Arch Bevis (Brisbane, Australian Labor Party, Shadow Minister for Aviation and Transport Security) Share this | Hansard source

The Customs Legislation Amendment (Border Compliance and Other Measures) Bill 2006 has already been dealt with in the Senate, and at the outset I want to commend the work of my colleague Senator Ludwig for his handling of this bill and the work that he has done on behalf of the Labor Party in relation to the matters contained in this bill.

This is an omnibus bill and contains a variety of measures. Some are minor housekeeping matters such as corrections to previous drafting errors; others include significant enhancements to security and Customs powers, and a belated attempt to get the trade modernisation ball rolling again. Labor support this bill, but we are concerned about a number of specific items, in particular the arrangements for the accredited client program.

It could be said that the bill is a great example of the tardy and haphazard approach this government has towards customs and trade related issues. Indeed, even before this bill had been before a chamber of the parliament the government had already introduced yet another bill seeking to amend some of the provisions it will insert into the Customs Act. Incredible as it seems, there is another bill to amend this bill even before it has been through the parliament.

It is worth noting that on this new bill the Law Council of Australia raised ‘its traditional concern as to the unrelenting piecemeal changes to the act’. What is most remarkable about Senator Ellison’s reign as Minister for Justice and Customs is the obvious and complete lack of planning. The senator should truly be seen as a great composer of a symphony of errors. Is it any wonder that the Australian trade community is slowly being strangled to death by the minister’s red-tape rollout? Not even the parliament is able to keep pace with it. Leaving aside the debate on the amendments to the amendments, I will now address each schedule of this bill.

The first schedule addresses a gap in the current law, whereby Customs can dispose of a certain perishable item seized under appropriate circumstances but, when it comes to explosive materials as well as certain hazardous chemicals and biological agents, Customs is powerless to dispose of them even when it lacks the capacity for safe storage. The bill sensibly remedies the situation by allowing the disposal, including destruction where necessary, of such goods where their retention would constitute a danger to public health or safety. That is a sensible measure and Labor supports it. We do not want our Customs officers or members of the travelling public unnecessarily exposed to such risks.

I turn to schedules 2 and 4 of the bill, together, as they both cover the government’s identification card regimes. Schedule 2 seeks to close gaps in our existing security regime. As it stands, five years after the September 11 attacks, the ability of Customs to control access to designated areas such as those used for examination of baggage or questioning of aircraft passengers is overly restricted. In particular, holders of either an aviation security identification card or a visitor identification card have had, in effect, unfettered access to these areas, even where access is not required for the fulfilment of the cardholder’s duties. For example, there is nothing to stop a shop attendant from accessing the areas outside their hours of employment. This schedule will enable Customs to issue a written direction to a holder of a security identification card of restricted access, either completely or in part, to such areas. I might add here that, although Labor supports this amendment, we are interested in the actual implementation of this change and will be keenly watching to make sure that it works as intended.

Schedule 4 also relates to those identification cards and aims to make it easier for Customs to keep its database up to date. Following commencement, card issuing authorities will be required to notify Customs if a card expires or has been revoked within seven days of it happening. Customs will also be able to request relevant information from the issuing authorities. Labor supports these important steps forward in tightening security at airports and at related facilities, but we do wonder if it could be more pre-emptive in cases where issuing authorities know that a particular card is due to expire by a certain date.

Schedule 3 aims to ensure that the act complies with the Australia-United States Free Trade Agreement. It mostly relates to the importation of specific goods or minor technical corrections. The change to the definition of ‘a person of the US’ is made to ensure that it is not confined to a natural person and that the distinction between US-originating and non-US-originating goods accurately reflects the agreement. Labor supports these amendments also as part of ensuring that Australia is fulfilling its obligation under international agreements and treaties.

I would like to highlight the compliance burden associated with bilateral agreements and the need for the government to heed Labor’s call to redouble its efforts on multilateral negotiations. Schedule 5 will activate the Accredited Client Program provisions that were first introduced as part of the international trade modernisation amendments in 2001. As the name suggests, this program is supposed to provide accredited importers with a simplified system for processing consignments. The anticipated benefits for participants, Customs and the country as a whole have changed markedly from the original 2001 proposals. These have been delayed by the inability of the Minister for Justice and Customs to deliver on time the Customs cargo management re-engineering project. Labor is pleased to see the government finally stirring from its lethargy, but we do have a number of criticisms of the government’s approach in this area, which I will go to later. My second reading amendment draws attention to the poor performance of this government in areas relating to trade facilitation and calls for a cost-benefit analysis of the Accredited Client Program.

Schedule 6 will provide Customs officers and delegated persons with necessary protections from a number of drug related offences. It will mean officers who possess or facilitate the trade of narcotic goods under approved circumstances will be protected from criminal responsibility. This is an obvious improvement to the act which will ensure Customs officers and their delegates can assist the Federal Police with their investigations and operations relating to the importation of illegal drugs. Once again, Labor is happy to support these changes.

I now refer to the Senate Legal and Constitutional Legislation Committee’s report on this bill, which was completed in May 2006. In the process of examining the bill, the committee received submissions and testimony from a number of witnesses, including the Customs Brokers and Forwarders Council of Australia, the Australian Customs Service, the Law Council of Australia, the Australian Federation of International Forwarders and the Australian Federal Police. The committee made three main recommendations in its report which were, firstly, that the changes to the unauthorised entry regime in schedule 2 be amended to limit the issuance of written notices directing a security card holder not to enter a restricted Customs area to circumstances where an immediate criminal or security threat or emergency is present; secondly, that an independent cost-benefit analysis of the Accredited Client Program be undertaken, taking into account the removal of the duty deferral mechanism; and, thirdly, subject to the preceding recommendations, that the Senate pass the bill.

Most of the evidence received by the committee related to the Accredited Client Program in schedule 5, which again is also the area of greatest concern to Labor. Although some of Labor’s concerns were not included in the committee’s majority report, it is worth noting that the vast bulk of them were and that government senators represented a four-two majority of the committee’s permanent membership. The committee’s majority report raised a number of significant issues. It is worth mentioning that government senators make up four of the six members on that committee. In regard to the development of the Accredited Client Program, the committee has the following to say in terms of its process and outcomes:

... the committee is not satisfied that the consultation period ... has encompassed all interested parties.

And also:

...  in more recent times the process appears to have become fractured.

I digress to note that, once again, the reality of consultation by this government does not match the version circulated by Customs. The report cited the ‘divergence in opinion between some of the industry bodies’ as evidence of this and suggested that anticipated benefits to participants in the program were based on those that would flow to a single section of the importing community, namely ‘a select group of larger companies’ that form part of the business partner group. As such, alternative models for the Accredited Client Program that could deliver benefits to a wider cross-section of the diverse importing community have been overlooked. Indeed, the government’s regulation task force made recommendations on broadening the appeal and benefits of the Accredited Client Program in its Rethinking regulation report released in April this year. The government has finally responded to recommendation 5.54, which, although late, would still have been welcome except for the fact that all we have been promised is to consider the matter further down the track.

The committee was also concerned that the bill did not contain any provisions relating to disputed payments, which could lead to unnecessary uncertainty for participating companies in the event that such a dispute arises. The committee also noted the absence of security standards in the legislation, in particular that no criteria are prescribed in the Customs Act or associated regulations against which assessment and compliance can be measured. With regard to the removal of full monthly duty deferral from the ACP model, the committee stated:

New costings and evaluations should be performed to fully elucidate the advantages of the ACP.

In expanding on these matters, I would like make a few comments about Labor’s own concerns with the ACP. As I mentioned earlier, this program is part of the broader international trade modernisation process, which commenced back in 2001. It has turned out to be the latest episode in a growing saga of government bungling and mismanagement.

Of course, the last season will be hard for the government to top. Who can forget the fiasco surrounding the integrated cargo system, which started out as a $26 million project and has since ballooned past the $200 million mark? At production costs similar to those of a Hollywood blockbuster, it looks more like the Titanic. I cannot help but notice that the minister is now looking to purchase a ship about the size of that ill-fated vessel as part of his grand vision for a floating prison in Indonesian waters. The minister was already playing the part of the captain of the Titanic late last year when he ignored all warnings about the approaching iceberg and proceeded headlong into the darkness with a faulty system ill-prepared for disaster. The ensuing chaos saw the ports clogged and massive delays in the clearance of cargo. In a stinging review, consultants gave the government zero stars for its performance. Industry has since filed claims for compensation worth almost $9 million, which are now being assessed. Just like the Titanic, there were only enough lifeboats for the first-class passengers. The very few parts of the new system that did function properly were those related to revenue collection.

It was not only shipping containers that were delayed whilst Customs clamoured to fix the mess. The ACP, being reliant on the new system, was effectively put further on hold. And now that the government has actually come to introduce its Accredited Client Program, it too looks like a turkey. In respect of flawed outcomes, the two main disappointments for industry and Labor were the broken promise to industry on duty deferral and the absence of any security standards. Full duty deferral was intended to create two key incentives that would encourage importers to participate. Firstly, it was meant to dramatically reduce the paperwork required of participating importers by bringing into place a single payment declaration, thereby reducing transaction costs for both the client and for Customs. Secondly, it was also meant to deliver a cash flow benefit to the participants as their liabilities for duty and processing charges payable would be deferred until the end of the month.

Unfortunately, the compromise scheme that we have before us today eliminates the cash flow benefit entirely and fails to significantly reduce the transaction costs. This is because the compromise scheme, which requires payment for any given month on the 15th day of that month, is now a complicated hybrid of deferred and advanced payments. Liabilities incurred over the first 15 days will in effect be deferred, but those expected to be incurred for the second half of the month will be brought forward, meaning that participants will have to estimate the likely value of what they expect to import. In the following month this estimate is reconciled with the actual and any discrepancy is settled.

With the withdrawal of these benefits, the only importers left with much incentive to participate became those which stood to profit from the alternative cost recovery scheme—that is, the large companies. If those were to be the benefits to importers participating in the program, what were meant to be the gains for Customs and the wider Australian community? One was that Customs was to enjoy corresponding cost savings that resulted from the simplified processing arrangements. But, just as those savings will now be lower for business, so too will they be lower for Customs, which will also have to provide guidance to importers in predicting their expected imports for the second half of each month.

By far and away the biggest benefits behind the ACP were to flow from having trustworthy importers securing their own supply chain, thereby freeing up Customs resources and enabling Customs to better target the use of them. Although importers already have an incentive to do this to some degree out of their own self-interest, the purpose of duty deferral and a simplified clearance process was to provide a reward to those that complied with security standards set by the government.

The government did not just strip the ACP of any meaningful reward. As noted by the Senate committee report, the government failed to include any substantial or additional security standards for the accredited clients to comply with. This not only goes against the original intent of the Customs International Trade Modernisation Initiative but also is inconsistent with the approach being taken by our larger trading partners, particularly the United States with its ACE program.

Flawed outcomes are quite often the direct result of flawed processes, and this case is no exception. Indeed, the abandonment of duty deferral was desired by neither Customs nor the minister, who was keen to point out to the committee during budget estimates hearings on 25 May this year that the policy was in Treasury’s hands and not his. It would be fair to say that the process could have been far more transparent as well as more consultative. That is Labor’s opinion, it is the opinion of the committee and it is the opinion of a very large section of the trading community. So one of Labor’s messages to Customs and to its minister today is: fix the process and you may find that you will have a better chance of getting the outcomes that you claim to seek.

Of course we only need to look at the direction in which this increasingly arrogant government has been heading since seizing control of the Senate chamber to realise that it will not heed anybody’s advice. With the government’s reckless sabotage of the Senate and its processes, regard for proper process, transparency and accountability—which have never been hallmarks of this government—have long since faded into the past.

Starting with the initial hearing into this bill, Labor have been trying to gain an understanding of how this compromised scheme was put together. And let me tell you, Mr Deputy Speaker, the more we have found out about it, the more worried we have become. Right now, we are looking forward to responses to a series of questions taken on notice by the government during the last round of budget estimates hearings in the Senate, and we can only hope that they will put to rest our concerns.

In the meantime, we have found ourselves in an adaptation of yet another Hollywood blockbuster, Dan Brown’s The Da Vinci Code, where Labor have been going back and forth between Customs, the department, Treasury and various industry groups, trying to get to the bottom of how the government came up with their final ACP model. As I have already said, we know that both Customs and the minister preferred the duty deferral option. In a sense, the only real difference between the minister and Labor on this issue is that we have been willing to roll up our sleeves and do the hard work in fighting for the best outcome for business, consumers, Customs and the government. The minister took the original proposal, which included full duty deferral, to Treasury for costing as part of the 2004 budget process. As I mentioned earlier, we are still waiting for a number of responses from the government, including the costing of this original proposal, but let me share with the House what we have learnt about it so far.

According to Mr Jeff Buckpitt, the National Manager of the Compliance Branch of the Australian Customs Service, Treasury rejected this proposal based on their concerns ‘about the financial impact of the program on the budget bottom line’. The size of this impact was calculated at $89 million over four years. It was explained that this cost was the result of duty payable in the month of June being deferred until July, which of course is in the subsequent financial year. Because of accounting conventions, this movement of payments from one year to the next showed up as a loss for the given year in which the liabilities were incurred.

Again according to Mr Buckpitt, the approximate value of duty being pushed from one budget to the next was roughly $20 million, which ‘would be the full duty payable in the month of June’ and which, over four years, was expected to add up to the $89 million that I mentioned. So a sensible and practical policy was junked because of an estimated accounting loss. I will stress that—it is an accounting loss. In the end, the government would still have received every single dollar that it was owed by pushing $20 million into the next financial year.

In the place of that proposal, a more complex scheme was put before the parliament which, without a doubt, added to the administrative costs of both Customs and, more importantly, business. But we already know that the government is not serious about tackling red tape—you only have to look at the GST operation to see that. In effect, this scheme means that the government will be willing to impose real costs on itself and business in order to avoid an accounting cost—an approach that would probably make the executives at Enron blush. Mr Deputy Speaker, if this seems to you like a warped approach to policy-making, all I can say is that it has happened and that it comes from ignoring many calls by my colleague Senator Ludwig for a thorough cost-benefit analysis of these matters.

But there is another dilemma with all of this, and only the government can put it to rest by releasing the details of Treasury’s costing. I might quickly add that we have been waiting for this for more than two months, and the absence of a government response only gives us cause for further concern. If the information that has been placed on the public record so far is correct, Labor have serious cause for concern that they may have got it all wrong. We will not know either way until the government provide further clarification, and we can only encourage them to do so as part of the process in clearing the air on accountability and what is an important matter for Customs, government and business alike.

It appears as though there are a number of holes in the details of the costing that the government has revealed to date, and it is incumbent upon it to fill those holes with the remaining pieces in the puzzle. Labor are happy to extend to the government the opportunity to lay all the facts on the table before we jump to any conclusions on this matter. But it has to be said that we have been waiting for a long time. In fact, we waited too long for the ACP to be introduced in the first place. Now that it has finally happened, the government should be showing greater eagerness to waylay any concerns about the revised program so that importers, their clients and the public can have full confidence as the program moves forward.

It has been more than 70 days since Labor asked Treasury for their costing on a program that, by and large, has cross-party support. The government have a clear choice: they can turn back the erosion of transparency and accountability that we have witnessed under their watch, particularly since they gained control of the Senate, and clear the smoky air surrounding the development of this program, or they can continue on their merry way and risk limiting the benefits of the trade modernisation initiative.

If the government ignore Labor’s offer to work with them, we will be forced to revisit these issues after we win government next year and they will have wasted more of the parliament’s time, not to mention putting business through unnecessary changes. When we do revisit this issue, we will deliver a program that provides real security benefits and that, at the same time, appropriately rewards traders who assist in the process. In the meantime, although the measures in the bill fall well short of Labor’s aspirations, it does at least make gestures towards improved trade facilitation. For the reasons I have outlined, I commend the bill and my second reading amendment to the House.

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