What’s happening at KNZ
Producer Vote 2021 – Chinese Grown Gold3 Kiwifruit
Zespri are holding a Producer Vote under Regulation 11 of the Kiwifruit Export Regulations 1999 (Regulations) asking kiwifruit growers to vote on an activity that is outside Zespri’s core business (as defined in the Regulations).
The proposed activity is a one season commercial trial where Zespri will purchase unauthorised Gold3 grown in China and market it under the Zespri brand.
The voting will be open from 31 May to 25 June 2021.
KNZ’s role is to monitor Zespri’s compliance with the Regulations. To ensure kiwifruit growers understand the Regulations relating to diversified activities, and to provide some background relating to this producer vote, KNZ have produced a brief report which is available below.
You will also find links to Zespri’s information brochures that will be emailed and posted to all kiwifruit growers.
4 May, 2021
KNZ’s assessment of Zespri’s Prior Notice 28 October 2020
Kiwifruit New Zealand monitors and enforces Zespri’s compliance with the mitigation measures in the Kiwifruit Export Regulations 1999. The Regulations prohibit Zespri from carrying out any activities that are not its core business, unless those activities ‘support core business’, as defined in regulation 10A, or are approved by a producer vote under regulation 11.
KNZ is required by regulation 33 to monitor and enforce Zespri’s compliance with regulations 10A and 11. The intent of these provisions is to establish the appropriate level of control by producers over Zespri’s engagement in activities that are not ‘core business’. It is important to note that KNZ’s role is not to itself make a decision about the desirability of an activity, or manage the risks undertaken by Zespri, or decide whether those risks are appropriate or whether the benefits of an activity outweigh the risks involved. Rather, KNZ’s role is to ensure that producer oversight is engaged where it ought to be.
On 28 October 2020 Zespri gave notice to KNZ under regulation 10A that it proposed to carry out an activity that was not core business, being a three- year trial of a commercial procurement model for Chinese-grown Gold3 kiwifruit, involving up to 1.95 million trays. Zespri’s view was that the proposed activity meets the definition of ‘supporting core business’, being that it is likely to enhance the performance of Zespri’s core business, and poses no more than a low risk (if any) to the interests of New Zealand producers.
The information initially provided by Zespri in its notification was not sufficient for KNZ to form a view on whether the notified activity ‘supports core business’, and KNZ engaged extensively with Zespri through November and December to obtain further and more detailed information to inform its assessment. The final tranche of information was received on 23 December 2020.
KNZ also consulted with NZKGI specifically on the identification of the potential risks to the interests of producers posed by the notified activity. NZKGI provided its input on 11 December 2020.
KNZ engaged Sapere Research Group to undertake a detailed analysis and provide advice on whether the notified activity met the definition of ‘supports core business’. Zespri facilitated engagement between Sapere and its own expert advisors and staff which has been a very useful process. KNZ also engaged a former New Zealand Ambassador to China, to work with Sapere. Sapere’s final report to the KNZ Board was received on 6 January 2021.
The KNZ Board met on 8 January 2021. After careful consideration of all the information a preliminary determination was made that the notified activity met the first leg of the Regulation 10A test, and was likely to enhance performance of Zespri’s core business. However, after considering the risks and the mitigation measures to reduce the risk, KNZ came to the conclusion that there were three areas of risk that posed more than a low risk to the interests of producers.
Therefore, KNZ’s preliminary decision was that the notified activity did not meet the definition of ‘supports core business’ under regulation 10A. If Zespri wished to proceed with the activity detailed in the Prior Notice it would need to hold a producer vote as detailed in Regulation 11.
A Draft Decision report setting out the reasons for this view was conveyed to Zespri for its comment on 11 January 2021.
Zespri did not provide a response to the Draft Decision. Instead, on 15 January 2021 Zespri wrote to KNZ stating that it wished to ‘withdraw’ its Prior Notice for a 3-year trial and would be providing a new Prior Notice in due course that would take into account KNZ’s position and risk assessment outlined in the Draft decision.
Notwithstanding that Zespri has taken that step, KNZ nevertheless considers that it is important for the transparent operation of the regulatory regime that producers and the public are informed of the process followed by KNZ, and its preliminary view that the notified activity did not meet the test under Regulation 10A.
If a future Prior Notice covers similar activities in China, as indicated by Zespri, then KNZ’s future assessment will draw on the work already completed.
25 January, 2021
Unauthorised SunGold Plantings in China
Zespri has advised growers and the public that it is developing a plan to address the issue of its PVR “Gold3” being grown illegally in China.
The Kiwifruit Export Regulations 1999 have a clear definition of Zespri’s “core business”. The buying and selling of kiwifruit grown in China is not covered by that definition and therefore if Zespri wish to commercialise (i.e. purchase and sell) this fruit, then it needs to follow the steps set out in Regulation 10A – prior notice rule.
10A ZGL must inform Board before carrying out activities that support core business
(1) ZGL must inform the Board before carrying out any activities that are not the core business but do support the core business.
(2) For the purposes of this regulation and regulation 11, an activity supports the core business if—
(a) the activity is likely to enhance the performance of the core business;
(b) the activity poses no more than a low risk (if any) to the interests of producers.
(3) A consideration of the nature of any risk under subclause (2)(b) must—
(a) first take into account any measures that ZGL has put in place to mitigate the effects of any risk event; and
(b) then consider—
i. the likelihood of a risk event occurring; and
ii. the impact on the interests of producers if a risk event occurred.
(4) In subclause (3), risk event means an event identified as a risk to the interests of producers that is posed by the activity.
(5) In this regulation and regulation 11,—
activity includes, without limitation, the ownership or operation of an asset
risk means foreseeable risk
Zespri has now given KNZ a “Prior Notice” under Reg 10A detailing a commercial trial it wishes to undertake in China during 2021. KNZ is undertaking an independent assessment of this activity and will determine if it meets the definition of “supports the core business” as detailed in Reg 10A (2).
If KNZ considers the activities proposed in the notice do support Zespri’s core business, then Zespri can carry out those activities without further regulatory steps.
If KNZ considers that the activities proposed in the notice do not support Zespri’s core business, then Zespri cannot carry out those activities, unless it has been successful in a producer vote as outlined in Regulation 11.
KNZ will complete its assessment as soon as practicable.
New Appointment to the KNZ Board
One of the changes made in the 2017 amendments to the Regulations was that two members of the KNZ Board are appointed by the Minister of Agriculture.
The first appointments made in 2017 were Neville Harris and Tim Main. Their first three-year term was completed in 2020 and the Minister has now made appointments for the next three-year term.
Neville Harris has been re-appointed as a director of KNZ, and the Board welcomes Sarah Paterson to her first term as a director.
Sarah has a strong background in international trade and governance and her profile is available here on our website.
Kristy McDonald ONZM QC
KNZ Board – Director Election 2020
When nominations for the election of a Director for Kiwifruit New Zealand closed on Monday, August 10th 2020, one nomination had been received, from the incumbent Andrew Fenton.
As there is only one nomination, an election will not be required and Andrew Fenton is re-elected unopposed.
Andrew’s final three year term on the KNZ Board will start on 1 October 2020.
I congratulate Andrew and look forward to his continued contribution to the KNZ Board.
Kristy McDonald ONZM QC
Collaborative Marketing Results 2019-20
Regulation 15 of the Kiwifruit Export Regulations 1999 requires KNZ, to disclose publicly within three months after the end of each season;
- the identity of each CM approval holder
- the volume marketed by each approval holder
- financial information to enable an assessment to be made, if the net returns for each arrangement were greater than if the arrangement had not been approved.
This information is contained in a report located here:
2019-20 Financial Statements and Auditor Report
Regulation 40 of the Kiwifruit Export Regulations 1999, requires KNZ to prepare financial statements that comply with generally accepted accounting practice, have them audited by a qualified auditor, signed by the Board and disclose publicly, within three months after the end of the financial year.
KNZ has complied with this regulation and the statements can be found here:
Statement of Intent and Funding Statement
KNZ has completed its first Statement of Intent (2017-2020) and met all performance measures on time.
Our next Statement of Intent 2020-2023 has now been finalised in accordance with Regulation 33A and can be found here.
Also under Regulation 39(4) KNZ must publicly disclose how the funding of KNZ has been achieved under Regulation 39.
This statement can be found here.
2019 Discrimination Complaint (Zespri grower number process)
In March 2019, KNZ received a complaint from a grower alleging discrimination by Zespri, in its process of issuing grower numbers, prior to the kiwifruit season commencing.
A KNZ complaints committee was formed and conducted an investigation. The final decision is attached.