THE EXPORT GRAIN CHAIN

Discussion Paper Prepared for The South Australian Freight Council Inc.

Source: D Bourne Jones: Mal_de_Mer

Source: Flinders Ports website

10th December 2008

By Ian Lovell

Introduction
A Grain Industry Forum hosted jointly by Shipping Australia Limited and the South Australian Freight Council was held on Monday the 24th of November 2008. Background papers prepared for the Forum can be found at: http://www.safreightcouncil.com.au/ba.asp . This paper is based on participant input at the Forum aimed at mapping the export grain chain and associated issues. The objective of the Forum is to identify grain export supply chain impediments in order to formulate an improvement strategy. This discussion paper forms an integral part of the process.
This report has been prepared based on information sourced from or supplied by third parties. Accordingly, Ian Lovell accepts no liability resulting from the accuracy, interpretation, analysis or use of information provided in this report. It is important to understand that much of the information gathered is anecdotal or based on information provided by third parties and as such has not been corroborated.

The Export Grain Chain

The export Grain Chain is complex and incorporates a large number of players [over 30] involved in commercial, operational and regulatory functions. Before bulk wheat and in SA/Victoria barley export market de-regulation the export of grain was controlled by the single desk marketers: AWB for wheat and ABB for Barley. A limited number of specialised grain types such as Durum wheat were exported by other companies but in terms of total exports this was small. Both AWB and ABB operated vertically integrated operations spanning the supply chain from buying, storing, contracting transport and loading. Since grain market de-regulation in 2007-2008 abolishing the single desk the number of participants, particularly buyers and sellers have increased. Concurrently there is an increase in smaller volume shipments particularly of containerised grain. In the last year containerised wheat exports have doubled and volumes through the Port of Adelaide are estimated at 1,500 twenty foot equivalent units (teu) per month. For transport operators and service providers the number of firms they deal with has increased as has the complexity of coordinating service provision. In addition drought conditions in Australia are forcing stronger competition for grain between the domestic and export feed and food market. High employment levels are also affecting the availability of adequately skilled labour in the grain supply chain. 2

The Export Grain Chain Generalised

Grain export ports in South Australia include: Port Adelaide, Port Lincoln, Port Pirie, Port Giles, Thevenard, Wallaroo and Ardrossan. Due to draught restrictions some bulk grain vessels load in one port and top-off in a second port. Port Adelaide has key bulk loading facilities at the Inner and Outer Harbor. Containers are loaded at the Outer Harbor DP World container terminal. Loading rates differ from Port to Port. Key parties involved in the grain chain include: Grain Forecasters [e.g. PIRSA] Growers/Producers Buyers [e.g. Overseas or Australian companies] Grain Exporters [e.g. Overseas or Australian companies] Banks Insurance companies [including EFIC] Ship Owner Charterer Shipping Agent Bulk Handlers/Loaders [e.g. ABB Ltd] Port Operators [e.g. Flinders Ports, ABB Ltd] Pilots [e.g. Flinders Ports, ABB Ltd] Stevedores [e.g. Patricks] Towage Operators [e.g. Svitzer, Port Lincoln Tug Co] Road Operators Rail Operators [e.g. GWA ] Rail Track Operators [e.g. ARTC] Depot operator Providores Bunker Services Waste Disposal Operators Fumigators Ship Cleaners Marine Surveyors Labour Providers Regulators Internationally: IMO, AMSA, SOLAS, ISO 14001, MARPOL, UNCITRAL and import country regulators In Australia: Australian Customs Service [ACS], Australian Quarantine Inspection Service, Environmental Protection Agency(s) [EPA], Department of Immigration and Citizenship [DIaC], Department of Infrastructure, Transport Regional Development & Local Government [DI], Department for Transport, Energy and Infrastructure [DTEI], Department of Health & Ageing Generic regulators at a Federal & State level for functions such as Occupational Health Welfare & Safety etc A number of firms fulfil more than one of these functions. Set out in the following diagram is a generalised map of the grain supply chain.

Grain Chain Map

Grain Buyers Grain Sellers Charter, Vessel & Logistics Arrangements

Bulk Handler Port Operations

Finance, banking, insurance Grain Grower Unload at export silo AQIS registered & approved establishment

Import Permit
Grain Forecast

Vessel Schedule & Stowage

Regulatory Authorities == Ships Agent

DI: Transport Security IMO, AMSA, SOLAS, ACS, AQIS, EPA, DIAC, DoHA, DTEI, ISO 14001, MARPOL, UNCITRAL

Approvals

Harvest & Transport

Unload & store on farm or at Bulk Handler Silo Ships Agent

Security, Berth Allocation Pilotage, Towage, Mooring, Marine Survey, Stevedoring Labour, Providores, Bunkers, Waste, Survey, Cleaning, Fumigation

Load for transport to export bulk handler Vessel Arrival & Berthing

Sea, rail or road to export port silo

Marine Survey, ACS / AQIS Inspection Approvals

Make up export consignment: Segregation & Blending Berth Vessel at destination port

Transport to port bulk loader

Load to ship & Vessel Departure

Ocean Voyage with or without 2nd port loading

Customs, Health Security, Inspections, approvals Port Operations

Unload grain to store

Load grain to transport

Sea, rail or road linehaul to destination

Unload grain delivery to customer (s)

Purchase by consumer(s)

Key Documents/Approvals Commercial Export Arrangements - Buyer with Seller Financial arrangements / Letter of Credit / Insurance Shipment specifications / Ship Charter / Delivery Date Import Permit Charter Party Arrangements Ships Agent at export port Seller buys grain from grower
Cash Forward Contract Firm Grain Offer Pool

Grower / Seller organises transport to accumulation site / export port Notifies: Seller, Port Operator/ Port services tugs, pilotage, mooring labour,
berth allocations, harbour services, stevedore, bulk handler, Transport Security, Marine Surveyor, AMSA, AQIS, ACS,

Ship prior to port entry Vessel Load Port, Survey, AQIS Quarantine Pre-Arrival Report (QPAR) 96 to 12 hours prior to arrival, Stow Plan Instructions & AMSA Stability Calculations, Ballast Water Plan, ACS arrival forms, De-Rat & Sanitation Certificates, Arrangements
Gypsy Moth Certificate if reqd, ISSC, ships security level, last 10 ports of call, power, water, waste, bunkers, stores, SOLAS, ETA, Vessel Entry Form ACS: Export

Exporter

Declaration
Request to Load Ship Stores, Departure Report AQIS Import Permit Survey

ACS: Export Clearance No. Authority to Deal Certificate of Clearance AQIS Export Permit [WEA bulk wheat] Phytosanitary Certificate

Fumigation Certificate

Arrival at Berth Ready to Load Declaration Marine Survey AQIS Pratique Inspection AQIS Ship Inspection Incinerator Inspection ACS/DIAC/Security Load Vessel / Lodge manifest AQIS inspection of grain & loading equipment Vessel Departure

Bulk Handler Approved Establishment

Vessel Clearance

Containerised Grain Exports Containerised grain exports differ from bulk grain exports in a number of ways. Essentially the grain export process involves grain being packed into a container in bulk or in bags. This takes place at a registered and AQIS approved facility. Once the container and grain is inspected by AQIS or under an AQIS approved arrangement the container is sealed and enters the regular container export supply chain. The empty container can be inspected at the container depot and sealed for transport to the packing facility. In contrast with bulk ship vessel grain exports the containership does not need to be grain inspected. An additional point of difference is that most containerships run to a fixed day sailing schedule and generally face fewer vessel delays compared to bulk charter vessels. Containerised grain exports can be packed off-port in regional areas with the containers being delivered from the container depot to the packing location by road and/or rail. The physical inspection may occur in the regional packing facility or if remote on arrival at a metropolitan location. AQIS requires different grade containers to be used for export bulk and bagged grain. Shipping Australia Ltd has produced the following guide. CONTAINER CLEANLINESS STANDARDS
Grade FOOD CONTAINER (FC) (Including DPI Grade) Criteria No Taint No Flaking Paint No Interior Transferable Stains Clean & Dry Floor No Cargo Residue No Infestation No Obnoxious Odours No Flaking Paint No Transferable Internal Rust No Transferable Floor Stains Clean & Dry Floor No Cargo Residue No Infestation No Cargo Residue Dry Floor Normal Wear & Tear Acceptable No Cargo Residue Cargo Worthy Suitable for carriage of nonsensitive Cargo. Includes containers prepared with linings & absorbent material. Commodities Dried Fruit Flour Grain/Peas/Cereals Rice

CLEAN CONTAINER (CC)

GENERAL CARGO (GC)

MULTI PURPOSE CONTAINER (MC)

Milk Powder Canned Fruit Personnel Effects Pet Food Bulk Food Commodities (with fitted liner) General Cargo Cotton Steel Machinery Tyres Hides Bone Meal Bagged Chemicals Scrap

Source: http://www.shippingaustralia.com.au/Portals/57ad7180-c5e7-49f5-b282-c6475cdb7ee7/061998FactSheet.pdf

In the case of grain AQIS rejects the container if it finds live pests in residues or on the structure of the container; live rodents or evidence of rodents harbouring behind linings; residue infestible by pests; structural damage that pests could enter after loading; non-infestible materials, odour, water, rodent carcasses or droppings. Documentation The following Australian Customs Service picture depicts export of containerised grain from a registered approved depot to the Container Terminal Operator. A guide is on the ACS website.

Source: ACS website

In addition to ACS AQIS documentation through EX-Doc is shown below.

AQIS EX-Doc

EXPORTER LODGES AN RFP WITH REQUEST FOR AN EDN AND REQUESTS THE RFP TO BE FORWARDED TO THE AA ESTABLISHMENT AT FINL STATUS

AA ESTABLISHMENT

EXDOC VALIDATES THE MESSAGE, OBTAINS EDN AND RETURNS THE RFP NUMBER, STATUS AND EDN TO THE EXPORTER OR AA ESTABLISHMENT

EDI USER AMENDS RFP WITH FURTHER DETAILS

IF A STATUS OF INIT

IF A STATUS OF FINL

EXDOC VALIDATES RFP AND ASSIGNS A STATUS OF EITHER INIT OR FINL

AA ESTABLISHMENT AMENDS & AUTHORISES RFP AND FORWARDS THE RFP TO THE EXPORTER AT HCRD STATUS. EXDOC ASSIGNS A STATUS OF EITHER INSP OR HCRD OR COMP

AA ESTABLISHMENT MUST AMEND RFP IF STATUS IS INSP

EXPORTER

EXDOC WILL ASSIGN A STATUS OF EITHER HCRD OR COMP

AQIS OFFICER PERFORMS FINAL SECURITY CHECK ON RFP WITH HCRD STATUS. EXDOC ASSIGNS A STATUS OF COMP

EXDOC GENERATES A CERTIFICATE WHEN RFP HAS A STATUS OF COMP

Source: AQIS http://www.daffa.gov.au/aqis/export/plants-grains-hort/exdoc/manual

Exporters through Ex-Doc notify AQIS of a potential export of product using the request for permit (RFP) suite of messages. An Export Permit Number (EPN) is required for all prescribed grain & horticulture. Grains: whole seeds of wheat oats barley canola dried field peas sorghum soybeans mung beans Grains: whole and split seeds of vetch lentils chickpeas lupins faba beans Grains: plant products hay and straw of cereal origin The receipt of an RFP [request for permit] initiates a regime of validation activities to ensure that the product complies with Australian and NPPO country standards. The final step in the approval process for RFPs is the allocation of an Export Permit Number (EPN) where applicable and production of the appropriate certificate by AQIS. RFP includes: Grain & Horticulture export registered/listed establishment, where the product is to be inspected quantity, description and identification marks of product description of how the product is packed, and container number(s) if applicable exporter details name of vessel, voyage number (or alternatively flight details), date of departure consignee, country of destination, port of discharge and place of final destination the type of Certificates and endorsements required, if applicable.

Phytosanitary Certificate Where a Phytosanitary Certificate is required AQIS procedures are clearly spelt out in Phytosanitary Certificate Completion (Exports) Work Instruction, at www.aqis.gov.au

Below are examples of Phytosanitary Certificates for Grain for Consumption Methyl Bromide Fumigated Grain for Consumption Phosphine Fumigated Bulk Grain
Phytosanitary Certificate Grain for Consumption Methyl Bromide Fumigated

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Phytosanitary Certificate Grain for Consumption Phosphine Fumigated

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Phytosanitary Certificate Bulk Grain

The Phytosanitary Certificate is the official means by which the Australian Government certifies to the National Plant Protection Organisation [NPPO] of the importing country that the product meets that countrys import standards and regulations. The following diagram represents a simplified export grain container chain. 12

Containerised Bulk Grain Chain Simplified Grain Buyer Grain Producer

Finance, Banking, Insurance

Exporter Booking request to Shipping Line / Agent Depot Inspection Declaration Pick up of empty container from depot CTO Container receival / load to stack Shipping line quote & booking confirmed Container Inspection Container Release Port Operations & Services Forwarding Instruction to Line / Agent from exporter

Grain Seller

Transport to packing place Grain Inspection Transport to Container Terminal ACS / AQIS / Line / Agent Approvals & docs

Instruction to Container depot

Bill of Lading Cut

Pack Container Seal Container

Vessel Arrival & loading

PRA & Book Time Slot to Depot & Container Terminal

Vessel Departure Vessel & Cargo Clearance

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ISSUES RAISED AT THE FORUM

ABB Grain Storage & Bulk Handling Facilities at Outer Harbor. Source: ABB Grain Ltd

A range of issues were raised at the Grain Forum and some solutions suggested at and after the Forum. This section summarises them. Market Information Information on the production of grain and market demand for it is dispersed across various sources / organisations Solution: Consider a linked web portal to make such information more accessible Grain Market Deregulation The deregulation of export grain has a number of impacts apart from increased competition. There is an increase in containerised exports as smaller volume/specialised traders and sellers enter the market. This is exacerbating a shortage of Food Quality export containers. Solution: AQIS approval to use liners in lower grade containers as a functional barrier between the cargo and the container As the market becomes increasingly dispersed in terms of grain exporters the transport task is becoming harder to manage, particularly in terms of avoiding berth clashes, schedule slippage, provision of tugs and use of rail. Solution: Make better use of information technology and shared information portals Produce a Grain Export Information & Procedures Pack for all parties in the supply chain accessible on the web

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Drought Drought conditions are increasing competition between the domestic and export markets for feed and food grain Solution: Greater efforts needed to drought proof farms / business diversification Shorter Lead Times/Delays/Inspections/In-Transit Fumigation Order lead times are getting shorter and can be between 5-21 days. This puts pressure on the whole supply chain. This is exacerbated by grain being shipped year round not just in peak season. The impact is that shipments can be delayed increasing costs. The new grain loading facility at the Outer Harbor has some 60,000 tonnes storage capacity and grain sourced from the Inner Harbor silos relies on a continuous/reliable transport chain. This increases the risk of ship delays in the event that: Grain is found to be unfit for export Loading equipment is not cleared as suitable for export grain The ship is not cleared as ready to load With the advent of Panamax ships the ready to load failure rate is significantly higher than smaller vessels Solutions: Use ships that have demonstrated procedures in place and appropriate levels of equipment to pass inspection Develop International Standards Tighten supply chain coordination and use sound practice to ensure rejections are minimised Have grain inspections carried out earlier in the chain e.g. at Inner Harbor Inspect ships at anchorage by the use of remote inspection technology Allow in-transit fumigation for minor infestation of grain where permitted by importing country examine Export Control Act 24/7 Operations Grain Ports, associated facilities and transport corridors need to be able to operate 24/7. Solution: 24/7 capability needs to be safeguarded by all three tiers of Government Availability of Services The availability of Tugs and AQIS inspectors to meet the grain task is an issue. The issue of availability of trained labour was also raised Solutions: Better coordinate vessel arrivals by early advice of berth and tug availability Increase AQIS staff levels and/or productivity Increase pool of trained inspectors, particularly in regional areas

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e.g. Use same staff to conduct pratique as ship hold inspections e.g. Use Marine Surveyor or third party to conduct inspection using remote technology uplinked back to AQIS office Increase training effort to meet labour shortages

EPA Requirements In the case of Ballast Water Australia has a dual system, one from Victoria and one for other jurisdictions. Emission controls being developed are onerous. Solution: Raise need for national consistency with Government Consistency in Regulation and Regulatory Criteria Many of the regulations applied to grain exports are to an extent subjective and this can lead to inconsistency in their application. AQIS inspections are a case in point that AQIS has sought to address. Solution: Greater transparency in criteria used by regulators shared with industry may assist as may chain participant training courses including web based training. Safety on the Waterfront Safety on the waterfront and at sea remains an ongoing issue that requires continual improvement without imposing a cost burden. Solution: Better national & international safety information sharing.

Summary
Issues raised at the Forum include: Market Forecast Information Better Use of the Web Consistent Grain Export Procedures Grain Information Pack Managing the Transport Task Sharing Of Information Shortage of Food Quality Grain Export Containers Use of Liners Drought - Diversification Shorter Lead Times: Supply Chain Coordination Ship Inspection Failures International Ship Standards Grain Inspections at Outer Harbor Risk of failure Ship Delays Berth Availability Inspection Of Ships At Anchorage Remote Inspection Technology In Transit Fumigation for minor infestation where permitted by import country 24/7 Operations Availability of Services EPA Requirements - Consistency Consistency in Regulation and Regulatory Criteria Safety on the Waterfront

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The grain chain is not only complex but is becoming time compressed as a result of larger ships, relatively smaller holding load capacity at ports and market demand. In looking at the regulatory arrangements there appears to be significant opportunity to streamline both functions and processes. In terms of industry there also appears to be scope for improvement through better sharing of information, albeit consistent with ACCC requirements. It is suggested that this paper and the minutes from the forum be widely circulated to grain chain participants, forum attendees and key Government agencies including: Australian Transport Council of Ministers [ATC] National Transport Commission AQIS & Grain Industry Consultative Committee DAFF ACS Department of Infrastructure, Transport, Regional Development and Local Government DFAT Austrade DTEI BTE / ABARE

In addition to circulating this information a follow on Grain Chain Solutions Forum is suggested to crystallise key issues and recommend tangible solutions at both a policy and operational level.

Comments on this discussion paper should be sent to: Neil Murphy General Manager South Australian Freight Council Inc 296 St Vincent St, Port Adelaide SA 5015 Tel: (08) 8447 0688, Mob: 0427 089 240 Fax: (08) 8447 0606 Email: murphy.neil@flindersports.com.au

Ian Lovell
Ian Lovell Consultant Tel 0400 708 182 ian.lovell@bigpond.com

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AQIS Special Terms / Glossary

Term

Meaning

AA ABS ACS AQIS AHECC AFFA

Approved Agreement (with AQIS) Australian Bureau of Statistics Australian Customs Service Australian Quarantine and Inspection Service The Australian Harmonised Export Commodity Classification assigned by the Australian Customs Service Department of Agriculture, Forestry and Fisheries - Australia, was previously known as the Department of Primary Industries and Energy (DPIE). Electronic Data Interchange UN Standard EDI for Administration, Commerce and Transport An exporter or agent who has Third Party Interface Software and is registered for a particular commodity Export Declaration Number obtained from ACS Electronic Documentation Section of AQIS Central Office AQIS Export Permit Number ( PIG / PIH number) AQIS Establishment Register System Export documentation software Customs Exports integration system software. EXDOC interfaces with it to obtain an EDN AQIS Local Area Network running EXDOC programs National Plant Protection Organisation Fresh fruit, Fresh vegetables, Dried fruit, Prescribed grain, Plants or Plant products for which a Phytosanitary certificate or any other official certificate is required by an importing country authority AQIS Remote Area Site running EXDOC programs Request for Permit to Export Prescribed Goods (EXDOC EDI message) (old EX28/EX222 document) AQIS Regional Office The United Nations EDIFACT registered global electronic certificate covering animal, plant and fish products Software developed by 3rd party software developers as the interface between the exporter and EXDOC United Nations Value Added Network (an alternative name for Carrier) AQIS Wide Area Network running EXDOC programs

EDI EDIFACT EDI User EDN EDS EPN ER EXDOC ICS LAN NPPO Prescribed Goods

RAS RFP RO SANCRT Third Party Interface Software UN VAN WAN

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