2.1
The Customs Amendment (Controlled Trials) Bill 2021 (the bill) contains one schedule which amends two Acts - the Customs Act 1901 (the Customs Act), and the Australian Border Force Act 2015 (the ABF Act).
Schedule 1 – Amendments
Amendment to the Australian Border Force Act 2015 (the ABF Act)
2.2
Item 1 would amend subsection 54(1) of the ABF Act to allow the Comptroller‑General of Customs (Comptroller-General) to, by writing, delegate any of his or her powers under a law of the Commonwealth, excluding section 179 of the Customs Act. This amendment would ensure that the Comptroller-General’s powers (to make rules with respect to controlled trials) could not be delegated.
Amendments to the Customs Act 1901 (the Customs Act)
2.3
Item 2 proposes to insert two new definitions – controlled trial and controlled trial provision – into subsection 4(1) of the Customs Act.
2.4
Controlled trial is defined as a controlled trial established under new section 179D of the Customs Act.
2.5
Controlled trial provision is defined as the following:
(a)
Part IV (importation of goods), other than Division 1 of that Part;
(d)
Part VI (exportation of goods), other than Division 1 of that Part;
(e)
Part VIA (electronic communications);
(f)
Part XI (agents and customs brokers);
(g)
Part XVA (tariff concession orders);
(h)
regulations made for the purposes of a provision covered by paragraph (a), (b), (c), (d), (e), (f) or (g).
2.6
The effect of these amendments would be to limit the scope of controlled trials to specific Parts of the Customs Act and to regulations made for the purposes of these Parts, including the Customs Regulation 2015 (the Customs Regulation). It is intended that controlled trials would be used to explore improved regulatory administration of processes associated with imports, exports and licensing.
2.7
The Explanatory Memorandum cites the example of establishing a 12-month controlled trial (with approved participants) to investigate whether it would be more expedient that outturn reports for cargo be provided once a month, instead of within certain timeframes that the cargo is unloaded (as set out in section 64ABAB of the Customs Act).
2.8
Item 3 would repeal the definition of rules in subsection 4(1) of the Customs Act and substitutes a new definition, such that rules means:
(a)
in relation to Part XA, means rules made under section 179; and
(b)
in relation to Part XB, means rules made under section 179L.
2.9
Item 3 would also update the Customs Act to refer to rules made in relation to the Australian Trusted Trader Programme and rules made in relation to controlled trials.
2.10
Item 4 proposes a new Part XB (dealing with controlled trials) be inserted into the Customs Act. The new Part XB – which would establish the legislative regime for controlled trials – contains four Divisions.
Division 1 – Preliminary
2.11
Division 1 – which consists of new sections 179A and 179B – provides a simplified outline for proposed new Part XB of the Customs Act. It also provides a brief explanation of Part XB.
Section 179A – Simplified Outline of this Part
2.12
Section 179A explains that the Comptroller-General may establish controlled trials and that a controlled trial could operate for a period of up to 12 months (with a possible one-off extension of up to 12 months).
2.13
Under this section, entities may apply (or would be invited) to participate in a controlled trial. Entities participating in a controlled trial may:
(a)
be released from certain obligations under the Customs Act; or
(b)
be required to satisfy certain obligations of the Customs Act in a different way to what is otherwise required under the Customs Act; or
(c)
may be required to comply with additional obligations; or
(d)
may receive benefits of a certain kind.
Section 179B – Application of this Part
2.14
The effect of new Section 179B would be to allow that legal and natural persons and partnerships – as an entity – may participate in a controlled trial.
Division 2 – Obligations and benefits under controlled trials
2.15
Division 2 of new Part XB outlines obligations under controlled trials and consists of new sections 179C and 179D.
Section 179C – Obligations under controlled trials
2.16
New Section 179C specifies when an entity’s obligations to comply with the requirements of a controlled trial begin and end.
Entities released from obligations
2.17
New subsection 179C(1) provides that an entity would only be released from an obligation under the Customs Act when that entity holds an approval that is in force to participate in a controlled trial (where the obligation is one specified in the rules establishing a controlled trial as an obligation in relation to that trial that entities are released from).
2.18
According to the Explanatory Memorandum, the effect of this provision is to clearly specify when a participating entity is not required to comply with a requirement under the Customs Act that it may otherwise be required to comply with (a controlled trial provision). Note 1, under subsection 179C(1) refers to new section 179L, which contains the power to make rules to establish a controlled trial. Note 2, under subsection 179C(1) indicates that the definition of a ‘controlled trial provision’ is set out in subsection 4(1) of the Customs Act.
Entities must satisfy obligations in a different way
2.19
Subsections 179C(2) and 179C(3) identify when an entity participating in a controlled trial would be required to perform an obligation under the Customs Act in a different way. When an entity’s approval to participate in a controlled trial is in force, the entity would be released from the affected obligation under the Customs Act, and during that time, must instead comply with the requirements as set out in the controlled trial rule. The note under subsection 179C(3) indicates that a failure to satisfy an obligation set out in the rule for a controlled trial is a ground for varying, suspending or revoking an entity’s approval under new section 179J.
Entities must comply with additional obligations
2.20
New subsection 179C(4) would apply where an entirely new obligation is included in a controlled trial rule. In that circumstance, an entity with an approval to participate in a controlled trial that is in force would be required to comply with each obligation specified in the rules for that controlled trial. Note 1 under subsection 179(4) states that entities are only required to comply with an additional obligation if it relates to a controlled trial provision. Note 2 under subsection 179C(4) states that the failure to comply with a new obligation in a controlled trial is a ground for varying, suspending or revoking an entity’s approval to participate in a controlled trial under new subsection 179J.
Section 179D – Benefits under controlled trials
2.21
New section 179D provides that when an entity holds an approval to participate in a controlled trial, and that approval is in force, that entity may receive benefits as outlined in the rules for a controlled trial.
2.22
It is recognised that entities may incur financial costs in participating in a controlled trial. The Explanatory Memorandum states that the purpose of this section is to enable an entity to receive benefits during that entity’s participation in a controlled trial. New section 179D would permit administrative or other benefits to be set out in the rules for a controlled trial to support or incentivise an entity’s participation in a controlled trial.
2.23
The example provided in the Explanatory Memorandum notes that an entity may need to change its administrative systems to comply with an obligation in a different way. In order to facilitate this, the Comptroller-General may specify in the rule (for that controlled trial) that participating entities will receive additional administrative support from the Department (that the entity would otherwise not receive) to facilitate that administrative change.
Division 3 – Participation in controlled trials
2.24
New Division 3 consists of proposed sections 179E, 179F, 179G, 179H and 179J.
2.25
Under Division 3, the processes with respect to participation in a controlled trial are outlined. It is noted that once the Comptroller-General makes the rule outlining the scope of a controlled trial (and the associated requirements) entities would then consider whether they wish to participate in the trial. Entities would then have to be approved by the Comptroller-General to participate.
2.26
The Comptroller-General’s rule making powers for controlled trials require that the rules specify the period of operation of a controlled trial. The Explanatory Memorandum notes that there may be a time delay between when the controlled trial is established in a rule, and when the controlled trial is in operation. It is also noted that the time delay would allow for entities to be fully appraised on what the trial is, allow them time to apply, and to receive approval to participate. Under new section 179J, an approval would be in operation for the same time that the controlled trial is in operation (as specified in the controlled trial rule).
2.27
Under the new legislation, if an entity is unable to comply with an additional obligation (due to delays in implementing new processes) the Comptroller-General may suspend that entity’s approval until it has the administrative infrastructure in place to comply. While the approval is suspended, the entity would be required to comply with the Customs Act as usual, or would not be required to comply with an additional obligation.
Section 179E – Approval of participation in controlled trials
2.28
New section 179E outlines the process for entities to be approved to participate in a controlled trial.
2.29
Subsection 179E(1) provides that an entity may apply to participate in a controlled trial in accordance with section 179F or may elect to participate following a written invitation from the Comptroller-General.
2.30
In either case, it is noted that the Comptroller-General may approve an entity where he/she is satisfied that the entity meets:
the general qualification criteria to participate in controlled trials generally (as outlined in a legislative instrument under new section 179K); and
the eligibility criteria as outlined in the rules establishing a particular controlled trial.
2.31
Subsection 179E(2) provides that in deciding whether to approve an entity’s participation, the Comptroller-General must consider any matter specified in the rules for the controlled trial under proposed paragraph 179L(3)(b) and any other matter the Controller-General considers relevant.
2.32
Subsection 179E(3) requires that an entity’s approval to participate in a controlled trial must specify the period for which the approval is in force.
2.33
Subsection 179E(4) requires that the Comptroller-General give the entity a copy of the approval to participate in a controlled trial.
2.34
Subsection 179E(5) requires that the Comptroller-General give written notice and reasons when he/she refuses an entity’s application or election to participate in a controlled trial.
2.35
Subsection 179E(6) clarifies that an approval to participate in a controlled trial is not a legislative instrument.
2.36
The Explanatory Memorandum notes that under the Australian Trusted Trader Programme, entities receive enduring benefits. Controlled trials, however, are strictly time limited, and any requirements or benefits conferred are not enduring in nature. It is suggested, therefore, that it would be inappropriate to subject decisions made by the Comptroller-General to merits review – which typically can take many months (or over a year) to conduct.
Section 179F – Application to participate in a controlled trial
2.37
New section 179F proposes that an application to participate in a controlled trial may be made by document or electronically. Section 179F also specifies the requirements for each type of application.
Section 179G – Election to participate in a controlled trial
2.38
New section 179G proposes that an election to participate in a controlled trial may be made by document or electronically. Section 179G also specifies the requirements for each type of application.
Section 179H – Conditions of approvals
2.39
New section 179H provides that an entity’s approval to participate in a controlled trial would be subject to the conditions specified in the rules in relation to that trial.
Section 179J – Variation, suspension or revocation of approvals
2.40
New section 179J would establish the Comptroller-General’s power to vary, suspend or revoke an entity’s approval to participate in a controlled trial, and the requirements to exercise this power. It is noted that the exercise of these powers:
is subject to the matters and procedures established in the rules for a controlled trial; and
may be tailored to the circumstances of that trial.
2.41
The Explanatory Memorandum indicates that these powers are needed because controlled trials involve a deviation from the Customs Act. Further, it is noted that failure to comply with requirements in a controlled trial would not involve the penalties or sanctions that would usually apply (for failure to comply with the corresponding requirements under the Customs Act).
2.42
New subsection 179J(1) establishes the Comptroller-General’s power to vary, suspend or revoke an entity’s approval to participate in a controlled trial, by written notice, in certain circumstances. The circumstances are when the Comptroller-General reasonably believes that the entity:
(a)
no longer meets the qualification criteria (if any) determined in an instrument under section 179K;
(b)
no longer meets the eligibility criteria (if any), specified in the rules for a controlled trial (see paragraphs 179L(3)(a)-(b));
(c)
has not complied, or is not complying, with a condition specified in relation to the rules for a controlled trial (see paragraphs 179L(3)(c)); or
(d)
has not complied with an obligation that has been created or varied for a controlled trial (see subsections 179C(2), (3) and (4)).
2.43
According to the Explanatory Memorandum, these amendments would mean that the Comptroller-General would be required to provide the entity with written notice, provides a minimum of seven days before the notice takes effect. The Comptroller-General would also be required to consider any information (and follow any procedures) as specified in the rule(s) for the controlled trial. This means that the procedures and considerations can be tailored to the specific trial.
2.44
Subsection 179J(2) requires the Comptroller-General to consider any matter specified in the rule(s) in relation to decisions to vary, suspend or revoke an approval and any other matter the Comptroller-General considers relevant when exercising the power to suspend, revoke or vary an entity’s approval.
2.45
This provision recognises that different trials may have different circumstances and processes established in the rule(s) for a controlled trial. This would ensure that the Comptroller-General takes into consideration specific circumstances that are unique to the controlled trial.
2.46
The example cited in the Explanatory Memorandum is a circumstance where entities participating in a trial experience difficulties updating systems. In this case, the rule(s) for a controlled trial may identify specific considerations the Comptroller-General must take into account, such as:
consultation with the affected entity;
consideration of the entity’s history of compliance; or
other considerations specific to the trial.
2.47
Subsection 179J(3) would require that any variation, suspension or revocation of an approval must be made in accordance with the procedures specified in the rules in relation to that trial. The procedures for exercising these powers may be tailored to the specific circumstances of that controlled trial. The Explanatory Memorandum notes that as the rule for the controlled trial is made before the controlled trial comes into effect, entities will also have the opportunity to review these procedures before deciding whether to apply, or electing to participate.
2.48
Notwithstanding any requirements specified in the rules for a controlled trial, subsections 179J(4) and (5) outline the requirements to exercise the powers under subsection 179J(1) in all cases. It is noted that while the considerations and procedures may vary between each rule for the controlled trial, in all cases entities must be given at least seven days’ written notice before a variation, suspension or termination takes effect.
2.49
The purpose of the required notice period contained in subsection 179J(5) is to ensure entities are aware of when obligations under the controlled trial end, and the usual obligations (under the Customs Act) resume. The Explanatory Memorandum notes that unlike obligations under the Customs Act, an entity’s failure to comply with the requirements of a controlled trial does not attract penalty or sanction. Penalties will, however, apply for failing to comply with the Customs Act.
2.50
It is also noted that, for the same reason (as set out above) the decision of the Comptroller-General to vary, suspend or revoke an entity’s participation in a controlled trial is not subject to merits review. Similarly, it is not proposed to give an affected entity an opportunity to respond to the notice. It is argued that this could “undermine the effective and efficient operation of a controlled trial”.
Consequences of suspension
2.51
New subsections 179J(6) to (9) specify the consequences of suspending an entity’s approval to participate in a controlled trial. Collectively, these provisions set out the consequences for an entity’s approval – including when an entity is and is not required to comply with the Customs Act during the suspension process.
2.52
Subsection 179J(6) clarifies that while the approval will have no effect while suspended, the overall time period that the approval was granted for continues to run, despite the suspension.
2.53
The effect of subsection 179J(6) would be to ensure that an entity’s approval to participate in the controlled trial does not extend beyond the time a controlled trial is in operation. The Explanatory Memorandum notes that an approval may be granted for 12 months, and that if an approval is suspended for one month within that time period, it would mean that the approval is in operation for 11 months.
2.54
New subsections 179J(7) and (8) specify that the Comptroller-General may revoke a suspension by written notice to the entity, specifying the day the revocation takes effect. The Explanatory Memorandum notes that, unlike subsection 179J(5), it is proposed to leave the notice period flexible, to cater to the individual situation of the entity. The effect would be to facilitate situations where an entity is ready to immediately comply with the requirements of a controlled trial, or when an entity requires more time.
2.55
Subsection 179J(9) specifies that the Comptroller-General would be able to vary or revoke an approval under subsection 179J(1), while it is suspended.
Division 4 – Instruments
2.56
Division 4 of the bill sets out the power of the Comptroller-General to make legislative instruments with respect to controlled trials. The Comptroller-General would be empowered to make two kinds of legislative instruments:
new section 179K allows the Comptroller-General to make a legislative instrument that determines the qualification criteria that entities must meet to participate in any controlled trial; and
new section 179L empowers the Comptroller-General to make rules that outline the operation and administration of each specified control trial.
2.57
The Explanatory Memorandum indicates that the purpose of this regulatory framework would be to test different approaches to operating at the border before widespread implementation and substantive legislative change is pursued. This would allow controlled trials to be undertaken with a greater degree of certainty and be administered in a timely manner. The Comptroller‑General’s instrument-making powers under this Division cannot be delegated.
Section 179K – General qualification criteria for any controlled trial
2.58
New section 179K would allow the Comptroller-General of Customs to, by legislative instrument, determine qualification criteria that must be met by entities in order to participate in any controlled trial. It is noted that, unlike rules established under section 179L, a rule made under section 179K is not tied to a single, time-limited controlled trial – rather it applies to all trials generally.
2.59
It is noted that examples of qualification criteria could be that an entity is able to pay all of its debts as they become liable, the entity satisfactorily complies with Customs-related laws, or that corporate entities have a registered ABN. This provision would have the effect of ensuring a degree of consistency and transparency in the expectations common for all trials.
Section 179L – Rules specific to a controlled trial
2.60
New section 179L would establish the Comptroller-General’s power to establish a controlled trial through a rule, the scope of that power, and the requirements for establishing a rule.
2.61
Subsection 179L(1) sets out the Comptroller-General’s powers to make rules with respect to establishing a controlled trial, outlining the period of time in which that controlled trial is in operation, extending the period of operation, and revoking a controlled trial so it is no longer in operation.
2.62
Subsection 179L(2) establishes the requirements for exercising the powers in subsection 179L(1). The Explanatory Memorandum notes that rules that establish a controlled trial must specify the purpose of that controlled trial. This requirement would facilitate entities having the opportunity to be appraised on what the trial is about, and an opportunity to consider participation in that trial. In addition, it is noted that under the amendments, the period of operation of a controlled trial must not be more than 12 months.
2.63
Subsection 179L(3) outlines the scope of the proposed rule-making powers with respect to a particular controlled trial. This provision would have the effect of ensuring that the eligibility requirements, procedures and considerations with respect to allowing, varying, suspending or revoking an entity’s participation are tailored to each trial and are transparently established by legislative instrument.
2.64
New paragraphs 179L(3)(a) and (b) provide that a rule for a controlled trial may outline the eligibility criteria an entity must meet in order for the Comptroller-General to approve an entity’s participation in the trial and the matters that the Comptroller-General must consider in deciding whether to approve an entity’s participation.
2.65
Paragraph 179L(3)(c) provides that the rule for a controlled trial may set out the conditions that approvals to participate in a controlled trial are subject to.
2.66
Paragraph 179L(3)(d) sets out the rule making power with respect to the matters the Comptroller-General must consider when deciding to vary, revoke or suspend an approval.
2.67
Paragraph 179L(3)(e) sets out the rule making power with respect to the procedures the Comptroller-General must follow when considering whether to vary, suspend or revoke an approval.
2.68
Paragraphs 179L(3)(f), (g) and (h) establish the rule making power whereby obligations are created, or certain obligations under the Customs Act are waived or varied for the purposes of a controlled trial.
2.69
New Section 179L(3)(f) sets out the rule‑making power to specify each obligation under the Customs Act that an approved entity is released from, while the controlled trial and approval are in operation.
2.70
Section 179L(3)(g) sets out the rule-making power to specify the obligation that an entity cannot satisfy in the way required by the Customs Act, and the way in which approved entities must to satisfy that obligation while the controlled trial is in operation.
2.71
Paragraph 179L(3)(h) sets out the proposed rule-making power for a controlled trial to establish a new obligation, provided such an obligation is within the scope of a controlled trial provision.
2.72
Paragraph 179L(3)(i) specifies the rule-making power to establish benefits that an approved entity may receive while the controlled trial and approval are in operation. It is noted that such benefits may be used to incentivise or facilitate participation in a controlled trial. Examples of benefits could include priority processing, or extra administrative support from the Australian Border Force to facilitate participation in, and administration of, the controlled trial.
2.73
New paragraph 179L(3)(j) would allow for rules to be made with regard to matters that are incidental or ancillary to a matter covered by paragraphs 179L(3)(a) to (i).
2.74
Subsection 179L(4) would clarify the scope of the rule making power under section 179L. It is envisaged that any rules made under this section could not create an offence or civil penalty; impose powers of arrest, detention or entry, search and seizure; impose a tax, set an amount to be appropriated, or directly amend the text of the Customs Act.
2.75
According to the Explanatory Memorandum, this provision would put beyond doubt what a rule may or may not do. In doing so, it would confirm that a rule for a controlled trial could not impose a penalty or sanction on an entity that does not comply with the requirements of the trial. The most severe consequence for failure to comply would be having an approval to participate in the trial revoked.