It is the kind of statistic that livestock exporters say must be addressed if the Federal Government is serious about making good on its commitment to improve agricultural competitiveness.
In the past nine years mandatory export certification costs for livestock exporters have increased by 122 percent, while the number of livestock exported has decreased by 36pc.
What is perhaps most surprising about that trend is that it occurred during a nine year period when the Federal Government spent $127m on programs designed to improve the overall efficiency of export certification services.
The livestock export industry, soon to be hit with another 60-70pc increase in mandatory export certification fee charges, says the time has come for the Abbott Government to get serious about improving departmental efficiencies in order to deliver on its commitment to increase agricultural competitiveness.
Under current legislation the Federal Department of Agriculture is required to charge full cost-recovery for the certification services it provides to exporters.
The Department says the costs it incurs from providing those services have increased since the 2012 rollout of the mandatory Export Supply Chain Assurance Scheme across all markets, for which it says full-cost-recovery arrangements have yet to be implemented.
The Department says the costs it will incur from conducting certification services for exporters in 2014-15 will rise to $11m, well above the forecast $6.7m in revenue it will receive from existing fees.
As a result the Department is proposing to increase fees by up to 60-70pc on average from July 1 to make up the difference.
The proposed fee hike equates to a substantial rise in costs for livestock exporters who compete in a highly competitive international market against competitors who do not face the same regulatory costs.
The Australian Livestock Exporters Council (ALEC) points out that Government influenced costs and charges account for almost 30pc of all costs exporters incur after the purchase of livestock.
In a written submission to the Federal Government’s review of export certification fees, ALEC has expressed anger at the level of inefficiency that exists at departmental level, and questions why exporters operating in a tough commercial environment should have to carry the costs of Government services that are unnecessarily inefficient by comparison.
Australian livestock exporters face the highest regulatory cost structure of the over 100 nations involved in livestock export.
ALEC says it acknowledges these costs reflect the fact that the Australian industry and Government have a higher commitment to protecting animal welfare than competing countries.
However, it maintains that a substantial proportion of the regulatory costs exporters face are caused by inefficient service delivery and structural problems within regulatory agency business models, and says the same high animal welfare outcomes could be achieved with far more streamlined departmental systems and processes.
It also questions the scale of the newly proposed fee increases, some of which appear to be over the top compared with what should be required to simply recover costs.
Examples ALEC points to include:
- Document processing rates: The proposed fee increases for the document processing function are the equivalent of $671.80 per hour. “By any measure this is an extraordinary fee to set to recover costs,” ALEC CEO Alison Penfold notes. “Some of the work is done by veterinarians at the APS 4 and APS 6 levels. The salaries for these officers range from $62,818 to $109,584. If we add a 30pc salary on cost and then add the Department’s 56pc overhead, the hourly rate for these two job levels (assuming 1700 hours pa), comes in at $75 and $130.70. These are the sorts of hourly fees that should be charged to exporters if this is a true cost recovery exercise.”
- Mileage rates for travel: The proposed mileage rate for travel related to inspections is $1.00 per kilometre. Ms Penfold points out that rate is significantly higher than the Australian Taxation Office cents per kilometre rate for car expenses which range from 63 to 75 cents per km. “Again, why is the Department charging excessively if this is a cost recovery exercise?,” she asked.
Certification fees in some cases will exceed $1000/animal
Livestock export fees for 2014-15 are expected to provide around $7m in revenue for the Department of Agriculture based on projected exported numbers of 3,526,636 livestock. Exporters are concerned that the Department will still want to recover the $7 million even if actual exported numbers fall short of estimations.
“Surely cost recovery should equate to the efficient services it delivers, and not lack such nimbleness and flexibility that it charges on fixed volume, whether that volume is met or not,” Ms Penfold said.
“The upshot of the already very high current fees and the even higher proposed fees is that the very competitiveness that is espoused is being undermined.
“We have the absurd situation where some small air freight consignments have certification fees imposed in excess of $1000 per animal.”
ALEC’s submission says the Government’s proposed cost increase “fails any test of reasonableness and fairness”.
It is calling for a third party agency such as the Productivity Commission or a private sector accounting/finance firm to undertake a detailed structural review of existing service delivery arrangements, and to design a system that better aligns regulatory cost structures to business.
“Exporters have made it clear that the proposed fee structure for 2014/15 will strip wafer thin margins into the red and challenge the viability of businesses involved in the livestock export sector,” the submission states.
“No business will be spared but the impact will fall hardest on smaller operators and the air freight sector which faces the most structurally incompetent system of cost recovery.”
ALEC says it wants to see a highly efficient regulator administering the Government’s interests in its industry, but says that is not currently the case.
Changes ALEC is proposing to the Federal Government’s draft cost-recovery fee schedule from July 1 include:
- The Department remove assessment and processing of ESCAS applications from cost recovery arrangements. ALEC says export certification relates to certifying against importing country requirements and it supports full cost recovery for this activity. However, ALEC says it is unaware of any output analysis being undertaken to determine the beneficiaries of ESCAS, and it is inappropriate to apply those costs to industry.
- The application of a 20pc discount on export certification costs to reflect the inefficiencies currently in the system and necessary to incentivise reform.
- As a matter of urgency, the Department establish a process for a more comprehensive review of the live export certification cost recovery arrangements that addresses the issues raised in its submission and other relevant concerns raised by industry, including a commitment for implementation from July 1, 2015. It says the process should include consultation with ALEC and address exports by both sea and by air.