A foreign ship arrives in Sydney carrying a full load of containerised goods. Some of those containers are bound for Melbourne. The ship could carry them there — it is already heading south. But it cannot, as a matter of law, discharge cargo in Sydney and then carry a domestic cargo from Sydney to Melbourne. That would be cabotage, and cabotage is restricted in Australia.
Understanding cabotage matters for traders who use multiple legs in their supply chain, who rely on transshipment, or who are planning logistics around a multi-port distribution strategy.
Sea cabotage: the Coastal Trading Act
Australia's domestic sea freight regime is governed by the Coastal Trading (Revitalising Australian Shipping) Act 2012. The Act establishes a licensing system for vessels carrying cargo between Australian ports.
An Australian-licensed vessel may carry coastal cargo freely. A foreign-flagged vessel wishing to carry cargo between Australian ports must obtain a temporary licence for each voyage, granted under a system that gives Australian vessels the right to match the foreign vessel's offer. In practice, this means that a foreign vessel cannot routinely operate as a domestic carrier between Australian ports.
Air cabotage: the Chicago Convention
International civil aviation is governed by the Chicago Convention 1944, which reserves the right to operate domestic air services — the "cabotage right" — to the nationals of each contracting state. Foreign airlines flying into Australia may carry passengers and freight between Australia and their home country; they may not carry domestic Australian freight between, say, Brisbane and Perth on their own account.
Why this matters for supply chain design
For importers designing a multi-port distribution strategy, cabotage constraints mean that the international carrier cannot simply continue domestically. The importer needs a domestic carrier for the coastal leg — adding a carrier relationship, a transfer of documentation, a new insurance period, and a new liability regime.
For traders considering transshipment through a hub port — Singapore or Port Klang, for example — the cabotage rules of the hub country determine whether a feeder vessel can carry cargo between ports within that country as part of the transshipment service.
The reform debate
Australia's coastal trading regime is regularly reviewed. Arguments for liberalisation point to the higher cost of domestic sea freight compared to road alternatives, the ageing of the Australian-flag fleet, and the difficulty of sustaining viable coastal shipping services on lower-volume routes. Arguments for retention point to maritime workforce skills, national security, and the strategic value of a domestic shipping capability.
The conventions governing each mode, and how they fit together on a door-to-door journey, are covered in Multimodal Transport: Moving Goods Door to Door, Book 8 of the International Trade and Transport Law Library. See the Library.