The revised policy on the fulfilment industry

1240/5(2776)

WRITTEN QUESTION TO THE MINISTER FOR ECONOMIC DEVELOPMENT BY DEPUTY G.P. SOUTHERN OF ST. HELIER

ANSWER TO BE TABLED ON TUESDAY, 14th MARCH 2006

Question

1. Wouldthe Minister confirm that the changesto the policy on fulfilment were released to the media by11.3 a.m. on 28th February 2006 and,ifso, would he explain whyhe was unableto inform the States in full of the details of the revised policy in response to a question in theAssemblyonthesame day?
2. Has the Minister soughtlegaladviceon the change in policy, andifsowillhe reveal that advice to member and if not, why not?
3. Hasthe Minister received confirmation that the distinction drawnbetweenthosecompanies beneficiall ownedbyJersey principals and those which are foreign ownedinparagraphs11 (i) and (ii)of the Policy for the Fulfilment Industry issued on 28th February 2006 is not open to challenge under international competition rules?
4. Would the Minister statewhetherthe policy set out in the aboveparagraphsmeans that anyexisting loca fulfilment companywhich is subsequentlyboughtby foreign principals would not then be supported? What consideration, ifany,hasbeengivenby the Minister totheconsequencesofany extension of this principleto other non-finance companies under the zero/ten tax proposals to be adopted in 2009, and if no such consideration hasbeengiven would he explain why not?
5. What confirmation, if any, hastheMinisterreceived that the distinction drawninparagraphs 11 (iii) and (iv between thosecompanies trading in DVDs/CDsand others, isnot contrary to competition rules underJCRA guidelines? Does this policy give anadvantagetotheDVD/CDmarket leader already establishedin the Island?
6. Would the Minister confirm that all fulfilment companies,whether locally ownedor not, and whetherwhol chain (WCC)or third-party service (3PS), provide a similar service,namely importing goods in bulk for individual despatch, thereby adding value, and, if so, would he indicate why they are not all treated inan equalway by the policy?
7. In related statements the Minister has stated that some 100 jobs might be lost in this sector as a result of th revised policy. Will the Minister informmembershow this estimatewas calculated and also indicate –

1. the total numberofcompanies operating in the fulfilment sector, together with thenumberofemplo and the GVAcontributionto the economy?
2. the numbersofcompanies,employeesandGVAineachof the sectors defined by the Ministe–r as

1. WCC
2. 3PS
3. Hybrid companies

3. how manycompanies have been operating without a licence under the Regulation ofUndertakings Development legislation that will nowberequired to applyfor such a licence,and how manyofthese licences will be for a 12-month period?
4. how manycompanies have already applied for a licence and have been waiting for a decision base the new policy sinceautumn last year,and how manyof these companies will receive a 12-month licence only?

8. Will the Minister inform memberswhat provisions of the Regulations ofUndertakings and Developmen legislation require the structure adopted byUKcompanieswhich take advantageof3PScompanies(thatis described in the policyas "little better than a sham") to applyfor a licence? Wouldhe inform members how some companies have been able to trade without such a licence, and for how long this practice has continued?
9. Will the Minister inform membershowmanyfulfilmentcompanies are operatinginthe Island using Offshor Services (OSL), the 3PS arm ofJersey Post? Will he further state –

(aw) h at proportion of total postal revenues, in real and percentage terms, is contributed by postal charges

from fulfilment business?

2. what profit isgeneratedbyOSLas a company?
3. what impact,if any, the newpolicy will have on the numberofcompaniesservicedandon the numb staff employedbyOSL,and
4. what consideration, if any,hehasgiven to the impactof the revised policyon the viability of proposed incorporation of Jersey Post?

Answer

1. In relation to part 1 ofthequestion, a revised policy was issued to the media by11.30am after I had finished answeringquestions in the Assembly.In relation to part 2 ofthequestion, I stated in myfirst answer that "I will be publishing later this morning a new revised policy in respect offulfilment". I was not asked to explain in full the details of the revised policy.  However, I personally sent membersbye-mail a full copyof the revised policyon the sameday.
2. I soughtand received extensivelegaladvicewhilstpreparing the policy that wasissued on 28 February 2006. This advice will bemade available as part of the ongoing Scrutiny Panel inquiry subject to the principles regarding the releaseof confidential legaladvicewhich has yet to beagreed.
3. Nosuchconfirmation has been received.
4. A changeof beneficial ownership is notified to Regulations & Undertakings for approval.Each such case will beevaluated on its individual circumstances.
5. We have no absolute confirmation that thepolicycouldnotbechallenged.The policy soughtto preserve the integrity ofthe Island incommercial and financial matters as is required under the RUDlaw.
6. Whole-chain companies(WCC) and third party service providers (3PS) donot provide a similar service from the Island. Therefore it is legitimate to differentiate theirtreatment within the content of the Fulfillment Policy.
7. It isnot possible to accurately estimate the numberofjob losses. TheEconomicDevelopmentDepartment will beworking with all Fulfillment companies to develop new markets with the intent of maintaining current employment levels. Muchof the information that has been requestedin 7a to7d is considered to be commercialinconfidence.Detailed analysis will be provided to the Economic Affairs Scrutiny Panelas part oftheirongoing enquiry.
8. Article 2 of the RUDLaw states that anyonecommencingan undertaking in the Island requires a license so to do. The definition ofan undertaking is any tradebusinessor profession whetheror not carried out for profit.
9. T h ere are 11companies currently using the services of Offshore Solutions.

1. The2006budgetedgroup turnove£r5 i6sm, ofwhich postage related to the whole ofthe fulfilment sector in Jersey is £27.6m (49%),ofwhichpotentially10%couldbe lost as a result of this policy although this is not likely tooccuruntil 2007.
2. Due to its initial investmentinwarehousing infrastructure and facilities, OSLdidnotmake a profitin 2005. OSL is budgeted to contribute £1.2m to Group Overheads and Profitability in 2006, although at this stageinthe year (March)itis still too early to say whattheactual outturn will be. In generating this contribution OSL pays the same Postage   Price s as its competitors in the localmarket place.  The main customer (approximately50%ofOSLbusiness) is UGDwhoare unaffected by the Policy.  Jersey Post has contingency plans for any loss ofbusiness as a result of this policy.
3. The policy will reduce the numberofcompaniesservicedbyOSL significantly and is likely to have an effect on the number of jobs in OSL. However,itistooearlyto quantify this at present.
4. Full consideration  wasgivento this policy  whenmodelling the future financing ofJerseyPost International Limited, before the SecondCommencementAct and TransferRegulations werelodged. The  future Chairman,ManagingDirectorandFinance Director of JPIL haveconfirmed they believe JPIL will continue to be a going concern if the fulfilment policy isimplemented as planned.