Productivity Commission review gives additional focus into the supply chain

On 19 February 2021, the Federal Treasurer requested the Productivity Commission (Commission) undertake an independent review (Review) “into supply chain vulnerabilities and risks” to “ensure that the Australian economy is prepared for “possible supply chain disruptions”.

The Terms of Reference for the Review suggest it originates from the COVID-19 pandemic and while Australian supply chains proved to be “resilient”, the circumstances highlighted potential vulnerability to global supply chain disruptions. Accordingly, the scope of the Review has been set as follows;

The purpose of the study is to examine the nature and source of risks to the effective functioning of the Australian economy and Australians’ wellbeing associated with disruptions to global supply chains, identifying any significant vulnerabilities and possible approaches to managing them.

In undertaking the study, the Commission should consider Australia’s part in global supply chains as an importer and exporter, and:

• consider the factors that make supply chains vulnerable.

• develop a framework for identifying supply chains that are vulnerable to the risk of disruption and also critical to the effective functioning of the economy, national security and Australians’ wellbeing.

• use trade and other relevant data to identify supply chain vulnerabilities.

• explore risk management strategies, including the roles of, and options for, government and businesses to manage supply chain risks.

The Commission has a very short timeframe to complete the Review, with an interim report (focussing on the import part of the supply chain) due at the end of March 2021 and a final report including findings on the export supply chain being due by late May 2021.

The Commission previously completed a number of reviews looking at issues affecting the supply chain, such as the merit of continuing the collection of general customs duties, the effectiveness of our anti-dumping system and Free Trade Agreements and the imposition of Goods and Services Tax on low–value imports.

The Review is consistent with the funding made available in the last Federal Budget for a “Supply Chain Resilience Initiative” to assist businesses with their supply chains. The Review is also consistent with some of the recommendations made late last year in the Senate Standing Committees on Rural and Regional Affairs and Transport which looked at enhancing the supply chain operation. The supply chain and the problems experienced at and around the Ports are currently under examination including:

• The Victorian Government initiated an independent review of the Victorian ports system. The review recommended the adoption of the “Voluntary Performance Model” at the Port of Melbourne to review the performance of the port and those operating infrastructure around the port. The Victorian Government has subsequently commenced another associated review, this time of the wider ports system in Victoria.
• The 14th meeting of national and state Infrastructure and Transport Ministers was held on 20 November 2020 and reached an agreement on a number of significant issues associated with the supply chain including “fast tracking” of infrastructure to support economic recovery, making roads safer, improving efficiency in the supply chain and the adoption of a national approach to stevedore infrastructure charges. The current proposal is to develop voluntary national guidelines for applying stevedore infrastructure and access charges. The aim is to provide “greater certainty and transparency for both stevedore and landside transport operators and support continued investment in terminal facilities”. That work is to include reference to the “Voluntary Performance Model” described above.
• A Port Botany Landside Improvement Strategy review has been announced into operations around Port Botany.
• NSW Ports recently issued direction on Botany Truck Congestion.
• Freight Victoria has just announced the commencement of a study into empty container management capacity and supply chain issues in Melbourne. This is to be conducted by the same firm that did a similar study in NSW which demonstrated significant additional costs from an inefficient system.

The supply chain is not only a concern to Australian state and Federal regulators but also to importers and exporters and their service providers moving goods through the supply chain. I have been working extensively with the International Forwarders & Customs Brokers Association of Australia, the Export Council of Australia and the Food and Beverage Importers of Australia, as well as others affected, to address these issues together with related issues such as detention charges.

Our focus in Australia is not alone as there is worldwide concern on congestion and costs in the supply chain triggering ongoing action such as by the Federal Maritime Commission in the USA and the European Commission.

Hopefully, those in industry will engage directly with the Review and the Commission will engage extensively and transparently. The vulnerabilities affect all of those involved in the supply chain and can pose a barrier to entry for Small and medium-sized enterprises with the consequence that other trade initiatives to reduce costs and enhance access to markets are eliminated. There is also concern that the position of licensed customs brokers and freight forwarders should be properly considered by the Commission – after all, few goods would move without their involvement and expertise. The regulatory regime and support for those service providers needs to be a priority.

Our Customs and Trade team are well placed to advise you on all aspects of Australian and international trade and e-commerce.