Agribusiness Perspectives Papers 1997/98

Paper 18
ISSN 1442-6951

Risk Management for Agricultural Compounds and Veterinary Medicines

Bruce Burdon

Food & Animal Policy Group, 
Ministry of Agriculture & Forestry, New Zealand.

Abstract

In early 1999 new legislation will seek to control agricultural compounds and veterinary medicines. The purpose of the Agricultural Compounds and Veterinary Medicines Act 1997 is to manage risks from the use of agricultural compounds to trade in primary produce, animal welfare and agricultural security. It also ensures that the use of agricultural compounds and veterinary medicines do not breach domestic food residue standards. The Agricultural Compounds and Veterinary Medicines Act is not a stand alone piece of legislation. It is primarily responsive to international trading arrangements and to standards and outcomes set under other legislation (Meat Act 1981, Dairy Industry Act 1952, Biosecurity Act 1993, Animals Protection Act 1960, and Food Act 1981). It is overlaid by the Hazardous Substance and New Organisms Act 1996, which has the purpose of managing environmental and human health risks. The task for those administering the Agricultural Compounds and Veterinary Medicines Act is to ensure that its objectives are met efficiently without compromising or duplicating the outcomes of other statutes. A risk management approach has been used to make recommendations on the extent of regulation required, if any. Some cost benefit analysis and minimum cost techniques are also used to keep the bureaucrats honest.

1. Introduction/Background

Existing legislation is dated and inadequate

Currently risk management for agricultural compounds and veterinary medicines in New Zealand is carried out under the Pesticides Act 1979, Animal Remedies Act 1967, Fertilisers Act 1960 and Stock Foods Act 1946. These Acts are prescriptive and impose blanket regulation over all compounds. They have very broad objectives, for example, to ensure that animal remedies are efficient and safe for use on animals, that the remedy is not a danger to public health or animal health, generally to promote the prudent, effective, and safe use of pesticides, etc. These Acts are outdated and do not adequately meet the needs of the rapidly changing domestic and international trading environments agricultural products are produced and sold in. For example, risks from biotechnology, prions (BSE), and biological control agents were not envisaged and there for not provided for in these Acts.

For the purposes of this paper the term 'agricultural compound' also means veterinary medicines.

Reform of existing legislation

In the early 1990s the Government agreed to the reform of agricultural regulation covering biosecurity, animal welfare, trade in primary products, and agricultural compounds.

At the same time, during the resource management law reform, and later the hazardous substances and new organism's law reform, the Government decided to mange risks to the environment and human health and safety from substances separately under a proposed Hazardous Substances and New Organisms (HSNO) Act. The HSNO Act's purpose is to protect the environment, and the health and safety of people and communities, by preventing or managing the adverse effects of hazardous substances and new organisms. This purpose is achieved by assessing substances for adverse effects on the environment (including social, cultural and economic effects) and approving the substance if it has a net benefit to New Zealand after taking account controls.

The need for agricultural compound regulation

The Director-General of the Ministry of Agriculture and Forestry has statutory responsibilities under MAF administered legislation to assist with the management of risks to trade in primary produce, animal welfare, and agricultural security. The responsibilities include: negotiating; consulating and setting of standards; verifying and certifying that standards have been complied with; and enforcement.

Agricultural compounds pose only a small part of the overall risks to trade, animal welfare and agriculture security. However, many compounds pose risks to more than one area, for example, a veterinary medicine may pose risks to trade and to animal welfare. It was considered more efficient to assess and manage the risks from these compounds under a single piece of legislation at the input stage, thereby reducing the risk of substandard performance at the output stage, which could result in product rejections or costly endpoint testing of produce.

MAF considered whether the risks it was responsible for managing could be done under the then proposed HSNO framework. However, the scope of the HSNO Act (and the then proposed Bill) and its risk management framework did not fully cover the risks the MAF Director-General had a statutory responsibility to manage. The main reasons were:

• not all agricultural compounds were hazardous substances or new organisms;
• there was a need to provide for registrations of an agricultural compound product as opposed to general substance approvals provided by the HSNO Act; and
• the HSNO Act was to be effects based, but other risks were also posed by compounds such as them not working (preventatives and cures of pests, weeds and disease).

The primary reason for separating environmental and human health and safety from trade and other considerations (which are currently bundled together in the Pesticides and Animal Remedies Acts) was to ensure good decision making. Good decisions require clear objectives. The risks of each piece of legislation are managed on behalf of two different groups: HSNO managing third party risks on behalf of the public of New Zealand, while the risks managed under the Agricultural Compounds and Veterinary Medicines (ACVM) Act are generally risks to producers and their production systems, for example, the risk of not meeting the requirements of the market. Under this arrangement the requirements of each law are clearly additive, and not traded off against each other (for example, an increase agricultural production being at the expense of the environment) . This flows through into the arrangements for decision making and process, providing for appropriate accountabilities in each case.

The scope of the remainder of this paper focuses on the risk managemenant provided under the ACVM Act.

2. Agricultural Compounds and Veterinary Medicines Act

Purpose/Principles

The Act's purpose is to prevent or manage risks associated with the use of agricultural compounds, being risks to--

(i) trade in primary produce;

(ii) animal welfare; and

(iii) agricultural security.

Its purpose is also to ensure that the use of agricultural compounds does not result in breaches of domestic food residue standards and to ensure the provision of sufficient consumer information about agricultural compounds.

The ACVM Act is primarily responsive to standards and outcomes set under other legislation (Meat Act 1981, Dairy Industry Act 1952, Biosecurity Act 1993, Animals Protection Act 1960, and Food Act 1981). Agricultural compounds will be assessed and controlled under the ACVM Act to ensure that the outcomes and standards set under the above laws or by international agreements, are not compromised.

The ACVM Act is enabling legislation. Regulation will only be imposed where there is a demonstrated risk to be managed and when the benefit of control exceeds the cost of control. There is also provisions for public participation in the decision making process, through submissions on applications for registration, or public consultation in the development of regulations.

Table 1: Relationship of the ACVM Act as an input to meeting the outcomes of other laws

3. Risk Management Approach of the ACVM Act

The ACVM Act is enabling legislation with a wide scope to cover all agricultural compounds. The basic philosophy of the ACVM Act is that all agricultural compounds must be registered, unless they have been exempted from registration.

The problem presented to regulators was to establish a risk management framework for determining whether a compound should be subject to any regulatory control and then to determine the appropriate regulatory control mechanism. The Act's purpose was of little assistance to resolving this problem, it simply stated that the risks be managed or prevented. Defining what the risks were and what the appropriate levels to manage them to were not spelt out.

The ACVM Act provided some guidance to develop a risk management framework from. It provides for risk management to be achieved in the following ways:

• compounds exempted from registration without control;
• compounds exempted from registration, but subject to prescribed standards;
• compounds exempted from registration, but subject to prescribed conditions; and
• trade name products subject to registration.

It also provided that an agricultural compound should be exempted from registration if:

• the compound does not pose any risk;
• the risks can be managed through prescribed conditions or standards;
• the risks posed are already adequately managed under some other legislation; or
• the likely cost of assessing and registering an agricultural compound as a trade name product is greater than the likely risks from the use of that agricultural compound without registration.

In terms of the process of developing this framework the industry were kept informed and consulted at every step. Firstly, a public discussion document was released on the proposals. Then four separate working parties (covering food/nutrition, animal, plants and fertilisers) consisting of MAF and industry representatives, assessed agricultural compounds and made exemption and control recommendations. The recommendations were discussed at the Agricultural Compounds and Veterinary Medicines Advisory Council, which consists of persons representing the interests of the organisations involved in the importation, manufacture, sale and use of agricultural compounds. A 'final' position statement, was distributed for public comment.

Finally, the proposal was put to the Government for policy approval. This process has taken 12 months.

Appendix 1 summarises the framework used to determine the need for regulatory control.

4. Summary of the Development of the Risk Management Framework

Identification of Relevant Hazards (Adverse Affects)

The first step in the framework was to identify what are the hazards (adverse effects) agricultural compounds could potentially cause. An analysis was made of primary standard setting legislation, international requirements and expectations. For each area of risk in the Act's purpose, thresholds and criteria were established. These are detailed in Appendix 2.

Determining whether the Agricultural Compound Could Cause any Hazard

(Adverse Affect)

Agricultural compounds or groups or classes of agricultural compounds were assessed against the hazard thresholds to identify if their use would breach the thresholds and therefore pose risks. In summary, if the use of an agricultural compound was considered to have any potential to cause:

• a restrictive or negative impact on New Zealand's trade in primary produce;
• an unacceptable effect on the welfare of animals treated;
• diminished agricultural security (i.e. capability to exclude, eradicate or effectively manage unwanted organisms or to have a negative impact on agricultural productivity); or
• a breach in the domestic food residue standards;

then that agricultural compound was assessed to determine the level of risk posed. Compounds which posed no hazard, that is, cause no adverse effects and therefore pose no risk were recommended to be exempted from registration without conditions.

Risk Assessment

Where an agricultural compound required a risk assessment, the risks were identified and the level of risk assessed. Risk, in this context, was defined as the product of the probability that a specified threshold will be exceeded times the magnitude of the consequential negative impact. Agricultural compounds were assessed in regard to each of the criterion set out in Appendix 2 to have either a high, medium or low probability that the threshold will be exceeded.

Agricultural compounds were also judged for each criterion in regard to either a high, medium or low magnitude of the negative impact due to exceeding the threshold. If there was insufficient information to make such an assessment about a compound with confidence then, as a precaution, such compounds were not recommended for exemption from registration. This has ensured that in the face of uncertainty a reasonably conservative decision has been made.

Where an agricultural compound is also a hazardous substance, the assessment and management of environmental and human health and safety risks will be carried out under the HSNO Act.

Risk Management

The next step was to determine if any regulatory control is necessary to manage the identified risks. As a basic principle there should be no more control than is necessary to be confident that the relevant risks can be managed.

The following decision matrix sets out the relationship between the assessment of the risks and the decision as to whether regulatory control should be imposed.

This matrix is weighted in favor of regulatory control of agricultural compounds. Probability and magnitude of impact are not of equal significance. The estimation of the magnitude of impact is of greater concern than the probability of the threshold being exceeded. For example, lost market access through unacceptable residues being found on produce would be unacceptable not matter what the frequency of occurrence is. Where there was only a low magnitude of impact (ie, very little cost whether the threshold is exceeded or not) then no controls would be imposed. If the magnitude of impact was estimated as medium to high then regulatory controls of some kind would be imposed.

5. Regulatory Control Decisions

Agricultural compounds that pose no or low potential risk

These compounds were characterised by low impact in the prescribed risk areas. There would be no or limited benefit (risk reduction) to be gained from registering or placing any other form of regulatory control on these compounds. Therefore, the decision was made that compounds falling into the 'no or low risk' category would be exempted from the requirement to be registered.

It is not proposed to place any form of regulatory control, under the ACVM Act, on these compounds. However, they will be subject to the conditions of other Acts, for example, the Fair Trading Act with respect to the adequacy of representations made about a product.

Examples of these compounds are; non-medicated topical skin preparations, compost, attractants and repellants, non-solvent cleaners (non-medicated shampoos, soaps, and tear stain removers).

Compounds exempted from registration, but subject to regulatory conditions

Agricultural compounds requiring regulatory control can be controlled by registering a product or by prescribing conditions. The ACVM Act provides that where the likely cost of assessing and registering an agricultural compound is greater than the likely cost resulting from risks from the use of that agricultural compound without registration, that compound should be exempted from registration. An assessment of agricultural compounds requiring regulatory control was made against this criterion, while having regard to the cost and effectiveness of the various control options. To be effective, regulatory conditions need to be broad and easily enforceable. The compounds falling into this category were ones where risks of their use can be managed by conditions such as requiring basic labelling, good manufacturing practice, that they are not used in food producing animals or plants etc.

Examples of these compounds are; plant compound adjuvants, including wetting and sticking agents, pH buffers, drift retardants, and water conditioners, herbal and homeopathic preparations, and topical or oral preparations applied solely to kill or to inhibit the development of external parasites.

Compounds exempted from registration, but subject to regulatory standards

A further category of compound was identified comprising those that pose some risks, but do to require active regulatory control. Agricultural compounds in this category will be subject to prescribed standards. Compliance with these standards is the responsibility of the importer, manufacturer or seller. Compounds such as fertilisers and oral nutrition products fall into this group. For the most part industry compliance will be achieved through voluntary codes of practice.

6. Outcomes

It is estimated that around a third of existing licensed animal remedies and registered pesticides will not require registration under the ACVM Act. This will reduce the cost of getting these products into the market.

Risk assessment and risk management have been recommended only where there is a demonstrated risk to be managed. This should also reduce compliance costs and avoid unnecessary regulation.

Greater responsibility is placed on the applicant, importer or manufacturer to identify the risks the product poses. It also places an obligation on the regulator to be transparent about its risk management standards, assessment methodology and outcomes required.

All agricultural compounds have been placed into categories depending on the risks they pose and the degree and type of risk management they require. For lower risk compounds, risk management can be achieved through self regulation, via codes of practice developed by the industry. Because the ACVM Act is enabling legislation, the risk management approach will be dynamic. Compounds can easily be reclassified as and when risks change. However, policy makers will need to act with caution as continual change will lead to confusion.

7. Hazardous Substances and New Organisms Act Interface

In my introduction I mentioned that the responsibility for management of risks from agricultural compounds had been split. Environmental and human health risks are to be managed under the HSNO Act, whilst trade, animal welfare, agricultural security and food residue risks are to be managed under the ACVM Act. It is not within the scope of this paper to present a summary of the risk management approach to be undertaken under the HSNO Act or the combined HSNO and ACVM Acts.

However, it is worth noting that many in the industry are concerned with the potential overlap between the ACVM Act and the HSNO Act. Overlaps are not at all uncommon between legislation. The range of circumstances in which the laws are applied makes it virtually impossible to neatly separate their application in every case. Overlaps need not be a difficulty provided they are properly identified and the various administering regulatory authorities work together to ensure they are appropriately managed to avoid duplication of effort.

MAF and the Environmental Risk Management Authority (who administer the HSNO Act) have identified a number of potential overlaps and are working together to ensure they are effectively and efficiently managed. It is to early to report how this will be achieved of how effective or efficient the administrative interface is likely to be.

8. Summary

In early 1999 new legislation will seek to control agricultural compounds and veterinary medicines.

The management of risks from agricultural compounds and veterinary medicines will be split between two agencies administering two different pieces of legislation. The HSNO Act will cover risks to the environment and human health and the ACVM Act will cover risks to trade, animal welfare, agricultural security, and to food residue standard.

The ACVM Act reform will facilitate a move away from prescriptive blanket regulation of all animal remedies and pesticides to a regime where regulation will only be provided where there are demonstrated risks to be managed, and where there is a net benefit in providing regulation.

The ACVM Act is enabling legislation and provides a range of risk management options.

After extensive consultation and liaison, MAF has determined thresholds and criteria for determining if agricultural compounds pose any hazard. All known agricultural compounds and veterinary medicines have been categorised according to the risks they pose (or don't pose). Where risk are posed they have been assessed to determine the type of risk management (if any) required included an assessment of the net benefit in providing the regulation.

The management of environmental and human health risk under the HSNO Act may provide appropriate risk management for the ACVM Act's purposes and likewise the risk management provided under the ACVM Act may contribute to achieving part of the HSNO Act's purpose. The two agencies are working together to ensure the overall risk management regime for agricultural compound and veterinary medicines will be effective and efficient.

References

Exemption from Registration Under the Agricultural Compounds and Veterinary Medicines Act 1997, MAF Public Discussion Paper No.6 (February 1998),

Final Proposal, Exemption from Registration Under the Agricultural Compounds and Veterinary Medicines Act 1997, (June 1998), MAF

Process for Registration Under the Agricultural Compounds and Veterinary Medicines Act 1997, (September 1998) MAF Consultation Document

These documents and other background information can be found in the ACVM section of MAF's web site www.maf.govt.nz 

Click here for Appendix 1

Determining whether any of the threshold criteria or regulatory control mechanisms to be used was based on an analysis of the risks posed. 

Appendix 2

ACVM Act thresholds and criteria for determining risks and the need for regulatory control

Risks to trade in primary produce

Thresholds:

i. Non-conformance with international standards for trade in primary produce, for example maximum residue limits as defined by Codex Alimentarius Commission; or

ii. Non-conformance with an agreed New Zealand national requirement, based on regulatory requirements in a significant portion of the international market; this includes assurances on residue limits, regulatory controls on importation, manufacture, sale and use, and efficacy of pest control programmes.

Criteria:

i. Whether the use of the compound could result in non-conformance with international standards or agreed national requirements;

ii. Whether the use of the compound could result in residues that exceed limits prescribed under the Meat Act 1981;

iii. Whether the formulation or presentation of the compound could encourage misuse or abuse leading to non-conformance with international standards or agreed national requirements;

iv. Whether the production of the compound may need to comply with commonly accepted good management practices in manufacturing, testing or use;

v. Whether there are international or competent authority expectations that the compound or ingredients in the compound should be subject to regulatory control;

vi. Whether any countries have imposed technically supportable restrictions on the use of the compound or its ingredients.

Risks to animal welfare

Thresholds:

i. The use of a compound could result in unacceptable pain or distress in the target animal; or

ii. The failure to achieve the product's claims to cure or control conditions that are characterised by unacceptable pain or distress in the target animal.

Criteria:

i. Whether the use of the compound could produce demonstrable evidence of unnecessary pain or distress; and

ii. Whether the use of a compound could result in demonstrable evidence of the failure to achieve product claims that result in unnecessary pain or distress in the target animal.

Risks to agricultural security

Thresholds:

i. Interference with the exclusion, eradication or effective management of pests or unwanted organisms pursuant to the Biosecurity Act 1993; or

ii. Diminished agricultural productivity as a result of interference with pest eradication or management; or

iii. Failure to achieve product claims against pests that could result in decreased productivity in the national herd/crop.

Criteria:

i. Whether the use of the compound could have a significant negative effect on productivity in the national herd/crop as a result of interference with pest eradication and management;

ii. Whether the use of the compound could hinder the exclusion, eradication or effective management of pests or unwanted organisms;

iii. Whether the use of the compound could result in demonstrable evidence of the failure to achieve product claims to eradicate or effectively manage pests of significance to productivity in the national herd/crop.

Breaches in the domestic food standards

Public health is not an area of risk to be managed under the ACVM Act. It is the responsibility of the Ministry of Health and the Environmental Risk Management Authority. However, the ACVM Act does provide power to regulate the use of agricultural compounds to ensure the Food Regulations 1984 are not breached. This means that in placing conditions on the import, manufacture, sale and use of agricultural compounds for trade reasons, regulators must ensure that those conditions will be sufficient to ensure that the above Regulations will not be breached.