Background Paper on the Use of Foreign Charter Vessels
General
Foreign Charter Vessels (FCVs) 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.
FCVs 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 2004.
In some cases FCVs 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 FCVs 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.
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 FCVs. 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 FCVs.
The current Quota Management System (QMS) was introduced in 1986. 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 FCVs
There are currently 26 FCVs that operate in New Zealand waters. They are flagged to four
countries: South Korea, Ukraine, Japan and Dominica. Nineteen of these FCVs are trawlers in
deepwater fisheries that operate year round: most have a long history as part of the
deepwater trawl fleet. The remaining FCVs 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 FCVs 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.
The Deepwater Fleet
The Deepwater fleet comprises approximately 45 vessels, 19 of which are FCVs. Most
companies that fish for deepwater species use FCVs or have used them in the past.
Deepwater trawl vessels generally fish between 300 and 340 days per year. Some FCVs are
specially equipped to operate in fisheries such as the trawl fishery for jack mackerel.
Of the nine main species caught by FCVs,2 roughly two-thirds of the total volume has been
taken by FCVs 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 FCVs in these fisheries is provided in Table 3.
The Highly Migratory Species Fleet
The Highly Migratory Species (HMS) fleet comprises approximately 30-35 vessels. The
majority of these are domestic vessels, with only four Japanese FCVs currently operating.
However, these four FCVs 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 FCVs in the nine key fisheries identified over the most recent five fishing years.
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 FCVs. FCVs 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, FCVs 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 FCVs 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 FCVs 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 2009.
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 FCVs 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.
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 FCVs 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 FCVs 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 1983. 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 FCVs 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 2006. 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.
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 FCVs.
Accident Compensation
Foreign crews aboard FCVs are covered by ACC if:
1. The injury was suffered in New Zealand4, 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 FCVs
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.
Appendix I: Facts and figures of FCVs in New Zealand
1.1 FCVs currently chartered in New Zealand. Vessels are broken down by flag State.
Total
Ukrainian
FCVs
4
Korean
FCVs
13
Japanese
FCVs
7
Dominican
FCVs
2
1.2 Total catch of nine key deepwater species, proportions caught by FCVs over the last five years
(tonnes), and approximate total export revenue of FCV catch.
2005/06
2006/07
2007/08
2008/09
2009/10
Total catch of nine key species
by all vessels (tonnes)
296,100
301,000
272,300
264,500
266,400
Total catch by FCVs of nine key
species (tonnes)
202,943
199,413
181,630
170,291
166,015
Percentage caught by FCVs
68.5%
66.3%
66.7%
64.4%
62.3%
Approximate total export
revenue of catch caught by
FCVs ($ millions)*
$387.3
$382.5
$322.5
$302.8
$274.6
* Calculated based on total export revenue and proportion harvested by FCVs
1.3 Catch taken in nine key deepwater fisheries for the last five years and the proportion of that catch
taken by FCVs.
Hoki
Ling (excludes
LIN1 and LIN2)
Hake
Barracouta
Squid
Jack mackerel
(excludes JMA1)
2005/06
2006/07
2007/08
2008/09
2009/10
Total catch (t)
102,100
101,200
88,300
89,700
107,200
% taken by
FCVs
38%
33%
30%
31%
31%
Total catch (t)
12,900
15,300
15,200
12,000
12,100
% taken by
FCVs
40%
40%
38%
33%
25%
Total catch (t)
8,500
11,700
6,100
9,900
6,300
% taken by
FCVs
69%
82%
83%
88%
77%
Total catch (t)
28,500
28,700
27,500
26,900
29,000
% taken by
FCVs
72%
79%
79%
74%
80%
Total catch (t)
72,800
69,900
56,000
46,300
32,400
% taken by
FCVs
91%
85%
87%
87%
94%
Total catch (t)
32,800
31,100
36,900
31,100
34,400
% taken by
FCVs
99%
99%
99%
99%
99%
Southern blue
whiting
White warehou
Silver warehou
Total catch (t)
25,300
25,600
31,900
38,000
36,300
% taken by
FCVs
100%
99%
94%
82%
84%
Total catch (t)
2,200
3,300
2,300
2,200
1,700
% taken by
FCVs
55%
52%
62%
74%
69%
Total catch (t)
11,000
14,200
8,100
8,400
7,000
% taken by
FCVs
67%
73%
73%
72%
79%