- 4.1 - Option 1: Status Quo
- 4.2 - Option 2: New Wine Act as proposed by the Wine Institute of New Zealand
- 4.3 - Option 3: Proposal based on other legislation
- 4.4 - Comparing Option 2 and Option 3
- 4.5 - Option 4: No specific legislation
4. - Options
This section presents four options for future regulation of the wine industry. Although the options are represented as stand alone entities, components can be mixed and matched to produce the most appropriate regulatory system. Submitters may like to consider this when making submissions.
4.1 - Option 1: Status Quo
This option represents the current system of wine regulation in New Zealand. Under this option all provisions that are currently in place would continue, i.e. winemakers would need to be licensed to make wine, compliance with standards, other than Food Regulations and export requirements, would be voluntary and compulsory levies would continue under the Wine Makers Levy Act.
Maintaining the current system has certain advantages, primarily that the system has credibility, it works and people are familiar with it. However, there are implications that need to be considered.
While the current system has served the industry adequately to date, it is likely to require regular modification to meet the demands of a changing industry, and a changing trading and market environment, as the gaps highlighted in section 1.3 (Reasons for review) will remain. Voluntary application of standards across the wine industry will continue, possibly creating free-rider problems and raising issues of inconsistency. Additionally, benefits provided to levy payers in other sectors under the Commodity Levies Act would not be available to grape wine makers.
4.2 - Option 2: New Wine Act as proposed by the Wine Institute of New Zealand
4.3 - Option 3: Proposal based on other legislation
4.4 - Comparing Option 2 and Option 3
Option 2 and Option 3 are similar, although there are some key differences. The areas of commonality are described below, followed by a description and implications of those areas where the options differ.
Common components of Option 2 and Option 3
Options 2 and 3 would both require new legislation. There would be provision to make standards (additional to those in the Food Regulations and the proposed joint Food Standards Code), where necessary to assure product integrity and safety. The Government could make standards after certain criteria were met, e.g. demonstrable need, economic efficiency, overseas market access requirements, and after consultation with the industry.
Standards would be generic and outcome based and may include:
- labelling requirements for variety, vintage and country of origin;
- application of HACCP; and
- record keeping requirements.
Providing for such standards would help ensure that wine making upholds product integrity through being true to label and by applying standards consistently across the wine industry.
Wine makers would be responsible for meeting standards and the Government would not prescribe how standards are to be met. Compliance with standards would be audited by independent third party agencies, which would compete to provide compliance audit services. However, how the two options propose to achieve a contestable compliance audit environment differs (see below). Non-compliance and unresolved issues between the third party agency and the wine maker would be reported to the enforcement body.
Both options would specifically legislate for an export certificate system where Government would be responsible for issuing export certificates. Provision would be made to accommodate overseas market access requirements to ensure that a credible export certificate system is provided.
The legislation would require the Wine Institute to show it had wine maker support before a compulsory levy payable to the Wine Institute to fund certain types of industry activities could be imposed. The legislation would also strengthen the accountability requirements of the Wine Institute to levy payers. However, how the two options propose to provide for a compulsory levy differs (see below). The existing funding arrangements of the Fruit Wine and Cider Makers Association would continue.
These two options limit Government intervention to those activities that are necessary to uphold product integrity and safety, and provide for export certificates and compulsory funding of some industry activities.
Areas of difference between Option 2 and Option 3
Compliance audits
Options 2 and 3 both propose that compliance with compulsory standards be audited by independent third party agencies. However, the mechanisms proposed to achieve this differ.
Option 2 proposes that the Government would perform checks on auditors to ensure consistent and equitable performance across the wine industry.
Option 3 provides a more comprehensive approach. It proposes that businesses develop programmes that show their wine making processes produce wine that complies with any compulsory standards. The Government would register those programmes once it was satisfied that the proposed programme would result in wine that complies with any compulsory standards. Auditors would then audit businesses to check compliance with their programme. Government would accredit the auditors to ensure only those people/agencies that have the appropriate skills and competencies can perform audits. This would give confidence in the validity of the audit report.
Taste testing
Option 2 proposes that, in addition to meeting compulsory standards and overseas market access requirements, wine for export must undergo a mandatory taste test, which would be cost recovered. Option 3 does not include a compulsory taste test requirement.
Responsibility for enforcement
Option 2 proposes that an enforcement body, nominally called the `Wine Standards Tribunal' be established to undertake enforcement activities. It would be a statutory body consisting of three members nominated by the Wine Institute and appointed by the Minister. The Wine Standards Tribunal would be involved in developing any compulsory standards for the wine industry.
The Wine Standards Tribunal would also issue a licence to wine makers to make wine for sale. The removal of this licence, and therefore the legal right to make wine for sale, would be the ultimate sanction for non-compliance with any compulsory standards. Other proposed enforcement options include warning letters, compulsory product recall, and expulsion from Wine Institute organised events. Appeals would be by judicial review through the Courts.
If a non-Government enforcement body were to be established, it would need to be subject to appropriate safeguards in order to protect the integrity of the system. It is likely that this would require complex accountability arrangements and may be costly to run. Additionally, the nomination of Tribunal members, as currently proposed, potentially raises conflict of interest issues that would need to be examined.
In contrast, Option 3 proposes that the Government undertake all enforcement activities. The range and availability of enforcement options would need to be discussed during policy development, but would be comparable to options available to other similar sectors and would be likely to include warnings, fines, suspension/removal of right to trade, and prosecutions. Like Option 2, appeals under Option 3 would be by judicial review through the Courts.
Funding of industry activities
Option 2 proposes that a new Wine Act would allow the imposition of a compulsory levy on grape wine to be paid to the Wine Institute following demonstration of wine maker's support. The new Wine Act would also impose certain accountability provisions on the Wine Institute for any compulsory levy money that the Wine Institute received under that Act.
Option 3 proposes that the Wine Institute be able to obtain a compulsory levy on grape wine under the Commodity Levies Act 1990. The Commodity Levies Act would have to be amended to include grape wine in the definition of `commodity' to enable this to happen. Before the Wine Institute could collect a levy, it would have to hold a referendum that demonstrated majority support for the compulsory levy. If the Wine Institute received any levy money under the Commodity Levies Act it would be required to comply with its accountability provisions, including accounting separately for levy money.
4.5 - Option 4: No specific legislation
This option would involve repealing all wine specific legislation (i.e. the Wine Makers Act 1981, the Wine Makers Regulations 1984, and the Wine Makers Levy Act 1976). While wine makers would still need to comply with the Food Act and associated Regulations and the proposed joint Food Standards Code, there would be no provision to make any additional compulsory standards (some current labelling requirements will cease when joint Food Standards Code in force). This would mean that industry-developed standards would have no legal status, and compliance would be voluntary. It is likely that these standards would be inconsistently applied across the wine industry.
The Government would only be able to provide an administrative export certification system, although the ability to withhold an export certificate would be an effective sanction.
All funding of both the grape and non-grape wine industries would be on a voluntary basis. This would encourage industry bodies to target their expenditure appropriately. However, some industry good activities might be under-provided because businesses that choose not to fund some activities could free ride on others' investments, and those who choose to invest may be unable to fully benefit from their investment.
Contact for Enquiries
Rural Affairs Coordinator
Sector Performance Policy
MAF Policy
Ministry of Agriculture and Forestry
PO Box 2526
Wellington
NEW ZEALAND
Phone: +64 4 894 0675
Fax: +64 4 4 894 0745
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