Forests (Regulation of Log Traders and Forestry Advisers) Amendment Bill

Forests (Regulation of Log Traders and Forestry Advisers) Amendment Bill

Government Bill

250—1

Explanatory note

General policy statement

The Forests (Regulation of Log Traders and Forestry Advisers) Amendment Bill (the Bill) is intended to establish a registration system for log traders and forestry advisers that strengthens the integrity of the forestry supply chain and supports a continuous, predictable, and long-term supply of timber for domestic processing and export. It is expected to operate in a manner that—

  • increases the transparency and professionalism of log buying, selling, and trading activities; and

  • improves the confidence and informed participation of businesses and investors in the forestry sector; and

  • contributes to improved economic, employment, and environmental outcomes from the forestry sector, nationally and for local communities; and

  • contributes to improved environmental and climate change conditions for New Zealand; and

  • contributes to the development, and improves the long-term sustainability, of domestic timber processing and the wider forestry sector.

The measures proposed in the Bill are aimed at building a more integrated forestry supply chain, with stronger linkages between forest growers and domestic processors, improved professional standards, and greater confidence in business transactions (both domestically and internationally).

COVID-19 has highlighted the need to increase the resilience of the sector to support regional economies and jobs and help ensure security of supply for domestic processors. The Bill will provide some of the critical foundations to help supply-chain stakeholders to navigate what is anticipated to be a more volatile and uncertain trading environment during the COVID-19 recovery period. It also makes provision to recognise and enable Forestry Authority oversight of industry accords or agreements established to support the forestry and wood processing sector during the COVID-19 recovery period and in the longer term that are consistent with the purpose of the Bill.

New Zealand’s log market is in transition, with smaller owners playing an increasingly important role in the annual harvest. Forecasts indicate that smaller owners will be providing 40% of the annual harvest during the 2020s, up from 25.5% in 2015 and just 14% in 2007.

The majority of those smaller owners (estimated at 14,000–15,000) have limited experience in the marketing and sale of forestry blocks. This can place them at a significant disadvantage when they come to plan, and negotiate, the sale of their forest. For an informed and transparent market, those owners need to know who to seek impartial, professional management advice from, the state of the market, their sale options, and how to seek redress. At present, there are few checks to ensure forestry advisers are experienced in the areas in which they are offering advice. A similar situation exists for the companies and trading entities that small forest owners contract with for the sale of their logs. Owners who are new to the market do not necessarily know the experience and business credentials of the firms they are contracting with to sell their logs.

The quality of the advice owners receive from forestry advisers and their interactions with log-trading entities are critical to the final returns they receive, and to the operation of the broader log market. A poor financial or environmental outcome for owners has flow-on effects on market confidence for current and new investors, the reputation and public image of the industry, and New Zealand’s ability to achieve its long-term land management and climate change objectives.

Equally, commitment to industry standards, access to quality advice, and reliable market information that creates greater confidence in and transparency across the supply chain is of value to other industry stakeholders such as log traders, including domestic wood processors who need to source log supplies from across an increasingly disaggregated supply source.

The initiatives proposed in the Bill are intended to strengthen confidence in the forestry supply chain (particularly for first-time entrants to the market), provide greater transparency in the system, build the sector’s social licence to operate, and help address the adverse impact of increased market volatility on all stakeholders during the COVID-19 recovery period.

The Bill provides for—

  • compulsory registration of individual forestry advisers providing 1 or more specified services related to the management, harvesting, or sale of forest resources or forest land; and

  • compulsory registration of entities seeking to purchase, process, or export logs grown in New Zealand; and

  • the Ministry of Primary Industries to act as the Forestry Authority responsible for administering the registration system. However, the Ministry will be able to delegate some of the Forestry Authority’s functions to a suitable industry body or other person outside the Public Service; and

  • regulated parties to meet certain requirements to become registered and retain their registration. These requirements will include meeting a fit and proper person test, operating in accordance with practice standards and any industry agreements to which they are a party, and meeting record-keeping and reporting requirements. Forestry advisers must also adhere to a code of ethics and meet other requirements set in regulations, such as skills, education, and professional development requirements; and

  • an arbitration and compliance system to support system accountability; and

  • powers and sanctions, including offences and penalties that are proportionate and commensurate with similar regulatory systems; and

  • supporting measures that enable flexibility in administrative requirements to ensure regulatory compliance is not unreasonably burdensome, and cost recovery through fees, charges, and levies; and

  • regulation-making powers to give effect to the regulatory system.

The Bill will come into force on a date appointed by the Governor-General by Order in Council, and 1 or more Orders in Council may be made bringing different provisions into force on different dates. This is to enable—

  • the development of enabling regulations and associated rules; and

  • the establishment of the Forestry Authority’s functions; and

  • the timely registration of log traders and forestry advisers.

Departmental disclosure statement

The Ministry for Primary Industries is required to prepare a disclosure statement to assist with the scrutiny of this Bill. The disclosure statement provides access to information about the policy development of the Bill and identifies any significant or unusual legislative features of the Bill.

Regulatory impact assessment

The Ministry for Primary Industries produced a regulatory impact assessment on 27 February 2020 to help inform the main policy decisions taken by the Government relating to the contents of this Bill.

Clause by clause analysis

Part 1 of this Bill amends the Forests Act 1949 (the Act). Part 2 makes a technical amendment to the Forests Amendment Act 2004.

The amendments commence by Order in Council. Anything not commenced by Order in Council commences on the day that is 2 years after the day on which the Bill receives Royal assent (see clause 2).

Part 1Amendments to principal Act

Clause 4 amends the Act’s interpretation section, section 2, to insert new definitions.

Clause 5 inserts 2 new sections as follows:

  • new section 2A gives effect to the new schedule for transitional, savings, and related provisions that is inserted by clause 9:

  • new section 2B lists the Parts of the Act that bind the Crown—that is, new Part 2A (inserted by clause 7) and existing Part 3A. Section 67A of the principal Act currently provides for Part 3A to bind the Crown, and that section is repealed by clause 8.

Clause 6 amends section 13, which protects various officers, employees, and appointees under the Act from personal liability for anything they do in good faith in the exercise of powers or in the performance of duties under the Act. The amendment extends the protection to a person outside the Public Service, if the person is acting as the Forestry Authority under a delegation from the chief executive of the Ministry for Primary Industries (see clause 7, new sections 63B and 63D).

Clause 7 inserts a new Part 2A. There are 4 subparts—

  • subpart 1 (registration and related matters) (new sections 63B to 63ZH):

  • subpart 2 (cost recovery) (new sections 63ZI to 63ZT):

  • subpart 3 (regulations) (new sections 63ZU to 63ZZA):

  • subpart 4 (rules) (new sections 63ZZB to 63ZZD).

Subpart 1—Registration and related matters

New section 63B provides for the Ministry for Primary Industries (the Ministry) to act as the Forestry Authority, a regulatory body for log traders and forestry advisers.

New section 63C sets out the Forestry Authority’s functions.

New section 63D is about delegations outside the Public Service. The Ministry’s chief executive (the Secretary) may delegate the Forestry Authority’s functions or powers using the general delegation provisions in section 41 of the State Sector Act 1988. These include a power to delegate outside the Public Service (an external delegation). Section 63D points to the external delegation provisions, indicates that the external delegate could be a forestry industry body, and requires that the Secretary must be satisfied, before making an external delegation, that the delegate has sufficient capacity and resources to properly carry out the delegated functions.

New section 63E is about oversight of externally delegated functions and powers. It authorises the Ministry to conduct periodic audits of the delegate and creates a power for the Ministry to obtain information from the delegate. Section 41 of the State Sector Act 1988 provides for further oversight and accountability as follows:

  • the Ministry must describe in its annual report the effectiveness of what has been done under the delegation:

  • the delegate must comply with the same statutory obligations that apply to the Ministry in respect of what has been delegated:

  • when acting under the delegation, the delegate must comply with relevant obligations in the code of conduct for the State Services:

  • the Ombudsmen Act 1975 and the Official Information Act 1982 apply as if the delegate were a government department:

  • relevant information held by the delegate is treated, for the purposes of the Official Information Act 1982, as if it were held by the Ministry:

  • the delegated functions and powers cannot be subdelegated.

If an external delegation is made,—

  • the delegate is protected from personal liability for anything they do in good faith in the exercise of powers or in the performance of duties under the Act (see the amendments made by clause 6); and

  • regulations may authorise the delegate (by way of a subdelegation) to make rules for some things that would otherwise be done by regulations—specifically, for the purposes set out in new sections 63ZW (registration), 63ZX (complaints and disputes), and 63ZY (fees and charges) (see clause 7, new section 63ZV).

New section 63F creates a power for the Forestry Authority to obtain information from registered persons. This will supplement regular reporting requirements that may be imposed by regulations (see new section 63ZW(k) and (l)).

New sections 63G to 63J are about the registration of log traders.

A log trader is someone who, in trade, buys or exports logs grown in New Zealand or processes logs they have grown themselves (see new section 63H). Transfers of logs, in trade, between related companies will also trigger the requirement to register. The words “in trade” are intended to exclude occasional or incidental purchases or transfers of logs (for example, the purchase of a log for personal use, such as by a hobbyist wood carver or furniture maker). Regulations can exempt classes of persons from having to register as log traders, or exempt classes of transactions or transfers from triggering the requirement to register.

A person is prohibited from acting as a log trader unless they are registered or exempt (see new section 63G(1)). There is also a prohibition against holding out that anyone is a registered log trader or exempt (see new section 63G(2)). It is an offence to fail to comply with these prohibitions (see new sections 63ZA and 63ZB).

A person is entitled to be a registered log trader if the Forestry Authority is satisfied that the person is a fit and proper person, meets entitlement criteria set by regulations, and meets the application requirements in new section 63O. As well as setting entitlement criteria, regulations can set the matters the Forestry Authority must take into account when it assesses whether someone is a fit and proper person.

New section 63J requires registered log traders to adhere to forestry practice standards (to be set by rules: see new section 63ZZC) and any forestry industry agreement that they are signed up to, if the agreement is one identified by regulations as applicable. Registered log traders must also continue to meet the eligibility criteria for registration, meet record-keeping and reporting requirements that are set by regulations, and comply with other obligations set by regulations. It is an offence for a registered log trader to fail to meet these obligations (see new sections 63ZA and 63ZB).

The relevant regulation-making powers are in new section 63ZW.

The registration of a log trader does not authorise it to provide forestry adviser services. To provide those services, a registered log trader must—

  • be an individual who is also registered as a forestry adviser and authorised to provide those services; or

  • engage the services of an individual who is a registered forestry adviser and authorised to provide those services; or

  • be or engage the services of a person who is exempt from the registration requirements for forestry advisers.

New sections 63K to 63N are about the registration of persons who provide forestry adviser services.

A forestry adviser service is any service listed in new section 63L that is provided to a client in the ordinary course of business. Regulations can identify other forestry adviser services. Regulations can exempt classes of persons from having to register as forestry advisers, or exempt the provision of classes of services from triggering the requirement to register.

A person is prohibited from providing a forestry adviser service for reward, unless the person is a registered forestry adviser and authorised to provide that service, or exempt (see new section 63K(1)). A person’s registration may authorise them to provide all or only some forestry adviser services. There is also a prohibition against holding out that anyone is a registered forestry adviser, authorised to provide a forestry adviser service, or exempt (see new section 63K(2)). It is an offence to fail to comply with these prohibitions (see new sections 63ZA and 63ZB).

A person is entitled to be a registered forestry adviser if the Forestry Authority is satisfied that the person is an individual (as opposed to a corporate entity), is a fit and proper person, meets entitlement criteria set by regulations, and meets the application requirements in new section 63O. As well as setting entitlement criteria, regulations can set the matters the Forestry Authority must take into account when it assesses whether someone is a fit and proper person.

New section 63N requires registered forestry advisers to adhere to forestry practice standards and a code of ethics (both to be set by rules: see new sections 63ZZC and 63ZZD). They must also continue to meet the eligibility criteria for registration, comply with any conditions of their registration, meet record-keeping and reporting requirements that are set by regulations, and comply with other obligations set by regulations. It is an offence for a registered forestry adviser to fail to meet these obligations (see new sections 63ZA and 63ZB).

The relevant regulation-making powers are in new section 63ZW.

New sections 63O and 63P are about how to apply for registration and how registration decisions are made.

The Forestry Authority will set the application form, but regulations will specify the information that applications must include (see new section 63ZW(o)). The application fee will also be set by regulations (see new section 63ZY). If an application for registration is declined, there is a right of review (see new sections 63W to 63Y).

It is an offence for a person to provide false or misleading information in an application (see new sections 63ZA and 63ZB).

New sections 63Q to 63S are about how to renew registrations and how renewal decisions are made.

Registrations expire on the last day of the registration period set by regulations (see new section 63ZW(p)). The registration period may be different for log traders and forestry advisers. The Forestry Authority will set the application form for renewal of registration, but regulations will specify the information that applications must include (see new section 63ZW(o)). The application fee will also be set by regulations (see new section 63ZY). If an application for renewal of registration is declined, there is a right of review (see new sections 63W to 63Y).

New section 63T allows the Forestry Authority to impose conditions on the registration of a forestry adviser. If a condition is imposed or modified, there is a right of review (see new sections 63W to 63Y). Conditions imposed by the Forestry Authority are in addition to any general conditions of registration that are set by regulations (see new section 63ZW(m)).

New section 63U allows the Forestry Authority to suspend a person’s registration if they fail to meet their obligations under the Act. The Authority has to give 15 working days’ notice before suspending a person’s registration. If a suspension is not lifted within 3 months, the registration is revoked. During that time, the registered person has an opportunity to provide information to the Forestry Authority that will justify the suspension being lifted.

New section 63V allows the Forestry Authority to revoke a person’s registration either at the person’s request or after the registration has been suspended for 3 months.

New section 63W provides a right of review if the Authority declines to register a person or renew their registration, or decides to impose or modify a condition of a forestry adviser’s registration.

New section 63X sets out who reviews a decision, which depends on who made the decision.

New section 63Y sets out the process and time frames for a review.

New section 63Z requires disputes to be referred to mediation or arbitration if they cannot be resolved by the resolution process set by regulations (see new section 63ZX). If a dispute is referred to arbitration, the Arbitration Act 1996 applies.

New section 63ZA creates offences for failures to comply with various provisions of the Act, and new section 63ZB sets out the maximum penalties—a fine of up to $40,000 for individuals or $100,000 for a company or other type of person.

New sections 63ZC to 63ZH are about forestry registers.

The Forestry Authority must keep and maintain a public register of log traders (new section 63ZD) and a public register of forestry advisers (new section 63ZE). The purpose of the registers is to enable members of the public to find out who is registered and how to contact them, and also to assist with enforcement of the Act. Those whose details are included in a register must notify the Forestry Authority of any changes (new section 63ZH). The Forestry Authority must ensure that the public has access to the registers, but may withhold a person’s physical address if its disclosure would be prejudicial to the safety of the person or their family.

Subpart 2—Cost recovery

New sections 63ZI to 63ZT are about cost recovery.

The Minister is required to take reasonable steps to recover the direct and indirect costs of administrating new Part 2A (new section 63ZI). In deciding the most appropriate method of cost recovery to use, the Minister must have regard to 4 principles of cost recovery: equity, efficiency, justifiability, and transparency (new section 63ZJ). Those who will be substantially affected by cost recovery should be consulted before costs are recovered (new section 63ZK). The Bill provides for a number of methods of cost recovery (new section 63ZL), but requires fees, charges, or levies to relate generally to the financial year for which they are charged (new section 63ZM).

New subpart 2 also provides for—

  • review by the Minister of the levels and methods of cost recovery (new section 63ZN); and

  • the operation of trust accounts kept by the person who collects a levy (new section 63ZO); and

  • the recovery of unpaid fees, levies, or charges as a debt due to the Crown (new section 63ZP); and

  • penalties for a failure to pay fees, levies, or charges (new sections 63ZQ to 63ZS).

The cost recovery provisions are modelled on those already in place in Part 3B of the Act, which relates to forest sink covenants (see sections 67ZH to 67ZT).

Subpart 3—Regulations

New sections 63ZU to 63ZZA are about regulations that can be made for the purposes of new Part 2A.

Regulations under new subpart 3 are made by Order in Council. They can only be made on the Minister’s recommendation, and the Minister must be satisfied that the regulations are not inconsistent with the purpose of new Part 2A, that consultation requirements have been met, and that the principles of cost recovery (if applicable) have been applied (see new section 63ZU).

The regulations can provide for matters relating to—

  • registration (new section 63ZW); and

  • complaints and disputes, including the establishment of a complaints panel (new section 63ZX); and

  • fees and charges (new section 63ZY); and

  • levies (new section 63ZZ).

Regulations that set levies are confirmable instruments (see new section 63ZZA), which means they are automatically revoked if they are not confirmed by an Act of Parliament within the time frame set out in section 47C of the Legislation Act 2012.

Most of the regulation-making powers can be converted (by regulations) into rule-making powers for an external delegate who is acting as the Forestry Authority (see new section 63ZV and the description of new section 63D, above). This allows an external delegate to be given control over the design of some aspects of the regulatory scheme and how it is administered. However, the power to set levies cannot be subdelegated. Rules made under a subdelegated power are legislative instruments and disallowable instruments for the purposes of the Legislation Act 2012.

Subpart 4—Rules

The Forestry Authority can make rules to set forestry practice standards (new section 63ZZC) and a code of ethics (new section 63ZZD). The Forestry Authority must first be satisfied that the rules are not inconsistent with the purpose of new Part 2A and that appropriate consultation has been done (new section 63ZZB).

Rules that set forestry practice standards have to identify which standards apply to registered log traders, registered forestry advisers, or both. Rules that set a code of ethics apply only to registered forestry advisers. A registered person who fails to comply with the rules could have their registration suspended or not renewed (see new sections 63S and 63U).

Rules made under new subpart 4 are legislative instruments and disallowable instruments for the purposes of the Legislation Act 2012.

Clause 8 repeals section 67A, which provides that Part 3A binds the Crown. Provision for this is made instead in new section 2B, inserted by clause 5.

Clause 9 inserts a new schedule of transitional, savings, and related provisions (Schedule 1AA) into the principal Act.

Part 1 (clauses 1 to 4) of Schedule 1AA reinstates the transitional provisions from the Forests Amendment Act 2004 that are repealed by clause 10. These provisions, which still have effect, are moved from the 2004 amendment Act to the principal Act to improve accessibility. There is no change in legal effect.

Part 2 (clauses 5 to 7) of Schedule 1AA contains the transitional provisions for this Bill, as follows:

  • clause 5 is an interpretation provision:

  • clause 6 provides that the new regime does not apply to anything agreed to before the commencement of the new regulatory regime, even if the agreement is for transactions or transfers to occur, or services to be provided, after commencement:

  • clause 7 delays the application of the substantive registration obligations and related offence provisions for a period of 12 months after the Bill comes into force.

Part 2Technical amendment

Clause 10 amends the Forests Amendment Act 2004 to repeal the transitional provisions that are relocated to Part 1 of new Schedule 1AA by clause 9.