Regulatory Impact and Business Compliance Costs Statement: Proposed Biosecurity (Costs) Regulations 2006; Sea Container Levy 2006 and Biosecurity Risk Screening Levy 2006
Statement of the Nature and Magnitude of the Problem and the need for Government Action
Under the Biosecurity (Costs) Regulations 2003, MAF charges importers and other parties for biosecurity-related cargo clearance services. MAF has reviewed its charges and identified some under cost recovery and some inequitable application of charges and difficulties in administering the current regime. MAF is seeking to replace the 2003 regulations made under the Biosecurity Act 1993 with new regulations and to recommend two new levies under the Biosecurity Act, the biosecurity risk screening levy and the sea container levy.
While there has been some over recovery in previous years, MAF is forecasting a small deficit of $200,000 to $300,000 (GST excl.) for the 2005/06 year. It expects to recover $18.3 million (GST excl.) from importers in 2005/06 under the Biosecurity (Costs) Regulations 2003.
Organism Identification and Border Inspection – MAF has been under recovering in the areas of organism identification and in border inspection. The existing fees for organism identification are not fully recovering the costs of services and revenue from fees is substantially below the cost of the services being provided. MAF’s direct and indirect costs have increased as it moves to implement new information technology and financial management systems to enable delivery of improved systems and this is not being reflected in the current hourly inspection rate.
Fixed Charges – The existing regulations provide for charging for unaccompanied personal effects, sawn timber, logs and roundwood, stored produce, non-complying sea containers and fishmeal as fixed charges. Some of these charges have been applied on a volume basis, eg, for sawn timber, unaccompanied personal effects. However, inspection costs for these goods can vary considerably and the existing fees are not reflecting the actual costs of inspection.
Individual Risk Goods – Under the existing regulations a person who imports an item of risk goods in their baggage, (whether or not the baggage is accompanied) is charged a fixed fee for either fumigation or if other treatment is required, (eg, heat treatment). However, difficulty is being encountered in recovering costs.
Import Documentation Fee – Some of the regulations have been difficult for MAF to administer and some charging practices have not always been consistently applied. For example, the current import documentation fee has been interpreted and applied inconsistently by MAF Quarantine staff at its different work sites thus creating an inequitable charging regime for importers. Also, the import documentation fee has only been applied to goods that have been assessed as potentially “at risk” from a biosecurity perspective. All imported goods are not receiving initial screening to determine whether or not the goods are considered a biosecurity risk and need further follow up and inspection. The initial screening for biosecurity risk needs to be applied in an equitable manner. Currently, importers are invoiced for the import documentation fee separately if inspection of goods is not required, creating additional administration work.
Import Health Standard (IHS) for Sea Containers – In January 2004, MAF introduced a revised (IHS) for Sea Containers from all countries, listing the requirements for managing the biosecurity risk of imported sea containers and their packaging into New Zealand. Requirements relate to container pre-arrival, arrival, transportation and subsequent devanning of containers and cargo at transitional facilities. The existing Biosecurity (Costs) Regulations 2003 pre-date the IHS and don’t fully reflect its revised requirements. The existing fee of $8.75 (GST incl) for the monitoring, verification and inspection of sea containers does not reflect the increased costs associated with the clearance processes and the increased monitoring and verification activities required by the IHS. In addition, the $8.75 fee is charged for both empty and full containers and therefore does not reflect that full containers require additional activities to clear the goods they contain.
The recently released report of the Office of Auditor General on Managing Biosecurity Risks Associated with High Risk Sea Containers has recommended that MAF implement additional measures for containers to ensure that the requirements of the IHS are met. The IHS requires all the systems and facilities associated with the biosecurity clearance of sea containers to be audited. In September 2005, MAF issued a standard “Requirements for the audit of sea containers”. However, all aspects of the Audit Standard are not able to be implemented as MAF can’t yet recover the costs of checking the external and internal cleanliness of sea containers until the Biosecurity (Costs ) Regulations have been amended.
Lack of Information – Until all aspects of the Audit Standard are implemented, MAF will not have all the information it needs to identify areas where improvements could be made. This includes information relevant to risk profiling sea containers. The delay in implementing all aspects of the Audit Standard has meant that the extent of poor practices (such as the provision of inaccurate documentation) cannot be determined. These delays also mean that incentives for industry compliance with the Sea Container Import Health Standard have been weakened. Full implementation of all aspects of the Audit Standard should provide stronger incentive for industry compliance, because where non-compliance is detected, future imports will be subject to increased inspection and associated costs.
Used Vehicles – A complex fee structure currently exists for the inspection of used vehicles with differing costs applied for the inspection of different size consignments, different vehicle types and penalty rates if re-inspection is needed. The current 15 categories of charges for used vehicles has created a complex charging structure for industry and more difficult for MAF to administer.
MAF Inspectors – MAF inspectors required to travel to/from locations to carry out inspection and other functions required under the Biosecurity (Costs) Regulations currently charge on a per kilometre basis and hourly rate basis for the time spent away from base. Because of the complexity, this charge has not always been applied consistently by MAF inspection staff, thus creating uncertainty for industry.
Statement of the Public Policy Objective
The public policy objectives are to:
- Ensure that changes in practice at the border are adequately cost recovered;
- Avoid under and over recovery of costs over time;
- Ensure the charges remain fair and equitable;
- Reduce compliance costs to importers given the way MAF provides services to them is potentially of more concern to them than their cost;
- Undertake the additional work and requirements that have been identified in the report of the Office of the Auditor General on Managing Biosecurity Risks Associated with High Risk Sea Containers.
Statement of feasible options (regulatory and/or non-regulatory) that may constitute viable means for achieving the desired objective(s)
Status Quo
The current arrangements are detailed in the Status Quo section as set out in the table under the preferred option. The Status Quo is not preferred for reasons outlined in the problem section.
Preferred Option
The preferred option is to promulgate the Biosecurity (Costs) Regulations 2006 and implement two levies under section 137 of the Biosecurity Act; ie, the sea container and biosecurity risk screening levies.
| Status Quo (Charge in the Biosecurity (Costs) Regulations 2003). All costs quoted include GST | Preferred Option (Charge in the new Biosecurity (Costs) Regulations. All costs quoted include GST |
| Veterinary inspector: $96.10 per hour. | Veterinary inspector: $96.10 per hour. |
| General inspector: $72.30 per hour (including for offshore inspection of ships). | MAF is proposing to rationalise these three hourly rates in the new regulations to one hourly rate, the General Inspector rate of $100 per hour. This includes the fee for offshore inspection of ships (in addition to reasonable costs of travel to/from the ship) and supervision of goods disposal (plus reasonable disposal costs) and other inspector functions. |
| Biosecurity scientist: $104.40 per hour. (This hourly rate covers the monitoring and audit of transitional and containment facilities). | |
| Biosecurity adviser: $130.00 per hour. (this hourly rate covers the issue of import permits and approvals related to transitional and containment facilities under the Hazardous Substances and New Organisms Act 1996. | |
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Fixed charges for the following goods; unaccompanied
personal effects, sawn timber, logs and roundwood, stored produce,
non-complying sea containers and fishmeal. Fixed charge per unit: |
All costs of inspection based on actual time at a cost of $100 per hour. |
| Charge for the inspection of documents of $28.70 per consignment of goods that have been assessed as potentially “at risk” from a biosecurity perspective. |
Biosecurity risk screening levy (new levy order) imposed on
all New Zealand Customs Service import entries of $3.38 to be
collected by the Customs Service at the same time as it collects its own
levy on import entries. (an entry can be one or several consignments).
The primary screening of goods for biosecurity risk would need to be imposed
as a levy rather than a fee as it is not a fee for a defined service and the
actions taken on each import entry may be variable. The rate of levy in subsequent years would be based on the estimated future cost and the over or under charge in the previous year. |
| Monitoring, verification and inspection of sea containers: $8.75 per container. |
Sea container levy (new levy order). Proposed levy is $7 for
empty containers and $16 for full containers. Loaded containers require
additional activities to clear the goods they contain so would attract a
higher levy than empty containers. MAF would invoice either importers or
shipping companies. The rate of levy in subsequent years would be based on the estimated future cost and the over or under charge in the previous year. |
|
Used vehicle charges:
15 categories of charge; with differing costs applied for the inspection of different size consignments, different vehicle types and for initial versus subsequent inspections: Motorcycle: $18.70 to $40.95 |
Current 15 categories of charge will be reduced to 4 as follows: Used
motor cycles & mopeds: $15 (total cost) |
|
Travel costs: costs based on 54c per km plus applicable hourly rate for time spent by inspector away from base & other actual and reasonable costs associated with inspection. |
Travel zone charge: (total costs) Zone 1: 0-10 km: $45 Where distance is greater than 75km, the inspections would be charged, based on the inspector’s time plus actual and reasonable costs (or 69c (GST incl) per km. |
|
Treatment of individual risk goods; (whether or not baggage is accompanied);
must pay for treatment of the item before clearance: If fumigated: $37.55 |
Actual and reasonable costs of fumigation or any other treatment by a MAF
approved treatment supplier prior to treatment.
This charge would be applied before the treatment takes place because difficulty has been encountered in the past in recovering costs. |
| Permits issued under import health standard and amendments to permits - $130 per hour. | $105 per permit issued or amended |
| Organism identification: charges from $130.55 to $174.69 for each identification carried out by a MAF laboratory. | Charges for organism identification by a MAF laboratory or a MAF approved external laboratory would not be regulated, but would be contestable and subject to market forces. MAF is aware that other providers of organism identification services are entering the market. |
| Timing for implementation of new regulations. |
The revised regulations, sea container and biosecurity risk screening levies
to be in place by 1 September or as soon as possible thereafter. MAF is taking into account the need to roll out the various charges effectively. |
Section 140 of the Biosecurity Act 1993 Contents of Levy Order specifies the matters that are to be included in the Order in Council that imposes a levy. A maximum rate of levy is required to be specified. MAF has specified a maximum rate of $4 for the biosecurity risk screening levy and for the sea container levy, a maximum rate of $10 per empty container and $20 per full container. Stakeholders were advised of these maximum rates during the consultation process. Rates for both levy orders are not able to be increased above these amounts without changing the levy order.
Statement of the Net Benefit of the Proposal, including the Total Regulatory Costs (Administrative, Compliance, and Economic Costs) and Benefits (including Non-quantifiable Benefits) of the Proposal, and other Feasible Options
Government
The key benefit to Government would be the ability to recover the cost of cargo clearance services and thus manage risks to biosecurity posed by movements across the border. MAF projects its proposed changes will increase recoveries from importers by $4.0 million (GST excl) per annum to $22.3 million (GST excl) in 2006/07. This will likely result in a surplus in 2006/07 but deficits in outyears.
The factors that drive revenue resulting from border clearance services are difficult to predict and include: the volume of imports; the rate of compliance with import requirements; and the risk profile of imports.
The proposed sea container levy would assist in managing risks to biosecurity through this high risk pathway through better information being obtained.
New Zealand Customs Service would benefit through funding enabling a more efficient and effective coverage of data collection.
Proposed zone fees would ensure consistency in charging and enable MAF to budget for travel costs and provide transparency for travel fees to industry.
The government would benefit from the knowledge that the regulations and the two levies provide the funding for biosecurity services to protect the community from the impact of unwanted organisms that could cause damage to our primary industries and the environment.
Importers/Shippers/Removal Companies
Importers, shippers and other individuals may benefit from the certainty about costs transparently charged in the regulations. The more streamlined charging regime proposed would result in decreased complexity and hence decreased administration and compliance costs.
The following benefits to importers have been identified specifically for the biosecurity risk screening levy:
- Reduced volume of invoices to importers. Single point government agency lodgment of import documentation would lead to reduced compliance costs and more expedient clearance processes;
- The biosecurity risk screening levy process is one part of a “whole-of-government response to border management needs, which is aimed at more efficient clearance processes;
- Consistent application of charges relating to risk screening through greater clarity. The current MAF inspection of import documentation fee has been applied inconsistently;
- Reduced MAF Quarantine services time bound to administrative tasks thus freeing up the quarantine inspectorate capacity and availability without additional costs to the importing industry.
- Those currently being charged for goods potentially at risk would benefit financially where costs of inspection have been reduced. For example, for one entry, the fixed charge of $28.70 (GST incl) for the inspection of import documentation would be replaced by a biosecurity risk screening levy of $3.38 (GST incl).
The sea container levy is a more appropriate means of charging because the cost is not a fee for a service but rather it funds the cost of a clearance system that may not be attributable to an individual container as a fee for a service. This levy would be applied more equitably through the differentiated charge for full or empty containers.
The biosecurity risk screening levy is a cost to some importers, who have previously not been charged under the current import documentation fee. However, MAF considers that all imported goods need to receive primary screening for biosecurity risk.
Importers would be expected to face overall additional costs of $4.0 million per annum under the proposed option, but can to some extent minimise charges by ensuring that their goods comply with import health standards. The charging regime has been formulated, where possible to incentivise behaviour that reduces biosecurity risks while reflecting the actual cost of services rendered. For example, importers of sea containers who ensure that containers meet entry requirements can avoid an additional hourly rate charge for inspection of non-complying sea containers. Similarly, importers of used vehicles, who ensure that vehicles met the required import health standards will avoid an additional re-inspection charge.
The new travel zone charging regime would ensure consistency in charging for importers and provide for greater transparency in how fees are charged to industry.
Consumers
The regulations impose costs of inspecting and processing imported goods to ensure compliance with biosecurity requirements. Importers will incur and pay costs. This may then be reflected in increased prices to consumers.
Society
The imposition of costs on consumers of goods and services would result in efficient operation of markets for goods resulting in efficient allocation of resources and increased welfare for New Zealand. This would be through greater protection from the impact of unwanted organisms that could cause damage to our primary industries and the environment.
Statement of Consultation Undertaken
Consultation on the proposed changes to the Biosecurity Cost Regulations 2003, the sea container levy and the biosecurity risk screening levy was undertaken through one consultation process over a six week period from 11 April to 24 May 2006. A discussion paper Border Clearance Costs and Organism Identification Requirements was sent to MAF’s border management consultation list comprising around 8,500 stakeholders and to key industry associations affected by the changes in April 2006. Meetings were held to outline the proposed changes in key centres. In addition, MAF had one-on-one meetings with stakeholders on request to address/clarify individual areas of concern. Articles were placed in MAF’s Biosecurity magazine, Container Watch, and the Shipping Gazette and the New Zealand Customs Service News and Information newsletter alerting stakeholders to the changes.
Twenty one submissions were received. Feedback from the industry consultation indicated that stakeholders generally supported the proposed simpler charging structure, the proposed direction for the regulations and were generally accepting of the proposed increases in charges, although some continue to express the view that these activities should be Crown funded. Submissions reflected individuals areas of concern with the regulations, most of which revolves around their implementation.
Significant issues raised in consultation included:
- Objections to any increases in charges or observations and concerns that the proposals included some unacceptable increases, eg, organism identification charges;
- Queries over whether sufficient incentives are in place for MAF to contain costs and work in an efficient manner;
- Statements that as industry is a significant funder of biosecurity, definite benchmarks need to be set in place upon which industry can measure performance;
- 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;
- Costs imposed need to be clearly justified to demonstrate that they are not unnecessarily high or excessive.
Other concerns raised in consultation included the collection mechanism for the sea container levy. MAF has met with representatives of the New Zealand Ship Owners and Agents Association to discuss the issue raised. Concern was also expressed about travel costs for MAF to undertake inspections for businesses that are located outside a main centre. MAF endeavours to use inspectors from the closest MAF office. However, this may not always be possible depending on the level of expertise required. Concern was expressed during consultation about the proposal to move from a fixed rate charge to an hourly rate charge for the inspection of unaccompanied baggage or effects. MAF has met with representative of the Overseas Movers Association to discuss their concerns.
MAF advised affected stakeholders, ie, approximately 8,500 on MAF’s border management list of further proposed changes on 6 June 2006 and invited feedback. Minimal feedback has been received (7 responses) with the majority being comments and queries relating to implementation and collection of the sea container levy. MAF will meet with representatives of the New Zealand Ship Owners and Agents association again, to discuss the issue raised.
The Treasury, the Ministries of Foreign Affairs and Trade, Health, and Economic Development, Departments of Prime Minister and Cabinet and Conservation and the New Zealand Customs Service have been consulted over the proposed changes. The Ministry for the Environment was informed. Comments that were received from these agencies have been considered and where appropriate included in the final version of the Cabinet paper. No major concerns were raised by departments.
Business Compliance Cost Statement
Initially there may be some cost involved with regulated parties needing to become familiar with the new charges and fees and the increases and decreases in the cost recovery fees themselves. MAF does not expect this to be significant. Invoicing systems are currently in place. Familiarisation with the new charges has already commenced as industry becomes aware of the proposed changes during consultation.
In 2005 the Biosecurity Strategic Unit of MAF commissioned Pricewaterhouse Coopers to undertake a high level assessment of the costs of complying with biosecurity requirements focusing on the most significant areas of compliance. The key findings of the review indicated that for the most part compliance costs (as defined and limited for the purposes of the review) are not viewed as being unduly onerous or excessive.
Compliance Cost Reductions – The simpler, more streamlined charging systems (such as reducing 15 categories of vehicle charges to 4) under the preferred option would reduce compliance costs on regulated parties. Importers will have a less complex charging structure and fewer charge categories to become familiar with.
The biosecurity risk screening levy would lead to reduced compliance costs as single point government agency lodgment of import documentation would lead to reduced volume of invoices to importers and more expedient clearance processes. MAF liaises with industry on an on-going basis to ensure that regulatory practices are well understood at an operational level.
The planned publicity for the new charges should result in greater preparedness by industry. MAF will advise details of the new charges in its Biosecurity and Container Watch publications and other appropriate publications such as the Shipping Gazette and New Zealand Customs Service newsletter. MAF will prepare a communications plan to ensure effective rollout of the regulations. This will be undertaken jointly with New Zealand Customs Service for the biosecurity risk screening levy. MAF will also prepare a list of the new fees and charges that will be circulated widely among affected stakeholders.
Contact for Enquiries
MAF Information Services
Pastoral House
25 The Terrace
PO Box 2526
Wellington, NEW ZEALAND
Fax: +64 4 894 0721
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