Thursday 20th Sep, 2018

INDUSTRY OPINION: New budget biosecurity levy a sleight of hand

Image: Jim Wilson and Shutterstock
Image: Jim Wilson and Shutterstock

By the Australian Federation of International Forwarders (AFIF)

THE Announcement in the Federal Budget of a Biosecurity Levy of $10.02 per TEU to be introduced on 1 July 2019, is an ill-considered measure which has implications for the freight forwarding industry and importing community.

DAWR describes the rationale for the levy as follows – “‘The levy would contribute to onshore surveillance, diagnostic, data analytics, research and adoption of new technology to help us to detect, identify and respond to exotic pests and diseases earlier and ensure we can move people and goods into Australia safely and more efficiently” (non-regulatory biosecurity activities).

DAWR explains the principle of the Biosecurity Levy and the process for collection – levied on a per-TEU basis for containerised cargo and per tonne basis for bulk cargo – is to cover non-regulatory biosecurity activities.

Whereas regulatory biosecurity activities (business as usual – BAU) are cost recovered via the FID process.

AFIF believes the DAWR functions and operations should all be considered ‘business as usual’ activities, both regulatory and non-regulatory and should be encompassed in a common cost-recovery mechanism.

Collection Process

The Biosecurity Levy, set at $10.02 per incoming twenty-foot equivalent sea container and $1 per tonne for non-containerised cargo, is proposed to be collected from “port operators” (as described by DAWR). This is not the port operator or owner, rather those who operate in the port in relation to handling of cargo, i.e. stevedores.

The Biosecurity Levy would be collected by the stevedore “transaction by transaction” at the time of importation. Whereas DAWR will invoice the stevedore on a quarterly basis.

  • Will the Biosecurity levy be segregated from stevedores’ operational accounts, i.e. cash flow?
  • Will there be additional administration costs in the logistics chain for collection of the Biosecurity fee?

When is a levy not a cost recovery – is it a double dip?

The Biosecurity Levy emanates from a recommendation within the Priorities for Australia’s Biosecurity System – an independent review of the capacity of the national biosecurity system and underpinning intergovernmental agreement. It should be noted that there were a significant level of recommendations from the review including a change to the passenger movement charge to collect “biosecurity revenue”. However, this and other revenue raising measures were not enacted.

In relation to this levy rather than cost recovery, as pointed out in a variety of forums, there was no prior consultation with industry on the levy arrangements or the review recommendation per se. Nor does DAWR by introducing such a levy need to give any credence to the Department of Finance Cost Recovery Guidelines where costs are recovered in relation to a service provided, i.e. the levy covers non-regulatory biosecurity activities.

Whereas, the principles of cost recovery where revenue is generated for a supposed service to be delivered would ensure appropriate and adequate discussion, it appears that no consultation is necessary for the introduction of a levy.

Clearly in this instance there will be no direct service provided for the levy, particularly relating to the importation of goods or the conveyances in which the goods are transported, whether that be by air freight or sea freight or the carriage entity itself.

Australian Federation of International Forwarders (AFIF) CEO Brian Lovell said it appears that the funding is being put away for a rainy day or if something happens.

“If that something does not happen, will the funds be returned to industry?” he asked.

“Well, I think it is clear as to how government operates that something will happen where those funds can be expended.”

Recent comments in the media, particularly from a recent conference held in Melbourne failed to understand a difference between DAWR’s levy and cost recovery rationale. The suggestion that the levy be incorporated into a cost recovery component of the import declaration clearly shows a lack of understanding of the Department of Finance Cost Recovery Guidelines.

So if applied in this manner, the levy stands alone to be recovered by the stevedores in whatever manner they so desire. Assuming there will be no absorption of these costs by that service provider, how this cost is transmitted through the supply chain to the end consumer becomes the issue.

What the review may not have been aware of (or if it was it took no particular note) is that currently within the import declaration charge there is an import container charge which has been in place for over ten years and which relates to surveillance work on containers and ports and would appear to address the rationale of why the “levy” was introduced. So it would appear there is a significant double dip!

If the issue is about community protection then such should be Federal Budget funded (through Government “appropriation” funding) and not a charge on a specific sector as the biosecurity risk comes from ALL imports, including international passengers and all conveyances and transport.

Where are the Importers and manufacturers voices?

Australian importers (consumers) are subject to one of the highest, if not the highest, import processing charges for both customs and biosecurity, in OECD economies. This is  translated into Australia’s position  in relation to the World Bank Organisation Logistics Performance Index (LPI) where Australia sits at a ranking of 95 (23 in 2006).

The LPI identified that border regulatory charging is the weakest aspect of Australia’s international logistics performance where such costs impact on Australia’s international trade and detract from Australia’s international trading performance.

Mr Lovell said it is not the responsibility of service providers to defend the position of international traders.

“These matters are more rightfully represented by those national associations which represent business interests either in relation to imports or exports,” he said.

“It would be appropriate that those entities, on behalf of the significant level of Australian manufacturers and importers impacted by the ‘levy’, seek to ensure that all costs in relation to customs and biosecurity activities are transparent and are cost efficient and cost-effective as to service delivery. What is seen in the DAWR ‘levy’ requires significantly more rigor in these aspects.”

Industry consultation or lack thereof

Finally not only does this new “levy” bring an interesting new dimension to regulatory costs related to importations, it also has a link to Australia’s commitment to the World Trade Organisation Agreement on Trade Facilitation where, within the provisions of Article 2 of the Convention, each Member shall, to the extent practicable and in a manner consistent with its domestic law and legal system, provide opportunities and an appropriate time period to traders and other interested parties to comment on the proposed introduction or amendment of laws and regulations of general application related to the movement, release, and clearance of goods, including goods in transit.

DAWR functions and operations are all ‘business as usual’ activities, both regulatory and non-regulatory and should be encompassed in a common cost recovery mechanism, in consultation with Industry.

It is disappointing that industry is treated with less that appropriate respect in relation to these changed arrangements and while there exists a DAWR Import Industry Finance Consultative Committee (noting that it is a consulting body rather than a decision making body) these issues have not been addressed in any context, despite the constituent members being under Govt. Confidentiality Agreements.

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