25 July 2013

Industry News

When Mindless Bureaucracy at the Border Damages Trade

Exports of meat from New Zealand were held up on Chinese wharves for a couple of weeks. The problem? The goods were accompanied by certificates issued by MPI, the Ministry of Primary Industries. That’s the latest name of the agricultural certification department. From time to time, our bureaucrats love to spend a few million dollars redesigning logos, changing their letterheads and websites. Why? Because they can. For many years this outfit was known as MAF, originally the Ministry of Agriculture and Fisheries, later changed to Ministry of Agriculture and Forestry.

It turned out that the Chinese Customs manual said that the certificates had to come from MAF. Some low level border official detected shrewdly that MPI is different from MAF and put the shipments on hold. The issue could have been sorted out quickly with a phone call, but that is not how some border services work. Ministers and Ambassadors were brought in and, after much high level discussion, the containers were released.

The irony is that, only a few months ago, MPI took action to close down our own approved container handling facility in Auckland, because our approval was for Daniel Silva Ltd and the company had since changed its name to DSL Logistics Ltd. The decision was rectified promptly, but we had to admit to a tinge of schadenfreude when we heard Minister Nathan Guy give a serve to the department’s Director General for neglecting to inform the Chinese bureaucrats of the name change.

Smuggling is not Black and White. Yeah, Right.

Zespri, the cooperative that holds a State-granted monopoly on the export of kiwifruit, has been involved in what seems to be a spot of old-fashioned smuggling into China. They produced two invoices: one with false low prices for Customs duty purposes only and another with the real sale price. The difference was made up by transfers, some of which reported as being in suitcases full of cash. The Chinese importer got sent to jail for 13 years and Zespri copped a large fine.

NZ Kiwifruit Growers Incorporated is conducting the obligatory inquiry. Its chief executive, Mike Chapman, was reported as saying "Nothing in China is black and white, but the media has portrayed [this case] as black and white." We are sorry to tell Mr Chapman that, in our experience of seeing smugglers operating, there are not too many shades of grey in these matters - in China, New Zealand or elsewhere. It is difficult to imagine that a large private exporter would do this sort of thing and risk the company’s name and reputation.

Air New Zealand Admits Collusion

The Commerce Commission has been running investigations into a number of airlines and major freight forwarders alleged to have colluded to increase freight costs for exporters and importers. Similar investigations have taken place in Europe, the United States and Australia. Here in New Zealand, ten airlines were fined $35 million.

The airlines negotiated penalties with the Commerce Commission, but Air New Zealand held out. It repeatedly and aggressively claimed that it was innocent, spending over $10 million in legal fees in the process. At one stage, general counsel John Blair said the airline “remains adamant it has not breached competition law”. Air New Zealand accused the Commerce Commission of grandstanding to "justify its existence".

Rob Fyfe’s replacement as chief executive, Christopher Luxon, seems to have a more pragmatic approach. The airline has now decided to admit some guilt and settle for a fine of $7.5 million plus costs.

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