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EXPORT CONTROL (HARDWOOD WOOD CHIPS) AMENDMENT REGULATIONS 2000 (NO. 1) 2000 NO. 43EXPLANATORY STATEMENT
STATUTORY RULES 2000 No. 43
Issued by the Authority of the Minister for Forestry and Conservation
Export Control Act 1982
Export Control (Hardwood Wood Chips) Amendment Regulations 2000 (No. 1)
The Export Control Act 1982 (the Act) commenced in 1982 in order to provide for the control of the export of certain prescribed goods.
Section 25 of the Act provides that the Governor-General may make regulations for the purpose of the Act. The Export Control (Unprocessed Wood) Regulations, the Export Control (Hardwood Wood Chips) Regulations 1996 (the 1996 Regulations), and the Export Control (Regional Forest Agreements) Regulations (the RFA Regulations) provide necessary support to the Act by prescribing export licensing arrangements for unprocessed wood and woodchips.
The purpose of the Regulations is to amend the 1996 Regulations to enable the Minister, on a case-bycase basis, to issue a restricted shipment licence to export native forest hardwood wood chips sourced from a region not yet covered by a Regional Forest Agreement (RFA).
Under the RFA process, the Commonwealth and relevant State Governments are committed to reaching agreement on the long-term management of native forests in a specified region which will: protect environmental and other values in a world class comprehensive, adequate and representative (CAR) reserve system; give forest industries a firm base to create jobs and business opportunities; and ensure the forest estate is managed sustainably for future generations.
Once an RFA is in place for a region, the RFA Regulations remove export licensing controls on unprocessed wood and wood chips (except for plantation-sourced material, where export controls are being lifted on a State-by-State basis under the Unprocessed Wood Regulations).
The 1996 Regulations established a transitional licensing arrangement to apply until the RFA process was completed, which was expected by 31 December 1999. They provided that, subject to an annual aggregate national ceiling, the Minister could grant applications for transitional export licences for a region where no RFA is in place, but prohibited the Minister from granting such licences if an application related to a period that began on or after 1 January 2000.
By December 1999, RFAs had been completed for six regions (the East Gippsland, Central Highlands and North East Regions in Victoria, the Tasmania Region, the South West Forest Region in Western Australia, and the Eden Region in New South Wales). However, RFAs were yet to be completed for a further six regions (the Gippsland and West Regions in Victoria, the Upper North East, Lower North East and Southern Regions in New South Wales, and the South East Queensland Region).
Consequently, the 1996 Regulations were amended by the Export Control (Hardwood Wood Chips) Amendment Regulations (No. 3) (the 1999 Amendment Regulations) to extend the operation of transitional export licences in force as at 31 December 1999 until 31 March 2000, provided those licences applied to a region not covered by an RFA as at 31 December 1999. This allowed a further three months for the RFA process to be finalised without adversely impacting on the operations of existing export licence holders.
In that three-month period, RFAs were finalised for the Upper North East and Lower North East Regions in NSW and the Gippsland and West Regions in Victoria. However, despite the best efforts of the Commonwealth, negotiations were not completed for the Southern Region in NSW and the South East Queensland Region.
The Government remains firmly of the view that the integrity of the RFA process is paramount, so the parties to the RFA process should not be rushed simply to meet the deadline. Similarly, enforcing the 31 March 2000 deadline for wood chip exports will in no way advance the finalisation of the unfinished RFAs. However, rather than extending the operation of existing transitional licences from 31 March 2000 to another future date, a more focused amendment was made to the 1996 Regulations.
The Regulations, therefore, permit hardwood wood chips to be exported from a region not covered by an RFA where a restricted shipment licence has been granted. They also prescribe the conditions relating to the application for, and granting of, such licences. The Regulations, in adapting the restricted shipment framework already existing under the 1996 Regulations:
* avoid any further extension of the transitional licensing regime under the 1996 Regulations; and
* ensure each application is considered on a shipment-by-shipment basis, having due regard to the need to protect areas that are or may be required to establish a CAR national forest reserve system and any other relevant matter.
A Regulation Impact Statement is attached.
Details of the Regulations are set out in the Attachment.
The Regulations commenced on gazettal.
Export Control (Hardwood Wood Chips) Regulations 2000 (No. 1)
Regulation 1 provides that the name of these Regulations is the Export Control (Hardwood Wood Chips) Amendment Regulations 2000 (No. 1).
Regulation 2 provides that these Regulations commence on gazettal.
Regulation 3 provides that the 1996 Regulations are amended as set out in Schedule 1 of these Regulations.
Schedule 1, Item  replaces paragraph (a) of Regulation 2 (Purpose of these Regulations) with a provision that prohibits, from the commencement of the paragraph, the export of native hardwood wood chips unless those wood chips are derived from a region for which an RFA is in force or they are exported under a restricted shipment licence.
This reflects the changes effected by the following provisions of the Regulations.
Schedule 1, Item  replaces Subregulation 24(1) with a provision which allows a person to apply for a restricted shipment licence to export hardwood wood chips from a region to which no RFA applies.
Under the 1996 Regulations, a restricted shipment licence was only available for the purpose of a trial of a prospective market or the analysis of the wood chips for suitability to undergo processing (with attendant restrictions and conditions attached). This amendment removes those categories and effectively replaces it with a requirement that the restricted shipment licence may only be issued for a region to which no RFA applies.
Schedule 1, Item  replaces the existing Subregulation 25(2) with a provision that requires the Minister to consider, prior to deciding whether to grant a restricted. shipment licence, the need to protect areas that are or may be required to establish a CAR national forest reserve system and any other relevant matter.
Under the 1996 Regulations, Subregulation 25(2) prohibited the granting of a restricted shipment licence unless the Minister was satisfied that certain conditions relating to the trial of a prospective market or the analysis of wood chips were met. This amendment removes those conditions and restrictions and replaces it with a provision which ensures that the Minister considers the need to protect areas that may be needed for a CAR national forest reserve system before deciding whether or not to grant the application. The Minister will also have to consider any other relevant matter, such as any obligations imposed under relevant Commonwealth environmental and heritage legislation.
Schedule 1, Items  and  makes a minor amendment to the heading of Regulation 27 and also omits from Subregulation 27(2) the words "granted for the purpose set out in paragraph 24(1)(a)", which are superfluous given the amendment to Subregulation 24(1).
Under the 1996 Regulations, Subregulation 27(2) imposed a condition on a restricted shipment licence issued for a trial of a prospective market that the wood chips had to be exported in one shipment. This amendment removes this reference, given that the amendment to Subregulation 24 (1) removes the categories of restricted shipment licence previously specified. Consequently, all restricted shipment licences granted after the commencement of the Regulations will be restricted to one shipment.
Schedule 1, Item  inserts Subregulation 27(3), which exempts a restricted shipment licence granted after 31 March 2000 from payment of a monitoring fee.
In accordance with the Export Control (Hardwood Woodchips) (Monitoring Fee) Order No. HW1, all licences to export hardwood wood chips have had to pay a monitoring fee based on the mass of wood chips permitted to be exported under the licence. This fee covers the cost of monitoring the exporter's compliance with conditions of the licence by the Woodchip Export Monitoring Unit (WEMU) of the Department of Agriculture, Fisheries and Forestry - Australia. While WEMU will continue to monitor such compliance during the period of operation of any restricted shipment licence granted after 31 March 2000, it already has sufficient funds for this purpose, raised from monitoring fees collected in previous years.
REGULATION IMPACT STATEMENT
Over the years, governments have faced the task of balancing competing interests of environment/conservation, industry and recreation regarding the use, management and conservation of native forests and native forest resources.
A major part of the Commonwealth's response during this time has been the use of export controls under the Export Control Act 1982 on unprocessed wood and wood chips sourced from both native forests and plantations. In more recent times, the Commonwealth has focused on limiting the export of wood chips sourced from native forests as a somewhat ineffective and anti-competitive means of ensuring sustainable management of that resource.
However, the National Forest Policy Statement 1992, supported on a bi-partisan basis, has provided a framework for a progressive, long-term and lasting resolution of conservation, forest industry and community interests and expectations concerning Australian forests; something export controls could never achieve.
The Statement requires joint Commonwealth-State comprehensive regional assessments of forests' environmental, heritage, economic and social values. These assessments then form the basis of negotiated Regional Forest Agreements (RFAs) between the Commonwealth and the States, which provide for future forest management and the basis of an internationally competitive and ecologically sustainable forest products industry.
RFAs therefore provide for a comprehensive, adequate and representative forest reserve system to apply in each region, while also clearly identifying those forest resources available for multiple use (including resources for sustainable timber harvesting, whether directed to domestic or overseas consumption). Consequently, once an RFA is in place, there is no need for export controls to apply in that region.
1. The Problem
In 1996, the Export Control (Hardwood Wood Chips) Regulations (the '1996 Regulations') were made to, in part, provide for transitional licence arrangements to apply to the export of native hardwood wood chips until the RFA process was completed for the, regions from which such exports were being sourced. On the basis that all RFAs were originally scheduled to be completed by 31 December 1999, the 1996 Regulations prohibited the export of such wood chips on or after 1 January 2000, unless they were sourced from a region for which an RFA was in force.
Further, in 1997, the Export Control (Regional Forest Agreements) Regulations (the 'RFA Regulations') were made to provide, in part, for the removal of export controls on unprocessed wood and wood chips from native forests while ever an RFA is in force for a region.
By December 1999, RFAs had been completed for 6 regions (the East Gippsland, Central Highlands and North East Regions in Victoria, the Tasmania Region, the South West Forest Region in Western Australia, and the Eden Region in New South Wales).
However, RFAs were yet to be completed for a further 6 regions (the Gippsland and West Regions in Victoria, the Upper North East, Lower North East and Southern Regions in New South Wales, and the South East Queensland Region). While the RFA process in each of these regions was close to completion, in early to mid-December 1999, it became apparent that, for a number of reasons, all RFAs would likely not be finalised by 31 December 1999.
Consequently, the 1996 Regulations were amended by the Export Control (Hardwood Wood Chips) Amendment Regulations (No. 3) (the 1999 Amendment Regulations), which extended the operation of transitional export licences in force as at 31 December 1999 until 31 March 2000, provided those licences applied to a region not covered by an RFA as at 31 December 1999. It was anticipated that this would allow the RFA process to be finalised without adversely impacting on the operations of existing export licence holders.
While the RFA process was finalised in the Upper North East and Lower North East Regions and the Gippsland and West Regions by 31 March 2000, RFAs for the Southern Region and South East Queensland Regions are still yet to be completed.
A similar problem has now arisen to that which arose in December 1999: exports of native hardwood wood chips will be prohibited from particular region if an RFA has not been completed by 31 March 2000. Where an RFA is in place, however, no export controls apply.
The Government remains firmly of the view that the integrity of RFAs is paramount, so parties should not be rushed simply to meet the deadline. Similarly, enforcing the 31 March 2000 deadline for woodchip exports will in no way advance the finalisation of the unfinished RFAs.
2. Objectives of Government Action
The Government seeks to ensure both the finalisation of the RFA process and the continued ability of Australian companies to compete on the export market while that process is being completed.
3. The Options.
(i) Continue the RFA process but prohibit exports in individual regions until RFAs are completed.
(ii) Continue the RFA process and further extend transitional export licences current as at 31 March 2000 for a further short period to allow the process to be concluded.
(iii) Continue the RFA process and allow exports from non-RFA regions on a case-by case, restricted shipment licence basis.
(iv) Terminate the RFA process and re-introduce export licence controls or develop industry-government arrangements.
4. Assessment of Impacts
(a) Groups Affected.
Companies currently permitted to export under licence would be directly affected, with a flow-on effect on forest owners, sawmillers, harvesting and trucking contractors whose businesses depend to some degree on the activities of such export companies.
(b) Costs and Benefits of the Proposed Option
This Option has the benefit of allowing the RFA process to be completed in full, thereby ensuring community confidence in the outcomes obtained. It may also encourage early finalisation of any unfinished RFAs, given that exports would be prohibited in the meantime.
However, RFAs are agreements between the Commonwealth and the relevant State Governments only. Therefore, it would be improper to adversely affect the business of third parties that are not able to influence in any material way the time taken to conclude such agreements.
It is difficult to assess the cost to current and potential exporters from the prohibition of exports from 31 March 2000 until remaining RFAs are concluded. However, the mass of wood chips authorised to be exported under transitional licences in non-RFA regions in force at that date totalled 90,000 green tonnes. Assuming exports occur at a consistent rate through the year, it is estimated that $520,000 dollars of current woodchip exports would be foregone each month the RFA was not finalised.
Also, a prohibition on exports would likely have a much greater negative impact on the competitiveness of current export licence holders and domestic activity in Australia. This is because:
* potential exporters are prohibited access to the market;
* any disruption to supply by current exporters, even for a short period of time, will likely have longer-term adverse effects on future export contracts as overseas customers are particularly sensitive to any discontinuity in supply; and
* there could be flow-on effects on sawmillers and harvesting and trucking contractors.
(a) Groups Affected.
It is considered that no clearly identifiable group will be adversely affected by this Option as it retains the status quo until the RFA process is finalised for all regions. However, it is possible that potential entrants into the woodchip export market would have to delay entry until an RFA is completed for a particular region.
(b) Costs and Benefits of the Proposed Option
Apart from a potential deferment of some economic benefit to companies not yet engaged in the woodchip export market, this Option would overcome the deficiency associated with Option (i) in that there would be no cost to existing exporters in non-RFA regions while RFA negotiations are finalised.
This Option also enjoys the same benefit as Option (i) in that it allows the RFA process to be completed in full, thereby ensuring community confidence in the outcomes obtained.
(c) Groups Affected.
No group will be adversely affected by this Option as it allows both current and potential exporters to apply to export on a shipment-by-shipment basis until the RFA process is finalised for each region.
(d) Costs and Benefits of the Proposed Option
This Option would overcome the deficiency associated with Option (i) in that there would be no cost to existing and potential exporters in non-RFA regions while RFA negotiations are finalised, provided any licence application has sufficient merit.
It would also overcome the deficiency associated with Option (ii) in that both current and potential exporters would be able to apply for licences should the need arise during the short time needed to finalise outstanding RFAs.
This Option also enjoys the same benefit as Options (i) and (H) in that it allows the RFA process to be completed in full, thereby ensuring community confidence in the outcomes obtained.
Also, utilising and slightly expanding the restricted shipment provisions already contained in the 1996 Regulations is a "minimal impact" approach that will be adequate in dealing with the relatively few licences expected to be sought.
Compliance costs for businesses will be restricted to the small cost associated with preparing an application. Of course, there is no guarantee that all applications for licences will be granted, as each application will be considered on its merits. This may represent a minor 'irritation' for business.
(a) Groups Affected.
Groups adversely affected by the termination of the RFA process would include conservation and environmental interests (given their great interest in the sustainable management of native forest resources), State Governments (who have Constitutional control over land use and are major industry players in their own right), private industry and the broader community (who have an interest in the native forest estate generally an in State Government forest holdings and activities). The RFA process has allowed all groups to have a significant input into the final outcome for each region.
Re-introduction of export licence controls with an annual national ceiling would particularly affect companies wishing to export that are not able to obtain licences under such circumstances.
(b) Costs and Benefits of the Proposed Option
There are obvious costs associated with the application of export licence controls that reduce the ability of companies to compete freely in international markets. While there might be short-term benefits to industry in developing industry-government arrangements, in the medium to longer-term, however, strong public interest concern will likely undermine any stability of supply or access to export markets.
This is particularly so if the RFA process, based on rigorous scientific assessments and extensive consultation, is terminated. As in the past, there will likely be strong pressure on both State and Commonwealth Governments to impose ad-hoc and anti-competitive restrictions on access to native forests and/or exports of same while ever such concern about environmentally sustainable forest management exists.
On-going consultation with governments and all sectors of the community has been a fundamental feature of the RFA process, which will continue under the proposed regulations.
In relation to the proposed amendments themselves, there is general support from industry, State governments and the Opposition for ensuring the RFA process is completed for all regions without adversely affecting legitimate activity in the international marketplace.
6. Conclusion and Recommended Option
Option (iii) has been accepted as the preferred option, given that:
* unlike Option (iv), it allows the R-FA process to be concluded in full, thereby ensuring that the strong public interest in this issue is accommodated;
* the "restricted shipment licence" approach encourages the Commonwealth and States to retain their commitment to finalising the RFA process as expeditiously as possible;
* unlike Option (i), it ensures that those currently engaged in. the native woodchip export sector are not adversely affected by delays in the RFA process over which they have no control;
* unlike Option (ii) there will be no prohibition on the entry of new participants in the export market, provided applications have sufficient merit; and
* in assessing all applications for licences, the Minister will have to ensure all Commonwealth statutory requirements are met, including environmental and heritage obligations.
7. Implementation and Review Strategy
In accordance with the National Competition Policy legislative review process, a Committee of Officials is scheduled to commence a review of these and related regulations under the Export Control Act 1982 prior to 30 June 2000.