October 2017 Newsletter

Notice of 2017 AGM and OGM – HOLD THE DATE Friday 17th November 2017, Hosted by Zepsri, 400 Maunganui Road, Tauranga

Our apologies for any inconvenience as a result of the change to the date of the 2017 AGM/OGM.  As many of our speakers are currently facing an uncertain time awaiting the outcome of post-election talks to establish the new government, the decision has been made to shift the date until later in the year when it is anticipated that there will be more certainty.

The NZSC AGM for Full Members will commence at 10.00am.  papers will be distributed in the prior week.

THE NZSC OGM for Full Members and Affiliates will commence with lunch at 12.15pm and conclude at approximately 4.30pm.

Shippers’ Council Opposes Port Napier Insurance Levy

The Council has voiced its opposition to Port Napier’s insurance levy, which came into effect on October 1 and will be passed onto exporters and importers effectively through the back door as added cost in the supply chain.

NZSC’s media statement on the issue noted that ports should either be absorbing increased insurance costs as part of normal business activity, or negotiating them with their commercial clients – the shipping lines; not imposing them on parties with whom they have no contractual relationship and therefore no ability to review and negotiate rates.

We see this an alarming precedent and will strongly oppose any targeting of shippers in this manner.

Commerce Act Changes – What Do The New Amendments Mean For Shippers?

The Cartels Bill (Commerce Amendment Bill) finally passed into law in mid-August, effectively ending international shipping lines’ exemption from the Commerce Act. The Council was consulted closely on this legislation and lobbied strongly for protection from anti-competitive behavior without dismantling vessel sharing arrangements. We are delighted that the targeted block exemption contained within the new legislation directly responds to our concerns.

Under the new competition legislation, international shipping lines will generally be prohibited from fixing prices, unreasonable capacity limitation, and the sharing of commercially sensitive information. The targeted block exemption provides an exemption for activities related to vessel sharing arrangements, such as co-ordination of schedules, pooling on vessels, sharing of equipment and capacity adjustments in response to fluctuations in supply and demand. Lines operating in VSA agreements will be able to agree container prices with regard to space on the ship as part of the VSA, provided the cooperation improves the service supplied to the shippers. The arrangements are challengeable under the competition provisions of the Commerce Act if they do not improve the quality of service supplied to shippers.

We note that if you’re looking for a consolidated Commerce Act including the new rules to apply to international shipping lines, you’ll have to wait a while yet. The amendments passed by Parliament don’t come into force until two years after the Commerce (Cartels and Other Matters) Amendment Act 2017 received Royal assent – on 14 August – which means the new provisions do not come into force until 14 August 2019.

You can read the NZSC media statement Passage of the Cartels Bill applauded by NZSC under Media Releases.

Review of Big Ships Report Underway

Further to discussion at this year’s Strategy Day, NZSC has commissioned a review of the Big Ships report undertaken in 2010 and updated in 2012. We have contracted NZIER,  a specialist economic research and analysis firm to test the conclusions reached in those earlier reports in light of relevant developments globally and in New Zealand.
Specifically, the new research seeks to answer the following questions:

  • In 2017, in light of the developments, including significant consolidation of shipping lines in the shipping industry, are the earlier conclusions still valid?
  • Given significant reductions in freight rates over the last two years, do the previous conclusions that bigger ships will drive lower freight rates hold true in the current environment and what would that do to sustainability?
  • What is the impact for New Zealand shippers if multiple ports invest in dredging and other infrastructure improvements to compete for bigger ships? For shippers is this a good or a bad thing?
  • Are there new implications that need to be considered?
  • Are there new policy recommendations?

The research is well underway and we plan to launch the research findings with a presentation from NZIER at this year’s OGM.

NZ Government Participated in IMO Strategy to Reduce Greenhouse Gas Emissions

NZ Government agencies are participating in International Maritime Organisation (IMO) negotiations on a strategy to reduce greenhouse gas (GHG) emissions from international shipping.

Their engagement will support New Zealand’s national interests as a Party to the Paris Agreement on climate change, including influencing outcomes that support its temperature goals. It will also demonstrate New Zealand is a credible voice on international climate change issues.

The Ministry of Foreign Affairs and Trade, the Ministry of Primary Industries and the Ministry of Transport will represent New Zealand at the next Strategy negotiations take place from 23-27 October. The Strategy will include targets and an indicative set of technical and operational measures. Scheduled for adoption in April 2018 and revision in 2023, it will inform New Zealand’s IMO engagement on climate change issues for the foreseeable future.

Correspondence from MoT notes that in engaging on the Strategy’s development, the government agencies seek to ensure that:

  • New Zealand and Pacific Island Countries do not experience any disproportionate burden from IMO measures to further reduce GHG emissions
  • Measures should not seek to reduce shipping activity or impose disproportionate costs on industry or consumers, and
  • Growth in shipping is decoupled from growth in emissions over time.

The Council has formally responded to a series of questions forwarded by MoT designed to inform advice and priorities for IMO engagement on the Strategy

Trade Update

At the time of writing we still don’t know who will form the next New Zealand government.  There are two scenarios being talked about most widely.  Both involve New Zealand First.  One would be led by National; the other by Labour and the Greens. What is the NZ First trade policy and how might it impact on New Zealand’s negotiating agenda?

NZ First claims that it is a pro-trade party that will support FTAs that are “demonstrably in New Zealand’s interests”.  It supports tax cuts for exporters.  It is on record as supporting FTAs with Russia and the UK.  Winston Peters has given at least one speech advocating a FTA linking the Commonwealth.  NZ First gets considerable support from companies involved in the primary sector – fishing, horse racing, meat, dairy and forestry.

In practice NZ First has not been supportive of FTAs in parliament.  As Foreign Minister under the Clark Government he famously opposed the FTA with China. It is difficult to think of an agreement that was more demonstrably in New Zealand’s interests to support.

In opposition in recent years NZ First has consistently opposed FTAs including TPP.

NZ First’s main concern relating to TPP seems to be in regard to Investor State Dispute Settlement (ISDS).  It is clear that the level of understanding of ISDS by members of the NZ First caucus is not high.  It is therefore possible that a National-led government might be able to provide sufficient reassurance to garner NZ First support for TPP if ISDS is properly explained.  TPP 11 would be worth $2.5 billion a year to the New Zealand economy.

Labour wants to re-negotiate the TPP 11 commitment on investment in existing houses to allow a ban to be imposed on foreigners making such purchases.  NZ First would probably support this endeavor.  The Greens share NZ First suspicions on ISDS.  Such a fundamental renegotiation of important parts of TPP is unlikely to be completed quickly.  A Labour/Green/NZ First scenario would be a big complication for TPP 11.  It would either result in a delay in the outcome or New Zealand withdrawal.

The proposed FTA between NZ and the EU should survive any scenario.  ISDS is not likely to be part of the negotiation which will make it more straightforward.  This is due to EU internal factors (a court decision over negotiating competence – EU v member states) but could be claimed as a victory/concession by NZ First, NZ First/Green.

A FTA negotiation with the UK cannot happen until the UK departs the Customs Union with Europe.  Under the most optimistic scenario (Theresa May’s Florence speech) that will be three years away.

A revival of the FTA with Russia would be regarded as very negative by the EU at this point in time because of the Russian activities in Ukraine.

NZ First may well be open to a FTA negotiation with the Trump administration.  National may likewise consider this.  Labour/Green concerns about Trump would likely make such a  negotiation impossible under the Labour/Green/NZ First scenario.

NZ First is likely to regard the FTA negotiation with India, the GCC and RECP with some suspicion.  Sri Lanka will probably also be a potential concern.

FTA Negotiation updates

TPP 11

As New Zealand voted NZ’s TPP negotiators were flying back from Japan where the latest TPP 11 negotiations had been taking place.  The concept is still alive but there are obviously complications. Vietnam seems intent on seeking a re-negotiation of more of the agreement than others are comfortable.  Should New Zealand join the Vietnamese side once our new government is formed this could delay or derail this negotiation.

Senior officials are going to meet again in October to see whether a final agreement is possible at the November APEC summit.


There has been no progress.


Negotiations appear stalled.  Australia and New Zealand have refused to accept proposals for a “political agreement” by the end of the year.  The quality of offers, particularly from India, is poor.


All signs remain positive.  Expect a senior visitor from Europe in November and agreement to launch negotiations at that time.  Actual negotiations could commence by the end of 2017.

FTA Upgrades

The focus is currently on China and Singapore.  Unfortunately progress could be impacted by Labour demands that some FTAs will have to be re-negotiated if they come into power to allow a ban to be imposed on foreigners purchasing existing houses.  A senior Chinese visit is due before the end of the year.

Positive Results From VGM Spot Checks

Maritime New Zealand’s VGM spot checks of a random selection of containers from Port of Tauranga’s Sulphur Point container terminal showed that NZ exporters are achieving good levels of compliance with the regulations. MNZ reports that of the 100 containers checked, just six had a weight that was different to their submitted weight – most weighing less than their stated weight; possibly due to moisture evaporation or rounding up of contents. The result is seen as providing reassurance that container weights are generally what they should be.

While VGM appears to have had a relatively smooth introduction in New Zealand, that’s not the case in some developing markets where VGM provisions have not been embedded in the legal or regulatory frameworks, resulting in significant problems for shippers and the trade generally in those countries. For example in Africa problems have been reported with significant delays and VGM “administrative fees”.

NZSC Responds to “Move PoAL” Call

The Council was one of several organisations to voice its concern in response to New Zealand First leader Winston Peters’ call to relocate Ports of Auckland (PoAL) operations to Northport.
In our view the possibility of relocation has been examined extensively in the past, including via the Port Future Study commissioned by the Auckland Council. The location of the port in the centre of Auckland creates great efficiency gains – particularly for imports. In recent years numerous studies have been undertaken – all of which confirm this important role. It would be unwise to ignore the findings of those studies.

Port News

Three new cranes ordered by Ports of Auckland (POAL) will be able to carry up to four containers at once.  Part of an investment to increase capacity from 900,000 teu a year to around 1.6-1.7 teu, the cranes will be used on POAL’s new deep-water container berth at the north end of Fergusson container terminal and are due to be delivered in late 2018.

Late September saw CentrePort host its first regularly-scheduled containership callers since container-handling facilities were severely damaged in last November’s Kaikoura earthquake. The returns follow a
NZ$28m project to secure 125 metres of CentrePort’s container wharf and reintroduce its two ship-to-shore cranes to operation. As well as temporary paving works, the project has entailed over 185 piles (equating to over a thousand tonnes of steel) being driven an average of 40 metres into the soil. Additionally, 644 gravel columns have been embedded into the ground to reduce any liquefaction from future earthquakes and provide resilience to the temporary works.

Global Shippers Forum Annual Meeting 1-3 October 2017

At the time of writing the Global Shippers Forum annual meeting is underway in Gran Canaria. The programme includes a review of the container shipping market and analysis of the impact on customer service of the three main alliances; liner shipping competition policy and anti-trust issues (including NZ status); and IMO emissions strategy and actions to reduce GHG emissions including potential impacts for shippers arising from the introduction of the 2020 sulphur cap (at an estimated implementation cost of US$60bn+ to industry).

The GSF 2017 Annual Report notes that environmental issues continue to feature highly on its agenda, as global approaches to greenhouse gases and sulphur emissions could have lasting implications for the supply chain.

GSF has for many years proposed a policy approach that would incentivise the uptake of technical fuel –efficiency measures and energy management on board ships. GSF sees these approaches as win-wins because in addition to supporting environmental goals they create lower running costs for operators and thus reduce pressure to raise rates to customers. The difficulty is that costs for investment in energy saving technology and involved in adopting energy management techniques fall on owners and operators – who in turn have supported alternative approaches such as a bunker levy which would load the costs onto customers. GSF concerns with this approach are two-fold: there is zero incentive for the sector to address its own emissions and the cost burden of reducing GHG emissions is imposed onto shippers rather than the ship owners/ operator.

GSF surcharges campaign

Also noted in the GSF annual report is the establishment of its global surcharges campaign,  “augurated in response to growing concerns about the widespread use of non-negotiable surcharges”  and other add-on charges by carriers.  GSF has set he following key campaign goals have been set:

  • To remove the imposition of surcharges as a standard commercial practice by 2020
  • To obtain recognition from WTO that non- negotiable shipping surcharges and ancillary charges amount to significant non-trade barriers within Trade Facilitation Agreements
  • To campaign for the inclusion of surcharge provisions in the 2020 INCOTERMS revision (including promotion of the FCA term in contractual terms between buyers and sellers when using containerised shipping)
  • To support members’ national and regional campaigns and policy legislative initiatives to prohibit the imposition of surcharges.
    • GSF will work with governments, and regional bodies to undertake a more detailed impact on surcharges, will intensify representations with the WTO, and other UN agencies, for inclusion of surcharges and ancillary charges as non-tariff barrier impediments to international trade, calling for the introduction of measures
    • to reduce red tape and ensure that shipping
fees and charges are approximate to the cost of services rendered.

Download the Post