Live Export

Live exporters facing huge cost surges under Federal cost-recovery plan

James Nason, February 25, 2021

THE cost of an annual livestock export license in Australia will soar from $25,000 to over $100,000 under the latest round of cost recovery increases planned by the Federal Government.

As it does with other export sectors, the Federal Government aims to recover the full bureaucratic costs it incurs for certifying and regulating the livestock export industry, through a series of fees and charges imposed on livestock exporters.

Every five years or so the Federal Government reviews and updates the rates it charges with a view to ensuring full cost recovery from industry.

In recent years, and particularly since the Awassi Express controversy in 2018, the Federal Government has expanded the size of the Departmental staff and the amount of resourcing it directs to overseeing and regulating the industry.

The Department of Agriculture, Water and Environment recently released a Cost Recovery Implementation Statement for live animal exports for 2020-21.

It shows that the annual cost of departmental employees who now oversee the industry has risen to $15 million.

It is not clear how many employees that expenditure covers.

This is for a sector with a total of 19 licensed exporters (cattle, buffalo, sheep and goats), of whom about half that number account for the majority of trade activity.

Exporters have expressed gratitude to the Federal Government for its decision in October last year to freeze all fees and charges in the 2020–21 financial year, which was applied to all export sectors to help overcome the impacts of COVID.

However, they now fear the new round of touted cost increases will cause potentially insurmountable damage to their viability as the Federal Government moves to return to full export cost recovery arrangements by 2023–24.

The Department’s Cost Recovery statement said fees and charges will remain at their current levels in 2020–21, but will rise year on year from 2021–22 to 2023–24.

To return to full cost recovery by 2023-24 the Department has proposed a wide range of fee increases and charges, in the order of 300pc to 500pc in some cases.

Annual license fees are set to increase from $25,000 to $106,551, approved arrangement fees for sea shipments from $20,000 to $85,241, and the cost to register an export premises will increase from $5000 to $21,311.

‘Our competitiveness is being shot to pieces’

“Our competitiveness is being shot to pieces,” was one livestock exporter’s take on the latest round of Federal Government cost increases.

The Federal Government statement said it also expects that a planned $222.2 million plan to upgrade the Information and Computer Technology system that underpins its export system will streamline and simplify essential export services and make them more efficient for the future.

It said the outcomes of this work are expected to reduce the cost of delivering regulatory services to the live animal export industry as well as reducing the interaction costs that regulated entities (exporters) will face in dealing with the department on regulatory matters.

The Department statement said it projected in 2018-19 that the total cost of all cost recovered arrangements for the Live Animal Export division in 2023–24 would be $28.4 million.

It says it now expects the direct impacts of its reforms to reduce this cost by $4.7 million to $23.7 million by 2023–24.

‘Devastating news’ for industry

Australian Livestock Exporters Council CEO Mark Harvey Sutton said the planned cost hike was devastating news for the industry, particularly given the “incredible work” of the industry to continue uninterrupted during the uncertain COVID period.

While exporters were being asked to shoulder significant cost increases, the Department should also be examining the many areas in which it could increase the efficiency of its operations, he said.

“We were very grateful for the Federal Government’s assistance with export fees and charges with the freeze on fees during COVID that they introduced in the October budget,” he said.

“But the really concerning thing in what has been proposed in the Cost Recovery Implementation Statement are the increases of three and five times higher than what is currently being recovered with minimal justification.

“Exporters are very concerned about regulatory inefficiencies within the Department, particularly at the operational level, and we think there are a number of areas that can be improved.

“For instance approved arrangements were supposed to increase efficiency and reduce cost but what we have seen is a devolution of approved arrangements.

“They exist only in concept at the moment, not practice.

“It is our very strong view there are significant opportunities for DAWE to streamline their regulatory processes and practices, as well regulating consistently, proportionately and in a manner that rewards good performance.”

Mr Harvey Sutton said consultation on the proposed fee increases must be a genuine two-way process to achieve regulatory efficiency and reform, rather than a tokenistic exercise.

The fee increase would also impact the sector’s global competitiveness, he said.

“The fact we pay some of the highest regulatory costs in the world does impact our competitiveness, and that is not just live exports, I think many other export industries would also hold that view.

“We have to be very mindful of the fact that this will have an impact on the economics of the industry if fully instated, at a time when cattle prices are high due to the supply situation and a lot of markets during the COVID period are sensitive to high prices.

“In addition to DAWE meaningfully engaging and examining where efficiencies could be gained, we’re also keeping one eye on our global competitiveness because that is going to be extremely important for agriculture and ultimately Australia’s economic recovery.”

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  1. Stephen Ridout, March 22, 2021

    An email to my local Ag Minister and another like it was sent to David Littleproud

    Subject: Cost Recovery Implementation Statement by DAWE

    Dear Minister Mark Furner,

    Just to give a you a brief insight into our business, we are a small and infrequent Licenced Livestock Exporter. Predominately we export Alpaca to Asia and Europe and on average have an EBIT of $800 to 900k annually. Our business is operated by myself and my wife , we have been exporting and running a quarantine facility for nearly 15 years.

    The system a number of years ago was based on charges and fees per shipment , approximately 5 years ago they went to a cost recovery system which has now been further increased and as a result will force a number of smaller exporters to close their doors. In fact those that don’t close will find their markets depleted because buyers will source stock elsewhere. The Federal Government will again fail the Australian people and businesses that reply on the Au Government to assist and promote Australian products.

    Recently the AU Federal Government has indicated a cost recovery exercise for the forthcoming 3 financial years with prices rising by 400%

    The Cost Recovery Implementation Statement that DAWE are about to impose (see attached) is in effect going to severely harm the Alpaca Industry and its members ability to obtain export sales.

    Sales have been impacted heavily over the last 4 years from a variety of restrictions , one of which was DAWE and their inability to swiftly resolve an issue between the NZ and Au protocol. Now this implementation really does make you wonder what DAWE and the Au Government are actually wanting to do to small business in this country. I was a Liberal voter for many a year , time for a change but we need to make it the right change!

    The proposed Cost Recovery scheme will force all exporters to increase their fees by up to 400%. As an simple example of one of the fees which is the Approved Arrangement fee which each exporter (air) must pay annually will rise from $10000 to over $40000. The number of exports shipments each year are of smallish numbers. We are not like the cattle , sheep and goat industries who have forward contracts to supply allowing producers and exporters to know their costs and negotiate contracts accordingly. Whilst this is a part of the business costs for exporters these costs are going to be passed on to breeders / buyers alike. Cattle / Sheep breeders / exporters are up in arms regarding this proposal and DAWE have failed in their research into the ramifications of such an increase.

    https://www.beefcentral.com/live-export/live-exporters-facing-huge-cost-surges-under-federal-cost-recovery-plan/

    The Asian market which currently is 100% of AU Alpaca export sales takes the lower end of the Alpaca stock. The costs associated with these exports is on the borderline of being a disincentive to purchase so with a massive increase in fees coming in effect it will kill off that market place. Its coupled with a dramatic increase on Air Freight (30 to 200%) which will remain in place because of the demand for space. It is unfortunately compounded by the huge reduction in Airline capacity from Australia which isn’t likely to return until 2023.

    Our main concern is that the massive increases in costs will need to be recovered by each exporter, European buyers are becoming more astute and have divert their attention from Au stock because of the closure and now will do so due to the ever increasing costs. As previously stated if we increase the costs for Asia we will definitely see a drop off in sales and that’s not healthy for a struggling Au Alpaca Industry. All exporters no matter who they are will go into a cost recovery mode and pass on the proposed DAWE fees. The Asian market will definitely be looking at NZ to supply at a greater rate if these imposed costs are put in place. The NZ market Eu buyers of (in the past Au Alpaca) has over the last 3 years grown substantially because of the Au closure so if and when it reopens from Australia we do not want further disincentives for Au breeders with massive price increases.

    The largest Alpaca export from NZ to Europe is about to go into Quarantine , it shows that the focus from EU Buyers has definitely gone from Au to NZ breeding stock. The imposed price increases will be an incentive for buyers to stay purchasing from NZ.

    Our Industry body is run by volunteers with little knowledge or expertise on exporting , I have sent them a letter giving them a heads up but feel that it needs to be championed by each state Government and again through a federal level to bring about change.

    If the imposed fees go ahead it will force us to close the doors and legal challenges or joining a class action will be forth coming.

    If you need further information or would like to discuss this email please contact me on the below numbers.

    Regards
    Steve

  2. Bruce Pott, February 25, 2021

    Will these increased fees see safer operations to avoid further dreadful outcomes that we will always remember since MV Gulf Livestock 1 went down
    Has there been any published reviews from this disaster ?

  3. Gil Schmidt, February 25, 2021

    It begs the question, is the Federal Government going to seek cost recovery at airports from departing and arriving passengers or is the Livestock industry a soft target?

    • Steve Ridout, March 22, 2021

      Take a look across many industries , the cost recovery system is in place for them to. Its a blatant cash grab without a true open book showing the true costs which would highlight the DAWE inefficiencies!

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