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Australia: Grain Terminals, Changes to Promote Competition

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A brief summary of some recent major changes that have occurred in relation to the export of grain in Australia.

Historical situation – formal regulation under WEMA

All grain ports in Australia were previously regulated under theWheat Export Marketing Act 20008 (Cth) (WEMA). Under WEMA, any port terminal owner or operator which was vertically integrated (ie, had a related company either upstream or downstream of the port in the grain supply chain) was required to submit an access undertaking to the Australian Competition and Consumer Commission (ACCC). With the extent of major agribusinesses in the grain industry in Australia, this meant that a large number of grain ports were regulated in this formal and rather inflexible manner.

New situation – flexible regulation under the Grain Code

Both the ACCC and the Commonwealth Government felt that the existing level of formal regulation had become unnecessary (and even potentially harmful) due to growing competition in the grain export terminal market. An example of this growing competition is in Newcastle where GrainCorp’s existing Carrington facility (previously heavily regulated) now competes with both the Newcastle Agri Terminal and the Louis Dreyfus facility (neither of which were regulated under WEMA). As such, the Commonwealth Government has recently introduced the Competition and Consumer (Industry Code-Port Terminal Access (Bulk Wheat)) Regulation 2014 (Cth) (the Grain Code). The Grain Code applies equally to all operating grain export terminals regardless of the level of competition that the terminal faces. This may not necessarily decrease the regulation that every port facility faces – it is merely designed to ensure that regulation can be more flexibly applied. The main requirements imposed on grain terminal operators include by way of example:

  • allocating port terminal capacity through a standard access mechanism;
  • publishing information on its website, including capacity available on a daily and weekly basis as well as key performance indicators;
  • processes for amending port loading protocols, including consultation procedures; and
  • complying with formal dispute resolution procedures.

Exemption from the Grain Code

In certain instances, it is possible for terminal operators to request that their regulation be reduced further, either due to strong competition in a particular region or for other reasons. This is achieved by an exemption from the Grain Code for individual operators based on case by case analysis. The ACCC and the Minister for Agriculture both have decision-making roles to play in an exemption, and will consider:

  • the legitimate business interest of the port terminal service provider;
  • the public interest;
  • the interests of exporters who require access to port terminal services;
  • the likelihood of fair and transparent access without regulation;
  • the promotion of economically efficient operation of and investment in port terminal facilities;
  • the promotion of competition in upstream and downstream markets;
  • the relationship of the terminal owner / operator to entities in upstream and downstream markets; and
  • whether there is another exempt provide in the grain catchment area for the relevant port.

Even if an exemption is granted to the operation of the Grain Code, the exempt port operator will still be required to publish:

  • a daily statement about ships due to load at the port;
  • standard information about capacity and demand;
  • standard terms and reference prices for access.

A number of ports have been granted exemptions from the Grain Code, including the GrainCorp Carrington facility mentioned above (due to the significant level of competition in its grain catchment area). All exemptions from the Grain Code involve a public consultation process, including the opportunity for any interested parties to make submissions either for or against the exemption of the port in question.

Ongoing application of the National Access Regime

While the Grain Code now automatically applies to port terminal facilities, it is still possible for anyone to lodge an application for declaration of a facility under Part IIIA (the National Access Regime) of the Competition and Consumer Act 2010 (Cth). This would generally involve a higher level of regulation of a facility than that imposed under the Grain Code. However, it is likely to be more difficult to have a facility declared under the National Access Regime because of the existing standard of regulation under the Grain Code. An application for declaration under the National Access Regime is, therefore, only likely in the most extreme circumstances By Philip Christensen, Jo Daniels and Simon De Young (Baker & McKenzie Brisbane and Melbourne)

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Author

Philip Christensen leads Baker & McKenzie's Brisbane office. Philip has over 25 years of experience advising Australian and overseas mining companies, investors and others in the mining industry. Philip has acted on company acquisitions, project acquisitions, farm-in agreements, off take agreements, financing, incorporated and unincorporated joint ventures and mine developments. Prior to joining Baker & McKenzie, he served in a number of roles, including as executive director of an Australian coal exploration company, chairman of a base metals exploration company, and non-executive director of Whitehaven Coal, a leading ASX listed coal mining company.

Author

Philip Christensen leads Baker & McKenzie's Brisbane office. Philip has over 25 years of experience advising Australian and overseas mining companies, investors and others in the mining industry. Philip has acted on company acquisitions, project acquisitions, farm-in agreements, off take agreements, financing, incorporated and unincorporated joint ventures and mine developments. Jo Daniels has over 20 years of experience in mining and natural resource, infrastructure, competition and regulatory, government law and general commercial work. Jo has recently advised clients on all aspects of competition law, including merger and acquisition authorisations, cartel investigations, joint venture structuring and third party access regulation. Specifically in the energy and resource sphere, Jo acts for clients on their investments and operations across the infrastructure industry. She advised on many major infrastructure projects and privatisations. Jo has published extensively on third-party access law. Simon De Young, a partner in Baker & McKenzie’s Melbourne office, has extensive experience in private equity, public and private treaty M&A and equity capital markets transactions. He is a member of the Firm's Global Health, Pharmaceutical & Biotechnology team, and has practiced in Australia and the United Kingdom.

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