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Submission to Transport Select Committee on proposed amendment to Section 198

Oral submission was made to Committee on 16 February 2017


31 January 2017

Chairperson

Transport and Industrial Relations Select Committee

Parliament

Submission: Maritime Transport Amendment Bill

Thank you for receiving our submission in respect of amendments to the Maritime Transport Act (the Act).

The Federation would like to appear before the committee to speak to our submission.

Coastal shipping is a vital part of New Zealand’s transport infrastructure.It also plays a role in civil defence.It is important for New Zealand economic, environmental and social welfare that the coastal network operates efficiently and effectively.Central and local government decisions can optimise the way that the coastal network performs.These decisions can also drive unnecessary costs into shipping operations.

The Federation is committed to working with decision-makers to ensure that the best policy settings are in place for the benefit of all New Zealanders.We are happy to work proactively to bring sector knowledge to support the policy-making process.

The New Zealand Shipping Federation is the key representative body for New Zealand’s coastal shippers.Members of the Federation are:

Coastal Bulk Shippingwww.coastalbulkshipping.co.nz

Coastal Oil Logisticswww.coll.co.nz

Golden Bay Cementwww.goldenbay.co.nz

Holcimwww.holcim.co.nz

Interislanderwww.interislander.co.nz

NIWAwww.niwa.cri.nz

Pacifica Shippingwww.pacship.co.nz

Silver Fern Shippingwww.sfsl.co.nz

Strait Shippingwww.strait.co.nz


Section 34: International vessels operation in New Zealand Waters pursuant to section 198

The members of the Federation have significant concerns about the proposed amendment to section 198 of the Act.We believe that the Committee has an important role in not allowing the amendment to create an even bigger loophole than already exists in the law in respect of international vessels carrying coastal cargo.

Section 198 is the section of the Act that sets out the situations where an international ship can operate in New Zealand waters.The significance of this is that international ships operate on very different terms to members of the Federation who are coastal operators subject to New Zealand laws and requirements.So-called international vessels may operate with manning levels and pay levels that are lower than that required by New Zealand law.They are exempt from the requirement that they buy Environment Trading Scheme (ETS) credits when they take on bunker fuel.They are outside the New Zealand net for income tax, GST, PAYE and ACC.The application of health and safety laws to such international ships is problematic.While international ships are outside New Zealand’s employment laws, we note that they are subject to the Maritime Labour Convention which will come into force in New Zealand with effect from March 2017 and will be policed by Maritime New Zealand.

Section 198 states

198 Coastal shipping

(1) No ship shall carry coastal cargo, unless the ship is—

(a) a New Zealand ship; or

(b) a foreign ship on demise charter to a New Zealand-based operator who employs or engages a crew to work on board the ship under an employment agreement or contract for services governed by New Zealand law; or

(c) a foreign ship—

(i) that is passing through New Zealand waters while on a continuous journey from a foreign port to another foreign port, and is stopping in New Zealand to load or unload international cargo; and

(ii) whose carriage of coastal cargo is incidental in relation to the carriage of the international cargo.

(d) [Repealed]

(1A) A ship referred to in subsection (1) (c) may only load and unload coastal cargo—

(a) at a New Zealand port at which it loads or unloads international cargo; or

(b) at a New Zealand port that it is scheduled to pass in the course of its continuous journey.

(2) If, in any case, the Minister is satisfied that there are no ships of any of the kinds specified in subsection (1) available to carry any coastal cargo, the Minister may authorise the carrying of coastal cargo in that case by any other ship on such conditions as the Minister considers appropriate (including any conditions relating to occupational safety and health); and every authorisation granted under this subsection shall, subject to subsection (5), have effect according to its tenor.

(3) Every person commits an offence who—

(a) carries coastal cargo in contravention of this section; or

(b) contravenes or fails to comply with any condition imposed under subsection (2).

(4) Every person who commits an offence against subsection (3) is liable on conviction,—

(a) in the case of an individual, to a fine not exceeding $10,000:

(b) in the case of a body corporate, to a fine not exceeding $100,000.

(5) Nothing in this section shall limit any other provision of this Act or any other Act, or any regulations or maritime rules made under this Act.

(6) In this section,—

coastal cargo, in relation to any ship, means—

(a) passengers who initially board the ship at a New Zealand port for carriage to and final disembarking from that ship at another New Zealand port; or

(b) goods initially loaded on the ship at a New Zealand port for carriage to and final unloading at another New Zealand port

continuous, in relation to a journey, means proceeding directly and expeditiously

foreign port means a port in a country other than New Zealand

goods has the same meaning as in section 2 of the Carriage of Goods Act 1979

international cargo, in relation to any ship, means—

(a) passengers who initially board the ship at—

(i) a foreign port for carriage to and disembarking at a New Zealand port; or

(ii) a New Zealand port for carriage to and disembarking at a foreign port; and

(b) goods initially loaded on the ship at—

(i) foreign port for carriage to and unloading at a New Zealand port; or

(ii) a New Zealand port for carriage to and unloading at a foreign port; and

(c) excludes coastal cargo

The effect of the section is understood to be that an international ship (operating on the preferential terms described above) can operate between the mainland islands of New Zealand and Chatham Island so long as it is either:

We are unclear as to how the Ministry is policing vessels that are operating pursuant to sections 198(1)(b) and 198(1)(c).We believe that the Committee could usefully obtain advice as to how the cumulative provisions of section 198(1)(c)(i) and (ii) are interpreted by the Ministry.We believe that the proposed amendment is a way of side-stepping the current rules to avoid enforcing them.

The effect of the amendment is not minor.The arguments in relation to Chatham Island can also be applied to trans-Tasman and other routes.

The Chatham Island Problem

We believe that the Committee should consider this issue in the context of the problems that have historically arisen in respect of the supply chain to Chatham Island.

Currently, we understand that there are 2 vessels operating on the Chatham Island route, each run by a separate company.The Southern Tiare is run by the Chatham Islands Enterprise Trust.The Norfolk Guardian is run by Quadrant Pacific, part of the Swire Group.

The Chatham Island situation is complex and it needs noting that it has never sustained a two vessel operation in the past.Of course, freight rates were never low enough for the Chatham Islanders and they see competition as a way of lowering freight rates.

The present situation is a good example of how a foreign-crewed and operated vessel can take out a NZ owned and operated business.Prior to the Chatham Island Enterprise Trust getting into shipping, a New Zealand vessel, Rangatira, serviced the Chatham Islands for 13 years. It seems to be generally acknowledged that apart from an inability to service the seasonal fluctuations in livestock numbers, the Rangatira provided a reasonable service. Approximately 5 years ago, with the support of the Chatham Island Enterprise Trust, another NZ flagged and crewed vessel, F.V Baldour, was introduced to the Chatham Island trade. This operated for approximately 12 months and was replaced with the foreign-crewed and foreign-flagged vessel, Southern Tiare.

The following is our understanding of the current situation.Southern Tiare is owned by Chatham Island Asset Management (Cook Island) Ltd which in turn is owned by the Chatham Island Enterprise Trust. The vessel is chartered to the operating Company, Chatham Island Shipping Ltd, a New Zealand Company, again owned by the Enterprise Trust. We understand that the vessel is crewed by a largely Tongan crew employed by Chatham Island Shipping. In order to meet the requirements of section 198 and immigration rules, the vessel undertakes a trip to Norfolk Island on a monthly basis. On their website http://www.chathamislandsshipping.co.nz/

this is described as:

Chatham Islands Shipping run a regular service between Napier - Waitangi - Pitt Island and Timaru. This service is interspersed with a regular run from Napier to Norfolk Island via Auckland.

The “interspersed” run to Norfolk does not appear in the shipping schedule on their website and appears to the Federation to be a work-around to get into the exception that already exists in section 198 of the Act

While the Federation has not been able to get a full list of pay rates for the vessel’s crew, we believe that the rate for 2nd mate of NZ$ 235.70 per day plus 8% holiday pay which means they need to work for 365 days in the year to earn a salary that is equivalent to that earned by a 2nd mate on a coastal vessel working two weeks on and two (paid) weeks off.By way of comparison, it is normal on coastal ships in New Zealand waters to have crews working two weeks on, two weeks off but we understand that the Southern Tiare does not roster the crew in this way.The vessel is not subject to New Zealand employment law but will be subject to the Maritime Labour Convention, e.g., in respect of the requirement to have written employment agreements. Apart from obviously low pay rates and absence of time off, of equal concern to the Committee should be issues relating to equipment failure and accidents.We suggest you enquire about these.

The proposed change to Section 198 would legitimise the current operation which is accepted by the Ministry of Transport and open the door to anyone else who wished to start trading on the NZ coast and use the Chatham Island as their loophole.

Allowing a foreign vessel to service Chatham Island may have provide some short-term comfort (in respect of both pricing and regularity of the schedule) to the islanders and to the Ministry.But if the current situation can be used as an indicator, the longer term outlook for New Zealand-based ship operators is not good.The Rangitira and its New Zealand operator has gone.Chatham Island is left with a service that we believe operates a vessel that is in a run-down condition and has proved unreliable in operation. It remains to be seen how long the Southern Tiare will remain in service.

We understand that the Norfolk Guardian also uses a side trip to Norfolk Island to get within the existing exceptions to section 198.

Clear Heads afloat

We note that the bill’s provision in respect of alcohol and drug testing will have limited effect on members of the Federation as operators of SOLAS vessels already have drug and alcohol policies in place.

In our submission on Clear Heads, the Federation asked for clearer mandated standards of testing so that these could not become issues for workplace negotiation.Our submission has not been accepted.

We are concerned that the government has not taken the opportunity to address the issue of drugs and alcohol usage by persons in positions of responsibility in respect of private recreational vessels.

As stated in our submission on the Clear Heads consultation, Federation members take the following view:

We look forward to discussing our submission with the committee.

Yours sincerely

Annabel Young

Executive Director