The purpose of the GIA is to build a strong partnership between primary industries and Government to deliver better biosecurity outcomes.
We're confident that DairyNZ becoming a GIA signatory would provide dairy farmers with more influence and certainty. We would have more say in biosecurity decision-making and we would get even more value from the levy money we invest on your behalf, in biosecurity readiness and response activities.
What do we want you to do?
- Read the Summary Document and the DairyNZ brochure.
- It’s important you understand the commitments that would be made on your behalf. For more detail, download the full Discussion Document.
- Fill in the submission form in the April 2018 issue of Inside Dairy (or download and print a copy here), and send it back to us by 19 April 2018 – no stamp required.
If you have questions or would like to discuss this proposal directly, phone 0800 4 DairyNZ (0800 4 324 7969 or email us on email@example.com. More information about the GIA concept is available on livestockgia.org.nz.
Questions and Answers on our GIA proposals
Update: 23 November 2017
Thanks to all of you who have responded or asked questions so far. The majority of questions to date relate to funding issues. We thought it would be useful to provide some additional background information:
- The GIA hasn’t been designed to reduce government spending on biosecurity, or withdraw support for the primary industries in favour of other priorities. The Government is still continuing to guarantee a minimum contribution of 50% towards biosecurity and response costs. It’s also introduced transitional discounts to encourage industries to sign up to the GIA as soon as possible, and to give them time to adjust to the new partnership arrangements. These transitional discounts mean early GIA signatories won’t pay their full share of readiness costs until 2020, and their full share of response costs until 2023.
- The GIA was set up in 2013 when Parliament made a series of changes to the Biosecurity Act. One of the changes was to enable the Ministry of Primary Industries (MPI) to recover costs from those industries that decide to stay outside the GIA where it’s equitable and efficient to do so. This means the funding environment for biosecurity readiness and response has already changed. In view of this, the purpose of this consultation process isn’t to ask you whether dairy farmers should contribute towards readiness and response costs because that decision was made back in 2013. What we’re asking you is whether DairyNZ should join the GIA and shape MPI’s biosecurity priorities, share decisions and agree the dairy sector’s cost-shares up front OR stay outside the GIA and let the Ministry and other signatories make those decisions for you, including the amount of money that will be cost-recovered from dairy-farmers?
General Q&A about the GIA proposals (Expand)
I already pay a milksolids levy, so why are you proposing to make me pay a biosecurity levy?
The Commodity Levies Act imposes legal restrictions on the activities that the existing milksolids levy can be used for. The milksolids levy can only be used to fund biosecurity activities including disease control and mitigation. It can’t be used to fund our minimum biosecurity response commitments under the GIA.
The Dairy Companies Association of New Zealand (DCANZ) has already signed the GIA – does that mean I could end up paying twice?
No. DCANZ is a GIA Signatory on behalf of DCANZ member companies i.e. dairy processing companies who are both primary processors and exporters of dairy products. DCANZ is limiting its contributions to readiness and response activities undertaken to maintain access of dairy products to export markets, or to protect customer preferences for these products. The interests of DCANZ’s dairy processing members are distinct from DairyNZ’s producer interests. DairyNZ’s focus would be on protecting the production of milksolids and providing advice relevant to dairy farming systems.
I also produce crops and other livestock already covered by a GIA - why should I pay separately?
Industry contributions towards GIA are directly-related to specific sectors and the benefits they receive from biosecurity readiness and response activities. If a dairy farmer owns a vineyard, they will benefit separately from activities undertaken to protect dairy cattle and grape vines. The benefits will be in proportion with the different levies they pay for each product.
Beef+LambNZ is also proposing to sign the GIA and to establish a biosecurity levy based on beef animals slaughtered. If that happens, why should dairy farmers pay a milksolids related biosecurity levy as well?
Dairy farmers produce both milk and beef products. The impacts of exotic pests and diseases can be different for these two products. Please be assured that, when calculating industry shares of costs and benefits from readiness and response activities, the value of dairy milksolids production and processing would be excluded from the contribution expected from Beef+LambNZ and DCANZ.
If Federated Farmers signs the GIA and I’m a member of Federated Farmers, will I pay twice?
No. Federated Farmers has advised that it will not be a Party to GIA Operational Agreements. As such, Federated Farmers will not need to make any financial contributions as a GIA Signatory.
What happens if a response to foot and mouth disease (FMD) ends up being bigger than the medium-scale scenario used as the basis for setting the maximum levy rates?
A large scale FMD outbreak would be a major, national economic event and the Government has agreed to pay 100% of response costs for such an event.
How are we protected from limitless liabilities under GIA?
There is an obligation for GIA Signatories to participate in ‘good faith’ and to not seek to free-ride on the investments of others. However, DairyNZ recognises that decisions about whether an industry is a beneficiary must be made in the context of alternative priorities rather than in the absolute (i.e. DairyNZ would not invest in the priorities of other industries if, on balance, the activities did not align with priorities for our sector).
DairyNZ is also unlikely to co-invest in biosecurity activities where our sector is an indirect beneficiary. For example, responding to exotic pests and diseases which impact pollinators and other ecosystem services.
There are mechanisms that exist to protect industry GIA Signatories from overly burdensome costs, such as:
- In developing GIA Operational Agreements, Signatories are able to agree ‘fiscal caps’ to limit their contribution to a response or readiness activity. Once reached, the limit can be exceeded, but only after the industry reviews its position and decides to make an additional investment in the activity.
- GIA Signatories can decline to participate in readiness or response activities if they consider that they are not beneficiaries. Industries outside of GIA do not have this option and, where other industries or MPI believe that they are likely to be beneficiaries, then cost recovery can apply.
DairyNZ, within its ability to influence, will not support the application of biosecurity measures or (as part of biosecurity responses) the registration and use of medicines or agri-compounds that pose a risk to the trade or reputation of dairy products (or that place constraints on the efficient processing of dairy products), unless the risks are outweighed by benefits to the production of milk solids.
Do fiscal caps apply across multiple responses?
Fiscal caps would be specified separately for each Operational Agreement. If there are multiple responses under different agreements the caps would be cumulative. However, DairyNZ’s proposal is to limit its funding liabilities to a maximum of $4.95 million in any 12-month period for all cost-shared response activities. This represents DairyNZ’s annual fiscal cap within GIA, across any and all GIA commitments to be funded by the proposed biosecurity levy.
If the costs of multiple response costs exceeded the DairyNZ annual maximum of $2.5 million, the Government could choose to make up the funding shortfall and recover the accrued financial liabilities from DairyNZ through a mutually agreed repayment plan.
If DairyNZ accrued financial liabilities from participating in responses, over what time would the Government require DairyNZ’s repayments be made?
Discussions with MPI have indicated that there is no limit on the time allowed for repayments. Decisions about repayment timeframes would depend on the amounts accrued and the ability of the sector to pay. MPI has indicated that it would not expect repayment at a rate that would cause significant financial hardship to an industry already compromised by a pest or disease outbreak.
Would the Government charge interest on accrued financial liabilities?
Yes. Annual interest would apply at the Government’s capital charge rate, which is the same as the Treasury’s default ‘public sector discount rate’ (PSDR) which, in October 2017, was 6%. The PSDR has been 6% since October 2016 (when it was reduced from 7%).
For more information about the PDSR click here.
Would the proposed biosecurity levy rates apply per response or be an annual total?
The biosecurity response levy proposed by DairyNZ would be set annually at a level appropriate to meet the total costs of all relevant GIA funding commitments. Our GIA proposal brochure provides specifics about the proposed levy.
Q&As in the Biosecurity levy Q&A section below provide further, general information about biosecurity readiness or response levies.
Biosecurity levy Q&A
What is a biosecurity GIA (readiness or response) levy and how is it established?
A biosecurity GIA levy can be imposed by the Governor-General at the recommendation of the Minister to fund all or some of a sector organisation’s commitments to the GIA.
It can only be imposed on a sector specified in the Gazette notice, unless the Minister is satisfied that:
- the persons outside a sector are represented by a GIA Signatory and are likely to benefit from the activities funded by the levy, and the costs of paying the levy are not disproportionate to the benefits they are likely to receive; or
- the levy is the most effective and efficient means of collecting funds from the organisation’s sector and it is not practicable to exclude individuals from the levy. These individuals are likely to receive benefits from the funded activities and that the costs of paying the levy are not disproportionate to the benefits they are likely to
The Minister cannot recommend a levy unless satisfied that proposed levy payers have been consulted and their views considered. The Act allows for consultation undertaken by an industry organisation for GIA purposes and for establishing a levy to be undertaken together.
How does a biosecurity levy work?
A readiness or response levy can be paid to the Director-General of MPI or to the industry organisation (the payee). If paid to the industry organisation, it is to enable the organisation to meet its GIA commitments. These provisions are described in section 100ZC of the Biosecurity Act.
If a levy is established, its payment is compulsory and legal action can be taken to recover unpaid levies. The biosecurity levy is different to the levies paid under the Commodity Levies (Meat) Order 2015, because the biosecurity levy is not time limited and does not expire.
What needs to be included in an application for a biosecurity readiness or response levy order?
A readiness or response levy order must specify several things. These are described in section 100ZD of the Act and include:
- How the levy may be spent
- Who must pay it
- How the levy amount is set
- The rate of the levy including whether there is to be single or multiple rates, what multiple rates apply to, the maximum rate(s) and how the rate is set by the payee to ensure the industry organisation meets its commitments, and how they are notified
- When and how the levy must be paid Who is responsible for collecting the levy
- What fees are paid for collecting the levy, including whether a collection fee is allowable, what the fee is and how it is set
- How compliance with the levy order will be determined including accounting, recording and reporting requirements of the levy collection, payer and the payee and the retention of records
- How disputes over who pays the levy and how much they pay will be resolved, including procedures to appoint arbitrators, arbitration processes, payment of arbitrators and arbitration costs, rights of appeal, appeal procedures and their governance and any other matters relating to dispute resolution
- Remuneration of auditors
The levy order may further specify:
- Repayments to be made to the payee to help determine the amounts of levy payable
- The circumstances and conditions for extensions of time to pay the levy
- Alternative ways of paying the levy
- Penalties for non, part or late payment
- Use of a trust account for levy payments.
The levy rate can be set at zero.
How are the levy funds held?
There are requirements for levy payments that are held in trust accounts. These are outlined in section 100ZE of the Act.
Working together to protect our future from exotic pests and diseases (Brochure)
Working together to protect our future from exotic pests and diseases (Summary)
Working together to protect our future from exotic pests and diseases (Discussion document)