Bills Digest no. 28 2012–13
PDF version [693KB]
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.
Cat Barker, Foreign Affairs and Defence Section
Leah Ferris, Law and Bills Digest Section
Dr Matthew Thomas, Social Policy Section
10 October 2012
Contents
Purpose
Background
Financial implications
Main issues
Key provisions
Concluding comments
Date introduced: 27 June 2012
House: House of Representatives
Portfolio: Attorney-General
Commencement: This Act commences on the day after it receives the Royal Assent
Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill's home page, or through http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation. When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website at http://www.comlaw.gov.au/.
The purpose of the Customs Amendment (Smuggled Tobacco) Bill 2012 (the Bill) is to amend the Customs Act 1901 (the Act) to create specific criminal offences for the smuggling of tobacco products and for the conveyance or possession of smuggled tobacco products where the person conveying or possessing the goods knows they were smuggled.[1]
The World Health Organization (WHO) Framework Convention on Tobacco Control (FCTC), to which Australia is a party, has been in force since February 2005. Article 15 of the FCTC requires parties to take a range of regulatory measures to combat the illicit trade in tobacco products.[2] Under Article 1 of the Convention, illicit trade means any practice or conduct prohibited by law and which relates to production, shipment, receipt, possession, distribution, sale or purchase including any practice or conduct intended to facilitate such activity.
Following four years of negotiations, the Intergovernmental Negotiating Body agreed in April 2012 on the text of a draft Protocol to eliminate illicit trade in tobacco products to be submitted for consideration and adoption to the Conference of the Parties to the WHO FCTC in November 2012.[3] The Protocol would require parties to:
- implement measures to control the supply chain for tobacco products, including through the establishment of a global tracking and tracing regime
- make certain conduct unlawful, including through the creation of criminal offences
- cooperate with other parties, including by sharing information, providing technical and mutual legal assistance and facilitating extradition and
- report on their implementation of the Protocol.[4]
Among the activities parties would be required to make unlawful are importing, exporting, selling, transporting and distributing tobacco and tobacco products in breach of the supply chain controls. It would be up to each party to determine which unlawful activities to make criminal offences and the penalties to apply to offences.[5]
Estimates
Estimating the true extent of any illicit activity is difficult, and tobacco smuggling is no exception. There is also reason to treat all estimates with caution: while the tobacco industry has an incentive to exaggerate the extent of smuggling in order to make a case for lower taxation, public health advocates may have an incentive to underestimate its extent.[6] While it was reached some time ago, one of the more rigorous and widely cited estimates is that arrived at in 2000 by Merriman, Yurekli and Chaloupka. Based on three separate analyses, each with its own methodological limitations, these researchers estimated that 6–8.5 per cent of cigarettes consumed around the world are smuggled.[7]
More recently, the Framework Convention Alliance developed an estimate to inform the second session of the Conference of the Parties to the WHO FCTC.[8] It estimated that the global illicit cigarette trade accounted for 10.7 per cent of sales in 2006 and may represent a loss to government revenue of US$40–50 billion each year.[9]
Cigarettes seized by customs agencies around the world
The World Customs Organization (WCO) is comprised of 179 customs agencies around the world that collectively process around 98 per cent of world trade.[10] Since 2002, the WCO has published annual reports on the illicit tobacco trade, drawn from data on seizures reported by its members. The data on which the reports are based has a number of limitations, including inconsistencies in the amount and quality of data provided by different members.[11] It also does not capture seizures of loose tobacco.[12] However, the reports provide some indication of the extent of, and trends relating to, the illicit global trade in tobacco.
Both the number of seizures and the total number of cigarettes seized decreased from 2009 to 2010, and again from 2010 to 2011, following increases in previous years, as indicated in the table below.
Number of seizures and cigarettes seized, as reported to WCO by members[13]
|
Year
|
Number of seizures
|
Number of cigarettes seized (billions)
|
Number of members that contributed data
|
|
2007
|
1416
|
2.5
|
64
|
|
2008
|
1654
|
2.3
|
64
|
|
2009
|
1964
|
3.4
|
68
|
|
2010
|
1519
|
3.2
|
67
|
|
2011
|
1026
|
1.9
|
64
|
Over 90 per cent of reported seizures in 2009 occurred in Europe, accounting for around 85 per cent of the quantity of cigarettes seized in 2009. Eastern and Central Europe accounted for almost half of all the seizures reported globally in 2009, with more than half the quantity of cigarettes seized worldwide being seized in Western Europe.[14] Detailed regional information is not provided in the public versions of the 2010 and 2011 reports, but Europe continued to account for around 90 per cent of reported seizures.[15]
In her second reading speech for the Bill, the Attorney-General stated that tobacco smuggling to Australia has not represented a major threat to date.[16] However, to the extent that tobacco smuggling to Australia does take place, the Australian Crime Commission (ACC) and Customs advise that organised crime groups are involved. [17] As outlined in the Customs submission to the Senate Committee inquiry into the Bill, it is the profitability of tobacco smuggling that attracts such involvement:
Tobacco smuggling offences are often committed by organised criminal syndicates who view tobacco smuggling as a high return and relatively low risk venture. Inexpensive tobacco products can be legitimately accessed overseas, with the sale of smuggled tobacco products in the Australian domestic market being very profitable given the high rates of excise duty. The profits made by these syndicates can also potentially be used to fund other criminal activities.[18]
According to the ACC, most illicit tobacco is imported, but there have been three significant seizures of locally produced tobacco since the closure of the legal Australian tobacco growing industry in October 2006.[19] The ACC also predicted that successful interdictions of smuggled tobacco at the border may make domestic cultivation and distribution more attractive to criminals.[20]
Estimates
There are no official estimates of the size of the illicit tobacco market in Australia.[21] The 2010 National Drug Strategy Household Survey found that:
- 4.9 per cent of smokers aged 14 years or older smoked unbranded loose tobacco (‘chop-chop’)at the time of the survey, with 1.5 per cent using it more than half the time and
- 4.6 per cent of smokers aged 14 years or older bought counterfeit cigarettes once a month.[22]
Respondents were not asked about their use of unbranded cigarettes. While the survey provides an indication of how many people smoke illicit tobacco, it does not estimate the size of the illicit market.
A report prepared by Deloitte for the tobacco industry used the results of a survey conducted by Roy Morgan Research in November 2011 to estimate the size of Australia’s illicit tobacco market. Using a ‘consumption based model approach’, for which the methodology is outlined in the report, Deloitte estimated that the size of the illicit tobacco market (unbranded tobacco and counterfeit and contraband cigarettes) as a proportion of the legal tobacco market is 13.4 per cent.[23] The Department of Health and Ageing (DoHA) considers that flaws in the methodology employed by Deloitte mean that its estimate substantially exaggerates the size of the illicit tobacco market in Australia.[24] DoHA and anti-smoking advocates have also criticised the methodology used for the report, as well as previous reports prepared for the tobacco industry by Deloitte and PricewaterhouseCoopers.[25]
Even if the estimate were accurate, it is an estimate of the total illicit tobacco market in Australia, so includes tobacco grown and sold here illegally as well as smuggled tobacco.
Tobacco seized at the border
The Australian Customs and Border Protection Service (Customs) detected 55 illicit shipments of tobacco to Australia during the 2010–11 financial year, amounting to 258 tonnes of tobacco and 82 million cigarettes.[26] The revenue that would have been lost had these smuggling attempts been successful equates to $135 million plus GST.[27] Information on Customs detections and the duty that would have been evaded for the financial years 2006–07 to 2010–11 is set out in the table below.
Customs tobacco seizures 2006–07 to 2010–11[28]
|
Year
|
Number of detections
|
Tobacco (tonnes)
|
Number of cigarettes (millions)
|
Duty that would have been evaded (dollars)
|
|
2006–07
|
19
|
67
|
42
|
30 000 000
|
|
2007–08
|
58
|
287
|
107
|
114 000 000
|
|
2008–09
|
33
|
180
|
50
|
70 000 000
|
|
2009–10
|
42
|
311
|
68
|
120 000 000
|
|
2010–11
|
55
|
258
|
82
|
135 000 000
|
The National Preventative Health Taskforce, established by the Australian Government in April 2008, released the National Health Preventative Strategy on 30 June 2009 to address the health challenges caused by tobacco, alcohol and obesity.[29]
The Taskforce made a number of recommendations regarding tobacco control.[30] On combatting the illicit tobacco trade, the Taskforce recommended that the Government:
- develop and implement a coordinated national strategy to prevent the emergence of illicit trade in Australia and to contribute to combating illicit trade internationally and
- contribute to the development and implementation of international agreements aiming to combat illicit trade.[31]
The Taskforce argued ‘that a piecemeal approach to tobacco control will be much less effective than a comprehensive one’ and argued that action in all of the following areas could make smoking history[32]:
- revenue measures that would reduce the affordability of tobacco products
- legislative reforms to address current deficiencies in tobacco regulation
- expenditure measures
- indigenous tobacco control
- other initiatives to reduce social disparities in smoking
- health system interventions
- reinvigoration of the Australian National Tobacco Strategy and
- overseas development. [33]
The proposal to amend customs and excise legislation to implement measures to prevent the erosion of prices through the evasion of duties on tobacco falls within revenue protection.[34] The abolition of duty free sales of tobacco products (partially addressed) was another measure proposed under this heading, as well as an increase in tobacco excise and customs duty. Introducing legislation to mandate the plain packaging of cigarettes falls under ‘legislative reforms’ and is also further discussed below.[35] These related measures are further discussed below.
On 11 May 2010, the Government released its response to the proposed Strategy. In accepting a number of recommendations put forward by the Taskforce, the Government referred to the commitment, in the Council of Australian Governments’ (COAG) 2008 National Health Care Agreement to ‘by 2018, reduce the national smoking rate to 10 per cent of the population and halve the Indigenous smoking rate’.[36]
In relation to the recommendations on preventing the illicit trade of tobacco the Government noted that:
Australia has in place a strong legislative and regulatory framework to control the illicit trade in tobacco products (Action 1.2) and
Australia is actively involved in current negotiations to develop an international protocol to eliminate the illicit trade in tobacco products under the auspices of the WHO FCTC (Action 1.3).[37]
In the 2012 Budget, the Government reduced the inbound duty free allowance for cigarettes and tobacco for international travellers.[38] Prior to the implementation of the changes, international travellers aged 18 years and over arriving in Australia were able to bring in up to 250 cigarettes or 250 grams of tobacco free of duty. Starting from 1 September 2012, the maximum amount travellers are allowed to bring into Australia will be 50 cigarettes or 50 grams of tobacco. The Government estimates that this measure will save $600 million in the period from 2012–13 to 2015–16.[39]
This measure has been criticised by Liberal Party members, who have stated that the reduction in the amount of tobacco that can be brought in legally will lead to an increase in tobacco smuggling. In his second reading speech for this Bill Warren Entsch stated:
In my view it is also very much likely to lead to a very significant increase in the black market trade in tobacco. Now that the Australian tobacco industry is virtually shut down, the opportunities for illegal chop chop coming out of Australia have been significantly reduced and this is highly unlikely. But what we are going to see is much more illegal product being imported in larger quantities. We have seen that in recent times, coming probably through our docks.[40]
He further stated:
Duty-free sales constitute about one per cent of the tobacco industry sales, yet tobacco represents up to 30 per cent of duty-free sales. In its attempt to hurt the tobacco industry, it is instead damaging those who sell it legally. It is also encouraging the illicit trade.[41]
The Tobacco Plain Packaging Act 2011 prohibits:
the use of all tobacco industry logos, brand imagery, colours and promotional text on the retail packaging of tobacco products. It allows for the use of a brand and variant name in a standard colour, position, font size and style. The [Act] mandates that retail packaging of tobacco products be a standard drab dark brown colour, with the exception of health warnings, the brand and variant name and any other relevant legislative requirements.[42]
In opposing the passage of the plain packaging legislation, the tobacco industry argued that the introduction of plain packaging could lead to an increase in the illicit tobacco trade.[43]
A tobacco industry challenge to the validity of the plain packaging legislation was rejected by the High Court of Australia in JT International SA v Commonwealth of Australia.[44]
In the Explanatory Memorandum, the Government has not explicitly mentioned its recently introduced tobacco plain packaging measure or the reduction in duty free allowances in the context of this Bill. Nevertheless, it is reasonable to assume that the potential for an increase in tobacco smuggling, partly as a result of the plain packaging measure (and to a far lesser degree the reduction of duty free allowances), may have been one of the drivers behind the increased penalties for tobacco smuggling contained in the Bill.[45] In a recent media release, the Government has included stronger penalties for people convicted of tobacco smuggling offences in its list of initiatives to reduce smoking.[46]
At its meeting of 28 June 2012, the Senate Selection of Bills Committee referred the Bill to the Senate Legal and Constitutional Affairs Legislation Committee (the Senate Committee) for inquiry and report by 14 August 2012.[47]
After a period in which submissions were called for and a public enquiry was held, the Senate Committee tabled its report on 14 August 2012.[48] The Senate Committee recommended that the Bill be passed[49] and commented that:
….the illicit trade of tobacco undermines the government's attempts to curb the prevalence of smoking in Australia and prevent its harmful effects. Since smuggled tobacco products evade government regulation, inspection and duty, these products present a significant risk to people's health, the environment and the economy.
The committee acknowledges that the Bill will introduce penalties for tobacco smuggling that are consistent with the maximum penalties for fraudulent conduct offences under the Criminal Code. The committee also notes that the Bill has received support from the tobacco industry and anti-smoking organisations alike. Accordingly, the committee strongly endorses this legislation.[50]
On 28 June 2012, the House of Representatives Selection Committee referred the Bill to the House Standing Committee on Social Policy and Legal Affairs, for the purpose of ensuring that ‘the proposed criminal offences are given proper examination’.[51] However, on the 20 August 2012, a statement was made by Graham Perrett discharging the committee's requirement to provide a report, due to the Senate Committee having tabled its report:
This committee commends the Senate committee's inquiry into the bill and its report. This committee agrees with the Senate committee's observation that smuggled tobacco undermines the government's ongoing efforts to reduce the harm from smoking in Australia. The Senate committee noted that submissions to its inquiry from both the tobacco industry and anti‑smoking organisations were supportive of the Bill and recommended that the Bill be passed.[52]
In its first report, tabled 22 August 2012, the Parliamentary Joint Committee on Human Rights examined all Bills introduced in the 18–29 June 2012 period, which included this Bill.[53]
In determining whether the Bill sufficiently complied with the Human Rights (Parliamentary Scrutiny) Act 2011, the Committee noted that:
…. the statement of compatibility claims that this Bill does not engage human rights as defined in the Human Rights (Parliamentary Scrutiny) Act 2011. The committee seeks clarification from the Attorney- General whether it would be more accurate for the statement of compatibility to state that the Bill does in fact engage criminal process rights as contained in Article 14 of the International Covenant on Civil and Political Rights (ICCPR), while acknowledging that the Bill is compatible with these rights.[54]
It appears that the Attorney-General has not responded to the issue raised by the committee.
The Senate Standing Committee for the Scrutiny of Bills had no comment on this Bill.[55]
While supporting the Bill, the Liberal Party has raised some concerns with the decreases in duty free allowances, the amount of funding currently being provided to Customs and the extent to which the Bill introduces new measures.[56]
In his second reading speech the Shadow Minister for Justice, Customs and Border Protection, Michael Keenan stated:
The new offences under the Customs Act make it easier for Customs officers to use and require less onerous proof of evidence for prosecution, which the Coalition supports.
However, the Government needs to answer why this measure has been introduced without any increases in resources for Customs to screen and inspect incoming cargo to stop the illegal tobacco from coming through our borders in the first place.[57]
A joint submission to the Senate Committee in support of the Bill was prepared by the three tobacco manufacturing companies in Australia (British American Tobacco Australia, Phillip Morris Limited and Imperial Tobacco Australia).[58] In particular, the companies commented that the current extent of tobacco smuggling in Australia, the links between smuggling and organised crime, and the risk of bribery and corruption of government officials, justify increased penalties.[59]
In its submission, Customs identified tobacco smuggling as one of its ‘key border risks’ and commented on the lack of deterrence provided by the current penalties.[60]
Customs stated that the changes proposed in the Bill:
...more accurately reflect the risks posed to the Australian community, the seriousness of the offences being committed, and provide a strong deterrent to criminals.[61]
According to Customs, the smuggling of tobacco endangers the community and the environment as smuggled tobacco products commonly contain dangerous contaminants and much higher levels of carcinogens than legitimate products. Smuggled tobacco products also circumvent quarantine controls, thereby increasing the potential for exotic pests and diseases to be introduced.
Customs also indicated that tobacco smuggling offences are often committed by organised crime syndicates who view tobacco smuggling as a high return and relatively low risk venture.[62]
Whilst criticising the report prepared by Deloitte, the DoHA maintains that illicit tobacco trade remains a public health concern in Australia:
Tobacco smuggling undermines Government efforts to reduce rates of smoking in Australia. In particular, smuggling reduces the effectiveness of tobacco excise as a tobacco control measure, and could reduce the effectiveness of plain packaging and expanded graphic health warning requirements…[63]
This view was also shared by the Australian National Preventive Health Agency and a number of anti‑smoking advocates, who emphasised the further need for deterrence.[64]
According to the Explanatory Memorandum, the proposed amendments will have no financial impact.[65]
As discussed above, there is some debate as to the extent of smuggling tobacco to Australia. While the size of the illicit tobacco market in Australia has undoubtedly been overstated by some commentators[66], an increase in the size of this market through smuggling activity could prove to be an unintended consequence of the plain packaging measure. And, were this to be the case, then the need for some means for identifying counterfeit tobacco products might prove more pressing.
In recommending that the Government mandate the plain packaging of tobacco products in Australia, the National Preventative Health Taskforce considered the potential for increased illicit trade in tobacco as a result of plain packaging and argued that this need not necessarily be the case. It proposed that the Government mandate some form of tax markings that would make cigarette packages difficult to counterfeit, as per Article 7, number 3 of the World Health Organisation (WHO) Draft protocol to eliminate illicit trade in tobacco products.[67]
No requirement for identification markings on tobacco products was specified by the Government in the Tobacco Plain Packaging Act 2011 or the subsequent Tobacco Plain Packaging Amendment Regulations 2011. This could suggest that the Government is not overly concerned about the potential for increased counterfeiting and illicit trade as a result of the plain packaging measure.[68] Alternatively, it may indicate that the Government does not place too much store in the capacity of identification markings to act as an anti-counterfeiting measure. What it does imply is that the Government believes that the onus should be primarily on the tobacco industry to take measures to ensure that its products are not able to be counterfeited. The industry may very well be doing so through the use of covert markings that does not breach the conditions of the Tobacco Plain Packaging Act. It is certainly in the industry’s interests to do so.
The Government’s reluctance to require the inclusion of identification markings on tobacco products could help to explain, to a degree, the increased severity of the penalties for tobacco smuggling offences contained in the Bill. In short, the Government might be of the view that deterring people from smuggling tobacco products into Australia—reducing the supply of illicit tobacco—should diminish the need for reliance upon anti-counterfeiting measures. This assumes that existing enforcement efforts, when combined with tougher penalties, will be sufficient to prevent any increase in smuggled tobacco products that may result from the plain packaging measure.
In her second reading speech, the Attorney‑General commented on the adequacy of the current provisions in acting as a deterrent:
Currently smuggled tobacco is usually prosecuted under a general smuggling provision, with penalties ranging from two to five times the amount of duty evaded.
However, these pecuniary penalties for tobacco smuggling are not necessarily an effective deterrent, as many penalties currently imposed for tobacco smuggling are not paid.[69]
She also noted that:
The proposed amendments to the Bill that are being debated here are about strengthening the offences, introducing for the first time a penalty with imprisonment attached to it for tobacco smuggling, more accurately reflecting the seriousness of the offence and providing a stronger deterrent to criminals.[70]
Justice Elizabeth Fullerton, of the Supreme Court of New South Wales, has expressed similar views. In sentencing an offender for tobacco smuggling in 2009, Justice Fullerton stated:
…I have no confidence at all that the penalties I will impose will have any deterrent effect on the defendant at all. That said, the enforcement of the penalties will be an avid waste of time.[71]
Customs has also stated that:
…only a fraction of the fine imposed is ever able to be recovered. These penalties are no longer an effective deterrent to tobacco smuggling activities and do not significantly disrupt the syndicates involved.[72]
In his second reading speech the Shadow Minister for Justice, Customs and Border Protection, Michael Keenan stated:
The inclusion of the imprisonment penalty will provide a strong deterrent to criminals and will demonstrate the seriousness of smuggling acts.[73]
Steve Georganas, MP also acknowledged that it can be difficult to extract penalties from some criminals and supported the added disincentive of a prison sentence of up to 10 years. He also noted that jail time is currently not available as a deterrent for smuggling offence under the Customs Act.[74]
In justifying the increase in penalty, the Attorney General has further commented that:
On some occasions sufficient evidence is identified to warrant the pursuit of fraud offences under the Criminal Code Act. These offences carry penalties of up to 10 years imprisonment.[75]
While there have been circumstances where investigations of tobacco smuggling have resulted in people being charged under section 134.2 of the Criminal Code Act 1995, which sets out the offence for obtaining a financial advantage by deception, there is not always sufficient evidence to warrant a prosecution under this section in every situation.[76] This is particularly the case where there is not enough evidence to prove that someone obtained a financial advantage via a deception (for example, where someone has been found to have merely been in possession of smuggled tobacco). Consequently, those who have been charged under this section appear to have been investigated with regard to smuggling operations.[77] The maximum penalty for an offence against section 134.2 of the Criminal Code Act is imprisonment for 10 years. [78]
Item 1 of the Bill amends subparagraph 210(1)(a)(iii) of the Customs Act to include a reference to new provisions established under item 2 of the Bill. Under section 210 of the Act, both customs officers and police officers have the power to arrest a person without a warrant in certain circumstances. This power can only be exercised where an officer believes on reasonable grounds that proceeding without a warrant is the only way to prevent one of the following from happening:
- making sure the suspect appears at court to answer the charge
- stopping the suspect from committing further offences
- stopping any evidence being lost, destroyed or concealed
- stopping any harassment of witnesses
- stopping the fabrication of evidence and
- safeguarding the safety or welfare of the suspect.[79]
Item 2 of the Bill inserts proposed section 233BABAD, which creates new offences for smuggling tobacco products and for conveying or possessing smuggled tobacco products. Currently, these offences are set out under subsection 233(1) of the Customs Act.
Proposed subsection 233BABAD(1) of the Customs Act makes it an offence for a person to import tobacco products with ‘the intention of defrauding the revenue’. Currently paragraph 233(1)(a) of the Customs Act prohibits the smuggling of goods. Smuggling is defined as any (or any attempted) importation, introduction or exportation of goods with intent to defraud the revenue.[80]
The Bill also makes it an offence, under proposed subsection 233BABAD(2), for a person to convey or have in their possession tobacco products, where the person knows that the tobacco was imported with the intent to defraud revenue. Although proposed paragraph 233BABAD(2)(c) requires that the person have knowledge that the goods were imported with the intention to defraud the revenue, when prosecuting a person for this offence it is not necessary to prove the identity of the person who imported the goods (proposed subsection 233BABAD(3)).
Unlike existing paragraphs 233(1)(b) to (d) of the Customs Act, (which cover the importation, exportation, and conveyance or possession of prohibited or smuggled goods) proposed subsections 233BABAD(1) and (2) are not strict liability offences.[81] This is consistent with the Guide to Framing Commonwealth Offences.[82]
Under proposed subsection 233BABAD(4) of the Customs Act, a person convicted under proposed subsections 233BABAD(1) or (2) can receive a sentence of imprisonment of not more than 10 years, or receive a fine, or both. How the fine is calculated depends on whether the court can determine the amount of the duty that would have been payable on the smuggled goods. If this amount can be calculated, then proposed paragraph 233BABAC(5)(a) states that the maximum fine will be that amount multiplied by five. If the court is unable to calculate the amount of duty avoided, then the maximum fine will be 1000 penalty units.[83] The fine is the same as applies to the existing general smuggling offence under paragraph 233(1)(a) of the Customs Act. However, under subsection 233AB(2) of the Customs Act, a person found guilty of either conveying or possessing smuggled tobacco is only subject to a maximum fine of three times the amount of duty avoided, where that duty can be calculated. Under proposed paragraph 233BABAC(5)(a) of the Bill, a person found guilty of conveying or possessing tobacco will now have to pay five times the amount of duty avoided.
While the proposed provisions are very similar to those that currently apply to the offence of smuggling, there are some important differences. As has been noted, proposed section 233BABAD provides that those found guilty of smuggling, conveying or possessing tobacco will now be subject to a maximum penalty of 10 years imprisonment, as well as the same pecuniary penalties that apply to smuggling offences under section 233 of the Act. Unlike section 134.2 of the Criminal Code Act, proposed section 233BABAD will also cover conveying or possession offences.
Proposed subsection 233BABAD(6) of the Bill aims to ensure that a person cannot be prosecuted twice for the same conduct, by providing that a person cannot be prosecuted for smuggling under section 233 of the Customs Act if they have already been prosecuted under the proposed provisions of this Bill.
Proposed subsection 233BABAD(7) sets out the definition for tobacco products, as goods specified under headings 2401, 2402 and 2403 of Schedule 3 to the Customs Tariff Act 1995. The definition includes broad varieties of tobacco products such as cigars, cigarettes, and tobacco extracts.[84] As noted in the Explanatory Memorandum to the Bill, subheadings 2402.90.00 and 2403.99.10 are excluded from the definition of tobacco products, as the goods listed under these headings do not contain any tobacco.[85]
Concluding comments
While it would appear that tobacco smuggling has so far not posed a major threat in Australia, its connection with organised crime groups and the extent to which it undermines existing health policy makes it a serious concern. It is also possible that the reduction in duty free allowances and the new plain packaging measures may lead to an increase in the amount of tobacco being smuggled. As has been noted, the current penalties are no longer proving to be an effective deterrent, with a majority of the fines imposed never being paid. It is therefore reasonable that the Government would seek to impose further penalties in regards to this offence. A penalty of 10 years imprisonment appears to be an acceptable benchmark in light of the current penalties for fraud offences.
Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2430.
[6]. D Merriman, A Yurekli and FJ Chaloupka, ‘How big is the worldwide cigarette-smuggling problem?’, in P Jha and FJ Chaloupka, eds, Tobacco control in developing countries, Oxford University Press, New York, 2000, pp. 365–392, pp. 383–384, viewed 9 August 2012, http://siteresources.worldbank.org/INTETC/Resources/375990-1089904539172/365TO392.PDF
[7]. Ibid., p. 384. The authors compared recorded exports and imports, analysed official estimates from around the world and analysed the links between recorded cigarette sales and price in neighbouring European countries.
[12]. Ibid., p. 4. Additionally, the analysis is based only on seizures of 100 000 cigarettes or more. However, only two members reported seizures below that threshold in 2011: p. 8.
[13]. World Customs Organization (WCO), Customs and Tobacco Report 2009, June 2010, viewed 9 August 2012, http://www.wcoomd.org/press/file.aspx?lid=1&id=13674; WCO, Customs and Tobacco Report 2010, June 2011, viewed 9 August 2012, http://www.wcoomd.org/files/1.%20Public%20files/PDFandDocuments/Enforcement/WCO_Customs_Tobacco_2010_public_en.pdf; WCO, Customs and Tobacco Report 2011, June 2012, viewed 9 August 2012, http://www.wcoomd.org/press/admin/file.aspx?lid=1&id=15989
[14]. World Customs Organization (WCO), Customs and Tobacco Report 2009, WCO, 2010, op. cit., p. 9.
[15]. World Customs Organization (WCO), Customs and Tobacco Report 2011, op. cit., p. 4; WCO, Customs and Tobacco Report 2010, op. cit., p. 4.
[17]. Australian Crime Commission, Organised crime in Australia – 2011 Report, Commonwealth of Australia, 2011, p. 18, viewed 9 August 2012, http://www.crimecommission.gov.au/publications/organised-crime-australia/organised-crime-australia-2011-report;
Australian Customs and Border Protection Service (Customs), Submission to the Senate Standing Committee on Legal and Constitutional Affairs, Inquiry into the Customs Amendment (Smuggled Tobacco) Bill 2012, July 2012, viewed 9 August 2012, https://senate.aph.gov.au/submissions/comittees/viewdocument.aspx?id=6bf2faf1-c8c2-4424-b5d7-45952892a826
[18]. Customs, Submission to the Senate Standing Committee on Legal and Constitutional Affairs, Inquiry into the Customs Amendment (Smuggled Tobacco) Bill 2012, op. cit.
[19]. Australian Crime Commission, Organised crime in Australia – 2011 Report, op. cit., p. 89.
[24]. DoHA, Submission to the Senate Standing Committee on Legal and Constitutional Affairs, Inquiry into the Customs Amendment (Smuggled Tobacco) Bill 2012, July 2012, op. cit.
[25]. Action on Smoking and Health Australia, Submission to the Senate Standing Committee on Legal and Constitutional Affairs, Inquiry into the Customs Amendment (Smuggled Tobacco) Bill 2012, 11 July 2012, viewed 9 August 2012, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=legcon_ctte/smuggled_tobacco/submissions.htm;
Quit Victoria, Submission to the Senate Standing Committee on Legal and Constitutional Affairs, Inquiry into the Customs Amendment (Smuggled Tobacco) Bill 2012, 13 July 2012, viewed 9 August 2012, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=legcon_ctte/smuggled_tobacco/submissions.htm; Quit Victoria, Illicit trade of tobacco in Australia: report for 2011: a report prepared for British American Tobacco Australia Limited, Philip Morris Limited and Imperial Tobacco Australia Limited: a critique by Quit Victoria, May 2012, viewed 9 August 2012, http://www.cancervic.org.au/downloads/mini_sites/Plain-facts/CritiqueDeloitte_May_2012_Update_-_Public_copy.pdf;
Quit Victoria and Cancer Council Victoria, Illicit trade of tobacco in Australia. A report prepared by Deloitte for British American Tobacco Australia Limited, Philip Morris Limited and Imperial Tobacco Australia Limited: a critique prepared by Quit Victoria, Cancer Council Victoria, March 2011 (updated 18 November 2011), viewed 9 August 2012, http://www.cancervic.org.au/downloads/mini_sites/Plain-facts/CommtsDeloitte18.11.11.pdf
[29]. A history of the National Preventative Health Taskforce has been set out in the Bills Digest for the Excise Tariff Amendment (Tobacco) Bill 2010 and Customs Tariff Amendment (Tobacco) Bill 2010, M Coombs, Excise Tariff Amendment (Tobacco) Bill 2010 and Customs Tariff Amendment (Tobacco) Bill 2010, Bills Digest, nos. 154-155,
2009–10, Parliamentary Library, Canberra, 2010, viewed 7 August 2012, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillsdgs%2FOPTW6%22
[45]. It appears that the Government’s 25 per cent increase in tobacco excise as a part of the 2010–11 Budget is the factor most likely to have increased interest in tobacco smuggling.
[56]. W Entsch, ‘Second reading speech: Customs Amendment (Smuggled Tobacco) Bill 2012’, op. cit.; M Keenan, ‘Second reading speech: Customs Amendment (Smuggled Tobacco) Bill 2012’, House of Representatives, Debates, 22 August 2012, p. 9680, viewed 23 August 2012, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;db=CHAMBER;id=chamber%2Fhansardr%2F34fd7cc2-1683-44b7-ae67-c8a75a3cbdca%2F0244;query=Id%3A%22chamber%2Fhansardr%2F34fd7cc2-1683-44b7-ae67-c8a75a3cbdca%2F0246%22;
D Tehan, ‘Second reading speech: Customs Amendment (Smuggled Tobacco) Bill 2012’, House of Representatives, Debates, 22 August 2012, p. 9687, viewed 23 August 2012, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2F34fd7cc2-1683-44b7-ae67-c8a75a3cbdca%2F0246%22
[57]. M Keenan, ‘Second reading speech: Customs Amendment (Smuggled Tobacco) Bill 2012’, op. cit., p. 9682.
[60]. Customs, Submission to the Senate Standing Committee on Legal and Constitutional Affairs, Inquiry into the Customs Amendment (Smuggled Tobacco) Bill 2012, op. cit., p. 1.
[64]. Australian National Preventative Health Agency (ANPHA), Submission to the Senate Standing Committee on Legal and Constitutional Affairs, Inquiry into the Customs Amendment (Smuggled Tobacco) Bill 2012, July 2012, viewed 9 August 2012, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=legcon_ctte/smuggled_tobacco/submissions.htm; Action on Smoking and Health Australia, Submission to the Senate Standing Committee on Legal and Constitutional Affairs, Inquiry into the Customs Amendment (Smuggled Tobacco) Bill 2012, op. cit.; Quit Victoria, Submission to the Senate Standing Committee on Legal and Constitutional Affairs, Inquiry into the Customs Amendment (Smuggled Tobacco) Bill 2012, op. cit.
[65]. Explanatory Memorandum, op. cit., p. 2.
[66]. For discussion on this point see M Thomas, op. cit., pp. 17–19. The risks associated with smoking counterfeit as opposed to ‘genuine’ tobacco products are also likely to have been exaggerated by the tobacco industry. Cigarettes have been described by prominent health researcher, Simon Chapman as ‘chemical cocktails—highly processed concoctions designed by tobacco industry chemists who add both natural and synthetic chemicals for a variety of reasons’: S Chapman, ‘Keep a low profile: pesticide residue, additives, and freon use in Australian tobacco manufacturing’, Tobacco Control, vol. 12, 2003, p. 51, viewed 10 October 2012, http://tobaccocontrol.bmj.com/content/12/suppl_3/iii45.full. In addition to intentional additives which are more or less harmful to the smokers, cigarettes may also contain contaminants such as pesticide residue. While additives might help to make tobacco products more pleasant for smokers (and are thus problematic from a public health perspective), they are not the main source of the carcinogenic compounds that pose major health risks for smokers. As public health researcher, Bill King notes, many of the ‘nasty things’ in cigarette smoke ‘are unavoidable by‑products of tobacco combustion’. B King, ‘Plain packaging and the ‘counterfeit’ scare mongering’, Crikey, 26 July 2011. And, as a result, ‘counterfeit cigarettes are unlikely to be more harmful than ‘genuine’ ones due to any additives’. Ibid. King goes on to state that ‘cigarettes vary in terms of the particular cocktail of carcinogens and other toxins smokers receive but it appears to be largely a zero-sum game, where cigarettes high in one carcinogen are low in others. Heavy metals may be an exception to this rule of thumb but they probably account for a small proportion of the overall harmfulness of cigarettes and it is implausible that counterfeit cigarettes would have massively higher loads of heavy metals than do ‘genuine’ cigarettes’. Ibid. Further, some of the contaminants found in counterfeit cigarettes are also likely to be found in genuine cigarettes.
[67]. Australian Government, Australia: the healthiest country by 2020, Preventative Health Taskforce, June 2009, p. 182, viewed 9 August 2012, http://www.preventativehealth.org.au/internet/preventativehealth/publishing.nsf/Content/CCD7323311E358BECA2575FD000859E1/$File/nphs-roadmap.pdf;
World Health Organisation Framework Convention on Tobacco Control, Conference on the Parties to the WHO Framework Convention on Tobacco Control, Draft protocol to eliminate illicit trade in tobacco products, 14 May 2010, p. 16, viewed 30 July 2012, http://apps.who.int/gb/fctc/PDF/cop4/FCTC_COP4_5-en.pdf
[68]. Certainly, Australia has been relatively successful to date in preventing the emergence of a widespread illicit trade in tobacco.
[69]. N Roxon, ‘Second reading speech: Customs Amendment (Smuggled Tobacco) Bill 2012’, op. cit., p. 8147.
[72]. Customs, Submission to the Senate Standing Committee on Legal and Constitutional Affairs, Inquiry into the Customs Amendment (Smuggled Tobacco) Bill 2012, op. cit., p. 2.
[73]. M Keenan, ‘Second reading speech: Customs Amendment (Smuggled Tobacco) Bill 2012’, op. cit., p. 9682.
[75]. N Roxon, ‘Second reading speech: Customs Amendment (Smuggled Tobacco) Bill 2012’, 27 June 2012, op. cit., p. 8147.
[78]. The burden of proof is on the prosecution to prove beyond reasonable doubt that the defendant not only obtained a financial advantage by a deception, but acted dishonestly in doing so.
[79]. Section 210(1)(b) of the Customs Act.
[80]. Subsection 4(1) of the Customs Act.
[81]. The application of strict liability offences removes the requirement for the prosecution to establish either negligence or fault: PH Butt and D Hamer, eds, LexisNexis Concise Australian Legal Dictionary, 4th ed., LexisNexis Butterworths, Chatswood, 2011, p. 589.
[82]. The Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers (the Guide) states that ‘strict and absolute liability should only be used in limited circumstances and where there is adequate justification for doing so’: Attorney-General’s Department (AGD), A guide to framing Commonwealth offences, infringement notices and enforcement powers, September 2011 edn, AGD, p. 22, viewed 20 June 2012, http://www.ag.gov.au/Documents/FINAL+-+A+Guide+to++Framing+Commonwealth+OffencesPDF+version.pdf
[83]. Proposed section 233BABAC(b) of the Bill. Section 4AA of the Crimes Act 1914 stipulates that a penalty unit is $110.
[84]. Explanatory Memoranda, op. cit., p. 6.
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