Mandatory industry 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 grainexport 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 competitionlaw), 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the current regime that was implemented under the Wheat Export Marketing Act 2008 (WEMA), which will be automatically repealed.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 thepublic 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 terminaloperators”, 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 inthe 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 andoperators 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 owneror 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 ofitself or an associated entity inproviding a port terminal serviceto an exporter or hinder anexporter’s access to port terminalfacilities;
3. Enter into an access agreement orinto negotiations about the termsof an access agreement with anapplicant exporter, subject tocertain conditions being satisfied;and
4. Comply with continuousdisclosure rules which require thepublication by the port terminalservice 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 providerhas the option to apply to theAustralian Competition & ConsumerCommission (ACCC) for anexemption from the new Code.

An exempt port terminal serviceprovider will not be subject to thestrict access obligations imposedby the new Code, but will still havean obligation to deal with exportersin good faith and to disclose dailyloading statements, policies formanaging demand, and standardterms and conditions (includingprice).

In considering whether or not togrant an exemption, the ACCC willhave regard, amongst other things,to the legitimate business interestsof 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 theMinister to exempt a port terminalservice 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 theport concerned; and
• Sound governance arrangements that ensure the business functionsefficiently and that allow itsmembers 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 theseentities from 1 October 2015, whichshould allow sufficient time forthose port terminal service providersto seek an exemption from the ACCC and if that application is notsuccessful, to take the necessarysteps to comply with the new Codeby the extended deadline.

Only time will tell whether the new Code achieves its objective topromote an efficient and profitablebulk wheat export industry byensuring that all bulk wheat exporters have port terminal access and reducing unnecessary regulatoryburden on port terminal serviceproviders.

It is considered likely that the new Code’s intent will be tested veryearly on in the new environment. Inparticular:

• Any port terminal serviceprovider that is a co-operative; or
• Does not actually export bulkwheat 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.