Shipping Industry Review Frequently Asked Questions

Q. Why establish a Shipping Industry Review?

New Zealand's shipping industry has been in a state of continued decline for the past decade. This review was announced by the Minister of Transport in August, 2000 and was charged with conducting a short-term inquiry into the future of the shipping industry in New Zealand and to make strategic recommendations on what could be done to increase New Zealand's participation in shipping and maritime services.

Q. Who was on the Review Team?

The Minister of Transport appointed the following people to conduct the Review:

• Mr Ian Mackay (Chair): Maritime lawyer and Master Mariner, former head of P&I Services (shipowners' liability advisers), former member of the State Insurance Investment Board, former member of the board of the Shipping Corporation of New Zealand, and former chair of the Maritime Safety Authority.

• Mr Dave Morgan: National President of the New Zealand Seafarers' Union.

• Mr Graham Cleghorn: Business consultant, board member of the New Zealand Manufacturers' Federation, Chair of the Manufacturers' Forum of the Employers and Manufacturers' Association (Northern).

• Captain John Deeney: Practising Master Mariner with extensive experience in the Pacific, and active in the Merchant Service Guild.

• Mr Rod Grout: President of the New Zealand Shipping Federation, Managing Director of Pacifica Shipping Ltd.

• Mr Trevor Smith: Master Mariner, Chairman of the New Zealand Shippers' Council, Executive Manager Regional Services of the New Zealand Dairy Board.

Q. What level of interest did the Review generate in the industry?

In order to assist with its deliberations, the Review Team sought the views of the wider shipping industry and wrote to a range of organisations inviting their submissions. A total of 83 written submissions were received and a number of organisations also took the opportunity to present their submissions directly to the Review Team.

Q. What did the Review Team recommend?

The recommendation's in the Review Team's report cover the following areas:

• Special tax arrangements (such as a tonnage tax and/or second register) to 'level the playing field' for shipping;
• Better use of current maritime training institutions;
• Closer partnership between the industry and the Royal New Zealand Navy;
• Commerce Commission investigation into alleged monopoly pricing by ports;
• Realising opportunities for domestic shipping arising from 'hubbing';
• Australia-New Zealand Closer Economic Relations and coastal shipping opportunities;
• Minimising compliance costs of regulations on shipping;
• Ratifying International Labour Organisation conventions on shipping; and
• Improving the collection and reporting of shipping and cargo related statistics.

Q. Is the Review Team's Report Government Policy?

No, the Report of the Shipping Industry Review is not Government policy and nor is it Ministry of Transport policy advice. The Report's proposals are those of the Review Team itself, and are now being considered.

Q. What is the Government going to do about the Report?

The Government has set up a Ministerial Committee to consider all the proposals contained in the Report of the Shipping Industry Review. It will then report to Cabinet with recommendations on what action the Government should take in response. The membership of the Committee is as follows:

• Hon Mark Gosche, Minister of Transport (Chair);
• Rt Hon Helen Clark, Prime Minister;
• Hon Jim Anderton, Deputy Prime Minister;
• Hon Dr Michael Cullen, Minister of Finance;
• Hon Steve Maharey, Associate Minister of Education (Tertiary Education);
• Hon Jim Sutton, Minister of Trade Negotiations;
• Hon Margaret Wilson, Minister of Labour;
• Hon Mark Burton, Minister of Defence;
• Hon Paul Swain, Minister of Commerce;
• Hon Laila Harre, Minister of Statistics; and
• Hon Judith Tizard, Associate Minister of Transport.

Q. The Review Team talks about terms such as 'participation', 'cabotage', 'special tax arrangements', 'second register', 'tonnage tax', 'hubbing', 'shippers', etc. What do these terms mean?

Participation
'Participation' was interpreted by the Review Team in its broadest sense to enable consideration of a number of issues regarded as relevant to the future of the industry. The Review Team's Report found that there were four main types of participation:

• Companies that own and operate ships under the New Zealand flag.
• Operators of demise-chartered foreign ships, which are crewed and operated in all respects as if they were New Zealand owned.
• Operators that charter vessels fully equipped and crewed by foreign nationals from overseas owners on a time or voyage-charter basis.
• New Zealand nationals employed in foreign ships in international services.

Cabotage
'Cabotage' refers to the reservation of a country's domestic trade to shipping operators of that country. It is a policy that is widely practised internationally.

Special Tax Arrangements
The Review Team recommended that the Government should put in place a financial, fiscal and regulatory regime involving a second register and/or a tonnage tax. Such support measures are common among OECD countries and are designed to address concerns about shipowners reflagging their vessels in countries providing advantageous taxation environments.

Second Register
Second registers are designed to give a country's shipowners fiscal advantages, through measures such as reduced corporate and seafarer taxation rates and favourable rates of depreciation. Second registers sometimes also provide for vessels to be crewed by non-nationals.

Tonnage Tax
The Review Team looked at the British tonnage tax scheme, which works on a notional 'derived profit' per 100 net ton per day. This means that the amount of corporate tax to be paid would be known each year in advance and the amount would usually be considerably less than were the shipowner paying corporate tax. The British tonnage tax regime also provides for compulsory training of national seafarers. Such a scheme could apply equally to ships operating on international as well as coastal trades.

Hubbing
Hubbing is a growing international practice of aggregating export and import cargoes at selected 'hubs' for on-carriage to their destinations. Traditionally, ships have 'hopped' from port to port around the New Zealand coast, loading and discharging as they went, but this can be costly and less efficient than hubbing. Already Auckland, Tauranga and Lyttelton are emerging as major hubs. Hubbing could offer good opportunities for increased participation by the New Zealand shipping industry, particularly coastal shipping, as imports and exports would need to be transported to the hub ports.

Shipper
A company or an organisation that contracts for the transport of its cargo is described as a 'shipper'. An example of a shipper could be a major exporter such as the New Zealand Dairy Board, or a major importer such as the Warehouse. Both are also major shippers domestically as well.

Shippers should not be confused with shipping companies (also known as 'carriers'), which carry the cargo.