Joe Ludwig (Queensland, Australian Labor Party, Manager of Opposition Business in the Senate) Share this | Hansard source

I rise to speak on the Customs Legislation Amendment (Border Compliance and Other Measures) Bill 2006. This is an omnibus bill which contains a variety of measures. I will briefly take the opportunity to outline the contents of the bill and, in particular, Labor’s analysis of the bill. Schedule 1 of the bill looks to address a gap in the current law. Presently, Customs may dispose of certain perishable items seized under appropriate circumstances; however, it does not have a similar power for explosive materials and certain hazardous chemicals and biological agents, even in cases where it lacks the capacity for safe storage. The bill remedies that inadequacy to allow the disposal, including destruction where necessary, of such goods where their retention would constitute a danger to public health or safety. This is a sensible measure that reduces the risk that Customs officers and members of the travelling public could unnecessarily be exposed to. As such, Labor supports it.

I will look at schedules 2 and 4 of the bill together, as both cover the government’s security identification regimes. Schedule 2 seeks to close gaps in our existing security regime regarding access to designated areas. Examples of these include areas used for the examination of baggage or the questioning of aircraft passengers. The ability of Customs to control access to designated areas is at present overly restricted. In particular, persons who hold either an aviation security identification card or a visitor identification card can have, in effect, unfettered access to these areas even where it is not required for the performance of their duties.

It is really incredible to think that the government is still fiddling around with this basic level of security more than five years after the September 11 attacks. The changes proposed in schedule 2 will enable Customs to issue a written notice to the holder of a security identification card directing restricted access to such areas. I might say, though, while Labor support this amendment, we are interested in ensuring that the actual implementation of this change works as intended.

Schedule 4 also relates to identification cards and aims to make it easier for Customs to keep its database up to date. Following commencement, the authorities that issue cards would be obliged to notify Customs inside seven days when a card expires or has been revoked. Customs will also be able to request relevant information from the issuing authority.

There are important steps in tightening security at airports and related facilities, so on that basis Labor supports them as stopgap measures. However, more broadly we do wonder if the system could not be more pre-emptive in some cases. Where issuing authorities know that a particular card is about to expire on a certain date, they should become a little bit more proactively engaged and not have to wait for the card to expire first before notifying Customs. It seems to me that the card management regime would allow you to know when a card is about to expire so that you can take intended action to ensure that it is renewed or cancelled as the case may be.

The third schedule makes minor and technical amendments to ensure that the act is compliant with the Australia-United States Free Trade Agreement. For example, the schedule includes a change to the definition of persons of the United States so that it is no longer confined to natural persons and a change so that the distinction between US-originating and non-US-originating goods accurately reflects the agreement. Labor supports these amendments as Australia is simply fulfilling its obligations under international agreements and treaties.

Schedule 5—and I might spend a little bit more time on this—activates the long-awaited Accredited Client Program provisions first introduced as part of the international trade modernisation amendment act in 2001. The program is supposed to provide accredited importers with a simplified system for processing consignments. The anticipated benefits for participants in the system, for Customs and for the country as a whole have changed significantly from the original proposals, though. Although they were delayed by the inability of the Minister for Justice and Customs to deliver the Customs cargo management re-engineering project on time, Labor can say it is pleased to now see the government finally dragging itself to some action. But we do have a number of criticisms of the government’s approach in this area, which I will go to shortly.

Schedule 6, in finalising the schedules themselves, will provide Customs officers with necessary protections from a number of drug related offences. The changes will mean that officers who possess or facilitate the trade of narcotic goods under approved circumstances—I should underline ‘under approved circumstances’—will be protected from criminal responsibility. This will ensure that Customs officers and their delegates can assist the Australian Federal Police with investigations and operations relating to the importation of illegal drugs. Labor supports those amendments.

Turning to the Senate Standing Committee on Legal and Constitutional Affairs inquiry and report, I note the report provides a brief overview of the bill and its six schedules. I will move specifically to the committee’s report on the bill itself. In examining the bill, the committee received submissions and testimony from 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. A recurring theme in relation to Customs legislation is the lack of adequate consultation. This bill is no exception. The committee had the following to say about the process and outcome. It said the committee ‘is not satisfied’ that the consultation period ‘has encompassed all interested parties’. It said ‘in more recent times the process appears to have become fractured’.

The report cited ‘the divergence of opinion between some of the industry bodies’ as evidence of this and suggested that anticipated benefits to participants in the Accredited Client Program—the ACP, for short—were based on those that would flow to a single section of the importing community, namely ‘a select group of larger companies’ that formed part of the business partner group, and, as such, alternative models for the ACP that might deliver benefits to a wider cross-section of the diverse importing community had been overlooked.

This was not all, though. There were a variety of other circumstances of concern that the committee raised over the proposed legislation. I will deal briefly with three of those, as time does not permit me to deal with all of them, and then return to them shortly. Firstly, the committee was concerned that the bill did not contain any provisions relating to disputed payments under the ACP. It said the absence of such provisions could easily lead to unnecessary uncertainty for participating companies in the event that such a dispute arose, simply because there were no provisions available for that eventuality. Secondly, the committee noted the absence of security standards. It particularly noted that no criteria were prescribed in the Customs Act or associated regulations against which assessment and compliance could be measured. Thirdly, with regard to the removal of full monthly duty deferral from the ACP model, the committee said that new costings and valuations should be performed to fully elucidate the advantages of the ACP. I flag this issue as I intend to return to it in a moment.

Finally, after considering the bill, the committee made two main recommendations. One was to amend the changes to the unauthorised entry regime in the schedule to limit the issuance of written notice, 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. The second was that an independent cost-benefit analysis of the Accredited Client Program be undertaken ‘which takes into account the removal of the duty deferral mechanism’.

In addition to the committee report, Labor senators expressed strong concern that changes to the Accredited Client Program represented a broken promise to industry and a missed opportunity to link enhanced security to facilitated trade. Labor’s chief concern with the bill, then, is the changes to the Accredited Client Program. That should come as no surprise to the government. This program was originally promised years ago, but the endless delays and botched implementation of the Customs cargo management re-engineering system have meant that the government has until now failed to progress the issue. In what can only be described as a half-hearted attempt to progress the Accredited Client Program, we now have this legislation before us.

This bill, insofar as it relates to the ACP, represents another broken promise by the Howard Liberal government. But, make no mistake, it is the means by which Senator Ellison will attempt to weasel his way out of a promise of a full duty deferral for participants in the program. Full duty deferral was supposed to create incentives to encourage importers to participate, primarily through two mechanisms. 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 Customs. So there would be one transaction, one cost and one payment declaration. Secondly, it was meant to deliver a cash flow benefit by deferring related liabilities until the end of the month. As in any ordinary business, you could put the transaction in and defer related liabilities to the end of the month. Many businesses operate on that basis. Instead, the ACP that we have before us eliminates the cash flow benefit entirely—it has gone completely—and fails to significantly reduce the transaction costs. This is because it is a compromise model. What we found was that the government came back with a compromise model that requires payment for any given month on the 15th day of that month, which means that we now have a messy hybrid of deferred and advance payments. So 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. If that sounds confusing, you should see how it is written.

When you look at how it will operate, you see it will mean that participants will have to estimate the likely value of what they expect to import. They will have to actually guess in advance what they are likely to import, then in the following month this estimate is reconciled with the actual, and any discrepancy is then settled. So every month you have a process of estimation, reconciliation and then a settlement one way or the other.

If listeners are confused, it is because of the gloss the government has put on the system. I apologise because the government is certainly not going to apologise for it. But at least I have saved listeners from the minister’s diagram. Standing orders prevent me from holding up their diagram about how it is supposed to work, but I encourage anyone to go to the EM and have a look at it, because it is confusing and it remains a very difficult process for those to operate within.

What is the effect of the withdrawal of these benefits? The effect is that only importers with incentive to participate will be left. Those which stood to profit from the alternative cost-recovery scheme—very large companies—may be the only ones. Yet again, the Howard government has failed small to medium sized businesses, while handing 20 or so big companies a trading advantage on a platter through Customs, the monopoly service provider. You have got to put it in context. Customs is a monopoly service provider in this area. There is no-one else. Businesses have to go through this process if they want to operate an importing/exporting business.

Some in industry are hoping against hope that the minister will come around. I think by now it is clear that it is too late. The government’s regulation taskforce made specific recommendations on broadening the appeal and benefits of the ACP in a report released in April last year. Yet again, however, Senator Ellison has failed to deliver. When the government finally responded to recommendation 5.54, all they did was promise to consider the matter further down the track. So here we are with the government going to implement this mishmash of a system and they have promised that they will have a look at it further down the track.

Small businesses in the trade community deserve better than this. The community deserves better than this, because the community was to enjoy the corresponding cost savings resulting from simplified process arrangements. But they too now will not be lower for Customs, which will have to provide guidance to importers in predicting their expected imports for the second half of each month. The biggest benefits behind the ACP were to flow from having trustworthy importers securing their supply chain, thereby both freeing up Customs resources and enabling it to better target the use of them. Although importers already have an incentive to do this out of their own self-interest, the purpose of the duty deferral and simplified clearance process was to provide a reward to those that complied with the higher security standards set by the government. All this is absent in the current legislation. The legislation brings not one security bonus to the community, despite the emerging international best practice of tying trade facilitation to enhanced security. What we have here is simply second rate.

Should anyone have any doubt that this represents another broken promise to the Australian trade community, they should look no further than the explanatory memorandum to the original provisions which lie dormant in the back of the Customs Act 1901. That EM promised full duty deferral. And now we have this dud. Flawed outcomes such as this are quite often the direct result of a flawed process. After all, the abandonment of duty deferral was desired by neither Customs nor the minister, who was keen to pass the buck and point out to the committee during budget estimates hearings on 25 May 2006 that the policy was in the hands not of his own department but of the Treasury. We saw the minister passing the buck to Treasury. So in a sense the only real difference between the minister and Labor on this issue is that only Labor is willing to do the hard work of fighting for the best outcome. The minister has already raised the white flag.

This minister took the original proposal, which included full duty deferral, to Treasury for costings as part of the 2004 budget process. In the absence of the full response from the government—and let me share with the Senate what we learnt about that—according to 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 to be $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 payment from one year to the next showed up as a loss in the given year in which the liabilities were incurred. The approximate value of duty pushed from one budget to the next was roughly $20 million, or an expected $89 million over four years. A sensible and practical policy was junked because of, it seems, an estimated accounting loss—not a real loss, mind you, but a paper accounting loss, it appears. In its place Senator Ellison has accepted a more complex scheme that would have, without doubt, added to the administrative costs of both Customs and, more importantly, business.

Governments must have strict and consistent accounting practices. They cannot pick and choose which accounting conventions to abide by. When it comes to setting policy, it is patently absurd to destroy economic value and create unnecessary red tape because of the idiosyncrasies that are inevitable under any accounting regime. There is another dilemma with all of this and it can only be put to rest with the release of the Treasury’s costings, which I have been trying to get for some time but to no avail. If the information is placed in the public arena then we will all be able to look at what Treasury have had to say about it, but it appears as though there are a number of holes in the details of the costings the government have revealed to date. It is incumbent upon the government—not the opposition but the government—to fill in the puzzle and provide the detail. I am happy to extend the opportunity to government to lay all the facts on the table today but, quite frankly, I do not think they will.

Labor wholeheartedly support schedules 1, 4 and 6. The only real issue we have with this bill is schedule 5, which attempts to dud small business in the Australian trade community. (Time expired)