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 The forest growers’ levy and how it is working

Geoff Thompson, New Zealand Tree Grower May 2014.

For those of us harvesting since the beginning of January there is a new line item in the reporting invoice. A levy of 27 cents a tonne is deducted from forest owners and paid to the new Forest Growers Levy Trust. This is to be allocated by the board for various industry projects.

The introduction of the levy is the culmination of a lengthy process promoted by the Forest Owners Association and the NZFFA to collect funds to share the costs of providing benefits to the entire plantation forest industry.The levy rate is modest at 27 cents a tonne in its first year, with a right for the board to increase the rate to 30 cents at some time during the six-year term of the levy order.
Collection of the levy from forest growers is under the statutory authority of the Commodity Levies (Harvested Wood Material) Order 2013.The only exception from payment is material collected for domestic firewood and Christmas trees.The board has powers to enforce payment.

The referendum and appointments

You may recall that in 2013 an interim board organised a nationwide referendum among all growers.The result was support for the proposal with ‘yes’ votes being 83.6 per cent of those who voted.The interim board then undertook another voting process to secure membership of the board by polling in the two classes of ownership, the large-scale forest owners and the small-scale owners − the latter are those with under 1,000 hectares of qualifying forest.

The result was the appointment of four members representing the large owners and they are Paul Nicholls from Rayonier, Bill McCallum from Hancocks, Phil Taylor from Blakely Pacific and David Balfour from Timberlands.The two positions for small-scale owners are filled by the NZFFA chair Ian Jackson, and Steve Wilton of Forest Enterprises.Those six appointees then elected myself as the independent member and chair of the board.Appointments are for two-year terms.At an early meeting Steve Wilton was elected deputy chair.

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Secretariat

The board has helpful continuity of membership from the interim board as not much time has been available to come up to speed with the implementation of the levy.A full work programme has been dealt with in the first months of this year.A crucial decision has been the engagement of the Forestry Owners Association and NZFFA as the secretariat for the Levy Trust.The establishment of a parallel secretariat would involve substantial duplication and overlap, so continuation with Forestry Owners Association personnel, supplemented by NZFFA support, is preferred.

A legal management agreement providing for the two organisations, working out of the Wood Centre in Wellington, has been completed and this spells out the tasks and the fee provided.This is subject to regular reviews as experience dictates.This secretariat works with the independent contractor Integral for collecting the levy data and raising invoices.This data is kept confidential to the contractor. Neither the secretariat nor the board members have access to individual harvesting data.The arrangement includes a research manager, Russell Dale based in Rotorua, who has the central task of considering research proposals and making recommendations to the board for final decisions.

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Who benefits

The existing programmes managed by the Forest Owners Association and involving committees of the Forest Owners Association and NZFFA members continue with levy funding. Currently around half of levy funds are allocated to research projects for the benefit of forest growers. Inevitably demand exceeds supply and some projects are likely to be supported by the industry bodies from voluntary levies.

As expected there has been a small level of objection to the collection from those who are philosophically opposed to payment administration imposed on their companies. However, the levy order provides statutory authority for collecting a payment.The board will take a tough line on non-compliers because the funds are for the benefit of the forest growing industry and will support important changes which occur across the industry, especially the increasing percentage which small-scale harvesting will contribute over the next 10 to 12 years.

There are discussions about who should benefit from the levy collection – the actual and potential payers or the entire industry.The board supports the latter view and regards the collection on harvest as the fairest system that could be applied.The entire growing industry from genetic research and planting, to harvesting and marketing have to be accommodated.

The levy is fortunate to have been launched at a time of strong log prices. Budgeting has been conservative, considering the 2013 harvesting results.With the early 1990s planting coming on stream it is hoped that additional funds will accumulate to allow more research projects to be considered.The budget for the 2014 calendar year is based on an income of $7 million.

The board is keen to develop an effective communication programme with growers to explain what is being done and expected. However, there is currently no way that direct communication with the 14,800 or so forest owners can be achieved but work is being carried out to remedy this. In the meantime, a rebranded website is in place and regularly updated. Consultation on the 2015 budget and programme will happen later in the year.

Geoff Thompson is a commercial lawyer at Duncan Cotterill lawyers in Wellington, with longstanding interests in plantation forestry. He is chair of the Forest Growers Levy Trust Inc.

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