Explanatory Memorandum
(Circulated by authority of the Minister for Justice and Customs, Senator the Hon Christopher Martin Ellison)Schedule 3 - Cargo Reporting
A proposal to amend the Customs Act to introduce sanction arrangements related to the reporting and accounting of cargo to Customs.
1. Problem
1.1 The importance of reporting and accounting of cargo
All goods landed in Australia are required to be brought to account and dealt with in accordance with the Customs Act 1901 for the purposes of ensuring Customs duties and tax liabilities are met and to ensure all Commonwealth legislation has been complied with, especially in relation to community protection matters.
The reporting of cargo is fundamental to achieving these objectives. If the Australian Customs Service (Customs) is not made aware of the individual consignments being landed in Australia it will not be able to risk assess consignments for prohibited goods. The risk assessment procedure primarily involves electronically screening consignment details (such as the consignor and consignee names) against known risk profiles.
Without this information Customs is unable to prevent prohibited goods such as illicit drugs from entering Australia.
1.2 Who is required to report cargo?
The responsibility for reporting cargo to be landed in Australia rests with the person who is responsible for the transportation of that cargo to Australia. Such persons include, among others, shipping and airline companies, freight forwarders and express couriers (hereafter referred to as cargo reporters).
1.3 What happens if cargo is not reported properly?
If consignments are not reported properly, that is to say, they are not reported in a timely manner or not reported in a comprehensive manner or not reported at all, the consignments will most likely evade the Customs risk assessing process. Consequently a consignment, such as one containing illicit drugs, could enter Australia without detection.
Based on the known quantities of drugs detected, it can be deduced that the improper reporting of cargo is a contributing factor to this problem.
1.4 Compliance with current cargo reporting legislation
There is significant and on going evidence that consignments are not being properly reported to Customs. The major problem concerns the late report of cargo. Surveys have indicated that up to 59 % of sea cargo is not reported within the current legislated timeframes. Some 12% of this cargo is reported after vessel arrival. Late report limits the time available to Customs to properly evaluate and risk assess the cargo.
The reporting of cargo to Customs has been a long-standing requirement. Customs has been in constant discussions with industry in an attempt to increase compliance. Customs also introduced electronic reporting of air cargo in 1990 and sea cargo in 1992 in order to facilitate the reporting procedure.
Coupled with the problem of cargo being reported late, there has also been significant incidents of delivery of consignments that were not reported. Of even greater concern is the fact that in many cases these consignments were targeted by Customs.
1.5 Why isnt the current legislation working?
The current provisions and the principles underpinning them were introduced in 1990 (Customs and Excise Legislation Amendment Act 1990) with some minor modification in 1992 (Customs Legislation Amendment Act 1992) to accommodate the introduction of electronic reporting.
Section 64AB of the Act requires sea cargo to be reported 48 hours before the arrival of the ship (24 hours if the sea journey takes less than 48 hours). Air cargo must be reported 3 hours after the arrival of the aircraft, but if it is reported electronically it must be reported 2 hours before arrival.
There are no offences for circumstances where the cargo is not reported within these time frames or the report is incomplete. Instead of the use of an offence regime, the provisions of section 74 of the Act apply.
Section 74 of the Act requires the cargo reporter to obtain a permission from Customs to unload the cargo. The intention of this provision is that if the cargo has not been properly reported a permission to unload will not be given. It was intended that the provision would be an incentive for cargo reporters to report their cargo properly.
This approach has proven to be untenable because of the disruption and cost to industry caused by delaying the unloading of ships and aircraft until the cargo has been reported properly. Consequently, the current provisions are proving ineffective in dealing with non-compliance with the requirements.
In addition, the application of section 74 of the Act does not only affect the offending cargo reporter, but also penalises those cargo reporters who have complied with the reporting requirements. This occurs in circumstances involving consolidations of LCL (less than container load) or FAK (freight of all kinds) containers. Consolidations are consignments belonging to more than one cargo reporter that are packed together into one container.
Industry consultation, help desk services and the use of admonishment letters have not had the desired effect of obtaining industry compliance. Consequently the objectives of the current legislation, to ensure cargo reporters properly report their cargo, are not being achieved.
Developments in the transport industry have aggravated the issue. On-going fragmentation in the industry has resulted in more parties becoming involved in the cargo reporting process. There has been a significant expansion in the number of freight forwarders involved in the reporting of cargo.
Freight forwarders buy space on ships and aircraft from the shipping/airline companies to carry freight for their own clients as well as on-sell any surplus space to other (usually smaller) freight forwarders.
2. Spcifications of desired objectives
To enable Customs to detect the importation of prohibited goods into Australia and to ensure revenue is not being evaded, Customs must be able to screen and risk assess information about consignments of cargo entering Australia.
2.2 This role is achieved in part by screening information
To be able to screen consignments effectively Customs must have certain information about each consignment. The person best positioned to provide this information to Customs is the person responsible for transporting the cargo to Australia - the cargo reporter. This information is held by the cargo reporters in documentary or electronic form as part of their commercial process.
2.3 The cargo report - an important source of information
It is important that cargo reports are presented to Customs within minimum time frames before the arrival of consignments in Australia. The minimum times are considered to be 24 hours for sea cargo and 2 hours for air cargo. However these times may need to be modified in relation to journeys that take less time than these minimum times such as Port Moresby to Cairns and Dili to Darwin.
It is important to provide Customs with adequate time to screen the information and to take any necessary pre-emptive action. This also has benefits for industry because Customs can generally provide a Customs release for consignments by the time the consignments arrive in Australia, enabling cargo handlers and importers to plan collection and delivery of cargo in advance.
2.4 Bringing the cargo report to account
Certain parties, namely stevedores, and licensed Customs depot operators perform an important ancillary function to the cargo reporter. This function relates to the bringing to account of cargo landed as distinct to cargo reported by the cargo reporter. Cargo reporters contract this function to them. These parties have over many years played an important role in ensuring Customs has an accurate picture of cargo landed including sea containers which are temporarily unloaded for operational reasons (known as restows in the industry).
An outturn report relates to the bringing to account of all the cargo listed in the cargo report for landing on a particular ship or aircraft. Usually cargo additional to that shown on the cargo report is landed (referred to as surplus cargo) or cargo which has been listed on the cargo report does not arrive (referred to as shortlanded cargo).
Stevedores and depot operators should provide Customs with timely outturn reports and information about restows.
2.5 The importance of this information in achieving Government objectives
The timely and accurate provision of information about consignments landed in Australia is essential if Customs is to fulfil the objectives of the Governments National Illicit Drug Strategy.
3. Identification of options
As the history of this issue indicates, other measures have been adopted by Customs in order to improve compliance by industry. These measures have generally been unsuccessful in achieving the level of compliance necessary to allow Customs to meet its border responsibilities.
3.1 Self regulation, quasi-regulation and co-regulation
The history of industry compliance suggests that the option of a self regulation regime would not be successful in increasing the level of compliance.
It can be argued that the industry has to some extent already been operating in a self regulating environment because of the practical limitations associated with applying the current provisions.
However, the industry is fragmented into a number of different sectors representing different interests - shipping and airline companies, freight forwarders, express couriers, stevedores, and depot operators. Among these sectors there are a number of industry associations representing different elements of each sector. Consequently there are a range of different interests which are difficult to reconcile in a self regulated/quasi regulated/co-regulated environment.
The industry is highly competitive, in which tight timetables, speed of delivery and cost factors are the primary considerations. Such an environment is not conducive to self regulation.
It is concluded that the option of a self regulated/quasi regulated/co-regulated regime would not be effective in achieving the desired objectives.
3.2 Could another person report cargo?
Some sections of industry have argued that the responsibility for reporting cargo should rest with the importer of the consignment, as this person will usually have all the required information in advance of the arrival of the consignment.
3.2.1 Using importers information
This option would require the importer or the importers representative - the customs broker - making a 2 in 1 report to Customs covering the import declaration for a consignment of goods which would double as the cargo report. It is argued that the information provided in such a report would be more accurate. Such an approach would reduce electronic communication costs for cargo reporters as the obligation for reporting cargo would be moved from them to the importer.
3.2.2 The problems with using importers information
* Information about transport logistics
This approach, of using importers' information, is fundamentally flawed. The importer does not always know on which ship or aircraft the consignment is to arrive. Only the person responsible for bringing consignments to Australia - the cargo reporter - is in a position to know exactly when and where consignments are to be landed in Australia. If the consignment does not arrive, only the cargo reporter is in a position to provide an explanation to Customs as to the reason it has not arrived.
* How would Customs know a cargo report is complete?
This proposal is administratively untenable. The individual entry of consignments into the Customs electronic system by the importers/customs brokers does not in itself provide a comprehensive list of cargo to be landed from a particular ship/aircraft. Customs would not be in a position to determine when all the consignments for a particular ship/aircraft have been received, only the cargo reporter can determine when this point is reached. It presupposes that all importers/customs brokers will provide Customs with the entry details within the time frames in advance of the arrival of the ship/aircraft. In many cases importers do not receive their import documents from suppliers until after the ship/aircraft has arrived.
* Not all consignments are required to be entered
It should be noted that not all consignments which are landed in Australia require a declaration in the form of a Customs entry. Consignments with a value not exceeding $250, such as mail order goods and small one-off importations may be cleared in other less formal ways. These consignments comprise a significant proportion of all importations. To the extent that these consignments do not require a formal Customs declaration they could not be reported by Customs brokers. The importers of these consignments would, in the majority of cases be unfamiliar with Customs procedures and therefore would not be in a position to provide timely information.
* Delays in receipt of information impact on Customs effectiveness
It is also anticipated that this option would cause delays in receipt of the cargo report by Customs thereby hampering Customs efforts to obtain the cargo report information early for screening purposes. Importers and customs brokers have acknowledged that they will not be able to provide the required information prior to the arrival in all cases. Consequently the screening of cargo reports could be less effective.
* Additional administration for importers/customs brokers
In such circumstances there would be an added administrative burden on importers and Customs brokers to establish the flight/voyage details. In circumstances where the cargo reporter has had to change the original flight/voyage plans the importer may not be aware of these changes until after the aircraft/ship has arrived. Both these cases will involve considerably more communications between the cargo reporter and the importer and customs broker and generally increase the administrative burden on industry. Under the option of the cargo reporter giving the cargo report to Customs much of this administration by importers and brokers is unnecessary.
It is concluded that the option of using information which Customs receives from importers and customs brokers does not make up the necessary elements of the cargo report and therefore does not achieve the desired objectives.
3.3 Explicit government regulation
The final option is that there be explicit Government regulation to increase the level of compliance and thereby assist Customs in fulfilling its border responsibilities, especially as they relate to detection of illicit drug importations.
This option proposes the making of offences where:
- •
- a cargo reporter reports consignments later than the legislated times;
- •
- a cargo reporter does not provide all the information required;
- •
- a cargo reporter fails to report consignments; and
- •
- a stevedore or depot operator fails to give Customs an outturn report within the legislated times. (an outturn report relates to the bringing to account of all the cargo listed in the cargo report for landing - some additional cargo may have been landed or some cargo listed for landing was not landed).
3.3.2 Creation of an obligation on stevedores and depot operators
Although stevedores and depot operators have over many years provided Customs with outturn reports and lists of restows, on behalf of the cargo reporter, there is not always a legal requirement for them to do so. It is proposed to recognise these practices in law and introduce offences related to timely and complete provision of such information.
This has become necessary because under an offence based regime it is essential to identify the persons actually responsible for an act, thereby addressing issues associated with the principles of vicarious liability. Currently the cargo reporter is held responsible for the actions of the stevedores and depot operators in relation to the accounting and clearance of the cargo from Customs control.
3.3.3 Creation of an administrative penalty scheme
The proposal seeks to introduce an administrative penalty regime where Customs would be able to issue a penalty notice for non-compliance to which would be attached a financial penalty.
Prior to the issue of such a notice Customs would seek an explanation from the cargo reporter for the non-compliance. In considering whether to issue a penalty notice Customs will need to take into consideration the reasons for the non-compliance and whether such reasons would be accepted in any judicial procedures which may follow if the cargo reporter refused to pay the penalty associated with the issue of the penalty notice.
Any administrative penalty would not exceed 12 penalty units. If the matter was to be prosecuted it is proposed the penalty would be more substantial, depending on further advice from the Attorney-Generals Department.
3.4 Certain elements common to all the options
There are a number of elements which would be part of each of the options discussed previously. These elements are as follows:
- a)
- cargo reporters to provide certain additional information as part of the cargo report related to:
- -
- the discharge of empty sea containers both international and domestic;
- -
- export cargo that is required to be discharged in an Australian port or airport prior to the departure of the ship or aircraft from Australia;
- -
- domestic cargo transported by sea; and
- -
- clarify the requirement to report mail.
- b)
- provide for a direction power in relation to cargo at wharves, airports and depots which is identified by Customs as being high risk or which has not been properly reported;
- c)
- require stevedores and depot operators to electronically communicate all outturn reports to Customs, and in the case of stevedores that they also electronically communicate lists of restows to Customs;
- d)
- provide monitoring powers at the premises of cargo reporters, stevedores and depot operators (these activities have been practised for many years but without any legislative basis);
- e)
- suspend an authority given by Customs to deal with a consignment which has not been delivered from Customs control and where a Customs officer receives information about the consignment and forms a suspicion that it involves an offence against the Customs related law.
With regard to paragraph (a), it should be noted that cargo reporters already provide Customs with this information except for the information related to empty domestic containers. It is proposed to formalise these practices and require the reporting of empty domestic containers. The reporting of empty domestic containers is not expected to be onerous or costly.
Regarding paragraph (c), most stevedores and depot operators already electronically communicate outturns to Customs. Stevedores presently electronically communicate lists of restows to Customs. The electronic communication is fundamental to ensuring timely and effective control over all cargo and containers that have been landed. Manual communication of this information would adversely effect the equitable application of the proposed sanction arrangements. Manual procedures introduce delays for importers and Customs brokers and increase the risks of cargo being delivered without Customs knowledge.
The information about empty containers and domestic cargo is required to assist Customs with the identification of the cargo for which it is responsible. History shows, for example, that empty containers and restows have been used to import illicit drugs. Because domestic cargo and export containers are intermixed, the status of this cargo is not always clear. It is difficult for Customs to determine whether such cargo is supposed to be part of the imported cargo.
4. Assessment of impact
The impact assessment is based on the option of applying explicit Government regulation (see points 3.3 Explicit Government regulation and 3.4 Certain elements common to all options).
In general the proposal will have a low financial impact on Government and industry. Any additional costs will be associated with the requirement that cargo reporters provide some additional information and also the provision of air-freight cargo reports earlier than at present.
None of the other measures have any financial implications.
4.1 Impact group identification
The proposal will require cargo reporters to report some additional information as part of the cargo report related to the unloading of empty domestic containers and export containers (see point 3.4 Certain elements common to all options). Although cargo reporters already have this information, it will require some additional administration on their behalf to communicate this information to Customs. This will affect some 367 shipping companies and freight forwarders.
The proposed legislation will mandate the electronic provision of the cargo report information 24 hours prior to the vessels estimated time of arrival in the port where the cargo is to be discharged or such other lesser time in recognition of any voyages that might be less than 24 hours. Current provisions do not mandate the electronic provision of this information however there is a requirement that the cargo report be provided 48 hours prior to vessel arrival or 24 hours prior to arrival if the voyage is less than 48 hours.
Statistics for end of financial year 99/00 indicate that nationally 95.1% of sea cargo was reported electronically with 68.9%reported within the proposed 24 hour, prior to arrival, timeframe. These figures suggest there is some impact on cargo reporters who will need to purchase the necessary hardware and software to report electronically and within the required timeframe. Some cargo reporters will need to make the necessary arrangements to report their cargo after hours or on public holidays to ensure this information is provided within the specified times.
In recognition of the circumstances of these cargo reporters, it is proposed to include a provision in the legislation to enable the CEO to provide a period of grace to such reporters. These cargo reporters would need to demonstrate, in an application to the CEO, that they will take such necessary steps so that they can comply with the legislation at the end of the period.
(b) Stevedores and depot operators
Stevedores and depot operators will be required to electronically communicate an outturn report to Customs (see point 2.4 Bringing the cargo report to account and point 3.3.2 Creation of an obligation on stevedores and depot operators).
The proposal is not expected to impact on the majority of these operators as they already electronically communicate outturns and restows lists to Customs.
The requirement will impact on some stevedores in smaller regional ports who currently provide this information in a documentary form.
Air freight cargo reporters will be required to report some additional information as part of the cargo report related to the unloading of export containers (see point 3.4 Certain elements common to all options). However as they already have this information and such unloadings are not a regular occurrence, any additional administration on their behalf will be minimal. The proposal will affect some 346 airline companies, freight forwarders and express couriers.
Under the proposal, a cargo reporter is required to give Customs a cargo report 2 hours before the aircraft arrival. Currently, manual cargo reports may be given to Customs up to 3 hours after the aircraft has arrived. It will no longer be acceptable to make manual cargo reports. Currently 99.7% of air cargo is reported electronically but only 67.8% were reported 2 hours prior to arrival. Consequently, those cargo reporters who currently make manual reports and those that do not submit cargo reports in a timely manner will be required to review their administrative arrangements in order to meet the proposed new requirements. This may include the purchase of computer equipment or computer services in order to comply with this requirement.
This aspect of the proposal has the potential to affect some 21 cargo reporters. In recognition of the circumstances of these cargo reporters, it is proposed to include a provision in the legislation to enable the CEO to provide a period of grace to such reporters provided they can demonstrate to the CEO that they have taken such steps so that they can comply with the legislation at the end of the period.
Depot operators will be required to electronically communicate an outturn report to Customs (see point 2.4 Bringing the cargo report to account and point 3.3.2 Creation of an obligation on stevedores and depot operators). All depot operators are already required to be connected to the Customs electronic cargo reporting system.
The proposal is not expected to impact on them as they already electronically communicate outturns to Customs.
The proposal has been developed on a basis of cost neutrality. Administration of the sanctions arrangements will be undertaken by officers currently allocated to cargo tracking functions as well as by some internal re-arrangement of work functions. Development of the Customs electronic systems is already accommodated within the budget of the Australian Customs Service. All these costs are charged against General Budget Appropriations.
As alluded to at point 4.1 Impact group identification, while cargo reporters may experience a minor increase in costs, most stevedores and all depot operators should not experience any cost increases.
(a) Sea freight - cargo reporters
There may be a slight increase in costs for cargo reporters in relation to the transmission of the proposed additional information relating to empty domestic containers and certain export containers.
Current costs for electronic communications is $0.30 per kilobyte. In most cases such additional information is not expected to equate to a kilobyte for each cargo report. Because the information is handled by electronic systems, it is expected that any labour costs would be limited to the initial modification of electronic systems.
(b) Sea freight - stevedores and depot operators
The proposal is expected to have minimal cost impact on most stevedores and depot operators as they already electronically communicate outturns and restow lists to Customs.
However the proposal is expected to incur some costs on a minority of stevedores. Such stevedores are located in smaller regional ports.
(c) Air freight - cargo reporters
Air cargo reporters will incur a minor increase in costs related to the electronic communication of the proposed additional information relating to export containers.
The current cost for electronic communications is $0.30 per kilobyte. In most cases such additional information is not expected to equate to a kilobyte for each cargo report. Because the information is handled by electronic systems, labour costs would be limited to the initial modification of electronic systems.
It is anticipated that some cargo reporters will incur additional costs related to the modification of their administrative arrangements. Such modifications may be necessary to obtain the information for the cargo report in time to meet the time requirements (i.e. 2 hours before the arrival of the aircraft). Because each business has its own administrative arrangements it is difficult to estimate the cost associated with making any modifications.
The proposal is expected to have minimal cost impact on depot operators as they already electronically communicate outturns to Customs.
Cargo reporters, stevedores and depot operators may choose to pass on any additional costs of communicating with the Customs electronic system. However any passing on of costs will need to be tempered in the context that the majority of cargo is already reported electronically and the economies of scale would suggest that any increase would be marginal. Provision of early cargo release status and proposed enhancements to the Customs electronic systems should result in improved transport and storage gains for industry and consequently consumers.
The proposal. as outlined at points 3.3 Explicit Government regulation and 3.4 Certain elements common to all options, will assist in giving effect to the Governments National Illicit Drugs Strategy.
* Sanctions will improve compliance
It is anticipated that the proposed sanctions arrangements will significantly improve the level of cargo reporting compliance. Currently there is no effective penalty that can be used against those cargo reporters who do not provide their cargo reports within the prescribed times or who do not provide all the required information on their cargo reports. The greater the level of compliance the more timely and effective the Customs screening process becomes, thereby increasing the chances of detecting prohibited goods, in particular, illicit drugs.
* Additional information will assist in identifying cargo of interest to Customs
The proposal that the cargo reporters provide additional information as part of the cargo report enables Customs to effectively identify cargo and containers and removes confusion which occurs at wharves and depots as a result of the intermingling of all categories of cargo and containers.
* Outturn reports will be more effective
The requirement that this information be provided by stevedores and depot operators is based on legal advice that cargo reporters cannot be held responsible for actions related to the making of the outturn report. This is an important consideration for the effective application of the proposed sanction arrangements.
* Clear rules for compliance monitoring
The proposed monitoring powers will benefit both Customs and business as they will set out clearly the extent of powers and rights for both parties. The current ad hoc arrangements are considered to be inappropriate in an environment based around legislative penalties.
* Greater equity for all cargo reporters
Although some cargo reporters may feel apprehensive about the introduction of sanction arrangements for non-compliance, the proposal will result in greater equity for all cargo reporters. Currently, cargo reporters complying with the cargo reporting requirements watch on as some of their colleagues do not comply, while Customs is unable to take effective measures against those non-compliant reporters.
* Greater efficiencies for industry
As a result of the proposal, if cargo is reported on time and in a complete form, Customs will be able to screen the cargo promptly. This will mean that in the majority of cases industry will know the Customs status of consignments before the ship or aircraft arrives. This will free up movement of cargo at wharves, airports and depots thereby assisting to relieve congestion at these places. Such developments would be expected to impact favourably on industry and contribute to waterfront and airport reform.
* Clear rules for compliance monitoring
The proposed monitoring powers will benefit both Customs and business as they will set out clearly the extent of powers and rights for both parties. The current ad hoc arrangements are considered inappropriate in a sanctions environment.
4.3.3 Benefits for the community
The main benefit for the community is that the proposal will assist Customs to more effectively detect prohibited goods, especially illicit drugs. Other border agencies, such as the Australian Quarantine and Inspection Service, will also benefit from the timely and accurate report of cargo.
5. Other issues
The proposal, as outlined at points 3.3 Explicit Government regulation and 3.4 Certain elements common to all options, is not considered to have a particular impact on small business. Customs cargo reports are essentially constructed from details already provided in standard transportation documentation, such as ocean bills of lading and air waybills.
However, the proposal is expected to impose costs on smaller stevedoring operations located in regional ports. These costs will be associated with establishing electronic connections with the Customs computer system.
Comments from some small businesses are detailed at 6.2.1.
Although cargo reporters will be required to provide information about export containers discharged at Australian ports and airports as part of the cargo report, this is not expected to impact on export procedures.
6. Consultation
6.1.1 Attorney-Generals Department
Discussions have been held with the Attorney-Generals Department and the Australian Government Solicitor. Their advice indicates that it is legally feasible to develop a sanctions arrangement as described at point 3.3 Explicit government regulation.
Industry has been consulted through industry associations, working groups and in some cases individual companies. As expected, industry does not whole-heartedly support the proposal, although they do acknowledge non-compliance is an issue for Customs.
Outlined below are the main issues raised by the various industry bodies.
6.2.1 Industry Reference Group
This body was established by Customs for the purpose of developing and implementing the Cargo Management Re-engineering Strategy which is concerned with the redevelopment of Customs electronic systems for reporting the arrival of cargo in Australia and its clearance. Member of this Group are:
- Australian Air Transport Association,
- Australian Chamber of Commerce,
- Australian Container Depot Operators Association,
- Australian Federation of International Forwarders Ltd.,
- Australian Shipping Federation which includes:
- the Australian Shipowners Association and
- the Australian Chamber of Shipping Ltd);
- Customs Brokers Council Inc.,
- International Air Couriers Association of Australia, and
- P & O Ports
Issues raised by the Group and the Customs response to them are as follows.
* Fairness associated with requirement to make timely and accurate cargo reports
The Group suggested that it would be fairer if responsibility associated with making timely and accurate cargo reports be broadened to include the person who supplies information to the cargo reporter for making the cargo report.
The information used to make the cargo report comes from the (air)ports where the cargo was loaded. This information may be transmitted directly to the cargo reporter in Australia or the information is consolidated overseas prior to transmitting to the cargo reporter in Australia. Because the person providing the information to the cargo reporter is based overseas, there is no action which may be taken against such a person. Responsibility for making the cargo report has to rest with a person in Australia.
* Requirement to work in a 24-hour, 7 days-a-week environment to report cargo
During a series of seminars to familiarise and consult industry on the proposed legislative changes one of the most common issues raised was the implied requirement that industry will be required to work in a 24-hour, 7 days-a-week environment to report cargo.
Many of the smaller industry operators claimed they couldnt afford the additional cost of a bureau, or pay overtime to staff, to meet with cargo reporting deadlines. Some smaller industry participants also were concerned about the costs of CMR compatible software.
There was criticism that the social (change in lifestyle of participants), capital (additional cost of more advanced IT) and recurring (staff overtime or use of bureaux) costs the proposal placed on industry has not been properly considered by Customs.
Customs acknowledged there would need to be some change to business practices by some cargo reporters, however Customs considers that in the context of obtaining timely information for the purposes of identifying prohibited goods, it is imperative these changes occur.
There were also a number of participants who understood that Customs required early reporting to ensure its border and revenue community service obligations are discharged, and that the market for bureaux will ultimately mature, thus providing cost effective services to reporters who need it. Alternatively, relevant information could be redirected electronically, so it can be processed after hours.
* Concern about arbitrary application of administrative penalties
In circumstances where the cargo reporter can demonstrate that the late or incomplete report of cargo was beyond the cargo reporters control then Customs is unlikely to issue a penalty notice. In saying that non-compliance was beyond the cargo reporters control, the cargo reporter would be required to demonstrate what steps had been taken with the overseas supplier of the information to rectify the problems. It should be noted that in many cases the information is provided by the overseas office of the local company.
As mentioned in point 3.3.3 Creation of an administrative penalty scheme, in applying any administrative penalty Customs needs to be certain that it has sufficient evidence to demonstrate that the cargo reporter was primarily responsible for the late or incomplete report of the cargo. This is critical in order to pursue prosecution in the event that the cargo reporter refused to pay the administrative penalty.
Such a procedure would be a deterrent against arbitrary application of the penalty provisions.
6.2.2 Conference of Asia Pacific Express Carriers (CAPEC)
The members of CAPEC are:
- DHL,
- Federal Express,
- TNT, and
- United Parcel Services (UPS)
Issues raised by this group and the Customs response to them are as follows.
* Questioned the need for penalties and their application
CAPEC stated its members would work with Customs to maximise timely report of cargo and questioned the need to introduce a penalty scheme. It was argued that a penalty scheme may not make allowances for events such as electronic transmission breakdowns beyond the control of the cargo reporter.
As stated in point 6.2.1, there will not be any arbitrary application of penalties. Customs will approach the issuing of penalty notices on the same basis as preparing a prosecution brief. In other words the evidence in relation to a particular non-compliance must be able to be defended in a court of law. This approach will prevent any arbitrary application of penalties.
* Unreported cargo is low risk in depots
CAPEC challenged the Customs assertion that cargo not reported on the cargo report is necessarily high risk. Their argument is based on the fact that cargo when unloaded is in Customs appointed airports and depots and is therefore secure under Customs control.
This argument is not, through Customs bitter experience, correct. Customs effectiveness at these places is dependent upon identifying the known risks of cargo and activities at a particular time. Consequently there are many opportunities for non-reported cargo to be secreted away without Customs knowledge. In more irresponsible circumstances such cargo has been allowed to be delivered into home consumption before Customs has had an opportunity to screen and risk assess it. Hence the importance of having cargo reported in an accurate and timely manner.
* Focus should be on delivery without Customs authority
CAPEC suggested that Customs attention should be focused on stopping cargo that has not be reported or not reported properly from being delivered into home consumption. This would be preferable to an approach where Customs places emphasis on ensuring that cargo has been reported or reported properly at an earlier stage.
Customs accepts the point made by CAPEC. However Customs already utilises its existing powers to prevent cargo that has not been reported or not reported properly from being delivered into home consumption. While this approach is an effective tool it has the potential to disrupt the commercial procedures related to the cargo handling and delivery processes.
Customs view is that if the cargo is reported and reported properly in the first instant there will be no necessity to disrupt the commercial cargo handling and delivery procedures by delaying the delivery of cargo.
* The time proposed to provide an outturn for non containerised cargo
While Patrick Stevedoring generally supported the proposal, there was concern about the time proposed by Customs in which an outturn is to be given to Customs for non containerised (break-bulk) cargo. Customs is proposing that an outturn for break bulk cargo must be given to Customs within 5 days of completion of unloading of a ship. Patrick Stevedoring would prefer that the break bulk report be given to Customs within 10 days.
The proposed time is considerably longer than the time proposed in which a containerised cargo outturn is to be given to Customs. An outturn for containerised cargo is to be given every 3 hours commencing from the discharge of the first container until discharge is completed. In the case of cargo unpacked from containers at depots, the proposed time to provide Customs with an outturn report is to be 24 hours from the time of unpack of a container.
Customs primary concern is to know about surplus cargo as soon as possible after it has been landed so that the risk of the cargo can be established. If the cargo is suspected of carrying prohibited goods such as illicit drugs, then steps can be taken to examine and monitor the consignment.
In allowing 5 days for stevedores to provide Customs with an outturn for break bulk cargo, Customs is acknowledging the practical difficulties faced by industry to provide the outturn any earlier. However to extend this period to 10 days would further reduce the effectiveness of the outturn in these circumstances.
Qantas, Ansett Air Freight, and BOC also made submissions. They did not express substantive concerns about the proposal.
6.2.5 Other organisations invited to make submissions
Sealand (stevedore), Smith Brothers (depot operator), Customs Cargo Automators (bureau service) and Tedis (software provider) were also invited to make submissions but did not do so.
7. Conclusion and recommendations
7.1 Explicit Government regulation
As explained in Part 3 Identification of Options, the conclusion is that explicit Government regulation is the preferred option to ensure cargo is reported on time and in a complete manner. Current legislative powers to deal with non-compliance have proven to be too disruptive and impede industry. Consequently they are ineffective and do not achieve their objective.
Considering the significant degree of non-compliance, self-regulation is not an appropriate response in such a highly competitive industry in which time, speed and costs are primary characteristics.
The introduction of sanctions will enable Customs to take action against non-compliance by way of an administrative penalty scheme and in more serious breaches, court action. Sanctions will not impede commercial dealings with cargo. The possibility of the application of administrative penalties or court action will provide a greater incentive for industry to comply with cargo reporting requirements. The proposal provides greater equity in Customs dealings with the industry in so far as those non-complying parties will be seen to be penalised for non-compliance.
The proposal is part of the Customs International Trade Modernisation Project, which includes the re-engineering of Customs electronic cargo management systems. It is proposed to commence the sanctions proposal with the introduction of the new electronic systems which are due to become operational during 2001. The new electronic systems will make the administration of the proposed sanction proposal more efficient.
Customs will in the intervening time commence an industry awareness program ensuring industry is ready for the introduction of the sanctions proposal.
A working group will be formed with industry representatives to ensure the smooth introduction of the proposal. In addition any issue of major concern may be raised by industry at the quarterly meetings of the Customs National Consultative Committee.
Information about the issue of penalty notices or other prosecution action will be reported in the Annual Report of the Australian Customs Service.