1.1
On 4 July 2019 the Senate referred, contingent upon introduction in the House of Representatives, the provisions of the Customs Amendment (Immediate Destruction of Illicit Tobacco) Bill 2019 (the bill) to the Legal and Constitutional Affairs Legislation Committee (the committee) for inquiry and report by 19 July 2019.
1.2
This followed a recommendation of the Selection of Bills Committee, which provided the following reasons for referral: '[t]o inquire into the contents of the Bill and allow stakeholders to inform the Committee of detailed concerns.'
Conduct of the inquiry
1.3
Details of the inquiry were advertised on the committee's webpage. The committee called for submissions to be received by 11 July 2019 and also wrote to a number of organisations inviting them to make a submission. The committee received six submissions, which are listed at Appendix 1. All submissions are available on the committee's webpage.
1.4
The committee did not conduct any public hearings for this inquiry.
Acknowledgements
1.5
The committee thanks all submitters for the evidence that they provided to this inquiry.
Purpose of the bill
1.6
The bill would empower the Comptroller-General of Customs (a position designated to the Commissioner of the Australian Border Force) to cause the immediate destruction of tobacco products that have been seized as prohibited imports. Currently, the Customs Act 1901 (the Act) requires such goods to be stored for at least 30 days before destruction.
1.7
On 4 July 2019 the Assistant Minister for Customs, Community Safety and Multicultural Affairs, the Hon Jason Wood MP, introduced the bill into the House of Representatives for the Minister for Home Affairs, the Hon Peter Dutton MP. Mr Wood explained the expected benefits of the bill:
The bill will ensure the [Australian Border Force] is able to respond in a dynamic and timely manner to destroy the ever-increasing volumes of tobacco and tobacco related seizures. These amendments will improve the handling of seized illicit tobacco, resulting in the effective regulation of tobacco permit conditions and enabling greater focus on targeting of illicit tobacco. This bill will improve financial outcomes for the government and enhance implementation of new tobacco measures.
Background and key provisions of the bill
1.8
Generally speaking, illicit tobacco includes tobacco on which excise or duty has not been paid, as well as tobacco that is not compliant with plain packaging laws.
1.9
In the 2018‑19 Budget the Commonwealth government announced a budget measure called the 'Black Economy Package — combatting illicit tobacco'. One component of this package was to introduce a prohibited import control for tobacco.
1.10
This component was given effect from 1 July 2019. As a result, tobacco products may not be imported into Australia without a valid import permit (though some exceptions apply). If tobacco products are imported without a valid permit then they may be seized without a warrant at the border.
1.11
Currently, the Act requires seized prohibited imports to be stored for at least 30 days before authorities may dispose of them. During this time, the owner of the seized goods may make a claim for the return of the goods.
1.12
The explanatory memorandum to the bill states that managing tobacco products under these arrangements poses administrative challenges:
Managing tobacco products as a prohibited import will result in a demonstrable increase of work at the border that may impact the Australian Government's ability to effectively regulate tobacco permit conditions and other border operations.
1.13
To address this, the bill would empower the Comptroller‑General of Customs to cause seized tobacco products to be dealt with in such manner as he or she considers appropriate, including the immediate destruction of the goods. These powers already exist in relation to prohibited psychoactive substances and prohibited serious drug alternatives.
1.14
If a person's goods are destroyed under the proposed powers, existing provisions may allow the person to recover from the Commonwealth the market value of the goods at the time they were destroyed. Certain requirements must be met for this to occur, including that the person establish, to the satisfaction of a court, that the circumstances required for the goods to be destroyed did not exist.
1.15
The statement of compatibility with human rights accompanying the bill concludes that the bill is compatible with applicable rights and freedoms. It states that the bill engages and enhances the right to the enjoyment of the highest attainable standard of physical and mental health, as it would help to combat illicit tobacco.
Previous version of the bill
1.16
Another bill, also called the Customs Amendment (Immediate Destruction of Illicit Tobacco) Bill 2019, was introduced into the House of Representatives on 14 February 2019 by the Minister for Home Affairs, the Hon Peter Dutton MP. That bill lapsed at prorogation of the 45th Parliament on 11 April 2019.
1.17
The bill introduced into the 45th Parliament was identical to the bill that is the subject of this inquiry, other than the commencement date. While the bill under inquiry would commence the day after Royal Assent, the previous would have commenced on 1 July 2019.
Consideration by other committees
1.18
The Scrutiny of Bills Committee did not comment on the bill introduced in the 45th Parliament. At the time the committee adopted this report, the Scrutiny of Bills Committee had not made any comment on the bill that is the subject of this inquiry.
1.19
The Parliamentary Joint Committee on Human Rights (the Human Rights Committee) stated that the bill introduced in the 45th Parliament did not raise human rights concerns. At the time the committee adopted this report, the Human Rights Committee had not made any comment on the bill that is the subject of this inquiry.
Key issues raised in submissions
1.20
The Australian Border Force (the ABF) highlighted some of the risks associated with illicit tobacco:
Illicit tobacco undermines public health measures to reduce the prevalence and uptake of smoking, bypassing important controls and standards relating to manufacturing, plain packaging and health labelling. Illicit tobacco can be manufactured in sub-standard processes, uses potentially poisonous ingredients, and inherently poses environmental and contamination risks.
1.21
The ABF submitted that the bill 'forms an important part of the Government’s response to the dangers posed by illicit tobacco'. It explained:
Immediate destruction would be a useful discretionary option to assist in management of seized tobacco products, particularly in cases where it is unlikely that the seizure would be challenged. This may include situations where tobacco is imported without a permit or in contravention of permit conditions.
1.22
The Queensland Law Society supported efforts to combat illicit tobacco but raised concerns about unintended consequences of the bill. It noted that as of 1 July 2019 most tobacco products are prohibited imports unless the importer has obtained an appropriate permit, and that certain transitional arrangements apply. It stated:
In circumstances where this Bill includes 'tobacco products' generally, i.e. is not confined to illicit tobacco products solely, we are concerned tobacco products which may have been imported legally prior to 1 July 2019 may be destroyed without due process.
1.23
The Queensland Law Society further noted that existing powers for the immediate destruction of goods relate to the importation of illicit substances (in particular, prohibited psychoactive substances or prohibited serious drug alternatives), which is 'a question of fact'. It contended that the bill would create uncertainty by extending these powers to 'the illegal importation of legal substances (tobacco products) which have been imported without a permit (a question of law)'. It expressed concern about:
…the potential implications where goods may be destroyed prematurely and where the obtaining of compensation is limited to the circumstances set out in section 206 of the Customs Act.
1.24
While acknowledging that the bill is intended to reduce the administrative burden of the Black Economy Package, the Queensland Law Society submitted that:
…control measures and related powers must be appropriately targeted and evidence based; particularly in light of the recent changes to permit and duty requirements impacting importers of tobacco products generally.
1.25
Three tobacco companies made submissions in support of the bill. One company, Philip Morris Limited, stated that '[f]ighting illicit trade is a top priority' for the company and that it makes 'reputational and business sense for us to ensure that our products are legally sold in the markets for which they are intended'.
1.26
The ABF advised that there is 'broad support within industry' for the bill. It stated the Department of Home Affairs, the Treasury, the Australian Taxation Office, and the ABF have 'conducted significant industry consultation to ensure the implications of new processes are understood'.
1.27
Some submitters commented on the handling of illicit tobacco products immediately before destruction. The Legal Services Commission of South Australia stated that a sample of the illicit tobacco should be obtained for possible use in legal proceedings:
In instances where illegal tobacco is seized and charges are laid, a properly obtained sample of the tobacco must be preserved before destruction in the event that the defendant seeks to allege that the product is not in fact tobacco. That sample must be made available to the defendant for appropriate forensic testing.
1.28
Philip Morris Limited requested the ability to inspect illicit tobacco so that it may better understand any issues in its supply chain:
In order to ensure effective supply chain controls are in place and determining points where goods might be diverted from normal sales channels, we respectfully request the ability to inspect and collect codes from [Philip Morris International] products before destruction.
Committee view
1.29
The committee supports the government's efforts to combat illicit tobacco. As identified by the Black Economy Taskforce in its October 2017 report, the wide availability of illicit tobacco has adverse public health effects and causes revenue loss.
1.30
The committee accepts advice from the ABF that managing illicit tobacco as a prohibited import will increase work at the border and may impact the government's ability to effectively regulate tobacco permit conditions and other border operations. The committee notes that the powers in the bill already apply to other substances, and considers the bill a reasonable way to combat the importation of illicit tobacco.
1.31
The committee acknowledges concerns that the bill may have unintended consequences, including the premature or wrongful destruction of tobacco products. However, the committee notes advice from the ABF that the proposed powers would be useful 'particularly in cases where it is unlikely that the seizure would be challenged'.
1.32
The committee is further reassured by submissions from tobacco companies expressing support for the bill, as well as evidence from the ABF stating that there is broad support for the bill within industry. Moreover, the committee notes that existing provisions in the Act may enable a person to seek compensation from the Commonwealth for goods that are destroyed.
1.33
The committee heard reasonable suggestions relating to handling of illicit tobacco prior to destruction. These include allowing evidence to be preserved for potential criminal trials and allowing the goods to be examined to better understand issues in supply chains. The committee sees benefit in allowing these processes to occur where appropriate and subject to the processes of authorities at the border. It also notes that the rationale for these processes applies regardless of whether the bill is passed, but is arguably more important if legislation permits illicit tobacco to be destroyed immediately.
1.34
The committee recommends that the government ensure that, where appropriate, there is an opportunity prior to the destruction of seized illicit tobacco for a relevant party to examine the seized goods or to obtain a sample of the seized goods for potential legal proceedings.
1.35
The committee recommends that the Senate pass the bill.
Senator Amanda Stoker
Chair