EXPLANATORY STATEMENT
DEPARTMENT OF AGRICULTURE, FISHERIES AND FORESTRY
Australian Meat and Live-stock Industry
(High Quality Beef Export to the European Union)
Order 2012
Statutory Basis
Under the Australian Meat and Live-stock (Quotas) Act 1990 and the Australian Meat and Live-stock Industry Act 1997, the Secretary of the Australian Government Department of Agriculture, Fisheries and Forestry (the department) may, where restrictions are imposed on exports of Australian meat, establish a scheme to allocate quota among holders of export licences.
This order is made under section 17 of the Australian Meat and Live-stock Industry Act 1997.
Background to Order
The European Union (EU) allows Australia to ship each financial year (1 July to 30 June) a quantity of high quality beef (HQB) to EU member countries at reduced tariff rates under a country-specific quota. The quota is managed on a cost-recovery basis by the department, which issues an order each year to ensure a fair and orderly export of HQB to the EU. The order also provides for the export of grain fed high quality beef to the EU under different quota arrangements.
For the purpose of this order, the quota year is from 1 July 2012 to 30 June 2013.
Consultation
Consultation was undertaken during a review of existing arrangements and again following the review. Exporters were given the opportunity to provide input about what should be reviewed and the review’s proposed changes to the administrative rules.
Summary of Order
The EU HQB quota access is for 7 150 tonnes, which for administrative purposes is divided into 6 650 tonnes of standard quota and 500 tonnes of non-standard quota. The orders detail the department’s administrative processes for managing the quota. The management aim is to optimise the value of the HQB access for the collective benefit of the Australian beef industry.
Orders are issued each year and focus on changing the dates to fit in with the operational requirements for the next quota year. This order includes amendments to some of the provisions. The amendments reflect the recommendations of the 2011 review conducted into the 2006 arrangements.
The review examined the effectiveness and efficiency of the current arrangements with emphasis on the operation of the non-standard quota. It also identified where improvements could be made in the overall quota allocation process and to the measures dealing with unused quota.
The report’s recommendations that modify existing arrangements relate to:
- calculation of performance to determine allocations
- treatment of new entrants
- eligibility conditions for non-standard quota
- timing and mechanism for re-distributing uncommitted or returned quota
- restricting trade in quota allocations.
The recommendations that introduce new provisions, which have been agreed to by industry, relate to:
- forfeitures
- penalties
- payment of fees.
Explanation of Amendments
Date Changes
The amendments to the dates reflect the timelines for the 2012-2013 financial year.
Changes to Administrative Rules
Part 1 - Preliminary
1.3(1) This part introduces definitions for the terms “first, second and third year new entrant”, “first-come first-served quota entitlement”, “new entrant”, “request amount” , “standard quota holder” and “supplementary quota entitlement”
1.3(2) Provides for a definition of body corporate.
1.4 Introduces an explanation of what constitutes use of a quota entitlement.
1.5 Refers to the legal time in the Australian Capital Territory.
Part 2 – Prohibition of exports
2.1 Remains unchanged because approvals and certificates are still required for product to enter at reduced tariff rates.
2.2 Remains unchanged because a certificate is still required to enter grain fed high quality beef at zero tariff.
Part 3 – Quota entitlements – initial allocations
Industry’s preference is that access to the high quality beef quota be based on a fair and equitable allocation process that acknowledges an exporter’s level of commitment to the market.
3.1 Introduces the concept of “stages” to the allocation process.
3.2 Divides the quota access amount into the standard and the non-standard categories and allows for unallocated non-standard quota to be allocated to the standard quota holders.
3.3(1) Maintains the existing eligibility criteria for standard quota. It also allows for entitlement calculations to be based on a three-year rolling average and requires a ‘request amount’ to be stipulated by the exporter when applying for quota.
Previously, calculations of entitlement were based on a single year of recorded shipments and allocations made regardless of whether the exporter could actually ship that amount. The three-year rolling average will smooth out the allocated amounts year on year and provide greater business certainty. The ‘request amount’ requires the exporter to focus on what can be achieved for a given year. Under the new arrangements the request amount is pivotal in calculating quota entitlement.
3.3(2) Refers to modifications made to existing transfer rules. The note refers to a long standing rule of not allocating less than 1 tonne. Less than 1 tonne is considered uncommercial.
3.4 Deals with the eligibility of new entrants to be allocated non-standard quota.
3.5 This new provision sets the rules for the allocation of non-standard quota to standard quota holders early in the allocation process. Previously standard quota holders could only access non-standard quota through a first-come first-served system that did not operate until well into the quota year, which often resulted in quota not being used.
3.6 Introduces the concept of notional calculations for standard quota entitlement. This provides the base around which final entitlement is calculated. The provision also changes the exiting formula used to calculate an exporter’s standard quota entitlement. The formula has changed from that based on a single year record of shipment to that of a 3-year average.
3.7 Introduces the concept of notional entitlement calculation for non-standard quota allocations to provide a base from which actual entitlement is calculated.
3.8 Makes provision for non-standard allocations to be based on a formula.
3.9(1) Provides for the steps to be used following the notional calculations to further calculate entitlement.
3.9(2) Provides the rules for calculating standard quota entitlement using the notional entitlement as the base and considering the request amount. The provision includes an existing rule that if an entitlement is less than one tonne, the entitlement is nil.
3.9(3) Provides for some standard quota holders to be able to have priority access to non-standard quota.
3.9(4) Provides for limits to allocation amounts from the non-standard quota pool for those with priority access.
3.10 This provision is unchanged because the requirement to notify the exporter in writing of their quota entitlement still applies.
Part 4 – Quota entitlements – subsequent allocations stages
Access to the European Union high quality beef market is constrained by the limits of the quota. However, market forces other than the quota itself may affect the level of demand for quota entitlement. For periods of weak demand, provisions for subsequent allocations allows for the optimum use of the quota.
4.2 Allows for further allocation of quota if after the initial allocation process there is still some quota left (known as supplementary quota) and when, for other reasons, unused quota becomes available (known as first-come first-served quota).
4.3 Provides the eligibility criteria for accessing supplementary quota.
4.4 Provides the eligibility criteria for accessing first-come first-served quota.
4.5 Provides the rules for allocating supplementary and first-come first-served quota.
4.6 This provision is unchanged because the requirement to notify the exporter in writing of their quota entitlement still applies.
Part 5 – Loss of allocated EU quota entitlement
Provisions in previous orders allowed for the recall of unused or uncommitted quota. Industry has asked that these provisions be strengthened because “sitting” on quota reduces its value to the industry, especially if it occurs towards the end of the quota year. The new provisions will continue to allow exporters the right of review.
5.2 This provision is modified by bringing the due date in relation to entitlement lapses forward by one month to provide more planning flexibility for exporters.
5.3 This provision introduces the concept of forfeitures, which are to apply when quota holders do not use a certain amount of their entitlement or release the entitlement allocated to them by a certain time or do not pay the prescribed service fee by the due date. Any forfeited entitlement becomes available to any quota holder under the terms of the first-come-first-served provisions. A decision to impose a forfeiture is appealable.
5.4 This provision introduces the concept of penalties for unused quota. The penalty is applied when quota is not used or returned for re-distribution by a certain time. The penalty is applied at the next allocation process. An exporter must show-cause why the penalty should not be imposed. A decision to impose a penalty is appealable.
Part 6 – Transfer of quota entitlement
Some industry members have sought exclusion from entitlement for those quota holders whose principle business objective is to trade in quota, rather than actually invest in exporting the beef. However, the option for exporters to transfer (or trade) quota amongst themselves is a long standing arrangement that recognises commercial realities and facilitates an efficient and effective way to maximise quota usage. To meet the exclusion request part way, the transfer/trade rules have been modified.
6.1 This provision is unchanged because the administrative requirement to record transfers still applies, as do the instances where quota may or may not be transferred.
6.2 Modifies existing provisions and includes new instances where quota cannot be transferred. It also strengthens the effectiveness of penalties by not allowing them to be transferred.
6.3 This new provision accommodates transfer rules around the new non-standard and supplementary quota arrangements and the modified first-come first-served arrangements. The aim is to prevent allocations to those who apply simply so they can ‘sell’ or transfer quota.
6.4 Limits how much quota an eligible exporter may transfer and over what period. This allows for some transfer for sound business reasons, while limiting transfer practices as a principle business objective.
Part 7 – Approvals
7.1 This provision is unchanged because the previous administrative arrangements on how to obtain approvals to export consignments still apply.
7.2 Expands the existing provision to include two periods instead of one where an exporter may apply for unused quota on a first-come-first-served basis. The provision allows for a timely and orderly distribution of residual quota on an as-needs basis. The allocation process will be based on demand, availability and payment of the prescribed fee.
7.3 This is a new provision that formalises a current practice of a quota holder notifying the department about the likelihood of quota being unused. This provision is in line with other quota management orders.
7.4 This provision is unchanged because the duration of approval remains the same.
7.5 The provision is unchanged because the basis for the calculations on how much an exporter has exported remains the same.
Part 8 – Certificates
This part remains unchanged because the production and procurement process for certificates remains the same.
Part 9 – Miscellaneous
This part remains unchanged because administrative detail remains the same.
Payment of Fees
The quota system is managed on an industry agreed fee-for-service, cost-recovery basis. An exporter’s access to an entitlement is subject to payment of the fee. Under previous arrangements the fee was paid once on the initial allocation. The new provision at sections 4.4, 5.3 and 7.2 allows for the fee to be charged whenever an exporter gains exclusive rights to a quota amount and for reasonable penalties to apply for non-payment. This principle is applied to other Australian managed quota systems.
Human Rights Compatibility
The amendments to the Order are compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
The modifications to the existing quota administrative rules will continue a fair quota allocation process. The modifications do not raise any human rights issues as their focus is on modifying business behaviour in relation to quota usage. Some current business behaviour tends to affect the value of the quota rent and increase costs to exporters. Some of the modifying mechanisms relate to penalties and forfeitures. These mechanisms are considered appropriate to ensure business practices optimise the rate and timely use of quota. The application of the penalty and forfeiture provisions are appealable and advance notices, show-cause opportunities, guidelines and web information will continue in place to safeguard against inadvertent infractions.
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