Sustainability and Biosecurity Policy Division

Department of Agriculture

Agvet Chemicals Policy

Sustainability and Biosecurity Policy Division

GPO Box 858

CANBERRA ACT 2601

Email:

Dear Madam/Sir

Accord provides the following submission on the Department of Agriculture’s (DA) Consultation Paper First Principles Review of Cost Recovery at the Australian Pesticides & Veterinary Medicines Authority, June 2014 (The Review).

Accord Australasia, represents the manufacturers and suppliers of formulated products, including: hygiene, cosmetics and specialty products, sunscreens, food contact sanitisers, household pesticides, disinfectants and specialty commercial products. These products help safeguard public health and enhance our quality of life.

As indicated in our February 2014 submission to the November 2013 Consultation Paper on this matter, our sector is highly regulated by a number of cost recovered agencies three of which are 100% cost recovered. The impost of cost recovery on Accord members is quite significant.

The majority of Accord members dealing with the APVMA are small to medium enterprises operating in low margin businesses that are susceptible to input cost-pressures. The majority of products are either fast moving low risk consumer goods or low risk, well characterised products which represent a low regulatory burden on the agvet sector and are not the core focus of the APVMA’s regulatory activities. Accord members thus have a specific and direct interest in the APVMA’s cost recovery processes and we welcomed the Review as the basis for ongoing analysis and dialogue on the APVMA’s cost recovery processes with a view to streamlining and minimising the cost burden on industry.

However, Accord is disappointed that the Review did not wait to take into account the government’s revised cost recovery guidelines released July 2014. The current Review is now out of date and we wonder if there is any benefit to industry in responding to an out of date report?

Furthermore, we note that the release of the government’s new national Industry Innovation and Competitiveness Agenda regarding greater acceptance of international standards and risk assessments will have a significant impact on the work and cost recovery arrangements of the APVMA once the principle is fully implemented.

As noted in our February 2014 submission, the November 2013 Consultation Paper did not undertake a thorough re-examination of the policy principles behind the APVMA’s approach to cost recovery. Nor did it test the assumption that the cross subsidisation to maintain low volume or niche products assists SME’s maintain a viable position in the market place and that it also encourages product innovation within this sector.

It is quite possible that the current cost recovery arrangements distorts the market, sets artificially high prices for products, disadvantages famers and the community in general by making agvet products more costly and ultimately making the sector less competitive on a cost basis. It is not the role of a cost recovery scheme to act as a de facto industry support scheme. This is the role of government.

While many of Accord’s concerns were noted in the Review, they were not necessarily addressed.

We continue to hold these reservations given that the starting premise for the Review was the justification of the existing costing regime against an outdated government cost recovery policy.

Accord’s position put to the 2013 Consultation Paper was that we supported cost recovery for services provided where there is a direct beneficiary receiving a commercial benefit. Under these circumstances it would appear appropriate that application fees are charged on a 100% cost recovery basis. However this would be contingent upon a number of factors – increased use of notification only for certain matters such as label changes, a streamlining of information and data requests, greater acceptance of overseas data and hazard assessments i.e. no reassessment but acceptance from comparable recognised authorities and no levy. Only under these conditions could Accord members be satisfied that they are receiving value for money and that the cost recovery process is efficient and effective. Given that these conditions appear not to have been met, any support for the Review’s findings are heavily qualified.

In Accord’s submission to the Harper Competition Policy Review, Accord submitted that in our view, full cost recovery is a break on innovation, a barrier to trade and stifles competition. The introduction of 100% cost recovery has not led to improved efficiency and effectiveness, rather it has led to increased costs and reduced outcomes. We believe that cost recovered services should be contestable. We support the introduction of contestability for cost recovered functions which are currently the monopoly of regulatory agencies and/or government departments. There was no consideration of this by the consultants throughout the Review process. As stated previously we were disappointed that the starting position of the Review was that all costs would be recovered.

Accord still holds reservations regarding the scope of the cost recovery review which should have been broader and included consideration regarding changing the scope and nature of the APVMA’s regulatory activities as well as constructing detailed quantitative economic modelling to assess the impacts of the proposed cost recovery model, including testing some of the supposed identified benefits attributed to the current arrangements resulting from the policy decision supporting cross subsidisation. Furthermore, a full and comprehensive Business Review Process should have been part of the Review process to determine whether the services are efficient and effective and not gold plated.

Accord supports the principle of user pays, and we do not object to 100% cost recovery for registrations and approvals. We have stated this before but we also sought a reduction in the levy which we regard as a tax on business. We fail to understand why a levy would need to continue if the full costs are covered for applications and approvals. The annual fee is proposed to be continued. Upfront fees and charges along with an annual registration fee, late fee and fees for variations along with various Good Manufacturing Practice (GMP) charges is the basis of the TGA’s cost recovery scheme. There is no levy placed on the sale of goods. We do not understand why the APVMA would need to continue with a levy scheme. Accord does not support the continuation of a levy scheme.

The Review proposes that the levy scheme will be used to fund a range of activities which meet the government’s broader social objectives as recognised in the Agricultural and Veterinary Chemicals Code Act 1994 (Agvet Code) and re-iterated in the Objects. These activities should be taxpayer funded as they are in the public interest and go beyond providing benefits to an identifiable individual or group that receives the activity or creates the need for it.

Accord does not support the maintenance of the APVMA’s financial reserves. This position is not consistent with the government’s cost recovery policy which states there must be alignment between the expenses of the activity and costs recovered. A properly constructed cost recovery arrangement should ensure that the APVMA has the necessary funds to complete its functions, but it should not encourage over-recovery.

Accord does not accept the Review’s finding regarding the difficulty with the implementation of a risk-based cost recovery model for compliance and enforcement. The APVMA is undertaking considerable work on risk categorisation. As stated before we do not support a levy. Funding for compliance and enforcement should come from the annual fee. This could be stratified based on risk. The TGA does this based on registered and listed products. We do not see that this is an insurmountable problem for the APVMA.

We also had difficulty in understanding how certain terms were used. A glossary would have been of assistance. For example, we are unsure as to what are the differences between an annual flat levy, a specific annual flat fee, a flat tiered annual licence and a specific tiered annual flat levy.

The recommendations will require policy changes from government if they are to be applied. It is unclear as to how these will be dealt with and what the next steps in the process are.

In light of the recent government decision regarding the acceptance of trusted international standards and the new cost recovery requirements we recommend that the Review’s recommendations and analysis be revisited to take into these into account.

At Attachment 1, additional comments are provided addressing specific recommendations in the Review.

Accord also supports the comments put forward by our sister organisations CropLife Australia and PACIA in their submissions.

Should you have any questions in relation to the issues raised please do not hesitate to contact me on 02 9281 2322, 0422 569 222 or by email at .

Yours sincerely

Authorised for electronic submission

Dusanka Sabic

Director, Regulatory Reform

21 October 2014

ATTACHMENT 1

Specific Comments on the recommended cost recovery framework

Registration and Approvals

Accord is on record for supporting 100% cost recovery for registration and other approvals where there is a demonstrated capturable commercial benefit. We do not support an upfront fee charged where minor changes are required by the APVMA. For minor changes these should be able to be notified with no associated fee.

Minor Use permits and Emergency Use permits

The cost recovery principle should apply and full costs should be charged. From the information provided in the Review, it appears that the beneficiary in most instances is the public and it would therefore be seen as a public good and should be tax payer funded.

Pre-application Advice

It states that a fee is not rebated on submission of an application. It is Accord’s understanding that if an application is successfully finalised then the pre-application charge is considered in the context of the overall cost. If this is the case then this needs to be made clearer in the recommended model.

General Activities

We do not agree that the general activities listed should be funded through the levy. All of these activities are in the public interest and as such should be taxpayer funded. Where it can be demonstrated that there is a capturable commercial benefit such as attending a seminar then a direct charging of individuals through cost recovery can be applied, but in general the list of activities should be tax payer funded through government appropriation. This is for the reason listed above in that the Agvet Code has a wide ranging charter much of which has social objectives which are in the public interest. It is only reasonable that the taxpayer fund these activities through appropriation and not through industry cost recovered funds.

Recommendation 3

While Accord supports the Manufacturing Licence Scheme (MLS) fee based on an annual tiered fee, in our submission, Members noted that this should commence at $500,000 indexed for growth and inflation. Where operators already hold a Good Manufacturing Licence (GMP) licence for an equivalent function then this should be accepted as deemed-to-comply with the APVMA’s requirements.

Recommendation 4

While we do not disagree with Recommendation 4, this needs to be a transparent process with the charging process fully disclosed.

Payment of application fees by instalment

Accord does not support application fees being paid through instalments. We do not think there is much merit in this proposal and uncertain as to whether it could be implemented under the Financial Management and Accountability Act 1997 (FMA Act) as the collection process is proposed to go over a number of financial years.

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