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Wheat Marketing Amendment Bill 2003
04-03-2014 06:50 PM
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Wheat Marketing Amendment Bill 2003
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THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
WHEAT MARKETING AMENDMENT BILL 2002
authority of the Minister for Agriculture, Fisheries and
the Hon Warren Truss, MP)
WHEAT MARKETING AMENDMENT BILL 2002
This bill is part of arrangements to provide a funding mechanism for the wheat industry to meet the operational costs of the Wheat Export Authority (WEA). Separate regulations are proposed to introduce a charge on all exports of wheat and for a fee to accompany applications for export consents made to the WEA.
At the time of the privatisation of the former statutory Australian Wheat Board in 1999, the WEA was established as a regulatory body to control the single desk wheat export arrangements, including the issuing of export consents to persons other than AWB (International) Ltd (AWBI), the manager of the single desk. Other key functions of the WEA are monitoring AWBI’s export performance and reporting on the benefits to growers; and
conducting a review before 2004 of AWBI’s use of its export rights, including its role in the consultation process with WEA for the issuing of export consents and AWBI’s veto over bulk exports.
The bill amends the Wheat Marketing Act 1989 (the WMA) to provide for the appropriation from the Consolidated Revenue Fund to the WEA, of monies equivalent to a charge to be imposed on exports of wheat through regulations which are proposed to be made under the Primary Industries (Customs) Charges Act 1999 . The WMA already provides for regulations to enable the WEA to collect a fee in respect of applications for export consents.
The bill also makes other minor changes to the WMA to improve the operational efficiency of the WEA and to clarify the objective of its export control functions. It includes provisions to allow the WEA Board to delegate its functions to the Chief Executive Officer; simplify the process to make minor variations to export consents; and strengthen the WEA’s powers to monitor compliance by exporters of wheat under consents. An objective statement is intended to clarify the role of the WEA in complementing the single desk arrangements managed by AWBI under the WMA.
Financial Impact Statement
There will be no net financial impact from this bill. The amount paid to the WEA via a special appropriation under the WMA will be equivalent to monies collected as the export charge to be imposed by regulations under the Primary Industries (Customs) Charges Act 1999 and penalties. In a normal season a charge of around 12-15 cents per tonne of wheat exported would be sufficient to meet the WEA’s current budgeted expenditure of around $2m annually.
If the Commonwealth is required to refund any excess charge to the person paying the charge, then an equivalent amount can be recouped by the Commonwealth from the WEA.
Regulation Impact Statement
On 1 July 1999, the statutory marketing and financing arrangements for wheat through the former statutory Australian Wheat Board ceased and these activities were taken up by a grower controlled, public company, AWB Ltd and its subsidiaries. AWB (International) Ltd (AWBI), the wholly owned subsidiary responsible for maximising net returns to growers through export sales and pooling, was granted, through the Wheat Marketing Act 1989 (the WMA), the single desk export right for wheat which had been held by the former Australian Wheat Board.
The export regulatory functions of the former Australian Wheat Board (under which other exporters could seek a permit from the Board to export wheat outside of the single desk) were taken over by the Wheat Export Authority (WEA). Previously the cost of the single desk administered by the former Australian Wheat Board was met from pool administration fees deducted from grower returns.
The WEA was established under the amended WMA to control the single desk wheat export arrangements. Its functions include
· issuing export consents to persons other than AWBI, after consultation with that company;
· monitoring AWBI’s export performance and reporting on the benefits to growers; and
· conducting a review before 2004 of AWBI’s use of its export rights, including its role in the consultation process with WEA for the issuing of export consents and AWBI’s veto rights over bulk exports (which are also provided for by the WMA as part of the single desk arrangement). The review is not about whether or not there should be a single desk and it will not incorporate National Competition Policy (NCP) principles. Rather it will assess the benefits from AWBI’s management of the single desk by examining issues such as pooling arrangements, pricing, the supply chain and the service and remuneration arrangements between AWBI and its parent, AWB Ltd.
A review of the WMA under the NCP principles was held in 2000. The then Government’s response, announced in April 2001, was to continue the current single desk arrangements including the WEA and its functions, but with improvements to the export consent system and development of effective performance indicators to monitor AWBI and as part of the 2004 review process.
The revised export consent system in place since January 2002 provides for the granting of long term niche market (12 month) and short term (3 month) consents for exports in bags and containers. In addition, the guidelines include "Exporter Eligibility Criteria" against which the applicant for a consent can be assessed. The WEA also provides notification of forward prospects for markets likely to be granted a consent.
The WEA conducts on-going monitoring of AWBI’s export performance and use of the single desk, against performance indicators developed as part of the response to the
NCP review. A ‘commercial-in-confidence’ report is provided each year to the Government with a “Growers’ Report” released publicly. These indicators and annual monitoring reports will form the basis for the 2004 review.
At the time of its establishment when AWB Ltd was privatised, the WEA was provided with interim ‘seed funding’ of $6 million under the WMA. This amount, which was expected to last for 5 years, was determined by the then Minister as money which the former statutory Australian Wheat Board was required to retain. It was essentially grower money held in reserves of the former Australian Wheat Board, established from pool revenue not distributed to growers.
The WEA has indicated that, with projected expenditure at about $1.8-2m annually, this capital and interest earnings will only be sufficient until the second half of 2003.
The problem therefore is how to provide on-going funding for the WEA to carry out its functions, given the wheat single desk arrangements will continue indefinitely unless the WMA is amended or repealed.
Wheat growers and their associated industry are the main beneficiaries of the WEA’s operations although the single desk premium itself may only be small, in the order of $US1 per tonne (National Competition Policy Review of the Wheat Marketing Act 1989, December 2000; Chapter 7). There is a market failure in that individuals within the industry would be unlikely to contribute voluntarily to obtain the services of the statutory WEA, which are available to all.
The only other projected revenue apart from interest would be if application fees were introduced under provisions of the WMA. However, the level of such fees can only be related to the services incurred in processing applications for consents and therefore could only make a minor contribution to the WEA’s overall budget.
Therefore, it is clear the WEA will require a permanent funding arrangement if it is to continue to undertake its functions effectively.
The objective is to achieve an equitable long term funding arrangement for the WEA, which takes account of the main beneficiaries of the wheat single desk and the WEA’s associated activities. The Government has indicated that the industry rather than the taxpayer should be responsible for funding the WEA since wheat growers are the main beneficiaries.
There are no existing regulations in place to meet this objective.
Options considered as being viable to meet the above objective are:
1. a fee for privilege (i.e. a charge) on the holder of the single desk; or
2. a levy/export charge on wheat.
Both options could be supplemented by fees for consent applications.
Impact analysis (costs and benefits) of each option
Who are affected
The problem of, and identified options for a solution to, funding the WEA potentially affects the Government, the wheat industry and the community generally. Within the wheat industry there could be a differential impact between growers generally and growers delivering to AWBI’s pools, and exporters, depending on whether a fee for privilege, a production levy or export charge is imposed and the proportion of sharing of any impost between growers and marketers/exporters.
Affect of options on existing regulatory arrangements
Wheat growers pay a 1% ad valorem levy on delivery/sales under the Primary Industries (Excise) Levies Act 1999 and regulations, to fund research through the Grains Research and Development Corporation (GRDC) under the Primary Industries and Energy Research and Development Act 1989 (the PIERD Act). Other grains, oilseeds and pulses are similarly levied for this purpose. In addition, there is a 0.015% ad valorem National Residue Survey levy imposed on wheat and some other grains.
The Levies and Revenue Service within AFFA collects these levies under the Primary Industries Levies and Charges Collection Act 1991 and disburses the relevant amounts to the appropriate organisation. The administration costs are borne by the relevant organisation.
A fee for privilege or levy/charge on wheat would, if passed back to growers (as seems likely), result in a minor additional ‘levy’ burden (12 to 15 cents per tonne) unless industry agreed to a concomitant reduction in the current levy rates for R&D.
A new Act would be required for an impost as a fee for privilege on the holder of the single desk.
A new levy/charge on wheat could be imposed through new and/or amending regulations made under the existing primary industries levies/charges legislation. The collection and administration could be handled by the Levies and Revenue Service within AFFA under new or existing regulations under the Primary Industries Levies and Charges Collection Act 1991 . The WEA would be expected to meet the associated collection costs.
Impacts of the proposed options as likely benefits and costs to affected groups
OPTION 1 - A fee for privilege, i.e. a charge, on the holder of the single desk (currently AWBI)
This option would involve new legislation to impose a tax/fee for privilege on the holder of the single desk (in this case AWBI) with the amount raised being passed to the WEA to meet its operational costs. The fee would be set as a percentage of the value of the single desk but would be expected to work out in the order of 12-15 cents per tonne of wheat delivered to raise around $2m to cover the operating budget of the WEA.
The Government and community would benefit in that this approach is a means of targeting the beneficiaries of the single desk and its value. The associated introduction of consent application fees could ensure exporters operating under consents (and indirectly growers who sold to them) also contributed something to the cost of the WEA. These non-bulk exports only account for around 2% of total wheat exported.
Furthermore, both the community and industry would benefit because the fee would not be imposed on those growers not delivering to the AWBI’s pools for export via the single desk. The costs are unlikely to be reflected in higher domestic prices because published pool prices would not be affected and the fee would not impact on operators on the domestic market. Industry would further benefit since the administration should be relatively simple and cost effective with no levy collection costs.
Wheat growers delivering to the pools would incur a cost of 12 -15 cents per tonne to the extent it was passed on by AWBI. The extra impost is minimal with net pool returns around $200 or more per tonne. The administration costs would be minimal since only one organisation would pay the fee.
OPTION 2 - Impose a Levy/Export Charge on Wheat
This option would involve making new regulations under the existing Primary Industries levies or charges legislation to impose either a new levy on all wheat sold or delivered or a charge on all exports of wheat whether by AWBI or other exporters. This would be in the order of 12-15 cents per tonne in average crop yield circumstances to raise around $2m to cover the operating budget of the WEA.
The Government and community would benefit from this option since the costs of the WEA/single desk would be met by the industry receiving the major benefit of the arrangements. Furthermore, in the case of an export charge, all growers who sell for export, rather than those exporting only through AWBI, would contribute to the costs
of the WEA. Also, other growers who do not use those services, that is by selling on the domestic market, would not contribute to the costs of the WEA. Also, apart from the initial establishment costs associated with legislation change, industry would bear the costs of administration and collection of the charge.
The administration would be simple and collection arrangements are largely in place for similar industry levies.
Wheat exporters and/or growers would incur the cost of an export charge or production levy estimated to be 12-15 cents per tonne to fund the WEA at $2m per year. This would be in addition to any consent application fee which exporters other than AWBI might have to pay. Such a fee would only relate to the services provided by the WEA in relation to processing costs for applications. An export charge ensures that only those industry participants who utilise the services of the WEA meet its costs. A grower levy could be seen as inequitable as it can be argued that only those growers using the single desk and benefiting from the WEA’s services should pay the costs.
Exporters would face an additional administrative burden and may also consider their international competitiveness is affected, although that would be unlikely given the small charge that would be needed.
Collection costs (yet to be determined) would be met by the WEA, either directly or as a deduction from charge payments, thereby imposing a further administrative cost on the system and industry. The cost would be expected to be greater for a levy on growers than for a charge on exporters because of the greater numbers involved and increased surveillance necessary; thereby imposing a further administrative cost on the system and industry.
It can be argued that all growers have the opportunity to sell (export) through the single desk if they wish to, and receive the resultant benefits, and that the domestic market is also supported by the arrangements. However, equity considerations suggest that growers not using the single desk and benefiting from the WEA’s services should not pay the costs.
The fee for privilege would be a cost only on those growers delivering to AWBI’s pools.
An export charge would be equitable in that it provides a means to ensure all wheat exporters (and indirectly growers who sell to them) would fund the costs of the WEA. AWBI is responsible for around 98% of exports. Exporters operating under consents could also contribute to the costs of processing those applications through additional application fees.
Within the industry wheat exporters would benefit from a production levy as opposed to an export charge since growers would directly bear all the costs associated with the single desk.
A grower levy could be seen as inequitable since it would be imposed on some 5mt of wheat (20-25% of production) that is used domestically and not exported, to finance an export regulator (the WEA). Consumers, and the community could incur a cost if a production levy was passed through in higher domestic prices for wheat, although the impost is marginal.
Even though domestic prices are probably influenced by export pool returns a charge on exports is more likely to be passed back to growers rather than forward to consumers.
Consultation on the broad range of funding options has been undertaken with the main stakeholders, the WEA, the Grains Council of Australia (GCA) and AWBI.
The WEA has opposed the introduction of consent application fees on the basis that all but a nominal fee could drive a number of niche and low volume exporters out of business with adverse consequences for marketing opportunities for growers and export market development. The WEA has also suggested that the cost of collecting the fees could outweigh the revenue benefit.
The GCA has indicated its views that industry alone should not fund the WEA, and argue that the benefits from the single desk flow through to rural and regional communities and the economy generally. It has also indicated a preference for any levy to be spread over all growers.
AWBI has previously indicated a preference for a ‘levy’ on pool deliveries and exports under consents (equivalent to a charge on all exports) and/or application fees to ensure that all users of the system contribute to the cost. It is expected that AWBI will simply pass on the costs to growers through pool deductions.
It is unlikely that industry would be prepared to bring forward a request for a levy/charge on wheat which would have the support of the industry.
Conclusion and recommended option
A charge on all exports of wheat, combined with an additional fee for consent applications by exporters other than AWBI is favoured over a production levy or a fee for privilege on the holder of the single desk since it ensures all users contribute to the costs of the WEA. A charge would be simple to implement and administer through existing levy arrangements. This approach follows the precedent of industry funding the single desk arrangements, set before privatisation of AWB Ltd and the establishment of the WEA. Domestic sales would be excluded and it is unlikely the charge would impact on domestic prices.
Application fees would cover at least part of the costs of processing those applications and discourage non-genuine applications.
Implementation and review
For either option the WMA would require amendment to appropriate the funds collected by whatever means to the WEA. A fee for privilege would require a new imposition Act whereas a levy/charge could be imposed by regulation.
The WEA is required to review before 2004 AWBI’s use of its single desk rights. This review which is about AWBI’s performance rather than the single desk system per se, would incorporate the annual monitoring performance reports from the WEA.
The WMA (including the operation of the single desk and WEA) will be subject to a further NCP review within 10 years from 2000 to meet the requirements of the Competition Principles Agreement between the Commonwealth and the States.
NOTES ON CLAUSES
Clause 1: Short title
1. The Act will be called the Wheat Marketing Amendment Act 2002.
Clause 2: Commencement
2. The Act will commence on the day it receives the Royal Assent.
Clause 3: Schedule(s)
3. Clause 3 provides that the amendments or repeal of each Act specified in the Schedule to the Bill and any other Item in the Schedule will have effect according to the terms of that Item. The Schedule refers to amendments to the Wheat Marketing Act 1989 (the WMA).
SCHEDULE 1 - AMENDMENTS
Wheat Marketing Act 1989
4. This Item inserts a new definition in Section 3 to define ‘wheat export charge amounts’. ‘Wheat export charge’ amounts are the charge identified in regulations and any penalties payable under the Primary Industries Levies and Charges Collection Act 1991 in respect of late payment of the charge. It is proposed to make regulations under the Primary Industries (Customs) Charges Act 1999 to impose a wheat export charge and that those regulations will link that charge to this definition.
5. This item inserts new Sections 5A and 5B in the WMA.
6. The new section 5A provides that for so long as AWB (International) Ltd (AWBI) (the company declared as nominated company B for the purposes of the WMA) is the manager of the wheat single desk rights under Section 57 of the WMA, the WEA must perform its export control functions so as to complement any objective of AWBI to maximise net returns to growers selling wheat for inclusion in its pools. However, this is not to prevent the WEA exercising those functions so as to allow for the development of niche and other markets by other persons, where the WEA considers there may be a benefit to growers and the wider Australian community. This recognises that the WEA has the final discretion in the granting of consents for the export of wheat in bags and containers and that a flexible approach is desirable to allow exporters to take advantage of market opportunities and to capture the benefits from the single desk arrangements.
7. The new Section 5B provides that the WEA may delegate all or any of its functions and powers, except those relating to employment and terms and conditions of staff, to the person undertaking the duties of chief executive officer of the WEA. The delegate, in exercising these powers or functions must comply with any directions from the WEA.
8. This item inserts new Sections 10A and 10B in the WMA.
9. The new Section 10A provides that the Commonwealth must pay the WEA amounts equal to the wheat export charge amounts (see Item 1) and appropriates the Consolidated Revenue Fund for this purpose.
10. The new Section 10B enables the Commonwealth to recover from the WEA expenses it incurs in collecting or recovering wheat export charge amounts (see Item 1) and in administration of the charge arrangements. The clause also makes clear that the Commonwealth can set off these expenses from payments of the wheat export charge amounts payable to the WEA under the new Section 10A. It is also made clear that any refund of overpayments which might arise as a result of subsection (18)(3) of the Primary Industries Levies and Charges Collection Act 1991 may be set off against amounts owed between the WEA and the Commonwealth.
11. This Item amends subsection 11(2) of the WMA to correct the reference to the relevant section of Commonwealth Authorities and Companies Act 1997 (CAC Act) regarding the powers of the WEA to invest surplus monies. The WEA is not a statutory marketing authority under the CAC Act.
12. This Item inserts new Sections 58 and 59 in the WMA.
13. The new Section 58 expressly provides for the WEA to vary a consent it has issued for the export of wheat, on request by the person to whom the consent was given. A new subsection 58(2) will prevent the WEA making a variation to a consent except in the matters for which a variation has been requested. The WEA will be able to decide whether to grant the variation request in full or part, in the same way as it does for original consent applications. The WEA’s consideration takes account, amongst other things, of any indicative tonnage advice for the particular market received from AWBI. However, paragraph 58(2)(b) provides that the WEA should not be able to vary the original consent if the result was to make the consent less favourable to the person.
14. Unless the variation is considered to be a minor matter by the WEA, the variation request will be treated in a similar manner to a new consent application, with AWBI being consulted. All requests for variations of consents will be considered against any guidelines issued under subsection 57(3E) of the WMA. The new subsection 58(5) provides that a request to vary the tonnage to be exported by not more than 500 tonnes would be a minor matter but other matters could also be deemed minor by the WEA where it was considered that the nature or impact of the consent would not be substantially changed by the variation.. These may include for example, the grade of wheat or the buyer. In the case of a minor variation being made to a consent the WEA is required to inform AWBI of the change.
15. A new subsection 58(7) provides that consent cannot be varied except in accordance with Section 58 of the WMA.
16. The new Section 59 of the WMA provides for the WEA to disclose information (including personal information) to another agency (as defined in the Privacy Act 1999) for the purposes of the control of wheat exports. The clause also allows that Australian Public Service employees of the Australian Quarantine and Inspection Service (AQIS) may provide the WEA with information (including personal information) for the purposes of the control of wheat exports. These provisions will allow the WEA to exchange information with agencies to better monitor compliance with export consents it has issued.