House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minster for Home Affairs, the Hon Jason Clare MP)

Schedule 1 - Amendment of the Customs Act 1901

GENERAL OUTLINE

1. The purpose of Schedule 1 is to make a range of amendments to the Customs Act to strengthen the cargo supply chain against criminal infiltration. These amendments respond to operational law enforcement advice that some holders of customs broker, depot and warehouse and members of other key organisations in the trading community had links to serious and organised crime and were using their positions to carry out or facilitate criminal activity.

Part 1 - Fit and Proper person tests

2. All persons applying for a broker licence must satisfy the CEO of Customs or his or her delegate that they are a 'person of integrity'. Where a company or partnership applies for a licence, this means directors and certain employees of the company or partners and certain employees of the partnership must be 'persons of integrity'. This does not include all persons who work for the individual, company or partnership, but there is an ongoing obligation for the licence holder to ensure that all persons who participate in the work of the customs broker are persons of integrity.

3. For depots and warehouse applicants, the CEO of Customs or his delegate must be satisfied that the applicant is a `fit and proper person'. Where a company or partnership applies for a licence, this means any director, officer or shareholder of the company who would participate in management and control of the place, to be covered by the licence or any partner of the partnership. The Customs Act also requires all employees of the applicant who would participate in the management and control of the proposed depot or warehouse to be fit and proper persons.

4. All persons applying to be registered as special reporters or re-mail reporters must satisfy the CEO of Customs or his delegate that the applicant is a `fit and proper person'.

5. The amendments made by this Part will replace the term 'person of integrity' with 'fit and proper person' to ensure consistency in terminology. The amendments will also require the CEO of Customs to consider, in determining whether a person is fit and proper, whether the person has been refused an aviation security identification card (ASIC) or a maritime security identification card (MSIC) or had an ASIC or MSIC suspended or cancelled.

6. The CEO is obliged only to have regard to whether a person has received a refusal, cancellation or suspension of an ASIC or MSIC in addition to a range of other matters, as opposed to solely basing his or her decision on the matter, to determine whether that person is fit and proper. Further, the measure is restricted to a refusal, cancellation or suspension of an ASIC or MSIC that occurred within the 10 years immediately preceding the relevant decision. This is a reasonable period and is consistent with the requirement to have regard to any conviction of the person committed within the 10 years immediately preceding the relevant decision, which currently exists in the Customs Act.

Item 1 - subsection 4(1)

7. Item 1 will insert a definition of transport security identification card which is defined as:

•

an aviation security identification card issued under the Aviation Transport Security Regulations 2005 ; and

•

a maritime security identification card issued under the Maritime Transport and Offshore Facilities Security Regulations 2003 .

Item 2 - 67EB(3)

8. Section 67EB contains matters the CEO must consider in registering a person as a special reporter. This includes consideration of whether a person is a fit and proper person. Subsection 67EB(3) contains matters the CEO must have regard to in deciding whether a person is a fit and proper person.

9. The amendment contained in this item will amend subsection (3) to require the CEO to consider whether a person has had an ASIC or MSIC refused, cancelled or suspended in deciding whether a person is a fit or proper person.

Item 3 - 67H(2)

10. Subdivision E of Division 3 contains provisions regarding registering re-mail reporters. This includes a fit and proper person test contained in section 67H. Paragraph 67G(1)(c) requires the CEO to be satisfied a person meets the fit and proper person test before the CEO can register them as a re-mail reporter.

11. The amendment made by this item will require the CEO to consider whether a person has had an ASIC or MSIC refused, cancelled or suspended in deciding whether a person is a fit or proper person.

Item 4 - 77K(2)

12. Section 77K contains the requirements for the grant of a depot licence. Subsection (1) provides the CEO must not grant a licence unless, in the CEO's opinion, the matters in that subsection are met. This includes a requirement that the CEO is satisfied a person, certain employees or certain persons where the applicant is a partnership or company, are fit and proper.

13. 77K(2) contains the matters the CEO must have regard to in determining whether a person is fit and proper for the purposes of section 77K. The amendment made by this item will require the CEO to consider whether a person has had an ASIC or MSIC refused, cancelled or suspended in deciding whether a person is a fit or proper person.

Item 5 - 77N(2)(d)

14. Section 77N contains general conditions to which a depot licence is subject. Subsection (2) requires the depot licence holder to notify the CEO in writing where certain events occur. This includes, at paragraph (d), a requirement to notify the CEO when certain persons are convicted of certain offences or become an insolvent under administration.

15. The amendment made by this item will extend this notification requirement to require a depot licence holder to notify the CEO where those certain persons described in paragraph (d) have been refused an ASIC or MSIC or had an ASIC or MSIC suspended or cancelled.

Item 6 - 77V(2)

16. Section 77V allows the CEO to give notice of intended cancellation of a depot licence to a licence holder where the CEO is satisfied one or more of the matters described in subsection (1) exists. This includes a situation where the CEO is no longer satisfied the licence holder, or certain persons where the licence holder is a company or partnership, are fit and proper.

17. Subsection (2) contains a list of matters the CEO must have regard to in deciding whether a person is fit and proper under subsection (1). The amendment made by this item will require the CEO to consider whether a person has had an ASIC or MSIC refused, cancelled or suspended in deciding whether a person is fit or proper.

Items 7 and 8 - 81(2)

18. Section 81 contains the requirements for the grant of a warehouse licence. Subsection (1) provides the CEO must not grant a licence unless, in the CEO's opinion, the matters in that subsection are met. This includes a requirement that the CEO is satisfied a person, certain employees or certain persons where the applicant is a partnership or company, are fit and proper.

19. 81(2) contains the matters the CEO must have regard to in determining whether a person is fit and proper for the purposes of section 81. The amendment made by item 8 will require the CEO to consider whether a person has had an ASIC or MSIC refused, cancelled or suspended in deciding whether a person is a fit or proper person.

20. Item 7 makes a minor, technical amendment relating to item 8.

Items 9 to 13 - 82(1)(c)

21. Section 82 contains general conditions to which a warehouse licence is subject. Subsection (2) requires the warehouse licence holder to notify the CEO in writing where certain events occur. This includes, at paragraph (c), a requirement to notify the CEO when certain persons are convicted of certain offences or become an insolvent under administration.

22. The amendment made by item 10 will extend this notification requirement to require a warehouse licence holder to notify the CEO where those certain persons described in paragraph (d) have been refused an ASIC or MSIC or had an ASIC or MSIC suspended or cancelled.

23. Items 9, 11, 12 and 13 make minor technical amendments consequential to item 10 and to ensure the provisions are consistent with current drafting practices.

Items 14 to 19 - 86(1A)

24. Section 86 provides for the suspension of warehouse licences. Subsection (1) allows the CEO to give notice to suspend a warehouse licence where the CEO has reasonable grounds for believing one of the things in subsection (1) exist. This includes where the CEO has reasonable grounds for believing that a person, certain employees or certain persons where the applicant is a partnership or company, are fit and proper.

25. Subsection (1A) contains the matters which the CEO must take into account when considering whether a person is fit and proper. Item 19 will insert new paragraph (1A)(d) which will require the CEO to determine whether a person has been refused an ASIC or MSIC in determining whether a person is fit and proper.

26. Items 14 to 18 make minor technical amendments to ensure the provisions are consistent with current drafting practices.

Items 20 to 26 - 86(1B)

27. These items make minor technical amendments to ensure the provisions are consistent with current drafting practices.

Items 27 to 30- 183CC

28. Items 27 and 28 will substitute the words 'person of integrity' with 'fit and proper person' to ensure consistency across the Customs Act.

29. Section 183CC provides for broker's licences. Subsection (1) provides the CEO must not grant a broker's licence unless, in the CEO's opinion, the matters in that subsection are met. Subsection (1) includes a requirement that the CEO is satisfied a person, certain employees or certain persons where the applicant is a partnership or company, are fit and proper.

30. 183CC(4) contains the matters the CEO must have regard to in determining whether a person is fit and proper for the purposes of section 183CC. The amendment made by item 29 will require the CEO to consider whether a person has had an ASIC or MSIC refused, cancelled or suspended in deciding whether a person is a fit or proper person.

31. Item 30 make a technical amendment consequential to item 29.

Items 31 to 40 - 183CG(3)

32. Section 183CG contains general conditions to which a broker's licence is subject. Subsection (1) requires a licence holder to notify the CEO where certain events occur. Items 31 to 34 amend that subsection to require the licence holder to notify where the licence holder has an ASIC or MSIC refused, suspended or cancelled.

33. Subsection (3) contains general conditions to which a broker's licence held by a customs broker is subject. Items 36 and 37 amend this subsection to include an obligation to notify the CEO where certain persons have an ASIC or MSIC refused, suspended or cancelled.

34. Paragraph (4)(a) provides a broker's licence held by a customs broker is subject to the condition that the broker shall do all things necessary to ensure that all person who participate in the work of the customs broker are persons of integrity. Item 40 will replace the words 'persons of integrity' with 'fit and proper persons' in section 183CG to ensure consistency across the Customs Act.

Item 41 - Subsection 183CQ(1)

35. Section 183CQ relates to the investigation of matters relating to a broker's licence. The CEO may give notice under subsection (1) where the CEO has reasonable grounds to believe one of the things contained in subsection exist.

36. This item will insert a reference to the refusal, suspension or cancellation of an ASIC or MSIC, allowing the CEO to give notice on that ground.

Division 2 - Application of amendments

Item 42 - Application of amendments

37. This item provides that the amendments made by Part 1 apply in relation to an application for, or the renewal of any of the following made on or after commencement of the item:

(a)

registration as a special reporter

(b)

registration as a re-mail reporter

(c)

a depot licence

(d)

a warehouse licence, and

(e)

a broker's licence.

38. Sub item 42(2) provides that the amendments made by Part 1 will, subject to sub item (3), apply in relation to a refusal, suspension or cancelation of a transport security identification card, whether the refusal, suspension or cancellation: occurs before, on or after the commencement of this item; or relates to a registration made or a licence granted before, on or after that commencement.

39. Sub item 42(3) provides that where the amendments made by Part 1 will require notification to the CEO of a refusal, cancellation or suspension of an ASIC or MSIC that occurred before commencement, the person will have 90 days to comply with the requirement after commencement of Part 1. This will give those people subject to the requirement time to comply with it.

Part 2 - Cargo Terminal Operators

Item 43 - After Part V

40. This item will insert new Part VAAA.

41. New Division 1 contains definitions relevant for the purposes of new Part VAAA.

42. New section 102B will contain the definitions for the purposes of new Part VAAA including definitions of cargo handler, cargo terminal and cargo terminal operator.

43. Cargo terminal operator is defined in new section 102B as meaning, 'in relation to a cargo terminal, a person who manages the cargo terminal'. This definition is deliberately broad to ensure the full range of persons that may manage a cargo terminal are covered and to ensure that new or varied business models do not create gaps in the control framework. In the current environment, this definition would for example include persons who have long-term exclusive access to a designated area of a port and who manage the operations and the security of the area. The definition also applies to a Port Authority (or other body) who allows third parties to use their facilities on a short-term basis (e.g. multi user berths). In the airport environment, and depending on where the goods are located immediately before being loaded or immediately after being unloaded, it could apply to the entity with responsibility for the airport as a whole or persons who have long-term exclusive access to a designated area of an airport and who manage the operations and the security of that area.

44. Where a cargo terminal operator also holds a depot or warehouse licence for the same premises the CTO obligations in this part do not apply. This is common at international airports. In such cases, the Customs depot licensing scheme would apply, not the new obligations, as the former would already achieve the aim of the new obligations.

45. New section 102BA will contain the meaning of fit and proper person for the purposes of new Part VAAA. The definition contained here is consistent with other fit and proper person tests contained throughout the Customs Act.

46. New Division 2 contains obligations, which will be imposed on cargo terminal operators.

47. New section 102C will require a CTO to notify Customs of the terminal it operates and the terminal's physical address.

48. New section 102CA will require a CTO to ensure that a cargo terminal has adequate physical security of the terminal and of any goods at the terminal.

49. New subsection 102CA(2) contains minimum requirements, which a CTO must meet in relation to physical security at a cargo terminal and new subsection 102CA(3) will require a CTO to notify Customs of any substantial changes to the cargo terminal that would affect the physical security of the terminal or of goods at the terminal.

50. New section 102CB will prevent a CTO from moving a sign placed by Customs at or near a cargo terminal without the written approval of an authorised officer.

51. New section 102CC will require a CTO to notify Customs where the CTO becomes aware of certain events occurring in relation to goods. A CTO will need to notify Customs when they become aware of any of the following events:

•

unauthorised movement of goods subject to Customs control in or from a cargo terminal;

•

unauthorised access to goods subject to Customs control in the cargo terminal or on a ship or aircraft within or adjacent to the terminal;

•

unauthorised access to an information system, whether electronic or paper based, relating to goods subject to Customs control;

•

enquiries relating to goods subject to Customs control from a person who does not have a commercial connection with the goods;

•

a theft, loss or damage of goods subject to Customs control;

•

a break in and entry, or attempted break in, of the cargo terminal

•

a change that may adversely affect the security of the terminal; and

•

a suspected breach of a Customs-related law in the cargo-terminal.

52. A CTO will be required to notify Customs as soon as practicable but no later than 5 days after becoming aware of the event.

53. New section 102CD will require a CTO to notify Customs where goods not belonging to the CTO remain at the terminal for more than 30 days.

54. New section 102CE will require a CTO to keep records of each person who enters the terminal.

55. New subsection (6) clarifies that the record keeping requirement contained in this section does not apply to an employee of a cargo terminal or an officer or an employee of, or of an authority of, the Commonwealth or a State or Territory. The obligation contained in this section will require this information be provided to Customs by the operator within 30 days of being requested. The Privacy Act 1988 applies to both public and private sector entities. As such, Customs officers are bound by the Privacy Principles in the Privacy Act when dealing with personal information. The private sector provisions in the Privacy Act are likely to extend to most CTOs.

56. New section 102CF will require CTOs to take all reasonable steps to ensure that they are a fit and proper person and, if the CTO is a body corporate, each executive officer of the body corporate is a fit and proper person.

57. New subsection 102CF(2) will require a CTO to provide, if requested to do so by an authorised officer, information that would support an assessment that the CTO is a fit and proper person and if the CTO is a body corporate each executive of the body corporate is a fit and proper person.

58. New section 102CG requires a CTO to take all reasonable steps to educate and train its employees or other persons involved in the CTO's business to ensure awareness of the CTO's responsibilities and obligations in relation to goods subject to Customs control.

59. New section 102CH will require a CTO to comply with any written direction given by an authorised officer under new section 102EB.

60. New section 102CI requires a CTO to provide an authorised officer with all reasonable facilities and assistance for the effective exercise of their powers under a Customs-related law.

61. New section 102CJ will allow the CEO to, by legislative instrument, impose additional obligations on CTOs generally. This will provide Customs greater flexibility in dealing with new and emerging threats in this domain.

62. The power to impose new obligations is circumscribed by reference to the protection of the revenue, ensuring compliance with Customs Acts, any other law of the Commonwealth prescribed by the regulations or a law of a State or Territory prescribed by the regulations, or for any other purpose. The reference to "any other purpose" in these provisions is limited to purposes of the Customs Act. It is not practical to list all the purposes of the Customs Act and those purposes may change from time to time. An example of a purpose not specifically identified in these provisions would be the effective operation of the Customs Act, which could be reflected in an obligation that further facilitates the exercise of powers by Customs Officers. For example, the CEO might consider it necessary to place obligations on CTOs requiring them to make available an adequate power supply to run specialist equipment or to facilitate space and access arrangements for mobile x-ray units.

63. New section 102CK creates a strict liability offence where a CTO fails to comply with an obligation or requirement set out in new Division 2 or under a legislative instrument made under new section 102CJ.

64. In developing this offence, consideration was given to both the Senate Standing Committee for the Scrutiny of Bills Sixth Report of 2002 on Application of Absolute and Strict Liability Offences in Commonwealth Legislation and A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers .

65. The offence is regulatory in nature and has a maximum penalty of 60 penalty units.

66. New Division 3 will impose obligations on cargo handlers.

67. Cargo handlers are defined in new section 102B as a person involved in any of the following activities at a cargo terminal:

(a)

the movement of goods subject to Customs control into, within or out of the terminal;

(b)

the unloading, loading or handling of goods subject to Customs control at the terminal;

(c)

the storage, packing or unpacking of goods subject to Customs control at the terminal.

68. New section 102D will impose the obligations which apply to CTOs contained in new sections 102CC and 102CF to 102CI, described above, on cargo handlers. These obligations are:

•

notification requirements relating to goods;

•

the requirement to take reasonable steps to ensure the cargo handler and certain persons are fit and proper ;

•

the obligation to take all reasonable steps to train staff;

•

compliance with written directions; and

•

the requirement to provide all reasonable facilities and assistance.

69. New section 102DA will impose an obligation on a cargo handler to not allow a container to be unpacked without the written approval of an authorised officer. This obligation does not apply if the goods are unpacked in a depot in accordance with the customs depot licence.

70. New section 102DB will impose an obligation on a cargo handler to not allow transhipment or export of goods, which are imported into Australia and still subject to Customs control without the written approval of an authorised officer.

71. New section 102DC requires a cargo handler to use its establishment ID for a port, airport or wharf when communicating with Customs unless the cargo handler has written permission from Customs to use a contingency code.

72. New section 102DD allows the CEO to, by legislative instrument, impose additional obligations on a cargo handler. This will provide Customs greater flexibility in dealing with new and emerging threats in this domain.

73. The power to impose new obligations is circumscribed by reference to the protection of the revenue, ensuring compliance with Customs Acts, any other law of the Commonwealth prescribed by the regulations or a law of a State or Territory prescribed by the regulations, or for any other purpose. The reference to "any other purpose" in these provisions is limited to purposes of the Customs Act. It is not practical to list all the purposes of the Customs Act and those purposes may change from time to time. An example of a purpose not specifically identified in these provisions would be the effective operation of the Customs Act, which could be reflected in an obligation that further facilitates the exercise of powers by Customs Officers.

74. New section 102DE creates a strict liability offence where a cargo handler fails to comply with an obligation or requirement set out in new Division 2 or under a legislative instrument made under new section 102DD.

75. In developing this offence, consideration was given to both the Senate Standing Committee for the Scrutiny of Bills Sixth Report of 2002 on Application of Absolute and Strict Liability Offences in Commonwealth Legislation and A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers .

76. The offence is regulatory in nature and has a maximum penalty of 60 penalty units.

77. New Division 4 contains provisions relating to the powers of authorised officers.

78. New section 102E contains general powers of authorised officers. New subsection (1) provides that, for the purpose of determining whether a provision of any Customs-related law has been, or is being, complied with, an authorised officer may enter a cargo terminal and exercise the power to:

•

inspect any document at the terminal;

•

take extracts from, or make copies of, any such document;

•

to take into the terminal such equipment and materials as the authorised person requires for the purpose of exercising powers under a Customs-related law in relation to the terminal.

79. New subsection 102E(2) allows an authorised officer, while at a cargo terminal, to:

•

access electronic equipment at the terminal; and

•

use a disk, tape or other storage device that is at the terminal or can be used with the equipment or is associated with it, if the authorised officer has reasonable ground for suspecting that the electronic equipment, disk, tape or other storage device is or contains information relating to certain matters.

80. These provisions allow authorised Customs officers with the power to enter, search and access information at cargo terminals without a warrant.

81. A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers provides that legislation should only authorise entry to premises by consent or under a warrant. The Senate Standing Committee for the Scrutiny of Bills has stated that entry without consent or warrant should only be allowed in limited circumstances. One of these circumstances is if a person obtains a licence or registration for the premises, which can be taken to accept entry by an inspector for the purpose of ensuring compliance with licence or registration conditions. While the proposed provisions do not establish a licensing scheme for cargo terminal operators and cargo handlers, the obligations imposed on these parties are of similar nature to a licence including those imposed under customs licensing arrangements for depot and warehouses. In addition, section 102DC could be taken to be a requirement for cargo terminal operators to register with Customs.

82. Under the Customs Act, Customs officers have a range of powers that they can exercise at a 'customs place' including ports, airports and wharves. These provisions in no way limit any of those powers.

83. New section 102EA allows an authorised officer to make requests to CTOs and cargo handlers.

84. New subsection 102EA(1) allows an authorised officer to request, in writing, a CTO provide documentation to the officer of the procedures and methods in place for ensuring the security of goods at the terminal or records relating to each person who enters the terminal. These powers will complement the obligations imposed on a CTO to maintain physical security and maintain records. These powers will also enable an authorised officer ensure a CTO is complying with those obligations.

85. New subsection 102EA(2) will give an authorised officer the power to, in writing, request that a CTO or cargo handler:

•

provide information to the officer that would support an assessment that the operator or handler, or certain persons are fit and proper; and

•

give the officer access to electronic equipment at the terminal for the purposes of obtaining information for certain matters.

86. New section 102EA does not provide a minimum timeframe a CTO will have to comply with a request made by an authorised officer. This has been left open to allow the maximum amount of flexibility in the provision. When issuing a notice an authorised officer will have regard to what a reasonable timeframe to provide the requested information is in the circumstances.

87. New section 102EB gives an authorised officer the power to give, in writing, certain directions to CTOs and cargo handlers. New section 102EB provides that any directions given under that section are not legislative instruments. This is included to assist readers as the directions are not legislative instruments within the meaning of section 5 of the Legislative instruments Act 2003 .

88. Subsection 5 of new section 102EB enables an authorised officer to give directions to anyone at a cargo terminal for specified purposes involving interference with goods subject to Customs control or preventing interference with the exercise of powers or functions of an authorised person at a cargo terminal. Directions given under this subsection are not required to be in writing.

89. CTOs and cargo handlers have an obligation to comply with any directions given under new section 102EB.

90. New section 102F inserts a power for the CEO to give a direction, in writing, to a CTO or cargo handler that they not be involved, either indefinitely or for a specified period, in any way, in the loading, unloading, handling or storage of goods subject to Customs control in the cargo terminal. Where the CTO or cargo handler is a body corporate, the CEO can also give such a direction to an executive officer of that entity.

91. New subsection 102F(3) requires the CEO, before giving a direction, to be satisfied that: the person to whom the direction will be given is not a fit and proper person; or the direction is necessary for the protection of the revenue or for the purpose of ensuring compliance with Customs Acts or any other law of the Commonwealth or of a State or Territory prescribed by the regulations.

92. New section 102FA creates a strict liability offence for failing to comply with a direction under new section 102F. The offence is regulatory in nature and has a maximum penalty of 100 penalty units.

93. In developing this offence, consideration was given to both the Senate Standing Committee for the Scrutiny of Bills Sixth Report of 2002 on Application of Absolute and Strict Liability Offences in Commonwealth Legislation and A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers .

94. Although this is a higher penalty than the suggested maximum for a strict liability offence of 60 penalty units contained in the Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers , it is justified in these circumstances given the serious nature of the direction and the possible consequences for security, community safety, and revenue for failing to comply. As a safeguard, a person subject to such a direction also has the right to apply to the Administrative Appeals Tribunal for review of the decision.

Part 3 - Using information held by Customs

Item 45 - After section 233BABAE

95. This item will insert new section 233BABAF in the Customs Act, which creates two new criminal offences for obtaining and using restricted information to commit an offence, and for unlawfully disclosing restricted information obtained from Customs.

96. New subsection 233BABAF(1) creates a new criminal offence where a person obtains restricted information from Customs and uses it to commit an offence against a law of the Commonwealth, a State or Territory. The offence will be punishable by a maximum of imprisonment for 2 years or 120 penalty units, or both.

97. Subsection (2) clarifies that in prosecuting a person under subsection (1), it is not necessary to prove that the defendant knew the offence was one against a law of the Commonwealth, a State or Territory.

98. New subsection 233BABAF(3) will create an additional offence where a person obtains restricted information from Customs, then unlawfully discloses that information to another person. This offence will also be punishable by a maximum of imprisonment for 2 years or 120 penalty units, or both.

99. Restricted information is defined as information, which is held in a computer owned, leased or operated by Customs; and to which access is restricted by an access control system associated with a function of the computer.

100. This offence is deliberately broad in its application. It does not matter how a person obtains the restricted information and it is not necessary for a person to obtain the information from a Customs computer. To prove information is restricted information it will be enough to show that the information which is obtained is stored on a Customs computer - the information does not have to be obtained from the place it is stored.

101. For example, where a person accesses information related to Customs that is contained on the computer of a Customs broker and then uses that information to commit an offence against a law of the Commonwealth, as long as the information which is obtained is held on a computer owned, leased or operated by Customs to which access is restricted by an access control system associated with a function of the computer, that is, the information is restricted information, then provided the relevant fault elements are present then the person will have committed an offence under new subsection 233BABAF(1).

Part 4 - Infringement Notices

102. Infringement notices supplement offences and provide an alternative to prosecution for an offence

103. Australian National Audit (ANAO) Report No. 15 2011-12 included the following recommendation about the Customs Act infringement notice scheme:

"To improve the usefulness of the Infringement Notice Scheme as a mechanism for improving compliance and discouraging non-compliance, the ANAO recommends that Customs and Border Protection:

(a)

reviews the operation of the Scheme to identify the impediments to its wider use and whether these impediments can be rectified, and if required

(b)

seeks any necessary administrative or legislative changes to the existing scheme to improve its effectiveness."

104. The amendments made by Part 4 are in part a response to that ANAO recommendation and seek to improve the utility of the Customs Act infringement notice scheme by increasing penalties to encourage greater compliance and to move some aspects of the scheme into subordinate legislation to provide some flexibility and simplification.

105. Part 4 will repeal Division 5 of Part XIII of the Customs Act, which contains the infringement notice scheme and replaces that Part with a regulation making power, which will allow most aspects of the infringement notice scheme to be prescribed by regulation. Any regulation made under the new provision will be subject to disallowance under the Legislative Instruments Act 2003 and will therefore still be subject to Parliamentary scrutiny. Further, inherent in any infringement notice scheme is the ability of the person who receives the notice to refuse to pay the fine and have the matter heard by a court.

106. The approach of prescribing an infringement notice scheme by regulation is consistent with A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers and other Commonwealth legislation such as the Airports Act 1996, Therapeutic Goods Act 1989 and the Great Barrier Reef Marine Park Act 1975 .

107. The regulations will specify all matters in relation to the infringement notice scheme except the maximum penalty, which the Customs Act prescribes. The Act also specifies that an infringement notice may only apply to strict liability and absolute liability offences contained in the Act.

108. New section 243X will contain this regulation making power.

109. New subsection 243X(2) provides that the maximum penalty under the scheme must not exceed either:

(a)

one-quarter of the maximum penalty a court could impose on a person for that penalty; and

(b)

either 15 penalty units for a natural person or 75 penalty units for a body corporate.

110. A note at the end of new subsection 243X(2) highlights that subsection 4(3) of the Crimes Act 1914 allows a court to impose a fine on a body corporate that is up to five times the maximum that could be imposed on an individual convicted of the same offence. This note is included for the purposes of new subsection 243X(2)(a) to clarify that the corporate multiplier applies to infringement notice penalties.

111. A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers provides that infringement notice provisions should generally ensure that the amount payable under a notice for a person is 1/5 of the maximum penalty a court could impose, but not more than 12 penalty units for a natural person and 60 penalty units for a body corporate. To increase the deterrence effect of the infringement notice scheme the ratio has increased to 1/4 of the maximum penalty a court could impose, but not more than 15 penalty units for a natural person and 75 penalty units for a body corporate. This ration is consistent with other Commonwealth legislation including for example section 1313 of the Corporations Act 2001 .

112. Subsection 243X(3) provides an exception to maximum penalties in paragraph 243X(2)(b). In some cases under the Customs Act, the maximum penalty a court can impose for a strict or absolute liability offence is determined by reference to the amount of duty or value of the goods. Section 243T of the Act is an example. Consistent with current arrangements under the Customs Act, the amount payable under an infringement notice will be limited to 1/5 of the maximum penalty a court could impose only.

113. In addition to the regulation making power, Division 5 will also contain provisions regarding forfeiture of goods that are prohibited imports if an infringement notice is paid and compensation in certain circumstances. Both of these provisions exist in the current infringement notice scheme.

114. Item 58 will contain a savings provision, which provides that the existing Division 5 in Part XIII will continue to operate until regulations are made under new subsection 243X(1).

Part 5 - Strict liability offences

115. Part 5 will increase the penalties for a significant number of existing strict liability offences and apply strict liability to several other offences. These amendments will standardise the penalties for many Customs Act strict liability offences and significantly enhance the effectiveness of the enforcement regime in deterring conduct that undermines the integrity of the Australian border and the collection of revenue. The strict liability offences are regulatory in nature, often occur in high volume and attract relatively minor penalties, the majority of which provide for a maximum of 60 penalty units or less, as recommended in A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers .

Items 59 to 60- subsection 60(3)

116. Subsection 60(3) creates an offence where the pilot of an aircraft causes the aircraft to land at a boarding station which is not appointed and does not, as soon as practicable, bring the aircraft for boarding to a boarding station appointed for that aircraft and permit the aircraft to be boarded.

117. Similar offence provisions exist in subsection 60(1) and (2). Subsection 60(1) is a strict liability offences and strict liability applies to certain elements of subsection 60(2).

118. To ensure consistency across the like offences in section 60 of the Customs Act, Item 60 will apply strict liability to the offences in subsections 60(2) and (3) and the offences will attract the same maximum penalty of 100 penalty units. An additional defence balances the higher than usual penalty for strict liability offences. It is a defence to a prosecution for an offence against subsection 60(2) and (3) where compliance with the provision is prevented due to stress of weather or other reasonable cause. The defendant bears the legal burden in relation to this defence but the matters required to be proved by the defendant are peculiarly within the knowledge of the defendant.

Items 61 to 104 and 125

119. The amendments made by these items will standardise penalty units for a number of strict liability offences across the Customs Act to either 30 or 60 penalty units.

Items 105 to 120 - sections 240 and 240AB

120. Section 240 places obligations on the owner of goods to keep relevant commercial documents for the purposes of enabling a Collector to verify the correctness of information provided to Customs. The documents must be kept for a specified period of time.

121. Owner of goods is defined very broadly in the Customs Act and includes any person being or holding himself out to be the owner, exporter, consignee, agent or person possessed of, or beneficially interested in, or having control of, or power of disposition over goods.

122. Section 240 contains a number of offences relating to the commercial documents.

123. Similarly to section 240, section 240AB of the Customs Act requires a person who makes a communication to Customs or who gives someone else information for the purposes of communicating information to Customs to keep, in accordance with section 240AB, a record that verifies the contents of the communication.

124. Section 240AB also contains a number of offences relating to the keeping of records.

125. The amendments will apply strict liability to the offences in sections 240 and 240AB.

126. Applying strict liability to these offences will improve the effectiveness of the enforcement regime. Further, the offences are regulatory in nature and carry relatively small penalties not exceeding 30 penalty units.

Item 121 - Section 243SA

127. Section 243SA contains offences where a person fails to answer a question asked by an officer or monitoring officer.

128. Item 121 will amend section 243SA to apply strict liability to these offences. Applying strict liability to these offences will improve the effectiveness of the enforcement regime. Further, the offences are regulatory in nature and carry relatively small maximum penalties of 30 penalty units.

129. Section 243SC of the Customs Act explicitly preserves the privilege against self-incrimination where a person is required to answer questions under section 243SA.

Items 122 and 123 -section 243SB

130. Section 243SB contains an offence where a person fails to produce a document or records that an officer, pursuant to a power conferred on the officer by the Customs Act, requires the person to produce.

131. Item 123 will amend section 243SB to apply strict liability to the offence. Applying strict liability to this offence will improve the effectiveness of the enforcement regime. Further, the offence is regulatory in nature and carries a relatively small maximum penalty of 30 penalty units.

132. Section 243SC of the Customs Act explicitly preserves the privilege against self-incrimination where a person is required to produce a document or record under section 243SB.

133. Item 122 makes a minor technical amendment.

Item 124 - subsection 243T(3)

134. Subsection 243T(1) provides that a person commits an offence where they make a false or misleading statement which results in the loss of duty. Subsection (3) provides that the penalty for a conviction against subsection (1) is an amount of not more than the excess.

135. The amendment made by this item will provide that the penalty for a conviction will be an amount not exceeding the greater of 60 penalty units and the amount of the excess.

Part 6 - Other amendments

Division 1 - Amendments

Items 126 to 128

136. Part V of the Customs Act sets out provisions that govern the granting and renewal of warehouse licences. Licensed warehouses are used to store imported goods in respect of which customs duty has not been paid. Such goods remain subject to Customs control until duty has been paid and the goods are delivered into home consumption.

137. Section 82 of the Customs Act sets out the statutory conditions to which a warehouse licence is subject. The section also empowers the CEO of Customs to impose additional conditions that the CEO considers necessary and reasonable for three purposes (subsection 82(3)). Section 82A also empowers to CEO to impose additional conditions on a warehouse licence for the same purposes at any time after a warehouse licence has been granted, and section 82B empowers to CEO to vary both sets of these conditions. Under section 82C of the Customs Act, it is an offence to breach of the conditions to which a warehouse licence is subject.

138. Warehouse licences are only valid for up to 12 months at a time and they remain in force until 30 June of any year, but may be renewed under section 84 of the Customs Act. Under subsection 84(2), where a warehouse licence is renewed, the CEO may specify conditions that are different to from those in the original licence.

139. The amendments contained in these items clarify that the CEO may specify different conditions upon the renewal of a licence than those imposed at the time the licence was granted or was last renewed.

Item 129 - section 100

140. Under section 68 of the Customs Act, imported goods must be entered either for home consumption or for warehousing. If goods are entered for home consumption, once all duties and taxes are paid and an authority to deal is granted by Customs, the goods can be taken directly into home consumption. If goods are entered for warehousing, the goods must be stored in a licensed warehouse and duty is not payable on the goods until they are entered for into home consumption from the warehouse.

141. However, section 100 of the Customs Act provides that where goods are entered for warehousing, the goods may be entered for home consumption and be delivered into home consumption without having to first go through a warehouse. The person making such an entry for home consumption must provide certain details to Customs and the holder of the warehouse licence where it was intended that the goods be warehoused.

142. There is concern that that goods dealt with in this way may avoid proper scrutiny by, and accountability to, Customs. Item 129 removes the ability to use this mechanism, unless permission is obtained.

Items 130 to 132

143. Division 3 of Part XI of the Customs Act sets out the licensing regime for customs brokers. Under section 181 of the Act, an owner of goods may authorise a person to be their agent if a person is a natural person who is an employee of the owner or the person is a customs broker.

144. The amendments contained in these items will make changes to the customs broker licensing provisions to improve the flexibility of the regime and to treat non-compliance more effectively.

145. Section 183CG of the Customs Act sets out the statutory conditions to which a broker's licence is subject. Subsection (6) empowers the CEO to impose additional conditions that the CEO considers necessary and reasonable for two purposes. However, there is no power in Division 3 of Part XII whereby the CEO may impose additional conditions on a broker's licence for the same purposes at any time after a broker's licence has been granted. Neither is there a power for the CEO to vary conditions on his or her own initiative.

146. Item 132 inserts new sections 183CGA, 183CGB and 183CGC.

147. New section 183CGA will allow the CEO to impose additional conditions on a broker's licence at any time if the CEO considers the conditions to be necessary or desirable for the protection of the revenue, for the purpose of ensuring compliance with the Customs Acts, or for any other purpose. This is similar to the powers that the CEO has in relation to the imposition of conditions on customs depot and warehouse licence holders.

148. New subsection 183CGA(2) will require the CEO to give the holder of the broker's licence written notice of the change in licence conditions. New paragraph 183CGA(2)(b) provides that any additional conditions imposed in a notice cannot take effect before 30 days after the giving of the notice or, if the CEO considers it necessary, the end of a shorter period specified in the notice.

149. New section 183CGB allows the CEO to vary the conditions imposed on the grant of a licence under 183CG or any additional obligations imposed under new section 183CGA. The conditions must be varied by written notice to the holder of the broker's licence and cannot take effect within 30 days of the issue of the notice unless the CEO considers it is necessary for any variation to commence earlier.

150. New section 183CGC creates a strict liability offence for the breach of any condition to which the licence is subject. The maximum penalty under this section is 60 penalty units.

151. In developing this offence, consideration was given to both the Senate Standing Committee for the Scrutiny of Bills Sixth Report of 2002 on Application of Absolute and Strict Liability Offences in Commonwealth Legislation and A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers . The offence is also similar to offences relating to breaches of customs depot and warehouse licence conditions.

152. Item 133 repeals sub section 183CJ(4).

153. Item 134 inserts a note at the end of section 183CJ which clarifies a broker's licence may be subject to additional conditions under section 183CGA and the conditions may be varied under section 183CG(7) or section 183CGA.

Items 135 and 136 - section 234

154. Section 234 of the Act sets out several offences, including offences relating to the provision of information that is false or misleading in a material particular (paragraph 234(1)(d)). Under paragraph 234(2)(c), an offence against paragraph 234(1)(d) is punishable by a penalty not exceeding 100 penalty units. Where the offence under paragraph 234(1)(d) is in respect of the amount of duty payable on particular goods, the penalty is an amount not exceeding the sum of 50 penalty units plus twice the amount of the duty payable on the goods (subsection 234(3)).

155. To improve the deterrent effect of these penalties, item 135 will increase the maximum penalty under paragraph 234(2)(c) from 100 penalty units to 250 penalty units and item 136 will increase the maximum penalty under subsection 243(3) from 50 penalty units to 100 penalty units.

Items 137 to 138

156. Section 240 of the Customs Act sets out the record keeping obligations on owners of goods imported into Australia or exported from Australia, those people who cause goods to be imported into Australia or exported from Australia and those people who receive goods that have been imported into Australia or are to be exported from Australia. These people must keep all relevant commercial documents that are necessary to satisfy Customs of the correctness of information communicated to Customs. Such documents must be kept for 5 years (from the commencement of the relevant activity) and can be required to be produced to Customs under section 240AA of the Customs Act.

157. Section 240AB sets out a different record keeping obligation on a person who makes a communication to Customs (for example a customs broker or a cargo reporter) or gives someone else information for inclusion in such a communication. Subsection 240AB states that the purpose of section 240AB is to help Customs to verify the content of communications to Customs (as opposed to the correctness of information) and to trace information that is communicated to Customs. Such records must be kept for one year after the relevant activity and can be required to be produced to Customs under section 240AC of the Customs Act.

158. The current arrangement creates an inconsistency in reporting between the parties involved in the cargo environment. This is not ideal and can create problems in dealing with the procurement of documents from parties involved, or to deal with non-compliance. The issue of inconsistent timeframes is exacerbated when one organisation performs a number of industry functions some with a five year document retention requirement and some with a one year document retention requirement. The one year document retention requirement does not always provide sufficient coverage when checking past compliance of an organisation.

159. The amendments made by items 137 and 138 will increase the time period in section 240AB from one year to five years for which a person must keep a record that verifies the contents of a communication made to Customs. This will ensure consistency with the record keeping obligations contained in section 240.

Items 139 to 142 - Section 243T

160. Section 243T sets out the strict liability offence of making a statement to an officer of Customs in respect of particular goods that is false or misleading in a material particular that results in either a loss of duty or an overpayment of a refund or drawback. It is also a strict liability offence to omit from a statement to an officer in respect of particular goods any matter or thing without which the statement is false or misleading in a material particular that has the same results. However, no matter who makes such a statement, or omits matters from such a statement, only the owner of the goods (not being a person who is to be treated as the owner of the goods because the person is an agent of the owner) commits the offence. This qualification on who is the owner is necessary due to the broad definition of "owner" in subsection 4(1) of the Customs Act. Under this provision, if an importer gives correct information to a customs broker and the broker incorrectly transcribes it and then communicates this incorrect information to Customs, the importer is the person who commits the offence, not the broker.

161. Section 243T does not apply to statements or omissions made in a cargo report or an outturn report. These reports are dealt with separately under section 243V.

162. Sections 243U and 243V set out strict liability offences for statements made to an officer of Customs in similar circumstances to section 243T that do not result in either a loss of duty or an overpayment of a refund or drawback. Unlike section 243T, the offence is committed by the person who makes the statement or omits matters from the statement, or causes the statement to be made or causes the matter to be omitted. For example, an importer of goods may provide incorrect information about goods to a customs broker who then communicates this information to Customs. In that instance, while the broker may be the person who communicates the incorrect information, the importer is the person who caused the false statement to be made. However, if a customs broker receives correct information from an importer and incorrectly transcribes it and then communicates this incorrect information to Customs, the broker is the person who caused the false statement to be made to Customs.

163. In order to improve the utility of section 243T, the amendments made by these items provide that liability for the offence will apply in the same way as under section 243U and 243V.

164. These amendments provide that the person who makes, or causes to be made, or omits or causes to be omitted, the statement that is false or misleading in a material particular will commit an offence under this section and not only the owner of the goods. This is fair and appropriate.

Division 2 - Application

Item 143 - Application of amendments

165. Item 143 inserts an application for the purposes of Part 5.