IL Paper Grain Chain Dec 10 08

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THE EXPORT GRAIN CHAIN

Discussion Paper

Prepared forThe South Australian Freight

Council Inc.

Source: D Bourne Jones: Mal_de_Mer

Source: Flinders Ports website

By

Ian Lovell

10

th

December 2008


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Introduction

A Grain Industry Forum hosted jointly by Shipping Australia Limited and theSouth Australian Freight Council was held on Monday the 24th of November2008. 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 theexport grain chain and associated issues.

The objective of the Forum is to identify grain export supply chainimpediments in order to formulate an improvement strategy. This discussionpaper 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 theinformation gathered is anecdotal or based on information provided by third parties and assuch has not been corroborated.

The Export Grain Chain

The export Grain Chain is complex and incorporates a large number ofplayers [over 30] involved in commercial, operational and regulatory functions.

Before bulk wheat and in SA/Victoria barley export market de-regulation theexport of grain was controlled by the single desk marketers: AWB for wheat

and ABB for Barley. A limited number of specialised grain types such asDurum wheat were exported by other companies but in terms of total exportsthis was small. Both AWB and ABB operated vertically integrated operationsspanning the supply chain from buying, storing, contracting transport andloading.

Since grain market de-regulation in 2007-2008 abolishing the single desk thenumber of participants, particularly buyers and sellers have increased.

Concurrently there is an increase in smaller volume shipments particularly ofcontainerised grain.

In the last year containerised wheat exports have doubled and volumesthrough the Port of Adelaide are estimated at 1,500 twenty foot equivalentunits (teu) per month.

For transport operators and service providers the number of firms they dealwith has increased as has the complexity of coordinating service provision.

In addition drought conditions in Australia are forcing stronger competition forgrain between the domestic and export feed and food market.

High employment levels are also affecting the availability of adequately skilledlabour in the grain supply chain.
http://www.safreightcouncil.com.au/ba.asphttp://www.safreightcouncil.com.au/ba.asphttp://www.safreightcouncil.com.au/ba.asp


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The Export Grain Chain Generalised

Grain export ports in South Australia include: Port Adelaide, Port Lincoln, PortPirie, Port Giles, Thevenard, Wallaroo and Ardrossan. Due to draught

restrictions some bulk grain vessels load in one port and top-off in a secondport. Port Adelaide has key bulk loading facilities at the Inner and OuterHarbor. Containers are loaded at the Outer Harbor DP World containerterminal. Loading rates differ from Port to Port.

Key parties involved in the grain chain include:Grain Forecasters [e.g. PIRSA]Growers/ProducersBuyers [e.g. Overseas or Australian companies]Grain Exporters [e.g. Overseas or Australian companies]BanksInsurance companies [including EFIC]Ship OwnerChartererShipping AgentBulk 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 operatorProvidoresBunker ServicesWaste Disposal OperatorsFumigatorsShip CleanersMarine SurveyorsLabour ProvidersRegulators

Internationally: IMO, AMSA, SOLAS, ISO 14001, MARPOL, UNCITRALand import country regulators

In Australia: Australian Customs Service [ACS], Australian QuarantineInspection Service, Environmental Protection Agency(s) [EPA],Department of Immigration and Citizenship [DIaC], Department ofInfrastructure, Transport Regional Development & Local Government [DI],Department for Transport, Energy and Infrastructure [DTEI], Department ofHealth & Ageing

Generic regulators at a Federal & State level for functions such asOccupational 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.


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Grain

Grower

Unload & store on farm or

at Bulk Handler Silo

Harvest &

Transport Load for transport to

export bulk handler Sea, rail or road to

export port siloUnload at

export silo

AQIS

registered &

approved

establishment

Make up export

consignment:

Segregation &

Blending

Transport to port

bulk loader

Load to

ship &

Vessel

Departure

Ocean Voyage with or

without 2nd

port loading

Berth Vessel at

destination port

Unload grain

to store Load grain

to transport

Sea, rail or road linehaul

to destination Unload grain delivery to customer (s)

GrainForecast

Grain

Buyers

Grain

Sellers

Bulk

Handler

Port

Operations

Regulatory

Authorities

DI: Transport SecurityIMO, AMSA, SOLAS, ACS, AQIS,EPA, DIAC, DoHA, DTEI, ISO14001, MARPOL, UNCITRAL

Ships

AgentSecurity, Berth Allocation

Pilotage, Towage,

Mooring, Marine Survey,

StevedoringLabour,Providores,Bunkers,Waste, Survey, Cleaning,

Approvals

Vessel

Arrival &

Berthing

Marine Survey,

ACS / AQIS

Inspection

Approvals

Customs, Health

Security, Inspections,

approvals

Port

O erations

Ships Agent

Vessel

Schedule &

Stowage

Finance,

banking,

insurance

Import

Permit

Purchase by

consumer(s)

Charter, Vessel &LogisticsArran ements

Grain Chain Map


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Commercial Export Arrangements - Buyer with Seller

Financial arrangements / Letter of Credit / Insurance

Shipment specifications / Ship Charter / Delivery Date

Import Permit

Sellerbuys grain from growerCashForward ContractFirm Grain OfferPool

Grower / Seller organises transport to accumulation site /

export port

Charter Party

Arrangements

Ships Agent at

export port

Vessel

Instructions

Arrangements

Notifies: Seller, Port Operator/ Port services tugs, pilotage, mooring labour,berth allocations, harbour services, stevedore, bulk handler, Transport Security,Marine Surveyor, AMSA, AQIS, ACS,

Exporter

Arrival at Berth

Ready to Load Declaration

Marine Survey

AQIS Pratique Inspection

AQIS Ship Inspection

Incinerator Inspection

ACS/DIAC/Security

AQISImportPermitSurvey

ACS: Export Clearance No.

Authority to Deal

Certificate of Clearance

AQIS

Export Permit [WEA bulk wheat]

Phytosanitary Certificate

AQIS

inspection

of grain &

loadingequipment

Load

Vessel /

Lodge

manifest

Key Documents/Approvals

Vessel

Clearance

Vessel

Departure

Bulk Handler

ApprovedEstablishment

Shipprior to port entry

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

Fumigation

Certificate

ACS: ExportDeclarationRequest to Load ShipStores, DepartureReport
http://www.abb.com.au/Portals/0/GMPDF/GMDFSheetCashPrices1860_5.pdfhttp://www.abb.com.au/Portals/0/GMPDF/GMDFSheetForwardContracts%201864_5.pdfhttp://www.abb.com.au/Portals/0/GMPDF/GMDFSheetForwardContracts%201864_5.pdfhttp://www.abb.com.au/Portals/0/GMPDF/GMDFSheetFirmGrainOffer%202474_2.pdfhttp://www.abb.com.au/Portals/0/GMPDF/GMDFSheetFirmGrainOffer%202474_2.pdfhttp://www.abb.com.au/Portals/0/GMPDF/GMDFSheetABBPool2606_1%20web%20version.pdfhttp://www.abb.com.au/Portals/0/GMPDF/GMDFSheetABBPool2606_1%20web%20version.pdfhttp://www.abb.com.au/Portals/0/GMPDF/GMDFSheetABBPool2606_1%20web%20version.pdfhttp://www.abb.com.au/Portals/0/GMPDF/GMDFSheetABBPool2606_1%20web%20version.pdfhttp://www.abb.com.au/Portals/0/GMPDF/GMDFSheetFirmGrainOffer%202474_2.pdfhttp://www.abb.com.au/Portals/0/GMPDF/GMDFSheetForwardContracts%201864_5.pdfhttp://www.abb.com.au/Portals/0/GMPDF/GMDFSheetCashPrices1860_5.pdf


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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 acontainer 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 underan AQIS approved arrangement the container is sealed and enters theregular container export supply chain. The empty container can be inspectedat the container depot and sealed for transport to the packing facility.

In contrast with bulk ship vessel grain exports the containership does not needto be grain inspected. An additional point of difference is that mostcontainerships run to a fixed day sailing schedule and generally face fewervessel 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 byroad and/or rail. The physical inspection may occur in the regional packingfacility or if remote on arrival at a metropolitan location.

AQIS requires different grade containers to be used for export bulk andbagged grain. Shipping Australia Ltd has produced the following guide.

CONTAINER CLEANLINESS STANDARDSGrade Criteria Commodities

FOOD CONTAINER

(FC)

(Including DPI Grade)

No Taint

No Flaking Paint

No Interior Transferable StainsClean & Dry Floor

No Cargo Residue

No Infestation

Dried Fruit

Flour

Grain/Peas/CerealsRice

CLEAN CONTAINER

(CC)

No Obnoxious Odours

No Flaking Paint

No Transferable Internal Rust

No Transferable Floor Stains

Clean & Dry Floor

No Cargo Residue

No Infestation

Milk Powder

Canned Fruit

Personnel Effects

Pet Food

Bulk Food

Commodities

(with fitted liner)

GENERAL CARGO(GC) No Cargo ResidueDry Floor

Normal Wear & Tear

Acceptable

General CargoCotton

Steel

Machinery

Tyres

MULTI PURPOSE

CONTAINER

(MC)

No Cargo Residue

Cargo Worthy

Suitable for carriage of

nonsensitive Cargo. Includes

containers prepared with

linings & absorbent material.

Hides

Bone Meal

Bagged Chemicals

Scrap

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


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In the case of grain AQIS rejects the container if it finds live pests in residuesor on the structure of the container; live rodents or evidence of rodentsharbouring behind linings; residue infestible by pests; structural damage thatpests could enter after loading; non-infestible materials, odour, water, rodentcarcasses or droppings.

Documentation

The following Australian Customs Service picture depicts export ofcontainerised grain from a registered approved depot to the ContainerTerminal Operator. A guide is on the ACS website.

Source: ACS website

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


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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

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

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

EXDOC WILL ASSIGN A STATUS OF EITHER HCRDOR COMP

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

EXDOC GENERATES A CERTIFICATE WHEN RFP HAS A STATUS OFCOMP

AA ESTABLISHMENT

EXPORTER

IF A STATUS OF INIT IF A STATUS OFFINL

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


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Exporters through Ex-Doc notify AQIS of a potential export of productusing the request for permit (RFP) suite of messages. An ExportPermit 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 ofvalidation activities to ensure that the product complies with Australianand NPPO country standards. The final step in the approval processfor RFPs is the allocation of an Export Permit Number (EPN) whereapplicable and production of the appropriate certificate by AQIS.

RFP includes:

Grain & Horticulture export registered/listed establishment, wherethe product is to be inspected

quantity, description and identification marks of product

description of how the product is packed, and container number(s) ifapplicable

exporter details

name of vessel, voyage number (or alternatively flight details), dateof departure

consignee, country of destination, port of discharge and place offinal destination

the type of Certificates and endorsements required, if applicable.


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Phytosanitary Certificate

Where a Phytosanitary Certificate is required AQIS procedures areclearly 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 AustralianGovernment certifies to the National Plant Protection Organisation [NPPO] ofthe importing country that the product meets that countrys import standards

and regulations.The following diagram represents a simplified export grain container chain.


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Finance,Banking,

Insurance

Containerised Bulk Grain Chain -Simplified

Grain

Seller

Grain

Buyer

Grain

Producer Transport topacking

lace

Booking request to

Shipping Line / Agent

Shipping line quote &

booking confirmed

Forwarding Instruction to

Line / Agent from exporter

Bill ofLading Cut

Instruction toContainer depot

Container

Inspection

Depot Inspection

Declaration

Exporter

Pick up of empty

container from depot

Container

ReleasePack

Container

Grain

Inspection

Seal

Container

Transport to

Container Terminal

PRA & Book

Time Slot to Depot& Container

TerminalCTO

Container

receival /

load to stack

ACS /

AQIS /

Line /

Agent

Approvals

& docs

Vessel

Arrival &

loading

Vessel &

Cargo

Clearance

Vessel

Departure

Port

Operations

& Services


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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 InformationInformation on the production of grain and market demand for it is dispersedacross various sources / organisationsSolution: Consider a linked web portal to make such information moreaccessible

Grain Market DeregulationThe deregulation of export grain has a number of impacts apart fromincreased competition. There is an increase in containerised exports as

smaller volume/specialised traders and sellers enter the market. This isexacerbating a shortage of Food Quality export containers.Solution: AQIS approval to use liners in lower grade containers as a functionalbarrier between the cargo and the container

As the market becomes increasingly dispersed in terms of grain exporters thetransport task is becoming harder to manage, particularly in terms of avoidingberth 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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DroughtDrought conditions are increasing competition between the domestic andexport markets for feed and food grainSolution: Greater efforts needed to drought proof farms / businessdiversification

Shorter Lead Times/Delays/Inspections/In-Transit FumigationOrder lead times are getting shorter and can be between 5-21 days. This putspressure on the whole supply chain. This is exacerbated by grain beingshipped year round not just in peak season. The impact is that shipmentscan be delayed increasing costs.

The new grain loading facility at the Outer Harbor has some 60,000 tonnesstorage capacity and grain sourced from the Inner Harbor silos relies on acontinuous/reliable transport chain. This increases the risk of ship delays inthe 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 significantlyhigher 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 OperationsGrain Ports, associated facilities and transport corridors need to be able tooperate 24/7.

Solution: 24/7 capability needs to be safeguarded by all three tiers ofGovernment

Availability of ServicesThe 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 RequirementsIn the case of Ballast Water Australia has a dual system, one from Victoriaand one for other jurisdictions. Emission controls being developed areonerous.

Solution: Raise need for national consistency with Government

Consistency in Regulation and Regulatory CriteriaMany of the regulations applied to grain exports are to an extent subjectiveand 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 withindustry may assist as may chain participant training courses including webbased training.

Safety on the WaterfrontSafety on the waterfront and at sea remains an ongoing issue that requirescontinual 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 WebConsistent Grain Export Procedures Grain Information PackManaging the Transport Task Sharing Of InformationShortage of Food Quality Grain Export Containers Use of LinersDrought - DiversificationShorter Lead Times:Supply Chain Coordination

Ship Inspection Failures International Ship StandardsGrain Inspections at Outer Harbor Risk of failureShip Delays Berth AvailabilityInspection Of Ships At Anchorage Remote Inspection TechnologyIn Transit Fumigation for minor infestation where permitted by import country24/7 OperationsAvailability of ServicesEPA Requirements - ConsistencyConsistency in Regulation and Regulatory CriteriaSafety on the Waterfront


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The grain chain is not only complex but is becoming time compressed as aresult of larger ships, relatively smaller holding load capacity at ports andmarket 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 throughbetter sharing of information, albeit consistent with ACCC requirements.

It is suggested that this paper and the minutes from the forum be widelycirculated to grain chain participants, forum attendees and key Governmentagencies 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 SolutionsForum is suggested to crystallise key issues and recommend tangiblesolutions at both a policy and operational level.

Comments on this discussion paper should be sent to:

Neil MurphyGeneral ManagerSouth Australian Freight Council Inc296 St Vincent St, Port Adelaide SA 5015Tel: (08) 8447 0688, Mob: 0427 089 240

Fax: (08) 8447 0606Email:[email protected]

Ian Lovell

Ian LovellConsultant

Tel 0400 708 182 [email protected]
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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AQIS Special Terms / Glossary

Term Meaning

AA Approved Agreement (with AQIS)

ABS Australian Bureau of Statistics

ACS Australian Customs Service

AQIS Australian Quarantine and Inspection Service

AHECC The Australian Harmonised Export Commodity Classificationassigned by the Australian Customs Service

AFFA Department of Agriculture, Forestry and Fisheries - Australia,was previously known as the Department of PrimaryIndustries and Energy (DPIE).

EDI Electronic Data Interchange

EDIFACT UN Standard EDI for Administration, Commerce andTransport

EDI User An exporter or agent who has Third Party Interface Softwareand is registered for a particular commodity

EDN Export Declaration Number obtained from ACS

EDS Electronic Documentation Section of AQIS Central Office

EPN AQIS Export Permit Number ( PIG / PIH number)

ER AQIS Establishment Register System

EXDOC Export documentation softwareICS Customs Exports integration system software. EXDOC

interfaces with it to obtain an EDN

LAN AQIS Local Area Network running EXDOC programs

NPPO National Plant Protection Organisation

Prescribed Goods Fresh fruit, Fresh vegetables, Dried fruit, Prescribed grain,Plants or Plant products for which a Phytosanitary certificateor any other official certificate is required by an importingcountry authority

RAS AQIS Remote Area Site running EXDOC programs

RFP Request for Permit to Export Prescribed Goods (EXDOC

EDI message) (old EX28/EX222 document)

RO AQIS Regional Office

SANCRT The United Nations EDIFACT registered global electroniccertificate covering animal, plant and fish products

Third PartyInterface Software

Software developed by 3rd party software developers as theinterface between the exporter and EXDOC

UN United Nations

VAN Value Added Network (an alternative name for Carrier)

WAN AQIS Wide Area Network running EXDOC programs

IL Paper Grain Chain Dec 10 08

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