Port of Melbourne tariff administered against shipping lines As outlined by Brendan Bourke, Chief Executive Officer Port of Melbourne (PoM), the Port Rail Transformation Project (PRTP) is being funded by an increase in the tariff on full import containers of $9.75 per TEU to take place "no earlier than 1 April 2020".The Minister expressed her support of the PRTP which is aimed at reducing truck movements and improving productivity – please refer to the Victorian government statement released yesterday titled Full Steam Ahead For On-Dock Rail. The announcement of the PRTP coincides with the PoM release of Our Plan for Rail 2020 (as a core component of the Rail Access Strategy submitted to the State in 2019) and complements the PoM long term growth objectives as outlined in their 2050 Port Development Strategy.
Commentary - FTA / APSA see significant merit in the PRTP in driving efficiency in the rail supply chain;
- During the PoM consultation process, FTA / APSA raised concerns about the cross-subsidisation fee model with obvious 'winners' and 'losers' i.e imports cross-subsidising exports (which are exempt of any increase); all road users cross-subsidising rail users; and the fact that initial benefits associated with the location of the on-dock rail will significantly benefit some stevedore operations over other - as one major importer member stated during the engagement process "why I am paying this significant fee only to fund operational benefits to my competitors?";
- While a reduction in the fee structure as announced yesterday is welcomed (now $9.75 per TEU as against the originally estimated cost of $15 per TEU), the FTA / APSA position to the PoM and Victorian Government remains that any fee increase must now be offset elsewhere to maintain the port's competitiveness – the introduction of the new tariff only adds to the need for regulation to wind back the stevedore administered Infrastructure Surcharges and Vehicle Booking System (VBS) fees – refer HERE for a complete list of national Infrastructure Surcharges.
Infrastructure Surcharges
Preliminary findings and policy recommendations to inform the Port of Melbourne Port Pricing and Access Review (review) included the need for setting of standards; "pricing transparency"; improvements to landside access and performance; a phased approach to monitoring supply chain costs (including consideration of the findings of the current ACCC review of Part X of the Competition and Consumer Act 2010); and the potential to progress to mandatory standards through regulation. Commentary - FTA / APSA sees merit in the introduction of measures to improve landside access and performance;
- FTA / APSA representatives clearly articulated that failure to regulate will continue facilitation of a "new normal" whereby entities such as stevedores and empty container parks will continue to collect significant revenue from the road and rail transport sectors rather than negotiating pricing with their contracted shipping line clients – as correctly identified in the review, these costs cascade down the supply chain with the addition of administrative fees, resulting in further inflated costs ultimately paid by export and import cargo owners;
- While some form of price monitoring may be beneficial in achieving "pricing transparency", FTA / APSA put forward a position that market forces are best placed to determine a commercial outcome – this could only be achieved with regulation to prevent the practice of stevedores collecting revenue via Infrastructure Surcharges (allowing stevedores sufficient lead times to re-negotiate appropriate contracts with shipping lines);
- Shipping line representatives responded by stating that eliminating the Infrastructure Surcharges would force costs back to the lines which in turn may result in increased freight rates – FTA / APSA acknowledged this and reiterated that this remained a preferred outcome in that it allowed cargo owners to negotiate price rather than being subject to an unregulated regime administered by stevedores with no available avenue to negotiate price;
- FTA / APSA sees a need for immediate policy and regulatory invention and does not see a need to await outcomes of the ACCC review - the likely repeal of Part X and an introduction of a Block Exemption regime will not affect existing stevedore practices of recovering costs via Infrastructure Surcharges.
The Victorian government is to be commended for taking the brave lead in commissioning the review with other state and national regulators watching with keen interest. The spotlight is now clearly on Minister Horne to take the next step to truly champion the cause for cargo owners and to establish an environment to facilitate fair commercial practices.
FTA / APSA will continue to lead industry's advocacy for reform on Infrastructure Surcharges and will keep members up to date on pertinent developments. |