Australia: Trade Facilitation on the wane? Integrity testing for Customs officers

Last Updated: 21 April 2012
Article by Andrew Hudson

The Fairfax media recently ran a series of stories which alleged that there was evidence of a level of corruption in the Australian Customs and Border Protection Services ("Customs").

The articles pointed to a number of Customs officers who had been dismissed over time as evidence of a systemic problem within Customs which was allowing the passage of illegal drugs and other contraband goods. The Federal Government seemingly agreed that there was an unacceptably high level of risk of corruption within Customs among other Government Agencies and has endorsed the introduction of "Integrity Testing" as a means to identify and eliminate corruption. In this context "Integrity Testing" would allow officials to "test" officials by offering them bribes or otherwise encouraging them to engage in illegal activity. Rejection of the offer or test by the official would be to pass the test and be "cleared", at least until the next test. Those who fail the test would be under suspicion and presumably be open to dismissal. The Federal Government proposes to pass laws to facilitate such Integrity Testing.

The reports also suggested that there is evidence of alleged corruption of others providing services in the supply chain for the movement of goods including among those licensed by Government to report the movement of goods or hold the goods subject to Customs control.

It is probably fair to say that those in industry would probably not be surprised as to the nature of the allegations. It is not the first time that questions have been raised as to the propriety of some of those involved in the supply chain, whether within Government agencies or those in the private sector providing services. However the concerted media exposure appears to have given cause to the Government to introduce legislation authorising Integrity Testing.

At the same time, the same media reports also pointed to alleged failings and deficiencies in Customs Integrated Cargo System ("ICS") which is used to report the movement of goods in the supply chain whether for import or export. Those alleged failings include an ability for criminals to identify when their cargo has moved to Customs "Container Examination Facility" for inspection or is otherwise held by Customs so that they abandon the cargo rather than be caught with the goods. An additional problem is where parties "steal" the identities of "legitimate" importers or exporters when identifying who is moving the goods hoping that the "trusted" nature of those importers and exporters will cause expedited delivery of goods and avoid normal targeting and alerts. At the moment, the ICS functionality does not allow these trusted importers to lock use of their identity and codes to allow their use by their authorised and legitimate service providers.

The real issue for those in industry is to deal with what comes next – when and if it arises. Any responses will be part of the political process rather than merely being part of the usual administrative review and reform. For example, the Federal Government has, to date, resisted the push by the Federal Opposition to have a broader review of Customs conducted by a former AFP Commissioner but that review may well form part of the platform of the Federal Opposition to be part of its agenda should it form Government.

So, what to expect next?

  • The immediate introduction for Integrity Testing for Commonwealth officers such as those in the AFP, Customs and the Australian Crime Commission
  • An increased emphasis on regulation of those seeking or holding licences from Customs including licensed customs brokers and those operating licensed premises. This has already been flagged by Customs and there has been an increase of review of the actions of those holding such licences together with legislative change to increase the ability of Customs to impose new and more rigorous conditions on those holding depot and warehouse licences
  • An increased review on "underbond" movements without permit. Customs has long identified these movement as being the cause of significant risk in allowing gods into home consumption without payment of duty or compliance with normal border assessments
  • An increased willingness of border authorities to intervene in exports and imports before goods leave Customs control. Recent legislative amendments, for example, give Customs new powers to suspend "authorities to deal" for export goods for further review
  • Additional resources and focus to review the use of Self Assesses Clearance Declarations ("SAC") for "low value" transactions. This has already been the subject of recommendations by the ANAO and review in the interim report of the Low Value Parcel Processing Taskforce released in March 2012. The Taskforce was established following the Productivity Commission review of the Australian Retail Industry which touched, in part on the use of the low value threshold and the SAC.
  • Changes to the access to and functionality of the ICS. The press reports would suggest that the "Customs hold" function which indicates which goods are subject to additional examination by Customs when otherwise cleared is being used by criminal elements to mark attention of law enforcement activities. This functionality could be subject to review. Further, we would hope that Customs adopt a system in which certain "trusted" traders can authorise those providing their cargo reporting services and "lock" the ICS against use of that traders details by parties other than its authorised reporters. This change has been proposed for some time but, to date, the reported costs of changes to the ICS functionality have caused Government to resist the change

Many traders question the likely effect of these changes to attitude, practice and legislation on the role of border agencies and Government to "facilitate" trade. The press reports cited unnamed sources who claimed that facilitation had gone too far and that there needed to be move back to closer review of goods, transactions, those making reports and involved with supply chain. It seems clear that some of the changes suggested above are likely to have the effect of putting more scrutiny on exports and imports which could potentially be at cost of expedited clearance for all transactions. This may create some tensions with other commitments of the Federal Government reported on 12 April 2012 that it would "cut" red tape for Australian businesses. This may also have the other, perhaps unintended consequence of increasing the value for "trusted trader" or "Authorised Economic Operator" programs whose members and their service providers could benefit from a less intrusive intervention by border authorities based on endorsement of their practices. There may now be compelling reasons for Customs to finally introduce such programs.

As always we will keep you informed of developments.

Author's Note: Please note that this article is based in part on an earlier commentary originally published in the Air Cargo Magazine. It has been revised and published here with the kind consent of Air Cargo Magazine.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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