Submissions Analysis on Border Clearance Costs and Organism Identification Requirements

Introduction

The Ministry of Agriculture and Forestry (MAF) released a discussion paper Border Clearance Costs and Organism Identification Requirements and a supporting information paper on proposed amendments to the Biosecurity (Costs) Regulations 2003 on 11 April 2006. The paper proposed:

  • An update to the Biosecurity (Costs) Regulations 2003;
  • Two new levies under the Biosecurity Act 1993; ie, the sea container levy and the biosecurity risk screening levy (formerly the biosecurity entry levy).

Six weeks were allowed for feedback on the discussion paper. On 6 June 2006, MAF advised stakeholders of modifications made to some of the proposals in light of the consultation feedback, changes in trade volumes and increases in some costs. The changes included increases to the sea container levy, the biosecurity risk screening levy and the MAF inspector hourly rate charge. The letter that was sent to stakeholders with the proposed revised charges is attached as Appendix 1. Stakeholders who provided feedback to the letter of 6 June have been responded to separately.

This submissions analysis provides a summary of the issues raised in submissions on MAF's discussion paper Border Clearance Costs and Organism Identification Requirements and MAF's response. Square brackets ([ ] ) indicate the number of the submission where the issue was raised.

Profile of Submitters

Twenty one submissions were received. Of these:

  • Six submissions were made by importers/customs agents;
  • Eight were industry associations representing several companies;
  • Four had an interest in used vehicle imports;
  • Two had an interest in shipping/ports;
  • Two were from transitional/containment facilities;
  • Two had an interest in air freight;
  • One submission was from a laboratory.

Industry Response

MAF advised over 8,500 stakeholders of the proposed amendments. Articles about the proposals were placed in Biosecurity magazine, the Shipping Gazette and the New Zealand Customs Service News and Information newsletter. Industry meetings were held in key centres to answer queries and clarify issues. In addition, MAF met with two industry groups separately to discuss their concerns.

The complexity of the regulations, a possible feeling of inevitability concerning amendments to Government charges, or the ability of some to pass on costs to clients may have contributed to the relatively low number of submissions received.

Submitters' General Comments

Some submitters made general comments relating to cost recovery and charging for biosecurity services. These included:

  • Support for the general direction of the changes to the regulations;
  • Statements that the simpler charging structure and the move to rationalise the hourly rate charges will make the charges more transparent;
  • Objections to any increases in charges or observations and concerns that the proposals included some unacceptable increases (in particular for organism identification);
  • Queries over whether sufficient incentives are in place for MAF to contain costs and work in an efficient manner;
  • A statement that compliance costs are increasing for those who import low risk goods infrequently;
  • Statements that charges need to be seen as a deterrent;
  • Statements that as industry is a significant funder of biosecurity, benchmarks need to be in place upon which industry can measure performance;
  • Costs imposed need to be clearly justified to demonstrate that they are not unnecessarily high or excessive.

MAF Response

Under section 135 of the Biosecurity Act 1993, MAF is required to recover costs that are not provided for by money appropriated by Parliament in accordance with the principles of equity and efficiency.

MAF's charges have not been amended since May 2003. Costs have increased in the intervening period. The proposed changes to the regulations and introduction of the two new levies reflect current costs and the changes in MAF's operations since that time.

MAF is aware that it has a responsibility to industry, the Government and taxpayers to keep administration and transaction costs low, and run an efficient, streamlined service. Stakeholders are welcome to discuss specific matters of concern with MAF Quarantine Services operational managers as they arise.

Part One: Biosecurity Act Requirements and Biosecurity Funding Review

One submitter endorsed the principles underpinning the review [4].

Two submitters stated that the provision of biosecurity border clearance services is a public good that should be funded by the Crown and it is therefore not fair or equitable to recover cargo clearance costs from industry [7, 9].

One submitter stated that the Government contribution of 7% for vessel clearance does not fairly represent the public good contribution for this activity [13].

MAF Response

In August 2003 Government directed MAF to review the current funding arrangements for the biosecurity services funded by Government. (The Biosecurity Funding Review). The review excluded passenger and aircraft clearance services, which were addressed separately by the Ministerial Committee on funding of border security. The Biosecurity Funding Review concluded that:

  • the Crown remains the most appropriate funder for most services, largely because most have substantial public good components, whether it is for public health, conservation or environmental reasons; or because the services in question have widespread or diffuse beneficiaries;
  • the existing cost recovery regimes for cargo clearances and laboratory fees should continue; and
  • costs should be based on consistent recovery of an appropriate share of overheads, and be designed more rigorously to avoid over or under-recovery.

The Government agreed in May 2005 that these funding principles be adopted for the assessment of any future changes to the funding of biosecurity services. These principles have consequently been applied to this review of the charges in the Biosecurity (Costs) Regulations 2003.

Part Two: Implications of Funding Principles for Third Party Charges and Key Changes

Hourly Rate Charges

Two submitters supported the reduction of categories for the hourly rate inspection charges from four down to two. One submitter also supported the reduction of the minimum charge from 30 minutes down to 15 minutes [13,15].

One submitter objected to the hourly rate inspection charge increase [11].

One submitter stated that the proposed changes will see more inspection services charged at an hourly rate, which based on current experience with the 2003 regulations, will see more variations in the time taken to perform the same task [8].

MAF Response

Under the Biosecurity (Costs) Regulations 2003, MAF is required to recover the costs of its services that are associated with border clearance. MAF has not increased its hourly rate charge since May 2003. Since that time MAF's direct and indirect costs have increased as it moves to introduce improved administrative and financial management systems that will enable MAF to respond more effectively to the needs of importers and stakeholders.

MAF acknowledges the importance of national consistency in administering the regulations and acknowledges that there has been some variation in its hourly rate charges to date. However, the new systems that MAF Quarantine Service will be implementing aim to deliver greater efficiency in the provision of services and accountability for inspector activity. These new systems will help to ensure that there is less variation in hourly rate charges over time but they will require ongoing monitoring.

The reduction of the hourly rate inspection minimum charge from 30 minutes to 15 minutes will also provide greater transparency in MAF's charging for inspection services.

Inspection of Unaccompanied Baggage or Effects

Three submitters objected to moving to an hourly rate charge. Comments included that there will be variances in time taken by inspectors to view similar numbers of items meaning inconsistency in charges. Two submitters stated that removal companies collect inspection fees on behalf of MAF from the importer of the effects, and as these are members of the general public, charges are on a "cash sale" basis and need to be collected prior to actual delivery to safeguard payment and reduce debt risk. The same two submitters stated that the proposed hourly rate charging would not allow certainty on the level of charge so prior collection of inspection costs would not be possible.

One submitter suggested a proposal whereby a schedule is agreed that specifies the number of items that can be inspected during a time period and an appropriate charge is set using this but based on the number of items nominated by MAF for inspection in a shipment [5, 8, 21].

One submitter sought clarification on whether the hourly inspection rate charge is per person when more than one inspector is present. The same submitter also sought clarification on how charging for 'in store' inspections would be handled, ie, would the charge be levied against each job inspected (as currently occurs) or a single charge raised for the total time taken and the removal company must allocate this cost back to the shipments concerned [21].

MAF Response

MAF has considered the arguments for an alternative means of charging for the inspection of personal effects, ie, specifying a set number of items to be inspected during a particular period of time. However we consider that charging for inspection at an hourly rate would allow MAF inspectors the necessary time required to carry out thorough inspections and to take appropriate mitigation measures if risk is detected. An hourly rate inspection charge would more accurately reflect the true costs of the work involved.

MAF accepts that this will mean that the exact charge will not be able to be known until the inspection is complete. However, this situation does not differ from most other instances, where the inspection time is variable (and where hourly rates are used), or where consignments may be liable for additional charges should they be non-compliant.

MAF considers that there are steps that the importer can take to encourage compliance and reduce any variability in charge, ie, ensuring required items for inspection are easily locatable for inspectors, or providing labour to assist in this process, thereby requiring less inspection time. MAF also considers that where an importer imports goods regularly, estimates should be able to be made of the approximate cost.

As some importers may be aware, MAF is in the process of reviewing the Operational Standard for General Facilities (Transitional). There will be changes regarding the inspection of personal effects imported into New Zealand. From date of the implementation of the revised standard, MAF will ensure that inspection requirements for importation of personal effects are fully enforced. From that time, the inspection of personal effects must only take place in transitional facilities as uncleared personal effects are not permitted to be delivered to personal residences. Interested persons will have the opportunity to comment when the new general facility standard is circulated for consultation in October or November 2006.

MAF advises that each inspector's time will be charged out at an hourly inspection charge when more than one inspector is present. The existing charging policy will apply for 'in store' inspections in the new regulations, ie, a charge will be applied for each consignment inspected.

Travel Costs for MAF Inspectors

One submitter sought clarification on the start point for the travel zones and on the charges for inspection beyond 75 kilometres [21].

One submitter considered that MAF has a responsibility to service the border at the first ports of entry and considered that there should not be any zone fee applicable for MAF inspection activities at first ports of entry. [8].

One submitter objected to the cost of MAF inspector travel for conducting border inspections and six monthly audits for level 3 quarantine facilities, claiming that their business should not be penalised for their location outside a main centre [19].

MAF Response

The starting point for the travel zone charge is the inspector's base, (ie, usual place of employment). Where an inspector is required to travel a distance greater than 75 kilometres, the charge is payable at $100 per hour and other actual and reasonable costs associated with the travel are also payable (or $0.69c per kilometre).

Where a MAF inspector needs to travel to undertake an inspection or to undertake any activity required by the regulations, MAF will need to recover its travel costs. Travel zone fees give certainty to stakeholders and enable charges to be levied in an efficient manner. Through its travel zone charging policy, MAF is endeavouring to achieve a balance across the range of inspections (and associated travel costs) that MAF needs to undertake to provide biosecurity services under the Biosecurity (Costs) Regulations.

In regard to inspections that are required to be undertaken at locations outside main centres, MAF will endeavour to use inspectors from the MAF office that is closest. However, this may not be possible every time, as it will depend on the level of expertise required for the inspection.

Sea Container Levy

Two submitters sought confirmation on how the sea container levy is to be collected, ie, via the shipping lines as it is collected currently or from the importer [12, 21].

One submitter considered that the sea container levy should be recovered direct from the importer or customs agent in the same way as it is for car carriers [16].

One submitter objected to the increased charge for full containers. The same submitter suggested an incentive be considered for importers with good compliance history, eg, such importers pay less for a full container, while importers who have poor compliance history pay a penalty per full container or a system of rebates could be implemented based on the previous year's performance [12].

One submitter agreed with the increase in the sea container levy from the current inspection fee to pay for the increased monitoring and verification activities and agreed with the list of cost items to be covered [20].

One submitter considered that pre-inspected cargo shipped in a containerised manner should be subject to the proposed levy of $7 for empty containers as opposed to the levy for loaded containers of $16, on the basis that there are no additional activities required to clear the goods due to the cargo being pre-inspected and the containers used for this activity have been already internally inspected prior to the loading of any pre-inspected cargo [15].

MAF Response

MAF initially considered that it might be possible to collect the levy directly from importers. However, further investigation indicated that collection of levies from each importer would be impractical. Following initial discussions with shipping companies, MAF considered that the current system of collection of the inspection charge by shipping companies could be simplified and improved.

In our letter of 6 June 2006 to affected stakeholders, MAF had put forward a proposal whereby within an agreed timeframe, shipping companies would supply MAF with a breakdown of the number of full and empty containers landed in New Zealand during the previous month. MAF would then raise a single invoice for that shipping company, based on the above information.

MAF is proposing that the existing system of collection of the inspection charge by shipping companies will continue for the new regulations, but this system can be simplified and improved. MAF is continuing discussions with Shipping New Zealand and representatives of the shipping lines on how the sea container levy will be collected.

The purpose of the sea container levy is to fund the sea container clearance system costs and for the increased monitoring and verification activities required by the revised import health standard for sea containers that are not specific to one importer. MAF considers that the application of an hourly rate charge of $100 for inspecting non-complying sea containers is an incentive for importers to ensure that containers comply with the required standard.

MAF notes that any pre-inspection that is undertaken applies to cargo only and not to the sea container that holds the cargo. Therefore, it will still be necessary to charge for inspection and clearance of the sea container.

Used Vehicles

Five submitters supported the simplification of the vehicle charge categories [6, 8,14,15,18]. Three submitters supported the reduction of MAF charges [6,8,18]. One submitter queried the definition for used motor vehicles as gross vehicle mass (GVM) information is not available to MAF inspectors during the inspection process [6].

One submitter considered that charges for inspection should be significantly lower in Japan than the inspection charges for vehicles inspected in New Zealand, claiming that it is significantly more expensive for MAF to inspect vehicles on-arrival in New Zealand than it is to inspect them in Japan [14].

One submitter considered that having the same fee for inspection and re-inspection would remove the deterrent effect [8].

MAF Response

In regard to the definition for used motor vehicles, MAF will obtain a comprehensive list of vehicle types and weights for use by inspectors before the new regulations are put in place. Where a vehicle weight is on the boundary of the two categories, MAF would charge for inspection at the lesser weight, ie, used motorcars and motor vehicles not exceeding a gross laden weight of 3,500 kg.

In relation to inspection charges for used vehicles inspected in Japan, MAF is investigating this and we will respond directly to the people concerned, but at this stage we think there are sufficient grounds for the current charging policy.

MAF considers that its proposal to implement an identical charge for inspection and re-inspection will continue to act as an incentive to comply with the required standards.

Organism Identification

Increased Fees

Three submitters objected to the proposal to increase fees for organism identification. One submitter considered that this would provide a strong disincentive to report live organisms and lead to fewer identifications being requested. One submitter suggested that the organism identification charge should only apply where identification is for a regulated pest only. Non-regulated organisms should not require formal identification. The submitter commented that there is a noticeable difference in the identification of organisms between ports that do have access to Laboratory Identification Centres and those that would require organisms to be sent away for identification, claiming that where there is no laboratory directly at hand, then there is a greater effort put in by the MAF inspector to establish the organism identification [8, 15, 20].

Review of Organism Identification Policy; Two Options Proposed

Two submitters stated a preference for option one. One submitter considered that this option would encourage importers to ensure organisms were eliminated before shipping [12, 20].

Three submitters stated a preference for option two. One submitter did not agree that option two would provide less incentive for importers to take all practical steps to eliminate the presence of organisms [13,15,18].

Another submitter agreed in principle with option one as an incentive for importers to take practical steps in eliminating the presence of organisms before they arrive in New Zealand but supported option two for ease of administrative facilitation [18].

One submitter expressed concern at the practice of only identifying live organisms and not dead organisms stating that collecting information on both live and dead organisms intercepted at the border provides much better data to determine risks associated with specific pathways or goods. The same submitter supported the proposal that MAF inspectors undertake organism identification on-site and also supported the move for a greater number of accredited providers of identification services considering that this would reduce costs by providing greater competition [20].

MAF Response

MAF acknowledges that there is a major increase in its charges for organism identification. However, organism identification is costly work and MAF has been substantially under recovering in this area. Fees for organism identification at MAF Investigation and Diagnostic centres will not be set by the new regulations but will be contestable. Other providers of organism identification services may enter the market. However, where MAF Quarantine Service inspectors undertake an organism identification, this would be charged at $100 per hour.

MAF has agreed to option two listed in the discussion paper Border Clearance Costs and Organism Identification Requirements. MAF is proposing that a revised system for organism identification and charging at non-border sites will be implemented from 1 September 2006 or as soon as possible after that time. MAF has made the following decisions in regard to its organism identification charging policy which will apply to the new regulations:

  • Organism identification required for risk profiling and other information gathering purposes will be funded by the Crown;
  • Importers will be required to pay for organism identification only where it is required to determine whether goods can be cleared for entry into New Zealand but the organism identification charge will be applied to all organisms, ie, regulated and non-regulated organisms.

MAF will also be investigating what inspections can be undertaken by MAF Quarantine Service inspectors.

Inspection of Non-complying Sea Containers

Costs of Moving Containers for Inspection

One submitter noted that port companies incur costs by providing essential services for MAF inspectors and supported a proposal that port companies invoice MAF for direct costs incurred in complying with MAF requests. The same submitter commented that port companies have sometimes had to create a business relationship solely for the purpose of passing on compliance costs. The submitter considered that once MAF has finalized its cost recovery proposals, it expected MAF to negotiate a price with each port company to cover all relevant compliance costs, and on the changeover, each port will invoice MAF and cease invoicing other parties [10].

One submitter sought reassurance that moving from a fixed charge of $40.40 for inspection of non-complying sea containers to an inspection charge of $100 per hour would not reduce the effectiveness of inspection [20].

MAF Response

MAF did not propose in its discussion paper Border Clearance Costs and Organism Identification Requirements that port companies invoice MAF for direct costs incurred in complying with MAF requests. MAF had proposed that it would pay the port companies for them to move high risk and non-complying sea containers for six sided inspection. MAF would then charge the importer for moving the containers and the importer would receive one invoice for both the inspection and moving of containers.

However, during the consultation process in April/May, we were informed that some port companies are already charging the importer for moving containers for six sided inspection. MAF is therefore now proposing not to pay port companies for them to move containers for six sided inspection.

MAF will only pay port companies for moving containers that are subject to audit inspection once audit inspection of containers is introduced. The cost of this activity is incorporated in the sea container levy.

Under the Biosecurity Act 1993, MAF has a responsibility to manage the risks associated with the importation of risk goods. MAF considers that some of the services provided by port companies to MAF for high risk containers are essential and legitimate services required to enable MAF to undertake its inspection activities. MAF therefore considers that provision of these essential services by the port company is an operational cost of operating facilities at a port.

MAF also notes that it undertakes biosecurity related activities at the ports such as biosecurity surveillance programmes, which are Crown funded and yet could potentially be charged to port companies (as the operation of the port generates the risk).

MAF considers that moving from a fixed charge to an hourly inspection rate charge for non-complying sea containers will not reduce the effectiveness of inspection.

Memorandum Accounting

Three submitters supported the concept of memorandum accounting. One queried whether in relation to used vehicles, this will be divided between the New Zealand operation and the off-shore Japan programme claiming that these are two different operations in respect to memorandum accounting. [13,15,18].

MAF Response

MAF's charges for vehicle inspection are the same in Japan as for New Zealand. MAF's revenue and expenditure for inspection of used vehicles in Japan will be included in the system of memorandum accounting to be established, but this will not be itemised to individual importer level.

Biosecurity Risk Screening Levy

One submitter expressed concern if New Zealand Customs Service were to charge a collection fee for the levy, claiming that the actual cost is negligible due to importers already meeting New Zealand Customs Service costs for assessing import entries [13].

One submitter objected to the imposition of the levy on pre-inspected used vehicles and machinery claiming that there has already been assessment as to the biosecurity risk, the electronic format the information is transferred to New Zealand in, and the lack of need for manual screening produces very little additional loading on the New Zealand systems [15].

MAF Response

The New Zealand Customs Service has identified some establishment and ongoing administration costs in collecting the biosecurity risk screening levy on behalf of MAF. However, these are considered minimal and an unavoidable cost in administering the levy on an ongoing basis.

MAF acknowledges that there is a lower risk for import documentation for used vehicles that have been pre-inspected. However, MAF considers that there continues to be a need to conduct biosecurity risk screening of import documentation in order to provide a biosecurity clearance for entry into New Zealand and notes that the fee at $3.38 is lower than the current $28.70 charge for the inspection of import documentation.

Transitional and Containment Facilities

Two submitters stated that MAF should clearly show how charges are calculated to ensure transparency and reassure users that costs are genuine and requested information on the proposed fee of $98 per hour (now $100 per hour) for the inspecting and compliance auditing of transitional and containment facilities.

Comments included:

  • MAF should review (and discuss with ERMA NZ) the amount of information that is required to be gathered during audits of facilities in order to ensure that the time and cost involved is minimised.
  • MAF should revisit the issue of travel costs and explore whether a different model, in which audit costs are not determined in part by geographic location is feasible.
  • MAF should review the processes associated with transfer of biological products and new organisms between transitional and containment facilities with the aim of simplifying compliance requirements and reducing compliance costs. A review was sought of the additional processing charge of $30 for each transfer approval.
  • Cost recovery for travelling time at $92 per hour, when the existing regulations specify that this be $72.30 [11,17].

MAF Response

Responses to the above comments are as follows:

  • Information is gathered until the point is reached where the auditor has confidence in the system. If the facility has met the necessary requirements, the audit will take less time and there will be fewer compliance costs.
  • Travel costs: In regard to inspections that are required to be undertaken at locations outside main centres, MAF will endeavour to use inspectors from the closest MAF office where possible. However, expertise is this area is limited and therefore a higher level of travel costs may be incurred.
  • Transfer approvals for biological products and new organisms between facilities are a legislative requirement. The current cost is based on the time required to check the transfer, ie, the receiver approval status and any ERMA conditions that may disallow the transfer.
  • The hourly rate inspection charge under the existing regulations is $104.40 ($92.40 plus GST). This is the hourly rate charge for biosecurity scientists. MAF is proposing for the revised regulations that the hourly rate charge will be $100 per hour.

Inspection of Wood Packaging and Dunnage

One submitter supported the introduction of the international standard and guidelines for regulating wood packaging materials, and that enforcement of the guidelines and costs of the audits would be covered by the sea container levy with non conformance to be charged at an hourly rate [13].

Other Issues Raised

MAF's Invoicing System

One submitter commented that MAF's billing process is cumbersome, and labour intensive to reconcile for its clients. A monthly deferred payment system was mentioned as an option [2].

MAF Response

MAF acknowledges that there are problems with its current invoicing systems and is moving to address these problems. The new biosecurity risk screening levy that will be introduced will enable single point government agency lodgement of import documentation and will assist in streamlining administrative processes between Customs and MAF.

Charging for Goods that are Transhipped

One submitter queried that the charging policy for goods that are transhipped was not covered in the proposed changes in the discussion paper [1].

MAF Response

These goods land in New Zealand and pose a biosecurity risk while temporarily in the country. MAF considers that any inspection activities to mitigate the associated risk, need to be cost recovered. These will be charged at the rates prescribed in the new regulations.

Waiver of Fees for Small Businesses

One submitter considered that all fees involving imports and exports should be waived until businesses are well established [19].

MAF Response

MAF considers that waiver of fees would be a subsidy and is not a valid option. The Biosecurity (Costs) Regulations provide for the recovery of costs relating to border clearance services. Where goods are required to be inspected for biosecurity clearance, then these inspection costs will be charged.

Accreditation

One submitter stated that where facilities/laboratories are accredited, this should be recognised and supported, and the need for border inspections should be reduced [19].

MAF Response

MAF considers that there will be a requirement for inspection of goods requiring biosecurity clearance. MAF notes that facilities and laboratories that do not meet accreditation and audit requirements will face greater compliance costs.

Contact for Enquiries

Elizabeth Paterson
Policy Analyst
Biosecurity New Zealand
PO Box 2526
Wellington
NEW ZEALAND

Tel: +64 4 894 0407
Fax: +64 4 894 0730
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