Introductory Info
Date introduced: 17 June 2020
House: House of Representatives
Portfolio: Agriculture, Water and the Environment
Commencement: 1 January 2021
Purpose of
the Bills
The purpose of the Customs
Charges and Levies Legislation Amendment (Sheep and Lamb) Bill 2020 (the
Customs Bill) and the Excise
Levies Legislation Amendment (Sheep and Lamb) Bill 2020 (the Excise
Bill), jointly referred to as the Bills, is to amend the definition of lamb in
the following Acts (the Acts):
The proposed changes made by the Bills are intended to
harmonise the definitions of lamb and sheep in the Acts with an amendment that
was made to the Export
Control (Meat and Meat Products) Orders 2005 (Export Control Orders) by the
Agriculture Minister on 20 March 2019 (explained below).[1]
Consequently, these amendments will:
… provide administrative clarity for levy payers and support
compliance with the levies system, through ensuring consistency across relevant
legislation in the definition of the animal upon which levies and charges are
imposed.[2]
Background
As discussed, the proposed amendments in the Bills are
largely as a consequence of changes to the Export Control Orders, which were
intended to address definitional issues around lamb and sheep that the industry
had been consulting on since 2017. This history is discussed below as context
for the changes made by the Bills.
Definitional issues
The definition of a lamb provides a demarcation between what
is a lamb and what is a sheep. The definition is important for several reasons
including:
1.
it underpins the labelling requirements of lamb and mutton meat for sale
in Australia and overseas
2.
it underpins the levies and charges on transactions relating to lambs
and sheep, the slaughter of lambs and sheep and the export of lambs and sheep[3]
3.
lamb has a higher saleyard price than mutton (according to the Australian
Bureau of Agricultural and Resource Economics and Sciences, the 5-year
average saleyard price of lamb is 654 cents per kilogram, and for mutton it is
436 cents per kilogram)[4]
and
4.
other countries with a ‘softer’ definition of lamb (an
animal defined as a lamb for a longer period of time) could have an unfair
advantage over Australian grown lamb both locally and in international markets.[5]
Up until the amendment of the Export Control (Meat
and Meat Products) Orders 2005, the Australian definition of lamb was ‘a
sheep that has not cut a permanent incisor tooth’.[6]
New Zealand has a different definition of lamb, which:
… includes age (<12 months) in their definition,
however dentition is the means by which the live animal is assessed as being a
lamb. The New Zealand definition allow [sic] either of the first permanent pair
of incisors to have erupted, however neither can be in wear. The New Zealand
definition therefore allows an older animal than the Australian definition.[7]
[emphasis added]
This is because:
Surveys of the age at which teeth erupt in Australia shows
that the first permanent incisor will erupt anywhere between 369 and 483
(average 427 days) days of age … Survey work in New Zealand shows average
age of teeth eruption to be slightly older.[8]
Industry suggest that the older definition also
‘gives producers no warning light about when a lamb stops being a
lamb’ which has consequences for the value of sheep and lambs for sale
and processing.[9]
Industry consultation
In April 2017, Meat and Livestock Australia (MLA), on
behalf of Sheepmeat Council of Australia (now Sheep Producers Australia),
undertook a review of the current definition of lamb. An interim
report was produced by the agricultural consulting company Holmes Sackett which
was tasked to:
… review the impacts of any change to the Australian
Language definition of lamb such that it would harmonise the Australian
definition with the New Zealand definition.[10]
The interim report focussed on potential implications to
the Australian sheep industry if the New Zealand definition was adopted,
namely, ‘no permanent incisor tooth in wear’. The interim report
stated, among other things, that a definitional change will:
1.
increase the age of a lamb from one year to an average of 427 days[11]
2.
have low market risk, as New Zealand has access to the same markets as
Australia[12]
3.
have no material impact on eating quality if Meat Standards Australia
(MSA) standards were adhered to[13]
4.
potentially have high market compliance, a finding based on the New
Zealand market compliance experience[14]
and
5.
have a positive net economic impact on processors – a 2008
assessment indicated that processors incurred a loss of $15.6 million as a
consequence of lambs that are found to have teeth erupted prior to slaughter
but which had been purchased as lamb.[15]
Following the Holmes Sackett interim report, a lamb
definition consultation
paper was published by the Sheepmeat Council of Australia and a public
consultation campaign launched on 4 October 2017.[16]
A summary
of the public consultation, released in February 2018, claimed that, of 509
complete responses, 83 per cent were in favour of the changed definition of
lamb.[17]
The subsequent February 2018 Explanatory
policy paper states the SPA’s Marketing, Market Access and Trade
Policy Committee endorsed a new policy position on the lamb definition as
follows:
Whereas the sheep industry continues to incur a significant
opportunity cost generated from an irresolute policy position on the lamb
definition, and
Whereas the lamb definition public consultation process has
identified broad industry support for the proposed change in definition,
therefore
Be it resolved, that Sheep Producers Australia endorse
changing the Australian lamb definition on the basis that:
1. Market access risk is minimised through the adoption of
the New Zealand definition of ‘young sheep under 12 months of age or
which do not have any permanent incisor teeth in wear’;
2. Final SPA Board approval is provided on the proposed
regulatory framework governing the new definition as developed by the
Australian Meat Industry Council (AMIC) and SPA;
3. Final Board approval is provided on the proposed
implementation process and budgeted investment of production levies required to
facilitate a change in definition; and
4. A strategic plan is collaboratively developed by AMIC and
SPA to achieve national regulatory harmonisation of sheepmeat marks and brands.[18]
On 21 November 2018, the Minister for Agriculture announced
that the definition of what constitutes lamb for export purposes will change to
align with the New Zealand definition.[19]
On 20 March 2019, the Minister for Agriculture and Water Resources
amended the Export
Control (Meat and Meat Products) Orders 2005 to change the definition of
lamb accordingly (which also changed the definition of mutton and ram).[20]
The changes commenced from 1 July 2019.[21]
Industry levies
The Acts impose levies and charges on transactions
relating to lambs and sheep, the slaughter of lambs and sheep and the export of
lambs and sheep.[22]
These levies and charges are set out in schedules to the Acts, and are
comprised of:
-
charges imposed per head of sheep and lamb for live export[23]
-
levies imposed per head on the slaughter of sheep and lamb for
human consumption[24]
-
levies imposed per head on transactions involving live sheep or
lambs, including the transfer of animals from one person to another or to
processors but not sheep for sale at a live-stock auction or transfers between
related companies[25]
and
-
national residue levies and charges imposed on transactions
relating to sheep and lambs, the slaughter of sheep and lambs and the export of
sheep and lambs.[26]
National residue levies are specifically collected for the purpose residue
monitoring activities (that is, testing animals for pesticide and veterinary
medicine residues).[27]
These levies and charges are imposed by the Australian
Government at the request of industry and the amounts raised are dispersed, in
full, to various industry bodies (including Meat
and Livestock Australia, the Australian
Meat Processor Corporation, the Australian
Livestock Export Corporation Limited, Animal Health Australia,
and the National
Residue Survey) to fund industry research and development, marketing,
animal health measures, biosecurity responses and residue testing.[28]
Whether an animal is defined as a lamb or a sheep is one
factor that determines the rate of levy or charge that applies under each of
the Acts (for example, the rate that applies to sheep and lamb transactions
also depends on the sale price of the sheep or lamb).[29]
The specific levy amounts are set in the:
While the definitional changes to sheep and lamb will
result in some animals being defined as lamb for longer than currently and may
result in increased rates of taxation being paid, the rate of levy that applies
to a particular transaction or other taxable activity depends on several circumstances
and is not always solely determined by whether an animal is defined as a sheep
or a lamb. Any changes to the amount of levy or charge paid will translate
directly into the amounts which are distributed to industry bodies. These
changes are primarily about aligning the definition of sheep and lamb in the
Acts with those in the Export Control Order and, as noted above, are supported
by the major industry bodies.
Committee
consideration
At its meeting of 16 June 2020, the Senate Standing
Committee for the Selection of Bills recommended that the Bills not be referred
to committees.[30]
Senate Standing Committee for the
Scrutiny of Bills
The Senate Standing Committee on the Scrutiny of Bills had
no comment on the Bills.[31]
Policy
position of non-government parties/independents
At the time of writing this Bills Digest, no comments on
the Bills by non-government parties or independent Members and Senators have
been identified.
Position of
major interest groups
As outlined earlier (in the ‘Background’
section of this Digest), many responses received to a public consultation
process in 2019 were in favour of the changed definition of lamb. During the public
consultation period conducted by Holmes Sackett, only 17 per cent of completed
responses did not support the proposed definitional change based on:
Not enough eating quality work has been done for sheep
outside MSA pathways.
That it is not clear how the changed definition would be
regulated and what it would cost.
That a precedent on this definition by New Zealand does not
guarantee success in negotiating future market access
That there are already physical signals available to
producers of impending change in animal classification between lamb and hogget.[32]
Since the amendment to the Export Control (Meat
and Meat Products) Orders 2005 no further concerns from major interest
groups about the proposed changes in these Bills have been identified. According
to the Explanatory Memorandum the changes in the Bills are supported by the
Australian Meat Industry Council and Sheep Producers Australia.[33]
Financial
implications
These Bills are estimated to have a nil net financial
impact over the forward estimates.[34]
Statement of Compatibility with Human Rights
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the
Bills compatibility with the human rights and freedoms recognised or declared
in the international instruments listed in section 3 of that Act. The
Government considers that the Bills are compatible.[35]
Parliamentary Joint Committee on
Human Rights
The Parliamentary Joint Committee on Human Rights had no
comment on the Bill.[36]
Key issues
and provisions
All provisions in the Bills seek to amend the definition
of lamb in the Acts so that they have the same respective meanings and align
with the amendments made to the Export Control (Meat and
Meat Products) Orders 2005.[37]
This will ensure that the definitions used to determine the appropriate excises
and levies aligns with that used for export purposes.
As a result of the proposed changes, the definition of
lamb will change in the Acts from:
- a
sheep that has not cut a permanent incisor tooth[38]
(or other similar wording) to
- as
an ovine animal that:
- is
under 12 months of age or
- does
not have any permanent incisor teeth in wear.[39]
Excise Levies Legislation Amendment
(Sheep and Lamb) Bill 2020
Schedule 15 to the National Residue
Survey (Excise) Levy Act 1998 sets out definitions of
‘lamb’, ‘sheep’ and ‘slaughter’ for the
purposes of imposing sheep and lamb transactions levies that are duties of
excise, for the purposes of investment in residue testing.[40]
Subclause 1(1) of Schedule 15 currently states that ‘lamb, sheep and
slaughter have the same respective meanings as in Schedule 18 to the Primary
Industries (Excise) Levies Act 1999’.
Item 1 of the Excise Bill repeals subclause 1(1) of
Schedule 15 of the National
Residue Survey (Excise) Levy Act 1998 to remove the reference to the Primary
Industries (Excise) Levies Act 1999 and inserts the new definition of lamb
as well as a definition of sheep and slaughter which are unchanged.
Schedule 17 of the Primary Industries
(Excise) Levies Act 1999 sets out definitions of ‘lamb,’
‘live-stock,’ ‘processor’ and ‘sheep’ for
the purpose of imposing levies on the slaughter of sheep for human consumption.[41]
Item 2 of the Excise Bill repeals and substitutes clause
1 of Schedule 17 to the Primary Industries
(Excise) Levies Act 1999 replace the current definition of lamb with
the proposed definition.
Schedule 18 of the Primary Industries
(Excise) Levies Act 1999 sets out the definition of ‘lamb,’
‘live-stock,’ ‘processor’ and ‘sheep’ for
the purpose of imposing levies on transactions involving sheep and lambs.[42]
Item 3 of the Excise Bill repeals and substitutes
clause 1 of Schedule 18 of the Primary Industries
(Excise) Levies Act 1999 to replace the current definition of lamb with
the proposed definition.[43]
Subitem 4(1) of the Excise Bill provides that items 1
and 3 of the schedule apply in relation to the following actions that occur on
or after 1 January 2021:
- transfers
of ownership of sheep or lambs
- the
delivery of sheep or lambs to a processor
- the
slaughter of sheep or lambs by a processor.
Subitem 4(2) of the Excise Bill provides that the
changes made by item 2 of the Bill applies in relation to the slaughter of
sheep or lambs on or after 1 January 2021.
Customs Charges and Levies
Legislation Amendment (Sheep and Lamb) Bill 2020
Schedule 5 to the National Residue
Survey (Customs) Levy Act 1998 sets out definitions of
‘lamb’ and ‘sheep’ for the purposes of imposing sheep
and lamb export charges, collected for the purposes of investment in residue
testing. Clause 1 of Schedule 5 currently states that ‘lamb and sheep
have the same respective meanings as in Schedule 12 to the Primary
Industries (Customs) Charges Act 1999’.
Item 1 of the Customs Bill repeals clause 1 of
Schedule 5 to the National
Residue Survey (Customs) Levy Act 1998 to remove the reference to the Primary
Industries (Customs) Charges Act 1999 and inserts the proposed definition
of lamb and the definition of sheep.
Schedule 11 of the Primary Industries
(Customs) Charges Act 1999 sets out the definition of ‘lamb,’
‘live-stock and ‘sheep’ for the purpose of imposing export
charges on sheep and lambs on exporters.
Item 2 the Customs Bill repeals and substitute clause
1 of schedule 11 of the Primary Industries
(Customs) Charges Act 1999 to replace the current definition of lamb
with the proposed definition.[44]
Schedule 12 of the Primary Industries
(Customs) Charges Act 1999 sets out the definition of ‘lamb,’
‘live-stock and ‘sheep’ for the purpose of imposing export
charges on sheep and lambs on producers.
Item 3 of the Customs Bill repeals and substitute clause
1 of schedule 12 of the Primary Industries
(Customs) Charges Act 1999 to replace the current definition of lamb
with the proposed definition.[45]
Item 4 of the Customs Bill provides that the
amendments apply in relation to the export of sheep or lambs from Australia on
or after 1 January 2021.