The HEA Exporting Framework The What, Why & How? Presentation material March 2020 Provided by Simon Hegarty Chief Executive Officer 1
HEA model in context of other export marketing models
HEA – strategic context diagram
HEA in MPI system (alignment with MPI’s regulatory model)
Supply/value chain : In-market Production Packing Market destination Fruit or Veg crop: •Export • Border entry: ICPR (phyto) • Market segment: Retail, • grades • For some products, rules may apply (e.g. wholesale or HRI? Options: • packs Kiwifruit, HEA products) • Customer requirements (e.g. • stores Private standards of retailer?) • Export • load-out • Local market • Processing • Combination of E, L, P No phyto requirements, but subject to Local: requirements of Food Act Processing Processed product, converted to retail ready or form as ingredient. information
HEA vs Free market: The Differences : HEA Free market • Exporting Entities Must have a licence to export No licence to export. Anyone can buy/source product and export it. • May need to ‘register’ as an exporter for some specific markets if product is under an Official Assurance Programme (OAP). • • Exported product Product must qualify for Must meet ICPR requirements for export according to EMS pest/disease status (Phyto cert) & requirements. requirements of Food Act (as a minimum, but • Must meet ICPR product not specifically certified for this). requirements for pest/disease status (Phyto cert). Enforceability HEA Act – EMS requirements Limited to contractual under Private Standards legally enforceable on 100% of (e.g. WQA, BRC etc) if that is a customer product exported across all requirement. exporting entities. No legal ability to enforce requirements (other than phyto under ICPR, or requirements of Food Act).
What does HEA do? - HEA’s functions Functions defined s6 & 7 of the HEA Act. The primary function is “to promote the effective export marketing of horticultural products” The 2 key tools in the Act are: 1. The Export Marketing Strategy (EMS) – the product group’s requirements (rules) for exporting 2. The export licensing system – anyone wanting to export the product needs a licence and is required to meet the criteria It is illegal to export HEA products, without a HEA licence (or licence exemption). 7
What does HEA do? - HEA’s functions (cont) HEA administers the Act by: Assisting Product Groups in their strategic development (based around their EMS) Approving and enforcing EMS requirements Administering Export licensing Monitoring & enforcement of licence holders Additional activities (s6(2) of the Act Advocate for horticulture on market access & removal of trade barriers Liaison between government and wider industry on relevant issues 8
Using the EMS a Product Group can : Set minimum quality standards & have a mechanism for enforcement Put in place enforceable food safety programmes (e.g. residue testing programmes) Bring structure and co-ordination to the industry Generate funding for R&D or generic market development for promotion purposes Collect industry information (production, packing, shipping) Tailor programmes according to the specific needs of the sector The value of these benefits has not been quantified however, they are considerable and enable exporters to reassure customers on the safety and quality of the NZ product. The true value is in having the ability to run industry programmes that all players are required to comply with, and having this recognised by the market. 9
What is typically in an EMS? • Industry vision, goals/objectives & the means by which the industry aims to achieve its goals/objectives • Quality management programme: sets minimum quality/grade standard for export & incorporates the industry food safety programme. Most include labelling requirements. May include adherence to export pre-clearance programmes. • R&D programme: Commitment to fund projects covering new cultivars, pest/disease treatment options, product storage life, innovation etc etc • Market Development Programme: generic market development proposals to stimulate future demand. • Industry Co-ordination, Development and Information: Taking an industry position on generic market access issues, collating industry information to assist decision making • Requirements to register with the Product Group and comply with the rules for exporting as laid out in the EMS • Details of grower, packer & exporter responsibilities 10
Export licensing All licence applicants are required to present their credentials to the product group as part of the licence application process. The HEA seeks a recommendation from the product group before determining whether a licence will be issued or not. Export licences – currently (at 30 Sept 2019) 82 licences held by 57 exporters across 7* product groups actively exporting. Licence stop/go: All exports require a CEDO (Customs electronic delivery order) from NZ Customs – exporter must have a valid HEA number for CEDO application. This is the stop/go mechanism – i.e. no CEDO, no export. All export consignments confirmed by Customs in monthly report to HEA listing each shipment by each exporter. HEA then monitors compliance with the licences held. 11
Licence Enforcement (disciplinary process) The Deterrent Effect: If it is proven an exporter has prejudiced or breached the EMS, the HEA can add conditions to a licence or, in serious cases, suspend or revoke the licence. An exporter can jeopardise their ability to continue doing business if they disregard the industry EMS. The disciplinary process is outlined in the Act and is handled by the Board. 12
Understanding the Points of difference • The HEA legislation provides the product groups with a status/influence (that they wouldn’t otherwise have) through: • The product group having the ability to enforce its EMS for exported product across the industry. • The licensing system providing the product group with a significant say in who can export the product (the final say rests with the HEA) . For any industry heavily dependent on export markets it is vital to have a well structured industry operating effectively to ensure key markets are developed & remain accessible. 13
How to maximise value from the HEA model? Communicate regularly Have a workable EMS that includes strategic growth objectives and robust mechanisms for implementation – be prepared to apply the rules Review and update EMS regularly Share generic information Have a cohesive attitude and approach 14
Current (June 2019) list of Product Group’s operating under the HEA model In order of Foreign Exchange (Forex) earnings (y.e. June 2019): 1. Avocados ($104.2m) 2. Summerfruit (peaches, plums, nectarines, cherries) ($71.5m) 3. Buttercup Squash ($59.6m) 4. Kiwifruit to Australia ($52.1m) 5. Blackcurrants ($10.8m) 6. Persimmons ($9.9m) 7. Boysenberries # ($4.4m) 8. Tamarillos ($0.09m) 9. Chestnuts * 10. Truffles * o Sum total of Forex in 2019 = $313.1m ( a 5-fold increase since 1990) o * = not currently exporting o # = not using export licensing mechanism 15
How is HEA governed? HEA reports to the Minister for Primary Industries ( s4 of the Act states it is administered in MPI ) HEA governance is provided by a board comprising: • Peter Luxton (Chairman from March 2020, Government independent appointee (Aug 2013 & March 20) • Stephanie Honey (independent Government appointee (Mar 2020)) • Mick Ahern (Exporter nominee (April 2015)) • Lesley Wilson (Hort NZ nominee (Nov 2018)) • Andrew Fenton (Hort NZ nominee (Dec 2015)) Staff – • Simon Hegarty (appointed CE in Aug 2005) • Barbara Maré (Administrator & Industry advisor part-time role) 16
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