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AAT reinstates customs broker's licence cancelled by Customs – the detailed "test match" version and more of the facts behind the case

There has been considerable interest in the recent AAT case which led to the reinstatement of a customs brokers' licence which had been cancelled by Customs.



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Following my earlier commentary which appeared through Hunt & Hunt and CBFCA channels, there have been requests for a  more detailed analysis of facts and the decision itself to pick up issues which may have not appeared in earlier, shorter summaries.  The customer is always right and so my more detailed commentary is set out below.


Of recent times, there has been significant Government focus on those in the "private supply chain" given heightened concern as to criminal involvement in the smuggling of tobacco, alcohol, drugs and firearms, and other security concerns.  Those concerns can be added to prevailing concerns as to the accuracy and timing of reports of cargo, proper reporting of movement of cargo under bond, proper valuation and classification of goods and ensuring that all relevant permits are secured.

The increase and focus on those in the private supply chain has spawned a number of developments including significant increase in conditions imposed on licensed custom brokers and those operating licensed premises.  There have also been public prouncements that the Australian Customs and Border Protection Service ("Customs") will adopt more active policies against those licensed entities who are perceived to not have observed their conditions.

Against this background, a very recent decision of the AAT in BR Williams Customs and Freight Forwarding Pty Ltd v. The Chief Executive Officer of Customs will doubtlessly create some controversy regarding actions taken by Customs against licensed brokers as the AAT ultimately reinstated a licence of a customs broker which had been cancelled by Customs following a report and recommendations by the National Customs Brokers Licensing Authority Committee ("NCBLAC").

There have been very few reported decisions in relation to Part XI of the Customs Act 1901 ("Act") which governs the licensing of customs brokers and other operators of licensed premises. 

Issue before the AAT

Following consideration of report of NCBLAC dated 25 September 2012, a delegate of Customs decided to cancel the licence of a customs broker.  The customs broker sought a stay of that revocation pending a review by the AAT to which Customs ultimately consented and the proceeding took place at short notice.

The issue for determination before the AAT was whether in the circumstances of the case and having regard to the report of NCBLAC, the licence of the customs broker should be cancelled or whether some other action should be taken.

Background facts

During several audits by Customs, it had identified a number of errors of different types.  These included errors in import declarations, movement of goods under Customs control without authority or, delay in payments of duty to Customs.

There had been some earlier steps by Customs to deal with identified errors.  This included the issue of 23 infringement notices for unauthorised movement of goods under Customs control contrary to section 33 of the Act and revocation of the right of the customs broker to use electronic funds transfer ("EFT") for payment of duties to Customs.

These events led to the issue of a notice under section 183CQ of the Act to the customs broker that Customs was referring the matter to NCBLAC for investigation and report ahead of potential action by Customs pursuant to section 183CS(1) of the Act.

There were essentially 3 matters referred to NCBLAC for investigation namely whether the broker had ceased to perform the duties of a broker in a satisfactory and responsible manner, whether documents prepared by the customs broker contained errors that were unreasonable and having regard to the nature and frequency of the errors whether it was necessary for the protection of the revenue and in the public interest for action to be taken against the licence of the customs broker.

NCBLAC investigation

NCBLAC considered 5 matters in its investigation as follows:

  1. The movement without authority and delivery without authority of 24 containers in New South Wales between 4 November 2010 and 18 January 2011 and one container in Queensland on 20 May 2011.
  2. Errors in various tariff classifications and related issues detected in the Custom's audit.
  3. Dishonouring payments attempted to be made by EFT leading to revocation of the company's EFT privileges with Customs.
  4. Failure to remit to client funds to Customs for the payment of duty within a reasonable period after for their receipt.
  5. Failure to finalise various declarations within required periods.

Of these issues, NCBLAC formed the view that issues 3 to 5 could have been due to financial problems of the customs broker but accepted evidence that the customs broker was not insolvent.

The matter of most concern to NCBLAC was the unauthorised movements of goods which, in its view, itself supported the revocation of the licence of the customs broker.

Despite the customs broker being under examination by NCBLAC between March and September 2012, Customs still renewed the licence of the customs broker from 1 July 2012.

Ultimately the NCBLAC report recommended the cancellation of the licence of the customs broker which recommendation was accepted by Customs and the licence was cancelled with effect from 23 October 2012.

Grounds for the AAT decision

  1. All parties agreed the cancellation of the licence was a serious measure so that pursuant to section 183CS(1)(b) of the Act, the AAT needed to be satisfied that cancellation (or some other action) was necessary for protection of the revenue or for the purposes of ensuring compliance with the Act.

    Customs referred to a number of previous authorities regarding who was "fit and proper" to hold licences under the Act and other decisions in relation to excise matters as to whether licences should be revoked on grounds that were necessary to protect the revenue.  However, it was clear that in no jurisdiction or tribunal had there been previous consideration of the provisions of section 183CS(1) of the Act.

    There was some preliminary debate about the correct standard of proof to be applied to determination of the matter and while the AAT resolved that proof was not required beyond reasonable doubt, the AAT did find that where an adverse finding carried serious consequences (as in this case) there was authority that the decision-maker should not be lightly persuaded.  Given the consequences of cancellation were significant the AAT accepted that it must be satisfied that there was cogent evidence to support a finding and the cancellation was "necessary".
  1. The customs broker provided evidence of mitigating factors which contributed to errors and also pointed to the absence of proof of subsequent errors.  While the AAT observed past errors having been caused by a serious lack of leadership and poor internal management and control, the AAT held that there was no significant risk that the customs broker would breach the Act in the future by unauthorised transactions or movement of goods.  Although the AAT agreed that the errors were not isolated or inadvertent, the AAT did point to a number of other mitigating factors and the fact that the breaches had occurred in the past, had been previously penalised by the issue and payment of Infringement Notices and that there was no evidence of other breaches subsequent to the breaches.  The AAT observed that the customs broker had been subject to regular Customs scrutiny since June 2011 and accordingly it was not unreasonable to infer that if there was evidence of there having been further breaches or unauthorised movements of goods then Customs would have led evidence to the AAT of such breaches in support of its decision to revoke the licence.
  2. The errors in tariff classification were, according to the customs broker, to have been caused in part by the client's lack of instructions.  Further, the failure of the customs broker to obtain an authority to act before it acted did not justify or warrant the cancellation of the licence on their own account.  In deciding this, the AAT agreed with NCBLAC which had reached a similar conclusion regarding the severity of the breaches.  The AAT also observed that it was not persuaded that the matters gave rise to concerns of insufficient management.  For these purposes the AAT observed that the audit which had identified the problems had taken place 2 years earlier, related to import transactions in 2009 and had no revenue implications.  Further those transactions represented a small number of imports compared to all those handled by the customs broker and that no action had been taken in respect of these errors at the end of the audit.
  3. As to the failure to remit payments to Customs, the AAT observed that there was some mitigating circumstances to explain many of those problems which it suggested were caused by poor systems and cash flow problems by the clients rather than the customs broker.  There was also no loss to revenue and all payments had been made within days of being due for payment.  The AAT was not satisfied that the breaches would occur with frequency to support the cancellation of the licence.  The AAT noted that Customs held a bond guarantee for compliance with payment obligations and there had been no apparent breaches since September 2011.  Again, the AAT held that it was not unreasonable to infer that any other evidence of failing to pay would have been produced by Customs. 
  4. The AAT also addressed the issue as to whether the matters cumulatively warranted the cancellation of the customs broker licence.  NCBLAC had come to such a conclusion.  However, the AAT observed that while it did need to consider and give weight to the report having been produced and delivered by NCBLAC, such a finding by NCBLAC was not evidence and the AAT was not bound by the material provided by NCBLAC.  While AAT gave the NCBLAC report respect it came to a different view on the facts.  Ultimately, while a number of problems had been identified, the AAT was not satisfied that cancellation was necessary for protection of the revenue or to ensure compliance.

When examined in detail, the AAT came to the conclusion that the breaches were in the distant past and that changes had seemed to work to remedy those problems and protect against future problems.

The AAT observed no evidence of wilful dishonesty or that officers of the customs brokers were ill-motivated or incompetent.  The AAT also found it relevant that there had been no loss of revenue or evidence of other risks (such as the importation of dangerous goods) or of continuing and persistent breaches or later failure to make payments when due.

Accordingly, the AAT found that the licence should not have been cancelled and ordered the Customs to reinstate the licence.

Other observations by the AAT

The AAT also made a series of other observations.

  1. Suspension of the custom's broker licence for a period pending remedial action may have been appropriate if there had been evidence of ongoing breach and remedial action identified to rectify the breach.  There was no evidence to support this and the AAT was not satisfied based on the evidence a suspension was necessary for the protection of revenue or to ensure compliance.
  2. Section 183CS(1) of the Act does not provide for Customs to impose conditions on customs brokers which may have been a more flexible remedy.
  3. Customs had already informally imposed administrative limitations on the custom's broker by removing its EFT privileges and requiring payment of a bond.
  4. Customs may have considered imposing conditions on the customs broker as part of the licence renewal process but given the licence renewal arose during the investigation by NCBLAC that option was not examined.

Remedy ordered

In the circumstances, the AAT resolved that an appropriate remedy was to order a reprimand against the customs broker but for the licence to be reinstated.  However, a reprimand should not be seen as a minimal response.  It carries weight and leaves open stronger action in the future.

Possible consequences of the decision

We have yet to hear whether Customs is likely to appeal the decision, a number of issues to arise from this important decision.

  1. This is clearly not the result intended by Customs or NCBLAC and runs contrary to the intention of their actions and Customs stated desire to enforce proper compliance .
  2. Although the AAT gave respect to the findings by NCBLAC it ultimately came to a different decision to that of NCBLAC and formed a different view regarding the seriousness of the activities of the customs broker.
  3. While every case is decided on its different facts, the AAT has given some indication as to what will and will not warrant cancellation of a licence.  However, in the current compliance environment, it is hard to see that significant breaches by a licensed broker (or other licensee) would not support more immediate action.  For example, regular movement of goods under Customs control without authority may now attract more action than Infringement Notices
  4. It was important to the AAT that it believed there was no threat to the revenue, there was a lack of likelihood of future breaches and also that there were mitigating factors as to the cause of past breaches.
  5. The AAT noted that many of the alleged breaches had taken place some time in the past and on many of them penalties had already been imposed on the customs broker by way of Infringement Notices and other administrative remedies following which there did not appear to have been any evidence of further breaches.  The absence of wilful dishonesty and incompetence also mitigated against loss of the licence.
  6. It appeared that if Customs had acted at the time of the relevant breaches there could have been different results but that the choice by Customs, to impose other penalties and the subsequent improved behaviour by the customs broker mitigated against the proposed cancellation.
  7. It needs to be kept in mind that licensing does not just apply to customs brokers but also to the operators of licenced premises and accordingly the decision does have consequences for the conduct of those licencees and any potential action by Customs in relation to the licences.
  8. It is important to recall that the relevant facts and action by Customs occurred prior to new conditions being imposed on licensed custom’s brokers and the new Government focus on the activities of licensed custom's brokers may lead to different actions. 
  9. On the facts, it appeared that the relevant breaches had occurred some time in the past, did not threaten the revenue and did not appear to have been of a recurring nature.  Accordingly, it did not appear that they would have supported the cancellation of a licence.
  10. It raises the possibility that Customs may require client payments on account of duty, GST and other charges to be placed in a trust account which is audited (as with other professionals) so as not to be easily available for other purposes.
  11. The decision does raise the interesting issue of the use by Customs of Infringement Notices which are subsequently paid.  The relevant provisions of the Act state that if an Infringement Notice penalty is paid, the liability of the person to the offence specified in the notice taken to be discharged, further proceedings cannot be taken against the person for the offence and the person is not regarded as having been convicted of the offence (see section 243ZK of the Act).  However, in these proceedings it appears that both NCBLAC and Customs had identified the movement of goods under Customs control without authority (for which Infringement Notices had been issued and paid) as some of the grounds for action against the customs broker.  Although this matter was not specifically raised by the decision of the AAT it may not appear to be within the spirit and intent of the Act for such Infringement Notices to then be used as evidence against a licensee in these types of proceedings.  This may certainly give licensees cause to think carefully about merely paying Infringement Notices if the relevant alleged offences could be used against them in future.  In those circumstances, we would seek clarification both from Customs and from NCBLAC as to their intended treatment of events which have led to the issue of Infringement Notices which have been paid and whether, in fact, both Customs and NCBLAC believe that such events can, in fact, be the subject of further action under Part XI of the Act.


It appears fair to assume (and expect) that Customs and NCBLAC may well move more quickly in the future given the nature of the changes to conditions applying to customs brokers and also the change in attitude of Government towards those holding licences and their concerns regarding security in the private supply chain.

As always, it is important to note that any errors identified by Customs in any audit of the operations of a licensed customs broker (or licensee of a licensed premises) could form the basis for action by Customs other than by way of penalty which could lead to suspension, revocation or cancellation of a licence if considered serious enough.

As always I am happy to advise and assist anybody facing such action by Customs.  I have previously presented in many forums on the issue of Customs new approach to licensees and the operation of these provisions and this case will be a topic of my presentations at CBFCA State Conventions.

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