Introductory Info
Date of introduction: 2024-06-26
House introduced in: House of Representatives
Portfolio: Home Affairs
Commencement: As set out in the body of this Bills Digest.
Purpose of the Bills
This Bills Digest relates to two Bills:
The purpose of the Modernising Licensing Bill is to amend the Customs Act 1901 to implement measures that aim to modernise and streamline the customs licensing processes.[1]
The purpose of the Licensing Charges Bill is to amend the Customs Licensing Charges Act 1997 to align the calculation of customs depot licence charges with that of customs warehouse licence charges.[2]
Background
Overview of Australia’s customs licensing regimes
The Australian Government monitors and regulates goods entering into Australia to manage risks inherent in international trade. These risks include trafficking of illicit goods, potential biological threats such as invasive species and diseases, and cyber security risks associated with flows of data.[3]
A key regulatory approach the Government employs to manage cross-border trade is to issue licences to individuals and businesses that deal with imported goods. The licensing requirements are typically designed to ensure that all parties involved are qualified and capable of fulfilling their responsibilities effectively.[4] Furthermore, the licensing framework provides a mechanism for sanctions and compliance actions against licensees found to be in breach of their conditions and obligations.[5]
Businesses involved in cross-border trade may need to hold the following licences:
- Customs warehouse licence: Goods such as fuel, alcohol and tobacco are required to be stored in licensed warehouses that meet certain safety standards. This licence is issued to operators of the warehouses.[6]
- Customs depot licence: This licence is issued to operators of facilities where imported goods are temporarily stored before they are processed through customs.[7]
- Customs broker licence: Individuals who want to be customs brokers must hold this licence.[8]
According to Home Affairs Minister, Clare O’Neil:
There are over 450 licensed depots, 500 licensed warehouses, 400 airports, seaports and cargo terminals, 2,100 licensed brokers and numerous freight forwarders and cargo reporters currently being regulated. [9]
The purpose of the licensing arrangements includes to ensure regulatory compliance, facilitate tax collection, enforce safety standards and combat illicit trade. Depending on the type of licences involved, a business may need to pay application and renewal fees.[10]
Regulatory burdens on businesses
While licences are a widely used tool by government agencies to regulate businesses involved in international trade, some businesses claim the licensing processes are ‘overly complex and burdensome’.[11]
The Government’s 2017 Review of Customs Licensing Regimes: Final Report (the Review Report) found that:
Historically, different [licensing] processes were developed by different agencies for those respective areas without significant reference to, or collaboration with, other agencies operating in this space.[12]
Consequently, several government agencies have responsibility for issuing and monitoring licences to customs brokers, depots and warehouses. These agencies include the Department of Home Affairs, Department of Agriculture, Fisheries and Forestry (DAFF), and the Australian Taxation Office (ATO). Each agency has its own licensing application and renewal processes.[13]
The Review Report argued that ‘there are significant time and cost savings to applicants, licensees and agencies from aligning licensing (or registration) processes between agencies’.[14] Consequently, the Review Report made recommendations for different agencies to work together to align their licensing processes.[15]
The Bills are informed by the Review Report and implement measures to align licensing requirements[16] and fee processes across licence types.[17]
Simplified Trade System reforms
The Bills form the next steps in the Australian Government’s Simplified Trade System (STS) reform agenda.[18] In the 2020–21 Federal Budget, the Morrison Government announced the STS reforms as part of its JobMaker Plan.[19]
The STS reforms aim to deliver a more effective and sustainable cross-border trade regulatory environment for the purpose of ensuring Australia remains a globally competitive trading nation.[20] According to a Consultation Paper released by the STS Implementation Taskforce in April 2024:
Australia must implement trade reforms to keep pace with its international competitors. As global trade volumes continue to grow, it is crucial we act now to ensure we have the appropriate regulations and systems in place to support Australian businesses to capitalise on the opportunities presented. [21]
The Consultation Paper foreshadowed the introduction of the Bills in Parliament in 2024:
The government will propose legislative amendments to the Customs Act 1901 and the Customs Licensing Charges Act 1997 to modernise and strengthen the customs licencing regime and digitise the claims process for the return of seized goods. It will also reduce administrative burdens via streamlined processes for compliance with certain obligations under customs legislation. Implementation is subject to parliamentary processes. [22]
Committee consideration
Senate Committee for the Selection of Bills
At its meeting on 4 July 2024, the Senate Selection of Bills Committee deferred consideration of the Bills until its next meeting.[23]
Senate Standing Committee for the Scrutiny of Bills
At the time of writing this Bills Digest, the Scrutiny of Bills Committee had not commented on the Bills.
Policy position of non-government parties/independents
As noted, the Bills form part of the Simplified Trade System reform agenda that was announced by the Morrison Government’s 2020–21 Budget.[24]
At the time of writing, the Coalition has yet to comment on the Bills.
The policy position of other non-government parties and independents could not be identified.
Position of major interest groups
Home Affairs Minister Clare O’Neil said the Government conducted consultation with key industry stakeholders in 2023 and 2024 to introduce the proposed amendments outlined in the Bills.[25] Some stakeholders have published their written submissions to the 2023 and 2024 STS Consultation Papers.[26]
Freight & Trade Alliance, an industry peak body for traders, customs brokers and freight forwarders, said ‘it sees merit in the proposed changes which largely aligns with member feedback and translated into formal submissions’.[27]
Financial implications
According to the Bills’ Explanatory Memorandum, the amendments in the Bills have a low financial impact.[28]
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 Bills’ 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 Bills are compatible.[29]
Parliamentary Joint Committee on Human Rights
The Parliamentary Joint Committee on Human Rights has considered the Bills and had no comment.[30]
Key provisions and issues
Modernising Licensing Bill
The Modernising Licensing Bill has one Schedule comprised of 14 Parts.
Commencement
Parts 1 to 13 of Schedule 1 of the Modernising Licensing Bill commence on the earlier of a day to be fixed by Proclamation or 6 months after Royal Assent.[31]
Part 14 commences on the later of:
This means Part 14 of the Modernising Licensing Bill will commence immediately after the commencement of Parts 1 to 13.
Part 1: Electronic lodgement of licensing applications
Part 1 amends various provisions in the Customs Act 1901 to facilitate electronic lodgement of depot licence and customs broker licence applications. As the name suggests, the Customs Act was first drafted in 1901, a time that predates the invention of modern communication methods. As such, the licensing application processes were typically paper based and businesses had to submit their applications to customs authorities by post or in person.[33] According to the Government’s Explanatory Memorandum to the Bills, the amendments proposed in Part 1 will enable a ‘digital transformation’ of licensing application processes.[34]
Item 1 inserts proposed subsection 77H(1A) into the Customs Act to allow depot licence applications to be made either by (paper) document or electronically. Item 4 inserts proposed subsection 77H(2A) to specify the requirements for making an electronic application for a depot licence. Proposed subsection 77H(2A) specifies that electronic applications must include information set out in an approved statement, accompanied by any required documents and the depot licence application charge.[35]
Item 21 repeals and replaces subsection 183CA(1) of the Customs Act so that a broker’s licence may be made by document or electronically.
Part 2: Notice of decisions
Part 2 modernises the requirements for serving notices of decisions made under the Customs Act. In the context of the customs licensing regime, ‘serving notices’ refers to the formal communication process through which customs authorities, specifically via Comptroller-General of Customs (also known as Australian Border Force Commissioner), deliver notifications to businesses and individuals who hold or apply for customs licences.[36]
These notices can relate to various administrative and regulatory actions, including:
- requests for additional information from licence holders or applicants
- imposition of addition obligations on licence holders
- notices of non-compliance
- notices of intended or actual cancellation of licences.
Various items in Part 2 of the Bill amend the Customs Act so that references to ‘serving’ notices become references to ‘giving’ notices.[37]
Item 42 repeals and replaces section 77ZA of the Customs Act to enable the giving of notices about depot licences by email or by other electronic means.[38] Importantly, proposed subsections 77ZA(1) and 77ZA(2) retain the existing method of giving notice by post.
Item 66 inserts proposed section 102AA into the Customs Act in equivalent terms in relation to the giving of notices about warehouse licences.
Item 103 inserts proposed section 183UAA in similar (but not equivalent) terms about the giving of notices and summons to customs brokers.
In other words, the amendments in Part 2 of the Bill modernise the methods by which notices under the Customs Act can be given to licence holders, allowing for electronic communication and improving the efficiency of the notification process.
Part 3: Streamlined notice publication requirements
Part 3 streamlines the publication requirements related to notices given by Comptroller‑General of Customs.[39] In particular, item 107 repeals and replaces subsection 77VC(4) of the Customs Act.
Currently, subsection 77VC(4) requires that if a customs depot licence is to be cancelled, the Comptroller-General must inform the owners of the goods in the depot of the cancellation by publishing a notice in ‘a newspaper circulating in the locality’.[40]
Proposed subsection 77VC(4) allows the Comptroller-General to publish such notice by any means considered appropriate, as long as the notice informs owners of goods of the cancellation and its date. This change eliminates the specific requirement to publish the notice in local newspapers, allowing for more adaptable notification methods.[41]
Similarly, item 108 repeals and replaces subsections 83(3) and (4) of the Customs Act to allow the Comptroller-General to determine the appropriate means of notifying the owners of goods in a warehouse that the customs warehouse licence has been cancelled; and that they must either pay duty on the goods or remove them from the warehouse.
Part 4: Streamlined disciplinary process for customs brokers
Part 4 streamlines the disciplinary and licence cancellation process for licensed customs brokers.[42]
Item 113 repeals subsection 183CQ(4) and inserts proposed subsections 183CQ(4) and 183CQ(4A). The amendment empowers the Comptroller-General of Customs to take compliance actions against non-compliant customs brokers in certain circumstances without needing to refer the matter to the National Customs Brokers Licensing Advisory Committee (NCBLAC).[43] The NCBLAC is a statutory body established under the Customs Act and its primary role is to provide advice and assessment to the Comptroller-General regarding the licensing and regulation of customs brokers.[44]
The new streamlined disciplinary process is only for cases where the facts are clear or ‘objectively established’, such as where:
- the customs broker’s company is in liquidation
- the customs broker has been convicted of a prescribed offence
- a licence charge has not been paid.[45]
According to the Explanatory Memorandum, the new streamlined process ‘removes a benign administrative layer to the decision making process’.[46] Furthermore, the new process implements and extends on recommendation 11 of the Review report.[47]
The new process aligns with item 111 and still provides non-compliant customs brokers with a fair opportunity to respond and present their case in writing.[48] Item 111 repeals subsection 183CG(8) of the Customs Act, which requires the Comptroller-General to notify a non-compliant customs broker if the Comptroller-General wishes to cancel the broker’s licence.
Part 5: Updates to eligibility criteria for customs broker nominees
Part 5 amends the eligibility criteria for customs broker nominees. A customs broker nominee is a natural person licensed to act as a customs broker but only as an employee of a business.[49]
Item 119 repeals paragraphs 183CD(d) and (e) of the Customs Act, which specify a person is eligible to be a customs broker nominee only if the person is:
- a director or an employee of the company if the customs broker is a company
- a member or an employee of the partnership if the customs broker is a partnership.[50]
It is arguable that directors or employees of these businesses are more likely to have the knowledge and skills to manage customs-related activities. As such, currently the law restricts customs broker nominees to be these individuals.
Item 119 removes these restrictions, which in effect allows a broader range of individuals to be nominated as customs brokers.[51] The Explanatory Memorandum does not specify the rationale for removing the restrictions. It is possible that the Government is relaxing the eligibility criteria because there is a customs broker shortage in the workforce. In a written submission to the Productivity Commission, the International Forwarders and Customs Brokers Association of Australia (a peak body for customs brokers) said the average age of the customs broker workforce is 55 and there are not enough young entrants into the industry.[52]
According to the Review report (p. 40):
…industry stressed that a key concern was that future licence classification had to be able to attract and retain new entrants to customs broking. Recruitment companies are finding it difficult to encourage people to enter the industry. These comments were made against a background of industry appearing to move away from utilising customs brokers for a wide range of tasks. Compilers are used in larger numbers to undertake the majority of work with a nominee customs broker ‘pushing the button’ on a customs entry.
Part 6: Amendments to the AusCheck Act
AusCheck is a background checking service administered by the Department of Home Affairs. Its primary function is to conduct background checks on individuals requiring security clearances for access to critical infrastructures.[53]
Section 4 of the AusCheck Act 2007 defines the term AusCheck scheme personal information as personal information that is obtained under the AusCheck scheme or that relates to the administration of the AusCheck scheme. Sections 13, 14 and 14A of the AusCheck Act authorise the collection, retention, use and disclosure of AusCheck scheme personal information under certain circumstances.
However, section 15 of the AusCheck Act creates criminal offences in circumstances where a person makes an unauthorised disclosure of personal information.
Item 121 inserts proposed paragraph 15(2)(e) into the AusCheck Act to allow for the disclosure of AusCheck scheme personal information to certain officials (for example, officers employed by the Department of Home Affairs, also known as Customs officers). According to the Explanatory Memorandum, the amendment ensures that the disclosure of personal information is controlled and limited to what is ‘appropriate and necessary for maintain the integrity of Australia’s customs operations’.[54]
Part 7: Updates to the fit and proper person test for licence holders
Part 7 extends and strengthens the current ‘fit and proper person test’ to ensure that licence holders have the integrity and competence to manage a depot or warehouse premise.[55]
When an individual or business applies for a customs depot licence, the customs authorities check if the applicant is fit and proper to hold such a licence. However, the current rules only apply the fit and proper test to those specific individuals (for example, company directors or business partners of a customs brokering business) directly connected to the applicant.
In other words, the current rules do not necessarily reflect the ‘commercial reality’ where companies often use sub-contractors, third-party entities and other service providers. These sub-contractors and third-party providers may be temporary employees of the licence applicant and are currently not subject to the fit and proper test.[56]
According to the Explanatory Memorandum:
[Transnational, serious and organised crime] groups are increasingly exploiting trusted insiders within the supply chain to facilitate cross border crimes. A ‘trusted insider’ is a person who uses their legitimate employment at the border, or in the supply chain, to facilitate illicit imports and exports.[57]
To address this risk, item 124 repeals paragraphs 77K(1)(a) to (g) of the Customs Act which currently set out the requirements for the grant of a depot licence. The existing paragraphs are replaced by proposed paragraphs 77K(1)(a) to (c) which introduce the notion of a person who participates in the management or control or, or in the operations carried out at, the depot. This brings more persons involved in the business within the scope of the fit and proper person assessment.[58]
Item 129 inserts proposed paragraphs 77V(1)(aa) to (ac) to align the fit and proper person test under section 77V (about the intended cancellation of a depot licence) with the assessment required when considering grant of such a licence under section 77K.
Item 135 amends paragraph 82(1)(c) of the Customs Act so that the wording of the conditions for a warehouse licence includes a reference to ‘a person who participates in the management or control of, or in the operations carried out at’ the warehouse.
Essentially then, the amendments help the Australian Border Force to mitigate the threat of ‘trusted insiders’ occupying positions that fall outside of the current scope of the fit and proper person assessment.[59]
Part 8: Strengthening integrity controls regarding licence applicants and holders
Part 8 strengthens the criteria for the granting and cancellation of depot and warehouse licences, while also reinforcing integrity controls. This includes extending the powers of Australian Border Force officers to issue directions to individuals operating within customs-licensed premises and addressing matters related to the conditions attached to these licences.[60]
Item 144 inserts proposed paragraph (j) into subsection 77K(1) of the Customs Act. The provision is a cross-reference to proposed subsection 77K(3A) which is inserted by item 145. This new subsection lists the specific matters that the Comptroller-General must consider when forming an opinion under new paragraph 77K(1)(j)—that it is inappropriate in all the circumstances to grant a depot licence. These matters include:
- the experience of the applicant and those involved in the management or control of the depot
- the applicant’s operating procedures and processes.[61]
The purpose of the new provisions is to address potential gaps in the current requirements by ensuring that licence applicants have the necessary experience to operate a customs depot responsibly. This helps prevent inexperienced applicants from exploiting the system to facilitate unlawful activities.[62]
Item 163 inserts proposed paragraph 82(1)(aa) into the Customs Act to impose an additional condition on warehouse licence holders. This condition mandates that if a person involved in the management or control of the warehouse ceases to participate, the licence holder must notify the Comptroller-General in writing.
This means that the warehouse licence holder must take proactive steps to remove access and control from individuals who are no longer involved in the management or control of the warehouse. This ensures that the Comptroller-General is promptly informed of significant changes in the management or control of the warehouse, allowing for timely assessments and responses to potential risks.[63]
Part 9: Renewal of licences
Part 9 aligns licence fee payment and renewal requirements and enhances suspension and cancellation provisions for non-payments.[64]
For example, currently, if a depot or warehouse licence holder fails to pay their licence charge by the end of a financial year, their licence could remain in force for an additional 90 days.[65] The amendments to section 77T which are inserted by item 177 reduce this period from 90 days to 30 days.
Item 172 also amends the note at the end of section 77S of the Customs Act to make clear that a depot licence may continue to be in force for a further period of 30 days after 30 June of the relevant financial year.[66]
Part 10: Cancellation and return of licences
Section 77VC of the Customs Act deals with the cancellation of depot licences. Currently, subsection 77VC(2) requires the Comptroller-General to cancel a depot licence if the licence holder requests cancellation in writing. Item 180 amends subsection 77VC(2) of the Customs Act by changing the word ‘must’ to ‘may’. The amendment grants the Comptroller‑General the discretion to cancel a depot licence upon request, rather than being obligated to do so.
The purpose of the amendment is to prevent non-compliant licence holders from circumventing scrutiny by voluntarily surrendering their licence to avoid investigation or penalties.[67]
Items 181 and 182 repeal existing subsections 77VC(5) (about depot licences) and subsections 87(7) and (8) (about warehouse licences). The amendments eliminate the requirement for licence holders to return physical depot and warehouse licences, respectively. Currently, licence holders are required to return the physical licences within 30 days of cancellation. The effect of the amendments is to remove the requirement to return physical licences, as more and more licences are now digitised.[68]
Part 11: Refund of charges
Part 11 deals with the refund of charges related to depot and warehouse licences by clarifying the conditions under which refunds are granted.[69]
For example, item 188 adds the words ‘on request’ to the end of the heading of section 77W of the Customs Act. The change clarifies that refunds are only applicable when the cancellation is initiated upon the written request of the licence holder. In all other instances, where cancellation occurs due to non-compliance, the refund provisions will not apply.[70]
The Explanatory Memorandum makes it clear that this amendment is ‘designed to ensure that licence fees are not refunded once a licence is cancelled, particularly where the licence holder has breached their licence conditions’. [71]
Part 12: Electronic lodgement of applications relating to the loading, unloading and use of aircraft's and ship's stores
Part 12 enables electronic lodgement of applications relating to the loading, unloading and use of aircraft's and ship's stores.[72]
Ships’ and aircrafts’ stores are defined by section 130C of the Customs Act and refer to goods and supplies carried on ships or aircraft for use on board. These goods include food supplies, spare machine parts and other items necessary for the operation of the vessel.
The process of bringing stores on board a vessel is called ‘loading’, and the process of removing stores from a vessel is known as ‘unloading’.[73] Customs authorities oversee the loading and unloading processes to ensure that all goods are accounted for and that no illegal goods are brought into Australia.[74]
Item 196 inserts proposed subsection 127(5A) into the Customs Act to provide that applications for approval to unship, unload or use ships' or aircrafts' stores may be made by (paper) document or electronically.[75] For example, under the proposed new law, a ship arriving at an Australian port could submit its application for approval to unload stores via digital forms.
Electronic applications tend to be processed more quickly than manual applications, allowing for faster clearance and reducing delays in port operations. The Explanatory Memorandum states:
Processes related to these applications are currently paper based and are submitted by post or personally handed to regional or port based customs officers. These manual processes are out of touch with the evolving trade environment and impose additional costs on businesses to trade, and for government to administer. The introduction of a digital process will significantly reduce the manual administrative workload of [Australian Border Force] ABF officers, provide efficiencies and cost reduction for industry.[76]
Part 13: Electronic lodgement of claims for the return of seized goods
Part 13 enables electronic lodgement of claims for the return of seized goods.[77] The Australian Government prohibits the import and export of certain goods to and from Australia. As such, the Australian Border Force is authorised to seize prohibited goods.[78]
However, goods may have been seized due to an error. A business may lodge a claim for the return of seized goods.
Items 206 inserts proposed subsection 205B(1C) into the Customs Act to allow for the electronic lodgement of claims for the return of seized goods.
Part 14: Contingent amendments
Part 14 makes amendments that are contingent on the commencement of the Excise and Customs Legislation Amendment (Streamlining Administration) Act 2024. These amendments are designed to update and align the warehouse licensing provisions of the Customs Act with changes introduced to the those provisions by the Excise and Customs Legislation Amendment (Streamlining Administration) Act 2024.[79]
Licensing Charges Bill
Commencement
The Licensing Charges Bill commences on the earlier of a day to be fixed by Proclamation or 6 months after Royal Assent.
Key provisions
The Licensing Charges Bill has one Schedule comprising two items. Item 1 repeals and replaces section 6 of the Customs Licensing Charges Act 1997.
Proposed paragraph 6(1)(a) specifies that for a depot licence that comes into force at the start of a financial year (1 July), the charge payable is set at $4,000. However, this amount can be adjusted by regulations, provided it does not exceed $6,000.
Proposed paragraph 6(1)(b) specifies the formula to calculate the pro-rata charge for a depot licence that does not start on 1 July. The purpose of the amendment is to streamline licence charge calculations and ensure the charge is fairly calculated based on the actual period the licence is in force.[80]
Proposed subsection 6(2) sets the default annual renewal charge for a depot licence at $4,000, with a maximum limit of $6,000 as prescribed by regulations.
Proposed subsection 6(3) provides for a reduced annual renewal charge of $1,500 (or up to $2,250 if prescribed) for depots that handled fewer than 300 transactions in the previous 12 months.
According to the Explanatory Memorandum to the Bills, currently subsections 6(2) and 6(3) of the Customs Licensing Charges Act 1997 do not adequately address licences granted between 1 April and 30 June, creating a gap in the renewal charge calculation.[81]
Concluding comments
The two Bills aim to support Australia’s position as a competitive trading nation by streamlining administrative processes for customs licences. The amendments cover various aspects, including digitisation of forms, streamlined eligibility criteria for customs broker nominees and a new formula to calculate licensing charges. The amendments are informed by the outcomes of Australian Government’s consultation with key stakeholders.[82]