Bills Digest No. 25 2002-03
Customs Legislation Amendment Bill (No. 1)
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Contact Officer & Copyright Details
Customs Legislation Amendment Bill
19 June 2002
House: House of Representatives
Portfolio: Justice and Customs
Schedules 1, 2, 4 and 6 commence on Royal Assent. The application
dates of other measures are described below where
contains a series of amendments to the Customs Act 2001
(Customs Act) and related legislation. The amendments have a
variety of purposes and these are discussed under each schedule
The bill contains six schedules. As there is no
central theme to the Bill the background to the various measures
will be discussed in the main provisions.
Proposed schedule 1 contains a
series of criminal code harmonisation amendments to the Customs
The Model Criminal Code Project commenced in the
early 1990 s. The first major part of the Model Criminal Code to be
developed was Chapter 2 Principles of Criminal Responsibility. This
chapter formed the basis of the Commonwealth Criminal Code (the
Code) and is contained within the Criminal Code Act 1995.
For further information regarding the history and operation of the
Code refer to the Bills Digests for the Environment and Heritage
Legislation Amendment (Application of Criminal Code) Bill (Bills
Digest No. 92, 2000-2001)(1) and Transport and Regional
Services Legislation Amendment (Application of Criminal Code) Bill
2002 (Bills Digest No 88, 2001-2002)(2).
The Customs Act was amended by the Law and
Justice Legislation Amendment (Application of Criminal Code) Act
2000 to harmonise the Customs Act with the principles
contained within the Code (see related Bills Digest No 96,
2000-2001)(3). This bill contains further amendments
that aim to harmonise the Customs Act with the Code.
The bill, in proposed items 1 to 5, 7 to
21, 23, 25, 27 to 31, 37, 39 to 41, 43, 49 to 59, 61, 62, 64 to 75,
76 to 83, 86, 88 to 98 converts penalties for offences
under the Act from amounts expressed in dollars to amounts
expressed in penalty units. There may be a drafting error in this
legislation as subsections 114B(7) and 130B(3) remain expressed in
The Criminal Code requires all offences of
strict liability(4) to be expressly identified as such.
If the provisions in an Act fail to expressly identify an offence
as one of strict liability, fault elements (for example, intention,
knowledge, recklessness) will be applied to the physical elements
of the offence. Items 6, 22, 24, 26, 36, 38, 42, 44, 46,
48, 60, 63 and 87 amend the Customs Act to expressly
provide that sections 19, 64, 64AA, 64AC, 67ET, 69, 71G, 74(1),
77D(5), 77E(5), 116(2), 122D(2) and 234A(1) are strict liability
By way of note, the Senate Scrutiny of Bills
Committee in their Alert Digest have raised issues with these
amendments relating to strict liability. The Alert Digest states
that the Committee has
sought the Minister s advice on further details
of the types of offence provisions to be amended and the reason, in
each case, for his view that the offences are already ones of
strict liability .
The bill also makes amendments to clarify the
requisite fault and physical elements of some offences under the
Act. Items 32, 33, 35, 36, 45-48 amend the current
law to make it clear that a reasonable excuse is an exception to
(rather than an element of) the offences in sections 67ES, 67ET,
77D and 77E of the Customs Act. Item 34 amends
section 67ES to ensure that the fault and physical elements of the
section are Code compliant.
The amendments contained in schedule
2 are designed to protect customs revenue following the
Full Federal Court decision in CEO of Customs v AMI Toyota
Ltd(5) (the Toyota Case).
The case concerned which components of the price
of imported goods should be included in calculating the amount of
customs due on imported vehicles. The price of vehicles imported by
Toyota Australia from its Japanese parent includes a component (the
average warranty cost) which relates to the cost of warranty given
to Australian vehicle purchasers. Under sale contracts Toyota
Australia is reimbursed by Toyota Japan for the cost of work
performed in Australia under warranty. Litigation ensued when the
Chief Executive Officer of Customs decided that the average
warranty cost should be included when determining the customs
While Customs was successful at first instance
in the Administrative Appeals Tribunal, Toyota won an appeal to
single judge of the Federal Court. This decision was upheld by the
Full Federal Court and an application by Customs to appeal was
rejected by the High Court.
Under the Customs Act the value of duty payable
is determined by applying the rate of duty to the value of the
goods. Division 2 of Part VIIII of the Customs Act sets
out the valuation methodology.
Generally speaking the value of goods is their
transaction value .(6) This in turn is based upon their
price . Price does not include value unrelated matters . This term
is defined in subsection 154(1) as:
- any rebate of, or other decrease in, the price other than such
a rebate or decrease the benefit of which has been received when
the price is being determined; or
- any costs, charges or expenses in relation to activities
undertaken by the purchaser on the purchaser's own account in
relation to the goods (including any activities of the purchaser
relating to advertising or promoting the sale of, or to warranties
or guarantees in relation to, the goods).
The key question for the Court in the Toyota
case was whether the average warranty costs component of the
purchase price came within paragraph (b) of the definition of value
unrelated matter and should be excluded from the price of the
The Full Court answered this question in the
affirmative. It stated that:
The average warranty costs are based on Toyota
Japan's pre-estimate of the likely cost of the liability undertaken
by Toyota Australia in giving and honouring its warranty
obligations to customers in respect of warranty repairs under the
Toyota Warranty policy. In return for payment of those costs [in
the purchase price] the actual costs are to be reimbursed. Thus,
the average warranty costs can be seen to relate to activities
undertaken by Toyota Australia in relation to warranties it gives
or its own account in relation to the cars it imports.
The Government has taken the view that this
interpretation is inconsistent with the Agreement on
Implementation of Article VII of the General Agreement on Tariffs
and Trade 1994 to which Australia is a party. It says that the
agreement does not allow the deduction of the seller s warranty
costs from the customs value.
According to the Explanatory Memorandum the
Court s decision could have significant revenue implications. The
deduction of warranty costs from the customs value of motor
vehicles has cost $15 million in revenue and without the
legislative action will continue to cost $300,000 a month. In
addition, Customs fears that a similar technique could potentially
be employed in other industries further undermining revenue.
To counter the Full Federal Court s ruling the
term value unrelated matter is repealed by item 3
of schedule 2. In its place a definition of rebate
is inserted which is based on paragraph (a) of the existing
definition of value unrelated matter (item 2).
Schedule 3 makes a number of
amendments to provisions introduced in the Customs Legislation
Amendment and Repeal (International Trade Modernisation) Act 2001
(the TMA). For an analysis of this legislation see Bills
Digest no.98 2000-2001.(8)
Many provisions of the TMA have not yet
commenced. Section 2 of the Act provides that they are to commence
on proclamation. If no proclamation has been made, the legislation
commences 2 years after Royal Assent. The TMA received royal assent
on 20 July 2001 meaning that the latest day it can commence is 20
The Government asserts that this time frame will
not be sufficient to allow Customs to introduce a new cargo
management system that underpins amendments made by the
Item 65 of schedule
3 amends section 2 of the TMA to extend the period for
commencement until 20 July 2004.
Part 4 of schedule 3 of the TMA provides for the
abolition of Customs existing computer systems. Subsection 2(4) of
the TMA provides that the Part 3 commences on a date fixed by
proclamation. As the law currently stands Customs is prevented from
phasing in the introduction of its new cargo management computer
system as all existing systems must be abolished on the same day.
Item 60 amends subsection 2(4) to allow the items
in Part 4 abolishing existing systems to commence on different
These amendments commence on Royal Assent.
The bill also amends the Customs Act to increase
Customs officer powers in relation to vessels that fall within the
Protected Zone exemptions under the Act. The amendments in this
Schedule form part of the package of the Government s
counter-terrorism measures, the main tranche being introduced into
Parliament in March 2002.(10)
The Torres Strait Treaty creates an area known
as the Protected Zone which, generally speaking covers the span of
water between Australia and Papua New Guinea. Subsection 30A(3) of
the Customs Act provides that the Chief Executive Officer of
Customs can, by notice published in the Gazette, exempt vessels
that are owned or operated by traditional inhabitants of the
Protected Zone (Protected Zone vessels) from the application of
provisions in the Customs Act.
The CEO of Customs in 1986 through the Gazette,
exempted the Protected Zone vessels from a number of reporting
requirements that apply to vessels that enter or leave Australia.
In particular the Protected Zone vessels are exempted from having
to enter appointed ports (section 58), hold a Certificate of
Clearance (section 118) and to go to a boarding station before
departure (section 128). The effect of these exemptions has been to
give traditional inhabitants the ability to move freely around
places between Papua New Guinea and Australia.
This exemption has however created some
enforcement problems for customs officials. Under the Act, customs
officers that are at a Customs place can monitor a vessel s cargo
and seize the goods without a warrant (section 203B). The above
exemptions have meant that Protected Zone vessels do not often
enter Customs places. As a result surveillance of the Protected
Zone vessels is normally performed in locations where customs
officials need to obtain a warrant before seizing goods. The
Explanatory Memorandum to the bill states that this arrangement
poses considerable operational and safety problems for the officers
This bill amends the current arrangements so
that Customs officials can seize goods from Protected Zone vessels
without having to obtain a search warrant.
Item 3 makes it clear that
Customs officers can seize goods from a vessel (ships or aircraft)
or near a vessel (where the goods have been unloaded from the
vessel or will be loaded onto the vessel) where the vessel falls
within the Protected Zone exemptions under the Customs Act, without
a search warrant (proposed sections 203CA and
203CB). Items 4 to 32 of the bill are
consequential amendments to the Customs Act that facilitate the use
of this new power.
The Senate Scrutiny of Bills Committee in their
Alert Digest have sought the Minister s confirmation that
consideration has been given to the Committee s Fourth Report of
2000: Entry and Search Provisions in Commonwealth Legislation,
April 2000 regarding this proposed increase in powers for customs
In that report the Committee stated that
Legislation should authorise entry onto, and
search of, premises only with the occupier s genuine and informed
consent, or under warrant or equivalent statutory instrument, or by
providing for a penalty determined by a court for a failure to
comply. Legislation should authorise entry onto premises in the
absence of consent or a warrant only in situations of emergency or
The report then went on to state that
There may be circumstances in which it may be
impracticable to obtain a warrant (even though warrants are now
often obtained by telephone Impracticality should be assessed in
the context of current technology. If an official exercises a power
to enter and search in circumstances of impracticality, that
official must, as soon as reasonably possible, then justify that
action to a judicial officer.(13)
The proposal in this Bill appears to be in
accordance with the Senate Committee s principles. The Explanatory
Memorandum to the legislation confirms that there are practical
difficulties in obtaining a search warrant for Protected Zone
vessels.(14) The vessels are often in remote locations
making it difficult for officers to obtain a warrant. If the
officer is able to obtain a warrant (for example by telephone), the
time taken to make the arrangements may jeopardise the officer s
ability to seize the goods. It may also pose a threat to the safety
of the officers involved in the investigation.
Re-mail refers to a process where a company
imports mail from a foreign organisation and then places it in the
Australia Post system or delivers it themselves.(15)
The Customs Act presently requires a detailed
report of re-mail items in a cargo when they are imported. Customs
uses this information to determine if any prohibited material is
The amendments proposed by schedule
5 reduce the amount of information required from
re-mailers. Customs has taken the view re-mail material is unlikely
to infringe Commonwealth legislation and that the existing
reporting requirements impose an onerous compliance burden on mail
Schedule 5 sets up a regime for
the registration of re-mailers. Such persons will not be required
to give more specificity than a submaster air waybill or an ocean
bill of lading. These documents should contain information such
- the invoice terms
- name and address of the seller of the goods (owner)
- name and address of the buyer of the goods (consignee)
- complete description of the goods
- name of the ship (or aircraft) on which the goods are to arrive
in Australia, and
- country of origin of the goods.
Item 1 inserts a definition of
re-mail item into section 63A. It sets out a checklist of criteria
that an item must satisfy in order to come within the definition.
The criteria include that the item does not exceed 80 cm in length,
that it consists only of paper and weighs no more than a kilogram.
The definition excludes mail . Mail is defined in section 63A of
the Customs Act as any goods consigned through the Post Office that
are carried on the ship or aircraft; and any other correspondence
carried on the ship or aircraft that is not consigned as cargo and
that is not accompanied personal or household effects of a
passenger or member of the crew.
Item 2 defines a re-mail
reporter as a person or partnership that has been so registered.
The registration regime is inserted by item 4.
Item 3 amends section 64 of the
Customs Act which deals with cargo reports. It provides that a
re-mail reporter will not be required to give more information
about re-mail items than that contained in a submaster airway bill
or ocean bill of lading unless more detailed information is
available to them.
Item 4 inserts proposed
section 67G which requires the CEO of Customs to register
a person who applies in the appropriate manner(18) to be
a re-mail reporter if the CEO is satisfied:
- that the applicant would be unlikely to have information, or
access to information, about re-mail items that would allow the
applicant to make cargo reports more detailed than the information
contained in a submaster air waybill or ocean bill of lading,
- the applicant is a fit and proper person.
The fit and proper person test is set out in
proposed section 67H. The test applies to
applicants who are natural persons as well as partners in a
partnership, company directors, officers and shareholders and
employees. Where a company is seeking registration it is also
subject to a separate a fit and proper person test
(proposed subsection 67H(3)).
In deciding whether a person is fit and proper,
the CEO of customs must have regard to matters including whether
- has been convicted of an offence against the Customs Act in the
last 10 years
- has been convicted of an offence under Commonwealth State or
Territory in the last 10 years that is punishable by imprisonment
for one year or more
- is an insolvent under administration
- whether the person has had their registration as a re-mailer
cancelled previously, and
- whether the person has supplied any misleading information or
documentation to the CEO of Customs in connection with the
application (proposed subsection 67H(2)).
Under the fit and proper person test that
applies for companies, the CEO of Customs must take into account
whether existing directors, officers or shareholders were involved
in the company if it has been convicted of specified offences in
the last 10 years. The test also requires the CEO of Customs to
consider the company s solvency.
Item 5 provides that decisions
of the CEO of Customs in relation to re-mail registration are
subject to review by the Administrative Appeals Tribunal.
These provisions commence on a date to be set by
Proclamation or 6 months after Royal Assent.
The Passenger Movement Charge (PMC) has its
origins in the departure tax of $10 that was introduced in 1978.
The PMC was introduced in 1994 and is currently set at $38.
The PMC was introduced as a cost recovery
measure to recoup the notional cost of Customs, Immigration and
Quarantine (CIQ) processing of inward and outward passengers and
the cost of issuing short-term visitor visas.(19)
Aggregate revenue collections from PMC were $226.2 million in 1999
The PMC is imposed by the Passenger Movement
Charge Act 1978 (the Charge Act) while Passenger Movement
Charge Collection Act 1978 (the Collection Act) provides for
its collection. Separate legislation is required to comply with the
requirements of section 55 of the Constitution.(21)
Schedule 6 of the Bill proposes
amendments to the Collection Act. Paragraph 5(j) of the Collection
Act provides that a person is exempt from the PMC if they are in
the course of a journey that has involved a previous departure by
the person from Australia in respect of which the person paid the
charge. According to the Explanatory Memorandum this provision was
intended to cover fly/cruise trips where a person flew into
Australia left on a cruise and then came back to Australia to fly
home. (22)In this situation no charge would be payable
on the second departure.
The Government is concerned that the language of
the exemption in paragraph 5(j) is broad enough to capture a
situation where a person departs Australia twice by aircraft. The
amendment in item 1 makes it clear that where a
person is involved in multiple departures from Australia (such as a
fly/cruise holiday) they will only be required to pay the passenger
movement charge once if their departure involves a fly/cruise
Item 2 also amends the
Collection Act so that representatives of the Taipei Economic and
Cultural Office and the Hong Kong Economic and Trade Office are not
required to pay the passenger movement charge. The bill achieves
this by amending paragraph 5(k) so that is refers to the
Overseas Missions (Privileges and Immunities) Act 1995.
Currently paragraph 5(k) ensures that no exemption is payable by
someone who has the benefit of:
- the Consular Privileges and Immunities Act 1972;
- the Diplomatic Privileges and Immunities Act 1967;
- the International Organisations (Privileges and Immunities)
Taipei and Hong Kong officials are not covered
by these existing diplomatic exemptions. The Government plans to
designate them by regulation so that they will be covered by the
Overseas Missions (Privileges and Immunities) Act
The Explanatory Memorandum states that changes
to the Collection Act could result in a net increase in PMC revenue
of up to $100 000.(23)
- For further discussion of strict liability see Transport and
Regional Services Legislation Amendment (Application of Criminal
Code) Bill 2002: (Bills
Digest No 88, 2001 2002).
- (2000) 102 FCR 578.
- ibid., at p. 591.
- The TMA was also examined by the Senate Legal and
Constitutional Affairs Committee. A copy of the Committee s report
may be found at :
- The Hon. Peter Slipper, Second Reading Speech, House
of Representatives, Hansard, 19 June 2002, p. 3248.
- Further information regarding associated amendments is
contained within the Bills Digest for the Border Protection
Legislation Amendment Bill 2002 (Bills Digest No 123 2000-2001).
- Explanatory Memorandum, Customs Legislation Amendment Bill
(No. 1) 2002.
- Senate Standing Committee for the Scrutiny of Bills Fourth
Report of 2000: Entry and Search Provisions in Commonwealth
Legislation, 6 April 2000, p. 73 74.
- ibid p., 75.
- p. 31.
- Under the Australian Postal Corporation Act 1989
Australia Post has the exclusive right to carry letters within
Australia, whether the letters originated within or outside
Australia. Other carriers may deliver items that do not come within
the definition of letter.
- Explanatory Memorandum, p. 35.
- A complete list of the information required can be found in
Australian Customs Service, Customs Guide To Importing And
Exporting. A copy of the report can be found at:
- This is set out in proposed section 67F.
- The Australian National Audit Office (ANOA) has reported that
the PMC is not linked to costs associated with these services and
is a tax.
- For a discussion of the administration of the PMC by the
Australian Customs Service see ANAO, Passenger Movement Charge
Report No.12, 2000-2001.
- Section 55 states:
- Laws imposing taxation shall deal only with the imposition of
taxation, and any provision therein dealing with any other matter
shall be of no effect, and
- Laws imposing taxation, except laws imposing duties of customs
or of excise, shall deal with one subject of taxation only; but
laws imposing duties of customs shall deal with duties of customs
only, and laws imposing duties of excise shall deal with duties of
- p. 41.
- p. 2.
Susan Dudley and Mark Tapley
27 August 2002
Bills Digest Service
Information and Research Services
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