Bills Digest No. 80 2003-04
Customs
Legislation Amendment (Application of International Trade
Modernisation and Other Measures) Bill
2003
WARNING:
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
Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Passage History
Customs Legislation Amendment
(Application of International Trade Modernisation and Other
Measures) Bill 2003
Date
Introduced: 4
December 2003
House: House of Representatives
Portfolio: Justice and Customs
Commencement:
This is an omnibus
Bill that amends several Acts and, apart from the date of Royal
Assent, it has a range of other commencement dates for various
legislative amendments (see the five page table in Clause 2 of the
Bill).
As noted above, this is an omnibus Bill and it has several
purposes in terms of its legislative amendments to various
Customs-related statutes. These purposes include:
-
clarify aspects of the major reforms associated with new
electronic communication arrangements aimed at implementing the
program of Customs international trade modernisation
-
enhance Customs border controls
-
clarify cargo reporting requirements, and
-
clarify calculation of Customs duties on alcoholic
beverages.
The Bill is also scheduled for cognate debate
with the Import Processing Charges (Amendment and Repeal) Amendment
Bill 2003, the detail of which is discussed in the accompanying
Bills Digest.
This omnibus Bill has no central theme. There is, however, a
significant part to the Bill that deals with the transitional
arrangements that will occur during the on-going program of Customs
international trade modernisation (ITM) and the transition between
the current Australian Customs Service's electronic reporting
systems and the new Integrated Cargo System (ICS). The overall aim
is to create an integrated system to replace the several computer
platforms now in use. This is referred to as the Cargo Management
Re-Engineering project (CMR).
Parliament, through its committees and debates, has examined ITM
and ICS on several occasions since 2000.(1) The
mandatory electronic reporting requirements of cargo movements and
the demands of the modern competitive trade environment have
created a significant challenge in terms of the information
technology (IT) systems required by Customs. The massive IT program
is reported to be $100 million over budget and over 12 months
late.(2) The Government for its part has suggested that
focus should also be made on the sophisticated functionality of the
system and that it is designed to process the collection of $6
billion annually.(3)
Press commentary, however, continues on industry's concerns that
the new computer systems are not yet stable and that rushing the
implementation may result in cargo being stranded at the
docks.(4)
The Bills Digest (No. 40 of 2003-04)(5) for the
Customs Legislation Amendment Bill (No. 2) 2003 contained an
outline of the stages involved in this major IT program. The CMR
project is being implemented in three stages. The first stage
connects the new computer system, the ICS which handles risk
assessment and reporting of imported and exported cargo, to the
small number of express carriers. This stage served as a pilot to
test some electronic reporting functions because of the large
volumes of cargo and the limited number of express
carriers.(6) The first stage was implemented
successfully in April 2003.(7)
The second stage is to implement the ICS export functions across
the industry. Release of the ICS export software was to be
completed by 1 December 2003 but has been delayed to early 2004.
Similarly, because industry testing of the components was delayed
from May until August 2003,(8) Customs will not cut over
from its existing export system, known as EXIT, until later in
2004.(9)
The final stage of the CMR project is the implementation of ICS
import functions. According to press reports, both industry and
Customs agree that the import cargo declaration software is the
most complex piece of the new system.(10) This may be
because there are many more categories of imports, they come from
more sources than our exports, and there will be more users of the
import software. Testing of the imports system by industry will
commence in the first half of 2004.
The statutory cut-off date for the completion of CMR has
recently been extended to July 2005.(11)
The Customs Act 1901 currently sets out the computer
systems that must be used to communicate with the Australian
Customs Service. There are several systems specified. The ITM
reforms, including those covered by the Customs Legislation
Amendment and Repeal (International Trade Modernisation) Act
2001 (the ITM Act), will see these specific legislative
references to computer systems replaced by notices in the
Gazette.
The ITM Act also contains transitional provisions that need to
be modified, including replacement provisions relating to the
arrival of ships, and aircraft and cargo reporting. These
transitional provisions need to take into account that there is a
period when the 'unamended Customs Act' will apply and when new
provisions dealing with imports in the Customs Act, as amended by
the ITM Act, will commence. Broadly stated, there is an overlap
during which both computer systems will have to be used leading up
to the 'turn-off' time for the current computer systems. It is
necessary to have provisions that identify which version of the
legislation will apply. The complexity involved in accommodating
arrival times for vessels in transit and/or who deliver imports to
more than one Australian port of call in a voyage is noted.
Clause 4 provides definitions that will apply
under the transitional mechanisms for ITM. The reference to 'import
cut-over time' means the time when the notification of imports
under the current electronic system actually cuts-over to the ITM
system, and 'turn-off time' means that time at which the current
computer systems are due to turn off (see the diagram which appears
at page 11 of the Explanatory Memorandum issued with the
Bill).
Clauses 5 and 6 authorise the
CEO of the Australian Customs Service to gazette dates for the
cut-over time and the turn-off time, respectively. The CEO of the
Australia Customs Service must gazette these dates before the 'ITM
import commencement date' (see paragraph 53 of the Explanatory
Memorandum).
Clauses 7 to 18 provide the
rules to determine when the unamended Customs Act will apply and
when the Customs Act amended by the ITM Act will apply, taking into
account the timing of notification of imports and the arrival of
the vessel at a port in Australia. Rules also apply to warehoused
goods in Australia that are subject to the Customs Act and that are
subsequently entered for home consumption (see Clause
9).
Sections 126D and 126DA of the ITM Act enable the CEO of the
Australian Customs Service to establish, maintain and determine IT
requirements applicable to communications with Customs. The
Customs Legislation Amendment Act (No. 2) 2003 provided a
transitional amendment (Item 38) for delayed application of ITM Act
amendments to exports. Clause 19
clarifies that sections 126D and 126DA continue to apply according
to their terms for imports from the ITM import
commencement date.
Section 68 of the Customs Act 1901 imposes an
obligation to enter for customs purposes, goods that are imported
or intended to be imported that are on board a ship or aircraft
that has commenced its journey to Australia (including, where
applicable, the importation of the ship or aircraft itself). This
requirement does not apply to personal items of the passengers or
crew, containers, low value items or certain goods that are
exempted by regulations. However, section 71 of the Customs Act
1901 enables Customs to require the owner of such 'excluded'
goods to provide information and, where necessary, Customs may
refuse entry of the goods or alternatively authorise the entry,
subject to any duty that is payable.
This procedure involves what is referred to as a self-assessed
clearance declaration (SAC). Items 2 and
3 refer to proposed definitional references to SAC
to be inserted by this Bill. These references are linked to a
comprehensive redraft of existing section 71 of the Customs Act
1901 and the insertion of a range of additional new sections
dealing with the requirement to give information and the authority
to deal with goods specified in section 68 that do not have to be
entered for customs purposes (see Item 6).
Within the range of 'excluded' goods, there are two categories,
already mentioned above. They are:
-
goods that are accompanied or unaccompanied personal or
household effects of a passenger, or a member of a crew, of a ship
or aircraft, and
-
goods prescribed under regulations.
Proposed new sections 71AAAA to 71AAAT,
inserted by Item 6, will classify the above two
categories as Subdivision AA goods. There is a refinement
to goods prescribed under regulations (see proposed new
section 71AAAE) which will now include the wording
'persons who are not required to comply'. This new provision to
prescribe excluded goods (or persons) by way of regulations is in
addition to the existing regulation provision referred to in the
current paragraph 68(1)(i) of the Customs Act 1901. The
remaining exempt categories (other than containers) are to be
classified as specified low value goods (see
proposed new section 71AAAD, which retains a
reference to paragraph 68(1) (i)).
Where decisions are made by Customs under the proposed
new sections 71AAAC, 71AAAM and
71AAAN, inserted by Item 6, these
decisions are reviewable by the Administrative Appeals Tribunal
(see Item 25, which sets out the types of
decisions that are reviewable).
Section 71E of the Customs Act 1901 enables an
application to be made to Customs for permission to move goods to a
place specified in the application. Subsection 71E (2A) specifies
that a 'computer movement application' must be transmitted to
Customs. Items 12 and 13 vary the
existing provisions to specify that subsection 71E (2A) continues
to apply except when the proposed new subsection
71E(2C) applies (see Item 13). The effect
of the amendments is to exempt from notification by a 'computer
movement application', goods that are temporarily entered in
accordance with an agreement between Australia and other countries
that allows this type of temporary importation of goods without
payment of duty.
Items 1 and 3 amend existing
provisions to broaden their application. The effect of Item
1 is to specify that a vessel has 'arrived' when it is in
port rather than being limited, at present, to when it is docked
for unloading of passengers or cargo. Item 3
corrects a legislative amendment made in 2002. The correction will
include the non-movement of aircraft until the removal of cargo
destined for that port of call has transpired.
Item 5 inserts significant new provisions in
the Customs Act 1901. These sections are proposed
new sections 77EA to 77EF. These sections
will empower the Minister to order the detention of certain goods,
which have not yet entered home consumption, where the Minister
considers it is in the public interest to do. The 'public interest'
is not defined. The Explanatory Memorandum, at paragraph
160, says the 'public interest' may change over time and that it is
expected that the power will only be exercised in very limited
circumstances. The example is given of the single importation of
'dangerous goods' where the Minister may act to ensure that the
goods are delivered in batches over a period of time. The Senate
Standing Committee for the Scrutiny of Bills has sought the
Minister's advice on the discretionary aspect of proposed
new section 77EA (see Alert Digest No. 1 of
2004).
Proposed new subsection 77EA(3) contains
express wording that states that the Minister's order to detain
goods 'has effect despite any provision of this Act to the
contrary'. This is a very broad Ministerial power. It is noted,
however, that a person whose goods have been detained for 12 months
may seek compensation (see proposed new subsection
77EF(5)). It is assumed that the types of goods in
question that are likely to be detained may include the now limited
range of permissible firearms that can be sold in Australia.
Division 2 of Part VI of the Customs Act 1901 deals
with the notification and clearance of goods for exports. At
present, the provisions allow certain bulk wharves used for
bulk-loading (e.g. for the export of grain) to be exempted from the
more detailed notification requirements. Some of these bulk-loading
wharves are now expanding their operations to handle non-bulk
exports. Item 14 will allow the exemption to be
more specific e.g. on the basis of the nature of the goods exported
(e.g. bulk grain) rather than the bulk loading facility itself.
Division 1 of Part VIII of the Customs Act 1901 deals
with the computation of duties. Division 1A deals with rules of
origin of goods in respect of which a preference applies.
Item 17 will insert a new Division
1AA after existing Division 1 to remedy a technical
problem in calculating duty by reference to the percentage
alcoholic content of the import. The problem arose when some cans
of alcoholic beverage were imported and labelled as containing 5%
alcohol by volume but the technical measure of the fluid in the can
turned out to be 4.8%. The Explanatory Memorandum provides
a reasonably detailed explanation of the particular case that
triggered the technical problem (see paragraphs 195 to 199).
Proposed new sections 153AA to
153AD provide rules on how to calculate the rate
of duty that should apply.
Under the Border Protection (Validation and Enforcement
Powers) Act 2001, amendments were made to Customs legislation
to the effect that a 'commander' of a vessel in the service of the
Commonwealth was defined to include a commissioned officer of the
Australian Defence Force. This definition is being expanded by
Items 18 and 19 to include 'the
most senior officer of Customs'. This recognises that Customs
officers may also be on a State water police vessel or on a
chartered civilian vessel rather than on official Defence vessels
or Australian Customs vessels and the Customs officer may need to
make a request to board or, if necessary, chase another
vessel. Item 35 makes the same type of
amendment in relation to the Migration Act 1958.
Item 20 and Item 36 in
relation to the Migration Act 1958) clarifies that moving
a detained ship may require travel by that ship across the high
seas to an Australian port for the purposes of an inquiry before a
competent authority. The Explanatory Memorandum states
that these provisions are consistent with paragraph 7 of Article
111 of the United Nations Convention on the Law of the Sea (see
paragraph 221 of the Explanatory Memorandum).
The Press commentary on industry concerns over the delays and
the significant blow-out of costs incurred by Customs with the
scheduled introduction of the new ITM computer systems is
noted.
-
See for example the two reports of the Senate Legal and
Constitutional Legislation Committee, Inquiry into the
Customs Legislation Amendment and Repeal (International Trade
Modernisation) Bill 2001, Import Processing Charges Bill 2000, and
the Customs Depot Licensing Charges Amendment Bill 2000 (May
2001) and Inquiry into the Outsourcing of the Australian
Customs Service's Information Technology (May 2002). See also
the Senate Estimates Committee (Senate Legal and Constitutional
Legislation Committee) transcript of 3 November 2003 at page
153 on ParlInfo at:
http://parlinfoweb.parl.net/parlinfo/view_document.aspx?id=82407&table=ESTIMATE.
A more recent summary is in Senator Mark Bishop's Second Reading
speech on the Customs Legislation Amendment Bill (No. 2) 2003,
Senate, Debates, 4 December 2003, p. 19181.
-
Chris Jenkins, 'Customs busted in $100m overrun',
Australian, 11 November 2003, p. 25 and Emma Connors,
'Customs rollout delayed again', Australian Financial
Review, 2 December 2003, p. 31. Also, Senator Mark Bishop,
Shadow Minister for Customs, 'Customs Let Crew Jump Ship - More
Evidence', Media Release, 15 January 2004.
-
The Hon Peter Slipper MP, Parliamentary Secretary to the
Minister for Finance and Administration, Consideration in Detail of
the Customs Legislation Amendment Bill (No. 2) 2003, House of
Representatives, Debates, 26 November 2003, p. 23053.
-
Emma Connors, 'Customs warned cargo could be left stranded',
Australian Financial Review, 27 January 2004, p. 3; Emma
Connors, 'Customs close to meltdown', Australian Financial
Review, 10 February 2004, p. 53.
-
Rosemary Bell and Sudip Sen, Bills Digest for the Customs
Legislation Amendment Bill (No. 2) 2003, No. 40 of 2003-04,
Department of the Parliamentary Library, at: http://www.aph.gov.au/library/pubs/bd/2003-04/04bd040.pdf
.
-
Australian Customs Service, Annual Report 2001-02, p.
1.
-
Riley, James, Dockland s data deadline , Australian, 2
September 2003; also Connors, Emma, Customs faces tech calamity ,
Australian Financial Review, 19 August 2003; Australian
Customs Service, Annual Report 2001-02, p. 16 18.
-
Connors, Emma, Customs faces tech calamity', Australian Customs
Service, New dates for Cargo Management Re-engineering rollout ,
Customs Media Release, 15 August 2003.
-
Australian Customs, Media Release, 'Cargo Management
Re-engineering (CMR) update', 10 December 2003.
-
Connors, Emma, Cost of Customs software blows out ,
Australian Financial Review, 27 May 2003.
-
Customs Legislation Amendment Act (No. 2) 2003 (see
Part 5A of Schedule 1).
Brendan Bailey
23 February 2004
Bills Digest Service
Information and Research Services
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