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Senate Estimates: Rural and Regional Affairs and Transport Legislation Committee: Agriculture and Water Resources Portfolio (Exports Division)

Tuesday, 18 October 2016

CHAIR: We will now move on to the Exporter Supply Chain Assurance System, or ESCAS.

Senator RHIANNON: The 2014 review of ESCAS found that nearly 13,000 animals had been transported outside approved channels between 2012 and 2014. Can you inform us how many animals have been known to move outside ESCAS since 2014?

Dr Clegg: I do not have that information with me, but I can provide it to you after this.

Senator RHIANNON: You will take that on notice?

Dr Clegg: Yes.

Senator RHIANNON: Can you also tell us which exporters were involved in each case?

Dr Clegg: The information about which exporter is involved in each case is already available on our websites. With the information I am going to get you on the number of animals, I will provide you with a link to that so you can see each of the reports we have done.

Senator RHIANNON: Will that also provide information on the penalties for each of these breaches?

Dr Clegg: Yes, it will.

Senator RHIANNON: Can you describe what those penalties are, please?

Dr Clegg: The penalties depend on the nature of the problem in each of the ESCAS arrangements: the number of animals involved, whether there were significant animal welfare issues, whether any such issues were minor, and whether animals were moved to facilities that were already ESCAS approved or whether they were moved to facilities that were not. Those are the key things we take into account. The types of things we do depend on the actions the exporter takes. For example, an exporter can implement training or provide additional supervision. In those cases we have allowed exporters to continue to use facilities. An example of that is the Dabbah abattoir in Israel, where there were poor animal welfare practices exposed by video from Animals Australia. The two exporters that were using that facility put in place remedial actions—which continue to this day and have seen a lift in the standards in that abattoir. That is an example where the exporter has invested.
There are other examples where the exporter will say, 'I will have it removed from the supply chain.' An example of that is some of the consignments that have gone to Thailand. Exporters have decided to close their supply chains there and not continue to export to those markets. In some cases, facilities are removed from the supply chain for a period, after which time another exporter or that same exporter may say they have invested and made some changes to the infrastructure or that there have been changes in personnel. They may say they have added an animal welfare officer or that they have better traceability systems in place. Then they will continue to use that facility.

Senator RHIANNON: I want to move on to the issue of repeat offenders. That same report stated that a limited number of supply chains were repeat offenders and that penalties to that point had not made any difference. Does that remain your assessment?

Dr Clegg: ESCAS is a work in progress. It depends on the relationship between the exporter and the importer. A good example of that is Kuwait, where there are decades-long relationships between the chief importer there and the exporter that sends most of our sheep to that market. They have implemented many things to try to reduce the leakage of sheep from facilities. They are generally abattoirs in Kuwait and they are taken out of those abattoirs by traders. They have gradually reduced that leakage over time but it has taken time to do that. In this year's Eid, I think the number of animals outside the supply chain in Kuwait was significantly less than in the first few years of ESCAS arrangements. Nothing works instantly. We rarely see that sort of success, other than just eliminating them. It is the ongoing investment and involvement between the importer and the exporter that is actually leading to animal welfare improvements.

Senator RHIANNON: Considering the scandals around the failure of ESCAS continues and the issue of repeat offenders is real, I understand that the report suggested that the department look at imposing fines or enforceable undertakings. Does the department have the power, under the Australian Meat and Live-stock Industry Act, to suspend or cancel a licence in response to an ESCAS breach? Can you cancel licences?

Dr Clegg: We can cancel licences under that act but you would need to meet a very high standard of proof that it was warranted. With ESCAS, in many instances there are some examples where exporters are vertically integrated and are responsible for the management of the facility and in most cases we have exporters that have a contractual arrangement with a third party in another country. It is actually the actions of the third party in another country or staff that are employed there that are breaching the ESCAS arrangement for their personal gain. In those circumstances, it is very difficult to consider that the exporter themselves have actually caused the breach. If there is enough evidence to prove that they are colluding, that they are deliberately flouting ESCAS arrangements, then we have a case to look at their licence.

Senator RHIANNON: Is what you are saying that some of that very horrific footage, like Animals Australia has collected, may not be sufficient because you or the exporter would argue, 'Well, it wasn't our fault'?

Dr Clegg: It is not that it was not our fault, it is the responsibility of the parties involved and the efforts the exporter has made to make their system work. It is an assurance system. It is not cast-iron guarantee that if anything at all goes wrong that you will fined or your licence will be cancelled. That would be unreasonable. We could not administer that.

Senator RHIANNON: Can you provide details of any fines or enforceable undertakings that have been imposed on repeat offenders or on anyone?

Dr Clegg: At the moment, the Australian Meat and Live-stock Industry Act and the Export Control Act do not provide us with the powers that you are talking about but we are seeking to have those powers added to the Export Control Act and part of the export legislation review, which is currently underway, is also looking at adding those penalties to the toolbox that we have to manage regulatory breaches.

Senator RHIANNON: Can I just ask for some clarification, I must have misheard: I thought you said that under the Australian Meat and Live-stock Industry Act that you could suspend or cancel licences.

Dr Clegg: Yes I can but that does not mean that it is a fine and it does not mean that it is an enforceable undertaking. That is an actual cancellation or suspension of the licence that was under AMLI.

Senator RHIANNON: Okay. I will split the question up. How many times has a licence been suspended and how many times has it been cancelled?

Dr Clegg: There was one cancellation this year.

Senator RHIANNON: Who was that?

Dr Clegg: That was for Frontier International Agri, which is a company that was not exporting livestock under ESCAS arrangements. That was a breeder issue.

Senator RHIANNON: Right. How many licences have been cancelled?

Dr Clegg: To my knowledge, that is the main one that I can recall.

Senator RHIANNON: I thought you said the first one was a suspension.

Dr Clegg: Sorry, that is a cancellation.

Senator RHIANNON: Is that the only one involving breeding cattle?

Dr Clegg: To my knowledge, no licenses have been suspended because of ESCAS since ESCAS was introduced. The main way we have managed breaches with ESCAS has been my limiting an exporter's supply chain, by suspending the supply chain, so they can no longer export to that market. That is the way we have managed noncompliance with ESCAS.

Senator RHIANNON: The conclusion that you would draw from that is that repeat offenders are getting away with it.

Dr Clegg: I would not say that. I would not say they are getting away with anything, because actions are taken.

Senator RHIANNON: I will ask the question in another way. Do we still have repeat offenders?

Dr Clegg: We still have exporters sending livestock to markets where the ESCAS arrangements do not always perform as they should, that is right.

Senator RHIANNON: So we still have repeat offenders, but we do not have examples of repeat offenders having their licences suspended or cancelled?

Dr Clegg: That is right, we do not.

Senator RHIANNON: I will come back to you later. Thank you.

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Senator RHIANNON: I am picking up from where we were up to on live export. I think we had agreed that there are repeat offenders and that there are no examples of licences cancelled; therefore it could be concluded that some exporters are willing to risk a breach. Does this mean the financial incentive to break the rules remains the biggest weakness of ESCAS?

Mr Read: We do not, as Dr Clegg talked about, apply the suspension of the licence but the suspension of the supply pathway as one of the measures to create that incentive to ensure higher levels of compliance. We are actually seeing that that is an effective mechanism. Not only is it the suspension of the pathway but the additional conditions that are being applied which have being identified on that website reference that Dr Clegg talked about. For example, from what we have seen occur, particularly in the Middle East recently from countries such as Kuwait and Jordan, we know the level of leakage that is occurring from those systems has decreased markedly. That is complemented by a range of activities that industry is preforming in-country as well. It is a combination of the exporter and the relationship of the importer developing those relationships to the point that they have high degrees of abilities to keep those animals in those pathways. Effectively, the regulatory response we are applying has been demonstrated to be effective through those reduced numbers that are actually getting out of those systems.

Senator RHIANNON: You just spoke of a decrease. Were you talking about a decrease in the number of repeat offenders or a decrease in the number of incidences of breaching the rules? Dr Clegg: It is about the number of animals that are reported to be leaving the supply chain. What we have found with Kuwait is that we are actually starting to see a decrease in the number of animals that are escaping, particularly in the high-risk period of Eid. The efforts that the exporters have put in with training additional people, closing down some facilities, not providing sales to the public during Eid, carcass-only sales and the phone-app arrangement have all reduced the amount of leakage of Australian sheep out of their supply chain into the markets and into the hands of private sellers. That is through the investment of the exporters and from the industry. They have put in a lot of effort, hours and work to get that result. That is the result we are after: an increase in animal welfare. That is what we are trying to achieve here: greater animal welfare everywhere and to spread Australia's better animal welfare practices to the countries we are going to.

Senator RHIANNON: Thank you for explaining that, but there are repeat offenders and that is what I am trying to understand. Can you run us through how you are handling one of the repeat offenders? Livestock Shipping Services: how many critical and how many major noncompliances does that exporter have on its record?

Dr Clegg: It has several major noncompliances and it has several critical noncompliances. I will have to take a question on notice for that to give you the exact numbers, but the ratings for that company are on our website. That company has actually improved this year. It has actually taken some risk-reduction measures itself. It did not participate in the Kuwait sales this year. Its performance in Jordan was very good. It is actually starting to turn the corner with its performance, I think. That is through the penalties that have been imposed on it and the additional costs it has had to bear to continue to supply the market, and those things are starting to change that exporter's behaviour in high-risk situations like Eid in markets where it is not the only supplier of livestock. What we have seen this year is only one exporter actually going to Kuwait. This meant that it was responsible for everything and therefore standards lifted perhaps. We saw a similar incident in Jordan, where there were two exporters—Wellard and LSS—and Wellard decided not to participate in that market anymore. Now LSS is the only one that will be responsible and, again, I think that has changed the behaviour of LSS in that market.

Senator RHIANNON: That is the first time I have heard positive things said about LSS. I was going to develop this further but I will have to come back to it.

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