Commonwealth Numbered Regulations - Explanatory Statements

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PRIMARY INDUSTRIES (EXCISE) LEVIES AMENDMENT (SEED COTTON) REGULATIONS 2017 (F2017L00299)

Explanatory Statement

Issued by Authority of the Deputy Prime Minister and Minister for Agriculture and Water Resources

Primary Industries (Excise) Levies Act 1999

Primary Industries (Excise) Levies Amendment (Seed Cotton) Regulations 2017

Legislative Authority

The Primary Industries (Excise) Levies Act 1999 (the Act) authorises the imposition of primary industries levies that are duties of excise. Section 8 of the Act provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed or necessary or convenient to be prescribed for carrying out or giving effect to the Act.

Purpose

The purpose of the Primary Industries (Excise) Levies Amendment (Seed Cotton) Regulations 2017 (the proposed Regulations) is to authorise a new excise levy on seed cotton to fund industry research, development, plant health and Emergency Plant Pest Responses (EPPR). The excise levy will be payable by the producer of the seed cotton, and be distributed to the Cotton Research and Development Corporation (CRDC) and Plant Health Australia (PHA).

Background

The current excise levies imposed by the Act are paid against the 'natural fibrous hairs that are produced from seed cotton by separating the hairs from the seeds and not further processing those hairs'. Exports of seed cotton, which by definition have not undergone processing to remove the fibrous hairs from the seeds at the time of export, do not attract this levy, thus creating an anomaly. Exports of seed cotton have recently become economically viable, meaning that this anomaly did not exist when the current excise levy was first imposed. Amendments through the Primary Industries (Customs) Charges Amendment (Seed Cotton) Regulations 2017 and the proposed Regulations will resolve this anomaly.

The proposed Regulations will impose a charge on exports of seed cotton at a rate equivalent to the current levy on cotton lint. The current levy on cotton lint is calculated as $2.25 per 227 kg bale of cotton lint, of which $2.21 and $0.04 is for R&D and PHA respectively. Seed cotton includes both cotton seed and cotton lint with an average composition of 41 per cent lint. Calculating an equivalent levy on seed cotton, which is charged on a per tonne basis, first requires the conversion of the $2.25 per 227 kg bale cotton lint levy to $9.91 per tonne. Accounting for the average 41 per cent cotton lint in seed cotton, the equivalent cotton seed levy will be $4.06 per tonne, of which $3.99 will be disbursed to R&D and $0.07 will be disbursed to PHA. The EPPR levy will be set at zero. The proposed Regulations will also stipulate who must pay the levy and provide that the customs charge is not imposed where excise levies have already been imposed on the seed cotton under Part 10 of Schedule 27 to the Primary Industries (Excise) Regulations 1999.

Under the Primary Industries Research and Development Act 1989, eligible cotton R&D expenditure is matched dollar for dollar by the Australian Government up to a cap of 0.5 per cent of the gross value of production. This cap will apply to matching of expenditure derived from the export of seed cotton.

Impact and Effect

The proposed amendments will prevent the undermining of the cotton industry's research systems by ensuring all cotton producers contribute proportionately to the statutory levy scheme regardless of where primary processing (ginning) occurs. There will be no net change to the amount of levy paid by producers against the total amount of cotton they produce, or the government matching contribution paid for R&D. The proposed Regulations will also enable the maintenance of cotton research programmes. The proposed Regulations will likely have a minimal regulatory burden on cotton producers who may be required to lodge a return within 28 days after the end of the month in which seed cotton is exported, and maintain records on seed cotton harvested, bought, sold or exported to validate their return.

Consultation

The Department of Agriculture and Water Resources (the department) liaised with Cotton Australia, CRDC and the Office of Best Practice Regulation (OBPR) in developing the seed cotton levies. Cotton Australia, which is the peak representative body for the cotton supply chain, consulted closely with its members (including all ginners, cotton co-operatives, consultants and grower associations), and obtained unanimous support to implement a levy on cotton that is exported as seed cotton, at a rate equivalent to the existing levy on cotton lint. The department also consulted the company that indicated plans to export seed cotton and found it was satisfied with the department's proposed approach.

The department consulted OBPR to determine whether a Regulation Impact Statement (RIS) was required for the seed cotton levy amendment proposal. OBPR assessed the proposal to have minor regulatory impact, and determined a RIS was unnecessary at this time (Ref: OBPR ID 21237).

Details

Details of the Regulations are set out in the Attachment A.

The Regulations are compatible with the human rights and freedoms recognised or declared under section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011. A full statement of compatibility is set out in Attachment B.

The Regulations are legislative instruments for the purposes of the Legislation Act 2003.

Attachment A

Details of the Primary Industries (Excise) Levies Amendment (Seed Cotton) Regulations 2017

Section 1 - Name

This section provides that the name of the proposed Regulations is the Primary Industries (Excise) Levies Amendment (Seed Cotton) Regulations 2017.

Section 2 - Commencement

This section provides for the proposed Regulations to commence on the day after the instrument is registered.

Section 3 - Authority

This section provides that the proposed Regulations is made under the Primary Industries (Excise) Levies Act 1999.

Section 4 - Schedules

This section provides for the Primary Industries (Excise) Regulations 1999 to be amended as set out in the applicable items in Schedule 1.

Schedule 1 - Amendments

Item 1 amends Schedule 27 to add a new part 10 for seed cotton.

Clause 10.1 provides for the definitions of 'leviable seed cotton' as defined in clause 1 of Schedule 5 to the Primary Industries (Excise) Levies Act 1999 and 'seed cotton' as defined in clause 12.2 of Part 12 of Schedule 37 to the Collection Regulations and amended from time to time.

Clause 10.2 provides for levy rates for seed cotton.

Subclause 10.2(1) provides when the levy will be imposed on seed cotton that is harvested in Australia and intended for export.

Subclause 10.2(2) provides when the levy is not imposed on seed cotton exports.

Subclause 10.2(3) states the date the levy will take effect.

Subclause 10.2(4) states that the rate for the R&D component of the levy on seed cotton will be $3.99 per tonne of seed cotton.

Clause 10.3 sets out the PHA levy payable on seed cotton.

Subclause 10.3(1) sets out that PHA levy levy is payable on seed cotton harvested on or after the date mentioned in Clause 10.2(3) and intended for export from Australia.

Subclause 10.3(2) specifies that the rate of PHA levy is $0.07 per tonne of seed cotton.

Clause 10.4 sets out the EPPR levy that is payable on seed cotton harvested on or after the date mentioned in Subclause 10.3(2) and intended for export from Australia.

Subclause 10.4(2) specifies that the rate of EPPR levy on seed cotton is presently nil.

Clause 10.5 specifies for the purposes of clause 11 of Schedule 27 to the Excise Levies Act, the levy imposed by this Part is payable by the producer of the seed cotton.

Attachment B

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Primary Industries (Excise) Levies Amendment (Seed Cotton) Regulations 2017

This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Legislative Instrument

The purpose of the Primary Industries (Excise) Levies Amendment (Seed Cotton) Regulations 2017 are to authorise a new excise levy on seed cotton to fund industry research, development, plant health and emergency plant pest responses. The excise levy will be payable by the producer of the seed cotton, and be distributed to the Cotton Research and Development Corporation and Plant Health Australia.

Human rights implications

This Legislative Instrument does not engage any of the applicable rights or freedoms.

Conclusion

This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.

The Hon. Barnaby Joyce MP

Deputy Prime Minister and Minister for Agriculture and Water Resources