Commonwealth Numbered Regulations - Explanatory Statements

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PRIMARY INDUSTRIES LEVIES AND CHARGES COLLECTION AMENDMENT REGULATIONS 2002 (NO. 6) 2002 NO. 291

STATUTORY RULES 2002 No. 291

Issued by the Authority of the Parliamentary Secretary to the Minister for Agriculture, Fisheries and Forestry

Primary Industries (Excise) Levies Act 1999

Primary Industries (Customs) Charges Act 1999

Primary Industries Levies and Charges Collection Act 1991

National Residue Survey (Customs) Levy Act 1998

National Residue Survey (Excise) Levy Act 1998

Primary Industries (Excise) Levies Amendment Regulations 2002 (No. 9)

Primary Industries (Customs) Charges Amendment Regulations 2002 (No. 5)

Primary Industries Levies and Charges Collection Amendment Regulations 2002 (No. 6)

Primary Industries Levies and Charges (National Residue Survey Levies) Amendment Regulations 2002 (No. 2)

Section 8 of the Primary Industries (Excise) Levies Act 1999 (the Levies Act), Section 8 of the Primary Industries (Customs) Charges Act 1999 (the Charges Act), Section 30 of the Primary Industries Levies and Charges Collection Act 1991, Section 8 of the National Residue Survey (Customs) Levy Act 1998 and Section 8 of the National Residue Survey (Excise) Levy Act 1998 provide that the Governor-General may make regulations prescribing matters required or permitted by those Acts to be prescribed or necessary or convenient to be prescribed for carrying out or giving effect to each Act.

The macadamia nut industry currently pays a statutory marketing levy and export charge of 4.5c/lcg and a statutory R&D levy and export charge of 2.3c/kg, both payable to Horticulture Australia Limited (HAL). In addition, macadamia nut growers pay a statutory National Residue Survey (NRS) customs levy and a statutory NRS excise levy of 0.2c/kg to the NRS. These levies and export charges, totalling 7c/kg, are currently collected on nut-in-shell (NIS).

The purpose of the Regulations is to provide for an increase in the rate of the marketing component of the macadamia nut levy and export charge and a change in the basis for expressing the rate for levy and export charge, from NIS to kernel, for all components of the macadamia nut levy and export charge for that portion of the crop delivered to processors.

Subclause 4(1) of Schedule 15 of the Levies Act and subclause 3(3) of Schedule 10 of the Charges Act provide that regulations may fix a rate of levy and export charge, respectively, for marketing purposes.

Subclause 4(3) of Schedule 15 of the Levies Act and subclause 3(5) of Schedule 10 of the Charges Act provide that regulations may fix a rate of levy and export charge, respectively, for R&D purposes.

Subclause 6(4) of Schedule 15 of the Levies Act and subclause 5(3) of Schedule 10 of the Charges Act provide that before the Governor-General makes regulations to respectively fix rates of levy and export charge for marketing the Minister must take into consideration any relevant recommendations made to the Minister by HAL.

Subclause 6(6) of Schedule 15 of the Levies Act and subclause 5(5) of Schedule 10 of the Charges Act provide that before the Governor-General makes regulations to respectively fix rates of levy and export charge for R&D the Minister must take into consideration any relevant recommendations made to the Minister by HAL.

Subclause 6(7) of Schedule 15 of the Levies Act and subclause 5(6) of Schedule 10 of the Charges Act respectively require HAL to consult with the body that is the eligible industry body for the relevant horticultural product before recommending rates of levy and export charge for marketing to the Minister.

Subclause 6(8) of Schedule 15 of the Levies Act and subclause 5(7) of Schedule 10 of the Charges Act respectively require HAL to consult with the body that is the eligible industry body for the relevant horticultural product before recommending rates of levy and export charge for R&D to the Minister.

Subclause 6(9) of Schedule 15 of the Levies Act and subclause 5(8) of Schedule 10 of the Charges Act require that a recommendation made by HAL to the Minister be accompanied by a written statement of the views of the industry body consulted in relation to the recommendation. The principal Regulations, which are the Primary Industries (Excise) Levies Regulations 1999 and the Primary Industries (Customs) Charges Regulations 2000, prescribe the Australian Macadamia Society Limited (AMS) as the eligible industry body with which HAL must consult in relation to macadamia nuts.

The amendments in the Primary Industries Levies and Charges (National Residue Survey Levies) Amendment Regulations 2002 are administrative in nature to change the NIS base to a kernel base for that portion of the crop delivered to processors. The changes do not represent a change in the current operative rate for NRS customs levy or NRS excise levy, which are collected at the same time, and in the same manner, as the marketing and R&D levies.

The amendments in the Primary Industries Levies and Charges Collection Amendment Regulations 2002 are also administrative in nature and effect the change of the collection methodology from an NIS measure to an operative kernel measure for that portion of the crop delivered to processors.

HAL consulted with the AMS before recommending to the Minister the increase in the marketing component of the macadamia nut levy rate and export charge rate and the change in expressing the levy and export charge rate from NIS to kernel for all components of the macadamia nut levy and export charge for that portion of the crop delivered to processors. The Regulations give effect to the recommendations of HAL, which are consistent with the macadamia nut industry's request.

The Regulations provide for:

1.       an increase in the marketing levy and export charge of lc/kg to 5.5c/kg, making a total levy and export charge payable by macadamia nut growers of 8c/kg; and

2.       a change to. enable the rate to be expressed as a kernel rate for that portion of the crop delivered to processors (which accounts for about 95% of total NIS harvest). This change is to be managed by an industry devised formula which converts NIS to kernel. Initially the 8c/kg NIS will result in a conversion to an equivalent amount of 25.21c/kg kernel;

•       this conversion will initially result in a marketing levy and export charge of 17.33c/kg kernel (equivalent to 5.5c/kg NIS), an R&D levy and export charge of 7.25c/kg kernel (equivalent to 2.3c /kg NIS) and an NRS customs levy and NRS excise levy of 0.63c/kg kernel (equivalent to 0.2c/kg NIS). The amount of money to be collected at a rate of 25.21c/kg kernel will be around the same as that which would be collected at a rate of 8c/kg NIS;

•       the method of calculation to convert from NIS to kernel is designed to not effect the net payment of levy and export charge in the industry.

The Office of Regulation Review was consulted in the preparation of the Regulations. A Regulation Impact Statement is attached, as annex "A".

Details of the Regulations are set out in the Attachment.

The Regulations commence on 1 January 2003.

0208526A
0208526B
0208526C
0208526D

ATTACHMENT

PRIMARY INDUSTRIES (EXCISE) LEVIES AMENDMENT REGULATIONS 2002 (No. 9)

Regulation 1 provides for the name of the regulations to be the Primary Industries (Excise) Levies Amendment Regulations 2002 (No. 9).

Regulation 2 provides for the commencement date to be 1 January 2003.

Regulation 3 provides that Schedule 1 amends the Primary Industries (Excise) Levies Regulations 1999.

Schedule 1        Amendment

Item 1 inserts a note after Schedule 15, clause 10.1, specifying where the term macadamia nut is defined.

Item 2 substitutes Schedule 15, clause 10.2, specifying what macadamia nuts are exempt from levy.

Item 3 substitutes Schedule 15, clauses 10.3 and 10.4.

•       clause 10.3 prescribes a rate of levy of 7.8c/kg for macadamia nuts in shell and a rate of levy of 24.58c/kg for dried kernels of macadamia nut payable to HAL. These rates incorporate the increase in the marketing component of the macadamia nut levy rate as requested by the AMS. In addition, notes to clause 10.3 indicate where the terms consigned mass, in shell and dried kernel are defined and indicate an AMS formula for determining the rate of levy for dried kernels, based on an industry calculation for converting macadamia nuts in shell to dried kernel.

•       clause 10.4 prescribes that 70.5% of the rate of the levy for macadamia nuts in shell and dried kernels of macadamia nut as prescribed in clause 10.3 is for the marketing component of the levy, while 29.5% of the rate of the levy for macadamia nuts in shell and for dried kernels of macadamia nut as prescribed in clause 10.3 is the research and development component of the levy. A note after clause 10.4 indicates there is an NRS excise levy on macadamia nuts.

PRIMARY INDUSTRIES (CUSTOMS) CHARGES AMENDMENT REGULATIONS 2002 (No. 5)

Regulation 1 provides for the name of the regulations to be the Primary Industries (Customs) Charges Amendment Regulations 2002 (No. 5).

Regulation 2 provides for the commencement date to be 1 January 2003.

Regulation 3 provides that Schedule 1 amends the Primary Industries (Customs) Charges Regulations 2000.

Schedule 1        Amendment

Item 1 inserts a note after Schedule 10, clause 10.1, specifying where the term macadamia nut is defined.

Item 2 substitutes Schedule 10, clause 10.2, specifying what macadamia nuts are exempt from export charge.

Item 3 substitutes Schedule 10, clauses 10.3 and 10.4.

•       clause 10.3 prescribes a rate of charge of 7.8c/kg for macadamia nuts in shell and a rate of charge of 24.58c/kg for dried kernels of macadamia nut payable to HAL. These rates incorporate the increase in the marketing component of the macadamia nut charge rate as requested by the AMS. In addition, notes to clause 10.3 indicate where the terms consigned mass, in shell and dried kernel are defined and indicate an AMS formula for determining the rate of charge for dried kernels, based on an industry calculation for converting macadamia nuts in shell to dried kernel.

•       clause 10.4 prescribes that 70.5% of the rate of the charge for macadamia nuts in shell and dried kernels of macadamia nut as prescribed in clause 10.3 is for the marketing component of the charge, while 29.5% of the rate of the charge for macadamia nuts in shell and for dried kernels of macadamia nut as prescribed in clause 10.3 is the research and development component of the charge. A note after clause 10.4 indicates there is an NRS customs levy on macadanua nuts.

PRIMARY INDUSTRIES LEVIES AND CHARGES COLLECTION AMENDMENT REGULATIONS 2002 (No. 6)

Regulation 1 provides for the name of the regulations to be the Primary Industries Levies and Charges Collection Amendment Regulations 2002 (No. 6).

Regulation 2 provides for the commencement date to be 1 January 2003.

Regulation 3 provides that Schedule 1 amends the Primary Industries Levies and Charges Collection Regulations 1991.

Schedule 1        Amendment

Item 1 substitutes the definition of consigned mass in Schedule 22, clause 10.2.

Item 2 inserts definitions for default recovery rate and dried kernel into Schedule 22, clause 10.2.

Item 3 substitutes the definition of macadamia nut in Schedule 22, clause 10.2.

Item 4 substitutes Schedule 22, clause 10.12 by specifying what must be included in a return.

Item 5 substitutes Schedule 22, subelause 10.14 (1) by specifying what records must be kept, in respect of each return period, by an exporter.

Item 6 substitutes Schedule 22, subclause 10.15 (1) by specifying what records must be kept, in respect of each return period, by a person who is other than a producer or an exporter.

PRIMARY INDUSTRIES LEVIES AND CHARGES (NATIONAL RESIDUE SURVEY LEVIES) AMENDMENT REGULATIONS 2002 (No. 2)

Regulation 1 provides for the name of the regulations to be the Primary Industries Levies and charges (National Residue Survey Levies) Amendment Regulations 2002 (No. 2).

Regulation 2 provides for the commencement date to be 1 January 2003.

Regulation 3 provides that Schedule 1 amends the Primary Industries Levies and Charges (National Residue Survey Levies) Regulations 1998.

Schedule 1        Amendment

Item 1 substitutes Regulation 154 to specify that the rates of customs levy destined for the National Residue Survey are 0.2c/kg for macadamia nuts in shell exported and 0.63c/kg of dried kernels of macadamia nut exported. Notes indicate where the terms consigned mass, in shell and dried kernel are defined, indicate the rate of NRS customs levy is an operative rate and indicate an AMS formula for determining the rate of levy for dried kernels, based on an industry calculation for converting macadamia nuts in shell to dried kernel.

Item 2 substitutes Regulation 155 to specify that the rates of excise levy destined for the National Residue Survey are 0.2c/kg for macadamia nuts in shell and 0.63c/kg of dried kernels of macadamia nut.

Notes indicate where the terms consigned mass, in shell and dried kernel are defined, indicate the rate of NRS excise levy is an operative rate and indicate an AMS formula for determining the rate of levy for dried kernels, based on an industry calculation for converting macadamia nuts in shell to dried kernel.

Background

Horticulture Australia Limited (HAL), on behalf of the Australian Macadamia Society Limited (AMS) has made a submission to Government for an increase in the marketing component of the macadamia nut levy and for a change in expressing the levy rate from nut-in-shell (NIS) to kernel for all components of the macadamia nut levy for that portion of the crop delivered to processors.

The macadamia nut industry participates in HAL through Regulations made under the Primary Industries Levies and Charges Collection Act 1991, the Primary Industries (Excise) Levies Act 1999 and the Primary Industries (Customs) Charges Act 1999. It also participates in the National Residue Survey (NRS) through Regulations made under the Primary Industries Levies and Charges Collection Act 1991, the National Residue Survey (Excise) Levy Act 1998 and the National Residue Survey (Customs) Levy Act 1998.

The macadamia nut industry currently pays a statutory marketing levy and export charge of 4.5c/kg and an R&D levy and export charge of 2.3c/kg, payable to HAL. In addition, macadamia nut growers pay a statutory levy and export charge of 0.2c/kg to the NRS. These three levies and export charges, totalling 7c/kg, are currently collected on NIS.

The macadamia nut industry has put a proposal to the Government for:

•       an increase in the marketing levy and export charge on macadamia nut growers of lc/kg NIS to 5.5c/kg NIS, making a total levy and export charge payable by macadamia nut growers of 8c/kg NIS; and

•       a change to enable the rate to be expressed as a kernel rate for that portion of the crop delivered to processors (which accounts for about 95% of total NIS harvest). This change is to be managed by incorporating into existing Regulations an industry devised formula which converts NIS to kernel. Initially the 8c/kg NIS will result in a conversion to an equivalent amount of 25.21c/kg kernel. Broken down this conversion will initially result in a marketing levy and export charge of 17.33c/kg kernel (equivalent to 5.5c/kg NIS), an R&D levy and export charge of 7.25c/kg kernel (equivalent to 2.3c /kg NIS) and an NRS levy and export charge of 0.63c/kg kernel (equivalent to 0.2c/kg NIS). The amount of money to be collected at a rate of 25.21c/kg kernel will be around the same as that which would be collected at a rate of 8c/kg NIS, as the method of calculation to convert from NIS to kernel is designed to not effect the net payment of levy in the industry.

This Regulation Impact Statement addresses the increase in the marketing component of the levy/charge (an increase of 22%). It does not address the conversion of product from NIS to kernel upon which levy is to be collected (which is designed to be revenue neutral). Around 95% of the macadamia nut harvest is delivered to processors and the current industry practice of processors is to pay growers according to the weight of kernel delivered.

Problem to be addressed

Production of macadamia nuts in Australia has shown a steady increase of 15% compound a year over the past decade. Production in 2006, according to the industry strategic plan, is forecast to be double that of 2001.

While Australia is the world's largest producer of macadamia nuts, it faces competition on world markets from the USA, South Africa, Costa Rica, Kenya, Brazil and Guatemala. All these countries, with the possible exception of the USA, are also increasing production.

While the forecast increase in Australian production of macadamia nuts in the medium term will in itself increase marketing levy receipts, the industry believes it needs to increase its current marketing levy to ensure consumer demand keeps pace with the expected increase in supply on both export and domestic markets. Otherwise there will be an inevitable lowering of international and domestic prices for macadamias.

Australian exports of macadamia nuts (in-shell and shelled) earned $110 million in 2001-2002 and were the third highest export earner for a horticultural product after fresh oranges and table grapes. In 2001-2002 Japan was the largest export market for shelled macadamia nuts valued at $27 million.

The proposed increase in the macadamia nut marketing levy/charge is expected to raise around an additional $400,000 annually which will principally be used to expand macadamia nut sales to Japan. Part of the funds will be utilised for promotion on the domestic market and, to quote the industry, "other timely market targets as opportunity and competitive advantage dictate".

The macadamia nut industry claims the lead time between market expansion activities and increases in sales average between two to three years. Thus the increase in the current marketing levy, if it is effective in increasing demand, should help macadamia prices remain steady in the face of expanding world supply.

Objectives of the Regulations

The objective of the industry proposal is to stimulate demand for Australian macadamias, particularly in export markets, principally Japan, by increasing the amount of industry funding available for marketing/promotion. .

Options

A voluntary levy to raise additional funds for marketing has not been recommended by the AMS The AMS claims growers and processors are not able to differentiate products sufficiently to prevent individual industry competitors from taking advantage of initiatives to expand market development and promotion. This creates a disincentive for individual growers and processors to invest in market development and promotion.

Only one option has been advanced by the industry - an increase in the current statutory marketing levy/charge to overcome the free-rider problem. Increasing the current marketing levy/charge will enable this investment gap to be filled by generic industry programs. These programs are intended to maintain and enhance the 40% increase in distributor sales growth evident in Europe and Japan over the past two years.

Therefore, the industry proposes to increase the current macadamia nut marketing levy and charge rates imposed under the Primary Industries (Excise) Levies Act 1999 and the Primary Industries (Customs) Charges Act 1999.

Impact Analysis

Likely Costs

There will be an extra direct cost to macadamia nut growers of $400,000 annually which will increase total industry funds available for marketing/promotion to $2.1 million yearly. In addition, as production of macadamias continues to rise, the overall amount of money raised through the marketing levy/charge will continue to rise commensurately.

The cost to the Commonwealth of the marketing levy/charge change will be zero. There is no Commonwealth matching payments for marketing levies and charges.

The increased levy/charge will continue to be collected in the same manner as under current Regulations by the Levies Revenue Service unit within Agriculture, Fisheries and Forestry Australia. The cost of notifying the changes to payers/collectors will be borne by the macadamia nut industry as the Levies Revenue Service operates under cost recovery arrangements.

There will be an initial extra business compliance cost for remitting levy/charge at the increased rate. This one-off cost will impact on seven main NIS processor establishments, which account for 95% of total NIS harvest intake, as well as on 30 small direct resellers.

Likely Benefits

The AMS believes the recommended change to the marketing levy/charge will benefit all members of the industry. There are about 950 macadamia nut growers in Australia, 760 of whom are members of the AMS.

The AIMS expects the industry to benefit from increased promotion of macadamias in export markets as it will increase sales and thus maintain prices in real terms at a time when additional supplies from Australia and other producing countries are being supplied to third countries.

Also increased promotion on the domestic market will assist to maintain prices in real terms as part of the forecast additional production is marketed on the domestic market.

Competition Policy

The increase in the macadamia nut marketing levy/charge will be applied equitably to all macadamia nut growers. Thus the proposed increase will have no impact on competition between macadamia nut growers.

The increased marketing/promotion funding will enable the industry to better compete internationally against other macadamia producing countries. In addition, promotional campaigns within Australia will enable the industry to better compete against other (mostly imported) nut products.

Consultation

The AMS proposal conforms to the Government's levy principles and guidelines which require the initiator to outline the case for market failure and net industry benefit for the increase in the marketing component as well as the practicality of the change from NIS to kernel.

The AMS consulted widely on the proposed changes with all known macadamia nut growers given the opportunity to vote in person or by proxy at Levy Payer Meetings. At a Levy Payer Meeting on 27 October 2001, the motion for an increase in the marketing component was agreed to by 80% of those growers that chose to vote. At a Levy Payer Meeting on 22 March 2002, the motion for a change in expressing the levy rate from NIS to kernel was agreed to by 79% of those growers that chose to vote.

The motion put to macadamia nut growers at the Levy Payer Meeting on 27 October 2001 to increase the marketing component of the levy/charge was debated at that meeting. Some opposition was expressed about the motion, along the usual lines of being opposed to levies in general, the wrong time to do it, low prices being received by growers and belief monies are not being spent wisely. In most instances opposing views were based on wrong perceptions and misunderstandings. The evidence remains that the AMS has a solid mandate for the increase. Since the Levy Payer Meeting the Government has not received any vocal or written opposition to the motion.

HAL, the entity to which the increased levy/charge will be paid has, as required under the Primary Industries (Excise) Levies Act 1999 and the Primary Industries (Customs) Charges Act 1999, supported the AMS proposals and recommended to the Government that the AMS proposals be implemented.

Implementation and review

The change to the macadamia nut marketing levy/charge is to be implemented by Regulation as soon as possible, depending on the legislative process.

The levy/charge rates and the marketing programs are reviewed regularly and at least annually by the AMS in consultation with its members.

Conclusion and recommended option

The macadamia industry proposal to increase the marketing levy and charge rates currently imposed under the Primary Industries (Excise) Levies Act 1999 and the Primary Industries (Customs) Charges Act 1999

•       conforms to the Government's levy principles and guidelines;

•       does not impose any significant extra regulatory burdens upon business;

•       does not restrict competition; and

•       has clear potential to benefit the industry.

The recommended option is to implement the AMS proposal.

Horticulture Policy
Food and Agriculture
Agriculture, Fisheries and Forestry - Australia

August 2002