In 1997, the Australian Customs Service (Customs) began a
process to replace its core information
infrastructure.(1) The aim of the Cargo Management
Re-engineering (CMR) project is to create an integrated system to
replace the several computer platforms (the legacy systems ) that
handle exchanges of complex and varied documentation involved in
routine imports and exports.(2) The Minister for Justice
and Customs, Senator the Hon. Chris Ellison, is reported as
describing the CMR project as the biggest overhaul of import and
export processes since Federation.(3) The ICS has to
satisfy the legislative requirements of Customs while, at the same
time, providing traders with a broader range of electronic
reporting options, and facilitating the identification of high-risk
Parliament, through its committees and debates, has examined the
ICS on several occasions since 2000. The massive IT program is
reported to be at least $100 million over budget and nearly three
years behind schedule.(5) The Government, for its part,
has suggested that attention should be paid to the sophisticated
functionality of the system and that it is designed to process the
collection of $6 billion annually.(6) Press commentary,
however, has focused on industry s concerns that rushing the
implementation of the new computer systems may result in cargo
being stranded at the docks.(7)
In 2001, Parliament passed a package of legislative measures,
the purpose of which was to modernise the way in which Customs
manages the movement of cargo into and out of
Australia.(8) Chief among this legislation is the
Customs Legislation Amendment and Repeal (International Trade
Modernisation) Act 2001 (ITM Act) which amends the Customs
Act 1901 to introduce new compliance measures for reporting
and accounting for cargo movements. The provisions of the ITM Act
commenced on 19 July 2005.(9) The effect of the
amendments relating to the importation of goods and the arrival of
ships and aircraft in Australia, is to set a deadline for the
implementation of Customs new system.
The CMR project has been implemented in three stages. The first
stage connected the ICS, which handles risk assessment and
reporting of imported and exported cargo, to a small number of
express carriers.(10) The first stage was implemented
successfully in April 2003.(11) The second stage
involved implementing the ICS export functions across the industry.
After some delays, implementation of the second stage was completed
in October 2004.(12)
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.(13) Imports
traffic makes up 90 per cent of Customs transactions and, as
reported in the press, there are industry concerns that the new
system could buckle under the load when imports traffic goes
online, especially in the run-up to Christmas.(14) On 24
May 2005 the Minister for Justice and Customs announced that the
Government had agreed to an extension to the transition phase of
the ICS import system in response to industry s concerns that
insufficient time was available for them to test their own
software, adapt business practices and train staff. In extending
the import cut-overtime until 12 October 2005, the Government
states that it is honouring a commitment made to industry that
there would be a transition period of approximately three
months.(15) The proposed amendments are the seventh made
to the legislation for the CMR program.(16)
The Customs Act 1901 currently sets out the computer
systems that must be used to communicate with Customs. There are
several systems specified. The international trade modernisation
reforms, including those covered by 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 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 the 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.
Section 4 of the Customs Legislation Amendment (Application
of International Trade Modernisation and Other Measures) Act
2004 (Application Act) provides definitions that apply under
the transitional mechanism for ITM. The ITM import commencement
date means the day on which the amendments(17) relating
to the importation of goods and the arrival of ships and aircraft
in Australia commence, that is 19 July 2005. 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 (except for Customs
Sections 5 and 6 of the Application Act authorise the CEO of
Customs to gazette dates for the cut-over time and the turn-off
time, respectively. The CEO of Customs must gazette the date of the
cut-over time before the ITM import commencement date . Section 5
of the Application Act provides that the import cut-over time must
be not more than 40 days (including Sundays and holidays) after the
ITM import amendments commenced, that is, not later than 28 August
2005. The turn-off time is to be not more than 40 days (including
Sundays and holidays) after the import cut-over time, that is, no
later than 7 October 2005.
Item 1 of Schedule 1 amends
the definition of import cut-over time to reflect new section 5
under which the import cut-off time may not necessarily be
specified by the CEO of Customs.(19) Item
2 repeals sections 5 and 6 of the Application Act and
substitutes new provisions. The Bill specifies both a new import
cut-over time and a turn-off time and allows the provisions of the
Application Act to be further modified by subordinate
legislation.(20) New subsection 5(1)
provides that the import cut-over time is 2am in the Australian
Capital Territory on 12 October 2005, or a later time to be
specified by the CEO by legislative instrument. Should the CEO
specify a later time, then that must be done before 12 October 2005
(new subsection 5(2)). The later time must be
before the end of 7 November 2005 (new subsection
New subsection 6(1) provides that the CEO must,
by legislative instrument, specify a turn-off time that is not more
than 40 days (including Sundays and holidays) after the import
cut-over time. If the CEO specifies a later import cut-over time
under new paragraph 5(b), then the turn-off time
must be within 40 days of that specified import cut-over time. The
CEO may need to specify a second turn-off time if the import
cut-over time is delayed. However, should the CEO need to change
the turn-off time, then that must be done before the first turn-off
time (that is, before 20 November 2005 at the latest), and the new
time must not be more than 40 days (including Sundays and holidays)
after the import cut-over time (new subsection
6(2). This suggests that the latest possible turn-off time
for the legacy systems would be about 17 December 2005.
Current legislation provides for a transition period of 40 days
during which importers may continue to submit information to
Customs using existing electronic reporting systems. The transition
period expires at 2am on Sunday, 28 August 2005. If the amendments
proposed by this Bill to extend the transition period are not
assented to by that time, then there may be insufficient time for
businesses to test that their computer systems are ready to comply
with Customs new Integrated Cargo System.
The Import Processing Charges Act 2001 restructured the
import processing charges levied by Customs for goods arriving by
air, sea and post. In May 2005, the Government foreshadowed that
increased charges will be levied on importers once the ITM Act
commences.(21) At that time the Government estimated
that the new charges would collect an additional $12.4 million in
2005-06.(22) According to the Explanatory
Memorandum, an extension of the transition period is expected
to reduce revenue from cost recovery measures contained in the
Import Processing Charges Act 2001 by $1.39 million this
Australian Customs Service, Annual Report 1997-98, p.
Riley, James, Dockland s data deadline , The
Australian, 2 September 2003, Computer section p. 1.
Cooper, Cameron, Customs bid to get services shipshape ,
The Australian, 3 April 2003.
Senator the Hon Chris Ellison, Customs streamline business
import/export controls , Media Release, E67/01, 9 April
For a discussion of the costs and delays see: Senate. Legal and
Constitutional Legislation Committee, Australian Customs Service ,
Estimates Committee Hansard, 24 May 2005, p. 115;
Riley, James, A long wait at the gate , Australian, 21
June 2005, IT Business section, p. 1; Senator Joe Ludwig, Cargo
management saga continues , Press Release, 6 May 2005;
Woodhead, Ben, Customs sticks to cargo project target ,
Australian Financial Review, 14 April 2004, p. 21;
Harrison, Murray, Rocky road for Customs outsourcing: the story
they didn t tell , Australian, 15 February 2005; Riley,
James, Customs project s cost rises , Weekend Australian,
12 February 2005, p. 35.
Hon Peter Slipper MP, Parliamentary Secretary to the Minister
for Finance and Administration, Consideration in Detail: Customs
Legislation Amendment Bill (No. 2), 2003 , House of
Representatives, Debates, 26 November 2003, p. 23053.
According to the Minister for Justice and Customs, Senator the Hon
Chris Ellison, the ICS is the most ambitious e-government project
ever undertaken in this country (Media Release E082/05,
5 July 2005).
For example: Connors, Emma, Faulty Customs system delayed again
, Australian Financial Review, 6 May 2005.
The legislation which supports the policy and technical
initiatives for CMR comprises three Acts Customs Legislation
Amendment and Repeal (International Trade Modernisation) Act
2001, Import Processing Charges Act 2001 and
Customs Deport Licensing Charges Amendment Act 2001. All
three Acts received Royal Assent in July 2001.
Explanatory Memorandum, Customs Amendment (Extension of
Import Cut-Over Time) Bill 2005, paragraph 8.
Australian Customs Service, Annual Report 2001-02, p.
ibid., p. 16 18.
The cut-over date was gazetted as 6 October 2004. Government
Notices Gazette GN37, Wednesday 15 September 2004.
Connors, Emma, Cost of Customs software blows out ,
Australian Financial Review, 27 May 2003.
Connors, Emma, Importers left in limbo again , Australian
Financial Review, 24 May 2005, p. 36; Mitchell, Selina,
Customs warned to declare system delay , The
Australian, 12 April 2005, IT Today section, p. 33.
Senator the Hon Chris Ellison, New era in cargo management from
October 12 , Media Release E082/05, 5 July 2005 .
Connors, Emma, Faulty Customs system delayed again ,
Australian Financial Review, 6 May 2005, p. 6.
The amendments are contained in item 38 of Schedule 3 of the ITM
Explanatory Memorandum, op. cit., paragraph 1.
The import cut-over time was specified by the CEO of Customs in
a legislative instrument made on 15 July 2005 and registered on 18
July 2005 (CEO Specification No. 1 of
2005). The legislative instrument was tabled in
both houses of Parliament on 9 August 2005.
Legislative instruments are subject to the scrutiny of
Parliament under the provisions of the Legislative Instruments
Import Processing Charges Amendment Act
Explanatory Memorandum, Import Processing Charges
Amendment Bill 2005, p. 2.
This paper has been prepared to support the work of the
Australian Parliament using information available at the time of
production. The views expressed do not reflect an official position
of the Information and Research Service, nor do they constitute
professional legal opinion.
Published by the Parliamentary Library, 2005.