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Amendments to the Agricultural Compounds & Veterinary Medicines Regulations 2001: 29 November 2004

Regulatory Impact Statement

Statement of the nature and magnitude of the problem and the need for government action

The Agricultural Compounds and Veterinary Medicines (ACVM) Act 1997 is enabling legislation. It works on the assumption that all agricultural compounds must be registered, unless they have been exempted from registration by regulation. The term agricultural compound has a wide definition and includes substances that pose little or no risk through to high-risk pesticides and veterinary medicines. The ACVM Act requires the Minister to recommend the making of an Order in Council (to exempt compounds from registration) if the Minister considers that the likely cost of assessing and registering an agricultural compound is greater than the likely risks from the use of that agricultural compound without registration. Compounds that fall into this category are those that:

a. do not pose any risk; or

b. the risk can be managed through conditions prescribed under the ACVM Act; or

c. the risks posed can be managed adequately under other legislation.

Currently some compounds are required to be registered when the risks they pose do not warrant registration, while other compounds meet the necessary criteria for registration, but are currently not included. Key problems with the current regulations include:

• The notification and reporting requirements in Schedule Three are unnecessary because there is sufficient and easily accessible information about the existence of these products without requiring notification and reporting.

• There is a lack of clarity around multipurpose exemptions which results in the potential for persons who manufacture, sell or use the product to consider that multipurpose agricultural compounds may be used without a condition for which a condition applies.

• The current requirement that homeopathic plant compounds (used in the management of plants) must be registered is unnecessary because they pose no concerns regarding animal welfare, residue or trade and bio-security issues.

• It is unclear whether fertiliser or fertiliser additives that are raw, or composted biological wastes are appropriately managed, as they cannot be consistently characterised as a compound.

• There is a risk that certain compounds that would otherwise require registration could be used as generic chemicals by persons on their own animals, or on plants on their own land.

• The mechanism provided in Schedule Two for managing the risks of violative residues is impracticable.

• There is potential for tainting problems (altering the taste, smell or colour of milk) relating to the conditions regarding herbal preparations used as veterinary medicine on teats.

• There are animal welfare risks associated with new cauterising preparations that are currently being developed which need to be managed, for example, it is unacceptable for products designed to be used to stop bleeding in major abdominal surgery to be used without that product being registered.

• There is a lack of clarity around exemptions for treatment for minor injuries which results in products that are intended for use in the treatment of minor injuries are currently not exempted.

• The requirement that animal semen and ova must be registered is unnecessary because the risks involved can be managed by exempting such products subject to compliance to approved codes of practice.

• It is not specified that an oral nutritional compound must not cause physical harm to the animal(s) exposed.

• The inclusion of plant material in Schedule One could imply that feed commodities such as hay are exempt without conditions.

• The list, in Schedule Seven of substances generally recognised as safe is out of date.

NZFSA does not have reliable information on the numbers of persons affected by the proposals, however, the numbers are not substantial, for example, certain kinds of products that are exempt from registration have reporting requirements which is likely to affect about 40 companies relating to about 300 products. While the numbers are not substantial, the work for those individuals for their products is significant and cannot be justified.

Statement of the public policy objective(s)

The objective is to ensure that such agricultural compounds and veterinary medicines are subject to controls, where appropriate, commensurate with the level of risk they pose.

Statement of feasible options (regulatory and/or non-regulatory) that may constitute viable means for achieving the desired objective(s)

Status Quo

All agricultural compounds and veterinary medicines must be registered under the ACVM Act unless they have been exempted from registration by regulation. An average cost of registration is $5,000 in government charges; the applicant's time in preparing an application (which is estimated to be on average about $5,000) and a time period of several months to go through the registration process before the product can be marketed. Key features of the current regulations include:

• There are seven Schedules in the Regulations which list agricultural compounds that are exempt from registration: Schedule One lists agricultural compounds exempt from registration if an applicable ‘code of practice’ is complied with. Where there is no applicable code of practice then there are no conditions that must be complied with; Schedule Two lists agricultural compounds exempt from registration if prescribed conditions in column Two and regulation six are complied with; Schedule Three lists agricultural compounds exempt from registration if conditions in column two, and regulations six and seven are complied with; Schedule Four lists conditions that an oral nutritional compound must comply with to be exempt from legislation; Schedule Five lists fertiliser and fertiliser additives exempt from registration if conditions complied with; Schedule Six lists plants not to be included in oral and topical preparations; Schedule Seven lists substances generally recognised as safe if used in accordance with any applicable conditions in Schedules Three and Four.

• There are notification and reporting requirements in Schedule Three.

• Multipurpose exemptions can apply where an agricultural compound is exempt for more than one purpose.

• Homeopathic plant compounds, products used in the production of plant tissue cultures and products used to protect plant grafts are required to be registered.

• Fertiliser or fertiliser additives that are raw, or composted biological wastes could be understood to managed under the ACVM Regulations.

• Generic chemicals can be used by persons on their own animals, or on plants on their own land.

• Schedule Two provides a mechanism for managing the risks of violative residues which involves regular amendments of the list of plant compounds generally recognised as safe.

• There is currently no control of tainting problems (altering the taste, smell or colour of the milk) relating to the conditions regarding herbal preparations used as veterinary medicines.

• New cauterising preparations are currently being developed.

• Products used for the treatment for minor injuries can be exempted except where a product contains certain specified ingredients, such as antibiotics.

• Products used to extend animal semen or to be used as media for animal ova currently must be registered.

• There are criteria set out in Schedule Four to determine if an oral nutritional compound is ‘fit for purpose’.

• Plant material is included in Schedule One.

• There is a list in Schedule Seven of substances (refer to Annex 1) generally recognised as safe.

This option does not meet the public policy objective because the likely cost of assessing and registering an agricultural compound is greater than the likely risks from the use of that agricultural compound without registration.

(preferred option) – Amend the Agricultural Compounds and Veterinary Medicines Regulations 2001

• Remove the reporting requirement in Regulation Seven that requires a person who imports into New Zealand, or manufactures for sale in New Zealand an agricultural compound, as described in the current Schedule Three to supply a first and subsequent report to the Director-General.

• Clarify by amending across all the schedules that multipurpose exemptions can apply where an agricultural compound is exempted for more than one purpose.

• Add homeopathic plant compounds, products used in the production of plant tissue cultures and products used to protect plant grafts, to Schedule One.

• Remove fertiliser or fertiliser additives that are raw or composted biological wastes and the unqualified exemption of plant material from Schedule One, allowing for the regulation under the Resource Management Act 1991.

• Exclude for ‘own use’ antibiotic active ingredients, hormones, active ingredients that are prescription human medicines and restricted drugs, substances that are prohibited by countries (eg United Nations, United States of America) importing New Zealand primary produce and verterbrate toxic agents from Schedule One, unless there is a specific code of practice approved under Section 28 of the ACVM Act.

• Remove the reference to “Part B of Schedule Seven” in Schedule Two and refer to “applicable food standards set in or under any enactment”.

• Amend the Schedule Two conditions regarding herbal preparations used as veterinary medicines by adding a condition to prevent the use on the teats of animals being milked for products of human consumption.

• Amend the Schedule Two exemption for cauterising preparations to make it clear that it relates only to superficially applied products.

• Amend the Schedule Two exemption pertaining to topical preparations to make the scope of skin abnormalities clear.

• Add an exemption to Schedule Two for products used to extend animal semen or to be used as media for animal ova.

• Add an additional criterion relating to physical damage/harm to the criteria in Schedule Four that must be applied to determine if an oral nutritional compound is ‘fit for purpose’.

• The management of risks be provided for by the sale of feed commodities as animal feeds in Schedule Four but not subject to the labelling requirements.

• Add an appended list of substances, limitations and qualifiers to the generally recognised as safe substances listed in Schedule Seven.

Statement of the net benefit of the proposal, including the total regulatory costs (administrative, compliance and economic costs) and benefits (including non-quantifiable benefits) of the proposal, and other feasible options

Government

Overall the net benefit for the proposal will ensure that the controls, if any, on agricultural compounds are commensurate with the level of risk they pose to ACVM Act outcomes. This should ensure agricultural compounds and veterinary medicines are regulated efficiently.

Industry

The proposal will help ensure compounds are regulated efficiently so that costs to industry can be kept to the minimum necessary to manage the risks. Importers, manufacturers and users of these compounds will benefit from lower costs if they import or use one of these imported compounds which will no longer be required to be registered (an average cost of registration is $5,000 in government charges) and improved availability of products.

A number of the proposed amendments to the schedules are quite technical. Importers of agricultural compounds and manufacturers who sell agricultural compounds will also benefit from the greater clarity resulting from these amendments. The benefits will only arise if someone actually imports or manufactures one of the compounds. Compliance costs for importers of agricultural compounds and manufacturers who sell agricultural compounds are expected to be reduced where products will become exempt from registration. Those who are currently required to provide reports as outlined in Regulation Seven will also benefit from a reduction in compliance costs. The compliance costs are detailed in the BCCS. Apart from one exception there are no additional costs resulting from this proposal. The exception is the potential cost implications for fertiliser or fertiliser additives that are raw or composted biological wastes. The amendment clarifies that these products are managed under the Resource Management Act. This affects people who are trying to sell or manage the disposal of biological waste.

Society

The amendments to the ACVM Regulations 2001 will continue to give assurance to individual members of society that agricultural compounds and veterinary medicines will be controlled so that any potential risks relevant to the ACVM Act are managed to an acceptable level. These amendments were specifically designed to reduce the existing costs of products.

Statement of consultation undertaken

Stakeholder consultation

The NZFSA prepared a public discussion document on the proposed amendments to the exemptions. All the substances were included in the discussion papers and have been put through the consultation process and are considered to be appropriate for inclusion in the schedule. NZFSA received three submissions. The following three issues of concern were raised.

One submitter raised concern regarding the necessity of excluding exemptions for certain agricultural compounds for ‘own use’ considering the schedule contains a qualifier that excludes compounds prepared by a person for use by the person. NZFSA considers that while in practice it may not be necessary to exclude certain products for ‘own use’ there is a need to be transparent with the increasing availability of generic compounds which would normally only be used as agricultural compounds in registered products, for example, antibiotic active ingredients.

The same submitter also raised concern about placing products used to extend animal semen or to be used as media for animal ova in Schedule Two rather than Schedule One. Items in both Schedule One and Schedule Two must comply with a relevant code of practice. However, where there is no relevant code of practice Schedule Two requires a product to be registered whereas items listed in Schedule One are exempt from registration. NZFSA have purposely proposed that products used to extend animal semen or to be used as media for animal ova are to be placed in Schedule Two because of the kinds of ingredients that are included in those products. These would only be found in registered products, for example, antibiotic active ingredients. NZFSA considers that if there is no relevant code of practice these products should be registered.

Another submitter raised concern regarding the removal of the reference to plant material in Schedule One. This proposal would place an obligation on those selling commodities as animal feed to ensure they are ‘fit for purpose’. The purpose of clarifying additional controls on feed commodities is not expected to impose any direct costs to those selling food commodities as animal feed. The retailer would be expected to take appropriate steps to verify the products safety if they do have concerns about a product, such as having regard to standard practice. The requirement to ensure that a product is ‘fit for purpose’ is to prevent a situation occurring where producers knowingly distribute feed commodities when they are aware they would not be acceptable under common practice. For example, allowing hay to get wet and knowingly selling it when most livestock producers would recognize it as potentially dangerous. Those selling food commodities as animal feed should be taking appropriate steps to verify the products safety in accordance with the Fair Trading Act currently.

Government departments/agencies consultation

The following government departments were consulted: Treasury, Ministry for the Environment, Ministry of Agriculture and Forestry, DPMC and the Ministry of Economic Development.

Business compliance cost statement

There are expected to be one off compliance costs for importers of agricultural compounds, and manufacturers who sell agricultural compounds associated with becoming familiar with the new regulatory requirements. Ongoing compliance costs are expected to be reduced around reporting, for example, importers of agricultural compounds and manufacturers who sell agricultural compounds would no longer be required to supply first and subsequent annual reports to the Director General as required by Regulation Seven. Where it is proposed that compounds will be exempt from registration, for example, homeopathic plants, ongoing compliance costs arising from the applicant's time in preparing an application are also expected to be reduced by an estimated $5,000.

The proposals will affect importers of agricultural compounds and manufactures who sell agricultural compounds. The affected parties would be advised about the amendments to the Regulations through AgVetLink and the NZFSA website.