Briefings

Mandatory code of conduct for access to Australian bulk wheat port terminal facilities

On 19 September 2014, the Australian Federal Government announced a mandatory code of conduct for Australian bulk grain export terminals under the Competition and Consumer Act 2010 (the new Code).

From 30 September 2014, port access for bulk wheat export in Australia will be governed by the new Code (and general competition law), replacing the current regime that was implemented under the Wheat Export Marketing Act 2008 (WEMA), which will be automatically repealed.

The new Code will have a far greater impact on the Australian bulk wheat export industry than first envisaged when the Federal Government released its early-assessment Regulation Impact Statement and “draft Code” to the public on 3 June 2014.

The Federal Government has materially broadened the application of the regulatory regime from that presented as the “draft Code” and which currently operates under WEMA. In particular, whereas the draft Code and WEMA focussed on “vertically integrated terminal operators”, the new Code will treat all port terminal service providers the same, at least initially.

Further, where the draft Code would have automatically expired on 30 September 2019, there is no automatic sunset or repeal date in the new Code – only a requirement for a review to be commenced before 30 September 2017.

Among other things, the new Code will impose strict access obligations on the owners and operators of all “port terminal facilities” which are defined as meaning a ship loader:

• At a port; and
• Capable of handling bulk wheat

and includes specified facilities situated at the port and associated with the ship loader that are capable of handling bulk wheat.

The practical effect is that the full requirements of the new Code will initially apply to any owner or operator of a ship loader capable of handling bulk wheat for export.

In summary, a port terminal service provider will be required to:

1. Deal in good faith with exporters;
2. Not discriminate in favour of itself or an associated entity in providing a port terminal service to an exporter or hinder an exporter’s access to port terminal facilities;
3. Enter into an access agreement or into negotiations about the terms of an access agreement with an applicant exporter, subject to certain conditions being satisfied; and
4. Comply with continuous disclosure rules which require the publication by the port terminal service provider of:

• A port loading statement, on a daily basis;
• Its policies and procedures for managing demand at each port terminal facility;
• Its port loading protocol and its standard terms and reference prices for each port terminal facility that it owns or operates;
• The expected capacity for each port terminal facility for each year;
• Key performance indicators, on a monthly basis; and
• Its stock information, on a weekly basis.

A port terminal service provider has the option to apply to the Australian Competition & Consumer Commission (ACCC) for an exemption from the new Code.

An exempt port terminal service provider will not be subject to the strict access obligations imposed by the new Code, but will still have an obligation to deal with exporters in good faith and to disclose daily loading statements, policies for managing demand, and standard terms and conditions (including price).

In considering whether or not to grant an exemption, the ACCC will have regard, amongst other things, to the legitimate business interests of the port terminal service provider, the interests of exporters, and the promotion of competition in both upstream and downstream markets.

The new Code also permits the Minister to exempt a port terminal service provider that is a co-operative that has:

• Grain-producer members who represent at least a two-thirds majority of grain-producers within the grain catchment area for the port concerned; and
• Sound governance arrangements that ensure the business functions efficiently and that allow its members to influence the management decisions of the cooperative.

There is a one-year grace period for those port terminal service providers who do not currently have an access undertaking in place under the current WEMA regime.

The new Code will apply to these entities from 1 October 2015, which should allow sufficient time for those port terminal service providers to seek an exemption from the ACCC and if that application is not successful, to take the necessary steps to comply with the new Code by the extended deadline.

Only time will tell whether the new Code achieves its objective to promote an efficient and profitable bulk wheat export industry by ensuring that all bulk wheat exporters have port terminal access and reducing unnecessary regulatory burden on port terminal service providers.

It is considered likely that the new Code’s intent will be tested very early on in the new environment. In particular:

• Any port terminal service provider that is a co-operative; or
• Does not actually export bulk wheat itself; or
• Operates in a region that has an oversupply of port terminal capacity,

must surely consider its respective rights to seek an exemption.

A review of the new Code must start before 30 September 2017.

For more information, please contact Stephen Thompson, Partner, on +61 (0)2 9320 4646 or stephen.thompson@hfw.com, or Owen Webb, Associate, on +61 (0)2 9320 4606 or owen.webb@hfw.com, or Richard Hoare, Associate, on +61 (0)3 8601 4582 or richard.hoare@hfw.com.