The Australian Government has announced that a new permit system for coastal shipping will be introduced. The latest round of changes will include the replacement of the tiered licence system with a single permit system, relaxation of importation rules for certain vessels and new maritime labour requirements.

This week, Australia’s Deputy Prime Minister for Infrastructure and Regional Development, the Hon Warren Truss MP, announced major changes to the coastal shipping regime in Australia.

In recognition of the abject failure of The Coastal Trading (Revitalising Australian Shipping Act) 2012 (Cth) as introduced by the previous Labour Government, the legislation will be significantly amended in an effort to encourage and seek to rejuvenate coastal shipping in Australia.

The new regime is intended to deregulate the coastal shipping permit system while at the same time preserve the application of Australian labour laws, maritime safety standards and environmental provisions.

Stemming the decline

The proposed amendments come in response to the dramatic decline in coastal shipping in Australia. As a percentage of overall freight in Australia, coastal shipping has been in decline even though total freight has been increasing. By 2030, Australia's overall freight task is expected to grow by 80%, but coastal shipping was only forecast to increase by 15% on the current model. Currently only 15 Australian trading vessels continue to operate a general licence and only eight operate with a transitional licence.

Recognising that Australian maritime exports account for 99% of exports and Australian ports manage more than AUD 400 billion worth of international cargo, the Deputy MP emphasised that "coastal voyages by international and domestic ships should be growing" and the current system, which imposes a number of unnecessary and costly reporting requirements, must be overhauled.

The new system

Under the new system, the Government will introduce a single permit system for coastal shipping, replacing the existing tiered licence system. A "Coastal Shipping Permit" will provide unrestricted access to coastal shipping for all vessels (Australian and foreign) for up to 12 months.

Vessel owners, or those responsible for the "management" of the vessel, will be eligible to apply for a shipping permit for their vessel. Applications must include details evidencing proof of ownership or responsibility, a copy of the vessel's registration certificate and an application fee. Once granted, a permit holder will be allowed to transfer the permit if the ownership or management of the vessel changes during a 12 month permit period.

Under the new regime, reporting obligations will be less onerous with only two reports required each year, one after each six month period. There will be no need to seek variations to cargo types, volumes carried, or travel dates anticipated for each voyage.

This compares with the current regime which requires owners to apply for a permit for each voyage that is likely to happen, report on what they anticipate doing and then again report on what actually happened.

The amendments will also encourage vessels being dry-docked in Australia. Permit holders will not be subject to the importation regime under the Customs Act 1901 (Cth) and will therefore have greater flexibility to undergo maintenance in Australia. Vessels undertaking the movement of liquid fuel products from offshore various installations like FPSOs and FSUs, including from offshore platforms, will also benefit from these changes and will not require importation.

Maritime labour requirements

One of the most controversial elements of the new proposal is the wage arrangements that will apply.

Permit holders on vessels undertaking more than 183 days of coastal trading (to be defined) in a permit period will be required to have two senior Australian crew on board and to pay all crew an Australian wage. However, foreign vessels trading for less than 183 days, will be subject to existing international on board arrangements.

Already this aspect of the proposal has faced criticism from trade unions, who claim that the new regime will discourage shipowners from basing their ships in Australia in order for them to take advantage of lower pay levels and less stringent regulations around working conditions.

Despite these objections the Government continues to assert that the amendments will decrease regulatory costs, increase the volume of Australian coastal shipping, decrease congestion of road and rail infrastructure, and inevitably increase jobs and enhance the competitiveness of the Australian maritime sector.

Next steps

The new Coastal Shipping Bill is expected to be introduced into the Australian Parliament later this year and the Government has stated its commitment to implement the new regime as soon as practicable after the legislation is passed.

A transition period is anticipated whereby application for permits can be made prior to the commencement of the permit system and voyages that have already commenced under a licence issued under the current system will continue until the voyage is completed.

The Government's initiative is to be applauded but the "devil is in the detail" and it will be necessary to closely review the eventual Bill to ascertain any wider implications, for example, the myriad possible implications to the offshore oil and gas sector.