Chapter 3 - Key issues
3.1
This chapter considers the main issues and
concerns raised by the Law Council in its submission. It also considers responses
provided by Customs in relation to these issues and concerns.
General concerns
3.2
The Law Council made a number of general preliminary
observations about the Bill.
Extent of changes to Customs
legislation and lack of consultation
3.3
The Law Council reiterated its concerns and
reservations, expressed previously to this committee in the context of other
amending legislation,[44] about the 'unrelenting
piecemeal changes'[45] being made to Customs
legislation. It argued that the Bill represents
'yet another amendment' to the Customs Act and is the seventh set of amendments
to the Customs Legislation Amendment and
Repeal (International Trade Modernisation) Act 2001 (Trade Modernisation Legislation).[46] The Law Council submitted that such frequent
piecemeal amendments and corrections do not aid easy comprehension of Customs
legislation by interested parties. In the Law Council's view, the Customs Act
requires extensive review to remedy areas of uncertainty.[47]
3.4
The Law Council also noted comments made by representatives
of Customs in the course of the committee's recent inquiry into the provisions
of the Customs Legislation Amendment (Border Compliance and Other Measures)
Bill 2006 (Border Compliance Bill). In particular, the Law Council pointed to
comments indicating that changes incorporated in the Border Compliance Bill
were of a minor and technical nature and subject to the availability of
resources within the Office of Parliamentary Counsel.[48] Against this background, the Law
Council expressed surprise that the current Bill
'should be introduced so quickly after the Border [Compliance] Bill'.[49]
3.5
In the Law Council's view:
... the Bill implements another,
entirely separate regime for the issue of infringement notices. This will
create huge additional confusion. The [Law Council] reiterates its view that
the parties subject to the [Customs] Act are being significantly disadvantaged
by the repeated and regular changes to the [Customs] Act. It seems grossly
unfair to the [Law Council] that the maxim "ignorance of law is no
excuse" should be applied to those subject to the [Customs] Act given
these regular changes.[50]
3.6
The Law Council was also critical of the lack of
consultation with respect to the Bill:
... the Bill has been introduced
with no obvious consultation. Customs regularly place significant reliance on
their consultation processes. However, the [Law Council] is unaware of any
consultation regarding the Bill.[51]
3.7
Further, the Law Council noted the apparent
absence of reasons for the expedited introduction of the Bill.
The Law Council again referred to advice given by representatives of Customs
during the committee's inquiry into the Border Compliance Bill. At that time, Customs
indicated that it was reviewing, and consulting upon, its duty recovery
provisions and payment under protest provisions; and, more generally, all offences
in the Customs Act in response to the Australian Law Reform Commission's review
into civil and administrative penalties.[52]
Significantly, in the Law Council's view, the matters which are included in the
current Bill were not included in the advice
given at the time of the Border Compliance Bill inquiry.[53]
3.8
While appreciating the necessity of the Bill's
proposed changes to the Singapore-Australia Free Trade Agreement (SAFTA), the
Law Council expressed the view that 'the apparently limited resources of
Customs and the Parliament could best be addressed to focus on other fundamental
amendments' to the Customs Act.[54] In
the Law Council's view, changes are required to address anomalies created by
the Customs duty recovery policy which allows Customs an indefinite period to
recover customs duty without a corresponding indefinite period for importers to
seek refunds of overpaid duty.[55]
3.9
Further, the Law Council suggested that changes should
be made to the Customs prosecution and averment provisions, as recommended by the
Australian Law Reform Commission (ALRC) in several reports dating back to 1992.[56] The Law Council noted that 'no such
reform has been discussed with industry and has not been sighted by interested
parties'. In its view, the prosecution provisions warrant urgent review.[57]
Customs response
3.10
Customs provided the following response to the
Law Council's assertion that the Bill contains
the seventh set of amendments to the Trade Modernisation Legislation:
Customs notes that the Bill does
not make any amendments to the trade modernisation legislation. Where the Bill
amends a provision in the Customs Act previously inserted by the trade
modernisation legislation, the amendment is not a correction of the previous
provision but additional to address new policy.[58]
Duty recovery
3.11
In
relation to duty recovery, Customs responded to the Law Council's argument that
current policy allows Customs an indefinite period to recover customs duty. Customs
pointed to the decision of the High Court in Malika Holdings Pty Ltd v Stretton, and advised that Customs' view
is that most duty recovery activity is authorised by section 153 of the Customs
Act. Section 153 is not limited to fraud and is not limited in time. The only
exception to the general rule is where duty is underpaid due to error by
Customs. In such cases, the CEO of Customs must demand the duty within four
years of the short-levy in order to be able to recover the duty.[59]
3.12
Customs
also advised that, although section 153 is not limited in time, the practice of
Customs is to go back no further than four years to recover duty. The Customs Regulations 1926 have
also been amended to increase the time period for importers to seek refunds of
overpaid duty from 12 months to four years.[60]
3.13
Customs
advised that it is currently progressing legislative amendments to clarify the
relevant provisions, using section 105-50 in Schedule 1 of the Tax
Administration Act 1953 as a model. An outline of the proposed amendments
has been provided to the Law Council, along with an invitation to provide a
submission to Customs on the proposed amendments.[61]
Customs prosecutions
3.14
In
relation to the amendment of provisions dealing with Customs prosecutions, Customs
responded to assertions by the Law Council that Customs is not addressing
reform in this area.
3.15
Customs
advised that it is in the process of developing a response to Customs-specific
recommendations of the ALRC's Report 95.[62]
Customs has developed criteria for classifying offences as civil or criminal
and an internal consultation phase has commenced to develop proposals for the
amendment of relevant provisions of the Customs Act. Customs has also commenced
research into the procedural aspects and other consequential amendments that
will be required to support the civil and criminal offence structure.[63]
3.16
Customs
informed the committee that, since there are a number of offences in the
Customs Act, the project is large and extremely complex and will require some
time to complete. Customs advised further that it intends to consult with
industry and interested parties once the consultation rounds within government
have been completed, and before any amendments are implemented.[64]
Schedule 1 – Import controls
3.17
Most of the substantive comments made by the Law
Council in its submission related to the new import control regime set out in
Schedule 1 of the Bill.
New Subdivision GB – surrender of
prescribed prohibited imports
3.18
The Law Council made several observations in
relation to Subdivision GB of Division 1 of Part XII of the Bill
which relates to the surrender of certain prohibited imports in section 234AA
places as an alternative to seizure of such imports.
Type of prohibited imports
3.19
The Law Council argued that clarification is
required of the type of prohibited imports to be prescribed by regulation as
being subject to the proposed surrender regime.
Customs response
3.20
Customs responded directly to the concerns
raised by the Law Council in relation to certain aspects of the Bill
and its proposed operation. At the outset of its response, Customs informed the
committee that it will be undertaking consultation with respect to the
operational impact of the proposed surrender and infringement notice scheme through
the Passenger Facilitation Taskforce.[65]
3.21
Customs advised that it is aiming to address the large number of low risk, high volume
prohibited items that are brought through Australian airports on a daily basis.
Such items include blow pipes, flick knives, nunchakus, electric fly swatters,
and electric shock devices.[66]
3.22
Customs
is of the view that the method of addressing prohibited items should be
commensurate with the level of threat posed to society. The aim of the proposed
surrender regime is to provide an alternative to the current process of seizing
all prohibited imports and is targeted towards 'one off, minor instances of the
importation of prohibited items'.[67]
3.23
Under
the current seizure regime, prohibited imports are seized and held by Customs
for thirty days to provide the importer with the opportunity to apply for their
return. Due to the low value of many of the goods, applications for their
return are rarely made and the goods are destroyed. Customs submitted that '(p)roviding
importers with the option to surrender prohibited items will streamline the
process and minimise the associated administrative burden'.[68]
3.24
Customs
advised that, as a part of the policy implementation, Customs will determine
which prohibited imports controlled under the PI Regulations it considers to be lower risk community and
consumer protection related items. These prohibited imports will then be
prescribed by regulation as subject to the new surrender regime and/or the
infringement notice scheme.[69]
New section 209N – surrender of
goods
3.25
As outlined in Chapter 2, new section 209N of
the Bill permits a person to surrender prescribed prohibited imports or
prohibited exports to an officer of Customs where the officer has reasonable
grounds to believe certain circumstances exist, as set out in subsection
209N(1).[70]
3.26
The Law Council submitted that it is unclear
exactly 'what policy objective is being served by conditioning the surrendering
of goods on an officer of Customs holding a certain belief'.[71] Further:
... it is not clear what will be the effect on the surrender of
goods if the officer in question either did not have the requisite belief or,
if he did, that belief was not based on reasonable grounds. It is the [Law Council's]
view that the surrendering of prohibited imports and prohibited exports should
be encouraged and this could [be compromised] by enabling any prohibited import
to be voluntarily surrendered to Customs and presumably without penalty.[72]
3.27
New subsection 209N(1) also contains a
requirement that an officer of Customs must inform a person importing goods of
the available options for dealing with the goods so that the person can make a
decision about whether or not to surrender them to Customs.[73] The Law Council expressed the view
that specific provision should be made in the Bill
for the length of time that a person may consider the available options and
whether the person can seek legal or other advice before making a decision.[74]
Customs response
3.28
In direct response to the Law Council's concern
that the proposed regime does not impose a limit on the amount of time a person
takes to make a decision regarding the surrender of goods, Customs pointed out
that the decision to surrender must be made before leaving the relevant
Customs-controlled area.
3.29
Further:
If an importer wished
to seek legal or other advice before making a decision in relation to the
goods, they would not be prevented from doing so. In this context it is
acknowledged that time is a limiting factor. However, as the importer is not
under arrest and the goods surrendered are low value, it is not envisaged that
legal advice would commonly be required or sought.[75]
New section 209P – effect of
surrender
3.30
The Law Council made a pertinent observation in
relation to new section 209P which deals with the effect of surrendering goods.[76] It pointed out that paragraph 209P(a)
indicates that no proceedings can be brought in circumstances where relevant
goods are surrendered. However:
... it may be that the person importing the goods may still
receive an infringement notice pursuant to the proposed new Section 243ZF.
Again, this will depend on the types of goods and offences prescribed for the
purposes of the new proposed Section 243ZF. It may be misleading for Section
209P(a) to state that no prosecution action can still be issued. Accordingly,
consideration should be given to amending Section 209P(a) so that it records
that even though a prosecution action cannot be taken, an infringement notice
can be issued.[77]
New section 209Q – right of
compensation in certain circumstances for goods disposed of or destroyed
3.31
New section 209Q provides a person who has
surrendered goods with the right to apply to a court of competent jurisdiction
for compensation in respect of the goods. The Law Council pointed out that:
As the costs of applying to a court for compensation would
likely exceed the amount of compensation, the [Law Council] considers that
there should be a less expensive initial avenue for compensation, such as
applying to an independent administrative body for compensation, about which,
if unsuccessful, application could then be made to a court.[78]
Customs response
3.32
Customs confirmed that '(t)here is no general
compensation in respect of goods that have been surrendered as they are
prohibited imports and an offence occurred at the time of their importation'.[79] Further, '(t)he right to apply for
compensation in respect of goods that have been surrendered only applies if it
is later proved that the goods were not prohibited imports in the first
instance'.[80]
New Subdivision GC – post-importation
permission
3.33
New Subdivision GC of Division 1 of Part XII
provides for post-importation permission for certain prohibited imports.
However, the Law Council submitted that there is no clarity as to the type of
goods which will be subject to that element of the proposed regime. The Law
Council pointed out that, since new section 209T indicates that Subdivision GC
will apply to goods as prescribed, some clarity needs to be provided as to the
application of Subdivision GC.[81]
3.34
The Law Council also noted that new Subdivision
GC to Division 1 of Part XII provides for the detention of certain prohibited
imports that are to be prescribed by regulations for the purposes of
Subdivision GC. It expressed concern that the type of prohibited imports to
which Subdivision GC will apply has not been identified apart from the fact
that they will consist of prohibited imports for which a permit, licence or
other approval to import them will be required. Further:
It is unclear to the [Law Council] why certain prohibited
imports requiring a permission or licence to be imported may be prescribed for
the purposes of this Subdivision and other prohibited imports requiring a
permission or licence to be imported are not also so prescribed and what policy
objective is served by prescribing some prohibited imports requiring permits or
licences to be imported and not prescribing other such prohibited imports for
the purposes of this Subdivision.[82]
New Subdivision B to Division 5 of
Part XIII – infringement notice scheme
3.35
The Law Council made several observations in
relation to the proposed infringement notice scheme for certain offences
relating to prohibited imports and section 234AA places.[83]
New regime for issue of
infringement notices
3.36
The Law Council expressed concern 'as to
confusion created by an entirely new regime for the issue of infringement
notices'.[84]
Customs response
3.37
Customs pointed out the proposed infringement
notice scheme in the Bill will only apply to the
aviation and postal environments and that it 'is unrelated to the regime
currently in place in the cargo environment and will operate differently to the
existing approach because of the scope and quantity of goods involved.[85]
New paragraph 243ZF(a) – type of
prohibited imports
3.38
New paragraph 243ZF(a) indicates that it will
apply to contraventions of paragraph 233(1)(b) if the offence relates to goods
that are prohibited imports of a kind prescribed by regulations made for the
purposes of section 243ZF. Again, the Law Council called for clarity from
Customs as to which goods will trigger liability by way of infringement notice.[86]
Customs response
3.39
Customs again indicated that, as a part of the
policy implementation, it will determine which prohibited imports controlled
under the PI Regulations it considers to be lower risk community and consumer
protection related items. Such prohibited imports will then be prescribed by
regulation as subject to the surrender regime and/or the infringement notice
scheme.[87]
New section 243ZG – legislative
instruments
3.40
New section 243ZG provides for the CEO of
Customs to make guidelines 'by legislative instrument' to make guidelines in
respect of the administration of Subdivision B to which he or she must have
regard when exercising powers under Subdivision B. The Law Council suggested
that, in practice, the guidelines will be considered by delegates of the CEO
who will be empowered to issue infringement notices.[88]
3.41
The Law Council also noted that, despite the
guidelines being described as a 'legislative instrument', the corresponding
provisions which currently apply in the Customs Act in relation to Division 5
of Part XIII (subsection 243XA(2)) state
specifically that 'the guidelines are a disallowable instrument' for the
purposes of section 46A of the Acts
Interpretation Act 1901. It argued that section 243ZG should be amended to
reflect that the guidelines for Subdivision B will constitute a disallowable
instrument.[89]
3.42
In relation to the adoption by Customs of the new
infringement notice scheme, the Law Council pointed to Chapter 12 of the ALRC's
Report 95[90] and, in particular,
Recommendations 12-1 to 12-10 which set out recommendations regarding any
infringement notice scheme.[91] The Law
Council suggested that clarification be sought from Customs that the
infringement notice scheme to be adopted for the offences in Subdivision B to
Division 5 of Part XIII will comply with each of the ALRC's recommendations.[92]
3.43
The Law Council also argued that the guidelines
associated with the new offences are extremely important:
The [Law Council] recommends that Customs be required to produce
the guidelines for consultation with interested parties before they are brought
into effect. For these purposes, the Bill should
reflect that the corresponding sections should not be implemented until the new
guidelines have been fully implemented.[93]
Customs response
3.44
With respect to the Law Council's argument
about the guidelines and disallowable instruments, Customs pointed out that the
guidelines, including the guidelines made under section 243XA, are legislative
instruments for the purposes of the Legislative
Instruments Act 2003 and could be subject to disallowance under that piece
of legislation. Since the commencement of the Legislative Instruments Act 2003 on 1 January 2005, all new legislation must specifically
refer to an instrument being a legislative instrument. Customs argued,
therefore, that it would 'be inappropriate to amend the section 243AG as
suggested'.[94]
Delegations to issue infringement
notices
3.45
The current guidelines associated with
infringement notices able to be issued by Customs for offences created by the Trade
Modernisation Legislation reflect that infringement notices may only be issued
by an authorised and trained delegate of the CEO of Customs. The Law Council
stated that it assumed that this process would continue for the new
infringement notice regime:
If so, then that may create difficulties as pursuant to the
proposed new paragraph 243ZH(2)(a), service of the infringement notice must
take place before a person leaves the Section 234AA place. Presumably, it will
be difficult for the relevant officer in such a place to make representations
to the appropriate delegate and for the delegate to properly consider the
entire scheme of the guidelines and issue an infringement notice before the
person leaves the Section 234AA place. Accordingly, [the Law Council] would
recommend that this provision be reviewed as to its practical application.[95]
Customs response
3.46
Customs told the committee that the process and
appropriate authorisation with regard to delegations is still being developed:
As the provision does not determine who the delegate is, the
decision regarding the appropriate delegation will take into account the
environment in which this scheme will operate and the operational
practicalities of the situation.[96]
Condemnation of goods
3.47
The Law Council also noted that there may be
some inconsistency between new paragraphs 243ZI(1)(f) and 243ZK(4) which state
that compliance with an infringement notice is not an admission of guilt and
liability, and new subsection 243ZK(5) which states that, if an infringement
notice is paid, the relevant goods are taken to be condemned as forfeited to
the Crown:
It is the view of the [Law Council] that such an action would be
consistent to an offence being deemed to have been committed by the person
subject to the infringement notice. The [Law Council] recommends that further
consideration be given as to whether the automatic condemnation should apply
following a party having complied with the terms of an infringement notice.[97]
Customs response
3.48
With respect to the condemnation of goods,
Customs informed the committee that the introduction of the infringement notice
scheme is intended to provide an alternative to prosecution for goods that do
not warrant further action. Further:
The person subject to
the infringement notice has committed the offence of importing a prohibited
item and as such the goods will not be returned. The issuing of an infringement
notice is an intermediate sanction for the offence. However, liability for the
offence is discharged upon payment of the notice.[98]
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