Background Paper on the Use of Foreign Charter Vessels

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1 General Background Paper on the Use of Foreign Charter Vessels Foreign Charter Vessels () are foreign owned and foreign flagged fishing vessels that are leased by a New Zealand company to fish in the New Zealand Exclusive Economic Zone (EEZ) 1. Vessels can be chartered in two ways: a) Demise charter (also known as bare boat charter) the Charterer hires/charters the bare ship without crew and has complete possession and control of the ship, including the right to appoint its master and crew. b) Time/voyage charter the Charterer hires the vessel and its crew, rather than just the vessel itself. The foreign owner of the FCV appoints the Master and crew. Before an FCV is permitted to operate in New Zealand waters it must be registered as a New Zealand fishing vessel; this arrangement does not alter the vessel s flag State. Foreign Charter Vessels operating in New Zealand act on behalf of New Zealand companies, not in place of them. are different to foreign licensed vessels that are used to fish in New Zealand waters under a government-to-government access agreement with no connection to any New Zealand quota, company or entity. In the past such agreements were in place with Japan, Korea and the USSR. Our only current agreement of this nature is the Multilateral Tuna Treaty between the United States and Pacific Island countries, including New Zealand and Australia. However no United States vessels have fished in New Zealand waters under this Treaty since In some cases are part of a wider business relationship between a New Zealand seafood company and an overseas enterprise. It is not uncommon for such relationships to extend to the export and marketing of catch and to joint ventures in processing. In some instances these business arrangements may also provide better access to foreign markets. Foreign Charter Vessels are prohibited from fishing within the Territorial Sea. In addition, all currently registered are greater than 46 m in overall length which means they are also not permitted to fish within those areas where the 46 m exclusion rule for trawl vessels applies; this includes Quota Management Areas 1 and 2, and within 26 nautical miles of the West Coast South Island. History When New Zealand s EEZ was established in 1977, the available catch that could not be harvested by the domestic sector was allocated to foreign countries under agreements that established foreign licensed fishing allocations. These arrangements permitted foreign vessels to operate in New Zealand and to return their catch to foreign ports for processing. 1 The EEZ covers the area from the edge of the Territorial Sea (12 nautical miles from shore) to 200 nautical miles from the coast.

2 Such agreements considered at the time to be temporary arrangements while the domestic sector built capacity - were reached with Japan, Korea and the USSR. To expand the domestic industry, New Zealand operators were encouraged to engage in joint ventures with overseas fishing companies. These joint ventures ranged from foreign parties investing capital in New Zealand to build up the domestic fleet through to the provision of additional fishing capacity in the form of. All such joint venture arrangements required government approval and were subject to an assessment that they would deliver maximum domestic benefit. In 1983 a precursor to the quota management system known as the Deepwater Allocation System (DAS) was introduced to control the harvest of seven deepwater species. The basis of that system was the allocation of individual quota to existing deepwater companies. Only those companies that could show they had the ability to access the fishery and had arrangements in place to process the catch were eligible for quota. In return, these deepwater companies were permitted to choose how they wished to harvest their entitlement including the option of using. The current Quota Management System (QMS) was introduced in Under the QMS, a total allowable catch (TAC) is determined for each stock or species. Fishing companies or other investors own quota, which is in effect a property right entitling the owner to a proportion of the TAC set for each species. At the beginning of each fishing year, annual catch entitlements (ACE) are determined based on the amount of quota a shareholder owns and the TAC for that particular species. Under the Treaty of Waitangi (Fisheries Claims) Settlement Act 1992 and the Fisheries Act 1996, iwi were allocated a share of all current and future species introduced into the QMS. Entitlements have generally been determined by the processes set out in the Maori Fisheries Act 2004, which has resulted in many iwi holding only small parcels of ACE. Selling ACE on the open market is viewed by many iwi as the best way to use these assets. During the late 1980s and early 1990s a number of large deepwater companies invested heavily in developing a domestic deepwater fleet. By the early 2000s some operators had replaced a proportion of their domestic catching capacity with FCV arrangements. Current use of There are currently 26 that operate in New Zealand waters. They are flagged to four countries: South Korea, Ukraine, Japan and Dominica. Nineteen of these are trawlers in deepwater fisheries that operate year round: most have a long history as part of the deepwater trawl fleet. The remaining operate in seasonal fisheries which include potting for hagfish, longline fisheries for southern bluefin tuna, and jig fisheries for squid (see Appendix 1). The average vessel age of the current FCV fleet is 26 years, compared to 23 years for the deepwater domestic fleet. Most have been operating in New Zealand for many years; the average date of first entry to New Zealand of the current FCV fleet is 1998, with some having been here since the late 1980s.

3 The Deepwater Fleet The Deepwater fleet comprises approximately 45 vessels, 19 of which are. Most companies that fish for deepwater species use or have used them in the past. Deepwater trawl vessels generally fish between 300 and 340 days per year. Some are specially equipped to operate in fisheries such as the trawl fishery for jack mackerel. Of the nine main species caught by, 2 roughly two-thirds of the total volume has been taken by over the last five years. This is approximately 40% of the total commercial harvest of all species in the Quota Management System. The annual value of this catch is estimated to have ranged between $274.6 and $387.3 million dollars (Appendix 1). 3 A detailed analysis of catch taken by in these fisheries is provided in Table 3. The Highly Migratory Species Fleet The Highly Migratory Species (HMS) fleet comprises approximately vessels. The majority of these are domestic vessels, with only four Japanese currently operating. However, these four take around one third of the catch in HMS fisheries. Legal framework International International law relating to fishing practices is largely governed by the following: United Nations Convention on the Law of the Sea (UNCLOS) International Labour Organisation (ILO) conventions International Maritime Organisation (IMO) conventions United Nations Convention on the Law of the Sea The UN Convention on the Law of the Sea sets out the rights and duties of flag States and coastal States. Under UNCLOS the sovereign rights of a coastal State extend 12 nautical miles from the coast to cover the Territorial Sea. However, the coastal State does not enjoy full sovereignty over its EEZ which extends from the outer edge of the Territorial Sea to 200 nautical miles, neither does it have general criminal and civil jurisdiction over foreign flagged vessels in its EEZ. The rights of the coastal State are limited to sovereign rights to manage the resources of the seabed and water column including fisheries, and jurisdiction to regulate specific areas, including marine pollution. Under UNCLOS, jurisdiction for the health and safety of people on board belongs to the flag State of the vessel concerned. International Labour Organisation The ILO has negotiated and adopted several Conventions and recommendations setting standards for workers on fishing boats. New Zealand can only apply the ILO marine Conventions to which it is currently party to New Zealand flagged fishing vessels. 2 Hoki, hake, ling, southern blue whiting, squid, barracouta, jack mackerel, white warehou, silver warehou. 3 This estimate of revenue has been calculated by applying the most recent export prices from Jan 2010 to Nov 2010 to all catch taken by in the nine key fisheries identified over the most recent five fishing years.

4 International Maritime Organisation The IMO establishes international standards for the safety and security of shipping and the prevention of marine pollution from ships. New Zealand is not a party to the IMO conventions applicable to fishing vessels. Domestic Fisheries The Ministry of Agriculture and Forestry is responsible for enforcing the fisheries legislation as it relates to. fishing in New Zealand waters must comply with all relevant provisions of the Fisheries Act 1996 (The Act) and Regulations made pursuant to it. Before conducting any fishing activity within New Zealand waters, must be registered under section 103 of the Act, which requires the consent of the Chief Executive of the Ministry of Fisheries (now Director General of the Ministry of Agriculture and Forestry). Consent of the Director General requires a risk assessment of the vessel and a safety inspection by Maritime New Zealand in the 30 days prior to registration. The Director General may place conditions on the registration of such as increased observer coverage or a shorter period of registration to allow for more frequent assessments. The current compliance regime is based on education, monitoring, surveillance, audit, analysis and enforcement, with a strong emphasis on educating and assisting the commercial sector to comply. Observers are placed on boats to collect biological information to inform science advice for managing stocks, but additional coverage may be required on to monitor the vessel s compliance with the Act. Under section 103(5) of the Fisheries Act 1996, the Minimum Wage Act 1983 and the Wages Protection Act 1983 are both applicable to the employment relationship between employees on the vessel and their employers whilst the vessel is in New Zealand waters. For this purpose, employees are people engaged or employed to do work on the vessel who hold a temporary entry class visa under the Immigration Act Maritime safety Maritime New Zealand is responsible for enforcement of the Maritime Transport Act 1994 which includes the Maritime Rules and Marine Protection Rules. There are three ways in which may be regulated under the Maritime Rules: 1. The Director of Maritime New Zealand may recognise certificates from a vessel s flag state if the flag state has survey standards for the construction of ships and performance standards for safety equipment which are of an equivalent standard to New Zealand. The vessel will still undergo an inspection by a Maritime New Zealand Safety Inspector (MSI) to ensure that the vessel and its equipment meet the necessary standards. 2. If the flag state of the vessel does not have equivalent standards for vessel construction or safety, the Director of Maritime New Zealand may require a survey of the vessel by a surveyor who is recognised by the Director and is employed by a Safe Ship Management organisation.

5 3. After two years, regardless of the previous two options, vessels must enter the Safe Ship Management system, which is the framework that all New Zealand commercial vessels must adhere to. Additionally, all must undergo six-monthly inspections by MSIs to ensure continued compliance with the applicable Maritime Rules. Labour and Employment The Department of Labour is responsible for ensuring that operating in New Zealand waters comply with the Minimum Wage Act 1983, the Wages Protection Act 1983 and the provisions of any other legislation deemed necessary to give full effect to those two Acts. The Fisheries Act 1996 allows Labour Inspectors to exercise their powers under the Minimum Wage Act 1983 and the Wages Protection Act As a result of practical challenges related to enforcement, requirements have been put in place around minimum pay and deductions using immigration policy. The minimum employment provisions that apply to crew of are included in the Code of Practice for Foreign Fishing Crew (the Code of Practice). New Zealand charter parties must undertake to adhere to the Code of Practice (2006) before immigration visas are issued. Under the Immigration Act 2009, New Zealand work visas for foreign crew are approved under standard temporary work policies such as the Approval in Principle (AIP) policy. For an AIP to be approved and foreign crew allowed work visas, three tests are applied: 1. Immigration is satisfied that suitable New Zealand workers are not available; 2. That the terms and conditions of the Code of Practice will be adhered to and; 3. The New Zealand chartering party must provide a guarantee of payment of minimum levels of crew remuneration in the event of default by the foreign employer. The Code of Practice was developed through negotiations with the Seafood Industry Council (SeaFIC) and the NZ Fishing Industry Guild in It puts in place minimum working and living conditions for FCV crews including regular reporting and provisions for onboard inspections. The Code of Practice also includes minimum remuneration requirements, access to employment relationship resolution institutions, and standard principles for employment agreements that are similar to those in the New Zealand Employment Relations Act. For detailed information about the requirements and policies in the Code of Practice, please see the accompanying link on the website. Compliance with the Code of Practice can be audited at any time by the Department of Labour which aims to audit all companies at least once over a three-year period. Possible sanctions for a company that is found to have major non-compliance include cancellation of the AIP and revocation of crew work visas, and refusal to grant further AIPs to the New Zealand Company involved or any New Zealand Company that has entered into a charter agreement with an employer that has a history of non-compliance.

6 Health and Safety in Employment Act 1992 The Health and Safety in Employment Act 1992 (the HSE Act) was amended in 2002 by the Health and Safety in Employment Amendment Act 2002 which extended coverage of the HSE Act to New Zealand flagged ships, but not to crews of. Accident Compensation Foreign crews aboard are covered by ACC if: 1. The injury was suffered in New Zealand 4, which includes the internal waters and territorial sea of New Zealand; and 2. The injury was not suffered a. On board a ship or aircraft on which the person came to New Zealand; or left New Zealand; or came to New Zealand, was carried and accommodated during the person s visit to New Zealand, and left New Zealand; or b. While embarking or disembarking from a ship or aircraft described above in subparagraph a. A crew member injured aboard an FCV may be entitled to rehabilitation and lump sum compensation, but will not be entitled to weekly compensation unless he or she is an earner who can establish earnings as an employee. Charterers do not pay ACC Work Account levies for the ship s crew if the wages are not subject to New Zealand tax. The crew on do not pay tax and the Earners Levy because they are paid by a foreign company. 4 Crew on an FCV are still considered to be in New Zealand if they embark in New Zealand on the FCV to travel from one place to another place in New Zealand, or return to the place of embarkation without disembarking at another place, and the FCV does not go further than 300 nautical miles from New Zealand.

7 Appendix I: Facts and figures of in New Zealand 1.1 currently chartered in New Zealand. Vessels are broken down by flag State. Ukrainian Korean Japanese Dominican Total Total catch of nine key deepwater species, proportions caught by over the last five years (tonnes), and approximate total export revenue of FCV catch. Total catch of nine key species by all vessels (tonnes) Total catch by of nine key species (tonnes) 2005/ / / / /10 296, , , , , , , , , ,015 Percentage caught by 68.5% 66.3% 66.7% 64.4% 62.3% Approximate total export revenue of catch caught by ($ millions)* * Calculated based on total export revenue and proportion harvested by $387.3 $382.5 $322.5 $302.8 $ Catch taken in nine key deepwater fisheries for the last five years and the proportion of that catch taken by. 2005/ / / / /10 Hoki Ling (excludes LIN1 and LIN2) Hake Barracouta Squid Jack mackerel (excludes JMA1) Total catch (t) 102, ,200 88,300 89, ,200 38% 33% 30% 31% 31% Total catch (t) 12,900 15,300 15,200 12,000 12,100 40% 40% 38% 33% 25% Total catch (t) 8,500 11,700 6,100 9,900 6,300 69% 82% 83% 88% 77% Total catch (t) 28,500 28,700 27,500 26,900 29,000 72% 79% 79% 74% 80% Total catch (t) 72,800 69,900 56,000 46,300 32,400 91% 85% 87% 87% 94% Total catch (t) 32,800 31,100 36,900 31,100 34,400 99% 99% 99% 99% 99%

8 Southern blue whiting White warehou Silver warehou Total catch (t) 25,300 25,600 31,900 38,000 36, % 99% 94% 82% 84% Total catch (t) 2,200 3,300 2,300 2,200 1,700 55% 52% 62% 74% 69% Total catch (t) 11,000 14,200 8,100 8,400 7,000 67% 73% 73% 72% 79%

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