TZANEROS, Mr Arthur, Chief Executive Officer and Managing Director, ACFS Port Logistics

[11:55]

CHAIR: I now welcome Mr Tzaneros from ACFS Port Logistics. Would you like to make an opening statement?

Mr Tzaneros : ACFS Port Logistics is a national business that employs approximately 1,200 permanent employees, runs a fleet of 300 trucks, 1,200 trailers and moves over 850,000, 20-foot equivalent units on a per annum basis on the port.

CHAIR: I am just writing down 1,200 people, 300 vehicles—?

Mr Tzaneros : We have over 300 vehicles, 1,200 trailers and move over 850,000 20-foot equivalent units of FCLs on a per annum basis—import and export.

CHAIR: That is a significant bit of kit there. To the opening statement, please.

Mr Tzaneros : There is a number of topics I would like to put forward today. I will go through them one by one. Firstly, the lack of minimum award rates on what, I would call, subcontractors. I break up subcontractors into two parts, being the gig economy and also the general subcontractor fleet. We have a situation around the country and more so in some particular states—I will use Melbourne as an example—where there is not a floor in the rates that you can pay these subcontractors.

As a company, you have a decision to make. You have a company fleet, where you have to pay the minimum award or, in our case, you pay the ACFS enterprise agreement, which is 30 per cent above the minimum award; or you have a choice of employing a subcontractor who works under no award and is a price taker. There is no doubt that is causing a threat to our broader business, because these subcontractors are constantly looking for work and are price takers right across the board. In Melbourne, for example, as I said earlier, we can employ a subcontractor with a truck and trailer and they have to pay themselves. We can actually end up paying them less than what we actually pay our company driver purely in wages.

CHAIR: That is a significant statement, that.

Mr Tzaneros : It is a genuine fact. We can pay a subcontractor but, when we actually work out what they get paid when they are doing shipping line stack runs, they probably get paid less than a company driver, and we have to provide the company driver with a truck.

CHAIR: Less than the company driver as wage?

Mr Tzaneros : Yes, wage! This causes significant issues. The reason I say it causes significant issues is, in order to actually earn a real wage, they have to do something. They have to not maintain their fleet, they have to buy a really cheap asset in the hope it just keeps going and doesn't break down or they potentially have to do something that is even worse—that is, work for us during the day and moonlight at night with minimal sleep in order to complement their wages, which is what is happening generally across the board. The important fact there is nobody actually knows what is left for the driver on a per-hour basis. Is it $20? Is it $10? Or is it as low as $5 an hour after they have to pay all their costs with these subcontractors?

The important part around that is: has the driver slept? Have they had their rest breaks? When they're running metro they're not filling in log books. They're running around all our families, on metropolitan roads, where there is the most traffic, and we've seen some very dangerous accidents, not only in recent days but over the preceding months—some big truck accidents on metropolitan roads.

I'm saying that minimum standards and rates need to be introduced to the subcontractor model, in all states. There shouldn't be a rule in the state of New South Wales and then no minimum award rates for some other states. We're also seeing the situation recently, due to demanding pressures, where companies out there are employing employees with their own ABNs—so, not the genuine subcontractor, but someone coming on as an individual employee as their own company. We're seeing wages being reduced through that as well.

All these pressures continue to multiply and cascade on the companies that are doing the right things. I used this terminology earlier, that the more compliant and the better and/or larger a company you are, the closer to the edge of the cliff you are. I think we've seen some recent examples of that, some recent struggles. I shouldn't speak of a competitor, but an Australian flagship company was Toll, and it's no secret in the public domain that they've struggled recent years, and that is a result of the pressures of driving down rates from the competition.

Another thing that's an indictment on our industry is that when the rates have gone as low as they can go then the next form of attack by procurement teams is payment terms. We've got a number of factors. As a company we need to pay our wages every seven days, as most companies do, and pay for fuel within 14 days and maintenance supplies within 30 days. We've got to pay our property rents on the first day of the month. Yet our customers expect us, at procurement time—either 60 days or 90 days, 90 days end of month. In the building industry, as an example, there's a standard that you must pay within a certain period, and it's not a negotiation point. Paying a transport company within a certain period of time should not be negotiation point.

CHAIR: Cash flow is king.

Mr Tzaneros : Cash flow is king in a transport company. If you don't have cash flow in your business you don't maintain your fleet, you don't pay your drivers, you don't pay their super, and it cascades all along. And we're starting to see that. I know there are road authorities out on the road, checking the quality of trucks, but surely they're not keeping it up. The standard of trucks that I've seen in some states is appalling.

CHAIR: Is this metro? Or are you talking about intra- and interstate?

Mr Tzaneros : I'm talking about metro. They're not going through the weighbridge stations. They're not attracting that much attention out on the road. I'm talking about metropolitan roads. So, we need to get the introduction of a mandatory system that is paying transport companies in time. That is what I'm proposing.

The next point I'd like to bring up, which is specific to the port, is the introduction of what I've referred to as a split tariff by the container terminals. They used to charge the shipping lines for lifts, to provide a service. They'll lift the container off the vessel and then load the container from the container terminal to the trucks. There's been the introduction of what they called a terminal infrastructure fee, which was introduced in about 2016. The name of that fee has changed to terminal access fee, because they couldn't justify the infrastructure component anymore, so they just called it a terminal access fee, which sort of took attention away from the actual infrastructure.

So what we've seen over time—I think it's important we understand where we started and where we are today. As a guide—this is public information that is monitored by the ACCC and provided publicly—terminals used to charge the shipping lines approximately $250 to $260 a container.

CHAIR: A lift?

Mr Tzaneros : A lift.

CHAIR: Who charged that?

Mr Tzaneros : That was charged from the container terminals to the shipping lines. The shipping lines are all internationally owned.

CHAIR: That they are.

Mr Tzaneros : The transport companies were paying zero infrastructure or access fee—I'll continue to call it an access fee from here on in. They paid zero dollars for an access fee. We always paid a time slot, and that was our access to get into the terminal.

CHAIR: What would a time slot cost?

Mr Tzaneros : The time slots have varied over time, and I don't have that with me today. It started out as $4 or $5, so it's insignificant. I'll focus on the access fee. Where are we today? The rates have been reduced to between $150 and $200 for shipping lines today. They've gone backwards from $250 or $260 down to $150 to $200.

CHAIR: So they've had a haircut.

Mr Tzaneros : They've had a haircut and they've improved their profits. Where are transport companies today? We went from zero. We're paying between $109 and $139 a container for access fees to get into the terminal. So whilst the rate to the shipping line has dropped by $50 to $100—say, $75 on average—the terminals now have found a new access fee, and they're charging between $109 and $139. We'll say that's an average of $115 or $120.

CHAIR: So they've picked up the slack and some?

Mr Tzaneros : And some. The only problem with that is it's very important to note that shipping companies have a right to negotiate. Transport companies have no right to negotiate. We are price takers. We have no choice. When this fee is implemented, when it is increased, how it's increased, by how much it's increased, when it's increased, we just have to accept it. And if we don't accept it and we don't pay it, we're cut out of the system the day that it's due. Literally if we don't pay it by the due date, the next day we're cut out of the system.

CHAIR: When you say the container terminal, you mean the stevedores?

Mr Tzaneros : That's correct.

CHAIR: Dubai Ports and Patrick—

Mr Tzaneros : Yes, Patrick Terminals, DP World, Hutchison—

CHAIR: Hutchison as well. And they all gang together and get the same charge?

Mr Tzaneros : No, they vary their timing. It's about a month apart or two months apart.

CHAIR: But it's all the same figure.

Mr Tzaneros : Very similar. Within a few dollars.

CHAIR: Where's the ACCC?

Mr Tzaneros : The ACCC is obviously monitoring that.

CHAIR: At least they're looking.

Mr Tzaneros : They are looking. I think it's important to note that infrastructure rates have been increasing at the rate of in excess of 50 per cent per annum since 2016, a little bit higher than CPI.

CHAIR: I'll try not to laugh! This is not a bad gig if you can get it. You're on the wrong side of the barbed wire fence. Sorry, keep going.

Mr Tzaneros : So I guess the question is: do transport companies pass on these access fees? Absolutely. We pass them on at cost, and sometimes we pass them on with a small margin. What is the consequence of that? What is the consequence of us passing on those fees? The consequence is that, whilst we pass on those fees, our customers have not budgeted for these fee increases. They have not budgeted for a 50 per cent increase in the access fee. Whilst we're collecting that fee, what do you think is the first thing our customers do? At every opportunity, they'll just go straight to tender—

CHAIR: Yes, renegotiate.

Mr Tzaneros : renegotiate and try and get a better deal either with you or with someone else. They can't negotiate the access fee because that is an ancillary charge that must be passed on. It only puts pressure on the transport fee. So the transport fee, if you actually monitor transport charges, is the fee that is actually tumbling whilst the overall charge to the customer is still increasing.

Shipping lines are reaping the benefits of lower rates. They're doing their job, in all fairness to them. They're negotiating the best deal that they can with the container terminals. You could just assume that rates charged to the shipping lines will continue to tumble because, whilst those rates are going down, transport access fees are going up. That's what I mean by a split tariff.

CHAIR: Can I come one step further, Mr Tzaneros. It's not all the ships, but a heck of a lot of these ships are now plying the coastal trade, too. So they ain't losing. They not only have a $150 haircut; they're also ploughing the nose of our rail industry and our road industry into the dirt. They're carting at reduced rates, on prices you couldn't compete with—$3 an hour. This just gets worse and worse. We're going to end up killing all our Australian businesses, whether in road or rail, because of these foreign owned shipping companies and foreign owned stevedores. I've had my rant. It won't be the last one. Keep going.

Ms Tzanetis : I think it's worth noting that, at the end of the day, the shipping lines should always negotiate the best deal that they can with the container terminals. I would expect that they would do so. The terminals, in particular, are fighting for market share. They can actually drop the rates to the shipping lines, knowing that they can increase the access fee with the transport operators, who have zero negotiating power and/or rights.

CHAIR: This was raised, in a hearing in Sydney, by Road Freight NSW. Their CEO, Simon O'Hara, was hot to trot on this. He kept saying: 'Who can fix this? The states blame the feds and the feds blame the states.'

Mr Tzaneros : Absolutely. Here are some interesting statistics. I won't mention the container terminal operator's name, but I'll give you their rates around the country. They're a national operator. Their access fee rates have gone up by 363 per cent in New South Wales, by 248 per cent in Queensland, by 305 per cent in Victoria and by 1,031 per cent in Western Australia.

CHAIR: Whoa! In what time period?

Ms Tzanetis : Between 1 July 2017 and 1 March 2021. This shows that there is no control or governance around the increases of these rates, nor justification for them. In March 2021 this particular stevedore bucked the trend. They only increased their access fee by 2.9 per cent. They must have got a speeding ticket from the ACCC. But they were not to be outsmarted. They introduced a new fee called a long-vehicle fee, and the industry has referred to it as a productivity tax. I will talk about the terminal which has implemented this fee. It's Patrick Terminals in Sydney and Brisbane. They have introduced a long-vehicle fee. It applies to any vehicle longer than 26 metres, so anything larger than a B-double, otherwise known as a higher-productivity vehicle. A higher-productivity vehicle in our industry is a vehicle that carries four 20-foot equivalent units.

CHAIR: Like a pocket train?

Ms Tzanetis : No. It would be longer than a pocket. A pocket would probably still qualify as B-double length. Anything that carries four TEU, or twenty-foot equivalent units, would attract this fee. This type of vehicle improves our productivity by 25 per cent—on the actual vehicle, as far as container volume goes. We also pass on those savings to the customer, and obviously that ends up with the consumer. Patrick have seen an opportunity here—I think it's because they got a speeding ticket with the infrastructure or the access fee—and they've said, 'Well, how can we continue our 50 per cent increases through another form of revenue raising?' And they've attacked the investment made by transport companies with the higher-productivity vehicles.

The industry has worked tirelessly in the last 10 years to progress what we call our HPVs. The vehicles under NHVR are safe and environmentally friendly. As I said, they're 25 per cent more productive than B-doubles, and they're 50 per cent more productive in capacity compared to what we call single trailers. These HPVs cost transport companies between $400,000 and $500,000 per set. You can appreciate the cost to a large company like ACFS. In the last four years alone, we've spent nearly $30 million just on these higher-productivity assets.

CHAIR: So we're talking a prime mover, two trailers and a dolly?

Ms Tzanetis : Absolutely. You may ask what the result of the productivity tax is. I guess we've had to be smart about this. We're passing on that fee to our customers. In the empty container world, our shipping lines would not accept the additional cost. And, to be honest, nor should they. We've had to revert to running our higher-productivity vehicles on stack runs into DP World and Hutchison, and we've had to employ subcontractors to run empty container stack runs on singles. So we've doubled the number of trucks on the road, just so we don't attract this fee.

CHAIR: You've stopped using the road trains, have you?

Ms Tzanetis : We've stopped using the road trains on empty stack runs into Patrick. We've replaced them with subcontractors. I've already said my piece about subcontractors.

CHAIR: Yes, you have.

Ms Tzanetis : So we've replaced them with subcontractors now, because it's the only viable way, under our contracted rates, to perform that work. We've now got contractors delivering one 40 foot or two 20 foots at a time, and they can do it at the same rate that we used to cart four TEU on a higher-productivity vehicle. I think you know where I'm trying to take you. We can't do it on one single truck under a company truck model.

CHAIR: Tell me this, Mr Tzaneros: how much was that long-vehicle fee?

Ms Tzanetis : It's $50 per trip.

CHAIR: Per trip?

Ms Tzanetis : Yes.

CHAIR: On top of anywhere between $109 and $139?

Ms Tzanetis : They don't charge access fees on empties. They charge access fees only on full containers. But the long-vehicle fee is applicable on empties and fulls. So, as I said, the long-vehicle fee is not able to be passed on to shipping lines.

The latest threat to our wonderful transport industry is the threat of foreign ownership in our landside logistics sector. It's coming. It's on its way. We're seeing foreign ownership using their global presence and/or vertical integration offshore to provide solutions that are impossible for Australian companies to compete with. We've heard some farcical examples. Only in the last week we had an example of a large importer that brings in about 20,000 TEU of whitegoods. In our industry, if you don't get your containers delivered and unpacked within 21 days, you get charged container detention, if you don't de-hire the empties. The container detention incurred by this customer over the last 12 months has been in the hundreds of thousands. In fact, I dare say it would be closer to half a million. They've been given an offer from a shipping line that they will guarantee there will be no container detention if they give them all of the landside transport.

CHAIR: Let me get this right. This whitegoods company has said to the shipping company, 'We don't want to get the detention, so you give us all your work'?

Ms Tzanetis : No. It's a little bit different to that. The shipping company has said to the whitegoods company: 'You have a container detention issue. We will resolve it for you, but, in order for it to be resolved, we want all your landside work for those 20,000 containers. We'll make that container detention go away, ongoing, on the basis that you give us your work.' I can't make that container detention go away, because I'm not an international shipping line who has that market power. So what we've got to be careful of here is vertical integration, which goes all the way back up and offshore. That's probably one of the latest threats. The reality is: we either make that container detention go away or we've got to find another solution to find them that $500,000 on a per-annum basis. It's not our fault that they can't unpack within 21 days. The customer can't unpack. Their warehouses are full. The manufacturing plant—

CHAIR: So all the blame is shifted to the Australian trucking company?

Mr Tzaneros : Sorry?

CHAIR: All the blame gets shifted to the Australian road transport company.

Mr Tzaneros : Absolutely.

CHAIR: And the cost?

Mr Tzaneros : We're left to carry something, again, that's out of our control. The shipping line is the one imposing the container detention. They're imposing it, but then they're also using it to their advantage to say, 'We can actually make this go away.'

CHAIR: Is there open dialogue through industry representatives to get to the relevant ministers, state and federal, to say, 'Do you realise what's going on under everyone's nose?' Do you have that opportunity?

Mr Tzaneros : Senator Sterle, I think there is a small amount of dialogue at different levels. I speak to you on the odd occasion about some of the pressures that I've spoken about today. A lot of the pressures—the most recent one is an evolving one. I'm talking about the last few weeks. The pressures of the long-vehicle fee and/or the access fees have been either in the last few months or in the last few years. Whilst there are a lot of people listening, I'm not seeing a lot of action being taken here. You've got the ACCC who's constantly saying that they're monitoring this; but they're powerless. If the ACCC is monitoring and is powerless, where is the right forum? Where is the right level of government to start taking action?

CHAIR: You're right. I suppose it throws it back on here that the transport companies need to be able to pass those costs on. The industry can say, 'Hang on, we want a cost recovery model; we want the ability to be profitable; we want a level playing field; we want you to go out there and enforce the minimum standards that are required, whether it be in fatigue management, whether it being in auditing, whether it being in access to roads or wages.' You can't do that. You can hope and plead for that to happen, but the big bogie from overseas can come and do whatever they like here. In Australia, it's 'nothing to see here; move along'. We've just got to have the other fight, don't we?

Mr Tzaneros : I've been in the industry now for well over 25 years. You've always had your challenges in this industry. We'd be silly to say that there are not everyday challenges, but it's the challenges in order to remain viable and be a good company, be a compliant company, pay the right award wages and pay above award wages. We're about to go into negotiations. I got a note this morning from the union saying it's time to engage. We want to give our employees more, and they deserve it. But how do you give your employees more, whilst they deserve it, whilst all the market pressures underneath you are saying, 'You can't keep giving more'? As I said, whether it's a subcontractor model, whether it's the gig economy, it's a different model that is saying, 'Don't own your own fleets.'

In conclusion, it's very evident that the transport industry is under attack in so many different ways. The objective is constantly to drive costs down with no regard to employee wages, conditions, safety, environment and/or any other costs. The strong and compliant blue-ribbon companies with strong enterprise agreements, new fleets, are under threat like they've never been before. I can tell you that there needs to be an intervention soon. Otherwise, I can stand here and say that we'll be one of those companies reducing our fleet size, and we'll be resorting to subcontractors and/or the gig economy ourselves in order to compete for the long term.

CHAIR: Thanks, Mr Tzaneros. Senator McDonald, do you have any questions?

Senator McDONALD: I'm very grateful for the evidence you've provided today. Thank you. I'm really disturbed, though, by the picture you're painting, particularly your last point—that you'll move to the gig economy. Do you want to continue expanding on that? I want to make it clear what happens when the supply chain fails in Australia.

Mr Tzaneros : Yes. You can continue to fight and fight to remain viable in your current structure, and you need to evolve in business in order to remain viable and sustainable. It is very evident that our current model—and, as I said, we're about to go into negotiations—is no longer competitive when there are other models out in the marketplace that are far more competitive and that don't have the constraints of an EA, let alone one that is 30 per cent and/or more above the minimum award. They don't have the compliance and/or the investment of buying brand-new fleets. A brand-new truck costs $250,000 to purchase, and you can go and buy a second-hand truck at $20,000 at the auctions with very minimal compliance and then swipe right and accept a job. Technology is coming, and it's coming very fast in our industry. To some extent, if something isn't done to manage the gig economy or the subcontractor model within our industries, we'll need to join it. It's very clear. You can sit here and fight it and fight it until your margins go down from 10 to five to 2½ to zero to minus 2½ to minus five, and then, in such a heavy asset industry that requires such material cash flow on a daily basis, you only need a year of bad results. By year 2, you're out of business. As I said, we've got 1,200 employees, and we have a responsibility to their families as well. Whilst I don't like to say it, it's very clear that our transport divisions'—not talking about our business but our transport divisions—margins are eroding to the point of, 'Why are we doing this?'

Senator McDONALD: So do you believe that the government regulation that enables a gig economy is not adequate? We've heard evidence from the ATO around their management of contractors versus subcontractors. We've heard a range of evidence. What is it specifically that would assist, then, to even the playing field?

Mr Tzaneros : It's very simple. Someone needs to earn the very basic right of the minimum award. As a minimum, they must earn the modern award within our industry. Someone earning that has to be the test. You cannot have someone driving around earning less than the modern award when it comes down to their pure wage after all costs. They have to earn the modern award. Anything below that is dangerous to the individual, dangerous to the sector and dangerous to the economy.

Senator McDONALD: Thank you, Senator Sterle. I'll hand back to you.

CHAIR: Thanks, Mr Tzaneros. I'm very mindful of the time, but, yes, you did right. I think the award is crap. It's embarrassing to think that road train operators can get paid $22 or $23 an hour before we start moving down the grades. It's embarrassing to think that we have a national law in this land that says, 'Thou shall earn that amount of money,' if you do X amount of hours and about all the other stuff that goes on when we have a serious lack of enforcement and we have sham contracting. We had the ATO here today. We had an interesting conversation—very nice people—and they promised me they'd go away and have a look. We know sham contracting is completely against the law, but we have tax agents who are advising their businesses to do it. They're saying: 'Nothing to see here. Move along.' We have international monoliths—these giants; these horrible corporations—who can do whatever they want on our shores. They can steal our freight, they can run around this nation at a tenth of the cost, supported by government and exploiting temporary voyage permits. We're driving our rail industry into the ground, and the rail operators have clearly said, 'We won't be around if all this freight keeps going off,' and then our trucking companies want to try and get the basic coverage—1,000 trucks or one truck should have the ability to have cost recovery plus profit.

Mr Tzaneros : Absolutely.

CHAIR: Thank you very much for your time. You're travelling back now?

Mr Tzaneros : I am—to Sydney.

CHAIR: Safe travels. Thank you very much. We'll be in touch.