Bills Digest No. 5, 2019–20
PDF version [504KB]
Claire Petrie
Law and Bills Digest Section
16 July 2019
Contents
History of the Bill
Purpose of the Bill
Background
Committee consideration
Policy position of non-government
parties/independents
Position of major interest groups
Financial implications
Statement of Compatibility with Human
Rights
Key issues and provisions
Date introduced: 4 July 2019
House: House of Representatives
Portfolio: Home Affairs
Commencement: The day after 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 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 July 2019.
History of the Bill
The Customs Amendment (Immediate Destruction of Illicit
Tobacco) Bill 2019 (the original Bill) was introduced into the House of
Representatives on 14 February 2019. The Bill was not debated, and
lapsed at the dissolution of the 45th Parliament on 11 April 2019.[1]
The present Bill was introduced into the House of
Representatives on 4 July 2019. It has the same name and is in
near-identical terms to the original Bill, with the only difference being the
commencement date. While the original Bill was to commence on
1 July 2019, alongside other changes to the regulation of tobacco
imports, the present Bill will commence on the day after it receives Royal
Assent.[2]
A Bills
Digest was prepared in respect of the original Bill.[3]
Much of the material in the present Digest has been sourced from that earlier
one.
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.
Since 1 July 2019, tobacco products have been
classified as prohibited imports, and require a permit to enter Australia.[4]
The Bill aims to streamline the processes for dealing with tobacco products
which have been imported in contravention of these new requirements.
Background
The 2018–19 Budget announced a ‘Black Economy Package’ for
the combatting of illicit tobacco.[5]
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.[6]
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.[7]
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.[8]
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[9]
- 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[10]
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.[11]
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.[12]
The Government has reported that between
1 July 2018 and 31 May 2019, the Illicit Tobacco Taskforce
seized over 140 million sticks and 60 tonnes of loose leaf tobacco, which it
calculates as representing over $180 million in evaded revenue.[13]
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.[14]
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.[15]
It is this measure to which the current Bill relates,
albeit indirectly. The reclassification of tobacco products as ‘prohibited
imports’ was implemented via regulatory amendments, and did not require
legislation to pass Parliament. The Customs
(Prohibited Imports) Amendment (Collecting Tobacco Duties) Regulations 2019
(Collecting Tobacco Duties Regulations), which commenced on
1 July 2019, provide 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.[16]
The Explanatory Statement to the Collecting Tobacco Duties
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’.[17]
The Bill is aimed at streamlining the process following
the seizure of tobacco in such circumstances. As noted by Assistant Minister
for Customs, Community Safety and Multicultural Affairs, Jason Wood, 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, impacts upon the border operations of the
Australian Border Force and limits the ability of the government to regulate
and manage illicit tobacco effectively.[18]
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’.[19]
Committee consideration
Legal and Constitutional Affairs
Committee
The Bill has been referred to the Senate Standing
Committee on Legal and Constitutional Affairs for inquiry and report by 19 July 2019.
Details of the inquiry are available at the Committee
homepage.
Senate Standing Committee for
the Scrutiny of Bills
The Scrutiny of Bills Committee has not reported on the
Bill at the time of writing. The Committee had no comment in relation to the
original Bill.[20]
Policy position of
non-government parties/independents
At the time of writing there has been no public comment on
either the Bill or original Bill by non-government parties or independents.
Position of major interest
groups
At the time of writing, the Senate Legal and
Constitutional Affairs Committee had published four submissions on the Bill,
one of which was from the Australian Border Force.
The Legal Services Commission of South Australia did not
state a position on the Bill, but noted that where illegal tobacco is seized
and charges are laid, a sample of the tobacco must be preserved before
destruction in the event the defendant seeks to allege the product is not
tobacco, and must be made available to the defendant for testing.[21]
Philip Morris Limited expressed support for the Bill, but
requested the ability to ‘inspect and collect codes from [Philip Morris
International] products before destruction’, in order ‘to ensure effective
supply chain controls are in place and determining points where goods might be
diverted from normal sales channels’.[22]
The Queensland Law Society expressed support for measures
aimed at eliminating illicit tobacco and associated criminal activity, but suggested
that the Bill may have unintended impacts. It noted that other prohibited
imports under the Customs Act must be stored for a minimum of 30 days
before they can be disposed of, and raised concerns about the potential for
goods to be ‘destroyed prematurely’.[23]
Financial
implications
The Explanatory Memorandum states that the amendments will
have no financial impact.[24]
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.[25]
Parliamentary Joint Committee on
Human Rights
The Parliamentary Joint Committee on Human Rights has not
reported on the current Bill at the time of writing. However, the Committee
found that the original Bill did not raise human rights concerns.[26]
Key issues and provisions
Existing
forfeiture provisions
The Customs Act provides for the forfeiture of a
range of goods upon importation into Australia.[27]
This includes all smuggled or unlawfully imported goods and all prohibited
imports.[28]
The Customs (Prohibited Imports) Regulations 1956 prescribe goods as prohibited
imports for the purposes of the Act.[29]
Since 1 July 2019, tobacco products imported without permission are
prohibited imports for the purposes of the Act.[30]
Prohibited imports fall within the definition of ‘special forfeited goods’, and
can be seized with or without a warrant in certain circumstances.[31]
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,[32]
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.[33]
The owner or person in possession may make a claim for the return of seized
goods.[34]
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.[35]
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. The term ‘tobacco products’ is defined in the Customs Act to
capture cigarettes, cigars, cheroots, cigarillos, loose tobacco (manufactured
and unmanufactured), tobacco extracts and essences.[36]
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.[37]
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.[38]
Item 1 is a consequential amendment which inserts
the term ‘tobacco products’ in the heading for subsection 206(2A).
[1]. Parliament
of Australia, ‘Customs
Amendment (Immediate Destruction of Illicit Tobacco) Bill 2019 homepage’,
Australian Parliament website.
[2]. Clause
2 of the Bill.
[3]. C
Petrie, Customs
Amendment (Immediate Destruction of Illicit Tobacco) Bill 2019, Bills
digest, 69, 2018–19, Parliamentary Library, Canberra, 27 March 2019.
[4]. J
Wood (Assistant Minister for Customs, Community Safety and Multicultural
Affairs) and M Sukkar (Minister for Housing and Assistant Treasurer), New
laws to combat illicit tobacco imports, joint media release, 1 July
2019.
[5]. Australian
Government, Budget
measures: budget paper no. 2: 2018–19, pp. 12–13.
[6]. Black
Economy Taskforce, Final report,
The Treasury, Canberra, October 2017, pp. 303–11; P Hawkins, ‘Tobacco’,
Budget review 2018–19, Research paper series, 2017–18, Parliamentary
Library, Canberra, 23 May 2018, pp. 49–50.
[7]. 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.
[8]. Black
Economy Taskforce, Final report, op. cit., pp. 307–8.
[9]. 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.
[10]. 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, joint 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.
[11]. Budget
measures: budget paper no. 2: 2018–19, op. cit., p. 13.
[12]. 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, joint media release, 28 March 2018.
[13]. Wood
and Sukkar, New laws to combat illicit tobacco imports, op. cit.
[14]. Budget
measures: budget paper no. 2: 2018–19, op. cit., p. 13.
[15]. Ibid.
[16]. 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. Pursuant to
this, the Minister has made the Customs (Prohibited
Imports) (Importation of Tobacco Products) Approval 2019, approving the
importation of certain tobacco products without a permit, including:
•
those on which duty is payable, and which have been imported by
(or as part of the unaccompanied personal or household effects of) a passenger
on, or crew member of, a ship or aircraft arriving in Australia (if the
passenger or member is at least 18 years old)
•
products with a final destination outside of Australia and
•
products imported for sale by military commissaries to persons
the subject of a Status of Forces Agreement between the Government of Australia
and the government of another country or other countries.
[17]. Explanatory
Statement, Customs (Prohibited Imports) Amendment (Collecting Tobacco
Duties) Regulations 2019, p. 2.
[18]. J
Wood, ‘Second
reading speech: Customs Amendment (Immediate Destruction of Illicit Tobacco)
Bill 2019’, (proof), House of Representatives, Debates, 4 July 2019,
p. 54.
[19]. Explanatory
Memorandum, Customs Amendment (Immediate Destruction of Illicit Tobacco)
Bill 2019, p. 2.
[20]. Senate
Standing Committee for the Scrutiny of Bills, Scrutiny
digest, 2, 2019, The Senate, Canberra, 28 March 2019, p. 75.
[21]. Legal
Services Commission of South Australia, Submission
to Senate Standing Committee on Legal and Constitutional Affairs, Inquiry
into Customs Amendment (Immediate Destruction of Illicit Tobacco) Bill 2019
[Provisions], 11 July 2019, p. 1.
[22]. Philip
Morris Limited, Submission
to Senate Standing Committee on Legal and Constitutional Affairs, Inquiry
into Customs Amendment (Immediate Destruction of Illicit Tobacco) Bill 2019
[Provisions], 11 July 2019, p. 2.
[23]. Queensland
Law Society, Submission
to Senate Standing Committee on Legal and Constitutional Affairs, Inquiry
into Customs Amendment (Immediate Destruction of Illicit Tobacco) Bill 2019
[Provisions], 11 July 2019, p. 2.
[24]. Explanatory
Memorandum, Customs Amendment (Immediate Destruction of Illicit Tobacco)
Bill 2019, op. cit., p. 3.
[25]. The
Statement of Compatibility with Human Rights can be found at pages 4–6 of the Explanatory
Memorandum to the Bill.
[26]. Parliamentary
Joint Committee on Human Rights, Human
rights scrutiny report, 2, 2019, Canberra, 2 April 2019, p. 169.
[27]. Customs Act 1901,
section 229.
[28]. Customs
Act, paragraphs 229(1)(a), (b).
[29]. 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’.
[30]. Customs
(Prohibited Imports) Amendment (Collecting Tobacco Duties) Regulations 2019,
Schedule 1.
[31]. Customs
Act, subsection 183UA(1) (definition of special forfeited goods),
sections 203, 203B, 203CA, 203CB.
[32]. Customs
Act, section 204.
[33]. Customs
Act, sections 205, 205A.
[34]. Customs
Act, section 205B.
[35]. Customs
Act, section 205C.
[36]. Customs
Act, subsection 233BABAD(7). Also see Hawkins and Barker, Customs
Amendment (Collecting Tobacco Duties at the Border) Bill 2018, op.
cit., pp. 6–7. However, note that the prohibited import controls for tobacco
products do 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).
[37]. 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.
[38]. 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.
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