Monday 19th Nov, 2018

INDUSTRY OPINION: Cost recovery… who did what, how, when and why

Photo: Ian Ackerman
Photo: Ian Ackerman

CBFCA CEO Paul Damkjaer takes a look at the DAWR’s proposed changes to Approved Arrangements

WITH the Department of Agriculture and Water Resources’ (DAWR) recent notification to industry on proposed changes to charging for Approved Arrangements (AA) – particularly related to licensed customs brokers under AA 19.1 and 19.2 – it is probably appropriate to understand some of the rationale of government behind cost recovery.

Many years ago, it was appropriate to have certain services provided by government – particularly those related to issues perceived to benefit the Australian economy, the nation and meet community service obligations budget funded.

However, we are all aware that governments have a penchant to spend forward and run deficits. So, the expectation that the government would fund what are perceived as community service obligations has changed to what it sees as a charge to those who use the services of government.

This methodology they have also placed upon regulatory agencies as to performance dividends is where their budget request will be reduced by a certain percentage and the agency in question will need to look to ways to make up that performance requirement by way of changes in resource allocation or funding from other sources – hence cost recovery was born.

Rather than appropriately address resource allocation and resource commitment in most cases it was just easier for the regulator to maintain the resources status quo and make up any budget shortfall out of cost recovery (which provides for creativity).

These cost recoveries have existed in the border clearance process as it relates to biosecurity and customs for many years. Over that period the cost recovery has risen accordingly, in some cases with appropriate oversight and transparency by way of stakeholder engagement (however even if the stakeholders did not support the change, what the regulator put forward becomes the cost).

In other places, transparency or justification as to any cost variation remains elusive. The Customs Brokers and Forwarders Council of Australia (CBFCA) has participated in that stakeholder engagement for many years as the not for profit industry association representing the interests of its members as service providers in the border clearance process.

The simple reason being that any cost in the first instance will fall to and impact on the financial resources and business arrangements of members. While many costs such as the import processing charge (IPC) have a simple pass-through to the importer of record and ultimately the end consumer, others such as fees and levies need to be paid and recouped.

What is interesting is that entities which purport to represent importers and businesses appear to have little if any interest in the impact of these cost recoveries of their respective business members and it is the work of others in this area which in reality is to the benefit of those entities. So the intervention by the CBFCA for its members supports others business cost determination.

As to the issue in question as to the AA charging proposal the CBFCA position has been, since the first discussion on cost recovery as it relates to AAs 19.1 and 19.2 (which were covered in previous Compliance Agreements for FCL and FCX), that these costs are – by way of the application of the Department of Finance Cost Recovery Guidelines – more appropriately addressed within DAWR service delivery requirements to the import declaration process and should be part of the Import Processing Charge (IPC).

In this regard it should also be noted that when the FCL FCX accreditation was first introduced there were significant resource savings to the then Australian Quarantine and Inspection Service and these were ongoing resource savings of considerable benefit.

As to the issue the CBFCA in its most recent commentary to the DAWR on the charging proposal (which has been its position since 2015) does not support the proposal on the basis of precedent and equity relating to cost recovery on other services provided, in other places, to other entities which have been recovered in the IPC.

Also there is question as to legality of such implementation in relation to existing Compliance Agreements which the CBFCA understands have not yet been rescinded.

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