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E L E C T R I C I T Y G A S W A T E R T R A N S P O R T O T H E R I N D U S T R I E S

Review of the Interface between the Land Transport Industries and the Stevedores at Port Botany

Other Industries - Issues PaperMay 2007

Independent Pricing and Regulatory Tribunal

New South Wales

Review of the Interface between the Land Transport Industries and the Stevedores at Port Botany

Other Industries – Issues paper May 2007 S9-26 ISBN 978 1 920987 92 3

This work is copyright. The Copyright Act 1968 permits fair dealing for study, research, news reporting, criticism and review. Selected passages, tables or diagrams may be reproduced for such purposes provided acknowledgement of the source is included.

Invitation for submissions The Tribunal invites written comment on this paper and encourages all interested parties to provide submissions addressing the matters discussed. Submissions are due by 8 June 2007. We would prefer to receive them by email at [email protected] You can also send comments by fax to (02) 9290 2061, or by mail to: Review of the Interface between the Land Transport Industries and the Stevedores of Port Botany Independent Pricing and Regulatory Tribunal PO Box Q290 QVB Post Office NSW 1230 Our normal practice is to make submissions publicly available on our website (www.ipart.nsw.gov.au). If you wish to view copies of submissions but do not have access to the website, you can make alternative arrangements by phoning one of the staff members listed under ‘inquiries’ at the front of this paper. We may choose not to publish a submission — for example, where it contains confidential or commercially sensitive information. If your submission contains information that you do not wish to be publicly disclosed, please indicate this clearly at the time of making the submission. If you would like further information on making a submission, the Tribunal’s submission policy is available on our website.

The Tribunal members for this review are: Dr Michael Keating AC, Chairman, Mr James Cox, Full Time Member and Ms Sibylle Krieger, Part Time Member

Inquiries regarding this review should be directed to:

Ruth Lavery 02 9290 8447 Dennis Mahoney 02 9290 8494

Craig Tipping 02 9290 8443

Independent Pricing and Regulatory Tribunal of New South Wales Level 2, 44 Market Street, Sydney NSW 2000

(02) 9290 8400 Fax (02) 9290 2061 www.ipart.nsw.gov.au

All correspondence to: PO Box Q290, QVB Post Office NSW 1230

TABLE OF CONTENTS

1 INTRODUCTION 1 1.1 Purpose of the review 1 1.2 Terms of Reference 2 1.3 Recent industry developments 2 1.4 Process for the review 3 1.5 Structure of the issues paper 4

2 CONTAINERISED FREIGHT AT PORT BOTANY 5 2.1 Expansion of containerised freight 5 2.2 Main players and their roles 7

2.2.1 Shipping lines 7 2.2.2 Stevedores 8 2.2.3 Road transport operators 10 2.2.4 Rail operators 12 2.2.5 Regulatory authorities 13 2.2.6 Intermediaries 14 2.2.7 Collecting an import container: The process 15 2.2.8 Interactions between supply chain participants 16

2.3 Challenges facing the landside supply chain 17 2.3.1 Landside congestion 17 2.3.2 Obtaining a VBS timeslot 17 2.3.3 The time spent by trucks at the terminals 20

2.4 VBS operating costs 22 2.5 VBS access charges 23 2.6 Untapped containerised rail freight potential 24

2.6.1 Rail access and booking a rail path 25 2.6.2 Rail window and rail path operating costs 27 2.6.3 Utilisation of intermodal facilities 27

3 PLANS FOR FUTURE EXPANSION OF CAPACITY 31 3.1 Expansion plans at Port Botany 31 3.2 Freight Infrastructure Advisory Board – Selected Recommendations 32

3.2.1 Expansion of Intermodal facilities 32 3.2.2 Peak pricing proposals 33 3.2.3 Increasing use of rail 34

3.3 Rail Track developments 35

4 SPECIFIC ISSUES FOR STAKEHOLDERS 37 4.1 The Vehicle Booking System (VBS) 37 4.2 Rail charges 39 4.3 Storage charges 39 4.4 Vertical integration of the containerised supply chain 40 4.5 Hours of operation 41 4.6 Misaligned incentives along the supply chain 42

APPENDIX 1 TERMS OF REFERENCE 43

APPENDIX 2 COMPETITION AND INFRASTRUCTURE REFORM AGREEMENT - CLAUSES 4.1 AND 4.2 49

APPENDIX 3 LIST OF INVITATIONS TO COMMENT 51

Introduction

1 INTRODUCTION

The Independent Pricing and Regulatory Tribunal (the Tribunal) has been requested by the Premier to undertake a review of the interface between the operators of containerised land transport and the stevedores at Port Botany. The review has been prompted by concerns about landside congestion at the port and the adequacy of the current manner in which it is being addressed. Improvements to the operations of the supply chain may result in imports and exports being moved faster and at least cost, contributing to the competitive advantage of NSW. The Tribunal is to examine the ways in which road and rail transport operators connect with the two stevedores at Port Botany, including looking at the fees charged for various services and the underlying costs of those services, and terms and conditions of access to the port facilities for the moving of containers. The Tribunal will address these issues in its draft report, which will be released in September 2007. To assist it in identifying and understanding the key issues for this review, the Tribunal has prepared this issues paper to encourage stakeholder comment.

1.1 Purpose of the review This review arises from concerns that have been expressed regarding efficient flows of containers into and out of the stevedores’ premises at Port Botany. Most landside transport is by road. Until last decade, trucks were admitted on a ‘first come first served’ basis by the stevedores and long truck queues commonly extended out past port entry. Not only did this slow the distribution of freight into and out of the port, affecting the NSW economy, but normal traffic flows were also disrupted by the truck queues outside the port entry. In response, the stevedores introduced Vehicle Booking Systems (VBSs) to allocate specific timeslots for individual trucks to collect their freight from the port. This should minimise physical congestion caused by truck queues, since trucks should only arrive at the port close to their allocated timeslot. It should also encourage efficient movements of containers to and from importers and exporters as it allows better planning. Stevedores charge fees to access their VBSs and also charge penalty fees for ‘no shows’ and late arrivals to discourage over-booking and waste of their resources. Stevedores also charge storage fees for containers that have been on the wharf for some time, to encourage turnover of containers within the limited space available at the wharf. However, issues have been raised concerning delays and costs in delivering and collecting containers at Port Botany, caused by the lack of availability of timeslots at certain times and a lack of certainty about fees to be charged and circumstances in which fees would be waived. Over time, more landside movements of containers have occurred by rail. Whilst the stevedores’ arrangements with rail operators have not been widely criticised, rail transport is an alternative to road and will be looked at in that context.

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1.2 Terms of Reference The terms of reference for the review are set out in full in Appendix 1. Specifically, the aspects to be reviewed are: • the cost base underpinning the provision of the vehicle booking systems (VBSs) and

other services provided to industry by the two stevedores

• the structure and framework of stevedoring charges and penalties (however described) payable by road and rail operators

• the impact of the VBSs, and the manner of the provision of other services, on road transport movements

• the impact of road and rail pricing on the choice of container transport mode to and from the port

• the efficiency of the landside logistics chain at Port Botany, noting the work already done by the Freight Infrastructure Advisory Board (FIAB).

The report is specifically required to consider: • whether charges and penalties are efficient

• whether charges and penalties are fair to all users

• whether these charges and penalties affect the efficient allocation of space and movement of trucks to and from the port

• arrangements which would help ensure that the stevedores provide a transparent and fair allocation of access and provision of services

• any road and rail issues not considered by FIAB which are specifically related to the efficiency of the interface between the stevedores and the land transport operators

• whether institutional changes would improve the efficiency of the landside logistics chain.

The terms of reference also require the Tribunal to have regard to clauses 4.1 and 4.2 of the Competition and Infrastructure Reform Agreement, which relate to port competition and regulation (see Appendix 2). The clauses broadly require governments to minimise regulatory burden on the port industry and, where possible, allow for competition.1

1.3 Recent industry developments A number of recent industry developments are already aimed at relieving present and impending congestion at Port Botany, including the expansion plans of the Sydney Ports Corporation and rail infrastructure developments relating to the NSW Government’s target that 40 per cent of containerised freight at the port should be moved by rail. These initiatives are not the subject of this review, but will impact on aspects of the Tribunal’s consideration of the issues set out in the terms of reference. 1 At its 10 February 2006 meeting, the Council of Australian Governments (COAG) established the

Competition and Infrastructure Reform Agreement. This agreement comes under the National Competition Policy (NCP) agenda and is aimed at providing a supportive market and regulatory framework for productive investment in energy, transport and other export-oriented infrastructure; and for their efficient use by improving pricing and investment signals and establishing competitive markets. See http://www.coag.gov.au/meetings/100206/index.htm.

2

http://www.coag.gov.au/meetings/100206/index.htm

Introduction

In November 2006, the Minister for Ports and Waterways announced a taskforce to provide strategic advice to the Government on a range of freight logistics issues including port operations, road and rail freight operations, container parks, planning and regulation.2 The taskforce is to assist the NSW Government determine how best to manage freight expansion at Port Botany. The commissioning of this IPART review is a recommendation from the taskforce’s first meeting.

1.4 Process for the review As part of this review, the Tribunal will undertake public consultation, including calling for written submissions and convening a public roundtable discussion by stakeholders. It will release a draft report and recommendations and invite further comments from interested parties. After considering these comments, it will provide its final report and recommendations to the Minister for Ports and Waterways. The proposed timetable for the review is as follows: Action Timetable

Release issues paper and invite submissions May 2007

Due date for submissions 8 June 2007

Hold roundtable discussion Mid July 2007

Release draft report and recommendations and invite submissions September 2007

Provide final report and recommendations to the Minister for Ports and Waterways

December 2007

Details for making submissions are found at the front of this paper before the Table of Contents. The closing date for submissions is 8 June 2007. Written submissions will be carefully considered by the Tribunal prior to the roundtable, and used by the Tribunal to focus discussion at that public meeting. Insofar as it relates to the terms of reference, the Tribunal welcomes information on • the problems experienced by industry participants at the port

• the impact the problems have on supply chain businesses’ efficiency, and

• suggestions for solutions to the problems faced. It is most useful to the Tribunal when reasons are provided for a view that is expressed in a submission, backed so far as possible with examples or data that can be independently verified or calculated.

2 The taskforce consists of The Hon. Joe Tripodi (Chair), Minister for Ports and Waterways; Mr Geoff

Farnsworth, Sea Freight Council of NSW; Mr Vince Graham, RailCorp; Mr Sam Haddad, Department of Planning; Mr Greg Martin, Sydney Ports Corporation; Mr Chris Oxenbould, NSW Maritime; Mr John Robertson, Unions NSW; Ms Liesbet Spanjaard, Saha International; Mr Terry Tzaneros, Austate Logistics Terminal; Mr John West, Dangerous Goods Logistics; and Mr Les Wielinga, Roads and Traffic Authority.

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The remainder of this paper lists a range of issues and questions on which the Tribunal seeks comments, but the list is not exhaustive and stakeholders are invited to raise and discuss any other issues relevant to the terms of reference.

1.5 Structure of the issues paper This issues paper is structured as follows: • Chapter 2 discusses the main features of the present containerised supply chain at Port

Botany - the growing size of the freighting tasks, the main players and their respective roles, and some of the challenges to their efficiency caused by the present and likely future growth in containerised trade. It also sets out questions that stakeholders may wish to address when preparing their submissions

• Chapter 3 presents recent and proposed developments at Port Botany aimed at addressing some of the challenges

• Chapter 4 outlines a range of specific issues and questions that stakeholders may wish to consider when preparing their submissions.

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Containerised freight at Port Botany

2 CONTAINERISED FREIGHT AT PORT BOTANY

This chapter presents the main features of the present containerised supply chain at Port Botany - the growing size of the freighting tasks, the main players and their respective roles, and some of the challenges that may stand in the way of an efficient, timely and least cost movement of freight through the chain. The port area at Port Botany covers 210 hectares and houses integrated facilities for general and container stevedoring, bulk cargo handling, trucking, warehousing, customs, quarantine and empty container storage. The focus of this chapter is on containerised freight.

2.1 Expansion of containerised freight Containerised freight volumes are measured in twenty foot equivalent units or TEUs.3 TEU volumes have been growing faster than the Australian economy as a whole in recent years. Between 1998/99 and 2005/06 volumes at Australia’s major ports rose at an annual average rate of 10.8 per cent a year.4 Over a more recent period (Table 2.1), the growth has remained rapid at 9.4 per cent with growth at Port Botany exceeding the five-port average. The major container ports in Australia are dominated by imports. Port Botany is no exception with full import containers outnumbering full export containers in the ratio of 2:1. Very few empty import containers are moved through the port but as many are exported empty as full. These features are apparent in the bottom half of Table 2.1.

Table 2.1 Containers movements, by type5,6

2001/02 2005/062005/06 Shares

Annual average %

changeFive PortsContainers TEUsFull import 1,481,280 2,167,605 45% 10.0%Empty import 279,714 328,711 7% 4.1%Full export 1,272,517 1,437,397 30% 3.1%Empty export 405,381 852,774 18% 20.4%TOTAL 3,438,892 4,786,487 100% 8.6%

SydneyContainers TEUsFull import 507,285 720,667 50% 9.2%Empty import 22,194 19,419 1% -3.3%Full export 307,412 340,150 24% 2.6%Empty export 172,562 365,229 25% 20.6%TOTAL 1,009,453 1,445,465 100% 9.4%

Source: Bureau of Transport and Regional Economics Waterline no. 41, December 2006, Table 11.

3 TEU is an internationally recognised measure of shipping container volumes. One forty foot container is

equal to two TEUs. 4 Source: ACCC Container Stevedoring Monitoring Report No. 8, November 2006, p 8. The major container

ports are Melbourne, Sydney, Brisbane, Fremantle, Burnie and Adelaide. In contrast to the average annual 10.8 per cent growth in container TEUs, the volume of goods and services produced in Australia, as measured by real Gross Domestic Product, has risen by an annual average of around 3.4 per cent over the same period (See ABS, Key National Aggregates, Table 1, row 5 Chain Volume GDP).

5 The five ports are Sydney, Brisbane, Melbourne, Fremantle and Adelaide. 6 Sydney ports include Port Botany, Glebe Island, White Bay and Darling Harbour.

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Port Botany, Australia’s second largest container port after Port of Melbourne, services the rapidly growing trade requirements of Sydney and New South Wales. In 2005/06, the port moved over 1.4 million TEUs. Most years show a seasonal pattern with peaks in October, November and December, although one stevedore advises that its cargo volume has not dropped significantly since December 2007 owing to overall volume growth. Recent growth in container TEUs at Port Botany is shown in Chart 2.1.

Chart 2.1 Port Botany Containerised Trade Volume 2000/01 to 2005/067

418,

559

433,

270

523,

550

594,

648

659,

421

690,

304

457,

731

484,

209

571,

225

634,

012

682,

085

720,

477

876,

290

917,

479 1,

094,

775 1,22

8,66

0

1,34

1,50

6

1,41

0,78

1

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

2000/01 2001/02 2002/03 2003/04 2004/05 2005/06

Financial Year

TEU

s

Exports Imports Total

Source: Sydney Ports Corporation. This growth is expected to continue. Chart 2.2 shows forecast growth and capacity constraints at Port Botany, from work undertaken by Access Economics and Maunsell for the Sydney Ports Corporation.8 The growth scenarios are based on average long term economic and demographic growth trends, world trade prospects and likely operational arrangements, and incorporate the rate of conversion of bulk trade to containerised trade at the port. Four scenarios are presented, showing possible outcomes depending on possible trade growth and the rate of conversion. Access Economics and Maunsell also provide analysis of port capacity, predicting that the existing port will exceed capacity by 2010. Plans for the expansion of Port Botany are based on these forecasts.

7 Note that around 50 per cent of export containers are empty. 8 For a fuller explanation, see “Port Botany Expansion Environmental Impact Statement. Appendix D”.

http://www.sydneyports.com.au/Botany/EIS/pdf_appendices/App_D.pdf

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http://www.sydneyports.com.au/Botany/EIS/pdf_appendices/App_D.pdf


Chart 2.2 Forecasts of container throughput at Port Botany

Source: Sydney Ports Corporation, Port Botany Expansion, January 2004. The remainder of this chapter discusses the nature and roles of the main players in the containerised freight chain as it presently stands and considers the challenges they face.

2.2 Main players and their roles The key businesses involved in the movement of containers through Port Botany include9: • around 25 shipping lines

• two stevedores, DP World and Patrick (owned by Dubai Ports and Toll Holdings, respectively)

• 250 or so road operators

• four rail operators in the metropolitan area

• six metropolitan intermodal operators

• 1,000 or more intermediaries and brokers in NSW who dispatch shipments on behalf of firms and individuals

• Australian Customs Service (ACS)

• Australian Quarantine and Inspection Service (AQIS)

• Sydney Ports Corporation (SPC).

2.2.1 Shipping lines Shipping lines own and operate shipping vessels for sea transportation of freight. About 25 shipping lines dock regularly at the containerised terminals at Port Botany. They own the containers, allocate them to users and manage them throughout the supply chain, penalising late returns to the docks. Shipping lines deal directly with freight forwarders, importers, exporters, stevedores, container parks and regulatory authorities.

9 Freight Infrastructure Advisory Board (FIAB), Railing Port Botany’s Containers, Proposals to ease pressure on

Sydney’s Roads, July 2005 and meetings with the Sydney Ports Corporation.

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The shipping lines, as members of consortia, or independently, negotiate rates for access to the two stevedores’ port terminals on an Australia-wide basis. Contracts generally specify bundled services (for example, for imports the bundle would include unloading ships, storing containers and loading them on to trucks or train) and performance criteria that the selected stevedore is to meet. During the term of the contract, the ships in any particular consortium dock only at that stevedore’s terminals. In 2005/06, the shipping lines paid $670.5 million to the two Australian stevedores, which represented 85 per cent of the stevedores’ total revenue.10 The Tribunal invites stakeholders to comment on any aspects of arrangements between shippers and stevedores that may be causing inefficiencies or extra costs to arise in the landside supply chain.

2.2.2 Stevedores The stevedores are the intermediaries between the shipping lines and the transport operators. As well as undertaking stevedoring activities (lifting cargo on and off vessels – the “ship side” activities), they also provide terminals for container transit and for the loading of containers on and off trucks and rail (the “landside” activities). In 2005/06, the stevedores’ landside activities across Australia generated revenue of $123.2 million, which represented 15 per cent of their total revenue.11

At Port Botany, the services for handling of containers are provided by two stevedores – Patrick Terminals (owned by Toll Holdings) and DP World – who together occupy 82.8 hectares (ha).12

Both stevedores operate around the clock, with ships arriving 24 hours a day. DP World (formerly known as P&O Ports) has stated that “as an international container terminal, Port Botany is expected to meet international standards and operate on a 24/7 basis.”13 While the contracts with the shipping lines require the stevedores to meet certain performance criteria, including the speed at which containers are unloaded to the wharf, they would seem not to contain requirements about the speed at or efficiency with which containers are moved from the wharf. The stevedores advise that, owing to capacity constraints, the landside interface must operate effectively to support the efficient loading and unloading of vessels. Stevedores make a number of decisions concerning access to their terminals from the landside, about the arrangements for rail and road operators to collect and deposit containers. A key statistic is the number of VBS timeslots each stevedore makes available each hour of the day.14 A summary of the latest available data on access offered is indicated in Chart 2.3 which are preliminary experimental estimates published by the Bureau of Transport and Regional Economics (BTRE).

10 ACCC, Container Stevedoring Monitoring Report No. 8, November 2006, p 15. 11 ACCC, Container Stevedoring Monitoring Report No. 8, November 2006, p 18. 12 See http://portal.pohub.com/portal/page?_pageid=80,57671&_dad=pogprtl&_schema=POGPRTL and

http://www.patrick.com.au/IRM/Content/terminals/PortBotany.pdf. 13 P&O Ports submission to ACCC, 27 February 2006, paragraph 58. 14 “As a result of resistance to the extended workweek from carriers in the past, P&O only operates on a 24/6

basis on the landside … [and] still faces significant resistance by the carriers to the 24/6 workweek and approximately 44% of Saturday slots were unused in 2005” P&O Ports submission to ACCC, 27 Feb 2006, paragraph 59.

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http://portal.pohub.com/portal/page?_pageid=80,57671&_dad=pogprtl&_schema=POGPRTL

http://www.patrick.com.au/IRM/Content/terminals/PortBotany.pdf


Some concerns have been raised about the accuracy and reliability of the BTRE data relating to VBS availability and truck turnaround times. The data, however is consistent with other information available to the Tribunal, and has been included to assist stakeholders in preparing their submissions. To the extent that better information is available, the Tribunal urges stakeholders to provide this in submissions, so that the Tribunal is in a position to conduct its consultation and undertake analysis using robust and detailed data.

Chart 2.3 Offered VBS timeslots at five Australian container ports, June quarter 2006

Source: BTRE Waterline no. 41, December 2006, p 9 using data supplied by Patrick and DP World. Notes 1. All port terminals are open Mon–Fri. The shifts of 0001–0800 hours; 0801–1600 hours and 1601–2400 hours

apply to the ports of Brisbane, Sydney, Melbourne and Fremantle. Adelaide opening times from Mon–Fri are 0701–1400 hrs and 1401–2200 hrs. Saturday opening hours do not apply to Adelaide.

2. DP World figures do not include stack/bulk runs, Customs X-ray or rail moves. 3. Up to 50% of Sydney Exports are empty containers which are frequently handled outside the VBSs. Based on Chart 2.3, the stevedores at Port Botany, who occupy 82.8ha, offered around 26,000 timeslots in the eight hours from 8am to 4pm Monday to Friday throughout the June quarter 2006. The number offered in the eight hours from 4pm to midnight over the same quarter is closer to 24,000.15

In terms of average slots offered per hour during each Monday to Friday in the quarter, 53 per hour were offered on average 8am to 4pm and 49 per hour were offered on average from 4pm to midnight.16

15 The Tribunal is unable to reconcile the total of 50,000 slots offered over the two time periods with the

statement by P&O Ports that it provides slots for 1,000 on an average day (source: P&O Ports submission to the ACCC 27 February 2006, paragraph 25. The P&O Ports number implies that about 61,000 slots were offered by P&O Ports (now DP World) alone in June quarter 2006.

16 The per hour calculations were based on 65 weekdays in the June quarter 2006 less four public holidays where the public holidays have been assumed to offer no slots based on the fact that “the number of timeslots in a day is determined by expected carrier demand and the availability of labour and equipment” (P&O Ports submission to the ACCC, 27 February 2006, paragraph 26).

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In Melbourne, where the stevedores’ dedicated container terminals occupy 74ha17 of land, they offer around 45,000 timeslots between 8am and 4pm. This is reduced by a third for the period between 4pm and midnight. Average slots per hour are 92 and 61 respectively. The number of daytime slots offered at the Port of Melbourne appears considerably higher than the number offered at Port Botany. The Tribunal understands that some of the key determinants of how many containers can be loaded in a shift and therefore the maximum number of trucks permitted through the stevedores’ gates include: the size of the landside workforce employed; the stock of equipment used; the limitations of the land space; and the optimal percentage of the terminal that may be filled.18

The Tribunal invites stakeholders to comment on any aspects of the stevedores’ methods and hours of operation or other business practices relating to the provision of access to the port terminals that may be causing inefficiencies or extra costs to arise in the landside supply chain. The Tribunal further invites comments on why the Port of Melbourne appears to offer considerably more VBS slots than Port Botany.

2.2.3 Road transport operators Road transport operators move containers from stevedores and container parks on behalf of importers and exporters. Land transportation of containers to and from Port Botany is dominated by trucks that move almost 80 per cent of containers by road; the rest is moved by rail. There are about 250 road carriers ranging from single truck owner-operators to large fleet national freight companies, of which P&O Trans (owned by DP World) is apparently the largest. No one carrier has more than 15 per cent of container movements with a typical large carrier having well under 5 per cent of the market.19

Road operators must gain sufficient and timely port access and match truck and driver availability to those access times. Mismatches result in idle drivers and trucks or missed timeslots and penalties for no shows and late arrivals, and ultimately in poor service to the transport operators’ customers – NSW’s importers and exporters. Most importers and exporters and transport companies presently work five, five and a half or six day weeks, and do not operate 24 hours on those days. Favoured times for access to port terminals are heavily dependent on those current work practices, as storage of containers may be required for the period outside the importer or exporter’s working hours. Another factor affecting the desirability of slots at certain times (from the road transporters’ viewpoint), is existing congestion on Sydney’s roads, and the resulting uncertainty about the time it may take to travel from the port to an importer’s premises.

17 Sources: http://www.patrick.com.au/IRM/Content/terminals/EastSwansonDock.pdf and

http://portal.pohub.com/portal/page?_pageid=80,57594&_dad=pogprtl&_schema=POGPRTL. 18 “The presence of too many containers at the terminal leads to congestion which has a significant

detrimental impact on the operational efficiency of the terminal” P&O Ports submission to ACCC, 27 February 2006, paragraph 54.

19 Submission by NSWRTA to the ACCC, 17 March 2006, p.3. http://www.accc.gov.au/content/trimFile.phtml?trimFileName=D06+16311.pdf&trimFileTitle=D06+16311.pdf&trimFileFromVersionId=753145.

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http://www.patrick.com.au/IRM/Content/terminals/EastSwansonDock.pdf

http://portal.pohub.com/portal/page?_pageid=80,57594&_dad=pogprtl&_schema=POGPRTL

http://www.accc.gov.au/content/trimFile.phtml?trimFileName=D06+16311.pdf&trimFileTitle=D06+16311.pdf&trimFileFromVersionId=753145



Chart 2.4 shows how transport companies have utilised the VBS timeslots made available to them. The higher the usage rate, the greater the possibility of congestion on the landside of the terminal, especially since average usage rates over an eight-hour period may mask variability between hours. An average usage rate of 90 per cent, for example, may well contain individual hourly periods where the offered timeslots are fully booked and transport operator demand for slots is unmet.

Chart 2.4 Usage rates VBS timeslots, June quarter 2006

Sources and notes as for Chart 2.3. The high usage rate in Chart 2.4 suggests that the daylight hours Monday to Friday appear to be the time that transport operators most desire to gain access to the port terminals. A previous study of the port has highlighted the different terminal and transport operators’ operating hours as a “mismatch of hours” 20. Anecdotal evidence suggests that, at least at Port Botany, demand has widened in recent years to the period from 5am to 5pm or even longer, but peak demand remains during weekdays from 6am to 2pm. Even so, according to DP World, about 93 per cent of containers are collected from their terminal within the three-day “free days” period (from when a container is made available for collection). About half of the stevedore’s storage revenue is derived from containers that have remained in the terminal for more than nine days after vessel discharge.21

However, if a mismatch of hours is a significant problem, it would be expected to result in higher costs through delays and penalties and lost sales for importers and exporters and or

20 See, Sea Freight Council of NSW Inc, Freight Supply Chain – Coordination of Working Arrangements (Mismatch

of Hours), January 2005. 21 P&O Ports submission to the ACCC, 27 Feb 2006, paragraph 47.

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higher costs for the intermediaries who service them. Those costs may include storage charges paid to the stevedores.22 Another result of an hours mismatch might be that the transport operators resort to interim storage. They would do this to avoid extra charges for timeslot violations, or when storage costs for import containers at a terminal are mounting (or likely to mount, or would mount for export containers) or there is a mismatch of operating hours with importers. This results in multiple-handling which would reduce charges and penalties paid to the stevedores but may increase storage and handling costs down the supply chain. The Tribunal invites stakeholders to comment on any aspects of the road transport operators’ current work practices and any trends in storage charges and volumes (both for on-port storage and at transport operators’ own depot storage) that may be causing inefficiencies or extra costs to arise in the downstream supply chain.

2.2.4 Rail operators Rail operators move containers by rail to metropolitan, regional and interstate intermodal terminals.23 Port Botany is serviced by rail operators along the Botany freight line. The major task of rail operators is to gain threefold timely access - to the port, to the freight line and, via the metropolitan rail network, to one of the intermodal terminals. Rail freight movement under these circumstances may be subject to lengthy delays, especially from the priority granted to passenger trains on the metropolitan network where the passenger and freight tasks overlap24. Rail freight from Port Botany is handled by four operators: 1. Patrick PortLink – the largest with around 50 per cent of market share, and, like Patrick

Terminals, owned by Toll Holdings.

2. Southern and Silverton – owned by Australia-wide railroad operator South Spur Rail Services.

3. Independent Rail of Australia (formerly Lachlan Valley Rail Freight) - owned by Bowport Allroads Transport, which also owns the intermodal facility at Minto (Minto International Shipping Terminal) and a fleet of trucks.

4. Australian Railway Group - owned by national rail transporter, QR National, and servicing a single site customer in regional NSW.

Rail track management of the Botany freight line and the rest of the Sydney metropolitan network is currently the responsibility of RailCorp, although it is expected that management of the Botany freight line will be passed to the Australian Rail Track Corporation when the South Sydney Freight Line25 nears completion.

22 The ACCC calculates that storage revenues for all Australian stevedores have risen from $4.94 per TEU in

2001/02 to $8.63 per TEU in 2005/06, coinciding with the introduction of Integrated Customs Service (ICS). ACCC, Container Stevedoring Monitoring Report No 8, p 18. The Tribunal has been advised that storage revenues per TEU have reverted to traditional levels since operations have returned to normal following the introduction of ICS.

23 Few importers and exporters have rail facilities that permit direct access to and from their warehouses or stores so they, or their agents, use an intermodal facility which transfers containers between transport modes.

24 Discussed in Section 2.6 of the issues paper. 25 Section 3.3 provides further detail on the South Sydney Freight Line (SSFL).

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Rail operators must book a rail path to and from the port and a ‘rail window’ (generally two to three hours in duration) at the port that is synchronised with the rail path. Since most trains must enter both terminals, and the rail track within the terminals is shorter than the freight train, the train is split at the Botany Rail Yard. The two sections both require an allocation of a rail window. As the rail path is allocated by RailCorp and the rail windows are issued by the two stevedores, train movements come under the control of a different party at the port boundary.26

Rail operators therefore may pay several charges to gain access to the port – one to RailCorp and one to each or both stevedores. The stevedore charges are based on the number of ‘lifts’

on and off the train per hour. 27 The stevedores guarantee a minimum number of lifts per hour for the fee. Once the charges are agreed the stevedores receive the same fee, irrespective of the number of lifts, as long as the guaranteed minimum is met. The charge from RailCorp permits access to the rail tracks. This charge is based on the net tonnes carried per kilometre travelled. A freight forwarder (see later) who books a container onto rail on behalf of, say, an importer organises a truck to pick up the container or repackaged freight once it is available at an intermodal facility. There are no booking systems at the intermodal facilities however rail operators must coordinate with intermodal terminals and road transport operators the exchange of import containers and export containers (and deliver the latter to port) in a timely manner. Under existing arrangements with intermodal terminal operators, each rail operator has exclusive access to a particular intermodal facility within Sydney (except for Cooks River). The inter-model terminals are discussed in section 2.6. The Tribunal invites stakeholders to comment on any aspects of access to rail infrastructure or of the current work practices of rail transport operators that may be causing inefficiencies or extra costs to arise in the downstream supply chain.

2.2.5 Regulatory authorities There are three key regulatory authorities that influence the movement of containers at Port Botany. Australian Customs Service (ACS) manages the security and integrity of Australia’s borders, facilitate the movement of legitimate travellers and goods across the border and collect border-related duties and taxes. ACS operates the Customs X Ray Facility (CEF) at Port Botany, which operates five and a half days a week. It selects a sample of containers (less than 5 per cent of the stevedores’ daily throughput) based on profiling and intelligence and X-rays them at the rate of about 100 containers a day at Port Botany. It takes an hour for a container to return to the terminal after X-ray. The container stays on the truck during the X-ray process. Currently, Patrick has the contract to transport all selected containers from

26 Given the limited rail capacity at the port, the Tribunal understands that the train operator needs to book a

rail window with both stevedores regardless of whether it is servicing both terminals since the train blocks both terminals upon arrival.

27 ’Lift’ in this sense means the number of containers that can be moved on and off the train in an hour.

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the two terminals to the ACS facility. The contract, awarded by tender, could be granted to any truck company next time. 28

Australian Quarantine Inspection Service (AQIS) provides quarantine inspection for internationalised cargo arriving in Australia and certification for some agricultural exports. Quarantine examines the exterior (especially the corner castings) of every container for contaminated matter and requires that such containers (usually a small number) be steam-cleaned before release. Both the ACS and AQIS inspection procedures are part of the supply chain process. They may delay the clearance of containers for various reasons – they may be suspected of carrying illegal goods or customs duty may not have been paid. Sydney Ports Corporation (SPC) is responsible for the leases between the NSW Government and the stevedores. Its responsibilities involve coordination of services as described in the Ports Corporatisation and Waterways Management ACT 1995 (NSW). Its business activities include pilotage, navigation and berthing of ships, managing shipping channels, managing and developing property, providing land for ship side and landside port businesses, managing port security, safety, the surrounding environment and logistics planning29. In practice, SPC appears to have little direct involvement in the landside activities that occur at the port terminal or within the downstream supply chain. However, SPC is involved in consultative groups that assist in planning for peak freight periods. Both road and rail operators can experience delays as a result of the actions of regulatory authorities. If a road or rail slot is booked in anticipation of clearance by ACS and AQIS, they may risk having to pay a no-show or cancellation penalty. The Tribunal invites stakeholders to comment on any aspects of the operations of the regulatory authorities that may be causing inefficiencies or extra costs to arise in the downstream supply chain. The Tribunal specifically invites comments on the current role of the SPC and on the role SPC might take in improving the efficiency of the supply chain.

2.2.6 Intermediaries Freight forwarders are both marketeers of container space and agents for exporters and importers. Freight forwarders reserve space on shipping vessels, organise container pick ups and deliveries and arrange for the return of empty containers to terminals in the time-frame required by the shipping lines. They act as agents for importers and exporters and coordinate the freight movement on their behalf. As such they communicate with many supply chain participants to ensure that containers are moved smoothly between importers and exporters. This involves ensuring that information is passed from the importer and exporter to shipping lines, stevedores and transport operators such as container numbers and when to collect the container from the

28 The ACCC reports that most of the recent growth in the stevedores’ ‘other’ undefined revenue

($37.1 million Australia-wide in 2005/06) has come from services provided to the ACS as part of the container examination facilities program. ACCC, Container Stevedoring Monitoring Report No. 8, pp 19-20.

29 Sydney Ports Corporation, Statement of Corporate Intent 2005/06.

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terminal. They also organise with customs brokers (or directly with customs) the paperwork, fees and clearance of containers through customs and quarantine. Traditionally, freight forwarders would act as agents for importers and exporters on the pre-ship loading side of the supply chain while customs brokers acted as agents on the land side after the ship had docked at the terminal. However, the Tribunal understands that these functions are combining, with both services now usually provided by one entity. The Tribunal invites stakeholders to comment on any aspects of the current work practices of freight forwarders, customs brokers and any remaining industry participants that may be causing inefficiencies or extra costs to arise in the downstream supply chain.

2.2.7 Collecting an import container: The process To animate the processes that the main players execute, consider the freight movements that occur after a land transport operator is instructed to pick up an import container from the port. Transport operators are granted three ‘free’ days by the stevedores before the stevedore charges for storage. The three free days as defined by the stevedores may include Saturdays and public holidays, which, given the work practices of importers, exporters and transporters, may significantly reduce the days available for pick up. One way to address this situation would be for the transport operator to move towards operating similar hours to the stevedores. That is, be able pick up the container during off-peak hours and store it at its own facilities (and expense) until the importer will take delivery. The container must also be cleared by ACS and AQIS before it can leave the terminal. Storage charges at some point are required because without them (or an equivalent mechanism) importers may use the wharf – a scarce resource - as a cheap storage facility rather than off-port warehousing. Storage charges levied on the freight forwarder or transport operator may be recouped from the importer; otherwise such costs will be borne by the freight forwarder, customs broker or transport company. For road operators, the container is usually transported directly to the importer. However, in the case of a mismatch of business hours between the road operator and importer, the container may be firstly transferred to a storage facility away from the port, requiring a double handling of containers if it needs to be offloaded to allow the truck to be used for another purpose. Once the importer and transport operator can arrange a suitable meeting time, the container will be delivered. A container picked up by a rail operator is usually taken to an intermodal facility where freight can be transferred between transportation modes. At the intermodal facility it may be transferred to a road operator and taken to the importer, or it may be unpacked into a format suitable for distribution to the importer. The latter course is likely for containers that are shared by importers or contain multiple products. (A similar repackaging process may take place at a road operator’s storage facility before it is delivered to the importer.) Freight forwarders and importers have 7 to 10 days from dispatch to deliver the container to an empty container facility for de-hiring. If the container is not de-hired by then, the shipping line, as its owner, will impose daily charges. An importer will usually pay a transport operator to deliver the empty container for de-hiring. Once de-hired, the container

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becomes the responsibility of the shipping line which either exports it empty for international repositioning or re-hires it domestically for an export run. Repairs, cleaning and maintenance are conducted on the containers, if necessary, at the empty container depots.

2.2.8 Interactions between supply chain participants Despite the ‘story’ above, as in most industries, generalisations are difficult to make. In this case, freight movements may be organised in a variety of ways, depending on the size of the importer or exporter (some of whom internalise their freight forwarding, customs broking and transport operations), the closeness and reliability of intermodal terminals and the cost and availability of off-port storage. Figure 2.1 provides a simplified schematic of how the various supply chain participants interact in the case of an import container. The parties in the middle column of the schematic are the ones who physically handle containers.

Figure 2.1 Main Players and Their Contractual Relationships

International suppliers

Shipping companies

Stevedores

Road and Rail Carriers

Import (purchasers)

Freight forwarders and customs brokers VBS and Rail Path

Port Authority

Sources: ACCC and IPART. Participants in the supply chain rely on other participants in varying ways. There are: • contractual relationships, where a contract is signed between the participants that sets

out the terms and conditions of the interaction and where there is a flow of money between the participants, are indicated by arrows in Figure 2.1

• communicative relationships, where information must flow between participants in order for the flow of containers to continue along the landside supply chain.

There may also be no contact between supply chain participants, but the actions of each participant may potentially influence the time and finances of the other participants.

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2.3 Challenges facing the landside supply chain The fundamental challenge facing the NSW ports industry is how best to manage the increasing volume of its containerised freight efficiently so as to ensure that it flows freely through the supply chain without congestion or bottlenecks. Over the next 20 years the annual number of containers moving through Sydney is expected to almost double to over 3 million TEUs. In response, the NSW Government has approved plans by SPC to expand Port Botany terminal facilities (see Chapter 3). Congestion on the lands side may be eased in a number of ways. In theory, one option would be to reduce demand. In this instance, this is an unacceptable alternative given Port Botany’s stevedores’ portside capabilities and expansion plans, and because an increase in demand supports a strong NSW economy, which is also desirable. Better alternatives involve supply side management strategies, including increasing the availability of access for road operators, and increasing the use of alternative transportation methods such as rail. Rationing of demand through direct regulation is another alternative, but not preferred where competitive market forces are able to resolve the congestion.

2.3.1 Landside congestion On the landside, historically, congestion took the form of truck queues at the port. Trucks were admitted on a ‘first come first served’ basis. As a result, very long truck queues were common and drivers and trucks were idle for extended periods. Normal traffic flows were also disrupted by the truck queues that sometimes extended for many kilometres. To reduce truck queue congestion each stevedore introduced a Vehicle Booking System (VBS) to provide a supply of timeslots for selection by individual road transport operators. The VBS is designed to control the rate at which trucks arrive to coincide with the terminal’s ability to service them. By regulating the distribution of truck arrivals, the VBS seeks to strike a balance between making more efficient use of both stevedore and transport operator resources against the cost of administering and accessing such a system. Introduction of the VBS, among other factors, has appeared to significantly reduced truck turnaround times, reduced the cost of waiting in queues and minimised truck queues.30

2.3.2 Obtaining a VBS timeslot Despite the introduction of VBSs, two problems persist. First, there is fierce competition by road operators for selected timeslots. The Tribunal understands that the demand for timeslots is greater than the supply during the peak periods on Mondays to Fridays. The early timeslots are the most popular as, by delivering the containers early, trucks can then be utilised elsewhere during the day. As there are only a limited number of timeslots offered, day slots are often effectively fully booked during peak hours.

30 Productivity Commission 1998, International Benchmarking of the Australian Waterfront, Research Report,

AusInfo, Canberra, April, p 177.

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The stevedores have offered more timeslots, mostly outside of traditional transport industry business hours, with the aim of clearing containers from the terminals. However, transport operators, following the pattern set by most of their client importers and exporters, have only reluctantly widened their business hours. One effect is that excess demand for the peak timeslots remains. Second, the VBSs are owned and operated by the stevedores at the port. Each stevedore operates its own VBS independently of the other VBS. Once the containers are on the wharf, each stevedore becomes effectively a monopolist in the sense that the rail and road operator must deal with that stevedore if it is to take delivery of a particular container. The stevedores determine the price and terms and conditions of access to the VBS using standard form contracts. Access to each VBS is not free - a fee is charged, either by annual subscription (DP World) or by monthly subscription (Patrick). The fee for access to the VBS entitles the payer to access the VBS to bid for slots; it does not entitle the payer to an allocation of timeslots per se, neither does it guarantee access to the terminal at the time booked. In the case of Patrick, a per slot fee applies to the slots booked by a carrier. The Patrick VBS terms and conditions include penalty charges to discourage no shows, while DP World includes penalties to discourage no shows and late arrivals. The stevedores are also vertically integrated. They have significant ownership holdings in three of the land transport companies, P&O Trans, Patrick PortLink and Patrick Port Services. These companies face direct competition from many other transport operators. The non-stevedore-affiliated land transport companies have expressed concern that the stevedores are generating an increasing amount of revenue from their landside access arrangements, including storage charges, and that it is unclear whether affiliated transport businesses face the same terms and conditions of access to the VBSs and to the terminals as they do. In order to pick up freight at the port, road operators need to be registered with the VBS of both stevedores. The road carrier does not control when and where containers will arrive or which stevedore will service the shipping line carrying the container; that is determined by the shipping line and the importer. Road operators therefore generally register with both stevedores to gain access to their VBSs in order to maximise their own business opportunities and guarantee container transport for their customers. When containers are available for pick-up at the port, the stevedores will inform the freight forwarder that operates on behalf of the importer. The freight forwarder will organise transportation from the port with their selected road operator. The road operator will then need to make a booking through the specific VBS of the stevedore holding the container in order to pick it up and deliver it to the required destination.

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Bookings for VBS slots can be made up to three days before the required pick-up day. Most bookings are made electronically via the internet with most slots coming online 7am–7.30am. Given that competition for timeslots in peak periods is high, there is rapid activity for the first five minutes or so after opening.31

DP World has different slots for different carrier classes with timeslots coming online at set times throughout the early morning depending on carrier class. DP World has separate charges depending on the type of access chosen by a transport operator. Charges increase to ensure greater access to required slots for those transport operators that move the majority of containers in and out of the port. Patrick charges the same fee per slot regardless of time of day or identity of carrier. At Patrick terminals in Sydney two releases of slots occurs daily (one at 7.00 am and one at 8.00 am) in order to spread the load on the computer system and prevent overload. Carriers are either allocated to the 7.00 am release or the 8.00 am release. No carrier is able to access both releases. The respective number of slots in the two releases were determined by Patrick, which divided the carriers into two groups according to the number of total slots used by those carriers in the previous year. Access to the VBS is allowed to each of those groups in the proportion of the total number of slots that accorded with that group’s total slot usage over the previous year. After booking, the road operator will arrive at the port at their allocated timeslot to pick up their container. In order to be permitted through the gates, the road operator will need to provide some key documents. These include a Maritime Security Information Card, which provides authorisation to enter the port under the Maritime Transport and Offshore Facilities Security Act 2003. They will also need the appropriate paperwork (or have it already sent electronically) to identify which container they are collecting. The road operator will proceed to the designated area to pick up their container. The container is retrieved by the stevedore and loaded onto the truck. Once secured onto the truck, AQIS will inspect the exterior of the container before it leaves the port precinct (and may instruct the carrier to have it steam-cleaned). The terminal verifies that the correct container has been loaded and permits the truck to leave the port. Due to the heavy demand for VBS slots, transport operators have commented on the difficulty in securing a desired timeslot and that they are unsure of how many timeslots are available each hour of each day. Further, they are concerned about how timeslots are being allocated. This is especially important if timeslots are pre-allocated to individual or select groups of transport operators because it may raise the possibility of preferential treatment for some operators. This can occur either by size of initial allocation at the prearranged “opening” times for booking in or by size and timing of any re-allocation once the initial round of bookings have been finalised and some free timeslots remain.

31 The second and subsequent rounds of bid, acceptance, rebid and fresh acceptances is more iterative. In the

case of DP World where there are three classes or categories of carrier: “B class” carriers are given exclusive access to a pool of slots between 07:30-08:20. During this period, they are subject to zone limitations that restrict carriers to a maximum number of slots for any given hour. The zone limit ensures all carriers within that carrier class are given fair and equitable access to the initial release of slots. After the initial booking period the zone limit is lifted and carriers are permitted to book any number of unused slots per hour from those remaining in the pool. Similar arrangements exist for A class carriers culminating in the cascading of all remaining slots from all segregated pools into a general pool at 10:30 for access by all registered carriers.” P&O Ports submission to ACCC, 27 February 2006, paragraph 27.

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The Tribunal invites stakeholders to comment on any aspects of the VBS, particularly in relation to the number of timeslots made available and on what basis, and the process by which those slots are made available across the day(s), and to whom. As noted previously under section 2.2.2, there are a number of factors that influence the number of VBS slots that are offered over any given time period at the terminal. These factors include the size of the landside workforce employed, the stock of equipment used and the limitations of the land space and the optimal percentage of the terminal that may be filled. These factors affect the ability of the stevedores to service trucks to load containers and hence the number of VBS slots that can be offered.

2.3.3 The time spent by trucks at the terminals A key performance indicator of the efficiency with which containers are transported in and out of the terminal, and therefore how many VBS slots can be made available, is average truck turnaround times (TTT). Truck turnaround times measure how long it takes for a container truck to enter the container terminal to pick up its required container and then leave the container park. The stevedores have commented that a decrease in average TTT is an improvement in efficiency at the port. Finer measures of TTT that distinguish between performance during peak and non-peak hours would be more informative. In any case published data are not publicly available on TTT at present. However, it is available for average container turnaround times (CTT). According to the BTRE, average CTT is average TTT in a quarter divided by the number of containers on a truck in that quarter. Chart 2.5 shows the average CTT for the major ports of Australia. During the June quarter 2006 average CTT was approximately 32 minutes at Port Botany from Monday to Friday and slightly lower on weekends. Since some trucks can pick up more than one container, TTTs are slightly higher than CTTs. The average CTT for the Port of Melbourne was approximately 23 minutes for the same period. This appears to be much lower than Port Botany.

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Chart 2.5 Average container turnaround times, June quarter 2006

Source: BTRE Waterline no. 41, December 2006, p 8 using data supplied by Patrick and DP World. Notes 1. All port terminals are open Mon–Fri. 2. Saturday opening hours do not apply to Adelaide. 2. DP World figures do not include stack/bulk runs, Customs X-ray or rail moves. 3. Up to 50% of Sydney Exports are empty containers which are frequently handled outside the VBSs. Another performance indicator is the variability of TTT. Variability can impact upon truck operators because the wider the variability of turnaround times, the greater the uncertainty and therefore the less predictability truck operators have in their business operations. The Tribunal asks stakeholders to comment on the variability of average turnaround times across the major ports and the variability of turnaround times faced by individual transport operators at Port Botany itself. The Tribunal also invites comment on how important predictability of turnaround times is to transport operators relative to average turnaround times at Port Botany. The Tribunal further invites comment on why turnaround times are higher for Port Botany compared to Melbourne, Adelaide and Fremantle. TTTs are measured “gate-to-gate”, that is, from the time a truck enters the gates of the terminal until it leaves. TTT is simply the amount of time a truck spends within the stevedore’s premises. TTT leaves out an important component of waiting time for trucks. Truck operators have noted that before trucks are allowed to enter the gates of the terminal, there can be a waiting time outside the gates which can be quite substantial on slow days. “Outside-the-gate” waiting exists even when a truck arrives at the gate within the timeslot that has previously been booked through the VBS, as the stevedores restrict entry to their yards to avoid congestion within their premises.

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The Tribunal invites comment on how truck turnaround times are currently measured by supply chain participants and how they should be measured. The Tribunal further invites comment on the extent to which the stevedores provide access to their facilities at the specific times booked on the VBS. A factor that may increase average TTT or its variability is the location of containers that are to be collected. Delays may occur when containers are at the bottom of a stack. Moving containers to an accessible location in advance of scheduled collection would reduce turnaround time. This would require transporters to provide to the stevedores container numbers in advance. Locking in container numbers in advance may reduce the operational flexibility available to transporters in that they are unable to substitute containers at a later stage. However, there is a trade-off between flexibility of container pick-ups and possible reduced truck turnaround times from increased housekeeping. The Tribunal invites comment on the choice between a system where container numbers are nominated in advance thereby offering the possibility of faster turnaround times; or not providing container numbers which would provide road carriers with greater flexibility. Or would industry participants prefer a system that allows the choice between both? Another way to reduce turnaround times is with increased use of Information and Communication Technology (ICT) and automation of the container pick-up process. The Tribunal understands that other ports in Australia and overseas are automating processes to reduce the amount of physical interaction and paper exchange required to access and pick up containers at the port. All measures are designed to save time and hence improve the efficiency of container movement, not just out of the terminal, but through the entire supply chain. The Tribunal invites comments on the increased use of ICT and automation and any other ways to reduce turnaround times and otherwise improve supply chain efficiency.

2.4 VBS operating costs The terms of reference require the Tribunal to consider the cost base underpinning the provision of the VBS. A number of costs are involved in operating each stevedore’s VBS. A list of these possible costs are below. 1. System running costs

• Set up of the internet site or server and Electronic Messaging Service (EMS) • Maintenance and operation of the site and EMS • Hardware • Software and software development, updates and upgrades • Staff used to operate and develop IT, software consultants, break fix contractors, • Staff operating the VBS, including Yard Managers and VBS clerks.

2. Interface with trucks, customs and quarantine

• Gatekeepers to administer entry and exit of the port • Staff at all check points to check the paperwork of the road operators • Staff to train and guide truck drivers

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• Physical structures such as fencing and the gateway • Allocation of space for trucks at entry and through out pickup.

3. Administrative costs

• Invoicing, following up on accounts receivable and payable. Many of these are shared costs where the outputs derived from the inputs are for the VBS along with stevedoring activities. The stevedores cover many of their costs through stevedoring charges to shipping lines. Therefore, determining precise VBS costs will be crucial in gauging what the appropriate access and penalty charges will be for the VBS. The Tribunal invites stakeholders to comment on VBS capital and operating costs and to assist it to distinguish between stand-alone VBS costs and those shared with other stevedoring activities.

2.5 VBS access charges The terms of reference requires the Tribunal to assess the structure and impact of the VBSs’ access arrangements and charges for containers moved by road; and to advise whether they are operated in an efficient and transparent manner. The structure of the charges for access to the VBS of each of the two stevedores are quite different. Table 2.2 sets out the existing fee structure. DP World levies charges to users on an annual subscription basis whereas Patrick charges are based on a combination of a monthly access fee and a fee-for-slot VBS. The DP World system has a graduating scale of charges depending on the level of service and access sought by road operators. Higher payment and grading results in greater access for carriers, recognising the larger volume moved by these transport operators. Patrick on the other hand charges a flat rate of $4.00 per timeslot with around 300,000 timeslots available per annum.

Table 2.2 VBSs Timeslot Charges and Penalties at Port Botany

Charges Penalties

P&O(DP World) B Carriers $29,221.50 pa*

A Carriers $1,334.00 pa*

AB Carriers $667.00 pa*

No show $100.00^

Wrong zone $50.00^

Patrick $4.00 per timeslot* + $10 monthly access fee^

No show $50.00^

* includes GST ^ plus GST

Source: Container Logistics Action Group, Application for authorisation in respect of stevedoring services, charges and practices at Port Botany, Dec 2005, p.12., P&O Ports Carrier Access Arrangements Port Botany Terminal, 2005-06 and Patrick’s VBS Handbook and Conditions of Access available at http://www.1-stop.biz/links.phpNotes: B Carrier Major Carrier with online access via internet to P&O Port’s database. A Carrier Standard Carrier with online access via internet to P&O Port’s database. AB Carrier Standard Carrier exclusively using the P&O Port’s Phone Booking Bureau only. No show Penalties incurred when a truck does not arrive for a booked timeslot and the stevedore is not

notified of the cancellation. Wrong zone Penalties incurred when a truck arrives outside its allotted hour-long time window.

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http://www.1-stop.biz/links.php


When road operators move a large quantity of containers to and from the terminal (block stack run-outs and run-ins), the stevedores may make separate arrangements for port access and charge additional payments.32

The VBSs may also impose penalties for ‘no shows’ and late pickups (‘wrong zones’). These are also detailed in Table 2.2. The stevedores have the discretion to waive these penalties, especially when they have contributed to the delay. The terms of reference identifies concerns held by the Container Logistics Action Group (CLAG), a group of industry participants whose members consist of downstream supply chain participants that have questioned the integrity and affordability of Port Botany access arrangements as currently implemented by the two stevedores through their separate VBSs. CLAG’s views on the stevedores’, that charges are inefficient, costs excessive and preference is given to transport affiliates, are set out in full in documents it has provided to the ACCC.33

The Tribunal invites stakeholders to comment on VBS access and penalty charges and the level of transparency of access through the stevedores’ VBSs.

2.6 Untapped containerised rail freight potential The rail share of the freight task at Port Botany is only 21.5 per cent.34 The level and growth of rail container TEUs over the past decade is shown in Chart 2.5. Growth had been minimal since 2002/03 until 2005/06.

Chart 2.5 Rail volumes through Port Botany 1997/98 to 2005/06

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06

Year

TEU

s

Source: SPC Logistics Review 2005/06.

32 This is a generalisation of a comment from CLAG, Container Logistics Action Group (CLAG), Application

for authorisation in respect of stevedoring services, charges and practices at Port Botany, December 2005, p 13 at www.accc.gov.au., which states that more than 50 containers are moved for one shipping line.

33 Container Logistics Action Group (CLAG), Application for authorisation in respect of stevedoring services, charges and practices at Port Botany, December 2005 at www.accc.gov.au.

34 Sydney Ports Corporation, Logistics Review 2005-06, p 3.

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http://www.accc.gov.au/



25

Sydney Ports Corporation attributes the increase in 2005/06 to a sharing in the additional demand generated within metropolitan Sydney plus a boost to export volumes that has resulted from the easing of drought conditions in some rural and regional areas of the state.35

The rail operators depend heavily on access into and out of Port Botany and then further access to intermodal terminals to transfer containers to inland and interstate trains and trucks. Each is considered in turn.

2.6.1 Rail access and booking a rail path Rail operators use the existing Metropolitan Rail Network (MRN) and the Botany freight line to access Port Botany. The Botany freight line is the only dedicated rail track extending from Port Botany to Sefton Junction via the Enfield marshalling yard. This part of the track, along with the MRN, is owned and controlled by RailCorp.36

Freight trains share the passenger network in the MRN and must give priority to commuter trains. Under existing access arrangements with RailCorp, freight trains are prohibited from operating within the MRN in commuter peak times (6am–9am and 3pm–6pm weekdays). Figure 2.2 shows the existing track usage and terminal locations within the MRN. The double lines (pink lines) show the dedicated freight network within Sydney37.

35 Ibid, p 7. 36 In January 2004 the State Rail Authority and the Rail Infrastructure Corporation merged to form RailCorp.

It is a state-owned corporation and provides passenger services throughout New South Wales. In the metropolitan area this is undertaken by CityRail. RailCorp owns and maintains the metropolitan network, and provides freight access to private operators within the metropolitan network. The State’s non metropolitan network is leased to or managed by the Australian Rail Track Corporation.

37 The lack of breaks in the double lines gives the misleading impression of continuity in the freight network. In fact only a small portion of rail track lines are dedicated to freight and hence sharing the passenger network is essential for most freight rail movements.

ent Pricing and Regulatory Tribunal

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Figure 2.2 Freight Train Track Usage within Metropolitan Rail Area

Source: Sydney Ports Corporation Sydney-Intermodal sustainability and opportunities for growth, Presentation at the Planning and Transport Research Centre (PATREC) Conference November 2004. Some termnology in this figure is inconsistent with the intermodal facilities listed in Table 2.3. Villawood is next to Leightonfield and Camellia is called Sandown.

Independ

Plans for future expansion of capacity

To arrange a rail pick-up or drop-off at the port a ’rail path’ needs to be booked with RailCorp to enable the train to move to and from the port38. This booking is necessary to ensure that the freight train does not clash with any passenger trains that may be using the MRN.

2.6.2 Rail window and rail path operating costs The terms of reference require the Tribunal to consider the effect that road and rail pricing may have on the choice of land transport chosen to move containers and any other rail issues not considered by FIAB that might affect the efficiency of the landside interface at the port. The Tribunal would therefore like to understand the costs involved in operating a rail service to and from the port, which includes booking a rail window and a rail path. Some of the costs might be joint ones with RailCorp. A brief list of possible costs would be: Rail Operators • Operational costs (including staff and equipment).

• Maintenance costs. RailCorp • System development and running costs involved in managing the flow of trains along

the network.

• Staff to monitor and operate the system. Stevedores • Infrastructure and machinery.

• System development and running costs for bookings.

• Staff to monitor and operate the system.

• Invoicing, following up on accounts receivable and payable.

• Gatekeepers to do administer entry and exit of the port.

• Security and MSIC compliance. The Tribunal invites stakeholders to indicate the costs of providing the services of rail windows and rail paths to rail operators.

2.6.3 Utilisation of intermodal facilities At the end of the container rail journey is one of six intermodal terminals in the Sydney metropolitan region. Their geographic locations, the company operating them and the rail operator servicing them are shown in Table 2.3.

38 In the coming years this function, along with operation of the Botany freight line, will be transferred to the

Australian Rail Track Corporation (see section 3.3).

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Other intermodal terminals operate across rural and regional NSW to move agricultural exports to port. They are located in the Central–West (Blayney, Forbes and Parkes), South–West (Cootamundra)39, and the North–West (Narrabri, Wee Waa and Moree).40

Table 2.3 Intermodal Terminals within Sydney Metropolitan Region

Intermodal Location Intermodal Company Rail Operator

Cooks River Maritime Container Services (MCS)

Various, including

Pacific National41

Camellia Patrick PortLink Patrick PortLink

Minto Macarthur Intermodal Shipping Company (MIST)

Independent Rail

Yennora Stocklands Patrick PortLink

Leightonfield Road Sea Rail Southern Silverton Rail

Villawood Mannway Southern Silverton Rail Source: Sydney Ports Corporation. Intermodal terminals function in a manner similar to the landside of port terminals in that: • they provide rail sidings and road access for trucks carrying containers • their working areas allow containers to be removed from, or loaded onto, rail wagons • they provide short term storage of empty or full containers in depots • their lifting equipment transfers containers to and from storage areas.

An important feature they have which is not shared by a port terminal is that intermodal terminals also provide a pack and unpack service. This means that containers can be unpacked and repacked into a different format to be transferred to individual importers. Intermodal terminals offer container depot facilities where shipping lines can position and hold containers. The terminal operators contract to effectively manage the shipping company's containers, arrange hiring and de-hiring and undertake minor repairs. This service saves the cost of returning containers to on-wharf or port-related storage, and aids in container turnaround time by releasing suitable containers to pack for export.42

In addition to the storage service, most intermodal terminals offer container cleaning services, particularly in relation to food-related exports where containers must comply with the requirements of shippers, the AQIS and overseas quarantine regulations.

39 There are intermodal facilities at Griffith and Wagga Wagga, however these are no longer serviced by rail

from Port Botany. They now are serviced by the Port of Melbourne. 40 Sydney Ports Corporation, Logistics Review 2005-06, p 13. 41 Pacific National, which is owned by Toll Holdings, services the Cooks River terminal only once a week as

part of its eastern states operation. However the Tribunal understands Pacific National does not regularly service the port.

42 Meyrick and Associates, National Intermodal Terminal Study, Final Report, February 2006, p 8.

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The Tribunal understands that there is considerable interest in expanding the intermodal facilities network to include other proposed sites. These sites include Enfield, (currently on hold43), Menangle and potential expansion of the current intermodal facility at Minto. Planning approval has also been given for the development of an intermodal terminal at Ingleburn. The Tribunal invites comment from stakeholders on the planned or mooted development and expansion of the various intermodal terminals in Sydney and the extent to which this is expected to ease congestion in the landside supply chain at Port Botany.

43 Sydney Ports Corporation, Logistics Review 2005-06, p 13.

29


30


3 PLANS FOR FUTURE EXPANSION OF CAPACITY

From the perspective of this review, an immediate concern of industry participants is the congestion that is showing up in a scarcity of peak-time VBS slots and terminal access. Solutions to such “scarcity of access” include, but are not limited to: Supply side • Increasing the availability of timeslots (by greater intensity of use).

• Increasing the use of off-terminal land for interim storage of containers prior to pick-up/set down.

• Increasing the size of the land allotted to port terminal activities.

Demand side • Pricing the scarcity by means of an appropriate peak pricing scheme.

• Increasing the use of substitutes for road transport – namely, by developing rail access, rail infrastructure and inter-model facilities.

Several of these approaches were mentioned or implied in the previous chapter. Industry participants and the NSW Government have already considered or commenced a number of projects to reduce congestion at Port Botany. Expansion of the port and the Freight Infrastructure Advisory Board’s (FIAB) proposals to achieve the NSW Government’s target of 40 per cent of container freight to be moved by rail to and from Port Botany are discussed below.

3.1 Expansion plans at Port Botany It is estimated that the existing infrastructure at Port Botany will reach its maximum feasible capacity by 2009 due to additional demand generated by forecast trade growth.44 In order to accommodate additional capacity needs, SPC is undertaking a major expansion of Port Botany terminal facilities. The key component of the project is infrastructure for a new container terminal to provide 1,850m of extra berth length (five berths) through the reclamation of about 60 hectares of land and a dedicated road and rail access.45

The volume of containers handled at Port Botany, following the Port Botany expansion, is expected reach 3 million TEU by the early 2020s.46 Approximately 60 per cent of this freight task is expected to be handled by road. The NSW Government has indicated that its preferred option is for a new third stevedore to operate the new terminal facility at Port Botany.47

44 Sydney Ports Corporation, Port Botany Expansion, January 2004. 45 http://www.sydneyports.com.au/botany/main.asp?pageid=28446 Freight Infrastructure Advisory Board (FIAB), Railing Port Botany’s Containers: Proposals to ease pressure on

Sydney’s Roads, July 2005, p 12. 47 Sydney Morning Herald, ‘Brisbane move on port duopoly’, Wednesday, 2 August 2006.

31

http://www.sydneyports.com.au/botany/main.asp?pageid=284


SPC is currently undertaking the tendering process for construction of the additional terminal and expects trade operations to commence by 2011. The project timeline is detailed in Table 3.1 below.

Table 3.1 Timing of Port Botany Expansion

September 2006 Registration of interest for design and construction contractors

Early 2008 Construction to commence

Mid 2008 Appoint stevedoring operator

2011 First berths available for trade Source: http://www.sydneyports.com.au/botany/main.asp?pageid=284 and http://www.sydneyports.com.au/botany/pdf/ProjectInfo.pdf The Tribunal invites comment on the likely effect of the expansion plans at Port Botany on access to the port terminals during peak periods and efficiency along the supply chain.

3.2 Freight Infrastructure Advisory Board – Selected Recommendations

In order to reduce congestion at the port, the NSW Government has a stated policy objective to increase rail’s share of container freight throughput at Port Botany to 40 per cent by 2011. In December 2004, the NSW Government commissioned FIAB48 to advise on how best to achieve this target given that the existing rail share is around 20 per cent.

3.2.1 Expansion of Intermodal facilities FIAB recommended establishing an expanded transport and container terminal network within Sydney and adopting terminal features and operational reforms that both increase freight transport efficiency and minimise the impact of the freight task on local environment. The FIAB report recommended a network of intermodal terminals (including Enfield, Moorebank and Eastern Creek), an expansion of the existing terminal at Minto and development of the planned facility at Ingleburn. According to the FIAB strategy, the terminals should be located within major industrial precincts and containerised freight transported by rail to the terminals. Containers should then be transported to warehouses and other destinations by road. The rationale for the establishment of an intermodal network is to reduce traffic congestion near Port Botany and reduce container transport costs, as well as to reduce the number of heavy vehicles on residential streets between Port Botany and Western Sydney.

48 FIAB was chaired by the Hon. Laurie Brereton and its members included senior representatives from the

NSW Roads and Traffic Authority, RailCorp, Sydney Ports Corporation, the NSW Department of Infrastructure Planning and Natural Resources and a number of other key industry participants. FIAB’s report has now been delivered to the Premier’s Infrastructure Implementation Group for further consideration. The group sits within the Premier’s Department and is chaired by Professor David Richmond. It provides advice on a container freight plan to support the expanded Port Botany terminal facilities.

32

http://www.sydneyports.com.au/botany/main.asp?pageid=284

http://www.sydneyports.com.au/botany/pdf/ProjectInfo.pdf


The Tribunal invites comment on the likely effects of expansion of the intermodal network in Sydney on access to the port and efficiency along the supply chain.

3.2.2 Peak pricing proposals FIAB has proposed a Freight Infrastructure Charge (FIC) of $30 per TEU to be levied on all import and export containers. FIAB believes that a charge of this magnitude is unlikely to erode NSW’s competitiveness as it would be incorporated within total import costs — and the average value of import container contents is estimated to be more than $40,000 per container. FIAB proposed that that the FIC be fully rebated for containers transported to and from the port by rail; and for containers transported to and from the port by road during designated off-peak hours. Under this proposal, the FIC would be collected by the Sydney Ports Corporation and the proceeds deposited into a Freight Movement Management Fund to be held and administered by the Director General of the Department of Infrastructure, Planning and Natural Resources49 constituted as a state-owned corporation. Revenues derived from the FIC would then be hypothecated to a dedicated fund and only spent on delivering elements of the intermodal strategy. This proposal appears to be based on the PierPASS system recently introduced at Ports of Los Angeles and Long Beach USA.50 PierPASS was an industry-generated solution aimed at reducing traffic congestion, improving truck turnaround times and improving the air quality in and around the ports. The PierPASS strategy was to administer a scheme that would make it more expensive to move containers during daylight hours. PierPASS commenced operation on 23 July 2005. In an effort to induce cargo owners to spread the pick-up and delivery times of their containers through nights and weekends, PierPASS levies a Traffic Mitigation Fee (TMF) on containers entering or exiting terminals by road during peak hours. The TMF is currently $US50 per TEU container.51 There are no TMFs imposed on return of empty containers, domestic containers, or transhipment to other ports. The cargo owners (shippers, consignees, or their agents) are responsible for the payment of TMFs directly to PierPASS. Payments are not accepted at the gate by the terminal operators. Cargo owners can choose to access the ‘off-peak’ program to avoid TMFs if containers are moved during the designated off-peak periods. In those cases the TMFs are either waived or reimbursed. The Tribunal invites comment on the likely impact of a peak pricing system, along the lines of the FIC, on access to the port terminals and the efficiency of the Port Botany supply chain.

49 This department has since been separated into the Department of Planning and the Department of Natural

Resources. 50 See http://www.pierpass.org/ for a fuller description. 51 This was effective from 24 April 2006. These figures were increased from the original amounts of $US40

per TEU and $US80 for containers larger than 20 feet. See http://www.pierpass.org/files/tmf_adjustment_overview_final_032406.pdf and http://www.pierpass.org/files/pierpassbro3.final.6_20_05.pdf.

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http://www.pierpass.org/

http://www.pierpass.org/files/tmf_adjustment_overview_final_032406.pdf

http://www.pierpass.org/files/pierpassbro3.final.6_20_05.pdf


3.2.3 Increasing use of rail Increasing the use of a rail substitute to road may decrease the demand for peak VBS slots. However, an impediment to employing this strategy in NSW is the availability of the rail network. Much of the main rail network is not dedicated to freight and the freight trains must share the tracks with passenger trains, which are given priority. Given this situation, FIAB proposed the use of off-peak times.52 FIAB also suggested expanding infrastructure to reduce this problem by: • undertaking a Botany freight line expansion

• building the South Sydney Freight Line (SSFL) under Auslink. The Botany freight line provides very short siding capacity (temporary holding area) at Port Botany stevedoring terminals. Trains arriving and departing must be broken into two or more parts at the Botany rail yard and the constant shunting and marshalling of trains means that available carrying and track capacity are used inefficiently. The SSFL is a proposed 30km dedicated freight line between Sefton and Macarthur in southern Sydney.53 Construction plans were approved by the NSW Minister for Planning on 21 December 2006.54 It is expected to take approximately three years for the line to be fully operational. The key objective of the SSFL is to eliminate the impact of RailCorp’s commuter peak-time prohibition on rail freight operations through the Sydney metropolitan passenger network. Once the SSFL is complete, there will be a greater flexibility for scheduling rail paths to and from the south. The Tribunal has been advised that challenges remain for servicing the north, north-west and west of Sydney (and beyond) which is not accessible through dedicated freight services.55

The Tribunal invites comment on the likely impact of the expansion of the freight rail network in Sydney on the number of containers moved by rail and on congestion at the port. The terms of reference require the Tribunal to investigate the access arrangements and charges applicable to rail transport operators for comparison with road transport operators, and the efficiency of the interface between land transport operators and the stevedores within the framework of FIAB’s findings. As such, the Tribunal will not replicate the work already done by FIAB. However, the Tribunal will take into account the findings during its investigations and consider their implications in making its final recommendations.

52 Peak times for Sydney are 6am – 9am and 2pm – 6pm on weekdays. 53 See http://www.ssfl.artc.com.au/54 See http://www.planning.nsw.gov.au/mediarelplan/fs20061221_472.html55 There would still be a small number of freight services that would continue to travel via the RailCorp

network rather than the SSFL and also in some situations, such as during train breakdowns, maintenance possession or infrastructure damage on the SSFL. Where freight services would remain on the RailCorp network, passenger trains would continue to have priority for the available train paths. For more information, see ARTC Southern Sydney Freight Line Submission Report, August 2006 http://www.ssfl.artc.com.au/documents.asp

34

http://www.ssfl.artc.com.au/

http://www.planning.nsw.gov.au/mediarelplan/fs20061221_472.html

http://www.ssfl.artc.com.au/documents.asp


3.3 Rail Track developments The operation of the rail track network in NSW is currently in transition. Previously in NSW, RailCorp and its predecessors maintained the rail infrastructure ownership and operated intrastate freight services. As a result of the 1997 Inter-Governmental Agreement between the Commonwealth, NSW, Victoria, Queensland, Western Australia and South Australia, ARTC was established by the Commonwealth government. Since commencing operations in 1998, ARTC has been acquiring and managing the majority of the interstate and regional rail network. ARTC has also been making significant direct investments in improving the interstate network as well as through funding grants under the Auslink program. Where ARTC does not own the network, it has sought to acquire access leases to consolidate most of the interstate standard rail gauge network under its control. In June 2004, ARTC signed a 60 year lease for access control of the NSW interstate and Hunter Valley rail network from the NSW Government. 56 ARTC’s lease of the interstate rail line ends to the south of Macarthur, where RailCorp’s passenger network terminates. At present, RailCorp is the owner and track manager for the dedicated freight lines within the Sydney metropolitan network. However, it is anticipated that ARTC will assume full control of the freight infrastructure agreed to under transitional arrangements following the construction of the SSFL. ARTC are also overseeing construction of the SSFL. The Tribunal invites comment on the impact on the supply chain of ARTC managing the metropolitan freight rail network.

56 http://www.artc.com.au/docs/nswlease/pdf/Final_Tripartite_Agreement.pdf

35

http://www.artc.com.au/docs/nswlease/pdf/Final_Tripartite_Agreement.pdf


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Specific issues for stakeholders

4 SPECIFIC ISSUES FOR STAKEHOLDERS

The Tribunal is required to address a number of specific issues arising from the terms of reference. Stakeholders may wish to use some of the more specific questions listed below to focus their submissions. Stakeholders may also make submissions on other issues as long as they are relevant to the terms of reference. A summary of the general invitations issued in chapters 2 and 3 and the specific questions raised below are listed, suitably numbered, in Appendix 3.

4.1 The Vehicle Booking System (VBS) A key issue for this review concerns access arrangements for road operators at the port through the VBSs of both stevedores. The many different issues relating to the VBSs operated by both stevedores have been consolidated into key topics. Cost and price issues The Tribunal invites comment on the following questions in relation to costs of the VBS. • What costs underpin the VBS access charges levied by the two stevedores? How are

the VBS access charges set?

• What costs are incurred by the stevedores in moving a container from the wharf to a truck or train?

• What influences the nature and amount of these costs (for example, are they influenced by the type of equipment used by a stevedore? Do they fluctuate with the number of containers handled by the stevedores?) and how have costs changed over time?

• Where do the port landside costs stop and the VBS costs start?

• Do the VBSs’ penalty charges reflect the cost to stevedores? What should they reflect?

• Should there be different charging arrangements for empty containers that are returned to the port, as opposed to full export containers?

Different pricing regimes

The Tribunal invites comment on the following questions in relation to the different pricing regimes of the two stevedores.

• Why do the stevedores have different pricing schemes for their VBSs? Do the different pricing schemes influence the efficiency with which transporters obtain access to the terminals?

• Would standardisation of charges be more appropriate?

• What style of pricing is preferred? Non-price access issues

The Tribunal invites comment on the following non-price access issues to consider in relation to the operation of the VBSs.

• What effect do access rules and conditions, and non-price constraints have on booking a timeslot? How do the stevedores use their discretion in determining access and charges, and what impact does this have?

37


• What are the stevedores’ obligations with regard to access to port facilities, and what should they be?

• What impediments to access exist?

• What is the maximum number of slots available each hour or each day? What factors determine the number of slots available?

• How has the number of slots changed over time?

• How has the length of time of each slot changed over time?

• What flexibility exists around the hourly allocation by stevedores through the VBSs? What happens when transporters arrive early or late? What grace periods exist at various times of the day?

Structural issues The Tribunal invites comment on the following questions that might be considered in relation to the structural issues in relation to efficiency of the VBSs. • How could the VBSs be improved?

• Is one VBS more effective or efficient than the other?

• Since the introduction of the VBSs have changes been made that improve the system? Or have changes had a negative impact? Are the original objectives of the VBSs still being met?

• What improvements in efficiency have resulted at Port Botany from the introduction of the VBSs?

• Do bulk runs by the stevedores outside peak hours reduce timeslot congestion? Are these available to all road operators? Should they be made more widely available?

• Are single truck owner-drivers disadvantaged by the VBSs?

Possibility of a third stevedore

The Tribunal notes that the NSW Government has called for expressions of interest for a third stevedore to operate at Port Botany. The Tribunal invites comment on how the introduction of a third stevedore might affect the answers to the questions above.

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4.2 Rail charges A further possible issue in the Port Botany supply chain is the level of competition and transparency in terminal access arrangements and charges for rail operators. Operators pay charges to ARTC and RailCorp for access to rail lines. However, these may be more comparable with road user charges paid by road operators. At the port, train operators pay a charge based on the number of ’lifts’ undertaken by the stevedore. However, these charges may need to be considered in their similarity to the stevedoring charges paid by importers and exporters for general stevedoring services, rather than being comparable to the VBS charges. Nevertheless the level of all these charges and their relativity to road operator charges (and VBS charges) will impact on end-users’ freight transport choices. The Tribunal invites comment on the following questions on the issue of rail access charges. • How are rail terminal access charges calculated? What are the costs relating to the

services to which the charges pertain? Are the charges cost reflective?

• What other charges and costs do rail operators face? What charges do intermodal operators levy on rail operators? How does this impact on the cost of transporting containers by rail?

• How should rail terminal access charges be determined relative to the VBSs’ charges?

• What is the impact of rail charges on rail’s share of container movement?

• Are there reasons other than price that explain why rail is not used as widely as road transport?

• What factors determine which mode of transport is used to move freight? Is price or reliability more important, or are there other factors of more note?

4.3 Storage charges Delays in access to the port for container collection by transport operators increase the port storage charges levied by stevedores. To allow time for transport operators to pick up their assigned freight from the port, the stevedores provide a number of free storage days at the port. The stevedores currently offer three free days of storage, which has recently been reduced from four days. Weekends and public holidays are generally treated as normal working days for the purposes of storage. The ACCC has found that stevedores’ revenue from this stream has been increasing.57

The Tribunal invites comment on the following questions on the issue of storage charges. • What is the rationale behind free storage days?

• How are current storage charges calculated? What are the costs relating to the services to which the charges pertain? Are the charges cost reflective?

• What is the utilisation of storage at Port Botany?

• What storage alternatives are there?

57 ACCC, Container Stevedoring Monitoring Report No.8, November 2006, p 18.

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4.4 Vertical integration of the containerised supply chain The stevedores have expanded their range of business activities to the landside interface part of the freight supply chain. Both stevedores have acquired significant interests in a range of transport and storage businesses in order to offer a more integrated freight logistics service. The stevedores appeared to be taking advantage of economies of scale and scope to compete with global operators who are increasingly offering ‘door-to-door’ integrated logistics services. However, since the purchase of both stevedores by new owners, the approach of each now appears somewhat different. Toll Holdings has recently been divesting its interests in certain freight and related transport businesses, selling some assets in line with undertakings given to ACCC following its acquisition of Patrick in March 2006. More recently it has announced plans to hive off all stevedoring operations, Pacific National and Patrick PortLink into a new publicly listed company called Asciano.58

DP World is also poised to divert its business interests away from operations in other parts of the supply chain. Recent media reports have indicated DP World is moving P&O Ports towards specialising only in stevedoring activities, and as such are proposing to sell 50 per cent of its interest in P&O Trans which is a road and rail transport, storage, warehouse and distribution arm of P&O Ports operating at Port Botany.59

It is unclear what will be the impact on the Port Botany supply chain of the proposed restructuring and divestitures being undertaken by the stevedores’ parent companies. The ACCC has jurisdictional mandate to assess the relevant competitive concerns associated with such developments. The Tribunal will not consider these matters. However, the Terms of Reference refers to the need for a transparent and fair allocation of access and provision of services in connection with the terminals, and in this context the Tribunal will consider concerns by industry participants that the stevedores may be providing preferential access arrangements to their affiliated businesses operating in the Port Botany supply chain60. The Tribunal will also look at whether any preferential access is given to supply chain participants who are not affiliated with the stevedores.

58 For more information see the ACCC website:

http://www.accc.gov.au/content/index.phtml/tag/mergersregister/59 Sydney Morning Herald, 5 January 2007, http://www.smh.com.au/news/business/corrigan-back-on-

wharves-for-pampo-competing-against-patrick/2007/01/04/1167777219307.html60 CLAG’s submission to the ACCC of 27 March 2006, p 2 refers to a possibility that where a booking

“system is not transparent and the stevedores have transport affiliates, it may be the case that they give time slot preferences to those affiliates.” See http://www.accc.gov.au/content/trimFile.phtml?trimFileName=D06+19177.pdf&trimFileTitle=D06+19177.pdf&trimFileFromVersionId=753145 P&O Ports denies this in its 27 February 2006 submission to the ACCC. http://www.accc.gov.au/content/trimFile.phtml?trimFileName=D06+11677.pdf&trimFileTitle=D06+11677.pdf&trimFileFromVersionId=753145.

40

http://www.accc.gov.au/content/index.phtml/tag/mergersregister/

http://www.smh.com.au/news/business/corrigan-back-on-wharves-for-pampo-competing-against-patrick/2007/01/04/1167777219307.html

http://www.smh.com.au/news/business/corrigan-back-on-wharves-for-pampo-competing-against-patrick/2007/01/04/1167777219307.html






The Tribunal invites comment on the following questions of the issue of vertical integration of the supply chain. • What is the extent of each stevedore’s business interest in businesses that operate in

the Port Botany supply chain?

• How has vertical integration by the stevedores impacted on the efficiency of the supply chain? What will be the impact of the proposed business separation and restructuring?

• Are the access arrangements and associated charges and penalties for the VBSs and rail access administered on a transparent and equitable basis? What terminal access arrangements are in place for transport businesses owned by Toll and DP World? Do they face the same costs as other operators?

• Is preferential treatment given to supply chain participants that are not affiliated with the stevedores?

4.5 Hours of operation Demand for access to VBS timeslots at Port Botany is greater than supply during peak periods. The stevedores offer alternative off-peak timeslots. However, some transport operators and the majority of importers and exporters tend to operate during normal business hours. This problem, termed ’mismatch of hours’, was identified in a report commissioned by the Sea Freight Council of NSW Inc.61 The study highlighted the need for better communication and coordination along the supply chain in order to achieve workable solutions to minimise the impact of the misalignment of operating hours in the industry. The Tribunal invites comment on the following questions on the issue of hours of operation. • To what extent does the mismatch of hours affect the efficiency of the Port Botany

supply chain?

• What will be the impact of stevedores moving to 24 hours a day, 7 days a week operation?

• What is the impact of the mismatch of hours on the VBSs?

• Which businesses are most affected by the mismatch in hours?

• Would changing VBS fees, penalties or storage charges alter demand in peak times?

• What incentives do (or could) exist for transporters and importers and exporters to operate at different times to those currently operated?

• Should relatively lower prices be applied to off-peak timeslots?

61 Sea Freight Council of NSW Inc, Freight Supply Chain – Coordination of Working Arrangements (Mismatch of

Hours), January 2005.

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4.6 Misaligned incentives along the supply chain Given the industry structure and the many participants, it is possible that the fees may not be flowing in a way that provides the best economic signals for efficient movement of containers. This could be occurring because the importers and exporters ultimately pay stevedore charges in their final freight price — but have no direct contract or relationship with the stevedores. Further, the individual standard charges and penalties are relatively small and therefore do not provide much incentive for individual importers and exporters, or transport operators, to dispute the charges. However, overall, this situation could be a significant issue that may be impacting on the efficiency of the supply chain. The Tribunal invites comment on the following questions on the issue of misaligned incentives. • How do transport operators, importers and exporters influence the landside operations

of the stevedores?

• Do importers and exporters influence which stevedore is used by shipping lines?

• What induces a shipping line to switch stevedores?

• Are the VBSs’ standard and penalty charges passed on to importers and exporters? What effect do these charges have on importers and exporters when choosing a shipping line?

• How relevant to shipping lines are the VBSs storage and penalty charges in the choice of stevedoring operator? How relevant are the charges for importers and exporters?

42

Appendices

APPENDIX 1 TERMS OF REFERENCE

Reference to the Tribunal The Independent Pricing and Regulatory Tribunal of NSW (IPART) is requested under Section 9 of the Independent Pricing and Regulatory Tribunal Act 1992 to undertake a review of the interface between the road transport industry, rail operators and the stevedores at Port Botany. Key background information for the Review is outlined at Appendix 1. Matters for Consideration With the commencement of the Port Botany Expansion, the volume of containers handled at Port Botany will triple by the year 2025 to 3.9M TEU. At least 60 per cent of this freight task will be handled by road. It is therefore imperative the issue of truck congestion and road transport efficiency is addressed. IPART is requested to review the interface between the land transport industries and the Port Botany stevedores, including the vehicle booking system, rail access arrangements and the provision of any other services to industry by or in connection with the stevedore’s business. In advising on the above, IPART is requested to examine the following matters, and to develop and make recommendations on options available for addressing any issues which it considers materially impact on the efficiency of the port-land transport interface: • an assessment of the cost base underpinning the provision of the vehicle booking

system and services referred to above

• structure and framework of charges and penalties (however described) payable by participants in the road transport industry and or rail operators

• impact of the vehicle booking system, and the manner of the provision of the services referred to above, on road transport movements

• impact of road and rail pricing on the choice of mode by which containers are transported to and from the port

• efficiency of the landside logistics chain at Port Botany, noting the work already done by FIAB.

The report should consider: • whether charges and penalties are efficient

• whether charges and penalties are fair to all users

• whether the efficient allocation of space and movement of trucks to and from the Port is affected

• arrangements which would help ensure that the stevedores provide a transparent and fair allocation of access and provision of services in connection with the terminal

• any road and rail issues raised in addition to those considered by FIAB which are specifically related to the efficiency of the interface between the stevedores and land transport operators at Port Botany, and

• whether institutional changes can be made to improve the efficiency of the landside logistics chain.

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Other matters

• IPART should consult with stakeholders and accept public submissions within the timetable for the investigation and report.

• IPART should have regard to the port competition and regulation principles set out in Clause 4.1 and Clause 4.2 of the Competition and Infrastructure Reform Agreement signed by COAG on 10 February 2006.

• IPART should take into account any relevant studies and practices undertaken both in NSW or other jurisdictions. A list of relevant NSW Government and industry reports is at Appendix A2.

Timing IPART is to investigate and provide a draft report to the Minister for Ports and Waterways within six months of commencement and a final report to the Minister after a further three months.

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Appendices

A1.1 Industry background

The majority of containers at Port Botany (80 per cent) are transported by road. The two stevedores, DP World (formerly P&O Ports) and Patrick, operate independent vehicle booking systems to manage the road movement of containers in and out of the port. Access to the terminals is arranged via subscription with each stevedore for truck slots per hour. The system also provides for penalties to discourage no shows or cancellations. Prior to the establishment of the VBSs long truck queues commonly occurred as drivers simply waited in turn for access to the terminal. Rail access charges to Port Botany are applied by the stevedores in part to recover the cost of servicing rail operations at the terminals. The access charges are applied on the basis of volume (per container) transported to and from the terminals. The magnitude of charges applied to individual rail operators is anecdotally high in comparison road transport. Consideration of the relative access charge per TEU would provide a meaningful comparison of the relative costs. The stevedoring industry (generally) is currently under annual monitoring by the Australian Competition and Consumer Commission (ACCC). The ACCC's container stevedoring monitoring program is undertaken at the direction of the Federal Treasurer under Part VIIA of the Commonwealth Trade Practices Act 1974 to monitor prices, costs and profits of container terminal operator companies at the ports of Adelaide, Brisbane, Burnie, Fremantle, Melbourne and Sydney. This is on the basis that stevedoring in Australia is dominated by the strong duopoly of Patrick and DP World. A report is prepared annually that monitors trends in container operator’s costs, revenues and profits. The ACCC reports the proportion of revenues earned from activities other than stevedoring has increased from 11 per cent in 2001-02 to 15 per cent in 2004-2005. In that period revenues from ‘non-stevedoring’ activities have doubled to $112.5 million. In its Container Stevedoring Monitoring Report No. 8 for 2005-06 released in November 2006, the ACCC states “a proactive approach by port managers to managing certain landside logistics arrangements may be necessary to ensure that the landside interface does not emerge as a transport bottleneck”. The ACCC considers the current landside interface arrangements for container stevedoring services needs further assessment. The vehicle booking system (VBS) and rail access arrangements are part of the landside interface between the port and connecting transport modes. Under the current arrangements, Patrick and P&O have a major role in managing the landside interface. Both companies also provide road and rail transport services. In a July 2005 report to the NSW Government on ways to manage the movement of increasing numbers of containers at Port Botany, the Freight Industry Advisory Board (FIAB) recommended the establishment of a Port Botany Logistics Chain Team to manage the logistics task, optimise the efficiency of the port-rail-road interface and enhance capacity on the infrastructure network. Following a Roundtable meeting with industry on 14th September 2006, the Minister for Ports and Waterways agreed to establish an industry/government taskforce to provide comprehensive advice to government on issues in the land transport logistics chain at Port Botany, including port operations, stevedoring, road and rail freight operations, intermodal

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terminal operations, container parks, planning and regulation. The Minister chaired the first meeting of the Port Botany Logistics Taskforce on 27th November 2006. Its Terms of Reference include vehicle booking systems and rail access charges. According to the ACCC, increasingly, automated VBSs are being used to manage the flow of containers into and out of ports. Revenue from this activity represents about 6.6 per cent of total “non-stevedoring” revenue and is therefore not a significant component of total revenues in the industry. However, the VBS component of “non-stevedoring” revenue is increasing. VBS revenue on a per unit basis increased 22462 per cent in the five years to June 2006. ACCC authorisations The ACCC recently authorised the Container Logistics Action Group (CLAG) representing container carriers, freight forwarders, customs brokers, importers and exporters to negotiate collectively on behalf of current and future members with the stevedores on terms, prices and conditions of supply of a range of services and terminal access conditions. The authorisation, however, does not compel the stevedores to participate in negotiations. The ACCC does not receive detailed cost and profit data on the VBSs. It simply provides economic monitoring of annual revenue data provided by the stevedores. Major issues A range of services are supplied to the participants in the land transport of containers by or in connection with stevedoring activity at Port Botany, including the VBSs, container storage, maintenance and repositioning services. Major issues in connection with these services include: • the transparency, applicability and affordability of charges and penalties

• the fees charged for access to the services and whether any benefit received is commensurate with those fees

• the level of penalties for missed bookings or late arrivals which may not be the carrier’s own fault

• the imposition of penalties to include Sundays and Public Holidays and

• whether there is adequate transparency in the way time slots are allocated.

62 This figure was derived by the ACCC and can be sourced at page 19 of ACCC, Container Stevedoring

Monitoring Report No. 8. The stevedores have advised the Tribunal that it is misleading.

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Appendices

A1.2 Relevant NSW Government and Industry Reports • Container Stevedore Monitoring Report No 8 by ACCC Nov 2006. • Mismatch of Hours Report by NSW Sea Freight Council Jan 2005. • Railing Port Botany’s Containers by the Freight Infrastructure Advisory Board July 2005. • Container Logistics Action Group (CLAG) submissions to ACCC seeking authorisation

to collectively bargain with stevedores, March 2006 at www.accc.gov.au. • P&O Ports response to CLAG submission March 2006.

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Appendices

APPENDIX 2 COMPETITION AND INFRASTRUCTURE REFORM AGREEMENT - CLAUSES 4.1 AND 4.2

The terms of reference require the Tribunal to have regard to the Competition and Infrastructure Reform Agreement signed by COAG on 10 February 2006. T he relevant clauses are Clause 4.1 and 4.2 and are listed below.

Port competition and regulation

4.1. The Parties agree that:

a. ports should only be subject to economic regulation where a clear need for it exists in the promotion of competition in upstream or downstream markets or to prevent the misuse of market power; and

b. where a Party decides that economic regulation of significant ports is warranted, it should conform to a consistent national approach based on the following principles:

i. wherever possible, third party access to services provided by means of ports and related infrastructure facilities should be on the basis of terms and conditions agreed between the operator of the facility and the person seeking access;

ii. where possible, commercial outcomes should be promoted by establishing competitive market frameworks that allow competition in and entry to port and related infrastructure services, including stevedoring, in preference to economic regulation;

iii. where regulatory oversight of prices is warranted pursuant to clause 2.3, this should be undertaken by an independent body which publishes relevant information; and

iv. where access regimes are required, and to maximise consistency, those regimes should be certified in accordance with the Trade Practices Act 1974 and the Competition Principles Agreement.

4.2. The Parties agree to allow for competition in the provision of port and related infrastructure facility services, unless a transparent public review by the relevant Party indicates that the benefits of restricting competition outweigh the costs to the community, including through the implementation of the following:

a. port planning should, consistent with the efficient use of port infrastructure, facilitate the entry of new suppliers of port and related infrastructure services;

b. where third party access to port facilities is provided, that access should be provided on a competitively neutral basis;

c. commercial charters for port authorities should include guidance to seek a commercial return while not exploiting monopoly powers; and

d. any conflicts of interest between port owners, operators or service providers as a result of vertically integrated structures should be addressed by the relevant Party on a case by case basis with a view to facilitating competition.

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Appendices

APPENDIX 3 LIST OF INVITATIONS TO COMMENT

Following is a complete list of all issues on which the Tribunal has sought comment throughout this report. Submissions may cover other issues so long as they relate to the terms of reference, and stakeholders’ attention is drawn to in section 1.4 of the paper.

1. The Tribunal invites stakeholders to comment on any aspects of arrangements between

shippers and stevedores that may be causing inefficiencies or extra costs to arise in the landside supply chain.

2. The Tribunal invites stakeholders to comment on any aspects of the stevedores’

methods and hours of operation or other business practices relating to the provision of access to the port terminals that may be causing inefficiencies or extra costs to arise in the landside supply chain. The Tribunal further invites comments on why the Port of Melbourne appears to offer considerably more VBS slots than Port Botany.

3. The Tribunal invites stakeholders to comment on any aspects of the road transport

operators’ current work practices and any trends in storage charges and volumes (both for on-port storage and at transport operators’ own depot storage) that may be causing inefficiencies or extra costs to arise in the downstream supply chain.

4. The Tribunal invites stakeholders to comment on any aspects of access to rail

infrastructure or of the current work practices of rail transport operators that may be causing inefficiencies or extra costs to arise in the downstream supply chain.

5. The Tribunal invites stakeholders to comment on any aspects of the operations of the

regulatory authorities that may be causing inefficiencies or extra costs to arise in the downstream supply chain.

6. The Tribunal specifically invites comments on the current role of the SPC and on the

role SPC might take in improving the efficiency of the supply chain. 7. The Tribunal invites stakeholders to comment on any aspects of the current work

practices of freight forwarders, customs brokers and any remaining industry participants that may be causing inefficiencies or extra costs to arise in the downstream supply chain.

8. The Tribunal invites stakeholders to comment on any aspects of the VBS, particularly

in relation to the number of timeslots made available and on what basis, and the process by which those slots are made available across the day(s), and to whom.

9. The Tribunal asks stakeholders to comment on the variability of average turnaround

times across the major ports and the variability of turnaround times faced by individual transport operators at Port Botany itself. The Tribunal also invites comment on how important predictability of turnaround times is to transport operators relative to average turnaround times at Port Botany. The Tribunal further invites comment on why turnaround times are higher for Port Botany compared to Melbourne, Adelaide and Fremantle.

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10. The Tribunal invites comment on how truck turnaround times are currently measured by supply chain participants and how they should be measured. The Tribunal further invites comment on the extent to which the stevedores provide access to their facilities at the specific times booked on the VBS.

11. The Tribunal invites comment on the choice between a system where container

numbers are nominated in advance thereby offering the possibility of faster turnaround times; or not providing container numbers which would provide road carriers with greater flexibility. Or would industry participants prefer a system that allows the choice between both?

12. The Tribunal invites comments on the increased use of ICT and automation and any

other ways to reduce turnaround times and otherwise improve supply chain efficiency. 13. The Tribunal invites stakeholders to comment on VBS capital and operating costs and

to assist it to distinguish between stand-alone VBS costs and those shared with other stevedoring activities.

14. The Tribunal invites stakeholders to comment on VBS access and penalty charges and

the level of transparency of access through the stevedores’ VBSs. 15. The Tribunal invites stakeholders to indicate the costs of providing the services of rail

windows and rail paths to rail operators. 16. The Tribunal invites comment from stakeholders on the planned or mooted

development and expansion of the various intermodal terminals in Sydney and the extent to which this is expected to ease congestion in the landside supply chain at Port Botany.

17. The Tribunal invites comment on the likely effect of the expansion plans at Port

Botany on access to the port terminals during peak periods and efficiency along the supply chain.

18. The Tribunal invites comment on the likely effects of expansion of the intermodal

network in Sydney on access to the port and efficiency along the supply chain. 19. The Tribunal invites comment on the likely impact of a peak pricing system, along the

lines of the FIC, on access to the port terminals and the efficiency of the Port Botany supply chain.

20. The Tribunal invites comment on the likely impact of the expansion of the freight rail

network in Sydney on the number of containers moved by rail and on congestion at the port.

21. The Tribunal invites comment on the impact on the supply chain of ARTC managing

the metropolitan freight rail network.

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Appendices

22. The Tribunal invites comment on the following questions in relation to costs of the VBS. a. What costs underpin the VBS access charges levied by the two stevedores? How

are the VBS access charges set?

b. What costs are incurred by the stevedores in moving a container from the wharf to a truck or train?

c. What influences the nature and amount of these costs (for example, are they influenced by the type of equipment used by a stevedore? Do they fluctuate with the number of containers handled by the stevedores?) and how have costs changed over time?

d. Where do the port landside costs stop and the VBS costs start?

e. Do the VBSs’ penalty charges reflect the cost to stevedores? What should they reflect?

f. Should there be different charging arrangements for empty containers that are returned to the port, as opposed to full export containers?

23. The Tribunal invites comment on the following questions in relation to the different

pricing regimes of the two stevedores. a. Why do the stevedores have different pricing schemes for their VBSs? Do the

different pricing schemes influence the efficiency with which transporters obtain access to the terminals?

b. Would standardisation of charges be more appropriate? c. What style of pricing is preferred?

24. The Tribunal invites comment on the following non-price access issues to consider in

relation to the operation of the VBSs. a. What effect do access rules and conditions, and non-price constraints have on

booking a timeslot? How do the stevedores use their discretion in determining access and charges, and what impact does this have?

b. What are the stevedores’ obligations with regard to access to port facilities, and what should they be?

c. What impediments to access exist?

d. What is the maximum number of slots available each hour or each day? What factors determine the number of slots available?

e. How has the number of slots changed over time?

f. How has the length of time of each slot changed over time? g. What flexibility exists around the hourly allocation by stevedores through the

VBSs? What happens when transporters arrive early or late? What grace periods exist at various times of the day?

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25. The Tribunal invites comment on the following questions that might be considered in relation to the structural issues in relation to efficiency of the VBSs. a. How could the VBSs be improved?

b. Is one VBS more effective or efficient than the other?

c. Since the introduction of the VBSs have changes been made that improve the system? Or have changes had a negative impact? Are the original objectives of the VBSs still being met?

d. What improvements in efficiency have resulted at Port Botany from the introduction of the VBSs?

e. Do bulk runs by the stevedores outside peak hours reduce timeslot congestion? Are these available to all road operators? Should they be made more widely available?

f. Are single truck owner-drivers disadvantaged by the VBSs? 26. The Tribunal invites comment on how the introduction of a third stevedore might

affect the answers to the questions above. 27. The Tribunal invites comment on the following questions on the issue of rail access

charges. a. How are rail terminal access charges calculated? What are the costs relating to

the services to which the charges pertain? Are the charges cost reflective?

b. What other charges and costs do rail operators face? What charges do intermodal operators levy on rail operators? How does this impact on the cost of transporting containers by rail?

c. How should rail terminal access charges be determined relative to the VBSs’ charges?

d. What is the impact of rail charges on rail’s share of container movement?

e. Are there reasons other than price that explain why rail is not used as widely as road transport?

f. What factors determine which mode of transport is used to move freight? Is price or reliability more important, or are there other factors of more note?

28. The Tribunal invites comment on the following questions on the issue of storage

charges. a. What is the rationale behind free storage days?

b. How are current storage charges calculated? What are the costs relating to the services to which the charges pertain? Are the charges cost reflective?

c. What is the utilisation of storage at Port Botany? d. What storage alternatives are there?

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Appendices

29. The Tribunal invites comment on the following questions of the issue of vertical integration of the supply chain. a. What is the extent of each stevedore’s business interest in businesses that operate

in the Port Botany supply chain?

b. How has vertical integration by the stevedores impacted on the efficiency of the supply chain? What will be the impact of the proposed business separation and restructuring?

c. Are the access arrangements and associated charges and penalties for the VBSs and rail access administered on a transparent and equitable basis? What terminal access arrangements are in place for transport businesses owned by Toll and DP World? Do they face the same costs as other operators?

d. Is preferential treatment given to supply chain participants that are not affiliated with the stevedores?

30. The Tribunal invites comment on the following questions on the issue of hours of

operation. a. To what extent does the mismatch of hours affect the efficiency of the Port

Botany supply chain?

b. What will be the impact of stevedores moving to 24 hours a day, 7 days a week operation?

c. What is the impact of the mismatch of hours on the VBSs?

d. Which businesses are most affected by the mismatch in hours?

e. Would changing VBS fees, penalties or storage charges alter demand in peak times?

f. What incentives do (or could) exist for transporters and importers and exporters to operate at different times to those currently operated?

g. Should relatively lower prices be applied to off-peak timeslots? 31. The Tribunal invites comment on the following questions on the issue of misaligned

incentives. a. How do transport operators, importers and exporters influence the landside

operations of the stevedores?

b. Do importers and exporters influence which stevedore is used by shipping lines?

c. What induces a shipping line to switch stevedores?

d. Are the VBSs’ standard and penalty charges passed on to importers and exporters? What effect do these charges have on importers and exporters when choosing a shipping line?

e. How relevant to shipping lines are the VBSs storage and penalty charges in the choice of stevedoring operator? How relevant are the charges for importers and exporters?

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review of the interface between the land transport ... · 1 introduction the independent pricing...

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