Australia: New Customs Legislation Affecting Cargo Reporters And Those Receiving Goods Under Customs´ Control And A New Role And Name For Customs

Introduction

On 3 December 2008, the Minister for Home Affairs introduced the new Customs Amendment (Enhanced Border Controls and Other Measures) Bill 2008 ("Bill") into Federal Parliament. The Bill delivers on some legislative reform which has been promised for some time. Further, the Bill also introduces a significant additional level of liability for those associated with goods under Customs' control, possibly in part in response to the recent Federal Court decision in Drew –v– Dibb.

The Bill addresses a wide variety of issues. However, the provisions which may be of immediate impact for those in industry are discussed below.

Arrival report and report of stores and prohibited goods

The Bill proposes to amend section 64AA of the Customs Act 1901 ("Act") relating to time periods for the reporting of the arrival in Australia of ships and aircraft and the reporting of stores and prohibited goods on such ships or aircraft. Customs has agreed to amend the Act to disregard periods which occur on a Saturday. As a result, the "Arrival Report" and the "Stores and Prohibited Goods Report" will now always be required the next business day after the arrival of a ship in Australia.

Form of Infringement Notice

Schedule 2 to the Bill proposes to amend the "form" provisions regarding Infringement Notices so that they must include a statement to the effect that if a person pays the amount referred to in the Notice (and any associated underpaid duty), then a person cannot be prosecuted for the alleged offence and will not be regarded as having been convicted of the offence. Such a statement has been included in practice but the amendment will compel the words.

Timeliness of Cargo Reporting

The Act currently provides for "cargo reports" to be made within a prescribed period before the estimated time of arrival of an aircraft or vessel. That has caused problems for cargo reporters to get the required information in time for that report.

For some time, Customs has adopted the view that while it will monitor compliance of the timeliness of cargo reporting based on the legislative provisions (ie whether the cargo report is late according to estimated time of arrival), it would only take any compliance action if the cargo report was found to be made late if the time to report had been based on actual time of arrival. This is set out in ACN2007/03.

Customs had promised that it was proposing to introduce a legislative change to reflect the practice contained in ACN2007/03. To that end, schedule 3 to the Bill introduces a new subsection 64AB(14A). The effect of the new subsection would be to provide that notwithstanding that a cargo report may be late based on the estimated time of arrival, if the report, when made, was within the prescribed timeframe based on the actual time of arrival, then Customs would not be able to prosecute the relevant cargo reporter or issue an Infringement Notice. However, it does not provide that there has been no offence, leaving other compliance activity available to Customs.

Missing goods and goods delivered without authority

The provisions in schedule 4 to the Bill create the most significant new potential liability for those in industry.

Those dealing with "goods under Customs' control" are already subject to an extensive liability and compliance regime. This includes the need to secure and observe the licence. Such parties are also exposed to potential liability under section 33 of the Act (if goods under Customs control are moved without Customs' authority) and under section 35A of the Act (if goods cannot be accounted for, the party is exposed to liability equal to the relevant customs duty on those goods). The "unfair" nature of the liability under section 35A was recently discussed at length by the Federal Court in the decision of Drew –v– Dibb.

Schedule 4 of the Bill now introduces another area of liability for those dealing with goods under Customs' control. According to the Explanatory Memorandum, Customs is concerned that those dealing with "non dutiable" goods may not be subject to redress if such goods are missing or delivered without authority. Clearly, there are categories of goods held under Customs' control which are not subject to duty. As also discussed in Drew –v– Dibb, there is also the possibility that goods which may have once been subject to duty liability may not come within the operation of section 35A of the Act if those goods are so comprehensively damaged to be without saleable value. As a result, the Bill introduces new sections 36 and 37 of the Act to create a new offence for a failure to keep goods safely or a failure to account for the goods.

The scheme of the provisions is similar to that in section 33 of the Act with a "3 tier" scheme. First, there are significant penalties for those who intentionally fail to keep goods safely, or fail to account for the goods regardless of the value of those goods. Second, there are strict liability penalties if the offences occur in an "inadvertent" fashion. On the third tier, Customs will have the option of issuing Infringement Notices for any breach of the relevant sections.

There is also a deeming provision so that if goods are removed by a person to a place other than a warehouse by authority of permission given under section 71E of the Act, that person is taken to have been entrusted with possession or custody and control of the goods and becomes liable under the new provisions.

Section 37 then sets out what constitutes "accounting" for the goods. This requires the Collector to either sight the goods or to be "satisfied" that the goods have been dealt with in accordance with the Act.

Finally, the provisions make it clear that the new sections 36 and 37 do not affect other liabilities of a person under the Act.

This raises a number of questions, most immediately that those exposed will need to review business practices to minimise risks as well as review their insurance cover.

Arrests without warrant

The Bill (in Schedule 11) also extends the offences for which Customs may arrest a person without a warrant where it believes that particular offences have been or are being committed. The effect of these provisions will be that Customs will now have the power to arrest a person without the benefit of a warrant if it believes that person is involved with a breach of section 33 of the Act. At the same time, the Bill also confers additional powers upon Customs to search that person who had been arrested without warrant.

Commencement dates

Generally, the majority of the provisions will commence after the Bill receives Royal Assent. In the case of the cargo reporting provisions, they will commence 28 days after the Act receives Royal Assent. However, the provisions in schedule 4 (regarding the new offences under section 36) will only commence on a day to be proclaimed or, if no proclamation, on a date which is 6 months from the date that the Bill receives Royal Assent. Presumably, this will provide an additional period to develop the revised Guidelines for the Infringement Notice Scheme. Hopefully, those revised Guidelines will be developed well before that deadline.

Conclusion

While the majority of the amendments reflect issues that have been raised with Customs for some time, the new offences under sections 36 and 37 of the Act do create significant additional liability for those handling and moving goods under Customs' control. Those operating in that part of industry should be carefully reviewing their terms and conditions of trade to ensure that this new liability can be passed on to others where appropriate and also to ensure that their insurances cover these new liabilities.

Otherwise, the Bill should be reviewed carefully to determine what impacts it will have upon business practices. We would be happy to assist with that process.

Thai FTA

The Government has also issued new regulations under TAFTA with revised Rules of Origin for many goods which also merit close review. Again, we are also pleased to assist. The commencement date is yet to be proclaimed.

Stop Press. Government to reform and rename Customs!

In an announcement to Parliament today, the Prime Minister released the long awaited review of Australian security. As part of the new strategy, Customs will be revamped to better help with border security and work against people smuggling. This will mean new tasks and resources and a new name being the Australian Customs and Border Protection Service! This clearly draws on the US title and may leave the door open for "non border security issues" such as trade facilitation and revenue collection to be moved to other departments.

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