Guide to commodity levies

Commodity levies are widely used in the primary sector. They are the way that industries invest in their own issues; the key issues that matter to them. The collective good is a significant aspect of a commodity levy. The old days when an industry could rely on a voluntary levy are way behind us. There are just too many issues that industries now need to be involved in to rely on something so unreliable.

Government has for a long time expected an industry to be acting on its own behalf. The Commodity Levies Act 1990 was created for this reason.

Other levies

Many of you will be familiar with the commodity levy renewal process. The summerfruit industry has voted for a commodity levy on four previous occasions, including the current 2014 Order. Many will also have voted in HortNZ levy renewals and Fruitgrowers Federation renewals before that. Some may also have participated in the NZ Apples & Pears levy and possibly other levies.

In which case you are probably pretty familiar with the basics. The main issue to remember is that levy renewals are very particular processes and the industry has some hard targets to meet.

For those of you who are familiar with commodity levies, you might want to skip the next section. However, for growers who want a refresher or who haven’t voted before, we’d like to set out a few basic issues first and then we’ll look at specific summerfruit issues in another area.

Commodity levies – the basics

  • A commodity levy Order lasts six years.
  • The process to renew a levy Order can take more than a year.
  • To renew a levy, the industry must go through a consultation process and then conduct a ballot to seek grower support.
  • The ballot is a simple yes/no weighted vote.
  • If the ballot is successful, the industry prepares and submits an application to MPI.
  • MPI conducts a thorough review of the application.
  • From there the new Order is drafted and, subject to Cabinet and Executive Council approval, the levy Order receives the Governor-General’s signature and is gazetted.
  • The outcome is a new Commodity Levies (Summerfruit) Order which would last a further six years.
  • The Order includes all those issues that were spelled out in the ballot paper.
  • You can find a copy of all commodity levy Orders here www.legislation.govt.nz. Enter ‘commodity levy’ in the search box and select the Order from the drop down box.

Are there any restraints?

The legislation places a number of requirements on Summerfruit NZ in regards to the levy.

  • The levy can’t be used for trading purposes.
  • The Order specifies what the levy can be used for.
  • The levy rate must be confirmed at the AGM each year.
  • The industry organisation must have a financial audit every year.
  • The audited accounts must be presented to growers at the AGM each year.
  • A report must be submitted to the Minister each year setting out how the levy has been spent in the last year.

 

The levy rate

There is a cap on the levy rate that can be collected. In the current summerfruit levy Order, the levy can be collected:

  • for apricots, nectarines, peaches, plums and hybrids thereof* up to a maximum of 1.75% at the first point of sale
  • for cherries up to a maximum of 1.0% at the first point of sale. 

‘Up to’ is an important point. It means that any rate below this can be collected, for instance the cherry levy is currently 0.75% at the first point of sale and 1.5% for the other crops.

It also means that the industry can’t collect more than 1.0% on cherries or 1.75% on the other summerfruit.

* ‘hybrids thereof’ includes any crosses within the prunus species such as pluots or apriums.

 

What can the levy be used for?

According to the Order the levy can be spent on:

  • product development
  • research, including market research
  • market development
  • protection or improvement of plant health
  • development and implementation of quality assurance programmes
  • education, information, or training
  • day-to-day administration of Summerfruit NZ.