Senate

Explanatory Memorandum

(Circulated by authority of the Minister for Justice and Customs, Senator the Hon Christopher Martin Ellison)

General Outline

The Customs Legislation Amendment and Repeal (International Trade Modernisation) Bill 2000 has as its basic aim the modernisation of the way in which Customs manages the movement of cargo into and out of Australia. The Bill will amend the Customs Act 1901 and the Customs Administration Act 1985 to:

•

create the legal foundations for an electronic business environment for cargo management;

•

establish a new approach to managing compliance that recognises that "one size doesn't fit all": and

•

improves controls over cargo and its movement where there has been a failure to comply with regulatory requirements.

Major features are as follows:

Communicating with Customs

The legislation sets out how people will electronically communicate with Customs.

It is proposed to allow people to communicate with Customs using a variety of connection options, such as the Internet.

Generally speaking, those wishing to communicate with Customs will be able to provide the information formerly provided to Customs using Customs specific systems with relevant information using "open" communication systems that satisfy the technical requirements set down by Customs to ensure the integrity of the information received. The existing systems operated by Customs will cease to become operative in due course. See Chapter 1.

Reporting Cargo

Consistent with the National Illicit Drug Strategy, the Government has decided to introduce compliance measures in relation to the report and accounting of imported cargo. The purpose of these measures is to improve the quality and timeliness of cargo information provided to Customs to facilitate the identification of high-risk cargo, particularly cargo that may contain illicit drugs.

There are weaknesses in the current reporting regime. For example, there are indications that up to 59% of sea cargo is not reported on time. Indeed, 12% of such cargo is reported after vessel arrival. For air cargo 48% is not reported on time. Of this percentage, 35% of reports were received after the plane landed in Australia.

In brief, a person who organises the transport of goods into Australia will be obliged to report information about goods within time frames set out in the legislation.

Cargo unloaded from a ship or aircraft will have to be accounted for by means of an outturn report, which shall be used to identify surplus or shortlanded cargo. As a general rule, those who unload cargo from a ship or aircraft will have to make the relevant report.

The legislation will also permit officers of Customs to control the movement of goods where there are reasonable grounds to believe they have been incorrectly reported or where there are reasonable grounds to believe there has been a breach of the Customs Act or some other piece of border legislation.

Penalties will apply for late or erroneous reporting. See Chapter 3.

Changes to the way import information is communicated

There will also be changes in the way that information about goods that need to be entered for home consumption is communicated to Customs.

It is proposed that goods will be entered for either:

•

warehousing; or

•

home consumption.

Transhipment entries are to be abolished.

There will be some changes to the way import information will be communicated to Customs.

One is to be called an import declaration. This effectively replaces the current entry for home consumption, and will be the one commonly used. The amount of information to be communicated in an import declaration will vary, depending on the type of goods imported, their customs value, place of exportation, etc.

Information relating to goods of nominal customs value (that is less than

$250 or such other amount set in the Customs Regulations) will not be required to be contained in an import declaration. For these goods, as a general rule a self-assessed clearance declaration will need to be made. See Chapter 1.

Finally, importers with a history of providing accurate information may be able to enter into an agreement with the CEO of Customs to communicate import information to Customs using a new format called a request for cargo release (an "RCR"). In such a case, the person will only have to communicate minimum amounts of information at the time of importation.

People who can make RCRs are to provide a monthly periodic declaration providing further information to Customs by the first day of the calendar month following the month in which the importations were made. See Chapter 2.

Exports

There will be changes to the way export information is to be reported.

For most people, the way exports are reported to Customs will not change.

However, where a person has a history of providing accurate information, the CEO can enter into an agreement with the person to communicate export information under the terms of the agreement.

It is proposed that these exporters will receive a set number of accredited client export authorisation numbers (ACEANs). In the typical case the ACEAN will be the only thing quoted at the time of exportation. See Chapter 2.

By the first day of each subsequent month following exportation, the person would be obliged to communicate a periodic declaration, giving greater details as to the goods exported. See chapter 2.

The other significant change is that exported goods will now be able to be reported up to 3 days after the goods have left Australia, rather than (as is the case now) as the goods are loaded onto transport. See Chapter 4.

There are other changes to the way goods bound for export is to be reported and controlled.

It is proposed to give Customs officers a qualified power to enter premises where there are reasonable grounds to believe export goods are located in commercial premises.

The reason for these powers is because the sheer volume of export information communicated to Customs, coupled with time sensitivity, logistical and cost issues involved in the export trade means that examination of goods intended for export when they reach wharves and airports can impede trade.

The proposed new powers can only be exercised with the consent of occupiers or people apparently in charge of premises (other than wharves, airports or other premises licensed by Customs) by specifically authorised Customs officers.

Authorised officers must advise that consent can be refused or withdrawn at anytime. Because there are no Customs revenue implications, if consent is refused there is no right to apply for a warrant to enter the premises. In addition, an authorised officer must also leave the premises when requested to do so.

No penalty can be imposed for failure to either answer questions or produce documents. See Chapter 4.

The Customs Act 1901 will also be amended to extend Customs control to allgoods brought to places such as wharves and airports. This means Customs will have the right of examination for all goods brought to a place for export, not just goods whose export is subject to a statutory condition or requirement.

There will be changes to the way in which goods moving to places of export are controlled.

The first set of powers are necessary because both Customs and the ATO have identified that goods under Customs control that are said to be bound for export are instead going into Australian commerce, with the net result that tax and duty that is properly payable is not being paid.

The ATO believes diversion in Australia is comparable to levels overseas, which are in the order of 30%. Customs has also identified that this diversion activity is widely undertaken at various stages of the underbond process.

In future, licensees of Customs warehouses must not allow goods for export to be taken from a Customs warehouse until the licensee has confirmed with Customs that the goods have been entered for export and have been given an authority to deal.

Moreover, consolidations of goods under Customs control for export must only be done at a wharf, airport, licensed depot or place appointed under the Customs Act or the Commerce (Trade Descriptions) Act 1905 where goods can be examined for export. The operator of the place where the consolidation is to take place must tell Customs the goods have arrived. See Chapter 4.

The final set of changes is necessary to ensure Customs has the time to locate and identify goods, and, where necessary, examine them. This is necessary to guard against the diversion into Australian commerce of goods on which duty has not been paid, exportation of prohibited exports and other controlled goods, as well as to ensure goods are exported when GST-free status is claimed.

A person will not be able to send goods for export directly to a wharf or airport without an entry for export, unless a person at the wharf or airport is prepared to make the entry on receipt of the goods, as happens now particularly with air cargo. Equally, the person at the wharf or airport cannot accept the goods unless they are prepared to make an export entry for the goods on behalf of the exporter at the time of receipt.

In a case where goods have already been entered, it is proposed that the party receiving goods at a wharf or airport will have to advise Customs they have in fact received goods. See Chapter 4.

In addition, it is proposed that if no export entry is required for a consignment of goods, the person delivering exempt entry goods to the wharf or airport must provide details of the goods to the person at the wharf or airport. It will then be the responsibility of the person at the wharf or airport to report those goods to Customs.

Penalties are proposed for failure to report the movement of cargo through the export process. See Chapter 4.

Extension of time for short paid duty

It is proposed to extend the time for recovery of short paid duty from 12 months to 4 years.

These time periods have been extended because not all audits are conducted within 12 months from the day Customs duty is paid on goods.

The 12 months time limit within which refunds can be claimed will also be extended from 12 months to 4 years, in line with the recovery provision.

These time limits are the same as those set out in the GST legislation. See Chapter 2.

Audit/monitoring powers

So Customs can adequately discharge its commercial and border responsibilities in assessing:

•

compliance with a Customs-related law;

•

whether a person's record keeping, accounting, computing or other operating systems accurately record and generate information to enable compliance with a Customs-related law; or

•

the correctness of information communicated to Customs;

the legislation proposes a revision of the audit powers currently contained in the Customs Act.

The information Customs would like to examine relate to:

•

information provided to Customs by cargo reporters;

•

information provided to Customs by those who communicate with Customs;

•

information provided to Customs by those who import goods; and

•

information provided to Customs by those who export goods;

new audit provisions known as monitoring powers will be incorporated into the Customs Act.

Specific Customs officers will be authorised to be monitoring officers.

The primary means of entry to premises for the purpose of exercising monitoring powers is through consent of the occupier of the premises. Consent may be refused or withdrawn at any time. A warrant to exercise monitoring powers may be sought from a Magistrate either initially or where consent is refused or later withdrawn.

The ambit of these provisions take into account the comments and recommendations made by the Senate Standing Committee's report on Entry and Search Provisions in Commonwealth legislation. See Chapter 2.

Offences and penalties relating to commercial audits

There will be changes in the way penalties may flow following the conduct of a commercial audit, or the examination of documentation at the point of importation.

These changes are being proposed because Customs considers the existing administrative and remission penalty system contained in sections 243T and 243U of the Customs Act to be unwieldy and inefficient. These provisions are proposed to be repealed.

A simpler system, where Customs can issue an infringement notice in lieu of prosecution for strict liability offences, will replace it. This is explained in Chapter 5.

It is also proposed to introduce new penalties for failure to provide accurate information, particularly in relation to exports. These are explained in Chapter 2.

Where any non-compliance has GST implications, appropriate penalties will be issued in the manner set out by the GST legislation.

Penalty Provisions

The legislation introduces a strict liability penalty regime where:

•

errors are made in communications with Customs; or

•

communications to Customs are received late or not at all; or

•

goods under Customs control are moved contrary to a direction from Customs, or without the permission of Customs.

The new penalties regime introduces the option of issuing an infringement notice to a person, to the value of 20% of the penalty that would have been payable if a strict liability prosecution was commenced. If the person pays the penalty, Customs' right to prosecute is extinguished.

However, there remains the capacity to commence a prosecution in a circumstance where Customs believes it can be proved that a person intended to breach the law. See Chapter 5.

This "three tier" liability penalty regime is not imposed lightly. However, the mischief intended to be addressed in the legislation is (for the most part) either the late or inaccurate reporting of information to Customs. If this information is received either late or inaccurately, Customs cannot perform its community service obligations of analysing information about incoming cargo so as to ensure that prohibited goods such as drugs are kept out of the country, or that the correct amount of duty and taxes is paid as a result of the importation or exportation of goods. The intention of the communicator is therefore irrelevant. The critical outcome is the quality of the information.

In the case of the movement of goods, it is important that goods that could be a risk to the Australian community stay put until Customs has completed its analysis of available information.

As the offences can be characterised as being technical or regulatory in nature, it is appropriate in the circumstances for there to be an infringement notice/strict liability penalty regime in place.

Disclosure of Protected Information

The Bill also includes amendments to improve Customs capacity to communicate with Commonwealth and State agencies, agencies and instrumentalities of foreign countries, and international organisations. The purpose of the amendments is to address shortcomings in the operation of section 16 of the Customs Administration Act 1985 (the Customs Administration Act), which concerns the recording and disclosure of protected information by Customs officers and people working in and for Customs. To achieve this outcome the Bill amends the Customs Administration Act to:

•

enable Customs to disclose personal information to the Australian Bureau of Statistics;

•

enable Customs to disclose information to the Norfolk Island Customs Service and other Norfolk Island agencies;

•

enable Customs to disclose personal information where the individual concerned has consented to that disclosure;

•

resolve certain technical inconsistencies and minor typographical errors;

•

delete the parts of section 16 which allow Customs to disclose cargo reports and import declarations to AQIS, and

•

delete the part of section 16 which allows Customs to disclose cargo reports to port authorities.

In addition, the Bill amends the Customs Act 1901 (the Customs Act) to allow Customs to disclose cargo reports to port authorities, including privatised port authorities.

Commencement

The substantive provisions of the legislation are to commence at various dates to be proclaimed. A relevant date can be a date 2 years from the day the Act received the Royal Assent.

The only exemption to this relate to those provisions which:

•

preserve the status quo in relation to communications made to Customs using the current EXIT or COMPILE computer systems during the period between the date of Royal Assent and the commencement of this legislation; or

•

relate to the provision of information of held by Customs to port authorities and AQIS.

These provisions will commence on the day of Royal Assent.

This is a variation from the usual practice, which provides that where legislation is to commence on a date of proclamation, the commencement date must be no longer than six months from the day the legislation received the Royal Assent.

The reason for the additional period is to cater for the significant change being introduced to industry through new cargo management processes and new information technology systems.

Aspects of this development include testing the new system, allowing an opportunity to those who wish to communicate with Customs to test the compatibility of their in-house systems against that of Customs; and subsequent migration from old to new systems. This work is currently being undertaken with the co-operation of the Australian trading community.

Because of the vagaries of developing a new computer system, and so as to avoid having to insert and administer complicated savings and transitional provisions in legislation if the computer system hasnt been fully developed, tested and in production by the time the Act receives the Royal Assent, plus six months, it is proposed to allow the legislation to commence up to 2 years after the Act receives the Royal Assent.

In this way, the trading community has plenty of time to consider, and be ready for, the new legislative provisions contained in the Bill, including, in particular, the new reports required by the Act and their communication in a new electronic environment.