IPART Letter 01 Jan 2008 - IPART - Independent Pricing and ... · Funding Night and Weekend Slots...

ATA NSW

Level 9, 70 Castlereagh Street SYDNEY NSW 2000

GPO Box 4588

SYDNEY NSW 2001

Ph: (02) 9222 1498 Fax: (02) 9231 3596

Email: [email protected]

CLAG

PO Box 232,

Rockdale NSW 2216

Ph: (02) 9567 8566

Fax: (02) 9567 8601

Mobile: 0400 131 558

Email: [email protected]

01 January 2008

Mr James Cox

Chief Executive,

Independent Pricing and Regulatory Tribunal,

P.O Box Q290,

QVB Post Office NSW 1230.

Dear Mr Cox,

Attached please find the ATANSW and Container Logistics Action Group joint response to the

Tribunal’s Draft Report on its Review of the Interface between the Land Transport Industry and

the Stevedores at Port Botany.

As you are aware we were granted an extension of time to 2 January 2008 to complete our

submission.

We would appreciate the opportunity to discuss our submission and the industry surveys

undertaken by ATANSW/CLAG with IPART staff at a convenient time. We will contact the staff

to arrange an appointment.

Yours Sincerely,

Mike Moylan, Chairman, ATANSW Container sub-committee: [email protected]

Martin Feil, Secretariat, Container Logistics Action Group: [email protected]

Reforming Port Botany’s links with inland

Independent Pricing and Regulatory Tribunal - Draft Report Reforming Port Botany’s links with inland transport

Submission Date: 01 January 2008

2 ATANSW/CLAG Response to Draft Report

This submission is a joint response by ATANSW and the Container Logistics Action Group (CLAG) to the arguments, findings, conclusions and recommendations advanced by the Independent Pricing and Regulatory Tribunal (IPART) in its Draft Report concerning Reforming Port Botany’s links with inland transport released in October 2007. We were and remain committed to the Terms of Reference established by the Minister for Ports and Waterways. Essentially, those Terms sought reforms to the landside interface at Port Botany that would address the growing problems of landside congestion and its impact on port efficiency. In our view the outcomes and recommendations of the Review must be evaluated against those fundamental benchmarks viewed within the context of the port’s rapid growth to an intermodal movement of 3.9 million TEUS in 2025. ATANSW and CLAG believe that IPART’s proposal for a Dutch Auction of VBS time slots is not practical. It will actually diminish the operational efficiency of Port Botany, increase congestion and add costs to the landside supply chain. ATANSW and CLAG value the work done by IPART and the understanding they have achieved of the complex processes of the cross border landside supply chain for sea freight at Port Botany. This review is a bellwether initiative by the NSW Government which will impact upon all container ports in Australia. Government consideration of the final IPART report will occur at a time when the Council of Australian Governments (COAG) will be refreshing its agenda for competition policy. This will include consideration of the commercial relationships between port stakeholders and a standard for charges by public monopoly infrastructure users that is based on their costs and a reasonable return on assets employed. Key issues and Draft Report concepts and findings we wish to respond to are listed in the Table of Contents. Each is dealt with in a separate part of our submission. We have also undertaken a survey of Carriers, Customs Brokers, Freight Forwarders, Importers and Exporters. We commend expansion of that survey process to IPART. There can be little doubt that one of the critical success factors for the task facing Port Botany will be obtaining a positive buy-in for any reforms from the entire cross border supply chain. Our submission is structured to provide, initially, specific responses to the draft report recommendations made by IPART at pages 8-11 of its report. The submission then provides additional recommendations for consideration in the final report. Arguments supporting our request are provided in this section. Our submission then considers a number of issues and perceptions which we believe are germane to IPART’s conclusions and recommendations. Finally, the appendices to this report provide, inter alia, an analysis of various vehicle booking systems including the Dutch auction proposal and our view of the advantages and disadvantages of each system. We have also included a costing of the amount of carrier costs per container for movements outside of normal working hours and at weekends.


PAGE

Executive Summary

2

Section 1: Specific Responses to IPART’s Draft Report Recommendations

5

Section 2: Recommendations requested by ATANSW/CLAG � ATANSW/CLAG Requests

8

Section 3: Major Issues Arising from IPART’s Recommendations, Findings and Conclusions

10

Section 3.1: The Dutch Auction � Business Risks � Queuing Issues � Longer Truck Turnaround Times (TTT) � Increased Supply Chain Costs at Port Botany � Market Response � Summary

10

Section 3.2: Other VBS Options � Preference for Larger Carriers � The PierPass Model � Funding Night and Weekend Slots

14

Section 3.3: A Port Botany Land Transport Task Force � Introduction � Composition of the Port Botany Road Landside Task

Force � Functions of the Task Force

17

Section 3.4: Days of Free Availability and Container Dwell Times

� Benchmarking overseas ports � Errors in Assumptions for the Draft Report Analysis � Summary

19

Section 4: Major Arguments for ATANSW/CLAG

22

Section 4.1: Technology and Accreditation Standards • Introduction • Accreditation Standards � Occupational Health and Safety and Chain of

Responsibility

22


PAGE

Section 4.2: A 24/7 Working Week for Port Botany • Introduction � Costs � Preconditions for 24/7 � Phasing 24/7

24

Section 4.3: A Port Botany Business Plan to 2025 � Every Large Entity has a Plan for Future Growth and

Development.

26

Section 5: Other Matters

27

Section 5.1: Draft Report Misconceptions and Errors • Stevedoring Accountability, not Micromanagement • Other Misconceptions and Errors • Inability to know Ship Arrival Times and the Magnitude of

the Landside Task • Errors Regarding Terminal Capacity • Benchmarking is not Valid Because “All Ports are

Different”

27

Section 5.2: Draft Report Omissions • Days of Availability, Capacity Constraints and Container

Density • Charges and Penalties • No Costing Model or Dutch Auction Detail

34

Section 5.3: The Survey

36

Section 6: Conclusion

37

Appendix 1: Survey Responses • Dutch Auction 1 • Port Botany Outcome of Dutch Auction

38

Appendix 2: VBS Options: Advantages and Disadvantages • Dutch Auction With Interruptible Slots • Dutch Auction Without Interruptible Slots • Existing System with Stevedore Ownership but Time Slot

Allocation, Transparency and Time Slot Price Differential • Independent Ownership, Transparency and no Time Slot

Price Differential

40

Appendix 3: Costing the Carrier Night Shift

43

Appendix 4: Sample Licence Agreement: Carriers and Port Authority of Vancouver

45


Section 1: Specific Responses to IPART’s Draft Report Recommendations (IPART Draft Report, Pages 8 to 11) IPART Recommendation 1:

That each stevedore provides real-time information about the size of the truck queue at its terminal, and an estimate of the time that trucks with booked VBS slots will need to wait after their slot to enter the terminal.

Partially agree. This measurement has no regard for the number of containers being brought into and out of the terminal by a truck. Truck Turnaround Time measurements need to be revisited to develop a more meaningful measurement of stevedore landside productivity. IPART Recommendation 2:

That road transporters invest in the communication devices they need to receive the Stevedores’ real time communications and act accordingly.

Partially agree. Measurement systems and communication technology for port efficiency is a much broader issue than communication devices. IPART Recommendation 3:

That stakeholders consider adopting a non-discretionary set of communication rules that establish how the stevedores will adjust the number of VBS slots when delays occur in their landside service.

Disagree. This presumes that the stevedores have the unilateral right to adjust slot numbers. IPART Recommendation 4:

To foster goodwill, that the stevedores consider making basic amenities such as toilets and cold drinking water available to truck drivers who are required to queue to gain access to the stevedores’ terminals.

Agree. IPART Recommendation 5:

That each of the stevedores ensures that its carrier access agreement specifies, in clearly expressed terms, how it operates its VBS, the complete terms and conditions of access to this system, and what a holder of a booking in this system is entitled to.

Disagree. We do not believe that the stevedores have an inalienable or efficiency justified right to own the VBS. This presumes that they do and that they can dictate the terms of the VBS and carrier access. IPART Recommendation 6:

That the stevedores each engage an independent auditor to conduct regular audits of their compliance with their carrier access agreements.

Disagree. ATANSW/CLAG considers that any audit of the stevedore’s activity should not involve a conflict of interest. Appointment and payment by the stevedores and the provision of other services or potential provision creates such a conflict.


IPART Recommendation 7:

That the NSW Government request the Roads and Traffic Authority to review whether ‘super B-double’ trucks can be permitted to access Port Botany along selected routes at selected hours in consultation with relevant local councils.

Agree. IPART Recommendation 8:

That Sydney Ports Corporation investigates, in consultation with the stevedores, the creation of a VBS that encourages two-way loading, covering the wider port precinct, taking into account the principles set out above. Sydney Ports Corporation should also take into account the views of the road transport operators to the extent that they relate to the construction of a joint VBS.

Disagree. This is a task for the Road Landside Task Force we propose. It is not equitable or appropriate for the users of the VBS to be excluded from the development of a system which is fundamentally about their operational efficiency. IPART Recommendation 9:

That the NSW Government take up the matters related to the work of the Australian Customs Service discussed in Chapter 4 with the Australian Government.

Disagree. The conclusions of Chapter 4 are limited to 24/7 operation of the Container X-Ray facility. The ACS is unlikely to contemplate that change. It would be more conducive to Port efficiency to redefine container availability. Containers that have impediments from ACS or AQIS whether it is for Container x-ray or some other purpose are not legally available. Container availability at Port Botany involves more than availability from the stevedores. The present policy simply uses ACS and AQIS to deliver additional storage revenue to the stevedores. IPART Recommendation 10:

That the road transporters invest in the technology needed to fully automate the gate processing for trucks.

Partially Agree. There is much more required for the technology solution than simply asking carriers to install transponders for gate automation. IPART Recommendation 11:

That the stevedores use container numbers that have been provided in advance to do more housekeeping to reduce truck turnaround time.

Agree.


That the NSW Government continue to undertake the following non-price initiatives to overcome impediments to increased use of rail to transport containers to and from Port Botany.

N.B. Recommendation includes various non-price initiatives.

Agree but fail to understand why IPART will recommend such specific investment by the State Government in rail whilst road investment is left entirely to the market and stevedore investment recommendations are regarded as micromanagement.



That a Port Botany Logistics Team (PBLT), modelled loosely on the successful Hunter Valley Coal Chain Logistics Team (HVCCLT), should be adopted to improve rail system performance at Port Botany relative to current arrangements. Given the distinctive differences between the Port Botany container chain and the Hunter Valley coal chain, a successful PBLT would need to embody the following design characteristics.

N.B.: Recommendation includes various characteristics

Agree with the concept but disagree with most of the specifics for operation. Task Forces should have goals and principles. IPART is certainly proposing who is in and out of the Rail Task Force and limiting its power. IPART is excluding the rest of the Port Botany service providers from the task force but expecting them to present views to the stevedores and train operators for their adjudication. IPART Recommendation 14:

That the Minister request Sydney Ports Corporation to facilitate and each of the stevedores to independently implement a two-tiered system for booking access to each of the stevedores’ facilities, as set out in Chapters 7 and 8. Essential features of this system would be:

N.B.: Recommendation includes a number of essential features

Disagree. ATANSW/CLAG’s response to this recommendation has been comprehensively covered in the body of our submission. IPART Recommendation 15

That the Minister consider implementing light-handed regulation that enables the collection by Sydney Ports Corporation of information for the purposes of monitoring performance and investment in landside activities at the port. The data should be disaggregated by stevedore, and the stevedore named. The data should be published regularly.

Partially agree. ATANSW/CLAG dos not consider that SPC has the specific skills and understanding necessary to collect and properly analyse such strategic information. This should be a task for the Road Landside Task Force in collaboration with SPC. IPART Recommendation 16

That further economic regulation of the Port Botany containerised freight supply chain only be considered if:

N.B.: Recommendation includes a number of conditions Disagree. This recommendation involves a very substantial burden of proof upon the Government in its efforts to improve the performance and efficiency of Port Botany. The criteria for imposing further regulation are either nebulous (e.g. what is insufficient voluntary cooperation, what are good regulations?)


Section 2: Recommendations Requested by ATANSW/CLAG ATANSW/CLAG Requests: ATANSW/CLAG asks that IPART exclude from its final report those requests included in its draft report with which we disagree. In particular, ATANSW/CLAG notes that the major recommendation made by IPART for a Dutch auction has not received any support of substance from the supply chain stakeholders at Port Botany. There is very little qualified support. ATANSW requests that IPART makes the following recommendations to the NSW Government:

1. The creation of a new VBS that is independently owned by an entity that is not a participant in the cross border service supply chain. The VBS would allocate the number of slots advised by the stevedores. The VBS operator would, on a daily/weekly basis, issue statistical and other information regarding the number of slots provided in each time slot, the recipients of the slots and other management information;

2. That Sydney Ports Corporation, in collaboration with port stakeholders

develop a Business Plan for Port Botany. The purpose of that plan would be to consider the full range of strategies, operating protocols and assets that must be utilised to meet the projected growth of Port Botany to 2025; The Plan would initially provide detailed analysis of Port container growth and Port stakeholder response for the next five years. It would undertake a specific study of strategies and assets deployed and other operating circumstances at overseas container ports who have successfully met the challenge of growth of the magnitude posed for Port Botany. Successive Plans would be developed for further five year periods. The Plans would focus specifically on environmental and technology issues that are central to meeting the growth envisaged at Port Botany. Specific interest groups could be co-opted to participate in the research and development of these core issues;

3. That a study be undertaken to determine terminal capacities, historical

usage of that capacity, present container density and the costs of additional lifts required to increase container density. If appropriate, consideration be given to increasing the days of free availability and treating Sundays and public holidays as days of non availability. The impact of such a change be tested in trials at the port over a one year period;

4. That containers subject to Customs or Quarantine impediments (such as

Container X-Ray or Customs examinations or AQIS action) be considered as not available regardless of the fact that they have been discharged;

5. That turnaround times be measured on the basis of turnaround times per

container plus a flag fall component (time) for queuing and processing rather than the existing measure of turnaround times per truck. Historical measurements and surveys of turnaround times should be disregarded for analytical purposes;


6. That a Road Landside Task Force be created to enable the preparation of the Business Plan, its ongoing implementation and revision and the monitoring of growth at the Port and the rate of take up of agreed responses to that growth. The Task Force would also be responsible for the implementation of process improvements such as the introduction of housekeeping measures to reduce container lifts and container turnaround times;

7. That wrong zones and no show charges be reduced to an agreed payment

for additional costs incurred by the stevedores plus a reasonable return on assets. Charges only be imposed using a No Fault standard;

8. That stevedore storage charges be reduced to a rate that is commensurate

with the cost of providing storage plus a reasonable return on stevedore assets. Stevedores to advise ACS and importers when containers have been at the terminal for more than five days;

9. That Sydney Ports Corporation, in collaboration with the Land Taskforce and ATANSW introduce a certification process for all carriers using Port Botany. This would focus on Occupational, Health and Safety, Chain of Responsibility , sustainable port management, security, truck registration and insurance and the ability of operators to transit containers through carrier depots using appropriate lifting equipment;

10. That the Landside Industry Task Force, in collaboration with Sydney Ports

Corporation, commission a blueprint for Port Botany technology development and implementation;

11. That the NSW Government provide the seed capital necessary for the

development of an infrastructure plan for the technology blueprint to the point where a public/private initiative may be viable.


Section 3: Major Issues Arising from IPART’s

Recommendations, Findings and Conclusions.

3.1: The Dutch Auction

Business Risks IPART acknowledges that no Vehicle Booking System at any port in the world allocates time slots on the basis of a daily auction. There is no suggestion that the auction should be trialled or any detail of auction processes, protocols or payment procedures. There is no detail regarding the level of payment that should be made to the stevedores for the provision of guaranteed turnaround times from the terminal gates. There is no explanation of how the truck queues at the gate will be managed to enable those with guaranteed slots to enter before those who have arrived previously with interruptible slots. There has been no costing or functional analysis for the creation of a unique suite of software to provide a platform for the operation of the Dutch auction and the open access of an indeterminate number of potential bidders. The risk of inadequate development and a failure to appropriately test a system has been recently evidenced by the debacle of the introduction of Cargo Management Re-Engineering by the Australian Customs Service two years ago. Any payment to the stevedores in excess of their costs plus a reasonable return on assets is likely to be contrary to public policy on charges for the use of public monopoly infrastructure. Any lesser payment will not motivate the stevedores to guarantee turn around times. They cannot guarantee them from outside the gate in any case. They cannot move outside their terminals and regulate queuing on public roads. It is not sufficient to propose a theoretical allocation system and leave it to the users to make it work. There is almost a unanimous rejection of the Dutch auction by the stakeholders at Port Botany. The reasons are logical and cost based. They are not based on self interest. Other Dutch auctions (such as the Sydney Market fish sales) are not relevant. Goods are being sold to retailers who are present and have their own authority for the level of a bid. Government intervention to enable the Dutch auction to work would have to be by way of micromanagement of the cross border supply chain and would involve significant winners and losers in the process. The Port Botany stakeholders cannot develop practical operational processes and protocols to make a Dutch auction work. The reason is that the processes do not exist and present processes can’t be revised to achieve a practical outcome. Its implementation with a secondary market would actually generate a new set of stakeholders whose only interest would be to appropriate a margin as middlemen generating a premium for their on sale or developing a strategy for horizontal and vertical integration of the cross border services supply chain. These strategies should not be initiated by Government.


Finally, IPART is actually proposing an auction for guaranteed slots and the present vehicle booking processes for interruptible slots. Presumably the two systems will co-exist over the entire range of time slots. The additional work and synchronicity required to meet daily programming requirements will impose a heavy administrative burden and increase the risk of being unable to meet customer requirements without creating additional transport, lifts and yard storage. These additional tasks will obviously increase metropolitan congestion. Meeting the terms of reference and the intermodal growth requires the implementation of practices that are proven elsewhere and have the enthusiastic buy in of the Port Botany stakeholders. The overwhelming evidence is that neither of these criteria are met by the Dutch auction recommendation. Persisting with the concept in spite of these facts creates a major business risk that will make port efficiency and congestion worse rather than better. Queuing Issues The Dutch auction proposed includes two central concepts involving two types of slots. The first type encompass auctioned slots with an accompanying guarantee from the stevedores that they will turn around trucks with a guarantee in a specified time period from the time of their arrival at the terminal gate. The second category is interruptible slots which have no turnaround time guarantee. A principal cause of and specific reason for the IPART review were the systemic delays and traffic congestion that began with queues at the terminal gates that ultimately flowed for kilometres into the surrounding roads. These delays have occurred for the past five years. A Dutch auction either creates the need for trucks with guaranteed slots to jump the queue or to form a separate queue. The interruptible slot queue is likely to be further delayed than at present as stevedores give preference to the shipside, followed by trains, followed by bulk run ins and run outs, followed by guaranteed slots. Longer Truck Turnaround Times (TTT) The stevedores cannot guarantee the length of the guaranteed slot queue and should not control the number of containers moving in or out of the terminal on a single truck. Therefore, it is difficult to imagine how the stevedores can guarantee TTT from the terminal gate. It may be postulated that those with guaranteed slots will turn up precisely on time but how will they achieve this given their variables of distance travelled and city/metropolitan congestion? Even if they achieve such precision they cannot enter the terminal at the same time. The TTT of those in the interruptible ranks depends upon the quantum of containers moved by those on that auction day who do not participate in the Dutch auction. It seems likely that the interruptible slots will form a queue that is longer than any present queue for the random ranks. This depends upon levels of auction participation. The preliminary view from our surveys is that most will not participate in the Dutch auction.


A faster (but still imprecise) TTT for guaranteed slots combined with a slower and much longer random rank for interruptible slots (or the introduction of a random rank at Patrick) is likely to actually increase aggregate congestion and decrease aggregate operational efficiency at Port Botany. It could be argued that the take up of guaranteed slots will increase as carriers and their clients learn to accept and use the Dutch auction process. This may reduce the congestion level. It may not as more small carriers enter the container carrying market. There is a major business risk implicit in introduction of the Dutch auction. In any case ATANSW/CLAG consider that present TTTs are meaningless as a measure of stevedoring efficiency and that historical studies have no substantial value as measures of Port Botany efficiency. For example, a truck may enter a terminal carrying no containers. It may leave carrying one twenty foot container. Alternatively a truck may enter with three containers and exit with another three. The aggregate TTT for the latter truck is obviously more than in the former case. Yet the average TTT for multi-container movements is far more efficient for both the carrier and the terminal. Present TTT measurements have ignored the Port and carrier efficiency increment resulting from connecting time slots to allow multiple container movements. Increasing Supply Chain Costs at Port Botany It is certain that whatever the valid efficacy of TTTs that may ultimately be delivered to carriers holding guaranteed slots the auction process will add to uncertainty in costs and supply chain lags in doing business at Port Botany. The IPART Draft Report offers no modelling or benchmarks for this implementation and take up phase. The process would certainly force all Port Botany stakeholders to change a number of their operational, accounting, administrative and communication systems with additional costs. Market Response Any provider of a new product or service tests the market to determine a number of product or service issues and the justification for moving to a new product or service offering. Proof of concept is a fundamental part of product or service development. ATA NSW/CLAG have conducted surveys seeking market responses to the Dutch auction recommendation and to other proposals. These are not major surveys. We cannot pay for those but they are a representative sample of user perspectives that should not be arbitrarily dismissed. Similar views have been expressed at stakeholder forums conducted by the Minister for Ports, the Sea Freight Council and IPART. Market opposition to the introduction of a Dutch auction has been almost total. The foundation of that opposition is that Port Botany stakeholders believe that it will make TTTs, congestion and port efficiency worse at Port Botany. This strong consensus should not be ignored. Meeting the growth in intermodal movements’ demand projected for Port Botany requires a more considered and phased plan than the introduction of an unproven, untested and unwanted resource allocation system.


Summary The Dutch auction recommendation is analogous to major public infrastructure sales or changes which, once consummated, cannot be reversed. If a Dutch auction is introduced and creates vehicle booking disruption and major additional supply chain costs and congestion, it will be very difficult to change to another system without creating a major disruption at Port Botany. Once the vehicle booking system eggs have been scrambled, it will be very difficult and costly to unscramble them. The market surveys and the disadvantages identified for the Dutch auction demonstrate that this VBS solution has limited prospects for successful introduction in the market place. The alternatives suggested warrant close consideration and detailed exposition. The Road Landside Task Force is an appropriate body to manage this process. In ATANSW/CLAG’s view it is important to be deliberate and create a consensus before any new system is introduced. The ACS Cargo Management Re-Engineering (CMR) process was introduced unilaterally by the Australian Customs Service and was an unmitigated disaster. Customs is still settling claims from eight hundred companies for damages two years after the system was introduced. Even now the CMR is regarded as only marginally better than the 1967 system it replaced. If CMR had been introduced in NSW first it is likely that the state would have lost a considerable proportion of its imports trade to other states. The financial cost of the failed system and consequential disruption was probably of the order of a billion dollars. Customs had been preparing for CMR since 1991. The Trade Modernisation Act which was the legislative vehicle for CMR was passed in 2001. It took four years for the legislation to be implemented and Customs had to go back to Parliament for an extension of time three times. Legislation lapses if it does not receive Royal Assent and is implemented within twelve months. The Minister refused to go back a fourth time. The CMR technology package was tendered originally for $40 million. It eventually cost Customs $270 million. This amount does not include the very substantially consultancy costs incurred by the new CEO of Customs to determine what went wrong in Custom’s processes. Where is the technology package for the introduction of a Dutch auction? What is the likely tender price? Who will pay for this and manage the process? Who has previously written a technical specification for a Dutch auction of VBS time slots for a cross border application?


3.2: Other VBS Options The Dutch Auction Without Interruptible Slots One alternative could be to make all slots subject to the Dutch auction. This would eliminate the two queues effect (which effectively brings back the random rank with its massive congestion). The problems created by this option (and by the Guaranteed slot option) is that a failure to obtain auctioned slots would effectively mean that that unsuccessful carriers could not pick up containers that they had committed to deliver to a client. The carrier would have no avenues of access to Port Botany. Obviously this would create a bidding distortion as the auctions proceeded and the carrier who had no slots was forced to bid and pay for any remaining slots to meet their customer demand. The system education process and technology changes necessary at the small end of the market for either Dutch auction alternative would have a radical effect on the businesses involved. Many carriers do not use the online VBS. They make telephone bookings or queue in the random rank. They do not use electronic banking. Preference for Large Carriers There are over three hundred carriers registered with the stevedores at Port Botany. A preference system already exists which is based on either charging a subscription of $30,000 a year for early access to the VBS (DP World) or making an ad hoc decision about who the large carriers are and giving them early access to the system (Patrick). The philosophy of preferring large customers is tried and tested. An ad hoc approach to preference is not generally employed in other markets. Generally, preferential customer systems are linked directly to quantities of a good or service supplied over a substantial time period. It is axiomatic that the larger the container carrier the more likely they are to contribute to Port Botany efficiency and reduce congestion. They have more trucks, more container yards, more forklifts and cranes and more containers to receive from or deliver to Port Botany. This asset base means that they have more programming options and more opportunities for two way running and linking slots. They also have greater scale volumes of truck movements to justify the introduction of night and weekend slots (even though this may not mean that they are break even for out of normal working hour movements).They will be more likely to consistently achieve more container movements from two way truck movements. Finally, legislative issues such as load limitations, chain of responsibility, Occupational Health and Safety are more likely to be entrenched in the internal systems of larger carriers. They tend to work for larger importer clients who require formal evidence of legislative compliance and are conscious of their own responsibilities under existing legislation.


There are a number of demand based ways of structuring a VBS. The detail needs to be worked out after a Demand based VBS process is accepted as part of the future solution at Port Botany. This proposal may be construed to be a barrier for entry. Size, operational capacity and the financial base of a company are barriers to entry for most industries. It is becoming increasingly prevalent on a global basis for major companies to require logistics solutions tenders that may involve hundreds of millions of dollars of business. Only very large companies or alliances of large companies have the capacity to tender for these projects. There is also an obvious need to cater for a significant part of the import industry that involves small business. Further research needs to be done to identify their contribution to the intermodal task at Port Botany and their flexibility. The Australian Customs Service can provide a break up by annual container movements of the top three or four thousand importers. There is no need to supply names of entities. What should be explored for the small and medium sized part of the container market are their willingness and the inducements needed for them to provide staff for night or weekend receipt of containers. A company receiving fifty containers a year may be prepared to provide warehouse staff one night a week if they have some certainty about the time of delivery. The PierPass Model This option involves a major slot pricing structure differential. It is directed at encouraging carriers and their clients to move into night and weekend work. The fundamental disincentive for carriers is that their costs for night and weekend shifts are greater than their revenues. Appendix 3 shows clearly that this is the case. Present attempts to move time slot take ups into out of hours and weekends are competing directly with a simple profit motive. Companies who operate night shifts and on weekends stop because they cant break even. They will only work at those times if there have been previous delays that create an even greater cost penalty. The revenue obtained from a levy in peak periods should, in the interests of greater port efficiency and reduced congestion, be used to encourage out of normal business hours running by eliminating the cost penalty that applies to these operations. It is counter productive to divert revenue obtained from measures introduced purely to reduce port congestion and increase port efficiency to purposes other than efficiencies and congestion reduction. It is a misuse of public revenue. It conflicts with the user pays principle of using a charge for a particular activity that may be deleterious to community interests to pay for corrective initiatives. If this principle is not applied then the charge is arguably a tax or excise. The amount of any levy should not be arbitrary. It should be related to the costs per time slot incurred in out of hours work by carriers at the Port terminals. Work needs to be done to develop a pricing model and to determine the timeslots that would be influenced by the levy/subsidy.


Funding Night and Weekend Slots The present levy approach has focused on the strategy of forcing greater use of night slots and weekend slots by penalizing the carriers and, through them, the importers. The stevedores, the Sydney Ports Corporation and the shipping companies are beneficiaries of the present suggested approach. If the stevedores and the shipping companies man up 24/7 to focus on ship container discharge and loading then they are forcing the rest of the supply chain to accept periods of limited stevedoring service on the landside. This creates costs for the rest of the cross border supply chain. If the shipping companies want to obtain 24/7 service then the stevedores should be using a Full Cost and Margin Recovery model to price for that service. It should not include imposing a cost on carriers and importers that allows the stevedores to factor in a level of landside services to gain a disproportionate margin from landside increments out of hours that have not been specifically costed into the transaction price established between the stevedores and the shipping companies. In essence if it is in the interest of the stevedores to man up and provide certain levels of service and lift assets out of normal working hours then they should subsidise the costs of carriers that enable them to achieve profits based on variable, marginal costs. Otherwise they are appropriating additional profit through their misuse of market power. Appendix 2 provides a matrix of the various VBS options together with their advantages and disadvantages.


3.3: A Port Botany Landside Task Force Introduction The most obvious conclusion arising from the IPART Draft Report is that much of the detail necessary to meet, concretely and factually, the NSW Government’s Terms of Reference has not been included in the Draft Report. That approach is not acceptable. Much of the information considered to date by IPART has not gone to the fundamental issues raised by the Terms of Reference. Errors of perception have occurred which are detailed in Section 5. The inquiry process has followed a path where different stakeholders have presented their agenda rather than contributed to a solution which represents a consensus of the views of all stakeholders at Port Botany. What has been extremely beneficial during the IPART review is the beginning of a sensible dialogue between the service providers at the port interface, the stevedores and the carriers. The key to reforming Port Botany’s links with inland transport is to establish a collaborative process which will, over the next few years, ensure that both short and long term initiatives are in place to achieve the fundamental goals of meeting intermodal growth, landside efficiency and reducing congestion. To achieve this goal it is necessary to create a Port Botany Road Landside Task Force. Composition of the Port Botany Road Landside Task Force The Task Force should comprise three members of senior operational management in the stevedoring businesses and three representatives of the container carriers chaired by an independent party with a casting vote. We acknowledge that there are other stakeholders at Port Botany but they are one step removed from the critical interface of intermodal container movement. Train operators are not so removed but IPART has already proposed that they should have a Task Force. This perspective may be challenged by various authorities and other service providers already participating in committees convened to discuss port related activities. We are not denying the significance of these forums. They are appropriate for issues of compliance and cargo facilitation. These issues should not be intermingled with landside terminal movement efficiency as this has, in the past, diluted focus on the landside interface. The stevedores’ business is entirely concerned with intermodal movements from ships to trains and trucks. The carriers’ business is entirely concerned with intermodal movement from the stevedores’ terminals to trains and trucks. Those movements are the entire, determining variable for achievement of Port efficiency. The efficiency of the landside movement from or to ships has already been achieved and the direct interface between the shipping companies and the stevedores has been engrossed in confidential contracts. No other Port stakeholder has been permitted to intervene in those arrangements.


Congestion is generally a direct result of Port intermodal inefficiency. Some congestion at the Port will always occur. Uncontrollable factors include weather and systems failures. The task is to minimise controllable congestion with day to day measures and an overarching strategy that is founded in landside movement efficiency. ATANSW/CLAG believes that congestion reduction is a simple consequence of landside efficiency. Our assumption is that the sea/stevedoring relationship already maximises seaside intermodal efficiency. Functions of the Task Force

The mission of the Task Force is found in the IPART Terms of Reference. This mission is to reduce congestion by maximizing port intermodal movement efficiency.

The functions that need to be performed to achieve this mission include:

� The creation of a joint resource of knowledge regarding other port strategies to manage port intermodal efficiency in the face of rapid growth in intermodal functions;

� Monitoring stevedores asset investment and workforce growth necessary to cope with container growth over the next seventeen years to 2025;

� Creating a Business Plan for intermodal movements that includes the volume take up by a third stevedore and the arrival and departure of larger container vessels. That Plan should have regard to environmental, safety and residential issues. Reducing congestion will create major external benefits in relation to these matters;

� Monitoring VBS data to ensure that the distribution of slots has been equitable and has followed agreed principles designed to minimise congestion by maximizing landside movement efficiency;

� Jointly developing solutions for day to day ebbs and flows in container movements and measuring terminal capacity including seasonal factors;

� Developing a joint strategy for Port efficiency management as container volumes increase;

� Establishing Key Performance Indicators for intermodal movements and Port Dwell times;

� Establishing Port Botany user standards and ensuring that these include the use of appropriate communication and measurement technology;

� Benchmarking Port Botany’s landside performance and cost structure (including storage, days of free availability and Late/no arrival charges by the stevedores) against other Ports;

� Initiating and managing the construction of a Port Botany logistics flow blueprint and develop a technology based real-time monitoring process to optimize truck efficiency and minimise truck movements within the port precinct and other intermodal sites directly servicing the port.

� Reporting to the Minister for Ports and Waterways on the progress of Port Botany’s intermodal efficiency and congestion reduction goals.


3.4: Days of Free Availability and Container Dwell Times Benchmarking Overseas Ports All global container ports offer a number of days of free availability before they impose storage charges on containers remaining at the port for a period in excess of the free time. ATA NSW/CLAG has, over the past three years, undertaken some internet research of Port sites to gain an appreciation of other major port practices. The Draft Report did not include any benchmarking analysis. The view was that there was little value in benchmarking because “all ports are different”. It could equally be said that “all factories are different”. Container ports may have different geographic features and use different crane, straddle, Rubber Tyred Gantry configurations but they are all producing an identical service, i.e., the intermodal movement of containers to and from ships to and from trucks and trains. Best global practice for the number of TEUs per hour moved to or from shipside to terminal floor was a major justification for the waterfront changes that occurred in 1998. Information on days of availability and the treatment of weekends and public holidays is freely available on port websites together with storage rates for container stays beyond the period of free availability. In 2005-6 the ACCC Container Monitoring Report calculated that the stevedores received $37 million in storage fees. In 2006-7 the fee amount was $31 million dollars. Both the quantum and the level of storage charges need to be reviewed within the context of the public policy principle that charges should be based on cost plus a reasonable return on assets employed. ATANSW/CLAG’s view is that storage profitability has directly impacted upon the stevedores’ mutual movement to increasingly restrict days of free availability. The IPART analysis on this issue focused on their view that increasing days of availability actually increased TTT, decreased port efficiency and increased congestion. This perspective directly conflicts with major overseas practice. It is also counterintuitive as it would seem that an intermodal process which involved the arrival of 300 containers a day at Port Botany for five days excluding public holidays should be more efficient in intermodal movements than the arrival of 500 trucks a day for three days including Saturdays and public holidays.


Errors in Assumptions for the Draft Report Analysis IPART’s analysis was based upon two core assumptions. These were that:

• Port Botany terminal space was stretched at a level of 7500 TEUs a day and experienced difficulty beyond 5400 TEUs a day; and

• The space issue could be solved but only by increasing terminal container density (i.e. stacking) beyond two high.

On the basis of these assumptions some self fulfilling conclusions were reached and illustrated with a scatter diagram that showed in no case would a TTT for a container moved in a five day free time assumption be faster than a TTT for a three day scenario. This is obviously not true. More importantly the two assumptions made are factually wrong. Total terminal capacity exceeds 20,000 TEUs based on present container densities used by the stevedores. When regard is had to block stacking of empty container, containers for export and containers block stacked for movement on and off trains the capacity of the terminals is increased even more substantially. Our view is that much of the stevedores’ revenue from storage is achieved without an actual cost of any substance. Evidence on the location of containers within the DP World terminal was published for some time. It showed that containers on storage had seldom moved from their original discharge position. Also, it is possible to calculate an implicit cost to the stevedores for the use of space at their terminal. Lease payments and other property related overheads would need to be known. The real significance of an implied charge is problematic when the space would otherwise be an idle resource. Finally, containers do not arrive and leave the terminal in equal daily aggregates. There is obviously a bias towards obtaining containers on the first day of availability. That is a major costing issue for large importers who measure their supply chains and their subsequent inventory requirements in days. The IPART analysis relied upon a theoretical model which has little relevance for the actual circumstances at Port Botany and no rationalisation of differing overseas days of availability decisions. The underlying driver on this issue for the stevedores has been their commitment to the concept of container dwell times as the predominant measure of terminal efficiency. ATANSW/CLAG consider that dwell times are only significant if there is evidence that the terminals are at or possibly approaching optimum capacity utilisation at a container density standard which is also based on a factual measure of the costs of additional lifts times the number of lifts that occur in a period. The stevedores disregard for housekeeping the container stock to minimise the number of container lifts required to service the roadside intermodal movement task each day conflicts with the proposal that dwell times are the Key Performance Indicator at the terminals. If space is not fully utilised and container lifts are seldom required for stored containers it is difficult to understand why dwell times have such significance.


Summary ATANSW/CLAG considers that the Draft Report has neither adequately nor correctly addressed the question of whether increasing days of availability would increase Port Botany efficiency and consequently, reduce congestion. The stevedores’ profit from storage is substantial when regard is had to the limited costs that are incurred. The number of days of free availability has an obvious impact on storage revenue. There has been no detail provided to support the claim that most revenue is obtained from long term storage. If space is the determinant and revenue is irrelevant it would be productive if the stevedores advised owners that their containers are on long term storage or that they move them from the terminal to Customs Approved Premises. This issue is complex and deserves more than cursory economic analysis based on incorrect assumptions. We believe that the State Government should commission a modelling project that would be provided with objective data upon which to base any ultimate position. The NSW Government expects to generate $50 billion dollars a year and 16,000 jobs from the expansion of Port Botany. It should be prepared to invest in the development of a Business Plan that incorporates state of the art analysis and benchmarking on the vexed question of the optimal number of days of free availability. Supervision of this task could be undertaken by the Road Landside Task Force in collaboration with the Sydney Ports Corporation. The analysis should include the seasonality of container inflows and outflows. There is only one reason of substance to restrict days of availability and that is the terminal capacity based on optimal container densities. When there are substantial peaks and troughs days of availability should vary to maximise port efficiency and minimise congestion in the Port Botany precinct and its surrounds.


Section 4: Major Arguments for ATANSW/CLAG Recommendations 4.1: Technology and Accreditation Standards Introduction Container carriers operating at Port Botany constitute a good example of perfect competition. There are over three hundred carriers operating at the port and there is no dominant carrier or small group of carriers. This environment generates substantial price and service based competition. It also ensures that small and medium sized importers and exporters have the opportunity to arrange exports and imports with a carrier that is keen to undertake their business. The fragmentation of the container carrier function creates a requirement for Government to ensure that standards and protocols apply which meet the provisions of NSW and Federal legislation. Substantial security requirements and protocols are enforced but other legislation and standards are not. The current transponder technology used is three generations old. Accreditation Standards The purpose of Accreditation Standards are to make sure that road transport container carriers operate to a minimum standard of compliance that is adequate to ensure that their vehicles are roadworthy, their operations are safe and that they meet all statutory requirements. Road transport container carriers are required to be licensed to operate in the port precinct (on roadways operated and controlled by the SPC). Licensing is by way of container carriers meeting the accreditation standards set out below. Accreditation Standards Compliance Level Audit Period Maintenance Standards NHVAS, Truck Safe or equivalent

audited maintenance system.

Annual

Depot Facilities Off street parking for vehicles and trailers.

Annual

OH&S Company to have OH&S Policy. Company to provide OH&S training to employees. Company to operate and maintain a fatigue management program for driving hours.

Annual

Statutory Compliance Complete list of vehicles and trailers. List of current vehicle and trailer registrations. Current insurance policies and CTP for: Vehicles; Trailers; Worker’s compensation; and Public liability.

As necessary to ensure compliance.


Accreditation would be by way of a binding agreement between the carrier and the Sydney Ports Corporation (SPC) to operate in the port precinct controlled by the SPC. Successful accreditation would result in vehicles operated by the carrier in the port precinct to be fitted with current generation Transponder Units. Only vehicles with a valid transponder would operate in the port area. Special arrangements can be made for vehicles that are infrequent port users. Transponders readers (RFID) stations can be located around the port area at container terminals, terminal queuing areas, empty container parks and freight stations to accurately measure waiting times, loading/unloading times and general port area usage by frequency and vehicle type etc. These data can be compiled, analysed, used by the SPC to evaluate port area usage and efficiency and published for wider commercial use. Accreditation and vehicle checks could be carried out by the RTA on behalf of the SPC. A similar licensing scheme operates in the Port Of Vancouver (see Appendix 4). Occupational Heath and Safety and Chain of Responsibility Truck overloading, expired insurance and registration, excessive driving hours and a host of other practices are a factor in container carrying at Port Botany. There is a need to create specific Port Botany operational certification to ensure that carriers meet the Port’s requirements. This is an area where a lot of work is undertaken out of normal hours at locations not normally frequented by private vehicles. It needs to be subject to RTA scrutiny and to standards that meet the present legislative requirements.


4.2: A 24/7 Working Week for Port Botany Introduction This proposal has been put forward by the stevedores as the way to achieve the goals of the Terms of Reference. The Draft Report does not accept that viewpoint. The key problems created by 24/7 are the additional costs, both financial and social, that are created for carriers, the balance of the supply chain and the citizens of Sydney generally. There is no doubt that meeting the challenge of Port Botany growth at the rate and ultimate level envisaged will require longer working hours. There is equally no doubt that it is not necessary to proceed at a precipitate and unmanaged rate with an increase in working hours. The period of port expansion is from now until 2025. We do not have to establish hours of work protocols to meet 2025 today. Particularly with the third terminal coming on line mid way through this period. Costs Appendix 3 provides an analysis of the additional financial costs that are incurred to transit containers during out of normal business hours and weekends. The inescapable outcome of that costing is that any carrier who establishes a night shift is incurring a loss on that activity. Given the number of service providers, competition in the container carrying market is price sensitive. Additional costs for out of hour’s delivery, yard storage and lifts and an additional transport leg are often not recoverable. Clients will move their business to another carrier. Preconditions for 24/7 It is not true to argue that the market should determine who will provide an acceptable service level. The fact is that there are insufficient time slots during the day and this is being exacerbated by the growth of container imports and exports. The task is to find a way to compensate carriers for out of normal hours work rather than rely upon an inefficient lottery which destabilizes the carrier industry by guaranteeing that they will lose money on a part of their business activity. There are compelling and obvious social costs involved in the 24/7 proposal. The growth to 2025 is not the end of the issue. We need to negotiate a reform process that does not create ongoing and long term social problems for those who work at Port Botany and those who live in the vicinity of the Port or along its transport paths. The stevedores’ 24/7 regime does not have the same social implications. Workers in that industry are compensated for night shifts and the pricing structure achieved with shipping companies obviously permits a profitable activity. The port is physically contained, the night work seaside volume is substantial and the port is relatively isolated from residential locations. As Port Botany grows there will be considerable pressure to any response simplistically based on increasing working hours. This increase should only occur when all other operational efficiencies are captured and when it is demonstrable that the stevedores are using efficient levels of manning and appropriate equipment resources to meet the task. It is not good enough to simply push the costs of growth onto the carriers and leave them to try to pass those costs down the cross border supply chain.


Phasing in 24/7 One of the major roles of the Road Landside Task Force should be to consider and recommend to Government progressive measures to achieve increases in working hours at Port Botany for the landside task. This should not be a once off task. It must not be imposed by the stevedores making unilateral decisions about the number of day time slots they will provide. Phasing in a substantial change to working conditions in the cross border supply chain and maximizing the environment for those living near the Port or along its transport paths to meet the imperative of a threefold growth in Port movements is not a trivial or short term matter. One very significant development will be the establishment of a third stevedore at Port Botany in the next five years or so. Presumably that stevedore will undertake approximately one third of the intermodal task at Port Botany. The creation of a 24/7 environment now would mean that the three stevedores would have some spare capacity in the years before 2025, but following the establishment of a full workload by the third stevedore. This would actually create a mismatch of operational hours at Port Botany where the stevedores, having forced the rest of the supply chain into an uneconomic work process, would not be prepared to offer 24/7 service themselves.


4.3: A Port Botany Business Plan to 2025 Every Large Entity has a Plan for Future Growth and Development The present IPART review is, in our view, only the first step in meeting the challenge of Port Botany growth. The NSW Premier has commented that the growth will deliver 16,000 jobs and $50 billion in additional, annual revenue to New South Wales. The usual strategy that corporations and Governments adopt when faced with a task of such financial magnitude and operational complexity with a long time frame is to create a Business Plan. We believe that a recommendation for such a plan is an essential element of IPART’s final report.


Section 5: Other Matters 5.1: Draft Report Misconceptions and Errors Stevedoring Accountability, not Micromanagement IPART’s Approach in its Draft Report has been to eschew any proposals directed at specific stevedoring operational practices. The IPART viewpoint was that there should be no “micromanagement” of stevedore activities at Port Botany. ATANSW/CLAG considers that identifying all contributing elements to inefficiency and consequential congestion at Port Botany and suggesting improvements is not micromanagement. This word is defined as “excessive control” not as imposing reasonable requirements for stevedoring accountability in their investment for and use of public infrastructure. This IPART perspective has created a deficiency in the Draft Report. A considerable amount of information was submitted to IPART regarding stevedoring VBS practices and asset management that was central to any response to the Terms of Reference. There is no consideration of that material evident in the Draft Report. For example, IPART says:

Patrick has invested over $200 million since 2005 in new equipment including five RMGs. It is important to note that Patrick has made this investment on a commercial basis without the need for Government intervention. While DP World has not adopted the same future investment philosophy it is consistent with workable competition for competitors to follow different investment strategies. - Pages 83 and 84

This is the total extent of the IPART analysis of the investment strategies of the stevedores to meet the challenge of a three fold increase in the number of TEUs processed at Port Botany. It is in stark contrast to the annual review of investment undertaken to meet the coal loading volumes for export from Dalrymple Bay. Similarly, IPART says:

The stevedores have devoted sufficient resources to keep containers moving onto and off the wharves fairly quickly. - Page 2

This simple comment is not a sufficient response by IPART in an Inquiry that has cost the NSW Government and the industry millions of dollars. The Terms of Reference created a major opportunity for the NSW Government to obtain a factual and lucid evaluation of what resources and manning was necessary to enable Port Botany to cope with the intermodal movement of 3.9 million TEUs in 2025. IPART has not taken the opportunity to provide this measurement. The draft report does not evaluate the present levels of manning and lift assets. It has not undertaken research necessary to understand what resources are used in ports that have moved from about the present TEU volume level of Port Botany to higher levels and ultimately to the projected level for Port Botany. The comment made by IPART at page 2 is a simple expression of belief, rather than the outcome of a considered and detailed analysis of two separate businesses providing stevedoring services with different resource strategies and different operating protocols. There is not one stevedoring service at Port Botany. ATANSW/CLAG believe that a major failing of the Draft Report is its substitution of unproven resource allocation concepts and their application to container port


operations for the essential detailed and measured evaluation of the present stevedoring resources applied at Port Botany and the extent of additional investment necessary to move to the projected TEU level. The draft report ignores evidence of the daily park up of straddles at Patrick and waiting times imposed upon carriers using night slots. Other information of substance and integrity was submitted to IPART on this issue which has been overlooked. There is a considerable volume of information which is publicly available on the ACCC website as well. The conceptual error underpinning this IPART perspective is the failure to grasp that the stevedoring market at Port Botany is not an open market. The process is an example of market failure. The stevedores have long term leases with the Sydney Ports Corporation and exercise monopoly power in their terminal. The barriers to market entry are absolute at the present time although a third stevedore will enter the market at some future time. The failure of the stevedores to respond to growth by additional manning and capital investment means they are not adequately disciplined by the market. To the extent that they operate in concert on matters such as storage charges, systemic delays and management of the VBS there is no market discipline at all. It is easy to impose market discipline on the downstream cross border service providers. Customs brokers, freight forwarders and carriers could be regarded as operating in a perfectly competitive market. They respond to price changes and exist or disappear on the simple basis of their investment strategy and pricing policy. The central issue of the IPART review is efficiency. Congestion reductions are a direct consequence of increased efficiency. Measures to improve operational efficiency should not be arbitrarily dismissed as micromanagement. The growth of the Port Botany intermodal task and the long term insularity of the stevedores from landside market demands have created an obvious distortion in the stevedores’ capital investment response to market growth and the prospect of even greater growth. Each stevedore has to man up and provide sufficient lifting equipment to meet the seaside demand otherwise shipping companies will impose penalties or, ultimately, go to the alternative stevedore or to other ports. The stevedores have no comparative sanctions forcing them to meet landside stevedoring demand. Excessive storage charges per TEU per day, the ability to push the costs of delay down the supply chain and the opportunity to limit fixed costs for overheads such as plant and equipment and variable labour costs are substantial issues for resolution. They bear directly on the goal of the NSW Government in establishing the IPART review. The Terms of Reference for the review were intended to create a body of knowledge and analysis that would result in a strategy to meet the growth in landside movements projected to occur by 2025. Part of that strategy cannot be to leave it up to the stevedores to maximise their profits by minimizing their capital investment and pushing costs down the cross border supply chain to all participants other than the shipping companies.


This may have been the strategy of the stevedores prior to their sale to DP World and TOLL (now Asciano). It is common for vendors to limit capital investment when they are in selling mode. It is not an appropriate strategy for Port Botany and NSW. The stevedores at Port Botany have long term possession of a major piece of State infrastructure which competes with similar infrastructures in other states. They must be accountable. It is not good enough to be told that Port Melbourne is achieving much higher numbers of day time slots because the stevedores are fully resourcing the landside task. In the case of Port Botany stevedore investment decisions will have a critical impact upon the ability of Port Botany to meet the projected intermodal task. Those decisions are not solely the prerogative of the stevedores who are using a vital piece of public infrastructure. Other Misconceptions and Errors Some of IPART’s functional analysis of Port Botany processes and operations is either not correct or too general. This sub-section discusses this assertion in relation to a number of specific comments in the Draft Report. We believe the IPART perspective underlying the comments leads to conclusions that are contrary to the purpose of the review. In the Draft Report IPART states:

Given the variable nature of the shipside task and the difficulties of forecasting required VBS timeslots on an hourly basis it is not obvious how an independently run VBS would involve any less discretion than the present system. Any independently managed VBS would be dependent on the stevedores for advice regarding the number of available slots and their timing. Otherwise, in IPART’s view, independent management of the VBS would interfere to unacceptable levels with the stevedores’ ability to move containers efficiently. The stevedores have specialized knowledge of the operation and capability of the lifting equipment on the wharves and have commercial incentives to arrange their assets and staff to best move containers off their premises to make way for more containers. Therefore the stevedores are in the best position to decide on the number of VBS slots to be put into the VBS from time to time. An independent operator is simply likely to become the scapegoat that both the stevedores and road transport operators blame for congestion. - Page 66

This viewpoint ignores the fact that VBS in many major ports are operated independently and that Patrick used an independent operator for a number of years. The stevedores only have to tell the VBS operator what slots they can handle in a given hour. The lack of transparency about slots is a major element of the Port Botany problem. The stevedores are just as dependent upon advice from carriers (who are dependent upon advice from Customs brokers) to know when trucks will come to pick up containers that have Customs and Quarantine clearance. If the number of hourly slots is known and the identity of the slot holder is known then this may eliminate a number of practices which have hampered the operational efficiency of Port Botany. The simple answer to IPART’s contention is that the stevedores should, just like other stakeholders, provide their piece of knowledge to the VBS owner and commit their resources to the joint services task for the cross border activity of clearing goods through Customs, intermodal movements and transport to or away from the port by rail or road. They can work out the manning and RTG/straddles they will provide. The Customs brokers and the carriers have been providing their information to the stevedores for years.


Contrary to IPART’s view, stevedoring is not rocket science. It is a simple intermodal movement repeated millions of times a year around Australia. The absence of any housekeeping (which would reduce their own costs) is an indication of the level of sophistication practiced by the stevedores. An independent VBS provider also creates the opportunity for a single Port Botany VBS. The stevedores obviously think that is a good idea. The stevedores don’t forecast time slots required. They dictate how many slots will be available. Their equation includes ship discharges, train movements, block stack runs, the random rank (DP World), container X-Rays (Patrick provides the transport for this function) and other elements such as ad hoc permissions to pick up and deliver specials, forcing transport operators to work night and the longer term goal of rationalising the carrier industry expressed publicly by DP World in its submission to IPART. It is difficult to understand why IPART believes that an independent VBS operator would be less discretionary than the stevedores in the ownership of the VBS and just as likely to be the “scapegoat” for carrier criticism. Firstly an independent operator would not own rail and road transport affiliates. They would not own empty container parks. They would not have substantial interests in the establishment of a whole of supply chain cross border services entity. A great deal of information has been submitted to IPART and is available on the ACCC website on these issues. No argument has been made by IPART to support its assertions. The word “scapegoat” in the Draft Report is unfortunate. It implies an IPART belief that the stevedores are “scapegoats” and that the carriers are seeking scapegoats rather than addressing fundamental inefficiencies in the operation of Port Botany. Inability to Know Ship Arrival Times and the Magnitude of the Landside Task IPART says:

The number and timing of ship arrivals at the port are highly variable and unpredictable. -

With respect, this is arrant nonsense which ignores global shipping practices, modern communication methods and statutory authority requirements. We no longer look for a sail on the horizon. Container shipping schedules are regular and ships and ports have modern communications. Carriers have to advise the stevedores that they will pick up containers in a particular time slot 48 hours in advance. Carriers are advised by Customs Brokers and importers which containers have been cleared for Customs and Quarantine purposes. Clearance is only finalized when the ship arrives. These clearances are fundamental to physical availability of containers regardless of whether the container has been discharged from the ship. Customs insists upon constantly updated information from shipping companies on ship arrivals and the supply of a manifest of goods carried on the ship prior to its arrival. Customs selects containers for Container X-Ray just prior to the ships arrival. Earlier selection would create a significant security risk.


Basically, all port stakeholders know in advance when a ship will arrive and what containers it is carrying. There may be adjustments to arrival dates for one reason or another but this is and has always been part of the process There are occasional container arrival surprises and these may account for some expensive port storage and delays created by Customs physical examination. No one appreciates the presence of a container at a port without documentation describing its contents. They are de minimis (less than 1% of containers). There are no surprise ship arrivals. Arrival blowouts are constantly monitored and communicated to the supply chain stakeholders and features and different demand levels but the operational process is homogeneous. Stevedores perform a simple intermodal task. They move containers from ships to trains and trucks. It is presumptuous to assume that we can learn nothing from benchmarking the Port Botany operational process against world best practice. There was no suggestion in 1998 that global benchmarking was meaningless when the then Managing Director of Patrick said that at 18 lifts an hour Australia was a long way behind World Best Practice of 28 lifts an hour. There are a number of processes and protocols at container ports where we should be learning from World Best Practice. The Draft Report is an insular document that is more concerned about resource allocation theory than about operational issues at Port Botany. If all ports are different why are the stevedores considered by IPART as one service. Surely all terminals are different too.

Errors Regarding Terminal Capacity

The draft report assumes that ideal container densities at the terminals are stacking two high and that the stevedores have operational difficulties if the TEU volume exceeds 5,500. The concepts of container density and of inventory levels increasing by 50% to a point where container density has to be increased are the fundamental assumptions and arguments used to contradict the experience of major ports all over the world. They generally offer much more liberal days of free availability and exclude weekends and holidays.

Our understanding is that the stockholding capacity of the port is 20,000 TEUs based on a container density of three to four for DP World and two for Patrick. These numbers are calculated from the terminal footprints nominated on their websites. This is a simple measurement that is not looking at optimal stevedoring behaviour or even measuring the task properly. It is still much larger than the IPART number of 5500 TEUs where IPART says the terminals are strained .The stevedores must be able to operate efficiently at more than 25% terminal capacity utilisation. Additionally, Port Botany does not receive 1.6 million containers. It receives 1.6 million TEUs. The mix of 20s and 40s is publicly available. The latter are increasing. The container arrivals and departures at the port are probably around the million mark. Container numbers are important for the measurement of lift costs, as it is not twice as costly to lift a 40’ as it is to lift a 20’.


The second major error in the analysis is to assume that two high is the most efficient density. The third major error is the assumption that the stevedores stack two high for optimal operational efficiency. DP World stacks three or four high because it uses lifting equipment that is able to reach that high. Patrick stacks two high because it uses straddles. This issue is discussed in detail elsewhere in this analysis. Further additions to terminal container capacity are created by:

• Empty container run ins are block stacked, often five high. • Block stacks for the stevedores purposes occur virtually every day. • Trains are loaded from block stacked containers. • DP World says they do 32 block stack moves for every 100 VBS slots (and 12

randoms). Stack runs are also block stacked. All of these elements have to be included in any analysis of terminal capacity. The concepts of container density and of inventory levels increasing by 50% are the fundamental assumptions and arguments used to contradict the experience of major ports all over the world. They generally offer much more liberal days of free availability and exclude weekends and holidays. ATANSW/CLAG believes the reduction in days of availability and the treatment of public holidays as available days is driven by storage revenue and limiting investment in lifting assets. Benchmarking is not Valid Because ‘All Ports are Different’ At IPART’s presentation of the Draft Report to stakeholders, the Director of Operations, DP World asked project staff if any international benchmarking had been undertaken. The question was dismissed as “not being relevant because all ports are different”. This comment had previously been made by IPART staff to ATANSW/CLAG representatives. Figure 3.1 at of the Draft Report shows the daily shipside task at Port Botany. This data was provided by Sydney Ports Corporation. We believe that this information should be made publicly available by SPC. It has no commercial in confidence status. Analysis beyond that undertaken by IPART would be of considerable value in achieving the objectives of the Government. At page 34 the Report states that for 54 days of 2006/07 the daily task exceeded 5500 TEUs. It does not state it but the obvious corollary is that for 311 days the daily task was generally between 3400 and 5500 TEUs with a mean of 4450. The maximum number was less than 7500 TEUs.


At Appendix H and Table H.1 (Page193) IPART assumes that containers will be removed at a constant rate over the days of free availability. This assumption is untrue and leads (in combination with other mistaken assumptions regarding the number of container rehandles, the capacity of the terminals and no measurement of the actual cost of a rehandle) to the false conclusion that additional days of free availability will actually create port inefficiency measured on the basis of a single criterion-turn around time. That criterion obviously ignores waiting time outside the terminals, waiting for documents receipt and delivery and waiting time within the terminal for Quarantine inspection after a container has been placed on a truck. Containers are moved at a daily rate derived from the stevedores manning and lift provisions and the time constraint/size of the seaside task. Most ships have contractual arrangements requiring immediate container discharge upon arrival. They may continue discharging into a second day. The reason for this is to maximise the speed of the ships service and reduce costs. For the same reasons importers generally want containers picked up from the port on the first day of free availability or immediately after a weekend or public holiday. Appropriate statistical analysis would demonstrate the size of the port task and residual stock levels on a daily basis. This would then allow correct modelling and analysis of the container inventory stock held at the terminals and the consequential container density. There is a substantial and real argument for increasing the days of free availability. The present IPART analysis has completely ignored overseas free availability best practice and does not truly reflect container densities at Port Botany. This sort of global port information should be held by Sydney Ports Corporation. The scatter diagram at Figure H.3 (page 194) shows what IPART’s assumptions must deliver. There is not one five day turn around time below the three day turn around times shown on the graph. This is patently ludicrous and indicates that three day turn around times simply had a quantum added to them to demonstrate five day turn around times. A computer generated diagram isn’t necessary. The result follows as an inevitable outcome of the assumptions. There is no attempt by IPART to examine a solution that divides the year into High, Medium and Low inflow seasons that would enable different responses from the stevedores and a different number of days of free availability. The important point about terminal stock holding levels is they should not be permitted to rise to a level that strains stevedore operational capacity (which we say has not been measured properly in the Report). All stakeholders at Port Botany are aware of the seasonality of full container imports. There should be a resourcing response that meets that seasonality. This is difficult for major items of equipment, but the stevedores could allow for greater flexibility by allocating different manning resources over the year. There is no analysis of manning levels in the night or discussion of the possibility of using trains at night when passenger pathways are more infrequently used. Port Botany is a major public infrastructure asset belonging to the people of NSW. It is not an asset of the stevedores. They are only a link in the cross border supply chain. If they will not invest to ensure the viability of the port, then they should not be there. There are many other stevedores that will make such an investment.


5.2: Draft Report Omissions Days of Availability, Capacity Constraints and Container Density A core element of the IPART argument is the view that capacity constraints at Port Botany occur at 5500 TEUs. Yet the footprint of the terminals based upon a container density of two high is not the case even at the present time. That results in a terminal capacity of 20,000 + TEUs. The maximum daily number of TEUs in SPC’s data supplied to IPART report was 7500 TEUs. The IPART draft report does not provide a calculation of existing capacity or the capacity that does exist if simple, sensible housekeeping is undertaken to block stack or stack higher rail containers, empty containers and export containers. DP World already stacks three and four high because its lifting equipment can handle this height. Why should capacity at the port be constrained by the stevedore’s investment in particular lifting equipment? This analysis would have benefited substantially from an examination of major port practice overseas. Charges and Penalties Storage charges and penalties for late arrival have been detailed previously in submissions by ATANSW and CLAG. Substantial submissions were also made to the ACCC in regard to CLAG’s ACCC collective bargaining application. The draft report does not consider whether such charges are appropriate. It does not have regard to the general public policy principle for charges for services at public infrastructure. Monopolies should be on a user pays basis with an appropriate margin for the operators return on assets employed. We believe that the revenue obtained in regard to storage and charges by the stevedores results in a distortion of operational efficiency at Port Botany. The stevedores have an incentive to delay the delivery of containers or to make time slots for their delivery difficult to obtain in normal working hours. Penalties for late shows and wrong zones are determined by the stevedores. Again, this is achieved without any regard for the actual costs created by the no show or wrong zone. As stated elsewhere in this submission, storage charges nationally were more than $30 million in 2006-7 and $37 million in 2005-6. No Costing Model or Dutch Auction Detail IPART has made no effort to cost the Dutch auction or to forecast what the likely slot auction revenue achieved will be. It does not indicate what the stevedores will be paid to create an incentive for them to guarantee slots. It does not provide an effective standard for the guarantee. Existing TTTs are not an appropriate measure. The introduction of a Dutch auction will change the industry, the cross border supply chain and the flow of imports and exports. The extent of the change and the level of commercial risk will depend on how many slots are auctioned, the price of the slots and the total amount of capital needed by various parties to meet the new disbursements and operating costs.


The amount paid for slots could be as high as $150 in peak periods (based on the cost of an extra transport leg, storage at the carrier’s premises and delivery at a specific time to an importer). It may be nothing at 2.00am on a Sunday morning. Would guaranteed slots be auctioned for that time? The total number of guaranteed slots could range from 500 a day to 2500 a day. The stevedores could decide to make all day time slots guaranteed. This would ensure that there was only one queue at the port during normal business hours. The effect on business capital would be significant. At 500 slots a day costing $100 a slot the revenue would be $17.5 million per annum. The cash flow impact on some businesses may be ruinous and they would be disadvantaged in the market place if they only work nights. The additional administrative and credit costs would either be passed on (cascading to a total expense of probably more than $25 million). Who would manage and collect the money? How would bad debts be recovered? There would be a large number of small bad debts. How will the State’s small debts recovery process handle an influx of claims? Gaming opportunities to change the industry through manipulation of the Dutch auction system would be significant. The introduction of Quota auctions for Textiles, Clothing and Footwear imports in the mid eighties created a number of business opportunities for quota traders. Why couldn’t external parties attempt to capture all day time slots? How do carriers who receive no day time slots organize their manning for a night shift with drivers that are currently engaged for day work, or vice-versa? Whilst labour immobility is an accepted economic concept the road transport industry operates on a 24/7 basis in many markets that are driven by demand not supply. These are organised arrangements where truck drivers are not assumed to be perfectly mobile over day to day varying shifts. Much more analysis on this issue is in progress. The matter has been grossly oversimplified in the draft report. It must not be if the recommendation for a Dutch auction continues in the final report. It is not right to impose a process on the industry without having regard to the consequences or costs for the industry and the state.


5.3: The Survey ATANSW/CLAG has undertaken three surveys to assist in gauging supply chain reactions to the proposal for a Dutch auction which is the centrepiece of the Draft Report. These surveys were directed at container carriers (Survey 1), Customs brokers and freight forwarders (Survey 2) and importers (Survey 3). It is intended to continue to obtain survey responses beyond the final date for submissions on the Draft Report to IPART. To date, sampled companies manage approximately 140,000 TEUs and employ more than 1000 people. This is a sample of more than 10 per cent of the landside task. Generally a sample of this size would be regarded as providing a high level of statistical confidence. The survey responses demonstrate that there is absolutely no industry support for the concept of a Dutch auction. ATANSW/CLAG considers that it is fatal to the objectives of the Terms of Reference to introduce a time slot allocation system that is not accepted by the majority of cross border supply chain service providers and their principals, the importers and exporters.


Section 6: Conclusion The NSW Government has, through its decisive action, created the opportunity to introduce reforms of the landside interface at Port Botany. These reforms will reduce costs and congestion. They will restore the balance of market power between the cross border supply chain stakeholders. They will enable the NSW Government to achieve its goal of creating 16,000 new jobs and an additional $50 billion in annual revenue from imports and exports for NSW. The outcome is not about making anyone a “scapegoat”. Present work practices and strategies cannot meet the existing level of demand for landside services at Port Botany. The growth forecasts until 2025 demand that measures be taken to implement reforms that will give the Port the ability to meet the land transport task that is rushing to meet NSW. There are obvious opportunities to implement changes but they will not be achieved quickly. The fundamental task now for the NSW Government assisted by the IPART review, is to establish a blueprint for reform and a mechanism for genuine collaboration amongst the landside stakeholders to translate the blue print into reality. The IPART review has achieved two fundamental goals. It has made everyone aware of the magnitude of the task facing the stakeholders at Port Botany. It has ended the Cold War between the stevedores and the carriers. We now face a long period of close planning and cooperation to meet Port Botany’s growth. There is no other way.


Appendix 1: Summary of Survey Results Number of companies participating to date of submission: 17 Number of Containers Annually: 100,000 (about 140,000 TEUs) Number of Employees: 1000 plus In favour of Dutch auction: None Against Dutch auction: 17 Transiting Containers Less than 30 per cent 5 30 – 50 % 2 More than 50 % 9 Out of Hours Deliveries None 2 Some 14 Prepared to bid for Slots Yes 1 No 16

Dutch Auction 1

More than present costs Yes 16 No 0 More Time Yes 16 No 0 More operational difficulty Yes 16 No 0 Better than existing VBS No 16 0 Improve TTT No 16 Yes 0 Make TTT worse2 Yes 14 No 0

Weighted Scores Alternative VBS • 3 points first preference, 2 second preference, 1 third preference

Keep Present System: 20

• Ranked first by two respondents, ranked last by fourteen respondents Keep Present System but publish number of slots each hour and recipients: 33

• This alternative was ranked first by one respondent and ranked second by fifteen respondents

Take VBS away from the stevedores, create transparency and either SPC or independent ownership: 42

1 One respondent did not answer this question.

2 Two respondents did not fill in this box.


• This alternative was ranked first by 13 of the sixteen respondents, second by one respondent and last by two respondents

Port Botany Outcome of Dutch Auction All respondents said the Dutch auction would cost more than present costs, take more time and be more difficult to operate. They all said that it would not be better than the present system and would not improve truck turnaround times. Fourteen said it would make truck turnaround times worse. As noted, two respondents didn’t mark the last box for this question.


Appendix 2: VBS Options: Advantages and Disadvantages Dutch Option with Interruptible Slots Advantages Disadvantages Allocates slots on the basis of market demand measured by bid amount. Smoothes out demand over 24/7 period. Creates basis for requiring stevedores to meet guaranteed turn around times Opens access to the VBS to anyone who wishes to trade or use time slots

Recreates the random rank with its congestion Creates two ranks at the terminals System has not been used at any port in the world Provides additional revenue to the stevedores for simply doing what they should do. Costs of operating and participating in the Dutch Auction. Creates a new time slot market that is not restricted to users of the system. This will increase uncertainty. It may increase the cost of slots and the return to the stevedores if they receive a percentage. Gives part of the user charge to parties that have no involvement in road transport No link between cost of slots and costs of auction system Direct imposition of additional training, technology, slot acquisition, administration and supply partner, communication on all businesses. This is particularly onerous at the micro end of the industry. Pushes carriers to 24/7 before Port Botany intermodal throughput warrants the change. Involves importers in supply chain processes that they have deliberately outsourced in the last two decades. Major Port disruption during protracted period of system take up refusal by users (note survey results) Auction imposed by Government instead


Advantages Disadvantages of created by market demand. Disadvantages smaller carriers and may force their exit from the industry. Increases the proportion of additional transport legs, associated lifts and yard storage. Increases the likelihood that trailers will be left in public roads. Creates the opportunity for speculation in time slots Creates the opportunity for strategic non-stakeholder action to disrupt the cross border services industry and the supply chain to create takeover opportunities

Dutch Auction Without Interruptible Slots Advantages Disadvantages Does not have the disadvantages associated with creation of interruptible slots and the consequential congestion resulting from the recreation of a random rank. The random rank would actually be extended under the Dutch Auction guaranteed slot system because it would operate at both instead of only one terminal and more slots would be dealt with as interruptible. Transparency. Slots provided in each time slot are known and recipients are known Allows operation of single VBS at Port Botany with common costs and operational protocols Removes opportunity for discretional preference for affiliates and service allies. System is known and flaws are known. Less market disruption from simply modifying known system. No training and administrative and programming disruption.

Doesn’t solve the problem of gradually introducing 24/7 Continues high level of competition for prime time slots. No automatic allocation through slot price mechanism to those who want the slots most. Micromanages carriers, brokers and importers forcing them to all act in the operation of a Dutch Auction. Imposes specific technology and administrative standards on small and micro- businesses. Significantly increases their overheads and barriers to entry. Would make it impossible for stevedores to avoid penalties. All slots would be “first class” Provides no new differential between high demand and low demand in resource allocation. Simply continues a first come first served distribution mechanism.


Advantages Disadvantages Probably eliminates all of the disadvantages nominated for the Dutch auction alternatives. Restores balance of power in the cross border supply chain Existing System with Stevedore Ownership but Slot Allocation Transparency and Time Slot Price Differential Advantages Disadvantages As for the previous model but will shift some part of container movements out of normal working hours Excess slot payments could be used to reduce or eliminate cost penalties for night and weekend work which currently result in carrier’ financial loss on out of hours work.

Revenue would probably accrue to those who have a location or affiliate relationship with the stevedores Increases extra legs and out of hours congestion in the suburbs and pathways to carrier depots. Existing System still owned by the stevedores but with much greater transparency and accountability for slot input.

Independent Ownership, Transparency and no Time Slot Price Differential Advantages Disadvantages Removes major problems that formed the basis of the ACCC complaint. Stops hidden preferences and stevedore orchestration of landside volumes and queuing in their own interests. Continuity of existing system with embellishments means that there would be little extraneous disruption from new system.

Over time other ways of exploiting the system and advantaging own agenda or affiliates are likely to occur. Difficult to prevent the system from being corrupted over time if it is owned by a major service supplier.


APPENDIX 3: Costing the Carrier Night Shift

Table 1.

Income for 20' container 40 to 49.9 kms from port. Process Minutes Hours Hourly Rate Container Rate

Travel time to port 60 1

Waiting time at port 60 1

Travel time to customer 45 0.75

Unloading time at customer 60 1

Travel time to empty park 45 0.75

Unloading time at empty park 30 0.5

300 5 $85.00 $425.00

Table 2.

Cost for transporting 2 X 20’ containers from Port Botany to carrier’s depot by B Double. Process Minutes Hours Hourly Rate Container Cost

Travel time to port 50 0.84

Waiting time at port 45 0.75

Travel time to depot 50 0.84

Unload containers at depot 20 0.32

Cost per 2 containers 165 2.75 $110.00 $302.50

Table 3.

Cost of Container Handling in carrier’s depot.

Process (for 2 containers) Number Rate No of Lifts Handling Cost

Lift off/Lift on 2 30 2 $120.00

Storage 2 7.5 2 $30.00

Total FCL handling cost $150.00

Empty handling cost 2 $10.00 $20.00

Total container handling $170.00

Table 4.

Cost of delivery for 2 X 20’ from carrier’s depot to customers, one container at a time. Process per container Minutes Hours Hourly Rate Container Cost

Load at carrier’s depot 10 0.17

Travel to customers 20 0.33

Unload at customers 60 1

Travel to depot 20 0.33

110 1.83 $85.00 $155.55

Total for 2 containers $311.10


Table 5.

Returning empties.

Process Minutes Hours Hourly Rate Container Cost

Load up 2nd empty 10 0.17

Travel to empty park 60 1

Unload at empty park 30 0.5

Cost per 2 containers 100 1.67 $85.00 $141.95

Total cost for 2 X 20’ containers $925.55

Total income for 2X 20’ containers $850.00

(based on a market rate of $425.00)

Net Loss on transactions $75.55 $37.78 per container


APPENDIX 4: Sample Licence Agreement: Carriers and Port Vancouver

LICENCE AGREEMENT

BETWEEN: VANCOUVER PORT AUTHORITY, a corporation established pursuant to the Canada Marine Act, with a place of business at 100 The Pointe, 999 Canada Place, Vancouver, B.C., V6C 3T4

and FRASER RIVER PORT AUTHORITY, a corporation established pursuant to the Canada Marine Act, with a place of business at 500 – 713 Columbia Street, New Westminster, B.C., V3M 1B2

(collectively, the “Licensor”) AND: TLS Applicant Company Name, a body corporate, with a place of business at TTLS Applicant Company Address

(the “Licensee”) WHEREAS: A. The Licensor has established a truck licensing system in respect of trucking companies, trucks, and drivers wishing to access and use the Licensor’s roadways and lands for the delivery, pick-up, and movement of containers; B. The Licensee has indicated a desire to provide container trucking services; and C. The Licensor has agreed to grant to the Licensee a licence over the Licensor’s roadways and lands on the terms and conditions hereinafter contained. NOW THEREFORE, in consideration of the mutual agreements contained herein, the parties hereto covenant and agree as follows: 1.0 Grant

1.1 Subject to the terms of this Licence Agreement, the Licensor hereby grants to the Licensee a non-exclusive licence to access, use, pass, and re-pass over the roadways and lands within the Port of Vancouver and Fraserport which roadways and lands are located in Vancouver, North Vancouver, Richmond, Surrey, New Westminster, and Delta, British Columbia and are within the Licensor’s jurisdiction and control (collectively, the “Licence Area”). It is understood and agreed that the Licence Area is subject to change and may be amended by the Licensor at any time and from time to time forthwith upon notice being given to the Licensee as set out in section 12 herein. 2.0 Term

2.1 The licence herein granted will commence and expire on the dates set out in the notice from the Licensor to the Licensee accepting the electronic licence application of the Licensee (the “Term”), subject to early termination as set out herein. 3.0 Purpose 3.1 The Licensee will use only a Permitted Vehicle for the delivery, pick up, or movement of containers into, within, and out of the Licence Area and for no other purpose whatsoever within the Licence Area. During the Term, only a Permitted Vehicle may operate within the Licence Area. In this Licence Agreement,


“Permitted Vehicle” means a tractor or other road transportation equipment that is:

(a) properly described and identified in advance and in writing by the Licensee to the Licensor at the TLS web portal at www.pacificgatewayportal.com\TLSportal; and

(b) identified and approved under the Licensee’s National Safety Code

(“NSC”) Safety Certificate. Notwithstanding the foregoing, the Licensor reserves the right at all times and from time to time, in its sole discretion, to determine if any tractor or other road transportation equipment is a Permitted Vehicle for the purpose of this Licence Agreement, which determination may be made arbitrarily. The Licensor’s decision in this regard will be final and binding on the Licensee. 4.0 Early Termination, Modification, or Suspension

4.1 The Licensor may suspend, modify, or terminate this Licence Agreement with or without cause if, before making such a decision, it: (a) informs the Licensee in writing of the proposed suspension, modification, or termination, and the reasons therefore; and (b) gives the Licensee at least fourteen calendar days within which to deliver a written submission to the Licensor with respect to the proposed suspension, modification, or termination. If the Licensor decides to take such action after considering the submission of the Licensee, it will give notice to the Licensee as set out in section 12 herein, such action to be effective on the date set out in the notice. 4.2 The Licensor may suspend this Licence Agreement in its sole discretion with or without cause without complying with section 4.1 (a) or (b) above if the reason for such action relates to an urgent circumstance, including, but not limited to any circumstance that may adversely affect the safety, security, or environmental condition of persons or property within the Licence Area. If the Licensor decides to take such action, it will give notice to the Licensee as set out in section 12 herein, such action to be effective on the date set out in the notice. Once the urgent circumstance no longer exists in the sole opinion of the Licensor, the Licensor will discontinue the suspension. 4.3 If the Licensor wishes to replace this License Agreement with a new standard form of licence agreement, the Licensor may terminate this Licence Agreement without complying with section 4.1(a) or (b) above by giving 30 days notice to the Licensee as set out in section 12 herein. 4.4 The Licensee may terminate this Licence Agreement at any time with or without cause by giving notice to the Licensor as set out in section 12 herein. 5.0 Investigation and Dispute Resolution 5.1 The Licensor may appoint a person to conduct a process, as described in section 5.3, for all issues related to the Licensee’s compliance with the requirement of this Licence Agreement to pay container truck owner-operators the minimum rate of remuneration as defined in section 8.1 (v) (i), (ii), and (iii).


5.2 In this Licence Agreement, the person appointed is referred to as “the Licensor’s Appointee” and this reference includes the plural and the appointee’s delegate, contractor, agent and employee. 5.3 The process, referred to in this Licence Agreement as “the process of investigation and dispute resolution”, (a) may be commenced by any person or entity by the submission of a complaint, inquiry or dispute to the Licensor’s Appointee; (b) will be an expedited process; and (c) may include any or all of the following: investigation, audit, negotiation, conciliation, mediation, arbitration, report, conclusion, or recommendation, the results of which are submitted to the Licensor. 5.4 The Licensor may post guidelines and procedures for the process of investigation and dispute resolution from time to time on the Internet site of the Licensor. 5.5 In addition, and without limiting the generality of any other section in this Licence Agreement, the Licensor may take the actions set out in section 4.1 after considering any information, as described in section 5.3(c) submitted to the Licensor by the Licensor’s Appointee. The findings of fact of the Licensor’s Appointee related to the Licensee’s compliance with the requirement to pay container truck owner-operators the minimum rate of remuneration as defined in section 8.1(v)(i), (ii), and (iii) will be final and binding on the Licensor and the Licensee for the purpose of section 4.1 of this Licence Agreement. The Licensor has exclusive jurisdiction to make decisions under section 4.1 of the Licence Agreement and is not bound by any information as described in section 5.3(c) submitted to the Licensor by the Licensor’s Appointee, except for the said findings of fact. 6.0 Licence Charges 6.1 The Licensee will be entitled to use the Licence Area as herein contemplated free of charge. 6.2 Notwithstanding section 6.1 above, the Licensor reserves the right, at any time upon giving notice to the Licensee as set out in section 12 herein, to charge the Licensee a fee for the licence hereby granted based on the Licensor’s costs of managing and administering this Licence Agreement and its truck licensing system generally and in such event, the Licensee will pay all such charges (plus any applicable taxes) to the Licensor forthwith upon demand. 6.3 The Licensor reserves the further right to set fees in accordance with the Canada Marine Act in respect of a Permitted Vehicle that comes into or uses the Licence Area and the Licensee will pay such fees (plus any applicable taxes) to the Licensor forthwith upon demand. 7.0 Licence Information 7.1 It is the Licensee’s sole responsibility at all times and from time to time to provide the Licensor with any information required by the Licensor in its sole and absolute discretion. Without limiting the generality of the foregoing, the Licensee will provide complete, accurate, and up to date information regarding the Licensee, every Permitted Vehicle and every driver that the Licensee employs or contracts with for the purpose of this Licence Agreement and the licence hereby granted.


7.2 In addition to the information required in section 7.1 above, and without limiting the generality of the foregoing, the Licensee will provide to the Licensor or authorize the Licensor to be provided with a copy of its current NSC Safety Certificate and, on request, its Carrier Profile as filed with the Ministry of Transportation. On request, the Licensee will provide the Licensor with one or more NSC and/or I.C.B.C driver abstracts. 7.3 In addition, and without limiting the generality of the information required by the Licensor in section 7.1 above, the Licensee will provide, upon request, to the Licensor, or to the Licensor’s Appointee, at any time during the term of this Licence Agreement, the following: (a) corporate and company records of the Licensee, its subsidiaries, affiliates, successor companies, and related companies; (b) payroll records, as defined and required by section 28 of the Employment Standards Act, RSBC 1996, c. 113, of the Licensee, its subsidiaries, affiliates, successor companies, and related companies; (c) records of the Licensee, its subsidiaries, affiliates, successor companies, and related companies that pertain to engagement and remuneration of contractors working in any capacity in the container truck industry; (d) collective agreements signed by the Licensee, its subsidiaries, affiliates, successor companies, and related companies that govern the Licensee and drivers of container trucks who provide services within the Licence Area; and (e) records described in subsections (a) to (d) related to a person, company or entity that may be a substitution for, a new corporate entity of, an assignee of the Licensee, or of which any principal of the Licensee may be the controlling mind.

7.4 In addition, and without limiting the generality of all other information that may be required by the Licensor, or the Licensor’s Appointee, the Licensee will provide the following information, at any time during the term of this Licence Agreement, upon the request of the Licensor or the Licensor’s Appointee:

(a) the collective agreement that the Licensee uses as a benchmark for purposes of payment of the minimum rate of remuneration;

(b) notice to the Licensor if the Licensee changes the collective agreement

described in section subsection (a) and identification of the replacement collective agreement being so used; and

(c) proof that the Licensee retains

(i) all payroll records required by applicable law, and (ii) records of remuneration of contractors, as described in section 7.3(c),

that contain, at a minimum, the following information on a per trip basis: origin, destination, invoice number, container number, whether delivery or return, revenue, and net pay.

7.5 The Licensee hereby acknowledges and agrees that the information provided pursuant to this Licence Agreement and the licence application process is gathered and required for the purpose of enhancing security, order, and operational efficiencies within the Licence Area and those communities adjacent to the Licence Area. In furtherance of this purpose the Licensee acknowledges and agrees that the Licensor may disclose any or all of the information provided by the Licensee to law enforcement, Government, and regulatory agencies and other licensees. The Licensee further acknowledges and agrees that the Licensor may disclose information regarding any proposed or actual suspension, modification, or termination of this Licence Agreement to third parties. 8.0 Licensee Covenants


8.1 The Licensee covenants and agrees with the Licensor:

(a) that it will be subject to and bound by the process of investigation and dispute resolution;

(b) that it will comply, and ensure the compliance of the Licensee’s

officers, employees, and agents, with all requests of the Licensor or the Licensor’s Appointee with respect to provision of information, including those described in sections 7.3 and 7.4, attendance at meetings at such time and place as may be directed, attendance at conferences or hearings, participation in interviews and inquiries, including answering all questions, and co-operation with any other procedure under the process of investigation and dispute resolution;

(c) that, in connection with the process of investigation and dispute resolution, it will bring and produce all documents, writings, books, deeds, and papers, in written and electronic form, in the Licensee’s possession, custody or power to the Licensor and the Licensor’s Appointee; (d) that, in connection with the process of investigation and dispute

resolution, the Licensor may, at any time, request or obtain any information, including that described in section 5.3(c), from the Licensor’s Appointee or otherwise communicate with the Licensor’s Appointee regarding these matters;

(e) that, in connection with the process of investigation and dispute

resolution, the Licensor’s Appointee may, at any time, provide any information, including that described in section 5.3(c), to the Licensor or otherwise communicate with the Licensor regarding these matters;

(f) that, in addition to, and without limiting the generality of, any other

powers of the Licensor, the Licensor may take the actions set out in section 4.1 if the Licensee fails to comply with subsections (a), (b), or (c) or as a result of the Licensor’s consideration of any information that the Licensor receives pursuant to subsections (d) or (e);

(g) to observe, abide by, and comply with all statutes, laws, by-laws,

orders, directions, ordinances, rules, and regulations of any lawful Governmental authority which apply to the Licensee, its operations, and a Permitted Vehicle or which in any way affect or apply to the Licence Area and the use and occupation thereof. In this regard, and without limitation, the Licensee will at all times and in all respects comply with and abide by all applicable labour, environmental, and safety laws, by-laws, rules, and regulations including the Canadian Environmental Protection Act, the AirCare On-Road Program (“ACOR”), and all applicable air quality and particulate emission standards or requirements that apply to the Licence Area and/or a Permitted Vehicle. The Licensee will submit any proposed Permitted Vehicle for ACOR testing and procedures. Any Permitted Vehicle that fails to meet the ACOR or other emission standards or requirements may be denied access to the Licence Area;

(h) to conduct its operations and provide container trucking services in a

safe and first-class manner and to observe, abide by, and comply


with all directions of the Licensor in respect of the Licensee, a Permitted Vehicle or any driver or operator;

(i) not to cause or permit the Licence Area or any part thereof to be used

for the unauthorized storage, treatment, generation, transportation, processing, handling, production, or disposal of any hazardous or contaminated material or substance. The Licensee further covenants not to cause or permit anything to be done within the Licence Area that results in contamination or environmental damage to the Licence Area or any adjacent lands;

(j) to ensure every Permitted Vehicle is properly maintained and is in good

condition and repair and meets all applicable vehicle safety, maintenance, and operational standards and requirements, including the NSC, the Motor Vehicle Act, and all applicable rules and regulations;

(k) to ensure that every driver and every occupant(s) of every Permitted Vehicle has a valid Port Pass and all necessary licences and authorizations to operate the Permitted Vehicle;

(l) to co-operate in a timely way with all requests made by the Licensor or

the Licensor’s Appointee pursuant to this Licence Agreement, the Licensor’s Letters Patent, the Canada Marine Act, or regulations passed under that Act;

(m) to ensure that every driver the Licensee employs or contracts with has

and maintains a safe driving record and adheres to and follows directions respecting designated truck routes and other directional signs that apply to location or movement of a Permitted Vehicle within the Licence Area. Without limiting the generality of the foregoing, the Licensee will ensure that every driver cooperates and complies fully with all directions of security and other personnel of the Licensor;

(n) to accept the Licence Area in its present condition and on an "as is" basis

in all respects; (o) to indemnify and save the Licensor harmless in respect of all actions,

proceedings, losses, damages, costs, claims, and liabilities, including without limitation claims against the Licensor by third parties and fees of solicitors and other professional advisors, and including without limitation damage to property outside the Licence Area, arising out of or in any way connected with:

(i) any breach, violation, negligent performance, or non-

performance of any covenant, condition, or agreement in this Licence Agreement by the Licensee or any person whom the Licensee is responsible for in law, including, without limitation, each and every operator or occupant of a Permitted Vehicle;

(ii) any personal injury, death, or property damage occurring on or

outside the Licence Area or any loss or damage arising out of or in any way connected with the Licensee's, or its employees' use and occupation of the Licence Area;

(iii) the Licence Area not being suitable for use by the Licensee; and


(iv) the transportation of any contaminated or hazardous material or

substance on, of or from the Licence Area by the Licensee, or by any agent, employee, contractor, or any other party for whom the Licensee is responsible in law,

(p) not to make any use whatsoever of the Licensor’s name, logo, or initials

without the specific written consent of the Licensor; (q) to comply in all respects and at all times with any appointment or

reservation protocols, procedures, or systems, whether centralized or mandatory or otherwise, that may be established or adopted by the Licensor or any terminal operator at any container handling terminal within the Licence Area;

(r) to participate in and comply with all of the Licensor’s programs and requirements respecting the identification of tractors and other road transportation equipment, and the tracking, monitoring, location and movement of a Permitted Vehicle into, within, and out of the Licence Area; (s) without limiting the generality of subsection (l) above, at the Licensor’s

request install radio frequency identification equipment in every Permitted Vehicle, all at the sole cost and expense of the Licensee;

(t) to update the information required herein promptly and in a timely

manner, should changes occur, to ensure accuracy and currency of the Licensor’s records;

(u) to ensure that the operator of a Permitted Vehicle, whether employed

by the Licensee or otherwise, complies with all of the Licensee’s covenants contained herein;

(v) to abide by and comply with any applicable law, lawful order, direction,

or enactment of any lawful Government authority respecting compensation standards payable to drivers, whether owner-operators or otherwise, for the delivery, pick-up or movement of containers into, within, and out of the Licence Area, compliance with such standards, violations, or alleged violations of such standards, and all applicable consequences, penalties, and remedies associated with violations or alleged violations of such standards; and, without limiting the generality of the foregoing, to ensure the remuneration — for the delivery, pick-up or movement of containers into, within or out of the Licence Area— of an owner-operator of a tractor is in accordance with the following, which for purposes of this Licence Agreement, is referred to as “the minimum rate of remuneration”:

(i) the applicable rate of remuneration set out in a collective agreement that is binding on the owner-operator of the tractor;

(ii) in the absence of a collective agreement referred to in section (i), any

applicable law in respect of rates of remuneration; or (iii) in the absence of a collective agreement referred to in section (i) and a

law referred to in section (ii), a rate of remuneration that is at


least equivalent to the applicable rate set out in a collective agreement, as amended from time to time, or renegotiated,

(1) that is binding on any other owner-operator of a tractor, (2) that is posted on the Internet site of the Licensor, and (3) whose applicable rate of remuneration is no less than that set

out in the Memorandum of Agreement between Trucking Companies (Owners/Brokers) and the Vancouver Container Truckers’ Association dated July 29, 2005;

(w) to maintain with one or more companies duly authorized to carry on business of insurance in the Province of British Columbia, the following policies of insurance: (i) comprehensive general liability insurance in a form acceptable to the

Licensor and with a minimum amount per occurrence of no less than $2,000,000, covering person injury, bodily injury (including death), and property damage;

(ii) automobile liability insurance on all vehicles used directly or indirectly

by the Licensee, protecting against damages arising from bodily injury (including death) and from claims of property damage, in an amount of not less than $2,000,000; and

(iii) such other insurance as the Licensor may reasonably require from time

to time.

The foregoing insurance policies will:

(i) be primary and not require the sharing of any loss by the Licensor or by an insurer of the Licensor;

(ii) name the Licensor as an additional insured with cross liability and

severability of interest clauses; (iii) include a waiver of subrogation clause; and (iv) be endorsed to provide the Licensor with 30 days advance written

notice of cancellation or any change or amendment that may restrict coverage.

The Licensee will provide the Licensor with satisfactory evidence of such insurance forthwith upon demand.

(x) in addition, and without limiting the generality of any other section in

this Licence Agreement, the Licensor may take the actions set out in section 4.1 if the Licensee fails to comply with subsection (p), or any other requirement of this Licence Agreement;

(y) the Licensor and the Licensor’s Appointee may exercise entry and

inspection powers similar to those described in section 85 of the Employment Standards Act, RSBC 1996, c. 113, as those powers pertain to records or information of the Licensee or under the Licensee’s custody or power as described in sections 7.3 and 7.4;

(z) the Licensor may release any personal or corporate information obtained

by the Licensor pursuant to its powers under this Licence Agreement, its Letters Patent, the Canada Marine Act or regulations


passed under that Act to the Licensor’s Appointee and the Licensor’s Appointee may release any personal or corporate information obtained by the Licensor’s Appointee under this Licence Agreement to the Licensor; and

(aa) the Licensee agrees to waive the initiation of, pursuit of, or participation in any claim, suit, action, petition, or proceeding of a judicial, quasi-judicial, or administrative nature against the Licensor’s Appointee that arises out of the performance of duties or responsibilities under the process of investigation and dispute resolution, the interpretation of that process, or any other related issues.

9.0 Licensor’s Reservations 9.1 The Licensor reserves the continuing right to use, occupy, and/or grant to third parties the right to use and/or occupy the Licence Area from time to time, in common with the Licensee. 9.2 Notwithstanding the grant of licence herein, the Licensor reserves the continuing right in its sole discretion at any time and from time to time to deny the Licensee, any Permitted Vehicle or any driver or operator access to the Licence Area. 10.0 Labour or Other Dispute 10.1 It is acknowledged and agreed to by the parties that this Licence Agreement will immediately terminate in the event of

(a) any labour dispute, including a lawful or unlawful strike, lockout, picketing, leafleting, blockading, or tortious activity, exercise of non-affiliation rights or any other lawful or unlawful labour dispute; or

(b) any other lawful or unlawful dispute, protest, demonstration, or other

disruptive activity directly or indirectly involving either the Licensor or the Licensee that adversely affects the Licensor, the Licence Area or any of its activities or operations. 11.0 Inactivity 11.1 It is acknowledged and agreed to by the parties that this Licence Agreement will immediately terminate if the Licensee has not engaged in the delivery, pick up, or movement of containers into, within, or out of the Licence Area for a period of ninety consecutive calendar days. This section does not apply if the Licensee is a long haul carrier. 12.0 Notice 12.1 It is each party’s sole responsibility to provide and maintain an electronic mail (e-mail) address for delivery and receipt of all notices in respect of this Licence Agreement. Any notice required or permitted to be given hereunder will be deemed to be duly delivered for all purposes, upon transmission to the e-mail address as provided by the other party. The Licensee waives the right to expect or receive any other form of notice, including written notice. It is the Licensee’s responsibility to check the electronic mail address listed in section 12.3 for notices


relating to this Licence Agreement. Notice of any order, direction, rule, and/or regulation to the Licensee affecting the use of the Licence Area by the Licensee as herein contemplated will be sent to the electronic mail address for delivery provided by the Licensee. The Licensee hereby waives any claim for costs or damages that may be occasioned or caused by any disruption or interference in the Licensor’s electronic mail system. 12.2 The Licensor’s electronic mail address is: [email protected]. 12.3 The Licensee’s electronic mail address is as set out in the electronic licence application of the Licensee. 13.0 Exclusion of Liability of Licensor 13.1 Notwithstanding any other provision in this Licence Agreement, and notwithstanding any statements, representations, agreements or conduct to the contrary, in no event will the Licensor be liable to the Licensee, or anyone claiming through or under it, for any claim, whether in contract or in tort, or based on any other theory of law whatsoever, arising from or connected in any way with this Licence Agreement, including, without limitation, any claim for loss of profits, indirect costs or consequential damages. 13.2 Without limiting the generality of the foregoing, the Licensor will have no liability whatsoever for any claim arising from or connected in any way with: (a) any step taken by the Licensor in furtherance of any of its rights under this Agreement; (b) the exercise of its discretion under any provision of this Agreement; (c) any termination, modification or suspension of this Agreement under sections 4.0, 10.0, 11.0, or otherwise; (d) the disclosure or release of any information by the Licensor related to or provided by the Licensee, under sections 5.0, 7.0, 8.0 or otherwise; or (e) any delays in relation to the Licensee’s ability to access or use the Licence Area under this Agreement. 14.0 Waiver 14.1 The failure of the Licensor to insist upon the strict performance of any covenant or condition contained in this Licence Agreement or to exercise any right under this Licence Agreement will not be construed or operate as a waiver of the covenant or condition, and no waiver will be inferred from or implied by anything done or omitted to be done by the Licensor. 15.0 Miscellaneous 15.1 Sections 4.0, 5.0, 7.0, 8.1(a) to (f), 8.1(l), 8.1(o) to (p), 8.1(v), 8.1(y) to (aa), 12.0, 13.0, 15.3, and 15.6 to 15.8 survive the expiration of this Licence Agreement and any bankruptcy or insolvency on the part of the Licensee. 15.2 The Licensee acknowledges that there have been no representations, warranties, or covenants made by the Licensor in any manner whatsoever other than as provided herein, and without restricting the generality of the foregoing, there is no representation or warranty by the Licensor as to the validity of its title to the Licence Area and there is no obligation on the Licensor to pave, maintain, or otherwise improve the Licence Area or ready it in any manner for use and occupation by the Licensee and/or the parties for whom the Licensee is responsible at law.


15.3 Upon the termination of this Licence Agreement, the Licensor may, without notice, remove any Permitted Vehicle or unauthorized vehicles and/or equipment on the Licence Area at the Licensee’s risk and expense and the Licensee will, on demand, compensate the Licensor for all costs incurred by the Licensor in connection with such removal. 15.4 Time is of the essence. 15.5 Except as set out herein, this Licence Agreement may not be amended, save and except in writing signed by both parties. 15.6 This Licence Agreement will be governed in all respects by the laws of the province of British Columbia and the laws of Canada applicable therein. 15.7 The Licensee will not be entitled under any circumstances to transfer, assign, mortgage or otherwise dispose of this Licence Agreement or any of the rights and privileges granted herein, and any such action will result in an immediate termination of the Licence Agreement. For purposes of this Section, a Change in Control of a body corporate or a partnership will be deemed to be an assignment of this Licence Agreement. "Change in Control" means the transfer by sale, assignment, transmission on death, mortgage, trust, or otherwise of any shares, voting rights, or interest which will result in a change of the identity of the person or persons exercising, or who might exercise, effective control of such corporation or partnership. 15.8 Each of the provisions contained in this Licence Agreement is distinct and severable from the others and a determination of illegality, invalidity, or unenforceability of any such provision or part hereof by a court of competent jurisdiction will not affect the validity or enforceability of any other provision hereof. 15.9 Upon delivery of an electronic notice from the Licensor to the Licensee accepting the electronic licence application of the Licensee, this Licence Agreement and all of the terms and conditions contained herein will be deemed to have been accepted by the Licensee and will form a binding agreement between Licensor and the Licensee.

IPART Letter 01 Jan 2008 - IPART - Independent Pricing and ... · Funding Night and Weekend Slots...

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Transcript of IPART Letter 01 Jan 2008 - IPART - Independent Pricing and ... · Funding Night and Weekend Slots...