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Finance and Government Operations - Senate Standing Committee - Reports - Honey (Export Inspection Charge) Bill 1982, dated 19 May 1982, together with transcript of evidence (1 volume) [Report only]


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The Parliament of the Commonwealth of Australia

SENATE STANDING COMMITTEE ON FINANCE AND GOVERNMENT OPERATIONS

Report on the Honey (Export Inspection Charge) Bill 1982

May 1982

Presented and

ordered to be printed 19 May 1982

Parliamentary Paper No. 118/1982

Parliamentary Paper No. 118/1982

The Parliament of the Commonwealth of Australia

SENATE STANDING COMMITTEE ON FINANCE AND GOVERNMENT OPERATIONS

Report on the Honey (Export Inspection Charge) Bill 1982

May 1982

The Commonwealth Government Printer Canberra 1982

© Commonwealth of Australia 1982

MEMBERS OF THE COMMITTEE

Senator P. E. Rae, Chairman (Tasmania), B. A., LL. B. (Hons) (Tas.) Senator A. W. R. Lewis (Victoria), LL. B. (Melb.) Senator J. Coates (Tasmania), B. Sc. (Syd.) Senator the Rt Hon. R. G. Withers (Western Australia), LL. B. (W.A.)

Senator P. A. Walsh (Western Australia) Senator B. K. Childs (New South Wales)

Secretary

R. J. Diamond, B. A. (Acc.), CCAE The Senate Parliament House Canberra Telephone: (062) 72 6975

Contents

Chapter Page

1 Introduction .................................................................................. 1

Terms of reference ................................................................. 1

Conduct of inquiry .................................................................. 1

2 Reason for examination of the Bill ............................................... 2

Role of the Committee ............................................................ 2

Review of Commonwealth Functions Committee recom­ mendation ........................................................................... 2

Reasons for export i n s p e c t i o n .................................................. 2

Rate of c h a r g e .................................................................................. 2

Background to honey i n d u s t r y ......................................................... 4

3 Department of Primary Industry role .......................................... 5

Provision of export inspection services ................................... 5

Export inspection p r o c e d u r e s ......................................................... 5

Sample analysis ............................................................................. 5

DPI attitude to inspection r e q u ir e m e n t.......................................... 6

4 Australian Honey Board .............................................................. 7

Role of the Australian Honey B o a r d ............................................... 7

AHB support to the honey industry ............................................... 7

AHB structure and f u n d i n g .............................................................. 8

5 Industry attitude to export inspection service and charges . . 9

Rate of c h a r g e .................................................................................. 9

Need for inspection s e r v i c e .............................................................. 9

Alternative testing p r o c e d u r e ........................................................ 11

6 Conclusions and recommendations .............................................. 12

Conclusion— Rate of charge ............................................................................ 12

Need for honey inspection ........................................................ 12

An alternative inspection and certification process . . . 12

Recommendations ....................................................................... 13

Appendixes 1 List of submissions received by the Committee .......................... 14

2 List of witnesses ............................................................................ 14

3 Telex from Mr J. C. Smith, Honey Corporation of Australia

Limited, 11 May 1982 14

4 Importing country requirements for ‘certificates in respect of honey’ ........................................................................................... 15

v

CHAP TER 1

Introduction

Terms of reference

1.1 On 25 March 1982, during the Second Reading debate of the Honey (Export In­ spection Charge) Bill 1982 and the Honey (Export Inspection Charge) Collection Bill 1982, the Senate passed the following Resolutions: (1) That the Honey (Export Inspection Charge) Bill 1982 be referred to the Standing

Committee on Finance and Government Operations. (2) That the Committee report to the Senate on or before 28 April 1982. 1.2 On 28 April 1982 the Senate passed the following Resolution: That the time for the presentation of the report from the Senate Standing Committee on

Finance and Government Operations on the Honey (Export Inspection Charge) Bill 1982 be extended by providing that the Committee report to the Senate on or before Wednesday 19 May 1982.

Conduct of inquiry

1.3 The Committee received nine submissions from individuals and organisations in the honey industry. A list of these submissions appears as Appendix 1. The Committee sought evidence from the Chairman of the Australian Honey Board, a representative of the Federal Council of Australian Apiarists’ Association and Australian Honey Packers

and Department of Primary Industry officers concerning the provisions of the Bill. A list of witnesses is attached as Appendix 2. Evidence was taken from these parties at a public hearing of the Committee in Canberra on 15 April 1982. 1.4 Pursuant to the Resolution of the Senate, as set out in paragraph 1.2 above, the

Chairman of the Committee, Senator P. E. Rae, reported to the Senate on 28 April 1982 as to the reasons for seeking an extension of time. The factors necessitating the extension are summarised as follows: (1) The Department of Primary Industry (DPI) submission was not received until

14 April 1982—the day before the public hearing. (2) The Hansard transcript of the public hearing on 15 April 1982 was not avail­ able until the afternoon of 27 April 1982. (3) More information was being sought on the proposal that questioned the need

for the inspection service as at present provided. (4) The Committee wished to follow up the proposal for the implementation of a stabilisation scheme.

1

CHAPTER 2

Reason for examination of the Bill

Role of the Committee

2.1 The Committee is concerned to be involved not only in the review of statutory authority activities under its continuing reference on oversight of authorities but also in the legislative process that creates and regulates their areas of interest as well as operation.

2.2 Control over the export of honey is exercised by the Australian Honey Board (AHB), as detailed in paragraphs 4.1 and 4.2 of this report. The AHB is established under the provisions of the Honey Industry Act 1962. It is as a result of the industry being largely regulated by a Commonwealth statutory authority that the Committee is currently examining the provisions contained in the Bill.

Review of Commonwealth Functions Committee recommendation

2.3 The Review of Commonwealth Functions (RCF) statement made by the Prime Minister on 30 April 1981 made the following recommendation: Wherever possible we intend to apply the 'user-pays’ principle and introduce new or increased charges for Government services as the best possible determinant of the value of

those services. . . . The program of export inspection charging, aimed at recovering approximately 50% of total costs, is to be extended; in the case of . . . honey from 1 July 1982 . . . 1 The Honey (Export Inspection Charge) Bill 1982 results from the policy decision contained in the above quote from the RCF Committee report.

Reasons for export inspection

2.4 In their submission to the Committee the Department of Primary Industry made the following statement in regard to the need for export inspection: Most foods and a range of related products exported from Australia are subject to manda­ tory inspection and certification procedures to ensure that minimum standards of quality,

hygiene and presentation are maintained and to ensure that any specified entry requirements imposed by importing authorities are met. Export inspection has been a key factor in ensuring the continued acceptability of Aus­ tralian products in international markets, and it is the Government’s policy that exporters, as the prime beneficiaries of the service, should bear part of the cost of providing it.2 2.5 The Committee has not examined nor questioned the government policy of the user paying for one-half of export inspection costs. This is a matter of policy for the government of the day. The questions raised by the Bill concern the rate of charge lev­ ied under the Bill and whether in fact an export inspection service is needed for honey at all. The industry attitude to these questions is set out in Chapter 5 of this report.

Rate of charge

2.6 The Bill prescribes that the rate of charge shall not exceed $14.00 per tonne. The actual charge is to be specified by regulation. The Minister’s Second Reading speech stated that the Government proposes that a rate of $6.75 per tonne apply for 1981 -82. 2

A basic aim of this C om m ittee was to exam ine the basis of the calculation of that charge. The submission from the D epartm ent of Prim ary Industry sets out the basis for arriving at this figure as follows: The wages bill of the thirty-one officers engaged in the export inspection of honey in

1981-82 was $550 000. In terms of calculating the total cost of these officers it has been determined, after consul­ tation with the Department of Finance, that an additional 50% should be added to the wages bill to cover

—Superannuation — Furlough — Recreation leave —Sick leave

—Compensation —Administration —Training

— Protective clothing Added to this are costs for overtime (less recoveries) and travel, bringing the total estimated 1981-82 costs of this segment of inspection to $906 300, i.e. $

— Salary .................................................................................................... 550 000

+ 50% on cost ..................................................................................... 275 000

— Overtime . .

. . less recoveries

— Travel . . .

825 000

$

4900 4000 900

80 400

906 300

A survey of inspection staff in the States has indicated that the groups devote approximately the following percentage of their time on inspection or inspection-related work on the separ­ ate industries

Group Milk products

Percentage

Edible oils Eggs Honey

Technologists . . . . 85 1 1 7

DESOs . . . . . . 70 3 13 14

Dairy assistants . . . 15 1 80 4

On this basis the proportion of total salaries of the group as a whole estimated as attributable to each area of inspection is as follows: Milk p r o d u c t s ......................... 58

Edible oils .............................. 2

E g g s ........................................ 30

Floney ............................................... 10

Allowing for an inflation rate of 10% in 1982-83 over the estimated total 1981-82 costs of $906 300, the total cost of the thirty-one DPI officers involved in the inspection of dairy products, edible oils, eggs and honey will be of the order of $ 1 m in 1982-83. The target for cost recovery, by industry group, is

$

Dairy products at 58 per cent of effort ................................................................. 290 000

Edible oils at 2 per cent of effort ........................................................................... 10 000

Eggs at 30 per cent of effort ................................................................................150 000

Honey at 10 per cent of e f f o r t ................................................................................ 50 000

500 000

3

At the time the proposed rate of charge for 1982-83 was calculated, it was estimated that a rate of the order of $6.75 per tonne would be necessary to effect appropriate cost recovery. Assuming exports were at the same level as in 1980-81 (i.e. 7 227 tonnes), a rate at this level could be expected to yield revenue of $49 000 in a full year.3

Background to honey industry

2.7 The honey industry is small by comparison to other primary industry activities. The total production of honey, in 1980-81, was 19 548 tonnes. According to DPI, 37% or 7 227 tonnes of this amount was exported.4 2.8 The industry is subject to climatic conditions which have caused great fluctuations

in honey production in recent years. Further, the Chairman of the AHB, Mr E. J. Davy, outlined the following factors which are currently affecting the industry: Two years ago, the export portion of the industry was quite healthy with a strong demand. There has always been competition but not very serious competition. Then we saw the

advent of communist China entering into the world as quite a substantial exporter. This has caused a serious downturn in the values obtainable for Australian exports. The honey which it produces is probably not up to the equivalent quality of Australian honey but because of a substantial price discount, it certainly has become a very strong competitor. Coupled with that was the strengthening of the Australian dollar, which, to some degree, is being remedied at the present time, and also fairly prolific production years to the point where the level of export honey available has increased substantially.5 2.9 The result of the charge as calculated above is that the honey industry, and specifically the export packing sector, sees the imposition of an inspection charge, which will amount to only approximately $50 000 in a full year, as representing a \ . . further erosion of viability’.6 2.10 Upon this basis, the cost to the taxpayer is the other half of the directly attribu­ table costs plus other indirect costs associated with the administration of the service. An example of indirect cost is that incurred by the Commonwealth for sample analysis of honey. As set out in greater detail in paragraph 3.8 the real cost is $45 000. The Com­ mittee has been informed that the question of charges for sample analysis performed at the Australian Government Analytical Laboratories is currently under review. In­ cluding other indirect costs, concerning departmental expense in administering the export inspection service, the Committee estimates the cost to the taxpayer to be in excess of $ 150 000 per year.

Endnotes 1. Review of Commonwealth Functions, 30 April 1981, Parliamentary Paper No. 96 of 1981, p. 16. 2. Department of Primary Industry, submission, p. 2. 3. ibid., pp. 10-11. 4. Evidence, p. 202.

5. Evidence, pp. 5-6. 6. The Federal Council of Australian Apiarists’ Associations, submission, p. 1.

4

CHAPTER 3

Department of Primary Industry role

Provision of export inspection services

3.1 The DPI undertakes the function of inspecting products prepared for export for compliance with statutory export standards. The inspection of honey for export is undertaken by DPI officers who also have inspection duties in relation to dairy prod­

ucts, eggs and edible oils.

Export inspection procedures

3.2 Regulations 12 and 13 of the Exports (Honey) Regulations prescribe that any person proposing to export honey must seek registration of their [ί/'c] premises as an export establishment. After registration, persons proposing to export honey are

required to furnish a ‘Notice of Intention’ to DPI in accordance with Regulation 23 of the Exports (Honey) Regulations. Submission of this form initiates the inspection pro­ cedure. Inspection is then undertaken by DPI inspectors who take random samples from the honey for analysis. According to the evidence given by Mr R. A. Wilson,

Senior Dairy Technologist, DPI, the inspectors also ‘ . . . undertake an organoleptic examination of the honey at the site of inspection. This is to insure that the product is true to label . . . ’’ A satisfactory result for this test, combined with the statutory dec­ laration by the exporter, contained on the ‘Notice of Intention’ that the honey complies

with the regulations, allows the DPI inspector to issue an ‘Export Permit’. 3.3 Where DPI inspectors are unable to visit export establishments due to their lo­ cation or other reasons the exporters are requested to submit samples accompanied by a statutory declaration made before a Justice of the Peace.

3.4 Analysis of the samples enables DPI to monitor exports. In evidence, Mr Wilson stated ‘We analyse in a year approximately 750 samples of honey to ensure freedom form adulteration and compliance with the regulations in every respect’.2 Whilst in most cases honey found by this analysis to have been adulterated will have already been

exported the DPI argue that they would be able to preserve Australia’s export repu­ tation by subjecting the particular exporter to heightened inspections and not issuing further ‘Export Permits’ until the results of analysis were received. It must be added that DPI have only uncovered two cases of adulteration in the last twelve years. The

DPI officers indicated to the Committee that if they discovered a serious case of adul­ teration they would notify the overseas importers. 3.5 As a result of the inspection procedures, but not required as part of the export process, a ‘Certificate in Respect of Honey’ is issued under Regulation 24 (3) of the

Exports (Honey) Regulations. The Certificate states the condition of the honey at the time samples were taken for the ‘Export Permit’. As set out further in paragraph 3.9, DPI place great importance on the use made of these certificates by importers.

Sample analysis

3.6 The more complex testing of honey is performed for DPI by the Australian Government Analytical Laboratories (AGAL) or approved State laboratories. It is fol­ lowing the result of AGAL testing that the ‘Certificate in Respect of Honey’ is issued.

As testing takes approximately six weeks the honey to which the test refers has in­ variably been exported. 5

3.7 Where exporters request additional analysis to satisfy the import requirements of particular markets the DPI provides certificates based on AGAL tests to show, for example, freedom from antibiotics or pesticides.

3.8 Although the present charge to the exporter is ‘. . . $1.50 for a detailed analysis of the honey’3, the real cost, as pointed out in the DPI submission, is ‘approximately $60 per sample’.4 Therefore, with approximately 750 samples analysed in a year the real cost of analysis is $45 000. This cost is currently met by the Commonwealth.

DPI attitude to inspection requirement

3.9 The DPI’s attitude to export inspection is set out in paragraph 2.4 above. In re­ gard to honey, the DPI places great emphasis on the use made of the ‘Certificate in Re­ spect of Honey’ which issues as the final product of the inspection process. According to

Mr Wilson, the Certificate is requested \ . . in 80% or 90% of cases or maybe more.’5 Mr Wilson added that the Certificate is required in some situations because of letter of credit requirements and in others because of import requirements in a number of countries.

3.10 The inspection and certification process also has the effect of helping to maintain industry standards. Mr P. T. Core, Acting Director, Export Inspection Service, DPI, stated in evidence that if the Department \ . . moved away from the safeguards of random sampling . . . the potential exists . . . for adulteration of that product with a cheaper product. I do not think that we have any absolute guarantee that unscrupu­

lous exporters would not submit a perfectly adequate product but would adulterate the product back on their establishments.’6 3.11 The Committee does not question the potential positive effects of the DPI pro­ cedures. However, the Committee does question whether it is necessary to impose the cost on the industry and the taxpayer of a system which is designed to protect the honey

industry from itself and which the vast majority of Australian exporters do not require. This matter is explored further in Chapter 5.

E ndnotes

1. Evidence,p. 136. 2. Evidence, p. 142. 3. Evidence, p. 141. 4. Department of Primary Industry, submission, p. 7.

5. Evidence, p. 139. 6. Evidence, p. 159.

6

CHAP TER 4

Australian Honey Board

Role of the Australian Honey Board

4.1 The Australian Honey Board’s (AHB) functions as defined in Section 16 of the Act are: (a) to make recommendations to the Minister with respect to the rate of Board levy and export charge to be prescribed from time to time under the Honey Levy Acts Nos 1 and

2 of 1962 and the Honey Export Charge Act 1973; (b) to make recommendations to the Minister with respect to the making of regulations under the Honey Industry Act 1962 or any other Act, for the purpose of controlling the export of honey from Australia;

(c) to make reports and suggestions to, and to formulate plans for the consideration of, the Minister with respect to any matter affecting the honey industry, including any matter relating to the export of honey from Australia; (d) to promote the consumption and sale of honey, both in Australia and overseas;

(e) to assist and encourage the improvement of the methods of production, storage and transport of honey; and (f) such functions in relation to the export, and the sale and distribution after export, of honey as are conferred by or under the Act. Under paragraph (f) above, the Board operates Pools, sets minimum grade values for bulk honey exports and maintains high export standards. These subjects are detailed separately in this report.1 In evidence to the Committee, Mr E. J. Davy, Chairman AHB, stated that the main ‘ . . . functions of the Board are to set minimum prices for export, register and license packing houses that wish to export and also carry on promotion for the domestic

market.’2 4.2 In relation to its export responsibilities, the AHB licenses exporters, registers export establishments and issues ‘Certificates of Permission of Authority to Export Honey’. This latter permit, as well as an ‘Export Permit’, is required by Customs prior

to shipment taking place. The AHB has one further control in that it sets minimum prices at which honey may be exported. 4.3 Mr Davy informed the Committee that, notwithstanding the extent of AHB's in­ volvement in the export process, there was no consultation between the Government

and AHB before the decision as to the rate of charge prescribed by the Bill was an­ nounced. Mr Davy stated: The only consultation was that I checked around to see what possible hope there was of having the charge removed or reduced. The information that came to me was that the Minis­

ter was insistent that these charges be recovered and that nothing could be done.3 Despite the lack of consultation the fact that a charge was to be introduced was known in the industry from the time of the RCF statement in April 1981. Further in July 1981 DPI officers visited the major exporters to discuss the basis for calculation of the charge

and the approximate level of the charge. At the same time discussions were held with Mr J. Wells, Assistant General Manager AHB, specifically as to the proposed rate of charge.4

AHB support to the honey industry

4.4 Apart from the regulatory activities in relation to honey export mentioned in paragraph 4.2 above the Board’s main functions have been to promote honey and to run

7

the Repossession Honey Pools. The Repossession Pool is a financing system whereby exporters place honey with the Board, who finance it with Reserve Bank loans, with the honey being repurchased by the exporter prior to export. 4.5 As an extension of the repossession pooling arrangements the AHB is currently

proposing a stabilisation scheme for honey. The Chairman of this Committee, in his statement to the Senate on 28 April 1982, referred to in paragraph 1.4, stated that the Committee would be seeking further information on the proposal for the implemen­ tation of a stabilisation scheme. Mr Davy indicated, however, that the proposal would not go to the Government until late August or September.

AHB structure and funding

4.6 The AHB is funded by levies on honey produced and sold in Australia and honey that is exported. In 1980-81, these levies totalled $263 541. 4.7 The Committee was concerned, when looking at AHB financing, to ascertain whether industry levies were being utilised in the most efficient manner. The Com­

mittee’s concern arises from the fact that the industry feels threatened by a levy under the Bill which amounts to only approximately $50 000 in a full year. 4.8 The Committee feels that it may be possible for the AHB to introduce some econ­ omies in its own operations. Specifically, it is noted that in 1980-81 it cost the industry

$36 940 for the Board to meet on three occasions. A contributing factor to this cost no doubt was the size of the Board with ten members of the industry represented. 4.9 When questioned as to the present effectiveness of the Board Mr Davy stated that ' . . . under the present operation of this Board I think there would certainly be some doubt whether it does justify itself.’5 However, Mr Davy went on to add that he saw the

Board’s future effectiveness closely linked to the proposed stabilisation scheme. 4.10 In evidence to the Committee Mr Smith raised the question of the number of members of the AHB as follows: Mr Smith— . . . Senator Rae, you did not ask me how many people should be on the

Board. Chairman—I would like to. Mr Smith—I think no more than five. I think it is crazy; I have always said so.6 T he question of the size o f the Board should be further examined by G overnm ent and the industry in conjunction with the proposed stabilisation scheme referred to in p ara­ graph 4.5 above.

Endnotes 1. Australian Honey Board Annual Report 1980-81, pp. 1-2. 2. Evidence, p. 36. 3. Evidence, p. 38. 4. Evidence, pp. 183-5.

5. Evidence, p. 47. 6. Evidence, p. 110.

8

CHAPTER 5

Industry attitude to export inspection service and charges

Rate of charge

5.1 All industry submissions to the Committee questioned the rate of charge proposed under the Bill of $6.75 per tonne inspected. A submission from the Tasmanian Honey Exporters states that: We believe very little actual work is involved. A sample of honey is collected and taken to

the office in Lauceston, and divided into two sections. One is retained by the inspectors for six months and then eaten and the other is sent express freight to Melbourne for analysis. . . . The necessary papers are signed and stamped by the inspectors on the prem­ ises. Actual time involved is approximately fifteen minutes.1 5.2 It should be noted that DPI did not make their calculation as to the rate of charge based on the actual costs of inspection and analysis but rather, as set out in paragraph

2.6, by apportioning the percentage of time spent on honey inspection against the total cost of the inspection service for the dairy, egg, edible oils and honey industries. Much subjectivity is involved in the DPI procedure, however, due to yearly variations in honey exports.

5.3 Mr J. C. Smith, M.B.E., Managing Director, Honey Corporation of Australia Limited (HCA), stated in evidence that: The Honey Corporation of Australia expects to ship in excess of 10 000 tonnes of honey overseas in the financial year ending 30 June 1982, and at $6.75 per tonne this would bring a

figure of $67 500 levy from us alone and there are many other exporters in Australia as well.2 It should be noted that DPI is currently seeking a recoveryof $50 000 per year. Mr Smith pointed out that the base figure used by DPI of 7227 tonnes, the 1980-81 export figure, was not representative of the current state of the industry. Mr Smith pointed out

to the Committee that the three years prior to 1980-81 had been extremely poor seasons. According to Mr Smith, that situation is now reversed, with the industry ex­ periencing good production levels. If this projection is proven accurate then the total recovery will be substantially above the intended 50%.

5.4 Another area of criticism contained in submissions was the level of honey export inspection charge compared to those levied for products such as butter, margarine and edible oils. A submission from Mr Briggs, National President, Federal Council of Aus­

tralian Apiarists Association (FCAAA), pointed out that an obvious disparity exists between the levy for butter at $2.50 per tonne and margarine at $1.00 per tonne while honey is set at $6.75.3 This aspect was also mentioned in several other submissions. The DPI’s explanation is set out in paragraph 2.6. In the DPI calculations, the factor work­ ing against honey exporters is simply the lower volume of exports. The level of charge is also influenced by the fact that DPI did not relate it to a fee for service but, rather, an

averaging of time claimed to be incurred on the basis of an allocation between indus­ tries. Recovery was then to be achieved by applying the costs so allocated to the tonnage exported. While there may be an amount of subjectivity in the time allocations between industries it is felt that the levying of the charge on a per tonne basis is the most

equitable. Were it on a fee for service basis the larger exporters would accrue a great cost advantage over smaller exporters.

Need for inspection service

5.5 Amongst the submissions received by the Committee, only one actively 9

questioned the need for a honey inspection system at all. This was the submission from the Honey Pool of Western Australia. The submission points out the procedures involved in the inspection process and the ‘Certificate in Respect of Honey’ which issues as a result of that process. The submission states:

We have discontinued collecting this Certificate as unnecessary and cannot remember when this form was last requested by an overseas client.4 This view was in direct conflict with the DPI evidence which suggested that the Cer­ tificate was requested by exporters in 80% to 90% of cases as set out in paragraph 3.9 above because of Letter of Credit and importing country requirements.

5.6 The Committee sought evidence in this regard from Mr Smith of AHC as that or­ ganisation exports in excess of two-thirds of all honey from Australia. In a supplemen­ tary submission to the Committee, Mr Smith made the following points: DPI submitted that it was necessary to have inspections for honey and Certificates of Con­

dition provided to conform to the Letters of Credit requirements. 1 questioned that at the Hearing and since my return, I have thoroughly checked with other exporters whether they sell by Letter of Credit. The response I have is that very little honey is sold on Letter of Credit at all and would not total more than a maximum of 5% of shipments made out of Australia and probably not more than 2% overall. The only times Letter of Credit arrangements are required would be for new unknown customers in smaller countries and by governments in countries wishing to promote their own honey production by imposing restrictions as a means of reducing imports. Since my return 1 have also checked with our major importers and their response is that the

forms are not needed and we will, therefore, not be collecting the Certificates of Condition in future unless specially requested by the occasional customer. Most of the submissions felt that honey inspection was not necessary for the normal type re­ quirements and it would appear that consideration of deregulation of honey shipments should be seriously considered. The only certificates that are required would be for full analysis which gives you the break

up of the sugars etc. and for those which require Pesticides and Antibiotics Certificates. I would doubt if there have been any more than five requests for full analysis of the honey in the last year and about twenty-five requests for Pesticides and Antibiotics Certificates.

Under normal exports of honey to the United Kingdom, West Germany and the United States of America, which are now taking most of our honey, it would seem that it is com­ pletely unnecessary to test the seven hundred and fifty (750) samples as was submitted by DPI.

I would believe that if 3% of the samples were tested, it would be more than adequate to keep a thorough check on what is going out of the country and would mean reduced cost of inspections.5 5.7 Mr Smith subsequently telexed on 11 May 1982 to inform the Committee that AHC had received advice from their overseas buyers that no certificates were required of DPI, including Pesticide and Antibiotic Certificates. A copy of this telex is attached as Appendix 2. It began to appear to the Committee that the practice may have changed. One major exporter said they never bothered to pick up the certificates and the majority exporters (over two-thirds), on checking, said they did not need them.

5.8 As a result of this conflicting evidence as to the need for ‘Certificates in Respect of Honey’ by overseas countries the Committee requested DPI to provide additional infor­ mation in regard to those countries which specifically required the certificates. In ad­ dition to the information received from the AHC, mentioned in paragraph 5.7, the Committee also sought information from the other major exporters as to the need for the certificate in the countries to which they export. A summary of the findings is attached as Appendix 4. In supplementary information provided to the Committee on 20 April 1982, DPI listed eight countries which required certificates. Subsequent check­ ing by the Department reduced this number to two countries. As shown in Appendix 4, according to the major exporters neither of those countries required the certificates.

10

■

5.9 On the above facts it appears to the Committee that not only should the industry be questioning the rate of charge levied and the cost efficiency of the system but also the real need for inspection at all. It must be remembered that the inspection procedures

are not provided solely to ensure compliance with importing country requirements, but also to protect the industry from unscrupulous operators. 5.10 Mr B. D. Clifton, Manager, Honey Pool of Western Australia, made the follow­ ing suggestion:

1 feel that the commercial contract which stipulates the grade purchased is a better regulator than the current inspection system. The honey is sold under a world-accepted system of colour grading and any exporter who did not comply with this commercial standard would

be quickly eliminated.6 This view was supported by Mr Smith when he suggested in evidence to the Committee that there is another monitoring system to detect unscrupulous operators, that is: The Australian Honey Board recommends to the Minister for Primary Industry that licences

should be issued to exporters. If an exporter’s honey does not come up to standard then the first agency the importer would contact would be the Honey Board. If enough complaints were made the person would not get his licence.7

Alternative testing procedure

5.11 The Committee received evidence that often the DPI officers did not collect samples personally but were provided with samples accompanied by a statutory declaration—see paragraph 3.3. An obvious extension to such a system which relies on the integrity of exporters was provided to the Committee by the Southern Farmers

Co-op Limited: Australia’s record as a honey exporter is an exemplary one, and we believe it will continue to be with a minimum amount of official scrutiny, as has largely been the case in the past. We believe also that there should be provision to avoid the export charge by packers testing

honey in their own NAT A registered laboratories, as is the case in the dairying industry . . ,8 Not all honey exporters have access to their own National Association of Testing Authorities laboratory (ΝΑΤΑ). However, it would be possible to implement a system whereby, when a ‘Certificate in Respect of Honey’ is required by an overseas importer,

for whatever reason, the Australian exporter could have the sample tested at a ΝΑΤΑ laboratory and, based on the ΝΑΤΑ report, DPI could issue the appropriate certificate. As two of Australia’s largest exporters, HCA and the Honey Pool of Western Australia, have indicated that they no longer require any certificates it would appear that a system

which could provide certificates in those cases where the exporters did require them would be quite satisfactory. Such a system would save money for the industry and tax­ payers whilst still ensuring that certificates were available where required at a real cost to the exporter and at no cost to the taxpayer. Eliminating the inspection procedure

would not affect the mechanism whereby the AHB obtains a levy on exports. This is calculated from returns by exporters to the AHB.

Endnotes 1. Tasmanian Honey Exporters, submission, p. 1. 2. Evidence, p. 83. 3. Federal Council of Australian Apiarists’ Association, submission, p. 1. 4. Honey Pool of Western Australia, submission, p. 1.

5. Honey Corporation of Australia, supplementary submission, p. 3. 6. Honey Pool of Western Australia, submission, p. 2. 7. Evidence, p. 215-16. 8. Southern Farmers Co-op Limited, submission, p. 2.

CHAP TER 6

Conclusions and recommendations

Conclusions

Rate o f charge 6.1 Inquiry as to the rate of charge levied under the Bill was one of the Committee’s main concerns at the outset of this matter. However, it became clear to the Committee during the inquiry that the procedures giving rise to the charge were even more worthy of investigation than the charge itself. Accordingly, the Committee simply highlights comments made on the method of calculation of the rate of charge and the arbitrariness

involved therein—paragraphs 5.1-5.4 refer.

Need fo r honey inspection 6.2 As has been shown by this Committee in previous inquiries, our most valuable contribution is often in facilitating consultation between the parties involved. In this particular inquiry it has resulted in Australia’s largest exporter, HCA, with over two- thirds of all honey exports, becoming aware that the certificates which issue as a result of the inspection process are not required by any overseas countries to which it exports. 6.3 As set out in paragraph 5.8 the countries which do require the certification are insignificant in terms of Australia’s total honey exports. The Committee therefore con­ cludes that inspection to ensure compliance with import country requirements is not necessary. 6.4 From the viewpoint of inspecting honey to maintain Australia’s currently high export reputation the Committee considers that the commercial contract which is based on the world-accepted system of colour grading, whereby the grade purchased is stipulated, is a better regulator in this regard. If honey sold does not meet the standards specified under the contract then the normal market pressures would apply, with the ability of the importer to lodge a complaint to the Australian Honey Board. 6.5 It is clear that the whole apparatus, system and cost of the inspection service is not required for the purposes of Letters of Credit other than, perhaps, in exceptional cases—paragraph 5.6 refers.

An alternative inspection and certification process 6.6 The Committee does not wish to suggest that DPI should completely withdraw from any role in this area. It is considered that random sampling of honey for export on

a far more limited scale than at present would still allow DPI to monitor exporters. With the relative stability in the organisations exporting honey it is considered that lim­ ited random sampling would suffice. 6.7 In those few instances where an overseas country does require certification the Committee concludes that the exporter should have the honey analysed at his own ex­ pense at an AGAL or ΝΑΤΑ laboratory and that, based on the laboratory report, DPI should issue to the exporter the ‘Certificate in Respect of Honey’. Evidence given to the Committee indicated that where certification was required the honey usually sold at a

premium which would more than cover the cost of analysis. 6.8 The effect of the alternative inspection and certification procedure would be to save the industry the 50% of inspection costs directly attributable to their exports. The taxpayers would be saved that part of inspection costs not met by the industry as well as

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other indirect costs currently met by the Commonwealth such as the cost to AGAL for laboratory analysis. 6.9 Discussion with DPI officers elicited no practical problems in principle with the proposals mentioned above.

6.10 The recommendations which follow will: (a) provide relief to the honey industry; (b) continue the monitoring of export honey standards; and (c) effect considerable savings to the taxpayer.

Recommendations

1. That the current honey inspection procedures be abandoned; to be replaced by a system of limited random sampling and testing of honey by DPI. 2. That the export of honey no longer require an export permit and to that extent that the provisions of the Commerce (Trade Descriptions) Act 1905-1973 not

apply.

3. That where an exporter requires a ‘Certificate in Respect of Honey’ then this be issued by DPI, based on AGAL or ΝΑΤΑ laboratory reports obtained by ex­ porters. The exporter would pay the actual cost of the analysis which is under­ taken. To facilitate this procedure DPI should maintain a register of approved

laboratories. 4. That DPI continue its role in relation to inspecting premises for registration as export establishments. 5. That the size and role of the AHB be reviewed at the time of the consideration of

the proposed Stabilisation Scheme. 6. That in view of Recommendations 1-4 above that the Honey (Export Inspection Charge) Bill 1982 and the Honey (Export Inspection Charge) Collection Bill 1982 be not proceeded with.

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APPENDIX 1

List of submissions received by the Committee

Honey Corporation of Australia Limited—submission dated 8 April 1982; supplementary sub­ mission dated 19 April 1982 The Federal Council of Australian Apiarists’ Associations—submission dated 8 April 1982 Department of Primary Industry—submission dated 14 April 1982; supplementary submission dated 20 April 1982

Honey Pool of Western Australia—submission dated 8 April 1982 Tasmanian Honey Exporters—submission dated 5 April 1982 Daybreak Apiaries Pty Ltd -submission dated 5 April 1982 Anchor Foods Pty Ltd—submission dated 5 April 1982

North West Branch, Tasmanian Beekeepers Association—submission dated 5 April 1982 Southern Farmers Co-operative Ltd—submission dated 13 April 1982

APPENDIX 2

List of witnesses

Mr Edward James Davy, Chairman, Australian Honey Board Mr James Carlyle Smith, M.B.E., Representative, Federal Council of Australian Apiarists’ Associations and Australian Honey Packers Mr Peter Thomas Core, Acting Director, Export Inspection Service, Department of Primary

Industry Mr Cornelius Sybrand Gorter, Principal Executive Officer, Export Inspection Service, De­ partment of Primary Industry Mr Robert Alan Wilson, Senior Dairy Technologist, Department of Primary Industry, Melbourne

APPENDIX 3

Telex from Mr J. C. Smith, Honey Corporation of Australia Limited, 11 May 1982: Please pass this information along to Senator Rae: Pesticides and antibiotics certificates for honey shipments—we have arranged with our buyers overseas that we do not need these certificates in future and will therefore not be ask­ ing DPI for them unless we get new customers. Therefore none of the certificates that the

DPI can provide us are now required for any of our export shipments of honey. Our buyers are testing for pesticides and antibiotics and have not found any problems at all in the last five years and have agreed that they will not require these certificates in future.

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APPENDIX 4

Importing country requirements for ‘Certificates in Respect of Honey’ Countries that DP! Telex reply Advice from

claim require certification to DPI query honey exporters

West Germany ............................. ...................not required not required

Portugal ...................................... ...................no advice not required

Malaysia ...................................... ...................no advice not required

Italy ........................................... ...................required not required

I n d o n e s ia ...................................... ...................not required not required

Belgium ...................................... ...................not required not required

S in g a p o re ...................................... ...................facilitates not required

clearance— not required

Middle East— B a h re in ...................................... ...................required not required

Qatar ...................................... ...................required not required

Saudi A r a b i a ............................. ...................not required not required

According to advice from honey exporters, the only country requiring certificates is Japan, to which very little honey is sold.

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