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CABOTAGE IN AUSTRALIA

A special feature of the subscribers' section of the Australian Shipowners' web site is a detailed description of what cabotage is in Australia, and how legislation gives rise to what, in Australia, passes for cabotage.

CABOTAGE -- A BACKGROUND TO THE ISSUES INVOLVED

The current debate about cabotage and the Government's intention to wind it back has brought to light a need to explain how cabotage is exercised in Australia and to what extent it can be wound back. This section of our site aims to provide an overview of the facts behind cabotage policy and identify some of the implications of a change in that policy.

What is Cabotage?

Cabotage is a term universally adopted in the international maritime community to mean the reservation of maritime coastal trades for ships registered or licensed in the country concerned. The word is French in origin meaning coastal sailing. Similar policies exist throughout the world in regard to air transport where domestic air routes are reserved for domestic operators. Such protection is also extended internationally with the exchange of cabotage rights between countries for flying through each other's countries, but in the maritime industry such exchanges of rights are not generally practiced.

International Practice

Nearly every country in the world with a coast of its own regards coastal shipping as an integral part of its domestic transport system. For some countries it is not a big issue where there is a short coastline with one or two ports. For others with very large coastlines opening up domestic transport sectors to foreign competition is something they have persistently regarded as non-negotiable in international fora.

The extent to which each country imposes cabotage varies considerably. Among the most rigid and exclusive are the U.S., Brazil and Indonesia, whilst among the least restrictive are Canada, Italy, Uruguay and Australia, which have no ownership, construction, or flag of registration restrictions on vessels seeking to trade on their coasts.

Cabotage in Australia under the Navigation Act

The Navigation Act requires all shipping engaged in the coasting trade to be either licensed or to be granted specific exemptions from the licensing requirements in the form of single or continuous voyage permits (SVPs or CVPs). Any ship, whether Australian or foreign, can obtain a license to operate on the coast provided certain economic conditions are met, as set out in Part VI of the Act, which are principally:

• that seafarers employed on the ship shall be paid wages at the current rates ruling in Australia, and
• that the ship is not in receipt, either directly or indirectly, of any subsidy or bonus from a foreign government.

The Australian flag

The Australian Ship Register is a high quality register administered by the Australian Maritime Safety Authority (AMSA). Australian flagged ships have an excellent safety and environmental record with a well below average record of deficiencies among world port state control authorities. As at 30 June 1998 there were 74 registered commercial or trading vessels in excess of 2000 gross tonnage.

When a ship is registered it receives legally recognisable Australian nationality established by the Registration Certificate. This has advantages in Australia and abroad. The ship will be accorded Australian protection on the high seas and in foreign ports. In addition, the proof of ownership that registration provides will be recognised internationally, while in Australia it facilitates the sale of the vessel or the arrangement of mortgages and other forms of finance. The registration of mortgages gives the mortgagee certain protection under the Shipping Registration Act and advantages over unregistered encumbrances.

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Flag Structure

REGISTRATION REQUIREMENTS
Registration is available for a ship in excess of 24 tonnage metres that is either:

(a) wholly owned by an Australian citizen, or citizens, or an Australian corporate body (it is compulsory for such a vessel to be registered), or
(b) owned by two or more persons or corporate bodies where the majority of shares in a vessel are held by Australian nationals, or
(c) on demise charter to an Australian based operator.

Ships under 24 metres may also be registered such as fishing vessels, off-shore supply vessels and pleasure craft.

INTERNATIONAL CONVENTIONS
Australia is a signatory to the following principal maritime Conventions: CLLMC 1976; Convention for Safe Containers (CSC) 1972; FUND 1971 and Protocols; INMARSAT C 1979; ISM Code; LOAD LINES Convention; MARPOL 72/78 (and Annexes I, II, III, and V); OPRC 1990; PAL 1974 and Protocols; SALVAGE 1989; SOLAS 1960 and subsequent amendments; STCW 1948/78 and subsequent amendments; TONNAGE 1969.

TAXATION
Taxation There are currently no special taxation benefits or exemptions for ships on the Australian Register. Accelerated depreciation, capital grants and grants in respect of the employment of Australian seafarers were removed in 1996. The Government is currently considering what, if any, fiscal assistance is appropriate for Australian shipping in the future.

CREWING STANDARDS/REQUIREMENTS
The requirements of the STCW Convention are fully applied to all crew members whether Australian or foreign. Where a ship is operating on the coast, there are additional crew requirements.

Under Part II of the Australian Navigation Act 1912, there are crew-related regulations concerning the operation of licensed ships on the coast in regard to the payment of crews' salaries and wages, their sick leave arrangements, medical expenses, and disciplinary procedures, which are designed with Australian crews in mind, but which a foreign shipowner wishing to apply for a licence to operate on the coast, would also need to follow.

There is no restriction on the employment of foreign seafarers other than that they must hold Australian seagoing certificates issued by AMSA and be subject to the requirements of the Migration Act when employed on the coast.

FOREIGN SEAFARERS EMPLOYED IN THE COASTING TRADE
If a ship enters Australia and stays in Australian waters for more than 30 days, any foreign nationals on board come under immigration regulations which require that such ships

(a) employ Australian residents, or
(b) enter into a labour agreement with the foreign crew which is vetted by relevant Government departments and the unions, or
(c) have their foreign crews issued with temporary entry visas, which can only be issued where there are no Australian residents qualified and available to crew the ship, a labour availability test that applies generally to all immigrants, temporary or otherwise.

The above restrictions do not apply to ships which spend up to 30 days in Australia, sail overseas and then return for another period of up to 30 days on a regular basis.

LICENCES TO OPERATE ON THE AUSTRALIA COAST
Registration on the Australian Register does not automatically confer a right to operate on the coast.

The Navigation Act requires all shipping engaged in the coasting trade to be either licensed or to be granted specific exemptions from the licensing requirements in the form of single or continuous voyage permits (SVPs or CVPs).

Any ship, whether Australian or foreign flagged, can obtain a licence to operate on the coast provided certain conditions are met, as set out in Part VI of the Navigation Act, which are principally:

(i) that seamen employed on the ship shall be paid wages at the current rates ruling in Australia. (This does not include terms and conditions of employment such as leave arrangements. The payment of Australian wage rates would not be substantially different from those applying to other OECD crews), and
(ii) that the ship is not in receipt, either directly or indirectly, of any subsidy or bonus from a foreign government.

The coasting trade is also governed by Part II of the Navigation Act which sets out in some detail the operating conditions with which licensed vessels trading on the coast must abide. These requirements cover, inter alia, minimum qualifications of seafarers, quality of provisions and water on board vessels, minimum accommodation standards relating to space, crew per cabin, and sanitary facilities, and medical supplies and inspections. In effect it covers matters required under international Conventions of the IMO and ILO to which Australia is a signatory and as such offers no barriers to quality foreign shipowners.

CONDITIONS UNDER WHICH COASTAL LICENCES ARE NOT REQUIRED
The Minister may grant a Single Voyage Permit (SVP) or a Continuous Voyage Permit (CVP) to unlicensed ships to carry coastal cargo specified in the Permit. One of the conditions for doing so, however, is that there is no suitable, licensed ship available that can meet the needs of the task. Unlicensed ships operating under a Permit are not bound by Part II of the Navigation Act covering coastal trading.

REGISTRATION FEES
Fees are applicable for a range of administrative actions, the most expensive being for the lodgement of an application for registration of a ship on demise charter (A$1953). Fees for Ship Registration, Licences and Permits are flat charges and not scaled to tonnage.

FURTHER INFORMATION
Further information and detail on ship registration requirements can be obtained from the Australian Shipping Registration Office:

Postal Address Location
GPO Box 2181
Canberra City ACT 2601 Level 1, 25 Constitution Avenue
Canberra City ACT 2601

Telephone Fax
Customer Assistance
(02) 6279 5921

International
612 6279 5921 Customer Assistance
(02) 6279 5922

International
612 6279 5922

Information regarding licenses and permits to trade on the Australian coast can be obtained from Maritime Transport in the Department of Transport and Regional Services:

Postal Address Location
GPO Box 594
Canberra City ACT 2601 Drakeford Building
72 Northbourne Avenue,
Canberra City, ACT 2601

Telephone Fax
(02) 6274 7662

International
612 6274 7662 (02) 6274 7744

International
612 6274 7744

Email
Maritime@email.dot.gov.au

Website
www.dotars.gov.au

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