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High compliance costs incurred locally and in export markets are causing business owners nightmares. Will productivity improvements and more free trade agreements help bring costs down?

By Sangeeta Anand

It annoys Tim Ritchie, the chief executive of the New Zealand Meat Industry Association, that the industry forks out about $80 million a year to meet New Zealand’s high food safety and hygiene standards.

That is what it costs for hygiene verifications carried out by the regulator, NZ Food Safety Authority (NZFSA), together with the work of AsureQuality, the provider of meat inspection services.

The meat industry exports more than 90% of its output to some 120 markets, and for its pains experiences the most government intervention of any segment of the commercial food production sector. Sheep meat is the second largest exported food commodity, earning the country $2.8 billion in 2009, according to Statistics New Zealand.

One of the industry’s major challenges is operating to a single set of standards that meet the varied requirements of all its markets, says Ritchie.

The industry appreciates that stringent food safety and hygiene standards help preserve the country’s reputation, but it would like to see the requirements standardised.


“This is a significant cost to the industry and there is no contestability in the provision of meat inspection services. Many of the verification and inspection activities are based on historical requirements and are no longer supported by sound science, and are therefore obsolete and add unnecessary costs to the production system,” says Ritchie.

On top of that are the costs associated with being one of the largest employers in the country. At the height of the meat processing season, the industry employs about 25,000 people, heaping employment-related compliance work on meat companies. The Holidays Act 2003, for example,caused major changes to the way employees are paid for holidays and sick leave, and introduced the concept of relevant daily pay.

“The act has resulted in significant direct costs arising from sick pay, disruption and loss of productivity, with absenteeism increasing on an average by 100 per cent,” says Ritchie.

High compliance costs are a big bug bear for NZ businesses. Exporters not only face the cost of satisfying local regulations, but also those of foreign markets.

There is hope, however, that breaking down trade barriers will be a first step in reducing the cost of exporting. The recently concluded APEC Summit in Japan, work on the Trans Pacific Partnership (TPP) to create a Pacific-wide free-trade deal, the apparent willingness of Japan to lower trade barriers and the start of free-trade negotiations with Russia all augur well for reducing compliance costs in those markets.


Technological improvements are also helping by raising productivity.

The New Zealand Customs’ Secure Exports Scheme (SES), which partners with exporters, gives them greater certainty about the movement of their goods, especially to and through the countries with which New Zealand Customs has mutual recognition arrangements.

A large number of exporters have already joined the SES. For their part, they have to ensure protection of their goods against tampering, sabotage, or smuggling from the point of packing to delivery to the port.

The NZFSA-developed e-certification is another platform that has been well received and is internationally recognised, with the United Nations developing a paperless certification system based largely on the NZFSA model.

The Electronic Certification, or E-cert, is a web application used to assist with providing government-to-government assurances that animal products exported from New Zealand comply with the regulations of importing countries.

The direct electronic exchange of information makes it difficult for traders to use forged documents to clear goods and also reduces the cost of paperwork.

The government is hoping that the use of E-cert by overseas authorities will pave the way for improved overseas trust in the integrity of New Zealand’s assurance programme and help lift export volumes.

It is also hoped this measure will help reduce the total compliance burden on exporters. Adoption of E-cert is already in train with Australia, China, Hong Kong, Japan and the European Union.

Another measure the government is considering is a new Joint Border Management System (JBMS). This will usher in a single shared computer system to replace the Customs Service’s CusMod and Ministry of Agriculture and Forestry’s Quantum ageing computerised border­clearance-systems.

The system will enable exporters to access and electronically submit all border clearance documents once, rather than to multiple agencies. It will also collate separate agency fees for one consignment to enable a single fee payment.

Exporters are hoping for more improvements. For example, goods exported to China require a Certificate of Origin (as per the FTA with China), issued by a designated non-government organisation. “For the meat industry this is an extra, unnecessary cost as nearly all the information required for the certificate of origin is already produced on other official documents that accompany meat exports.

“While rationalised government systems can reduce duplication and cost, it is important to ensure that the costs involved in introducing a new system do not outweigh the potential benefits,” Ritchie says. [END]


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