While Government has moved against its own officers believed to have been involved in criminal activity as well as introducing new integrity testing and other measures, it has also introduced a series of legislative and practice changes aimed at increasing control of those in the private supply chain and enhancing the ability to deal with those found to be acting inappropriately. That has led to a variety of measures including the additional conditions which were imposed in July 2012 associated with the issue of renewed licences for licensed customs brokers and those operating licensed premises.
At the same time, the Federal Attorney-General released a series of Fact Sheets in July 2012 which included reference to significant additional controls to be imposed. The Australian Customs and Border Protection Service ("Customs") made subsequent comments to the effect that it would be seeking to enhance its control over those in the private supply chain as well as increasing sanctions available under the Customs Act 1901 ("Act").
We have kept those affected up-to-date with various updates, presentations through CBFCA forums in the second half of 2012 and continue to be involved through further updates and the development of CPD courses in conjunction with the CBFCA.
New Bill introduced
On 20 March 2013 the Minister for Home Affairs ("Minister") introduced the Customs and AusCheck Legislation Amendment (Organised Crime and other Measures) Bill 2013 ("Bill"). The introduction of the Bill was accompanied by a media release by the Minister which focused on the Bill and its aims to fight organised crime. Customs also released Australian Customs and Border Protection Notice 2013/12 ("Notice") in relation to the Bill. Both releases gave some details of the Bill and the media release also contained announcements from the Minister regarding the establishment of new taskforces in Melbourne and Brisbane to follow the taskforce which had been operating in Sydney.
According to the Notice,
"the purpose of the Bill is to amend the Act and the AusCheck Act 2007 to mitigate vulnerabilities at Australia's borders. The Bill forms the latest part of a package of measures to deter and prevent infiltration by serious and organised crime into Australia's seaports, airports and cargo supply chains".
The Bill sets out a variety of detailed amendments to legislation. I have focused below on some of the amendments which will have more substantive effect on readers.
Some details of the Bill
According to the Notice, the amendments to the Act seek to strengthen the cargo supply chain against criminal infiltration by:
- placing statutory obligations on Cargo Terminal Operators ("CTO's") and those that load and unload cargo which are similar to those already imposed on holders of depot and warehouse licences. These obligations include mandatory reporting of unlawful activity, ensuring the physical security of relevant premises and cargo and fit and proper person checks on management at Customs' request. Non-compliance is to attract criminal or administrative sanctions (the latter by way of strict liability);
- creating new offences for using information from the Integrated Cargo System to aid a criminal organisation;
- providing the CEO of Customs can consider the refusal or cancellation of an ASIC or MSIC when determining whether a person is fit and proper under the Act;
- aligning aspects of the customs broker licensing scheme with that of depots and warehouses including providing that the CEO of Customs has the power to impose new licence conditions at any time and making it an offence to breach certain licence conditions; and
- adjusting other controls and sanctions to the Act including increasing penalties for certain strict liability offences and the offences in section 234 of the Act and improving the utility of the Infringement Notice Scheme by, for example, increasing the relevant penalties.
Further detail on the Bill
From a preliminary (and necessarily brief) review of the Bill, the following aspects may be of specific interest to readers.
- There have been some changes to broker licensing provisions replacing the current "person of integrity" test with a "fit and proper" test where appearing in the Act. The concept of what will constitute a fit and proper person has been adjusted to extend the definition to exclude persons have been refused the grant of an ASIC or an MSIC.
- Operators of CTOs face significant new obligations through the licensing regime consistent to those operating under licences issued by Customs in other areas. That will be matched with penalties for failures to observe, many of which are imposed on a strict liability basis.
- The Bill creates 2 new criminal offences for obtaining and using restricted information to commit an offence, and for unlawfully disclosing restricted information obtained from Customs. As stated in the Explanatory Memorandum associated with the Bill, the new offence is "deliberately broad in its application". It is irrelevant as to how the "restricted information" is secured and it is not necessary for the person to have obtained the information from a Customs computer. Proof of information being restricted information merely requires that the information which is obtained is stored on a Customs computer and the information does not have to be obtained from the place it is stored. Accordingly, those receiving such information will need to have additional measures in place to ensure it is not passed on to third parties. This will mean that parties who have access to Customs' systems (such as licensed customs brokers, cargo reporters and other parties in the private supply chain) will need to be especially careful on the use to which information secured from Customs is used and who has access to that information.
- There are wholesale changes to the Infringement Notice Scheme which is used by Customs as an alternative to prosecution for an offence. Readers will recall that we had referred previously to an ANAO Report which included a recommendation that Customs "improve the effect and use of the Infringement Notice Scheme". As the Explanatory Memorandum associated with the Bill notes, the amendments to be made are in part a response to that ANAO recommendation and also to improve compliance by increasing penalties. Significantly, it also moves some aspect of the Scheme into regulation to "provide some flexibility". As a result, the provisions of the Act associated with Infringement Notices will be removed and replaced with a regulation making power allowing most aspects of the Infringement Notice scheme to be prescribed by regulation. Customs has pointed out that such new provisions will be subject to disallowance and therefore still be subject to Parliamentary scrutiny. However, in reality, details of such regulation are rarely scrutinised by those in Parliament and accordingly those in industry will need to be closely monitoring those developments. There are also increases to the penalties which can be imposed through the Infringement Notice Scheme.
- Part 5 of the Bill introduces a number of changes to strict liability offences. Most relevantly for many readers, the Bill will introduce strict liability offences for failures to keep commercial documents or records of communication with Customs. In the latter case, the period to maintain records of communications with Customs will be increased from 1 year to 5 years. There will also be the introduction of strict liability penalties for failure to answer questions asked by Customs or failing to produce documents or records required by the Act (although the privilege of self-incrimination is retained).
- Part 6 of the Bill contains a number of additional amendments. Relevantly, this increases the already significant penalties under section 234 of the Act including offences relating to the provision of information that is false or misleading in a material particular. Customs will now be conferred with the ability to impose additional licence conditions on licensed customs brokers in the same way as Customs can impose additional conditions on Customs depot and warehouse licence holders. In addition, section 243T of the Act will now be amended so that parties in addition to an "owner" will be liable for errors or omissions in statements to Customs which lead to the underpayment of duty. This will extend liability to those person who have caused that error or omission to be made which will extend liability to licensed customs brokers or others in the supply chain. While this is consistent to liability of all parties under sections 243U and 243V of the Act, it will significantly increase the financial and business risks for licensed customs brokers. There are also changes to the handling of goods which are subject to a warehousing declaration and entries for home consumption.
- There are also significant changes to the AusCheck Act 2007 associated with the issue of ASICs or MSICs. These will also be relevant as failure to issue those licences will also have an effect on licensed customs brokers and operators of warehouses and depots.
Effect of the amendments
On the assumption that the Bill will be passed largely in its form (and it is safe to assume that the Bill will be subject to approval by both sides of politics), the following issues immediately arise.
- Generally, the changes in the Bill reflect an intention to increase control and compliance in two ways. Firstly, it enhances control by increasing the powers of Customs or other authorities in relation to those operating under licences or approvals from Government. Secondly, by increasing penalties for failure to comply it is intended to encourage compliance.
- The changes in the Bill include significant changes to provisions originally introduced with the Trade Modernisation Legislation a number of years ago. These seem to suggest that the additional regulation first imposed by the Trade Modernisation Legislation did not have the intended effect and now require further changes and increased penalties.
- The increases in penalties associated with the Infringement Notice Scheme and section 234 of the Act as well as changes to section 243T of the Act will significantly increase risks and liability for importers and exporters and their service providers.
- Licensed customs brokers and other parties (such as cargo reporters) will now need to retain records of communication with Customs for a period of 5 years. However, this is largely consistent with the obligation to retain commercial documents and many such reporters already ensure that records are kept for a 5 year period. However, those parties reporting to Customs will need to review their systems for retaining documentation and reporting.
- The increase in control over those operating licensed premises will continue to create issues for such parties. Accordingly, we will include reference to those new obligations and controls in my presentations at various CBFCA member forums and CBFCA CPD.
- As contemplated by these changes, the increases in penalties and regulation also increase the risk profile for those in the private supply chain. This will require close attention by those parties to their terms and conditions to ensure that, where appropriate, those increased liabilities can properly be passed on to their clients and customers. At the same time, parties will need to check with their providers of professional indemnity and business insurance to ensure that the increased liabilities are able to recovered and in what circumstances.
- The Notice refers to the consultation undertaken with industry previous to the introduction of the Bill although specific details of the Bill and its wording were not subject to earlier release of an exposure draft of the Bill. Presumably, Customs and other regulators will further consult with industry on the specifics of these amendments including the new regulations to be associated with the Infringement Notice Scheme.
We will continue to keep you informed of developments as well including details of these amendments in the Bill in our presentations at the CBFCA state conventions and in the CBFCA CPD program.
As always, do not hesitate to contact me to discuss the details of the Bill.