Export Inspection (Quantity Charge) Amendment Regulations 1999 (No. 1) 1999 No. 21
EXPLANATORY STATEMENT
STATUTORY RULES 1999 NO. 21
Issued by the authority of the Minister for Agriculture, Fisheries and Forestry
Export Inspection (Quantity Charge) Act 1985
Export Inspection (Quantity Charge) Amendment Regulations 1999 (No. 1)
Section 10 of the Export Inspection (Quantity Charge) Act 1985 (the Act) provides that the Governor-General may make regulations, not inconsistent with the Act, prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act, and, in particular, exempting a class or classes of a prescribed commodity from charge, and prescribing different rates of charge in respect of different classes of prescribed commodity.
The Export Inspection (Quantity Charge) Regulations (the Regulations) prescribe quantity charges payable by persons in whose name an export permit is issued under the Export Control Act 1982 by the Australian Quarantine and Inspection Service (AQIS). The quantity charges are part of the mix of charges agreed by industry to recover the costs of providing export inspection services.
The Regulations provide for an additional fee to be charged in relation to containerised grain that has been prepared for export under an approved certification assurance (CA) arrangement. Presently the Australian Quarantine and Inspection Service (AQIS) does not collect any revenue for containerised exports of grain exported under CA arrangements, yet it incurs overhead costs of maintaining CA schemes. Currently in excess of 50% of containerised export grain operates under a CA arrangement in some States, and if the trend of clients moving to CA arrangements continues then the Program will trend towards a trading deficit.
The Review and Evaluation of the AQIS Grain Export Program recommended that "operators of certification assurance for bulk and containerised grain, contribute to AQIS overheads through an appropriate charging mechanism, to be determined in consultation with the AQIS Grain Industry Consultative Working Group (AGICWG)". At its 13 August 1998 meeting AGICWG agreed to an overhead charge of 50 cents per tonne for containerised product exported under CA arrangements. The 1 December 1998 meeting of AQIS Business and Finance Committee endorsed this additional charge.
The Office of Regulation Review has considered and advised that the attached Regulation Impact Statement satisfies the requirements for regulation impact statements as set out in A Guide to Regulation and contains an adequate level of analysis.
The purpose of the Regulations is therefore to make provision for clients to be charged a fee for containerised grain exported under a CA arrangement.
The Amendment Regulations will amend the Regulations as follows:
Clause 1 - Name of Regulations
Provides for the title of the Regulations.
Clause 2 - Commencement
Provides that the Regulations as amended commence on 10 March 1999.
Clause 3 - Amendment
Provides that the Regulations are amended as set out in the Export Inspection (Quantity Charge) Amendment Regulations 1999 (No.
Schedule 1 - (Regulation 3 - Rates of Charge)
Item 1 inserts the additional charge.
AQIS GRAIN EXPORT PROGRAM
CA overhead charge for containerised exports
REGULATION IMPACT STATEMENT
1. Introduction
Under the Export Control Act 1982 and subsidiary legislation, the AQIS Grain Program is responsible for inspecting and certifying exports of prescribed grains (and non-prescribed grains requiring some form of certificate) to comply with (i) Australian export standards (ii) the requirements of the importing countries and (iii) the principles of the International Plant Protection Convention (IPPC). Currently, the prescribed grains are: wheat, barley, oats, lupins, field peas, sorghum and, under separate Orders, mung beans (a further seven grains are due to be prescribed in the near future). Non-prescribed grains (those grain and seeds not declared by the regulations to be prescribed grains for the purposes of the Export Control Act 1982) such as rice or maize, when they do not require certification, can be exported without AQIS inspection.
This Regulatory Impact Statement relates to the Export Control (Quantity Charges) Regulations under the Export Control (Quantity Charges) Act 1985 and the Export Control (Fees) Orders under the Export Control Act 1982.
2. Problem
As an alternative to end-point inspection, and within prescribed categories of risk, AQIS encourages companies to manage their own phytosanitary inspection responsibilities, under Quality Assurance (QA) arrangements. Trained or accredited company personnel thus perform the inspections normally conducted by AQIS inspectors, for grain and other export commodities regulated by the Grain Program (hay, malt, flour etc). In the export trade, QA schemes are known as Certification Assurance (CA) and are audited by AQIS periodically.
The problem is that AQIS garners no revenue from CA arrangements for containerised exports, in terms of tonnage or fee-for-service inspection fees. The revenue from auditing charges, at fee-for-service rates, may cover the direct costs involved, but it does not cover AQIS's indirect (overhead) costs, incurred when settingup and maintaining CA schemes. Already, over 50% of the container trade operates on CA arrangements, in some States, and if more companies export containerised product under CA arrangements (as they are likely to do), the Grain Program's revenue will dwindle but the overhead costs are likely to remain the same.
An overhead charge of 3.9 cents per tonne has already been agreed, in consultation with the AQIS-Grain Industry Consultative Working Group (AGICWO), for companies exporting bulk grain under CA arrangements. This CA overhead charge is applied to bulk exports, in addition to a fee-for-service charge for auditing.
In the recent Review and Evaluation of the AQIS Grain Export Program (February 1998) industry called for a comparable CA overhead charge for containerised exports, to provide (i). equity with bulk grain and (ii) remove the cross-subsidisation of container operators on CA, by those on end-point inspection:
Recommendation 19: that operators of Certification Assurance (CA) arrangements for bulk and containerised grain, contribute to AQIS overheads through an appropriate charging mechanism, to be determined in consultation with the AGICWO.
3. Objective
In line with the Grain Program's policy of streamlining procedures, to minimise administrative overheads, for both AQIS and industry, the aim is to introduce a simple CA overhead charge for containerised exports, based on the "user pays" principle.
4. Options
Option 1: No CA overhead charge for containerised product.
Option 2: A charge for the Export Clearance Declaration (form EX222) or its
equivalent. (For CA arrangements, an Export Clearance Declaration is
signed by a company representative [authorised in the CA Manual] and must
be lodged with the Australian Customs Service before the goods can be
cleared through its EXIT system. A copy is forwarded to AQIS.)
Option 3: A charge at an agreed rate per container.
Option 4: A charge at an agreed rate per tonne.
5. Impact Analysis
Option 1, not to introduce a CA overhead charge for containerised product, would maintain and eventually exacerbate the inequities outlined in Section 2.
Option 2, a charge for the Export Clearance Declaration (form EX222), of say $10.00, is attractive in its simplicity. The overheads involved in raising an invoice, however, would almost negate the income, unless several charges (eg a monthly total) could be accumulated on a single invoice. Alternatively, if AQIS simply charged the CA operator for a pad of EX222 forms, at $10.00 a form, the overheads would be reduced accordingly.
This option, though it may be applicable as a short-term measure, is not available in the same form as a longerterm measure. AQIS is extending its computerised system of issuing EXport D0Cumentation (EXDOC) for meat exports, to encompass grain exports. EXD0C Grain, as the new system is known, is due to be introduced sometime early in 1999, around the time the CA overhead charge is due to come into effect.
Under EXDOC, the EX222 will disappear and a general fee will be levied on the Request for Permit (RFP), which is a transaction charge for EXDOC administration itself and not a substitute for the EX222. It would be a simple procedure, however, for EXDOC Grain to generate an equivalent of the EX222, for which AQIS could charge the exporter $ 10.00.
The EX222, or its EXDOC equivalent, involves some inequities, however. If exporters paid $10.00 per consignment for this document, it would mean that a single container would contribute the same overhead revenue as a 100-container consignment. These inequities, arising from differing numbers of containers in consignments, would unfairly penalise small exporters in favour of large operators.
Option 3, an agreed charge per container, would also be administratively simple; and it would overcome some of the volume inequities outlined in Option 2. Exporters of Less-than-Container-Lots (LCLs), however, would still be disadvantaged in relation to Full-Container-Lots (FCLs).
Again, on the downside, this option creates its own inequities, from a tonnage point of view. Clearly, 20 ft and 40 ft containers are capable of loading different tonnages of the same commodities; and chaff or light oats, for example, can provide a lesser tonnage than wheat or canola in the same container.
Under EXDOC, operators on CA can be identified through the Permit Issued Grain (PIG)
number timber, which must be obtained from AQIS before exporting prescribed grain (or non-prescribed grain
requiring a certificate). Given that all the necessary information is provided in the Request for Permit (RFP), and
in the Permit Issued Grain (PIG) number, it should again be relatively simple for EXDOC Grain to generate a CA
overhead charge per container, and automatically bill the exporter through the AQIS MASS system, or through
EFTPOS, if it is introduced. Where a cleaner/packer is on CA, and not the exporter, the exporter must decide
whether to recoup the CA overhead charge from the clean/packer.
Option 4, an agreed charge per tonne, is also an administratively simple option; and it is more equitable because it administers an overhead fee in direct proportion to the volume exported.
AQIS is currently building into EXDOC Grain, an ability to charge all bulk exports at the tonnage rate, so it would be relatively simple for EXDOC to apply a CA tonnage charge for containers and to automatically bill the exporter through the AQIS MASS system, or through EFTPOS if it is introduced. Again, where a cleaner/packer is on CA, and not the exporter, the exporter must decide whether to recoup the CA overhead charge from the clean/packer.
6. Consultation
On October 1996, senior officers of the Grain Program, together with members of the then Quarantine and Inspection Advisory Council (QIAC), began a review and evaluation of the AQIS Grain Export Program A Discussion Paper entitled Export Inspection: Adding Value to Australia's Grain Sales on the International Market was circulated to industry and other interested stakeholders, including State Governments, for comment.
Members of the evaluation team also travelled extensively throughout the grain exporting States, to talk directly to exporters, co-operative bulk handling companies, marketing boards, cleaner/packers and other niche players. A draft report was circulated to all stakeholders for further comment The final report of the Review and Evaluation of the AQIS Grain Export Program (February 1998), was endorsed by the stakeholders.
The proposal to introduce a CA overhead charge, given in Recommendation 19 of the report, was agreed at the 21 November 1997 meeting of the AQIS-Grain Industry Consultative Working Group (AGICWG), which is the principal forum through which AQIS consults with industry on a range of strategic, policy, operational, charging and market access issues.
At its meeting on 22 April 1998, the Working Group again endorsed AQIS's proposal to legislate Recommendation 19 into operational practice. Furthermore, at the 13 August 1998 meeting, the AGICWG agreed to introduce a CA overhead charge of $0.50 per tonne of containerised product.
Conclusion and Recommendation
Option 1, not to introduce a CA overhead charge for containerised product, is simply not an acceptable option, either for industry or AQIS.
it would mean sectors of industry on end-point inspection (or on bulk CA arrangements) and, in the face of
,,would continue to subsidise exporters on containerised CA programs increasing uptake of CA in the container trade, the Grain Program would have to raise inspection fees to balance the budget, thus exacerbating the inequities that already exist.
Option 2, a charge for the Export Clearance Declaration (form EX222), or its EXDOC Grains equivalent, would be administratively simple. It is not the preferred option, however, because of the inequities it introduces. A single charge for a single form would advantage the larger operators, with many containers in each consignment, and unduly disadvantage the smaller exporters with one or two containers in a lot.
Option 3, a charge per container, is not the preferred option, because of inequities it produces. The export trade deals in both 20 ft and 40 ft containers, and any charge per container would automatically be iniquitous; and such a fee mechanism would be further confounded by the LCL and FCL. alternatives.
Option 4, the tonnage charge, is the preferred option. Exporters would contribute to AQIS's CA overhead revenue in direct proportion to the tonnage of commodity exported - the 'userpays' principle.
A tonnage charge for CA grain exports is also consistent with current practice elsewhere in AQIS: (i) the CA overhead for bulk grain is a tonnage charge; and (ii) CA overhead charges for other export commodities in AQIS - eg fish and processed foods - are based on tonnages.
An analysis of the CA costs for containerised grain was conducted for the 22 May 1997 meeting of the AGICWG (see attachment); and a CA overhead charge of $0.50 per tonne was endorsed by the 13 August meeting of the Working Group. This 50 cents per tonne CA overhead charge for containers, compared with 3.6 cents per tonne for bulk grain, reflects the higher number of consignments per volume of exports in the container trade.
8. Implementation and review
In accord with AQIS's communication strategy, agreed in consultation with the AGICWG, industry will be forewarned of the CA overhead charge for containerised exports becoming law, through representative members of the AGICWG. An explanation of the new arrangements, from an operational point of view, will also be circulated to AQIS inspection staff by Quarantine Operational Notice.
The impact of the new CA overhead charge for containerised exports will be reviewed by its
effect on (i) costs to industry; (ii) the Grain Program's revenue; and (iii) through meetings
of the AGICWG. The AGICWG meets formally three or four times each year and conducts
out-of-session meetings (teleconferences) as required.
j/ops/mikeRIchning/CA overheads - regulation impact statement
9812471 charging
AGENDA ITEM 8
GRAIN PROGRAM
ANALYSIS OF INDIRECT PROGRAM COSTS
FOR CONTAINERISED GRAIN
Indirect Program Costs (All Grain)
Budget
Salaries and On-Costs $ 476,323
Administrative Costs $ 154,953
Financials (Depreciation, Doubtful Debts) 45,658
Overheads (National) $ 782,832
Sub-Total $1,459,766
Less component for reduction in inspectors $ (391,416)
Total $1,068,350
Projected Containerised Grain Revenue 1996197
Revenue %
Containerised Prescribed Grain $ 412.790 7%
Containerised Non-Prescribed Grain $1,238,370 22%
Non-containerised Revenue $ 4,186,870 71 %
Total $5,897,000 100%
Estimated Indirect Cost per Tonne for Containerised Grain
Total Indirect Cost $1,068,350
Containerised Grain Component 29%
Cost $ 309,822
Estimated Tonnes 600,000
Indirect Cost per Tonne 0.52
* Currently direct costs include the part cost of officers thoughout the States involved in management and other non-inspection activities. These have been included in the indirect component for the purposes of this exercise. The calculation equates to 0.25 of an annual inspector for the five main States.
** Allowance has been made for a reduction in overheads due to a reduction in inspector numbers under full CA arrangements. It is estimated that a reduction in the. inspectorate from 65 to 16 would result in a 50% reduction in Overheads.