Senate

Explanatory Memorandum

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

Chapter 1 - Cargo Management Re-engineering

Outline of Chapter

This Chapter explains the changes to the Customs Act made necessary following the development of a new integrated cargo management system that allows people to communicate with Customs using "open" forms of communication such as the Internet.

This Chapter also explains the new concepts of:

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an import declaration;

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a warehouse declaration;

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a self-assessed clearance declaration;

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the new legislative provisions permitting Customs to advise owners of goods whether their goods are clear to enter Australian commerce; and

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changes to transhipment provisions.

Detailed Explanation of the Law

Maintenance of Electronic Communication Systems by Customs

The Customs Act currently sets out a number of electronic systems for people to use when wishing to communicate with Customs electronically. For example:

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reports of cargo (and some applications to move goods) can be made either by the Sea Cargo Automation System or the Air Cargo Automation System established by section 67A of the Act;

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COMPILE is used to make entries for home consumption. It is established by Division 4A of Part IV of the Act; and

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the EXIT system created by Division 3 of Part VI to the Act establishes the method of communicating information about exports.

These systems are sometimes described as "legacy systems".

In preference to this multiplicity of computer systems, Customs is creating an single integrated system so Customs and its client base can communicate with each other in relation to cargo being imported to and exported from Australia. This is known as the Cargo Management Re-enineering Project, or CMR

This gives effect to the terms of the recently amended Kyoto Convention on the Simplification and Harmonisation of Customs Procedures, which requires Customs administrations to allow the lodging of information by electronic means.

Generally speaking, people will be able to give Customs information via "open" communication systems that satisfy the technical requirements set down by Customs to ensure the integrity of the information received. This could include the use of the public Internet.

As a result of this, provisions of the Customs Act referring to specific systems such as COMPILE and Sea Cargo Automation are to be removed from the Act. Part 4 of Schedule 3 and item 99 of Part 5 to Schedule 3 removes from the Act provisions relating to "legacy systems" not otherwise removed from the Customs Act by other changes contained in this bill.

Items 82 and 84 of Part 4 to Schedule 3 and item 99 of Part 5 are savings provisions which commence the day the legislation receives the Royal Assent. They preserve the status quo in relation to communications made by those legally eligible to use the legacy systems, between the day of Royal Assent and the proclamation of the provisions establishing CMR, once CMR is ready to start.

Item 1 of Part 1 to Schedule 3 adds a new section 126D of the Act, which requires the CEO to maintain information systems so people can communicate with Customs electronically.

It also adds new section 126E of the Act. This requires the CEO to Gazette:

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the information technology requirements that have to be met by a person wishing to communicate information with Customs;

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the action a person has to take to verify the receipt of information communicated to Customs;

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the information requirements that have to be met to satisfy a requirement that a person has "signed" an electronic communication; and

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information technology requirements to be met to satisfy a requirement that a document be produced to Customs when that document is produced electronically.

This advises the community of the CEO's requirements that must be met before communications can be sent to Customs electronically, as permitted by Part 2, Division 2 of the Electronic Transactions Act 1999.

These requirements are to ensure electronic communications are secure, and as far as practicable protected from corruption.

This is an example of a requirement likely to be Gazetted.

Proposed new paragraph 126D(2)(c) allows the CEO to determine the electronic technology requirements that have to be met to satisfy a requirement that a person's signature be given to Customs in connection with information, when the information is communicated electronically.

So that current Government policy can be implemented, and there is a degree of assurance that the person communicating with Customs is the person they claim to be, it would be desirable for the CEO to require an entity with an ABN to use a digital certificate which includes that entity's ABN, issued by a certification authority approved by the National Office of the Information Economy.

Where the CEO is satisfied that a Customs information system will be inoperative for a significant period, people wishing to communicate with Customs may either utilise another system used by Customs, or paper.

However, where paper is used, new section 126E of the Customs Act provides that the person must then provide the information electronically to Customs within 24 hours from the time the CEO advises on the Internet, or, where practicable, by E-mail that the system is again operative. Failure to do so can lead to a penalty of 50 penalty units.

It is recognised that most payments made to Customs use electronic funds transfer (EFT) technology. When the system is inoperative, payments to Customs can't be made, and according to law, goods can't be taken into Australian commerce.

A new section 126F allows Customs to accept an undertaking given by a person that they will make all payments owing on the importation of goods within 24 hours of the system again becoming operative.

Failure to discharge an undertaking can lead to a penalty of up to 50 penalty units.

The Importation of Goods

Items 38 and 39 of Part 2 to Schedule 3 will repeal sections 71A to 71D and sections 71F to 71L of the Customs Act.

These provisions govern how information (other than that contained in arrival, cargo and outturn reports) is provided to Customs, and how goods move from Customs control, and into Australian commerce.

As a general rule, the substance of the old provisions remain. However, there are a number of small changes. These are now outlined.

To make the terms of the Customs Act more modern, references to making reports "by computer" have been removed. Instead, reports that must be reported using the new system are required to be made "electronically". To confirm this, item 95 of Part 5 to Schedule 3 inserts into subsection 4(1) of the Act a definition of " electronic ". In relation to a communication, the term "electronic" is defined to mean the "transmission of a communication by computer".

There is one other important change in nomenclature. The legislation creates the concept of "import declarations" and "requests for cargo release" (or "RCRs").

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"RCRs" are discussed in greater detail in Chapter 2.

The Kyoto Convention uses the term "declaration", rather than the traditional Australian term of "entry". The Customs Act is amended to reflect the term used internationally.

That notwithstanding, item 34 of Part 2 of Schedule 3 adds a new subsection 68(3A) that says that an "entry for home consumption" is made by communicating either an import declaration or RCR to Customs.

This is important so other legislation which uses the term "entry for home consumption" can continue to operate.

An example of this sort of legislation is section 16AC of the Quarantine Act 1908, which says that regulations may provide for a notice to Quarantine of the proposed importation of goods can be made in an "entry" for home consumption.

Other changes are in new sections 71K and 71L . These proposed amendments provide that the CEO may set out the information required in (amongst other things) an import declaration. It is proposed to remove any doubt the CEO can make more than one type of import declaration for different circumstances, or different classes of importers.

This is so importers importing goods with a limited customs value can make an import declaration that contains less information than a "full" declaration.

It is proposed that goods with a customs value between $250 and $1000, or such other value as may be set out in the Regulations will be able to use the simpler declaration. The import processing charge payable for making this communication will be less than that payable for a "full" import declaration. For further information, see the explanatory memorandum to the Import Processing Charges Act 2000.

A further change to these provisions will allow Customs to have goods under Customs control held where they are presently located.

Currently, when an application is made to move goods into either Australian commerce or to another place under Customs control, Customs can either approve the move or require the goods to be moved somewhere for further examination.

One of the greatest risks of prohibited imports going into Australian commerce is when a consignment of goods is moving.

Therefore, where Customs has yet to complete an assessment of the possible risks goods contained in a particular consignment pose, such as where a cargo report has been provided late, the law will give Customs the capacity to hold goods at their current location, until it and other agencies (such as AQIS) have completed their risk assessments.

The final change allows an officer of Customs to suspend or cancel an authority given by Customs to take goods into Australian commerce where there are grounds to believe there has been a breach of a "Customs-related law."

Item 11 of Part 5 to Schedule 1 adds a new section 4B to the Customs Act. It provides that a Customs-related law is the Customs Act, the Excise Act 1901 (and regulations) or any other Act (and their regulations) which relates to either the importation or exportation of goods, where the act of importation or exportation is subject to any restrictions, charges or taxation.

New subsections 71C(11)-(14) allow an officer of Customs to suspend an authority, effective from the time the notice is served (if on paper) or sent (if communicated electronically). The officer must set out the reasons for the suspension, and where there are no reasonable grounds to believe there is a breach of a Customs- related law, revoke the notice.

These powers are necessary because sometimes Customs receives late information suggesting the contents of a particular consignment breach a customs related law. The capacity to take appropriate action is thus necessary to be contained in the legislation.

Finally, item 44 of Part 2 to Schedule 3 amends subsection 167(3A) of the Customs Act, which governs how payments under protest are made. This is one way in which an importer indicates that it disputes an assessment of customs duty made by Customs. The section is amended so that a "payment under protest" can only be made at the time of making payment in respect of goods following an import declaration advice, or a periodic declaration.

However, to remove any confusion, item 45 makes clear that the old subsection 167 (3A) remains applicable to entries made using the former COMPILE computer system, made prior to the commencement of provisions removing recognition of the COMPILE system, even after the new legislation commences operation.

Self-Assessed Clearance Declarations

Item 37 of Part 2 to Schedule 3 introduces the new concept of a self- assessed clearance declaration.

The new section 71 of the Customs Act inserted by this legislation provides that unless:

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a particular communicator of information falls within a class of person set out in the Customs Regulations; or

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the goods being imported fall within a class of goods set out in the Regulations;

an owner of goods (as defined in the Customs Act) of a kind referred to in paragraphs 68(1)(e), (f), or (i) will have to report the importation of goods that have a customs value of less than $250 (or some other figure specified in the Customs Regulations) in a self- assessed clearance declaration. A self-assessed clearance declaration is not an entry and will require very little information such as whether or not the value of the goods exceeds the $250 threshold.

This self-assessed clearance declaration replaces the old screen-free process previously conducted by individual Customs officers.

Once the declaration is made, Customs decides whether the goods are to move into Australian commerce, or remain under Customs control. Where goods are to remain under Customs control, reasons must be given.

So long as the self-assessed clearance declaration charge (if payable) and any other charges and taxes are paid, the goods may then be moved into Australian commerce.

The new section 71AAA of the Customs Act provides the person making the self assessed declaration will be required to pay an import processing charge under the Import Processing Charges Act 2000 . For further information, see the explanatory memorandum to the Import Processing Charges Bill 2000.

However, the Regulations will be able to exempt particular classes of people from having to pay the charge. In addition, those who report goods in an "abbreviated cargo report" (as defined by section 63A of the Customs Act), will not need to pay the self-assessed clearance declaration charge. This is because these persons operate under a legislative scheme with its own charging regime and if not exempted they would be paying two lots of charges.

Finally, the new section 71AAB of the Customs Act will allow a person to enter into an arrangement with the CEO to pay charges in respect of self-assessed declarations.

This is designed to assist people such as express carriers, who make many such declarations daily on behalf of their clients.

Payments must be made by the 21st day of the next month if no other arrangement has been made with the CEO.

Failure to pay the charges leads to an agreement being terminated, with the outstanding amount recoverable as a debt.

Section 71 of the Customs Act currently provides that where goods are not required to be entered the owner of the goods must provide certain information to Customs. Section 71 is being replaced by Item 37 of Part 2 of Schedule 3 and in respect of certain goods not required to be entered the owner or person acting on behalf of the owner must communicate information to Customs.

Subsection 132(4) of the Customs Act sets out the time at which the rate of duty is determined for goods whose owner is required by section 71 to provide information about them.

Subsection 132(5) of the Customs Act sets out the time at which the rate of duty is determined for goods whose owner is not required by section 71 to provide information about them.

Item 3 of the table in subsection 132AA(1) of the Customs Act sets out when duty must be paid on goods whose owner must provide information about them under section 71.

Items 41A, 41B and 41C of Schedule 3 will amend these provisions to reflect the changes proposed to be made to section 71, ie that in some circumstances the owner of goods or a person acting on behalf of the owner must provide information about the goods.

Transhipment

Under the current Customs Act, goods that are imported into Australia, but have as their ultimate destination a place overseas are called "transhipped" goods.

The current section 68 of the Customs Act requires these goods to be "entered".

Items 32 and 33 of Part 2 of Schedule 3 and item 42 of Part 2 to Schedule 3 removes the requirement to "enter" transhipped goods currently contained in sections 68 and 128 of the Customs Act, so as to simplify cargo processes.

However, so as to ensure Customs' control over these goods is not compromised, item 35 to Part 2 to Schedule 3 adds a new section 68A , which provides an officer of Customs with the power to order that particular goods not move from where they are, or to deliver them to a particular place for the purposes of examination.

To further ensure that Customs has the right to exercise powers such as the power to examine goods, item 28 of Part 2 to Schedule 3 adds a new paragraph 30(1)(ae) of the Customs Act, to make clear these goods are under Customs control whilst in Australia.

Warehouse Declarations

Item 38 of Part 2 to Schedule 3 inserts a new Subdivision D to Division 4 of Part IV of the Act.

The existing provisions relating to the regulation of goods bound for warehouses licensed under Part V of the Customs Act are currently combined with provisions dealing with the entry of goods.

To assist the readability of the Act, provisions dealing with goods going to customs warehouses have been separated from provisions dealing with other goods.

The legislation imposes the same conditions and requirements on goods moving to a warehouse as those on goods that are going directly into Australian commerce.

Information that must be provided to Customs is now to be set out in a warehouse declaration. It is an approved statement made by the CEO of Customs, and can be disallowed by Parliament.

The only change is the warehoused goods declaration fee, payable under new section 71BA of the Customs Act. The current formula used to calculate the current warehoused goods fee is removed.

Instead, the legislation imposes a flat fee of $23.80 (or an amount not exceeding $34.80 as set by Regulation) for electronic declarations, and $60 (or an amount not exceeding $90, as set by Regulation) for documentary declarations.

Provision of Clearance Information

One of the products of Customs' redevelopment of its computer systems is a diagnostic facility that makes it possible to provide specified persons with information relating to goods being imported into Australia.

Item 143 of Part 6 to Schedule 3 of the legislation adds a new section 77AA of the Customs Act.

Under that new section, Customs may tell a cargo reporter whether an impending arrival report made under new section 64 of the Customs Act or an arrival report under new section 64AA has been made, and if so, the estimated or actual time of arrival of the ship or aircraft.

New subsection 77AA(1) provides that certain information can be released to a cargo reporter in respect of impending arrival reports and arrival reports. New suubsections 77AA(2) and (3) provide Customs may inform the owner of goods of the stage reached by Customs in deciding whether or not to give an authority to deal with goods that have been entered for import and the stage reached by Customs in considering a movement application.

New subsections 77AA(4) and (5) will allow Customs to disclose to an owner the stage reached by Customs in deciding whether or not to give an authority to deal with goods entered for export and the stage reached in preparing to give a submanifest number in respect of a submanifest.

Customs may also tell the owner of goods (as defined in section 4 of the Customs Act) the stage Customs has reached in its consideration of a request to move goods into domestic commerce, a warehouse, or to move goods under section 71E of the Customs Act.

The provision of this information is intended to aid those involved in the import/export process by allowing them to determine the status of their cargo at any point in time following provision of the necessary information to Customs.