Customs Legislation Amendment and Repeal (International Trade Modernisation) Bill 2001

Explanatory Memorandum

(Circulated by authority of the Minister for Justice and Customs, Senator the Hon Christopher Martin Ellison)
This memorandum takes account of amendments made by the House of Representatives to the bill as introduced.

Regulation Impact Statement

1. Background

Over recent years there have been major changes in the communications and computing technologies in business. International business practices have also changed dramatically, as has the structure and business processes of the cargo handling industry.

The Australian Customs Service (Customs), in consultation with the Australian Quarantine and Inspection Service (AQIS) and the Australian Bureau of Statistics (ABS), has initiated a project to re-engineer its cargo management business systems.

The re-engineering of cargo processes and systems is an issue that is clearly at the forefront of the agenda for the international trade community. The Australian Customs Service is not alone in recognising the need for cargo re-engineering. The United States of America and Sweden are also in the process of addressing this issue.

The technology would allow the movement away from a one size fits all method of reporting information to Customs. Information would be able to be provided in a number of ways, allowing greater flexibility for traders. There would also be an arrangement whereby the Chief Executive Officer of Customs may enter into individual contracts, which will be tailored to meet the needs of specific clients.

It is proposed to make changes to the way in which cargo is reported which would complement the changes being undertaken in the cargo re-engineering project.

The information contained in cargo reports ensures all goods landed in Australia are brought to account and dealt with in accordance with the Customs Act 1901 (the Act). Further this ensures Customs duties and tax liabilities are met and all Commonwealth legislation has been complied with, especially in relation to community protection matters.

The reporting of cargo is fundamental in fulfilling Customs objectives. If 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.

The current cargo-reporting regime demonstrates low levels of compliance by industry particularly with respect to timeliness in the lodgement of cargo reports. In order that Customs can meet its responsibilities to prevent the movement into Australia of illicit drugs and other prohibited imports and maintain a high level of trade facilitation, it is imperative that Customs is able to identify high-risk cargo ahead of arrival.

It is therefore proposed to legislate to make it mandatory to provide an electronic report of cargo information prior to arrival of the vessel or aircraft and to introduce penalties for non-compliance. This will 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 in advance.

The changes to the reporting of export cargo and the strengthening of Customs control over export cargo would assist Customs in adequately performing functions including controlling the export or prohibited or restricted exports; collection of statistical data for the Australian Bureau of Statistics; control of underbond goods to prevent evasion of Commonwealth revenue; and verification of exports for the Australian Taxation Office for GST purposes .

Customs must also ensure that imported and exported goods comply with Customs and the Australian Taxation Offices commercial requirements to ensure duty and tax obligations are properly acquitted.

Customs commercial compliance system is based on self-assessment. An effective self-assessment regime must be underpinned by record retention requirements, audit powers and deterrent penalties. These areas have been identified by Customs as being critical to ensuring that the risks inherent in a self assessment regime are kept to acceptable limits. It is therefore imperative that there are effective and efficient auditing measures available to monitor compliance, given that Customs conducts its commercial audits in a post transactional environment.

The requirements and powers need to be modernised to reflect recent changes to Government and criminal law policy.

There have also been significant changes in technology and to business practice in recent years. The amendments will allow industry to utilise those advances. The amendments will also recognise technology currently used in commercial business practice.

Detailed examination of each area of these proposals is set out in the Schedules to this Regulation Impact Statement as follows -

Schedule 1 - Cargo management re-engineering
Schedule 2 - Commercial compliance
Schedule 3 - Cargo reporting
Schedule 4 - Exports measures

2. Implementation/review

The distinct, although related, areas within the Bill will need to be implemented at different stages. This is necessary as some of the changes depend upon the commencement of the computer systems being introduced as part of the cargo re-engineering process.

2.1 Cargo management re-engineering

It is proposed to introduce the cargo management re-engineering reforms progressively in line with systems developments from the third quarter of 2001. It is proposed that the provisions of the Bill relevant to particular aspects of systems development commence at varying times by Proclamation to tie in with the implementation of each stage of business systems and processes reform.

The amendments will include changes to cargo reporting requirements, introduce flexible electronic communication mechanisms, provide for early identification of surplus and shortlanded cargo and reform current cargo entry requirements. While the legislation will provide a legal basis for accredited client arrangements, each accredited client agreement will be tailored to suit the circumstances of the particular client, and therefore each agreement will be different. In order to ensure certainty regarding the scope of the arrangement, articulating the scope and the rights and responsibilities of the parties, is required.

2.2 Commercial compliance

In the commercial compliance context, it is proposed that the compliance powers will commence upon Proclamation. These requirements and powers are not dependent upon computer systems being activated - they simply ensure that Customs can monitor compliance with current obligations. There will be an administrative moratorium for 6 months after commencement for new offences, to enable Industry to familiarise themselves with the new requirements.

Customs commercial compliance audit teams will continue to advise clients of the proposed changes. Further information also will be provided to industry through the Customs Advisory Service and Customs Information Centres.

2.3 Cargo reporting requirements

It is proposed to commence the new cargo reporting provisions (including sanctions for non-compliance) 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 cargo reporting requirements more efficient.

Customs will in the intervening time commence an industry awareness program ensuring industry is ready for the introduction of the cargo reporting requirements in order to avoid application of the proposed sanctions for non-compliance. In recognition that some cargo reporters will need more time to comply with the requirement to report electronically prior to the arrival of the vessel or aircraft, it is proposed to include a provision in the legislation to enable the CEO to provide a period of to such reporters. The grace period could be up to 2 years provided the cargo reporter can demonstrate to the CEO that they will make the necessary arrangements to allow them to comply with the legislation at the end of the grace period.

A working group will be formed with industry representatives to ensure the smooth introduction of the proposed legislative changes. In addition any issue of major concern may be raised by industry at the quarterly meetings of the Customs National Consultative Committee.

2.4 Exports measures

The proposals in relation to reporting movement of goods for export and requiring cargo handlers to confirm the status of goods for export with Customs are dependent on the systems enhancements in the cargo management re-engineering proposal. The new measures will therefore commence by Proclamation in accordance with the cargo management proposals detailed above.

In the intervening time, Customs will conduct an awareness program for the relevant segments of the export industry to ensure that the industry is ready for the implementation of the new requirements.

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