Before the last election, Shane Jones set a new regulatory regime around forestry. It's now coming into effect. I'd forgotten about it.
However, Jones has decided the industry can't fend for itself and needs an extra dose of regulation. Yet his actions suggest the industry's interests are not his main priority. His innocuous sounding Forests (Regulation of Log Traders and Forestry Advisers) Amendment Bill will sacrifice the interests of forest owners – among them North Island iwi owners – in favour of utopian plans for an enhanced domestic wood processing sector, which Jones hopes will boost employment, especially in his homeland in the Far North.
The Bill was introduced into Parliament under urgency on May 14. Indeed, Jones was in such a hurry that he gave the industry only a week to provide submissions to the Select Committee considering the Bill. (And for reasons best known to the Minister, the Environment Select Committee has been tasked with evaluating the Bill, not the better qualified Primary Production Select Committee.)
The Ministry for Primary Industry's Regulatory Impact Statement on the Bill was only made available to submitters two days before the date of submissions closed. This haste would be unacceptable in an advanced democracy like New Zealand, even if all the Bill did was set out an occupational licensing regime to ensure log traders and forestry advisers are "fit and proper people" – which is the Bill's ostensible purpose.
...
The RIS reveals serious shortcomings even with the Bill's more modest occupational licensing objective. The evidence relied on to support the proposed occupational licensing regime is described in the RIS as "qualitative," but it is clearly only anecdotal. Indeed, the RIS acknowledges shortcomings in the evidence available to define the magnitude of the problem faced by small forest owners arising from "time constraints on the policy development process."
This would be concerning enough if all the Bill proposed was an occupational licensing regime. It is in no one's interest for a regulatory regime to be introduced without a proper evidence base.
But the bigger problem lies with the more ambitious, unevaluated regulatory provisions of the Bill supporting the Minister's lofty plans for promoting "an enhanced domestic wood processing sector." The Minister's failure to subject these provisions to proper assessment – or to even raise them in his Cabinet Paper – shows a concerning disregard for due process.
Despite the lack of any decent evidence that an occupational licensing regime is needed for log trading, we're getting a new occupational licensing regime around log trading.
In August 2020, Parliament enacted the Forests (Log Traders and Forestry Advisers) Amendment Act. The Amendment Act (which was grandfathered under the Forests Act 1949 – presumably to speed its implementation pathway) provides a new regime for log traders and forestry advisers to be registered and subject to certain professional standards.
That new regime is to operate from 6 August 2022.
From 6 August 2022, there is a one-year transition period for log traders and forestry advisers to get registered before penalties will apply.
Public consultation on the proposed registration system closed in January and MPI is currently working on (and seeking feedback about) the new registration system.
The new regime introduces a professional compliance (aka occupational licensing) regime on a previously unregulated part of the forestry sector.
The regime came about as a sort of kneejerk reaction from public discussion about the high proportion of raw logs which were being directly exported – and the concern that this was leaving a lower proportion of logs available for processing in New Zealand sawmills and/or impacting on the domestic lumber price.
This background is reflected in the stated purpose of the Amendment Act:
The Amendment Act seeks to achieve this purpose by introducing an occupational licensing and compliance regime for log traders and advisors operating in the forestry sector. This seems to be despite the fact that the captured activities operate in a commercial or business context – and not at a consumer or retail level. Amongst other things this seems rather puzzling - and arises the concern that, perhaps rather like the RMA, it will be used as a sword and not a shield by those (in trade) seeking some sort of commercial advantage over their rivals.
Captured activities – log traders
The Amendment Act seeks to capture the activities of ‘log traders’, being a person in trade who:
• buys New Zealand logs, whether after harvest or in the form of trees to be harvested at an agreed time, and whether or not the person intends to on-sell the logs; or
• exports New Zealand logs; or
• processes New Zealand logs that the person has grown themselves,
and includes a person who does any of these things as the agent for another person:
(Also captured is a company that, in trade, transfers the ownership of New Zealand logs to or from a related company, whether the transfer relates to logs after harvest or in the form of trees to be harvested at an agreed time).
There is a prescribed volume threshold of 2,000m3 of New Zealand logs per year.
Businesses involved in shipping and logistics are not caught by the Amendment Act.
Forestry adviser service
The Amendment Act also captures ‘forestry advisor services’.
This is defined as someone who, in the ordinary course of business, provides advice on:
• the establishment, management, or protection of a forest;
• the management or protection of land used, or intended to be used, for any purpose in connection with a forest or proposed forest;
• the appraisal, harvest, sale, or utilisation of timber or other forest produce;
• the appraisal of a forest, forest land, or other forestry sector assets;
• the application of the emissions trading scheme to forestry activities (within the meaning of the Climate Change Response Act 2002); or
• the beneficial effects of forests (including, for example, how they contribute to environmental and economic outcomes).
(Also captured are those acting on behalf of others in relation to their sale or purchase of timber or other forest produce).
However, the Amendment Act does not cover the provision of advice, in a professional capacity, by those professional advisers who are already regulated by another professional body (e.g. real estate agents, financial advisors, lawyers and accountants).
Compliance and reporting standards
Those who are required to register as:
• a log trader; or
• a forestry advisor,
will need to satisfy the Forestry Authority (under the umbrella of MPI) that they meet the ‘fit and proper person’ standard.
They may also have to provide evidence of their qualifications and experience in the forestry and wood processing sector – (the details of this requirement is s till being developed by MPI).
Once registered, log traders and forestry advisors will be subject to ongoing compliance, reporting and record keeping obligations.
A disputes (complaints) body is also established under the Amendment Act to hear and administer complaints.
Standard setting
The Forestry Authority has the power to set standards for any matter relating to forestry operations and delivery of forestry advisor services including:
• land preparation, planting, forest management, harvest planning and site preparation and valuation;
• biosecurity, sustainable land use, biodiversity and emissions trading;
• sale and purchase agreements for domestic transactions or exports; and
• other sale and purchase requirements.
However, the rule-making power must not impose any condition or requirement which would be a matter for commercial agreement between parties.
Code of ethics
The Forestry Authority may make rules that set a code of ethics for registered forestry advisers.
The code of ethics may include matters relating to:
• professional responsibility (maintaining the highest standards of integrity and technical accuracy); and
• responsibility to clients (including issues of confidence and conflicts of interest); and
• professional work standards by registered forestry advisers in employment; and
• maintaining professional competency.
Penalties
Penalties for non-compliance with the occupational licensing and compliance regimes established under the Amendment Act provided for fines of up to $40,000 for individuals and up to $100,000 for companies.
Timeline
Te Uru Rākau – New Zealand Forest Service (part of MPI) is working on a registration system which is due to come into force on 6 August 2022. Under the Amendment Act, log traders and forestry advisers must register to operate from this date.
That is, from 6 August 2022, there is a one-year transition period for log traders and forestry advisers to get registered before penalties will apply.
I can understand why the Commerce Act exempts statutory regimes from Commerce Commission cartel enforcement. In some perfect world, there'd have been a weighing up of the costs and benefits of the occupational licensing regime through the legislative process. A CBA in the regulatory impact analysis would have shown that the benefits of the regime exceed the costs imposed by the restraint on competition.
But that's not the Parliament we've got. The Parliament we've got passes these messes under urgency with rush-job regulatory impact assessments that can't possibly have tried weighing purported benefits against the cost of creating cartels.
Just think about the range of people who could get swept up in the "Forestry Advisory Services" category.
