirty-three as at 30 June 1977. Membership will be further reduced to twenty-five from 1 October 1977. At that date eighteen of the twenty-five members of the Council will directly represent the products or processed products of rural industries. Nine of the members are Commonwealth statutory commodity boards covering apples and pears, canned fruits, dairy products, wool,

* These industries continue to be represented on the Council by the Australian Apple and Pear Corporation, the Australian Canned Fruits Board, Australian Overseas Citrus Exporters’ Association and by other meat and wool organisations. The Flour Millers’ Council of Australia has given notice of intention to resign.

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dried fruits, eggs, honey, meat and wine. Another, the Rice Marketing Board, is a State statutory body.

2.51 Admission of a new member to the ASC is dependent upon acceptance by resolution. The ASC may also determine the number of representatives to which the applicants shall be entitled and the subscription payable in accordance with the constitution. In June 1977 the Council passed amendments to its constitution to allow

the admission of associated members and this will permit consideration of broader membership including regional representation of shippers.

Representation on the ASC 2.52 Members of the ASC are entitled to appoint representatives according to the value of the freight paid for the commodity which the member or its constituents produces for export or actually ships overseas. No commodity is entitled to more than six representatives. As at 30 June 1977 one member had three representatives, five members bad two representatives and twenty members had only one representative.

2.53 There are ten sub-committees through which the ASC covers all parts of the world. Representation on these sub-committees varies considerably depending on the trades on which members have an interest. Nine ASC members are represented on all ten sub-committees with other members having lesser representation; one member

being represented on only one sub-committee.

Role of Sub-Committees 2.54 Within certain overall policies established by the ASC, each sub-committee negotiates terms and conditions for its area of Australia’s outward liner cargo shipping. Each sub-committee appoints a negotiating committee for this purpose. The negotiating committee reports back to the full sub-committee for ratification of any

agreement reached with shipowners.

The ASC Executive Staff 2.55 The ASC has a full-time executive staff consisting of the Executive Director and an office staff of six. The role of the Executive Director is defined in the ASC Constitution, but in addition he normally participates in negotiations. His assistants

include a research officer, an office manager, and a senior assistant to the Executive Director. The balance of the staff perform general office functions including typing, manning of the switchboard, copying, handling of mail, etc. The Sub-Committees and the executive do not have direct access to services of the staff except through the

Executive Director who is responsible for servicing their research and other requirements.

Sources of ASC finance 2.56 Over many years government involvement with the operations of shipper bodies has been accompanied by direct or indirect assistance/11 In the 1950s the Department of Commerce and Agriculture is said to have obtained information from shipping companies on their operational costs to assist Exporters’ Overseas Transport

Committees. In 1960 the Federal Government provided assistance of $10,000 p.a. to enable the Federal Exporters’ Overseas Transport Committee to supplement the cost of a research program into ways and means of reducing costs. When the ASC was

(υ “The Australian Shippers’ Council” , a CEDA study by D. C. Ferguson, 1976.

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established in 1972 the Government agreed to provide it with financial assistance. Further details are contained in Chapter 9.

2.57 The following chapters of this report will consider the related interests of shippers and shipowners and the ways in which Australia has endeavoured to encourage efficient shipping under present legislation, before considering desirable changes in current legislation and practices.

CHAPTER 3

CONFERENCES AND THE INTERESTS OF SHIPPERS AND SHIPOWNERS

3.1 Conferences are associations of liner firms providing services between defined ranges of ports under agreements to regulate competition between members and to inhibit the intrusion of competition from outside/1* In spite of these characteristics the Conference system is generally supported by shippers and governments. Nevertheless,

particular actual or potential practices of Conferences are matters of concern and have led to legislation in various countries to influence or control Conference organisation and practices.

3.2 A review of the shipping policy of Australia must recognise explicitly the potential benefits and disadvantages of Conference organisation to shipowners and to shippers. Australian policy and legislation must reflect these benefits and costs if the Conference system is to work to ensure the availability of efficient liner services to the

mutual benefit of shippers and shipowners.

THE CONCEPT OF EFFICIENCY

3.3 The concept of efficiency in liner shipping is fundamental to Australian liner shipping policy. In his Second Reading Speech on the Trade Practices Bill, 1966, the then Attorney-General, the Hon. B. M. Snedden, Q.C., made frequent reference to

efficiency in the provision of liner shipping services which would be to the benefit of shippers/21 section 123 (1) (c) (ii) of the Trade Practices Act empowers the Governor- General to disapprove a Conference agreement if it “does not have due regard to the

need for services by way of overseas cargo shipping to be efficient, economical and adequate” . The words “efficient, economical and adequate” are not clearly defined in the legislation, nor have they been defined in statements by the Government. It has been left to the Trade Practices Tribunal in 1975 to wrestle with the meaning of the words. The Tribunal noted that the meaning of “economical and adequate” could be

encompassed by the word “efficient"/3* .

3.4 The definition of “efficient” adopted in this report reflects the desire of government to ensure that resources and skills are employed in liner shipping to the benefit of shippers and in a way to sustain commercially viable shipping services. An efficient liner service on a route is one in which the right ships for the trade are well managed, and the ships and methods of operation provide a frequency and quality of

service at rates consistent with the value of service to the shippers, while enabling shipowner(s) to earn a reasonable rate of return in the long run. A service to which this definition applies, may be the service of a single shipowner or the service provided by a number of shipowners whether acting pursuant to a Conference agreement or not.

I t is r e c o m m e n d e d th a t th is d e fin itio n o f “ e ff ic ie n t” b e u s e d f o r s h ip p in g le g is la tio n a n d th a t th e w o r d “e ffic ie n t” re p la c e th e te r m “ e ff ic ie n t, e c o n o m ic a l a n d a d e q u a te ” w h e re it p r e s e n tly a p p e a r s in P a r t X .

Trade Practices Tribunal, Report to the Minister in re Australia/Eastern USA Shipping Conference, 3 December 1975,

paragraph 2.28.

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3.5 Through Part X of the Trade Practices Act and other measures, the Government has attempted to create and encourage conditions favourable to the provision of efficient liner services. The development of liner cargo shipping in the Australian trades demonstrates that in large part the Government has been successful. However, to evaluate the effectiveness of implementation of Government policy in detail, it is necessary to consider the working of commercial forces in respect of liner shipping.

Subsequent to this, the appropriate role of government is considered at the conclusion of this chapter.

The Common Interests of Shippers and Liner Cargo Shipowners 3.6 The demand of shippers for liner cargo shipping arises from the profits which producers, exporters and importers can earn by moving goods in international trade by sea in small or relatively small lots on ships offering scheduled services. Without the presence of profits in the production and trade transactions there would be no demand for liner shipping. Therefore, the shipowner should have a vital interest in the financial well-being of the shipper. Similarly, the shipper is concerned with the viability of the shipping services necessary to enable his trade transactions to take place. This mutual dependence of shipper and carrier is characteristic of all transport because the demand for transport is derived from the demand for and profit in the trading of goods between distant locations.

3.7 The mutual dependence of shippers and liner shipping companies is important. It is the foundation for co-operation between shippers and shipowners and provides an opportunity for government to rely, in part, on commercial processes to ensure the provision of efficient liner services.

3.8 While shippers and carriers are interdependent, both groups are in business to maximise their own profits in the long run. Shippers and shipowners must be assumed to deploy their resources to maximise their own long-run benefits. Shippers will sell in markets and ship by means which will maximise their profits. A shipper may shift his sales from one continent to another or may use chartered shipping rather than liner services. Shipowners will deploy their ships and invest in ships in the way that is in their best interest. Notwithstanding containerisation, liner companies may shift ships between routes or may move out of liner shipping in the long run. Therefore, while shippers and shipowners share an interdependence, there are conflicts between their interests as they try to maximise their respective profits from a trade.

The Case for Conferences in Liner Shipping 3.9 The Conference system is now some one hundred years old. The'system of Conferences originated in the latter part of the nineteenth century during a period when the development and maintenance of scheduled shipping services was made difficult by the presence of surplus shipping capacity. The durability of Conferences during varied economic conditions and in the face of investigations by various governments, is indicative of net benefits derived from the system both for shipowners and shippers.

3.10 A common argument for Conferences is that, without them, the nature of liner shipping would lead to uneconomic competition and the breakdown of desirable scheduled services. Uneconomic competition would arise from two sources. First, the occasional intrusion of ships into a trade taking cargo important to the efficient utilisation of scheduled ships can make impossible the maintenance of an efficient level of service. Secondly, the importance of utilisation of ship capacity and the presence of a differential rate structure, can lead to severe rate competition between liner firms,

sometimes characterised as “cut-throat rate wars” . Such rate competition between

16

lines is not likely to cause the demise of all liner shipping, but, if such competition is able to occur at any time, it will cause an uneconomically low level of service. Undoubtedly both of these types of competition can and have occurred but in themselves they are not sufficient justification for the Conference system. Indeed, the presence of competitive pressures from outside and within a Conference is vital to the maintenance of efficient services provided at reasonable rates.

3.11 For the breakdown of a Conference to be contrary to the interests of shippers, particular conditions must be present. Shippers must choose services offering low rates but which will not give an adequate level of service in the long run. That is, shippers make a substitution of a service in the short run, which has detrimental effects on the

services available to meet shippers long-run needs. That may occur if shippers underestimate their need for, and the long-run cost of, a scheduled service.

3.12 It may be argued that shippers should bear, and can support the responsibility of determining, the type and cost of service they require within a competitive environment free of the constraints of the Conference system. However, shippers appearing before investigations into the Conference system in the UK and USA and in previous

considerations of shipping policy in Australia, have overwhelmingly supported providing shipping lines with the protection of the Conference system to ensure the maintenance of scheduled services.

3.13 In the course of this investigation shippers have supported the existence of the Conference system as long as Conferences are not in a position to abuse their monopoly powers. Shippers clearly believe that, in practice, sufficient shippers are likely to take too short a range view when choosing between shipping services and select low rated services rather than the higher but stably priced and higher quality

service which, with shipper patronage, could be available.

3.14 In some trades the breakdown of Conferences has not apparently been to the detriment of shippers. Examples of this are generally short sea trades where frequent services, whether fully scheduled or not, are available even in the absence of Conferences. This may not be the case on a long sea route, especially for Australia.

Australia’s general cargo cannot readily be served by vessels other than those dedicated to the trade and often quite specialised with substantial refrigerated capacity.

3.15 Support for the Conference system does not mean that competitive pressures from outside the Conference, or between member lines, are undesirable. In fact, some competitive pressures are vital to the maintenance of efficient liner services. Without some competition the results of service and price rivalry are absent and the adjustment

of liner services to dynamic conditions lags. Competitive forces, either from outside or within a Conference, may not even be evident in the form of substitute services operating with different prices. Often the potential competition of alternatives which could be available to shippers is the source of rivalry and competitive response. These

competitive forces are considered in more depth later.

3.16 The role of competition in the maintenance of efficient liner services is complex. It is influenced by the organisation of a Conference and in particular by whether the Conference is open or closed to new members. Under an open Conference, such as is supported by American shipping policy, new lines are able to join a Conference on the

general terms applying to all members. In a closed Conference a new member is only admitted with the agreement of existing members. The advantage of the latter system is that it provides an opportunity for the lines to rationalise their services so as to provide a desired level of service at minimum cost. The potential disadvantage of a closed

Conference is that the monopoly power of the Conference becomes so great that

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insufficient competitive pressures exist to ensure efficiency or to hold down profits to reasonable levels.

3.17 Under either the closed or open Conference system non-conference liner services may exist. They can continue to operate as long as a relatively stable relationship exists between the rate structures and share of market enjoyed by the Conference and non-conference lines. The presence of non-conference lines is not evidence that the Conferences are not warranted.

3.18 The explanation by shippers of the economic need for Conferences often neglects the most important reason for Conferences. Economies of scale in ship size warrants the use of a fleet of ships on a route with the largest ship size possible consistent with the value of frequency of service. This is explained under “The Case for Differential Freight Rates” later in this chapter. However, while there are economies of scale in ship size, a limited number of individual firms can exist because there are only minor economies of firm size. Once a firm has a competitive frequency of service on a route, little advantage is gained over competing firms by adding more ships. In the absence of Conference agreements competition between the few firms can lead to an unstable and sub-optimal shipping service. Even with an open Conference, competition can result in an excess of service competition, evident most often in surplus capacity.111 The organisation structure most likely to enable the economies of scale to be realised is a closed Conference with rationalised services. Unfortunately, the very monopoly power of Conferences which can be used to provide shipping services more economically than would otherwise be the case, can also be misused to th.e detriment of shippers and, in some cases, shipowners.

The Protection of Shippers’ Interests in General 3.19 It is in the shippers’ interests that liner firms earn adequate returns to ensure the long-run availability of efficient services. In the commercial economy in general, competition is relied on to bring about this efficiency. In shipping, where Conferences are present, the influence of competitive pressures is dulled. With the limits placed on competitive forces, especially price competition, it is necessary to consider whether

shipper interests are protected sufficiently.

3.20 A closed Conference, while creating the opportunity for rationalising shipping services, also creates an environment in which inefficiencies may develop in the services. This is not likely to take the form of insufficient capacity which is readily apparent to shippers and not in the interests of the shipping lines. The presence of surplus capacity is not so readily apparent to shippers in view of the seasonal variations in trade volumes and the need to provide capacity to meet inward and outward trades. Nor need the presence of surplus capacity be detrimental to the interests of all Conference members, as some lines may maintain a desirable volume and mix of traffic to earn at least adequate profits. If liner rates are based on average costs, the profits of the least efficient firm may be sufficient to keep it in the trade in the short run and there may be little incentive from inside the Conference to rationalise the capacity. What commercial pressures can exist to bring about the rationalisation of the shipping capacity in this case?

3.21 As the surplus capacity reaches sufficient proportion that liner rates move to uneconomic levels, the use of non-conference lines or chartered shipping becomes increasingly attractive to shippers. Such alternatives will create or add to pressures on the Conference and between the lines to rationalise the capacity. In a closed

111 See, J. W. Devanney III et a!., “Conference Ratemaking and the West Coast of South America” , J o u r n a l o f T r a n s p o r t E c o n o m i e s a n d P o l i c y . Vol. IX, 1975, pp. 154-177.

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Conference it may be possible to adjust the capacity within a planned framework. However, in an open Conference, where the level of co-operation between member lines is more limited, it may be more difficult to bring about change. At the extreme, a

competitive rate war may be necessary to establish the competitive relationship between the lines and lead to the withdrawal of capacity by the least efficient or least powerful carrier. Therefore, the commercial opportunities which may be utilised by shippers to induce efficiency in Conference operations rest on the potential use of non­

conference services and the exploitation of commercial rivalries between Conference members. The form of Conference agreements, especially in a closed Conference, is very important as it determines the relationship between member lines.

3.22 The monopoly power enjoyed by Conferences can also be used to protect monopoly profits. The limits on these profits are for shippers to use competitive forces from outside the Conference. Shippers can make use of competitive forces in various ways. They may be applied by an individual shipper with sufficient volume and value of

traffic or they may be applied by shippers acting in formal or informal groups. Over the history of the Conference system the benefits to shippers from acting collectively for certain purposes have been widely acknowledged. The working of competitive forces is vital to the protection of individual and collective shipper interests and will be subject

to closer examination in this Report.

3.23 In general, the crucial concern of shippers with Conferences is the extent to which the competitive forces available to shippers can be used to ensure that Conferences do not charge excessive freight rates to earn excess profits or to cover inefficiencies. The competitive forces necessary to ensure efficiency in liner operations are the same forces which must be used by shippers in examining the reasonableness of

individual rates. The working of these competitive forces can be considered after the basic features of liner tariffs have been described and explained.

The Case for Differential Freight Rates 3.24 As discussed in Chapter 2 a wide range of freight rates is commonly charged by Conferences, so that the rate on the highest rated commodity may be many times higher than the rate on the lowest rated commodity. There is no doubt that in the

interest of efficiency in shipping, the rate on each commodity should be high enough to cover the costs associated with the commodity. For example, the capital and operating costs associated with refrigerated cargo are higher than the costs of general cargo. However, while the higher rates may be attributable in part to higher costs, it is also

true that many of the differences in rates are based on differences in the ability of a commodity to pay a higher freight rate and not on differences in cost. Conferences are known to charge on the basis of what they think the traffic will bear. Is this necessary

for profitable liner shipping and is it in the interest of any or all shippers?

3.25 There are three reasons for differential freight rates, that is freight rates based on what the traffic will bear. The first reason arises from the presence of economics of scale in ship-building and operation. The second reason arises from the joint cost nature of inward and outward services. The third reason comes from the presence of surplus

shipping capacity from time to time. Each of these reasons warrants fuller explanation. 3.26 The capital and operating costs of ships do not increase in proportion to ship size. The cost of operating a container ship with a 2,000 container capacity is not twice

the cost of operating a 1,000 container capacity ship. Therefore, in a trade which can only support the smaller ship, a higher average freight rate must be charged, all other things being equal, than on a route supporting the larger ship. Viewed in the context of a single trade route, the incremental cost of adding capacity decreases so that the

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revenue from the additional traffic needed to utilise that capacity can be less than the average rate. This phenomenon is justification for charging a less than average freight rate on some commodities as long as they cover the relevant costs for which they are responsible. This principle is widely recognised as desirable in transport. It enables low valued resources to be transported, but these low value and rated commodities are, at the same time, contributing to the overall profitability of the carrier to the benefit of higher rated cargoes. Low rated commodities, as long as they cover their relevant costs, are not subsidised by high rated commodities.111 3.27 In the schematic example given in Table 1 the optimum sized ship has a capacity of 2,000 containers. While the average revenue which this ship needs to cover its costs is $1.82 per unit, this cannot be charged on all cargo or commodities B and C could not move. Differential pricing is necessary and enables commodities B and C to make a contribution to overall profits along with A. Commodity D cannot be carried economically. If the profits from A, B and C are excessive, their freight rates could be reduced to an appropriate level; the losing service, D, cannot be produced economically.

TABLE 1

Commodities Ability to pay(% per cargo unit)

Commodity Demand (in Container loads)

Ship size (in containers)

Ship Cost f$ per time period)

Average Cost f$ per Cargo

Unit)M

Incremental cost($ per cargo unit)fO

A 2.50 900 900 20,000 2.22 2.22

B 1.80 700 1,600 31.200 1.95 1.60

C 1.50 400 2,000 36,400 1.82 1.30

D 1.00 200 2,200 38,600 1.75 1.10

Note (1) Assuming 10 units per container.

The example shows that differential pricing is necessary and favourable to the interests of shippers and shipowners as it enables both groups to benefit from the economies of scale in shipping. In reality, while the economies of scale apply to the individual ship, the selection of ships for a trade requires the selection of optimum sized ships for a fleet to serve a trade. The extent to which costs can be reduced by using larger ships is constrained at any one time by the need of shippers for frequent service.

3.28 In spite of the economies of scale present on routes, a number of firms may continue to provide competing liner services because the economies of scale arise from ship size and not the total capacity offered by one firm. Without a Conference, in practice a closed Conference, rationalisation of sailings and the use of the optimum size vessels is unlikely between competing firms. However, the working of a closed Conference should enable the average cost of providing a liner service to be held down as the use of the largest ships, consistent with a frequency of service required by shippers, is possible through the rationalisation of sailing schedules. The sharing of the benefit derived from rationalisation depends upon the strength of the monopoly power of the Conference and its ability to use the power to the advantage of its members.

3.29 The practical working of the economies of scale can be readily observed. Larger ships are employed on high volume trade routes than on low volume trade routes. Over time, the number of firms on trade routes have declined and consortia have become

U) This conclusion differs from that of Μ. B. Deakin. S h i p p i n g C o n f e r e n c e s : A S t u d y o f th e i r O r i g in , D e v e l o p m e n t a n d E c o n o m i c P r a c ti c e s . (Cambridge: Cambridge Umv. Press. 1973), pp. 92-101 Deakin’s argument is based on the

erroneous assumption that ship size stays the same irrespective of the volume of trade on a route.

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necessary to avoid uneconomic rate wars. The recent development of consortia has been accelerated by containerisation which has increased the economies of scale available in capital intensive ships but, more particularly, has reduced diseconomies of scale in the surface handling of freight.

3.30 The important implication of the presence of long-run economies of scale in shipping is that differential pricing is a necessary and desirable feature of Conference tariffs. Rates are set above the relevant costs for the traffic and at a level based on the ability of the traffic to pay. Therefore, the system for the negotiation of rates must be one consistent with the determination of the appropriate level of individual rates as well as the overall level of rates.

3.31 The second reason for differential pricing by Conferences is the existence of the joint costs of inward and outward voyages. The implication of joint costs is explained best in relation to the common and simplified example of a sheep station which necessarily produces some meat and some wool. The price for each commodity must

cover its incremental cost of marketing but, beyond that, the farmer seeks to obtain the best price he can for each product to cover the joint cost of raising the animal. The case of liner shipping is comparable. A liner company selects a routing which it believes will be profitable overall. While the company must ensure that calls at each port in a range

of ports cover the assignable costs (including time) of calling at that port, the inward and outward sailing costs must simply be covered in total. To divide the ship costs equally between inward and outward trades because sailing times are the same or in proportion to tonnage carried, would make as much sense as dividing the cost of

raising sheep equally between wool and mutton. The liner company, like the sheep farmer, is interested in his overall result and that is shown by round-voyage accounting. In some trades the inward and outward cargoes may be able to make an equal contribution to revenues but often the revenue potential will be imbalanced.

3.32 In imbalanced trades the range of prices may differ on the inward and outward legs depending on the commodity composition and volume of the trades. It is advantageous to the line to accept traffic at lower rates on the leg on which surplus ship capacity exists in order to encourage cargoes in that direction. If the pricing policy is

successful a liner firm may achieve a high physical utilisation of capacity on inward and outward legs but the earnings on the trades may be significantly different.

3.33 The joint nature of inward and outward voyages and the practice of differential pricing make the assessment of liner economics difficult. The profitability of routes needs to be assessed on a round voyage basis and the reasonableness of rates, especially low rates, assessed in the light of the overall result and the directional balance of the

trade.

3.34 The third reason for differential pricing by Conferences is the periodic existence of surplus ship capacity. This may be caused by major increases in available ship capacity, as with the introduction of new vessels, or by seasonal and cyclical variations in the level of demand. During periods of surplus capacity, lines may accept lower rated

cargoes that at other times, perhaps by carrying more open-rated commodities than usual/11 In liner trades where seasonal trade patterns are strongly pronounced, a seasonal structure to some rates may be desirable.

3.35 For all these icasons differential pricing is to be expected and is desirable in Conference tariffs. However, in the complex and dynamic world of shipping such pricing makes the establishment of reasonable prices related to efficiency difficult.

111 An open-rated commodity is a commodity carried generally on chartered ships and which conference members may carry at rates which they determine individually.

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FREIGHT RATE DETERMINATION

3.36 Liner rates are established normally by a rate committee of a Conference. The committee has various information available to it on the characteristics of the commodity and the market in which it is sold. This information includes the density and value of the commodity, the volume in which it is expected to be sold, special handling requirements and any other particular features of the commodity, of its handling or of its markets. A shipper presents information which he believes explains why it is in his own and the conference’s interests to charge a low rather than a high rate.

3.37 When seeking low or reduced rates various arguments may be available to a shipper or shippers. The arguments hinge on the availability of alternatives to shippers, the threat of the loss of markets to shippers or the possibility that, given a rate incentive, shippers may be able to reduce liner costs. These types of arguments are characteristic of shipper/carrier rate negotiations in all modes of transport. Only the importance of arguments varies from one situation to another.

Carrier competition 3.38 A common argument of shippers in the negotiation of domestic rates is the availability of carrier competition from competing modes of transport. In overseas trade this argument is not relevant, currently, for most commodities, the use of air freight being possible only for a limited range of commodities and/or in special circumstances. Another form of carrier competition involves the potential use of

different firms within a mode. In the case of Conference shipping this may take the form of the use of non-liner shipping or the use of non-conference lines. Under the threat of losing business a Conference may adjust its rates and/or service. If the Conference refuses and the shippers’ argument is genuine, the result will be the withdrawal of the shippers’ business from the Conference. On occasion shippers may even find that by approaching one line in a Conference with the promise of all of their business, the line may carry an argument to the Conference rate committee. If the inter­ line competitive pressures are strong enough and the shippers’ traffic significant enough, a line may even be prepared to risk the break up of the Conference.

Market competition 3.39 In the absence of inter and intramodal competition, shippers may be forced to rely on the various market competitive forces relating to the commodity in its present or potential markets. The term “market competition’ is used throughout this Report in this restricted sense. It is not to be confused with carrier competition. Market competitive forces are less readily identifiable and less readily substantiated than other forms of carrier competition. Market competition is relevant when a shipper or

shippers have the alternative of selling their goods in alternate markets thus avoiding the use of a particular line or Conference. For example, the possibility of shifting exports from Australia/U.K. to Australia/North America could provide an oppor­ tunity for negotiating lower rates to the U.K. Market competitive arguments may also

apply to any one market. That is the profit margins on the sale of a commodity may be so slight that the trade of a shipper may decline unless a f r e ig h t r a t e r e d u c t io n is introduced. This, of course, is the least desirable argument for a shipper to have to use.

Cost reduction 3.40 Shippers may also negotiate rate reductions on the basis of cost reductions

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which they can bring to the Conference if some of the cost savings are passed on in lower rates, generally to compensate the shipper for higher costs. Such schemes commonly involve the consolidation of shipments into larger lots which are more efficient to handle and/or give a better utilisation of ship capacity. For example, the

negotiation of rates on meat to the U.S. East Coast for 1976 involved the heavier loading of containers, and honey previously exported in drums is now transported in ships’ tanks to the United Kingdom at a lower cost and a lower freight rate.

Other arguments of shippers 3.41 Shippers may use other arguments in commercial negotiations but these appeal as much to the carrier’s ‘goodwill’ as they do to his self interest. For example, when

carrier costs are increasing rapidly shippers may argue that they need time to be able to adjust their affairs to a new level of rates. Shippers may also use various arguments about the apparent equity of rates, for example, by comparing the level of their rates with those on o+her commodities or other routes.

Negotiation of rates 3.42 The conduct of negotiations requires considerable skill. Negotiations can often require many hours of research and discussions on the details of commodity transport and commodity markets. Negotiations are not one-shot affairs but must be viewed as

events in an on-going process. Good negotiators are generally acknowledged to prepare with extreme care and to argue forcibly cases on which they are prepared to act. When shippers are seeking new rates or specific rate concessions, it is the shippers who are forced to present information to the Conferences. The most effective

arguments of the shippers are based on the alternatives available to them and to which it is in the interest of the Conference to respond.

3.43 The processes of shipper representation and of negotiations are necessary to the adjustment of liner rates to dynamic market conditions. Liner companies ship and rate hundreds of commodities and yet they do not maintain substantial marketing departments either themselves or through their agencies. Liner companies, perhaps to

their own detriment, as recognised by aggressive liner companies such as Sea-Land in American trades, rely heavily on shipper representations.

3.44 The numerous freight rates to be maintained by Conferences and the difficulties of estimating the cost of carriage for particular commodities may lead to such reliance on charging what the traffic will bear that freight rates are set too low on some commodities. Some commodities may not make a sufficient contribution beyond direct

handling costs to compensate for ship time required for loading and discharging the cargo. If this occurs it may cause freight rates on other commodities to be higher than necessary to cover total costs.*11

THE ROLE OF COMMERCIAL NEGOTIATIONS BETWEEN SHIPPERS AND CONFERENCES

3.45 Shipper/carrier negotiations perform important functions. The negotiations affect rate levels and the efficiency of Conference services.

3.46 The most important function of rate negotiations in the imperfect economic market of liner shipping, is to bring to bear on the Conference the various competitive

111 Some cargoes are sometimes carried at abnormally low rates in relation to actual costs because of shipowners strictly observing uniform rates out of a range of ports, high centralisation costs of some cargoes to some ports, following promotional rates, temporary incapacity of some cargoes currently to meet actual costs, or to maintain goodwill.

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forces available to or affecting shippers. Negotiations lead to individual freight rates consistent with moving the traffic at rates commensurate with liner profitability. Conference rates are administered prices set by a rate committee; they are not set by the working of competitive forces as are ship charter rates. However, while the rates are

not set by competitive forces in the sense that charter rates may be made in the light of the availability of several alternate ships, Conference freight rates are constrained by various competitive forces. The competitive forces work through the functions of the rate committee of a Conference and through the negotiations which it holds.

3.47 The negotiation of rates by shippers on the basis of competition brings some pressure to bear on the overall profits and efficiency of the Conference. However, these pressures are limited by the significance of the competitive forces available to shippers. First, alternatives in the form of non-conference shipping or alternative markets may not be viable for all shippers. Secondly, the restraint of competitive conditions in product markets need not be so stringent as to prevent monopoly profits and/or

inefficiency in Conference operations. Thirdly, individual shippers normally lack the resources or inclination to study the efficiency or profitability of Conference services unless they can exert some influence on those, services. The power of individual shippers is based normally on the alternatives available to them or their ability to influence shipping costs through scheduling or other arrangements associated with their cargo. Last, shippers normally do not challenge the adequacy of low rates on certain cargo but rather seek to have their own rates lowered to be closer to low rated cargoes. This is in spite of the possibility that the Conference lines’ need for more revenue may arise from some of their rates being too low. ;

GOVERNMENT INTERVENTION

3.48 The case for government intervention in the determination of the terms and conditions of liner services is based on the concern of government for the efficiency of overseas cargo shipping services. It has been shown that in trades able to support a number of lines, the formation of Conferences is desirable. However, since

Conferences possess significant monopoly power, their working must be subject to some government control. In this regard, the control by government may be likened to the regulation of public utilities and railways in many countries. This comparison does not pre-judge the means by which government may exercise its control in international shipping.

3.49 Various approaches may be taken to control by government. In the U.S.A., legislation requires that Conferences are open and has established the Federal Maritime Commission to perform a regulatory role.(1) This role may be likened to the regulatory role of other agencies, such as the LIS Interstate Commerce Commission, which controls firms in domestic markets in which competitive forces have been judged to work ineffectively.

3.50 In Australia, government has chosen to assume the responsibility for the control

1,1 In the “Report on the Regulated Ocean Shipping Industry” of January 1977, prepared in the U.S. Department of Justice, the U.S. A. federal regulation of freight transportation by ocean carriers in United States foreign commerce was reviewed. The Introduction stated, “In brief, this regulation allows ocean carriers to combine in conferences for the purpose of entering into rate agreements and to do so with immunity from the anti-trust laws, provided that their agreements are filed with and approved by the FMC. The regulation does not impose any entry or exit restrictions on carriers and it

grants the FMC only the most limited authority to decide whether rates are lawful.” The report concludes, in the light of U.S. A. experience of the regulated open conference system, inter alia, that, “A competitive system could supply these benefits* in a more efficient, and less costly manner. Conferences do little more than fix rates. There is nothing inherent in the conference system that insures a given level of service or rate stability. Capacity, sailing, service and marketing decisions are met on a carrier-by-carrier basis, not by conferences. Further more, conferences do not guarantee stable rates; conference rates change frequently, and mainly upward.” (*i.e. benefits thought to be achievable only under the conference system, viz frequent, regular service and stable rates).

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of Conferences directly rather than use a regulatory tribunal.!1) However government has also placed considerable reliance on the working of commercial forces. In the words of the Attorney-General in 1966, “the attainment of better freight rates and other terms and conditions is most likely to be achieved by negotiations between

shipper bodies and shipowners, which negotiations can reflect the economies achieved by better organisation, limitation of tonnaging and greater resort to modern cargo handling techniques”.<2)

3.51 Irrespective of the means of control employed by government, the purposes of intervention are basically similar to the reasons found in other countries in the regulation of railways and/or public utilities. The first is to ensure that monopoly powers are not used to produce unreasonably high profits (monopoly profits) or

allowed to dull innovation and responsiveness so that the costs or quality of service become unreasonable. While rate-of-return regulation is not feasible in the sphere of international shipping, monitoring the profitability of Conference services is necessary and achieving a responsiveness by Conferences to the process is essential.

3.52 The second purpose of intervention is to ensure the reasonableness of commercial responses. The presence of monopoly powers may be used to prevent a shipper’s traffic from being moved although it could be carried economically. This may occur if lines are not sufficiently responsive in their pricing. On the other hand, it may

also happen that lines cut their rates below the costs associated with the traffic, including allowances for the ships’ time, in their eagerness to attract or retain traffic.

3.53 In the absence of explicit rate-of-return regulation of Conferences, the two purposes of intervention may not be clearly evident in control procedures. This is particularly true in Australia where the working of the control process is left largely to commercial forces. However, recognition of the two purposes of intervention is vital. It

cannot simply be assumed that the effective use by shippers individually of the arguments available to them for the negotiation of rates, will lead to efficiency in liner shipping. In order to improve the functioning of commercial processes and minimise government intervention it is necessary for government to strengthen the position of

shippers. The organisation and resources of shippers in their normal private commercial negotiations with Conferences are not appropriate or adequate for the study of Conference efficiency and profitability. Indeed, many shippers may lack even the resources and expertise to negotiate effectively with Conferences about terms and

conditions for the carriage of their own freight. Even with resources and expertise available, government support may be necessary to ensure the availability of adequate information by which shippers may assess the efficiency of Conference services. In view of the international nature of shipping, the determination of efficiency with respect to profitability will not be able to be judged within a precise rate-of-return framework.

3.54 Australian governments have a long tradition of providing support to shippers and to the functioning of commercial processes. The Conferences serving Australia

On 8 March, 1977 the FMC Chairman, addressing the American Shipper International Forum, briefly reviewed development of U.S. ocean transportation policy since enactment of the 1916 Shipping Act. Having regard to policies of other countries as well as U.S. experience he said, “In my view, there are at least five alternatives to our present ‘open’ ocean transportation philosophy that could be considered in seeking to harmonise the goals of a competitive U.S.

merchant marine and stable U.S. ocean trades. These are (1) enactment of broad cargo preference laws to be implemented through bilateral agreements with the maritime nations with which we trade, (2) U.S. support for an international Code of Liner Conduct which would be acceptable to the majority of the maritime nations of the world, (3) adoption of the closed conference system coupled, (perhaps, with deferred rebates), (4) more extensive use of pooling

agreements, tightly drawn ‘shipper loyalty’ agreements, joint service agreements to rationalise sailings, legalised rebating, or (5) a combination of the above.”

Speech by The Hon. B. M. Snedden, Q.C., M.P., op. cit. p. 2.

121 Ibid, p. 3.

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have co-operated, in general, to see that the commercial process has worked satisfactorily. A major feature of government policy since 1972 has been to rely on the work of a designated shipper body, the Australian Shippers’ Council, to assist it to ensure the efficiency of liner services. An important function of this Report is to evaluate the effectiveness of that policy.

CHAPTER 4

PRESENT LEGISLATION

4.1 Prior to enactment of the Trade Practices Act 1965, the Australian Industries Preservation Act prohibited contracts and combinations in restraint of trade and detrimental to the public interest, and prohibited monopolisation. A specific exemption from those provisions in favour of ocean shipping had been in effect since

1930.

4.2 Shipowners had pointed out to the Government at that time that, in view of the huge capital outlay, it was essential that liner shipping be assured of obtaining payable cargoes, that haphazard overlapping sailings by different lines serving the main ports were undesirable, and that it could be disastrous for shippers to find there were no

sailings when they needed to ship their products. In the interest of both shipowners and shippers it was essential to avoid the irregularity and uncertainty of open competition between shipowners. The closed Conference system would provide sailings agreed between shippers and shipowners on condition that shippers would not encourage

“outsiders”, and in addition shippers would be required to enter into loyalty arrangements involving a penalty for patronising an “ outside” shipowner.

4.3 Following a Conference convened by the Prime Minister in 1929, at which shipowners and shipper interests were represented, the Australian Industries Preservation Act was amended in 1930. A new section*1* relieved shipowner members of the Conference on the Australia-United Kingdom/Continent route, of establishing

the defence that the restraint of trade involved in their operations, governed by an agreement approved by the Australian Oversea Transport Association, (A.O.T.A.) was not to the detriment of the public and was not unreasonable. It operated only in respect of agreements for carriage of goods from Australia. It was considered

questionable whether there was any need to provide for agreements for inwards shipping and there was some doubt whether extra-territorial considerations would preclude the operation of the Australian Act from extending to inwards shipping. The new section provided an exemption only for the Australia-United Kingdom/Continent Conference.

4.4 The Association consisted of representatives of the Conference operating on the Australia-United Kingdom/Continent route, and representatives of the shippers concerned with that route. The Conference representatives were members of the Oversea Shipping Representatives’ Association (O.S.R.A.) and the shipper repre­

sentatives were members of the Federal Exporters’ Oversea Transport Committee (F.E.O.T.C.)

T r a d e P r a c tic e s A c t 1965

4.5 The Trade Practices Act 1965 was an Act to preserve competition in Australian trade and commerce to the extent required by the public interest. The Trade Practices

n> “ An agreement in relation to the carriage of goods to other countries made and entered into between shippers of the one part and shipowners or their representatives of the other part, and approved by the Australian Oversea Transport Association, whereby, in consideration of periodical sailings to be provided by the shipowners, and the carriage of goods of the shippers at agreed rates, the shippers agree to ship exclusively by the shipowners, shall not, by reason of such

provisions, be deemed to be made or entered into in contravention of this Part of this Act, nor shall the making or carrying out of such an agreement, or the refusal to extend the advantages of the agreement to shippers who do not offer to enter into it, be deemed to be an offence against this Part of this Act. “In this section, the “Australian Oversea Transport Association" means the Association formed under that name in

Sydney on or about the twenty-sixth day of June One thousand nine hundred and twenty-nine, and includes the Council of that Association."

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Tribunal was directed under the Act to take as a basis of its consideration the principle that the preservation and encouragement of competition was desirable in the public interest. It was to weigh other enumerated factors before deciding a balance whether a restriction or practice was in fact contrary to the public interest.

4.6 The early thinking of the Attorney-General was that the new trade practices legislation should be given a fairly wide extra-territorial operation. Restrictive agreements and practices with respect to ocean shipping, whether made or carried out within or outside Australia, would have been required to be registered, they would have been examinable and, if found to be contrary to the public interest, made subject to an order to “cease and desist” .

4.7 Outwards cargo shipping therefore was made exempt from the Trade Practices Act 1965 and the Australian Industries Preservation Act continued to apply to outwards cargo shipping for a short time. The Attorney-General gave notice that additional provisions would be introduced upon completion of the Government’s consideration of trade practices relating to ocean shipping.

Shipowners’ views 4.8 Between the earlier announcement by the Government in December 1962 of proposals for new trade practices legislation and the introduction of the shipping amendments to the Trade Practices Act in 1966 there were numerous representations to Government by shipowners and shippers.

4.9 Shipowners urged retention of the provision in the Australian Industries Preservation Act and extension of that provision to other shipping routes from Australia. They suggested that there be provision to record with a Registrar any agreement between shipowners and shippers providing for closed Conference services. They suggested that there be provision for arbitration on any matters of dispute. They had in mind arbitration on legal rights under the agreement or contract rather than arbitration on terms and conditions of services where these were in dispute between owners and shippers. Shipowners also suggested recording Conference agreements with a Registrar, in respect of trades in which no shipper body existed.

4.10 These suggestions were in line with the provision in the Australian Industries Preservation Act which exempted the a g r e e m e n t b e tw e e n shippers and shipowners rather than the Conference agreement.

Shippers’ views 4.11 Shippers favoured the approach of the shipowners subject to adequate safeguards to ensure that the shipper body would receive adequate information for negotiations. They also proposed at that time that there should be some agreed formula for determining freights. However, the shippers assumed that the proposal of the shipowners for arbitration referred to arbitration in the wider sense of being designed to arrive at terms and conditions of services.

Departmental views 4.12 There was departmental agreement on the need for closed Conferences provided that they were tuned to shippers’ needs and were related to an organised body of shippers, with safeguards to ensure that bargaining was fair and genuine. It was considered also that both shippers and government should be able to exert an influence on shipowners to discard surplus capacity and out-dated methods.

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4.13 It was considered that any Australian legislation relating to ocean shipping must have regard to four basic requirements— “(a) the need to avoid direct statutory regulation of ocean shipping, leading to jurisdictional clashes with other countries,

(b) the need for the Government to be responsible for any ultimate action against ocean shipping operators, (c) the need to recognise closed Conferences (with perhaps some modifications), provided they operate acceptably—that is, negotiate with shipper bodies and

provide efficient, economical and adequate shipping services, and (d) the need to ensure genuine negotiations between Conferences and shipper bodies on freights and other terms and conditions of carriage of goods”. 4.14 Further it was considered that provision should be made to allow an

independent shipowner to be admitted to a closed Conference in the event that the Government wished as a matter of national policy, to have an Australian line in the Conference.

4.15 In the last resort the philosophy of the shipping proposals was, “combine acceptably, or else compete” . The philosophy of the general provisions of the Trade Practices Act was “compete, unless your combination is acceptable” . The two philosophies were seen to say the same thing with a different emphasis.

4.16 The object of the proposed provisions, while accepting Conferences and their limitation on competition, was to give organised shippers a voice and to place the Government in a position to influence Conferences not only to give organised shippers that voice, but also to provide services having due regard to the need for ocean shipping

to be efficient, economical and adequate.

4.17 The Minister was to be able to seek appropriate undertakings from shipowners. Refusal to give an undertaking, dishonouring an undertaking, or failure to have due regard to the need to be efficient, economical and adequate could lead to disapproval of the Conference agreement. At every point, including inquiry by the Trade Practices

Tribunal, there would be opportunity for the Conference to adjust its arrangements to make them acceptable. Similar provisions would apply to the “one line Conference” i.e. a shipowner providing the only liner service on a particular route.

Inter-Departmental Committee 1966 4.18 An Inter-Departmental Committee reported in February 1966 in favour of closed Conferences operating with dual rate contracts. It saw the only alternative to closed Conferences subject to control, to be adoption of an open Conference system

with government regulation, as in the U.S.A. It saw the danger that this might introduce uncertainty to the extent that lifting of Australia’s exports might be prejudiced.

4.19 The Inter-Departmental Committee’s Report noted that several overseas enquiries had proceeded on the basis that, despite all the disadvantages, there was no practical alternative to accepting Conferences in the liner trades. The real questions were what form Conferences should take and what safeguards there should be.

Exporters required uniform, stable freight rates in order to quote firm prices in advance. That could be achieved only by getting the shipping companies together to agree on rates. Such a meeting constituted a Conference.

4.20 The Committee considered alternatives but agreed on the case for acceptance of closed Conferences subject to control. Such Conferences would provide uniform and stable freight rates; would enable shipowners to control over-tonnaging; and

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shipowners could guarantee to lift cargoes under such a system. The probability that in the absence of outward Conferences, inwards Conferences could restrict competition from outsiders, cargo being available to an “ outsider” for only the outward leg of each voyage, was noted.

4.21 At one stage there was a proposal to provide for Boards of Inquiry rather than for a reference to the Trade Practices Tribunal. One suggestion was that as the Trade Practices Tribunal would not have specialised knowledge of the problems of the shipping industry, it could have no functions in the new proposals. Instead, the Government could constitute, where necessary, an ad hoc Board of Inquiry, the members of which would be selected from more suitably qualified persons. However, the suggestion was dropped.

OBJECTIVES OF PRESENT LEGISLATION

4.22 In the Second Reading Speech on the Trade Practices Bill, 1966, the Attorney- General noted three special characteristics of ocean shipping, namely: (a) its sheer magnitude; (b) the importance to Australia’s trading position that its cargoes be lifted to their

markets—with a consequential need for organisation; (c) that by definition it involved at least two jurisdictions, namely those of Australia and the maritime nation. ;

The Government had therefore decided that application of the principles applicable to ocean shipping should devolve upon the Government directly rather than upon a regulatory tribunal.

4.23 The Government believed that restrictive arrangements relating to outwards cargo shipping were not in Australia’s interests unless accompanied by suitable safeguards, in which case they could have beneficial effects for shippers, shipowners and Australian interests generally. Accordingly such arrangements were to be permissible only if parties to them gave and observed certain specified undertakings.

These undertakings were to constitute necessary safeguards for the protection of Australian interests.

4.24 The Government also believed it desirable that, wherever possible, terms and conditions on all of Australia’s liner routes should be reached through commercial negotiations between Conference representatives and a strong shipper body repre­ sentative of relevant shippers. The need for governmental action was recognised where negotiations did not operate satisfactorily and for promotion of improved organi­ sation upon which better freight rates depended. The Bill was also to protect the interests of Australian flag shipping operators.

4.25 All final decisions in regard to the permissibility of Conference agreements were to become matters for the Governor-General and the Government was to accept direct responsibility for the administration of the shipping provisions. The Bill sought to avoid jurisdictional conflicts under international law, and applied only to outward traffic. Provision was to be made for situations where a particular route was served by a single shipping line.

4.26 An amendment in 1972 provided for designation by the Minister of a single shipper body to negotiate with shipowners in all outwards liner trades.

4.27 The main provisions of Part X of the Act therefore aim to do two main things. First they recognise that Conferences are in the public interest by exempting them from

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the general provisions of the Trade Practices Act. Secondly they seek to regulate or control Conferences in the public interest by (a) providing for undertakings to be required from shipowners to negotiate with a designated shipper body, and

(b) providing for disapproval of a Conference agreement if there is not due regard to the need for services to be efficient, economical and adequate.

PROVISIONS OF PART X OF THE TRADE PRACTICES ACT

The full text of Part X is attached at Appendix II.

Exemption of Agreements 4.28 Sections 1x2 and 113 together exempt outwards cargo shipping Conference agreements from Part IV of the Act. Sections 112 and 113 thereby permit those restrictive practices listed in section 113, viz. the fixing or regulation of freight rates:

giving or withholding of special rates or priveleges or advantages: pooling or apportioning of earnings, losses of traffic: allocation of ports or restriction or other regulation of the number and character of sailings between ports: restriction or other regulation of the volume or character of goods to be carried. Section 113 further makes

it clear that an agreement is not a “ Conference agreement” by reason only of any provision as between shipowners and shippers with respect to the terms and conditions applicable to contracts for outwards cargo shipping.

Undertakings 4.29 Under section 122 the Minister may request each of the parties to a Conference agreement to give an undertaking in writing that, whenever reasonably requested in writing by the shipper body designated by the Minister, that party will take part in negotiations with the shipper body with regard to arrangements for, and the terms and

conditions that are applicable to, outwards cargo shipping to which the Conference agreement relates. A “ shipper body” is defined by section 111 as an association that, in the opinion of the Minister, represents the interests, in relation to outwards cargo shipping, of persons who are shippers of goods, or producers of goods of a kind

exported from Australia.

4.30 The undertaking given under section 122 also commits the party concerned to: - have due regard to matters and considerations raised, and representations made, by the designated shipper body; - provide a designated officer (or his deputy) with information concerning the

progress of negotiations; - permit the officer to be present at meetings in the course of negotiations; - give consideration to any suggestions that the designated officer may make; and - on request by the shipper body, make available information reasonably

necessary for the purposes of negotiations (the shipper body is similarly obliged).

4.31 Similar provisions in respect of individual shipowners operating outside a Conference agreement are contained in section 128.

4.32 In the exercise of his powers under section 122 and section 128 the Minister has in every case designated the Australian Shippers’ Council as the shipper body for the purpose of the undertakings sought. Designation of any other shipper body would

require notices accordingly from the Minister to appropriate shipowners.

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Powers of the Governor-General 4.33 Section 123 endeavours to give section 122 some force and also to discipline Conference behaviour in certain respects in the public interest by the threat of disapproval of a Conference agreement. It empowers the Governor-General to disapprove a Conference agreement if a party to it has failed to maintain an Australian agent or has failed to give an undertaking under section 122. The Governor-General may disapprove a Conference agreement if, after consideration of a report to the

Minister by the Trade Practices Tribunal, he is satisfied that; - there has been a failure to comply with section 114 or with an undertaking under section 122; - the agreement, its interpretation or application, or the conduct of its parties, or

facilities provided by them, does not have due regard to the need for overseas shipping services to be efficient, economical and adequate; or - the agreement, its interpretation, its application, or the conduct of its parties prevents or hinders an Australian flag operator engaging efficiently, and to a

reasonable extent, in overseas cargo shipping.

4.34 For the purposes of a decision on whether due regard has been had to the need for services to be efficient, economical and adequate, consideration must be given to the need to ensure the continuing provision of services and the conditions under which

shipowners may reasonably be expected to provide such services (sub-section 123(2)).

4.35 An “Australian flag shipping operator” is defined by section 111 and is a person who normally uses, or proposes to use a ship or ships registered in Australia and no other ship, and who is an Australian citizen or body corporate incorporated by or under the law of the Commonwealth or of a State or Territory of Australia.

4.36 The effect of disapproval is to make the Conference agreement unenforceable, to make it illegal to do anything in pursuance of the agreement and to make it illegal for the parties to enter into a new agreement without the Governor-General’s approval (Sects. 124 and 125).

4.37 Similarly, section 129 gives the Governor-General power to “declare” an individual shipowner for like reasons subject to the same requirement to have regard to the need for continuing services. Additionally, however, the Governor-General may

“declare” a shipowner following disapproval of the Conference agreement to which the shipowner was a party. A “declared” shipowner is prohibited by section 130 from participating in contracts, practices or inducements designed to ensure shipper loyalty, and from using freight cutting or fighting ships against another shipowner.

Trade Practices Tribunal inquiries 4.38 As the Governor-General may disapprove a Conference agreement and, or “declare” a shipowner in certain circumstances only after consideration of a Tribunal report, procedures leading to such a report are laid down in the Act. Before referring

the matter to the Trade Practices Tribunal for inquiry and report under section 132, the Minister is required by section 133 to endeavour to secure an undertaking or action by the relevant shipowner or Conference parties to make the reference unnecessary. The Minister, or his officers, must carry on, or endeavour to carry on, consultations with the shipowner or Conference parties to that end. Under section 135 the Minister may subsequently withdraw a reference of a matter to the Tribunal upon the giving of an undertaking to the Tribunal by a shipowner to the satisfaction of the Minister. Such

an undertaking becomes enforceable as a matter of contempt of the Tribunal with appropriate penalty if not complied with, evaded, or frustrated.

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Ancillary provisions 4.39 A number of machinery provisions relate to definitions (Sect. I ll) , repre­ sentation in Australia by a local agent and notification of an address for service of notices (Sect. 114) the filing of Conference agreements (Sects. 116 to 120) the conduct

of Tribunal inquiries (Sects. 134 to 139) and civil remedies for injured parties (Sects. 114 to 146).

Clerk of Shipping Agreements 4.40 Sections 115 to 121 provide for the appointment by the Governor-General of a Clerk of Shipping Agreements with whom Conference agreements, and amendments thereto, must be filed. The appointee is bound by appropriate secrecy provisions not to divulge information except in defined circumstances.

ThE PRACTICAL OPERATION OF PART X

Exemption from Part IV 4.41 Everything done pursuant to a shipping Conference agreement is protected from the general provisions of the Trade Practices Act. It is ambiguous from the wording of the Act whether single shipowners are similarly exempt from Part IV. This

ambiguity should be removed. Single shipowners who are members of a disapproved Conference agreement are sheltered from Part IV although there are specific restraints upon a “declared” shipowner.

4.42 Exemption of shipping from Part IV is occasionally criticised. This criticism may be encouraged in part by the inclusion of shipping legislation within the framework of the Trade Practices Act and employment of some of the administrative provisions contained under the general provisions of that Act. The legislation is

thereby seen to require periodical re-justification.

Inwards Conferences 4.43 Although there is no doubt that outwards cargo shipping Conferences are exempt from the general provisions of the Trade Practices Act, legal opinion seems to favour the view that inwards shipping Conferences are subject to Part IV.

4.44 If inwards Conferences are covered by Part IV, it places a significant qualification upon the exemption of outwards Conferences. An inwards Conference operating over a particular route tends to be composed of many or all of the members of an outwards Conference carrying cargo over the same route but in the reverse

direction. Their shipping arrangements are tailored to the round-voyage requirements of the service and if action were taken, deliberately or capriciously, against an inward Conference under Part IV of the Trade Practices Act, the disruption of the inwards services could impose costs upon Australian exporters as well as consumers of

imported goods. Moreover, it is scarcely appropriate that inward shipping Con­ ferences continue to be subject to the control of the Trade Practices Commission when the other half of round-voyages, i.e. outward shipping Conferences, are dealt with in a distinctly different way.

Undertakings 4.45 Undertakings have been requested from all the members of Conferences serving Australia’s outward liner cargo trades and from a number of single shipowners. There is generally no need to seek an undertaking from a non-conference line competing with

Conference lines since the non-conference line would be expected to provide terms and

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conditions competitive with those established as a result of an undertaking by the Conference. An undertaking may be requested, however, because of the significance of an individual shipowner in relation to the Conference operation. A good example of

this arose when most of the members of the Australia-Eastern USA Shipping Conference resigned in 1975. The Conference did not immediately cease to exist. Two of the lines which resigned, the Australian National Line and Associated Container Transportation (Aust) Ltd, by virtue of a joint venture agreement operating as PACE Line constituted a separate Conference under the Act. The remaining lines continued to negotiate with the Australian Shippers’ Council and constituted very significant carriers in the trade.

4.46 In no case has a shipowner been known to fail to comply with an undertaking. Consequently there has been no occasion for action to be taken against a Conference or a shipowner on this ground under section 123 or section 129.

Australian National Shipping 4.47 Sections 123 (1) (c) (iii) and 129 (2) (c) (iii) concern the protection of the rights of an Australian flag shipping operator to engage efficiently and to a reasonable extent in overseas cargo shipping. The Australian National Line now operates in five different outward Conferences and will shortly begin operations in a sixth outward Conference. For a time another Australian National shipping operator, namely Flinders Shipping Co. Ltd, operated in the Australian Northbound Shipping Conference. It is not possible to say to what extent entry of these lines into those Conferences may have been facilitated by the provisions contained in the Trade Practices Act. In any event there has not been cause to seek an inquiry by the Trade Practices Tribunal because of an Australian shipping operator being prevented from, or being hindered in, engaging in overseas cargo shipping.

Local agents 4.48 The remaining ground for disapproval of a Conference agreement or “declaration” of a shipowner is failure to comply with section 114. That "section requires that a shipowner be represented by a person resident in Australia, have an address in Australia for service of notices and that he must notify the Minister accordingly. As the only penalty for failure to comply with section 114 is to seek disapproval of a Conference agreement such action has never been taken against a shipowner nor would it have been likely to have been taken. A quicker, cheaper and more likely penalty is needed.

Filing of agreements 4.49 Section 117 requires the filing of particulars of Conference agreements with the Clerk of Shipping Agreements. There has been difficulty in obtaining the prompt filing of agreements and, in particular, the filing of amendments to agreements. There is a penalty for failure to file an agreement but there are loopholes. In addition, if an agreement has not been filed, it is extremely difficult to establish that an agreement in fact exists. It would be preferable, instead, to provide an incentive to shipowners to file the details of an agreement.

4.50 There are a number of minor deficiencies in the current legislation which should be considered for amendment, if amendments are proceeding on major matters. These are dealt with in Chapter 10.

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Negotiations 4.51 It is now accepted practice for shipowners, whether or not they have given an undertaking to the Minister to do so, to consult with the Australian Shippers’ Council on changes in freight rates and other terms and conditions of outwards liner cargo

services. Nevertheless, the Australian Shippers’ Council generally makes formal requests for negotiations under the Trade Practices Act. Even though they may be motivated by the knowledge that the Council can make a formal request and so compel

negotiations, it is clear that shipowners regard negotiations as desirable from their own point of view.

4.52 The Act does not attempt to spell out any conditions of negotiations or the manner in which they should be conducted, these being determined by agreement between shippers and shipowners. Each of the Australian Shippers’ Council sub­ committees works within guidelines established by the Council and otherwise proceeds

according to its own discretion. The Council and its sub-committees merely advise shippers of their agreement to changes in terms and conditions of services. The Council has no powers to bind shippers to their acceptance.

Provision of information 4.53 The conduct and outcome of negotiations in respect of profits sought by shipowners depends upon the provision of information by the shipowners. In some cases accountants are engaged by the ASC to examine Conference figures which in turn

have been prepared by accountants for the Conference. Cost and revenue figures of individual member lines in a Conference are confidential because shipowners in the same Conference could gain some advantage from knowledge of a competitor’s commercial results.(1) For this reason consolidated Conference figures are provided to the Council. Experience has shown that more information is received under these

commercial negotiations than could be hoped to be obtained by direct government regulation.

4.54 The requirement of the Act that information that is reasonably necessary be provided, however, gives rise to differences between ASC sub-committees and shipowners and for that matter, between members of ASC sub-committees. The Minister’s representative at negotiations is sometimes consulted by one side or the

other regarding his assessment of whether information supplied meets the require­ ment. Although there is no precedent or bench mark, there has never been a situation where it has been considered that a reference to the Trade Practices Tribunal for failure to provide information could have been reasonably justified.

Representative of the Minister 4.55 An officer designated by the Minister or his deputy has always been permitted to be present at negotiations. There appears to be general agreement that the officer has frequently been instrumental in assisting the parties to the negotiations.

4.56 Parties may fail to reach a commercial agreement, e.g. because hard pressed shippers are unable to concede that markets can be retained at a reasonable return if subject to freight rates which shipowners have indicated are necessary to provide them with a reasonable return. The presence of the officer tends to encourage the belief that

111 “Other than the accountants, no one knows the results of any one carrier’s operations, except that each individual shipowner is able to evaluate his performance (from the figures he has submitted) as against the totals for the entire conference—this becomes a very effective tool of internal company management as areas of weakness in its operation become apparent in comparison with its competitors as a group”—Agman R. S. op cit pp. 36— 37.

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he or the Minister may arbitrate in the event of such a deadlock. In fact there is no provision in Part X to resolve a deadlock and decisions are left to individual shippers whether to seek alternative shipping or alternative markets if the shipowner declines to meet the terms sought. The role of the officer is not to arbitrate, though he may make

suggestions to assist the negotiations or bring to notice matters of Government concern.

4.57 The shipowner ultimately exercises his own decisions on whether to invest in existing or new vessels in the trade in the light of the prospective revenue and costs. Power to impose a freight rate or a compulsory agreement could obviously be a source of ill-judged disruption of shipping services.

THE TRADE PRACTICES TRIBUNAL

4.58 There has been only one reference to the Trade Practices Tribunal under the shipping provisions of the Trade Practices Act. Details are contained in the Tribunal’s report “In re Australia/Eastern U.S.A. Shipping Conference” of 3 December 1975.

4.59 The Australian Shippers’ Council met with the Conference in an endeavour to avoid further over-tonnaging in the northbound trade. As the Conference maintained that it was unable to give an appropriate undertaking consultations were held between Conference members and officers acting on the Minister’s behalf, in accordance with

section 133 of the Act. The Conference members were still unable to give any undertaking which would render the proposed reference to the Trade Practices Tribunal unnecessary. The Minister therefore proceeded with the reference.

4.60 It became clear from the course of the Inquiry that a cheaper, quicker and more simple procedure is needed to deal with matters subject to reference to the Tribunal under present legislation. The application for new membership of the Conference

which eventually gave rise to the reference was dated 12 March 1975. The reference was made to the Tribunal on 3 June 1975 and the report to the Minister was dated 3 December 1975. Had the particular circumstances surrounding this Inquiry not placed a limit upon the time available for its completion it probably would have run into the following year.

4.61 Conditions of trading and shipping are sufficiently dynamic to make it likely that a report would be irrelevant after such a period of time. Long inquiries are accepted in anti-trust law and in the USA under the Federal Maritime Commission

procedures where specific monetary penalties are applicable to past breaches of law. In the operation of the relevant sections of Part X of the Trade Practices Act penalties are not imposed for past actions. Rather the provisions are designed simply to correct continuing situations. Naturally, heavy costs are incurred by the parties to an Inquiry

of such length and heavy demands are placed upon departmental resources.

4.62 It seems that when the legislation was drafted it was assumed that the Tribunal procedure and disapproval of a Conference agreement would rarely, if ever, be invoked. It was also hoped that if a reference to the Tribunal became necessary, a Conference would act to allow the Minister to withdraw the reference or would give an undertaking to enable disapproval of its agreement to be avoided. Because of the operation of USA law as well as Australian law in relation to the Conference in this only Tribunal Inquiry, the Conference found itself unable to so act or to give such an undertaking.

4.63 The conclusion which must be drawn is that if the purpose is really to try to bring pressure on a Conference to take measures lo improve its “efficiency” (as defined in Chapter 3), or its economy, efficiency and adequacy of services, there must be simpler

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ways to reach a similar result more quickly and at far less cost and inconvenience to shippers and shipowners. Moreover, if the Minister believes an inquiry is needed, an ad hoc inquiry by a person(s) selected for his (their) initial comprehension of the problems

could readily provide the Minister with effective advice on possible solutions.

Value of negotiations 4.64 The Tribunal noted that negotiations between the Conference and the Australian Shippers’ Council were useful and genuine. It believed that Conference members often finished up settling for an increase lower than intended when

negotiations commenced. It noted sound economic reasons why a Conference should not try to drive too hard a bargain: these were the possibility of attracting competition, the quite real risk of damaging overseas markets and the power of statutory marketing

authorities to make their own shipping arrangements outside Conference operations if need be.

4.65 The Tribunal also noted other benefits of negotiations which provide a channel of communications by means of which the shipping lines can be made fully aware of the demand conditions for, and any special marketing problems of, relevant Australian exports. Secondly it saw the presence of a Government representative at negotiations

being of some assistance in the negotiating process and of the Government being kept closely informed of facts and arguments. Thirdly it was noted that meetings between shippers and shipowners gave the opportunity for shippers, in an organised way, to draw attention to any shortcomings in services. Finally, and importantly, the Tribunal

noted that the ASC has the opportunity at negotiations to protect those regions or commodities which might be disadvantaged if free market conditions prevailed.

“Efficient, economical and adequate” 4.66 Examination of the Tribunal’s conclusions on the criteria of “efficient, economical and adequate” reinforce the belief that these terms present problems of definition. More precisely defined criteria are desirable to assist shipowners, shippers,

the Minister, and the administering department in actions and proceedings pursuant to the Act.

WHAT PART X DOES NOT DO

4.67 Important to an understanding of the current provisions in Part X as well as to consideration of future legislation, is an appreciation of some of the things that Part X at present does not do. These are listed for clarification and do not necessarily point to possible recommendations for changes in those respects.

4.68 First and most important, Part X does not make any provision for agreement to be reached, or any appeal to a further body, as a result of shipper and shipowner negotiations. There is a wide margin between possible areas of disagreement and circumstances which would, on rare occasions, justify steps towards a reference to the

Trade Practices Tribunal and disapproval of a Conference agreement.

4.69 Although statutory marketing authorities in some cases have the power under their respective Acts to establish, and require shippers in their industries to observe, terms and conditions of shipping including the level of freight rates, no similar authority is given to the designated shipper body.

4.70 No authority is given to an officer designated by the Minister or his deputy to

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participate in negotiations and he has no specific statutory right to see information provided to shippers by shipowners. Conference members are required to do no more than give consideration to his suggestions. He does not fulfil the role of arbitrator or conciliator.

4.71 There is no provision in the Act whereby “window information” from operation of the Australian National Line in overseas conferences, even if readily available, can be brought into consideration.

4.72 There is no provision in the Act for the Minister, the designated shipper body or any other person or authority, to fix freight rates. Nor as discussed in Chapter 3, is there any assistance given by the Act as to how economy, efficiency and adequacy of services should be defined and might be measured for purposes of protecting Australian interests.

4.73 There is no protection, by way of indemnity for the Australian Shippers’ Council, against actions for damages brought by any party who has been affected, or considers himself to be affected, in business as a result of negotiations or agreements reached between the Council and shipowners.

4.74 Australia lacks any general provisions in Part X or elsewhere, in relation to shipping which would enable the Minister, or the Government, to take retaliatory action against discriminatory measures adopted by other countries in relation to shipping, or by national flag carriers of other countries. Other countries have such legislation and there have been representations that suitable provisions be implemen­ ted. '

4.75 Conference agreements and amendments, and the terms of dual rate contracts, are required to be filed with the Clerk of Shipping Agreements but the Minister has no power of disapproval of the terms of such agreements. Agreements do not have to be publicly available.

4.76 There is no provision in the Act for the way in which the designated shipper body should be constituted except for the definition of “shipper body” as an association representing the interests of shippers or producers of exports.

4.77 No provision is made for any form of inquiry other than a Trade Practices Tribunal Inquiry.

4.78 Under Part X importers have no role nor is there any provision in relation to inward Conferences. Inward Conferences are not specifically exempt from Part IV of the Trade Practices Act.

4.79 There is no provision to compel a closed Conference to admit a new member in the event that additional tonnage of the kind provided by the new member, or the service proposed, may be needed in the trade concerned.

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CHAPTER 5

CONTROL OF CONFERENCE AGREEMENTS AND PRACTICES

5.1 Shippers and shipowners have a mutual interest in the development of a prosperous trade, as explained in Chapter 3. However, it must be assumed that the major concern of shipowners is the advancement of their own self interest.

5.2 In the provision of liner shipping, the working of competition between carriers cannot be relied upon to protect the interests of shippers by fostering the provision of efficient shipping services. Acceptance of this by shippers and governments has led to the approval of shipping Conference agreements which restrict competition between

member lines ana inhibit competition from non-members. In return for the approval of Conference agreements, shippers have certain expectations and govern­ ments certain requirements of shipowners. The reason for government regulation of shipowners party to Conference agreements is to ensure that the restriction on

competitive forces permitted by allowing the Conference system, works toward the provision of more efficient liner services than would exist in the absence of Conferences.

5.3 Shipowners party to Conference agreements are given exemption from Part IV of the Trade Practices Act, by section 112 of that Act. The rationale for this is that Conferences enhance the efficiency of liner shipping and, therefore, the efficient development of Australian trade. However, in view of the cartel structure of the

Conferences and the domination of them by foreign lines subject to regulations and policies in other countries, it cannot be assumed that any Conference agreement enhances the provision of a more efficient liner service.

RESTRICTIVE TR AD E PRACTICES A N D LINER SHIPPING

5.4 Part IV of the Trade Practices Act defines those practices which are contrary to the Act because of their restrictive effects on trade. Under the Trade Practices Act as amended by the Trade Practices Act Amendment Bill, 1977, seven types of action are disallowed. Two of these prohibited actions are not relevant to shipping; they are, anti­ competitive price discrimination which applies to the sale of goods only, and resale

price maintenance. In theory, each of the other actions could be found in shipping and might be disallowed. However, under section 112 of the Act, shipowners acting in pursuance of a Conference agreement, are given exemption from Part IV in its entirety. The desirability of exempting shipowners from each of the relevant sections of Part IV must be considered.

Contracts, arrangements or understandings affecting competition 5.5 Section 45 of the Act prohibits contracts, arrangements or understandings having the purpose or effect of substantially lessening competition in a market. There is no doubt that the lessening of competition is an essential feature of Conference

agreements and that exemption from this section of the Act is essential to the operation of Conferences.

5.6 Conferences can rationalise the supply of shipping so as to provide efficient schedules and capacities of shipping. Concomitant with the planned supply of shipping is the need to make rates jointly. However, while these practices can be used to provide liner shipping services more efficiently than with no inter-corporate agreements, the

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practices have the potential to be used to the benefit of shipowners and the detriment of shippers. This is the reason for the requirement of filing Conference agreements and the power of the government to disapprove them. Therefore, while shipowners should be exempt from section 45 in respect of shipping agreements, arrangements, and understandings, they should be required to file details of these and their going into effect should be subject to revised provisions of the Act.

Monopolisation practices 5.7 Section 46 prohibits a corporation substantially in control of a market for goods or services from taking advantage of the power to damage a competitor, or prevent or deter the entry of a competitor into the market. The reasons for protecting minor suppliers in a market include the common social concern for the welfare of small enterprises and the desire to preserve even a small level of competition because of the stimulus to efficiency and innovation which can be engendered by a small competitor in a market.

5.8 The same benefits from competition can exist in liner shipping. The case for Conference agreements is not founded on the undesirability of competition but on the disadvantage of excessive competition. If a Conference is operating efficiently, its rates and services should be sufficiently attractive to shippers to make the entry of competitors difficult. In reality, however, competitors can continue to exist by serving specialised parts of a shipping market not served by Conferences or by taking advantage of inefficiencies in Conference operations or the slowness of a Conference to adopt efficient technological innovations. Under these conditions competitors can and do exist.

5.9 Since a non-conference line can keep Conferences efficient by strengthening the bargaining position of shippers and can serve minority shipper interests in a trade, such a line should not be prevented from competing with a Conference. In such competition both the Conference and non-conference lines should adhere to the principles of fair competition on a commercial basis, except as allowed by an approved Conference

agreement.

5.10 The possibility of inefficiencies due to non-conference competition is not a sufficient reason for giving shipowners the right to use unfettered monopolisation practices as well as to enjoy exemption from section 45 of the Act. It is recognised that when surplus capacity exists in a trade an important function of competition is to lead

to the withdrawal of inefficient services. This competition between shipowners, whether acting separately or in conjunction with any other carriers, through agreement or otherwise, should be the basis of refraining from anti-competitive monopoly behaviour. This could be subject to procedures determined by the Minister for Transport, to be invoked in response to complaints to the Minister.

5.11 In practice, however, it would be impossible to establish enforceable rules to distinguish between all kinds of anti-competitive behaviour intended to be permitted by approval of a Conference agreement and loyalty contracts, and all kinds of anti­ competitive behaviour which may have been made possible because of that approval

but which it is wished to prevent. It would be necessary to list practices if shipowners are not to be placed in an undesirably uncertain position in relation to the law. The only specific anti-competitive behaviour which should not be permitted in these circum­ stances, and which can be listed is the use of “fighting ships” . I t is th e r e fo r e r e c o m m e n d e d th a t s h ip o w n e r s b e e x e m p t e d f r o m s e c tio n 4 6 o f th e A c t b u t th a t u se o f a

f ig h tin g sh ip e ith e r s e p a r a te ly o r in c o n ju n c tio n w ith a n y o th e r c a r r ie r , th r o u g h a g r e e m e n t o r o th e r w is e , b e m a d e illeg a l. The term “fighting ship” means a vessel used in a

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particular trade by a carrier or group of carriers at freight rates or in accordance with schedules contrary to general practice with the Conference, for the purpose of excluding, preventing, or reducing competition by driving another carrier out of the

said trade.

Exclusive dealing arrangements 5.12 Exclusive dealing arrangements are general in shipper/carrier contracts in international shipping. Under these arrangements, shippers enter into contracts with shipping lines or Conferences in which they commit their cargo to a line or lines for a period of time and, subject to one or two months notice of withdrawal, on terms which

the shippers believe are better than alternatives available. That shippers individually or collectively, use their control of traffic as a negotiating position for favourable contracts from competing lines, is well known.

5.13 Exclusive dealing contracts in the form of dual rate or deferred rebates lessen the freedom of shippers to use alternative carriers during the period of the contract, generally a year. In general, shippers are not opposed to the system because they do not believe that the constraints on their freedom are excessive and they see benefits for

themselves as well as shipowners in the system.

5.14 Shippers are concerned with the availability of a reliable service over time provided at as reasonable a price as possible. In the short run, shipper/carrier contracts give carriers some assurance of the availability of cargoes and enable sailings to be scheduled well in advance. In this way the contract system aids in the efficient provision

of scheduled sailings. In the long run, the contract system facilitates investments in the ships and specialised port facilities necessary to serve trades efficiently.

5.15 Therefore, it is recommended that shipowners be exempted from section 47 of the Trade Practices Act, subject to the power o f the Minister for Transport, following upon compulsory consultations with shipowners concerned, to make an order invalidating loyalty contracts on a route in whole or in part, when shipowners are taking undue

advantage o f the power they may have on that route. However, as in any contract, it is necessary to ensure that the contracts contain certain provisions for the protection of shipper and shipowner interests and to maintain the efficiency of overseas liner cargo shipping. These matters are considered later in this chapter.

Mergers 5.16 At the present time ANL is the only Australian company engaged in liner shipping. Therefore, section 50 of the Act is not relevant currently to overseas liner shipping and it is not likely to become so in practice.

Boycotts 5.17 The Trade Practices Amendment Act contains special provisions for the prohibition of secondary boycotts. Collective boycotts which should be prohibited can be imagined in shipping; under section 45D, however, closed Conferences operating

with loyalty contracts could be illegal notwithstanding the exemption of approved Conference agreements from section 45. In view of the recommendation that shipowners be exempted from both section 45 and section 47 it is recommended that shipowners be also exempted from section 45D.

Summary of the applicability of Part IV 5.18 Part IV of the Trade Practices Act is a package of provisions which taken together prohibit a range of anti-competitive practices. The individual sections of Part

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IV have been considered to see whether it is reasonable for shipowners to be exempted from the whole of Part IV. With certain recommended qualifications, exemption from Part IV in total is consistent with recognition of Conferences and loyalty contracts. Not every section of Part IV is applicable to shipping but the present exemption from Part IV as a whole is adequate and more simple than exempting shipowners only from the specific sections which might have application to shipowners. The qualifications recommended are the filing of agreements exempted from Part IV; making use of a fighting ship illegal; and powers to make an order invalidating loyalty contracts under certain circumstances.

GOVERNMENT RESPONSIBILITY IN RESPECT OF CONFERENCES

5.19 As the legality of lessening competition in liner shipping is established by Commonwealth statute, it is the responsibility of the Commonwealth to make sure that the powers of Conference members are not abused. It does not follow that the most effective way to execute that responsibility is for substantial government intervention.

Indeed, the practice in Australia has been to assist and encourage the working of commercial forces to ensure the provision of efficient shipping services where Conference agreements restrict inter-carrier competition. However, reliance on the commercial process does not remove the ultimate responsibility from government for control of the Conference system. This is recognised in the existing power of the Governor-General to disapprove a Conference agreement under section 123 of the Trade Practices Act.

5.20 Investigations have revealed a number of issues concerning the ways in which the Government should exercise its responsibility. The aspects of responsibility as laid down in section 123 of the Trade Practices Act are not in doubt. They include responsibility for agreements reached by Conference members, the interpretation and application of agreements and the conduct of individual lines party to an agreement. It is necessary to examine the practices of government within each of these areas of responsibility.

Control of Conference agreements 5.21 Under current legislation Conference agreements must be filed with the Clerk of Shipping Agreements and shipowners acting pursuant to Conference agreements are totally exempt from Part IV of the Act. Consideration of Part IV has lead to the conclusion that this exemption of shipowners should be accompanied by additional provisions.

Exemption from restraint of trade regulations 5.22 It is necessary to permit shipowners to meet and make arrangements normally considered to lessen competition but shipowners should only implement these agreements when they are considered by the Minister for Transport to meet the needs of efficient overseas cargo shipping. It is recommended that a contract, arrangement or understanding to which two or more shipowners are parties, o f a type referred to in

section 45 o f the Act, and including any o f the features described in section 113, be deemed to be disapproved and the parties thereto restrained in accordance with provisions in section 124 until the contract, arrangement or understanding has been filed and has met other provisions to be set down in Part X o f the Act.

5.23 Conference agreements should be filed and should be considered legal and effective within a period of the time of filing, say 30 days, unless disapproved. Similar

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provisions should apply to amendments or additions to agreements except that amendments or additions approved by a designated shipper body should go into effect immediately or at an agreed date and be subject to filing within a reasonable time. The benefits of allowing commercial processes to operate without delay outweigh the potential disadvantages of allowing changes to take place without government

approval.

5.24 The requirement that Conference agreements be filed and allowed to go into effect only if not disapproved, more clearly indicates government responsibility for the content of agreements than does the present legislation. This places a greater onus on

Conference members to file original agreements, amendments and additions thereto, than exists currently. There remains the possibility, however, of a contract, arrangement or understanding not being filed. To deal with the situation where it is believed that any such agreement has not been filed, or for that matter where it is

believed that there has been any breach of Part X, it is recommended that a provision similar to section 155 be included in Part X with the “Minister or Officer acting on his behalf' exercising the authority thereby given. Section 155 gives power to the Trade Practices Commission to require the production of documents within a time and in a

manner specified by notice if it is believed that a person is capable of furnishing information relating to a matter that may constitute a contravention of the Act. The Commission may also, under section 155, exercise powers of search and discovery. Appropriate penalties are provided for non-compliance or obstruction.

Conference agreements to be public documents 5.25 Conference members have regarded Conference affairs as highly confidential for decades. Until recent years it was general for Conference tariffs to be held as confidential. The shroud of secrecy created by Conference members has been, and still

is, detrimental to the interests of Conferences, government and shippers. With certain exceptions, agreements filed with the Clerk of Shipping Agreements should be available for inspection by the public and copies made available in accordance with conditions specified by regulation.

5.26 Conference agreements should be permitted when they are in the interests of the provision of efficient liner services. There is, therefore, good reason for the shippers served by the agreements as well as for government to be knowledgeable of them. In the absence of knowledge of the actual Conference agreements, shippers, concerned with

the efficiency of liner shipping, must guess at the precise content of agreements. Knowledgeable persons are aware of the main elements of the agreements. They do not know the details to their satisfaction and they are suspicious of Conference agreements because of components of agreements which they suspect could be there.

5.27 While Conference agreements are not now available to the public, they may be used by the Minister for Transport in the proceedings before a Tribunal under the Act. Therefore, and as follows from the requirement for Conference agreements to be filed and to be liable to disapproval under sub-section 123 (1), they may be the focus of a

Tribunal hearing and may be made available to a Tribunal. The Act does not require the Tribunal to keep the information confidential.

5.28 The importance attached to the secrecy of their agreements by Conference members seems misplaced. The mere tradition of secrecy appears to play a considerable part in the adherence of shipping lines to the view that secrecy is necessary. Some lines fear the misuse or misinterpretation of agreements by poorly

informed persons. This possibility exists but appears no greater problem than the misrepresentation of Conference agreements based on information which itself may be

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incorrect. The expectations of opponents to Conferences about the contents of agreements can be more damaging to Conferences than the actual content of the agreements.

5.29 Conference members argue that the agreements affect their commercial affairs and should be confidential to them. This ignores the fact that the cartels are given the right to exist as long as their agreements are in the public interest. It is not regarded as a right in the private interest.

5.30 Conference members also seem to exaggerate the commercial value of the agreements to non-conference lines and to shippers. Both of these parties are well aware, in a general way, of the existing provisions of Conference agreements and use this information in the conduct of their affairs. For example, shippers are well aware

of lines party to an agreement who may wish to expand the services they offer, but who are restricted from doing so by the Conference agreement. Shippers may use this knowledge during negotiations of rate or service matters.

5.31 Conference members often claim the need for confidentiality of their agreements as though Conference members themselves held strictly to the rules of confidentiality. This is often not the case. Further, the public nature of Conference agreements filed with the Federal Maritime Commission in the USA has not been shown to have

detrimental effects on owners. However, it seems possible that some aspects of arrangements which non-American lines regard as purely commercial matters may not, in fact, be filed.

5.32 The requirement to file arrangements pertaining to those matters listed un section 113 and maintaining these as public documents does raise a problem in respect of agreements which fall under this section of the Act but which are concerned with commercial arrangements affecting consortia arrangements in the finance and running of ships. Unfortunately, there is no clear dividing line between a Conference constitution, which may be likened to corporate Articles of Association, and consortia

arrangements which might deal largely with financing and related commercial arrangements. Therefore, although Conferences enjoy the unusual right to enter into agreements normally considered to lessen competition because of the special conditions applying to international shipping, it does not seem necessary nor practical to require that A LL matters of agreement must be public. However, since it is Conference lines which enjoy the right of exemptions from provisions of Part IV, it is recommended that the procedures for filing agreements permit Conference members to

request the Minister for Transport to allow certain provisions o f agreements to remain confidential. Information on the number and general type of agreements or provisions in agreements allowed to remain confidential should be reported by the Minister annually. '

5.33 It is recommended that agreements between shipowners coming under section 113 o f the Act be filed with the Clerk o f Shipping Agreements and, with exceptions approved by the Minister for Transport, be held open for inspection by the public and copies be made available to the public under terms and conditions established by the Minister.

The right of independent rate action by Conference members 5.34 At the present time the content of Conference agreements is a matter for shipowners to decide, subject to disapproval of agreements by the Governor-General under section 123 of the Act. This procedure is not adequate as some provisions of agreements may be needed to ensure the efficient operation of a Conference, but lines may not introduce such provisions themselves. One such provision is the right of independent rate action. It is recommended that, subject to exemptions granted by the

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Minister for Transport in respect o f Conferences with effective cargo, revenue or profit pooling arrangements between members, Conference agreements be required to grant member lines the right to take independent rate action after giving due notice to parties to the Conference agreement.

5.35 Permitting Conferences allows the role of competition to be suppressed in the interests of the rationalisation of liner services. Rationalised sailing schedules and shipping capacity should produce the most efficient service possible. Unfortunately, not all of the practices of shipowners can be prescribed by government nor can private (or public) monopolies be guaranteed to respond efficiently to the complex and

dynamic conditions of world markets. Some of the inefficiencies which may occur in conferences could be avoided by shipowners party to Conference agreements retaining the right to independent rate action. The feasibility of this measure is supported by its working presently in Australian trades to the USA, by the workability of independent

rate action in American railway freight bureaux and by theoretical consideration of the working of dynamic competition in shipping Conferences.

5.36 The right of lines to take independent rate action on seven and two days notice respectively exists in the current agreements of two Australian Conferences; they are the Australian-Eastern USA Shipping Conference and the Australian-Pacific Rate

Agreement Conference respectively. In the former Conference independent rate action has been taken by Refrigerated Express Lines to reduce non-container rates on meat. The Conferences have two important features. First, they are open Conferences, as required by American law, and lack pooling agreements. Secondly, they are composed

of lines some of which operate differentiated services in terms of ports of call and the degree of containerisation. Both of these features are compatible with and conducive to independent rate action.

5.37 Somewhat analogous with right of independent rate action in Conferences is the legal requirement in the USA that railway rate bureaux give their members the right of independent rate action. These bureaux, like shipping Conferences, are exempted from American anti-trust provisions prohibiting collusive pricing because of the potential benefit from collective pricing in the case of railways. Independent rate action is not

often taken by member lines but it is not uncommon. The practice does not give rise to rate wars but it does result in a responsiveness to various competitive conditions which would not be possible if all rates were set on the basis of a majority vote between member lines.

5.38 The examples provided by American railways and some shipping Conferences are in accord with rate action which may be expected as a result of dynamic competition in shipping. Shipping lines in Conferences today operate capital intensive ships and their owners recognise clearly the need for long run stability of rates and

services. Owners are not likely to engage in reckless rate cutting in response to shippers attempting to play off one carrier against another. Shipowners recognise that the result would be a gradual erosion of the rate structure. Indeed, even quite loose rate agreements between shipowners may be quite stable as owners resist efforts of shippers

to play one line off against another. The present rate agreement to the US West Coast is a good example. Under wiud conditions, then, is the right of independent rate action likely to be used and why is it advantageous?

5.39 First, when shipping lines produce non-homogeneous services, lack of know­ ledge or attempts to preserve a competitive position can result in a reluctance to allow rate differentials. For example, container lines may not vote for palletisation allowances in freight rates; conversely, non-container lines may not vote for container

allowances. The maintenance of a position may not be economic but may be forced by

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reliance on rates determined by voting procedures. Then the only means by which the economic and competitive forces can be worked out is if the forces are strong enough for lines to withdraw from a Conference. Because of the important consequences of withdrawal from a Conference, responsiveness may, at best, be delayed. One example where a line withdrew from a Conference to respond to special competitive conditions with price action, was the withdrawal of Knutsen Line from AUSMACON in January,

1976. '

5.40 Secondly, the right of independent rate action may be a desirable check on the excesses of service competition in Conferences. In the absence of rate competition, shipowners compete on the basis of service. This may result in excess capacity to the overall detriment of shipowners and shippers. Outside the Australian trade, such excesses may have developed to the point where a Conference broke down and a disruptive rate war was necessary to force weaker lines to withdraw and to enable capacity to be matched to the needs of the trade. The events in the Australia to US East

Coast and Gulf trade had some similarity in 1975 with such a pattern of events. In general, however, the pressure exerted by Australian shippers has avoided the worst problems of excess capacity. Nevertheless, the right of independent action by lines would provide for the working of earlier checks to the development of excess capacity and, to that extent, would provide for stable and efficient Conference arrangements.

5.41 The right of independent rate action need not be actually used to be an effective feature of a Conference agreement. The right provides a legal means by which a line may respond to economic conditions. The willingness of a line to act unilaterally will often but not always be sufficient to lead the Conference to agree to the action1 in question, thereby making unilateral action unnecessary.

5.42 Independent rate action is not consistent with the efficient working of all Conference agreements. It is only possible when shipowners have not entered into explicit agreements for the sharing of traffic, revenue or profits. Open Conferences do not have such agreements. Therefore, the right of independent rate action should be a clause in all open Conferences. Closed Conferences may merely control the sailing rights of new members and give other members unlimited rights. In such a Conference the right of independent rate action would be desirable. In some closed Conferences a pooling agreement may apply only to the major commodity or commodities. With the exception of commodities subject to pooling agreements, independent rate action should be permitted.

5.43 For closed Conferences which may practice some traffic pooling or sharing arrangements, it is not practical to prescribe precise conditions under which the right of independent action would be inappropriate. Determination of whether the right is necessary in a closed Conference agreement must be left to the judgement of the Minister for Transport.

Control of shipowners’ practices pursuant to Conference agreements 5.44 The objective of the Government in allowing the operation of Conferences in overseas shipping is to enable the provision of more efficient shipping services than would otherwise be possible. To ensure that this is achieved requires not only that the form of Conference agreements is consistent with efficient operation in the public interest, but that the actions of lines under these agreements are consistent with the long-run efficiency of liner shipping.

5.45 The Government must retain general powers in respect of Conference agreements because it is not possible to anticipate all of the requirements for the practices of shipowners, acting pursuant to Conference agreements, to be consistent

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with the provision of efficient overseas cargo shipping. It is conceivable that the actions of lines under sections allowed in Conference agreements will be different from that expected. It is not necessary for the Government to maintain an elaborate and active regulatory body but it must have the legal authority to investigate, on complaint by shippers or carriers or at the Government’s own initiative, actions by lines pursuant to

Conference agreements and contrary to efficient shipping operations.

5.46 This “ reserve power” of Government should rest on the power of the Minister to disapprove a Conference agreement, i.e. in lieu of present power vested in the Governor-General. It is not appropriate to establish a system of fines for unspecified actions. In reality, any problems arising are likely to be minor and resolvable through

discussions between the Minister for Transport and Conference lines. It is recommended that the provisions in sections 123 and 129 be retained but that ‘Minister be substituted for ‘Governor-General’ and that reference to the Tribunal be deleted.

The control of entry into closed Conferences 5.47 Shipowners party to Conference agreements prefer a minimum of regulation and government intervention. They are particularly concerned that any weakening of their control over the entry of new lines would threaten the protection which they enjoy

currently in their investment in ships. Shipowners may argue that in a closed conference with rationalised tonnage they are more vulnerable to the conditions of competition than in an open Conference where surplus capacity may be maintained by Conference lines. However, the Conference with the rationalised service should be in

the best position to deter competition as long as the Conference rates reflect the reduced costs enabled by rationalisation.

5.48 The concern of shipowners about the actions of governments, whose political life is much shorter than the economic life of the companies’ investments in ships, is not unreasonable. Nevertheless, it is not appropriate for the right to control entry into a closed Conference to rest solely with existing member lines. It is natural that existing

lines would protect their share of a trade by rejecting new members, hence the need for potential new members to have considerable economic strength. However, a new member even though rejected by existing lines may be desirable to the trade for many reasons. The line may bring in needed capacity, may add a new and desirable level of

competition or may introduce a type of service not available currently. In such circumstances, it is likely that a line’s application would be supported by a wide range of shippers. However, a new service may also be supported by a certain group of shippers while rejected by the majority of shippers.

5.49 It is recommended that where the entry o f a new line into a closed Conference is rejected by the Conference members but supported by the Australian Shippers’ Council, the Minister undertake an inquiry into the matter. The requirement of endorsement of the line’s entry into the Conference by the ASC provides for a sufficient spectrum of

shipper interests to give adequate protection against poor judgement by a small group of shippers and even by Government alone.

The filing of information in Australia

5.50 The presentation of well documented cases by shipping lines or by Conferences to the Government and/or to relevant shipper bodies requires the availability of adequate data. Government, in seeking to ensure that decisions are made consistent with the need for efficient shipping services, may need Conferences and/or lines to

provide information to it. To ensure that information is available within a reasonable time period requires that shipping lines doing business in Australia, under exemption

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from restraint of trade practices, maintain in Australia information prescribed by the Government.

5.51 It is recommended that shipowners providing liner services to or from Australia be required to maintain and to make available to the Minister on request appropriate records in Australia o f schedules o f services and o f tonnages o f cargo discharged and loaded at Australian ports. Greater flexibility concerning the information to be kept in Australia may be realised if the requirements are prescribed by regulations rather than specified in the Act.

Ensuring effective negotiation of rates and service matters 5.52 The conduct of the ASC with respect to negotiations is considered in detail in Chapter 8. Therefore, only the general principles guiding the responsibilities of shipowners acting pursuant to Conference agreements are considered here.

5.53 The requirement that Conferences negotiate with the ASC is a logical legal requirement of Conferences. It establishes the minimum level of negotiation. The requirement should not preclude other negotiations being carried on, if in the commercial interests of the shipper(s) and the line(s) of Conference involved. However, effective negotiations by the ASC should reduce substantially the need for separate negotiations by special interest groups.

5.54 The working of section 122 of the Act is satisfactory in establishing the obligation of shipowners, party to Conference agreements, to negotiate with the ASC. However, it is claimed by several shippers that Conferences may refuse to negotiate with them because all negotiation must take place with the ASC. To avoid the possibility of any ambiguity it is recommended that the requirement o f Conference members to negotiate with the designated shipper body be retained as set down in section 122 o f the Act but that a clause be added to establish that other negotiations may be conducted also, subject to the following conditions: Conference members must notify the Minister for Transport o f their intention to negotiate with shippers separately from the designated shipper body where a significant proportion o f the outward cargo in a trade route would be affected' i f the basis for separate negotiation is likely to have a material effect on the efficiency o f services offered, the Minister shall be so informed: any resulting agreement shall not come into effect until the Minister fo r Transport is satisfied that implementation o f the agreement is in the national interest.

5.55 There are three purposes in this recommendation. The first is to provide for and to encourage the conduct of negotiations through a national organisation, the ASC, as the most effective framework for negotiations. The second is to ensure that negotiations separate from the ASC may be conducted when warranted. The third is to provide the Minister for Transport with the authority to prevent rate and service conditions being negotiated by major sectors of a trade to the detriment of shippers in general. In practice, this provision would most likely apply to meat and wool whose control over freight arrangements could bring about changes in shipping in such a way as to impose unnecessary costs on other shippers. It is also possible that the negotiated results may meet the interest of some commodity group but may not reflect adequately the long-run needs of exporters, processors and/or producers.

5.56 Negotiations “separate from the designated shipper body” are negotiations which have not been approved by and/or the results not approved by, the designated shipper body. It is recognised that effective negotiation by the ASC may call for meetings between Conferences and groups of shippers. As long as these negotiations

are carried on as a part of the overall strategy for negotiation established by the ASC, the possibility of errors and diseconomies for shipping are insufficient to warrant

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government intervention. However, if a commodity, representing a significant part of a trade, carries out negotiations separately from the ASC, the chance of errors and diseconomies is sufficiently great to warrant direct government control of the results.

5.57 The presence of a representative of the Minister for Transport at negotiations, held under section 122, as in the past is supported by shippers and shipowners. It is acknowledged that it is the only effective way for the Government to be knowledgeable about the conduct of, and arguments in, negotiations. The representative of the

Minister reports to the Minister on negotiations. Such reports should be of value to the Minister in considering what, if any, action is appropriate if negotiations are conducted without agreement, an event which must be considered inevitable and reasonable on occasion.

5.58 The representative should not be expected to play the role of an arbitrator or a conciliator. In practice, however, it is acknowledged by shippers and carriers that the Minister’s representative is able to assist with the progress of negotiations from time to

time. The working of the negotiating system is considered in detail in Chapter 8.

Shipper/carrier rate agreements 5.59 Shipper/carrier agreements are largely matters for commercial negotiation. However, experience in Australia and elsewhere has shown that the agreements can strengthen Conferences’ monopoly power unduly.

5.60 The agreements normaly require shippers to ship their cargo entirely by Conference vessels, thereby preventing a shipper from using a competing service for the duration of the contract except when the shipper’s reasonable needs cannot be met by Conference vessels. The provisions of agreements affecting the use of non­ conference vessels are important. The terms of the agreement should be stringent

enough to protect the Conference lines and to enable them to rationalise their services. However, they should not be so stringent as to force shippers to rely on Conference vessels when the service provided is unreasonably low.

5.61 A typical clause governing the use of the Conference vessel is the following clause from Form “A”—General Cargo, Memorandum of Agreement of the Australia to Europe Shipping Conference. “5(a) In consideration of the foregoing the Shipper agrees to confine all its

shipments of Conference Cargo (including those of its Principals and/or Subsidiaries) to vessels provided by the Members of the Conference therefor and further agrees not to make directly or indirectly any such shipment by

any vessels other than those provided by the Conference except with its concurrence which shall not be unreasonably withheld and in the event of a dispute the matter shall be referred for decision to the Conference and ASC. (b) In agreeing to confine all its shipments of Conference Cargo to vessels

provided by Members of the Conference, the Shipper undertakes to do so without evasion or subterfuge either directly or indirectly by any means including the use of intermediaries of persons firms or entities affiliated with or related to the Shipper.” 5.62 In the event of a dispute over the use of non-conference shipping which cannot

be settled directly by the Conference and the ASC, the Memorandum of Agreement provides for the dispute to go to arbitration in Sydney.

5.63 In general, the dispensation system has worked well and given rise to few complaints by shippers. However, in view of the difficulty of policing the agreement, Conferences do not normally pursue shipper use of non-conference lines vigorously,

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except when competition from non-conference lines and/or the volume of cargo affected are important. The wording of the shipper/carrier agreements appears to ensure that a shipper is only obliged to use the Conference service when it is reasonably available. This is essential.

5.64 Not all shipper/carrier agreements have the same wording. The Sub­ committees and the Council of the ASC are aware of the problems that can arise as well as the advantages to shippers of reference of disputes to the ASC prior to arbitration. The desire to have the ASC intercede on a shipper’s behalf has to be offset against delays which this might incur and the possible preference of an individual shipper to rely upon arbitration. Possible difficulties for the ASC in being called upon to agree that there has been a breach of the agreement have also to be considered.

5.65 Not all shippers using Conference services are required to sign shipper/carrier contracts. Some commodities, such as grains, are mainly bulk cargoes. Only small, speciality parcels of grain are carried by liner vessels. The rates charged must reflect current market conditions and the rates are normally “open” for the individual lines to charge the best rate that they can,

5.66 However, it is believed to be not uncommon for lines to have dual rates and to give shippers the contract rate without requiring the signing of a loyalty contract. Flexibility in the administration of the dual rate system can have advantages for the small infrequent shipper who may be given the contract rate without being a party to a contract. Nevertheless, shippers who have signed contracts and may incur some

inconvenience in confining their cargoes to Conference vessels, may feel discriminated against by lines allowing some shippers to enjoy contract rates, without contractual obligations to confine relevant freight to Conference vessels.

5.67 Policing the operation of the dual rate shipper/carrier contracts is not a matter which can be dealt with effectively by government regulation. To the extent that problems exist they would be dealt with best through the ASC. However, at paragraph

5.15 it has been recommended that the Minister have certain powers to intercede when shipowners are taking undue advantage of the power they may have in a trade.

Monitoring the efficiency of liner services 5.68 The responsibility of the government for liner shipping, requires it to monitor the general efficiency of liner services. At the present time, while the government assumes this responsibility, the study of and negotiation with Conference members of matters affecting efficiency are left primarily to shippers. While any aspect of the conduct of shipowners party to a Conference agreement may be a matter relevant under section 123, a frequent matter of concern to shippers is the appropriateness of

the shipping capacity provided. During boom periods in trade, there may be some difficulties which arise from the shortage of shipping capacity. At these times shippers are allowed to use non-conference ships. But the major and recurring concern of shippers is that excess capacity is maintained by Conference lines to the detriment of shippers. Since the provision of excess capacity is also recognised in theoretical studies as being the greatest weakness in the economics of the Conference system, it is a matter which deserves the special attention of the Government. The use of capital intensive container ships and slot chartering to serve peak traffic needs is not likely to bring to an end the issue of capacity in the provision of liner services.

5.69 Therefore, it is recommended that Conference members and the designated shipper body should be required to report separately and annually to the Minister for Transport on the state o f liner shipping capacity in the past year and their expectations fo r the

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co m in g y e a r . The reports should indicate any special problems and describe any special

studies which have been conducted.

5.70 The performance of economic studies of liner shipping within Australia is important. Studies designed to show the theoretical optimum capacity of shipping for a trade route must be used with care and considerable judgement. However, if used properly, computer models can contribute to the analysis of problems in relation to past or future capacity requirements. This was demonstrated in the study of the

Australia/Europe trade carried out by the Department of Trade and Industry in 1962­ 64.

5.71 The understanding gained from such analyses of the relationships between the level of service, variability of cargo volumes and costs, is extremely valuable. While such studies are not warranted on all trade routes, i t is r e c o m m e n d e d th a t r e s o u r c e s b e d e v o te d to a p r o g r a m o f c o m p u te r b a s e d s tu d ie s o f th e e c o n o m ic s o f lin e r s e r v ic e s on m a jo r

ro u te s.

5.72 The need for research in both the Department of Transport and the ASC is considered further later in this Chapter and in subsequent Chapters.

INWARD SHIPPING

5.73 Inward and outward liner shipping must have similar exemptions from Part IV of the Act if the Conference system is to operate. This is the present practice under Part X of the Act although the application of this part of the Act to inward Conferences is of doubtful legality in view of the interpretation of sections 112 and 113. I t is

r e c o m m e n d e d th a t th is u n c e r ta in ty b e re m o v e d .

5.74 However, while inward Conferences need to be permitted, it is less easy to control their practices than the practices of outward Conferences. The Conference offices are overseas and shipping contracts are frequently entered into by the overseas shippers of goods. Further, foreign shippers and governments, concerned with

overseas shipping, take an active interest in their outward (Australian inward) freighting arrangements. If all governments attempted to exercise equal power over inward and outward Conferences, choas would result. However, the matter is not easily resolved because the efficiency of liner shipping is fundamentally dependent on

round-voyage analysis.

The economics of round-voyage analysis 5.75 Some of the issues associated with the use of round-voyage data by shippers arise from a misunderstanding of the appropriate use of the data. Analysis of round- voyage data is essential for an adequate assessment of the efficiency of Conferences in

meeting the capacity requirements between ranges of ports. It is, also, the necessary framework forjudging whether the level of profit from the trade is at a reasonable level or whether the Conference is taking advantage of cartel organisation to earn monopoly profits. The requirement for round-voyage data is for sufficient data to be provided to enable the reasonableness of capacity to be assessed and for assurance to be gained that

overall profits are not excessive.

5.76 Round-voyage data have no relevance to rate making on any one voyage leg once the directional pattern in the utilisation of vessel capacity has been established and as long as Conference lines are not earning excess profits. The necessity of round- voyage data for the effective negotiation of specific freight rates is a fiction arising from the mistaken notion that in liner shipping rates can be related to some accounting

51

apportionment of costs. Rates are and should be related to the need of commodities for particular rates if they are to move by Conference ships, subject only to the rates covering their direct relevant costs, including the costs of ship time and capacity as appropriate.

5.77 For Australian shipping policy to function effectively, Conferences must agree to the provision of sufficient information to achieve these ends. The mechanics of such an information system and its effective implementation can be expected to be difficult because of the complexities of trading patterns and the difficulties of international arrangements.

5.78 Certain governments including those of the UK and West Germany have passed laws prohibiting the provision of certain shipping information without the approval of the governments of those countries. The Federal Maritime Commission of the USA has encountered strong resistance to the provision of information under American law. No way is seen, which is likely to be successful, of compelling the provision of round- voyage data, including traffic, costs and revenue. Therefore, the practical question is whether Conferences will provide sufficient information which, when combined with information from other sources, will be sufficient to satisfy the protection of Australian

interests in efficient liner shipping. On the basis of past experience, the availability of inward and outward cargoes and sailing schedules from the Conferences, the insight into Conference affairs provided by ANL to the Minister and ongoing research by the ASC and Department of Transport, it is reasonable to conclude that sufficient knowledge of the utilisation and profitability of Conference services can be maintained in Australia for the effective working of Australian shipping policy. The earning :of unreasonable profits by shipowners in Conferences is not a sufficient issue to warrant confrontations with other countries to achieve marginal imporvements in the analysis of the profitability of shipowners.

Control of inward Conferences 5.79 As a practical matter it seems neither necessary nor feasible for Australia to extend its influence significantly over the organisation and practices of inward

Conferences. The rates on most imported commodities are negotiated by exporters overseas and there is little evident interest among Australian importers in developing sophisticated Australian organisations for the negotiation of rates.

5.80 The requirements which should be imposed on shipowners party to inward Conference agreements is for their agreements to be filed with the Clerk of Shipping Agreements and for records of inward cargoes and schedules to be retained in Australia. Agreements filed should be held as public documents except for documents

granted a confidential status in the same way as outward agreements. It is recommended accordingly.

5.81 The absence of a national commercial organisation to represent the interests of importers with Conference lines places an obligation on government and government instrumentalities to provide advice and assistance to importers. This role cannot reasonably be played by the ASC because of its funding and its greater competence in dealing with matters affecting all or groups of exporters rather than any particular firm’s interests. The concern of importers are more often specific corporate or regional matters rather than being national in scope.

5.82 Although the Government may lack explicit powers over inward Conferences, the practical realities are that the powers of Government with respect to outward Conferences can be used to induce shipowners to make changes in inward services should such be warranted. The essential integrity of the economics of inward and

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outward shipping provide the Government with the right and power to bring about changes inward. For example, the necessary level of participation of an efficient Australian flag line in an outward trade is influenced by the share of the inward trade carried by the line. In the absence of a sufficient share of inward trade, claims could be

laid for a more significant share of the outward trade. The wording of section 123(l)(c)(iii) is consistent with the negotiation with a Conference along these lines.

5.83 Although inward and outward membership of Conferences serving a trade route may differ slightly, sufficient similarity exists to ensure that an inward Conference cannot ignore the concerns of Australian shippers and the power of the

Australian Government.

GOVERNMENT INTERVENTION

5.84 Government influence over shipowners rests on the ultimate power of the Government to impose penalties. These may take the form of fines or the requirement that certain actions shall or shall not be undertaken. Shipping lines wishing to

participate in Australian trade must abide by these conditions. There is no doubt about the desire of foreign shipowners to serve the Australian trade so that, while the Government cannot simply impose any of its wishes on shipowners, it has the capacity to exercise reasonable choice about the conditions under which shipping is provided.

5.85 As previously stated, the objective of government action is to enhance the efficiency of liner shipping. The measures required vary with the changing circumstances in shipping. Therefore, it is necessary to examine both the criteria for the exercise of government powers and the powers themselves in respect of shipowners

providing liner services.

Efficiency criterion for Government intervention 5.86 The concept of efficiency must be clearly defined for it to be acceptable as the basis for Government intervention. This does not require that the definition be simple or static. On the contrary it must be one applicable to a wide variety of dynamic

conditions. It has been recommended that an efficient service on a route be defined as one in which the right ships for the trade are well managed, and the ships and methods of operation provide a frequency and quality of service at rates consistent with the

value of service to the shippers while enabling the shipowner(s) to earn a reasonable rate of return in the long run. ·

5.87 A service to which this definition applies, may be the service of a single shipowner or the service provided by a number of shipowners whether acting pursuant to a Conference agreement or not. Where a number of shipowners are providing the service both the average rate of return and the range of returns earned by the

shipowners are important. It must be expected that a range of returns will exist. In view of the potential for inefficiencies in business practices, either with or without Conference agreements, it is possible that the average rate of return may be reasonable but the range of returns unreasonable. This possibility is most likely where constraints

on competition by a Conference enable the operation of firms with very low and very high returns. Many factors in a trade may contribute to a range of returns so that the reasonableness of the range of returns can only be judged in the light of those conditions.

5.88 In theory, the efficiency of a service could be subject to precise measurement but in practice it is a matter of judgement. The use of judgement and not precise

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measurement to determine whether a policy objective is being achieved is com­ monplace.

5.89 The application of the efficiency criterion to Conferences by government is particularly difficult for four reasons. First, the objective of efficiency is not shared by shipowners and shippers who seek the maximisation of their own profits and are only concerned with the welfare of each other to the extent necessary for their own self interest. The objective of efficiency requires that each party earn a reasonable rate of return for a trade to be viable, but the Government in seeking efficiency may be seen as

acting in conflict with the interests of some or all shippers or shipowners. Since the Government does not have ultimate responsibility for the allocation of resources to shipping or exporting industries, government must be cautious in enforcing what it perceives as efficiency solutions to problems. Secondly, the precise measurement of the influence of any one change in shipping service on efficiency is difficult. For example, the costs and benefits of a shipping service every eight days rather than every six days are difficult to determine. Thirdly, the demand and supply circumstances of liner shipping are complex and dynamic. Therefore, any judgement about efficiency must take into account variations in many factors which have taken place in the past and may take place in the future. Fourthly, explicit measurement and Australian regulation of the rate of return earned by foreign shipowners is not possible. Attempts by the U.S.A. to get information on the returns of foreign shipowners have been countered by the passage of legislation in some maritime countries preventing the provision of such information. However, the inability to apply explicit constraints on rates of return does not deny the applicability of the concept of efficiency as defined. What this constraint on the application of the principle makes clear is the importance of multi-faceted research into the operation of liner services.

5.90 All of these circumstances make the precise measurement of efficiency impossible but make the exercise of judgement about efficiency imperative. The difficulty of measuring efficiency increases the need for efforts to monitor efficiency when international cartels are permitted to affect business in Australia.

Research and the efficiency criterion 5.91 In spite of the difficulties in pursuing efficiency, measures can be taken to enhance efficiency. In the past this has been done by bringing about the publication of Conference tariffs and by requiring shipowners to negotiate with shippers on rate and service matters. Improvements in the processes to achieve efficiency can be realised now from the lessons of the way the system has worked in the past. The requirement is for the Government to increase its ability to analyse and respond to problems of concern to shippers and shipowners. The Australia-East Coast U.S.A. inquiry in 1975 demonstrated the need for increased resources to be devoted to research.

5.92 The research programs recommended are twofold: first, to assist the ASC develop and maintain economic analyses of ship capacities on major trade routes and the costs of current and potential shipping services; and secondly, to maintain a staff within the Department of Transport responsible for shipping studies.

5.93 The rationale for the two programs rests on the desirability of developing an effective research function in both the ASC and the Department of Transport. The separation of research functions between the ASC and the Department of Transport is somewhat artificial but should be workable.

5.94 To evaluate the efficiency of liner shipping requires studies of conditions over a period of time with the co-operation of shipowners. Studies of at least one route should be carried out by the Department each year. They should be related closely to the work

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of the ASC in the monitoring of Conference efficiency and in the negotiation of rates and service levels. The studies require the views of shippers and the results must be evaluated by shippers. The results of studies by the ASC should be available to the Department of Transport (Other research functions of the ASC are considered in

Chapter 9).

5.95 The Department of Transport must have staff devoted to research and to administrative functions to be able to advise the Minister. The research staff should be responsible for special studies undertaken at the initiative of the Department or, if appropriate, at the request of shippers and/or shipowners. Matters studied by the

Department would generally be ones affecting policies adopted in relation to the efficiency of shipping. Examples of studies are, the economics of trans-shipment rather than direct services to Europe or the UK, the economics of centralisation procedures and charges in Australia, berthing rights in a closed Conference, the demand for non­ container shipping, the problems or cargo handling and documentation, the effects of regional differences in freight rates on Australian industries, the economic con­ sequences of international trade and/or shipping agreements, and the role of ANL in

international trade. Obviously some of the studies have been, or are being undertaken. The Bureau of Transport Economics would undertake some of the studies and is in fact currently studying centralisation in the outwards trades.

5.96 A recommendation for research does not state a clear cut criterion of when government action is necessary. Such a criterion does not exist. What a research program should provide when working in conjunction with the administrative and policy staff is the rationale for intervention, recommended courses of action for

affected parties and a statement of the expected consequences of these actions.

Government powers 5.97 The legislative powers of government are necessary to improve the framework within which businesses function and to control the working of businesses. This is true for all commercial activities and not just for international shipping. However, limits

exist on the ability of the Government to alter the provision of goods and services through the private sector of the economy. The final limit, short of the Government subsidising private companies, is the commercial viability of the enterprises. In some circumstances subsidies may be necessary to achieve desired output and service levels,

but, neither through commercial negotiations, Government fines, nor restrictions on any requirements of business behaviour, can firms be required to operate at a loss.

5.98 In the realm of international shipping the ability of the Australian Government to control liner shipping is more limited than in purely domestic businesses. The international nature of shipping means that shipowners are potentially subject to the jurisdiction of more than one government. Therefore, measures proposed by

Australia must have regard to the views of, and potential for reaction from, foreign governments. This is made all the more important because of the tradition of freedom of shipping from government interference so that the intrusion of government is a matter likely to attract considerable publicity.

5.99 Firms in international shipping also can escape the legislation of Australia more readily than a domestic firm. Both the nature of their assets and the international nature of shipping suggest that it is more likely for a shipping firm to transfer some or all of its resources to shipping, or some other business, outside Australia than it is for a

domestic firm to leave Australia. To the extent that serving Australia’s shipping needs become less profitable than serving the needs of other countries, shipowners could be expected to shift resources from serving Australian trade to serving other trades. In

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practice, this does not mean that Australia is powerless to influence the provision of liner shipping.

5 .1 0 0 The powers of government rest on the desire of s h i p o w n e r s t o participate in Australian trade because it is profitable to do so. Measures of government to enhance the efficiency of overseas cargo shipping services may bring benefits to shipping lines and to this extent would be welcomed by them. Measures which increase the efficiency of services but which diminish their profitability, could be accepted as long as profits remain at adequate levels. Shipowners and shippers could be expected to resist measures forcing up the costs of shipping.

5.101 The first part of this chapter included recommendations for the control of Conference agreements and of shipowners’ practices pursuant to Conference agreements. I t is r e c o m m e n d e d th a t th e r e s p o n s ib ilitie s o f g o v e r n m e n t w ith r e s p e c t to sh ip o w n e r s in C o n fe r e n c e s b e s e t d o w n m o r e e x p li c it ly th a n th e y a r e in th e c u r r e n t

le g is la tio n . This would provide the Government with more effective powers than it possesses at present. Powers in addition to those currently available are recommended. The power of the Government to disapprove a Conference agreement and subject shipowners to regulations against the lessening of competition is a desirable power. It is sometimes suggested that the power to disapprove a Conference agreement is never an effective power for the Australian Government. This Report disagrees with that view.

5.102 Australia seeks to control the provision of cargo shipping services so that the best practicable services are made available. This does not mean that Conference systems of the choosing of some lines are desirable. Conference agreements can be to the detriment of shippers and, at times, of some shipowners as well. '

5.103 Disapproval of a Conference agreement and prohibition of agreements and practices lessening competition may produce an environment detrimental to the interests of shippers. Two questions are vital, therefore. Is the operation of lines in open competition worse than an “imperfect” Conference? Are the lines likely to form a new Conference more compatible with the needs of the trade? No single answer is possible to either question.

5.104 It is not possible to predict precisely the conditions under which the Government may disapprove a Conference agreement. It is hoped that other recommendations in this report, particularly the right of lines to take independent rate action, will make disapproval unnecessary. Nevertheless, the power should be retained for use in situations where it may be desirable to hasten the working of competitive forces by disapproval of a Conference agreement.

5.105 Even without government intervention the operation of Conferences can break down; aggressive lines finally find it necessary to take independent action. This may occur when a new or old line has developed a competitive advantage in costs or service from which it can benefit insufficiently because of Conference restrictions. It may also

occur when a trade becomes over-tonnaged so that profits become unneccessarily low. In any of these situations, sufficient reallocation of traffic volumes may only be achievable within a reasonable time period by open competition. The change may not necessarily be brought about by government action affecting the details of Conference agreements. On many occasions the mere threat of a line’s withdrawal from a

Conference is sufficient to bring about an acceptable compromise. The history of Conferences suggests that following a period of active competition a new Conference would form, better adjusted to the needs of the trade.

5.106 In the event of likely concerns about under or over capacity, inadequate service levels or unwillingness or inability to reach shipper/carrier agreements on rates, there are n o r e a s o n s t o believe that new Conference agreements would not be made. The

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experience of revised Conference arrangements in the trade to the east coast of North America which evolved in 1976 following the breakdown of the Conference as a result of the actions by the Meat Board, is of the type to be expected.

SUMMARY AND GENERAL CONCLUSIONS

5.107 The responsibilities of government for the control of Conference agreements and practices as laid down in the present Act are generally correct. However, insufficient detail has been developed in many aspects of the legislation. This may have arisen, in part, from treating shipping as requiring exemptions from the Trade Practices Act rather than requiring separate legislation.

5.108 Examination of PaC IV of the Act indicates that the present, virtually blanket exemption given to shipping is not warranted. For shipowners to gain exemption for actions otherwise considered to lessen competition, shipowners should file an agreement allowed to go into and remain in effect subject to the approval of the Minister for Transport.

5.109 Government responsibilities with respect to the approval of both provisions in and the working of Conference agreements must be made explicit and the capability of the Government to rule on shipping matters increased. It is important to increase the capability of the Department of Transport and the Australian Shippers’ Council to perform economic research into shipping. Conditions on major trade routes should be the subject of on-going research by the staff of the ASC. To facilitate research and

encourage a better understanding of Conference affairs, Conference agreements filed with the Minister of Transport should be public documents, with exemption to be granted by the Minister on the grounds of the critical commercial nature of the information.

5.110 The performance of research into general aspects of liner shipping must be conducted giving due regard to round-voyage conditions. However, comparisons of inward and outward conditions have no relevance for rate making beyond the implications of capacity and total profitability. No need is evident for the

establishment of an organisation for importers to negotiate freight rates collectively. However, the Minister for Transport should continue to advise and assist importers in their dealings with Conferences.

5.111 Government influence over Conferences is exercised partly through the requirements and conditions proposed in the legislation and partly through the possibilities for intervention by the Minister under the powers provided in the Act. The levying of fines, the right to require certain actions and the power to subject

Conferences to restraint of trade regulations are all important measures available to the Minister.

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C H A PTER 6

NON-CONFERENCE SERVICES

6.1 Liner services in Australian trades are provided predominantly within the Conference system explained in Chapter 2. However, non-conference services are common and their role in shipping services is an important matter in shipping policy. Some of the recommendations in Chapter 5 apply equally to shipowners operating as Conference members and those operating otherwise. This Chapter endeavours to

cover additional matters in respect of individual shipowners.

6.2 There are two main circumstances in which to consider the role of non-conference services. The first is where one or more shipowners are operating on a route without a Conference agreement. The second is where one or more shipowners operate on a route outside and in competition with members of a Conference.

ISSUES ON ROUTES WITHOUT CONFERENCE AGREEMENTS

6.3 Liner services are procided on a number of routes on which only limited demand exists for scheduled shipping services. Single lines alone providing regular services are rare in the Australian trades. One example is the Safocean service to South Africa. Two or more lines provide regular services without a Conference to some Pacific Islarids,

and to Pakistan.

Single line routes 6.4 A shipowner providing liner services on a route without an alternate scheduled service in existence, exercises a strong control over the quality of service and the rates charged. However, like a Conference, the line is constrained by a range of competitive

commodity market conditions and carrier alternatives available to shippers. j Comparable issues exist for the conduct of the single line service as may exist for a j Conference. Does the carrier take undue advantage of the uniqueness of the service to I charge excessive freight rates, to earn excess profits, or to cover inefficiencies? Does the carrier respond to competitive forces, especially market competitive forces in a way which allows the efficient development of the trade? ;:

' " ! ί

6.5 These issues provide the need for government to exercise some powers over the j practices of shipowners in a monopoly position on a route. The present provisions in ; Division 4 of Part X of the Act are generally appropriate to this task. Similar ; requirements are imposed on individual shipowners operating non-conference services |

to those imposed on Conferences under Division 3 of Part X.

6.6 Specific restraints upon “declared shipowners” prohibit certain restrictions on competition with other shipowners. Part X needs to be amended, however, to make it clear that individual shipowners are not also subject to Part IV. It is recommended that section 112 be appropriately amended to extend the exemption from Part IV to individual shipowners acting in accordance with Division 4 but making it clear that those individual shipowners are subject in all respect to Part Xprovisions. Provision is also needed to

substitute more appropriate monetary sanctions in lieu of inquiry by the Trade Practices Tribunal followed by “declaration” by the Governor-General e.g. for failure to notify an address for service of notices and for failure to provide or comply with an undertaking. Consistent with other conclusions and recommendations of this Report it

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is also recommended (in paragraph 5.46) that section 129 be amended to delete any reference to the Tribunal and to substitute “Minister” for “Governor-General”.

6.7 It is sometimes complained that the Act provides no effective sanctions against inefficiencies of non-conference shipowners. Such an owner might not have loyalty arrangements and might do nothing else which he would be prevented from doing if declared under section 129. In these circumstances it must be concluded that there is

little interest in his share of the trade on the part of other, more efficient shipowners. Any additional sanction might well lead to the shipowner’s withdrawal of his service from the trade. Where the trade is served by no other shipowner this could mean no service at all or a more inefficient service.

6.8 In circumstances where a minor trade route is not being efficiently served by a carrier, unresponsive to sanctions under Division 4, it is appropriate for the Government to consider the desirability of developing a competing service by ANL. The threat of such action by ANL may be sufficient to lead to improvements in the

shipowner’s performance.

6.9 Consideration has been given to the unusual circumstance which exists in the Trans-Tasman trade where there is nominally a Conference but the Union Steam Ship Company exercises a virtual monopoly. This is an exceptional situation attributable to the influence of New Zealand trade unions in preventing third flag cross-trading by

foreign shipping. As the freight rates charged by the Union Steam Ship Company in this trade are subject to the approval of the New Zealand authorities, the most appropriate way for the ASC to deal with any difference of view with the company, is to put its point of view to those authorities. If there are matters which the ASC is unable to resolve through its representations, consideration could be given to discussions

between the relevant Australian and New Zealand officials.

Multiple-type non-conference routes 6.10 Where there are multiple-type non-conference routes it could be expected that there would be adequate competition and hence no need to seek undertakings from lines to negotiate with the ASC. There would probably be sufficient incentive for lines

to seek negotiations with shippers for business reasons. This may not be the case, however, and to protect the interests of exporters the way should continue to be left open for undertakings to be sought.

6.11 Experience has shown in the Caribbean trade, and at one time in the Papua-New Guinea trade, that even without a liner Conference agreement, individual shipowners tend to follow common freight rates. There is therefore a need for the ASC to be able to seek negotiations under the Act with the rate leader(s).

LINES IN COMPETITION WITH CONFERENCES

6.12 Non-conference lines operating outside and in competition with a shipping Conference provides benefits tor shippers by serving particular requirements of the trade and stimulating more efficient services by Conference lines. Non-conference lines can provide an important alternative carrier for shippers.

6.13 Some shipowners prefer to operate outside Conferences. For example, Polish Ocean Lines has operated for some years in the Australian/Europe trade route outside the Conference. However, many shipowners operate outside a Conference when they first provide a service on a route. During this period they compete aggressively with

Conference services to gain a share of the trade satisfactory to them. Having

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established a firm position in the trade they may then proceed to negotiate with a Conference for membership from a position of strength. This practice was followed by Orient Overseas Container Line in the East Asia trade.

6.14 During the periods of aggressive competition accusations of inefficient practices may be common. Hidden rate cutting and rebating may be matters of concern to shipowners as lines compete on the basis of short-run conditions while the relative

efficiencies of the competing services are being established.

6.15 During such periods, or in anticipation of them, it is likely that privately owned shipping lines will raise the spectre of state-owned lines competing on non-commercial bases. The example commonly raised is Eastern Bloc shipping lines of which the most prominent in Australian trade is FESCO. However, the issue of subsidisation of lines could apply to lines of other countries and even to privately owned companies receiving either or both operating and capital subsidies.

6.16 The issue of the influence of government subsidised lines on the viability of commercially based services is likely to become more and not less significant in the future. It is conceivable that state-owned or assisted lines could obtain such a large share of a trade as to present a degree of insecurity for shippers. The risk of a state- owned or assisted line withdrawing its service for political reasons at a critical point in time is generally greater than the risk of withdrawal of service for purely commercial reasons.

6.17 It is recommended, therefore, that the Government have powers to intervene where the competition o f a line expanding significantly in a trade is not based on sound commercial practices. Exercise of any such power will be most difficult because of its implications for international relations and because of the difficulty of ascertaining the real nature of the competitive process. Even the most grossly profit minded shipowner

may be accused of uneconomic rate cutting when trying to establish an adequate share of a market.

6.18 Legislation passed in the USA, the United Kingdom and Japan (see Chapter 11 and Appendix VII) provides examples of the kind of powers which could be enacted to enable the Government to take action against foreign discrimination. It is recommended that legislation along the lines o f section 14 o f the United Kingdom Merchant Shipping Act be adopted. This legislation is discussed further in Chapter 11.

NON-LINER SHIPPING

6.19 Representations have been made regarding Australian flag participation in non­ liner services, such as bulk shipping and tankers, in both inwards and outwards trades. Because of the priority given in this study to liner shipping, it has not been practicable to give consideration to these other types of shipping. They are governed by long or short term charter arrangements but may be subject to direct control by exporters or importers in Australia or overseas. There might well be a case for government intervention in this circumstance to ensure more efficient foreign shipping and/or participation by ANL. Intervention may have to be directed towards the importers or exporters responsible for the restrictive arrangements. It is not possible to say from this study whether such intervention should be under Part IV or under Part X of the Trade Practices Act.

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C H A PTER 7

THE ROLE OF ANL

7.1 The Australian Government may influence not only the supply of shipping services through controls and requirements on foreign lines, but may also affect the supply of shipping through participation by ANL, whether subsidised or not. Government policy is to continue to encourage and support entry of Australian flag

ships into both the overseas trade and shipping conferences where this would be economic and efficient/11 There is no real reason in sight at this time for payment of subsidies for ANL’s oversea* liner shipping operations although it has been frequently pointed out that many foreign shipping lines are subsidised directly or indirectly by government in respect of operating costs, purchase of vessels, and taxation provisions.

RELEVANCE OF COSTS

7.2 Many shippers appear to share a concern that ANL, because of costs of Australian crewing, assists Conferences to claim higher freight rates on the basis of average costs of Conference members. This concern does not take into consideration increasing crewing costs of foreign shipping, the lessening importance of crewing costs

relative to capital and other costs of large vessels/21 and possible cost savings in other areas due, for example, to ANL’s relative efficiency, attraction of cargo, or better industrial relations. It fails to take into account the relative profit expectations of a government line vis-a-vis those of risk-taking private foreign shipping investors.

Moreover, appropriate allowance is made in at least some Conference negotiations with the ASC for any higher Australian Flag costs. Most important of all, however, is the failure to perceive that freight rates are, or should be if the ASC operates to most effect, related primarily to market prospects and alternative shipping opportunities.

This is especially so in those outwards trades in which the amount of space is determined by inwards cargo requirements and shipowners are seeking cargo to fill surplus capacity on the outwards leg of each voyage.

CONTRIBUTION TO EFFICIENCY

7.3 There are four specific ways in which the ANL may be of assistance in achieving more efficient overseas liner cargo shipping. Each of these ways can be achieved with ANL competing on commercial terms. The first is through direct influence within a Conference in support of Australian trading interests or by itself meeting special

shipping needs not catered for by a Conference.

7.4 The second way in which ANL may assist the objective of more efficient overseas liner cargo shipping is through influence on foreign shipowners to improve their service rather than risk the entry of ANL services into a trade. Where it can be established that the ANL could provide a mere efficient service, government policy clearly

contemplates that, subject to such other considerations as availability of suitable vessels, capital, and suitable port facilities ANL stands ready to enter the trade. This must represent an incentive to shipowners, especially in smaller but profitable trades.

111 “Liberal and and National Country Parties’ Transport Policy", 1975.

121 “In the early 1970's a new containership cost approximately $30 million and its containers another $6-9 million. The cranes used in loading and unloading the ships cost another $2 million. The total cost for establishing a containership operation on a major American trade route during the early 1970s was estimated to be $120-200 million. The comparable cost of a new breakbulk ship was $10-15 million.” U.S. Justice Department “ Report on the Regulated Ocean Shipping Industry”, 1977.

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7.5 Thirdly, ANL may continue to encourage innovation through the employment of different types of vessels in different trades and adoption of modern cost-saving techniques. The Line’s vehicle deck-container vessels in the Japan trade have set records in cargo handling and its new vehicle deck vessel in the Singapore-West Malaysia trade, in association with other lines employing two similar vessels, will modernise shipping in that trade. In the Asian trades ANL has helped to accelerate the move to containerisation.

7.6 Fourthly, the presence of ANL in overseas shipping affords the Government as well as the Line, a closer insight into the costs and conditions of operating in overseas shipping. This insight is of most value in facilitating policy making and government decisions. It is not available to assist shippers in their negotiations.

7.7 Not only is it difficult to compare directly the costs of one operator with another even within one Conference trading area, but the window afforded by participation of ANL in overseas shipping would be less effective if it were believed by ANL’s partners and by other Conference members that information provided to government was, in turn, provided to the ASC.

7.8 There can be obvious advantages for both shippers and ANL in operating within shipping Conferences rather than being in competition with them. Without going into those advantages, and any disadvantages, it follows that if the national policy towards

negotiation of terms and conditions of outwards liner cargo shipping favours a collective approach, it would be consistent that ANL should work for efficiency from within Conferences. There should always be avenues, however, for ANL to.be available to serve significant special interests, if necessary operating outside a Conference.

RIGHT OF ENTRY INTO OVERSEAS CARGO SHIPPING 7.9 It is concluded from these arguments regarding the possibility of ANL assisting the achievement of more efficient shipping, and the stated Government policy regarding entry of Australian flag ships into overseas trade and shipping Conferences, that legislation should continue to protect the right of entry of an efficient Australian flag shipping operator into overseas cargo shipping to a reasonable extent. In Chapter 12, which considers international developments in shipping, attention is drawn to such provisions in the UN Convention on a Code of Conduct for Liner Conferences and

although ANL has had no apparent problems in gaining reasonable access to Conferences operating in the Australian trades with the existing provisions in the Trade Practices Act, consideration could be given to terms of entry along the lines of those provisions. .

7.10 It is consistent with conclusions of this and previous chapters that the ANL should be seen as part of the overall government policy for securing efficient overseas liner cargo shipping and that for this reason as well as stated government policy in relation to Australian national shipping, legislation should continue to protect rights of entry of efficient Australian national shipping operators into our overseas trades.

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C H A PTER 8

SHIPPER/CARRIER NEGOTIATION OF RATES AND SERVICE CONDITIONS

8.1 The needs of shippers are met best when the right ships for the trade are well managed, and the ships and methods of operation provide a frequency and quality of service consistant with the value of service to the shippers whilst enabling shipowners to earn a reasonable rate of return. The involvement of government in regulation of

liner shipping arises, inter aim, from the desirability of permitting shipowners to form Conferences. The cartel nature of Conferences gives rise to questions about the actual efficiency achieved in the services provided by their members and the reasonableness of the profits which they earn. The benefits of Conferences need to be reflected in freight

rates and services so that the needs of shippers are seen to be met.

8.2 The means by which government seeks to ensure that Conferences lead to more efficient services than could be provided in their absence, is the control of the content and working of Conference agreements and the placing of certain obligations on shipowners. Recommendations with respect to these measures are made in Chapter 5. However, beyond establishing an appropriate framework within which the com­ mercial processes may work, government interference with commercial matters is kept

as limited as possible. The daily performance of the system is left to the shippers and shipowners who must live with the results. Consequently there is a flexible and responsive system but it is one which gives rise to difficult issues. The objective of this chapter is to consider those issues related to the working of commercial processes.

General Issues in the Working of Commercial Negotiations 8.3 The general philosophy of government policy can be traced back to 1929 when as discussed in Chapter 4 the then Prime Minister, the Rt. Hon. S. M. Bruce, convened the

Overseas Shipping Conference. The objective of the Conference, attended by shippers, producers and shipowners was to find way s to reduce the high cost of shipping to and from Australia. As a result of that Conference the Australian Overseas Transport Association (AOTA) was formed. Since that time various organisations have existed

amongst and between shippers and shipowners to facilitate negotiations and discussions to improve the efficiency of overseas cargo shipping. The ASC is the most recent of the shipper organisations.

8.4 The importance of the general philosophy first espoused in 1929 was reflected in the second reading speech on the Trade Practices Bill 1966 by the then Attorney- General, the Hon. B. M. Snedden.(1> Mr Snedden said, “In this industry, therefore, the Government has concluded that the attainment of better freight rates and other terms

and conditions is most likely to be achieved by negotiations between shipper bodies and shipowners, which negotiations can reflect the economies achieved by better organisation, limitation of tonnaging and greater resort to modern cargo handling techniques” . He also said “At a conference between shipowners and shipper interests, convened in 1929 by the then Prime Minister, it was agreed that regularity and

certainty in overseas liner shipping is best achieved by means of the closed Conference system, with Conferences undertaking to provide regular, scheduled sailings on a given route, at rates agreed with a body representing the shippers using the route, on condition that the shippers agreed to ship exclusively with the Conference.” This is a

10 “Parliamentary Debates” , 20 April 1966.

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key statement which established the policy of Government within which the ASC has functioned. This has resulted in the “cost-revenue” approach to negotiations predominating as against the “competition” approach, which this report argues has been given inadequate weight in collective negotiations.

8.5 Further, the Attorney-General said, “The Government believes that it is desirable that, wherever possible, the terms and conditions on all of our liner routes should be reached through a process of commercial negotiation between, on the one hand, representatives of the relevant Conference and, on the other, a strong shipper body representative of the relevant shippers. However, the Government also recognises the need for provisions enabling appropriate governmental action to deal with situations where the negotiation process does not operate satisfactorily, and for provisions which will promote the improved organisation upon which better freight rates depend.”

8.6 The second reading speech by the Minister for Trade and Industry, when introducing amendments to the Overseas Cargo Shipping provisions of the Trade Practices Act, in 1972,(1> did not enlarge upon those earlier statements of the purpose of negotiations. The Minister did say, however, that the amendments would enable the ASC to undertake all negotiations with shipowners and Conferences operating in all

Australian export liner trades. Negotiations would cover both the arrangements for and the terms and conditions of carriage of export cargoes in Australia’s overseas liner trades. He also referred to the existing policy that these were matters for commercial negotiation within the framework of the Act.

8.7 The effectiveness of relying heavily on commercial negotiations to ensure efficiency in overseas cargo shipping is influenced by the legislation discussed in Chapter 5. However, many issues for government policy relate directly to the adequacy of the working of the commercial process. Issues which arise range from the desirability of introducing more direct government regulation of rules, as is done in the USA, to the effectiveness of rate negotiation by the sub-committees of the ASC. The range of issues is considered below.

Reliance on commercial negotiations 8.8 Government regulation has been common when it has been believed that the forces of dynamic competition are not sufficiently effective. The USA, although the bastion of free enterprise in many respects, has applied rigid regulation over domestic transport services and rates and has given the Federal Maritime Commission (FMC) considerable powers with respect to international shipping. The question is sometimes raised, whether Australia should move in the direction of FMC type regulation.

8.9 The FMC has authority through the Shipping Act of the USA to determine, prescribe, order and enforce a just, reasonable, maximum rate. It enforces certain procedures in relation to rate changes. However while the FMC generally requires the filing of tariffs and rate changes, it does not intervene in rate matters unless there are complaints that the rates are contrary to the interests of American commerce. It is reluctant to intervene in the matter of freight rates because of the difficulty of freight rate determination and the enforcement of rates if it were to determine them as a general rule. There is obviously great difficulty for regulatory authority intervention when rates are set on the basis of commodity market and carrier commercial conditions.

8.10 Rate and related actions by the FMC are taken to protect American interests, 0 1

01 “Parliamentary Debates,” 11 October 1972.

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including ports and shipping, as well as shippers. Intervention by the FM C could be interpreted, in many cases, to have been to protect the interests of American shipowners and not to ensure that the benefits of competitive shipping are realised by shippers. For example, recent limits have been placed on the amount by which the rates

charged by FESCO, the Russian line, could be below other Conference rates. The Conference had agreed to a differential on the basis of the lower quality service provided by FESCO.

8.11 In the USA, generally, there has been a growing recognition that the regulation of transport rates and services introduces inefficiences of its own. This is not to deny that, where a carrier or carriers can exercise significant monopoly power, it is the responsibility of government to ensure that excessive profits are not earned and that

rates and services are efficient. W hat is being recognised is that regulation, by inhibiting commercial responses to dynamic competition, can detract from the efficiency of transport. The influence of these views is to be seen in the changes in the powers of the Interstate Commerce Commission (ICC) over domestic transport. The

powers of the FMC are less extensive than those of the ICC so that the shipping legislation has not been a matter of major concern. Flowever some concern has arisen over the need for the FMC to resort to a considerable degree of regulation and litigation. This need may well arise from anti-trust limitations on the powers of the

FMC to approve practices of closed Conferences.

8.12 There are two major disadvantages with the Australian government attempting to regulate rate and service matters. First a shipowner cannot be compelled to stay in the trade and, therefore, cannot be compelled to carry cargo at any given freight rate. This is not to say that a shipowner cannot be told that if he wants to carry cargo, then

the most that he may charge is a certain rate. However, this is only effective if the rate proposed is profitable for the carrier and/or if alternate equivalent means of transport are available to shippers. In these conditions greater flexibility exists in setting rates

and service conditions if commercial negotiations are carried on. If commercial negotiations fail the Government may consider employing the ANL in the trade.

8.13 Second, the regulation of rates and services by government introduces administrative costs and rigidities to the search for solutions leading to efficient shipping services in the interests of shippers and shipowners. Further, the absence of specific regulations also ensures the flexibility of government in bringing influence to

bear as necessary.

8.14 It is appropriate, therefore, that primarily, reliance should continue to be placed on commercial negotiations to resolve matters between shippers and shipowners. This conclusion is one shared by shippers. Although some shippers are dissatisfied with the legislation affecting negotiations and the performance of the ASC and/or certain

commodity boards, there is little support for the introduction of direct regulation over shipping rates and services. Changes in Part X of the Trade Practices Act and changes in the conduct of negotiations by shippers hold out the most favourable prospects of improvements. The issues here focus on the role of collective action in negotiations.

Legislation for collective action in negotiations 8.15 Negotiations with the designated shipper body by Conference members, and shipowners who are not members of a Conference, can be required under sections 122 and 128 of the Trade Practices Act. While legislation may not be necessary to ensure

that some negotiations take place, the sections are of importance because they require negotiation whenever reasonably requested by the designated shipper body.

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8.16 In the broadest sense the only authority needed for negotiation is the ownership of authorisation by the owner of goods to be shipped on one side and the authorisation of the shipowner on the other side. The process of negotiation requires a willingness on each side to enter into negotiations. The Act lays down the minimum incidence of negotiations; it does not prescribe limits on the persons or groups with whom negotiations may be undertaken. However, a general expectation has been that the requisite negotiation by the designated shipper body would render other negotiations largely, but not completely, unnecessary.

8.17 Section 111 of the Act defines a “shipper body” as “an association that in the opinion of the Minister, represents the interests, in relation to outwards cargo shipping, of persons who are shippers of goods, or producers of goods of a kind exported from Australia.” In the second reading speech on the 1972 amendment of the Act, the Minister for Trade and Industry referred to a 1971 study by a cross-section of export organisations. That study group saw an Australian Shippers’ Council (ASC) as a

national body, fully representative of producers, commodity groups and exporters.

8.18 Other Government legislation is germane to shipper/carrier negotiations in view of powers given to statutory commodity authorities with respect to transport arrangements. In general, the Acts authorise the authorities to issue export licences, to make arrangements to shipment and/or to specify the terms and conditions under which a commodity may be shipped. These powers, in practice, give the authorities

absolute control over the routeing of cargo which is of extreme significance in negotiations with shipowners. Shipowners are not required by law to negotiate or to provide information for negotiations which are not requested under Part X of the Trade Practices Act. Negotiations become necessary because of the significance to shipowners of the commodity under central direction by an authority. The powers of the authorities are directed toward obtaining favourable terms of shipment rather than to the control of Conferences exempt from restrictive trade practices legislation.

8.19 The expression of dissatisfaction both with the negotiations of the ASC and the negotiations of the commodity authorities raises vital issues which must be considered against the general case for collective action.

The case for collective action 8.20 The case for collective action by shipowners is to reduce and control inter­ carrier competition so that costs are held down and profits are held up. In practice, it is often more difficult to prevent service competition from raising costs than it is to avoid rate competition. However, the durability of most Conferences attests to the similarity of conditions affecting most shipowners. It is only when conditions of ship operation , such as ship costs or the utilisation of ship capacity, or market conditions, such as areas or commodities served, become too divergent that a Conference may break up.

8.21 Shippers face greater difficulties than shipowners in negotiating shipping arrangements collectively but their need for doing so is strong. Their difficulties emanate from the great diversity of conditions and requirements for the transport of heterogeneous commodities, from the varied needs of shippers in a range of ports served

by a conference and from their dispersal geographically. The importance of collective action arises from the enhanced bargaining power which shippers can gain from collective action. The implications of collective action for the effectiveness of

negotiations are considered best in relation to the general bases for negotiation. As outlined in Chapter 3 these are the negotiation of rates on the basis of the potential use of alternative carriers, the presence of market competitive forces, the opportunity for cost reduction, and equity arguments.

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8.22 Effective negotiation requires research. Since significant economies of scale can exist in research, it follows that collective action can be most desirable. When the end purpose of all shippers is the same and only a single research method is possible, the highest level of collective support is desirable. When ends are different and, even

competing, and when alternate approaches are possible the case for collective research is weakened or possibly negated. However, competing shippers of one country, competing in world markets, are unlikely to be in such rigorous competition one with another that a level of co-operation in research is not desirable and practical.

8.23 The research needs of shippers fall basically into two categories. The first, is to know sufficient about the shipping service to be assured that a service is provided with the right type and capacity of .drips and to know the relationship between aspects of the quality of service and the costs. The second, is to prepare information and strategies for

the negotiation of rates and conditions of service on the basis of competitive forces. There is no clear distinction between the two types of research and it is largely for this reason that the monitoring of the efficiency of shipping services is more appropriately a

function for shippers than for the government. Since research into the efficiency of shipping services is a need of all shippers and the methods of analysis although specialised, are not likely to vary widely between research programmes, it is logical to assign the function of monitoring the efficiency of shipping services to the ASC as the most representative body of shippers in Australia.

8.24 This is not to imply that the research is not multifaceted and that individual shippers or groups of shippers may not wish to evaluate the efficiency of the particular services available to them. But, the economics of the services available to particular shippers must still be considered within the framework of the economics of the service

overall. The results of the overall analysis are important to the analysis of particular shippers.

8.25 The appropriate organisation framework for the research and the presentation of negotiating positions for rate concessions is difficult to determine. It must be consistent with the needs of the types of cases for rate concessions. The cases may be intermodal or intramodal competition, market competition or cost-saving opportu­

nities, as described in Chapter 3. At issue for collective negotiations is the extent to which argument on such issues are likely to be common between shippers.

8.26 The availability of shipping lines alternative to present Conference carriers, on attractive terms, would require a volume and diversity of cargo such that negotiation on a collective basis across a range of commodities could be desirable. However, negotiation on the basis of the relevance of air cargo competition could apply to one or

a small group of commodities. Some individual commodities may be shipped in sufficient volume that the use of chartered ships may be efficient. Chartered ships may be employed carrying one commodity alone or carrying a combination of commodities to enable a good utilisation of ship capacity.

8.27 The effects of, or opportunities raised by, market competitive factors would most likely be differentiated between commodities, although factors, such as changes in currency values, may affect all commodities. For collective negotiation to be

commercially feasible in these conditions requires that shippers accept rate adjustments which have regard to the possible need for differing treatment between them.

8.28 Negotiations on the basis of cost savings which are possible in the handling and transportation of a commodity are most likely on an individual commodity basis. Changes in packaging, for example, may enable an improvement in space utilisation for shipowners and may be feasible if some of the benefit is passed back to shippers in

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reduced rates. At times, such changes may also be applicable to all or a wider range of commodities, as occurred with containerisation.

8.29 A diversity of “equity” arguments may be used by shippers. They may be used individually or collectively. However, arguments related to the indirect effects of freight rates on the well-being of a community are often most forcibly expressed by a collective body of shippers, especially one with the support of government.

8.30 The bases on which shippers should negotiate rates and related matters, clearly give rise to situations in which dilferent shippers will have different cases to present. Collective action does not necessarily mean uniform solutions but with many commodities involved it is unlikely that much differentiation would be possible. Therefore, the greater the divergence of negotiating positions between commodities, the less likely that collective action will be satisfactory.

8.31 The extent of collective action acceptable is usually a matter of compromise and judgement. Costs arise from restriction of freedom of individual action. While it may be argued that the benefits of collective action are realised mainly by small shippers, benefits are not confined to them. To make an effective use of chartered ships, shippers

exporting commodities in large quantities may be forced to seek cargo from small shippers. Small shippers’ cargo also helps to meet the overhead costs of Conference shipping, often available when seasonal cargo is not offering, and adds to volume which enables economies of scale in vessels.

8.32 The four main bases for negotiating rates and service conditions give rise to instances in which the cases of shippers may differ. While a diversity of shippers’ positions does not prevent a centralised approach to negotiation, it does suggest that to compel all negotiations to take place always through a central agency would not always be appropriate to the circumstances. The degree of centralisation in negotiation can only be a matter of judgement. It may well change from time to time.

8.33 A level of decentralisation may be appropriate for shippers either on the basis of commodity considerations or regional groupings. The bases for decentralisation would be similar. The case for rate or service concessions based on carrier or market competition or even on the possibility of cost savings, may differ sufficiently between shippers that, in practice, negotiations can be carried out more effectively on a decentralised than a centralised basis. For example, there may be need to present detailed arguments on the status of market competition for certain export goods; or on services by small non-conference ships which may be feasible for some shippers. This does not mean that negotiations in those circumstances can be conducted only by a decentralised approach but it can be readily conceived that another body may be better equipped to argue a case with shipowners than the national shipper body. Which is the most appropriate would probably depend in part on the organisation of shipowners, particularly whether the trade was served by a nationwide Conference or not.

Concerns about non-collective negotiations 8.34 Concern may be voiced not only for the effectiveness with which a particular shipper, commodity organisation, or regional group of shippers pursues its own case but the effects of that action on other shippers. Only consideration on a case by case basis can determine the effectiveness of shippers in carrying out negotiations with Conference members. This matter is not pursued here except to reiterate a recommendation of Chapter 5 viz, when negotiations are held separately from the ASC by a shipper(s) representing a significant part of a trade, the Minister for Transport shall be informed by Conference members and any agreement shall not go into effect until the Minister determines that the agreement is not in conflict with the national

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interest. This power of the Minister is necessary to avoid inefficient agreements or the implementation of agreements in inefficient ways.

8.35 The effects of independent actions of shippers are considered best by considering the actions of shippers each seeking to minimise the cost of ocean transport. As stated previously shippers may seek rate and service concessions on the basis of cost savings, market competitive factors, carrier competition and/or equity arguments.

8.36 A rate concession gained because of cost savings should always be beneficial to all the parties involved, as both shipper and shipowner should be able to operate more profitably. If a rate concession is given to enable expansion of traffic into a new market, this should result in improved utilisation and therefore profits for shipper and

shipowner. If a rate concession is necessary to enable a shipper to continue to export, the profits of both shipper and shipowner can be assumed to be less than during more prosperous times, but the reduced rate would be better for the shipowner, shipper involved and other shippers, than the complete loss of the traffic. This assumes that the

rate has not been reduced to a level below cost, to the detriment of the shipowner as well as other shippers. If a rate concession is necessary because of alternate carriers available to a shipper, for example, the use of chartered shipping by a commodity such as wool moving in high volume, the conference lines and all shippers are better off if the

Conference can meet the competition at a profitable rate rather than lose the traffic.

8.37 However, in the latter case it might seem at first that it would be even better if the negotiating strength of the large wool cargoes were used to the advantage of all commodities. For example, instead of negotiating a 10% reduction in the rate on wool, a reduction might be negotiated in all rates. How might this be attempted and what

would be the implications? 8.38 The maximum loss in revehue acceptable to Conference members would be the loss to be incurred by the reduced rates on wool. Therefore, the options might be a 10% reduction in the rates of wool or a 3% reduction in all rates. However, under the latter

alternative wool is better off being shipped by chartered vessels—a situation which might well still apply at the next year’s negotiation. Therefore, for this outcome to be feasible the negotiating authority needs tight control over cargo routeing, including

wool, the Conference needs to know that the rate levels could be adjusted should wool be routed by chartered ships in future years, and the negotiating authority has to be in a position to determine what distribution of rate reductions are fair and economic. If these conditions were accepted as practicable, long-run effects must also be considered.

These include the reduced incentive for individual shippers to seek out competitive alternatives to Conference shipping and the potential misallocations of freight between Conference shipping and other forms of overseas transportation. Shippers would soon find it beneficial to withdraw from the Conference shipping system when a lower cost

method of transport arose, rather than be forced to share the saving with other shippers through shipper/carrier negotiations.

8.39 The responsiveness of rates and service conditions to competitive factors produces an incentive for shippers to seek alternate ways of shipping overseas. The example given above was wool being exported by chartered shipping. The example could just as well have been a high valued commodity being shipped by air.

8.40 This discussion has been carried to some length to demonstrate the necessity of allowing shippers to ensure that the rates they pay reflect the carrier and market competitive forces relevant to their commodities. The same conclusion can apply to negotiations conducted on a regional basis where local competitive conditions may

exist. The ability of Conference members to respond to these competitive forces enables them to retain traffic which, as long as it is priced above relevant costs,

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contributes to their revenue and to the efficiency of the service in the interest of all shippers.

8.41 The issue raised by the conclusion that rates should reflect competitive conditions is how far can negotiations of rates and service conditions be accomplished through a collective organisation such as the ASC? The answer to that question is unlikely to be clear cut. General consideration would suggest that at times negotiations may be completed successfully within a single collective system. At other times more flexibility or even decentralisation may be inevitable. The organisation framework appropriate for shippers is influenced significantly by the pricing practices of Conferences.

Conference rate proposals and commercial negotiations 8.42 The organisation required of shippers for negotiations is influenced not only by the characteristics of their trade but also by the manner in which rate proposals are brought forward. When, periodically, special problems arise for certain commodities, it is usual for shippers to approach Conferences directly, This process, separate from annual contractual negotiation of rates, raises no serious problem. The negotiations of primary concern are those following on rate proposals brought forward by Conference

members.

8.43 In spite of a rate structure based on rating commodities differentially according to their ability to pay, Conference members characteristically propose across-the- board rate increases. While maintaining rate differentials in real terms, across-the- board percentage increases in rates can distort competitive relationships and lead shippers to consider using non-conference services.

8.44 Conferences, when negotiating with the ASC, propose that all rates be raised by a nominated percentage. They have been able to do so because the competitive conditions to which they have had to respond have not changed substantially as between commodities. The position of Conferences is similar to railways before the development of road transport competition, when they were essentially production co­ operations orientated firms, able to rely heavily on a class rate system changed from time to time by across-the-board adjustments.

8.45 The expectation of Conference members is that shippers, faced with new conditions of market competition or having alternate carriers available to them, will approach the Conference members for concessions. Through this process the level of particular rates should be kept in line with competitive conditions. If many shippers presented different individual cases to Conference members concerning the unique effect of a freight rate increase on their commodities, the burden of negotiation thrown on the limited marketing and pricing organisations of Conference lines would be beyond their capability. In those conditions the across-the-board approach to introducing rate changes would not be achieving its object.

8.46 This is not to suggest that the across-the-board approach is wrong, although it may be argued that shipping lines should have better developed marketing depart­ ments. The major conclusion to be drawn is that Conference members favour a centralised approach by shippers as all, or most shippers are faced with the same or a similar rate increase, in percentage terms, at the same time.

8.47 Within the Australian context, where Conference agreements are given special exemption from Part IV of the Trade Practices Act and where the Government seeks to use a shipper body to ensure that Conferences operate efficiently, the negotiation of across-the-board rate increases provides an ideal opportunity for discussions centering on the efficiency of Conference operations.

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8.48 The information generated by and for the ASC, as the shipper body currently responsible for these negotiations, provides an opportunity for shippers to negotiate rate matters collectively. For example, discussion of the efficiency of Conference

services would be expected to lead to negotiations on the level of service and level of rates. The opportunity to interrelate discussions of Conference efficiency with the negotiation of rate and service conditions is an important benefit of using a shipper

body as the organisation for monitoring the efficiency of Conference services.

8.49 Examination of the record of the ASC casts light on the effectiveness of that organisation since 1972. The record is valuable in considering the role of collective negotiation in general and in considering the weaknesses and strengths of the ASC in particular.

THE RECORD OF THE AUSTRALIAN SHIPPERS’ COUNCIL

8.50 The ASC acts both as an agency for monitoring the efficiency of Conference shipping and as the designated shipper body for negotiating specific rate and service conditions. No clear cut division between these functions is possible and fusion of the two roles may well have caused difficulties in the working of the ASC. However, the

two purposes must be kept in mind when reviewing the record of the ASC. The record is reviewed by considering the activities of the ASC with respect to research and negotiations. Conclusions are reached on the effectiveness with which the ASC has worked before considering the reasons for the strengths and weaknesses.

Research work of the ASC 8.51 Shipper/carrier negotiations require the performance of considerable research. This is true when the objective of shippers is to present a convincing case to carriers based not only on the costs/revenue of existing carriers but also on the existence of

market or carrier competitive conditions which make it desirable for a Conference to take favourable rate and/or service action. The need for research is increased considerably when the negotiating process requires knowledge and analysis of shipping costs and shipping line operating decisions. This is the case for the ASC

because it is faced with across-the-board rate increases justified by Conferences on the grounds of cost increases and because government has left to the designated shipper body processes of ensuring that shipping services are provided efficiently.

8.52 There is no doubt that the ASC has recognised its need to conduct research. Its Annual Report of 1975/76 shows that in that year 27 percent of the Council’s resources were devoted to research. The activities included the employment of a firm of accountants in London, Whinney Murray & Co., to verify costs provided by

Conferences, and the performance of research by the ASC staff and researchers retained by the ASC.

8.53 As part of the process to verify the reasonableness of Conference claims for needed rate increases, the ASC receives certain cost information. The form and detail in which this has been presented has varied from Conference to Conference and from time to time. Expertise within the ASC is needed to analyse the figures and the

accounting principles applied which can easily give a false impression of the need for a freight rate increase.

8.54 The ASC needs to be satisfied that the basic data and the accounting principles genuinely reflect a true situation. Since, the member lines of a Conference are in competition with one another and do not have access to each other’s figures, and as the substantive data are often located overseas, the ASC has employed overseas

accountants to work with Conference accountants. The ASC’s accountants advise

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whether they are satisfied with the principles employed and the members lines’ underlying figure. This is not a simple auditing arrangement. Rather it is the obtaining of expert advice from independent accountants which will allow the ASC to be reassured that they can go ahead on the basis of the information provided or which will provide the ASC with a basis on which to further probe the validity of the Conference figures.

8.55 The ability of the ASC to conduct meaningful studies of or to verify Conference costs has been the subject of criticism. It is not appropriate to report in detail the cost breakdown provided by some Conferences or the agreement reached between Conferences and the ASC on accounting measures. On the whole, the process of discussion on the costs available has worked as well as could be expected/11

8.56 It is claimed, with some truth, that the complexities and variety of format and presentation of the accounting of individual lines prevents an understanding of aggregate figures presented to the ASC. At the extreme, critics claim that the lines’ accounting records could be used to prove anything. The ASC is well aware of these dangers. Overall, no significant critism of the ASC seems warranted in its work to monitor Conference costs. However, the monitoring of the change in costs and cost components appears more valuable as a general aid to negotiation than the verification of actual cost levels in any one year.

8.57 The lack of validity of Conference cost/revenue claims is said to be evident in past outlandish claims of some Conferences relating to revenue shortfall. Also, although Conferences normally base their proposed rate increases on revenues needed to cover costs, they settle for rate increases at lower levels than claimed. While Conference figures may be averages over the member lines, there has not been sufficient movement of high cost lines out of Conferences to explain the continued operation, and apparently solvent operation, of lines in Australian trades in spite of an apparent regular shortfall in rate increases. It is acknowledged that a shortfall is feasible in particular years, especially during rapid inflation, but it is not possible, if true, as a continuing phenomenon. A common belief, seemingly reasonable, is that the figures presented by Conferences to the ASC are inflated beyond the costs which Australian exports need to cover. This seems a reasonable conclusion both from the nature of the negotiation which takes place and from the results of the negotiations over time.

8.58 In freight negotiations the ASC has concerned itself with costs and revenues for the total service and has not, in general, sought to establish the equitability of the differentials between commodity rates. However, rates on particular commodities are based on ability to pay. Only increases in the lowest rates, which may be close to direct handling costs, can really be explained on the basis of cost. Therefore, it is suggested that the ASC should be more concerned with the development of negotiating strategies based on market and carrier competition, as well as being concerned with ways for shippers and carriers to jointly hold down costs.

8.59 There is a need for the ASC to concern itself with the efficiency of Conference services and this must entail consideration of costs. It does seem reasonable however to conclude that in both its concern with the efficiency of liner services and in its negotiation of particular rates, the ASC has had to concentrate too much on cost based studies. There is a need for example, for deeper studies of the difficult but critical question of capacity planning. Although it is undeniable that more expertise is needed in the research function of the ASC, expenditure on professional services, including accountants, absorbed over $43,000 in 1976/77 of a total ASC expenditure of $ 180,047. 1

(1) See Agman R.S. op cit p.36 for discussion of the agreement of CENSA members to provide such figures.

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8.60 It is pertinent that the finances of the ASC did not allow for the appointment of a research officer until 1975, three years after its inception. Projects recently undertaken have included the basis of calculation of currency adjustment factors and of bunker surcharges; current cost accounting; vessel financing; cargo handling charges;

economics of freight rate surcharges; separate commodity negotiations; and comparison of methods of applying freight rate variations.

8.61 The various research studies of the ASC have been increasingly oriented to aspects of the efficiency of shipping services and to factors, such as costs in port, affecting cargo costs. Studies have also been oriented to general matters, such as bunker surcharges and currency allowances, affecting all shippers and reasonably

negotiated within the context ot the impact of specific phenomena on costs. The ASC has not conducted studies which can be seen to be oriented to negotiating strategies based on market or carrier competition. However, such studies may well be performed by individual shippers or commodity authorities and brought into ASC negotiations by them. The extent to which this is done is evident in the record of the ASC in negotiations.

The work of the ASC in negotiations 8.62 The detailed work of negotiating freight rates and service conditions is handled through the ten regional Sub-Committees of the ASC.(1) During 1975/76, 206 Sub­ Committee meetings were held in addition to 17 meetings of the Executive and 4

meetings of the Council. The many meetings are more protracted and difficult because of the amount of time given to questions of efficiency. In view of the complexity and detail of negotiations carried out only general features of the negotiating process can be described. The means by which the Sub-Committees develop their positions are

important.

8.63 Sub-Committees are made up of nominees of members of the ASC who represent shippers or producers in the relevant trade. The voting procedure laid down in the constitution of the ASC for the Sub-Committees is clearly intended to give weight in some way to the importance of commodities in a trade. The practice,

however, has been to accord equal voting power to all members although the weight attached to the views of members of the Sub-Committees is naturally influenced by the importance of each member in the trade. The negotiations are handled by a negotiating committee drawn from the Sub-Committee. Recommendations of the negotiating committee are subject to review and acceptance or rejection by the Sub-Committee.

8.64 On notification of a proposed rate increase a Sub-Committee will characteristi­ cally request cost information and service details of a Conference and the first meetings with a Conference committee will attempt to resolve specific issues related to the content and level of costs. Some Conferences complain that at times this process is

excessive as some shippers pursue details for an unreasonable period. Whether this complaint is warranted or not and whether it is a useful strategy in negotiating or not, cannot be factually ascertained. However, while at times, it, like other negotiating activities, may be carried to excess, there is no doubt that the presence of the Minister’s

representative has a moderating effect on both sides.

8.65 The negotiating arguments of the Sub-Committees are many and varied and highlight the significant cost and service aspects. These differ with each negotiation though there are some common threads, for example the relevance of replacement 1

(1) There are some matters which the ASC deals with through its executive relevant to outwards trades generally e.g. participation in the PJT inquiries into charges for conventional Stevedoring and for container terminal handling; and advice to Government with regard to shipper interests in draft international conventions.

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values, efficiency of operations as measured by turnround times and labour costs particularly. In general the Sub-Committees do not appear to develop detailed arguments related to the use of non-conference transport except where such alternative services are actually operating.

8.66 Arguments of market or carrier competitive conditions are normally made orally only and in a manner intended more to influence the general position of the Conference than to lead to the selective modification of an across-the-board increase

between commodities. Pressures between ASC members for differential treatment exist commonly but it is exceptional for them to be reflected in the ASC position. This occurs, generally, when they can be justified on cost grounds. For example, exceptions have arisen because of differences in costs and capacity utilisation between refrigerated and general cargo and because of the differential dollar impact of only applying rate increases by uniform percentage amounts. Because percentage rate increases result in increased dollar contributions to overheads it is said by some higher rated commodity

shippers that percentage increases may be neither efficient nor “fair”.

8.67 The practice of the ASC of pursuing uniform adjustments to Conference rate proposals not only makes the preparation of documented market and carrier competitive arguments difficult but it encourages, and the ASC provides in its constitution in Article 11(b) for, individual members to take their special cases to Conferences separately. Differences between the interests of ASC members and the fact that not all commodities are represented on each Sub-Committee negotiating committee, make other than across-the-board adjustments to rates difficult. But there are at least some ASC members who recognise the limitations of across-the-board adjustments and the need to try to develop negotiating positions which take greater account of market and carrier competition arguments.

8.68 The uniform approach has compelled shippers with special competitive conditions affecting them to develop their arguments individually outside the ASC. This has applied especially to the commodity authorities with constitutional power to negotiate overseas transport arrangements. This tendency for special cases to be negotiated outside the ASC and for the ASC to rely on arguments relating to the

totality of the service has weakened the ASC’s potential collective bargaining strength.

8.69 Adherence to the uniform approach has also led the ASC to deal with the concerns of shippers in certain regions inadequately. The ASC has relied on the regional interests of its national membership to bring in views from and to disseminate views to the regions. In spite of vigorous complaints about the failure of this system, members of the ASC were reluctant to recognise the reality of this problem and to respond to it.

8.70 Conditions of membership have now been agreed upon which will allow representative State shipper bodies to become members of the ASC. The admission of representative state shipper bodies and related amendments to the constitution of the ASC are endorsed as the most effective way available of giving a better voice to regional concerns within the ASC and to providing better understanding between the ASC and the individual shippers. 8.71 Shippers in a region may also feel that, in certain instances, negotiations on a

regional rather than a national basis is relevant. This is most likely to apply where shipping services operate only from a limited range of Australian ports. The right solutions are likely to emerge as experience is gained from involvement of one or more State-based bodies in the ASC.

8.72 The existence of the ASC and the power of the Minister to designate a shipper

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body representative of shippers has led, in one case, to concern by shippers and a shipowner about the status of “ non-authorised” negotiations. This is in spite of the fact that no legislation prohibits negotiations outside the ASC. The problem of dealing with regional issues within a national organisation is not unique to the ASC or to

shipping. Discontent with arrangements for shipping services may stem from failure of national statutory marketing authorities to agree to their regional shippers making their own shipping arrangements, or to make adequate provision for regional

requirements when negotiating shipping arrangements on a national basis. This appears to have been so when W.A. apple and pear shippers wished to negotiate shipping to South-East Asia, and when initial arrangements by the Australian Meat Board, in 1975, for services to East Coast North America excluded the Atlanttrafik

Express Service, the only direct service from Fremantle to that area.

8.73 These examples of regional issues are not presented to criticise the Boards concerned nor to make a case that W.A. is unique. They are presented as examples of the complexity of dealing with regional matters. There is no easy means of solving such difficult issues, particularly where specific regional commodity problems should be

settled within their national commodity organisations. The prime need is for flexibility in views and institutional arrangements so that distinctive regional conditions affecting two or more commodities can be dealt with by the ASC as they arise.

8.74 It seems unlikely that shipping services from any range of Australian ports will remain separate from other ranges for long periods. For example, developments during 1977 will see more ships serving both the Eastern States and W.A. in the service to Singapore. In such a changing environment, it does not seem appropriate for the Minister for Transport to designate a regional shipping body to negotiate specific local

shipping matters. If the concern of shipping lines and of shippers is with the implications of negotiations outside the ASC, it is, of course, open to the Minister, under the present legislation, to request fresh undertakings giving greater flexibility to the lines.

8.75 Even this measure would require submissions, formal decisions and changes in institutional arrangements and should be avoided if possible. It is hoped that better understanding of regional conditions should be achieved within the ASC through the presence of State shipper bodies facilitated by the recent agreement permitting them to

become members.

8.76 It is not appropriate to spell out the procedures to be used by the ASC in dealing with matters peculiar to certain regions. It is conceivable that regional issues may be important to a Conference or line serving all Australia. In this case, a requirement affecting particular ports could be a part of the national position. Where the shipping

services concerned only affect a certain range of ports in Australia, it may be appropriate for a Sub-Committee of the ASC to establish a regional negotiating committee or for the Sub-Committee to recommend that the regional negotiation be the responsibility of a regional shipper body. The existing provisions of Part X would

allow the ASC to make suitable arrangements for negotiations “under its umbrella” so as to avoid the need to seek qualified undertakings from shipowners.

8.77 There can be no wholly conclusive measure of the effectiveness of freight rate negotiations. It is not an accurate measure to assess the performance of the ASC in terms of the level of rate increases implemented compared with the levels first requested by shipping lines. Nevertheless, it is clear that government support of the ASC and the

active participation of most major shipper bodies in the ASC, have caused shipping lines and Conferences to respect the views of the organisation and to attempt to reach

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agreement on rate and service matters through negotiation. In spite of a conclusion that the ASC has been effective to some extent, some shippers and commodity marketing authorities are dissatisfied with its working. This dissatisfaction is in itself

an indication that all is not well.

8.78 The working of the ASC has not come up to expectations but this is in part because the expectations about the desirable level of centralisation of negotiations and uniformity of results across commodities and regions have been wrong. Considering the number of trade routes and the h e te r o g e n e o u s c o n d i t i o n s o f c o m m o d i t y markets and shipping competition, it is not surprising that some negotiations would be held outside the ASC as long as the ASC adhered to a uniform approach.

8.79 Separate negotiations outside the ASC may merely be an appropriate recognition that the uniqueness of shipper requirements and/or shipping conditions warrants separate negotiation. When separate negotiations are conducted, it is not very productive to compare the results of the separate bodies with the results achieved by the ASC. Results achieved in commodity or regional negotiations may be “better” than those achieved by the ASC when more competitive conditions or opportunities

for greater efficiency are available. What is important is to ensure that separate negotiations are conducted for reasons of more effective negotiation and not because of personality conflicts or ambitions of the officers of different organisations.

8.80 The record of the ASC since 1972 suggests that it has acted in ways which have engendered the dissatisfaction of some regional and commodity groups by being unable to accommodate itself to regional and specific commodity negotiating positions. Greater emphasis on negotiation on the bases of commodity and carrier competitive conditions and greater emphasis on cost reducing studies would have provided better means of incorporating special cases. The predilection of the ASC for national and uniform positions appears to have caused resentment in some groups who have felt a growing need to work independently.

8.81 The weaknesses in the approach taken by the ASC have been shown up by the unique economic conditions of the 1970s. Neither the approach nor the weaknesses are new. The history of AOTA has examples of conflicts between the general result of negotiations and the interests of particular shipper groups. Concern that rate increases be cost justified reached its peak with the formula approach introduced in 1956. Although this strict adherence to cost analysis was found to be inconsistent with both competitive rate making and economising on costs, the approach has had some lasting effects. These have been desirable in terms of the willingness of Conferences to discuss their costs. They have been undesirable to the extent that the result has been an excessive emphasis on an across-the-board rate increase. '

8.82 The high inflation of the 1970s and the rapidly changing conditions in commodity markets have given rise to dissatisfaction amongst shippers. Under­ standably, all shippers are concerned about the magnitude of rate increases. However, both the large size of proposed increases and changing conditions in commodity markets have created the needs, as well as provided the meaningful opportunity, for certain commodities to negotiate their rate increases on the basis of competitive conditions. Repeated and larger across-the-board rate increases have made obvious the importance of negotiation on the basis of competitive forces to an extent not found in previous decades. The general recognition evident amongst shippers of the importance of competitive conditions as they affect commodities and regions, provides the basis on which reorganisation of the ASC can proceed to enable better use of collective negotiation in the future.

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SOME IMPLICATIONS OF THE REVISED EMPHASIS IN NEGOTIATIONS

8.83 Adjustment of the ASC to a new emphasis in the negotiation of rates and service conditions will not be easy. Different procedures and attitudes will be required and it is likely that conflicts of interest that will arise in the future will be different to those that have arisen in the past.

Future research requirements

8.84 The emphasis of the research work of the ASC on analysis of Conference costs has absorbed a considerable amount of the time of negotiating committees, as well as that of the research staff. In the future it will not be possible for negotiating committees to spend as much time digging into Conference costs and accounting procedures; more

of this work must be left as a largely technical function of the ASC executive. Members of the committees must resist the temptation of squandering their time on detail which is difficult to discuss in depth in the committee context.

8.85 The negotiating committees will be forced to devote much more of their time to the establishment of negotiating positions related to competitive conditions. This work will require the committee to deal with matters of the general characteristics of the negotiating arguments and to ensure that the arguments presented are supported

adequately. The necessary research can be carried out partly by the ASC executive staff and partly by the members of the ASC.

8.86 Research carried out in the preparation of negotiating positions will provide a basis for better argued and documented cases presented to Conferences. This may go some way to countering the criticisms of shipowners that in negotiations with the ASC, Conferences are the only ones providing detailed information. However, there is no

more prospect of, and less justification for, shippers presenting data showing the explicit profitability of their businesses than of Conferences providing information on the profitability of their services on a round-voyage basis.

8.87 The performance of more research, orientated to the efficiency of liner services by both the ASC and the Department of Transport should result in a greater exchange of technical information between them than has taken place in the past.

The position of small shippers 8.88 Small shippers will continue to realise the benefits of ASC negotiations on the basis of the efficiency of Conference services. However, the use of arguments on explicit competitive forces in the negotiation of freight rates is more difficult to accomplish for

a shipper body whose members are small, numerous and diversified than for an organisation representing large and/or homogeneous exporters. For example, it will be more difficult for an organisation such as the Australian Manufacturers’ Export Council than the Australian Meat Board to develop a, or a number of, positions on the

basis of competitive forces. Therefore shipper bodies with many diversified members must give more attention to the education of their members concerning transport to overseas markets. This is necessary in order that small shippers increase their capacity to approach Conferences when their national body is unaware of a particular concern

at the time of the ASC negotiation. The small shippers must be encouraged to draw to the attention of their national bodies, failures of shipowners to deal reasonably with their cases.

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Conflicts of interest 8.89 It is naive to believe that any system of setting or negotiating liner freight rates will be free from controversy and conflicts of interest. Recognition of the role of competitive forces in setting rates can be expected to give rise to feelings of injury

(jealousy) by shippers whose freight rates increase at an above average rate. The competitive nature of people suggests that such first feelings are most likely. But the action of shippers must be conditioned by acknowledgement that shippers are not in competition with one another in the negotiation of rates and that shippers benefit from co-operation in negotiations.

8.90 Conflicts of interest must also be expected between shippers and shipowners. Commercial negotiations must come to finality, but it may not be with rate and service conditions agreed to by shippers. In the end it is shipowners who must have the responsibility of setting freight rates. In that context neither arbitration nor concilia­ tion of differences between shippers and shipowners at the end of negotiations are recommended. Formal arbitration or conciliation proceedings can adversely affect the conduct of commercial negotiations. Arbitration is not practicable because of the inability of, and the lack of desirability for, the Government to regulate rate and service conditions. Conciliation is not necessary in view of the presence at negotiations of the representative of the Minister for Transport to facilitate the conduct of negotiations, as well as to report to the Minister on the conduct of the negotiations. Failure of shippers

or shipowners to act in a responsible way and in the interest of efficient overseas shipping services during negotiations could be matters for further actions by the Minister. ;

8.91 Notwithstanding the presence of conflicts of interest in the future, the conduct of negotiations on rates and service conditions by the ASC on the basis of the efficiency of Conference practices and the competitive forces to which they must respond must be the basis for negotiations. The system is consistent with economic principles, with the policy of government to rely on commercial forces and with the new views of the ASC. The long term development and financing of the ASC to facilitate the revised approach to commercial negotiations are considered in the next chapter.

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CHAPTER 9

FINANCING AND LONG TERM DEVELOPMENT OF THE ASC

9.1 The Australian Shippers’ Council has been functioning during a period of rapid inflation of costs and difficulties for traditional Australian liner trade exports. This has placed a heavy strain on its resources and the basis of its operations. It was concluded in the previous chapter that the performance of the ASC has not come up to

expectations, partly because of wrong expectations in the first place but also partly due to the approach adopted by the ASC to rate negotiations.

9.2 This chapter considers the structural and operational features of the ASC. Arising from that examination, consideration is then given to questions of staffing and the level of funding required to bring about more effective negotiations and greater support for the ASC.

OPERATING DIFFICULTIES OF THE ASC

9.3 As the ASC was established at the beginning of a period of rampant inflation, it is not surprising that since its foundation in 1972 some weaknesses have become evident in the organisation. Explicit recognition of the weaknesses is an essential first step to the establishment of a more effective organisation. Discussion with its members and its

executive has revealed a good understanding of the problems by the ASC. It is currently considering proposals produced by its own members for its reorganisation and future development.

Sources and use of funds 9.4 The Commonwealth Government has provided the ASC with financial support. F or the first two years the Commonwealth supplemented the subscriptions of members by providing a contribution on a dollar for dollar basis up to a maximum of $35,000 in

any one year and also contributed $20,000 to initial capital. In 1974 the matching funds

TABLE 1 ASC REVENUES

Financial Year

Commonwealth Grants

$

Primary Seat

$

ASC Subsription^x)

Second and Third Seats

$

Amount Subscribed

$

1972/73 55,000* 750 500 27,750

1973/74 35,000 1,050 550 35,450

1974/75 90,000 1,250 550 37,450

1975/76 90,000 1,500 600 43,200

1976/77 120,000 l,762f 600 50,012

* Includes establishment grant of $20,000 for capital equipment, f Includes a special levy of $162 per member.

Source: Australian Shippers’ Council.

Note: Assistance up to $140,000 in 1977/78 has been announced.

(1) The ASC Executive recommended on 1 September 1977 that 1977/78 subscriptions be; Primary seats $1950, Secondary seats $700, Associate Membership $1325.

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were increased to a two to one dollar basis up to a maximum of $90,000, and in 1976/77 the maximum was increased to $100,000. In addition in 1976/77 a non-matching grant of $20,000 was made available to the ASC. The increase in funds was necessary to cover the effects of inflation and to enable the ASC to expand its operations and perform more research. Government financial support has been provided because a collective

research and negotiating body materially assists all exporters. This is entirely consistent with the need for a body to be concerned with the overall efficiency of Conference services. The annual revenues and expenditures of the ASC since 1972/73 are shown in Tables 1 and 2.

9.5 Table 2 shows that the funds devoted to professional services have increased substantially. The growth of this expenditure and the rising administrative costs of supporting the work of the ten Sub-Committees are m a t t e r s o f c o n c e r n t o the ASC. Table 3 shows a more detailed percentage breakdown of expenditures for the year ended 30 June 1977.

TABLE 2

ASC EXPENDITURE

Financial Year

Salaries

$

Professional Services $

Capital

$

Other

$

Total

$

1972/73 14,866 12,381 10,066 12,180 49,493

1973/74 32,424 9,793 14,919 29,160 81,246

1974/75 56,179 21,250 8,185 33,213 118,827 :

1975/76 80,465 21,047 992 34,106 136,610

1976/77 92,653 43,368 250 43,776 180,047

Source: Australian Shippers’ Council.

TABLE 3

DISTRIBUTION OF EXPENDITURES OF THE ASC 1976/77 (Percentage of Total Expenditure)

Per cent

Executive 17.4

Communications 10.4

Administration .16.1

Research 29.0

Legal Fees 7.6

Rent and Office Expenses 11.8

Travel and Expenses 5.5

Capital Expenses 2.2

Source: Australian Shippers’ Council.

9.6 Although the ASC has always operated with a limited budget the shortage of funds did not substantially impair the working of the organisation prior to 1976. The funds available in the first two years were sufficient to enable the foundation of the organisation to be laid, but the increase in members’ payments and government grants during 1974/75 were essential to and timely for, the growth of the organisation.

9.7 The funds are inadequate now for three reasons. First, the effects of inflation are eroding the real value of the funds. Secondly, the maturing of the ASC has led to pressures to undertake more diverse tasks. Participation in the Prices Justification Tribunal hearings on stevedoring charges is evidence of an awareness that the ASC

should concern itself with matters affecting the efficiency of the overseas cargo services

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and not merely with the immediate negotiation of rates and service conditions. Thirdly, in 1976 the actions of the ASC were not curtailed to the extent necessary in view of limited funds, resulting in a serious expense overrun in the current year. Lower expenditures may have prevented useful and highly desirable work on behalf of

shippers but would have been consistent with the availability of funds. The issue for the future development of the ASC is whether forecast revenues from present sources will be adequate, when properly controlled and utilised, to enable the ASC to achieve its objectives.

THE OBJECTIVES AND METHODS OF THE AUSTRALIAN SHIPPERS’ COUNCIL

9.8 While adequacy of its revenues is now a matter of major concern to the ASC, the question of funding, while an important matter during the development of the ASC, has not significantly inhibited the type of activities practiced by the organisation. The availability of additional funds may have enabled more research into the verification of

Conference costs and would have facilitated research into matters related to efficiency and shipping costs. It is unlikely however that radically different research would have been undertaken. Additional funds would also have made the organisation’s representation to the Prices Justification Tribunal on stevedoring charges more

acceptable to the ASC’s members. However, the shortage of funds has not been the only factor which has caused the effectiveness of the ASC to be placed in doubt. The ‘soft matters’ of objectives, methods, organisation, powers of the ASC and the expectations of its members and others, have been of more importance.

9.9 The constitution of the ASC lists eleven objectives for which the Council was established. They include activities which can be reasonably concluded to be the means by which the primary objectives of the organisation are to be achieved. The constitution also explains that the ASC was formed “for the purpose of negotiations with shipowners or other carriers with regard to arrangements for, and the terms and

conditions applicable to, the carriage of cargo, whether wholly or partly by sea, from Australia . . .” The ASC was formed specifically to be the designated shipper body as defined in Part X of the Trade Practices Act and “to secure efficient, economical and adequate shipping services” . (The Constitution of the ASC is at Appendix VI.)

9.10 The ASC’s perception of its objectives and the means to achieve them was influenced greatly by the earlier experience of AOTA in the UK/Europe trade. It has undoubtedly striven to serve the best interests of all shippers in the long run by working for “efficient, economical and adequate shipping services”. It has relied heavily on the

analysis of cost and cost related information provided by the Conferences, followed by a certain amount of what is sometimes referred to as “horse trading”: i.e. very loose and general discussion about the ability of the trade, in general, to pay higher freight rates.

9.11 Doubts have persisted in the ASC about the practicality of seeking alternative shipping in the major trades. Conference members provide a frequency and quality of service on such a scale that liner type cargo shippers have been thought unlikely to find alternative shipping sufficiently satisfactory to offer a real challenge to the Conference. The question of differential rate adjustments has been put aside because of fears of its divisive effects and lack of confidence in being able to reach agreement between members. The attitude of shippers has also been influenced by the realisation that some circumstances require prolonged study and negotiation between a commodity and

shipowners. The ASC has sought to meet shippers’ needs by negotiation for levels of service on the basis of estimated revenue for shipowners; this is reflected in across-the-81

board freight rate increases. Under its constitution the ASC has, with a few exceptions, left the negotiation of differential treatment to individual commodity groups.

9.12 There has been insufficient recognition by the ASC of two important principles. The first is that some separation is possible between the purpose of ensuring that Conference services are of the right type and are provided efficiently, and the purpose of negotiating rates. The separation is not and cannot be complete because aspects of the quality of service should affect carrier costs and rates. However, analysis of Conference costs is more closely related to the monitoring of Conference efficiency than it is to the negotiation of rates. The second principle is that the negotiation of rates must give recognition to significant changes in competitive and cost conditions as they

affect particular commodities and/or regions. As noted earlier, failure to recognise this principle has led the ASC to neglect research into and the formulation of ASC negotiating positions related to changing competitive conditions. This approach tends

to be a disincentive to innovation and greater efficiency.

9.13 The ASC is more ready to recognise today the importance of preparing negotiating positions giving recognition to competitive forces. Not all members are convinced that the system will not cause some rates to be higher than would otherwise be the case, although recognition of the case is growing. It is important that the ASC recognise explicitly its functions to monitor and promote efficiency in the provision of overseas cargo shipping services as distinct from the negotiation of rates. Not only will such recognition guide the types of research conducted into Conference services but it will also provide the basis for wider activities. Research into shipping operations and costs are still essential to the work of the ASC but their role must be seen as of most significance in relation to the monitoring of Conference efficiency.

Powers of the ASC 9.14 The ability of the ASC to serve the interests of shippers rests on the powers which it possesses with respect to shipowners. The powers of the ASC come from three sources. They are, the powers it possesses as an organisation of shipowners’ customers, the powers derived from its backing by government and the powers brought to it by individual members.

9.15 The ASC commands respect from most shipowners as a significant body representing a large proportion of Australian shippers. The history of shipper/conference relations in Australia has demonstrated that shipowners have perceived it mutually beneficial to discuss rates and service conditions with a collective body of shippers. The presence of benefits to shipowners means that the owners would expect to share benefits with shippers to ensure the long-run continuity of the process. The mutual benefits derived from collective discussions are the opportunity to discuss broad matters affecting costs and the quality of service, the check provided on irresponsible negotiation (or refusal of shipowners to negotiate) by the collective presence of carriers and shippers, and a simplification of the negotiation process. Conferences may also view agreement with a shipper body as providing a “stamp of approval” .(1) The desire of shipowners to derive their share of benefits from these sources can be expected to lead to consultations with a shipper’s council whether or not it has legislated government backing.

(1) This could work against shippers (and shipowners) if it results in inefficient and insufficient attention of shipowners to the periodic and specific competitive arguments of particular shippers. Complaints about the arrogant behaviour of shipowners should be viewed with concern by the ASC but it must be remembered that it is often easier for a sales representative of a shipowner to tell a shipper that he cannot take action for some reason, such as the agreement with the ASC, rather than offend the shipper by arguing about the existence and/or relevance of certain competitive forces.

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9.16 The concern of shipowners to satisfy the ASC has been increased by the backing provided to the ASC by the Government. The general backing has made it clear that a radical dissatisfaction on the part of the ASC with the performance of shipowners could be reasonably expected to bring some action from government. The presence of

the Minister’s representative at negotiations has facilitated serious negotiation. Finally, there is no doubt that shipowners want the commercial process to work in order to avoid the long-run costs and inefficiencies which could result from more direct government regulation. Increased regulation by the Government would be seen by

shipowners as a costly lead to other governments.

9.17 The powers of collective shipper bodies derived from their representing a large number of Australian shippers and backed by government have enabled them to negotiate levels of rates without resort to detailed arguments of competitive forces. Prior to the 1970s the magnitude of across-the-board rate changes and the greater

stability of market conditions, did not result in changed competitive conditions playing a major role in annual negotiations. Nevertheless, periodically groups of shippers caused dissent by resort to the threatened or actual use of chartered ships to achieve better rates.

9.18 The ASC has been able to use its general powers, increased by government backing, to negotiate rates. It has also used, but only to a very limited and unsatisfactory extent, the powers of competitive arguments which could be brought to it by shippers. However, a shipper body only possesses the powers derived from competitive forces to the extent that shippers can and do present these arguments

through that body. The ASC itself does not ship goods subject to market competition, does not control the routing of cargo and cannot charter ships. These are limitations on its powers in comparison with individual shippers. However, it does not necessarily follow that shippers negotiating through the ASC need lose these powers of

negotiation. Rather, collective negotiation can provide an added strength in negotiation especially when the use of non-conference or chartered shipping is being contemplated. The viability of such action may well be increased by the collective action of shippers.

9.19 Changes in the organisation and attitudes in the ASC are expected to enable it to utilise in negotiations the competitive forces affecting rates. This approach is practical whereas the establishment of a cargo authority responsible for the routing of Australian exports and, therefore, possessing the negotiating powers itself, is obviously

impractical.

9.20 A particular matter of concern has been raised during this review with respect to the power of the Meat Board to specify maximum rates for the carriage of meat, the kind of power which some members suggest should be provided to the ASC for all commodities. Leaving aside the question of the practicality of the suggestion, what is

overlooked is that the power to specify maximum rates adds no power to a shipper over that provided by the availability of alternative means of transport to a market or the availability of alternative markets. If the Meat Board uses its power it does not “set freight rates”. It is stating the maximum rate it is prepared to pay in the light of

competitive conditions. If the competitive alternatives do not exist and the carriers used previously decline to accept meat at the rate proposed, the Board is in a difficult position in the short run (it can only back down) and a weakened negotiating position in the long run. It is not considered necessary, desirable or practical to provide the ASC

with the power to prescribe maximum rates.

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Indemnity of the ASC 9.21 The present Trade Practices Act contains no provision similar to that customarily provided for statutory authorities, t o indemnify the ASC, its members or employees from claims for losses incurred by persons who consider that they have been disadvantaged as a result of an action by the Council.

9.22 This question was first raised in 1974 and since then a number of possible solutions have been canvassed. Proposals for the limited indemnity of members through insurance cover or for incorporation of the ASC as a limited liability company were both investigated by the ASC and considered to be inadequate. An appropriate amendment to the Trade Practices Act, similar to the provisions made for primary industry marketing boards is held to be a better way of achieving the necessary protection.

9.23 The Australian Shippers’ Council differs from the marketing boards in that it is not a statutory corporation and, while its functions are to negotiate terms and conditions for outwards cargo, it does not enter into contracts on behalf of its members or other persons. Contracts for shipment are direct agreements between the shipper

and shipowner and acceptance of terms and conditions applying to a shipper’s goods are decisions taken by that shipper. Individual shippers, so far as the ASC is concerned, are free to negotiate with shipowners operating outside Conferences. Views have been expressed that it is doubtful whether an action could be taken against the Shippers’ Council per se, but the liability of members and employees of the Council for acts or defaults done in good faith is obscure and their indemnification would be a prudent and just provision.

9.24 The fact that the lack of any indemnity is of considerable concern to members of the ASC and its employees tends to discourage willingness to participate fully in the ASC’s activites and to create unwarranted hesitancy in some aspects of negotiations with shipowners. I t is r e c o m m e n d e d th a t a m e n d m e n ts to P a r t X o f th e T ra d e P r a c tic e s A c t in c lu d e a n a p p r o p r ia te in d e m n ity p r o v is io n c o n s is te n t w ith C o m m o n w e a lth L e g a l

P o lic y .

Organisation of the ASC 9.25 The organisation of the ASC has been described in Chapter 2. The organisation has given rise to concern among the membership because of the cost of more adequately servicing the needs of the executive and the Sub-Committes. However, the cost-effectiveness of the organisation of the ASC in this regard is not a matter which is viewed with concern in this report. The members of the ASC are well aware of the need to organise the ASC efficiently and in keeping with the number and organisation of Conferences and shipowners with whom they negotiate. This would be practicable if more funds were available.

9.26 The organisation of the ASC also influences the effectiveness of the Sub­ Committees in negotiations. It is apparent that the performance of the ASC could be improved and made more satisfactory to shippers and shipowners, in some respects. Four major weaknesses have been evident. First, some negotiating committees have had an insufficient representation of shippers actually in the trade. Secondly, the chairmen of negotiating committees have not always been selected specifically for their negotiating skills. Thirdly, inconsistent attendance at negotiations going on over a number of days has been to the detriment of effective negotiation. Fourthly, the authority of representatives of some shippers party to negotiations has been insufficient to allow meaningful negotiation to be carried on.

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9.27 These deficiencies, along with those of the approach of the ASC to negotiations, are recognised by members of the ASC. One proposal to overcome them is to require the Executive Director of the ASC to play a major role in the conduct of the actual negotiations.

Expectations held for the performance of the ASC 9.28 The expectations held for the ASC at the time it was established have influenced peoples’ perceptions of its success or failure. Notwithstanding the voluntary nature of membership in the ASC and the requirement that negotiation with the ASC establishes

the minimum level of negotiation necessary between shippers and shipowners, it has been a common expectation that the greater the amount of negotiation performed through the ASC the more successful the organisation. While it is true that successful performance of the ASC will attract members, it does not follow that all negotiations held separate from the ASC represent a weakness or failure by the ASC.

9.29 As discussed in Chapter 8 the performance of the ASC has also been judged by comparing the percentage rate change negotiated by the ASC with the change negotiated separately by regions and/or commodities. Such comparisons are meaningless because freight rates must reflect competitive conditions which do change

from time to time between commodities. Recognition of these changes have been especially necessary because of the high rate of inflation.

9.30 It cannot be denied that disillusionment with the ASC has been related to weakenesses in the functioning of the organisation, but some of the results produced, such as differential rate increases, were a reasonable outcome from negotiations. Better results may have been achievable in a more harmonious environment but to have seen

this as a major source of concern has not been reasonable. A number of weaknesses in the functioning of the ASC have been discussed but it should be added that incorrect and unreasonable expectations for the achievement of the ASC have made the effectiveness of the organisation look worse than it is.

Effectiveness of shipowners in rate-making 9.31 In examining the performance of the ASC in the conduct of negotiations on rate and service matters it is necessary to give some attention to the attitudes and performance of shipowners.

9.32 Major conferences and shipping lines have shown a willingness to negotiate with the ASC. However, the experience has not always been favourable, especially where a shipowner is the sole operator on a route. It is suggested that if the representative of the Minister reports that the conduct of negotiations has been unsatisfactory in any major

respect, parties to the negotiations be so informed. Such action may be sufficient to prevent major breakdowns in negotiations later.

9.33 The experience of shippers approaching lines outside the framework of the ASC is not so favourable. There is no doubt that shipowners are strongly operations orientated and do not have well developed marketing organisations in Australia. This may in part account for what shippers often regard as a “take it or leave it” attitude on

the part of shipowners. A particular complaint of some shippers is that shipowners may refuse to negotiate matters because negotiations have already been held with the ASC. It is to be hoped that the development of regional representation on the ASC will enable the ASC to become more aware of such complaints by shippers and to prevent

any possible cover-up for inadequate marketing departments or incorrect expla­ nations by shipowners.

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9.34 It can be expected that the more effective negotiation of rates by the ASC on the basis of competitive conditions will place new demands on the marketing and rate­ making departments of shipowners. Absence of more effective marketing departments in the shipping lines may on occasion prove a frustration to shippers but may also enable them to get rate concessions which better informed lines might not be prepared to concede.

ORGANISATIONAL DEVELOPMENT 9.35 The organisational development of the ASC must be looked at in the light of proposals in earlier chapters regarding the ASC’s role in negotiations with shipowners. The ASC has had, or has under consideration, various proposals for its

long-term development.

Research capacity 9.36 As discussed elsewhere in this Report a considerable amount of research is necessary to enable the ASC to present effective arguments to shipowners regarding alternative shipping, and the effects upon marketing of exports of any increase in freight rates or changes in services. The ASC performs inter-related functions in negotiating freight rates according to these last mentioned factors and in influencing

the efficiency of liner shipping—without the need for a government regulatory authority and detailed regulations.

9.37 The availability of more resources to the ASC would enable it to develop its research capacity in the interests of all members. There may be economies in research effort as well as a greater capacity for exporter groups to reconcile their shipping requirements and annual negotiating positions within the ASC framework. There must, however, be certain types of research on market conditions which can only be done within the commodity groups and some of this will necessarily be concerned with comparative freight costs both for alternative services and also those available to competing supplying countries. This would continue.

9.38 A significant amount of research is necessary into the basis of information supplied to a negotiating committee by shipowners. In the past considerable expense has been incurred on an overseas accountant to perform this work in the UK/Europe trade. In this trade because of its traditional relationship with shippers, the freight review exercise is the most exhaustive of all the trades and is likely to be of a standard unique in shipper/shipowner exchanges. This is unavoidable because certain information, mainly financial information, is held only by overseas head offices of foreign shipping lines. Because of legislation of other countries it is impractical to require such information to be available in Australia.

9.39 The work of overseas accountants could perhaps be reduced if the ASC had the resources to develop its own shipping accounting expertise to analyse as much as possible of the information as shipowners may be prepared to make available to the ASC here. Nevertheless, a high level of expertise has been gained over many years into in-depth analysis in the UK/Europe trade. In that trade one per cent of the freight rate equates to about $1 million per annum as against the accountancy cost of $20,000 per annum.

The Secretariat 9.40 For some time the ASC has had its future organisation under review with the objective of becoming a more effective body. Proposals for the future have included a

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reorganisation of the ASC secretariat. One such proposal envisaged a staff of ten which does not seem excessive. Under it, specialists in such matters as legal studies, accounting and research would be appointed. The proposal sought to reduce much of the burden now undertaken by Sub-Committees and to reduce the number of meetings

to be attended. In 1976 the estimated budget to provide for this development as well as the ASC’s other commitments was $200,000 p.a.

9.41 When consideration is given to the suggestions and conclusions of this report, particularly in relation to research, a figure of $400,000 p.a. would possibly be more realistic, given a three year devHopment period to come up to this figure. The recommendations made in the Report could be expected to require a greater degree of

reorganisation and more staff than the earlier ASC proposal.

9.42 It is recommended that subject to the availability o f adequate finance the organisation o f the secretariat be geared to give adequate support to the conduct of negotiations taking into account the negotiating considerations dealt with in Chapter 8 and that the A SC be encouraged to consider its future management accordingly.

Approach to negotiations 9.43 Two recent studies have been concluded within the ASC on its approach to negotiations. They recognise the problems which have resulted from across-the-board percentage changes in freight rates and propose alternative approaches. The ASC is

developing these with a view to making this aspect of its activities more effective. The general direction of those studies is consistent with conclusions of this Report and it is suggested that the ASC be given the opportunity to develop its own solutions along these lines. This is expected to lead to a stronger ASC in all major respects.

9.44 In discussions with shippers and shipowners there was support for some such approach to negotiations as that being considered by the ASC. Shipowners, who might have been expected to propose an overall freight rate package seem to feel that they are not well placed to make the necessary assessments and prefer that the initiative should come from shippers, as has indeed been suggested by one of the ASC studies. In the past the initiative has tended to come from shippers but not in the form of negotiating a freight rate package. Some shippers seem to feel that this approach to negotiations

might be too ambitious but on balance there seems to be a desire to make it work.

Other possible arrangements 9.45 The Government in practice relies heavily upon the ASC to assist in the protection of the national interest in relation to outwards liner cargo shipping. If the ASC continues to receive direct financial assistance and/or the Government’s support

through Commonwealth legislation to fund its activities, Government has an additional reason to want to be satisfied that the best approach to control of Conference operations is being employed.

9.46 Provided that the ASC can be relied upon to function reasonably effectively in relation to negotiation of freight rates, encouragement of efficiency of liner shipping and negotiation downwards of Conference “cartel” profit levels, extensive Govern­ ment powers and intervention should be unnecessary. The commercial approach to the

regulation of liner cargo shipping has been reasonably successful to date and the proposals being considered by the ASC should enable commercial resolution of problems as they arise.

9.47 Notwithstanding these conclusions, consideration has been given to other possible arrangements which would necessarily mean a greater degree of government

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involvement. The Government could appoint the President of the ASC as a part-time or full-time position. It might appoint an executive-director and/or provide the Council’s secretariat. The purpose of such involvement would be to increase the

Government’s influence with respect to the working of the ASC and especially the research which it undertakes.

9.48 There are two other alternatives to which consideration could be given. One would be to establish the designated shipper body as a statutory authority with membership appointed by the Minister. The other alternative is to establish a Shipping Tribunal to investigate and make recommendations on shipping freight rates and services. Consideration would need to be given to these alternatives if there were lack of confidence that the ASC could more effectively pursue questions of differential freight rates to meet the different needs of commodity cargoes. If the ASC appears unlikely to do this, or if in practice attempts to do so are unsuccessful, the principal role of the ASC would be to monitor the profitability and overall efficiency of shipping Conferences. This would be so even though the ASC would, at the same time, be negotiating an overall level of service compatible with forward estimates of costs and revenue of the Conference members. If the principal task being performed is on behalf of government, and government is funding the shipper body, a greater degree of Ministerial control could be considered desirable.

9.49 Establishment of a statutory shipper authority with members appointed by the Minister would enable the Minister to select a group of shippers and producers on the basis of their individual capacities, their abilities to work with one another, and their knowledge of the nqeds of exports for liner shipping services. The authority would be charged with the task of consultation with shipowners on liner shipping services and

shipowners’ revenue expectations on behalf of all Australian exporters and producers for export. It would not be the function of appointees, though chosen from particular areas of industry, to press the interests of their respective commodities as their first consideration, which tends to be the present position. It is suggested that membership

should consist of appointees representing each of the commodity statutory marketing authorities and such other persons as may be appointed at the Minister’s discretion.

9.50 The authority so appointed would still have the knowledge and experience to seek the kind of shipping services which Australian exports need. It would have similar or better capacity to encourage efficiency and discourage excessive profit-taking resulting from the operation of shipping cartels. Individual cargo and commodity interests could independently negotiate with shipowners as necessary to establish appropriate freight rates for their cargoes. They should do so in those circumstances on a strictly commercial basis without government intervention and without direct access

to information provided to the statutory authority by shipowners. Each would presumably negotiate on the basis of commercial advantages and disadvantages and alternative shipping opportunities.

9.51 A less attractive alternative would be to establish a Shipping.Tribunal within or attached to the Department of Transport. The Tribunal would be charged with examining liner shipping services and freight rates with a view to making recommendations on appropriate changes and adjustments from time to time. It would examine proposals for freight rate increases and recommend, where appropriate, that proposed increases be adjusted in the light of projections of revenue and costs and in

the light of the operating efficiency of the shipping lines concerned. It could be given power to fix freight rates but preferably would simply make recommendations with object of persuading shipowners to moderate their claims. This should have a significant force of persuasion, particularly as it would represent a clear indication to

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potential outside competition of the degree of any excess profits being earned in a trade.

9.52 These alternatives to the present arrangements would almost certainly mean a greater degree of government involvement. Government would be under greater pressure to intervene in situations which are now more likely to be treated as situations of commercial negotiation and compromise—and therefore best left to the commercial

interests concerned. This has to be weighed against the relative future effectiveness of the ASC compared with the alternative considered. Neither alternative approach could provide effectively for collective bargaining by shippers to determine appropriate differential freight rate adjustments which, however difficult, is one of the potential

advantages of a voluntary association of shippers specifically representing the different cargoes carried by liner conferences. Subject to the above arguments it is recommended that the ASC be given the opportunity to develop its own solutions.

LEVEL OF ASC FINANCIAL REQUIREMENTS

9.53 ASC expenditure in 1976/77 was $181,045. The forecast requirement for 1977/78, including $12,045 required to meet a deficiency carried over from 1976/77, is $217,000.

9.54 The deficit incurred in 1976/77 is attributed to participation by the ASC at Prices Justification Tribunal hearings and legal costs incurred in connection with the break­ up of the Australian East Coast USA Shipping Conference. The ASC estimates that about $7,842 of the estimated deficit is due to legal costs associated with the Prices

Justification Tribunal hearings and another $6,320 is attributed to accounting costs for those hearings. While the hearings were directed towards stevedoring charges rather than shipping services the expenditure was justified because of the practice of shipowners in passing on increases in stevedoring costs through freight rate increases.

9.55 Future funding requirements might be assessed on the basis of past expenditures and these have been moderate in relation to the task performed. The ASC has consistently been concerned at the level of its finances and the need to get the most out of those funds. It has been fortunate to be able to pursue research, albeit far less than

desirable, and to obtain an experienced executive director for less than might reasonably be expected. If adequate research is to be pursued in the future and suitable research staff and a professional negotiator are to be retained, expenditure must increase significantly. The requirement is difficult to estimate pending decisions of the

ASC on its future modus operandi but is assumed to be about $400,000 p.a., building up to this figure over three years.

Long term finance 9.56 Options for long term financing of the Australian Shippers’ Council are limited to member subscriptions, government grants, a levy on liner export freights, or a combination of these.

9.57 In the ASC’s view it is impractical to raise the level of member subscriptions because this would lead to resignations. Members of the Council contributed in the order of $50,000 in 1976/77 and the Government grant in 1977/78 will be $140,000. Proposed future ASC development would require on a similar basis, a contribution of

$300,000 p.a. from the Government. If the Government contribution were to be maintained at the 1977/78 level of $140,000, member contributions for future development would need to rise to $260,000 or about $11,500 a member.

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9.58 In view of the ASC protests regarding the difficulty of increasing the level of membership subscription (now $1,950 for a primary seat), it must be accepted that there would be a loss of membership if subscriptions were raised to an average of about $11,000 p.a. per member. The loss of membership would outweigh the gain in revenue. In fact, there can be little doubt that the ASC would have no option but to curtail its activities to an undesirable extent to avoid such high subscriptions.

9.59 Some shippers and shipowners contend that the ASC should attract member­ ship, and therefore subscriptions, as a result of recognition of its success in achieving improved services and satisfactory freight rates for exports. There may be some truth in this. If negotiations with shipowners took the individual needs of commodity groups into account more effectively than in the past, it is possible that these groups would be more willing to bear a high proportion of the costs of the ASC. This is an additional reason for supporting differential rate increases at annual rate negotiations where individual commodity groups can substantiate a claim for special consideration.

9.60 It must be recognised however that there are limiting factors which will prevent the ASC from being entirely self-financing. A great many individual exporters and a number of potential member organisations are too remote from the ASC and its work to recognise the benefits which they recieve. Some organisations represent industries

with only a small proportion of exporters who nevertheless benefit from more efficient outwards cargo shipping. There is also a tendency in many organisations to leave the funding and the burden of work to others if the receipt of the benefits is not directly related to membership and subscriptions.

9.61 Members of the ASC and potential members do not necessarily benefit equally from all work done by the ASC. There may be conflicts of interest because of different shipping requirements for, e.g. refrigerated and dry cargo space. A reluctance by exporter and producer bodies to reduce their own research and their own capacities to negotiate outside ASC may limit their capacities to increase subscriptions to the Council. Their members could quite reasonably take the attitude that they do not intend to pay twice for a similar service. While in some cases this may be a short-sighted attitude which ignores the benefits of collective negotiations its existence cannot be ignored.

9.62 Arguments can be advanced against the increasing reliance of the ASC upon a direct government grant. Members may be encouraged to look to the Government for ever increasing levels of financial support. Grants do not encourage responsibility or higher levels of representation on negotiating committees. Most of all, however, government grants do not represent an assured source of income to permit the long term planning and continuity of staff necessary to establish an adequate program in support of negotiations. ,

A levy on liner cargo 9.63 The ASC has considered alternative methods of finance in order to seek greater independence from reliance on government assistance. There is a belief within the ASC that it should be financed to a greater extent by the export industry and especially those sections which presently make no contribution to but receive substantial benefits from efficient liner cargo shipping. The only viable funding arrangements other than member subscriptions, which cannot be adequate, and/or Government grants, is a levy on cargo lifted by shipping lines operating liner cargo services.

9.64 On a per tonne/c.m. of cargo basis, the levy needed to meet the long term development and strengthening of the ASC would be extremely small. Nevertheless support within the ASC for a levy is not unanimous. Major commodity groups object

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that their members are already levied to pay for industry negotiations and a levy would fall most heavily in aggregate on exports of their industries. Consequently the ASC advised the Minister on 26 January 1977 that the proposal for a levy on export liner cargo tonnage had majority support only.

9.65 A scheme since developed by some ASC members envisages a levy coupled with a matching government grant and continuation on a relatively low level of direct member subscriptions. It seeks to meet some of the objections of the major commodity groups by reducing the direct impact of a levy, and to maintain a direct government contribution in recognition of the tasks performed by the ASC on behalf of the

Government. It also seeks to maintain a level of member subscriptions commensurate with attracting members while maintaining some degree of responsibility in seeking membership and pursuing ASC business.

9.66 In order to meet development proposals already referred to, this scheme, which has yet to receive Council approval, would involve a levy of four cents per tonne/c.m. on liner cargo raising $280,000 p.a.; a government grant of $140,000 p.a.; and subscriptions of $16,000 p.a. It would therefore yield about $436,000 p.a. which should

meet the ASC’s financial needs for its further development and contribute a small amount to a fund to meet unforeseen commitments.

9.67 The levy would be payable by shippers as a surcharge on freight. Receipts would be paid into a fund dedicated to financing the ASC. From time to time the amount of the levy would be determined by the Minister after consultations with the ASC. Freight could not be loaded unless the amount of the levy had been paid into the fund or to e.g.

shipowners, committed to remit the levy to the fund at appropriate intervals. Under such a simple arrangement collection costs should be small but it has not been possible to estimate the cost. Withdrawals from the fund by the ASC would be subject to the Minister’s approval of the overall ASC budget. The levy would be applied only to those

tonnages lifted at scheduled rates. The level of revenue would also vary with the level of export trade and the ASC would need to be “buffered” against these fluctuations by being able to draw from the fund supported by the levy.

9.68 A number of arguments can be raised on the question of the collecting agency. A major consideration is the desirability of avoiding the appearance of shipping lines financing the ASC’s activities. On the other hand it is desirable that a levy should not become confused with other levies for other purposes, e.g. stevedoring levy, and

therefore some closer connection with the outwards liner cargo shipping operators may be desirable. The final recommendation on the collecting agency would be best left for consideration by an inter-departmental committee which could take into account points of view raised by other departments in respect of legal considerations, collection

problems and consistency with government policy in other areas in matters of this kind.

9.69 The advantages of the levy are that it would provide adequate funding for the ASC; it would be readily adjusted from time to time; and would ensure that all exporters shipping on liner vessels would contribute to negotiations to improve services which they use. Hopefully it would also encourage wider and higher level

participation in the affairs of the ASC because of the greater effectiveness of the ASC with more adequate finance.

9.70 The major disadvantages of a levy are the tendency to be self-perpetuating and facilitating expenditure without direct responsibility for raising the funds. High volume exports would contribute heavily to the ASC’s operations, but perhaps the contribution should be seen as being simply proportional to the total benefits received

by them.

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9.71 It could be objected that there will be those who do not necessarily favour the ASC in principle or its operations but will have no choice about paying the levy—this could equally be applied to statutory levies in general on rural and export industries. It might also be questioned whether the sum to be raised makes it worthwhile instituting legislation for a levy scheme which is not unanimously supported by producer and exporter groups.

9.72 It might be thought that statutory boards which have powers to raise levies on their industries could increase their contributions sufficiently to avoid the necessity for a levy. The possibility of adequate finance for the ASC through an increase in their contributions is very doubtful because of other demands on their resources and the amount needed for the ASC.

9.73 It might be argued that there is no justification for further direct government grants to the ASC if the principle of a levy is adopted. The levy would be comparatively small even at 6 cents per tonne/c.m. and would reach out directly to all those shippers

using the vessels operating under terms and conditions negotiated by the owners with the ASC. The conclusion has been reached, however, that if the financial levy scheme is to have the support of major commodity groups, recognition must be given to the task performed on behalf of government by the ASC by direct government grant.

Recognition must also be given to the impact upon these major commodity groups and the need to reduce that impact.

9.74 I t is r e c o m m e n d e d th a t th e m o s t a p p r o p r ia te w a y to p r o v i d e f o r th e A S C ’s f u t u r e

r e q u ir e m e n t f o r fu n d in g is to in tr o d u c e le g is la tio n to p r o v i d e f o r a l e v y on lin e r c a r g o

e x p o r t s c o u p le d w ith a d ir e c t g o v e r n m e n t g r a n t a n d a s m a ll m e m b e r s h ip s u b s c r ip tio n . If

the Government is unable to agree to introduction o f legislation for a levy on liner cargo exports then, for the ASC to be able to do the job for which it has been established, and required of it by existing and recommended future legislative provisions, the ASC must depend upon the Government for at least $350,000 p.a. coupled with membership subscription, building up to this figure over three years.

9.75 In view of the continuing requirement for government funding the present practice of tabling the ASC’s annual report should be continued, and in the case of a levy should be required by legislation. The annual report should contain appropriate financial statements.

9.76 I t is r e c o m m e n d e d th a t i f th e p r in c ip le o f a le v y on lin e r c a r g o e x p o r t s is a d o p te d ,

m o r e d e ta i le d e s t im a te s o f f u t u r e r e q u ir e m e n ts b e d e v e lo p e d w ith th e A S C s a s s is ta n c e

a n d th a t th e a p p r o p r ia te a m o u n t o f th e le v y b e d e te r m in e d a c c o r d in g ly .

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CHAPTER 10

MINISTERIAL POWERS AND DEPARTMENTAL FUNCTIONS

10.1 Recognition by successive Australian Governments of the advantages of liner shipping Conferences has involved their regulation in the national interest. Regulation has sought to ensure that the restriction on competitive forces, permitted by allowing the Conference system, works towards the provision of more efficient liner cargo

shipping services than would be likely to exist in the absence of Conferences.

10.2 It has been concluded in this report that this objective has been and will continue to be most effectively pursued through maximum reliance upon commercial processes. Some legislative backing and reserve powers of government are necessary and these need to be expressed more explicitly in legislation. In particular there is a need for broader ministerial powers to encourage efficiency of shipping and to lend support to

commercial processes likely to assist in that direction.

MINISTERIAL POWERS

10.3 The Trade Practices Act currently provides for the exercise of some powers by the Minister. Other powers are exercised by the Trade Practices Tribunal and the Governor-General. The Minister may request a shipowner to be represented by an agent and to provide an address for service of notices in Australia. He may extend the

time allowed for filing of a Conference agreement and may request shipowners, including parties to a Conference agreement, for undertakings to negotiate with the ASC in accordance with section 122 and section 128. He may, after consultations with the parties to a Conference agreement, or with an individual shipowner, refer certain matters to the Trade Practices Tribunal for inquiry and report.

10.4 Several recommendations have been made regarding the extension of control over Conference agreements and operations and over non-conference operations. They call for a number of separate extensions of the power of the Minister. In each case the need for ministerial discretion rather than statutory obligations and penalties can

be related to problems of attempting to impose defined statutory obligations on shipowners, as well as the need to encourage efficiency with a minimum of resort to prosecution for breaches of law.

10.5 The most important suggested power of the Minister would involve the substitution of “the Minister” for “the Governor-General” in section 123 and section 129 and deletion of references to the Trade Practices Tribunal so as to give the Minister discretion to disapprove a Conference agreement. Procedures under the present

provisions are too unwieldly to allow for effective control of shipping Conferences under relatively fluid trading conditions. Disapproval of a Conference agreement should not be seen as a penalty so much as withdrawal of a privilege when the public interest might be better served without a Conference, or by new Conference arrange­

ments. The end of a Conference agreement and beginning of another need not necessarily involve major disruption or loss of shipping services and should be a matter for decision by the Minister when circumstances call for the compulsory termination of an existing Conference.

10.6 Complementary to the repeal of sections 132 to 139, amendments to Part X should permit the Minister to require the provision of any information necessary to

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determine whether there is cause why he should not disapprove a Conference agreement and to provide for undertakings, which might render disapproval unnecessary, to be enforceable.

10.7 The recommendation in Chapter 5 that Conference agreements should not come into effect unless the Minister is satisfied that they meet the needs of efficient overseas cargo shipping, requires appropriate amendments to Part X. There should continue to be a monetary penalty for failure to file an agreement.

10.8 In circumstances calling for availability of Conference agreements for public inspection; the right of independent rate action by individual Conference members; or entry of a new line to a Conference without the agreement of the existing Conference members but with the support of the ASC, a measure of Ministerial discretionary power is recommended. Provision would need to be made in section 129 for the Minister to be able to disapprove a Conference agreement unless his decision on independent rate action or entry of a new line were complied with by the Conference concerned.

10.9 Recommendations have been made regarding negotiations between shipown­ ers and other parties separate from the ASC affecting a significant proportion of an outwards liner cargo trade. They call for the Minister’s approval before any resulting

agreement could be brought into effect. This could be enforced through monetary penalties for failure to notify the Minister and for implementing the resulting agreement without his approval. The reserve powers of disapproval of the Conference agreement and for declaration of an individual shipowner in the event of failure to have due regard to the need for services to be efficient (as defined in Chapter 3) would be a last resort.

10.10 It has been recommended that shipowners be obliged to refrain from employment of “fighting ships”. Since it is more likely that shipowners will resort to freight rates inconsistent with the recommended definition of efficiency, most situations of “unfair" restriction of competition can be expected to leave open the possibility of disallowance of a Conference agreement under section 123. However, the possibility exists of employment of a vessel or vessels to meet a non-conference

operator’s scheduled calls, at drastically reduced freight rates. This possibility warrants provision for the Minister to investigate the apparent use of a “fighting ship” and to order the operator of the vessel to desist. There should be power to require the provision of information and to prohibit the loading of cargo by a vessel the operator

of which fails to comply with the Minister’s order.

1 0 .1 1 In respect to the recommendation in Chapter 5, on undue advantage being

taken of a shipowner’s power to enforce loyalty contracts, it is suggested that the Minister be empowered to suspend a loyalty contract in whole or in part. Suspension should only be invoked if, after consultations with the parties, the Minister is satisfied that the shipowner is unduly restricting the efficient carriage of Australian exports. The Minister’s order should rerider the contract unenforceable to the extent stipulated in the order. An appropriate circumstance might be a requirement under the contract for the shipper to divert shipment of goods from a natural routing not served by the shipowner or Conference where direct carriage is available.

10.12 Recommendations in Chapter 5 call for the maintenance in Australia of records of schedules of services and tonnages of cargo lifted and discharged, and annual reports to the Minister on the state of shipping services capacity. These fall within the category of information which should be available to the Minister. Appropriate provision should be made through regulation making powers to specify

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the appropriate information to be kept in Australia and to be supplied to the Minister. Failure to comply should be subject to a monetary penalty.

10.13 The remaining matters recommended for extension of ministerial discretion relate to inwards liner shipping Conferences and the operations of government subsidised lines. It has been suggested that the Minister should be able to exercise his discretion on whether to allow public inspection of inwards Conference agreements.

Adoption of legislation similar to U.K. legislation in relation to discriminatory actions of foreign government subsidised shipping would give the Minister powers to seek information and make appropriate orders to protect the shipping or trading interests of Australia and other countries to fulfil international obligations.

10.14 It has been recommended in Chapter 9 that the ASC be partly financed through a levy on liner cargo exports. The proposal envisages that the levy would be paid into a fund from which drawings would have to meet with the approval of the Minister.

DEPARTMENTAL FUNCTIONS

10.15 Certain additional responsibilities would fall upon the Department of Transport as a consequence of broadening the Minister’s powers as recommended. In addition this report, at Chapter 5, has commented upon the need for adequate research within the Department of Transport to be able to advise the Minister effectively on

matters of efficiency. A need has been recognised for the Minister, and hence the Department, to be able to advise and assist importers as well as exporters. It has been recommended also that resources be devoted to a programme of computer based studies of the economics of liner services on major routes.

10.16 The day-to-day administration of Part X of the Trade Practices Act and policy advice to the Minister on liner cargo shipping are the responsibilities of the Liner Branch of the Sea Transport Policy Division, Department of Transport. The Branch collaborates closely with other Departments and the ASC as well as directly with

industry in studying the shipping needs of Australia’s overseas liner cargo trade. It also provides briefings and representation as appropriate for international meetings. The Clerk of Shipping Agreements is attached to the Branch.

10.17 An officer of the Liner Branch is present at ASC/shipowner negotiations in accordance with Part X of the Trade Practices Act. His presence is generally accepted as assisting in negotiations although in the strict sense he is not a conciliator. Through his presence at negotiations the Department and the Minister are kept informed of the progress of negotiations and the degree to which shipowners are complying with the

provisions of Part X, including questions of efficiency. It is recommended that section 122 and section 128 be amended to require information provided to the designated shipper body to be provided also to the officer designated by the Minister for the purpose o f sub­ section 122(2) (b).

10.18 In addition the Liner Branch, albeit with limited resources, carries out a minimal amount of investigation and research to assist in policy formulation and assistance to shippers. Liner cargo shipping provides an indefinite service based upon longterm investments in specialised vessels, frequently designed and built for a particular trade. Studies of its efficiency therefore must have regard to past performance and future prospects including seasonal influences and major fluctuations

in trade for one reason or another. The research carried out by the Liner Branch in this field falls short of these long-term needs. More complicated studies may be carried out by the Bureau of Transport Economics.

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SHIPPING INVESTIGATION UNITS

10.19 The UNCTAD secretariat has produced a series of reports on the protection of shipper interests. They include a paper on shipping investigation units and their part in assisting policy information.(1) A unit’s task is to uncover and analyse facts and figures upon which sound policy decisions can be taken and policies can be harmonised with policies in other related areas of government.

10.20 The shipping investigation unit should study data on cargo flows, port-to-port and commodity by commodity, converted into figures demonstrating needed shipping ' space. Study of data on ship movements would lead to assessments of space utilisation and operational efficiencies in terms of port calls, numbers of vessels, and frequency of

calls. It is desirable to study freight rates; relative movements between trades; relativity with rates paid by overseas trade competitors; and the likely impact of changes in freight rates on the flow of cargo and adequacy of services. Such studies also throw light upon the probable magnitudes of profitability of foreign shipping.

10.21 It is recommended that consideration be given to development o f a shipping investigation unit along these lines within the Department o f Transport to strengthen and supplement the current level o f investigation o f such matters. Such a unit would complement the research functions of the ASC as well as improving the policy advice to the Minister.

STREAMLINING OF ADMINISTRATIVE ARRANGEMENTS

10.22 In the course of administration of Part X of the Trade Practices Act, some deficiencies in the present administrative requirements have become apparent.

10.23 The Act requires the appointment of the Clerk of Shipping Agreements, and persons acting in that capacity, by the Governor-General. This provision presumably is intended to reassure shipowners of the impartiality of the appointments. In practice the appointments are made from the career stream of officers within the Public Service on the recommendation of the Department according to normal selection processes. The Clerk of Shipping Agreements is, of course, bound by the provisions of the Public Service Act and the Crimes Act.

10.24 Complementary to other recommendations of this report it is therefore recommended that Part X be amended so as to allow appointments to an office o f director o f shipping agreements, and ofpersons temporarily filling the position, in the normal way. This would avoid the necessity to seek the Governor-General’s approval for short-term temporary appointments.

10.25 It is also recommended that the secrecy provisions o f Part X be repealed or that they be modified to permit access by departmental officers to the records o f the Clerk (Director) o f Shipping Agreements.

10.26 Approval under the existing provisions of the Act to permit provision of information to a person who has been a party to a Conference agreement needs to be clarified. It is recommended that provision o f information to a party who has ceased to be a party o f a Conference agreement be limited to information which would have been available during the period that he was a party to the agreement.

10.27 There is no effective way of enforcing the notification of appointments of agents and addresses, and changes thereto, for purposes of serving notices under the

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Act. I t is r e c o m m e n d e d th a t p r o v is io n b e m a d e in le g is la tio n f o r a n a p p r o p r ia te m o n e ta r y p e n a lty .

10.28 Regulations under the Act relieve shipowners of the obligation to file variations in freight rates with the Clerk of Shipping Agreements. I t is r e c o m m e n d e d th a t th e r e b e p r o v is io n f o r r e g u la r a d v ic e o f d e ta i ls o f f r e i g h t r a te v a r ia tio n s to th e

D e p a r tm e n t o f T r a n s p o r t.

10.29 P r o v is io n is n e e d e d to b r id g e th e p e r i o d w h en u n d e r ta k in g s u n d e r th e A c t c e a s e to b e e ffe c tiv e , e .g . f o l lo w in g r e s ig n a tio n o f a lin e f r o m a C o n fe r e n c e , a n d a n e w u n d e r ta k in g ca n b e o b ta i n e d f r o m a sh ip o w n e r . T h e r e is a ls o n e e d to p r o v i d e f o r d e le g a tio n o f

M i n is t e r i a l p o w e r to a llo w a n e x te n s io n o f tim e f o r th e p r o v is io n o f u n d e r ta k in g s . There may be merit in considering a change to require the provision of undertakings to the Department rather than to the Minister in order to simplify what has bedome a routine procedure. I t is r e c o m m e n d e d a c c o r d in g ly .

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CHAPTER 11

SETTLEMENT OF DISPUTES AND PROVISION OF PENALTIES

11.1 Discussion in earlier chapters has been related to the ability of Conferences, although normally operating within guidelines set by governments, to exercise cartel powers in a manner inimicable to the national interest. An individual shipowner who is the only operator in a trade may similarly have monopoly powers equal to if not greater than a Conference. Legislation is therefore required to protect the national interest. Relevant suggestions in earlier chapters are drawn together in this chapter.

11.2 Australia’s particular needs lie somewhere between British and United States liner shipping legislation; viz: the Merchant Shipping Act 1974 and the Shipping Act 1916. Both Acts are examples of philosophies suited to individual national needs but dealing with the same type of industry. Therefore before proceeding to the question of settlement of disputes and penalties under Australian legislation, the British and U.S.A. laws are briefly considered.

BRITISH MERCHANT SHIPPING ACT 1974

11.3 Great Britain’s Merchant Shipping Act 1974 is wide ranging and is concerned with the efficient and safe operation of the merchant fleet. It deals with such matters as safety standards, manning standards, accommodation, professional competency, and health. As Britain’s shipping policy is one of freedom from regulation the Act is not concerned with commercial aspects of shipping and is silent on commercial relations between the British merchant fleet and shippers. It nevertheless provides the British Government with sweeping powers to protect British shipping against discriminatory measures taken by other Governments and foreign flag shipping.

11.4 Great Britain has other legislation which could be extended to Conferences. The 1973 Fair Trading Act provides for the extension of the 1956 Restrictive Trade Practices Act to agreements relating to services. Such an extension is at the discretion of the Secretary of State who may, by Order, bring specified services and restrictive agreements relating to those services within the scope of the Restrictive Trade Practices Act. It has however been announced in the British Parliament that it is not intended to apply the 1956 Act to international shipping Conference arrangements.

Effectiveness of the British legislation

11.5 Great Britain’s registered shipping represents some 10 per cent of world seagoing tonnage and on that basis Great Britain is the third largest merchant shipping nation. Great Britain also lies at the centre of the world’s busiest sea lanes and is a major shipping exchange centre. Under these circumstances it is highly possible that a

reasonable degree of competition will be faced by Conference members. Consequently there is likely to be less need for regulations of shipping in Great Britain than in Australia.

11.6 Despite the stated U.K. intention not to apply the provisions of the Restrictive Trade Practices Act to shipping, the existence of those provisions may be a limiting factor on discriminatory or predatory practices. The possible necessity for action to be

taken a g a in s t f o r e ig n shipowners, moreover, is diminished by the wide ranging and

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effective legislation protecting British shipping from foreign flag discrimination, in trades where the great majority of British ships are employed. That legislation is considered later in this chapter.

UNITED STATES SHIPPING ACT 1916

11.7 Unlike the British Merchant Shipping Act and the Australian Trade Practices Act, the United States Shipping Act provides for close supervision of the shipping industry by a statutory regulatory body, the Federal Maritime Commission (FMC). It provides for specified fines for a wide range of actions which contravene it. The FMC

has, subject to appeal to the Courts, power to allow, amend, or disallow agreements, rates and practices in the shipping industry. Unlike Australian legislation, the Shipping Act provides for control over inward as well as outward shipping, and provides measures to deal with disputes concerning discrimination against U.S. flag shipping in

foreign trades.

11.8 The U.S. Shipping Act itemises and proscribes a number of unacceptable actions. For the more serious of these, such as the use of deferred rebates, fighting ships, retaliatory practices (e.g. the refusal to grant available space to a shipper to enforce loyalty, or as a reaction to shipper complaints), or discriminatory contracts based on the volume of freight offered, a fine not exceeding $25,000 is specified for each

offence committed by a U.S. citizen. Where foreigners violate those provisions of the Act the Secretary of Commerce is empowered, on certification by the FMC, to refuse entry of the offender’s vessels to U.S. ports until the violation ceases. That latter

provision also applies to parties to a combination, agreement or understanding which results in U.S. flag carriers being excluded from trading between foreign ports.

11.9 In addition to those items other less serious actions are prohibited and a number of requirements are listed. For example discounting of rates and discriminatory rates and charges are prohibited; agreements, variations of agreements, and tariffs must all be filed.

11.10 Action may be initiated through the FMC either by a person lodging a complaint and/or seeking compensation, or by the Commission itself. The Commis­ sion is required to fully investigate any violations of the Act, rules or regulations and

may then, after a full hearing, make an order relevant to the violation or make an order for payment where reparations are being sought. The Commission is however not enabled to initiate reparation hearings.

11.11 Orders by the Commission are subject to appeal to the Courts and monetary orders are enforceable through the same system. General penalties of fines not exceeding $5,000 are provided for each violation of the Act and fines of not more than $1,000 for each day of violation of an order, rule or regulation made by the

Commission.

11.12 The legislation applying to discrimination against U.S. flag vessels is considered later in this chapter.

Effectiveness of the USA legislation 11.13 The United States, like Great Britain, has a large merchant shipping fleet but the application of its shipping legislation is greatly influenced by the philosophy of its anti-trust legislation. The result has been that a system of supervision enforced by a

regime of fines for a large number of specified violations has become established

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1 1 .1 4 The operation of this system was recently reviewed by the U.S. Department of Justice. In its report,11' the Department concluded that Conference power has not been constrained by either the regulations or by market forces and that current USA regulations may well have resulted in cartelisation of the shipping industry. The review further concluded that the C o n f e r e n c e s y s t e m does not ensure rate stability or stated levels of service and in fact does little more than fix freight rates, and that a competitive ocean shipping industry could achieve the same benefits in a less costly manner.

11.15 The Report considered that “Government regulation seems to have aban­ doned a balancing of interests in favour of promoting stability and increased cartelisation of the industry” and that “shipper choice and consumer welfare are subordinated to those goals on the presumption that they are concomitantly

benefited”. To remedy this situation the Report proposed either repeal or substantial modification of the Shipping Act to increase competition.

11.16 Although the Shipping Act and the FMC are, in the view of the Report, not attaining the results for which they were designed, there are advantages where a degree of supervision is necessary, in having a system with clearly defined guidelines specified for the industry. This objective is achieved by the Shipping Act.

11.17 A further difficulty associated with the United States approach (and one which is relevant to the Australian situation) is the difficulty of detecting violations, a difficulty inherent in any highly regulated system. The Chairman of the Federal • Maritime Commission recently touched on this point12' when speaking of the possible

advantages to the USA of closed Conferences compared with the open Conference system with its resultant overtonnaging. He spoke of “the existence of malpractices— frequently in collusion with shippers or forwarders—that spring up quickly” . There is no doubt that such practices are difficult to police.

TRADE PRACTICES ACT PART X

11.18 The main provisions of the Trade Practices Act relating to overseas cargo shipping were considered in Chapter 4. There is a presumption inherent in Part X of the Act that shippers and shipowners have a joint interest in the provision of efficient shipping services and that they will seek to reach agreement on rates and conditions and on the provision of services to attain that end. The Act contains relatively little in the way of conditions to be met by the parties, or of specific prohibitions and attendant penalties and provides minimal guidance concerning negotiation procedures and the

reaching of agreements. There is no machinery for the conciliation or arbitration of disputes between shippers and shipowners. Nor is direct provision made for the settlement of disputes between Conference members or between Conference members and other shipowners.

11.19 Enforcement of Part X of the Act rests almost completely on the power of disapproval of a Conference agreement and/or the declaration of an individual shipowner even in respect of failure to appoint a resident agent and maintain an Australian address for serving notices. The only exceptions are where fines are specified for failure to file Conference agreements ($2,000); for breaches of the secrecy provisions; for breaches of the Act relating to and following disapproval or disallowance by the Governor-General ($50,000); and for contempt of the Trade Practices Tribunal.

11.20 Matters required to be referred to the Governor-General for disapproval or declaration fall into two categories. The first consists of failure on the part of parties to 1 2

(1) The Regulated Ocean Shipping Industry.” A Report of the US Department of Justice (1977). (2) Address by Karl E. Bakke. before the American Shipper International Forum New York City March 8, 1977.

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Conference agreements or individual shipowners to take action requested by the Minister concerning their representation in Australia and the giving of undertakings to the Minister. Such matters may be referred directly to the Governor-General by the Minister without the necessity for further inquiry.

11.21 The second category, contained in sections 123(l)(c) and 129(2)(c), may not be self evident and are matters in respect of which a formal inquiry is required. These are the only matters for which the Act specified a procedure for the settlement of disputes; i.e. referral to the Trade Practices Tribunal for report to the Minister following

consultations to seek to avoid the reference.

11.22 The emphasis is on settlement by agreement. Section 133 requires the Minister or his nominees to carry on or endeavour to carry on consultations with parties to a Conference agreement or with an individual shipowner with a view to securing an undertaking or action that would make further procedures unnecessary. Such action is

required before the matter may be referred to the Trade Practices Tribunal for inquiry.

11.23 Following referral to the Tribunal, the Minister may withdraw the referral at any stage on receipt of a satisfactory undertaking. Failure to comply with such an undertaking or in any other way negating the undertaking constitutes a contempt of

the Tribunal and is punishable as a contempt of the Court.

11.24 The possibility that evidence, which the parties might prefer to be confidential, could be made public by the Tribunal might encourage shipowners to give early and appropriate undertakings and/or to reach agreement more readily with the ASC. However it is possible also that the information held overseas would be protected by

foreign legislation, or that confidentiality would be sought from and granted by the Tribunal.

11.25 Division 6 of Part X of the Act confers jurisdiction on the Court to determine civil actions instituted by any person who suffers loss or damage by an act in contravention of sections 124 or 130, to recover the amount of the loss or damage.

Effectiveness of the penal provisions of the Act 11.26 In Chapter 5 it was concluded that the responsibilities of government for the control of Conference agreements and practices as laid down in the present Trade Practices Act are correct, but that insufficient detail had been developed in many

aspects of the legislation. These conclusions apply in general to the disputes and penal provisions of the Act.

11.27 Enforcement of the present provisions rests almost entirely on the power of disapproval or declaration, which in most circumstances can only be applied after a probably protracted investigation by the Trade Practices Tribunal. Provision is not made for quick and simple remedies for the more straight forward breaches of Part X.

11.28 It is not clear whether the threat of disapproval or declaration has acted as a deterrent. It is likely that shipowners have accepted compromise as a commercially best solution. The likelihood of compromise would be furthered if the power of disapproval were vested in the Minister without the necessity for a public inquiry. In

view of the fact that only once in ten years has occasion been found to seek an Inquiry, and as such infrequent circumstances are difficult to foresee, it would be preferable to leave any need for an ad hoc inquiry to the Minister’s discretion.

11.29 There is a need to make specific provisions in the nature of fines, for specified offences against the Act. Provisions of fines for such offences would provide cheaper, quicker and more certain remedies than disapproval of a Conference agreement following a Tribunal Inquiry and would confine agreement to serious offences justifying a degree of disruption or reconstruction of a liner shipping Conference.

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SUGGESTED NEW PROVISIONS

11.30 The aims of suggested disputes settlement and penal provisions are to simplify the present provisions, consistent with the need to provide specified penalties for specified actions without imposing a regulatory body to supervise the industry; to

simplify procedures leading to disapproval of a Conference agreement or declaration of a shipowner; and to make clear that the ultimate responsibility for the efficiency of overseas shipping lies with the Government. Protection of Australian shipping from discrimination by foreign governments, as recommended in Para 6.18, is considered in a later section of this Chapter.

11.31 It was concluded in Chapters 5 and 8 that agreement on rates and conditions should be left to commercial processes; that arbitration of disputes between the ASC and shipowners is impracticable and conciliation unnecessary. In cases of a serious breakdown in negotiations it would be open to the Minister to examine the operations

of the shipowner or Conference concerned, to determine whether those shipping operations were being conducted efficiently and, if not, to take appropriate action. There is, of course, no way in which the shipowner could be required to accept non- profitable rates and conditions. It is significant that differences between shippers and

shipowners have, with one exception, been settled by negotiation before either a reference by the Minister to the Trade Practices Tribunal or the requisite prior consultation with the Minister, for that matter, has become necessary.

11.32 Enforcement of Part X must take cognisance of the fact that breaches, if any, are more likely to be by foreign shipowners and foreign flag vessels, because of the few Australian ships in overseas liner shipping. There must therefore be two constraints; a difficulty in enforcing penalties, particularly monetary penalties on foreign flag vessels

and the need to maintain continuity of liner shipping services in Australia’s foreign trade.

11.33 The thrust of the recommended amendments to the Act is to give shipowners an incentive to conform with shipping legislation aimed at improved efficiency. As discussed in Chapter 5, the levying of fines, the right to require certain actions and the power to subject conferences to restraint of trade regulations are all important measures available to the Minister. Ministerial action, without recourse to the Trade Practices Tribunal, is to be preferred, either with or without public inquiry. Parties to a disapproved Conference agreement should be bound, as provided in Part X at present,

to refrain from anti-competitive behaviour. Similarly, declared shipowners should continue to be subject to the same restraint. Part X already provides appropriate penalties for any breach.

11.34 A complementary system of fines is desirable for specific breaches of the Act. Lack of provision for monetary penalties is a weakness in the present Act, where in effect, almost the only possible penalties are disapproval of a Conference agreement

and/or declaration of an individual shipowner. In view of the scale of operations in liner shipping such fines would need to be substantial to have any impact.

11.35 It is envisaged, however, that the Act will continue to be administered with the maximum of goodwill between shippers, shipowners and the Government. It is expected that most matters which might require imposition of penalties or settlement of disputes will be resolved, as in the past, through discussions. It is desirable, however, to list certain actions and their consequences pursuant to the recommendations in this Report.

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SUGGESTED PENAL PROVISIONS 11.36 It has been recommended (Para 5.79) that members of inwards Conferences be required to file copies of their Conference agreements and that approved agreements should be exempt from the provisions of Part IV of the Trade Practices Act. A

consequential requirement would be the amendment of section 114 to require shipowners in inwards as well as outwards trades to maintain agents and addresses for service of notices in Australia. In most cases the agent and address would be the same

for inwards and outwards shipping.

11.37 An amendment is also desirable to require the shipowner or his agent to maintain in Australia records of schedules of service, the tonnage of cargo loaded and discharged in Australian ports and such other information as the Minister may reasonably require.

11.38 An appropriate fine, say up to $20,000 for a body corporate, is suggested for non-compliance with any of the requirements of this section.

11.39 Section 118 provides for a fine not exceeding $2,000 for not filing a Conference agreement within thirty days. Under the recommended new provisions (Para 5.6) the agreement would be deemed to be disapproved until thirty days after being filed and may be specifically disapproved by the Minister during those thirty days.

11.40 It was recommended in Para 5.10 that exemption of shipowners from the provisions of Part IV (section 46) be subject to prohibition of the use of fighting ships either separately or in conjunction with any other carrier, through agreement or otherwise.

11.41 Breach of this requirement would be of a serious nature being a deliberate contravention by an anti-competitive action. It is suggested that a deterrent penalty be provided, say a fine not exceeding $50,000 for each violation. Additionally, or in lieu of the fine, the Minister might disapprove the Conference agreement should the contravention be interpreted as not having due regard for the need for services to be

efficient. In the case of an individual shipowner, whether acting within a Conference or individually the Minister could be empowered to deny the right of entry into Australian ports for trading purposes of nominated vessels for as long as those vessels are being employed as fighting ships.

11.42 Also relevant to the conduct of Conferences and exemptions from Part IV is the proposal made in Para 5.48 that the Minister be empowered to undertake an inquiry when entry of a new line is rejected by a closed Conference but supported by the

ASC. It is proposed that the Minister’s decision be binding on the Conference. Failure to comply with the Minister’s decision should lead to disapproval of the Conference agreement.

11.43 Section 121 provides penalties applicable to the Clerk of Shipping Agreements or others for breaches of the secrecy provisions of the Act. In Para 5.24 and Para 10.25 it has been recommended that the degree of confidentiality of agreements be reduced and the secrecy provisions applying to the Clerk of Shipping Agreements be removed. It is suggested that the relevant penal provisions be repealed and the Clerk of Shipping

Agreements be subject to the normal confidentiality provisions applying to officers of the Commonwelath Public Service.

11.44 It is recommended in Para 5.53 that the negotiation requirements in section 122 be retained but that clauses be added to enable other negotiations subject to: • conferences notifying the Minister of their intentions to negotiate outside the Shipper’s Council where significant proportions of outbound cargo are

affected;

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• the Minister being advised if the basis for separate negotiations is likely to have a material effect on the efficiency of the services offered; • agreements having a material effect on the efficiency of existing services, not coming into effect until the Minister is satisfied that implementation is in the

national interest.

11.45 It is recommended that for violation of these and the existing requirements of the section, a penalty of a fine not exceeding $5,000 for a body corporate be provided for each day for which the offence continues.

11.46 Section 123 remains relevant to the recommended amendments except that disapproval would be by the Minister and without the requirement of a report by the Tribunal. Sections 124, 125,126, 130 and 131 should be retained with powers vested in the Minister rather than the Governor-General under section 125, to restrain parties to disapproved agreements pursuing such an agreement or other behaviour lessening competition.

11.47 A further amendment to section 123 is necessary, however, to add the use of fighting ships as an additional cause for disapproval. Amendment is also necessary to substitute efficient, defined as recommended in Para 3.4, in lieu of “adequate, economic and efficient”. Section 128 relating to individual shipowners requires amendments similar to those needed in section 122 to delete reference to the Tribunal and

substitution of “the Minister" for “the Governor-General” .

11.48 Division 5. Sections 132 to 139 of this Division referring to the Tribunal require deletion in consequence of the above recommendations. References to injunctions and contempt of the court need to be deleted from the remaining sections of the Division.

11.49 With the removal of the contempt of court provisions there is need to legislate for a deterrent fine to be imposed where shipowners have not complied with the sanctions imposed in Part X of the Act or, in the case of Conferences, where a Conference has failed to admit an applicant shipowner after being directed to do so by the Minister. A fine such as $5,000 for each day on which the offence continues is suggested.

11.50 Section 144 of Division 6 concerning civil remedies in relation to overseas cargo shipping should be retained in essence but amended to refer to acts done in contravention of the provisions of Part X of the Act.

FLAG DISCRIMINATION

11.51 Unlike the majority of maritime nations, Australia has no provisions in the Trade Practices Act to protect its national flag shipping from discriminatory practices by foreign governments or agencies. Such provisions were unnecessary when the Act came into force, but, since then, Australian ships have entered a number of trades and, apart from provisions to counter restrictive practices by outward Conferences, remain unprotected by national legislation.

11.52 All major developed maritime nations have comprehensive flag protection legislation. In particular the U.S.A., British and the recent Japanese provisions warrant consideration. (These provisions are at Appendix VII). A brief outline of the laws of a number of other developed countries is given in this section.

U.S.A. legislation 11.53 Section 26 of the Shipping Act 1916 authorises the Federal Maritime Commission, on complaint, to investigate the action of any foreign government, with

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respect toU.S. shipping in foreign trades, where it appears that the laws, regulations or practices of that country operate in such a manner that U.S. vessels are not accorded equal privileges in foreign trade, either in respect of trade to or from that country or of passage or transport of goods in or through that country which are intended for

shipment by U.S. vessels. The FMC is required to report the results of its investigations and recommendations to the President who is authorised and empowered to seek equal privileges for U.S. shipping by diplomatic action. In the event of the President being unsuccessful he is required to inform Congress of the facts in order that proper action may be taken.

11.54 Section 14(a) of the Act authorises the FM C to determine, after due notice and hearing, whether foreign shipowners have used deferred rebates, fighting ships, discriminatory actions or contracts or retaliatory practices in U.S. trades. The section goes further in authorising the FMC to determine whether such shipowners who are parties to any combination, agreement or understanding, have used such unfair

practices in trades between foreign ports to exclude U.S. vessels who have applied, from admission on equal terms. The Secretary of Commerce is authorised, on certification by the FMC of such a violation, to thereafter refuse such person the right of entry to any US port for any vessel they own or operate either directly or indirectly

until the FMC certifies the violation has ceased.

British legislation

11.55 Part III of the Merchant Shipping Act 1974 confers powers on the Secretary of State where he is satisfied that “ a foreign government or any agency or authority of a foreign government have adopted, or propose to adopt, measures or practices concerning or affecting the carriage of goods by sea which—

(a) are damaging or threaten to damage the shipping or trading interests of the United Kingdom, or (b) are damaging or threaten to damage the shipping or trading interests of another country, and the Secretary of State is satisfied that action under this section

would be in fulfilment of the international obligations of Her Majesty’s Government to that other country.”

11.56 Under those provisions the Secretary of State is authorised to obtain all the information he requires to establish the action he should take and to enforce compliance with such action. He may make orders— • regulating the carriage of goods and the rates to apply

• regulating the admission and departure of ships and their cargoes • regulating the making and implementation of agreements including charter- parties relating to carriage of goods by sea and requiring them to be subject to his approval

• imposing charges on ships entering U.K. ports to work cargo.

Before making such an order the Secretary of State is required to consult with shipping or trading interests of the U.K. and other persons he considers appropriate.

11.57 Provision is made for orders to be the subject of approval by each House of Parliament before their implementation, or in cases of urgency within a specified time of their implementation. Provision is also made for fines to enforce disclosure of information and to ensure confidentiality of such information.

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Japanese legislation 11.58 Japan, on 1 June 1977, promulgated legislation to come into force within three months, titled the “Law on Special Measures Against Unfavourable Treatment to Japanese Oceangoing Ship Operators by Foreign Governments and Others”, known in

short as the Anti-Flag Discrimination Law.

11.59 The Law provides, in brief, that when the interests of Japanese oceangoing ship operators are considerably harmed by unfavourable treatment by any foreign government and others, the Minister for Transport may notify the offenders that unless the situation ceases to exist within a specified time limit (not less than six months), he may order that countermeasures be taken. The authorised countermeasures that might be imposed, subject to their effect on the national economy, are

• restriction or prohibition, for a specified period, of entry of ships to Japanese ports • restriction or prohibition for a specified period of loading or unloading of cargo.

11.60 The law further provides for the Minister, at his discretion, to hear the parties concerned, to consult with other administrative authorities, to require reports by the ship operators concerned on their business activities, to authorise Ministry officers to enter premises and ships of such operators or their agents to inspect their books, documents and other objects.

11.61 Penalties are provided for acts against any authorised countermeasure (imprisonment not exceeding one year or a fine not exceeding Y5 million) or, for failure to submit a report, for submission of a false report or obstruction to or evasion of an inspection (fine not exceeding ¥100,000). Provision is also made in the Act for all actions by the Minister in notifying offences imposing countermeasures or cancelling such actions, to be publicised.

Other national laws 11.62 Legislation for the protection of national flag shipping from discriminatory actions varies considerably between the various maritime nations as illustrated in the above paragraphs. Most however have in common provisions for the use of some degree of discretionary action by the government concerned.

11.63 T h e F e d e r a l R e p u b lic o f G e rm a n y : Section 18 of the Foreign Trade Law provides that if international trade by sea is affected by measures which restrict the participation on a competitive basis of the German merchant fleet in the carriage of goods, the conclusion of freight contracts for the movement of goods on foreign-flag ocean-going ships and the chartering of such ships by persons resident in the Federal Republic of Germany may be subject to restrictions in order to counteract considerable detrimental effects to the economic situation of the German merchant fleet.

11.64 In I t a ly , where a foreign government restricts free competition in international trade by sea by the adoption of discriminatory measures (such as cargo reservation, non-commercial competition, port or fiscal preferences, customs controls designed to influence the choice of flag, etc) operating to the detriment of the Italian merchant marine, the Italian Government shall have the power to require a special licence for the carriage of cargo by ships flying the flag of the discriminatory country or on ships which although not flying the flag of such country enjoys the benefit of the above measures.

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11.65 The Netherlands provides that as to ships of those nations which impose higher rates or duties of any kind whatsoever on Netherlands vessels than are being imposed on national vessels or the goods of the same nature imported or exported in national vessels, or where the import or export of goods of any nature, free to national vessels, is

forbidden to Netherlands vessels, the Netherlands reserves the rig h t. . . to take measures of retaliation, either by forbidding the vessels of that nation the import of certain goods, or by subjecting those vessels to a duty to be determined, or the goods imported by the vessel to raised import duties . . . in such a manner t h a t . . . complete

reciprocity shall be preserved.

11.66 Norway, Sweden, Denmark and Finland have similar legislation providing fines or imprisonment if transport by the (national) ships to or from a foreign country is subject to discrimination as compared to transport by ships registered in the said country or another country . . . orders may be given which prohibit or restrict the right

to make contracts for the chartering of ships or the transportation by ships registered in the country where the discrimination takes place.

11.67 France has legislation providing that when a country applies discriminatory measures . . . the Government is authorised to take by decree, all measures appropriate in the circumstance against ships flying the flag of the (discriminating) country as well as against cargoes transported by those ships or coming from that country.

Conclusion 11.68 The British legislation gives the Government very wide discretionary powers and makes clear that the responsibility for retaliatory action rests completely with the Government. It enables retaliatory action to be imposed against an offending State irrespective of the flag used for carriage of its goods. It empowers the Government to

close ports for trading against nominated ships or to impose penalty rates for entry, to demand such information as it considers necessary and to regulate such shipping or rates as it sees fit.

11.69 Such powers, while primarily acting as a deterrent, enable countervailing actions appropriate to the situation and provide for those actions to be enforced and monitored. The British style of legislation appears to be suitable for adoption in Australian legislation. As discussed in Chapter 6 it is recommended accordingly.

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CHAPTER 12

INTERNATIONAL POLICIES AND PRACTICES

12.1 The terms of reference of this study require account to be taken of international developments in the field of shipping policy. Prior to the last decade shipowners enjoyed the ability to offer their services freely around the world. Free access to ports was available in most countries and this was coupled with relative freedom of shippers

to enter into contracts of carriage with shipowners, irrespective of the nature of the cargo or flag of the vessel employed. International discussions and agreements have taken on a new dimension in relation to shipping in the last decade which has seen an increase in international activities associated with shipping policies and practices, some of which have challenged the viability of established concepts and free competition.

12.2 This change has resulted in no small way from the aspirations of developing countries, and other countries, to participate in their overseas maritime transport; the recognition by Governments of a need to strengthen consultation procedures between users and suppliers of shipping services; a growing intervention by Governments and

an increasing concern over “non-commercial” competition by flag of convenience vessels and the liner fleets of state trading countries. Other issues include subsidies, and unilateral and bilateral actions to limit freedom of access to cargoes. There are major policy conflicts within and between these issues.

12.3 Impetus to international discussions of shipping policies has been given through the involvement of a number of organisations including UNCTAD, the OECD and IMCO and regional bodies such as ESCAP and the South Pacific Forum.

12.4 UNCTAD, through its Committee on Shipping, and the OECD, through its Maritime Transport Committee, have become significant in this regard. The Committee on Shipping, established in the mid-1960’s with a broadly based membership of representatives of most countries of the world, provides member nations with the opportunity to express their views on maritime matters and so influence international policies and practices.

12.5 It was under the auspices of UNCTAD that the terms of the UN Convention on a Code of Conduct for Liner Conferences were negiotated and finally adopted in 1974. Although the Convention has not yet entered into force, it directly emphasises the markedly changing international attitudes on shipping policy in the last decade.

12.6 The Maritime Transport Committee of the OECD, of which Australia has been a member since 1971, largely represents the interests of the developed maritime nations. The Committee undertakes examination of, and consultations on, shipping policy matters and reviews the commercial shipping situation and developments in the freight market. A recent re-organisation of the work of the Committee emphasises the

importance being placed on international maritime activities. Within the OECD, national maritime policies come under close scrutiny; influenced strongly by the interests of the developed maritime nations represented within the Organisation.

12.7 It has been reported in various sources that a number of countries have introduced or proposed cargo reservation laws, or have entered into agreements which involve cargo reservation. Prominent among the countries mentioned in these reports are Latin American countries, African countries and South East Asian countries.

12.8 Although in practice it is not always possible for countries to implement such cargo reservation in full, due mainly to limitations in national fleet size, its adoption or

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consideration indicates current emphasis which many countries are placing on protection of their national shipping fleets.

12.9 Likewise there have been many reports of bilateral shipping arrangements between countries. These tend to follow on from national flag reservation laws or in the absence of such laws reflect national policies on shipping. Frequently it can be assumed

that they are entered into on the initiative of developing countries. However, state trading countries are also prominent. In view of the wide-spread nature of such agreements it has to be assumed that developed maritime nations cannot have avoided

such cargo sharing arrangements altogether.

12.10 U.S.A. relations with the U.S.S.R. are covered by a formal maritime agreement which was renegotiated in December 1975 for a further six years. The agreement retained the theoretical three way trade split (a third of the trade each to U.S.A. and U.S.S.R. lines and one third to cross-traders) but an article recognising equal and substantial cargo sharing rights between the two countries was added.

Additionally a memorandum agreement was signed in July 1976 between the U.S.A. Federal Maritime Commission and the Soviet Ministry of Merchant Marine, concerning principles to govern participation of Soviet vessels in the U.S. ocean cargo trades, aimed at eliminating liner freight rate cutting.

12.11 However, dominant thinking among developed maritime nations is that the circumstances which necessitate bilateral agreements are often of a multinational nature and consequently should be resolved multilaterally rather than through a proliferation of bilateral arrangements.

A u s t r a l i a ’s I n t e r n a t i o n a l S h i p p i n g P o l i c i e s

12.12 Current government overseas shipping policy recognises that shipping provides a vital lifeline for Australia’s overseas trade and supports encouragement of efficient shipping services to and from Australia. As already discussed in this Report, the Government supports the operation of Conference shipping where it provides the

most efficient and economic services to Australia. The Government also continues to encourage and support entry of Australian flag ships into both the overseas trade and shipping Conferences where this would be economic and efficient.

12.13 Participation in the work of international organisations evidences Australia’s support for international solutions to shipping problems. This is indicated by Australian representation, at times in an executive or co-ordinating capacity, at meetings such as the Committee on Shipping of UNCTAD and the Maritime Transport

Committee of the OECD. Australia’s expertise and constructive contributions to the work of these international bodies has become widely recognised. The major matters discussed within some or all of these bodies include areas of major international shipping interest in which Australia is vitally concerned, particularly the development

of merchant marines, the strengthening of shipper representation, the increased role of government and the development of shipping legislation.

12.14 Australia has no unilateral shipping legislation regarding cargo reservation and does not discriminate against foreign flag vessels. Australia has not yet entered into any bilateral shipping agreements.

12.15 It is recognised that the increase in the volume of shipping belonging to state trading countries during recent years offers competition to established shipping services and there may be a question as to whether this competition is fair, commercial competition. Chapter 11 recommends that legislation be introduced to enable

Government to counter all forms of shipping discrimination by foreign governments and/or their shipping fleets.

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AUSTRALIA’S INTERNATIONAL AND BILATERAL COMMITMENTS

OECD Invisibles Code 1 2 .1 6 Australia, as a member of the OECD is subject to the obligations of the Invisibles Code which include Note 1(1) referring to member country shipping policy commitments to principles of “free" shipping. OECD member countries (with the exception of U.S.A.) are committed to the principle not to hamper free and fair competition within international trade by, inter alia, legislative provisions in favour of the national flag, preferential shipping clauses in trade agreements or discriminatory port regulations. This “free shipping” agreement is open to criticism because some of the principles which it embodies are not sufficiently flexible to cater for changing international maritime policies and practices. While activities of non-member countries have altered according to changing circumstances and aspirations, member countries have been restrained by the Invisibles Code.

Exchanges with respect of Part X of the Trade Practices Act 12.17 Following the implementation of the existing legislation in 1966, Australia exchanged assurances with several countries relating to mutual consultation, taking into account the provisions of Part X of the Trade Practices Act. The assurances were

exchanged with Great Britain, West Germany, Sweden, Denmark, Netherlands and Norway from late 1967 to early 1968. The assurances recognised that consultations would not formally restrict freedom of action but reasonable time would be given before action were taken.

The Basic Treaty of Friendship and Co-operation between Australia and Japan 12.18 This Treaty, ratified on 21 July 1977, was drawn up within a broad framework to serve as a basis for further co-operation between Australia and Japan and represents

a formal expression of the interdependence between the two countries. Article X of the Treaty specifically provides the framework for strengthening relations between Australia and Japan in maritime transport. It calls for co-operation in the development of shipping between the two countries on a fair and mutually advantageous basis.

U.N. Convention on a Code of Conduct for Liner Conferences 12.19 The U.N. Convention is a complex instrument involving shipping rights and the protection of shipper interests. It breaks new ground in many areas, but raised controversy over the concept of national flag rights in liner Conference shipping.

12.20 In accordance with Article 49, the Convention shall enter into force when at least twenty-four countries with a combined tonnage of 25 per cent of world cargo tonnage have become contracting parties. To date twenty countries, but with less than 4 per cent of total world tonnage have become contracting parties.

1 Note 1 of the O E C D I n v i s i b l e s C o d e s t a t e s “As the shipping policy of the Governments of the Members is based on the

principle of free circulation of shipping in international trade in free and fair competition, it follows that the freedom transactions and transfers in connection with maritime transport should not be hampered by measures in the field of exchange control, by legislative provisions in favour of the national flag, by arrangements made by governmental or semi-governmental organisations giving preferential treatment to national flag ships, by preferential shipping clauses in trade agreements, by the operation of import and export licensing systems so as to influence the flag of the carrying ship, or by discriminatory port regulations or taxation measures—the aim always being that liberal and competitive commercial and shipping practices and procedures should be followed in international trade and normal commercial considerations should alone determine the method and flag of shipment.”

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12.21 The major developed maritime nations of the world (with a large percentage of world cargo tonnage) have not become Contracting Parties although many of them in 1974 voted in favour of opening the Convention for signature.

12.22 The terms of the Convention provide for a Review Conference five years from the date of entry into force, to review implementation and to consider and adopt appropriate amendments. Notwithstanding these provisions if the Convention has not entered into force five years from adoption of the final Act (1974), a Review

Conference shall be convened at the request of one-third of the States entitled to become Contracting Parties to the present Convention, in order to review the provisions and to consider and adopt appropriate amendments.

IMPLICATIONS OF RECOMMENDATIONS OF THIS REPORT

12.23 In the light of more recent international developments in the field of shipping policy, it is appropriate to consider in detail the provisions of the U.N. Liner Convention. (Text at Appendix VIII.) 12.24 The Convention refers to “regular, adequate and efficient services” whereas

this Report recommends adoption of “efficient service” only. The recommended definition of “efficient service” , however, embraces the concepts of regularity and adequacy.

12.25 Chapter I of the Code of Conduct sets out some important definitions. The definition of a liner Conference111 appears to be basically consistent with Part X and the recommendations for amendment of Part X of the Trade Practices Act.1 (2) The

definition of a Conference agreement under Part X (Sect 113) focuses on restriction of competition and may include an agreement which does not fix freight rates. It does,' however, include all agreements which do fix freight rates.

12.26 Recognition of “a national shipping line” rests with the country concerned provided that the line’s head office and its effective control is in that country. Australia could recognise both ANL and any line in which an Australian operator has a substantial share, provided that the line has its head office in and its effective control is

in Australia. Decisions could be reached as and when required rather than establish rigid criteria.

12.27 The definition of “shipper” in the Code is limited to persons with a beneficial interest in goods being shipped. That is supplemented by a definition of “shippers’ organisation” which permits authorities to recognise a “body which promotes, represents and protects the interests of shippers” .

12.28 The rest of the definitions in Chapter I of the Code would require additional new definitions in Australian legislation if it were decided to legislate to bring the Code into force here.

12.29 Chapter II of the Code deals with relations among member lines. It contains the so-called 40:40:20 provisions and protects the rights of national shipping lines to participate in the carriage of their countries’ trade. It could be said to contain the hoped-for alternative to unilateral and bilateral decisions by some countries to totally

exclude third-country shipping lines.

(1) “A group of two or more vessel-operating carriers which provides international liner services for the carriage of cargo on a particular route or routes within specified geographical limits and which has an agreement or arrangement, whatever its nature, within the framework of which they operate under uniform or common freight rates and any other agreed conditions with respect to the provision of liner services.” (2) At the final Plenary session the Australian delegation said, “ My Government’s interpretation is th a t. . . ‘a group o f will

be interpreted to mean ‘a group of two or more vessel operating carriers whose members prove. . . Λ”

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12.30 Article 1 of Chapter II deals with membership of Liner Conferences. Shipping lines applying for Conference membership are required to furnish evidence of ability and intention to operate a regular, adequate and efficient service, to undertake to abide by the Conference agreement, and to deposit a financial guarantee. In addition lines which are not national lines in a trade are subject to further criteria. These relate to volume of trade; adequacy of space provided; effect of admission on efficiency and quality of Conference services; current participation outside a Conference, or in another Conference. Grounds for refusal must be given in writing. Views of shippers’ organisations and appropriate authorities must be taken into account.

12.31 Although these requirements of Article 1 seem to present no particular difficulties, they are more extensive than Part X of the Trade Practices Act and suggested amendments. Only very limited powers of intervention in membership have been recommended (Para 5.48) and the present provisions do not regulate terms and conditions of Conference membership at all. If it were decided to accede to the Convention, additional amendments would be needed to spell out obligations, in accordance with Article 1, which conferences would have to meet in considering membership applications.

12.32 Article 2 deals with the controversial question of rights to participate in carriage of trade. Member lines would have sailing and loading rights and the right to share in any pool. Unless otherwise mutually agreed, the national shipping lines (as a group) of each of two countries would have equal rights to freight generated by their mutual foreign trade and carried by the Conference; but third-country lines, if any, would have the right to a significant part, such as 20 per cent of that freight.

12.33 Extensive provisions in this Article spell out the way in which trade would be shared in proportion to existing shares or by commercial negotiation depending upon whether national lines, of one or both countries concerned, participate. National lines of a region would be able to redistribute allocated shares among themselves. Periodical reviews of shares would be required. Most important, however, is the provision that national shipping lines may require pooling arrangements or adjustment of sailings so as to provide opportunity to participate in proportion to their entitlements under the cargo sharing formula. Conference agreements must permit the lifting of cargo by vessels with unbooked space, irrespective of pool shares, if the cargo would otherwise

be shut out.

12.34 Reading this Article together with Article 1, national shipping lines which can demonstrate their ability and intention to operate a regular, adequate and efficient service are assured of rights (not obligations) of participation on defined terms. However, there is considerable flexibility to permit Australia or any country to take less than its full entitlement in a trade even though the “regular, adequate and efficient”, and other criteria could be met.

12.35 These provisions would clearly strengthen the rights of participation of the Australian National Line or any other Australian shipowner to share in Conference cargoes. Although the Convention provisions protect the interests of national lines (as well as third flag) they differ from the approach in section 123 which this report has recommended be retained to protect Australian interests. Whether any change in

section 123 is needed from a policy point of view is doubtful, provided ANL continues to have the success it has had in the past in gaining a share in liner shipping Conference operations and that the existing words “engaging efficiently, to an extent that is reasonable”·]) are interpreted as having regard, inter alia, to liner cargo trade 1

(1) Section 123, Trade Practices Act 1974.

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generated by Australia. Nevertheless accession would require enactment of the broader terms of the Convention.

12.36 Article 3 concerns decision-making procedures as between members of a Conference. It would bestow on national lines a right of veto in matters relating to the trade between their countries. Otherwise the procedures should be based on equality and shall ensure that service of a trade is not hindered by voting rules. Matters

requiring unanimous decisions must be defined.

12.37 In preparing this report, consideration has been given to the question of voting rights within a Conference. These are not regulated by Part X of the Trade Practices Act. On balance there appeared no particular advantage in legislating specifically in regard to voting rights. Rather, recommendations have been directed to possible major impediments to efficiency.

12.38 Article 4 establishes sanctions which a Conference may impose on any of its members and rights of members in respect of withdrawal, suspension or expulsion from a Conference. This Article would standardise certain features of Conference agreements generally enabling Conferences to force a member or former member to

meet its share of Conference obligations. Part X of the Trade Practices Act does not attempt to regulate such features of Conference agreements. The Article itself presents no policy problems.

12.39 Article 5 concerns self-policing of Conference agreements and practices while Article 6 enables authorities to require all Conference agreements to be made available to them.

12.40 The self-policing provisions represent a further modification of Conference agreement provisions. Conferences are required by the Article to list malpractices, fix penalties, exercise reviews of complaints, and report to authorities. Shippers are obliged to co-operate in combatting malpractices.

12.41 There is provision in Part X of the Trade Practices Act for filing of outward Conference agreements and it has been recommended that filing of inward Conference agreements be required. It is also recommended that the Minister have discretionary power to make agreements available to the public.

12.42 Chapter III establishes rules for consultations, loyalty arrangements and other relations between Conference members and shippers. It places obligations upon both.

12.43 Article 7 provides for loyalty arrangements based on contract or other lawful systems. The differential between contract and non-contract rates must be within a specified limit and 150 days’ notice of any change must be given to shippers. Damages are to be regulated by the contract but must not exceed the freight charges on goods

shipped with a non-conference carrier. The contract should provide for resolution of disputes on the differential but in respect of the form or terms of the contract the parties may refer the matter for resolution under procedures set out in the code. The matters to be covered by the loyalty arrangement are listed in Article 7.

The form of a loyalty contract agreed between Conference members must be filed under Part X of the Trade Practices Act.

12.44 Article 8 requires Conferences to provide, within loyalty contracts, for dispensation to utilise any vessel if the Conference members cannot accommodate a shipper’s cargo. This is a standard provision in loyalty contracts.

12.45 Article 9 requires tariffs to be available, on request, to shippers at reasonable cost and to be examinable at offices of shipping lines and their agents. Implementation of this Article would confirm what is generally the practice.

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12.46 Article 10 requires Conferences to provide annual reports to shippers’ organisations covering such matters as consultations, complaints, membership, services, tariffs and other relevant information.

12.47 Part X of the Trade Practices Act and recommended amendments do not include specific provisions for annual reports by Conferences, but there should be no difficulties in introducing the concept. In annual negotiations such kinds of information are now commonly provided.

12.48 Article 11 lists matters, inter alia, on which consultation shall take place between a Conference and shippers’ organisations which may be designated by appropriate authorities. These requirements are covered by more broadly expressed provisions in Part X of the Trade Practices Act. Designation of the shippers’

organisation in relation to outwards trades only is consistent with the provisions of the Code.

12.49 The Article has further provisions, however, covered neither by Part X nor suggested amendments thereto. Article 11 requires advance notice of intended decisions (but allows urgent decisions to be implemented before consultations); consultations to begin within a maximum period specified in the Conference

agreements or not later than thirty days after notice; and requires the parties to strive to reach agreement consistent with their commercial viability. Both sides must take account of each other’s views.

12.50 In practice Conferences do give the ASC advance notice and generally respond to requests for delayed implementation of decisions affecting terms and conditions of outwards shipping. The absence of any requirement to begin negotiations within a specified time affords flexibility and encourages planning long way ahead for annual

negotiations. The frequency of ASC negotiations and the need to avoid clashes between the timing of these would inevitably lead to artificial interpretations of this requirement in Article 11 by all parties to the negotiations. In negotiations between the ASC and conferences there are always real endeavours to reach agreement consistent with commercial viability, and the ASC, as a matter of its own commercial requirements as well as through the power of Conferences to have their position considered, has regard to the views and problems of Conferences.

12.51 Chapter IV deals with freight rates including surcharges and currency changes.

12.52 Article 12 sets out three criteria for freight rate determination. First, freight rates shall be as low as feasible commercially and shall permit a reasonable profit to shipowners. This requirement is reflected in the recommended definition of “efficient” liner services (Para 3.4).

12.53 Second, the cost of operations shall be evaluated, as a general rule, for the round voyage of ships. Where applicable, the outward and inward voyage shall be considered separately. Those provisions in effect provide sufficient flexibility to enable costings on either a round voyage or single voyage basis. The economies of

round-voyage analysis have been discussed at Paras 5.74 and 5.77 of this report. It was concluded there that the earnings of unreasonable profits by shipowners in conferences is not a sufficient issue to warrant confrontations with other countries to achieve marginal improvements in the analysis of profitability of shipowners. At Para 5.75 it is pointed out that round-voyage data have no relevance to rate making in any one voyage leg. However, if other countries were to obtain round-voyage data under the Code, Australia might find it prudent to require similar data, whether or not a contracting party to the Convention.

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12.54 This Article specifies that rates should take into account the nature of cargoes and the interrelation between weight and cargo measurement, as well as the value of cargoes. These are not as important as the requirement for rates to be as low as commercially feasible while affording shipowners a reasonable profit. Rather they

represent a means of adjusting the rates in pursuit of commercially low rates and reasonable profits. In practice freight rates currently take the nature and value of cargoes and their weight and measurement into account.

12.55 A further requirement of Article 12 relates to promotional freight rates and/or special rates for specific goods. For these, conditions of trade for those goods, particularly of the developing and land-locked countries, shall be taken into account. In the context of Australian exports care must be taken that conditions of trade for other goods be taken into account too.

12.56 Article 13 requires conferences’ tariffs not to differentiate unfairly between shippers similarly situated. Conference members must adhere strictly to the tariff and other valid documents. These requirements present some difficulties for strict interpretation/enforcement. It would clearly be difficult in practice to establish what is unfair differentiation. As this report has concluded, differential freight rates are necessary to “efficient” liner services. Even between similarly situated cargoes, depending upon what that means, there may be lost trading opportunities if the needs

of “one-off” market openings cannot be met because a special rate concession cannot be given.

12.57 Part X of the Trade Practices Act does not require strict adherence to the published tariff nor does this report so recommend. The recommended power of veto by the Minister in respect of negotiations conducted other than with the ASC endeavours to meet the need to avoid unfair differentiation in as flexible a way as

possible. Rigid adherence to Article 13 of the Code could well drive cargo out of liner shipping, and certainly away from liner conference shipping.

12.58 The second part of Article 13 requires tariffs to be simple, clear and contain as few classes as possible. They should indicate, as far as practicable, the corresponding SITC code and the BTN or other internationally adopted nomenclature. Classification should be prepared in co-operation with shippers’ organisations and other national

and international organisations.

12.59 Article 14 governs the conditions for general freight-rate increases. It does not refer to across-the-board increases and can be read to mean that a number of concurrent increases on different cargoes, whether on a differential basis or a uniform

basis, represents a general rate increase.

12.60 It requires not less than 150 days’ notice to shippers’ organisations and/or shippers of intended general rate increases, their extent, date of affect and reasons for the increase. The option is left open to adopt a different period of notice according to regional practice or agreement.

12.61 In periods of unforeseen major changes in costs/revenue it may be impractical to expect Conference members to continue to operate at existing rates. In such circumstances Conferences could be forced to resort to Article 16 which permits temporary surcharges to be imposed to cover sudden increases in costs or losses of revenue. Consultations must precede surcharges but there is provision for imposition

of a surcharge, in effect, forty-five days or sooner from the giving of notice to shippers. Factors leading to a surcharge would presumably lead eventually to a general rate increase if they persist and are not offset by decreases in costs or increases in revenue due to other factors.

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12.62 In the light of Australian e x p e r ie n c e , 1 5 0 days’ notice of a general increase might not be excessive even though it might encourage higher bids by shipowners to cover the uncertainties of predicting costs and revenues so far ahead of the forthcoming contractual year (shipper rate contracts generally run for one year). A

substantial period of notice would assist the ASC and its members to adequately research their commercial arguments against the increase.

12.63 In addition, Article 14 requires consultations to commence thirty days, or as agreed between the parties, after any of the relevant parties have requested them. If requested, the conference shall submit a report from independent accountants including an aggregated analysis of relevant costs and revenues. The relevance of aggregated data has been discussed in Chapter 8 of this report.

12.64 There is provision in Article 14 for recourse to conciliators if there is failure to agree at the consultations but the recommendation of the conciliators is not binding unless accepted by the parties. If the Conference rejects the recommendation, shippers may regard themselves as not bound, after appropriate notice, by any loyalty contract.

Loyalty contracts, in fact, generally provide for withdrawal on notice by the shipper.

12.65 The consequences of these provisions is close to what happens in Australia now, with the additional step of reference to conciliation. Implementation of the Code by Australia would make it desirable to establish national conciliation procedures as an effective substitute for the processes set out in the Code for international mandatory conciliation. In the meantime this report has concluded that neither conciliation nor arbitration is desirable (Chapter 8). .

12.66 Article 14 requires that a deferred rebate shall not be forfeited if the Conference rejects the conciliators’ recommendations and a shipper terminates his loyalty contract.

12.67 If there is any increase in the freight rate on one or more commodities dominating a trade, it shall be treated as a general freight-rate increase for the purposes of the Code.

12.68 Article 14 allows parties to agree on the duration between one general rate increase and the next but otherwise requires at least ten months between the increase becoming effective and the notice of the next increase. This means that, unless otherwise agreed between the parties, there must be at least fifteen months between general rate increases.

12.69 If it were not for the availability of action under Article 16 to introduce surcharges more frequently than is now done and for additional reasons, a period of 15 months between increases would not be very practicable. Even so, the effect for Australia is to disrupt the annual basis of the work of the ASC, without any significant

degree reducing the frequency of negotiations. Indeed the frequency could be increased with surcharge negotiations regularly being held a few months before those for general rate increases. Conferences would be obliged to compile interim figures and forecasts as negotiations became more and more out-of-line with annual accounting periods. Therefore it would be expected that there would be a continuation of past practice in Australia of agreement between the ASC and Conferences on timing of

negotiations and this, in practice, would be consistent with the Code.

12.70 Article 15 provides for promotional freight rates for non-traditional exports subject to initial and thereafter annual justification by shippers. Conferences may take into account whether a promotional rate is likely to create substantial competitive distortions in exports of a similar product from another country. Each Conference member is required to accept a fair share of the cargo.

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12.71 Article 16 requires surcharges to be regarded as temporary, to be reduced as relevant circumstances improve. A Conference must give notice of an intended surcharge to and there must be consultations with, shippers. When exceptional circumstances warrant, however, immediate imposition of a surcharge is permissible

subject to consultations as soon as possible. If the parties do not agree on the surcharge within fifteen days the matter goes to conciliation, unless otherwise agreed. Pending resolution of the dispute, the surcharge may be imposed thirty days after initial notice.

In the case of exceptional circumstances, failure to reach agreement results in conciliation. There is also provision for recovery of losses by either party. A certain amount of information must be given to shippers. 12.72 Article 17 sets out rules to deal with currency changes. Adjustments of rates by

a currency adjustment factor must be such that in aggregate member lines neither gain nor lose. Notice must be given to shippers and there must be prior consultations, or subsequent consultations in exceptional circumstances requiring immediate impo­

sition of an adjustment. Consultation procedures are the same as for surcharges and losses by either party through delays or excessive adjustment are recoverable.

12.73 The ASC regularly negotiates currency adjustment factors under Part X. No difficulty is seen in implementing Article 17. 12.74 Chapter V is titled “Other M atters”. Article 18 bans the use of “fighting ships” against non-conference competition and Articles 19-21 place obligations on Conferences in relation to adequacy of service, their head office location and local

representation. In addition Article 22 permits Conference agreements, which must conform to the Code, to include other matters not inconsistent with the Code. This report has recommended amendment of Part X to ban use of “fighting ships”. 12.75 Article 19 requires Conferences to ensure that services are regular, adequate

and efficient and to take measures to handle seasonal requirements. Conferences are required to keep under review the possibilities of rationalisation and increased efficiency. Benefits from rationalisation shall be fairly reflected in freight rates. Tariffs should specify the minimum cargo for port calls subject to inducement and shippers

must given adequate notice of availability of cargo. 12.76 Article 20 requires a Conference as a rule to establish its head office in a country served by it unless its members agree otherwise. The final decision is a matter for conciliation between the Conference members, but it would be unusual if a Conference in the Australia trade did not have its head office in Australia or another country which it serves.

12.77 Under Article 21 Conferences must have local representation, but it permits regional representation if there are practical reasons. Names and addresses must be readily available and, at the Conference’s option, its local representatives may have

adequate delegation of powers of decision. Existing provisions in Part X require local agents and provision of details to the Minister.

12.78 Article 22 requires that conference agreements and loyalty arrangements conform to the Code. For effective enforcement of this provision supplementary legislation enabling the Minister to compel compliance may be necessary. It also makes desirable their public availability.

12.79 Chapter VI contains twenty-four separate articles setting out provisions and machinery for settlement of disputes between a Conference and a shipping line; between members; between a Conference member and shippers’ organisation; and between two or more Conferences. Basically it requires international mandatory

conciliation, unless the parties otherwise agree, which takes precedence over national measures.

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12.80 There is provision for non-recognition of a conciliator’s recommendations, for resolution of disputes between lines and organisations of one country within its national jurisdiction, and for awarding of costs for vexatious or frivolous claims.

12.81 Under some circumstances it is possible that the government might wish to take some matter to international mandatory conciliation or to threaten to do so, through the ASC or ANL as a principal party to a dispute. However, there is also the possibility that a Conference, or foreign shipping line, might wish to employ Article 25,

or the threat, to stay proceedings under national law in respect of a dispute so as to have it taken to international mandatory conciliation. Whatever the likely outcome of the deliberations of the conciliators, this would result in heavy costs and a drain on the resources of the ASC or ANL as the case may be. In the case of general freight rate increases, the increase could be implemented pending the conciliators’ recom­ mendation so that Australian shippers might have to bear the increase proposed by the Conference for a very long period of time, probably years, before a final decision might be taken. It is difficult to believe that shipowners would be unable to find some way in which to pass on the costs of such proceedings so that shippers would in fact eventually pay the total cost of the prolonged proceedings. At the end of it all there is not even any

obligation upon shipowners to accept the recommendation of the conciliators. The whole process would be overtaken by successive movements in freight rates and changes in service conditions.

12.82 It would be intolerable for the ASC or ANL to be put in the position of being threatened with international mandatory conciliation during the course of a negotiation. The very process which should afford such shipper organisations arid national lines with some protection would in fact put them in a very weak negotiating position, bearing in mind the relative size and resources of ANL, ASC and

international shipping Conferences.

12.83 Before Chapter VI could be acceptable, Australia would need to contrive an appropriate reservation to prevent the ASC or ANL being taken against their wishes, and the wishes of the Australian Government, to international mandatory con­ ciliation. This would probably require also provision of some form of national conciliation or arbitration procedure to take precedence in relation to disputes

involving the ASC or ANL, over the procedures provided for in Chapter VI of the U.N. Liner Convention.

12.84 Article 26 requires contracting parties to confer upon Conference and shippers’ organisations such capacity as is necessary for the application of the provisions of Chapter VI. This would require incorporation of the ASC as a body which can sue or be sued. If it were decided to establish the Australian designated shipper body as a statutory body, the legislation could include an appropriate provision conferring the necessary capacity upon the shipper body.

12.85 A resolution of non-conference lines by the ninth Plenary meeting called upon countries not to prevent such lines from competing with a conference provided that they adhered to the principle of fair competition. It said that except for the operation of

loyalty arrangements, shippers should be able to choose between conference and non­ conference lines. This is not part of the Code and does not call for legislation. Part X and the recommendations of this Report endeavour to keep open the possibility of non-conference competition as a spur to efficiency.

CONCLUSIONS

12.86 Exchanges between Australia and certain OECD countries seem to place Australia under a possible obligation to give those countries the opportunity to discuss

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proposed changes to shipping legislation. It could be appropriate that this be done within the Maritime Transport Committee. The recommendations contained in this report, however, do not lead Australia into conflict with existing international obligations.

12.87 Consideration of the provisions of the UN Convention on a Code of Conduct for Liner Conferences leads to the conclusion that they differ in significant respects from the recommendations of this Report coupled with the existing provisions of Part X of the Trade Practices Act. In some instances the provisions of the Convention are wider. In other instances the provisions of the desirable national shipping policy are

wider. Some differences may not be a problem for accession to the Convention if legal opinion confirms that the desirable national shipping policy can be met by legal provisions which, though different, are not inconsistent with the Convention. Other differences might be met by appropriate reservations. On closer study some differences might be considered to be slight enough to make the Convention’s provisions

acceptable. These are questions which can be resolved only by a detailed joint study by the Department of Transport and the Attorney-General’s Department. Only when such a study has been made, can conclusions be reached on the terms on which desirable national shipping policy can be reconciled with the Convention. Such a study is also necessary before it will be possible to say whether appropriate reservations and

appropriate administrative and legislative arrangements to facilitate the Convention’s implementation can be devised.

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TERMS AND ABBREVIATIONS

AAE ABOSCON ACTA ACT(A) AESCON

AJCL ANL ANRO ANSCON AOTA ASC ATOSCON AUSINCON AUSMACON

BTN

CENSA

COMECON DWT

EASTINDIACON ECNA ESCAP ESS FEOTC FESCO FMC ICC IMCO LASH Lo-Lo OCL OOCL

OSRA PACE PAD Reefer Ro-Ro Scandia

SITC SUNAMAM

Asia Australia Express Ltd Australia/Burma Outward Shipping Conference Associated Container Transportation (Aust.) Pty Ltd Associated Container Transportation (Australia) Ltd Australia/Europe Shipping Conference Australia Japan Container Line Australian National Line Australia/South East Asia ro-ro service Australia Northbound Shipping Conference Australia Oversea Transport Association Australian Shippers’ Council Australia/Thailand Outward Shipping Conference Australia/Indonesia Outward Shipping Conference Australia/Singapore and West Malaysia Outward Shipping Conference

Brussels Tariff Nomenclature (Standard Customs Tariff Coding) Council of European and Japanese National Shipowners Associations

Eastern European Economic Community (excluding Russia) Deadweight tonnage (cargo capacity including weight of bunkers and stores) Australia/East India Outward Shipping Conference

East Coast of North America Economic and Social Commission for Asia and the Pacific Eastern Searoad Service Federal Exporters’ Oversea Transport Committee Far Eastern Shipping Co. of Vladivostock United States Federal Maritime Commission

United States Interstate Commerce Commission Inter-governmental Maritime Consultative Organisation Lighter aboard ship (barge carrying vessel) Lift-on Lift-off vessel '

Overseas Containers Ltd Orient Overseas Container Line Oversea Shipping Representatives Association Pacific America Container Express Pacific Australia Direct Line

Cargo unit for refrigerated or chilled cargo Roll-on Roll-off (ramp access ships) Vessels with more than one hatch across the main holds and side loading ports

Standard International Tariff Classification Brazil State Shipping Regulatory Agency

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TASMANCON WCNA WESTINDIACON

Trans Tasman Freight Conference West Coast of North America Australia/West India Outward Shipping Conference

BIBLIOGRAPHY

COMMONWEALTH GOVERNMENT PUBLICATIONS AUSTRALIA Australian Bureau of Statistics. O v e r s e a s a n d C o a s ta l S h ip p in g 1971-72 to 1975-76 (Ref. No. 14.10). AUSTRALIA Australian Bureau of Statistics. O u tw a r d s O v e r s e a s C a r g o 1971-72 to

1974-75 (Ref. No. 14.16).

AUSTRALIA Report from the Senate Select Committee. T h e C o n ta in e r M e t h o d o f H a n d lin g C a r g o e s . Parliamentary Paper No. 46. 1968.

AUSTRALIA Trade Practices Tribunal. R e p o r t to th e M in is te r ( f o r T r a n s p o r t) in re A u s tr a lia /E a s te r n U S A S h ip p in g C o n fe r e n c e . Dec. 1975.

OTHER REPORTS Australian Shippers’ Council. A n n u a l R e p o r ts 1972-73 to 1975-76. UNCTAD. Consultation Machinery— R e p o r t b y S e c r e ta r ia t. TD/B/C.4/127. April 1975.

UNCTAD. Costs and Freight Rates in Liner Trades— R e p o r t b y S e c r e ta r ia t TD/B/C.4/128. Sept. 1975. UNCTAD. Review of Maritime Transport. A n n u a l R e p o r ts b y S e c r e ta r ia t. UNCTAD. The Effectiveness of Shippers’ Organisations. R e p o r t b v S e c r e ta r ia t

TD/B/C.4/154No. 1976. "

UNCTAD. UN Conference of Plenepotentiaries on a Code of Conduct for Liner Conferences. F in a l A c t a n d to n n a g e r e q u ir e m e n ts . UN NY 1975. UNITED KINGDOM. Report of Committee of Inquiry into Shipping HMSO May 1970.

U.S.A. The Regulated Ocean Shipping Industry. A R e p o r t o f th e U .S .

D e p a r tm e n t o f J u s tic e . 1977.

OTHER REFERENCES Agman R.S. Competition, Rationalisation, and United States Shipping Policy. J o u r n a l o f M a r itim e L a w a n d C o m m e r c e . Oct. 1976.

Croner World Directory of Freight Conferences. Croner Publications New Malden 1975. Deakin, Μ. B. and Seward, T. Shipping Conferences: A Study of their Origin, Development and Economic Practices. U n iv. o f C a m b r id g e O c c a s io n a l P a p e r N o .

3 7 . CUP 1973.

Devanney, J. W. Ill e t a l. Conference Ratemaking and the West Coast of South America. J o u r n a l o f T r a n s p o r t E c o n o m ic s a n d P o li c y V ol. I X . 1975. Ferguson, D. C. T h e A u s tr a lia n S h ip p e r s ' C o u n c il. CEDA Aug. 1976. Goss, R. Some Financial Aspects of Shipping Conferences. J o u r n a l o f T r a n s p o r t

E c o n o m ic s a n d P o lic y . May 1971.

Heaver, T. D. A Theory of Shipping Conference Pricing and Policies. M a r itim e S tu d ie s a n d M a n a g e m e n t. Vol. 1. 1973.

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Roch, A. G. M. Current Pricing Behaviour in Liner Shipping. I n s titu te f o r S h ip p in g R e s e a r c h . Bergen 1968.

Sturmey, S. G. S h ip p in g E c o n o m ic s — C o ll e c te d P a p e r s . Macmillan, London 1975.

A PPEN D IX 1

OVERSEAS CARGO SHIPPING LEGISLATION

(Statement by the Minister for Transport, the Honourable P. J. Nixon, M.P.)

The Minister for Transport, Mr Peter Nixon, announced today the establishment of a study group from the Department of Transport to review Australia’s overseas cargo shipping legislation. The group will include Mr I. Grigor, Assistant Secretary, Department of Transport, and will be assisted by a consultant from Canada, Dr T. Heaver, an

internationally recognised expert in transportation. The group has been asked to report to Mr Nixon within six months. M r Nixon said that the review would cover the operation of Part X of the Trade Practices Act, possible future legislative arrangements and the role and long term

financing of the Australian Shippers’ Council. M r Nixon said that the group would take into account the views of all interested parties from both private and Government sectors as well as international developments in the field of shipping policy.

CANBERRA 17 March 1977

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I

A PPEN D IX II

prciation,

TRADE PRACTICES ACT 1974

PART X—OVERSEAS CARGO SHIPPING

D iv is io n S e c tio n s

1— Preliminary 111-114

2— Filing of Conference Agreements 115-121

3— Powers in relation to Conference Agreements 122-127 4— Powers in relation to I n d i v id u a l S h ip o w n e r s 128-131

5— General 132-143

6— Civil Remedies in relation to Overseas Cargo Ship­ ping 144-146

PART X—OVERSEAS CARGO SHIPPING

D iv is io n 1— P r e lim in a r y "

111. (1) In this Part, unless the contrary intention appears— “Australian flag shipping operator” means— (a) for the purposes of the making of an order under section 123—a person who carries on, or proposes to carry on, operations by way

of overseas cargo shipping between ports between which any of the outwards cargo shipping to which the relevant conference agreement relates is carried on; or (b) for the purposes of the making of an order under section 129—a

person who carries on, or proposes to carry on, operations by way of overseas cargo shipping between Australia and the port or ports to be specified in the order, being a person who normally uses, or proposes normally to use, for the purposes of those operations, a ship or ships registered in Australia and no other ship, and being an Australian citizen or a body corporate incorporated by or under a law of Australia or of a State or Territory; “Clerk” means the Clerk of Shipping Agreements appointed under this Part and includes a person appointed to act as Clerk of Shipping Agreements; “conference agreement” means an agreement to which this Part applies; “declared shipowner” means a shipowner in respect of whom an order under section 129 is in force; “disapproved agreement” means a conference agreement in respect of which an order of disapproval under this Part is in force; “ outwards cargo shipping” means overseas cargo shipping commencing at a place in Australia; “overseas cargo shipping” means the carriage of goods wholly or partly by sea from a place in Australia to a place outside Australia or from a place outside Australia to a place in Australia;

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“shipowner” means a person who carries on the business of outwards cargo shipping, whether alone or in partnership with another person or other persons, and includes such a person irrespective of nationality or place of incorporation, residence or business; “shipper body” means an association that, in the opinion of the Minister,

represents the interests, in relation to outwards cargo shipping, of persons who are shippers of goods, or producers of goods of a kind exported from Australia.

(2) For the purposes of this Part— (a) an arrangement or understanding, whether formal or informal and whether express or implied, shall be deemed to be an agreement; (b) a reference to an agreement shall be read as including a reference to

an agreement made outside Australia and to an agreement made before the commencement of this Part; and (c) a reference to an agreement shall be read as including a reference to an agreement that is not enforceable by legal proceedings whether or

not it was intended to be so enforceable.

112. Part IV does not apply in relation to overseas cargo shipping engaged in by a shipowner in pursuance of a conference agreement, including a disapproved agreement.

113. (1) Subject to this section, an agreement is an agreement to which this Part applies if the agreement, whether as originally made or by reason of a subsequent variation, is one the parties to which are or include two or more persons carrying on two or more businesses that include outwards cargo

shipping and is one that makes provision, in relation to outwards cargo shipping, ha\ring the purpose or effect of restricting, preventing or hindering— (a) competition between any of the parties to the agreement; or (b) competition between persons other than those parties and those

parties or any of them, including provision for— (c) the fixing or regulation of freight rates; (d) the giving to shippers, or the withholding from shippers, of special

rates or other special privileges or advantages; (e) the pooling or apportioning of earnings, losses or traffic; (0 the allocation of ports or the restriction or other regulation of the number and character of sailings between ports; or (g) the restriction or other regulation of the volume or character of goods

to be carried. (2) An agreement is not an agreement to which this Part applies by reason only of any provision as between shipowners of the one part and shippers of the other part with respect to the terms and conditions that are to be

applicable to contracts for outwards cargo shipping.

114. (1) The Minister may, by notice in writing to a shipowner served as prescribed, request the shipowner to comply with the provisions of this section, and, where such a request has been made, the provisions of subsections (2) to (7) apply. ·

(2) The shipowner (not being a natural person resident in Australia) shall, at all times after the expiration of 14 days from the date of service of the notice, be represented for the purposes of this Part by a person (not being a body

Part IV not to apply.

Agreements to which Part applies.

Shipowners may be required to be repre­ sented by agent and give address for service.

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Clerk of Shipping Agreements.

Agreements subject to filing.

corporate) resident in Australia and appointed by the shipowner as the agent of the shipowner for the purposes of this Part. (3) The appointment shall not be deemed to be duly made or revoked until the shipowner has given n o t i c e in w r i t i n g of the appointment or revocation to the Minister, specifying the name, and, in the case of an appointment, the place of residence, of the agent.

(4) Everything done by the agent in his representative capacity shall, for the purposes of this Part, be deemed to have been done by the shipowner, but not so as to affect any liability of the agent under this Part. (5) The Shipowner shall, at all times after the expiration of 14 days from the date of service of the notice, have an address in Australia for service for the purposes of this Part.

(6) The address does not become the address for service of the shipowner until the shipowner has given notice in writing of the address to the Minister, and an address so notified continues to be the address for service of the shipowner until another address has been so notified.

(7) A document or notice required or permitted to be served on, or given to, the shipowner under or for the purposes of this Part, including process of the Court, may, notwithstanding any other law, be served or given by leaving it at his address for service or by serving it by registered post on the shipowner

at that address. (8) Where a shipowner has given notice in writing to the Minister of the appointment of an agent of the shipowner, or of an address in Australia of the shipowner for service, for the purposes of this Part, the notice shall, for the purposes of sub-section (4) or (7), as the case requires, be deemed to have been given in accordance with a request made by the Minister in pursuance of sub­

section (1). (9) Failure to comply with this section is not an offence but entails the consequences specified in this Part.

Division 2—Filing o f Conference Agreements 1 1 5 . (1) There shall be a Clerk of Shipping Agreements, who shall be

appointed by the Governor-General. (2) Where the Clerk of Shipping Agreements is, or is expected to be, absent from duty or the office of Clerk of Shipping Agreements is vacant, the Governor-General may appoint a person to act as Clerk of Shipping Agreements during the absence or until the filling of the vacancy,, as the case mav be.

(3) The Clerk, and any staff necessary to assist him, shall be persons employed under the P u b lic S e r v ic e A c t 1922-1973.

116. (1) An agreement made before the commencing date that is, on that date, an agreement to which this Part applies becomes subject to filing on that date. (2) An agreement made on or after that date that is, when made, an agreement to which this Part applies becomes subject to filing upon the making of the agreement.

(3) An agreement to which this Part applies, whether made before or after that date, that becomes subject to filing at a time after the making of the agreement, being a time on or after the commencing date, becomes subject to filing at that time.

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117. (1) Where a conference agreement has become subject to filing, particulars of the agreement, in accordance with this section and verified as required by this section, shall be furnished to the Clerk within the period of 30 days after the date on which the agreement became subject to filing.

(2) In the case of a conference agreement that becomes subject to filing on a date after the date of making of the agreement, the particulars required to be furnished are particulars of the agreement as varied, whether in respect of the parties or in respect of the terms, by any variations made on or before the date

on which the agreement becomes subject to filing. (3) The duty to furnish particulars under this section in respect of a conference agreement that has become subject to filing is not affected by any subsequent variation or determination of the agreement and if, at any time

after a conference agreement becomes subject to filing, the agreement is varied, whether in respect of the parties or in respect of the terms, or is determined otherwise than by effluxion of time, then, except as otherwise

prescribed, particulars of the variation or determination, verified as required by this section, shall be furnished to the Clerk within the period of 30 days after the day on which the variation or determination occurs. (4) The requirements of this section may be complied with—

(a) in respect of an agreement—by any party to the agreement; or (b) in respect of a variation or determination of an agreement—by any person who was a party to the agreement immediately before, or is a party immediately after, the variation or determination.

(5) Subject to the regulations, the particulars to be furnished of an agreement are— (a) the names of the parties to the agreement and the date of the agreement; and

(b) the whole of the terms of the agreement, whether or not relating to overseas cargo shipping. (6) The particulars to be furnished of an agreement, or of a variation or determination of an agreement, shall be furnished—

(a) in so far as the particulars are contained in an instrument in writing by which the agreement, variation or determination was, in whole or in part, made or effected—by lodging with the Clerk a true copy of that instrument; and (b) in so far as the particulars are not contained in such an instrument,

whether or not there is such an instrument—by lodging with the Clerk a memorandum of those particulars, verified as a true copy or a full and correct memorandum, as the case requires, by statutory declaration of the person by whom the particulars are furnished or of a competent person authorised by that person.

(7) The regulations may provide for excluding any particulars from the particulars required to be furnished under this Division. (8) A person referred to in sub-section (4) may, before the expiration of the time within which, but for this sub-section, the particulars are required to be

furnished, apply in writing to the Minister for an extension of that time and, where such an application is made, the time within which the particulars are required to be furnished shall be taken not to expire— (a) whether or not the application is granted—before the expiration of 14

days after the date on which the Minister informs the applicant in

Particulars io be furnished of certain agreements, variations

and deter­ minations.

127

writing of his decision on the application; or (b) if the application is granted—before the expiration of the period of the extension granted by the Minister.

Failure to 118. (1) If the requirements of section 117 are not complied with in respect

furnish 0f an agreement, each person who was a party to the agreement when it

ω teanarS became subject to filing is guilty of an offence. offence. (2) If the requirements of section 117 are not complied with in respect of a

variation or determination of an agreement, each person who was a party to the agreement immediately before, or immediately after, the variation or determination is guilty of an offence. (3) The penalty for an offence against this section is a fine not exceeeding

$ 2000.

(4) It is a defence to a prosecution for an offence against this section if the person charged satisfies the Court that—

(a) he did not, within the time aliowed for the furnishing of the particulars, advert to the question whether particulars of the agreement, variation or determination were required by this Act to be furnished to the Clerk and his failure to advert to that question was not attributable to a desire to avoid, or to indifference to, his

obligations; (b) he reasonably relied on another party to ensure that the required particulars were duly furnished; or 1

(c) he believed in good faith that particulars of the agreement, variation or determination furnished to the Clerk by him within the time allowed complied with the requirements of this Act, and that either the particulars, or the necessary further or amended particulars, were duly furnished, except as regards time, by himself or another party before the institution of the prosecution or he did not know or suspect,

before the institution of the prosecution, that there had been default in compliance with the requirements of this Act with respect to the furnishing to the Clerk of particulars of the agreement, variation or determination.

clerk to file 119. (1) Where particulars of an agreement, or of a variation or

particulars, determination of an agreement, are duly furnished to the Clerk in accordance

with this Division, or where those particulars are duly furnished except that the time allowed for furnishing the particulars has expired, the Clerk shall file the document containing the particulars in a repository of such documents to be kept by him.

(2) The Clerk shall keep such records and indexes of documents received by him under this Division as he thinks necessary or as the Minister directs.

120. In proceedings under this Act before the Court, other than proceedings for an offence against a provision of this Division, particulars of an agreement, or of a variation or determination of an agreement, as appearing from a document filed by the Clerk are p r i m a f a c i e evidence of the agreement, variation or determination.

121. (1) This section applies to every person who is or has been the Clerk or a member of the staff assisting the Clerk. (2) Subject to this section, a person to whom this section applies shall not, either directly or indirectly, except in the performance of a duty under or in connexion with this Part—

Filed documents

evidence.

Secrecy.

128

(a) make a record of, or divulge or communicate to any person, any information concerning the affairs of another person acquired by him by reason of his office or employment under or for the purposes of this Part; or

(b) produce to any person a document furnished in pursuance of this Division. Penalty: $1000 or imprisonment for 3 months.

(3) A person to whom this section applies shall not be required to produce in a court any document relating to the affairs of another person of which he has the custody, or to which he has access, by virtue of his office or employment under or for the purposes of this Part, or to divulge or

communicate to any court any information concerning the affairs of another person obtained by him by reason of any such office or employment, unless it is necessary to do so for the purposes of, or of a prosecution under or arising out of, this Part.

(4) This section does not apply in relation to— (a) the communication of information to, or the production of a document to, the Tribunal for the purposes of an inquiry under this Part, the Minister or an officer acting on behalf of, and with the

authority of, the Minister; or (b) the communication or production to a person of, or of information or documents concerning, particulars furnished to the Clerk of an agreement to which, according to those parriculars, that person is or

has been a party. (5) For the purposes of paragraph (4) (b), the communication or production of any matter or document to a person authorised by writing under the common seal of a body corporate to represent the body corporate

for the purposes of this section shall be deemed to be communication or production to that body corporate. (6) In this section— “court” includes any tribunal, authority or person having power to require

the production of documents or the answering of questions; “produce” includes permit access to and “production” has a corresponding meaning.

Division 3— Powers in relation to Conference Agreements

122. (1) The Minister may serve on each of the parties to a conference agreement who carry on outwards cargo shipping to which the agreement relates a notice in accordance with this section. (2) A notice to a party under sub-section (1) shall request the party to give

to the Minister, not later than a date specified in the notice, an undertaking in writing executed by the party that, whenever the party is reasonably requested by the designated shipper body, by notice in writing, to take part in negotiations with that shipper body with regard to arrangements for, and the

terms and conditions that are to be applicable to, outwards cargo shipping to which the conference agreement relates— (a) the party will take part in those negotiations and will have due regard to matters and considerations raised, and representations made, by

the designated shipper body in the course of the negotiations;

Minister may request undertakings.

129

Disapproval of agreements.

(b) the party will cause an officer designated from time to time by the Minister to be furnished with such information as the officer requires concerning the progress of the negotiations, will permit that officer to be present at any meetings in the course of the negotiations and will give consideration to any suggestions that he may make; and (c) if the designated shipper body requests the party to make available

for the purposes o f the negotiations any information that is reasonably necessary for those purposes and itself makes available for those purposes any such information that the parties or any of them request to be made available, the party will make available the information requested by the shipper body. (3) An undertaking for the purposes of this section shall be deemed to be duly given notwithstanding that it contains qualifications or exceptions if they were permitted by the notice requesting the undertaking or have been accepted by the Minister by notice in writing to the party.

(4) A person on whom a notice has been served under sub-section (1) may, before the date specified in the notice, apply in writing to the Minister for an extension of the time for compliance with the notice and, where such an application is made, the time within which the notice is to be complied with shall be taken not to expire—

(a) whether or not the application is granted—before the expiration of 14 days after the date on which the Minister informs the applicant in writing of his decision on the application; or ·â– 

(b) if the application is granted—before the expiration of the period of the extension granted by the Minister. (5) The designated officer may appoint an officer or officers to be his deputy or deputies and any undertaking given for the purposes of this section by a party to a conference agreement shall be deemed to include an undertaking that the party will—

(a) cause a deputy so appointed to be furnished with such information as the deputy requires concerning the progress of the negotiations with the designated shipper body; and (b) in the event of the absence of the designated officer from a meeting in

the course of the negotiations, permit the deputy, or, if there is more than one deputy, one of the deputies, to be present at that meeting and give consideration to any suggestions that he may make. (6) In this section— “designated officer” means the officer designated by the Minister under

paragraph (2) (b); “designated shipper body” means the shipper body designated by the Minister in the notice requesting the undertaking.

123. (1) The Governor-General may, by order, disapprove a conference agreement, whether or not particulars of the agreement have been furnished to the Clerk, on a ground specified in the order, being one of the following grounds:—

(a) that a party to the agreement has, without reasonable excuse, failed to comply with section 114; (b) that there has been a failure to comply with a request for the giving of an undertaking made by the Minister under section 122 in relation to

the agreement;

130

(c) that the Governor-General is satisfied, after consideration of a report to the Minister by the Tribunal, that— (i) there has been a failure to comply with an undertaking given under section 122 in relation to the agreement;

(ii) the agreement, or the manner in which it is being interpreted or applied by the parties, or the conduct of, or the provision of facilities by, the parties in relation to outwards cargo shipping to which the agreement relates does not have due regard to the need

for services by way of overseas cargo shipping to be efficient, economical and adequate; or (iii) the agreement, or the manner in which it is being interpreted or applied by the parties, or the conduct of the parties in relation to

matters to which the agreement relates, is preventing a person from, or hindering a person in, engaging efficiently, to an extent that is reasonable, in overseas cargo shipping in relation to which he is an Australian flag shipping operator. (2) For the purposes of sub-paragraph (1) (c) (ii), consideration shall be given to the need to ensure the continuing provision of services by way of

overseas cargo shipping and, in that connexion, the conditions under which, on a long term view, shipowners may reasonably be expected to provide such services.

124. (1) Where an agreement is disapproved under this Division, the Effect of agreement becomes, upon the date on which the order of disapproval takes disapproval, effect, unenforceable as regards observance of the agreement, so far as it relates to outwards cargo shipping, on and after that date, but a transaction entered into, whether before or after the order takes effect, in pursuance of the

agreement is not illegal or unenforceable by reason only of the making of the order. (2) A party to a disapproved agreement shall not— (a) do any act or thing in pursuance of, or enforce or purport to enforce,

the agreement (including the agreement as varied by any later agreement) so far as it relates to outwards cargo shipping; (b) enter into any other conference agreement (whether with the same parties or with other parties) that relates, in whole or in part, to the

carriage of goods from Australia to a place outside Australia that is a place to the carriage of goods to which the disapproved agreement related; or (c) do any act or thing in pursuance of, or enforce or purport to enforce,

an agreement referred to in paragraph (b).

Penalty: $50,000.

125. (1) Where, in his discretion, he considers it desirable to do so, the Reinstate-Governor-General may— ment of

disapproved

(a) by order, revoke an order disapproving a conference agreement; or agreement or (b) approve the entering into by one or more of the parties to a approval 0f disapproved agreement of another conference agreement, whether agreement with or without parties who were not parties to the disapproved

agreement.

(2) Paragraphs 124 (2) (b) and (c) do not apply in relation to a conference agreement in respect of which an approval has been given under this section and which has not been disapproved under this Division.

131

injunctions. 126. The Court is empowered, on the application of the Minister, to grant

an injunction restraining a person who has been convicted of an offence against section 124 from further contravening that section.

Publication 127. An order under this Division— menosment (a) shall be published in the G a z e tte ; and of orders. (b) takes effect on the date of publication or on such later date as is fixed

by the order.

Division 4— Powers in relation to Individual Shipowners

Minister 128. (1) Subject to sub-section (2), the Minister may serve on a shipowner a

may request notice requesting the shipowner to give to the Minister, not later than a date un erta mgs. Sp e c jf jecj jn qie notice, an undertaking in writing executed by the shipowner

that, whenever the shipowner is reasonably requested by the designated shipper body, by notice in writing, to take part in negotiations with that shipper body with regard to arrangements for, and the terms and conditions

that are to be applicable to, outwards cargo shipping to which the notice relates— (a) the shipowner will take part in those negotiations and will have due regard to matters and considerations raised, and representations

made, by the designated shipper body in the course of the negotiations; ;

(b) the shipowner will cause an officer designated from time to time by the Minister to be furnished with such information as the officer requires concerning the progress of the negotiations, will permit that officer to be present at any meetings in the course of the negotiations and will give consideration to any suggestions that he may make; and (c) if the designated shipper body requests the shipowner to make

available for the purposes of the negotiations any information that is reasonably necessary for those purposes and itself makes available for those purposes any such information that the shipowner requests to be made available, the shipowner will make available the information requested by the shipper body. (2) A notice under sub-section (1) requesting an undertaking shall be expressed to relate to outwards cargo shipping by the shipowner to a specified port or to specified ports, not being outwards cargo shipping that is within the operation of a conference agreement, not being a disapproved agreement, particulars of which have been furnished under Division 2.

(3) An undertaking for the purposes of this section shall be deemed to be duly given notwithstanding that it contains qualifications or exceptions if they were permitted by the notice requesting the undertaking or have been accepted by the Minister by notice in writing to the shipowner.

(4) A shipowner on whom a notice has been served under sub-section (1) may, before the date specified in the notice, apply in writing to the Minister for an extension of the time for compliance with the notice and, where such an application is made, the time within which the notice is to be complied with

shall be taken not to expire— (a) whether or not the application is granted—before the expiration of 14 days after the date on which the Minister informs the applicant in writing of his decision on the application; or

132

(b) if the application is granted—before the expiration of the period of the extension granted by the Minister. (5) The designated officer may appoint an officer or officers to be his deputy or deputies and any undertaking given for the purposes of this section by a shipowner shall be deemed to include an undertaking that the shipowner will—

(a) cause a deputy so appointed to be furnished with such information as the deputy requires concerning the progress of the negotiations with the designated shipper body; and (b) in the event of the absence of the designated officer from a meeting in

the course of the negotiations, permit the deputy, or, if there is more than one deputy, one of the deputies, to be present at that meeting and give consideration to any suggestions that he may make. (6) In this section— “designated officer” means the officer designated by the Minister under

paragraph (1) (b); “designated shipper body” means the shipper body designated by the Minister in the notice requesting the undertaking.

129. (1) Subject to this section, the Governor-General may, by order, declare a shipowner to be, in relation to outwards cargo shipping to a port or the ports specified in the order (in this section referred to as the “relevant shipping”), a shipowner to whom section 130 applies.

(2) The Governor-General shall not make such an order except on a ground specified in the order, being one of the following grounds:— (a) that the shipowner has, without reasonable excuse, failed to comply with section 114;

(b) that the shipowner has failed to comply with a request for the giving of an undertaking made by the Minister under section 128 in relation to the relevant shipping; (c) that the Governor-General is satisfied, after consideration of a report

to the Minister by the Tribunal, that— (i) the shipowner has failed to comply with an undertaking given under section 128 in relation to the relevant shipping; (ii) the conduct of, or provision of facilities by, the shipowner in

relation to the relevant shipping does not have due regard to the need for services by way of overseas cargo shipping to be efficient, economical and adequate; (iii) the conduct of the shipowner in relation to overseas cargo

shipping between Australia and a port or the ports to be specified in the order is preventing a person from, or hindering a person in, engaging efficiently, to an extent that is reasonable, in overseas cargo shipping in relation to which he is an Australian flag

shipping operator; or (iv) a conference agreement to which the shipowner was a party, being an agreement that related in whole or in part to the relevant shipping, has been disapproved under this Part and the

disapproval has not been revoked. (3) For the purposes of sub-paragraph (2) (c) (ii), consideration shall be given to the need to ensure the continuing provision of services, by way of overseas cargo shipping and, in that connexion, the conditions under which,

Declaration of ship­ owners.

133

on a long term view, shipowners may reasonably be expected to provide such services. (4) Where, in his discretion, he considers it desirable to do so, the Governor-General may, by order, revoke an order under sub-section (1).

(5) An order under this section— (a) shall be published in the Gazette; and (b) takes effect on the date of publication or on such later date as is fixed by the order.

Prohibitions 130. A declared shipowner shall not, in respect of outwards cargo shipping

applicable to to a port specified in the order by virtue of which he is a declared shipowner— declared shipowner. (a) enter into a c o n tr a c t, o r follow a practice, under which a shipper—

(i) is subject to restrictions with respect to, or is subject to any detriment by reason of or in the event of, his giving patronage to another shipowner; or (ii) obtains or may obtain advantageous freight rates on condition

that, or by reason that, he gives all or a part of his patronage to the shipowner, or to two or more particular shipowners; (b) pay or allow, or make an agreement to pay or allow, to a shipper a deferred rebate, that is to say, a rebate of portion of any freight

money upon fulfilment by the shipper of a condition with respect to confining patronage to the shipowner or to two or more particular shipowners; (c) with the object of substantially damaging the business of another shipowner or preventing another shipowner from entering into competition with him, engage in freight-cutting, or use a vessel whether alone or in conjunction with any other shipowner, to forestall the first-mentioned shipowner in the obtaining of cargoes; or (d) retaliate, or threaten to retaliate, against a shipper for giving patronage to another shipowner—

(i) by refusing, or threatening to refuse, to carry goods of the shipper or to carry goods of the shipper otherwise than on terms disadvantageous to the shipper; or (ii) by resorting to other discriminatory measures. Penalty: $50,000.

injunctions. 131. The Court is empowered, on the application of the Minister, to grant

an injunction restraining a person who has been convicted of-an offence against section 130 from further contavening that section.

Division 5— General

Munster may 132. (1) The Minister may refer to the Tribunal for inquiry and report any refer certain matter relevant to the exercise of the power of the Governor-General to make

Tribunal.0 an order upon a ground specified in paragraph 123 (1) (c) or 129 (2) (c), and the Tribunal shall hold an inquiry, and make a report accordingly. (2) For the purposes of an inquiry under this section— (a) the Tribunal shall, subject to section 43, be constituted by a Division

of the Tribunal consisting of a presidential member and two members who are not presidential members; (b) section 43 applies as if the holding of the inquiry, and the making of a

134

report on the inquiry, were the hearing and determining of proceedings; and (c) sections 109 and 110 do not apply.

133. The Minister shall not refer a matter to the Tribunal under section 132 unless he has first carried on, or endeavoured to carry on, either personally or through officers acting on his behalf and with his authority, consultations with the parties to the conference agreement concerned who carry on overseas

cargo shipping, or with the shipowner concerned, as the case requires, with a view to securing such undertaking or action, by those parties or by that shipowner as will render the proposed reference unnecessary.

134. (1) In an inquiry under this Division in respect of a matter arising under section 123, any party to the conference agreement concerned is entitled to be represented. (2) In an inquiry under this Division in respect of a matter arising under

section 129, the shipowner concerned is entitled to be represented. (3) In an inquiry under this Division— (a) the Minister is entitled to be represented; (b) if the Tribunal is satisfied that a shipper body has a sufficient interest

in the inquiry, the Tribunal shall grant to the shipper body leave to be represented; and (c) the Tribunal may grant to any person appearing to it to have a sufficient interest in the inquiry leave to be represented.

(4) The representation of a person or body in an inquiry under this Division shall be— (a) by a barrister or a solicitor of the Supreme Court of a State or Territory or of the High Court; or

(b) by a person approved by the Tribunal.

135. (1) In connexion with an inquiry under this Division, the Tribunal may receive an undertaking to the Tribunal by a shipowner with respect to a matter appearing to the Tribunal to be relevant to the operation of this Part. (2) The Minister may withdraw a reference of a matter to the Tribunal

under this Division upon the giving of an undertaking under sub-section (1) to the satisfaction of the Minister. (3) An undertaking to the Tribunal under this section shall not, unless the contrary intention appears expressly from the terms of the undertaking, be construed as an admission as to any matter.

(4) The Tribunal shall record in writing an undertaking received or given for the purposes of this section and the writing shall be placed in the records of the Tribunal.

136. A person who— (a) fails to comply with an undertaking given to the Tribunal under this Part; (b) aids, abets, counsels or procures, or is in any way directly or indirectly

knowingly concerned in, or party to, a failure to comply with such an undertaking; or

Minister to consult with shipowners before

making reference.

Representation.

Undertakings to Tribunal.

Failure to comply with undertaking

contempt of Tribunal.

135

(c) does an act or thing with the intention of evading or frustrating such an undertaking or causing or encouraging the evasion or frustration of such an undertaking, is guilty of a contempt of the Tribunal.

Punishment 137. (1) A contempt of the Tribunal referred to in section 136 is punishable of contempt, b y the Court as if it were a contempt of the Court and jurisdiction is conferred

on the Court to hear and determine proceedings in respect of such a contempt. (2) Subject to this section, a proceeding in respect of such a contempt shall be instituted, carried on, heard and determined in accordance with the laws applicable to and in relation to the punishment of contempts of the Court.

(3) In so far as any such law is incapable of application, the Court may give a direction as to the manner of instituting, carrying on, hearing or determining a proceeding referred to in sub-section (2). (4) For the purposes of proceedings under this section, the Court shall be constituted by not less than three Judges.

(5) Proceedings before the Court in accordance with this section shall not be instituted except with the consent in writing of the Minister. (6) A reference in a law of Australia to an offence against a law of Australia shall be read as including a reference to a contempt referred to in this Part.

Protection 138. Where a person enters into, or purports to enter into, a transaction

of certain that involves a failure by him to comply with an undertaking given to the

persons. Tribunal, a person who is not bound by the undertaking has the same rights

and title, whether as a party to the transaction or as a person claiming directly or indirectly under a party to the transaction, as he would have had if the transaction had not involved such a failure.

Publication 139. (1) Where the Tribunal has made a report to the Minister under this of reports of Division, the Minister shall— Tribunal. (a) upon the expiration of a period of 60 days after the date on which he

received the report; or (b) if, before the expiration of that period, the Governor-General makes an order after consideration of the report, immediately after the making of the order, direct the Registrar to make the report public.

(2) After a direction has been given under sub-section (1) in respect of a report, a person may, on payment of the prescribed fee (if any)— (a) inspect a copy of the report at the office of the Registrar; or (b) obtain a copy of the report certified to be a true copy under the hand

of the Registrar or of a Deputy Registrar. (3) Section 165 does not apply in relation to a report of the Tribunal under this Division.

institution of 140. (1) For the purpose of proceedings before the Court for an offence prosecutions, against this Part, the references in paragraph 163 (4) (b) to the Attorney-

General shall be read as references to the Minister. (2) Proceedings before the Court in respect of a contempt of the Court in relation to an injunction under this Part shall not be instituted except with the consent in writing of the Minister.

Aiding and 141. (1) A person who aids, abets, counsels or procures, or is in any way abettmg. directly or indirectly knowingly concerned in, or party to—

136

(a) the commission of an offence against this Part; or (b) the doing of an act or thing outside Australia that would, if done within Australia, be an offence against this Part, shall be deemed to have committed the offence and is punishable accordingly.

(2) The references in sub-section (1) to an offence against this Part shall be read as including references to a contempt of the Court in relation to an injunction under this Part.

142. Where a person enters into, or purports to enter into, a contract of carriage or other transaction that involves an offence by him against this Part or a breach by him of an injunction of the Court under this Part, a person who was not guilty of such an offence or breach in relation to the transaction has

the same rights, whether as a party to the transaction or as a person claiming directly or indirectly under a party to the transaction, as he would have had if the contract or transaction had not involved such an offence or breach.

143. For the purposes of proceedings in respect of a contempt of the Court consisting of failure to comply with an injunction under this Part, the Court shall be constituted by not less than three Judges.

D iv is io n 6 — C iv il R e m e d ie s in r e la tio n to O v e r s e a s C a r g o S h ip p in g

144. (1) Subject to this section, a shipper, shipowner or other person who suffers loss or damage by an act of another person done in contravention of section 124 or 130 may recover the amount of the loss or damage by action against that other person.

(2) Jurisdiction is conferred on the Court to hear and determine actions under this section and that jurisdiction is exclusive of the jurisdiction of any other court, other than the jurisdiction of the High Court under section 75 of the Constitution.

145. The court in which an action under this Division is instituted may, on the application of the Minister, defer or adjourn the hearing of the action where it is satisfied that it is in the interests of justice to do so having regard to any pending or possible prosecution or proceedings for an injunction or for

contempt of the Court arising out of disobedience to an injunction.

146. In proceedings against a person under this Division, a finding of a fact by the Court in proceedings under, or arising out of, this Part in which— (a) that person has been found guilty of an offence against a provision of Division 3 or of Division 4;

(b) an injunction has been granted against that person; or (c) that person has been found guilty of contempt of the Court, is p r i m a f a c i e evidence of the fact and the finding may be proved by production of a document under the seal of the Court from which the finding appears.

Protection of certain persons.

Constitution of Court.

Actions for damages.

Deferment of action on application of Minister.

Findings in contempt proceedings

evidence.

137

A PPEN D IX III

Table 1

Conferences with agreements filed pursuant to Part X of the Act

30 June 1977

C o n feren ce M e m b e r s

A r e a s S u b je c t to

A g r e e m e n t

Australia Northbound Shipping Conference (ANSCON).

Australia/Thailand Outward Shipping Conference (ATOSCON).

Australia/Sri Lanka Outward Shipping Conference.

Australia/Burma Outward Shipping Conference

(ABOSCON).

Australia/East India Outward Shipping Conference (EASTINDIACON).

Australia/West India Outward Shipping Conference (WESTINDIACON)

Australia Japan Container Line Limited; Rederiaktiebolaget Helsingborg trading as Aus­ tralia West Pacific Line; Aus­ tralian Shipping Commission trading as Australian National Line; China Navigation Co Ltd; Eastern and Australian Steamship Co Ltd; Yamashita Shinnihon Steamship Co Ltd; Knut Knutsen OAS trading as Knutsen Line; Kawasaki Kisen Kaisha L t d ; M its u i O S K Lines Ltd; Nippon Yusen Kaisha; Nedlloyd Lijnen b.v.; Orient Overseas Container Line; Asia Australia Express Line.

Nedlloyd Lijnen b.v.; The Ship­ ping Corporation of India Ltd; William Chariick Ltd

(Southern Shipping Lines).

Peninsular and Oriental Steam Navigation Co; .Nedlloyd Lij­ nen b.v.; The Shipping Corpo­ ration of India Ltd.

The Shipping Corporation of India Ltd; Peninsular and Oriental Steam Navigation Co.

Peninsular and Oriental Steam Navigation Co; The Shipping Corporation of India Ltd.

Peninsular and Oriental Steam Navigation Co; Nedlloyd Lij­ nen b.v.; The Shipping Cor­ poration of India Ltd.

Philippines, Sabah, Brunei, Sar­ awak, Hong Kong, Taiwan, China, Japan, Okinawa and Korea (and such additional ports or areas as may be entered in Conference freight tariffs).

Thailand, Sabah, Brunei and Sarawak.

Sri Lanka.

Burma.

East India.

West India.

Australia/Singapore & Blue Funnel Line Ltd; Penin-West Malaysia Outward sular and Oriental Steam Nav-Shipping Conference igation Co; Guan Guan Ship- (AUSMACON). ping Pte Ltd; Kawasaki Kisen

Kaisha Ltd; Nedlloyd Lijnen b.v.; The Shipping Corporation

Singapore & Ports in West Malaysia (and other ports re­ levant to the trade as set out in the Freight Schedule from time to time).

138

Table 1

Conferences with agreements filed pursuant to Part X of the Act

30 June 1977

Conference M em bers

A reas Subject to A greem ent

Australia/Indonesia Outward Shipping Conference (AUSINCON).

Trans Tasman Freight Conference (TASMANCON).

Australia/Pacific Coast Rate Agreement

Australia/Eastern Canada Shipping Conference

Australia/Eastern USA Shipping Conference

Australia/Europe Shipping Conference

of India Ltd; Southern Shipping Lines; Nippon Yusen Kaisha; Malaysian International Ship­

ping Corporation.

Blue Funnel Line Ltd; Nippon Yusen Kaisha; Nedlloyd Lijnen b.v.; Guan Guan Shipping Pte Ltd; The Shipping Corporation

of India; Neptune Orient Lines Ltd.

Tucker Shipping Pty Ltd; Union Steam Ship Co. of New Zealand Ltd; Abel Tasman Shipping Co. Pty Ltd (formerly

HCS Coasters Pty Ltd).

Pacific-Australia Direct Line; Pacific Far East Line Inc;

Hamburg-Suedamerikanische Dampfschiffahrts-Gesellschaft; Farrell Lines Inc.

Associated Container Trans­ portation (Australia) Ltd; Col­ umbus Line (Hamburg-Sueda­ merikanische Dampfschif­

fahrts-Gesellschaft); Farrell Lines Inc; Australian Shipping Commission (Australian Na­ tional Line); Trader Navigation

Co Ltd trading as Atlanttrafik Express Service.

Farrell Lines Incorporated; Hamburg-Suedamerikanische Dampfschiffahrts-Gesellschaft Eggert & Amsinck, trading as Columbus Line; Associated Container Transportation

(Australia) Ltd; Australian Shipping Commission trading as the Australian National Line; Trader Navigation Com­ pany Limited (Atlanttrafik Ex­ press Service); Refrigerated Ex­

press Line (A/ASIA) Pty Ltd.

Associated Container Trans­ portation (Australia) Ltd;

Ports in Indonesia as set out in the schedule from time to time (at present Surabaya, Semerang and Djakarta).

New Zealand.

Pacific Coast Ports U.S.A. and inland points via such ports.

East Coast of Canada.

Atlantic & Gulf Ports of the United States of America, Puerto Rico and the Virgin Islands.

Aden, Djibouti, Red Sea Ports, Gulf of Akaba Ports, Egyptian

139

Table 1

Conferences with agreements filed pursuant to Part X of the Act

30 June 1977

C o n feren ce

Areas S u b je c t to

M e m b e r s A g r e e m e n t

(AESCON) Australia New Zealand Europe Ports, Mediterranean Ports,

Container Service; Adriatic Sea, Aegean Sea, Tur-

Overseas Containers Limited kish & Black Sea Ports, Por-Dolphin Line Ltd; tuguese & Spanish Ports,

Compagnie Generate Mar- French, Belgian, Netherlands & itime; German Ports, Scandanavian &

Hapag-Lloyd Aktiengesell- Baltic Ports, U.K. & Eire Ports, schaft; Nedlloyd Lijnen b.v.; Lloyd Triestino Societa per

Azioni di Navigazione; Blue Star Line Limited; Ellerman & Bucknall Steam­ ship Co Ltd; Jadranska Slobodna Plovidba

(Yugoslav Line); ’

Compania Naviera Marasia S.A.; Port Line Limited; ScanAustral A/S Scandinavian

Australia Carriers Ltd); Aktieselskabet det Ostasi- atiske Kompagni (The East Asiatic Company Limited); Rederiaktiebolaget Transat­

lantic; Wilh Wilhelmsen; Shaw Savill & Albion Company Limited; The Australian National Line; The Australian Steam Shipping

Company Limited; Baltic Shipping Company; The Peninsular & Oriental Steam Navigation Company.

140

Table 2

Non-agreement conferences with arrangements filed pursuant to Part X of the Act

30 June 1977

P a r tie s to A rr a n g e m e n t

A r e a s S u b je c t to

A rr a n g e m e n t

Australia West Pacific Line; New Guinea Australia Line Pty Ltd; Karlander New Guinea Line; Re­ frigerated Express Lines (A/ASIA) Pty Ltd.

New Guinea.

Peninsular & Oriental Steam Navigation Co; C. Clausen Steamship Co. Ltd; Shipping Corporation of India.

Persian/Arabian Gulf Ports.

South Pacific United Lines; Cie Des Chargeurs Caledoniens; Societe Maritime Caledonienne; Sof- rana Unilines (Aust) Pty Ltd.

New Caledonia and New Hebrides.

Sofrana Unilines (Aust) Pty Ltd; Karlander (Aust) Pty Ltd; Hetherington Kingsbury Pty Ltd. Fiji.

Associated Container Transportation (Australia) Ltd; PAD Shipping Australia Pty Ltd; Rederiaktiebolaget Transatlantic; Sofrana Fiji Express Line SARL.

Fiji, New Hebrides, New Caledonia.

Table 3

Independent Liner Shipping services operating in outward trades

S h ip p in g O p e r a to r A r e a S e r v e d

Safocean Pty Ltd, Gulf Shipping Lines.

Far Eastern Shipping Co.

Pacific International Lines, Hong Kong Islands Ship­ ping Co Ltd, Gulf O c e a n Lines of Hong Kong, Z im Israel Navigation Co Ltd.

South & East Africa/Mauritius. Philippines, Hong Kong, Japan, Vladivostok.

Philippines, Hong Kong, Taiwan.

Reefer Lines Pty Ltd.

Pacific International Lines. British Asian Shipping Co., Pacific International Lines, Karlander (Aust) Pty Ltd.

East Asia.

Thailand.

Indonesia.

British Asian Shipping Co., Gulf Ocean Lines of Hong Kong, Pacific International Lines, Reefer Lines Pty Ltd, Zim Israel Navigation Co Ltd.

Singapore/West Malaysia.

Peninsular & Oriental Steam Navigation Co., Gulf Shipping Lines. '

Pakistan.

Knut Knutsen OAS, South Pacific United Lines.

Polish Ocean Lines.

West Coast North America.

Europe.

141

Table 3

Independent Liner Shipping services operating in outward trades

S h ip p in g O p e r a to r A r e a S e r v e d

Japan Reefer Carrier Co., Gulf Shipping Lines, Westralian Farmers Transport Pty Ltd, Kuwait Livestock Trading & Transport Co., Patrick Oper­ ations Pty Ltd.

Arabian/Persian Gulf.

Zim Israel Navigation Co. Ltd., Gulf Shipping Lines, Japan Reefer Carrier Co. East Africa/Red Sea.

Farrell Lines Inc., Hong Kong Islands Shipping Co. Ltd., Nauru Pacific Line. Papua/New Guinea.

Columbus Line, Companhia de Navegacao Lloyd Brasileiro, Nedlloyd Lijnen b.v., Shaw Savill & Albion Co. Ltd.

South America/Caribbean.

Australian National Line. New Zealand.

Pacific Navigation Co. (Tonga National Line). Western Samoa, Tonga.

Nauru Pacific Line. Fiji, Western Samoa, Nauru.

Pacific Far East Line. Fiji, Eastern Samoa, Honolulu. .

South Pacific United Lines. Papeete.

Farrell Line Inc. American Samoa.

Daiwa Line. Honiara, Tarawa, Guam, Saipan,

Truk.

142

APPENDIX IV

Table 1

Outward Overseas Shipping Cargo by type of service

1971-72 to 1974-75

1 9 7 1 - 7 2 1 9 7 2 - 7 3 1 9 7 3 - 7 4 1 9 7 4 - 7 5

G r o s s W e i g h t

t o m e s *000

V a l u e

$ 0 0 0

G r o s s W e i g h t

t o n n e s '0 0 0

V a l u e

$ 0 0 0

G r o s s W e i g h t

t o n n e s Ό 0 0 WOO

G r o s s W e i g h t

t o n n e s ’0 0 0 so o o

Liners Tramps/bulkships Tankers

6,123 100,806 3,234

2,578,157 2,018,888 79,843

6,747 124,576 3,051

3,767,567 2,125,557 79,605

6,489 143,380 3,609

3,810,951 2,711,880 183,010

6,228 156,971 6,138

3,391,922 4,624,010 313,958

All vessels 110,163 4,676,886 134,374 5,972,730 153,479 6,705,841 169,337 8,329,890

Source: Australian Bureau of Statistics—Outwards Overseas Cargo (Reference No. 14.16)

Table 2

Liners

1 9 7 1 - 7 2 1 9 7 2 - 7 3 1 9 7 3 - 7 4 1 9 7 4 - 7 5

G r o s s W e i g h t V a l u e G r o s s W e i g h t V a l u e G r o s s W e i g h t V a lu e G r o s s W e i g h t V a l u e

t o n n e s Ό 0 0 $ 0 0 0 t o n n e s Ό 0 0 $ 0 0 0 t o n n e s Ό 0 0 w o o t o n n e s Ό 0 0 w o o

General Cargo 4,224 1,809,674 4,613 2,678,202 4,337 2,871,932 4,291 2,738,393

Bulk-dry 739 59,575 745 73,714 1,207 89,171 1,144 106,462

Bulk-liquid 88 11,295 74 9,833 82 15,799 11 1,540

Refrigerated 1,066 695,574 1,303 1,001,487 863 833,590 784 544,974

Non-cargo 6 2,037 13 4,333 — 459 — 551

TOTAL 6,123 2,578,157 6,747 3,767,567 6,489 3,810,951 6,228 3,391,922

Source: Australian Bureau of Statistics—Outwards Overseas Cargo (Reference No. 14.16)

Tramps/Bulkships

1 9 7 1 - 7 2 1 9 7 2 - 7 3 1 9 7 3 - 7 4 1 9 7 4 - 7 5

G r o s s W e i g h t V a l u e G r o s s W e i g h t Fti/ne Gross W e i g h t Fn/ue G r o s s W e i g h t y a l u e

t o n n e s Ό 0 0 $ 0 0 0 t o n n e s Ό 0 0 $ 0 0 0 t o n n e s Ό 0 0 $000 t o n n e s Ό 0 0 w o o

General Cargo 3,743 314,622 3,418 340,108 3,972 452,563 4,396 677,779

Bulk-dry 96,881 1,626,957 120,883 1,674,217 139,288 2,187,782 152,368 3,866,514

Bulk-liquid 15 1,859 6 247 25 1,231 34 1,685

Refrigerated 96 44,078 139 70,788 65 40,660 84 41,739

Non-cargo 70 31,374 129 40,199 29 29,643 85 36,291

TOTAL 100,806 2,018,888 124,576 2,125,557 143,380 2,711,880 156,971 4,624,010

S o u r c e : A u s t r a l i a n B u r e a u o f S t a t i s t i c s — O u t w a r d s O v e r s e a s C a r g o ( R e f e r e n c e N o . 1 4 .1 6 )

143

All Vessels

1 9 7 1 - 7 2 1 9 7 2 - 7 3 1 9 7 3 - 7 4 1 9 7 4 - 7 5

G r o s s W e i g h t V a l u e G r o s s W e i g h t V a l u e G r o s s W e i g h t V a l u e G r o s s W e i g h t V a l u e

t o n n e s Ό 0 0 $ 0 0 0 t o n n e s ’0 0 0 $ 0 0 0 t o n n e s ’0 0 0 $ 0 0 0 t o m e s '0 0 0 $ 0 0 0

General Cargo 8,192 2,136,238 8,300 3,031,721 8,963 3,370,733 13,301 3,617,084

Bulk-dry 97,620 1,686,531 121,628 1,747,928 140,495 2,276,953 153,512 3,972,977

Bulk-liquid 3,113 81,055 2,862 76,272 3,063 153,804 1,570 116,275

Refrigerated 1,162 739,652 1,442 1,072,276 928 874,248 869 586,714

Non-cargo 76 33,411 142 44,532 29 30,103 85 36,842

TOTAL 110,163 4,676,886 134,374 5,972,730 153,479 6,705,841 169.337 8,329,890

Source: Australian Bureau of Statistics—Outwards Overseas Cargo (Reference No. 14.16)

Table 3

Inward and outward overseas cargo by broad geographic areas

1975-76

I n w a r d C a r g o

L i n e r S e r v i c e s A l l V e s s e l s

t o n n e s c .m e t r e s t o n n e s c .m e t r e s

W 0 ’0 0 0 ’0 0 0 ’0 0 0

O u t w a r d C a r g o

L i n e r S e r v i c e s A l l V e s s e l s

t o n n e s c .m e t r e s t o n n e s c .m e t r e s

Ό 0 0 Ό 0 0 ’0 0 0 ’0 0 0

North America/Hawaii —East Coast 226 511 827 635 323 115 2,969 11 5

—West Coast/Hawaii 226 428 770 643 213 38 2,873 38

—Central America 4 2 45 2 19 6 56 6

—Bermuda/Caribbean - — 98 — 6 8 20 11

South America 5 13 5 13 26 16 503 19

Europe (excluding USSR) —North Western Central & Baltic 491 1,781 951 1,875 835 526 20,627 575

—Southern 52 254 128 285 262 55 7,764 55

USSR 4 1 4 1 78 2 2,394 2

Africa 52 72 163 74 221 65 1,802 109

Asia —Western 6 11 399 11 2 7 13 458 31

—Persian Gulf/Southern 42 90 9,432 102 281 107 2,345 349

—South Eastern 144 398 1,783 493 566 237 3,054 287

—Eastern 559 1,742 2,849 2,858 1,091 366 109,008 399

Pacific/New Zealand —Papua New Guinea 24 65 44 75 139 185 219 222

—Pacific Islands 21 22 932 24 123 154 389 160

—New Zealand 550 69 641 71 484 96 1,646 96

Other - — 644 9 - — — -

TOTAL CARGO 2,407 5,459 19,718 7,170 4,766 1,989 156,133 2,488

S o u r c e : A u s t r a l i a n B u r e a u o f S t a t i s t i c s — O v e r s e a s a n d C o a s t a l S h i p p i n g ( R e f e r e n c e N o . 1 4 .1 0 ).

144

Liner cargo loaded in Australia for overseas—by geographic areas and countries

1972-73 to 1975-76

1 9 7 2 - 7 3 1 9 7 3 - 7 4 1 9 7 4 - 7 5 1 9 7 5 - 7 6

Table 4

t o n n e s

W O

c .m e t r e s

W O

t o n n e s

W O

c .m e t r e s

W O

t o n n e s

W O

c .m e t r e s

'0 0 0

t o n n e s

’0 0 0

c .m e t r e s

W O

North America —East Coast 358 125 356 86 347 71 323 115

—West Coast/Hawaii 304 52 254 44 337 56 213 38

—Central America 8 7 10 7 20 7 19 6

—Bermuda & Caribbean 31 25 7 15 13 10 6 8

South America 35 13 15 4 35 29 26 16

Europe —North Western Central & Baltic States 1,019 655 894 464 830 428 835 526

--Southern Area 251 110 224 70 238 66 262 55

USSR (Europe & Asia) 26 5 54 — 51 11 78 2

Africa 149 125 122 151 100 123 221 65

Asia (excluding USSR) —Western Asia 37 13 28 17 32 21 27 13

—Persian Gulf Southern 212 82 179 78 200 92 281 107

—South Eastern 554 351 577 371 541 319 566 237

—Eastern 1,431 540 1,193 536 1,011 453 1,091 366

Papua New Guinea 137 267 146 195 208 219 139 185

Pacific Islands 126 257 173 177 220 171 123 154

New Zealand 299 573 356 619 459 429 484 96

TOTAL 4,976 3,200 4,588 2,835 4,643 2,503 4,766 1,989

Source: Australian Bureau of Statistics—Overseas and Coastal Shipping (Reference No. 14.10)

Table 5

Cargo loaded in Australia for overseas by state of shipment and by type of service

1975-76

t o m e s ’0 0 0

L in er c .m e tr e s Ό 0 0

Οί/ier V essels t o m e s c .m e tr e s

’0 0 0 ’00 0

A/1 V essels to n n es c .m e tre s

’0 0 0 ’0 0 0

NSW 1,278 802 19,258 73 20,536 875

Vic. 1,422 680 4,627 39 6,049 718

Qld 637 235 27,883 34 28,521 269

SA 344 141 4,227 143 4,571 285

WA 888 120 87,622 193 88,510 313

Tas. 186 11 3,783 16 3,969 27

NT 11 — 3,966 — 3,977 —

TOTAL 4,766 1,989 151,366 499 156,133 2,488

S o u r c e : A u s t r a l i a n B u r e a u o f S t a t i s t i c s — O v e r s e a s a n d C o a s t a l S h i p p i n g ( R e f e r e n c e N o . 1 4 .1 0 )

145

Table 6

Overseas cargo discharged in Australia by state of discharge and by type of service

1975-76

Liner O th er Vessels A ll Vessels

ton n es W O

c .m e tr e s W O

to n n es W O

c .m e tr e s W O

t o m e s W O

c .m e tr e s W O

NSW 1,270 1,724 4,923 488 6,193 2,212

Vic. 686 2,820 2,278 696 2,964 3,516

Qld 135 420 2,053 207 2,188 627

SA 58 187 2,498 188 2,556 376

WA 176 301 4,605 109 4,781 409

Tas. 68 5 213 12 281 17

NT 15 2 741 11 756 13

TOTAL 2,407 5,459 17,311 1,711 19,718 7,170

Source: Australian Bureau of Statistics—Overseas and Coastal Shipping (Reference No. 14.10)

Table 7

Liner cargo loaded in Australia for overseas by States

1972-73 to 1975-76

1 9 7 2 -7 3 1 9 7 3 - 7 4 1 9 7 4 - 7 5 1 9 7 5 - 7 6

to n n es c. m e tr e s to n n es c. m e tr e s to n n es c. m e tr e s t o m e s c. m e tr e s

Ό 0 0 Ό 0 0 W 0 Ό 0 0 Ό 0 0 W 0 Ό 0 0 Ό 0 0

NSW 1,318 1,203 1,197 1,100 1,484 1,064 1,278 802

Vic. 1,317 1,090 1,137 1,194 1,181 1,002 1,422 680

Qld. 700 118 784 117 679 117 537 235

SA 472 183 441 266 449 158 344 141

WA 812 155 791 119 641 96 8 8 8 120

Tas. 317 28 232 39 192 65 186 11

NT 10 — 7 — 18 — 11 —

TOTAL 4,946 2,776 4,588 2,835 4,643 2,503 4,766 1,989

S o u r c e : A u s t r a l i a n B u r e a u o f S t a t i s t i c s — O v e r s e a s a n d C o a s t a l S h i p p i n g ( R e f e r e n c e N o . 1 4 .1 0 ).

146

Table 8

Liner cargo from overseas discharged in Australia by States 1972-73 to 1975-76

1 9 7 2 - 7 3 1 9 7 3 - 7 4 1 9 7 4 - 7 5 1 9 7 5 - 7 6

to n n es c. m e tr e s to n n es c. m e tr e s to n n es c. m e tr e s to n n es c. m e tr e s

Ό 0 0 Ό 0 0 ’0 0 0 ’0 0 0 Ό 0 0 Ό 0 0 Ό 0 0 Ό 0 0

NSW 799 1,654 1,120 2,077 1,149 1,891 1,270 1,724

Vic. 673 2,262 735 3,038 503 2,875 686 2,820

Qld 142 218 165 367 159 396 135 420

SA 90 112 96 175 94 186 58 187

WA 158 210 183 341 216 325 176 301

Tas. 94 2 91 3 104 3 68 5

NT 8 11 5 11 4 4 15 2

TOTAL 1,965 4,470 2,394 6,012 2,229 5,679 2,407 5,459

Source: Australian Bureau of Statistics—Overseas and Coastal Shipping (Reference No. 14.10).

Table 9

Liner cargo loaded in Australia for overseas by major commodities 1974-75

D e s tin a tio n

M a jo r c o m m o d itie s ( p e r c e n t o f t o ta l lin er c a rg o tonnage)

R e e fe r c a rg o in clu d ed ( p e r c en t o f

t o ta l lin er cargo tonn age)

North America/Hawaii —East Coast m e a t 70.4, manufactures 7.3, minerals 4.2 72.8

—West Coast manufactures 26.6, minerals 24.5, meat 16.5 20.8

Central and South America Europe and USSR

cereal products 31.8, manufactures 14.7, minerals 10.4, grain 9.2, meat 7.5 8.5

—North West/Central Baltic wool 24.9, manufactures 19.1, minerals 17.6, pro­ cessed fruit 7.0, meat 5.5, fresh fruit 5.5

11.1

—Southern minerals 39.6, wool 23.0, hides 21.4, meat 3.2 3.8

Africa

Asia

cereal products 18.0, manufactures 14.0, vehicles, parts and equipment 11.8, grain 6.6 6.6

—Red Sea/Persian Gulf/Southern manufactures 33.0, cereal products 9.9, grain 9.7, dairy products 8.6, meat 6.7, wool 6.0

11.7

—South Eastern manufactures 24.2, dairy products 9.7, chemicals 8.0, grain 6.5, grain products 5.2 8.2 —Eastern

Pacific/New Zealand

minerals 22.8, wool 14.3, cereal products 10.9, man­ ufactures 8.5, meat 5.8, grain 5.8 8.9

—Papua New Guinea grain 27.4, manufactures 19.6, cereal products 8.5, animal food 6.7, sugar 5.1 2.4 —Pacific Islands grain 24.6, manufactures 15.4, petroleum products

7.6, cereal products 7.4

2.6

—New Zealand manufactures 35.7, grain 20.4, gypsum 9.8, chemicals 8.0, vehicles/parts 6.5 0.7

147

A P P E N D IX V

Table 1

Freight rate movements in major liner trades 1971 to 1977 (percentage increase)

1. AUSTRALIA TO UK/EUROPE

D a te E ffe ctiv e

G e n e ra l C a rg o

R e e fe r W o o l

1971 October 15.75 15.75 —

1972 September — — - 8 .0

October 4.0 4.0 —

1973 September — — 4.0

October 4.0 4.0 —

1974 February " --- 9.0 —

September — — 4.0

October 4.5 4.5 —

1975 January 12.5 12.5 —

June 2.5 2.5 —

October 15.0 15.0 —

September — — 25.0

1976 April 17.5 17.5

September — — 25.0

October 10.0 1 0 .0 —

1977 September — — 10.0

October 9.0 9.0 —

148

Table 2

Freight rate movements in major liner trades 1971 to 1977 (percentage increase)

2. AUSTRALIA TO JAPAN

D a te E ffe ctiv e

G e n e ra l C a rg o

R e e fe r W o o l

1971 May(1> 12.5 12.5 —

June — — 5.3

September (Mutton/ Lamb carcasses) — 5.7 ' __

1972 May 15.0 10.0<2)

September — — 5.6

1973 November 6.8 6.8 6.8

1974 November 17.0 17.0 17.0

1975 March 5.0 5.0 5.0

June 5.0 5.0 5.0

November 17.5 — —

1977 January 11.5 11.5 11.5

(1> General/Reefer increase did not apply to eggs, egg pulp and casein which increased 10.0% in the same month. t2) Except mutton carcasses.

149

Freight rate movements in major liner trades 1971 to 1977 (percentage increase)

Table 3

3. AUSTRALIA TO NORTH AMERICA

D a te E ffe c tiv e

G e n e ra l C a rg o

R e e fe r W o o l

1971 September 25.0 25.0 25.0

1972 October 6.5 6.5 6.5

1973 September 4.0 4.0 4.0

1974 September 22.5 22.5 22.5

1975 January 5.0 5.0 5.0

May 5.0 5.0 5.0

November 13.5 13.5

1977 January — 9.5(2) —

February 12.5 12.5(3) 12.5

(lt Except meat to ECNA & WCNA.

<3) Except meat to ECNA, WCNA & except Mexico.

150

Freight rate movements in major liner trades 1971 to 1977 (percentage increase)

Table 4

4. AUSTRALIA TO NEW ZEALAND

D a te E ffe c tiv e

A l l C a rg o

( R o -R o )

1971 October 7.5

1972 March 5.0

1973 July 8.0

1974 July 18.0

1975 June 8.82

1976 January 14.0

July 15.0

1977 January 3.5

July 9.0

MS. Union Company ceased conventional liner operations in 1974, with conventional vessels being now used to carry bulk cargoes only.

As a result BHP has introduced its own vessels carrying steel cargo to New Zealand.

151

A PPEN D IX VI

THE AUSTRALIAN SHIPPERS’ COUNCIL

1 MEMBER ORGANISATIONS AS AT 30 JUNE 1977

Australian Apple and Pear Corporation Australian Bulk Tallow Shippers’ Association Australian Canned Fruits Board Australian Chambers of Commerce Export Council Australian Council of Wool Buyers Australian Dairy Corporation Australian Dried Fruits Control Board Australian Egg Board Australian Floney Board

Australian Manufacturers’ Export Council Australian Meat Board Australian Meat Exporters’ Federal Council Australian Overseas Citrus Exporters’ Association Australian Wine Board Australian Woolgrowers’ and Graziers’ Council Australian Hide, Skin and Leather Exporters Association Iron and Steel Shippers’ Association Metals and Minerals Shippers’ Association of Australia Limited Ricegrowers Co-operative Mills Ltd Sheepskin Export Packers’ Association of Australia The Flour Millers’ Council of Australia The Rice Marketing Board for the State of N.S.W. The Rock Lobster and Prawning Association of Australia Victorian Maltsters’ Association Woolscourers, Carbonisers and Fellmongers Association of Australia Wool Textile Manufacturers of Australia

152

THE AUSTRALIAN SHIPPERS’ COUNCIL

CONSTITUTION

Title 1. The name of the Council formed in Sydney on the 30th day of August, 1972 for the purpose of negotiations with shipowners or other carriers with regard to arrangements for, and the terms and conditions applicable to, the carriage of cargo, whether wholly

or partly by sea, from Australia shall be “THE AUSTRALIAN SHIPPERS’ COUNCIL” .

Definitions 2. In this Constitution unless the contrary intention appears:— “Act" means the Restrictive Trade Practices Act 1971 as may be amended from time to time.

“Council” means The Australian Shippers’ Council. “Chairman” means the Chairman of a Sub-Committee appointed by the Council. “Commodity” means a class of goods of a kind exported from Australia. “Constitution” means the Constitution of the Council.

“Director” means the Director of the Council or, in his absence or until the Director has been appointed, such other person appointed from time to time by the Council, to act for or perform the duties of the Director in a temporary and honorary capacity.

“Member” means a Member of the Council and Membership shall have a corresponding meaning. “Associate Member” means an Associate Member of the Council and Associate Membership shall have a corresponding meaning.

“Motion” includes any amendment to a motion. “President” means the President of the Council. “Producer” means a person who is a producer of goods of a kind exported from Australia.

“Producer Organisation” means an organisation of persons who are Producers of a Commodity. “Representative” means a person appointed by a Member or Associate Member to represent the Member or Associate Member on the Council.

“Resolution” means a resolution of the Council agreed to by not less than two- thirds of the votes of the Representatives present in person or by proxy and entitled to vote on the matter or motion. “Schedule” means the Schedule annexed to this Constitution.

“Shipowner” means a person who carries on the business of the carriage of cargo, either alone or in partnership with any other person or persons, from Australia. “Shipper” means a person who is a shipper of goods of a kind exported from

Australia. “Shipper Organisation” means an organisation of persons who are Shippers of a Commodity. “Trade” means the carriage of cargo, whether wholly or partly by sea, from

Australia.

153

“Treasurer” means the Treasurer of the Council. “Vice-President” means a Vice-President o f the Council. Words in the singular shall include the plural, and words in the plural shall include the singular, unless the contrary intention appears.

Objects 3. The objects for which the Council is established are: (a) to be the shipper body as defined in the Act; (b) to secure efficient, economical and adequate shipping services;

(c) to represent the interests of shippers, producers and commodity groups; (d) to secure the greatest possible co-operation between shippers, producers and commodity groups; (e) to negotiate with shipowners and others with regard to arrangements for, and

the terms and conditions applicable to, overseas cargo shipping; (f) to consult with and secure arrangements between Members and Associate Members upon matters concerned with overseas cargo shipping; (g) to co-operate with, assist and make representations to any Government,

Statutory or Local Authority on any aspect of any law, regulation or enactment concerning overseas cargo shipping; (h) to subscribe to, become a party to and co-operate with, any company, association or organisation, whether incorporated or not, whose objects are,;

in whole or in part, similar to those of the Council; (i) to obtain, accumulate, maintain and assimilate information on any matter relevant to overseas cargo shipping; (j) to investigate, study and make recommendations on technical or other

problems concerning overseas cargo shipping; (k) to do all such other things as the Council may deem incidental or conducive to the attainment of the above objects or any of them.

4. Membership shall be comprised of the organisations listed in the first column of the Schedule and such other persons and organisations as may be admitted to Membership or Associate Membership in accordance with Clause 23 hereof.

The Council 5. The control of the Council shall be vested in the Members and Associate Members and the powers of the Council shall, without limiting the generality thereof, include the power to:

(a) determine matters of policy in the operation of the Council in the achievement of its objects; (b) admit applicants to Membership or Associate Membership; (c) determine the number of Representatives that Members shall be entitled to

appoint to the Council; (d) amend or vary the Constitution; (e) make Rules or By-laws of the Council and vary or amend the same; (f) expel a Member or Associate Member from Membership or Associate

Membership; (g) appoint Sub-Committees; (h) appoint an Executive Committee;

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(i) determine the amount of the annual subscriptions payable by a Member or Associate Member; 0) make levies on Members or Associate Members for the purposes of the Council.

Representation on the Council 6. (a) Each Member shall be entitled to appoint to the Council at least one Representative and such further number of Representatives as the Council shall determine PROVIDED THAT until otherwise determined by the

Council each Member whose name appears in the first column of the Schedule shall appoint to the Council the number of Representatives set against its name in the second Column of the Schedule and PROVIDED FURTHER THAT no Commodity shall be entitled to more than 6 Representatives on the

Council.

(b) The Council shall, in determining the number of Representatives a Member shall appoint to the Council, have regard to the value of freight paid for the Commodity which that Member, or its constituents, produces or ships during the period of the three years for which statistics are available immediately preceding the date on which the determination is made. (c) Where more than one Member represents the same Commodity these

Members may each appoint to the Council a number of individual Representatives which number of Representatives shall, collectively, be proportional to the amount of the Commodity which those Members, or their constituents, produce or ship. (d) In the event that it is not possible to ascertain the value of freight paid for a

particular Commodity the Council may, in determining the number of Representatives that Member shall appoint to the Council, have regard to the percentage of “value by liftings” or “f.o.b. value” or the amount of that Commodity in lieu of the value of freight paid for the Commodity. (e) A Member may at any time, by notice in writing signed by the Member, or a

responsible officer of the Member, and lodged with the Director, request the Council to review the number of Representatives each Member shall appoint to the Council and the Council shall, at a meeting to be held not later than thirty days after the receipt by the Director of the Member’s request, review

the number of Representatives each Member shall appoint to the Council and the Council may at that meeting determine the number of Representatives each Member shall appoint to the Council. (f) If no request is made by a Member in accordance with the last paragraph on or

before the expiration of three years after the date of the formation of the Council, it shall within one month of that date review the number of Representatives each Member shall appoint to the Council and shall at least once in every period of three years thereafter review the number of

Representatives a Member shall appoint to the Council. (g) The determination by the Council of the number of Representatives a Member shall appoint to the Council shall be by Resolution. (h) An Associate Member shall have one Representative on the Council.

Appointment of Representatives 7. (a) The appointment of a Representative to the Council shall be by notice in writing signed by the Member or Associate Member, or a responsible officer of

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the Member or Associate Member, and shall be lodged with the Director prior to the time fixed for the holding of the first meeting of the Council at which it is proposed that the Representative may vote. (b) The revocation of an appointment of a Representative shall be by notice in writing signed by the Member or Associate Member, or a responsible officer of the Member or Associate Member, who made the appointment, and shall be lodged with the Director and shall take effect from the time it is lodged with the Director. 8. (a) There shall be an Executive Committee consisting of the following Officers:

(i) the President; (ii) two Vice-Presidents; (iii) the Treasurer; and (iv) Chairmen and Vice-Chairmen of Sub-Committees. (b) Officers of the Executive Committee other than the President shall be elected

at each Annual General Meeting by the Council from among the Representatives. (c) The President shall be appointed by the Council at each Annual General Meeting PROVIDED THAT where appointed from among the Repre­

sentatives he shall cease to be a Representative of the Member or Associate Member who appointed him and that Member or Associate Member may appoint another Representative to the Council in his place. The President may ex officio attend all meetings held under the auspices of the Council including,’ without affecting the generality of the foregoing, all meetings with Shipping Conferences and Shipping Companies. (d) For the purpose of the election of Representatives to the Executive Committee

the Director shall act as Returning Officer. (e) The nomination of a Representative as an Officer of the Executive Committee: (i) shall be in writing in a form approved by the Council; (ii) shall be signed by at least two Members or Associate Members or one of

each, or their responsible officers, who are eligible to vote; (iii) is invalid unless the written consent of the Representative nominated is endorsed on the form; and (iv) is invalid unless it is lodged with the Director in sufficient time to permit

the inclusion of the nomination in the final Agenda specifying the business to be transacted at the Annual General Meeting at which the nomination is to be determined. .

(1) If the number of Representatives nominated for election to particular offices on the Executive Committee does not exceed the number to be elected the Representatives nominated shall be declared to be duly elected at the Annual General Meeting. (g) If the number of Representatives nominated for election to particular offices

of the Executive Committee exceeds the number to be elected a secret ballot shall be conducted by the Director in a manner to be determined by the Council. (h) Officers of the Executive Committee shall hold office from the Annual General

Meeting at which they are elected until the next ensuing Annual General Meeting and are eligible for re-election. (i) An Officer of the Executive Committee shall not be removed from his office except at a meeting of the Council convened for that purpose.

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(j) An Officer of the Executive Committee other than the President shall vacate his office: (i) if the Member or Associate Member who has appointed him its Representative revokes the appointment;

(ii) if the Member or Associate Member who has appointed him its Representative ceases to be a Member or Associate Member; (iii) if he is absent without leave from three consecutive meetings of the Executive Committee. Subject to sub-clause (b) hereof the President may

only be removed from office by Resolution of the Council. (k) The Executive Committee may grant leave of absence to an Officer of the Executive Committee for a period not exceeding three months. (l) When an Officer of the Executive Committee is granted leave of absence,

ceases to be an Officer of the Executive Committee or is for any reason unable to perform his duties as an Officer of the Executive Committee, the Executive Committee may appoint another Representative to act in his position until a Representative is elected to his position or until the Officer is able to perform

these duties.

Powers of the Executive Committee 9. (a) Overall management of the Council shall be vested in the Executive Committee. (b) The powers and responsibilities of the Executive, unless otherwise designated

by Resolution of the Council, shall be restricted to the making of recommendations to the Council on any matter and the controlling of the administrative and research functions of the Council. (c) A member of the Executive when acting in his capacity as a member shall not

be or be deemed to be the agent of the commodity group which has appointed him to the Council under Clause 7(a) of this Constitution. (d) The Executive Committee shall not act contrary to any decision reached at a General Meeting of the Council but the Executive Committee shall have the

power to: (a) take on lease, or otherwise obtain, any office or building for the purposes of the Council; (b) control the finances of the Council;

(c) authorise payment out of the funds of the Council expenses as shall be properly incurred in the operations of the Council in the achievement of its objects; (d) give to the Director such advice, guidance or instructions it considers

necessary to secure implementation of the Council’s decisions; (e) borrow money for bridging purposes only. The total amount on loan to the Council shall not exceed $20,000 at any one time.

The office of Director 10. (a) The Council shall appoint a Director who shall be a salaried officer of the Council, the terms of appointment and subsequent adjustments to be determined by the Executive of the Council.

Note 1. 9. (e) The Executive Committee shall have the power to borrow money for bridging purposes only. The total amount on loan to the Council shall not exceed $20,000 at any one time.

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(b) Subject to Clause 9 hereof the Director shall: (i) manage the day to day affairs of the Council; (ii) appoint any person whose services may be deemed necessary for the carrying out of the purposes of the Council, at any time to suspend or

discharge that person, and to fix the remuneration (if any) to be paid for the services of that person. (iii) procure legal or other professional advice or assistance as may be necessary to the operation of the Council or the achievement of its

objects;

(iv) convene, in accordance with the Constitution, meetings of the Council and of the Executive Committee; (v) attend all Meetings of the Council, the Executive Committee and of Sub­ committees of the Council and keep minutes of those Meetings; (vi) conduct all correspondence on behalf of the Council and keep copies of

all correspondence sent by him on behalf of the Council; (vii) keep a Register recording the names and addresses of each Member and Associate Member, the number of Representatives each Member is entitled to appoint to the Council, particulars of the Representatives

from time to time appointed to the Council by each Member and Associate Member and the voting entitlement of each Member; (viii) carry out any directions of the Council or of the Executive Committee. (c) The Director shall be the public officer for the Council and shall accept service of all notices directed to or served upon the Council.

Sub-committees 11. (a) The Council may form Sub-committees of not less than three Nominees of Members and/or Associate Members of the Council for such purposes and with such powers and such duties as are consistent with the Objects of the

Council.

(b) A Sub-committee may, on behalf of Members and Associate Members conduct negotiations with regard to arrangements for, and the terms and conditions that are applicable to, the carriage, whether wholly or partly by sea, of cargo from Australia, with Shipowners or other carriers and with such other bodies, groups, authorities or instrumentalities as may be concerned with such carriage of cargo PROVIDED THAT this power shall in no way limit the power of any Member or Associate Member to conduct any negotiations for such carriage on its own behalf. Any resultant agreement reached at such individual Member or Associate Member negotiations shall be notified to the Council within 14 days so that the Council shall have the opportunity to have the matter referred to the Minister for Transport if it considers such action desirable. (c) A Sub-committee appointed to conduct such negotiations shall consist of

Nominees of Members or Associate Members who represent Shippers or Producers in the Trade to which the particular Conference Agreement relates, or in which the particular shipping lines or line operate.

Meetings 12. (a) A n n u a l G e n e r a l M e e tin g s o f th e C o u n c il

(i) There shall be at least one meeting of the Council in each year to be known as the Annual General Meeting.

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(ii) The first Annual General Meeting shall be held at a time on a date and at a place to be fixed by the Executive Committee, being a date not less than ten nor more than fourteen months subsequent to the date of the formation of the Council. (iii) Each Annual General Meeting subsequent to the first Annual General

Meeting shall be held at a time on a date and at a place to be fixed by the Executive Committee, being a date not less than ten nor more than fourteen months subsequent to the previous Annual General Meeting. (iv) Not less than twenty-eight days before each Annual General Meeting

the Director shall post to each Member and Associate Member a notice in a form approved by the Council and signed by the Director which notice shall specify the time, date and place of and embody a draft agenda for the Annual General Meeting. (v) A Member or Associate Member wishing to put forward a matter or

motion for consideration at an Annual General Meeting shall communicate the substance of the matter or the form of the motion to the Director in sufficient time to permit the inclusion of the matter or motion in a final agenda specifying the business to be transacted at the

Annual General Meeting which final agenda shall be posted by the Director to each Member and Associate Member not less than ten days before the date fixed for the holding of the Annual General Meeting. (vi) The non-receipt by a Member or Associate Member of a notice or final

agenda referred to in sub-paragraphs (iv) and (v), respectively, above shall not invalidate the holding of or proceedings at any Annual General Meeting. (vii) At each Annual General Meeting the Council shall, by Resolution

determine the amount of the Annual Subscription to be paid by each Member and Associate Member and the Council shall, in making that determination, estimate the financial requirements of the Council for the ensuing year. (viii) At each Annual General Meeting the Council shall appoint two persons

or a firm having not less than two partners not being Members, Associate Members or Representatives as the Auditors of the Council to hold office for the ensuing year and the Council shall fix the remuneration, if any, to be paid for their services.

(b) G e n e r a l M e e tin g s o f th e C o u n c il

(i) A meeting of the Council, other than an Annual General Meeting of the Council, may, subject to the provisions of the following sub­ paragraphs, be held at any time by the order of either the President, two Members of the Executive Committee, or at the request of not less than

four being Members or Associate Members. (ii) Not less than ten days before each meeting of the Council the Director shall post to each Member and Associate Member a notice in writing signed by the Director which notice shall specify the time, date and

place of and embody a draft agenda for the meeting. (iii) A Member or Associate Member wishing to put forward a matter or motion for consideration at a meeting of the Council shall com­ municate the substance of the matter or the form of the motion to the

Director in sufficient time to permit the inclusion of the matter or

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motion in a final agenda specifying the business to be transacted at the meeting which agenda shall be posted by the Director to each Member or Associate Member not less than five days before the date fixed for the holding of the Meeting. (iv) The non-receipt of a notice or final agenda referred to in sub­

paragraphs (ii) and (iii), respectively, above shall not invalidate the holding of or the proceedings at a meeting of the Council.

(c) M e e t in g s o f th e E x e c u tiv e C o m m itte e

(i) A meeting of the Executive Committee may, subject to the provisions of the following sub-paragraphs, be held at any time by the order of the President, one of the Vice-Presidents or not less than two of the Officers of the Executive Committee. (ii) Prior to a meeting of the Executive Committee the Director shall ensure

that each Officer of the Executive Committee receives a notice in writing in a form approved by the Council signed by the Director which notice shall specify the time, date and place of and embody a draft agenda for the meeting. (iii) An Officer of the Executive Committee wishing to put forward a matter

or motion for consideration at a meeting of the Executive Committee shall communicate the substance of the matter or the form of the motion to the Director in sufficient time to permit the inclusion of the matter or motion in a final agenda specifying the business to be 1 transacted at the Meeting which agenda shall be made available by the Director to each Officer of the Executive Committee prior to the time fixed for the holding of the meeting. (iv) The non-receipt of a notice or final agenda referred to in sub­

paragraphs (ii) and (iii), respectively, above shall not invalidate the holding of or the proceedings at a meeting of the Executive Committee.

(d) M e e t in g s o f S u b - c o m m itte e s

(i) A meeting of a Sub-committee appointed by the Council may, subject to the provisions of the following sub-paragraphs, be held at any time by the order of the Representative appointed as Chairman of that Sub­ committee. (ii) Prior to a meeting of the Sub-committee the Chairman of the Sub­

committee shall ensure that each member of the Sub-committee receives a notice in writing in a form approved by the Council signed by the Chairman, or on his behalf, which notice shall specify the time, date

and place of and embody a draft agenda for the meeting. (iii) A member of a Sub-committee wishing to put forward a matter or motion for consideration at a meeting of a Sub-committee shall communicate the substance of the matter or the form of the motion to

the Chairman in sufficient time to permit the inclusion of the matter or motion in a final agenda specifying the business to be transacted at the meeting which agenda shall be made available by the Chairman to each member of the Sub-committee prior to the time fixed for the holding of the meeting. (iv) A Member or Associate Member may, by notifying the Chairman prior

to a meeting of the Sub-committee, appoint an alternate to his nominated Representative on that Sub-committee.

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(v) The non-receipt of a notice or final agenda referred to in sub­ paragraphs (ii) and (iii), respectively, above shall not invalidate the holding of or the proceedings at a meeting of the Sub-committee.

Proceedings at meetings of the Council 13. (a) A meeting shall be presided over by the President, or in the absence of the President, a Vice-President, or in the absence of a Vice-President, a Representative elected by the Representatives present at the meeting and

entitled to vote. (b) Subject to the provisions of paragraph (c) of this clause there shall be a quorum at a meeting when a majority of the combined total of Members and Associate Members is represented thereat PROVIDED THAT the total votes

entitled to be cast by Representatives present is more than half the voting strength of the Council but not otherwise. (c) If, within thirty minutes of the time appointed for a meeting, a quorum for a meeting does not exist then that meeting shall stand adjourned to a time, being

a time not less than twenty-four hours after the time appointed for the holding of that meeting, and place as the Representatives present at the meeting and entitled to vote shall direct or in the absence of such a direction a time, being a time not less than twenty-four hours after the time appointed for the holding

of that meeting, and place as directed by the President, or in his absence, a Vice-President, or in their absence, the presiding Representative and at such adjourned meeting the Representatives then present and entitled to vote shall

constitute a quorum. (d) A meeting shall proceed in accordance with the final agenda for the Meeting and upon conclusion of the business set forth in that agenda the meeting may proceed to consider any additional business as may be proposed by a

Representative present at the meeting and entitled to vote PROVIDED THAT such additional business shall not include a proposal concerning any of the following matters: (i) the admission of a Member or Associate Member;

(ii) the expulsion of a Member or Associate Member; (iii) the determination of the number of Representatives a Member shall appoint to the Council; (iv) the alteration or variation of the Constitution;

(v) the alteration or variation of any Rules or By-laws of the Council; (vi) the determination of the amount of an annual subscription payable by a Member and/or Associate Member; (vii) the making of a levy on Members and/or Associate Members. (e) The Executive Committee may invite observers, advisers or any other person

to attend a Meeting of the Council, the Executive Committee or any Sub­ committee appointed by the Council. Such observers may by agreement of those present at a meeting and entitled to vote address the meeting upon any matter under consideration at the meeting but shall not be entitled to vote.

Voting at meetings of the Council 14. (a) A Member or Associate Member shall exercise its voting entitlement through the Representative it shall appoint to the Council.

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(b) Subject to paragraph (i) of this clause a Member or Associate Member shall be entitled to one vote on each matter or motion for determination by the Council for each Representative it shall appoint to the Council. (c) A Member who has appointed two or more Representatives to the Council

may, by notice in writing signed by the Member or a responsible officer of the Member and lodged with the Director but not otherwise, cause its voting entitlement to be cast by one Representative designated in that notice. (d) A representative who is not present at a meeting of the Council may vote by proxy appointed by the Member or Associate Member, or the Member or Associate Member who appointed the Representative to the Council may notify the Director prior to the time fixed for the holding of the meeting, of the appointment of an alternate Representative for the purposes of that meeting. (e) At a meeting of the Council the President, or in his absence, the presiding Vice-President, or in his absence, the presiding Representative, shall announce whether any instruments appointing proxies have been received and, if by reason of the number of proxies so appointed, it appears that a decision on a matter or motion by show of hands cannot be reached all matters or motions shall be determined by ballot. (f) If not less than four Representatives present in person at a meeting of the Council request that a matter or motion be decided by ballot the matter or motion shall be so decided. (g) A ballot under paragraph (e) and (f) of this Clause shall be conducted in such , manner as the meeting directs or, in the absence of such a direction, as the President or in his absence, the presiding Vice-President, or in his absence, the presiding Representative, directs. (h) Subject to paragraph (i) of this clause a matter or motion for determination by the Council, other than a matter or motion requiring determination by Resolution of the Council, shall be determined by a majority of the votes of the Representatives present in person or by proxy and entitled to vote and voting. (i) The President shall not have a vote. (j) In the event of an equality of votes on a matter or motion before a meeting of the Council the matter or motion shall be deemed to have been negatived. (k) A declaration by the President, or in his absence, the presiding Vice-President, or in his absence, the presiding Representative, that a matter or motion for determination by the Council has been accepted or rejected shall be prima facie evidence of the fact. .

Voting at meetings of Sub-committees 15. (a) Each member of a Sub-committee appointed to conduct negotiations with regard to arrangements for, and terms and conditions applicable to, the carriage of cargo from Australia in accordance with clause 11(b) hereof shall

be entitled to vote on each matter or motion for determination by the Sub­ committee PROVIDED THAT the voting power of each member of the Sub­ committee shall be determined from time to time by the Sub-committee: (i) in the case of members of Sub-committees appointed by Council

Members (a) having regard to the value of freight paid for the Commodity which that Member, or its constitutents, produces or ships during the

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period of the three years for which statistics are available immediately preceding the date on which the determination is made; or (b) if it is not possible to ascertain the value of freight paid for a

particular Commodity, having regard to the percentage of “value by liftings” or “f.o.b. value” or the amount of that Commodity in lieu of the value of the freight paid for that Commodity; and

PROVIDED FURTHER that where more than one Member repre­ sents the same Commodity on a Sub-committee the aggregate voting power of such Members shall not exceed that to which the Commodity is entitled as determined in accordance with sub-paragraphs (a) and (b)

hereof

(ii) in the case of members of Sub-committees appointed by Associate Members of the Council—having regard to the extent of their interest in the shipping services covered by the Sub-committee. (b) A representative who is not present at a meeting of a Sub-committee may vote

by proxy appointed by the Member or Associate Member. (c) If a member of a Sub-committee present in person at a meeting of a Sub­ committee requests that a matter or motion be decided by ballot, the matter or motion shall be so decided.

(d) A ballot under paragraph (c) of this clause shall be conducted in such manner as the meeting directs or, in the absence of such a direction, as the Chairman, or in his absence, the presiding member of the Sub-committee, directs. (e) A matter or motion for determination by a Sub-committee shall be

determined by a majority of the votes of the members of the Sub-committee present in person and entitled to vote and voting. (f) The member presiding at a meeting of a Sub-committee has a deliberative vote and does not have a casting vote.

(g) In the event of an equality of votes on a matter or motion before a meeting of a Sub-committee the matter or motion shall be deemed to have been negatived. (h) A declaration by the Chairman, or in his absence, the presiding member of the Sub-committee, that a matter or motion for determination by the Sub­

committee has been accepted or rejected shall be prima facie evidence of that fact.

Financial year of the Council 16. The financial year of the Council terminates on the thirtieth day of June in each year.

Property of the Council 17. (a) All property and moneys of the Council shall be vested in the President, Vice­ Presidents and Treasurer for the time being as the Trustees of the Council for the use and benefit of the Members and Associate Members for the time being

of the Council. (b) The Trustees shall deal with or invest the property and moneys of the Council in such a manner as the Council may determine. (c) The Trustees shall open and maintain in the name and on behalf of the

Council an account at a bank as directed by the Executive Committee.

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(d) Moneys shall not be drawn from an account of the Council except by cheque or order signed by any two of the Trustees of the Council or by any one Trustee and the Director or by any one of the foregoing and such other persons as may be authorised by the Council from time to time.

Subscriptions and levies 18. (a) Each Member whose name appears in the first column of the Schedule shall pay to the Treasurer within one month of the date of the formation of the Council by way of a first annual subscription an amount equal to the sum set

against its name in the third column of the Schedule. (b) A Member’s or Associate Member’s annual subscription and annual fees payable by a Member in respect of additional Representatives shall be paid by the Member or Associate Member within one month of the date of the Annual

General Meeting at which the annual subscription is determined by the Council. (c) The Council may, by Resolution but not otherwise, at any time determine an amount to be paid by way of a levy, in addition to the annual subscriptions

payable by the Members and/or Associate Members, for the purposes of the Council and the Council shall, in determining the proportion of the amount of the levy to be paid by each Member or Associate Member, have regard to the number of Representatives appointed to the Council by that Member or Associate Member. .

(d) The proportion of the amount of a levy to be paid by a Member or Associate Member shall be paid by the Member or Associate Member to the Treasurer within the time determined by the Council. (e) A Representative of a Member or Associate Member who does not pay its

annual subscription, or its proportion of the amount of a levy, in accordance with the Constitution shall not be entitled to vote upon any matter or motion at any meeting while such subscription or levy remains unpaid.

Treasurer 19. The Treasurer shall: (a) receive and take charge of all moneys belonging to the Council (b) forthwith upon receipt thereof pay into the account of the Council all moneys

received by him on behalf of the Council (c) make all payments authorised to be made in accordance with the Constitution and any Rules or By-Laws of the Council (d) Keep books and accounts as the Executive Committee directs (e) arrange for the books and accounts of the Council to be audited at the end of

each financial year of the Council (f) furnish to the Executive Committee for presentation at each Annual General Meeting of the Council. (i) a report on the financial position of the Council at the end of the financial

year of the Council immediately preceding each Annual General Meeting (ii) a statement of income and expenditure of the Council for that financial year and (iii) a statement of the assets and liabilities of the Council at the end of that

financial year.

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Auditors 20. (a) The Auditors of the Council shall hold office from the date of their appointment until the next ensuing Annual General Meeting after their appointment and are eligible for re-appointment.

(b) Where an Auditor is unable to perform his duties the Executive Committee shall appoint another person to act as Auditor in his place. (c) The Auditors of the Council shall immediately after the presentation of the Treasurer’s report and statements referred to in Clause 19 hereof

(i) audit the books, accounts and vouchers of the Council and (ii) certify whether in their opinion, the statements of the Treasurer are properly drawn up and are true and fair according to the books and

accounts of the Counc.il and the information furnished to them by the Treasurer or by any Member or Associate Member. (d) The Executive Committee may, at such time as it thinks fit, direct the Auditors of the Council to audit the books, accounts and vouchers of the Council, and

the auditors shall furnish to the Executive Committee a report on the audit.

Annual Report 21. (a) At each Annual General Meeting the Executive Committee shall present a report stating fully the proceedings and activities of the Council during the financial year of the Council immediately preceding the Annual General

Meeting and the Treasurer’s report together with the Auditors’ statement on the books of, accounts of and the finances of the Council during that financial year. (b) Upon adoption of the foregoing report by the Council the Director shall

submit a copy to each Member and Associate Member.

Inspection of books and accounts 22. The books and accounts of the Council shall be open for inspection by the Members and Associate Members of the Council at such places and times, and under such conditions as the Executive Committee shall determine.

Admission to membership/associate membership 23. The procedure for admission of Members and Associate Members other than those listed in the first column of the Schedule shall be as follows: (a) The applicant for Membership or Associate Membership shall lodge with the

Director (i) a written application stating the name and address of the applicant, particulars of the nature and extent of the applicant’s interest in overseas cargo shipping, and any other information as the Council may

from time to time require and (ii) an undertaking, in a form acceptable to the Council, that the applicant will, if admitted to Membership or Associate Membership, be bound by the Constitution and any Rules or By-laws of the Council. (b) The consideration of an application for Membership or Associate Member­

ship will be placed on the agenda of a meeting of the Council to be held not

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later than 30 days after the receipt by the Director of the application for Membership or Associate Membership and relevant particulars concerning the applicant shall be circulated to Members and Associate Members with the notice convening that meeting. (c) At a meeting at which an application for Membership or Associate

Membership is considered the Council shall (i) by Resolution determine whether the applicant is to be admitted to Membership or Associate Membership. and shall if the applicant is admitted to Membership or Associate Membership

(ii) by Resolution determine, in accordance with Clause 6 hereof, the number of Representatives which the applicant shall be entitled to appoint to the Council (iii) by Resolution determine, in accordance with sub-paragraph (vii) of

paragraph (a) of Clause 12 hereof, the amount of the subscription payable by that Member or Associate Member from the date of its admission to the date of the next succeeding Annual General Meeting.

Resignation of membership/associate membership 24. A Member or Associate Member shall, upon giving not less than three months’ notice in writing signed by the Member or Associate Member or a responsible officer of the Member or Associate Member to the Director of its intention to withdraw from ' Membership or Associate Membership, be entitled to withdraw from Membership or Associate Membership but shall be liable to pay to the Council all moneys as may be

owed to the Council by the Member or Associate Member to the date of its withdrawal from Membership or Associate Membership.

Expulsion 25. (a) If, by Resolution it is determined that a Member or Associate Member has infringed the Constitution or any of the Rules or By-laws of the Council or has acted inconsistently with its position as a Member or Associate Member or

has acted so as to bring discredit upon the Council or has otherwise acted in a manner inimical to the interests and objects of the Council and if by Resolution it is determined that the interests of the Council require that that Member or Associate Member shall cease to be a Member or Associate Member, the Council may, by notice in writing signed by the Director and served upon that Member or Associate Member by the Director but not otherwise request that Member or Associate Member to forthwith resign from the Council. (b) A Member or Associate Member requested to resign in accordance with

paragraph (a) of this Clause may by notice in writing signed by the Member or Associate Member, or a responsible officer of the Member or Associate Member but not otherwise, forthwith resign its Membership or Associate

Membership but shall be liable to pay to the Council all moneys as may be owed to the Council by the Member or Associate Member to the date of its resignation. (c) If within ten days of the service on a Member or Associate Member of a notice requesting its resignation that Member or Associate Member does not tender its resignation a General Meeting of the Council shall be called for the purpose

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of considering the question of the expulsion of that Member or Associate Member. (d) At a General Meeting of the Council called for the purpose of considering the matter of the expulsion of a Member or Associate Member the Member or

Associate Member whose expulsion is under consideration shall be allowed to offer an explanation either orally through the Representative of such Member or Associate Member, or in writing signed by the Member or Associate Member or a responsible officer of the Member or Associate Member, of the

conduct complained of and the Council may by Resolution, but not otherwise, determine whether that Member or Associate Member shall be expelled from Membership or Associate Membership and if the Council does

determine that the Member or Associate Member shall be expelled that Member or Associate Member shall forthwith cease to be a Member or Associate Member but shall be liable to pay to the Council all moneys as may be owed to the Council by the Member or Associate Member to the date of its

expulsion.

Principal office 26. The principal office of the Council shall be situated at a place to be determined by the Executive Committee.

Amendment of the Constitution 27. The Consitution may be amended by a determinaton by way of Resolution of the Council.

Dissolution 28. (a) At a meeting of the Council called for the purpose of dissolving the Council the Council may by Resolution, but not otherwise, determine to dissolve the Council.

(b) Upon such determination the Council shall direct the determination and adjustment of outstanding charges amongst the Members and Associate Members, the manner in which the property and assets of the Council are to be realised, the payment of all debts and liabilities of the Council, and the distribution of any surplus in such manner as the meeting may determine. (c) Immediately such directions shall have been executed, the Director shall

report the same to the President and to the Members and Associate Members and thereupon the Council shall become dissolved.

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SCHEDULE TO THE CONSTITUTION OF THE AUSTRALIAN SHIPPERS’ COUNCIL

No of Represen- Subsen tatives tion

$

Australian Apple and Pear Board 1 750

Australian Apple and Pear Shippers’ Association 1 750

Australian Bulk Tallow Shippers’ Association 1 750

Australian Canned Fruits Board 2 1,250

Australian Canners’ Association 1 750

Australian Chambers of Commerce Export Council 2 1,250

Australian Citrus Growers’ Federation 1 750

Australian Council of Wool Buyers 2 1,250

Australian Dairy Produce Board 3 1,750

Australian Dried Fruits Control Board 1 750

Australian Egg Board 1 750

Australian Honey Board 1 750

Australian Manufacturers’ Export Council 2 1,250

Australian Meat Board 1 750

Australian Meat Exporters’ Federal Council 3 1,750

Australian Overseas Citrus Exporters’ Association 1 750

Australian Wine Board 1 750

Australian Woolgrowers’ and Graziers’ Council 2 1,250

Australian Wool and Meat Producers’ Federation 2 1,250

Federated Hide Merchants’ Association of Australia 1 750

Iron and Steel Shippers’ Association 2 1,250

Metals and Minerals Shippers Association of Australia Limited 2 1,250

Ricegrowers Co-operative Mills Limited 1 750

The Rice Marketing Board for the State of New South Wales 1 750

Sheepskin Export Packers Association of Australia 1 . 750

Woolscourers, Carbonisers and Fellmongers’ Federation of Australia 1 750

Wool Textile Manufacturers of Australia 1 750

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APPENDIX VII

F L A G P R O T E C T IO N L E G IS L A T IO N

1. United Kingdom Legislation Legislation protecting the shipping and trading interests of British flag vessels is contained in Part III of the Merchant Shipping Act 1974 and Schedule 4 to that Act.

M e r c h a n t S h ip p in g A c t 1974 PART III

P R O T E C T IO N O F S H IP P IN G A N D T R A D IN G IN T E R E ST S

Foreign action affecting shipping 14.— (1) The Secretary of State may exercise the powers conferred by this section if he is satisfied that a foreign government, or any agency or authority of a foreign government, have adopted, or propose to adopt, measures or practices

concerning or affecting the carriage of goods by sea which— (a) are damaging or threaten to damage the shipping or trading interests of the United Kingdom, or (b) are damaging or threaten to damage the shipping or trading interests of

another country, and the Secretary of State is satisfied that action under this section would be in fulfilment of the international obligations of Her Majesty’s Government to that other country. (2) The Secretary of State may by order make provisions for requiring persons in the United Kingdom carrying on any trade or business to provide the Secretary of State with all such information as he may require for the purpose of enabling him— (a) to determine what further action to take under this section, and (b) to ensure compliance with any orders or directions made or given under

this Section.

(3) The Secretary of State may by order provide for— (a) regulating the carriage of goods in ships and the rates which may or must be charged for carrying them; (b) regulating the admission and departure of ships to and from United

Kingdom ports, the cargoes they may carry, and the loading or unloading of cargoes; (c) regulating the making and implementation of agreements (including charter-parties) whose subject matter relates directly or indirectly to the

carriage of goods by sea, and requiring such agreements to be subject to the Secretary of State’s approval in such cases as he may specify; (d) imposing charges in respect of ships which enter United Kingdom ports to load or unload cargo. (4) In a case falling within subsection (l)(a) above, an order under subsection (3)

above shall specify the measures or practices which in the opinion of the Secretary of State are damaging or threaten to damage shipping or trading interests of the United Kingdom. (5) An order under this section may authorise the Secretary of State to give

directions to any person for the purpose of the order:

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Provided that this subsection shall not apply for the purpose of recovering charges imposed under subsection (3)(d) above. (6) Any order or direction made or given under this section— (a) may be either general or special, and may be subject to such conditions

or exceptions as the Secretary of State specifies (including conditions and exceptions operating by reference to the giving or withholding of his approval for any course of action); (b) may be in terms that require compliance either generally or only in

specified cases; (c) may be varied or revoked by a subsequent order, or as the case may be, a subsequent direction, so made or given, and an order made pursuant to this section shall be contained in a statutory instrument. (7) Before the Secretary of State makes an order under this section he shall consult such representatives of the shipping or trading interests of the United Kingdom, and such other persons, as appear to him appropriate. (8) If a person discloses any information which has been furnished to or obtained by him under this section, or in connection with the execution of this section, he shall, unless the disclosure is made—

(a) with the consent of the person from whom the information was obtained, or (b) in connection with the execution of this section, or (c) for the purposes of any legal proceedings arising out of this section or of

any report of such proceedings, be liable on summary conviction to a fine not exceeding £400. (9) A person who— (a) refuses or wilfully neglects to furnish any information which he is

required to furnish under this section, or (b) in furnishing any such information makes any statement which he knows to be false in a material particular, or recklessly makes any statement which is false in a material particular,

shall be liable on summary conviction to a fine not exceeding £400. (10) A person who wilfully contravenes or fails to comply with any provision of an order or direction made or given pursuant to this section, other than a provision requiring him to give any information, shall be liable—

(a) on summary conviction to a fine of not more than £5,000; (b) on conviction on indictment to a fine; and where the order or direction requires anything to be done, or not to be done, by, to or on a ship, and the requirement is not complied with, the owner and master of the ship are each to be regarded as wilfully failing to comply, without

prejudice to the liability of anyone else. (11) In this section “foreign government” means the government of any country outside the United Kingdom; and references to ships are to ships of any registration. (12) Schedule 4 to this Act shall have effect for supplementing this section, which in that Schedule is called “the principal section".

Parliamentary control of orders under Part III 15.—(1) No order shall be made in exercise of the powers conferred by subsection (3) of the last preceding section unless—

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(a) a draft has been approved by resolution of each House of Parliament, or (b) it is declared in the order that it appears to the Secretary of State that by reason of urgency it is necessary to make the order without a draft having been so approved. (2) An order made in exercise of the powers conferred by the said subsection (3) without a draft having been approved by resolution of each House of Parliament

shall cease to have effect at the expiration of a period of 28 days beginning with the date on which it was made unless before the expiration of that period it has been approved by resolution of each House of Parliament, but without prejudice to anything previously done, or to the making of a new order.

In reckoning for the purposes of this subsection any period of 28 days, no account shall be taken of any period during which Parliament is dissolved or prorogued or during which both Houses are adjourned for more than four days. (3) An order under the last preceding section which is not made in exercise of the

powers conferred by subsection (3) of that section shall be subject to annulment in pursuance of a resolution of either House of Parliament. (4) If an order under that section recites that it is not made in exercise of the powers conferred by the said subsection (3), the recital shall be conclusive.

SC H E D U L E 4

P R O T E C T IO N O F S H IP P IN G A N D T R A D IN G IN T E R E ST S

Customs Powers 1. — (1) An order made under the principal section with the consent of the Commissioners of Customs and Excise may provide for the enforcement and execution of any order or direction under the principal section by officers of

customs and excise. (2) Officers of customs and excise acting under any provisions made under sub­ paragraph (1) above shall have power to enter any premises or vessel. (3) Section 53 of the Customs and Excise Act 1952 (power to refuse or cancel

clearance of ship or aircraft) shall apply as in the principal section and this Schedule were contained in that Act.

Orders imposing charges 2. — (1) An order under subsection (3)(d) of the principal section— (a) may apply to ships of any description specified in the order, and may apply in particular to ships registered in a specified country, or ships

carrying specified goods or cargoes, and (b) may contain such provisions as appear to the Secretary of State expedient to enable the Commissioners of Customs and Excise to collect any charge imposed by the order, and (c) may apply any of the provisions of the customs Acts which relate to

duties of customs, subject to any modifications or exceptions specified in the order. (2) The charge so imposed may be a fixed amount, or may be an amount depending on the tonnage of the ship. (3) Any such charge shall be payable to the Secretary of State.

171

Criminal proceedings 3. —A person shall not be guilty of an offence against any provision contained in or having effect under the principal section or this Schedule by reason only of something done by that person wholly outside the area of the United Kingdom unless that person is a British subject or a company incorporated under the law of any part of the United Kingdom.

Interpretation 4. —In the principal section “port” includes an off-shore terminal, and references to entering or leaving a port shall include references to using or ceasing to use an off-shore terminal.

2. United States Legislation United States legislation makes provision in Section 14 and 14a of the Shipping Act 1916 for the protection of U.S. flag vessels from discriminatory actions by foreign shipowners. Protection of U.S. shipping from actions by foreign governments is contained in Section 26 of the Act.

S h ip p in g A c t 1916

S e c tio n 1 4 . That no common carrier by water shall, directly or indirectly, in respect to the transportation by water of passengers or property between a port of a State, Territory, District, or possession of the United States and any other such port or a port of a foreign country—

First. Pay, or allow, or enter into any combination, agreement, or understanding, express or implied, to pay or allow a deferred rebate to any shipper. The term “deferred rebate” in this Act means a return of any portion of the freight money by a carrier to any shipper as a consideration for the giving of all or any portion of his shipments to the same or any other carrier, or for any other purpose, the payment, of which is deferred beyond the completion of the service for which it is paid, and is made only if, during both the period for which computed and the period of deferment, the shipper

has compiled with the terms of the rebate agreement or arrangement.

Second. Use of a fighting ship either separately or in conjunction with any other carrier, through agreement or otherwise. The term “fighting ship” in this Act means a vessel used in a particular trade by a carrier or group of carriers for the purpose of excluding, preventing, or reducing competition by driving another carrier out of said trade.

Third. Retaliate against any shipper by refusing, or threatening to refuse, space accommodations when such are available, or resort to other discriminating or unfair methods, because such shipper has patronised any other carrier or has filed a complaint charging unfair treatment, or for any other reason.

Fourth. Make any unfair or unjustly discriminatory contract with any shipper based on the volume of freight offered, or unfairly treat or unjustly discriminate against any shipper in the matter of (a) cargo space accommodations or other facilities, due regard being had for the proper loading of the vessel and the available tonnage; (b) the loading and landing of freight in proper condition; or (c) the adjustment and settlement

of claims.

Any carrier who violates any provision of this section shall be guilty of a misdemeanor punishable by a fine of not more than $25,000 for each offence: Provided, That nothing in this section or elsewhere in this Act, shall be construed or applied to

172

forbid or make unlawful any dual rate contract arrangement in use by the members of a conference on May 19, 1958, which conference is organised under an agreement approved under section 15 of this Act by the regulatory body administering this Act,

unless and until such regulatory body disapproves, cancels, or modifies such arrangement in accordance with the standards set forth in section 15 of this Act. The term “dual rate contract arrangement” as used herein means a practice whereby a conference establishes tariffs of rates at two levels the lower of which will be charged to

merchants who agree to ship their cargoes on vessels of members of the conference only and the higher of which shall be charged to merchants who do not so agree.

S e c tio n 1 4 a . The board upon its own initiative may, or upon complaint shall, after due notice to all parties in interest and hearing, determine whether any person, not a citizen of the United States and engaged in transportation by water of passengers or property—

(1) Has violated any provision of section 14, or (2) Is a party to any combination, agreement, or understanding, express or implied, that involves in respect to transportation of passengers or property between foreign ports, deferred rebates or any other unfair practice designated in section 14,

and that excludes from admission upon equal terms with all other parties thereto, a common carrier by water which is a citizen of the United States and which has applied for such admission. If the board determines that any such person has violated any such provision or is a party to any such combination, agreement, or understanding, the board shall

thereupon certify such fact to the Secretary of Commerce. The Secretary shall thereafter refuse such person the right of entry for any ship owned or operated by him or by any carrier directly or indirectly controlled by him, into any port of the United States, or any Territory, District, or possession thereof, until the board certifies that the violation has ceased or such combination, agreement, or understanding has been

terminated.

S e c tio n 2 6 . The board shall have power, and it shall be its duty whenever complaint shall be made to it, to investigate the action of any foreign Government with respect to the privileges afforded and burdens imposed upon vessels of the United States engaged in foreign trade whenever it shall appear that the laws, regulations, or practices of any

foreign Government operate in such a manner that vessels of the United States are not accorded equal privileges in foreign trade with vessels of such foreign countries or vessles of other foreign countries, either in trade to or from the ports of such foreign country of passengers or goods intended for shipment or transportation in such vessels

of the United States, either to or from ports of such foreign country or to or from ports of other foreign countries. It shall be the duty of the board to report the results of its investigation to the President with its recommendations and the President is hereby authorised and empowered to secure by diplomatic action equal privileges for vessels

of the United States engaged in such foreign trade. And if by such diplomatic action the President shall be unable to secure such equal privileges then the President shall advise Congress as to the facts and his conclusions by a special message, if deemed important in the public interest, in order that proper action may be taken thereon.

3. Japanese Legislation Law on Special Measures Against Unfavorable Treatment to Japanese Oceango­ ing Ship Operators by Foreign Governments and Others (Law No. 60 June 1, 1977).

Article 1. The purpose of this law is, when the interests of Japanese oceangoing ship operators are considerably harmed by unfavorable treatment by any foreign

173

government and others, to enable such Japanese ocean-going ship operators to engage in their business activities under equal conditions of competition with foreign oceangoing ship operators by taking special measures to cope with such situation and thereby to contribute to the sound development of the Japanese oceangoing ship operating business. Article 2. The terms listed below shall be construed in this law as defined below.

1) “Ship operating business” shall refer to “ship operating business” as defined in Paragraph 2, Article 2, the Maritime Transportation Law (Law No. 187 of 1949). 2) “Oceangoing ship operating business” shall refer to any ship operating business performed between any Japanese port and any port outside Japan or between any ports outside Japan.

3) “Japanese oceangoing ship operator” shall refer to any juridical person or other organisation established under Japanese law, or any individual of Japanese nationality engaged in oceangoing ship operating business. 4) “Foreign oceangoing ship operator” shall refer to any foreign government, any foreign public body and others, any juridical person or other organisation established under foreign law, or any individual of foreign nationality engaged in oceangoing ship operating business.

5) “Shipping agency business” shall refer to “shipping agency business” as defined in Paragraph 10, Article 2, the Maritime Transportation Law.

Article 3. When Japanese oceangoing ship operators are treated less favorably, as the result of any of the following measures taken by any foreign government, foreign public body and others, than foreign oceangoing ship operators of its own country (if such measure is taken by a foreign public body and others, the country to which it belongs) (hereinafter called the oceangoing ship operators of the foreign country concerned), causing considerable harm to Japanese oceangoing ship operators, the

Minister for Transport may, if he finds it necessary to cope with such situation, notify the oceangoing ship operators of the foreign country concerned that he may order any countermeasure under paragraph 1, Article 4 unless the said situation ceases to exist within a specified period not shorter than six months:

1) To require shippers to utilise the transportation service of foreign oceangoing ship operators with respect to cargo transport between a foreign country and Japan. 2) To require Japanese oceangoing ship operators to conclude an agreement providing for favorable treatment to foreign oceangoing ship operators with respect to the cargo referred to sub-paragraph 1 or

3) To take other measures than those referred to in sub-paragraphs 1 and 2, the scope of which shall be specified by the Cabinet order, that eventually adversely affect the competitiveness of oceangoing ship operating business conducted by Japanese oceangoing ship operators. 2. The Minister for Transport, after having made any notification referred to in paragraph 1, should make a public announcement of an outline of the situation

referred to in paragraph 1, the names of the oceangoing ship operators of the foreign country concerned to whom the notification was given and the contents of the said notification. In such an instance, the Minister for Transport should, as required by the ordinance of the Ministry of Transport, take the necessary measures to make the contents of the public announcement known to the parties engaged in shipping agency

business, shippers utilising services of the oceangoing ship operating business and other parties concerned, specified by the ordinance of the Ministry of Transport. 3. The Minister for Transport, when he finds that the situation referred to in paragraph 1 has ceased to exist, should make a public announcement to that effect, and

174

notify the oceangoing ship operators of the foreign country concerned, to whom a notification referred to in paragraph 1 was given, that he no longer will order any countermeasure under paragraph 1, Article 4.

4. The provisions of the latter part of paragraph 2 shall apply mutatis mutandis to the public announcement made under paragraph 3.

Article 4. The Minister for Transport, when the situation referred to in paragraph 1, Article 3 has not ceased to exist even after the lapse of the period of time specified in the notification thereunder, may order any of the following countermeasures against the oceangoing ship operators of the foreign country concerned to whom the notification was given:

1) To restrict or prohibit, for a specified period, entering Japanese ports of ships used in oceangoing ship operating business conducted by the oceangoing ship operators of the foreign country concerned, and 2) To restrict or prohibit, for a specified period, loading or unloading of cargo in Japan

of the ships referred to in sub-paragraph 1.

2. An order referred to in paragraph 1 should be issued, with due care not to exceed the extent necessary for coping with the situation referred to in paragraph 1, Article 3 and to minimize the effect of the order upon the national economy.

3. The Minister for Transport may hear the parties concerned, who are specified by the ordinance of the Ministry of Transport referred to in the latter part of paragraph 2, Article 3, regarding the relevant circumstances when he finds it necessary to do so in issuing order referred to in paragraph 1.

4. The provisions of paragraph 2, Article 3 shall apply mutatis mutandis to the order issued under paragraph 1.

5. The Minister for Transport, when he finds the situation referred to in paragraph 1, Article 3 has ceased to exist, should make a public announcement to that effect, and withdraw his order referred to in paragraph 1.

6. The provision of the latter part of paragraph 2, Article 3, shall apply mutatis mutandis to the public announcement made under paragraph 5.

Article 5. The Minister for Transport, when he intends to issue notification referred to in paragraph 1, Article 3 or order referred to in paragraph 1, Article 4, should consult in advance with the heads of other administrative authorities concerned.

Article 6. The Minister for Transport may, within the requirements for the implementation of this law, require parties engaged in oceangoing ship operating business or parties engaged in shipping agency business in connection with oceangoing ship operating business to submit reports on their business activities and/or have

officials of the Ministry of Transport enter the offices, other premises and/or ships of oceangoing ship operators of the foreign country concerned, to whom a notification referred to in paragraph 1, Article 3 has been given, or of parties engaged in shipping agency business in connection with the oceangoing ship operating business conducted by such oceangoing ship operators of the foreign country concerned and inspect their books, documents and other objects.

2. Any official who makes direct inspection referred to in paragraph 1 should carry, and show to the parties concerned, a certificate of identification.

3. The authority to make direct inspection referred to in paragraph 1 should not be construed as approved for the purpose of investigation of criminal offence.

175

Article 7. Necessary procedures and other matters for implementation of this law, except those prescribed in this law, shall be prescribed by the ordinance of the Ministry of Transport.

Article 8. Any party who acts against any order in paragraph 1, Article 4 shall be subject to penal servitude for a period not exceeding one year or a penalty not exceeding Y5,000,000.

Article 9. Any party who fails to submit a report, or submits a false report, as required by paragraph 1, Article 6 or who refuses, obstructs or evades inspection required thereby, shall be subject to a penalty not exceeding Y 100,000.

Article 10. When the representative of any juridical person (which includes any organisation other than juridical person having an appointed representative or manager in this paragraph) or any agent, employee or any other person in the service of

any juridical or natural person commits, in performance of the business of such juridical or natural person, any action in violation of either of the Articles 8 and 9, the juridical or natural person shall be subject to a penalty under the applicable article other than that the person who has directly committed such action shall be subject to a

penalty imposed by this law.

2. When an organisation other than juridical person is subject to any penalty referred to in paragraph 1, the representative or manager thereof shall represent such organisation in the litigation, and the provisions of the law concerning criminal litigation against juridical persons shall apply mutatis mutandis to such penalty.

Supplementary Provisions 1. This law shall come into force on a day prescribed by the Cabinet order not later than three months from the date of promulgation of the law.

2. Part of the Ministry of Transport Law (Law No. 157 of 1949) shall be amended as follows: In paragraph 1, Article 4, sub-paragraph 15-2-3 shall be altered to sub-paragraph 15-2-4, sub-paragraph 15-2-2 to sub-paragraph 15-2-3, and sub-paragraph 15-2 to sub­ paragraph 15-2-2, and the following sub-paragraph shall be added after sub­

paragraph 15, 15-2 To issue necessary order for coping with unfavourable treatment to Japanese oceangoing ship operators by any foreign government and others.

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APPENDIX VIII

UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT

Geneva

UNITED NATIONS

CONFERENCE OF PLENIPOTENTIARIES ON A CODE OF CONDUCT FOR LINER CONFERENCES

Held at Geneva from 12 November to 15 December 1973 (first part) and from 11 March to 6 April 1974 (second part)

Volume II

Final Act (including the Convention and resolutions) and tonnage requirements

UNITED NATIONS

NEW YORK, 1975

177

NOTE

Symbols of United Nations documents are composed of capital letters combined with figures. Mention of such a symbol indicates a reference to a United Nations document.

For the reports and other documents of the first and second parts of the Conference, as well as information on organizational matters, see U n ite d N a tio n s C o n fe r e n c e o f P le n ip o te n tia r ie s o n a C o d e o f C o n d u c t f o r L in e r C o n fe r e n c e s , vol. 1,

R e p o r ts a n d O th e r D o c u m e n ts (United Nations publication, Sales No. E.75.II.D.11).

For the report of the Preparatory Committee on its first and second sessions, see TD/CODE/1 and TD/CODE/2 and Corr.2, respectively.

178

C O N T E N T S

PART ONE

P a g e

Final Act and a n n e x e s ...............................................................................................180

Final Act of the United Nations Conference of Plenipotentiaries on a Code of Conduct for Liner C o n fe re n c e s .......................................................................... 182

A n n e x I. Convention on a Code of Conduct for Liner Conferences. . . . 185

A n n e x to th e C o n v e n tio n : Model rules of procedure for international mandatory c o n c ilia tio n ...............................................................................209

A n n e x II. Resolutions adopted by the C onferen ce.................................................212

1. Completion of the work of the Conference.............................................212

A n n e x to r e s o lu tio n 1: Principles in regard to the settlement of some fundamental issues before the United Nations Conference of Plenipot­ entiaries on a Code of Conduct for Liner Conferences.............................. 214

2. Non-conference shipping lines.....................................................................215

3. Local conciliation.........................................................................................215

PART TWO

Tonnage req u irem e n ts.............................................................................................. 216

179

P a rt one

F IN A L A C T A N D A N N EX ES*

C O N T E N T S

Page

Final Act of the United Nations Conference of Plenipotentiaries on a Code of Conduct for Liner Conferences, held at the United Nations Office at Geneva, from 12 November to 15 December 1973 and from 11 March to 6 April 1974 . 182

A N N EX I ' 1

Convention on a Code of Conduct for Liner C o n fe re n c e s .............................. 185

Objectives and principles................................... . .............................................185

Chapter I. D e f in itio n s .............................................................................................. 185

II. Relations among member lin e s..................................................................186

III. Relations with s h ip p e r s ............................................................................190

IV. Freight r a te s ................................................................................................... 193

V. Other m a t t e r s .............................................................................................197

VI. Provisions and machinery for settlement of disputes................................. 199

A. General provisions.................................................................................... 199

B. International mandatory conciliation......................................................201

C. Institutional m a c h in e r y ......................................................................... 206

VII. Final clauses............................................................... 207

A n n e x to th e C o n v e n tio n : Model rules of procedure for international mandatory

conciliation......................................................................................................... 209

*Originally issued as TD/CODE/11/Rev.i and Rev.l/Corr.l.

180

A N N E X I I

Resolutions adopted by the C o n f e r e n c e .................................................................212

1. Completion of the work of the Conference............................................. 212

A n n e x to r e s o lu tio n 1: Principles in regard to the settlement of some fundamental issues before the United Nations Conference of Plenipotentiaries on a Code of Conduct for Liner Conferences . . 214

2. Non-conference shipping lines..................................................................... 215

3. Local conciliation......................................................................................... 215

181

FINAL ACT OF THE UNITED NATIONS CONFERENCE OF PLENIPOTENTIARIES ON A CODE OF CONDUCT FOR LINER CONFERENCES, HELD AT THE UNITED NATIONS OFFICE AT GENEVA, FROM 12 NOVEMBER TO 15 DECEMBER 1973 AND FROM 11 MARCH TO

6 APRIL 1974

1. The General Assembly of the United Nations, by resolution 3035 (XXVII) of 19 December 1972, requested the Secretary-General of the United Nations to convene, as early as possible in 1973, under the auspices of the United Nations Conference on Trade and Development, a conference of plenipotentiaries to consider and adopt a convention or any other multilateral legally binding instrument on a code of conduct for liner conferences.

2. The United Nations Conference of Plenipotentiaries on a Code of Conduct for Liner Conferences was convened at the United Nations Office at Geneva. The first part of the Conference was held from 12 November to 15 December 1973 and the second

part from 11 March to 6 April 1974.

3. The Governments of the following 79 States members of UNCTAD participated in both parts of the Conference: Algeria, Argentina, Australia, Bangladesh, Belgium, Bolivia, Brazil, Bulgaria, Burundi, Canada, Chile, China, Columbia, Cuba, Czechos­ lovakia, Democratic Yemen, Denmark, Ecuador, Egypt, El Salvador, Finland, France, Gabon, German Democratic Republic, Germany, Federal Republic of, Ghana, Greece, Guatemala, Honduras, Hungary, India, Indonesia, Iraq, Italy, Ivory Coast, Jamaica, Japan, Khmer Republic, Liberia, Libyan Arab Republic, Madagas-1 car, Malaysia, Mexico, Morocco, Netherlands, New Zealand, Nicaragua, Nigeria,

Norway, Pakistan, Panama, Peru, Philippines, Poland, Republic of Korea, Republic of Viet-Nam, Romania, Saudi Arabia, Senegal, Singapore, Spain, Sri Lanka, Sudan, Sweden, Switzerland, Syrian Arab Republic, Thailand, Trinidad and Tobago, Tunisia, Turkey, Ukrainian Soviet Socialist Republic, Union of Soviet Socialist Republics, United Arab Emirates, United Kingdom of Great Britain and Northern Ireland, United States of America, Uruguay, Venezuela, Yugoslavia, Zaire.

4. The Governments of the following four States members of UNCTAD participated only in the first part of the Conference: Afghanistan, Costa Rica, Ethiopia, Uganda.

5. The Governments of the following nine States members of UNCTAD participated only in the second part of the Conference: Bhutan, Chad, Guinea, Guyana, Iran, Kenya, Kuwait, United Republic of Cameroon, United Republic of Tanzania.

6. The Government of the following State member of UNCTAD was represented by an observer at both parts of the Conference: Austria. .

7. The Governments of the following States members of UNCTAD were represented by observers at only the first part of the Conference: Iran, Kuwait.

8. The Economic Commission for Africa was represented at the first part of the Conference.

9. A representative of the following specialised agency participated in both parts of the Conference: International Monetary Fund.

10. A representative of the following specialised agency participated only in the first part of the Conference: Food and Agriculture Organization of the United Nations.

11. The following intergovernmental organisations participated in both parts of the Conference as observers: Commonwealth Secretariat, East African Community, European Economic Community, Organisation for Economic Co-operation and Development, Organization of African Unity, Organization of American States.

182

12. The following non-governmental organisations were represented by observers at both parts of the Conference: Baltic and International Maritime Conference, Council of European and Japanese National Shipowners’ Associations (formerly Committee of European National Shipowners’ Associations), International Air Transport Association, International Chamber of Commerce, International Federation of

Forwarding Agents’ Associations, International Shipowners’ Association, National Shippers’ Councils of Europe—Plenary.

13. The following non-governmental organisations were represented by observers at only the second part of the Conference: International Association of Ports and Harbours, International Cargo Handling Co-ordination Association.

14. The Conference, at its first part, elected Mr. C. P. Srivastava (India) as President of the Conference. On his assumption of the office of Secretary-General of the Inter­ Governmental Maritime Consultative Organisation on 1 January 1974 the Con­ ference, at its second part, decided that Mr. Srivastava should continue to preside, as an independent President of the Conference.

15. The Conference, at its first part, elected the following Vice-Presidents of the Conference: Mr. I. Averin (Union of Soviet Socialist Republics), Mr. B. O. Awokoya (Nigeria), Mr. G. Breuer (Federal Republic of Germany), Mr. P. Daza Valenzuela (Chile), Mr. J. de Groot (Netherlands), Mr. S. Kembukuswa ne Nlaza (Zaire), Mr. G. Negash (Ethiopia), Mr. R. J. Polaschek (New Zealand), Mr. M. Reed (Norway), Mr.

R. E. Reynolds (Canada), Mr. J. Ruzicka (Czechoslovakia), Mr. M. Shanmuganathan (Sri Lanka), Mr. H. Umar (Indonesia), Mr. H. S. Walker (Jamaica).

16. The Conference, at its second part, elected Mr. K. W. McQueen (United Kingdom of Great Britain and Northern Ireland) to replace Mr. M. Reed (Norway), who was not present at the second part of the Conference.

17. The Conference elected Mr. E. J. Antoun (United States of America) as Rapporteur.

18. The following committees were established by the Conference:

G e n e r a l C o m m itte e

Chairman: The President of the Conference Members; The President, Vice-Presidents and Rapporteur of the Conference and the Chairmen of the Main Committees

F ir s t M a in C o m m itte e

Chairman: Mr. D. Popov (Bulgaria) Vice-Chairman-cum-Rapporteur: Mr. H. Ben Salem (Tunisia)

S e c o n d M a in C o m m itte e

Chairman: Mr. Y. K. Quartey (Ghana) Vice-Chairman-cum-Rapporteur: Mr. T. Tscherning (Sweden)

T h ir d M a in C o m m itte e

Chairman: Mr. F. Castillo Najera (Mexico) Vice-Chairman-cum-Rapporteur: Mr. M. Husain (Pakistan)

C r e d e n tia ls C o m m itte e

Chairman: Mr. B. Brum (Uruguay) Members: China, Greece, Japan, Nicaragua, Senegal, Union of Soviet Socialist Republics, United Republic of Tanzania, United States of America, Uruguay.

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19. The Secretary-General of the United Nations was represented by: Mr. M. Perez Guerrero, Secretary-General of UNCTAD. Mr. W. R. Malinowski, Director, Division for Invisibles of the secretariat of UNCTAD, served as Director-in-Charge of the Conference, and Mr. Μ. T. Adebanjo, Secretary of the Trade and Development Board, served as Secretary of the Conference.

20. The Conference had before it, as a basis for its work, the reports of the Preparatory Committee of the Conference on its first and second sessions (TD/CODE/1 and TD/CODE/2 and Corr.2). At its second part, the Conference also had before it the report of the Conference on its first part (TD/CODE/7).

21. The Conference also had before it three notes prepared by the UNCTAD secretariat: “Glossary of terms used in the draft code of conduct for liner conferences” (TD/CODE/L.2); “Glossary of terms used in the proposed text of a code of conduct for liner conferences” (TD/CODE/L.3); and “Transitional arrangements for the Code: final clauses” (TD/CODE/L.4). At its second part, the Conference also had before it a document prepared by the UNCTAD secretariat entitled “Texts for a code of conduct for liner conferences, with changes suggested by the UNCTAD secretariat” (TD/CODE/L.15 and Add.l).

22. On the basis of its deliberations, as summarised in the reports of the Conference on its first and second parts (TD/CODE/7 and TD/CODE/10), the Conference prepared and decided to open for signature the Convention on a Code of Conduct for Liner Conferences, which is annexed to this Final Act (annex I).

23. The resolutions adopted by the Conference are reproduced in annex II. ;

I n w i t n e s s w h e r e o f the undersigned representatives have signed this Final Act on

behalf of their respective States.*

D o n e at Geneva, this sixth day of April, one thousand nine hundred and seventy-four,

in a single copy in the Chinese, English, French, Russian and Spanish languages, each text being equally authentic. The original of the Final Act shall be deposited in the archives of the United Nations Secretariat.

C. P. Srivastava, P r e s i d e n t o f th e C o n fe r e n c e

W. R. Malinowski,

D ir e c to r -in -c h a r g e o f th e C o n fe r e n c e

Μ. T. Adebanjo, S e c r e t a r y o f th e C o n fe r e n c e

* The States whose representatives signed the Final Act are: Algeria, Argentina, Australia, Bangladesh, Belgium, Bhutan,

Bolivia, Brazil, Bulgaria. Burundi, Canada, Chile, China, Colombia, Cuba, Czechoslovakia, Democratic Yemen, Denmark, Ecuador, Egypt, Finland, France, Gabon, German Democratic Republic, Germany, Federal Republic of, Ghana, Greece, Guatemala, Guinea, Honduras, Hungary, India, Indonesia, Iran, Iraq, Italy, Ivory Coast, Jamaica, Japan, Kenya, Khmer Republic, Kuwait, Liberia, Libyan Arab Republic, Madagascar, Malaysia, Mexico, Morocco, Netherlands, New Zealand, Nicaragua, Nigeria, Norway, Pakistan, Panama, Peru, Philippines, Poland, Republic of Korea, Republic of Viet-Nam, Romania, Senegal, Singapore, Spain, Sri Lanka, Sudan, Sweden, Switzerland, Thailand, Trinidad and Tobago, Tunisia, Turkey, Ukrainian Soviet Socialist Republic, Union of Soviet Socialist Republics,

United Arab Emirates, United Kingdom of Great Britain and Northern Ireland, United Republic of Cameroon, United Republic of Tanzania, United States of America, Uruguay, Venezuela, Yugoslavia, Zaire.

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ANNEXES Annex I

CONVENTION ON A CODE OF CONDUCT FOR LINER CONFERENCES Objectives and Principles T he C o n tr a c tin g P a r ti e s to th e p r e s e n t C o n v e n tio n ,

D e s ir in g to improve the liner conference system,

R e c o g n is in g the need for a universally acceptable code of conduct for liner conferences,

T a k in g into account the special needs and problems of the developing countries with respect to the activities of liner conferences serving their foreign trade, A g r e e in g to reflect in the Code the following fundamental objectives and basic principles:

( a) The objective to facilitate the orderly expansion of world sea-borne trade;

(b ) The objective to stimulate the development of regular and efficient liner services adequate to the requirements of the trade concerned; ( c) The objective to ensure a balance of interests between suppliers and users of liner shipping services;

( d) The principle that conference practices should not involve any discrimination against the shipowners, shippers or the foreign trade of any country; ( e) The principle that conferences hold meaningful consultations with shippers’ organisations, shippers’ representatives and shippers on matters of common

interest, with, upon request, the participation of appropriate authorities; (f) The principle that conferences should make available to interested parties pertinent information about their activities which are relevant to those parties and should publish meaningful information on their activities,

H a v e a g r e e d as follows:

Part one

C h a p te r I

DEFINITIONS

L in e r c o n fe r e n c e o r c o n fe r e n c e

A group of two or more vessel-operating carriers which provides international liner services for the carriage of cargo on a particular route or routes within specified geographical limits and which has an agreement or arrangement, whatever its nature, within the framework of which they operate under uniform or common freight rates

and any other agreed conditions with respect to the provision of liner services.

N a tio n a l s h ip p in g lin e

A national shipping line of any given country is a vessel-operating carrier which has its head office of management and its effective control in that country and is recognised as such by an appropriate authority of that country or under the law of that country.

Lines belonging to and operated by a joint venture involving two or more countries and in whose equity the national interests, public and/or private, of those countries

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have a substantial share and whose head office of management and whose effective control is in one of those countries can be recognised as a national line by the appropriate authorities of those countries.

T h ir d - c o u n tr y s h ip p in g lin e

A vessel-operating carrier in its operations between two countries of which it is not a national shipping line.

S h ip p e r

A person or entity who has entered into, or who demonstrates an intention to enter into, a contractual or other arrangement with a conference or shipping line for the shipment of goods in which he has a beneficial interest.

S h ip p e r s ’ o r g a n is a tio n

An association or equivalent body which promotes, represents and protects the interests of shippers and, if those authorities so desire, is recognised in that capacity by the appropriate authority or authorities of the country whose shippers it represents.

G o o d s c a r r ie d b y th e c o n fe r e n c e

Cargo transported by shipping lines members of a conference in accordance with the conference agreement.

A p p r o p r i a te a u th o r ity

Either a government or a body designated by a government or by national legislation to perform any of the functions ascribed to such authority by the provisions of this Code.

P r o m o tio n a l f r e i g h t r a le

A rate instituted for promoting the carriage of non-traditional exports of the country concerned.

S p e c ia l f r e i g h t r a te

A preferential freight rate, other than a promotional freight rate, which may be negotiated between the parties concerned.

C h a p te r I I

RELATIONS AMONG MEMBER LINES

A r t i c l e 1

MEMBERSHIP

1. Any national shipping line shall have the right to be a full m e m b e r of a conference which serves the foreign trade of its country, subject to the criteria set out in article 1, paragraph 2. Shipping lines which are not national lines in any trade of a conference shall have the right to become full members of that conference, subject to the criteria

set out in article 1, paragraphs 2 and 3, and to the provisions regarding the share of trade as set out in article 2 as regards third-country shipping lines.

2. A shipping line applying for membership of a conference shall furnish evidence of its ability and intention, which may include the use of chartered tonnage, provided

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the criteria of this paragraph are met, to operate a regular, adequate and efficient service on a long-term basis as defined in the conference agreement within the framework of the conference, shall undertake to abide by all the terms and conditions of the conference agreement, and shall deposit a financial guarantee to cover any outstanding financial obligation in the event of subsequent withdrawal, suspension or expulsion from membership, if so required under the conference agreement.

3. In considering an application for membership by a shipping line which is not a national line in any trade of the conference concerned, in addition to the provisions of article 1, paragraph 2, the following criteria, in te r a lia , should be taken into account: ( a) The existing volume of the trade on the route or routes served by the conference

and prospects for its growth; ( b) The adequacy of shipping space for the existing and prospective volume of trade on the route or routes served by the conference; ( c) The probable effect of admission of the shipping line to the conference on the

efficiency and quality of the conference service; ( d) The current participation of the shipping line in trade on the same route or

routes outside the framework of a conference; and ( e) The current participation of the shipping line on the same route or routes within the framework of another conference. The above criteria shall not be applied so as to subvert the implementation of the provisions relating to participation in trade set out in article 2.

4. An application for admission or readmission to membership shall be promptly decided upon and the decision communicated by a conference to an applicant promptly, and in no case later than six months from the date of application. When a shipping line is refused admission or readmission the conference shall, at the same time,

give in writing the grounds for such refusal.

5. When considering applications for admission, a conference shall take into account the views put forward by shippers and shippers’ organisations of the countries whose trade is carried by the conference, as well as the views of appropriate authorities if they so request.

6. In addition to the criteria for admission set out in article 1, paragraph 2, a shipping line applying for readmission shall also give evidence of having fulfilled its obligations in accordance with article 4, paragraphs 1 and 4. The conference may give special scrutiny to the circumstances under which the line left the conference.

A r tic le 2

PARTICIPATION IN TRADE

1. Any shipping line admitted to membership of a conference shall have sailing and loading rights in the trades covered by that conference.

2. When a conference operates a pool, all shipping lines members of the conference serving the trade covered by the pool shall have the right to participate in the pool for that trade.

3. For the purpose of determining the share of trade which member lines shall have the right to acquire, the national shipping lines of each country, irrespective of the number of lines, shall be regarded as a single group of shipping lines for that country.

4. When determining a share of trade within a pool of individual member lines and/or groups of national shipping lines in accordance with article 2, paragraph 2, the

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following principles regarding their right to participation in the trade carried by the conference shall be observed, unless otherwise mutually agreed: (a ) The group of national shipping lines of each of two countries the foreign trade between which is carried by the conference shall have equal rights to participate in

the freight and volume of traffic generated by their mutual foreign trade and carried by the conference. (b ) Third-country shipping lines, if any, shall have the right to acquire a significant part, such as 20 per cent, in the freight and volume of traffic generated by that trade. 5. If, for any one of the countries whose trade is carried by a conference, there are no national shipping lines participating in the carriage of that trade, the share of the trade

to which national shipping lines of that country would be entitled under article 2, paragraph 4 shall be distributed among the individual member lines participating in the trade in proportion to their respective share.

6. If the national shipping lines of one country decide not to carry their full share of the trade, that portion of their share of the trade which they do not carry shall be distributed among the individual member lines participating in the trade in proportion to their respective shares.

7. If the national shipping lines of the countries concerned do not participate in the trade between those countries covered by a conference, the shares of trade carried by the conference between those countries shall be allocated between the participating member lines of third countries by commercial negotiations between those lines.

8. The national shipping lines of a region, members of a conference, at one end of the1 trade covered by the conference, may redistribute among themselves by mutual agreement the shares in trades allocated to them, in accordance with article 2, paragraphs 4 to 7 inclusive.

9. Subject to the provisions of article 2, paragraphs 4 to 8 inclusive regarding shares of trade among individual shipping lines or groups of shipping lines, pooling or trade­ sharing agreements shall be reviewed by the conference periodically, at intervals to be stipulated in those agreements and in accordance with criteria to be specified in the conference agreement.

10. The application of the present article shall commence as soon as possible after entry into force of the present Convention and shall be completed within a transition period which in no case shall be longer than two years, taking into account the specific situation in each of the trades concerned.

11. Shipping lines members of a conference shall be entitled to operate chartered ships to fulfil their conference obligations. .

12. The criteria for sharing and the revision of shares as set out in article 2, paragraphs 1 to 11 inclusive shall apply when, in the absence of a pool, there exists berthing, sailing and/or any other form of cargo allocation agreement.

13. Where no pooling, berthing, sailing or other trade participation agreements exist in a conference, either group of national shipping lines, members of the conference, may require that pooling arrangements be introduced, in respect of the trade between their countries carried by the conference, in conformity with the provisions of article 2, paragraph 4; or alternatively they may require that the sailings be so adjusted as to provide an opportunity to these lines to enjoy substantially the same rights to participate in the trade between those two countries carried by the conference as they

would have enjoyed under the provisions of article 2, paragraph 4. Any such request shall be considered and decided by the conference. If there is no agreement to institute such a pool or adjustment of sailings among the members of the conference, the groups

1 8 8

of national shipping lines of the countries at both ends of the trade shall have a majority vote in deciding to establish such a pool or adjustment of sailings. The matter shall be decided upon within a period not exceeding six months from the receipt of the request.

14. In the event of a disagreement between the national shipping lines of the countries at either end whose trade is served by the conference with regard to whether or not pooling shall be introduced, they may require that within the conference sailings be so adjusted as to provide an opportunity to these lines to enjoy substantially the same

rights to participate in the trade between those two countries carried by the conference as they would have enjoyed under the provisions of article 2, paragraph 4. In the event that there are no national shipping lines in one of the countries whose trade is served by the conference, the national shipping line or lines of the other country may make the

same request. The conference shall use its best endeavours to meet this request. If, however, this request is not met, the appropriate authorities of the countries at both ends of the trade may take up the matter if they so wish and make their views known to the parties concerned for their consideration. If no agreement is reached, the dispute

shall be dealt with in accordance with the procedures established in this Code.

15. Other shipping lines, members of a conference, may also request that pooling or sailing agreements be introduced, and the request shall be considered by the conference in accordance with the relevant provisions of this Code.

16. A conference shall provide for appropriate measures in any conference pooling agreement to cover cases where the cargo has been shut out by a member line for any reason excepting late presentation by the shipper. Such agreement shall provide that a vessel with unbooked space capable of being used, be allowed to lift the cargo, even in

excess of the pool share of the line in the trade, if otherwise the cargo would be shut out and delayed beyond a period set by the conference.

17. The provisions of article 2, paragraphs 1 to 16 inclusive concern all goods regardless of their origin, their destination or the use for which they are intended, with the exception of military equipment for national defence purposes.

A r ti c le 3

DECISION-MAKING PROCEDURES

The decision-making procedures embodied in a conference agreement shall be based on the equality of all the full member lines; these procedures shall ensure that the voting rules do not hinder the proper work of the conference and the service of the trade and shall define the matters on which decisions will be made by unanimity.

However, a decision cannot be taken in respect of matters defined in a conference agreement relating to the trade between two countries without the consent of the national shipping lines of those two countries.

A r tic le 4

SANCTIONS

1. A shipping line member of a conference shall be entitled, subject to the provisions regarding withdrawal which are embodied in pool schemes and/or cargo­ sharing arrangements, to secure its release, without penalty, from the terms of the conference agreement after giving three months' notice, unless the conference

agreement provides for a different time period, although it shall be required to fulfil its obligations as a member of the conference up to the date of its release.

189

2. A conference may, upon notice to be specified in the conference agreement, suspend or expel a member for significant failure to abide by the terms and conditions of the conference agreement.

3. No expulsion or suspension shall become effective until a statement in writing of the reasons therefor has been given and until any dispute has been settled as provided in chapter VI.

4. Upon withdrawal or expulsion, the line concerned shall be required to pay its share of the outstanding financial obligations of the conference, up to the date of its withdrawal or expulsion. In cases of withdrawal, suspension or expulsion, the line shall not be relieved of its own financial obligations under the conference agreement or of any of its obligations towards shippers.

A r t i c l e 5

SELF-POLICING

1. A conference shall adopt and keep up to date an illustrative list, which shall be as comprehensive as possible, of practices which are regarded as malpractices and/or breaches of the conference agreement and shall provide effective self-policing machinery to deal with them, with specific provisions requiring;

( a) The fixing of penalties or a range of penalties for malpractices or breaches, to be commensurate with their seriousness; (b ) The examination and impartial review of an adjudication of complaints, and/or decisions taken on complaints, against malpractices or breaches, by a person or body unconnected with any of the shipping lines members of the conference or their affiliates, on request by the conference or any other party concerned; ( c) The reporting, on request, on the action taken in connection with complaints against malpractices and/or breaches, and on a basis of anonymity for the parties concerned, to the appropriate authorities of the countries whose trade is served by the conference and of the countries whose shipping lines are members of the conference.

2. Shipping lines and conferences are entitled to the full co-operation of shippers and shippers’ organisations in the endeavour to combat malpractices and breaches.

A r ti c le 6

CONFERENCE AGREEMENTS

All conference agreements, pooling, berthing and sailing rights agreements and amendments or other documents directly related to, and which affect, such agreements shall be made available on request to the appropriate authorities of the countries whose trade is served by the conference and of the countries whose shipping lines are members of the conference.

C h a p te r I I I

RELATIONS WITH SHIPPERS

A r ti c le 7

LOYALTY ARRANGEMENTS

1. The shipping lines members of a conference are entitled to institute and maintain loyalty arrangements with shippers, the form and terms of which are matters for consultation between the conference and shippers’ organisations or representatives of

190

shippers. These loyalty arrangements shall provide safeguards making explicit the rights of shippers and conference members. These arrangements shall be based on the contract system or any other system which is also lawful.

2. Whatever loyalty arrangements are made, the freight rate applicable to loyal shippers shall be determined within a fixed range of percentages of the freight rate applicable to other shippers. Where a change in the differential causes an increase in the rates charged to shippers, the change can be implemented only after 150 days’ notice to those shippers or according to regional practice and/or agreement. Disputes in

connexion with a change of the differential shall be settled as provided in the loyalty agreement.

3. The terms of loyalty arrangements shall provide safeguards making explicit the rights and obligations of shippers and of shipping lines members of the conference in accordance with the following provisions, in te r a lia : ( a) The shippers shall be bound in respect of cargo whose shipment is controlled by

him or his affiliated or subsidiary company or his forwarding agent in accordance with the contract of sale of the goods concerned, provided that the shipper shall not, by evasion, subterfuge, or intermediary, attempt to divert cargo in violation of his loyalty commitment;

(b ) Where there is a loyalty contract, the extent of actual or liquidated damages and/or penalty shall be specified in the contract. The member lines of the conference may, however, decide to assess lower liquidated damages or to waive the claim to liquidated damages. In any event, the liquidated damages under the contract to be paid by the shipper shall not exceed the freight charges on the

particular shipment, computed at the rate provided under the contract; (c) The shipper shall be entitled to resume full loyalty status, subject to the fulfilment of conditions established by the conference which shall be specified in the loyalty arrangement;

fd) The loyalty arrangement shall set out: (i) A list of cargo, which may include bulk cargo shipped without mark or count, which is specifically excluded from the scope of the loyalty arrangement; (ii) A definition of the circumstances in which cargo other than cargo covered

by (i) above is considered to be excluded from the scope of the loyalty arrangement; (iii) The method of - settlement of disputes arising under the loyalty arrangement; (iv) Provision for termination of the loyalty arrangement on request by either

a shipper or a conference without penalty, after expiry of a stipulated period of notice, such notice to be given in writing; and (v) The terms for granting dispensation.

4. If there is a dispute between a conference and a shippers’ organisation, representatives of shippers and/or shippers about the form or terms of a proposed loyalty arrangement, either party may refer the matter for resolution under appropriate procedures as set out in this Code.

A r ti c le 8

DISPENSATION

1. Conferences shall provide, within the terms of the loyalty arrangements, that requests by shippers for dispensation shall be examined and a decision given quickly

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and, if requested, the reasons given in writing where dispensation is withheld. Should a conference fail to confirm, within a period specified in the loyalty arrangement, sufficient space to accommodate a shipper’s cargo within a period also specified in the loyalty arrangement, the shipper shall have the right, without being penalised, to utilise any vessel for the cargo in question.

2. In ports where conference services are arranged subject to the availability of a specified minimum of cargo (i.e. on inducement), but either the shipping line does not call, despite due notice by shippers, or the shipping line does not reply within an agreed time to the notice given by shippers, shippers shall automatically have the right, without prejudicing their loyalty status, to use any available vessel for the carriage of their cargo.

A r t i c l e 9

AVAILABILITY OF TARIFFS AND RELATED CONDITIONS AND/OR REGULATIONS

Tariffs, related conditions, regulations, and any amendments thereto shall be made available on request to shippers, shippers’ organisations and other parties concerned at reasonable cost, and they shall be available for examination at offices of shipping lines and their agents. They shall spell out all conditions concerning the application of freight rates and the carriage of any cargo covered by them.

A r ti c le 10

ANNUAL REPORTS

Conferences shall provide annually to shippers’ organisations, or to representatives of shippers, reports on their activities designed to provide general information of interest to them, including relevant information about consultations held with shippers and shippers’ organisations, action taken regarding complaints, changes in member­ ship, and significant changes in service, tariffs and conditions of carriage. Such annual

reports shall be submitted, on request, to the appropriate authorities of the countries whose trade is served by the conference concerned.

A r ti c le 11

CONSULTATION MACHINERY

1. There shall be consultations on matters of common interest between a conference, shippers’ organisations, representatives of shippers and, where practicable,' shippers, which may be designated for that purpose by the appropriate authority if it so desires. These consultations shall take place whenever requested by any of the above- mentioned parties. Appropriate authorities shall have the right, upon request, to participate fully in the consultations, but this does not mean that they play a decision­ making role.

2. The following matters, in te r a lia , may be the subject of consultation: (a ) Changes in general tariff conditions and related regulations;

(b ) Changes in the general level of tariff rates and rates for major commodities;

( c) Promotional and/or special freight rates;

( d) Imposition of, and related changes in, surcharges;

(e ) Loyalty arrangements, their establishment or changes in their form and general conditions;

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(f) Changes in the tariff classification of ports;

( g) Procedure for the supply of necessary information by shippers concerning the expected volume and nature of their cargoes; and (h) Presentation of cargo for shipment and the requirements regarding notice of cargo availability.

3. To the extent that they fall within the scope of activity of a conference, the following matters may also be the subject of consultation: ( a) Operation of cargo inspection services;

(b) Changes in the pattern of services;

(c) Effects of the introduction of new technology in the carriage of cargo, in particular unitisation, with consequent reduction of conventional service or loss of direct services; and _ ( d) Adequacy and quality of shipping services, including the impact of pooling,

berthing or sailing arrangements on the availability of shipping services and freight rates at which shipping services are provided; changes in the areas served and in the regularity of calls by conference vessels.

4. Consultations shall be held before final decisions are taken, unless otherwise provided in this Code. Advance notice shall be given of the intention to take decisions on matters referred to in article 11, paragraphs 2 and 3. Where this is impossible, urgent decisions may be taken pending the holding of consultations.

5. Consultations shall begin without undue delay and in any event within a maximum period specified in the conference agreement or, in the absence of such a provision in the agreement, not later than 30 days after receipt of the proposal for consultations, unless different periods of time are provided in this Code.

6. When holding consultations, the parties shall use their best efforts to provide relevant information, to hold timely discussions and to clarify matters for the purpose of seeking solutions of the issues concerned. The parties involved shall take account of

each other’s views and problems and strive to reach agreement consistent with their commercial viability.

C h a p te r I V

FREIGHT RATES

A r tic le 12

CRITERIA FOR FREIGHT-RATE DETERMINATION

In arriving at a decision on questions of tariff policy in all cases mentioned in this Code, the following points shall, unless otherwise provided, be taken into account: ( a) Freight rates shall be fixed at as low a level as is feasible from the commercial point of view and shall permit a reasonable profit for shipowners;

(b ) The cost of operations of conferences shall, as a rule, be evaluated for the round voyage of ships, with the outward and inward directions considered as a single whole. Where applicable, the outward and inward voyage should be considered separately. The freight rates should take into account, among other factors, the nature of cargoes,

the interrelation between weight and cargo measurement, as well as the value of cargoes; ■

( c) In fixing promotional freight rates and/or special freight rates for specific goods, the conditions of trade for these goods of the countries served by the conference, particularly of developing and land-locked countries, shall be taken into account.

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A r t i c l e 13

CONFERENCE TARIFFS AND CLASSIFICATION OF TARIFF RATES

1. Conference tariffs shall not unfairly differentiate between shippers similarly situated. Shipping lines members of a conference shall adhere strictly to the rates, rules and terms shown in the tariffs and other currently valid published documents of the conference and to any special arrangements permitted under this Code.

2. Conference tariffs should be drawn up simply and clearly, containing as few classes/categories as possible, depending on the commodity and, where appropriate, for each class/category; they should also indicate, wherever practicable, in order to facilitate statistical compilation and analysis, the corresponding appropriate code number of the item in accordance with the Standard International Trade Classifi­ cation, the Brussels Tariff Nomenclature or any other nomenclature that may be internationally adopted; the classification of commodities in the tariffs should, as far as practicable, be prepared in co-operation with shippers’ organisations and other national and international organisations concerned.

A r t i c l e 14

GENERAL FREIGHT-RATE INCREASES

1. A conference shall give notice of not less than 150 days, or according to regional practice and/or agreement, to shippers’ organisations or representatives of shippers and/or shippers and, where so required, to appropriate authorities of the countries whose trade is served by the conference, of its intention to effect a general increase in freight rates, an indication of its extent, the date of effect and the reasons supporting the proposed increase.

2. At the request of any of the parties prescribed for this purpose in this Code, to be made within an agreed period of time after the receipt of the notice, consultations shall commence, in accordance with the relevant provisions of this Code, within a stipulated period not exceeding 30 days or as previously agreed between the parties concerned; the consultations shall be held in respect of the bases and amounts of the proposed increase and the date from which it is to be given effect.

3. A conference, in an effort to expedite consultations, may or upon the request of any of the parties prescribed in this Code as entitled to participate in consultations on general freight-rate increases shall, where practicable, reasonably before the consultations, submit to the participating parties a report from independent accountants of repute, including, where the requesting parties accept it as one of the bases of consultations, an aggregated analysis of data regarding relevant costs and revenues which in the opinion of the conference necessitate an increase in freight rates.

4. If agreement is reached as a result of the consultations, the freight-rate increase shall take effect from the date indicated in the notice served in accordance with article 14, paragraph 1, unless a later date is agreed upon between the parties concerned.

5. If no agreement is reached within 30 days of the giving of notice in accordance with article 14, paragraph 1, and subject to procedures prescribed in this Code, the matter shall be submitted immediately to international mandatory conciliation, in accordance with chapter VI. The recommendation of the conciliators, if accepted by the parties concerned, shall be binding upon them and shall be implemented, subject to the

provisions of article 14, paragraph 9, with effect from the date mentioned in the conciliators’ recommendation.

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6. Subject to the provisions of article 14, paragraph 9, a general freight-rate increase may be implemented by a conference pending the conciliators’ recommendation. When making their recommendation, the conciliators should take into account the extent of the abovementioned increase made by the conference and the period for

which it has been in force. In the event that the conference rejects the recommendation of the conciliators, shippers and/or shippers’ organisations shall have the right to consider themselves not bound, after appropriate notice, by any arrangement or other contract with that conference which may prevent them from using non-conference

shipping lines. Where a loyalty arrangement exists, shippers and/or shippers’ organisations shall give notice within a period of 30 days to the effect that they no longer consider themselves bound by that arrangement, which notice shall apply from the date mentioned therein, and a period of not less than 30 days and not more than 90 days shall be provided in the loyalty arrangement for this purpose.

7. A deferred rebate which is due to the shipper and which has already been accumulated by the conference shall not be withheld by, or forfeited to, the conference as a result of action by the shipper under article 14, paragraph 6.

8. If the trade of a country carried by shipping lines members of a conference on a particular route consists largely of one or few basic commodities, any increase in the freight rate on one or more of those commodities shall be treated as a general freight- rate increase, and the appropriate provisions of this Code shall apply.

9. Conferences should institute any general freight-rate increase effective in accordance with this Code for a period of a stated minimum duration, subject always to the rules regarding surcharges and regarding adjustsment in freight rates consequent upon fluctuations in foreign exchange rates. The period over which a general freight- rate increase is to apply is an appropriate matter to be considered during consultations

conducted in accordance with article 14, paragraph 2, but unless otherwise agreed between the parties concerned during the consultations, the minimum period of time between the date when one general freight-rate increase becomes effective and the date of notice for the next general freight-rate increase given in accordance with article 14,

paragraph 1 shall not be less than 10 months.

A r tic le 15

PROMOTIONAL FREIGHT RATES

1. Promotional freight rates for non-traditional exports should be instituted by conferences.

2. All necessary and reasonable information justifying the need for a promotional freight rate shall be submitted to a conference by the shippers, shippers’ organisations or representatives of shippers concerned.

3. Special procedures shall be instituted providing for a decision within 30 days from the date of receipt of that information, unless mutually agreed otherwise, on applications for promotional freight rates. A clear distinction shall be made between these and general procedures for considering the possibility of reducing freight rates

for other commodities or of exempting them from increases.

4. Information regarding the procedures for considering applications for pro­ motional freight rates shall be made available by the conference to shippers and/or shippers’ organisations and, on request, to the Governments and/or other appropriate authorities of the countries whose trade is served by the conference.

5. A promotional freight rate shall be established normally for a period of 12 months, unless otherwise mutually agreed between the parties concerned. Prior to the expiry of

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the period, the promotional freight rate shall be reviewed, on request by the shipper and/or shippers’ organisation concerned, when it shall be a matter for the shipper and/or shippers’ organisation, at the request of the conference, to show that the continuation of the rate is justified beyond the initial period.

6. When examining a request for a promotional freight rate, the conference may take into account that, while the rate should promote the export of the non-traditional product for which it is sought, it is not likely to create substantial competitive distortions in the export of a similar product from another country served by the

conference.

7. Promotional freight rates are not excluded from the imposition of a surcharge or a currency adjustment factor in accordance with articles 16 and 17.

8. Each shipping line member of a conference serving the relevant ports of a conference trade shall accept, and not unreasonably refuse, a fair share of cargo for which a promotional freight rate has been established by the conference.

A r t i c l e 1 6

SURCHARGES

1. Surcharges imposed by a conference to cover sudden or extraordinary increases in costs or losses of revenue shall be regarded as temporary. They shall be reduced in accordance with improvements in the situation or circumstances which they were imposed to meet and shall be cancelled, subject to article 16, paragraph 6, as soon as the situation or circumstances which prompted their imposition cease to prevail. This shall be indicated at the moment of their imposition, together, as far as possible, with a description of the change in the situation or circumstances which will bring about their increase, reduction or cancellation.

2. Surcharges imposed on cargo moving to or from a particular port shall likewise be regarded as temporary and likewise shall be increased, reduced or cancelled, subject to article 16, paragraph 6, when the situation in that port changes.

3. Before any surcharge is imposed, whether general or covering only a specific port, notice should be given and there shall be consultation, upon request, in accordance with the procedures of this Code, between the conference concerned and other parties directly affected by the surcharge and prescribed in this Code as entitled to participate in such consultations, save in those exceptional circumstances which warrant immediate imposition of the surcharge. In cases where a surcharge has been imposed without prior consultation, consultations, upon request, shall be held as soon as possible thereafter. Prior to such consultations, conferences shall furnish data which in their opinion justify the imposition of the surcharge.

4. Unless the parties agree otherwise, within a period of 15 days after the receipt of a notice given in accordance with article 16, paragraph 3, if there is no agreement on the question of the surcharge between the parties concerned referred to in that article, the relevant provisions for settlement of disputes provided in this Code shall prevail.

Unless the parties concerned agree otherwise, the surcharge may, however, be imposed pending resolution of the dispute, if the dispute still remains unresolved at the end of a period of 30 days after the receipt of the abovementioned notice.

5. In the event of a surcharge being imposed, in exceptional circumstances, without prior consultation as provided in article 16, paragraph 3, if no agreement is reached through subsequent consultations, the relevant provisions for settlement of disputes provided in this Code shall prevail.

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6. Financial loss incurred by the shipping lines members of a conference as a result of any delay on account of consultations and/or other proceedings for resolving disputes regarding imposition of surcharges in accordance with the provisions of this Code, as compared to the date from which the surcharge was to be imposed in terms of the notice given in accordance with article 16, paragraph 3, may be compensated by an

equivalent prolongation of the surcharge before its removal. Conversely, for any surcharge imposed by the conference and subsequently determined and agreed to be unjustified or excessive as a result of consultations or other procedures prescribed in this Code, the amounts so collected or the excess thereof as determined hereinabove,

unless otherwise agreed, shall be refunded to the parties concerned, if claimed by them, within a period of 30 days of such claim.

A r ti c le 1 7

CURRENCY CHANGES

1. Exchange rate changes, including formal devaluation or revaluation, which lead to changes in the aggregate operational costs and/or revenues of the shipping lines members of a conference relating to their operations within the conference provide a valid reason for the introduction of a currency adjustment factor or for a change in the freight rates. The adjustment or change shall be such that in the aggregate the member lines concerned neither gain nor lose, as far as possible, as a result of the adjustment or change. The adjustment or change may take the form of currency surcharges or

discounts or of increases or decreases in the freight rates.

2. Such adjustments or changes shall be subject to notice, which should be arranged in accordance with regional practice, where such practice exists, and there shall be consultation in accordance with the provisions of this Code between the conference concerned and the other parties directly affected and prescribed in this Code as entitled

to participate in consultations, save in those exceptional circumstances which warrant immediate imposition of the currency adjustment factor or freight-rate change. In the event that this has been done without prior consultations, consultations shall be held as soon as possible thereafter. The consultations should be on the application, size and

date of implementation of the currency adjustment factor or freight-rate change, and the same procedures shall be followed for this purpose as are presecribed in article 16, paragraphs 4 and 5, in respect of surcharges. Such consultations should take place and be completed within a period not exceeding 15 days from the date when the intention to

apply a currency surcharge or to effect a freight-rate change is announced.

3. If no agreement is reached within 15 days through consultations, the relevant provisions for settlement of disputes provided in this Code shall prevail.

4. The provisions of article 16, paragraph 6 shall apply, adapted as necessary to currency adjustment factors and freight-rate changes dealt with in the present article.

C h a p te r V

OTHER MATTERS

A r tic le 1 8

FIGHTING SHIPS

Members of a conference shall not use fighting ships in the conference trade for the purpose of excluding, preventing or reducing competition by driving a shipping line not a member of the conference out of the said trade.

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A r t i c l e 1 9

ADEQUACY OF SERVICE

1. Conferences should take necessary and appropriate measures to ensure that their m e m b e r lines provide regular, adequate and efficient service of the required frequency on the routes they serve and shall arrange such services so as to avoid as far as possible bunching and gapping of sailings. Conferences should also take into consideration any special measures necessary in arranging services to handle seasonal variations in cargo volumes.

2. Conferences and other parties prescribed in this Code as entitled to participate in consultations, including appropriate authorities if they so desire, should keep under review, and should maintain close co-operation regarding the demand for shipping space, the adequacy and suitability of service, and in particular the possibilities for rationalisation and for increasing the efficiency of services. Benefits identified as accruing from rationalisation of services shall be fairly reflected in the level of freight rates.

3. In respect of any port for which conference services are supplied only subject to the availability of a specified minimum of cargo, that minimum shall be specified in the tariff. Shippers should give adequate notice of the availability of such cargo.

A r t i c l e 2 0

HEAD OFFICE OF A CONFERENCE

A conference shall as a rule establish its head office in a country whose trade is served by that conference, unless agreed otherwise by the shipping lines members of that conference.

A r ti c le 21

REPRESENTATION

Conferences shall establish local representation in all countries served, except that where there are practical reasons to the contrary the representation may be on a regional basis. The names and addresses of representatives shall be readily available, and these representatives shall ensure that the views of shippers and conferences are made rapidly known to each other with a view to expediting prompt decisions. When a conference considers it suitable, it shall provide for adequate delegation of powers of decision to its representatives.

A r ti c le 2 2

CONTENTS OF CONFERENCE AGREEMENTS, TRADE PARTICIPATION AGREEMENTS AND LOYALTY ARRANGEMENTS

Conference agreements, trade participation agreements and loyalty arrangements shall conform to the applicable requirements of this Code and may include such other provisions as may be agreed which are not inconsistent with this Code.

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P art two

C h a p te r V I

PROVISIONS AND MACHINERY FOR SETTLEMENT OF DISPUTES

A. G E N E R A L P R O V I S I O N S

A r ti c le 2 3

1. The provisions of this chapter shall apply whenever there is a dispute relating to the application or operation of the provisions of this Code between the following parties: (a) A conference and a shipping line;

(b) The shipping lines members of a conference;

(c) A conference or a shipping line member thereof and a shippers’ organisation or representatives of shippers or shippers; and (d ) Two or more conferences.

For the purposes of this chapter the term “party” means the original parties to the dispute as well as third parties which have joined the proceedings in accordance with ( a) of article 34.

2. Disputes between shipping lines of the same flag, as well as those between organisations belonging to the same country, shall be settled within the framework of the national jurisdiction of that country, unless this creates serious difficulties in the fulfilment of the provisions of this Code.

3. The parties to a dispute shall first attempt to settle it by an exchange of views or direct negotiations with the intention of finding a mutually satisfactory solution.

4. Disputes between the parties referred to in article 23, paragraph 1 relating to: (a ) Refusal of admission of a national shipping line to a conference serving the foreign trade of the country of that shipping line; (b ) Refusal of admission of a third-country shipping line to a conference;

( c) Expulsion from a conference;

(d ) Inconsistency of a conference agreement with this Code;

(e ) A general freight-rate increase;

(fi Surcharges;

(g ) Changes in freight rates or the imposition of a currency adjustment factor due to exchange rate changes; (h) Participation in trade; and

(i) The form and terms of proposed loyalty arrangements

which have not been resolved through an exchange of views or direct negotiations shall, at the request of any of the parties to the dispute, be referred to international mandatory conciliation in accordance with the provisions of this chapter.

A r tic le 2 4

1. The conciliation procedure is initiated at the request of one of the parties to the dispute.

2. The request shall be made: ( a) In disputes relating to membership of conferences: not later than 60 days from

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the date of receipt by the applicant of the conference decision, including the reasons therefor, in accordance with article 1, paragraph 4 and article 4, paragraph 3; (b ) In disputes relating to general freight-rate increases: not later than the date of expiry of the period of notice specified in article 14, paragraph 1; ( c) In disputes relating to surcharges: not later than the date of expiry of the 30-day

period specified in article 16, paragraph 4 or, where no notice has been given, not later than 15 days from the date when the surcharge was put into eifect; and (d ) In disputes relating to changes in freight rates or the imposition of a currency adjustment factor due to exchange rate changes: not later than five days after the

date of expiry of the period specified in article 17, paragraph 3.

3. The provisions of article 24, paragraph 2 shall not apply to a dispute which is referred to international mandatory conciliation in accordance with article 25, paragraph 3.

4. Requests for conciliation in disputes other than those referred to in article 24, paragraph 2, may be made at any time.

5. The time limits specified in article 24, paragraph 2 may be extended by agreement between the parties.

6. A request for conciliation shall be considered to have been duly made if it is proved that the request has been sent to the other party by registered letter, telegram or teleprinter or has been served on it within the time-limits specified in article 24, paragraphs 2 or 5. ;

7. Where no request has been made within the time-limits specified in article 24, paragraphs 2 or 5, the decision of the conference shall be final and no proceedings under this chapter may be brought by any party to the dispute to challenge that decision.

A r ti c le 2 5

1. Where the parties have agreed that disputes referred to in article 23, paragraph 4 ( a ) , ( b ) , (c ) , ( d ) , (h ) and (i) shall be resolved through procedures other than those established in that article, or agree on procedures to resolve a particular dispute that has arisen between them, such disputes shall, at the request of any of the parties to the

dispute, be resolved as provided for in their agreement.

2. The provisions of article 25, paragraph 1 apply also to the disputes referred to in article 23, paragraph 4 ( e ) , ( j ) a n d ( g) , unless national legislation, rules or regulations prevent shippers from having this freedom of choice. -

3. Where conciliation proceedings have been initiated, such proceedings shall have precedence over remedies available under national law. If a party seeks remedies under national law in respect of a dispute to which this chapter applies without invoking the procedures provided for in this chapter, then, upon the request of a respondent to those proceedings, they shall be stayed and the dispute shall be referred to the procedures defined in this chapter by the court or other authority where the national remedies are sought.

A r ti c le 2 6

1. The Contracting Parties shall confer upon conferences and shippers’ organisations such capacity as is necessary for the application of the provisions of this chapter. In particular:

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(a ) A conference or a shippers’ organisation may institute proceedings as a party or be named as a party to proceedings in its collective capacity; (b ) Any notification to a conference or shippers’ organisation in its collective capacity shall also constitute a notification to each member of such conference or

shippers’ organisation; ( c) A notification to a conference or shippers’ organisation shall be transmitted to the address of the head office of the conference or shippers’ organisation. Each conference or shippers’ organisation shall register the address of its head office with

the Registrar appointed in accordance with article 46, paragraph 1. In the event that a conference or a shippers’ organisation fails to register or has no head office, a notification to any member in the name of the conference or shippers’ organisation

shall be deemed to be a notification to such conference or organisation.

2. Acceptance or rejection by a conference or shippers’ organisation of a recommendation by conciliators shall be deemed to be acceptance or rejection of such a recommendation by each member thereof.

A r ti c le 2 7

Unless the parties agree otherwise, the conciliators may decide to make a recommendation on the basis of written submissions without oral proceedings.

B. I N T E R N A T I O N A L M A N D A T O R Y C O N C I L I A T I O N

A r ti c le 2 8

In international mandatory conciliation the appropriate authorities of a Contract­ ing Party shall, if they so request, participate in the conciliation proceedings in support of a party being a national of that Contracting Party, or in support of a party having a dispute arising in the context of the foreign trade of that Contracting Party. The

appropriate authority may alternatively act as an observer in such conciliation proceedings.

A r ti c le 2 9

1. In international mandatory conciliation the proceedings shall be held in the place unanimously agreed to by the parties or, failing such agreement, in the place decided upon by the conciliators.

2. In determining the place of conciliation proceedings the parties and the conciliators shall take into account, in te r a lia , countries which are closely connected with the dispute, bearing in mind the country of the shipping line concerned and, especially when the dispute is related to cargo, the country where the cargo originates.

A r ti c le 3 0

1. For the purposes of this chapter an international panel of conciliators shall be established, consisting of experts of high repute or experience in the fields of law, economics of sea transport, or foreign trade and finance, as determined by the

Contracting Parties selecting them, who shall serve in an independent capacity.

2. Each Contracting Party may at any time nominate members of the panel up to a total of 12, and shall communicate their names to the Registrar. The nominations shall be for periods of six years each and may be renewed. In the event of the death, incapacity or resignation of a member of the panel, the Contracting Party which nominated such person shall nominate a replacement for the remainder of his term of

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office. A nomination takes effect from the date on which the communication of the nomination is received by the Registrar.

3. The Registrar shall maintain the panel list and shall regularly inform the Contracting Parties of the composition of the panel.

A r ti c le 3 1

1. The purpose of conciliation is to reach an amicable settlement of the dispute through recommendations formulated by independent conciliators.

2. The conciliators shall identify and clarify the issues in dispute, seek for this purpose any information from the parties, and on the basis thereof, submit to the parties a recommendation for the settlement of the dispute.

3. The parties shall co-operate in good faith with the conciliators in order to enable them to carry out their functions.

4. Subject to the provisions of article 25, paragraph 2, the parties to the dispute may at any time during the conciliation proceedings decide in agreement to have recourse to a different procedure for the settlement of their dispute. The parties to a dispute which has been made subject to proceedings other than those provided for in this chapter may decide by mutual agreement to have recourse to international mandatory conciliation.

A r ti c le 3 2

1. The conciliation proceedings shall be conducted either by one conciliator or by am uneven number of conciliators agreed upon or designated by the parties.

2. Where the parties cannot agree on the number or the appointment of the conciliators as provided in article 32, paragraph 1, the conciliation proceedings shall be conducted by three conciliators, one appointed by each party in the statement(s) of claim and reply respectively, and the third by the two conciliators thus appointed, who shall act as chairman.

3. If the reply does not name a conciliator to be appointed in cases where article 32, paragraph 2 would apply, the second conciliator shall, within 30 days following the receipt of the statement of claim, be chosen by lot by the conciliator appointed in the statement of claim from among the members of the panel nominated by the Contracting Party or Parties of which the respondent(s) is(are) a national(s).

4. Where the conciliators appointed in accordance with article 32, paragraphs 2 or 3 cannot agree on the appointment of the third conciliator within 15 days following the date of the appointment of the second conciliator, he shall, within the following 5 days, be chosen by lot by the appointed conciliators. Prior to the drawing by lot:

( a) No member of the panel of conciliators having the same nationality as either of the two appointed conciliators shall be eligible for selection by lot; ( b) Each of the two appointed conciliators may exclude from the list of the panel of conciliators an equal number of them subject to the requirement that at least 30

members of the panel shall remain eligible for selection by lot.

A r ti c le 33

1. Where several parties request conciliation with the same respondent in respect of the same issue, or of issues which are closely connected, that respondent may request the consolidation of those cases.

2. The request for consolidation shall be considered and decided upon by majority vote by the chairmen of the conciliators so far chosen. If such request is allowed, the

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chairmen will designate the conciliators to consider the consolidated cases from among the conciliators so far appointed or chosen, provided that an uneven number of conciliators is chosen and that the conciliator first appointed by each party shall be one of the conciliators considering the consolidated case.

A r ti c le 3 4

Any party, other than an appropriate authority referred to in article 28, if conciliation has been initiated, may join in the proceedings: e ith e r

(a ) A sa party, in case of a direct economic interest;

or

(b ) As a supporting party to one of the original parties, in case of an indirect economic interest, unless either of the original parties objects to such joinder.

A r tic le 3 5

1. The recommendations of the conciliators shall be made in accordance with the provisions of this Code.

2. When the Code is silent upon any point, the conciliators shall apply the law which the parties agree at the time the conciliation proceedings commence or thereafter, but not later than the time of submission of evidence to the conciliators. Failing such agreement, the law which in the opinion of the conciliators is most closely connected

with the dispute shall be applicable.

3. The conciliators shall not decide e x a e q u o e t b o n o upon the dispute unless the parties so agree after the dispute has arisen.

4. The conciliators shall not bring a finding of non liq u e t on the ground of obscurity of the law.

5. The conciliators may recommend those remedies and reliefs which are provided in the law applicable to the dispute.

A r ti c le 3 6

The recommendations of the conciliators shall include reasons.

A r ti c le 3 7

1. Unless the parties have agreed before, during or after the conciliation procedure that the recommendation of the conciliators shall be binding, the recommendation shall become binding by acceptance by the parties. A recommendation which has been accepted by some parties to a dispute shall be binding as between those parties only.

2. Acceptance of the recommendation must be communicated by the parties to the conciliators, at an address specified by them, not later than 30 days after receipt of the notification of the recommendation; otherwise, it shall be considered that the recommendation has not been accepted.

3. Any party which does not accept the recommendation shall notify the conciliators and the other parties, within 30 days following the period specified in article 37, paragraph 2 of its grounds for rejection of the recommendation, comprehensi vely and in writing.

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4. When the recommendation has been accepted by the parties, the conciliators shall immediately draw up and sign a record of settlement, at which time the recommendation shall become binding upon those parties. If the recommendation has not been accepted by all parties, the conciliators shall draw up a report with respect to those parties rejecting the recommendation, noting the dispute and the failure of those parties to settle the dispute.

5. A recommendation which has become binding upon the parties shall be implemented by them immediately or at such later time as is specified in the recommendation.

6. Any party may make its acceptance conditional upon acceptance by all or any of the other parties to the dispute.

A r ti c le 3 8

1. A recommendation shall constitute a final determination of a dispute as between the parties which accept it, except to the extent that the recommendation is not recognised and enforced in accordance with the provisions of article 39, 2, “Recommendation” includes an interpretation, clarification or revision of the recommendation made by the conciliators before the recommendation has been accepted.

A r ti c le 3 9

1. Each Contracting Party shall recognise a recommendation as binding between the parties which have accepted it and shall, subject to the provisions of article 39, paragraphs 2 and 3, enforce, at the request of any such party, all obligations imposed by the recommendations as if it were a final judgement of a court of that Contracting Party.

2. A recommendation shall not be recognised and enforced at the request of a party referred to in article 39, paragraph 1 only if the court or other competent authority of the country where recognition and enforcement is sought is satisfied that: f a) Any party which accepted the recommendation was, under the law applicable

to it, under some legal incapacity at the time of acceptance; (b ) Fraud or coercion has been used in the making of the recommendations;

( c) The recommendation is contrary to public policy ( o r d r e p u b lic ) in the country of enforcement; or ( d) The composition of the conciliators, or the conciliation procedure, was not in accordance with the provisions of this Code. '

3. Any part of the recommendation shall not be enforced and recognised if the court or other competent authority is satisfied that such part comes within any of the subparagraphs of article 39, paragraph 2 and can be separated from other parts of the

recommendation. If such part cannot be separated, the entire recommendation shall not be enforced and recognised.

A r ti c le 4 0

1. Where the recommendation has been accepted by all the parties, the recom­ mendation and the reasons therefor may be published with the consent of all the parties.

2. Where the recommendation has been rejected by one or more of the parties but has been accepted by one or more of the parties:

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( a) The party or parties rejecting the recommendation shall publish its or their grounds for rejection, given pursuant to article 37, paragraph 3, and may at the same time publish the recommendation and the reasons therefor; (b ) A party which has accepted the recommendation may publish the recom­

mendation and the reasons therefor; it may also publish the grounds for rejection given by any other party unless such other party has already published its rejection and the grounds therefor in accordance with article 40, paragraph 2 ( a ) .

3. Where the recommendation has not been accepted by any of the parties, each party may publish the recommendation and the reasons therefor and also its own rejection and the grounds therefor.

A r ti c le 4 1

1. Documents and statements containing factual information supplied by any party to the conciliators shall be made public unless that party or a majority of the conciliators agrees otherwise.

2. Such documents and statements supplied by a party may be tendered by that party in support of its case in subsequent proceedings arising from the same dispute and between the same parties.

A r ti c le 4 2

Where the recommendation has not become binding upon the parties, no views expressed or reasons given by the conciliators, or concessions or offers made by the parties for the purpose of the conciliation procedure, shall affect the legal rights and obligations of any of the parties.

A r tic le 4 3

1. (a ) The costs of the conciliators and all costs of the administration of the conciliation proceedings shall be borne equally by the parties to the proceedings, unless they agree otherwise. ( b) When the conciliation proceedings have been initiated, the conciliators shall be

entitled to require an advance or security for the costs referred to in article 43, paragraph 1 (a ) .

2. Each party shall bear all expenses it incurs in connexion with the proceedings, unless the parties agree otherwise.

3. Notwithstanding the provisions of article 43, paragraphs 1 and 2, the conciliators may, having decided unanimously that a party has brought a claim vexatiously or frivolously, assess against that party any or all of the costs of other parties to the proceedings. Such decision shall be final and binding on all the parties.

A r ti c le 4 4

1. Failure of a party to appear or to present its case at any stage of the proceedings shall not be deemed an admission of the other party’s assertions. In that event, the other party may, at its choice, request the conciliators to close the proceedings or to deal with the questions presented to them and submit a recommendation in accordance

with the provisions for making recommendations set out in this Code.

2. Before closing the proceedings, the conciliators shall grant the party failing to appear or to present its case a period of grace, not exceeding 10 days, unless they are satisfied that the party does not intend to appear or to present its case.

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3. Failure to observe procedural time-limits laid down in this Code or determined by the conciliators, in particular time-limits relating to the submission of statements or information, shall be considered a failure to appear in the proceedings.

4. Where the proceedings have been closed owing to one party’s failure to appear or to present its case, the conciliators shall draw up a report noting that party’s failure.

A r t i c l e 4 5

1. The conciliators shall follow the procedures stipulated in this Code.

2. The rules of procedure annexed to the present Convention shall be considered as model rules for the guidance of conciliators. The conciliators may, by mutual consent, use, supplement or amend the rules contained in the annex or formulate their own rules of procedure to the extent that such supplementary, amended or other rules are not inconsistent with the provisions of this Code.

3. If the parties agree that it may be in the interest of achieving an expeditious and inexpensive solution of the conciliation proceedings, they may mutually agree to rules of procedure which are not inconsistent with the provisions of this Code.

4. The conciliators shall formulate their recommendation by consensus or failing that shall decide by majority vote.

5. The conciliation proceedings shall finish and the recommendation of the conciliators shall be delivered not later than six months from the date on which the conciliators are appointed, except in the cases referred to in article 23, paragraph 4 ( e ) ( f) , and ( g ) , for which the time limits in article 14, paragraph 1 and article 16, paragraph

4 shall be valid. The period of six months may be extended by agreement of the parties.

C. I N S T I T U T I O N A L M A C H I N E R Y

A r ti c le 4 6

1. Six months before the entry into force of the present Convention, the Secretary- General of the United Nations shall, subject to the approval of the General Assembly of the United Nations, and taking into account the views expressed by the Contracting Parties, appoint a Registrar, who may be assisted by such additional staff as may be

necessary for the performance of the functions listed in article 46, paragraph 2. Administrative services for the Registrar and his assistants shall be provided by the United Nations Office at Geneva.

2. The Registrar shall perform the following functions in consultation with the Contracting Parties as appropriate:

( a) Maintain the list of conciliators of the international panel of conciliators and regularly inform the Contracting Parties of the composition of the panel; ( b) Provide the names and addresses of the conciliators to the parties concerned on request; (c) Receive and maintain copies of requests for conciliation, replies, recom­

mendation, acceptances, or rejections, including reasons therefor; ( d) Furnish on request, and at their cost, copies of recommendations and reasons for rejection to the shippers’ organizations, conferences and Governments, subject to the provisions of article 40; .

(e) Make available information of a non-confidential nature on completed conciliation cases, and without attribution to the parties concerned, for the purposes of preparation of material for the Review Conference referred to in article 52; and .

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(J) The other functions prescribed for the Registrar in article 26, paragraph 1 (c ) and article 30, paragraphs 2 and 3.

C h a p te r V I I

FINAL CLAUSES

A r ti c le 4 7

IMPLEMENTATION

1. Each Contracting Party shall take such legislative or other measures as may be necessary to implement the present Convention.

2. Each Contracting Party shall communicate to the Secretary-General of the United Nations, who shall be the depositary, the text of the legislative or other measures which it has taken in order to implement the present Convention.

A r ti c le 4 8

SIGNATURE, RATIFICATION, ACCEPTANCE, APPROVAL AND ACCESSION

1. The present Convention shall remain open for signature as from 1 July 1974 until and including 30 June 1975 at United Nations Headquarters and shall thereafter remain open for accession.

2. All States a are entitled to become Contracting Parties to the present Convention by: ( a) Signature subject to and followed by ratification, acceptance or approval; or

(b ) Signature without reservation as to ratification, acceptance or approval; or

(c) Accession.

3. Ratification, acceptance, approval or accession shall be effected by the deposit of an instrument to this effect with the depositary.

A r ti c le 4 9

ENTRY INTO FORCE

1. The present Convention shall enter into force six months after the date on which not less than 24 States, the combined tonnage of which amounts to at least 25 per cent of world tonnage, have become Contracting Parties to it in accordance with article 48. For the purpose of the present article the tonnage shall be deemed to be that contained

in L l o y d s R e g is te r o f S h ip p in g — S t a t i s t i c a l T a b le s 1 9 7 3 , table 2 “World Fleets— Analysis by Principal Types”, in respect to general cargo (including passenger/cargo) ships and container (fully cellular) ships, exclusive of the United States reserve fleet and the American and Canadian Great Lakes fleets.b

a At its 9th plenary meeting on 6 April 1974, the Conference adopted the following understanding recommended by its Third Main Committee: “In accordance with its terms, the present Convention will be open to participation by all States, and the Secretary- General of the United Nations will act as depositary. It is the understanding of the Conference that the Secretary-

General, in discharging his functions as depositary of a convention or other multilateral legally binding instrument with an “All-States” clause, will follow the practice o f the General Assembly of the United Nations in implementing such a clause and, whenever advisable, will request the opinion of the General Assembly before receiving a signature or an instrument of ratification, acceptance, approval or accession.” b The tonnage requirements for the purposes of article 49, paragraph 1 are set out in part two below.

207

2. For each State which thereafter ratifies, accepts, approves or accedes to it, the present Convention shall come into force six months after deposit by such State of the appropriate instrument.

3. Any State which becomes a Contracting Party to the present Convention after the entry into force of an amendment shall, failing an expression of a different intention by that State: ( a) Be considered as a Party to the present Convention as amended; and

(b ) Be considered as a Party to the unamended Convention in relation to any Party

to the present Convention not bound by the amendment.

A r t i c l e 5 0

DENUNCIATION

1. The present Convention may be denounced by any Contracting Party at any time after the expiration of a period of two years from the date on which the Convention has entered into force.

2. Denunciation shall be notified to the depositary in writing, and shall take effect one year, or such longer period as may be specified in the instrument of denunciation, after the date of receipt by the depositary.

A r t i c l e 51

AMENDMENTS

1. Any Contracting Party may propose one or more amendments to the present Convention by communicating the amendments to the depositary. The depositary shall circulate such amendments among the Contracting Parties, for their acceptance, and among States entitled to become Contracting Parties to the present Convention which are not Contracting Parties, for their information.

2. Each proposed amendment circulated in accordance with article 51, paragraph 1 shall be deemed to have been accepted if no Contracting Party communicates an objection thereto to the depositary within 12 months following the date of its circulation by the depositary. If a Contracting Party communicates an objection to the proposed amendment, such amendment shall not be considered as accepted and shall not be put into effect.

3. If no objection has been communicated, the amendment shall enter into force for all Contracting Parties six months after the expiry date of the period of 12 months referred to in article 51, paragraph 2.

A r ti c le 5 2

REVIEW CONFERENCES

1. A Review Conference shall be convened by the depositary five years from the date on which the present Convention comes into force to review the working of the Convention, with particular reference to its implementation, and to consider and adopt appropriate amendments.

2. The depositary shall, four years from the date on which the present Convention comes into force, seek the views of all States entitled to attend the Review Conference and shall, on the basis of the views received, prepare and circulate a draft agenda as well as amendments proposed for consideration by the Conference.

208

3. Further review conferences shall be similarly convened every five years or at any time after the first Review Conference, at the request of one-third of the Contracting Parties to the present Convention, unless the first Review Conference decides otherwise.

4. Notwithstanding the provisions of article 52, paragraph 1, if the present Convention has not entered into force five years from the date of the adoption of the Final Act of the United Nations Conference of Plenipotentiaries on a Code of Conduct for Liner Conferences, a Review Conference shall, at the request of one-third of the

States entitled to become Contracting Parties to the present Convention, be convened by the Secretary-General of the United Nations, subject to the approval of the General Assembly, in order to review the provisions of the Convention and its annex and to

consider and adopt appropriate amendments.

A r ti c le 5 3

FUNCTIONS OF THE DEPOSITARY

1. The depositary shall notify the signatory and acceding State of: f a) Signatures, ratifications, acceptances, approvals and accessions in accordance with article 48; (b ) The date on which the present Convention enters into force in accordance with

article 49; f c) Denunciations of the present Convention in accordance with article 50;

( d) Reservations to the present Convention and the withdrawal of reservations;

( e) The text of the legislative or other measures which each Contracting Party has taken in order to implement the present Convention in accordance with article 47; (f) Proposed amendments and objections to proposed amendments in accordance with article 51; and (g ) Entry into force of amendments in accordance with article 51, paragraph 3.

2. The depositary shall also undertake such actions as are necessary under article 52.

A r tic le 5 4

AUTHENTIC TEXTS—DEPOSIT

The originals of the present Convention, of which the Chinese, English, French, Russian and Spanish texts are equally authentic, will be deposited with the Secretary- General of the United Nations.

IN WITNESS WHEREOF the undersigned, having been duly authorised to this effect by their respective Governments, have signed the present Convention, on the dates appearing opposite their signatures.

ANNEX TO THE CONVENTION

Model rules of procedure for international mandatory conciliation.

Rule 1

1. Any party wishing to institute conciliation proceedings under the Code shall address a request to that effect in writing, accompanied by a statement of claim to the other party, and copied to the Registrar.

209

2. The statement of claim shall: ( a) Designate precisely each party to the dispute and state the address of each:

(b) Contain a summary statement of pertinent facts, the issues in dispute and the claimant’s proposal for the settlement of the dispute; (c) State whether an oral hearing is desired and, if so, and to the extent then known, the names and addresses of persons to give evidence, including experts’ evidence, for the claimant: (d) Be accompanied by such supporting documentation and relevant agreements and

arrangements entered into by the parties as the claimant may consider necessary at the time of making the claim; (e) Indicate the number of conciliators required, any proposal concerning the appointment of conciliators, or the name of the conciliator appointed by the claimant in accordance with

article 32, paragraph 2; and (fi Contain proposals, if any, regarding rules of procedure.

3. The statement of claim shall be dated and shall be signed by the party.

R u le 2

1. If the respondent decides to reply to the claim, he shall, within 30 days following the date of his receipt of the statement of claim, transmit a reply to the other party and copied to the Registrar.

2. The reply shall: (a) Contain a summary statement of pertinent facts opposed to the contentions in the statement of claim, the respondent’s proposal, if any, for the settlement of the dispute and any remedy claimed by him with a view to the settlement of the dispute; : (b) State whether an oral hearing is desired and, if so, and to the extent then known, the

names and addresses of persons to give evidence, including experts’ evidence, for the respondent; (c) Be accompanied by such supporting documentation and relevant agreements and arrangements entered into by the parties as the respondent may consider necessary at the

time of making the reply; (d) Indicate the number of conciliators required, any proposal concerning the appointment of conciliators, or the name of the conciliator appointed by the respondent in accordance with article 32, paragraph 2; and ( e) Contain proposals, if any, regarding rules of procedure.

3. The reply shall be dated and shall be signed by the party.

R ule 3

1. Any person or other interest desiring to participate in conciliation proceedings under article 34 shall transmit a written request to the parties to the dispute, with a copy to the Registrar.

2. If participation in accordance with ( a) of Article 34 is desired, the request shall set forth the grounds therefor, including the information required under rule 1, paragraph 2 (a ) J b ) and ( d ).

3. If participation in accordance with (b) of article 34 is desired, the request shall state the grounds therefor and which of the original parties would be supported.

4. Any objection to a request for joinder by such a party shall be sent by the objecting party, with a copy to the other party, within seven days of receipt of the request.

5. In the event that two or more proceedings are consolidated, subsequent requests for third- party participation shall be transmitted to all parties concerned, each of which may object in accordance with the present rule.

R u le 4

By agreement between the parties to a dispute, on motion by either party, and after affording the parties an opportuntiy of being heard, the conciliators may order the consolidation or separation of all or any claims then pending between the same parties.

210

R u le 5

1. Any party may challenge a conciliator where circumstances exist that cause justifiable doubts as to his independence.

2. Notice of challenge, stating reasons therefor, should be made prior to the date of the closing of the proceedings, before the conciliators have rendered their recommendation. Any such challenge shall be heard promptly and shall be determined by majority vote of the conciliators in the first instance, as a preliminary point, in cases where more than one cpnciliator has been

appointed. The decision in such cases shall be final.

3. A conciliator who has died, resigned, become incapacitated or disqualified shall be replaced promptly.

4. Proceedings interrupted in this way shall continue from the point where they were interrupted, unless it is agreed by the parties or ordered by the conciliators that a review or rehearing of any oral testimony take place.

R u le 6

The conciliators shall be judges of their own jurisdiction and/or competence within the provisions of the Code.

R u le 7

1. The conciliators shall receive and consider all written statements, documents, affidavits, publications or any other evidence, including oral evidence, which may be submitted to them by or on behalf of any of the parties, and shall give such weight thereto as in their judgement such evidence merits.

2. ( a) Each party may submit to the conciliators any material it considers relevant, and at the time of such submission shall deliver certified copies to any other party to the proceedings, which party shall be given a reasonable opportunity to reply thereto; (b) The conciliators shall be the sole judges of the relevance and materiality of the evidence

submitted to them by the parties; ( c) The conciliators may ask the parties to produce such additional evidence as they may deem necessary to an understanding and determination of the dispute, provided that, if such additional evidence is produced, the other parties to the proceedings shall have a reasonable opportunity to comment thereon.

R u le 8

1. Whenever a period of days for the doing of any act is provided for in the Code or in these rules, the day from which the period begins to run shall not be counted, and the last day of the period shall be counted, except where that last day is a Saturday, Sunday or a public holiday at the place of conciliation, in which case the last day shall be the next business day.

2. When the time provided for is less than seven days, intermediate Saturdays, Sundays and public holidays shall be excluded from the computation.

R u le 9

Subject to the provisions relating to procedural time-limits in the Code, the conciliators may, on a motion by one of the parties or pursuant to agreement between them, extend any such time­ limit which has been fixed by the conciliators.

R u le 10

1. The conciliators shall fix the order of business and, unless otherwise agreed, the date and hour of each session.

2. Unless the parties otherwise agree, the proceedings shall take place in private.

3. The conciliators shall specifically inquire of all the parties whether they have any further evidence to submit before declaring the proceedings closed, and a noting thereof shall be recorded.

211

R u le 11

Conciliators recommendations shall be in writing and shall include: ( The precise designation and address of each party; (b ) A description of the method of appointing conciliators, including their names;

( c) The dates and place of the conciliation proceedings;

(d ) A summary of the conciliation proceedings, as the conciliators deem appropriate;

(e) A summary statement of the facts found by the conciliators;

(f) A summary of the submissions of the parties;

(g) Pronouncements on the issues in dispute, together with the reasons therefor;

(h) The signatures of the conciliators and the date of each signature; and

( i) An address for the communication of the acceptance or rejection of the recommendation.

R u le 12

The recommendation shall, so far as possible, contain a pronouncement on costs in accordance with the provisions of the Code. If the recommendation does not contain a full pronouncement on costs, the conciliators shall, as soon as possible after the recommendation, and in any event not later than 60 days thereafter, make a pronouncement in writing regarding costs as provided in the Code.

R u le 13

Conciliators’ recommendations shall also take into account previous and similar cases whenever this would facilitate a more uniform implementation of the Code and observance of . conciliators’ recommendations.

Annex II

RESOLUTIONS ADOPTED BY THE CONFERENCE

1. Completion of the work of the Conference T h e U n ite d N a tio n s C o n fe r e n c e o f P le n ip o te n tia r ie s o n a C o d e o f C o n d u c t f o r L in e r

C o n fe re n c e s ,

H a v in g m e t in accordance with General Assembly resolution 3035 (XXVII) of 19 December 1972 to consider and adopt a convention or any other multilateral legally binding instrument on a code of conduct for liner conferences, H a v in g a g r e e d unanimously in respect of a large number of paragraphs contained in the draft code of conduct for liner conferences annexed to the reports of the three main committees of the Conference of Plenipotentiaries,

H a v in g n o te d that the principles in regard to the settlement of some fundamental issues before the United Nations Conference of Plenipotentiaries for a Code of Conduct for Liner Conferences submitted by the President of the Conference, and annexed to this resolution, have been accepted, among the States participating in the Conference, by all developing countries, all socialist countries of Eastern Europe and a number of developed market-economy countries, and having noted also that a number of other developed market-economy countries have not accepted the above-mentioned principles and that a number of other such countries have reserved their position on the

subject,

T a k in g n o te that all countries which have accepted the principles referred to in the preceding paragraph have agreed that these principles shall form the basis of further work on the relevant sections of the draft code of conduct for liner conferences,

212

T a k in g n o te also of the views of countries which have not accepted the principles referred to above and the desire of these countries that their views be taken into account in the further work,

1. T a k e s n o te of the substantial progress achieved during the first part of the Conference;

2. T a k e s n o te also of the report on the plenary meetings of the Conference and of the reports of its three main committees;

3. C o n s id e r s that the best interests of all countries will be served by a resumption of the United Nations Conference of Plenipotentiaries on a Code of Conduct for Liner Conferences in Geneva on 11 March 1974 for a period of three weeks in order that it may complete its task;

4. R e q u e s ts the Secretary-General of the United Nations and the Secretary-General of UNCTAD to make arrangements for the resumption of the Conference of Plenipotentiaries accordingly;

5. A f f ir m s that the large number of paragraphs agreed unanimously and contained in the draft code of conduct for liner conferences annexed to the reports of the three main committees of the Conference of Plenipotentiaries shall not be reopened for any further discussion or for changes in the texts of these paragraphs, with the exception of

any editorial and/or legal drafting changes that may be deemed necessary;

6. N o te s the agreement of all countries who have accepted the principles in regard to the settlement of some fundamental issues before the United Nations Conference submitted by the President of the Conference, and annexed to this resoution, to continue to regard these principles as the basis for further work at the resumed

Conference of Plenipotentiaries and not to reopen discussion on these principles and also not to reopen for any further discussion or changes the relevant paragraphs of the draft code agreed by all such countries, and based on these principles, with the exception of any editorial and/or legal drafting changes that may be deemed necessary

or any other drafting changes considered necessary for securing improved conformity of the texts of these paragraphs with the agreed principles;

7. C o n fir m s the willingness of all parties to this resolution to continue negotiations at the resumed Conference of Plenipotentiaries from the stage reached at its adjournment with a view to considering and adopting at the resumed conference a convention or any other multilateral legally binding instrument on a code of conduct for liner conferences;

8. R e q u e s ts the UNCTAD secretariat to prepare texts in legal language in respect of texts annexed to the reports of the main committees of the Conference and to circulate such texts to the Governments of all member States as an aid to their consideration well in advance of the resumption of the Conference of Plenipotentiaries.

6 th p le n a r y m e e tin g 1 5 D e c e m b e r 1 9 7 3

213

Annex to Resolution 1

Principles in regard to the settlement of some fundamental issues before the United Nations Conference of Plenipotentiaries on a Code of Conduct for Liner Conferences.

A. R o le o f G o v e r n m e n ts

1. Upon the request of Governments, requisite information is to be furnished by the conferences.

2. Government representatives are to have the right to be present during consultations, to participate in the discussions fully, to make suggestions, and to promote agreement between the parties, but they shall have no role of a decision-maker.

3. Governments are to have a similar right of participation in conciliation proceedings.

B. P a r tic ip a tio n in tr a d e

1. Equality of the rights of national lines at the two ends.

2. A share of 20 per cent is to be allocated to third-flag lines where they exist.

3. If national lines do not carry, or are unable to carry, their allocated share of the trade—and on this point they themselves shall make the decision—that portion of their share of the trade which they do not carry will revert to the pool to be shared p r o ra ta .

4. National lines within a region at one end are to have the flexibility of adjustments among themselves in regard to their shares. ;

C. Im p le m e n ta tio n

1. Every effort is to be made by the parties to reach a settlement during consultations.

2. Where a matter is not settled by consultation and a dispute arises, it should be submitted to mandatory international conciliation; among such matters are questions relating to freight rates, surcharges, and currency adjustment factors.

3. Conciliators’ recommendations, if accepted by the parties, shall be binding.

4. If conciliators’ recommendations are rejected, reasons for their rejection are to be stated comprehensively in writing and published.

5. A review conference is to be convened after five years to review the working of the convention with particular reference to implementation. Such review conferences are to be held every five years thereafter.

D. C r ite r ia f o r th e d e te rm in a tio n o f f r e ig h t r a te s 1. These criteria should be as contained in the proposal submitted by the socialist countries of

Eastern Europe for paragraph 54 of the Code.a

2. The time between the date when one general freight-rate increase becomes effective and the date of notice of the next general freight-rate increase should not be less than 12 months.

N o te . Reference was made to the apprehensions among different groups in regard to the question of outside competition, but the hope was expressed that this problem would be satisfactorily resolved by mutual discussion in the Committee or drafting group concerned.

a For the text of this proposal, which was subsequently sponsored also by the Group of 77 and by France, see alternative I to paragraph 54 of the Code in U n i t e d N a t i o n s C o n f e r e n c e o f P l e n i p o t e n t i a r i e s o n a C o d e o f C o n d u c t f o r L i n e r

C o n f e r e n c e s , vol. I, R e p o r t s a n d o t h e r d o c u m e n t s (United Nations publication, Sales No. E.75.II.D ll) , part four, sect. I.

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2. Non-conference shipping lines

T h e U n ite d N a tio n s C o n fe r e n c e o f P le n ip o te n tia r ie s o n a C o d e o f C o n d u c t f o r L in er

C o n fe re n c e s,

H a v in g p r e p a r e d the Convention on a Code of Conduct for Liner Conferences with a view to improving the liner conference system, B e a rin g in m in d that the Convention is applicable to liner conferences and their external relations,

R e s o lv e s th a t:

1. Nothing in that Convention shall be construed so as to deny shippers an option in the choice between conference shipping lines and non-conference shipping lines subject to any loyalty arrangements where they exist; 2. Non-conference shipping lines competing with a conference should adhere to the principle of fair competition on a commercial basis;

3. In the interest of sound development of liner shipping service, non-conference shipping lines should not be prevented from operating as long as they comply with the requirements of paragraph 2 above.

9 th p le n a r y m e e tin g 6 A p r il 1974

3. Local conciliation

T h e U n ite d N a tio n s C o n fe r e n c e o f P le n ip o te n tia r ie s o n a C o d e o f C o n d u c t f o r L in er

C o n fe re n c e s ,

B e a r in g in m in d the importance of the consultation provisions and the dispute settlement procedures provided in the Convention on a Code of Conduct for Liner Conferences, N o tin g that proposals were made to provide in the Code for submitting some

disputes to local conciliation, 1. R e q u e s ts the first Review Conference to be convened in accordance with article 52 of the Convention to give priority consideration to the subject of local conciliation, taking into account the views expressed by the Contracting Parties to the Convention

on whether or not the absence of local conciliation has hampered the effective settlement of disputes and, if so, which subjects should be considered appropriate for local conciliation and what procedures should be applied for resolving such disputes.

2. A g r e e s that in preparing for the Review Conference the depositary shall seek the views of all States entitled to attend the Review Conference, which should be required to take into account the views expressed by appropriate authorities, liner conferences and shippers’ organisations.

9 th p le n a r y m e e tin g 6 A p r il 1974

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Part two

TONNAGE REQUIREMENTS*

TONNAGE REQUIREMENTS FOR PURPOSES OF ARTICLE 49(1) OF THE CONVENTION ON A CODE OF CONDUCT FOR LINER CONFERENCES

General cargo (including passenger cargo) ships and container (fully cellular) ships, exclusive of the United States reserve fleet and the American and Canadian Great Lakes fleets

(Gross registered tons; steamships and motorships o f 100 gross tons or more are included)

General cargo (including Container ships passenger)cargo) (fully cellular) Total

Great Britain and Northern Ireland A u s t r a l i a ....................................

B a h a m a s ....................................

B angladesh....................................

Barbados ....................................

B e liz e .............................................

B e r m u d a ....................................

Canada3 ....................................

Cayman Islands . . . .

C yprus.............................................

Falkland Islands . . . .

F i j i .............................................

G a m b i a ....................................

G h a n a .............................................

G i b r a l t a r ....................................

Gilbert and Ellice Islands . .

Grenada ....................................

G u y a n a ....................................

Hong K o n g ....................................

I n d i a .............................................

J a m a i c a ....................................

K e n y a .............................................

M a l a y s i a ....................................

Maidive Islands . . . .

M a l t a .............................................

Mauritius . . . . .

M o n tse rra t....................................

N a u ru .............................................

New G uinea....................................

New Hebrides . . . .

New Zealand . . . .

Nigeria.............................................

St. Kitts-Nevis . . . .

St. L u c i a ....................................

St. V in c e n t....................................

S e y c h e lle s ....................................

Sierra Leone....................................

S in g a p o r e ....................................

Solomon Islands . . . .

Sri Lanka (Ceylon) . . .

T a n z a n i a ....................................

T o n g a .............................................

*OriginalIy issued as TD/CODE/IO (vol. II). annex I.

5,231.668 1,344,805 6,576,473

252,672 83,123 335,795

56,125 — 56,125

34,285 — 34,285

696 — 696

620 — 620

52,085 — 52,085

136,646 — 136,646

43,567 — ■ 43,567

2,137,943 — 2,137,943

2,100 — 2,100

3,954 — 3,954

641 — 641

115.152 — 115,152

1,500 — 1,500

1,333 — 1,333

226 — 226

6,336 — 6,336

159,845 — 159,845

1,314,740 — 1,314,740

12,253 — 12,253

10,533 — 10,533

119,672 — 119,672

76,963 — 76,963

5,600 — 5,600

13,779 — 13,779

711 — . 711

26,940 — 26,940

22,074 — 22,074

4,369 — 4,369

107,333 — 107,333

95,630 — 95,630

396 - 396

904 — 904

2,247 — 2,247

192 — 192

1.035 — 1,035

1,029,662 55,681 1,085,343

629 — 629

32, 274 — 32, 274

25,593 — 25,593

1,658 1,658

216

General cargo (including passenger 1 cargo) Container ships

(fully cellular) Total

Trinidad and T o b a g o .................................... 5,555 — 5,555

Turks Islands . . . . . . 1,323 — 1,323

U g a n d a ...................................................... 5,510 — 5,510

Virgin I s l a n d s ............................................. 578 — 578

Zambia............................................................... 5,513 — 5,513

Total British Commonwealth 11,161,060 1,483,609 12,644,669

A l b a n i a ...................................................... 57,068 57,068

Algeria............................................................... 51,227 — 51,227

A r g e n t i n a ...................................................... 667,832 — 667,832

Austria............................................................... 67,125 5,932 73,057

B a h r a i n ...................................................... 1,444 — 1,444

B e l g i u m ...................................................... 316,454 31,036 347,490

B r a z il............................................................... 1,005,151 — 1,005,151

Bulgaria . . . . . . . 280,198 — 280,198

B urm a............................................................... 45,449 — 45,449

C a m e r o o n ...................................................... — — —

C h i l e ............................................................... 213,072 213,072

China, People’s Rep. of. . . . . 1,137,797 — 1,137,797

China ( T a iw a n ) ............................................. 691,117 — 691,117

C o l o m b i a ...................................................... 203,252 — 203,252

Congo ............................................................... — — —

Costa R i c a ...................................................... 7,091 — 7,091

C u b a ............................................................... 281,549 — 281,549

C zech o slo v a k ia............................................. 25,106 — 25,106

D a h o m e y ...................................................... — —

D e n m a r k ...................................................... 1,222,596 140,225 1,362,821

Dominican R e p u b l i c .................................... ' 8,470 — 8,470

Ecuador ...................................................... 49,838 — 49,838

E g y p t ............................................................... 162,191 — 162,191

El S alv ad o r...................................................... — — —

E t h i o p i a ...................................................... 22,932 — 22, 932

Faroe I s l a n d s ............................................. 6,067 — 6,067

F i n l a n d ...................................................... 557,310 3,895 561,205

France ............................................................... 1,419,765 135,521 1,555,286

G a b o n ............................................................... — — —

German Democratic Republic . . . 620,927 — 620,927

Germany, Fed. Rep. o f .................................... 2,977,640 613,808 3,591,448

G reece............................................................... 6,336,866 3,986 6,340,852

G u a te m a la ...................................................... 7,972 — 7,972

G uinea............................................................... 4,132 — 4,132

H o n d u r a s ...................................................... 62,548 — 62,548

H u n g a r y ...................................................... 52,779 - 52,779

Iceland.............................................................. 58,061 — 58,061

I n d o n e s i a ...................................................... 523,011 — 523,011

I r a n .............................................................. 111,436 — 111,436

I r a q .............................................................. 47,743 — 47,743

Irish R e p u b l i c ............................................. 34,695 6,260 40,955

Israel .............................................................. 249,942 77,879 327,821

Italy .............................................................. 1,278,966 69,161 1,348,127

Ivory C o a s t..................................................... 82,365 — 82,365

Japan . . . .................................... 5,730,942 950,683 6,681,625

Jordan .............................................................. 5,987 — 5,987

Khmer R e p u b lic ............................................ 1,880 — 1,880

Korea ( N o r t h ) ............................................. 9,266 — 9,266

Korea ( S o u t h ) ............................................. 388,074 3,451 391,525

Kuwait.............................................................. 214,675 •-- 214,675

Lebanon ..................................................... 118,908 — 118,908

217

General cargo (including passenger/cargo) Container ships

(fully cellular) Total

Liberia.................................... 3,523,102 146,848 3,669,950

L i b y a .................................... 5,962 — 5,962

Madagascar . . . . 29,139 -- ' 29, 139

Mauritania . . . . — — —

Mexico.................................... 100,011 — 100,011

Monaco . . . . 770 — 770

Morocco . . . . 43,303 — 43,303

Netherlands . . . . 1,968,375 153,165 2,121,540

Nicaragua . . . . 17,819 — 17,819

Norway . . . . 2,215,246 135,154 2,350,400

O m a n .................................... 1,023 — 1,023

Pakistan . . . . 455,061 — 455,061

Panama . . . . 3,182,121 965 3,183,086

Paraguay . . . . 15,566 15,566

P e r u .................................... 213,000 — 213,000

Philippines . . . . 646,829 — 646,829

P oland .................................... 1,058,771 — 1,058,771

Portugal . . . . 481,627 5,695 487,322

Q a ta r .................................... — — —

Romania . . . . 129,503 — 129,503

Russia (USSR) . . . 6,462,506 35,200 6,497,706

Saudi Arabia . . . 36,992 — 36,992

Senegal.................................... 6,045 — 6,045

Somali Republic . . . 1,180,015 — 1,180,015

South Africa. . . . 280,342 — 280,342

S p a i n .................................... 1,025,406 20,808 1,046,214

Sudan .................................... 37,158 — 37,158

Sweden.................................... 1,089,283 151 727 1,241,010

Switzerland . . . . 145,732 — 145,732

S y r i a .................................... 1,071 — 1,071

Thailand . . . . 65,380 — 65,380

Tunisia.................................... 14,763 — 14,763

T urkey.................................... 369,488 — 369,488

United Arab Emirates . . 6,876 — 6,876

United States of America6 . 2,188,907 1,723,755 3,912,662

Uruguay . . . . 42,477 — 42,477

Venezuela . . . . 119,980 — 119,980

Vietnam (North) . . . 3,981 — 3,981

Vietnam (South) . . . 30,980 — 30,980

Yemen Arab Republic . . 2,844 — 2,844

Yemen, People’s Dem. Rep. . 713 — 713

Yugoslavia . . . . 982,639 — 982,639

Z a i r e .................................... 34,646 — "34,646

World Total 66,795,428 5,898,763 72,694,191

S o u r c e : Data are extracted from table 2 of L l o y d 's R e g i s t e r o f S h i p p i n g — S t a t i s t i c a l T a b l e s 1 9 7 3 , “World Fleets—Analysis

by Principal Types” . They refer to the position at 1 July 1973.

NOTES. The tonnage of general cargo and container ships in the United States reserve fleet and the U n i t e d States and C a n a d i a n G r e a t Lakes fleets are included in the original table but are excluded here, in accordance with the provisions of

article 49 (1) of the Convention, on the basis of information supplied to the UNCTAD secretariat by Lloyd’s Register of Shipping in a letter dated 3 April 1974, which stated that there is no container ship tonnage in the excluded categories. The nomenclature and listing of countries and territories are as in the original s o u r c e .

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References to China are to be understood in the light of General Assembly resolution 2758 (XXVI) of 25 October 1971. By that resolution, the general assembly, i n t e r a l ia , decided: .. to restore all its rights to the People’s Republic of China and to recognise the representatives of its Government as the only legitimate representatives of China to the United Nations, and to expel forthwith the representatives of Chiang Kai-

shek from the place which they unlawfully occupy at the United Nations and in all the organisations related to it.” a Total general cargo tonnage . . . .

L e s s Great Lakes general cargo tonnage . .

295,073 158,427

136,646

b Total general cargo tonnage . . . .

L e s s Great Lakes general cargo tonnage . .

4,740,955 52,048

4,688,907

Reserve f l e e t general c a r g o tonnage (estimated—see source, p. 3). . . . 2,500,000

2,188,907

219