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Ken Phillips is co-founder and Executive Director of Independent Contractors of Australia. He is a published authority on independent contractor issues and directs research on related commercial and trade practices issues. Through his numerous articles in newspapers and think-tank and academic journals, Ken is known for approaching issues from outside normal perspectives and is frequently sought out for media comment.

Why can’t Colbeck see the wood for the trees?

Thursday, October 02, 2014

There’s an impending ‘disaster’ for around 15,000 small businesses in Australia as a result of the Abbott government's persisting with a Labor/Green ‘environmental’ agenda.

It’s to do with new ‘illegal’ logging laws that come into effect in November this year.

In an effort to save the world’s forests, the Labor/Green alliance, under the Gillard/Rudd governments, passed the Illegal Logging Prohibition Act 2012. It’s one of those regulatory approaches that we saw consistently under Labor and reflects an oppressive, ponderous and impossible-to-comply-with bureaucratic approach to social, environmental or other agendas. It’s a law that lacks the capacity to work in practice.

The Act requires importers of wood products to declare that none of the imported wood was illegally logged. This includes wood contained in imported furniture, for example. Get it wrong and the importer is up on criminal charges.

What brought my attention to the issue were the representations from many small business people who are about to be slammed by the laws. Perhaps surprisingly, 15,000 of the 17,000 importers are small businesses. Last month I explained in an article in The Australian how it is impossible to comply with the laws. The very design of the laws will create ‘criminal’ activity because the requirements it sets are impractical. I explain this further below.

My article prompted a flurry of representations from small business groups to the minister in charge, Tasmanian Senator Richard Colbeck, and to which he responded. Here’s one reply from the minister demonstrating his stand.

In a typical bureaucratic approach, Colbeck states: “I am confident that the existing laws strike the right balance between encouraging businesses to do the right thing and minimising the impact on their day-to-day operations.” That is, Colbeck is firm in his determination to break the Coalition’s election promise to fix the flawed laws.

Colbeck’s letter makes a number of soothing, political ‘hose down small business opposition’ statements. This includes his remark that, in the first 18 months, compliance will be a friendly process conducted by sympathetic bureaucrats. Further, he denies that the law applies a reverse onus of proof.

And he says the government will help businesses understand the laws in other countries to which the new Australian law requires importers to comply. That is, small business importers must know the laws in every country from which their imported timber (eg, timber in a lounge suite) has possibly been sourced. If they declare incorrectly, they are subject to criminal sanction.

Colbeck’s response treats small business people as fools.

He is persisting with a law that creates criminality. But he says, ‘don’t worry, the bureaucratic police won’t initially apply the law as it is written’. This is nonsense. The law is what it says, and the bureaucratic police have a statutory obligation to apply the law. And apply it they will!

Colbeck’s denial of a reverse onus of (criminal) proof is a sleight of hand, a political con. That he is wrong can be shown by a simple reading of the new law. I’ve gone to the trouble of double-checking the Act and it is plain both in its intent and its design. I’ve extracted and summarised the most relevant sections here.

The legislation is plain and obvious. Small business importers are obligated by law to know, understand and to ensure compliance with logging laws in every country from which wood and wood products may have been sourced. For Colbeck to offer as an excuse that his friendly department will provide helpful assistance in understanding the complex laws in multiple countries is an additional Colbeck cop-out.

Colbeck’s department doesn’t currently have the necessary information that small business importers are obligated to know. The departmental officers are not held responsible if they provide incorrect information. But if an importer honestly follows the department’s information, as scant as it is, this does not exempt an importer from criminal prosecution or conviction. Lack of knowledge of a law is no defence in a court prosecution. If Colbeck doesn’t know this, he should. If he does know this, his letter of response is deceiving spin.

I came across this sort of bureaucratic arrogance under the Rudd/Gillard Labor/Green alliance several times. One instance was where they introduced complex paid parental leave administrative requirements. One bureaucrat I discussed this with admitted that there would be large-scale non-compliance amongst small business people because of the flawed design. But the bureaucrat responded to me, ‘they’ll just have to do it!'

The consequence of Colbeck’s persistence with this impossible-to-comply-with reporting system will be a major trashing of small businesses in this sector. This will fit the bureaucratic intent.

Colbeck’s department clearly can’t, it seems, gather the information needed to ensure compliance. If they could, the law would put a legal onus on the department to supply such information. Common sense would say that if an importer has reported on the basis of the information supplied by the department, that that should be sufficient proof of an intent to comply. But common sense is not in Colbeck’s remit, it appears.

Rather, it fits bureaucratic design to force small business people out of the wood-importing business and have the industry consolidated into a small number of large players. This will be the direct consequence of Colbeck’s law. It will result in a massive elimination of competition in the sector. Colbeck’s bureaucrats will be happy because they’ll only need to monitor a few large conglomerate importers for compliance. Watch prices go up!

Am I being too harsh on Minister Colbeck? ‘No’ is the answer. He has ‘listened’ to the industry, he says, but is choosing to ignore practical realities. Maybe he has an incompetent department advising him? Maybe there’s a sleight-of-hand protection policy for the local timber industry? Who knows?

There’s no dispute that illegal logging must be stopped. However, in this instance, this combination of arrogance, ignorance and incompetence in system and legislative design has effectively been transferred from the Labor/Green alliance to the Coalition government.

[First published in Business Spectator, October 2014]

Phil commented on 02-Oct-2014 02:39 PM
In the Philippines and Thailand, where I spend a lot of my time, they call favouring those who have the power to influence legislation corruption! Many also understand that corruption is crippling their economic potential.

In Australia of course, we are lucky to live in a "corruption free" society with a positively thriving non-mining economy. Or to paraphrase a Malaysia observation "different economy, same clowns in charge".
MS commented on 03-Oct-2014 03:41 PM
This article omits to say that importers will have to ensure all land rights have been met, that all payments have been made, and also they have to assess overseas armed conflict in every country of supply. They will have to document all this and more, for every import, and keep these records for 5 years. If they don't do all this, even if there isn't any illegal timber present, they can be fined tens of thousands of dollars. And if by chance they do import something with illegal timber in it, and are judged as not having done their Due Diligence "properly", they can go to prison for 5 years, even if they had no idea that there was any illegal timber present. This law is worthy of North Korea, not Australia.

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