Scrutiny of Acts and Regulations Committee

Abalone - Taking Stock, Information Paper,
Review of the Fisheries (Abalone) Regulations 1996
December 1996


Table of Contents

Chairman's Foreward

Introduction

The Industry

The Regulations

Meetings and Visits

Additional Submissions

Conclusions

Appendices

1 - Regulations

2 - Regulatory Impact Statement

3 - Buckmaster RIS Submission

4 - VAPA - RIS Submission

5 - VADA - RIS Submission

6 - VAPA - SARC Submisison (1)

7 - VADA - SARC Submission (2)

8 - Academic Paper

9 - Newspaper Articles


CHAIRMAN'S FORWARD

The Fisheries (Abalone) Regulations were made by the Governor in Council on 1 April, 1996. They came into operation on that day. Their objective was to replace all previous regulation of the abalone industry with a set of regulations which managed and controlled the abalone fishery from the point of its taking in Victoria to the point of sale or export. The Regulations do this primarily by introducing an "abalone audit trail".

Before the Regulations were made, a Regulatory Impact Statement had been prepared and circulated to explore questions of the cost and benefit of regulating the abalone trade in Victoria. Consultation over the Regulations had also taken place with major players. As a result of the RIS, certain amendments were made to the draft Regulations that were circulated with the RIS.

However, even after the Regulations were made, the Committee received submissions from divers and processors in the central zone who expressed their objections to aspects of the Regulations.

In the usual scrutiny which the Subordinate Legislation Subcommittee undertakes of all regulations made under Acts of the Victorian Parliament, there were one or two aspects which the Committee wished to explore further. This Information Paper is a result of this examination. It aims to better inform all readers of the nature of the abalone industry and of the regulation of the trade which now applies in Victoria.

I am thankful for the co-operation which we received from the Department of Natural Resources and the Environment, and for the interest shown in the Regulations by the Victorian Abalone Divers Association and Victorian Abalone Processors Association which first highlighted their concerns with the new Regulations.

The Committee is empowered to move motions of disallowance of Regulations where it has formed the view that the Regulations are in breach of the Subordinate Legislation Act 1994. In the case of the Fisheries (Abalone) Regulations 1996, the Committee will not move such a motion. The Paper which you are about to read provides a range of information about abalone and canvasses technical questions about the Regulations.

I acknowledge with thanks the participation in this project of my colleagues on the Subordinate Legislation Subcommittee: the Honourable Maree Luckins, MLC, the Honourable Peter Katsambanis, MLC, the Honourable Don Nardella, MLC and Ms Mary Gillett, MP. I am also grateful for the assistance rendered by the Chairman of the Full Committee of the Scrutiny of Acts and Regulations, Mr Peter Ryan, MP .

Finally, my thanks are extended to the staff of the Committee. In particular, I would mention Tanya Coleman, Legal Researcher and Rhonda MacMahon. Assistant Executive Officer. Other members of staff also played their respective roles in bringing this document to fruition. They are Helen Mason, Executive Officer; Stephen Robertson, who was Acting Assistant Executive Officer during the early days of preparation of the Paper; Dominique Saunders, Legal Researcher and Richard Kings, Office Manager.

Murray H. Thompson, MP
Chairman
Subordinate Legislation Subcommittee


FISHERIES (ABALONE) REGULATIONS 1996

INTRODUCTION

1. Examination pursuant to section 21 of the Subordinate Legislation Act 1994.

The Committee has examined the Fisheries (Abalone) Regulations 1996. These Regulations are reproduced as Appendix 1 to this Information Paper.

2. Committee will not recommend disallowance

The Committee has resolved not to recommend that the Parliament disallow the Fisheries (Abalone) Regulations either in whole or in part. It will not recommend that the Parliament amend the Regulations in any particular way. It notes that amending Regulations to parts of the Regulations are planned with anticipated improvement to the administration of the Regulations.

The Committee recommends this Information Paper to Members of Parliament and to the public generally as an example of the nature of the work the Committee performs with respect to the scrutiny of Regulations made under Acts of the Parliament of Victoria.

The Committee meets in Subcommittee to examine regulations (also called subordinate legislation) made under principal Acts. Its recommendations form the basis of this document, and have been adopted by the Scrutiny of Acts and Regulations Committee (SARC) in Full Committee.

THE INDUSTRY

3. The Abalone Industry in Victoria

Abalone is a marine snail that is greatly appreciated as a food in Asia. The most abundant species found in Victorian waters is the blacklip abalone. These are found in reef areas from the low-tide zone to depths of about 30 metres. As adult abalone do not move far , divers are restricted to a known 121 square kilometres (approximately) of inshore reef area. This area supports the abalone populations which are exploited by the Victorian commercial fishery. Some suggest that Victoria is responsible for as much as 10-14% of the world production of abalone.

Appendix One to the Regulatory Impact Statement (RIS) describes abalone biology in this way:

Growth rates differ from site to site according to environmental factors such as water flow and food availability. Abalone from sheltered waters grow more slowly than those from exposed reef areas where higher water exchange provides more food in the form of drifting seaweed. First maturity is normally at four years of age, and breeding takes place annually. Juvenile abalone settle locally in response to stimuli provided by grazing of adults.

The biology of abalone makes them particularly vulnerable to over exploitation and illegal fishing. Failure in the breeding and juvenile settlement cycle is a common feature of overfished abalone fisheries throughout the world. Once depleted, abalone stocks do not generally recover quickly. (RIS p. 34)

The RIS is reproduced as Appendix 2 to this Information Paper. The RIS accompanied the making of the Fisheries (Abalone) Regulations 1996.

The formula for the cost of an annual licence fee for a diver is set out in section 15(1)(d) of the Fisheries Act 1968 and for 1996-1997 is $46,334.20. The cost of the business of abalone diving (ie the annual licence fee plus the on-going value of the business) was revealed by bidding at a recent public auction as in excess of $3,000,000.

One abalone can be described loosely as worth a $10 dollar note. This is because the beach price for standard processor abalone is $25 per kilogram which is about 3 abalone. With the right market connections, a diver could get $30 per kilogram for live abalone. The live trade, although prized, is less than 10% of the total legal Victorian catch.

While it is hard to accurately put a figure on it, it seems that illegal abalone can be bought for $5 each (rather than $10). This cheaper price includes the risk of detection which a seller or purchaser runs.

Victorian waters are divided into three zones - western, central and eastern zone. A Total Allowable Catch (TAC) is set for each of the zones. Within that TAC there is an individual quota for each licensee (diver) of 20 tonnes in the eastern and western zones and 20.58 tonnes in the central zone. The individual quota can normally be reached in less than 70 days of diving, although weather conditions vary from zone to zone which may extend that period. The central zone includes Port Philip Bay where the smaller abalone favoured for the live trade market may be caught. The small size of these abalone also impact on the number of days' fishing required to reach the individual quota. Divers may also purchase extra quota throughout the year which would increase their fishing days - and their profit - but when the new year starts, each diver who pays the abalone licence fee is granted the same quota.

All licence holders are subject to steep penalties, including forfeiture of quotas and loss of licence as appropriate, for non-compliance with licence conditions or overfishing or being found with abalone for which there is no corresponding abalone docket or for other breaches of the Regulations currently under examination (see, for example, Part III of the Fisheries Act 1968 as well as Part 5 of the Fisheries (Abalone) Regulations 1996).

There are three types of personal licences issued under the Fisheries Act 1968 with respect to abalone. These are the licence to take abalone for sale also called an abalone licence (for a diver); the abalone processor's licence (to process abalone for sale) and the abalone storer's licence (to store abalone) (see section 13(1) of the Fisheries Act). Methods of calculating the relevant fee are set out in section 15 of the Fisheries Act.

The Fisheries Act, and the Regulations made under it, fall within the Department of Natural Resources and the Environment (DNRE). When the RIS was being prepared, the Department was known as the Department of Conservation and Natural Resources (DCNR).

THE REGULATIONS

4. Fisheries (Abalone) Regulations 1996

It is not within the Committee's role to examine the questions of policy behind Regulations. Rather, the Committee considers issues raised by section 21(1) of the Subordinate Legislation Act 1994. These include whether the statutory rule:

(h) is inconsistent with principles of justice and fairness;

(j) has been prepared in contravention of any of the provisions of this Act or of the guidelines with respect to the statutory rule and the contravention is of a substantial or material nature; or

(k) is likely to result in administration and compliance costs which outweigh the likely benefits sought to be achieved by the statutory rule.

The Committee has considered reporting to the Parliament on the basis of section 21(1)(h), (j) and (k) of the Subordinate Legislation Act.

The Committee considers that provisions which impose extremely narrow time limits may be inconsistent with principles of justice and fairness (s.21(1)(h)). Amendments to the Regulations extending certain time limits are foreshadowed, and the Committee is inclined not to report given these imminent changes.

The Committee has evaluated concerns that the Regulatory Impact Statement does not simply and fully explain why regulation is required in this area and that, accordingly, the Regulations may be in contravention of section 10(1) of the Subordinate Legislation Act and Parts 3 or 4 of the Premier's Guidelines made under section 26 of the Act. Reporting to the Parliament on this basis is possible under section 21(1)(j) of the Subordinate Legislation Act. After a full examination of the many issues raised, the Committee has chosen not to report under this principle.

Finally, a number of submissions were made on the RIS and to the Committee in relation to compliance costs but, while the precise volume of illegal activity cannot be ascertained, the Committee took the view that the likely benefits sought to be achieved are in excess of the alleged high compliance costs. Thus, reporting under section 21(1)(k) of the Subordinate Legislation Act is not appropriate.

The Committee is aware of the economic importance of the industry to Victoria as well as the importance of maintaining a sustainable abalone fishery.

5. Effect of the Regulations

The commercial fishery in Victoria has been a limited entry fishery since 1968. (see sections 13A to 13D of the Fisheries Act). These restrictions have meant that only holders of an abalone licence can take abalone for sale in Victoria. There are particular provisions relating to small non-commercial or recreational abalone taking as developed in Part 2 of the Regulations. Management of the processing sector is also seen as important because of its link to valuable export markets.

The Regulations establish a new framework for the management and control of the abalone fishery in Victoria. The framework comprises several features. These include the requirement that abalone taken by licensed divers be landed in sealed bins, as well as the introduction of an abalone transfer certificate scheme. Certain existing provisions are enhanced. Each of these components has been instituted with the aim of supporting the audit trail scheme to ensure better the sustainability of the abalone fishery.

6. Justice and Fairness

Some of the new provisions impose very strict and brief time limits by which certain actions must be taken. For example, with respect to the taking and landing of abalone, Part B of the relevant abalone docket must be completed by divers within 30 minutes of landing (reg. 17(1)(l)). Within 15 minutes after the time of an abalone processor receiving abalone, if Part B of the duplicate and triplicate copies of the abalone docket has not been completed, the processor must notify the Secretary (reg. 20(1)(e)). Regulation 21(2)(a) requires a consignment of abalone without a docket to be weighed and notified and recorded within 30 minutes. The penalty for failure to comply with a condition (such as these are) is 10 penalty units as well as possible cancellation of the licence (section 17 (2) of the Fisheries Act). The question arises as to why there is such a hurry. The RIS explains these provisions but does not offer reasons for the urgency. The urgency is in marked contrast to the more relaxed requirement to notify the Secretary within 72 hours if the telephone number of the fax machine is changed (reg. 23(1)(b)(iii)).

The RIS describes the impact of these Regulations on divers with regard to time constraints in a manner which highlights some of the advantages of the scheme. For example, with respect to divers:

There is a reduction in the number of dockets to be completed annually from 365 to approximately 70 assuming each landing is sent to one processor or interstate destination. Divers will no longer be limited to selling to one processor each day and will also be able to sell directly interstate. This will allow divers to maximise their marketing opportunities. (p.16 RIS)

With respect to processors, the RIS states:

Processors will be required to comply with completion of paperwork and have available a phone and fax service when receiving abalone at their premises. Staff will need to be trained to ensure that legal provisions are complied with. There will be some costs in terms of staff duties, phone and fax costs and possible short time delays between receipt of abalone and commencement of processing. (p.17 RIS)

The DNRE has accommodated one of the time issues raised by processors in submissions on the RIS. This concerned the requirement in the Regulations circulated with the RIS that the weighing and documentation of interstate abalone comply with the 30 minute time limit. The Regulations were amended prior to making so that there is no obligation to comply with the strict 30 minute deadline if the licensed abalone processor has obtained the Secretary's approval in writing for an extension of time to comply. This accommodation illustrates the DNRE's willingness to amend where it is persuaded that change is appropriate.

Such brief time limits, could have been considered reportable by the Committee on the basis of being inconsistent with principles of fairness under section 21(1)(h) of the Subordinate Legislation Act. Changes are expected in due course with respect to time restrictions applicable to processor requirements. These planned amendments indicate Departmental openness to supportable complaints.

7. Regulatory Impact Statement

Section 10 of the Subordinate Legislation Act spells out what a RIS must include. In this list is:

(a) a statement of the objectives of the proposed statutory rule;

(c) a statement of other practicable means of achieving those objectives;

(d) an assessment of the costs and benefits of the proposed statutory rule and of any other practicable means of achieving the same objectives; and

(f) any other matters specified by the guidelines.

It may be that the Fisheries (Abalone) Regulations do not comply with section 21(1)(j) of the Subordinate Legislation Act because the regulations have been prepared in contravention of the statutory requirements for RISs.

On a perfunctory reading of the RIS, it appears that there is an unsubstantiated premise that there is illegal diving for and processing of abalone and that regulation to prevent such activity is essential. The RIS contains assertions such as the following:

The rise in value of abalone has led to increased levels of illegal fishing by poachers who are conducting increasingly sophisticated illegal operations. (RIS p. 8)

It is estimated that Australia wide there is more than 700 tonnes of abalone exported annually which cannot be accounted for by combined legal production in abalone producing States. The annual value of the Victorian component of this illegal trade is proportionately estimated at $10 to $12 million.(RIS p. 9)

There is no specific source for these assertions other than a reference to the National Compliance Committee of the Standing committee for Fisheries and Aquaculture which has identified illegal fish sales as a national problem. (RIS p. 27)

Portland Ocean Trading Pty Ltd expresses its dismay at the allegations in the RIS this way:

We wish to express our dismay at the continued use of a figure of 700 tonnes of illegal abalone per year. Our company researched the matter of reconciling the export figures and production figures. We found out from D.P.I. that not only has such an exercise not been done but that the database is so corrupted by sloppy recording that it is impossible to draw any conclusion at all. Yet this assertion, about the 700 tonnes, is still in the public arena and amplified by the media.

The uncritical repetition of unsubstantiated and totally impossible figures by some Government officials, divers and enforcement officers not only transcend the normal bounds of self interested exaggeration but threatens the status of a valuable Australian fishery (in) the international market Not to mention poisoning relationships between the D.C.N.R. and stakeholders.

This company is appalled at the continued assertions regarding large scale evasion and finds it hard to operate in such an atmosphere. (submission on the RIS dated 6 March, 1996)

Both diving groups and processors resent the implication of the RIS that there is large scale illegal activity and that the regulations need to be in place to limit this.

For example, one writer discusses the RIS in this way (Appendix 3):

My first impression was of a document very heavy on allegations and very light on evidence. Further and more careful scrutiny did little to change that initial reaction, but instead raised in my mind the very serious question of accountability for the claims made.

I could find very little evidence of any rigorous analysis regarding risk assessment, economics, or presumed effects of management actions, harvesting etc.) on abalone populations. This lack of reasoned argument is most disturbing in a formal public document...

I suggest that most readers of the RIS will be left with an impression of an enforcement-driven document, characterised by an array of unsubstantiated assertions and a distinct lack of compelling evidence to support them.

The DNRE response to this writer was that the RIS was approved by the Office of Regulation Reform who certified that the cost benefit analysis was adequate.

The objectives of the Regulations relate to proper and serious matters such as ensuring the sustainable use of Victoria's abalone resources (reg. 1 (a)) but the RIS appears to be drawn on a wider canvas of illegal activity. Indeed, the new measures in the Regulations together with the strengthened former provisions are said "to increase the likelihood that illegally caught abalone will be detected when it is laundered into the export chain" (RIS p. 5).

Statements such as this give the Regulations an aura of achievement beyond what it is that the Regulations actually attempt to do. The regulations establish a reasonably onerous scheme under which those who benefit from the licensing regimen pay a price of compliance with rules covering method of presenting the catch etc. Illegal poaching is not controlled by the Regulations except tangentially by means of the paper trail.

The RIS gives the impression that the Regulations control the illegal abalone trade. While the audit trail increases the difficulty for illegally caught abalone to find a market, there is still a range of illegal activity not ameliorated by the Regulations. For example, illegal abalone from Victoria is sold (either dried or in long-life packets) to Asian visitors to Australia from car boots outside theme parks on the Gold Coast of Queensland and also in Cairns. The value of a single car boot of abalone sold in this way could be as much as $40,000.

This focus of the RIS was seen by most respondents to the RIS as a slur on the abalone trade, and was one to which the Department of Conservation and Natural Resources responded by asking those troubled by the claim to present material disproving it. For example, in a letter from the Department to the Chairman of the Victorian Abalone Processors Association (4 January, 1996) the Acting Manager of Victorian Fisheries writes:

If you have information to suggest that the national estimate of 700 tonnes of illegal trade in abalone is incorrect, we would welcome your advice and are prepared to submit any information that you can provide for the consideration of the Compliance Committee.

Arguably, such a responsibility should not lie on divers and processors but rather the overcoming of illegal activity should have been explored and presented as a regulatory objective, with reasons for eliminating illegal activity clearly formulated and defined (see p. 3404, G 51 22 December 1994 - the Premier's guidelines).

It should be noted, however, that the letter mentioned above of 4 January, 1996 continues:

The correspondence from VAPA indicates that offence has been taken by some processors in relation to allegations of possible involvement by processors in illegal activities. The Department has not intended to offend any processor. It is a fact, however, that a number of processors have been successfully prosecuted in recent times. Furthermore, a number of Departmental staff are concerned that shortcomings in current regulations may have contributed to a number of instances where the law was insufficiently robust to allow prosecutions to proceed against suspected offences. The intent of the proposed regulations is to improve the law to ensure that legislative intent can be realised.

In the DCNR's summary of the Submissions on the RIS, the DCNR asserts in response to suggestions of a slur against the abalone industry found in the RIS from VAPA, VADA, Buckmaster and Portland Ocean Trading Pty Ltd that:

A large percentage of the Department's Special Investigations Group investigations involve abalone offences where licensed processors are involved in handling poached abalone. Organised crime can be defined as conspiracy by groups of individuals engaged in take, possession and sale of abalone to subvert the regulatory framework in an organised manner. Large scale organised illegal fish harvesting and selling have been detected and successfully prosecuted. Five Victorian licensed processors have been taken to court on abalone and related fraud offences, and found guilty. Two cases are pending and two further investigations are ongoing.

The Committee has often stated that a RIS need not be an economic or philosophical treatise but rather present simply and fully the reasons why regulation is required in the area. It may be argued that the RIS fails in this regard because it does not properly convey the reason why regulation of this activity is sought.

Evidence in support of why the new audit trail approach is regarded favourably could include prosecution statistics, confirmed reports of illegal practices, or newspaper or other media accounts of unlawful practices. The Committee could expect to see that the nature and extent of the problem of illegal fishing by poachers would be documented in greater detail than is present in the RIS. It is not sufficient to declare that the objectives of the Regulations are to provide a consolidated framework for the management and control of the Victorian abalone fishery and then to premise much of the regulatory apparatus on a proportional estimate of the Victorian component of illegal trade within Australia.

Such failure could amount to the statutory rule having been prepared in contravention of a provision of the Act. Under section 21(1)(j) of the Act the Scrutiny Committee could report this to a House of the Parliament. The Committee has examined the issues raised and presents this discussion of those concerns so that DNRE and other Departments will be conscious of the importance of accurately reflecting in an RIS the objective of proposed Regulations.

8. Public consultation

Except for the matters raised above, the RIS appears to comply with section 10 of the Subordinate Legislation Act.

During the RIS process not all those who made submissions on the Fisheries (Abalone) Regulations opposed the Regulations. It would seem that the abalone industry is quite strongly divided.

There is a response from one amateur abalone fishing group which expresses concerns that there continues to be a restriction on the taking of Greenlip abalone. In reply, the Department suggests that these issues will be further addressed in the Draft Abalone Management Plan which was issued in May, 1996. Some respondents have urged that the appropriate time for the making of these regulations was after the making of the Abalone Management Plan.

As mentioned at the outset, it is not for the Committee to examine questions of policy such as timing. The Committee observes that it received a copy of the Draft Abalone Management Plan and that aspects of control of the abalone fishery appears to be under review.

Smaller processors have expressed satisfaction with the Regulations. One even supplied information not given in the RIS of a scheme which breaches the intent if not the letter of the former regulations - but the loophole, the Department advises, cannot be closed. (see Submission from Pacific Prime Pty Ltd and DCNR reply found at Appendix 4).

The Victorian Abalone Divers Association Inc (VADA) and the Victorian Abalone Processors Association Inc (VAPA) object strongly to the new Regulations and to a perceived haste in implementation and lack of consultation (see paras 14 and 15 below).

The Department strongly believes that it has done all it could be expected to do in the consultation and RIS process. It has offered to do almost whatever would make it easier for the participants to comply with the Regulations. However, apart from the acceptance of written approvals given by the Secretary under regulation 32 there has been little response to the Department's offer.

In the earlier consultation phase, it seemed as if all parties were satisfied with the approach taken and Departmental officers were surprised to receive RIS replies expressing dissatisfaction. It notes that the 3 major processors (whose correspondence is referred to below) are not members of VAPA and that they are satisfied with the Regulations. The Department recalls meetings where high compliance costs were alleged by processors who could not detail the amounts claimed.

The Committee received copies of letters from the Abalone Fishermen's Co operative Ltd in Mallacoota, the Western Abalone Divers Association of Warrnambool and the Victorian Fishing Industry Federation Inc centred in Melbourne. These groups are quite happy with the Regulations and the consultative process which led to their introduction. Their correspondence was with the Minister and confirmed their support for the Fisheries (Abalone) Regulations.

The Western Abalone Divers Association writes:

....we believe that it is important for our industry (to) be demonstrably honest at all levels. The new Regulations ensure this and in the future, will enable abalone divers to avoid any of the suspicion that seems to have appeared in recent years. (3 May, 1996)

The Abalone Fishermen's Co-operative writes:

Our purpose in writing to (the Minister) is to express our support and satisfaction with the above regulations which were developed after wide ranging and extensive consultation with all sectors of the abalone industry in Victoria. In fact the consultation process extended over approximately two years and representatives from our organisation were extensively involved in the development and consultation process from both the catching and processing perspectives.

As with any regulatory regime there are costs involved, but in our view the costs of compliance have been minimised and we believe the costs will prove to be far outweighed by the benefits accruing from a healthier and more productive and accountable industry at all levels. (3 May, 1996)

9. Administrative Costs

The RIS presents the costs and benefits of the Regulations and details the costs in Appendices 2 to 4 to the Statement. The Office of Regulation Reform has certified that the assessment appears adequate for the purposes of section 10(3) of the Subordinate Legislation Act.

However, respondents to the RIS dispute the purported benefits and outcomes. One suggests that there is "very little evidence of any rigorous analysis regarding risk assessment, economics or presumed effects (of management actions, harvesting etc.) on abalone populations" (see letter 4 March 1996, in Appendix 3). VAPA contends that the statements of impacts on processors are inaccurate and misleading, particularly regarding costs and duplication of existing paperwork (see Submission on RIS from the Victorian Abalone Processors Association Inc in Appendix 5).

Some divers also complain of the cost of compliance with bin tagging and docket completion required by the Regulations. However, as the industry is very profitable, and the resource itself has both natural and financial value to Victoria, the costs of compliance may be seen as proportionately small.

In the letter referred to in Paragraph 8 above, the Abalone Fishermen's Co-operative makes just this point. The Chairman of the Co-operative goes on to say:

In this regard I must note that our organisation and member divers have already expended funds and developed systems to ensure compliance with the regulations and would be extremely concerned if that investment is wasted.(3 May, 1996)

The question of administrative costs outweighing likely benefits is one on which the Scrutiny Committee could have reported to the Parliament under section 21(1)(k) of the Subordinate Legislation Act. However, the Committee believes that on balance the administrative costs are not excessive to divers or processors.

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