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Animal Products (Ancillary and Transitional Provisions) Regulations Amendment

Regulatory Impact and Compliance Cost Statement

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

 Under the provisions of the Animal Products Act 1999 all new animal product business are required to operate under a risk management programme.  Existing businesses that were previously operating under the Meat Act 1981 can continue to operate under these provisions until 1 July 2006 (depending on the type of business).

 A          Existing businesses

 Some existing animal product businesses were never licensed and some petfood operators were never approved under the Meat Act.  These businesses cannot obtain licenses under the Meat Act because the Meat Act licensing system ceased being able to issue new licenses from November 2000.  Because they fall within the definition of “existing business” in the Animal Products (Ancillary and Transitional Provisions) Act 1999 (Transitional Act) they may not be subject to the regulatory regime of the Animal Products Act 1999 until 1 July 2006 .  Until then, these businesses would be operating without any product safety regulatory oversight and may pose a risk to the public, animal health or to export market access.

 The exact nature and extent of both these types of operations is not precisely known because they tend to come to the attention of regulatory authorities only if a specific problem arises that can be traced to them or they are accidentally discovered during investigations into other matters or if someone in the industry lets the Ministry of Agriculture and Forestry (MAF) or the New Zealand Food Safety Authority (NZFSA) know about them.  In the last eighteen month 5-6 such operations have come to MAF/NZFSAs attention some of these have since closed down but at least 2 (being a mixed petfood, slink/rendering operation and a fish operation) continue to operate.

 B          Regulation 11

Regulation 11 of the Animal Products (Ancillary and Transitional Provisions) Regulations 2000 (the Transitional Regulations) provides that a Hazard Analysis Critical Control Point (HACCP) plan that has previously been recognised by the Director-General of MAF, or a duly recognised employee of the Ministry, can be included in a risk management programme without the need for further independent evaluation.  Three specific standards issued under the Meat Act regime are listed.  Since the making of the regulations a further revision has been made to one of the standards, but as it is not listed in the regulation it is not available to animal product businesses. 

Statement of the public policy objective(s)

 The public policy objectives are the same as those specified in the Animal Products Act 1999 (section 2 – Object of the Act) and state as follows:

1.      Minimise and manage risks to human or animal health arising from the production and processing of animal material and products by instituting measures that ensure so far as is practicable that all traded animal products are fit for their intended purpose; and

2.      Facilitate the entry of animal material and products into overseas markets by providing the controls and mechanisms needed to give and to safeguard official assurances for entry into those markets.

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

 Status-Quo

A          Existing businesses

The status quo is not a feasible option as some existing businesses are operating outside the regulatory system and are potentially illegal.  Their continued operation poses an unacceptable risk to the public, animal health and/or the access of New Zealand products to export markets.

  B          Regulation 11

The status quo does not recognise that a revised standard has been made, thus denying businesses the opportunity to develop risk management programmes based on the revised standard.

 Non-regulatory

 No non-regulatory option was available to deal with the existing business problem or the revised standard as both these are matters of current law, unless the law is changed there can be no resolution of the problems identified. 

Regulatory

 A          Existing businesses

The change to the definition of ‘existing business’ so that it captures those who currently operate outside the regulatory regime could be achieved by either amending the Transitional Act or by making a regulation under section 25(2)(b) of that Act.  Changing the definition of ‘existing business;’ by regulation is the preferred option.

 While an amendment to the Act would usually be preferable, because it allows the change to be seen on the face of the legislation, it is a much lengthier process involving passage of an amendment Act through Parliament and could, therefore, see these operations continuing to be unregulated for some time.  The making of a regulation is legally available (section 25(2)(b) provides for the meanings of specific terms used in the Transitional Act to be set out in regulation), can normally be achieved in a shorter time than passage of an amendment act through Parliament and would ensure that this matter is addressed in a timely manner. 

B          Regulation 11

Amendment of the relevant legislation is the only option.

 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

 Total regulatory costs and benefits of all feasible options, including status quo

 A          Existing businesses

Those persons that will be affected by this change are those currently operating businesses outside the regulatory system, they will have to meet the same costs as their competitors who are operating within the regulatory system.

 These proposals do not involve an increase in regulatory costs over and above those associated with the requirements of the Animal Products Act and the Animal Products (Ancillary and Transitional Provisions) Act 1999.  For existing businesses there will be costs associated with the development, implementation and ongoing management of risk management programmes.  The specific costs that any particular business will face will depend on the particular nature of the business and the particular products that they deal with.

 Allowing these businesses to continue to operate outside the regulatory regime of either the Meat Act or the Animal Products Act allows the potential threat to the public and animal health to go unchecked.  Should one of these operations be traced as the source of a food safety or animal health problem it has the potential to disrupt access for New Zealand ’s animal products to overseas markets.  Animal product exports in 2001 were estimated at over $6.8 billion per annum or over 22% of this country’s total exports.  The particular portion of export markets that could be put at risk would depend on the particular nature of the event and the product concerned.  However, past experience has shown that some overseas markets are particularly sensitive and will close to all New Zealand products should an adverse event occur in New Zealand .  Ensuring that all animal product businesses operate within the appropriate regulatory framework provides a level of assurance to the public, the relevant industry sector, and New Zealand ’s export markets.

 B          Regulation 11

This provision recognises that many animal product businesses have been operating under requirements very similar to those now required by the Animal Products Act and provides a mechanism that allows a speedy transition to the Animal Products Act regime. 

It is proposed that ‘Revised HACCP Standard for HACCP Application, HACCP Competency Requirements and HACCP Implementation, issued on 20 September 2002 ’ be included in the list of standards against which recognition can be judged.  This will allow a wider range of animal product business to avail themselves of the transitional mechanism provided by regulation 11, thus encouraging an increasing number of businesses to move to the Animal Products Act regime in a speedy and cost effective manner.  The original reference is to be retained for convenience.

 Statement of consultation undertaken

 The Treasury and the Department of Prime Minister and Cabinet were consulted in the preparation of these policy proposals.  No significant concerns were identified.

 A          Existing businesses

The proposed change to the definition of ‘existing business’ has been discussed with representatives of the Petfood Industry Association, the Meat Industry Association and the Seafood Industry Council.  These organisations are supportive of the proposal because it is their members, who are operating within the current regulatory environment, that are at risk from the potential fallout should one of these unregulated operations be the source of a problem.  It has not been possible to discuss the proposal with any operators who would be directly affected by the proposal.  Apart from those that have come to the attention of officials, the specific operators are not known and unlikely to make themselves known as their operations are potentially illegal.

 B          Regulation 11

The revised standard proposed for inclusion in regulation 11 was developed in consultation with industry and its recognition is supported because of the benefit that will flow to those businesses who wish to use the standard to gain recognition of their HACCP plan.

 Business compliance cost statement

Sources of compliance costs

 A          Existing businesses

These proposals do not extend the source of business compliance costs over and above those associated with the requirements of the Animal Products Act 1999 and the Animal Products (Ancillary and Transitional Provisions) Act 1999 as they apply across the various animal product sectors.  For existing businesses the specific costs that any particular business will face will depend on the particular nature of the business and the particular products that they deal with.  These factors determine which particular regulatory requirements apply to the business and therefore what level of form-filling, reporting or other aspects of ‘red tape’ will be required with the development, implementation and ongoing management of risk management programmes, or the requirements of a regulatory control scheme under the Animal Products Act.  Initial start up costs should be one-off, costs associated with the implementation and on-going management of requirements will have some one-off costs and some on going.

 B          Regulation 11

Many animal product businesses are required by the Animal Product Act to have a risk management programme in place by the end on the transition period.  Regulation 11 provides that a HACCP plan that has previously been recognised by the Director-General of MAF, or a duly recognised employee of the Ministry, can be included in a risk management programme without the need for further independent evaluation.  Thus saving businesses the costs associated with such evaluation.

 Parties likely to be affected

 A          Existing businesses

Those business currently operating outside the current regulatory framework.  In the main such operations are likely to be of small to medium size.  The exact nature and extent of these types of operations is not precisely known because they tend to come to the attention of regulatory authorities only if a specific problem arises that can be traced to them or they are accidentally discovered during investigations into other matters or if someone in the industry lets MAF/NZFSA know about them.  In the last eighteen month 5-6 such operations have come to MAF/NZFSAs attention some of these have since closed down but at least 2 (being a mixed petfood, slink/rendering operation and a fish operation) continue to operate.

 B          Regulation 11

Those animal product business wishing to avail themselves of the transitional mechanism provided by regulation 11 that were not previously able to because their HACCP plan did not fall into one of the standards previously listed.  Such businesses include meat, seafood, petfood, renderers, and pharmaceutical processors.  The number of such businesses that will decide to make use of this option is not known. 

Estimated compliance costs of the proposal

 A          Existing businesses

For existing businesses there may be costs associated with the development, implementation and ongoing management of risk management programmes, or regulated control schemes or other standards and specifications made under the Animal Products Act.  The specific costs that any particular business will face will depend on the particular nature of the business and the particular products that they deal with and the particular regulatory standards, specifications etc that will apply to their operation.  Anecdotal information from industry associations and from businesses involved in the development of risk management programmes suggests that for small to medium businesses start up costs can range from several hundred to several thousand dollars depending on the nature of the business, ongoing costs also cover a significant range but are less than the start-up costs.  However anecdotal information from overseas indicates that the process of developing these types of programmes can also lead to the identification of savings in other areas of the business not directly linked to development of the original programme because of the introduction of systematic procedures and other management practices.  As New Zealand businesses are still in transition to the requirements of the Animal Products Act there is no reliable cost information available as to the specific costs that businesses likely to be affected by this proposal will face.

 B          Regulation 11

Compliance costs associated with the evaluation of risk management programmes will be reduced.  Regulation 11 provides that a HACCP plan that has previously been recognised by the Director-General of MAF, or a duly recognised employee of the Ministry, can be included in a risk management programme without the need for further independent evaluation.  The exact cost saving for each business will vary depending on the particular nature and size of the business and the particular products that they deal with.

 Longer term compliance cost implications

 A          Existing businesses

The operations will face no greater compliance costs than other like businesses operating in their particular sector.  Becoming familiar with the requirements of the Animal Products Act as it applies to the particular business should decrease over time but there will be a need to maintain on-going overview as risk management is considered a dynamic process that needs to be reviewed and updated over time.

 B          Regulation 11

The transition mechanism provided by regulation 11 is a cost minimisation strategy intended to assist business to make the initial transition to the Animal Products Act.  The saving of duplicate evaluation costs applies to the initial registration of a risk management programme only.  All businesses are required to have their risk management programme fully evaluated within three years of the initial registration. 

Level of confidence of compliance cost estimates

 The level of confidence in the sources of compliance costs is very high.  Estimates of the exact level of costs are not available, anecdotal information indicates a range of potential costs for potentially affected businesses but as the various sectors are still in transition confidence in this information can only be low to medium at this time.

 Compliance cost issues identified in consultation

 None

 Overlapping compliance requirements

 There are no overlapping compliance requirements identified.

 Steps taken to minimise compliance costs

 The NZSFA will issue media statements, post notices on its web site and initiate articles in industry and other media to advise interested parties and potentially affected parties of the changes made to the Transitional Act and regulations.

 A          Existing businesses

The proposal gives operators a period of 6 months in which to develop their risk management programme.  The NZFSA provides information on its web site about the development of risk management programmes, several industry associations have or are developing information and/or tools to assist their particular sector in the development of risk management programmes. 

B          Regulation 11

The transition mechanism provided by regulation 11 is a cost minimisation strategy.  Industry is aware of the current regulation 11 and that a revised standard was issued in 2002.  The NZFSA has effective communication channels to the likely affected businesses through its website and electronic notification systems.  Any other businesses should pick up on the information through the publicity that the NZFSA will undertake and through industry associations.