The Department of Agriculture is investigating claims that sales of thousands of Australian sheep in Jordan and Kuwait have breached live export rules.
The revelations come on the eve of the Islamic Festival of Sacrifice and with huge demand for sheep for holy family offerings, animal welfare activists are concerned the sheep will soon face brutal slaughter.
Animal activists say they told the Department more than a year ago that sheep were being sold away from approved supply chains, and the investigations have begun too late.
"Animals Australia investigators have alerted the Department of Agriculture to severe breaches of live export regulations occurring in Jordan and Kuwait," Animals Australia legal counsel Shatha Hamade said.
"There should be no leakage of these animals to these roadside stalls and the real concern here is that the Department of Agriculture and the Australian Government have been well aware of these particular points of leakage."
The complaint alleges about 10,000 Australia sheep exported to Jordan have "leaked" from approved supply chains, and been sold in unofficial markets.
If that's true, it would be a major breach of the live export rules put in place in 2011, after revelations of horrific abuse of Australian cattle in Indonesia.
For the Festival of Sacrifice, animals are purchased and slaughtered, the meat shared with family and friends.
In parts of the Middle East, the festival has a questionable animal welfare history, with sheep being stuffed into car boots and many inhumanely slaughtered.
"Animals Australia made complaints about the notorious roadside markets in Kuwait some 14 months ago," said Ms Hamade.
"We've lodged three complaints with the Australian Government. And in Jordan, four months ago we also lodged a formal complaint about the leakage that's happening in pretty much the same locations and basically it's continued unabated."
Ms Hamade says the Department has been slow to act on previous complaints, and she fears animals will suffer.
"Because no sanctions have been rolled out by the Government and because the exporters have not been held to task, there's been no deterrent for them to change their behaviour.
"In fact, in a deliberate attempt to circumvent Australian law, the ear tags are now being removed from more, if not most, of the animals to avoid them being tracked back to the exporter responsible for them being in these stalls and marketplaces."
This is not the first alleged or proven breach of the live export rules, with exporters having previously breached the rules in Indonesia, Pakistan and Kuwait.
The Livestock Exporters' Council has expressed concern over the allegations.
"This is an issue that clearly is demonstrating that in this particular supply chain in Jordan there are potentially some significant issues," spokeswoman Alison Penfold said.
"Particularly at this time of year with the Festival of Eid, it is of grave concern to us that livestock could exit controlled facilities and we can not assure welfare."
It is the first major test of the live export regulatory process under the new Government and new Agriculture Minister, Barnaby Joyce.
"The system has been very successful in many other instances and we can see the issues," Mr Joyce said.
"Getting the trade up and running again in Indonesia shows the success of the system.
"No system in any form of politics or any form of trade is perfect. You're always going to get problems.
"What we have to do is let the process follow its proper mechanism and make sure our reaction is tempered by the effect that we're dealing with trading partners."
The Minister is supportive of the live export rules introduced by the former Labor government, but says he is aiming to cut what he calls the "red and green tape for livestock exporters".
While parts of the industry want the regulations wound back, Mr Joyce says he is happy to follow his Department's advice for now.
"I'm watching the process very closely," he said.
"But I'll let my views stay in the background until the process has come to its own conclusion."