Federal Register of Legislation - Australian Government

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SR 2002 No. 284 Regulations as made
Principal Regulations. These regulations repeal the Australian Horticultural Corporation (Export Control) Regulations.
Administered by: Agriculture
General Comments: This instrument was backcaptured in accordance with Section 36 of the Legislative Instruments Act 2003
Registered 01 Jan 2005
Tabling HistoryDate
Tabled HR05-Dec-2002
Tabled Senate05-Dec-2002
Gazetted 04 Dec 2002
Date of repeal 01 Oct 2019
Repealed by Sunsetting

Horticulture Marketing and Research and Development Services (Export Efficiency) Regulations 2002 2002 No. 284



Subject:       Horticulture Marketing and Research and Development Services Act 2000

Horticulture Marketing and Research and Development Services (Repeals and Consequential Provisions) Act 2000

Horticulture Marketing and Research and Development Services (Export Efficiency) Regulations 2002

Section 34 of the Horticulture Marketing and Research and Development Services Act 2000 (HMRDS Act) provides that the Governor-General may make regulations prescribing matters required or permitted by that Act to be prescribed or necessary or convenient to be prescribed for carrying out or giving effect to that Act.

Section 19 of the HMRDS Act provides for the Secretary of the Department of Agriculture, Fisheries and Forestry to declare that a horticultural product is a regulated horticultural product and that a horticultural market is a regulated horticultural market in respect of that product.

Section 22 of the HMRDS Act provides for the establishment of export licensing regulations to facilitate the export of regulated horticultural products.

Section 45 of the Horticulture Marketing and Research and Development Services (Repeals and Consequential Provisions) Act 2000 (Repeals Act) provides for the continuation of Part V of the Australian Horticultural Corporation Act 1987 (AHC Act) despite the repeal of the AHC Act.

Section 46 of the Repeals Act provides for references to powers, duties or functions of the Corporation (the former Australian Horticultural Corporation) to be taken as references to the industry export control body (Horticulture Australia Limited).

The AHC Act was repealed and replaced by the HMRDS Act. Despite this, the export control provisions (and orders, regulations and other instruments made under the AHC Act for the purposes of Part V) of the AHC Act were retained and transferred from the former AHC to Horticulture Australia Limited (HAL) for a transitional period of two years maximum.

The purpose of the regulations is to provide HAL with the facility to continue to administer export control arrangements in the horticultural industry. The regulations replace the current regulations that have been in force during the transitional period and apply to the export of regulated horticultural products to regulated horticultural markets.

The primary focus of the regulations is to maintain the process for administering horticultural product export licences. The regulations will allow HAL, as the horticultural industry export control body, to publish Licence Permission documents, which will set out conditions under which exports of particular products to specified markets can be made. For the purposes of increased accountability and transparency the industry export control body will be required to follow a five-step process (as identified in the Deed of Agreement between the Commonwealth and HAL) for the use of export control arrangements that are in addition to those currently in place.

Essentially the five step process requires a sector of the horticultural industry to develop a prima facie case for the use of export efficiency powers which is then reviewed by the Board of HAL. A Regulatory Impact Statement on the proposed use of the powers is to be prepared by the Department of Agriculture, Fisheries and Forestry which provides for Ministerial approval of the use of the powers. HAL then undertakes to administer the arrangements, which includes annual performance reviews, a three year net public benefit review and a ten year legislation review in accordance with National Competition Policy Guidelines.

Details of the regulations are contained in the attachment.

The Office of Regulation Review was consulted in the preparation of the Regulations. An approved regulation impact statement is attached.

The regulations commence on 1 February 2003 to facilitate the ongoing administration of export control arrangements by HAL beyond 31 January 2001, when the existing regulations expire.

Regulation Impact Statement (RIS) - Export Control Powers in Horticultural Industries


The Australian horticulture industry was given export control powers under a provision of the Australian Horticultural Corporation Act 1987. The Australian Horticultural Corporation (AHC), a statutory body, administered this head of powers from 1988 to February 2001 when an industryowned service company, Horticulture Australia Limited (HAL), replaced the AHC and other statutory bodies that used to service the industry. The current use of the powers, however, is based on Corporation Permissions that were issued in 1997. Only the apple, pear and citrus industries are currently using the powers.

During the consultation between the Commonwealth and industry on the formation of HAL the Government committed to transfer the powers to HAL. It did so for a transitional period of two years while regulations were put in place. The principles governing the use of the powers by any horticultural industry and the manner in which HAL would administer the powers were set out in the Memorandum of Understanding (MoU) between the Commonwealth and the horticulture industry. The key principle requires industries using the powers to use them in a manner consistent with other Government regulations, including the National

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Competition Agreement, and that it should result in a net public benefit to Australia.

The role of HAL, as the administrator of the head of powers, is to ensure the key principles and major points of the MoU are complied with by industries that are currently using the powers and those that may want to use the powers in the future. The details of the key principles are outlined in the Implementation Statement of this Regulation Impact Statement (RIS).

This RIS has been prepared to examine whether an export control head of powers should be retained after the two-year transition period expires on 31 January 2003.

Industry overview and current use of the powers

An overview

The Australian horticultural industry comprises fruits, vegetables, nuts, cut flowers and nursery products (Horticulture Australia 2001). It is the second largest agricultural industry in Australia after wheat. In 2000, it accounted for 12 per cent of total agricultural value, and 19 per cent of all agricultural employment (Australian Bureau of Statistics 2002a). It has a strong regional character particularly in the irrigated regions where over 70 per cent of both fruits and vegetables are grown. The industry tends to be small business based, and it is diverse in structure and focus.

The gross value of production (GVP) of the horticulture industry in 1999 was $5.6 billion, while the farm-gate value was $4.7 billion (Horticulture Australia 2001). The value of horticultural exports in 2000/01 was $1,540 million, with fresh produce accounting for close to 47 per cent, and fresh or dried fruits accounting for close to 29 per cent (Australian Bureau of Statistics 2002b). Total imports in 1999/2000 were valued at $93 million (Horticulture Australia 2001). Per capita consumption for both fruits and vegetables appears to have peaked, fluctuating at around 90 kilograms in mid-to-late 1990s (see Table 1).

Table 1. Australia's per capita consumption of fruits and vegetables, 1995 - 2000















Source: FAO 2002

Horticultural exports

Australia is a relatively small player in the world market for horticultural products (see Table 2), with an estimated share of 1.3 per cent of world exports (FAO 2002). With domestic per capita consumption appearing to be peaking, these figures would have to increase to provide another avenue for growth in the industry.

Table 2. Australia's share of world horticultural exports by selected product,

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   Value of exports   

   Share of world   

   Volume of Exports   

   Share of world exports  

   Lemon & limes   
   Peaches and nectarines   

   23 658   
   2 512   
   80 680   
   11 595   
   13 448   
   9 350   
   4 345   

   per cent   

   Metric tonne   
   36 588   
   136 825   
   7 100   
   20 544   
   6 872   
   1 084   

   per cent

Source: FAO 2002

Asia is a strong export market for Australian horticultural produce with the main export markets being Singapore, Hong Kong, Malaysia, and Japan. Exports of fresh value added fruit have been successful, for example, pink lady apples to the United Kingdom.

Australia enjoys counter seasonal advantage for fresh produce in some of its largest export lines in the northern hemisphere for example, citrus exports to the United States. However, a significant proportion of Australia's horticultural exports are minimally processed (Australian Bureau of Statistics 2002b).

Prices tend to vary for the same product going to different markets and for products going to the same market but grown in different regions. For example, in 2001-02, the per unit export price for fresh avocado exports varied from $3.21 for Queensland crops to $6.56 for those grown in Tasmania (Australian Bureau of Statistics 2002a). Top unit prices were paid by Brunei at $6.97 compared to $1.22 for avocados exported to Lebanon. Even products like pears, where export control powers allow only the export of high quality fruit, experience price variation. For example, the per unit price of fresh buerre bosc pears ranged from $1.04 for Queensland produce to $2.24 for South Australian fruit. The story is similar for fresh peckham, with per unit export price ranging from 94 cents per unit for South Australian fruit to $1.52 for Queensland fruit.

Each industry also appears to have its own key export market. Currently, between 10 to 12 per cent of fresh apples are exported, and mostly for Asian markets, especially Malaysia and Singapore (Australian Bureau of Statistics 2002b). For pears, only 8 per cent is exported as fresh fruit, mostly to Singapore and Malaysia. Key export markets for strawberries are Hong Kong, Singapore, and United Arab Emirates.

Current use of export control powers

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A total of 28 industry organisations signed the MoU with the Commonwealth, but only the pear, apple and citrus industries currently use the powers. There is, however, support by the whole industry for the retention of the powers. According to Horticulture Australia (2002), all industry shareholders of HAL are in favour of retaining the powers.

As part of the review process that led to the establishment of HAL, an Industry-Government Working Party was created to consider retaining the powers. The Working Party engaged a Consultant, PricewaterhouseCoopers, to assess existing use of the powers. The Consultant reported that the use of the powers was, in some cases, providing a net benefit to Australia's horticultural industries and the Australian community (PricewaterhouseCoopers 1999). In addition, the Consultant also pointed out that there were clear economic rationales that justify the use of the powers. One of the economic justifications was the ability to exercise market power in export markets if the opportunity existed. As a result, the Consultant recommended that the powers, as they existed and administered by the AHC, should continue to exist, but some changes should be made to ensure their use were based on a net-public benefit test and that their operation was transparent. These recommendations were incorporated into the MoU.

It is worth noting, however, that while only citrus, apples and pears currently use the powers, these three commodities account for a significant proportion of fresh fruit exports. For example, they made up close to 60 per cent of fresh or dried fruit export earnings in 2001-02 (table 3). In addition, other industries have indicated their desire to consider using the powers in the future (Horticulture Australia 2002).

Table 3: Value of Australia's fresh and dried fruit exports, 2001 - 2002.



   United States   



   South Korea   

    All vegetables   
    All fruits   
    Other citrus   

   226 244.3   
   444 018.2   
   45 981.4   
   22 711.3   
   190 848.5   
   148 747.4   
   42 131.0   

   39 560.6   
   34 664.3   
   4 896.3   



   1 963.8
   1 963.8

Source: Australian Bureau of Statistics 2002b

The problem

The problem being addressed is whether it is in Australia's national interest

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to retain export control powers under the Australian Horticultural Corporation Act 1987.

The desired objectives

The objective of the Government is to enable Australian horticultural industries to fulfil their full potential in overseas markets.

The options

Option 1: Remove the regulatory head of powers.

Option 2: Retain the regulatory head of powers and the principles governing the use of those powers.



The main stakeholders affected by the two options are: those who currently utilise regulatory export control powers (apple, pear and citrus growers, exporters, Horticulture Australia Limited), potential suppliers to export markets (growers and exporters), Australian consumers and the Australian Government.

The number of industries in the Australian horticultural sector, as indicated earlier, is large, and the industry is also highly diverse. As suggested by PricewaterhouseCoopers (1999), some may benefit from export control, while others may not. The head of powers allows industries that benefit from managing exports, but cannot achieve control by self-regulation, realise their full potential in overseas markets. At the same time, the head of powers does not preclude industries that can regulate themselves to manage exports on a voluntary basis.

Benefits of export control powers

Enhancing natural advantage

While Australia's share of world trade, for most horticultural products being traded in the world market, tends to be small, the perishable nature of fresh horticultural products and differences in production seasons provides opportunities for Australian horticultural exporters to exercise market power by capturing a significant share of some horticultural markets for a limited time each season.

While differences in production seasons offer possibilities for Australian horticultural exports, product differentiation offers possibly a more effective and longer-term way of achieving market power in a foreign market. If Australian exports can be successfully differentiated from products from other countries, then it is possible that Australia can enjoy long-term economic benefits.

Australian citrus exports to the United States is one example of the use of export control powers to enhance natural advantage. The Australian citrus industry believes that the high prices it has enjoyed in the US market (see Table 4) is due, in part, to the use of export control powers to constrain supply to the US citrus market for a period of 10-12 weeks, from July to September, when Australian growers enjoy a comparative advantage due to differences in production seasons.

Table 4. Average FOB Pricing for Summer Oranges - Australia, California, S. African standard cartons, 16K and 7/10 bu.

  Source country  




















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Source: Horticulture Australia 2002b.
Legend: AU = Australia; CA = California; and SA = South Africa

However, other southern hemisphere producers would also benefit from these seasonal differences. And the existence of a price premium for Australian oranges in the US market would, in the longer term, encourage other Southern Hemisphere producers to enter the market. Hence the benefits created by the use of Australian export control powers to enhance differences in production seasons alone would appear to be temporary, depending on the lead-times required to establish competing sources of supply.

It appears that Australian citrus continues to attract higher prices than California and South African citrus, which may suggest that product differentiation (i.e. the development of trading reputation for 'Australian' branded oranges) could be a key feature of this horticultural market.

Developing and protecting export markets

Gaining access to, and developing export markets for, fresh horticultural produce is long, difficult and costly because of quarantine and many other requirements. Losing export markets, however, could be relatively easy. For example, the Woodard Royal Commission into the Australian Meat Industry in 1982 found that malpractice in the nature of commercial cheating was widespread in the export industry, probably between 1979 and when the practice was discovered in 1981 (Woodward 1982). Horse and kangaroo meat was labelled as beef and exported to the United States and other markets, and meat prepared for pets also found its way into meat for human consumption at export markets. This action seriously threatened continued access for Australian meat to the US and UK markets (Frawley, Nieper and Wilson 1999), and placed in jeopardy export sales that were valued at around US$15 million at the time (based on Bureau of Agricultural Economics figures, 1982). To protect Australian exporters from fraudulent operators, the Australian Government introduced the Export Control Act 1982.

A recent review of the Export Control Act 1982 (as part of the Commonwealth's commitment to National Competition Policy) found the Act to be serving its purpose of protecting export markets and export earnings, and recommended its retention (Frawley, Nieper and Wilson 1999).

It is apparent, however, that the provisions of the Export Control Act 1982 were insufficient for the needs of the horticultural industry, or there would have been no need to introduce the Australian Horticultural Act 1987. While there are no objectives stated in the legislation, the Export Control Act 1982 is used primarily for food safety, to ensure exported food is wholesome and has been prepared under hygienic conditions (Frawley, Nieper and Wilson 1999). It does not deal with other aspects that could also result in the loss of export markets, like the inability to meet agreed conditions, like product quality and reliable supplies, on a consistent basis. In addition, the Export Control Act 1982 does not provide for the horticultural industry to manage exports so that exports opportunities are maximised. These other powers were provided for by the Australian Horticultural Act 1987.

Maximising import quota rents

Australian horticultural exporters can also exercise market power in foreign markets if the importing country grants Australia a share (import quota) of its total imports. Such arrangements provide Australian exporters with an opportunity to receive prices greater than 'world prices' for their produce. The difference in price (the 'quota rent') can be captured by Australian exporters where they co-operate. However, these quota rents can be dissipated (effectively 'handed back' to the importing country) where Australian exporters compete with each other for market shares.

The granting of export control powers by the Australian Government would enable an entity entrusted with those powers to prevent Australian exporters competing against each other, and thereby maximise the quota rents obtainable. In 1999, the International Branch of AFFA advised that the type of export control exercised by the AHC was consistent with World Trade Organisation (WTO) rules (AFFA 1999). These rules have not changed, as the new round of multilateral trade negotiations under the WTO is not expected to conclude until January 2005 and HAL continue to administer the powers in accordance with the Corporation Permissions that were issued by AHC in 1997.

Where Australian exports compete with exports from other countries, it may still be in Australia's interests to control its exports. For example, in the US citrus market, the current export control powers have prompted HAL to begin discussions with South African citrus exporters on how to 'manage' competition between citrus producers in both countries. It is unlikely that any one exporter, in an absence of export control powers, would have a sufficient incentive to seek to enter into such arrangements.

While Horticulture Australia (2002) is now exploring with South Africa ways in which they can retain a competitive edge in the US citrus market, it is worth noting that the erosion of abovenormal prices overtime is an issue that industries using or intending to use the powers must take into account. Even if Australia and South Africa can work out a successful alliance for the US citrus market, any prices higher than 'competitive prices' are likely to attract supplies from Latin America, New Zealand, or any other place that could profitably supplies citrus to the United States. A larger alliance could be worked out, but the cost is likely to increase with the number of partners, which in the longer term may no longer be worth paying to stay in the

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The costs of export control

Loss of market opportunities

The use of export control powers may impose costs on some sectors of the horticultural industry where the use of those powers tend to restrict exports to classes, varieties and products with characteristics that have the potential to attract higher prices in export markets. To protect the premium price for the premium classes or varieties, the export of lower-valued classes or varieties has to be restrained. As a result, the opportunity to export other classes or varieties, and develop markets for those products, would be lost. This has been the case with citrus exports to the United States, where potential suppliers (growers and exporters) have expressed dissatisfaction with existing arrangements.

Encouragement to over-investment

The use of export controls may also impose costs where Australian producers, processors and exporters make investment decisions on the basis of the premiums achievable in 'niche' markets rather than on the prevailing world prices for the commodities they produce. While the premiums may persist for several seasons, unless access can be controlled indefinitely, any premiums obtained will generally be 'bid away' through competition.

Net public benefit

After the Ecological Sustainable Development (ESD) impacts on all stakeholders, including small business, are assessed, the use of export control powers may confer a net benefit, or impose a net cost on the Australian community. Accordingly, the Government intends to limit the use of export control powers to those cases where it can be clearly demonstrated that the exercising of the powers does not conflict with other Government policies and practices, and results in a net benefit to Australia. The Government believes that the measures that are already in place, as outlined in the MoU between the Commonwealth and industry, have sufficient safeguards to ensure the public-netbenefit test is met before an industry can use the powers or continue to use the powers beyond the specified period.

Clause 1(3) of the Competition Principles Agreement outlines the requirements in the determination of net public benefit.


The consultation process adopted by the Industry-Government Working Party in the review of the current use of the powers followed the RIS framework, with all stakeholders being consulted through letters, the media and meetings. A total of 89 submissions, over 100 representations and 1 petition were received, and these are fully documented in PricewaterhouseCoopers (1999). In addition, extensive consultation between all horticultural industries took place during the development and signing of the MoU, which 28 peak industry bodies signed. HAL has informed AFFA that all industry shareholders of HAL are in favour of retaining the head of powers.

However, non-shareholders like some exporters have been known to oppose the use of the powers in some markets, particularly for citrus exports to the United States. For example, Craig Mostyn & Co Pty. Ltd., a horticultural exporter, made application to the Administrative Appeal Tribunal in 1999 for a review of the condition under which citrus have been exported to the United States, with the Tribunal dismissing the application (The Administrative Appeal Tribunal 1999). Despite opposition from some of its members, the Australian Horticultural Exporters Association (AHEA), on August 23 2002 and by a vote of just over 50 per cent, passed a resolution to 'review AHEA's position on export control powers market by market', recognising that the powers have been beneficial in some cases. That is, the majority of the members of AHEA supports the retention of the head of powers provided a proper review process is in place to assess each use of the powers. The balance of the members did not support the resolution (AHEA 2002).

The recommended option

The recommended option is to retain the head of powers that HAL currently administers to control the export of horticultural products. This allows horticultural industries that benefit from export control, but need regulations to gain that control, to realise their full potential in overseas markets, and thereby advancing Australia's interests.

A strategy to implement and review the preferred option

The strategy to implement the use of export control powers is outlined in Schedule 10 of the MoU between the Commonwealth and the Horticulture Industry. It consists of a five-step process that industries that want to use the powers must satisfy. The five-step process is outlined below.

Step 1: Application and consultation.

The industry that wants to use the powers makes an application to HAL, setting out the case for new export controls. The case should include:

•       a description of the power being sought,

•       a description of the justifying market circumstances,

•       a description of the net public benefit for Australia,

•       an outline of a business/marketing plan,

•       a quota administration plan (is applicable), and

•       a report on the consultation processes and outcomes.

The process recognises that effective consultation is critical, and this means that:

•       all interested stakeholders are to be given a reasonable opportunity to comment;

•       there is sufficient information made available to stakeholders to allow for meaningful comment;

•       that submissions are public documents; and

•       the final consultation reports must note both assenting and dissenting arguments.

The consultation must include a minimum 30-day period for public comment.

Step 2: Review of the case.

Step 2 provides for the Board of HAL to review an application for compliance with the requirements. If the Board is satisfied that due process has been followed and that a net public benefit has been demonstrated, HAL would finalise the case and passes the recommendation and supporting documentation to AFFA for consideration.

Step 3: AFFA approval.

AFFA would prepare a RIS based on the criteria and checklist information derived from Steps 1 and 2, and forwards it to ORR for consideration. If the Secretary of AFFA considers that the case satisfies the criteria set down for the use of export control powers, advice is to be provided to the Minister that the use of the powers is to be approved.

AFFA must also confirm that: due process has been followed;

•       the export control instrument is legally constructed;

•       the case has been cleared by the ACCC on trade practices compliance and by DFAT on Australia's treaty obligations.

Step 4: Operation

Step 4 concerns the operation of the new export control powers with HAL administering the powers, issuing licences and administering quota (if applicable), under the business plan and conditions approved by the Secretary of AFFA.

It is expected that any administrative disputes arising from the operation of an agreed export control powers would be managed through the company's internal dispute management systems in the first instance. There is also a right of review by stakeholders of any administrative decision in relation to Corporation Permissions by HAL to the Administrative Appeals Tribunal.

Step 5: Performance and reviews

HAL undertakes performance and continuous review, including:

•       annual reviews against performance indicators set out in the business and marketing plan;

•       assessing whether the use of the powers generated the expected net public benefit.

HAL forwards the review to AFFA and may recommend minor changes to the use of the powers, based on the finding of the annual review.

After 3 seasons of use of an export control powers, the approved instrument is reviewed using a RIS process in a manner acceptable to the Commonwealth, to see if a case exist for its continuance (in effect, the instrument sunsets at the end of the fourth year, unless the outcome is positive).

After 10 years, a National Competition review is conducted of the use of the export control powers by the industry.


Australian Bureau of Statistics 2002a, Yearbook Australia, Canberra.

2002b, Magnetic Tape Service, Cat. No. 5464.0

AFFA 1999, Advice on Australian Horticultural Corporation Export Controls, Canberra.

AHEA 2002, Personal communication.

Bureau of Agricultural Economics 1982, 'The world economy', Quarterly Review of the Rural Economy, vol. 1, no. 1, pp 12 - 29.

FAO 2002, Export Statistics, Rome.

Frawley, P.T.,Makin, L.G., Nieper, R.E., and Wilson, B.L. 1999, Export Assurance: National Competition Policy Review of the Export Control Act 1982, Canberra.

Horticulture Australia 2002a, Personal communication.

2002b, Average FOB Pricing for Summer Oranges - Australia, California, S. African standard cartons, 16K and 7/10 bu., Sydney.

2001, The Australian Horticultural Statistics Handbook 2000 - 2001, Sydney.

PricewaterhouseCoopers 1999, Consultant's Report to the Industry-Government Working Party on Horticulture export Controls, A report prepared for the Department of Agriculture, Fisheries and Forestry, Canberra.

The Administrative Appeal Tribunal 1999, Re Craig Mostyn & Co Pty Lt (applicant) and AHC (respondent), Decision and Reason for Decision, no. V98/153. Melbourne.

Woodward, A.E. 1982, Report of the Royal Commission into Australian Meat Industry, Australian Government Publishing Service, Canberra.