Issues:

 

 

Return to Bulletin Board

Transport & Trade - Recent Australian Developments

In this issue of e-update, Middletons Moore & Bevins bring you up to date with three recent developments. The first is in connection with the latest report to the Commonwealth Government's concerning the Trade Practices Act and its implications for international liner shipping operations. The second development relates to a pending review of port arrangements in Victoria. The third issue concerns ballast water management in Victorian ports.

LINER CONFERENCES

Part X of the Trade Practices Act, permits liner operators to be exempted from the competition provisions of the Act and to permit them to operate on a collaborative basis, subject to compliance with the registration and notification requirements of the Act.

Part X permits liner carriers to operate on a conference basis with common rates and services, subject to compliance with regulatory requirements. Without specific exemption, joint services and the conference system generally would contravene the Act.

The Productivity Commission considered whether Part X of Act should be retained and, if so, whether amendments should be made.

The Productivity Commission recommended that Part X of the Act should be retained, but be subject to a further review in 2005. The future review was proposed on the basis of ensuring consistency with current trends international shipping. The Commission also concluded that Part X:

Government's Response

The Government has announced that it accepted the recommendations of the report, but that it wilt implement some further amendments to improve the application of competition policy principles to international liner shipping but also to protect the interests of Australian importers and exporters.

However, in accepting the report, the Government decided the Minister and the Australian Competition and Consumer Commission should have power to deal with unreasonable anti-competitive behaviour.

REVIEW OF PORT SERVICES AND PRICE REGULATION IN VICTORIA

The Port Services Act 1995 required the Office of the Regulator-General in Victoria to conduct a public inquiry into whether or not the prescribed services currently regulated through Port Pricing Orders should continue to be subject to price regulation and, if so, the form of that price regulation. The current Port Pricing Orders expire on 30 June 2000.

The Office launched its public inquiry on 17 September 1999 and, after a lengthy process of draft reports and submissions from the Melbourne Port Corporation (MPC), the Victorian Channels Authority (VCA) and other interested parties, it has prepared a Draft Decision which sets out the price caps for the period 1 July 2000 to 30 June 2005.

Based on the information available to the Office, it has determined a benchmark revenue requirement for the prescribed services of both the MPC and the VCA. These revenue requirements were then used to describe 'X' factors which will apply to the prices levied by the MPC and the VCA.

While the 'X' factors are a central feature of the future price controls, there are a number of additional provisions which have been highlighted as necessary to enable effective price regulation over the next 5 years.

These additional provisions include:

The Office has invited the regulated entities and any other interested parties to comment on the Draft Decision before Friday 19 May 2000.

BALLAST WATER - VICTORIA

The Environment Protection Authority ("EPA") in Victoria recently issued a draft industrial waste management policy covering Ships' ballast water and hull cleaning. The State's initiative is independent of steps under consideration on a national level by the Australian Quarantine Inspection Service ("AQIS").

The State's intention is for their protocols dealing with these issues to operate in due course within a national network. Until that network is in place, the State's requirements are in addition to those imposed by AQIS and any other provisions of Commonwealth law or IMO requirements.

The Victorian protocols are administered by the Department of Natural Resources & Environment ("DNRE") and are intended to minimise further introductions of exotic organisms into Victorian marine waters and to manage issues arising from past and future introductions.

The Victorian arrangements require masters to manage their ship's ballast water in accordance with the Australian Ballast Water Management Guidelines and the Coastal Voyage Ballast Water Guidelines. in addition, for ships that call more than 3 times in 12 months in Victorian ports and also trade within defined limits, the owner or charterer of that ship must develop and implement a Ship's Ballast Water Management Plan.

The draft industrial waste management policy also addresses hull fouling, through maintenance procedures and use of anti-foulant coatings or paints. The draft policy precludes hull cleaning in Victorian waters, other than in accordance with a strict Code of Practice.

Further updates will be provided as the implementation of the draft policy is progressed by the EPA and DNRE.

Acknowledgement: The above article is reproduced from the May 2000 issue of "Transport & Trade", a Newsletter of Middletons Moore & Bevins. For further information please call:

David Roylance, Partner, Melbourne Tel +61 3 9205 2014
Robert Springall, Partner, Melbourne Tel +61 3 9205 2015
Gavin Vallely, Partner, Melbourne Tel +61 3 9205 2023
Stephen Thompson, Partner, Sydney Tel +61 2 9390 8278
web www.mmb.com.au

Note from Middletons Moore & Bevins: "This newsletter is intended to provide a general summary and should not be relied upon as a substitute for legal advice"

CURRENT ISSUES IN TRANSPORT LAW

In this issue of Update, Middletons Moore & Bevins address a number of topics relevant to those involved in transport and trade. Four separate topics are considered, which impact upon various sections of the Australian transport and trade industry.

NAVIGATION ACT REFORM

The cornerstone of Australian maritime law is the Navigation Act. This legislation, initially passed in 1912, was based on the English Merchant Shipping Act of 1894. The Navigation Act has been amended on numerous occasions over the last 87 years. After the Government's recent "Stage l" review there are further amendments pending in the Navigation Amendment (Employment of Seafarers) Bill, that is presently in the Parliamentary system.

The "Stage 1" review was intended to reform aspects relating to employment on Australian flagged ships.

The recently announced "Stage 2" review will address all other aspects of the Navigation Act and the review team is required to report to Government by December 1999. With this in mind, the review team has requested submissions by 15 October 1999. If required, we can provide further information and comment on the review process. Details of the "Stage 2" review can be found on the internet at http://www.dotrs.gov.an.

CARE WHEN CONTRACTING

Historically, when carriers and forwarders have entered into contracts for international transportation, the contracts have been made subject to base terms relating to responsibilities and liabilities, particularly in relation to loss or damage to cargo.

Inevitably these contracts (whether in the form of a charterparty, a contract of affreightment or some other form of forwarding agreement) address liabilities and responsibilities. Typically such agreements have been made subject to the carrier's or forwarder's form of Bill of Lading or otherwise made the sea carriage subject to the Hague Rules or the Hague Visby Rules. In addition such agreements have usually regulated liabilities and responsibilities during land carriage, storage and forwarding.

Recently there has been a trend for some shippers - particularly those dealing with the United States of America - to demand carriers or forwarders enter into more onerous contracts. That is contracts that do not incorporate the Hague Visby Rules (or a similar Convention) and restrict or abrogate the rights, immunities and limitations that the carrier or forwarder would otherwise have.

From the carrier's or forwarder's perspective this trend should be resisted whenever possible, although this may give rise to commercial problems. The bases for rejecting the approach are twofold.

First, there is the risk of uncertainty and disputes. Long standing decisions and procedures give certainty in international trade. This is an important point. In any given situation each of the parties has access to historical precedents as to how that situation may be addressed. The risk in departing from accepted and understood clauses is that it may create uncertainty and, eventually, the need for further litigation to determine the actual effects of departing from accepted contractual provisions.

Secondly, there are insurance issues. Conventions, such as the Hague Visby Rules, give a clear understanding to the parties as to responsibility, liability and limitation aspects. Carriers and forwarders arrange their insurances to reflect these issues. If careers or forwarders agree to accept more onerous terms, the risk is that their insurances may not respond to liabilities, costs or expenses in excess of the provisions that would have otherwise applied. That is, insurances may limit cover to the equivalent of the Hague Visby Rules, leaving the carrier or forwarder exposed for any excess above that amount. This means that if a carder or forwarder intends to contract on terms that restrict or eliminate the usual rights, the carrier or forwarder should ensure that their insurances will respond in respect of the additional liabilities, even if the affect is that the carrier's or forwarder's insurers will require an additional premium.

Clearly, cariers and forwarders should resist arrangements that may increase or extend their responsibilities beyond presently applicable limits. If there is no commercial alternative, additional insurance should be arranged and the costs of additional insurance cover factored into any rate quotations. In any event, any such contracts should be carefully reviewed before being accepted by the carrier or forwarder.

CREW EMPLOYMENT CONTRACTS

Foreign owners should be aware of a recent decision in the Victorian Courts. A Russian crew member, injured in an accident in Victoria, commenced County Court proceedings against the Owner.

As the accident occurred in Victoria, the Court determined it had jurisdiction and based on the circumstances of the incident, the crew member recovered substantial damages. Further steps before the Court of Appeal of the Supreme Court failed to set aside the judgment.

Whilst it is extremely difficult to contract away jurisdictional rights, all foreign owners trading with Australia should ensure that the employment contracts for all crew members contain a clear and unambiguous jurisdiction provision. There is no certainty that an Australian Court will decline jurisdiction even if there is such a clause; however, the prospects of the Court declining jurisdiction will be stronger if the employment contract does have an unequivocal forum clause.

FREIGHT TAX

All foreign operators involved with Australian trade will be aware that a tax often called "freight tax" is payable under the existing Income Tax Assessment Act. Under Division 12 of that Act, in most circumstances 5% of freight paid to a foreign carrier of export cargo is deemed earned in Australia and is therefore subject to income tax. In view of current Australian Corporate tax rates, the 5% deemed income equates to an effective impost of 1.8% of freight.

However, freight tax may not be applicable where the operator is subject to a "Double Tax Treaty". To avoid any difficulties arising with freight tax, foreign operators trading from Australia should check whether there is an entitlement to exemption from this tax under an applicable taxation treaty and, if so, ensure that the appropriate exemption procedures are followed, an exemption obtained from the Australian Taxation Office, and details provided to the ship's agents.

The pending imposition of a broad based consumption tax (or goods and services tax) does not appear to alter the "freight tax" obligations.

Acknowledgement: This article on the GST is reproduced from Issue No.14, October 1999 of "Transport & Trade", a Newsletter of Middletons Moore & Bevins. For further information please call:

David Roylance, Melbourne Tel +61 3 9205 2014
Robert Springall, Melbourne Tel +61 3 9205 2015
Gavin Vallely, Melbourne Tel +61 3 9205 2023
web www.mmb.com.au

Note from Middletons Moore & Bevins: "This newsletter is intended to provide a general summary and should not be relied upon as a substitute for legal advice"

GST - TRANSPORT IMPLICATIONS

After a significant review of Australian taxation policies, two major changes will apply in trade and commerce with Australia. First, a major taxation package passed by the Australian Parliament, takes effect from I July 2000. Secondly, the Government is finalizing a review of business taxes applicable in Australia. The business tax review, when announced. will be the subject of a future Update.

The corner-stone of the taxation package to be implemented from 1 July 2000 is the abolition of wholesale sales taxes and a number of other secondary taxes and their replacement with a broad based goods and services tax ("GST"). This Update is intended to outline some issues arising from the GST legislation and possible implications for the transport industry.

GST PRINCIPLES

GST will operate as a value added tax. Each Australian supplier of goods or services will be required to register with the Tax Office. The supplier will then be required to charge GST on goods or services it provides and to account to the Tax Office for GST it collects. If the recipient of goods or services in turn provides those goods or services to another party, that recipient is also required to be registered with the Tax Office and charge GST on its supply of goods or services (but gain an input credit for GST it has already paid on those goods or services). The GST package is intended to create a broad based consumption tax, with very limited exemptions from the 10% GST tax rate. The GST

Legislation provides that GST will not be payable on a range of "input taxed supplies", which at the moment am primarily financial services. The supplier of an "input taxed supply" will not be entitled to claim an input credit for the GST charged for anything acquired or imported and which relates to that supply.

IMPACT ON TRANSPORT

For those involved in international trade, it should be noted that specific "supplies" of transportation services are categorized as GST free. The GST free items are listed in Division 38-I of the GST legislation.

GST will not be payable on services relating to the transport, loading or handling of goods within Australia, if the supply of those transportation services is an integral part of the carriage of goods to or from Australia and those services are provided by the supplier who transports those goods to or from Australia. As such services may be provided either directly or through agents or sub-contractors, all arrangements need be reviewed, as often a number of entities are involved in the transportation process.

If transport services are provided by a supplier other than the actual provider of the transport, those services would he subject to GST, but a registered recipient may be eligible to claim an input tax credit.

For international trade:

will all he GST free. Insurances applicable to domestic transport will be subject to GST.

Provision of services in Australia for services to be performed wholly outside Australia will require careful consideration. Any transport service performed wholly outside Australia will be GST- free as such supplies are consumed outside Australia.

The supply of ship's stores for use or sale on a ship on a voyage that has a destination outside Australia is to be GST free, whether or not part of the voyage involves a voyage between ports in Australia.

Coastal trade and other transportation within Australia will be subject to GST if the subject cargo does not have an international destination.

For a non-resident operating in Australia, that non- resident must have a registered agent and that agent will be liable to account for GST on goods or services supplied by its non-resident principal.

IMPORTS AND EXPORTS

Exports will be GST-free. Exported goods must be physically exported from Australia and exported services must be performed outside Australia.

GST issues are not limited to exports. In some circumstances an importer may be liable for GST where a described "reverse charge" applies. GST on imported goods will be collected by the Australian Customs Service. GST on imports is an area that will need careful consideration.

LONG TERM CONTRACTS

Whcthcr long term contracts entered into before 1 July 2000 that involve the supply of goods or services beyond 1 July 2000 are subject to GST depends on three issues:

Each contract will need to be carefully reviewed to determine whether or not supplies under that contract are subject to GST. A key factor is

whether the contract contains an "opportunity to review". The application of GST to long term contracts is likely only to be of more direct concern to those involved in domestic transportation.

FREIGHT TAX

A tax often called "freight tax" is payable under the existing Income Tax Assessment Act. Under Division 12 of that Act, in most circumstances 5% of freight paid to a carrier of export cargo is deemed earned in Australia and is thereforesubject to income tax. Whilst this is in effect a tax on export freight, the GST legislation does not remove these provisions. Accordingly, "freight tax" remains in force, unaltered.

SUMMARY

The introduction of GST into Australian revenue law will significantly impact upon all entities involved in transport of cargo or in the import or export of goods or services.

As GST is intended to operate as a broad based tax, it will have application not only to carriers, but also to all intermediaries involved in the transport industry, including forwarders, consolidators, NVOCC operators. equipment leasing operators, and ship and cargo brokers.

It is not possible in this Update to identify the myriad of possible risks and the ramifications of the application of GST to all aspects of the transport industry and its implication to the industry.

However. as the effective date of I July 2000 is less than a year away, prompt steps should be taken to address issues arising from implementation of GST.

Acknowledgement: This article on the GST is reproduced from Issue No.13, September 1999 of "Transport & Trade", a Newsletter of Middletons Moore & Bevins. For further information please call:

David Roylance, Melbourne Tel +61 3 9205 2014
Robert Springall, Melbourne Tel +61 3 9205 2015
Gavin Vallely, Melbourne Tel +61 3 9205 2023
web www.mmb.com.au

Note from Middletons Moore & Bevins: "This newsletter is intended to provide a general summary and should not be relied upon as a substitute for legal advice"