❓ A parliamentary question probes Gunns Ltd's timber supply obligations to local manufacturers, the effectiveness of value-adding requirements, and potential subsidies to millers, with the Minister responding by affirming Gunns' contractual commitments and denying any price-setting mechanisms or subsidies.
AnsweredQoN 806Legislative Council
QuestionView source ↗
(1) Does Gunns Ltd have a binding obligation to make available the timber to be supplied to the relevant industry segments and in particular local manufacturers, in accordance with the requirements of schedule 5 of its log supply contract with the Forest Products Commission, at reasonable prices and relevant sizes and thus in the form of a viable supply to the manufacturers? (2) If not, what is the intended purpose of the schedule 5 requirements? (3) Did the minister or the Forest Products Commission obtain any legal advice on the effectiveness for local manufacturers of the value-adding requirements contained in the schedules, and in schedule 5 in particular, to the timber supply contract with Gunns - (a) prior to drawing up the schedules; or (b) subsequent to drawing up the schedules? (4) Have briefings been given to Gunns Ltd regarding meeting these value-adding requirements; if yes, by whom and on what date; if not, why not? (5) Why are royalties capped or increased in controlled increments for 10 years, protecting millers from market forces, but timber resources for furniture manufactures and the fine woodcraft industry are open to market competition? (6) Is this a form of subsidy to Gunns and other millers; if yes, why is such a subsidy seen as necessary; if not a subsidy, why is it not? Hon KIM CHANCE
AnswerView source ↗
I thank the member for some notice of this question. (1) Like all Forest Products Commission customers with contracts of sale arising from request for proposal 2649, Gunns Ltd has a binding contractual commitment to provide timber to local value-adding manufacturers in accordance with schedule 5 of its contract. I refer the honourable member to my answer to question on notice 1793 of 5 May 2004 regarding the extent of that commitment. (2) Not applicable. (3)(a) and (b) Yes. The Forest Products Commission took commercial legal advice related to all contracts arising from the request for proposal process. This includes the Sotico Pty Ltd contract that has subsequently been assigned to Gunns Ltd. (4) The Forest Products Commission meets regularly with all its customers, including Gunns. The commission sought, and received, written assurance from Gunns that it intended to meet the commitments of schedule 5 to the contract before agreeing to assignment of the contract from Sotico. (5) The Government set timber stumpages in consultation with the market, including sawmillers and furniture manufacturers. The Government does not have a role in specific commercial dealings between sawmillers and their customers. (6) No; log prices exceed the cost of production. I will refer back to part (1) of the honourable member’s question. The question used the term “reasonable prices” in relation to the supply from a sawmiller to a customer. What is being missed in this equation is that any contract for log supply between the Forest Products Commission, on behalf of the Government, and a sawmiller cannot purport to set prices in any way at all. Any attempt to do that would clearly be ultra vires the Trade Practices Act. All a contract is able to do is ensure, as this one does through schedule 5, that timber of a specification will be made available to the local market. That is all that can be done. To suggest that somehow these contracts can be used as a price-setting mechanism is simply folly, and anyone who has spent five minutes thinking about the effect of the Trade Practices Act would understand why that is the case.
(2) If not, what is the intended purpose of the schedule 5 requirements? (3) Did the minister or the Forest Products Commission obtain any legal advice on the effectiveness for local manufacturers of the value-adding requirements contained in the schedules, and in schedule 5 in particular, to the timber supply contract with Gunns - (a) prior to drawing up the schedules; or (b) subsequent to drawing up the schedules? (4) Have briefings been given to Gunns Ltd regarding meeting these value-adding requirements; if yes, by whom and on what date; if not, why not? (5) Why are royalties capped or increased in controlled increments for 10 years, protecting millers from market forces, but timber resources for furniture manufactures and the fine woodcraft industry are open to market competition? (6) Is this a form of subsidy to Gunns and other millers; if yes, why is such a subsidy seen as necessary; if not a subsidy, why is it not? Hon KIM CHANCE replied: I thank the member for some notice of this question. (1) Like all Forest Products Commission customers with contracts of sale arising from request for proposal 2649, Gunns Ltd has a binding contractual commitment to provide timber to local value-adding manufacturers in accordance with schedule 5 of its contract. I refer the honourable member to my answer to question on notice 1793 of 5 May 2004 regarding the extent of that commitment. (2) Not applicable. (3)(a) and (b) Yes. The Forest Products Commission took commercial legal advice related to all contracts arising from the request for proposal process. This includes the Sotico Pty Ltd contract that has subsequently been assigned to Gunns Ltd. (4) The Forest Products Commission meets regularly with all its customers, including Gunns. The commission sought, and received, written assurance from Gunns that it intended to meet the commitments of schedule 5 to the contract before agreeing to assignment of the contract from Sotico. (5) The Government set timber stumpages in consultation with the market, including sawmillers and furniture manufacturers. The Government does not have a role in specific commercial dealings between sawmillers and their customers. (6) No; log prices exceed the cost of production. I will refer back to part (1) of the honourable member’s question. The question used the term “reasonable prices” in relation to the supply from a sawmiller to a customer. What is being missed in this equation is that any contract for log supply between the Forest Products Commission, on behalf of the Government, and a sawmiller cannot purport to set prices in any way at all. Any attempt to do that would clearly be ultra vires the Trade Practices Act. All a contract is able to do is ensure, as this one does through schedule 5, that timber of a specification will be made available to the local market. That is all that can be done. To suggest that somehow these contracts can be used as a price-setting mechanism is simply folly, and anyone who has spent five minutes thinking about the effect of the Trade Practices Act would understand why that is the case.
(3) Did the minister or the Forest Products Commission obtain any legal advice on the effectiveness for local manufacturers of the value-adding requirements contained in the schedules, and in schedule 5 in particular, to the timber supply contract with Gunns - (a) prior to drawing up the schedules; or (b) subsequent to drawing up the schedules? (4) Have briefings been given to Gunns Ltd regarding meeting these value-adding requirements; if yes, by whom and on what date; if not, why not? (5) Why are royalties capped or increased in controlled increments for 10 years, protecting millers from market forces, but timber resources for furniture manufactures and the fine woodcraft industry are open to market competition? (6) Is this a form of subsidy to Gunns and other millers; if yes, why is such a subsidy seen as necessary; if not a subsidy, why is it not? Hon KIM CHANCE replied: I thank the member for some notice of this question. (1) Like all Forest Products Commission customers with contracts of sale arising from request for proposal 2649, Gunns Ltd has a binding contractual commitment to provide timber to local value-adding manufacturers in accordance with schedule 5 of its contract. I refer the honourable member to my answer to question on notice 1793 of 5 May 2004 regarding the extent of that commitment. (2) Not applicable. (3)(a) and (b) Yes. The Forest Products Commission took commercial legal advice related to all contracts arising from the request for proposal process. This includes the Sotico Pty Ltd contract that has subsequently been assigned to Gunns Ltd. (4) The Forest Products Commission meets regularly with all its customers, including Gunns. The commission sought, and received, written assurance from Gunns that it intended to meet the commitments of schedule 5 to the contract before agreeing to assignment of the contract from Sotico. (5) The Government set timber stumpages in consultation with the market, including sawmillers and furniture manufacturers. The Government does not have a role in specific commercial dealings between sawmillers and their customers. (6) No; log prices exceed the cost of production. I will refer back to part (1) of the honourable member’s question. The question used the term “reasonable prices” in relation to the supply from a sawmiller to a customer. What is being missed in this equation is that any contract for log supply between the Forest Products Commission, on behalf of the Government, and a sawmiller cannot purport to set prices in any way at all. Any attempt to do that would clearly be ultra vires the Trade Practices Act. All a contract is able to do is ensure, as this one does through schedule 5, that timber of a specification will be made available to the local market. That is all that can be done. To suggest that somehow these contracts can be used as a price-setting mechanism is simply folly, and anyone who has spent five minutes thinking about the effect of the Trade Practices Act would understand why that is the case.
(b) subsequent to drawing up the schedules?
(5) Why are royalties capped or increased in controlled increments for 10 years, protecting millers from market forces, but timber resources for furniture manufactures and the fine woodcraft industry are open to market competition? (6) Is this a form of subsidy to Gunns and other millers; if yes, why is such a subsidy seen as necessary; if not a subsidy, why is it not? Hon KIM CHANCE replied: I thank the member for some notice of this question. (1) Like all Forest Products Commission customers with contracts of sale arising from request for proposal 2649, Gunns Ltd has a binding contractual commitment to provide timber to local value-adding manufacturers in accordance with schedule 5 of its contract. I refer the honourable member to my answer to question on notice 1793 of 5 May 2004 regarding the extent of that commitment. (2) Not applicable. (3)(a) and (b) Yes. The Forest Products Commission took commercial legal advice related to all contracts arising from the request for proposal process. This includes the Sotico Pty Ltd contract that has subsequently been assigned to Gunns Ltd. (4) The Forest Products Commission meets regularly with all its customers, including Gunns. The commission sought, and received, written assurance from Gunns that it intended to meet the commitments of schedule 5 to the contract before agreeing to assignment of the contract from Sotico. (5) The Government set timber stumpages in consultation with the market, including sawmillers and furniture manufacturers. The Government does not have a role in specific commercial dealings between sawmillers and their customers. (6) No; log prices exceed the cost of production. I will refer back to part (1) of the honourable member’s question. The question used the term “reasonable prices” in relation to the supply from a sawmiller to a customer. What is being missed in this equation is that any contract for log supply between the Forest Products Commission, on behalf of the Government, and a sawmiller cannot purport to set prices in any way at all. Any attempt to do that would clearly be ultra vires the Trade Practices Act. All a contract is able to do is ensure, as this one does through schedule 5, that timber of a specification will be made available to the local market. That is all that can be done. To suggest that somehow these contracts can be used as a price-setting mechanism is simply folly, and anyone who has spent five minutes thinking about the effect of the Trade Practices Act would understand why that is the case.
(6) Is this a form of subsidy to Gunns and other millers; if yes, why is such a subsidy seen as necessary; if not a subsidy, why is it not? Hon KIM CHANCE replied: I thank the member for some notice of this question. (1) Like all Forest Products Commission customers with contracts of sale arising from request for proposal 2649, Gunns Ltd has a binding contractual commitment to provide timber to local value-adding manufacturers in accordance with schedule 5 of its contract. I refer the honourable member to my answer to question on notice 1793 of 5 May 2004 regarding the extent of that commitment. (2) Not applicable. (3)(a) and (b) Yes. The Forest Products Commission took commercial legal advice related to all contracts arising from the request for proposal process. This includes the Sotico Pty Ltd contract that has subsequently been assigned to Gunns Ltd. (4) The Forest Products Commission meets regularly with all its customers, including Gunns. The commission sought, and received, written assurance from Gunns that it intended to meet the commitments of schedule 5 to the contract before agreeing to assignment of the contract from Sotico. (5) The Government set timber stumpages in consultation with the market, including sawmillers and furniture manufacturers. The Government does not have a role in specific commercial dealings between sawmillers and their customers. (6) No; log prices exceed the cost of production. I will refer back to part (1) of the honourable member’s question. The question used the term “reasonable prices” in relation to the supply from a sawmiller to a customer. What is being missed in this equation is that any contract for log supply between the Forest Products Commission, on behalf of the Government, and a sawmiller cannot purport to set prices in any way at all. Any attempt to do that would clearly be ultra vires the Trade Practices Act. All a contract is able to do is ensure, as this one does through schedule 5, that timber of a specification will be made available to the local market. That is all that can be done. To suggest that somehow these contracts can be used as a price-setting mechanism is simply folly, and anyone who has spent five minutes thinking about the effect of the Trade Practices Act would understand why that is the case.
Hon KIM CHANCE replied: I thank the member for some notice of this question. (1) Like all Forest Products Commission customers with contracts of sale arising from request for proposal 2649, Gunns Ltd has a binding contractual commitment to provide timber to local value-adding manufacturers in accordance with schedule 5 of its contract. I refer the honourable member to my answer to question on notice 1793 of 5 May 2004 regarding the extent of that commitment. (2) Not applicable. (3)(a) and (b) Yes. The Forest Products Commission took commercial legal advice related to all contracts arising from the request for proposal process. This includes the Sotico Pty Ltd contract that has subsequently been assigned to Gunns Ltd. (4) The Forest Products Commission meets regularly with all its customers, including Gunns. The commission sought, and received, written assurance from Gunns that it intended to meet the commitments of schedule 5 to the contract before agreeing to assignment of the contract from Sotico. (5) The Government set timber stumpages in consultation with the market, including sawmillers and furniture manufacturers. The Government does not have a role in specific commercial dealings between sawmillers and their customers. (6) No; log prices exceed the cost of production. I will refer back to part (1) of the honourable member’s question. The question used the term “reasonable prices” in relation to the supply from a sawmiller to a customer. What is being missed in this equation is that any contract for log supply between the Forest Products Commission, on behalf of the Government, and a sawmiller cannot purport to set prices in any way at all. Any attempt to do that would clearly be ultra vires the Trade Practices Act. All a contract is able to do is ensure, as this one does through schedule 5, that timber of a specification will be made available to the local market. That is all that can be done. To suggest that somehow these contracts can be used as a price-setting mechanism is simply folly, and anyone who has spent five minutes thinking about the effect of the Trade Practices Act would understand why that is the case.
I thank the member for some notice of this question. (1) Like all Forest Products Commission customers with contracts of sale arising from request for proposal 2649, Gunns Ltd has a binding contractual commitment to provide timber to local value-adding manufacturers in accordance with schedule 5 of its contract. I refer the honourable member to my answer to question on notice 1793 of 5 May 2004 regarding the extent of that commitment. (2) Not applicable. (3)(a) and (b) Yes. The Forest Products Commission took commercial legal advice related to all contracts arising from the request for proposal process. This includes the Sotico Pty Ltd contract that has subsequently been assigned to Gunns Ltd. (4) The Forest Products Commission meets regularly with all its customers, including Gunns. The commission sought, and received, written assurance from Gunns that it intended to meet the commitments of schedule 5 to the contract before agreeing to assignment of the contract from Sotico. (5) The Government set timber stumpages in consultation with the market, including sawmillers and furniture manufacturers. The Government does not have a role in specific commercial dealings between sawmillers and their customers. (6) No; log prices exceed the cost of production. I will refer back to part (1) of the honourable member’s question. The question used the term “reasonable prices” in relation to the supply from a sawmiller to a customer. What is being missed in this equation is that any contract for log supply between the Forest Products Commission, on behalf of the Government, and a sawmiller cannot purport to set prices in any way at all. Any attempt to do that would clearly be ultra vires the Trade Practices Act. All a contract is able to do is ensure, as this one does through schedule 5, that timber of a specification will be made available to the local market. That is all that can be done. To suggest that somehow these contracts can be used as a price-setting mechanism is simply folly, and anyone who has spent five minutes thinking about the effect of the Trade Practices Act would understand why that is the case.
(1) Like all Forest Products Commission customers with contracts of sale arising from request for proposal 2649, Gunns Ltd has a binding contractual commitment to provide timber to local value-adding manufacturers in accordance with schedule 5 of its contract. I refer the honourable member to my answer to question on notice 1793 of 5 May 2004 regarding the extent of that commitment. (2) Not applicable. (3)(a) and (b) Yes. The Forest Products Commission took commercial legal advice related to all contracts arising from the request for proposal process. This includes the Sotico Pty Ltd contract that has subsequently been assigned to Gunns Ltd. (4) The Forest Products Commission meets regularly with all its customers, including Gunns. The commission sought, and received, written assurance from Gunns that it intended to meet the commitments of schedule 5 to the contract before agreeing to assignment of the contract from Sotico. (5) The Government set timber stumpages in consultation with the market, including sawmillers and furniture manufacturers. The Government does not have a role in specific commercial dealings between sawmillers and their customers. (6) No; log prices exceed the cost of production. I will refer back to part (1) of the honourable member’s question. The question used the term “reasonable prices” in relation to the supply from a sawmiller to a customer. What is being missed in this equation is that any contract for log supply between the Forest Products Commission, on behalf of the Government, and a sawmiller cannot purport to set prices in any way at all. Any attempt to do that would clearly be ultra vires the Trade Practices Act. All a contract is able to do is ensure, as this one does through schedule 5, that timber of a specification will be made available to the local market. That is all that can be done. To suggest that somehow these contracts can be used as a price-setting mechanism is simply folly, and anyone who has spent five minutes thinking about the effect of the Trade Practices Act would understand why that is the case.
(2) Not applicable. (3)(a) and (b) Yes. The Forest Products Commission took commercial legal advice related to all contracts arising from the request for proposal process. This includes the Sotico Pty Ltd contract that has subsequently been assigned to Gunns Ltd. (4) The Forest Products Commission meets regularly with all its customers, including Gunns. The commission sought, and received, written assurance from Gunns that it intended to meet the commitments of schedule 5 to the contract before agreeing to assignment of the contract from Sotico. (5) The Government set timber stumpages in consultation with the market, including sawmillers and furniture manufacturers. The Government does not have a role in specific commercial dealings between sawmillers and their customers. (6) No; log prices exceed the cost of production. I will refer back to part (1) of the honourable member’s question. The question used the term “reasonable prices” in relation to the supply from a sawmiller to a customer. What is being missed in this equation is that any contract for log supply between the Forest Products Commission, on behalf of the Government, and a sawmiller cannot purport to set prices in any way at all. Any attempt to do that would clearly be ultra vires the Trade Practices Act. All a contract is able to do is ensure, as this one does through schedule 5, that timber of a specification will be made available to the local market. That is all that can be done. To suggest that somehow these contracts can be used as a price-setting mechanism is simply folly, and anyone who has spent five minutes thinking about the effect of the Trade Practices Act would understand why that is the case.
(3)(a) and (b) Yes. The Forest Products Commission took commercial legal advice related to all contracts arising from the request for proposal process. This includes the Sotico Pty Ltd contract that has subsequently been assigned to Gunns Ltd. (4) The Forest Products Commission meets regularly with all its customers, including Gunns. The commission sought, and received, written assurance from Gunns that it intended to meet the commitments of schedule 5 to the contract before agreeing to assignment of the contract from Sotico. (5) The Government set timber stumpages in consultation with the market, including sawmillers and furniture manufacturers. The Government does not have a role in specific commercial dealings between sawmillers and their customers. (6) No; log prices exceed the cost of production. I will refer back to part (1) of the honourable member’s question. The question used the term “reasonable prices” in relation to the supply from a sawmiller to a customer. What is being missed in this equation is that any contract for log supply between the Forest Products Commission, on behalf of the Government, and a sawmiller cannot purport to set prices in any way at all. Any attempt to do that would clearly be ultra vires the Trade Practices Act. All a contract is able to do is ensure, as this one does through schedule 5, that timber of a specification will be made available to the local market. That is all that can be done. To suggest that somehow these contracts can be used as a price-setting mechanism is simply folly, and anyone who has spent five minutes thinking about the effect of the Trade Practices Act would understand why that is the case.
(4) The Forest Products Commission meets regularly with all its customers, including Gunns. The commission sought, and received, written assurance from Gunns that it intended to meet the commitments of schedule 5 to the contract before agreeing to assignment of the contract from Sotico. (5) The Government set timber stumpages in consultation with the market, including sawmillers and furniture manufacturers. The Government does not have a role in specific commercial dealings between sawmillers and their customers. (6) No; log prices exceed the cost of production. I will refer back to part (1) of the honourable member’s question. The question used the term “reasonable prices” in relation to the supply from a sawmiller to a customer. What is being missed in this equation is that any contract for log supply between the Forest Products Commission, on behalf of the Government, and a sawmiller cannot purport to set prices in any way at all. Any attempt to do that would clearly be ultra vires the Trade Practices Act. All a contract is able to do is ensure, as this one does through schedule 5, that timber of a specification will be made available to the local market. That is all that can be done. To suggest that somehow these contracts can be used as a price-setting mechanism is simply folly, and anyone who has spent five minutes thinking about the effect of the Trade Practices Act would understand why that is the case.
(5) The Government set timber stumpages in consultation with the market, including sawmillers and furniture manufacturers. The Government does not have a role in specific commercial dealings between sawmillers and their customers. (6) No; log prices exceed the cost of production. I will refer back to part (1) of the honourable member’s question. The question used the term “reasonable prices” in relation to the supply from a sawmiller to a customer. What is being missed in this equation is that any contract for log supply between the Forest Products Commission, on behalf of the Government, and a sawmiller cannot purport to set prices in any way at all. Any attempt to do that would clearly be ultra vires the Trade Practices Act. All a contract is able to do is ensure, as this one does through schedule 5, that timber of a specification will be made available to the local market. That is all that can be done. To suggest that somehow these contracts can be used as a price-setting mechanism is simply folly, and anyone who has spent five minutes thinking about the effect of the Trade Practices Act would understand why that is the case.
(6) No; log prices exceed the cost of production. I will refer back to part (1) of the honourable member’s question. The question used the term “reasonable prices” in relation to the supply from a sawmiller to a customer. What is being missed in this equation is that any contract for log supply between the Forest Products Commission, on behalf of the Government, and a sawmiller cannot purport to set prices in any way at all. Any attempt to do that would clearly be ultra vires the Trade Practices Act. All a contract is able to do is ensure, as this one does through schedule 5, that timber of a specification will be made available to the local market. That is all that can be done. To suggest that somehow these contracts can be used as a price-setting mechanism is simply folly, and anyone who has spent five minutes thinking about the effect of the Trade Practices Act would understand why that is the case.
I will refer back to part (1) of the honourable member’s question. The question used the term “reasonable prices” in relation to the supply from a sawmiller to a customer. What is being missed in this equation is that any contract for log supply between the Forest Products Commission, on behalf of the Government, and a sawmiller cannot purport to set prices in any way at all. Any attempt to do that would clearly be ultra vires the Trade Practices Act. All a contract is able to do is ensure, as this one does through schedule 5, that timber of a specification will be made available to the local market. That is all that can be done. To suggest that somehow these contracts can be used as a price-setting mechanism is simply folly, and anyone who has spent five minutes thinking about the effect of the Trade Practices Act would understand why that is the case.
(2) If not, what is the intended purpose of the schedule 5 requirements? (3) Did the minister or the Forest Products Commission obtain any legal advice on the effectiveness for local manufacturers of the value-adding requirements contained in the schedules, and in schedule 5 in particular, to the timber supply contract with Gunns - (a) prior to drawing up the schedules; or (b) subsequent to drawing up the schedules? (4) Have briefings been given to Gunns Ltd regarding meeting these value-adding requirements; if yes, by whom and on what date; if not, why not? (5) Why are royalties capped or increased in controlled increments for 10 years, protecting millers from market forces, but timber resources for furniture manufactures and the fine woodcraft industry are open to market competition? (6) Is this a form of subsidy to Gunns and other millers; if yes, why is such a subsidy seen as necessary; if not a subsidy, why is it not? Hon KIM CHANCE replied: I thank the member for some notice of this question. (1) Like all Forest Products Commission customers with contracts of sale arising from request for proposal 2649, Gunns Ltd has a binding contractual commitment to provide timber to local value-adding manufacturers in accordance with schedule 5 of its contract. I refer the honourable member to my answer to question on notice 1793 of 5 May 2004 regarding the extent of that commitment. (2) Not applicable. (3)(a) and (b) Yes. The Forest Products Commission took commercial legal advice related to all contracts arising from the request for proposal process. This includes the Sotico Pty Ltd contract that has subsequently been assigned to Gunns Ltd. (4) The Forest Products Commission meets regularly with all its customers, including Gunns. The commission sought, and received, written assurance from Gunns that it intended to meet the commitments of schedule 5 to the contract before agreeing to assignment of the contract from Sotico. (5) The Government set timber stumpages in consultation with the market, including sawmillers and furniture manufacturers. The Government does not have a role in specific commercial dealings between sawmillers and their customers. (6) No; log prices exceed the cost of production. I will refer back to part (1) of the honourable member’s question. The question used the term “reasonable prices” in relation to the supply from a sawmiller to a customer. What is being missed in this equation is that any contract for log supply between the Forest Products Commission, on behalf of the Government, and a sawmiller cannot purport to set prices in any way at all. Any attempt to do that would clearly be ultra vires the Trade Practices Act. All a contract is able to do is ensure, as this one does through schedule 5, that timber of a specification will be made available to the local market. That is all that can be done. To suggest that somehow these contracts can be used as a price-setting mechanism is simply folly, and anyone who has spent five minutes thinking about the effect of the Trade Practices Act would understand why that is the case.
(3) Did the minister or the Forest Products Commission obtain any legal advice on the effectiveness for local manufacturers of the value-adding requirements contained in the schedules, and in schedule 5 in particular, to the timber supply contract with Gunns - (a) prior to drawing up the schedules; or (b) subsequent to drawing up the schedules? (4) Have briefings been given to Gunns Ltd regarding meeting these value-adding requirements; if yes, by whom and on what date; if not, why not? (5) Why are royalties capped or increased in controlled increments for 10 years, protecting millers from market forces, but timber resources for furniture manufactures and the fine woodcraft industry are open to market competition? (6) Is this a form of subsidy to Gunns and other millers; if yes, why is such a subsidy seen as necessary; if not a subsidy, why is it not? Hon KIM CHANCE replied: I thank the member for some notice of this question. (1) Like all Forest Products Commission customers with contracts of sale arising from request for proposal 2649, Gunns Ltd has a binding contractual commitment to provide timber to local value-adding manufacturers in accordance with schedule 5 of its contract. I refer the honourable member to my answer to question on notice 1793 of 5 May 2004 regarding the extent of that commitment. (2) Not applicable. (3)(a) and (b) Yes. The Forest Products Commission took commercial legal advice related to all contracts arising from the request for proposal process. This includes the Sotico Pty Ltd contract that has subsequently been assigned to Gunns Ltd. (4) The Forest Products Commission meets regularly with all its customers, including Gunns. The commission sought, and received, written assurance from Gunns that it intended to meet the commitments of schedule 5 to the contract before agreeing to assignment of the contract from Sotico. (5) The Government set timber stumpages in consultation with the market, including sawmillers and furniture manufacturers. The Government does not have a role in specific commercial dealings between sawmillers and their customers. (6) No; log prices exceed the cost of production. I will refer back to part (1) of the honourable member’s question. The question used the term “reasonable prices” in relation to the supply from a sawmiller to a customer. What is being missed in this equation is that any contract for log supply between the Forest Products Commission, on behalf of the Government, and a sawmiller cannot purport to set prices in any way at all. Any attempt to do that would clearly be ultra vires the Trade Practices Act. All a contract is able to do is ensure, as this one does through schedule 5, that timber of a specification will be made available to the local market. That is all that can be done. To suggest that somehow these contracts can be used as a price-setting mechanism is simply folly, and anyone who has spent five minutes thinking about the effect of the Trade Practices Act would understand why that is the case.
(b) subsequent to drawing up the schedules?
(5) Why are royalties capped or increased in controlled increments for 10 years, protecting millers from market forces, but timber resources for furniture manufactures and the fine woodcraft industry are open to market competition? (6) Is this a form of subsidy to Gunns and other millers; if yes, why is such a subsidy seen as necessary; if not a subsidy, why is it not? Hon KIM CHANCE replied: I thank the member for some notice of this question. (1) Like all Forest Products Commission customers with contracts of sale arising from request for proposal 2649, Gunns Ltd has a binding contractual commitment to provide timber to local value-adding manufacturers in accordance with schedule 5 of its contract. I refer the honourable member to my answer to question on notice 1793 of 5 May 2004 regarding the extent of that commitment. (2) Not applicable. (3)(a) and (b) Yes. The Forest Products Commission took commercial legal advice related to all contracts arising from the request for proposal process. This includes the Sotico Pty Ltd contract that has subsequently been assigned to Gunns Ltd. (4) The Forest Products Commission meets regularly with all its customers, including Gunns. The commission sought, and received, written assurance from Gunns that it intended to meet the commitments of schedule 5 to the contract before agreeing to assignment of the contract from Sotico. (5) The Government set timber stumpages in consultation with the market, including sawmillers and furniture manufacturers. The Government does not have a role in specific commercial dealings between sawmillers and their customers. (6) No; log prices exceed the cost of production. I will refer back to part (1) of the honourable member’s question. The question used the term “reasonable prices” in relation to the supply from a sawmiller to a customer. What is being missed in this equation is that any contract for log supply between the Forest Products Commission, on behalf of the Government, and a sawmiller cannot purport to set prices in any way at all. Any attempt to do that would clearly be ultra vires the Trade Practices Act. All a contract is able to do is ensure, as this one does through schedule 5, that timber of a specification will be made available to the local market. That is all that can be done. To suggest that somehow these contracts can be used as a price-setting mechanism is simply folly, and anyone who has spent five minutes thinking about the effect of the Trade Practices Act would understand why that is the case.
(6) Is this a form of subsidy to Gunns and other millers; if yes, why is such a subsidy seen as necessary; if not a subsidy, why is it not? Hon KIM CHANCE replied: I thank the member for some notice of this question. (1) Like all Forest Products Commission customers with contracts of sale arising from request for proposal 2649, Gunns Ltd has a binding contractual commitment to provide timber to local value-adding manufacturers in accordance with schedule 5 of its contract. I refer the honourable member to my answer to question on notice 1793 of 5 May 2004 regarding the extent of that commitment. (2) Not applicable. (3)(a) and (b) Yes. The Forest Products Commission took commercial legal advice related to all contracts arising from the request for proposal process. This includes the Sotico Pty Ltd contract that has subsequently been assigned to Gunns Ltd. (4) The Forest Products Commission meets regularly with all its customers, including Gunns. The commission sought, and received, written assurance from Gunns that it intended to meet the commitments of schedule 5 to the contract before agreeing to assignment of the contract from Sotico. (5) The Government set timber stumpages in consultation with the market, including sawmillers and furniture manufacturers. The Government does not have a role in specific commercial dealings between sawmillers and their customers. (6) No; log prices exceed the cost of production. I will refer back to part (1) of the honourable member’s question. The question used the term “reasonable prices” in relation to the supply from a sawmiller to a customer. What is being missed in this equation is that any contract for log supply between the Forest Products Commission, on behalf of the Government, and a sawmiller cannot purport to set prices in any way at all. Any attempt to do that would clearly be ultra vires the Trade Practices Act. All a contract is able to do is ensure, as this one does through schedule 5, that timber of a specification will be made available to the local market. That is all that can be done. To suggest that somehow these contracts can be used as a price-setting mechanism is simply folly, and anyone who has spent five minutes thinking about the effect of the Trade Practices Act would understand why that is the case.
Hon KIM CHANCE replied: I thank the member for some notice of this question. (1) Like all Forest Products Commission customers with contracts of sale arising from request for proposal 2649, Gunns Ltd has a binding contractual commitment to provide timber to local value-adding manufacturers in accordance with schedule 5 of its contract. I refer the honourable member to my answer to question on notice 1793 of 5 May 2004 regarding the extent of that commitment. (2) Not applicable. (3)(a) and (b) Yes. The Forest Products Commission took commercial legal advice related to all contracts arising from the request for proposal process. This includes the Sotico Pty Ltd contract that has subsequently been assigned to Gunns Ltd. (4) The Forest Products Commission meets regularly with all its customers, including Gunns. The commission sought, and received, written assurance from Gunns that it intended to meet the commitments of schedule 5 to the contract before agreeing to assignment of the contract from Sotico. (5) The Government set timber stumpages in consultation with the market, including sawmillers and furniture manufacturers. The Government does not have a role in specific commercial dealings between sawmillers and their customers. (6) No; log prices exceed the cost of production. I will refer back to part (1) of the honourable member’s question. The question used the term “reasonable prices” in relation to the supply from a sawmiller to a customer. What is being missed in this equation is that any contract for log supply between the Forest Products Commission, on behalf of the Government, and a sawmiller cannot purport to set prices in any way at all. Any attempt to do that would clearly be ultra vires the Trade Practices Act. All a contract is able to do is ensure, as this one does through schedule 5, that timber of a specification will be made available to the local market. That is all that can be done. To suggest that somehow these contracts can be used as a price-setting mechanism is simply folly, and anyone who has spent five minutes thinking about the effect of the Trade Practices Act would understand why that is the case.
I thank the member for some notice of this question. (1) Like all Forest Products Commission customers with contracts of sale arising from request for proposal 2649, Gunns Ltd has a binding contractual commitment to provide timber to local value-adding manufacturers in accordance with schedule 5 of its contract. I refer the honourable member to my answer to question on notice 1793 of 5 May 2004 regarding the extent of that commitment. (2) Not applicable. (3)(a) and (b) Yes. The Forest Products Commission took commercial legal advice related to all contracts arising from the request for proposal process. This includes the Sotico Pty Ltd contract that has subsequently been assigned to Gunns Ltd. (4) The Forest Products Commission meets regularly with all its customers, including Gunns. The commission sought, and received, written assurance from Gunns that it intended to meet the commitments of schedule 5 to the contract before agreeing to assignment of the contract from Sotico. (5) The Government set timber stumpages in consultation with the market, including sawmillers and furniture manufacturers. The Government does not have a role in specific commercial dealings between sawmillers and their customers. (6) No; log prices exceed the cost of production. I will refer back to part (1) of the honourable member’s question. The question used the term “reasonable prices” in relation to the supply from a sawmiller to a customer. What is being missed in this equation is that any contract for log supply between the Forest Products Commission, on behalf of the Government, and a sawmiller cannot purport to set prices in any way at all. Any attempt to do that would clearly be ultra vires the Trade Practices Act. All a contract is able to do is ensure, as this one does through schedule 5, that timber of a specification will be made available to the local market. That is all that can be done. To suggest that somehow these contracts can be used as a price-setting mechanism is simply folly, and anyone who has spent five minutes thinking about the effect of the Trade Practices Act would understand why that is the case.
(1) Like all Forest Products Commission customers with contracts of sale arising from request for proposal 2649, Gunns Ltd has a binding contractual commitment to provide timber to local value-adding manufacturers in accordance with schedule 5 of its contract. I refer the honourable member to my answer to question on notice 1793 of 5 May 2004 regarding the extent of that commitment. (2) Not applicable. (3)(a) and (b) Yes. The Forest Products Commission took commercial legal advice related to all contracts arising from the request for proposal process. This includes the Sotico Pty Ltd contract that has subsequently been assigned to Gunns Ltd. (4) The Forest Products Commission meets regularly with all its customers, including Gunns. The commission sought, and received, written assurance from Gunns that it intended to meet the commitments of schedule 5 to the contract before agreeing to assignment of the contract from Sotico. (5) The Government set timber stumpages in consultation with the market, including sawmillers and furniture manufacturers. The Government does not have a role in specific commercial dealings between sawmillers and their customers. (6) No; log prices exceed the cost of production. I will refer back to part (1) of the honourable member’s question. The question used the term “reasonable prices” in relation to the supply from a sawmiller to a customer. What is being missed in this equation is that any contract for log supply between the Forest Products Commission, on behalf of the Government, and a sawmiller cannot purport to set prices in any way at all. Any attempt to do that would clearly be ultra vires the Trade Practices Act. All a contract is able to do is ensure, as this one does through schedule 5, that timber of a specification will be made available to the local market. That is all that can be done. To suggest that somehow these contracts can be used as a price-setting mechanism is simply folly, and anyone who has spent five minutes thinking about the effect of the Trade Practices Act would understand why that is the case.
(2) Not applicable. (3)(a) and (b) Yes. The Forest Products Commission took commercial legal advice related to all contracts arising from the request for proposal process. This includes the Sotico Pty Ltd contract that has subsequently been assigned to Gunns Ltd. (4) The Forest Products Commission meets regularly with all its customers, including Gunns. The commission sought, and received, written assurance from Gunns that it intended to meet the commitments of schedule 5 to the contract before agreeing to assignment of the contract from Sotico. (5) The Government set timber stumpages in consultation with the market, including sawmillers and furniture manufacturers. The Government does not have a role in specific commercial dealings between sawmillers and their customers. (6) No; log prices exceed the cost of production. I will refer back to part (1) of the honourable member’s question. The question used the term “reasonable prices” in relation to the supply from a sawmiller to a customer. What is being missed in this equation is that any contract for log supply between the Forest Products Commission, on behalf of the Government, and a sawmiller cannot purport to set prices in any way at all. Any attempt to do that would clearly be ultra vires the Trade Practices Act. All a contract is able to do is ensure, as this one does through schedule 5, that timber of a specification will be made available to the local market. That is all that can be done. To suggest that somehow these contracts can be used as a price-setting mechanism is simply folly, and anyone who has spent five minutes thinking about the effect of the Trade Practices Act would understand why that is the case.
(3)(a) and (b) Yes. The Forest Products Commission took commercial legal advice related to all contracts arising from the request for proposal process. This includes the Sotico Pty Ltd contract that has subsequently been assigned to Gunns Ltd. (4) The Forest Products Commission meets regularly with all its customers, including Gunns. The commission sought, and received, written assurance from Gunns that it intended to meet the commitments of schedule 5 to the contract before agreeing to assignment of the contract from Sotico. (5) The Government set timber stumpages in consultation with the market, including sawmillers and furniture manufacturers. The Government does not have a role in specific commercial dealings between sawmillers and their customers. (6) No; log prices exceed the cost of production. I will refer back to part (1) of the honourable member’s question. The question used the term “reasonable prices” in relation to the supply from a sawmiller to a customer. What is being missed in this equation is that any contract for log supply between the Forest Products Commission, on behalf of the Government, and a sawmiller cannot purport to set prices in any way at all. Any attempt to do that would clearly be ultra vires the Trade Practices Act. All a contract is able to do is ensure, as this one does through schedule 5, that timber of a specification will be made available to the local market. That is all that can be done. To suggest that somehow these contracts can be used as a price-setting mechanism is simply folly, and anyone who has spent five minutes thinking about the effect of the Trade Practices Act would understand why that is the case.
(4) The Forest Products Commission meets regularly with all its customers, including Gunns. The commission sought, and received, written assurance from Gunns that it intended to meet the commitments of schedule 5 to the contract before agreeing to assignment of the contract from Sotico. (5) The Government set timber stumpages in consultation with the market, including sawmillers and furniture manufacturers. The Government does not have a role in specific commercial dealings between sawmillers and their customers. (6) No; log prices exceed the cost of production. I will refer back to part (1) of the honourable member’s question. The question used the term “reasonable prices” in relation to the supply from a sawmiller to a customer. What is being missed in this equation is that any contract for log supply between the Forest Products Commission, on behalf of the Government, and a sawmiller cannot purport to set prices in any way at all. Any attempt to do that would clearly be ultra vires the Trade Practices Act. All a contract is able to do is ensure, as this one does through schedule 5, that timber of a specification will be made available to the local market. That is all that can be done. To suggest that somehow these contracts can be used as a price-setting mechanism is simply folly, and anyone who has spent five minutes thinking about the effect of the Trade Practices Act would understand why that is the case.
(5) The Government set timber stumpages in consultation with the market, including sawmillers and furniture manufacturers. The Government does not have a role in specific commercial dealings between sawmillers and their customers. (6) No; log prices exceed the cost of production. I will refer back to part (1) of the honourable member’s question. The question used the term “reasonable prices” in relation to the supply from a sawmiller to a customer. What is being missed in this equation is that any contract for log supply between the Forest Products Commission, on behalf of the Government, and a sawmiller cannot purport to set prices in any way at all. Any attempt to do that would clearly be ultra vires the Trade Practices Act. All a contract is able to do is ensure, as this one does through schedule 5, that timber of a specification will be made available to the local market. That is all that can be done. To suggest that somehow these contracts can be used as a price-setting mechanism is simply folly, and anyone who has spent five minutes thinking about the effect of the Trade Practices Act would understand why that is the case.
(6) No; log prices exceed the cost of production. I will refer back to part (1) of the honourable member’s question. The question used the term “reasonable prices” in relation to the supply from a sawmiller to a customer. What is being missed in this equation is that any contract for log supply between the Forest Products Commission, on behalf of the Government, and a sawmiller cannot purport to set prices in any way at all. Any attempt to do that would clearly be ultra vires the Trade Practices Act. All a contract is able to do is ensure, as this one does through schedule 5, that timber of a specification will be made available to the local market. That is all that can be done. To suggest that somehow these contracts can be used as a price-setting mechanism is simply folly, and anyone who has spent five minutes thinking about the effect of the Trade Practices Act would understand why that is the case.
I will refer back to part (1) of the honourable member’s question. The question used the term “reasonable prices” in relation to the supply from a sawmiller to a customer. What is being missed in this equation is that any contract for log supply between the Forest Products Commission, on behalf of the Government, and a sawmiller cannot purport to set prices in any way at all. Any attempt to do that would clearly be ultra vires the Trade Practices Act. All a contract is able to do is ensure, as this one does through schedule 5, that timber of a specification will be made available to the local market. That is all that can be done. To suggest that somehow these contracts can be used as a price-setting mechanism is simply folly, and anyone who has spent five minutes thinking about the effect of the Trade Practices Act would understand why that is the case.
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