Bills Digest No. 69, 2018-19
PDF version [563KB]
Claire Petrie
Law and Bills Digest Section
27 March 2019
Contents
Purpose of the Bill
Background
Key issues and provisions
Committee consideration
Policy position of non-government
parties/independents
Position of major interest groups
Financial implications
Statement of Compatibility with Human
Rights
Date introduced: 14 February 2019
House: House of
Representatives
Portfolio: Home Affairs
Commencement: 1 July 2019
Links: The links to the Bill,
its Explanatory Memorandum and second reading speech can be found on the
Bill’s home page, or through the Australian
Parliament website.
When Bills have been passed and have received Royal Assent, they
become Acts, which can be found at the Federal
Register of Legislation website.
All hyperlinks in this Bills Digest are correct as at
March 2019.
Purpose of
the Bill
The purpose of the Customs Amendment (Immediate
Destruction of Illicit Tobacco) Bill 2019 (the Bill) is to amend the Customs Act 1901
to enable the Comptroller-General of Customs to destroy illicit tobacco
immediately upon seizing it.
The amendment is connected with the Government’s intention
to reclassify tobacco products as prohibited imports from 1 July 2019, so that
they require a permit to enter Australia. This will be done through regulatory
amendments and does not require legislation. However, the Bill will streamline
the processes for dealing with tobacco products which have been imported in
contravention of these new requirements.
Background
Black Economy
Package
The 2018–19 Budget announced a ‘Black Economy Package’ for
the combatting of illicit tobacco.[1]
This was aimed at targeting the three main sources of illicit tobacco in
Australia—smuggling, leakage from licensed warehouses, and domestic
production—and adopted a number of recommendations from the Black Economy
Taskforce’s final
report, which was publicly released with the Budget.[2]
The Taskforce’s report noted that estimates of the size of
the illicit tobacco trade in Australia vary:
According to the Department of Immigration and Border
Protection (DIBP) the size of the market is unknown, but could range from 3 to
14 per cent of total consumption. In 2015-16 terms this would suggest
expenditure of $0.5 billion to $2.3 billion. In a 2015 study that focused on
consumption, or demand, KPMG concluded that excise revenues foregone could be
$16 billion. Assuming an average excise rate, this would suggest expenditure in
the order $2.5 billion. Other estimates are higher, including those submitted
to the 2016 Joint Law Enforcement Committee Inquiry into Illicit Tobacco, which
estimated lost excise of about $4 billion, which could imply expenditure in the
order of $6 billion.[3]
The Taskforce identified a ‘clear regulatory failure by
all levels of government going back a number of years to enforce laws governing
illicit tobacco’, with responsibility spread across a range of agencies and
organisations, and existing laws and penalties ‘difficult-to-enforce’ and not
reflective of the seriousness of the crime.[4]
The ‘Black Economy Package—combatting illicit tobacco’ included
the following measures:
- imposition
of customs duty on imported tobacco products at the time they enter an
Australian port, removing the ability of importers to defer the payment of duty
by storing tobacco in licensed warehouses. This was implemented by the Customs
Amendment (Collecting Tobacco Duties at the Border) Act 2018, with corresponding
legislation also passed to impose taxation at the time of manufacture on any tobacco
manufactured domestically[5]
- creation
of a multi-agency Illicit Tobacco Taskforce to enable enhanced cooperation in
tackling illicit tobacco and disrupting illicit tobacco syndicates. The
Taskforce was established on 1 July 2018, replacing the Australian
Border Force’s Tobacco Strike Team[6]
and
- ongoing
funding for the Australian Tax Office to bolster its capabilities to detect and
destroy domestically grown illicit tobacco crops, as well as an ATO excise
systems upgrade.[7]
Other recently-enacted measures not included as part of
the package, but arising out of a 2016–17 Budget commitment to combat the
illicit tobacco trade, have included strengthening the offence and penalty
regime under the Customs Act and Excise Act 1901.[8]
Prohibited
import control for tobacco
The Black Economy Package also included the introduction
of a prohibited import control for tobacco from 1 July 2019, requiring permits
for all tobacco imports other than those imported by travellers within
duty-free limits.[9]
The Budget papers explained that the measure would:
...make it easier for the ABF to take enforcement action and
seize tobacco where no duty has been paid, increasing the deterrent against
illicit tobacco smuggling.[10]
It is this measure to which the current Bill relates,
albeit indirectly. The reclassification of tobacco products as ‘prohibited
imports’ will be achieved through amending Regulations under the Customs Act,
and does not require legislation. The Customs
(Prohibited Imports) Amendment (Collecting Tobacco Duties) Regulations 2019,
which commences on 1 July 2019, amends the Customs (Prohibited Imports)
Regulations 1956 to specify that the importation of tobacco products into
Australia is prohibited unless:
- written
permission is granted by the Minister or an authorised person, and the
permission is produced to the Collector or
- the
Minister makes a legislative instrument approving the importation.[11]
The Explanatory Statement to the amending regulations
states: ‘tobacco products imported without a valid permit would be a prohibited
import and able to be seized without a warrant at the border’.[12]
The Bill is aimed at streamlining the process following
the seizure of tobacco in such circumstances. As noted by Minister for Home
Affairs, Peter Dutton, in his second reading speech:
The Customs Act 1901 currently requires seized
prohibited imports to be stored for a minimum of 30 days before destruction.
This storage requirement, together with legislative and administrative
requirements for prohibited imports, will impact upon border operations and
limit the ability of the government to regulate and manage illicit tobacco effectively.[13]
The Bill addresses these potential inefficiencies in the
handling of seized tobacco products by giving the Comptroller-General of
Customs the power to deal with seized tobacco in any manner they see fit,
including immediately destroying the tobacco upon seizure. This change is
intended to ‘significantly enhance the ability of Australian Border Force
officials to effectively deal with imported illicit tobacco’ and ‘significantly
reduce the operational burden of implementing the illicit tobacco reforms’.[14]
Key issues
and provisions
Existing
forfeiture provisions
The Customs Act provides for the forfeiture of a
range of goods upon importation into Australia.[15]
This includes all smuggled or unlawfully imported goods and all prohibited
imports.[16]
As discussed above, the Customs (Prohibited Imports) Regulations 1956 prescribe
goods as prohibited imports for the purposes of the Act.[17]
From 1 July 2019, tobacco products imported without permission will be
prohibited imports for the purposes of the Act.[18]
Prohibited imports fall within the definition of ‘special forfeited goods’, and
can be seized with or without a warrant in certain circumstances.[19]
Subdivision G of Division 1 of Part XII of the Act sets
out a process for dealing with goods which have been seized as forfeited goods.
This requires that such goods be stored in an approved place,[20]
and that a seizure notice be served on the owner of the goods, or if the owner
cannot be identified, on the person in whose possession or under whose control
the goods were at the time of seizure.[21]
The owner or person in possession may make a claim for the return of seized
goods.[22]
If no claim is made within 30 days after the day the seizure notice is served,
the goods are taken to be condemned as forfeited to the Crown.[23]
Existing section 206 provides that certain goods may be
dealt with outside of this process. Relevantly, subsection 206(2A) states that
where:
- goods
are seized under the relevant provisions of the Customs Act and
- the
Comptroller-General of Customs is satisfied the goods are a prohibited
psychoactive substance or a prohibited serious drug alternative
then the Comptroller-General may cause the goods to be
dealt with in such a manner as he or she considers appropriate. This can
include the immediate destruction of the goods without adhering to the notice
and storage requirements which would otherwise apply.
Change made
by the Bill
The Bill has one substantive provision. Item 2 of
Schedule 1 amends subsection 206(2A) of the Customs Act to extend the
provision’s coverage to ‘tobacco products’. This will allow the
Comptroller-General of Customs to immediately destroy (or otherwise deal with)
tobacco products which have been seized as prohibited imports under the Customs
Act.
While the term ‘tobacco products’ is not currently defined
in the Customs Act, the Customs Amendment (Collecting Tobacco Duties
at the Border) Act 2018 will insert a definition into that Act from 1 July
2019.[24]
‘Tobacco products’ will capture cigarettes, cigars, cheroots, cigarillos, loose
tobacco (manufactured and unmanufactured), tobacco extracts and essences.[25]
Owners of tobacco products destroyed under subsection
206(2A) may have the right to recover the market value of the goods, if they
can establish that the circumstances required to trigger the destruction did
not exist.[26]
If the Comptroller-General deals with goods under subsection 206(2A), within
seven days of doing so they must give or publish a notice which identifies the
goods, provides details of the manner in which the goods have been dealt with
and the reasons for doing so, and sets out the owner’s right to seek recovery of
the market value.[27]
Item 1 is a consequential amendment which inserts
the term ‘tobacco products’ in the heading for subsection 206(2A).
Committee
consideration
Selection of
Bills Committee
On 14 February 2019, the Selection of Bills Committee
deferred consideration of the Bill to its next meeting.[28]
Senate
Standing Committee for the Scrutiny of Bills
The Scrutiny of Bills Committee has not commented on the
Bill at the time of writing.
Policy
position of non-government parties/independents
At the time of writing there has been no public comment on
the Bill by non-government parties or independents.
Position of major
interest groups
No major interest groups appear to have commented on the
Bill at the time of writing.
Financial
implications
The Explanatory Memorandum states that the amendments will
have no financial impact.[29]
Statement of Compatibility with Human Rights
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the
Bill’s compatibility with the human rights and freedoms recognised or declared
in the international instruments listed in section 3 of that Act. The
Government considers that the Bill is compatible.[30]
Parliamentary
Joint Committee on Human Rights
The Parliamentary Joint Committee on Human Rights has not
commented on the Bill at the time of writing.
[1]. Australian
Government, Budget
measures: budget paper no. 2: 2018–19, pp. 12–13.
[2]. Black
Economy Taskforce, Final report,
The Treasury, Canberra, October 2017, pp. 303–11; P Hawkins, ‘Tobacco’,
Budget review 2018–19, Research paper, 2018–19, Parliamentary Library,
Canberra, 23 May 2018, pp. 49–50.
[3]. Black
Economy Taskforce, Final report, op. cit., p. 30. For further information about
the illicit tobacco trade see: P Hawkins and C Barker, Customs
Amendment (Collecting Tobacco Duties at the Border) Bill 2018, Bills
digest, 35, 2018–19, Parliamentary Library, Canberra, 18 October 2018, pp. 4–5.
[4]. Black
Economy Taskforce, Final report, op. cit., pp. 307–8.
[5]. See:
Excise
Tariff Amendment (Collecting Tobacco Duties at Manufacture) Act 2018.
For further information about the two Acts and their background, see Hawkins
and Barker, Customs Amendment (Collecting Tobacco Duties at the Border) Bill
2018, op. cit. and J Ayoub, Treasury
Laws Amendment (Black Economy Taskforce Measures No. 2) Bill 2018 [and] Excise
Tariff Amendment (Collecting Tobacco Duties at Manufacture) Bill 2018,
Bills digest, 44, 2018–19, Parliamentary Library, Canberra, 14 November 2018.
[6]. P
Dutton (Minister for Home Affairs) and K O’Dwyer (Minister for Revenue and
Financial Services), Illicit
tobacco taskforce to target $600 million black market, media release, 3
July 2018; M Biddington, Customs
Amendment (Illicit Tobacco Offences) Bill 2018, Bills digest, 9,
2018–19, Parliamentary Library, Canberra, 13 August 2018, pp. 3–4.
[7]. Budget
measures: budget paper no. 2: 2018–19, op. cit., p. 13.
[8]. Customs
Amendment (Illicit Tobacco Offences) Act 2018; Treasury
Laws Amendment (Illicit Tobacco Offences) Act 2018. For further
information, see M Biddington, Customs Amendment (Illicit Tobacco Offences)
Bill 2018, op. cit.; A Taylor (Minister for Law Enforcement and Cyber Security)
and K O’Dwyer (Minister for Revenue and Financial Services), Tough
new measures on illicit tobacco, media release, 28 March 2018.
[9]. Budget
measures: budget paper no. 2: 2018–19, op. cit., p. 13.
[10]. Ibid.
[11]. Customs
(Prohibited Imports) Amendment (Collecting Tobacco Duties) Regulations 2019,
Schedule 1, clause 1, subsection 4DA(1). Subsection 4DA(9) provides that the
Minister’s legislative instrument may approve the importation of a specified
tobacco product (or class of products), importation by a specified person (or
class of persons), importation in a specified way or means, or importation of a
tobacco product which does not exceed a specified value or amount.
[12]. Explanatory
Statement, Customs (Prohibited Imports) Amendment (Collecting Tobacco
Duties) Regulations 2019, p. 2.
[13]. P
Dutton, ‘Second
reading speech: Customs Amendment (Immediate Destruction of Illicit Tobacco)
Bill 2019’, House of Representatives, Debates, 14 February 2019, p.
13389.
[14]. Explanatory
Memorandum, Customs Amendment (Immediate Destruction of Illicit Tobacco)
Bill 2019, op. cit., p. 2.
[15]. Customs Act 1901,
section 229.
[16]. Customs
Act, paragraphs 229(1)(a), (b).
[17]. Section
50 of the Customs Act provides that Regulations may be made prohibiting
the importation of particular goods into Australia, whether absolutely or in
specified circumstances. Section 51 states that such goods are ‘prohibited
imports’.
[18]. Customs
(Prohibited Imports) Amendment (Collecting Tobacco Duties) Regulations 2019,
Schedule 1.
[19]. Customs
Act, subsection 183UA(1) (definition of special forfeited goods),
sections 203, 203B, 203CA, 203CB.
[20]. Customs
Act, section 204.
[21]. Customs
Act, sections 205, 205A.
[22]. Customs
Act, section 205B.
[23]. Customs
Act, section 205C.
[24]. Customs Amendment
(Collecting Tobacco Duties at the Border) Act 2018, Schedule 1, clause
1: ‘tobacco products means goods classified to heading 2401,
2402 or 2403 of Schedule 3 to the Customs Tariff Act 1995 (except
goods classified to subheading 2402.90.00 or 2403.99.10 of that Schedule).’
[25]. Hawkins
and Barker, Customs
Amendment (Collecting Tobacco Duties at the Border) Bill 2018, op.
cit., pp. 6–7. However, the prohibited import controls for tobacco products
will not extend to cigars, which means these products can still be imported
without a permit: Customs
(Prohibited Imports) Amendment (Collecting Tobacco Duties) Regulations 2019,
Schedule 1, clause 1, paragraph 4DA(2)(c).
[26]. Customs
Act, subsections 206(6) and (7). A right to recover the market value of the
goods will only exist if the goods are not special forfeited goods within the
meaning of section 205D (that is, the goods must not fall within the definition
of special forfeited goods in subsection 183UA(1) or have been
forfeited under certain provisions of the Commerce (Trade
Descriptions) Act 1905) and if the goods were not used or otherwise
involved in the commission of an offence.
[27]. Customs
Act, subsections 206(3) and (5). Subsection 206(4) specifies that the
notice must be in writing and either served personally or by post on the owner
of the goods, or if the owner cannot be identified, on the person in whose
possession or under whose control the goods were at the time of seizure. Where
no such person can be identified, the notice must be published in a newspaper
circulating in the location in which the goods were seized.
[28]. Senate
Standing Committee for Selection of Bills, Report,
1, 2019, The Senate, Canberra, p. 5.
[29]. Explanatory
Memorandum, Customs Amendment (Immediate Destruction of Illicit Tobacco)
Bill 2019, p. 3.
[30]. The
Statement of Compatibility with Human Rights can be found at pages 4–6 of the Explanatory
Memorandum to the Bill.
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