The company announced yesterday that it would no longer conduct wharf activities under the control of publicly owned company TasPorts at Lady Barron on Flinders Island.

If the dispute is unresolved, the remote island community could be left stranded without the weekly freight service.

Furneaux Freight uses a Stevedore Licence Agreement to unload cargo at Lady Barron in order to run the service using 44-metre vessel Matthew Flinders III.

The company has terminated the agreement, and will stop operating under it from September 28.

Infrastructure Minister Rene Hidding said discussions were under way with Flinders Mayor Carol Cox to resolve the issue.

Mr Hidding said the government was advised that the dispute was in relation to non-conformances identified through audits into safety and dangerous goods handling ordered by TasPorts at Lady Barron Port.

He said Furneaux Freight notified TasPorts yesterday that it was unwilling to rectify the issues identified and that it would terminate its licence agreement for the management of the port.

"I have committed to the Mayor that the government will ensure a sustainable, safe and efficient shipping service for Flinders Island," Mr Hidding said.

A spokeswoman for the company said it did not want to discontinue the service to Flinders Island, but due to ongoing disputes with TasPorts it would be exploring other options for stevedore activities, which could include a third-party operator.

The spokeswoman said the company would make a further statement tomorrow.

Mr Hidding said the council was working closely with the Department of State Growth and TasPorts to have a contingency service in place in order to support the island's short-term needs.

Furneaux Freight began the service to Flinders Island in 2010 following the demise of Southern Shipping.