Explanatory Statement
Issued by Authority of the Deputy Prime Minister and Minister for Agriculture and Water Resources
Primary Industries (Customs) Charges Act 1999
Primary Industries (Customs) Charges Amendment (Seed Cotton) Regulations 2017
Legislative Authority
The Primary Industries (Customs) Charges Act 1999 (the Act) authorises the imposition of primary industries charges that are duties of customs. Section 8 of the Act provides that the
Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or that are necessary or convenient for carrying out or giving effect to the Act. The regulations to the Act may impose a charge on one or more specified products in circumstances ascertained in accordance with the regulations.
Purpose
The purpose of the Primary Industries (Customs) Charges Amendment (Seed Cotton) Regulations 2017 (the proposed Regulations) is to authorise a new customs charge on seed cotton products to fund industry research, development and plant health and Emergency Plant Pest Responses (EPPR). The customs charge will be payable by the producer of the seed cotton, and be disbursed to the Cotton Research and Development Corporation (CRDC) and Plant Health Australia (PHA).
Background
The customs charge imposed on cotton producers exporting seed cotton will fund Research and Development (R&D), plant health and the EPPR for the industry. The current excise levies imposed by the Primary Industries (Excise) Levies Act 1999 are paid against the ‘natural fibrous hairs that are produced from seed cotton by separating the hairs from the seeds and not further processing those hairs’.
Exports of seed cotton, which by definition have not undergone processing to remove the fibrous hairs from the seeds at the time of export, do not attract this levy, thus creating an anomaly. Exports of seed cotton have recently become economically viable, meaning that this anomaly did not exist when the current excise levy was first imposed. Amendments through the proposed Regulations and Primary Industries (Excise) Levies Amendment (Seed Cotton) Regulations 2017 will resolve this anomaly.
Impact and Effect
The proposed Regulations will impose the charge on exports of seed cotton at a rate equivalent to the current levy on cotton lint. The current levy on cotton lint is calculated as $2.25 per 227 kg bale of cotton lint, of which $2.21 and $0.04 is for R&D and PHA respectively. Seed cotton includes both cotton seed and cotton lint with an average composition of 41 per cent lint. Calculating an equivalent levy on seed cotton, which is charged on a per tonne basis, first requires the conversion of the $2.25 per 227 kg bale cotton lint levy to $9.91 per tonne. Accounting for the average 41 per cent cotton lint in seed cotton, the equivalent cotton seed levy will be $4.06 per tonne, of which $3.99 will be disbursed to R&D and $0.07 will be disbursed to PHA. The EPPR levy will be set at zero. The proposed Regulations will also stipulate who must pay the levy and provide that the customs charge is not imposed where excise levies have already been imposed on the seed cotton under Part 10 of Schedule 27 to the Primary Industries (Excise) Regulations 1999.
Under the Primary Industries Research and Development Act 1989, eligible cotton R&D expenditure is matched dollar for dollar by the Australian Government up to a cap of 0.5 per cent of the gross value of production. This cap will apply to matching of expenditure derived from the export of seed cotton.
The proposed amendments will prevent the undermining of the cotton industry’s research systems by ensuring all cotton producers contribute proportionately to the statutory levy scheme regardless of where primary processing (ginning) occurs. There will be no net change to the amount of levy paid by producers against the total amount of cotton they produce, or the government matching contribution paid for R&D. The proposed Regulations will also enable the maintenance of cotton research programmes. The proposed Regulations will likely have a minimal regulatory burden on cotton producers who may be required to lodge a return within 28 days after the end of the month in which seed cotton is exported, and maintain records on seed cotton harvested, bought, sold or exported to validate their return.
Consultation
The Department of Agriculture and Water Resources (the department) liaised with Cotton Australia, Cotton Research and Development Corporation and the Office of Best Practice Regulation (OBPR) in developing the seed cotton levies. Cotton Australia, which is the peak representative body for the cotton supply chain, consulted closely with its members (including all ginners, cotton co-operatives, consultants and grower associations), and obtained unanimous support to implement a levy on cotton that is exported as seed cotton, at a rate equivalent to the existing levy on cotton lint. The department also consulted the company that indicated plans to export seed cotton and found it was satisfied with the department’s proposed approach.
The department consulted OBPR to determine whether a Regulation Impact Statement (RIS) was required for the seed cotton levy amendment proposal. OBPR assessed the proposal to have minor regulatory impact, and determined a RIS was unnecessary at this time (Ref: OBPR ID 21237).
Details
Details of the Regulations is set out in the Attachment A.
The Regulations are compatible with the human rights and freedoms recognised or declared under section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011. A full statement of compatibility is set out in Attachment B.
The Regulations is a legislative instrument for the purposes of the Legislation Act 2003.
Attachment A
Details of the Primary Industries (Customs) Charges Amendment (Seed Cotton) Regulations 2017
Section 1 – Name
This section provides that the name of the proposed Regulations is the Primary Industries (Customs) Charges Amendment (Seed Cotton) Regulations 2017.
Section 2 – Commencement
This section provides for the proposed Regulations to commence the day after the instrument is registered.
Section 3 – Authority
This section provides that the proposed Regulations is made under the Primary Industries (Customs) Charges Act 1999.
Section 4 – Schedules
This section provides for the Primary Industries (Customs) Charges Regulations 2000 is amended as set out in the applicable items in Schedule 1.
Schedule 1 – Amendments
Item 1 amends Schedule 14 to insert a new Part 6 relating to seed cotton.
Clause 6.1 provides for the definition of seed cotton as set in clause 12.2 of Part 12 of Schedule 37 to the Collection Regulations and amended from time to time.
Clause 6.2 sets out the charges that are imposed on seed cotton exported from Australia.
Subclause (1) and (2) provides for when the charges are be imposed on seed cotton exported from Australia.
Subclause (3) specifies that the rate for the research component of the charge is $3.99 per tonne of seed cotton.
Clause 6.3 sets out the Plant Health Australia levy imposed on seed cotton.
Subclause (2) specifies that the rate of PHA charge is $0.07 per tonne of seed cotton.
Clause 6.4 sets out the EPPR levy imposed on seed cotton.
Subclause 6.4(1) specifies how EPPR charge is imposed on seed cotton.
Subclause (2) specifies that the rate of EPPR charge on seed cotton is presently nil.
Clause 6.5 sets out who pays the charge on seed cotton.
Clause 6.6 sets out the conditions when the charge on seed cotton is not imposed.
Attachment B
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Primary Industries (Customs) Charges Amendment (Seed Cotton) Regulations 2017
This Legislative Instrument is 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.
Overview of the Legislative Instrument
The purpose of the Primary Industries (Customs) Charges Amendment (Seed Cotton) Regulations 2017 is to authorise a new customs charge on seed cotton products to fund industry research, development, Plant Health and Emergency Plant Pest Responses. The customs charge will be payable by the producer of the seed cotton, and be disbursed to the Cotton Research and Development Corporation and Plant Health Australia.
Human rights implications
This Legislative Instrument does not engage any of the applicable rights or freedoms.
Conclusion
This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.
The Hon. Barnaby Joyce MP
Deputy Prime Minister and Minister for Agriculture and Water Resources