RED meat export processors will be slugged for the full cost of a new safety certification system being implemented this month.
AMIC chairman Gary Burridge.
The new system of delivering export inspection and certification known as the Australian Export Meat Inspection System (AEMIS) means processors will pay an extra $35 million in addition to the $50 million they already pay to safeguard meat quality and maintain international market share.
Under the old arrangements of 50 years' standing, beef and sheep producers contributed to the cost of AQIS programs according to different legislation and collection methods.
Many years ago Australian cattle and sheep producers were charged a slaughter levy per head to fund part of the AQIS costs, which was clearly identified on livestock account sales.
In recent years processors have been required to pay part of the cost of AQIS inspection directly to AQIS. These costs are factored into the livestock purchase cost on price grids or prices bid at saleyards, to recover these AQIS costs.
Australian Meat Industry Council (AMIC) chairman Gary Burridge said successive governments in Australia had been moving to recover some of the costs of AQIS operations from industry in the face of rising regulatory charges.
In 2008 AQIS export certification costs for the meat industry were estimated at $85 million. The meat industry abattoir sector paid 60 percent or about $50 million of this until June 2009.
The government provided the abattoir sector with a rebate of $35 million to cover the remainder.
The rebate represented the legitimate contribution of the Government for the service, including the community good generated from a professional food safety system. The rebate also covered the inefficiencies of a monopoly government service in satisfying the requirements of government bureaucrats on the issue of food safety.
The Beale Review in 2008 recommended that government move to a policy of full-cost recovery for AQIS export certification charges. This was in spite of the Beale Review not raising this issue at any of its "public consultations" with industry. Neither did the Federal Govern-ment admit it was actually part of the review in the first place.
Mr Burridge said that while processors had been moved to 100 percent cost recovery since the introduction of AEMIS on October 1, the news was not all bad, with AMIC negotiating with the Govern-ment several concessions that will see industry reforms introduced to offset the cost impact.
"The entire meat industry supply chain was effectively going to pay more for the AQIS service with the removal of the Government's 40 percent rebate. It was a case of minimising what those cost increases might be," he said.
According to AMIC, many of Australia's major trading partners require an AQIS on-plant veterinarian (OPV) to inspect livestock at the abattoir (ante mortem) and to supervise post mortem inspection.
The AEMIS system employs more objective data collection and analysis systems that can demonstrate how well an export abattoir is performing in complying with meat hygiene and food safety standards.
AEMIS also provides the basis for future reforms that promise real savings for producers and processors alike.
"The AEMIS system is a once-in-a- generation opportunity to improve meat inspection systems.
"Export establishments are currently subject to monthly AQIS audits and in the future better-performing export abattoirs will require fewer audits, further reducing AQIS inspection fees to industry," Mr Burridge said.
AEMIS will also incorporate im-proved systems to collect pathology data at the abattoir. Mr Burridge is confident the system has the ability to provide valuable feedback to producers on animal health.
"In the past, AQIS officers have not regularly collected this data. This feedback can help livestock producers identify health issues that may be affecting fertility, productivity, growth rates and yield in a producer's herd or flock," he said. Since the commencement of AEMIS, 19 export abattoirs had taken advantage of the new regulations to reduce AQIS costs.
Mr Burridge said AEMIS was the beginning of further reductions in AQIS inspection costs to industry and AMIC had reached an in-principle agreement with the Federal Government for an on-going review of AQIS fees, structure, and procedures.
"Industry has always been concerned that government needed to fully understand the implications to business of a move to 100 percent cost recovery for export certification and the removal of the 40pc rebate," he said.
"Concerns have always existed among some that 100pc cost recovery may mean the end of some meat manufacture businesses exporting meat, as these companies cannot cope with the full cost recovery policy by the Government.
"When assessing the government's full-cost recovery policy, AMIC has always argued that a legitimate contribution by government to the costs of export certification needed to be considered."
Mr Burridge said government moves to address an emerging world food shortage, build agriculture, create more jobs in regional communities and curtail the downward spiral in manufacturing, seemed at odds with its policy of asking the meat industry to pay higher costs for export certification. He said Australia's major meat export competitors such as the USA and Brazil had significantly lower fees for export certification.
A report by SG Heilbron Economics indicated the Food Safety Inspection Service in the US did not charge for man-dated certification services in ordinary working hours. It only charged fees for overtime and holiday work.
The US Congress has consistently accepted the arguments of the meat industry that certification is a service that confers public benefits and is a public good that protects the health and safety of consumers and allows exports.
In 2010 the FSIS recovered about $US140 million in user fees from total certification costs of $US930m which was equivalent to 15pc cost recovery.
The same report pointed out that in Brazil, meat exporters are not charged for export meat inspection fees.
"This provides both of these major export competitors with a lower cost of production and therefore greater international competitiveness, surely a disadvantage to the Australian industry," Mr Burridge said.
Despite the ongoing challenges ahead to refine the new system, Mr Burridge said the implementation of the AEMIS model was not the end of the negotiation process with AQIS on productivity gains and efficiencies.
"Rather, it's the start," he said. "Industry has the best opportunity for a long time to identify a range of new efficiencies across the board that will reduce the cost of this monopoly Government service. This is more important than ever in view of the Government's policy on cost recovery."
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