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attorney-general's portfolio
Australian Customs Service

CHAIR —We are now dealing with the Australian Customs Service.

Senator Ellison —Mr Woodward, the CEO of the Australian Customs Service, has an opening statement in relation to some amendments to the budget portfolio statements.

CHAIR —Welcome, Mr Woodward. Please begin with your opening statement and then Senator Ludwig will ask some questions.

Mr Woodward —There are a couple of changes where errors were discovered in the PBS that I would like to correct if I can. We will table the corrections. The first is on page 118, table 3.1. There is a figure of 591,455. That is a typographical error; it should read 591,554. On page 124 there is a reference to the sale of goods and services in relation to the tax office. There is a fairly important transposition of a decimal point. It shows $4.1 million; it should read $41 million. There are other references to it in the PBS. The third one is on page 106 under the heading `Aviation Security—Enhancement: Air Cargo Scanner'. The total figure provided of $8.4 million over two years is correct but the break-up underneath it is not correct. The amount for operating expenses should read $2.5 million instead of $3.7 million. The amount for depreciation should read $1.3 million and not $0.1 million. The total adds up to the same figure: $8.4 million. I table these amendments.

CHAIR —Thank you, Mr Woodward.

Senator LUDWIG —If I inadvertently traverse those I hope you will pull me up. I have done some of my preparation based on the figures that have now been corrected so we will see how we go. I refer to the PBS, page 117. Who was selected to provide the consultancy advice as a result of the DOFA inquiry into Customs' budget?

Mr Woodward —Are you referring to the major inquiry into the budget?

Senator LUDWIG —Yes.

Mr Woodward —Ernst and Young.

Senator LUDWIG —What was the estimated cost of that consultancy? Has it been finalised or is it ongoing?

Mr Woodward —They have only just started. In fact I have not even met the consultants yet. They have only been going for a couple of days. The rough figure we think could be in the order of $300,000 but we are not 100 per cent sure.

Senator LUDWIG —I guess there would have been a call for tender, a tender process and then a winning of the tender. You would have had some idea of the amount of money in that.

Mr Woodward —I go back to the previous meeting where we discussed the fact that this consultancy would take place. Terms of reference were agreed between Senator Ellison and the Minister for Finance and Administration. The control of it—I am not sure if that is the right word—is actually with the department of finance. We were involved in the selection process but the mastermind of all of that was the department of finance. We indicated that we had no objections to Ernst and Young. There was a normal process which narrowed down a field of four to, in the end, one.

Senator LUDWIG —So what was the suggested figure at that time of how much it would cost? There would have been a ballpark figure, I suspect.

Mr Woodward —To the best of my knowledge there was no figure actually stipulated. It is our assessment that it would be of the order of $300,000.

Senator LUDWIG —This is not a comment directed at you, Mr Woodward, but I find it surprising that someone would enter into a contract with a consultant without an idea of how much it is likely to cost. So I suspect it is there somewhere, and you might want to take it on notice.

Mr Jeffery —Sorry, I misunderstood your earlier question. The tender that has been accepted is about $300,000. We can give you the exact amount, but my memory is that it is $300,000 or thereabouts.

Senator LUDWIG —Is there a date for when it is to be finalised?

Mr Woodward —The expectation is that it will be completed at the end of August.

Senator LUDWIG —My next question is in respect of the cost recovery model. There are no increases this year to the cost recovery that you use. Is there a reason for that?

Mr Woodward —Are you referring to the import processing charge?

Senator LUDWIG —Yes.

Mr Woodward —The import processing charge is at its maximum level. The legislation puts a ceiling on it so it is at the maximum level now.

Senator LUDWIG —So is there scope for it to increase after that?

Mr Woodward —There is scope if the parliament provides for it. It is at its statutory limit at the moment.

Senator LUDWIG —How can it increase other than through that? What are the variables?

Mr Woodward —The only way that it can increase is if we put a submission to the government. Obviously it will be something that is taken into account by the consultant in the review of our finances. The government would form a view and then, if it agreed, legislation would be put forward.

Senator LUDWIG —But at this stage you have not put a submission forward?

Mr Woodward —No, there are a whole series of things that are referred to in the PBSs which would be subject to reconsideration in the light of the outcome of the consultant's report.

Senator LUDWIG —Are the terms of reference available for the consultancy? You may have already provided them.

Mr Woodward —I think we have already passed them to the committee. I am sure that we have.

Mr Jeffery —The answer to question on notice No. 68 from the last estimates period, which I think was provided in the last couple of days, provides the terms of reference.

Senator LUDWIG —In relation to the PBS there is a new capital injection for financing of the Bay class vessels of $3.63 million.

Mr Woodward —That is for the existing vessels.

Senator LUDWIG —The existing vessels?

Mr Woodward —I will get our chief financial officer to answer, in case I have misunderstood.

Mr Brocklehurst —That capital injection funding has been in place for a number of years and it relates to finance lease payments for the boats.

Senator LUDWIG —And it is for what exactly?

Mr Brocklehurst —The lease payments for the boats.

Senator LUDWIG —It was originally part of the financial deal or the leasing arrangement and that is just the amount that goes through each time after that?

Mr Brocklehurst —That is correct.

Senator LUDWIG —For administered capital and departmental equity injections and loans you will receive an injection of $19.471 million—that is the maritime vessels finance lease which is $3.638 million. Is there an end-date on that? How long is the lease for?

Mr Brocklehurst —It is a 10-year lease.

Senator LUDWIG —Have the Bay class vessels been depreciated to zero value or their sale value?

Mr Woodward —I have a recollection that we might be able to buy them for a dollar but I will get an expert to confirm that.

Mr Jeffery —The answer is that we will own them and we are depreciating them over 10 years. So at the end of the 10th year we will own the vessels.

Senator LUDWIG —So it is effectively a zero value. I was wondering whether there was any residual but you have answered that one.

Mr Jeffery —I do not think so. If there is we will let you know.

Senator LUDWIG —In respect of the trialling of an automated biometric border processing system, there is $1.234 million for that. Is that ongoing or is that a one-off injection?

Mr Woodward —It is a one-off payment.

Senator LUDWIG —Perhaps you could explain that. Last time, as I recollect, we were told that the biometric border processing system was for some sort of improved pass—

Mr Woodward —We have obtained one-year funding in relation to the possible application of biometric techniques at the border. We are working in close cooperation with the foreign affairs department, which has also received some funding, and the Department of Immigration and Multicultural and Indigenous Affairs, which has also received some funding for biometrics at the border. But you probably heard the reference to SmartGate—you may have even seen SmartGate. It is to extend the current application perhaps into a second airport with a bit of trialling going beyond Qantas aircrew. It is the next stage in the evolution of biometrics at the border.

Senator LUDWIG —Has there been any evaluation of that program to date?

Mr Woodward —There has been an evaluation.

Ms Batman —Yes, the evaluation was completed and we may have already given you some results.

Senator LUDWIG —I suspect that you would normally be answering questions from Senator Bishop. Unfortunately, I do not quite look like Senator Bishop but you will have to assume for the process that I am. There is a bit of a gap between when I last had an opportunity to question you at estimates and now. I think I have missed you by a year or so. I also have some recollection but, by all means, if it has already been provided please let me know and I will move on.

Ms Batman —I have a feeling that we have provided it to the committee but, if not, I will certainly provide the results. We had quite a comprehensive evaluation.

Senator LUDWIG —I think that the last time I was speaking to you it had not been evaluated at that time but it was proposed to be evaluated. You had finished the Qantas trials or had progressed through the Qantas trials where there was a low error rate.

Ms Batman —The system is still operating but we concluded the evaluation based on data within the first six months. But it has been ongoing since then so it did not stop at that point.

Senator LUDWIG —Has it extended beyond the one airline as yet?

Ms Batman —Not as yet. The funding provided in the budget will enable us to put it into another airport and to work with another airline and also, perhaps, with passengers. The aim is to trial it with the new Australian passport that the Passports Office is developing that would have a biometric chip in place. We need to have the technology to be able to read that chip at the Australian border.

Senator LUDWIG —And that is in conjunction with SmartGate, so that when they put the passport on the stand—as it was—the electronic device will then read the data chip as well, take the photograph and `read' the photograph and then scan the biometric measures.

Ms Batman —That is very close to what will happen.

Senator LUDWIG —It is a layman's interpretation—forgive me.

Ms Batman —At the moment you enrol in SmartGate and the photo of you is held in a database. That is called up when you present to the kiosk, and the comparison is of the live face with the photo in the database. In the next iteration of it, the aim would be that you do not have to enrol; that you carry your passport, the passport has a chip in it that contains a digital photo of you, and the comparison is made between the digital photo in the passport and the live image of you standing there. So no enrolment is necessary—you carry your photo in a digital form inside the passport.

Senator LUDWIG —That seems a better leap forward, doesn't it.

Ms Batman —It certainly is. It is also using RF technology, which means that you do not have to put your passport in exactly the right spot, you can just hold it close to the kiosk.

Senator LUDWIG —All right—but don't talk to the Privacy Commissioner about RF technology! Where is the next place of utilisation of the SmartGate going to be? Have you decided on a venue yet?

Ms Batman —No, we have not quite concluded that. We are still in that phase. We are trying to get the most use with another airline and also with Qantas, who have got so many enrolled. We are still going through the criteria to make that decision.

Senator LUDWIG —I want to move now to page 96 and get an overview of the equity injections, but if I am traversing too broad an area I can try to narrow it down. In relation to the Melbourne Commonwealth Games, the M2006, there is $0.099 million for `staging', for `non-security support' for that. What is that about?

Mr Woodward —This is a non-security related initiative. Ms Peachey will be able to give you a bit more information on that.

Ms Peachey —The capital injection of the $0.099 is a small amount. The total non-security over the coming years is $2.3 million. The capital actually relates to just the provision of cabling and things like additional workstations.

Senator LUDWIG —For the `surveillance and enforcement program to provide for the protection of Australia's Southern Ocean waters and resources', there is a small amount, $1.079 million. Just generally or briefly, what is that for?

Mr Woodward —The total amount for the Southern Ocean during the year will be about $45 million. The capital component of it, as you can see, is an extremely small proportion.

Ms Grant —The small amount of that funding that is for capital relates to equipment that we will need and some fitting out of operational rooms back here in Canberra.

Senator LUDWIG —Isn't that provided for in the original $45 million program?

Mr Jeffery —That is part of it.

Senator LUDWIG —There is $1.2 million set aside for the purchase of the pallet X-ray machines. The last time I was speaking to you you had not finished the purchase of all the pallet X-rays. Is that the final—

Ms Grant —We have not quite finalised that purchase yet. We have placed the order and are just waiting on delivery of those machines now.

Senator LUDWIG —How many machines are to be purchased?

Ms Grant —We have a machine for Adelaide, a machine for Brisbane and one other for Fremantle.

Senator LUDWIG —Does that then complete all the locations where you are going to employ pallet X-rays?

Ms Grant —It will.

Senator LUDWIG —That still leaves smaller ports like Bundaberg, Mackay and, correct me if I am wrong, Townsville without pallet X-rays. Do they have pallet X-rays in Queensland?

Ms Grant —None of those smaller ports you have mentioned will have a pallet X-ray. We do have the capacity in those particular ports to either deploy mobile X-ray equipment there if needed or do physical examinations of the high-risk cargo that we would select for examination in those locations.

Senator LUDWIG —Where would be the nearest public X-ray machine to Gladstone if it is a mobile one? Where would it be located?

Ms Grant —I am sorry; the pallet X-rays would not be mobilised. We have either static machines that we can relocate around the countryside as needed or X-ray vans that literally drive X-rays in vehicles. There is equipment like that in Cairns. The mobile van is in Cairns. Other X-rays are in Brisbane as well.

Senator LUDWIG —Are there likely to be any further purchases of pallet X-ray machines or is that the final group that is going to be purchased and put into use?

Mr Woodward —This is the end of the current program but obviously the government continues to look at security and other risks in the maritime environment. It is possible that the government may want to have a look at pressures in other ports.

Senator LUDWIG —Perhaps you can tell me what the item is that is contained in container examination facilities. Have you finalised all the X-ray facilities—that is, the fixed or static X-ray facilities? I think there was one in Sydney that became operational. There was one proposed for Brisbane, if my memory serves me right.

Mr Woodward —This was again discussed at the last meeting. There was a shortfall in relation to the identification of containers at ports, the movement to the four large container examination facilities and their return. We had obtained funds for about three-quarters of the cost. There was about a quarter missing. The shortfall was then discussed.

Mr Jeffery —I am sorry; we were jumping onto another item. The $3 million is a final year payment for the container X-rays.

Mr Woodward —I apologise for that.

Mr Jeffery —It is a capital component.

Senator LUDWIG —Of the container X-rays?

Ms Grant —It was just the timing in which the funding was provided. The final $3 million of the capital funding for the container examination facilities is being provided this financial year.

Senator LUDWIG —That is what I thought it was. That was the fixed cargo container X-rays?

Ms Grant —Yes; the ones in Sydney, Melbourne, Brisbane and Fremantle.

Senator LUDWIG —I was not sure where you were going, Mr Woodward, but we will come back to that. Are they now all operational?

Mr Woodward —They are all operational and all producing results.

Senator LUDWIG —The last thing I want to deal with is the neutron scanner program. I do not recall that so it must be a new one. Can you tell me a little bit about that, please?

Mr Woodward —It is close to home for you, Senator Ludwig.

Senator LUDWIG —I am open to an invitation to go and visit it, then.

Mr Woodward —It is not there yet. We have been working with the CSIRO for a couple of years in relation to one of the deficiencies that we have seen in the examination of cargo. We think we have reasonable arrangements now—and they could certainly be improved—in relation to sea cargo. A lot of effort and a lot of money has been spent on sea cargo but we currently have a deficiency—and I stress there are small-scale X-ray facilities available for air cargo—because of the need to have a penetrating mechanism to look at ULDs, the air cargo containers, as they come off aircraft and before they go into depots at the airport.

We have been working with the CSIRO to see if there is a different technology available which would also be able to process those containers in less than about two minutes, because there is a need to get containers very quickly out of aircraft and into the depot arrangements. The CSIRO has done a lot of work and has come up with an approach which involves neutron radiography as distinct from X-ray or gamma-ray technologies. And there are some other elements which I do not want to go into because there are patents, so far as CSIRO are concerned.

Senator LUDWIG —I am not asking you to go into proprietary matters.

Mr Woodward —The aim is to use Brisbane airport as a trial airport to finalise the work that CSIRO has been doing and to build a small facility at Brisbane airport to see whether what works in theory actually works in practice. That is what this is about. If it does work—and at this stage we are as confident as we can be—then it has massive potential, not only for Australia but for the rest of the world. And there has been a lot of international interest in it.

Senator LUDWIG —A neutron scanner would not have the problems associated with it that ionising radiation has, would it?

Mr Woodward —CSIRO and Customs—we have our own radiological adviser—are working closely with ARPANSA, the relevant regulatory agency, to ensure that what we do with the airport and CSIRO has all of the necessary protections. The latest I hear is that there is the possibility that we will not need the massive buildings that we currently have at the CEFs, the container examination facilities, but we will learn more about that over the next three or four weeks.

Senator LUDWIG —Perhaps you could keep the committee apprised at some future point about the success or otherwise of that project. It would be interesting and I would like to take an interest in it.

Mr Woodward —Yes.

Senator LUDWIG —I have seen a number of gamma-ray facilities in use in various locations and I have seen your cargo X-ray facility but it would be interesting to see what resolution you achieve with a neutron scanner and what you can detect as a consequence.

Senator SCULLION —I can recall that a bit over year ago there was a fair bit of criticism in the media with regard to what I suppose I can call the Tomson case. They made some comparisons with the Milford inquiry and the downside of that was economically quite substantial. Could you give us an update on exactly where we have gone from there?

Mr Woodward —It is probably useful if I recount what happened and provide a little bit of background. The Sydney Morning Herald ran an article about an old Customs prosecution that took place in the 1980s. That article appeared in the press in April last year. A couple of months later the Nine Network ran a story on 60 Minutes titled `Stitched up' which dealt with the Customs investigation of Mr Tomson in the late 1980s. We were quite concerned about the quality of the reporting. We wrote to the director of programming for the Nine Network to express our concerns about the poor standard of journalism reflected in the 60 Minutes program. In essence, our concerns related to inaccuracy and unfairness. We subsequently lodged a formal written complaint with the Australian Broadcasting Authority asserting that the program had breached the commercial television code of practice. The ABA has not yet responded.

Customs briefed independent counsel, a Mr Bellew, seeking advice about whether there was substance to the allegations and whether further examination was warranted. On the information made available and in the absence of further particulars and information requested several years ago, counsel concluded that the allegations were baseless and incapable of being particularised. The same allegations against Customs were made in submissions to an inquiry being conducted by the House of Representatives Legal and Constitutional Affairs Committee. Customs referred this material and all relevant files in relation to the Tomson investigation and prosecution to Mr Bellew for further advice. Mr Bellew concluded that he could find no evidence to establish the allegations of malicious prosecution or conspiracy to pervert the course of justice. In his view, the material supports the conclusion that, generally speaking, Customs adopted a proper approach to Mr Tomson's investigation and prosecution.

Of particular concern is the allegation made in the 60 Minutes program that Customs bankrupted Mr Tomson. Publicly available information indicates that, in fact, the petitioning creditor was a Mr Bounpraseuth. A person of the same name and address has a long history of convictions, including malicious wounding. Most notably, he was convicted in 1996 of supplying a prohibited drug and was sentenced to two years imprisonment. We believe the drug concerned was heroin. The Australian Law Reform Commission reported on averments in its report No. 95, 2002. The commission recognised the continuing requirement for an averment provision but made some recommendations to tighten its operation. The Minister for Justice and Customs has signalled his agreement to implementing these recommendations as far as Customs legislation is concerned.

Customs also sought advice from the Solicitor-General as to the role that averments played in the Tomson case. The advice from the acting Solicitor-General was, in essence, that averments played very little role in establishing the key elements of the prosecution case. Rather, the case is an example of the limited role averments can play in Customs prosecutions of this kind. The acting Solicitor-General advised that this advice could be made public, and waived legal privilege. Customs provided the advice to the House of Representatives committee inquiring into averments. The committee classified our submission as confidential even though we did not lodge it on that basis.

Senator SCULLION —Two things, Madam Chair. Mr Woodward, I come from a fishing background rather than a legal background. Could you give me a basic understanding of the term `averment'?

Mr Woodward —In essence it is an affirmation that an event or a fact actually occurred which is only available in matters that do not involve criminal prosecutions. It is averring that a fact is a fact.

Senator SCULLION —Would it be possible, Mr Woodward, to provide the committee with the advice from the Solicitor-General?

Senator Ellison —I have some advice here, Madam Chair. It is an opinion in relation to averments, which may be of great interest to the Senate Legal and Constitutional Legislation Committee.

CHAIR —Is it on averments generally, Minister?

Senator Ellison —It is on averments generally and, in particular, in reference to the Tomson case, but it does relate to the use of averments by Customs. Of course, we saw the High Court decision on the Labrador case. I seek to table that opinion and I believe it will be of great assistance.

Senator SCULLION —Thank you, Minister. Is that the advice that was referred to by Mr Woodward?

Senator Ellison —Yes, it is.

Senator SCULLION —Mr Woodward, would it also be possible for you to be able to provide the committee with any advice that was provided to you by Mr Bellew?

Mr Woodward —The Bellew advice is quite substantial. We have provided it to the other committee. There have been two sets of advice. The first set of advice we can make available to the committee.

Senator Ellison —Madam Chair, the question of averments is an important issue, and customs prosecutions in particular. In the Tomson case, which achieved some publicity last year, there were matters which Customs stated very clearly were misrepresentations of its position. It is important that Customs makes these statements for the record and clarifies the record indeed.

Senator LUDWIG —In this matter, were those allegations made here, by this committee?

Senator Ellison —No.

Senator LUDWIG —I am not sure why you want to use this forum to air them. There are obviously other ways you can do it.

Senator Ellison —The question has been raised by Senator Scullion and Customs has, of course, answered that question. The Senate Legal and Constitutional Legislation Committee is certainly a committee which would be looking at any averments questions which might arise in the future in relation to changes of legislation.

Senator LUDWIG —I hope not.

Senator Ellison —For instance, I have mentioned the Australian Law Reform Commission, which I am minded to take on board. I think it is a more than appropriate committee to consider these questions. I think the matter is fairly well covered there and we can move on.

Senator LUDWIG —The portfolio budget statement of page 106 has a figure of $10.6 million at the top of the page and states:

The Government will provide additional funding of $10.6m over two years to the Australian Customs Service. This funding will meet additional logistics costs resulting from increased levels of cargo container examinations—

at a number of locations. Is that a total cost?

Mr Woodward —That was the question I started to answer before. I was caught in midstream.

Senator LUDWIG —I thought that might have been it. Did you want to finish it? I did not give you the opportunity of concluding it.

Mr Woodward —It is just a reminder that we had funding that would have covered about three-quarters of the costs of identifying sea containers and moving them to the facility and back again, but there was a shortfall. After consideration of our submissions, the government has agreed to pick up funding of that for two years.

Senator LUDWIG —Is that for the next two years?

Mr Woodward —It is for this year and next.

Senator LUDWIG —Does that include running costs?

Mr Woodward —It covers those parts that I mentioned: the identification, which is on the part of the relevant stevedoring authorities; the transport, which is handled by different companies—in Sydney, for example, it is handled by Patricks; the transport of those containers; and the return of those containers to the port.

Senator LUDWIG —I see. This is the perennial argument about who pays for the transportation between the—

Mr Woodward —The identification and transportation of—

Senator LUDWIG —So the $10.6 million is for the transportation for this year and next year. Is it fair to say, because you still have not been able to sort out who should pay that amount, whether it should be Customs or the stevedoring companies themselves—or have you sorted that out?

Mr Woodward —No. If we had the ability to increase the import processing charge, there would be an argument that suggests that the import processing charge would cover it—in other words, that that amount should be picked up in increased import processing charges. The government has chosen not to go down that route, at least at this stage, but has chosen to go down the route of funding the logistics expenses.

Senator LUDWIG —So, rather than you funding it out of your existing budget, the government has decided to give you a two-year grace?

Mr Woodward —Yes.

Senator LUDWIG —What happens at the end of two years?

Mr Woodward —I am sure that between now and then the matter will be resolved.

Senator LUDWIG —I guess I will find out. How can it be resolved? Or are you relying on a rise in the import processing charge or the stevedoring companies? How is the resolution being worked through?

Mr Woodward —There are various ways in which you can do it. One is—and this has been debated, including with the industry—that the actual cost of identification and movement is about $280 a container. You could charge the owners, the brokers or the forwarders involved with each container that we identify and move $280. That is an option that was discussed with the industry, and the view was that it would be better to spread the costs rather than impose a large charge. That is one way of doing it. We have the authority to do that but the government is not inclined to go down that route.

Senator LUDWIG —Was a paper prepared in relation to that?

Mr Woodward —I would have to check. My recollection is that it was raised through the cabinet processes.

Senator LUDWIG —There may have been but it is not available.

Mr Woodward —No.

Senator LUDWIG —I will not persist. So it does not mean that there will be additional hours of operation of those cargo container examination centres—their hours are now relatively fixed and stable?

Mr Woodward —The hours are relatively fixed but they are long. There has been some misinformation.

Senator LUDWIG —There were two shifts, weren't there?

Mr Woodward —The longest worked for 16 hours a day, from memory, and the others for around 12 to 13 hours for five days a week.

Senator LUDWIG —If we have not already asked that, perhaps you could take it on notice to provide the answer for operation—

Mr Woodward —At the moment, weekend work is done, if necessary, but it is not on a regular basis.

Senator LUDWIG —and the throughput of each in terms of the containers that are X-rayed. I will move on to the $4.9 million for the security upgrade.

Mr Woodward —In large part, it flowed from another discussion we had at the last meeting, which was the theft of computers from Customs facilities. As a result of that we instituted a review of security at every Customs site, and I think about 100 individual Customs sites were reviewed. We looked at security requirements in those sites and tried to look generically, as well, to ensure that events of that kind would not happen again. We raised the issue through the cabinet processes, and we achieved funding to allow us to implement changes in relation to security, with a particular focus on security related to our IT equipment.

Senator LUDWIG —So it is basically to ensure that you keep your laptops safe?

Mr Woodward —We have large numbers of servers. Our mainframe is in a very secure facility which the firm involved in the review of our IT confirmed was secure. We have a large number of sites. We are also at the moment looking at the way in which we will be handling IT of that kind in the future. Out of both of those reviews will come an answer which will inevitably involve the physical aspects—in other words, the security of rooms—and other ways we might improve security of all of our IT equipment.

Senator LUDWIG —So is the $4.9 million to be spent on the process, hardware or security personnel?

Mr Woodward —The $3.3 million is for capital.

Senator LUDWIG —So what will that be? Lockable rooms? Perhaps you could give me an explanation.

Mr Woodward —They are just examples.

Senator LUDWIG —I do not need much of an explanation, but just something to get an understanding of it.

Mr Woodward —Rooms, racks and other security devices.

Ms Batman —Access control, racks, lockable storage cabinets, alarms and that sort of thing.

Senator LUDWIG —That is all I really needed, Mr Woodward, just to understand the process of what you are embarking upon. That is an ongoing process?

Ms Batman —It is a one-off.

Senator LUDWIG —So what happens in two or three years time when they get old?

Mr Woodward —We have the safeguard of having a major financial review which is about to get under way. The financial review is looking at Customs' funding, as you can see from the terms of reference, not just this year but in relation to commitments into the future. I am quite confident that, if the consultants thought that more was needed to be done in relation to IT security in the future, they would cover that in their report.

Senator LUDWIG —I am happy to be checkmated; that is an excellent answer. According to page 108 it seems the revenues from other sources at outputs 1 through to 3 are all decreasing. Are there reasons for that?

Mr Woodward —The biggest single component is the civil maritime surveillance and response figure, which has reduced from $156,909,000 to $128,565,000. I think we may have provided an explanation. This was another area where we got into a little bit of difficulty last time. The $128,565,000 figure is almost a mathematical calculation based on the number of sea days, so far as patrol boats are concerned, and the number of flying hours for P3s, multiplied by hourly rates—65,000, roughly. I have forgotten the other figure for the P3s. That produces the $128 million figure. The other figure, as I recall, was incorrect.

Mr Jeffery —In answer to question No. 69 to the last committee we provided an explanation of the mistake we had made in the previous PBS, which led to this one being corrected from $156,909,000 down to $128,565,000. We provided a full explanation in the answer to question No. 69.

Senator LUDWIG —I will find that; thanks very much. So there has not been a reduction in the sea days or the air hours; it is just the way of expressing it?

Mr Jeffery —Not a reduction in the commitment. We made an error in the way we calculated it.

Mr Brocklehurst —In respect of outputs 1 and 2—

Senator LUDWIG —They are negligible but you can cover them.

Mr Brocklehurst —in the current financial year 2003-04, we received some additional one-off revenues. One of them was a diesel fuel rebate that was backdated for a couple of years. The other was a contribution towards a fit-out of Melbourne airport. They are one-off revenues that we received this year that will not be repeated next year, and that explains the reduction.

Senator LUDWIG —So the normal revenue from other sources in outputs 1 and 2 would be at about the four and the one of output 5?

Mr Brocklehurst —Yes.

Senator LUDWIG —So there is a oneoff in the 200304 years.

Mr Brocklehurst —That is correct.

Senator LUDWIG —At previous estimates in February it was indicated that as part of the quarantine initiative Customs was to receive $238 million with which 460 staff were to be recruited. Were those staff recruited?

Mr Woodward —Yes.

Senator LUDWIG —Where have they been distributed to?

Mr Woodward —The major distribution areas are airports, the postal facilities, I think air cargo. They would be the major areas. There may have been a small distribution into the sea port environment as well.

Senator LUDWIG —Is that a fixed funding initiative or is that ongoing?

Mr Woodward —It terminates. My recollection is that the forward estimates indicate that it expires in 200708. Is that correct?

Mr Brocklehurst —That is correct. The funding is in our appropriation revenue up to and including 2006-07.

Senator LUDWIG —What happens past that date?

Mr Brocklehurst —It is subject to review for the continuation of that funding.

Senator LUDWIG —So it is too early to ask exactly what will happen should that funding expire, really, isn't it?

Mr Brocklehurst —Yes. The review has not been completed.

Senator LUDWIG —Has the review started? That is the major review. Will it also be rolled into that, or will it be a separate one?

Mr Woodward —I think there has been discussion in another committee. The genesis of it was footandmouth disease and related issues. There were a number of questions in another committee to the agriculture department, and I think it may have been indicated that there is to be a review initiated in the next six or 12 months.

Senator LUDWIG —That will not be from your section?

Mr Woodward —We obviously are involved. It does impact on us significantly, as you can see.

Senator LUDWIG —These staff are basically dealing with quarantine and—

Mr Woodward —These are Customs staff.

Senator LUDWIG —They are Customs staff to deal with quarantine matters—is that right?

Mr Woodward —There was a decision taken that produced, over four years, about $590 million spread largely between Customs and Quarantine. There was also money provided to Australia Post and also funding provided in relation to improvements in airport infrastructure. Of that roughly $590 million, if my memory is right, about $238 million went to Customs. So obviously we have a very keen interest and will be actively involved in the review.

Senator LUDWIG —Has the review started?

Mr Woodward —No.

Senator LUDWIG —Who will be the lead agency in relation to the review?

Mr Woodward —I would expect AQIS would be the lead agency and they will be consulting closely with us. I have no doubt the two ministers will be heavily involved and interested in it as well.

Senator LUDWIG —And, I expect, the staff as well. Of the funds invested in the CMR from savings made throughout Customs, is it intended that the funding levels will return to their previous state once the project is operational?

Mr Woodward —Can you just go a little bit further in that question? I just want to be sure I understand the import.

Senator LUDWIG —The savings that have been indicated that will be derived from CMR once it is operational—that was my understanding.

Mr Woodward —CMR was not designed as a cost saving mechanism.

Senator LUDWIG —Are you sure?

Mr Woodward —No, that was not the genesis of it. It is one of the projects I have been involved in since it was first designed.

Senator LUDWIG —Perhaps I will put it another way. You have invested significant funds in CMR—is that right?

Mr Woodward —Yes. We have invested significant funds for a couple of reasons.

Senator LUDWIG —And those funds came from where?

Mr Woodward —The funds until now have come from savings which we have achieved in relation to other IT projects and in other parts of Customs. It has been self-funded until this point.

Senator LUDWIG —Those funds, then, have been generated from other areas, but I do not know whether you have identified those in the past for the committee; I think you have indicated they are from savings more generally.

Mr Woodward —That is right. As I say, we have prioritised our IT projects and said that CMR has a higher priority than most—not all—other projects. Some has come from there and some has come from other savings which we have been able to achieve within Customs.

Senator LUDWIG —At some point, though, it will be increasingly difficult to identify savings to invest in CMR?

Mr Woodward —We have reached that point now.

Senator LUDWIG —It seemed to me that you had. Does CMR require any additional money and where will that come from?

Mr Woodward —That is where the $43 million figure came in at our last discussion.

Senator LUDWIG —Yes, that was the last injection, but that was only a one-off. There is no new money in this one.

Mr Woodward —That is right. There are pressures in a number of areas, including the integrated cargo system and the Customs connect facility, and there are other pressures that have arisen in relation to other things that we have been asked to do by the government without additional funding. The aggregate of all of that in our view would require additional funding of about $43 million. We put that view to our minister, it was considered by ministers and we gained the ability to tap into additional funds to enable us to manage for the rest of the current financial year. The consultant's review will look at our funding position for this year and for future years in the light of those pressures.

Senator LUDWIG —There is no new money identified in this budget for CMR?

Mr Woodward —When you say `identified', do you mean have we been provided with any specific funding in 2004-05 for CMR?

Senator LUDWIG —Yes.

Mr Woodward —I think the answer to that is no. We will examine it and we will be putting it to the consultant that additional funding will be required for next year. We will need to convince the consultant, and eventually ministers, of our needs.

Senator LUDWIG —What has occurred, effectively—and correct me if am wrong—is this: the investment in CMR, aside from the $43 million that was a one-off, came from savings from within Customs. You have now come to breaking point, but you are hopeful that the review will come forward with mechanisms to provide for funding for CMR. That leaves the question of where you identified those funds from within Customs originally. Those areas have obviously been without the funding they would otherwise have had, so it is creating pressures in those areas. What happens this year or next year when those areas are also cash-strapped and require additional funds?

Mr Woodward —We are trying to string all of that together. We are trying to deal, firstly, with the additional capital funding requirements, particularly CMR, but there are other capital funding requirements; and secondly, we are attempting to deal with a number of initiatives, including port security, increased air cargo screening capability and a whole series of other initiatives. We will be using access to the $43 million to cope with all of that and then having the consultant's review to establish whether our assessment of the requirement was correct, but also to come up with a figure for next year.

There is no doubt that there are pressure points within Customs. The fact, as we have indicated in last year's PBS and again in this year's PBS, that our staffing numbers are reducing is a pressure point for us. There will be pressures in other areas but, as I said last time, this is nothing new to Customs. Over the last 12 or 13 years we have had far more years in which there have been very significant staffing reductions and pressure points on us than there have been years in which manna has come from heaven.

Senator LUDWIG —Is there a final figure on how much has been invested in CMR?

Mr Woodward —To this year it is about $145 million to $146 million.

Senator LUDWIG —Is that including the one-off $43 million?

Mr Woodward —No, not all the $43 million would go there. The answer to the question is $145 million to $146 million. That will include any funds that are provided out of their own fund, but the actual cost is $145 million to $146 million.

Senator LUDWIG —How much is attributable to that which has been funded out of Customs?

Mr Woodward —Until this year I think the amount we had made available was $80 million to $85 million. That was before this financial year. In other words, we had found savings of $80 million to $85 million which we had invested in CMR.

Senator LUDWIG —When is that likely to be finalised?

Mr Woodward —As for the timetable, remember that there are a couple of important phases, and on the exports phase we have had consultation with the software developers. The system itself has been built—I stress that.

Senator LUDWIG —Yes. I have got some more detailed questions for later about that, so we might leave it till then. I was really after a ballpark figure.

Mr Woodward —We are confident the first phase will get going in October with the cutover commencing in mid-September for exports.

Senator LUDWIG —I might come back to that. There was a matter—I do not normally deal with these issues but it is one that stood out and it is more indicative than individual—involving a case for wrongful dismissal. I will not mention the person's name now, although it may have been mentioned earlier. Are you aware of that case? I think it was heard in Brisbane in May.

Mr Woodward —I am aware of a case that is before the Industrial Relations Commission where the person concerned has appealed against dismissal from Customs.

Senator LUDWIG —So it is ongoing?

Mr Jeffery —It is being heard yesterday, today and tomorrow, I believe, if it is the same case. It commenced yesterday and I believe it is ongoing.

Senator LUDWIG —I do not think I will deal with it if it is ongoing.

Mr Jeffery —I am assuming it is the same case. It is a Queensland related case. Is it a person from Cairns?

Senator LUDWIG —Yes.

Mr Jeffery —It is before the tribunal.

Senator LUDWIG —That is even more than I want to put on the record. If it is ongoing I will not deal with it.

Mr Jeffery —It is before the tribunal today.

Senator LUDWIG —I was not aware of that. I thought it had been finalised. Is that the appeal?

Mr Jeffery —Yes.

Senator LUDWIG —My information was short of that, so I was unaware that it had been on appeal.

Mr Jeffery —Sorry, when you say `on appeal' the person concerned—and I may not be using the correct word—has protested, or has appealed, to the Industrial Relations Commission and it is that which is being heard. It is not an appeal against an Industrial Relations Commission decision; it is an appeal against our decision, for wrongful dismissal. We have taken the decision, the person has gone to the Industrial Relations Commission and that is being heard by the Industrial Relations Commission at the moment.

Senator LUDWIG —However we put it, it is on foot.

Mr Jeffery —Yes.

Senator LUDWIG —I will come back to it when it is no longer on foot and ask a bit more about it then. More generally, given the industrial relations that you administer, you have a rehabilitation section and those sorts of things within Customs—is that right?

Mr Woodward —Within our staffing area if you are talking about occupational health and safety generally, yes.

Senator LUDWIG —Yes, I am. I guess Comcare is the way you deal with your occupational health and safety issues.

Mr Woodward —It involves both of us. We have a responsibility and they have a responsibility.

Senator LUDWIG —Is there a complaints handling process that you use if people have a grievance?

Mr Woodward —Yes.

Senator LUDWIG —Could you take me through that process?

Mr Woodward —I am not sure that I have all the expertise. The person who is probably most expert is not here. I can say categorically, because I have seen the papers coming and going where you get—

Senator LUDWIG —I might leave that. I indicate that I may put it on notice to get a little bit more information about it. I am keen to look at not particularly the individual circumstances of a particular matter—that has its own life—but the processes that Customs have in place to ensure that they deal with employees fairly on occupational health and safety issues, through Comcare, and, in relation to any disputes they might have with their employer, to ensure that there is a proper grievance handling process in place. I would like to come back and explore those issues with you.

Mr Woodward —I am happy to do that.

Senator LUDWIG —Has Customs been referred to the Ombudsman? Has the Ombudsman dealt with complaints that have been raised in Customs? What are they likely to be?

Mr Woodward —In terms of numbers?

Senator LUDWIG —Both.

Mr Woodward —There is an array of circumstances. I do not have the figures before me, but my recollection is that the numbers have certainly declined. There have been a number of cases of tension over the years, but, to be quite honest, I have not myself had to personally deal with the Ombudsman over the last couple of years. There have not been events of such magnitude that the Ombudsman has contacted me and said that he wanted to talk. In 2002-03 the number of complaints was 70.

Senator LUDWIG —Have you looked to see how that compares with other agencies of your size?

Mr Woodward —I am sure we have looked at it, but—

Senator LUDWIG —I am happy for you to take it on notice. Some of these things are indicative of how you interface with the public and how the public perceive you.

Mr Woodward —I take them seriously. I recall that about four or five years ago I had a number of cases put to me which involved my discussion personally with the Ombudsman—the then Ombudsman expressing views in some of these cases on the way in which we went about handling them. I have not had that sort of involvement for the last few years. I am as confident as I can be that we are up with the pack of good performers, but I will do that comparison.

Senator LUDWIG —Perhaps you could look at that. The same thing applies to the issue I talked about earlier—staffing—and whether, if you have a complaints process or a complaints handling process, there is a way staff can deal with their grievances. Do you have statistics on those?

Mr Woodward —We can outline that. We can certainly get some statistics.

Senator LUDWIG —That might be better.

Mr Woodward —But can I stress that with those statistics—as distinct from the general Ombudsman statistics—you have to bear in mind the particular work environment. A lot of our people work in a physical environment and therefore are more subject to back strains, breaks and everything else than is a person who works solely in an office environment. But we will provide those statistics for you.

Senator LUDWIG —I understand that. But there are also mechanisms you can put in place to mitigate that and deal with some of those issues. You are not the only workplace that has physical work associated with it. However, 70 seems a lot in relation to the Ombudsman. I would not mind if you look at that.

Mr Jeffery —Can I just comment that it is in a table in our annual report. Quickly looking at that, the Ombudsman exercised discretion not to investigate 62.

Senator LUDWIG —That makes it look a bit better.

Mr Jeffery —There will be some flowing over years, and he actually finalised 82 complaints in that year. Over the last three years, there were 83 in 2000-01, 80 in 2001-02 and 70 in 2002-03. So over the last three years it has gone down a bit. But we can get you figures for some earlier years. As Mr Woodward said, eight to 10 years ago we were the subject of some very significant Ombudsman inquiries.

Senator LUDWIG —I do not need to go back that far. I am only looking at the current performance. I do not require you to go to that length. That employee matter raised in my mind a number of other issues, and that is what I am interested in. Some of the indicia as to how you perform are Ombudsman complaints, grievances by staff, grievances handed to you by the public at first instance, and how you deal with them. And then there is the bigger question of morale within the organisation. That is really the last question. It goes to staffing levels, funding and all of those issues. More generally, how do you find the morale currently?

Mr Woodward —It is almost an impossible question to answer. If you ask a dozen different people in any organisation you will probably get a dozen different answers. There is certainly a lot of confidence and satisfaction in the role we currently have to perform and the way in which we discharge it. There is no doubt that some areas feel under pressure; some feel under considerable pressure. There is some uncertainty that is inevitable as we move into areas that we have not moved into as vigorously in the past. Maritime security is an example of this. There is certainly unease about staffing reductions which have been in the PBS, and we have certified agreement negotiations starting now which will produce another array of knowledge on our part and maybe a few more tensions as well. But I hate to use expressions like `excellent', `very good', `good' et cetera because I am just not sure—I think the broad descriptions are more meaningful than those sorts of terms.

Senator LUDWIG —Have you done any staff surveys on some of these issues?

Mr Woodward —We do do staff surveys. We do a number of surveys. We have done one staff survey which has identified areas in which we could get better.

Mr Jeffery —A copy of the last staff survey was provided to the committee.

Senator LUDWIG —When was that? I may have asked for that.

Mr Jeffery —Yes, you did.

Senator LUDWIG —That is the last one that you have done?

Mr Jeffery —There has not been another one since then.

Senator LUDWIG —Have you given consideration to doing a staff survey or some such way of measuring—

Mr Woodward —We do them on a regular basis—I might be reminded as to the frequency, but it is every couple of years. We also do industry surveys so that we not only get the feel of our staff about what we do and how well we do it, we also get the views of industry. We try and put the results in some sort of trend analysis, which is fairly difficult if you have different firms undertaking the staff surveys. I think we do it quite systematically.

Mr Jeffery —Senator, there was one due this year but we deferred it until next year because we did not think it was appropriate to run one in the middle of certified agreement negotiations—that might introduce some biases into it. But it was due during this year and we will probably run it during next year.

Senator Ellison —This might be an opportunity for me to add that my dealings with Customs officers around the country have been numerous over the three years I have been the minister. I have certainly been impressed by the commitment of Customs officers and their dedication to the job, and with that has to come a strong morale. Of course, in some areas of Customs there are pressures because it is not an easy job. But I have come across people in Customs from all walks of life—pharmacists, people with tertiary education, people from other services who have joined Customs because of the interest in the job—and that is quite significant. I think it is a matter for significant praise that when the service advertises a job it is oversubscribed many times over.

CHAIR —Thank you very much, Minister. Senator Ludwig, will you be continuing now?

Senator LUDWIG —Yes, unfortunately. Perhaps a general position on where you are now financially would not hurt either. I am looking at the outcomes and outputs map on page 103. Does that express what I think it does in that there is a total price of outputs of $879.9 million and a departmental outcome appropriation of $702.619 million? Does that mean that the price of your output—in other words, the price to run your department, if I am right—is $879.9 million? Is that right?

Mr Brocklehurst —Yes.

Senator LUDWIG —You do not have that amount? It says that the departmental outcome appropriation is $702 million. So you add those two together?

Mr Brocklehurst —Yes, if I could just clarify that. There are three components to the $879 million, in essence. There are appropriations that we receive from the government, which is the $702 million; there are the resources we receive free of charge from the Department of Defence in respect of the civil maritime surveillance program, and that is $128 million; and there is various other revenue that we get of $48 million, the bulk of which is money that we get from the ATO in respect of GST administration activities.

Senator LUDWIG —That is those kiosks that are run—

Mr Brocklehurst —That is under other activities, yes. That was $48 million.

Senator LUDWIG —What then is your total expenditure—in other words, the cost of running the department—in comparison to that? It seems that we have been talking this afternoon about cost pressures. Is there a sum total of how much you need to balance your budget? I understand that the review is going to try to identify some of those, as well.

Mr Woodward —The capital side is where we are under real pressure. That is the $43 million capital injection that we have been talking about. We are still six weeks out from the end of the year. The last figuring that I saw would suggest that we will probably call on about $30 million of that $43 million capital injection.

Mr Brocklehurst —That is our current estimate.

Mr Woodward —That might change a bit but we may not need to call on the whole $43 million.

Senator LUDWIG —You are hopeful, if I can use that expression, that the review will then identify—

Mr Woodward —We are hopeful that the review will confirm that and, secondly, it has been tasked with looking at our requirements for future years. The report will cover both.

Senator LUDWIG —We will look forward to that. Are there any planned or proposed public relations advertising projects in the coming 12 months on the board?

Mr Woodward —There is one for which we are not paying anything. One of the TV channels—

Senator LUDWIG —That is a helpful one. Minister, are you funding that one?

Mr Woodward —One of the TV channels has expressed interest in the sorts of things that we do and may well produce a series on Customs at work. We are cooperating in that but we are not paying for anything.

Senator LUDWIG —Can you tell me about that?

Mr Woodward —I cannot say any more than if it comes off—and there are commercial realities; it might prove to be a dud—there could be 10 or 12 episodes of a series dealing with everyday Customs activities.

Senator LUDWIG —Like `Reality Customs'.

Mr Woodward —Yes, like `Reality Customs'. It might be a dud, in which case you will not see it.

Senator LUDWIG —I do not want to sink your boat before it sails. I was just trying to understand. You have sparked my interest.

Mr Woodward —If you are talking about large-scale advertising, I am not aware of any that we are going to do. But we do things like publicising phone numbers—hotline type things—

Senator LUDWIG —I was really looking at major advertising contracts and whether you have any consultants who have been selected to tender for information kits or that kind of thing. I am not talking about the bags of trinkets or things like that that you put out—although they sometimes can amount to significant amounts of money. I know that you have those. You have your Coastwatch program, your numbers and things like that.

Mr Woodward —The Frontline program and those sorts of things.

Senator LUDWIG —That is part of your ongoing operation in support of the good work you do. I was more interested in whether there were any major consultancies for projects or advertising budgets that have been proposed for the next 12 months.

Mr Woodward —I am not aware of any. If we have to correct that, we will certainly do that.

Senator LUDWIG —I am talking about any major contracts that have been let, or may be let, in the next 12 months. If there is, you could perhaps tell me their cost and what they intend to do.

Mr Woodward —Do you mean contracts generally—contracts unrelated to advertising?

Senator LUDWIG —No, I mean contracts related to advertising.

Mr Woodward —We will get back to you in relation to advertising, but I am not aware of any large-scale advertising envisaged of the kind you have spoken about.

Senator LUDWIG —Contracts, as you know, should appear on your web site.

Mr Woodward —They do.

Senator LUDWIG —And in your annual report if they are over—

Mr Woodward —All of the big things we are talking about have been discussed in this committee in the past.

Senator LUDWIG —I think there is a finance and public administration requirement for that to be dealt with, so I do not need to go there; it will be there for me if I wish to have a look at it. I am only interested in this in relation to advertising. I would not mind asking about the show. Is it a show? What can you tell me? Is it subject to commercial-in-confidence?

Mr Woodward —I do not want to say too much because of the commercial interest of one of the channels in the show, and they are trying to gazump some of the other channels.

Senator LUDWIG —So there is competition for `Reality Customs'.

Mr Woodward —The closest thing I can think of is the comparable New Zealand program which was run in New Zealand a couple of years ago and in Australia within the last 12 months.

Senator LUDWIG —I mustn't watch enough television!

CHAIR —We will just have to make sure that we go home early tonight, Senator Ludwig, and you can get all the television viewing you want.

Senator LUDWIG —I had one in mind but I decided not to mention it.

CHAIR —No, best not to go there.

Senator LUDWIG —No, I am not going to go there. Perhaps you could take this on notice and if there is anything to add or if it comes to pass, we usually have a return date for when questions on notice are due back.

CHAIR —That is 16 July.

Senator LUDWIG —If something happens between now and then that you can tell us about that might be helpful to the committee, please let us know.

Mr Woodward —Yes.

Senator LUDWIG —Otherwise we will leave it alone. I turn now to the container inspection area. Has Singapore now implemented a high-volume X-ray inspection at particular terminals?

Mr Woodward —I have a feeling that they have, but I am not sure there is anyone else here who can confirm that with absolute certainty.

Senator LUDWIG —Perhaps you could take it on notice.

Mr Woodward —We will take it on notice. We know that China, Hong Kong, the United States, Canada and Singapore have—I am pretty sure, although I have not visited it myself. We will check.

Senator LUDWIG —The area that I was interested in was the type of technology utilised, the processing capacity and those sorts of issues that surround it. Has anyone from the ACS inspected the installation? You indicated that you have not been there.

Mr Woodward —I personally have not been there. I think what might lie behind your question is that, as part of the US security initiative, there was a program involving the identification of the 20 top ports in the world.

Senator LUDWIG —Yes.

Mr Woodward —Singapore was one of those and there are special requirements flowing from the agreement between Singapore and the United States in relation to placement. In most ports it involves placing—I cannot say so categorically—US officials in that country.

Senator LUDWIG —Yes, they have an outreach program.

Mr Woodward —There is then the provision of information back to the United States. Singapore is part of that program. As to what particular equipment it has got, I do not know; but we will find out for you.

Senator LUDWIG —And you were not involved in any of that anyway as Australian Customs, were you? Did they come and ask for help?

Mr Woodward —It is not for help.

Senator LUDWIG —I will rephrase it then: for assistance.

Mr Woodward —There has been discussion between the US commissioner and me. I stress that the aim was for CSI to be applied in the large ports of export to the United States. We are very small in comparison with the rest of the world so far as containerised sea cargo exports to the US are concerned.

Senator LUDWIG —I might leave that. It is a matter I can come back to another time or I can put my questions about it on notice if I need to. The CEF facilities in Sydney and Melbourne do not operate 24 hours, do they?

Mr Woodward —No. From memory it is 16 hours in Sydney and Melbourne. As I said before, the others—Brisbane and Fremantle—operate around 12 to 13 hours a day, five days a week, with the ability to do further work at the weekend if particular circumstances arise.

Senator LUDWIG —Has any consideration been given to extending that to 24/7?

Mr Woodward —There has been consideration given to closer matching of the hours of work of the stevedores in each of those cities and when Customs operates. That issue has been picked up as part of the current review of maritime security. I am sure that that will be considered by the government.

Senator LUDWIG —Is the review of maritime security a report? Has that been made available or is that one to cabinet?

Mr Woodward —The review is still continuing. It has not been completed. To the best of my knowledge there is no report. The hours are 15[half ] in Melbourne, 15[half ] in Sydney, 10.5 in Brisbane and 13.5 in Fremantle.

Senator LUDWIG —I think you indicated earlier that the cost for each container was about the $280 mark for handling.

Mr Woodward —That is the logistics component of it. The real cost is about $280.

Senator LUDWIG —The real cost is $280 and the logistics—

Mr Woodward —What we have done is spread it. Our approach so far has been to spread it through the import charging mechanism. From recollection, the $23 million was about $14 extra. It was a bit over $14, which has been spread rather than imposing $280 through the forwarders or brokers on the owners of the containers.

Senator LUDWIG —So the cost would be $280 if you charged each individual user of the container?

Mr Woodward —Approximately $280.

Senator LUDWIG —If you then spread it throughout the industry it amounts to about $14 per container extra.

Mr Woodward —About $14 extra for the processing charge. But that only recovers a certain amount. As we said on the last occasion, if we were to recover the additional amounts we have spoken about before—that is, the $10 million or the seven plus three—that would add another $5 to the charge.

Mr Jeffery —To clarify, it is not $14 per container; it is $14 per import entry. Rather than charge per container we put it across entries and charged the whole of the importing community on an entry.

Mr Woodward —It is a consignment. In other words, a consignment could be two containers or there could be 10 consignments in a container.

Senator LUDWIG —Is that fair? Is that a fair way of doing it? Why not per container rather than—

Mr Woodward —It was the subject of robust discussion with industry. Various views were expressed. More people were inclined to support spreading it than to say, `We'll hit the individual owners with $280.'

Senator LUDWIG —No. I meant per container across all containers as distinct from per consignment. Or was that too hard to identify?

Mr Woodward —We are trying to think of the practicalities of actually administering it. We administer charges at the moment on a consignment basis. It would be imposing a totally new mechanism with, I think, quite significant overheads, which would not make sense.

Senator LUDWIG —I just needed to clarify that in my own mind. Thank you. In terms of the cartage—do you call it cartage?—between the containers—

Mr Woodward —The logistics charge.

Senator LUDWIG —There are different contractors at different ports that do the cartage or the logistics transport—is that right?

Mr Woodward —Yes. From memory, it is Patrick in Sydney and Melbourne and a smaller firm in Brisbane, the name of which I cannot remember. We can provide that to you.

Senator LUDWIG —Yes, please, could you take it on notice. I was after the payment made in the last year or last financial year to the various firms, and which firms they are, for logistics support in X-ray. That amount is isolated and budgeted. Is that the total amount? You have to find it for the next financial year.

Mr Woodward —Others may be able to explain it more simply than I can, but what we have said is that we aim to move about 80,600 containers a year. That is what we aim to do. We work out the cost of movement per container and then work backwards from that to say, `Okay, how much of an increase in the import processing charge would be necessary to recover the contract prices that have been agreed in each of the various ports against the background of a requirement for just over 80,000 containers and the average cost of moving in each of the various ports?' When I said 280, I think I am right in saying that that is probably an average figure. There may be slight differences between the four facilities because of location and everything else.

Senator LUDWIG —Is that amount for the next financial year out of your current budget or is that the 10-odd—

Mr Woodward —That is the 10. In other words, we have three-quarters of it in round terms now, which we are recovering through the import processing charge, but we cannot recover the rest because of the ceiling that is applied so the government has appropriated funds for that.

Senator LUDWIG —What is the total amount?

Mr Woodward —Roughly $23 million.

Senator LUDWIG —The 80,000 containers represent what percentage of the total container movements?

Mr Woodward —About five per cent.

Senator LUDWIG —The total is?

Mr Woodward —Twenty times 80,000.

Senator LUDWIG —I thought I would put you to the test rather than me at this time of the day.

Mr Woodward —It adds up to about $1.6 million.

Senator LUDWIG —About one-third of what San Francisco does in a year.

Mr Woodward —You have a better knowledge of San Francisco than I do.

Senator LUDWIG —It is a lot, isn't it? While on that topic, I did appreciate that Customs was very helpful in that too and I want to put on record that I was appreciative of Customs' support in allowing us to be able to undertake some of the work that we did over there.

Mr Woodward —Thank you.

Senator LUDWIG —My compliments to your staff based overseas. They are of an excellent and high quality. I can only concur with what the minister indicated earlier about Customs. I have always found them to be that and I have also utilised, as I think Ms Batman knows, inspections in other places within Queensland and Sydney and found the same. That is an aside but it is an important thing to put on the record.

Mr Woodward —Thank you.

Senator LUDWIG —The X-ray drive through portals at the major ports are for full containers, so we are only checking full containers at the moment, aren't we?

Mr Woodward —There is the potential to look at empty containers, but at the moment I think I am right in saying—

Ms Batman —We do a range of empties as well. Empties go through as well. The percentage is very low.

Mr Woodward —There are some empties that go through but the numbers are not great.

Senator LUDWIG —And the reason is that it may not be empty?

Mr Woodward —There have been quite significant drug related seizures where the drugs have been found in the structure of the container as distinct from within the container itself.

Senator LUDWIG —And in the figure of five per cent that you indicated, do you benchmark that according to overseas requirements or to what the US will require or Europe?

Mr Woodward —We do not benchmark it. We know that with Canada the comparable figure is something like three per cent and about five per cent for the US. I think that the five per cent for the US is an increase on what they were doing. I think they were doing about two per cent or three per cent a couple of years ago. We think we have a lot more information in relation to cargo, its movement, importers, exporters and forwarders than many other countries do, and we are going to have more when CMR comes on stream. We have a fairly sophisticated intelligence system—I think better than some other countries—which enables us to identify the containers in which we are interested and therefore focus on those most likely to produce results rather than adopt a random approach. The CEF is obviously capable of doing more but at the moment I could not advance a strong argument to say that if our intelligence systems operate well enough there is justification for examining more than five per cent.

Senator LUDWIG —You indicated that the US does about five per cent. Where is that figure taken from? The figures I have, which were from a US Senate committee, seemed to indicate that it was much higher than that—unless we are not comparing apples with apples.

Mr Woodward —It depends where you look. I have got a paper from the Center for Trade Policy Studies, Protection without protectionism, by Aaron Lukas of the Cato Institute, which said that for sea containers the increase has been from two per cent to 5.2 per cent.

Senator LUDWIG —Yes, but if you look at movement by land, sea or rail the figure is now about 12.1 per cent.

Mr Woodward —We can really only compare it with sea. They have got a more complex border than we have with the rail and—

Senator LUDWIG —Yes, with Canada and Mexico.

Senator Ellison —I think that you will find that if you bring in those two the rate changes because the land borders are easier—

Senator LUDWIG —They seemed to suggest they are very porous.

Mr Woodward —Then they had special arrangements which involved precertification of firms, carriers and, indeed, drivers of vehicles. But I think the comparison is best with sea container figures and the best figure that we can come up with is about five per cent. If there are other figures that are better than ours then we will certainly take those into account.

Senator LUDWIG —That was my recollection. I think that when you then introduce rail and land it becomes a difficult comparison to make.

Mr Woodward —It is.

Senator LUDWIG —It is one that I guess can be made but I do not know whether it is quite valid in this instance. Rather than having that argument, I was more interested in whether you benchmark and what you use as your benchmark figure. It does appear that you do that.

Mr Woodward —We did not start that way. We believe that the information we have, the systems we have and the intelligence we have are better than most other countries that we would be benchmarking against. So we have said: what is the most appropriate figure within financial restraints in the Australian environment? Obviously we have regard to what others do but if the US increased it to 10 per cent or 15 per cent we would not automatically say that we need 10 per cent or 15 per cent because the circumstances are different.

Senator LUDWIG —That is not what a benchmarking exercise does either. It tries to identify a range of what would be comparable. But I will not go into what a benchmarking exercise is; I am sure that you can find out for yourself. What was the complete capital cost of installing the four current machines?

Mr Woodward —I think it is about $190 million, but we will correct that if necessary.

Senator LUDWIG —And the operational costs?

Mr Woodward —That was the amount that was budgeted by the government for a four-year period, from memory.

Ms Grant —I will give you the breakdown of that. The $190 million was the total cost for the four years. The operating cost is $81.1 million, the capital cost is $29.2 million and the logistics cost is $80 million. That should add up to about $190.3 million, and that is over four years.

Senator LUDWIG —Does that include depreciation?

Ms Grant —The depreciation amount is included in the operating cost.

Senator LUDWIG —Is that depreciation to zero over the four years or is it a depreciation of a fixed percentage over the four years?

Mr Woodward —Could we take that on notice?

Senator LUDWIG —Yes, I am happy for you to take that on notice.

Mr Woodward —We would expect that they would have a life longer than four years. I would be surprised if it depreciates to zero over four years.

Senator LUDWIG —I used that as a bad example. They would seem to have a longer tail; they would be residual and they would be carried forward.

Mr Woodward —We can provide that for you.

Senator LUDWIG —Has the recent ASIO assessment of risk for port security been provided to Customs?

Ms Grant —Yes, it has. We have a copy of that report.

Senator LUDWIG —Is that available?

Mr Woodward —I am sure it would not be available.

Senator LUDWIG —I did not think it would be but I had to ask. How will it be used and what will come of it? It seems that a lot of reports and assessments are made, and it is very difficult for this committee to gauge what the outcomes of those assessments are, what is put in place by way of what was recommended in those reports and what was followed up by government in taking heed of the relevant assessment and doing something about it. We get left with a gap where an assessment is confidential and cannot be provided. Nothing might come of it, for all we know, but it might have made significant recommendations for port security or other issues. Is there something with which you can help me regarding that?

Mr Woodward —The first thing to bear in mind is that the driver for maritime security is not customers; the driver for maritime security is the transport department. They have the prime carriage of the implementation of the new international maritime organisation requirements for both ports and vessels. They carry the legislation through. We have been identified as a law enforcement agency for the purposes of that legislation, but the driver is not this body. We will be heavily involved but it is the transport department that drives it.

Senator LUDWIG —I was not asking more generally; it was only what involvement you will have. You will not be the lead agency.

Mr Woodward —We are a law enforcement agency. We have a heavy physical presence. We are present at about 35 of the 65 ports throughout Australia—more than anyone else. We will be heavily involved in relation to first port boarding of vessels, to the extent that our resources permit, working on behalf of the immigration department in the checking of passports, the identity of seafarers and in the assessment of cargo. We will have a role, obviously, in relation to a whole array of potential Commonwealth offences that might be committed, but as a law enforcement agency under the maritime security legislation.

Senator LUDWIG —One of the major threats, as I understand it, is what could come through in containers which are, effectively, currently screened by you. It is partly your job to look after the process of bringing them ashore and releasing them. What I am trying to do is elicit information that you can provide to the committee without divulging the content of the assessment, so you will have to bear with me. Are there recommendations for augmented inspection programs or the like as a result of the assessment that you will put in place? What are you capable of telling the committee about?

Mr Woodward —I mentioned before that there is a review of all aspects of maritime security which is under way. There is an interdepartmental committee which is looking at it. I am not a member of the committee, but I am sure they would have taken into account the ASIO threat assessments. That committee has not yet reported.

Ms Grant —No, the process is still being worked through. All the relevant agencies on that IDC have made a contribution, as has Customs. But the reporting time line for the work of the IDC is June, and then it will be going for further government consideration.

Senator LUDWIG —Has the 24-hour rule that the US has implemented for cargo manifest been considered by Customs?

Mr Woodward —The period in advance of loading of vessels?

Senator LUDWIG —Yes.

Mr Woodward —Yes, we have considered it. We are certainly not applying it at the moment, because of the better information and better intelligence that we have. We do not believe at the moment that there is a need for that sort of information to be provided 24 hours in advance of loading, as the Americans have required. There is a set of statutory requirements now: 48 hours or 24 hours depending on how far the vessel is from arrival in port. Customs believe, at the moment at least, that we get the information we want in a timely way to enable us to risk assess the vessel and the cargo on the vessel.

Senator LUDWIG —Are there any Customs offices which are open the same hours as ports? It was a question you answered earlier, in that the stevedoring industry is not in sync with the cargo hours that you operate—two shifts of 16 hours in one location. You indicated in answer to that—

Mr Woodward —There are some ports where some stevedores currently work on Saturdays, and we do not as a regular rule work on Saturdays. If there are urgent inspections required of us then we have got the ability to actually do it. But we do not as a routine work beyond the hours that I have mentioned to you. As to whether we should do any more than that, that would be an issue that, I am sure, would be picked up in the review. There would be a whole host of priorities, I am sure, and where it would fit in the priorities I do not know.

Senator LUDWIG —So of the five per cent that are sampled they will not be sampled from a Saturday.

Mr Woodward —They would be sampled from a Saturday but they would be picked up and looked at on the following Monday.

Ms Grant —If it were a particularly red-hot target, it would be dealt with on the Saturday; it would not be held over until the Monday.

Senator LUDWIG —I was more after the ordinary processes. I expect that if it were a red flag one—

Mr Woodward —If it were red-hot, we would take it off. But we would not let too many people know that we had.

Senator LUDWIG —Of the narcotic or other finds in containers this year, how many were the result of prior intelligence? It is probably a difficult issue to tell. What I am trying to gain is: which ones were picked up by the X-ray? I do not know whether you can provide that detail.

Mr Woodward —I honestly do not think we can. What we have said is that intelligence underpins everything that Customs does. To a very significant extent we are heavily dependent on AFP intelligence. They have got the overseas network; they have got something like 35 or more posts overseas. We work very closely with them. We get intelligence from them. In some cases it could be specific intelligence and in other cases it could be very general intelligence. In other cases the AFP, the Crime Commission and other agencies have no involvement at all. Some of the most interesting seizures we have had have emanated from people coming through airports. Our people have asked questions and looked at documents that have led us and other law enforcement agencies to explore cargo movements, but that has come from completely unrelated circumstances.

Senator LUDWIG —With respect to the containers on the wharves there is a three-day free-storage limit. Do you work with the stevedoring companies to ensure that those containers that are caught in that inspection do not create a breach of the three-day limit?

Mr Woodward —I know the problem you are talking about.

Senator LUDWIG —Nobody wants to incur a breach.

Mr Woodward —We have been involved in a number of discussions with brokers, forwarders and stevedores in an attempt to see if we can reduce the number of circumstances in which the three-day limit is exceeded and a charge imposed for an extra day or more. We have been working very closely with stevedores and others in an attempt to reduce that. I think the number of complaints has reduced significantly. Ms Grant has been involved in some of those negotiations and she might have more information.

Senator LUDWIG —I was also looking at whether industry advised you of what the cost is to them when the three-day limit is breached and they are required to contribute.

Ms Grant —We have all of that information. In the first instance we work with the stevedores so that the order in which they deliver boxes to our container examination facilities minimises complications with the free storage days on the wharf. They work closely with us in the management of the movement of those containers. So if we have selected a container that has less storage time available to it than another container, they will deliver the box that is going to run out of free storage before something that has a lot of storage left on it. The stevedores do that in conjunction with us.

There can be a range of costs to industry. If they have booked a truck and contract labour to unpack the container when it is delivered, but when the truck turns up to collect the box it is not ready because it has not come back from the Customs examination facility, they will incur the costs of the truck, the downstream contract labour and the additional storage charges while the box is on the wharf.

Senator LUDWIG —Obviously, it is a matter that you have looked at. I wonder if you could take it on notice unless you have those figures there. Have you spoken to the stevedoring companies and have they indicated what it costs them? Have they told you what the problem is and how it might be resolved—firstly, where they incur breaches and, secondly, how much those breaches might amount to? I would be surprised if they had not told you the costs that they had incurred as a consequence of not being able to get the box inspected within the three days. What are the outcomes, if any, that you are currently canvassing to resolve some of those outstanding issues with stevedoring companies?

Ms Grant —I can certainly take the question on notice. We have done the statistics and found that 96 per cent of all containers inspected by Customs are returned to the wharf with free storage days remaining. Of those containers, 81 per cent have two or more days of free storage and four per cent of containers are being returned to the wharf with no free storage days. That represents 0.2 per cent of the total loaded containers coming into Australia.

We have also found that late reporting of the cargo influences some of those boxes that go back with no free storage days, because by the time the cargo is reported to us they have already cut into their free storage days. So we take the position that that is more the result of the cargo reporter not meeting the requirements of the Customs Act rather than our process causing additional costs that could have otherwise been avoided.

I think the costs of the storage charges were provided in response to a question on notice from the last hearings, but I have some of those details here. Patrick Corporation charge for the first three days beyond the free-storage period at $49.50 a day for a 20-foot container or $99 a day for a 40-foot container. On the fourth day and thereafter it rises to $121 a day for a 20-foot container and $242 a day for a 40-foot container. P&O have similar figures. For the first three days beyond the free-storage period it is $44 for a 20-foot container and $88 for a 40-foot container. For the fourth day and thereafter it is $110 for a 20-foot container and $220 for a 40-foot container.

In our discussions with the stevedores we have found some interesting statistics that indicate some of the containers that have been through our examination facility and are returned to the wharf within the free-storage days are still incurring storage charges because the owners of those boxes are not organising their removal from the wharf. We tend to get complaints about that but we can show that has not been impacted by the sojourn in the Customs facility. There is quite a range of factors impacting on this whole storage charge issue. The stevedores have been very cooperative with us in trying to streamline the process and minimise any storage charges resulting from this process.

Senator LUDWIG —Isn't there a 24-hour requirement by the act as to notifying the port of the manifest information?

Ms Grant —The Customs Act requires 48 hours prior to a vessel's arrival in which the cargo is to be reported.

Senator LUDWIG —So that will tell you that the box will turn up in 48 hours and that gives you the ability to be able to select it and return it within the three days. Is that how it works?

Ms Grant —We should be able to select which boxes we would like to go through the container examination facility as soon as we have that cargo report in our system, so that when the cargo is actually being discharged from the vessel the stevedore can put the boxes selected by Customs in our stack, the Customs stack, which is part of the agreement they have with us. Then those boxes can be moved to the container examination facility as soon as they are off that vessel.

Senator LUDWIG —So any of those in breach of those requirements would then eat into their available time because you still might want to apply an inspection to some of those boxes?

Ms Grant —That is correct.

Senator LUDWIG —Do you know what percentage that is?

Ms Grant —Yes. I have a two per cent incidence of late reporting in Melbourne, a 10 per cent one in Sydney and a nine per cent one in Brisbane and Fremantle of those boxes that we have selected for examination.

Senator LUDWIG —What about a total for those that breach the 48-hour rule? I am happy for you to take that on notice.

Ms Grant —I actually have the figure. We have got about a 90 per cent compliance rate nationally for cargo reports being lodged on time with Customs.

Senator LUDWIG —Is there a program to ensure that you can increase that to whatever the target might be? Have you benchmarked that figure to ensure that you are doing as well as you can?

Ms Grant —The cargo report is a fairly key component for us in our risk assessment process, so we would aim to have as close to all cargo reports as possible reported within the time frames that we require. The compliance part of Customs has been undertaking a cargo reporting compliance exercise to lift the compliance rate for cargo reporting—a few years back the reporting was around a 50 per cent compliance rate—and that program has given us the result of lifting it to about 89 or 90 per cent.

I think that program has been a program of educating the cargo reporters and working with them to find the impediments—why they cannot report to us. I think it is a reasonable assessment to say we have probably plateaued at around that point with an education program, but we continue to monitor the situation and work with individual companies to make sure that there are no issues impeding our better compliance.

Senator LUDWIG —So there is no current investigation to improve that figure?

Ms Grant —The cargo reporting compliance regime is an ongoing program. What I am saying is that the amount of effort we are going to have to put in to get that last 10 per cent is probably quite large, and we are working on it.

Senator LUDWIG —It might exceed the amount of effort you need to put into it.

Mr Woodward —Senator Ludwig, can we correct two things that we have told you?

Senator LUDWIG —By all means.

Mr Woodward —You mentioned the ASIO threat assessment. I imagine we are talking about the same thing. I have just been provided with a news release from the Deputy Prime Minister and the Attorney-General in which they released a comprehensive assessment of the threat to Australia's shipping and port infrastructure from terrorism. It was released on 30 April. That is all that we have. I have no other information in relation to threat assessments. There is one other point, which Mr Jeffery will deal with.

Mr Jeffery —In my comment on the revenue from other sources under output 3, I think I confused two issues. The reduction from $156,000 to $129,000 reflects the movement into our base budgeting of the money we had previously received from DIMIA for Coastwatch, which is referred to on page 107, which is about $27 million a year. That is now not reflected in revenue from other sources; it is reflected in part of our total appropriation. DIMIA transferred that money to us. Previously we had got it on an annual basis—about $27 million a year.

Senator LUDWIG —So DIMIA are still transferring that money to you?

Mr Jeffery —They were; it has now been taken out of their base appropriation and put into ours. It is in our appropriation to Customs and it does not appear under the—

Senator LUDWIG —I see.

Mr Jeffery —My confusion was with revenue from other sources. I think I confused the issue. The reference to the transfer is on page 107, where it indicates that some $114.4 million over four years has been transferred from DIMIA to Customs.

Senator LUDWIG —I was going to get to that; now I understand it. Perhaps that is a bold statement to make. You have helped to clarify it a little. So there was no mistake in relation to the calculation of the hours?

Mr Jeffery —There actually was, in any event, and we corrected that. The numbers are not all that different, and that is where I got confused. We had answered the question on the one I referred you to.

Senator LUDWIG —We dealt with the neutron scanner earlier. You are still a little way off knowing how much it might cost, because it is only in a feasibility stage—that is right, isn't it? That is my understanding from what you said earlier.

Mr Woodward —The money that has been appropriated will enable us to complete the trial at Brisbane airport, including the payments we will need to make to CSIRO in relation to that equipment.

Senator LUDWIG —What about ordinary air cargo that is placed in containers and put in aeroplanes. How is that currently being dealt with? You are developing the neutron to deal with that. How is it dealt with now?

Mr Woodward —At the moment—to describe it in non-technical terms, because I do not know the technical ones myself—the individual parcels, boxes or whatever which make up these ULDs are put through our small X-ray facilities in depots. We currently X-ray about 70 per cent of them, but it is pretty labour intensive. A lot of X-rays are involved, and it means that screening of them occurs a long time after they actually leave the plane. There are certain risks in that.

Senator LUDWIG —And that is why you have been examining other ways of trying to do it prior to loading.

Mr Woodward —That is right. Mass screening closer to the point of arrival in case there is anything in those consignments that we would not want to leave the airport.

Senator LUDWIG —In the last 12 months have ships' masters provided all the information that they are required to in advance, like crew lists and things? I suspect there are statistics on that, Ms Grant.

Ms Grant —We do have good compliance with ships providing the ship's crew list to us prior to their arrival.

Senator LUDWIG —What is the compliance rate over the last 12 months?

Ms Grant —I cannot give you an exact percentage, but it is not an area of noncompliance.

Senator LUDWIG —So you do get all the lists from the masters or you do not know whether you do?

Ms Grant —Yes, we certainly get all the lists from the ships' masters; I am just not sure if they are all precisely within the 48 hours prior to arrival. But we certainly have them by the time the vessel is alongside and we need to have the information.

Senator LUDWIG —How many ships are boarded to check the crew list? As I understand it, the way it works is that the ship's crew list should turn up 48 hours before the boat arrives, and you have then got it to check. It might go to Immigration and you would also look at it. When the ship arrives, how many do you board to check the crew list?

Ms Grant —The national average at the moment is about 70 per cent of all first port arrival vessels.

Senator LUDWIG —How many of those will indicate discrepancies between the crew lists provided 48 hours in advance and what your ship boarding shows?

Ms Grant —We do not have a very high incidence of discrepancy between crew lists and those people present. I do not have a statistic I could give you here. I would have to take that on notice.

Senator LUDWIG —By all means—anything like that. If you do not have it here, I am happy for you to take it on notice and get back to me.

Ms Grant —I will certainly take it on notice.

Senator LUDWIG —Do you have what might be called absconder rates? How many people do not return to their ship?

Ms Grant —In a sense, Customs only knows about deserters, as we refer to them, if the ship's master reports to us that some crew have been found to be missing on departure. I think there has been some media reporting recently that it was around 103.

Senator LUDWIG —I am happy for you to take that on notice and get back to me. What I was looking for was the process involved. If the ship's master advises you that someone has absconded, how many were there in the last two years who did not return to their vessel when it sailed?

Ms Grant —The particular figures we have got refer to an article that was in the Courier-Mail earlier this month, which reported that there were 103 deserters. It reflects a question on notice to which the department of immigration provided some figures for a Department of Transport and Regional Services question on notice. They have given us the information that of the 103, 39 have since departed Australia, 46 have visas to remain or await decisions on their visa applications and 18 remain unlawfully in Australia.

Senator LUDWIG —And that is information provided by DIMIA? It certainly sounds like it.

Ms Grant —That is 0.015 per cent of all sea crew arrivals during the period, or about one in every 6,700 crew arrivals.

Senator LUDWIG —I understand that passports have now become compulsory for crews—is that right?

Ms Grant —Yes, from November last year.

Senator LUDWIG —Is there any failure to provide passports when crews arrive that you have detected? If you board a ship, do you check for passports as well?

Ms Grant —We do. The compliance rate has been very good. Since the requirement came in the majority of crew have had the necessary identity document and passport to present.

Senator LUDWIG —Do you have the statistics of the 70 per cent that you inspect and check the crew list and then check for discrepancies between the crew list and the crew on board? You say there is a very low incidence of variations or discrepancies between those lists. What about the discrepancies in those having a passport—do all of them have passports? How many, on those 70 per cent of vessels you have inspected, do not?

Ms Grant —I will need to take that on notice to get the precise figures.

Senator LUDWIG —Thank you. You might not be able to answer this but how do you select which vessel will be boarded? Is there a preference given to FOCs, or is there a particular threat assessment you might use to determine that, or is it random?

Ms Grant —We have a range of risk indicators that, in combination, will determine whether we consider a vessel to be of high risk and in need of a boarding, although with the current environment and the Migration Act requirements for as many people as possible coming to Australia it is desirable that we can do that migration clearance on their behalf.

Senator LUDWIG —So is preference given to FOCs as part of your risk assessment?

Ms Grant —I am sorry?

Senator LUDWIG —Foreign owned. I am sorry, I did not know whether I had to explain an acronym to Customs!

Ms Grant —The details about the vessel can be fed into the risk assessment.

Senator LUDWIG —So it is a computer model that you use? If it is secret don't tell me—not that you would anyway.

Ms Grant —We have developed profiles and there is a range of parameters within those profiles.

Senator LUDWIG —That is a computer based profile that you feed the number of ships into, it spits out who fits the profile, you do an examination to see whether or not it has got a reasonable fit to what you expect and then you go and do the inspection. I know I am telling you this but is that about right?

Ms Grant —That is a reasonable understanding, yes. Can I just clarify the information I provided about the 103 deserters. That was actually for the period 1 July 2001 to January 2004. It is quite a lengthy period of time.

Senator LUDWIG —Yes. That was helpful. On the accredited client program, or ACP: what has Treasury done in relation to the bid for deferral of duty?

Mr Woodward —I think we can say, in short, that there was no immediate attraction on the part of the government to it. But there was an acceptance that the issues involved were such that it ought to be picked up as part of the consultant's review. So a final decision will be taken following the report of the consultant.

Senator LUDWIG —I guess it is asking the reverse, but is it worth asking questions in this area or am I likely to get the response that it is part of the review? The area I am interested in is whether there is a resolution forthcoming, and I suspect the answer to that is: it is part of the review now.

Mr Woodward —The final decision will be taken in the light of the review.

Senator LUDWIG —Have companies indicated whether, without this incentive, they would see little value in the scheme, or is that still going to be picked up by the review?

Mr Woodward —There are some companies and some consultants acting on behalf of companies who have expressed that view. There are others who have got a particular focus on exports and for whom that is not particularly relevant who have got an interest. There are CSI processes as well where the speeding up of international trade is facilitated by the speedy movement of information between exporting countries and importing countries, so there could be a commercial advantage for an individual company that has some sort of accreditation, say, in getting its cargo into the United States.

Senator LUDWIG —What happens to companies—PriceWaterhouse might be one of them—who have assisted ACP clients to meet audit requirements of the scheme? If it does not proceed, they may have wasted their money. Has any consideration been given to that position by Customs?

Mr Woodward —The view we have taken is that the right decision ought to be taken by the government and we should not pre-empt that. It could be that your concern does not come to fruition.

Senator LUDWIG —That is why I prefaced my remarks by saying that it may now be rolled up as part of that process. The question might be a bit early in the overall scheme of things. Is there any idea as to how many companies are currently accredited or how many are awaiting accreditation? Perhaps if we get some of that data down, we can compare it in the future.

Ms Grant —We currently have no accredited clients. We have one company that is an exporter and is very close to being able to sign up the necessary documentation. The exporters are slightly different from importers who may become accredited clients. For the accredited clients to be able to actually start operating as an accredited client, they are dependent on the new integrated cargo system. It is a little premature for anybody to be actually operating as an accredited client until that system is fully rolled out.

Senator LUDWIG —Is there an annual fee attached to it?

Ms Grant —The only fees will be the cost recovery regime that applies across all importers.

Senator LUDWIG —Some of that might change, depending on the review and what the findings are. Is that a fair assessment?

Mr Woodward —There is legislation in relation to fees for accredited clients. The charges are on the books now.

Senator LUDWIG —Will that fall under the review process as well? Minister, you could probably tell me that.

Mr Woodward —I cannot rule that possibility out. I would have thought that the whole area would be looked at as part of the review.

Senator Ellison —I would think so. I think that the CEO has it right. I would envisage it being incorporated in the review.

Senator LUDWIG —I might leave that area in the sense that there are questions there but we might wait for the review process. I want to turn to CMR. I knew we would get there eventually. I think we dealt with some issues earlier. Perhaps we can have a progress report on the different modules. We spoke about phase 1 and the date and the estimated cost. Do we want to now deal with it in a little more detail? In relation to both the export and import modules, I have a whole series of questions, but perhaps you could update the committee as to where it is and I might be able to rule some of them out as we go.

Ms Peachey —At the last estimates committee hearing, we indicated that the ICS—the integrated cargo system—was built in terms of all code being cut and the IT development taking place. There are two principal areas—the exports and the imports—as Mr Woodward said earlier. With the exports module, the announcement of the date for cut over to exports was 13 May. That is for 6 October, with transition arrangements where both systems—the current legacy systems and the export system ICS—will run for two weeks prior to that. On the import side, as I said—

Senator LUDWIG —When is it going to go live?

Ms Peachey —On 6 October.

Senator LUDWIG —That is the exports on the 6th.

Ms Peachey —Yes. In fact, 2 a.m. eastern standard time on 6 October.

Senator LUDWIG —Is that the high or the low season for exports?

Ms Peachy —It is an average peak period. The peak period for exports can vary. There are different peaks and troughs. Certainly industry have indicated that they would not like to see the rollover in the November-December period or in the January period.

Senator LUDWIG —So have industry agreed that 2 a.m. on 6 October is a fine date to start?

Ms Peachey —They have, yes.

Senator LUDWIG —So you do not believe it clashes with the beginning of the import season?

Ms Peachey —No. The current import system—the legacy system—will continue to run through that period.

Senator LUDWIG —I am sorry, I may have interrupted you. I just thought I would clear that up.

Ms Peachey —No, that is fine. On the import side, there have been two phases of development: the cargo reporting side and the import declaration side. As I said earlier, all the system functionality is built. The import declaration site was the last part of that. It has gone through a phase of testing and is currently in our own testing environment. So Customs is testing it. At the last committee meeting I said that we would be looking to complete that in May. We will actually complete our own testing of that part of the functionality in June this year. The reason for that is that in previous phases we have tested and then done the integration with the CCF, the gateway. This time we have actually decided to do the integration first and then run the testing. So it has extended that testing period but has provided an outcome that will give us a better indication of the system running connected with a gateway. That will be made available to industry for testing sometime during July. That is a test phase. We will not roll out that system, as we have agreed with software developers on the export side, until the system in test is reliable and robust. We have said to industry that that is likely to be in the early part of 2005.

Senator LUDWIG —When October comes around you will have two systems operating in tandem.

Ms Peachey —Yes, that is right.

Senator LUDWIG —Has there been any concern expressed by industry about dealing with that?

Ms Peachey —Insofar as the exports and the imports systems are now quite separate systems, no. But the area of interest for industry is the phasing and the ability for them to be able to take the new exports functionality into production or into an operating environment and also to be ready to adopt the imports sometime in the early part of 2005. We are working with them on that.

Senator LUDWIG —Is the imports tested by all of the industry participants when it is rolled out at that point—rolled out might not be the right phrase—or is it tested with a select audience until it works?

Ms Peachey —There are two sides of the development. One is EDI messages and the other is Customs Interactive. The bulk of users obviously used EDI messages to Customs. The software developing community developed the software that industry uses. They roll it out to their industry clients. The bulk of the testers are the software developers or the in-house developers within companies. Progressively it will be the broader industry that will be looking to use the Customs Interactive.

Senator LUDWIG —Is there any testing still left to be done on the export module or is that right to go?

Ms Peachey —That is in industry testing at the moment.

Senator LUDWIG —When will it come out of industry testing?

Ms Peachey —When it is ready to go. When we cut over.

Senator LUDWIG —So before 6 October.

Ms Peachey —It is continuing. I might get Mr Harrison from the IT side to explain how industry are doing their testing.

Senator LUDWIG —You were going very well.

Ms Peachey —Thank you.

Senator LUDWIG —If we get too technical you will lose me, unfortunately.

Mr Harrison —There will be ongoing testing of sorts but, by the same token, we have agreed with the software developers that there will be a period of stability during the next four months. They have a number of things that they have to do in terms of rolling out their product to industry itself. So it is a yes/no answer, if you like, in the sense that we will be doing work in the background that will not have an effect on the product that the software developers will be working with in terms of their task. By the same token, we will get to the end point together.

Senator LUDWIG —And there will be an evaluation of that?

Mr Harrison —There will certainly be an evaluation of the whole exercise, yes.

Senator LUDWIG —What you are referring to is effectively ensuring that the software glitches, or the tweaking that is required, will be done after the four months unless it radically requires your stepping in.

Mr Harrison —No, I do not mean to give that impression. We will continue to do that tweaking or tuning work, or optimisation of code—however you want to refer to it.

Senator LUDWIG —There is a whole range of phrases that the IT industry uses, I think.

Mr Harrison —There is indeed. But that will continue throughout the period and after implementation.

Senator LUDWIG —Have the software developers been able to give their clients guarantees that they will be able to work with the export side?

Mr Harrison —No, the discussions that we have had with the software developers have led to an agreement whereby we both agree that it is sensible to go live in October, as we have discussed, but that agreement was based on some work that still needed to be done and is currently being done. We are revisiting that work in meetings with the software developers that are now scheduled for June and July. So we are yet to confirm that all of the loose ends have been tied.

Senator LUDWIG —If—to use the simple term—faults arise at the software end, it is one of those issues that the software developers will be called on to fix. If it is a problem at the Customs end, what happens then? Is there a liability to Customs if there is a pause in the system which causes customer loss? Where does the negligence lie?

Mr Harrison —The first point is that there are no guarantees in a system of this size and complexity that we will not discover problems between now and when we wish to go live. The software developers understand that, as we do. The reality is that if they are significant we need to revisit the decisions we have made.

Senator LUDWIG —Is there a maximum load capacity for simultaneous users of the system? If so, what is it?

Mr Harrison —There are a number of metrics which it may be better to provide to you on notice.

Senator LUDWIG —By all means.

Mr Harrison —As we have discussed, different methods of communication, different transactions and different systems have different metrics, and we can provide as much of those as we have. We have agreed on the exit criteria, if you like, with the software developers, about where that level of performance should be in order to be able to go live. Our current testing has led us to be very confident that we will be able to achieve the levels we need to. As I say, I think it is probably better to give you, on notice, the detail of the metrics we have in that area.

Senator LUDWIG —There are limits, of course, to all systems, and I am looking at the variation between the points of load and whether or not there is a sufficient margin, given the number of users who might be using the system. You might include some of that so that I can understand it. Also, I heard earlier today of a fault having occurred in a line—it was a telecommunications issue—but it did not signal to the users of the system that there was a problem: it remained blank. At some point in time the system users had to work out for themselves that the system had gone off line. All these sorts of things had been taken into consideration in the use of this.

Mr Harrison —Yes, it is a complicated answer, I am sorry, Senator. The system itself is reasonably sophisticated in terms of the messages that go back but there are other components. For example, there is what we call the high availability of the system, which incorporates such things as high redundancy of machinery. In other words, if one box breaks there is another box ready to kick in to replace it. If one box breaks there are hot spares available to plug in to replace it. We try to reduce as much as we can the single points of failure within this particular system. At the other end of the scale, if the system itself is not available for whatever reason—somebody cuts a cable on the Internet or somewhere—then there are business continuity planning arrangements that we are currently negotiating with industry to cover that contingency, as well. We think we have the bases covered.

Senator LUDWIG —What about response times? Would you include some of that data in the answer to the question on notice?

Mr Harrison —That is, as I understood it, what the question was.

Senator LUDWIG —I am interested in more than that. That is why I wanted to include response time. I tried to encompass a broad—

Mr Harrison —The throughput that is required?

Senator LUDWIG —Yes. Not only the throughput that is required, which then generates the response time, but also how often the system might go offline and the contingencies that you have for that—those sorts of issues. If the current number of users exceeds the limit, what happens? Does the system crash out or does their response time become very long and then they get frustrated and lose their data and get annoyed with you—those general issues?

Mr Harrison —The sorts of numbers I can give you, for example—

Senator LUDWIG —I am happy for you to take it on notice. If you have them there, that is fine.

Mr Harrison —I have some. For example, we have a target of 4,800 messages per hour to be processed through the system. In our testing so far we have achieved 6,000 messages per hour. The availability of the system over the 10 months has been, in industry tests, 99.16 per cent. Our target is 99.5 per cent, so we are a bit short on that.

Senator LUDWIG —I was also interested in comparisons with what industry is likely to use it at, in other words, is 6,000, which is what you might run at, 50 per cent of what you expect industry to use it at? Does it have a life and a certain growth, or is that at five per cent-plus max?

Mr Harrison —Our target, as I said, is 4,800 messages; we have actually been able to run it at 6,000. The 4,800 is generous compared to what we expect industry to use. In other words, the target itself is more than what we expect to happen. And we have exceeded the target in performance testing so far. Just for the record, we did some response time testing just yesterday which showed some very good results. We have a target turnaround time for the different messages of roughly three minutes. Our testing yesterday showed that the critical transactions were turned around in various components within one minute, which again was exceeding our target.

Senator LUDWIG —One minute from what? There will be a field and you will input data and then press the button.

Mr Harrison —When you send a message to us two things happen. The first thing is that the gateway that receives the message sends a message back to say that it has got it. The second thing that happens is the response to the message. Both of those transactions were turned around within one minute. The tests we ran yesterday were internal tests, that is, if you were sitting at your Internet terminal and sent it to us, the Internet lag was not involved in that. We are running various tests in various scenarios. One of our software developers routinely sends us messages that we are doing performance testing as well. They have a direct connection to us rather than having to go through the Internet. So there are a number of different components that we are testing. We have not cracked all of our targets in all of the areas but we are headed in the right direction.

Senator LUDWIG —What about likely training for users of the system? Has that been undertaken or started to be undertaken?

Ms Peachey —It certainly has. At the last estimates committee hearing I gave an outline of the number of industry users of the system that we have already provided training for. Because we have had some delay in the actual cutover to exports, Customs has made a commitment to provide refresher training for all industry users as well. That involves training and running sessions in all capital cities and major regional centres around Australia before exports goes live. These are at no cost to industry.

Senator LUDWIG —How many are planned?

Ms Peachey —I think it is 65 but I will just check my notes and come back if I can before trying to locate the piece of paper right now. They are certainly run in all capital cities and major regional centres. On top of that, we have—and we will be putting on our Internet this week—quick reference guides of the major features of the export system together with facts sheets and manuals plus interactive tutorials. So if industry participants cannot actually get to sessions there is a wealth of material that can be downloaded from our Internet site along with interactive tutorials that can be done at any time.

Senator LUDWIG —Are you sending out CDs to the various users?

Ms Peachey —CDs are available. When people ring our 1800 number if they cannot access it through the Internet we can certainly provide that material.

Senator LUDWIG —How much is that costing? Are the funds put aside for that?

Ms Peachey —Yes.

Senator LUDWIG —Or have we already asked for that?

Ms Peachey —We provided information in answer to a question on notice.

Senator LUDWIG —I am happy for you to take that on notice and perhaps update it.

Ms Peachey —That would be fine. We have a significant budget to be able to do the publications and other material going forward to support the transition.

Senator LUDWIG —There would be a travel component in that for the—

Ms Peachey —There is. In answer to the question on notice we said that running the refresher courses was costing around $250,000. That is expected to involve 3,000 industry participants at the 65 workshops that I mentioned. The total cost is $250,000, and that includes conducting sessions, our staff costs and travel costs.

Senator LUDWIG —We have already asked what the total cost of CMR is. I think that the last time we asked it was $146 million and it is now a bit more than that.

Mr Woodward —Given that there may never be an end because there is no system yet developed that anyone can ever say is completed, I think our assessment of the development costs would involve an increase of about $38 million on that, which would take it to about $184 million.

Senator LUDWIG —Has any consideration been given to making it available to other countries or other users?

Mr Woodward —There has been a lot of interest in this system. I am fairly heavily involved in work in our region and in recent times we have had discussions with China, Japan, Korea, Hong Kong, Indonesia and Thailand, and all of them are keenly interested in what we are doing, as of course are those who are involved in the commercial development processes of it. I think there is the potential once it has all settled down to explore the possibility of export either of the system, or components of it, in conjunction with those who have been involved in developing the program.

Senator LUDWIG —Has any of that work started? For instance, have there been recent trips to China—

Mr Woodward —The focus is on getting a working system rather than on selling it but there has been a lot of interest and people have been coming out and having a look at where we are going. The US, which is spending probably more than 10 times what we are spending to develop a comparable system, is keenly interested. We already have arrangements whereby we have people who inform the US as to where we are going and how far we have reached, and we get information from them.

Senator LUDWIG —Did you recently go to China?

Mr Woodward —Yes.

Senator LUDWIG —Was that part of the program? I do not want to use the words `hawking the wares' or `how good the model was'. They are my words, and I am happy for you to explain it differently.

Mr Woodward —The principal purpose of my visit was to sign a memorandum of understanding with my Chinese counterpart for exchange of information and intelligence—basically the Customs wherewithal. It gave me the opportunity to actually see what they are doing in Beijing and Shanghai and also to talk to people that had been involved in the building and development of the container X-ray facilities, which are, as you know, Chinese.

Senator LUDWIG —Was this model mentioned as well?

Mr Woodward —It was certainly mentioned. The Chinese have continued to show an interest in it. In fact we have another Chinese vice-minister who will be in Australia in a couple of weeks time, and I would be surprised if this is not on the agenda.

Senator Ellison —Madam Chair, while we are on the CMR, it is my intention to have a CMR roundtable next week. I had one earlier this year with industry stakeholders. The CEO and I will be meeting with those stakeholders in Sydney next week to get feedback on how they see the program going, how we can move things along and whether any improvement is needed.

CHAIR —Didn't you talk about that roundtable with Senator Bishop at the last estimates?

Senator Ellison —Yes.

Senator LUDWIG —Did you invite Senator Bishop to come along?

CHAIR —He is not here.

Senator LUDWIG —We will move on, then. I have just put some questions on notice in another area.

Proceedings suspended from 4.57 p.m. to 5.08 p.m.

CHAIR —I would like to welcome Rear Admiral Russ Crane, who is appearing for the first time at estimates.

Mr Woodward —Can I emphasise that Admiral Crane started last Friday, and we have the deputy director-general here as well, so between all three of us we will do our best to answer your questions.

Senator LUDWIG —Welcome to this wild world of Customs! What is the current status of tenders for the new Coastwatch contracts? I probably started asking this, some time ago, a bit early but now I suspect we are getting closer to the mark.

Mr Woodward —We have gone out with a draft RFT, and our aim is to have a final request for tender available by the end of June or, at the very latest, early July. We are getting reactions to the draft; they will be incorporated in the final RFT document.

Senator LUDWIG —Is there a document yet or is it in the process of being developed?

Mr Woodward —There is a draft that has been circulated to the potential tenderers and then that will be finalised in the light of the reactions we get to it.

Senator LUDWIG —Is that a commercial document? Is that available to the committee or is it in a draft stage?

Mr Marshall —It is publicly available.

Senator LUDWIG —If it is not too hefty, can you make a copy available to the committee?

Mr Woodward —It is hefty—it would be three inches.

Senator LUDWIG —Then no; if I want it I will ask for it again. If I do think I need to read it, I will make a separate inquiry through the committee.

Mr Marshall —It is accessible through the Internet site.

Senator LUDWIG —If it is that big, I will come and ask you, if that is okay. There is only so much printing we can do in our office, I am told. Are any extensions of existing contracts being considered as part of the open tender for new ones? Is it going to be that the existing contracts will finish on a particular date and then you expect the new contracts to take over or are there transitionals arrangement?

Mr Woodward —I will get some additional information from my colleagues. Our current intention is to have a new contractor in place by the middle of 2007. There are differing termination dates for the current tasks. In one case we have agreed to continue the contract until mid-2005. We are in discussion in relation to two other contracts. One relates to the Dash 8s and the other relates to the Reims. We will need to be taking decisions on those progressively over the next couple of months, but there should be no assumption that the existing contractor will be successful in getting a contract for that extra couple of years period.

Senator LUDWIG —So the short answer is that there might be an extension in relation to those two?

Mr Woodward —Yes, there might be an extension, but we are not saying that there is necessarily only one contractor who can discharge those two responsibilities between now and then. There may well be others. We would be looking at exploring whether the same or a better level of service can be provided cheaper than the existing contractor provides it, and I think that is reasonable.

Senator LUDWIG —Yes. Are the existing contractors aware of that?

Mr Woodward —I would be surprised if they are not aware.

Mr Marshall —In speaking with the contractors over a period of time it has been evident to all parties that there is no automatic right for them to have the contracts extended to 2007. I feel certain that they are well aware that we are able to go to the market and test.

Senator LUDWIG —Are you doing that at the moment?

Mr Marshall —We have already extended two contracts. Reef Helicopters, which is now Australian Helicopters, have had their contract extended to 2007 and we have extended one of the SAPL contracts until 2007. We are currently considering what we might do in respect of the three Reims aircraft, and then we will have to have further consideration about the others, but we are only at the consideration stage.

Senator LUDWIG —Is there a date by which you have to make a decision?

Mr Marshall —In relation to the Reims contract—the three aircraft—that expires in December this year. We will be required to have made our decision by the end of June this year on whether to go forward with that contract or to seek the services of somebody else.

Senator LUDWIG —By 30 June?

Mr Marshall —Yes.

Senator LUDWIG —Perhaps you could take on notice to give me the various dates for the decisions.

Mr Marshall —There are two other contracts and the decisions on those need to be made by the end of this year. One of the contracts is for the five Dash 8s that Mr Woodward mentioned and the other contract is for the 412 helicopter that is operated in the Torres Strait by Australian Helicopters.

Senator LUDWIG —And is the extension that could occur as a consequence of that for all of them for 2007-08 or does it vary as to the extension?

Mr Marshall —We have to maintain the service until the new contracts come in, but we would be looking at all options, so long as we have the surveillance area covered. It does not necessarily mean that we would do it in exactly the same manner as we are doing it today.

Senator LUDWIG —I think I may have asked that badly. If those extensions are agreed to, when would the contract then conclude?

Mr Marshall —The current contracts say that we can extend up to five years.

Senator LUDWIG —I see. It is up to five years, so you could extend it by one, two, three or four years.

Mr Marshall —Yes.

Senator LUDWIG —So hypothetically you could extend it for one year because you have decided to have a new contractor and so you could have that as the transitional period.

Mr Marshall —That is a possibility, yes.

Senator LUDWIG —All of those are possibilities—I do not mean to constrain you in that way. Is there consideration for any new technology to be deployed to effect the outcomes that you envisage by the contracts?

Mr Woodward —The original intention was to look at what are emerging opportunities for us in relation to coastal surveillance. The existing combination of fixed-wing aircraft and helicopters, and the continuation of that, is a possibility. We wanted to explore satellites, and we are using satellites now. We are working both with Defence and separately in relation to unmanned aerial vehicles. We are also looking at `under the sea' type options in relation to vessels. The other obvious one that I forgot to mention, and we have covered it in Senate estimates before, is high-frequency surface wave radar, which will have a vector of about 9,000 square nautical miles. It is subject to the finalisation of one or two minor remaining problems in the Torres Strait.

Senator LUDWIG —They are only possibilities being canvassed at the moment—is that right?

Mr Woodward —They are the most obvious ones. My colleagues might have others.

Senator LUDWIG —I was not particularly after a fulsome listing. They seem to be further out technologies in the sense that if the contracts come up at the end of this year and have to be renegotiated, they seem to be, at least given those descriptors, a little further off.

Mr Woodward —I want to stress that what we are talking about is what might be implemented in 2007 not what might be implemented this year.

Senator LUDWIG —Yes, that is helpful for me to understand.

Rear Adm. Crane —I think the other important issue is that what we would be looking to contract for would define a level of service for an outcome we would be seeking that a range of technologies might provide a solution to, either in whole or in part. So, rather than being specific about a particular technology, we would be seeking an optimum mix.

Senator LUDWIG —That may have some effect on how you draw up the tenders to determine what might be the outcomes in 2007?

Mr Woodward —The tender documentation contemplates a range of options coming back. It may be that a firm comes back saying, `Well, I'll have a mix of fixed-wing aircraft, rotary-wing aircraft, satellites and various other things.' That option is there.

Senator LUDWIG —So you can set the outcomes and the tenderers will then provide a mix of solutions for you. For example, there could be a reduction in air and surface surveillance once the Torres Strait radar is operational. Are those the sorts of things that might be put in the mix?

Mr Marshall —In fact it would not be a reduction. The coverage of the surface wave radar will give us an increased coverage and enable us to cue our aircraft differently from the way that we are doing it now. So we would not need necessarily to fly as much as we are now but we would have the area covered in a much better way.

Senator LUDWIG —Are those sorts of issues canvassed in the tender document?

Mr Marshall —The tender documents make it fairly clear that we are looking for an outcome and we are asking for the tenderers to tell us how they will give us that outcome, and it could be a mixture of all sorts of things, as Admiral Crane has said. We have specifically asked for satellite coverage of some parts of the exclusive economic zone but in relation to the coverage of the rest we are virtually open to the suggestions of the tenderer.

Senator LUDWIG —In relation to the Torres Strait islands, there was an issue raised by a senator when he visited Mabuiag Island in the Torres Strait. The local council expressed concern about the Customs service in that particular region. It was their understanding that the appointment of each island is—in their words—`inadequate' because the officers are part time on contract and lack enforcement power and back-up. I know that may be an overstatement, but in the Torres Strait islands are part-time officers employed to effect Coastwatch operations?

Mr Marshall —Not to effect Coastwatch operations, but there are a number of Torres Strait Customs officers that are employed on a part-time basis on a number of the islands. Mabuiag is one of those islands.

Senator LUDWIG —Are they on an AWA or an individual contract? How is their remuneration organised?

Mr Marshall —I am unaware of the detail but I know that they were on a part-time rather than a full-time basis.

Senator LUDWIG —Do they have enforcement powers?

Mr Marshall —That is something that I could not answer.

Mr Woodard —We will provide you with a written answer to that. I do not think they have the powers of a Customs officer, but remember that we have fairly significant contingent of full-time officers based on Thursday Island and the ability to rapidly move them to any of those islands by either of the two helicopters, so that is the mix. Frankly, we were looking to find a way in which we could properly engage Torres Strait Islanders and use their skills and abilities to help us in the enforcement of Customs law in the region.

Senator LUDWIG —Perhaps you might take that on notice. As for further information, I did not want to read some of the details into the transcript but I am happy to provide you with some of them.

Mr Woodard —We are certainly happy to do it. If there are concerns we would like to deal with them.

Senator LUDWIG —It is a local concern. I think it does raise some issues that you may want to address, because what I have heard so far is in relation to part-time Customs officials who may lack certain investigative powers. It seems, from the answers that you have given, that that is right. There are other measures to assist the resolution of some of the issues, so perhaps the people need to be made aware of those sorts of things and how they can contact the Thursday Island contingent and ensure that those sorts of issues can be dealt with. I might get the relevant office to contact you separately about that.

Mr Woodard —Yes.

Senator LUDWIG —You might also then look at the issues that I have raised more generally as well.

Mr Woodard —Yes.

Senator LUDWIG —I refer to the CADF, which is a trust fund. It seems that it is accruing interest and that it has been a difficult issue to address over the last period.

Mr Woodward —There was quite a discussion on that at the last Senate estimates committee hearing. Since then there has been, I think, at least one more meeting, which Mr Burns may have been involved in. He can bring you up to date on where we are on that.

Mr Burns —There was one more meeting of the CNCC, the Customs National Consultative Committee, where we tabled a motion that spells out the rules for the disbursement of the old CADF. We will discuss that again at the next CNCC meeting to finalise the issue. That is consistent with the message we gave at the last Senate estimates and consistent with the discussions with industry in the CNCC arena over the last couple of meetings.

Senator LUDWIG —So has there been progress?

Mr Burns —The progress has been to make clear the eligibility provisions for the disbursement of the fund. It has not been a debate that has had across-the-board industry agreement; there has been inter-industry disagreement. We believe that the proposal that has gone forward is the one of least resistance—the one that everybody in the industry can accept. It is based on disbursement of the fund according to an allocation of digital certificates to sign on to the ICS. The only people who are eligible for it will be importers who have a minimum number of transactions over the first three months of the ICS.

Senator LUDWIG —Are there any other criteria, or is that the criterion?

Mr Burns —They are the criteria.

Senator LUDWIG —So they have to have what—X number?

Mr Burns —No. To obtain a share in the disbursement it will not matter now many individual digital certificates a company, a broker or a forwarder or anybody has. So long as they have one, they will get one share. If a broking firm or something like that has a centre in each of the major cities they will still only get one share. It will be allocated on the basis of one share and a minimum number of transactions in the first three months.

Senator LUDWIG —How many would that be?

Mr Burns —There is still a bit of discussion about that. I think 12 is the number that we have settled on. That number was designed to get more than just somebody who imports one, two or three consignments over a period of time—to ensure that they are a professional importer/exporter user of the system. It was designed to keep it above the minimum level but not get into the high numbers whereby only the major importers could participate.

Senator LUDWIG —You will fund digital certificates as such, then, through that process?

Mr Burns —It will be a reimbursement arrangement. We are not proposing to put the money up front; the operators have to fund their own digital certificates. We will know who has signed up to and joined the ICS connected to Customs. We will have to ensure that we count them accurately and then apply the minimum performance criterion to ensure that we have a population and can then share the total amount of money. The idea is that you literally divide one into the other and disburse the fund. There will be nothing left over.

Senator LUDWIG —How will you get a digital certificate?

Mr Burns —Anybody who wishes to communicate with Customs electronically has to provide evidence of identity. The digital certificate is that evidence. They go through a registration process with the ICS. The digital certificate process is part of that. They lock into our system and we count them from there.

Senator LUDWIG —And then they meet the eligibility criteria?

Mr Burns —Then we have to make sure that they do.

Senator LUDWIG —Won't you have to wait for a certain period to elapse before you know what the population group is?

Mr Burns —We have said that the eligibility period will be the first three months. Industry was pretty insistent that we get this thing over and done with. So rather than keep it going for 12 months, in which a minimum number of transactions of 12 might not be appropriate—that would only be one a month, which hardly implies a medium user—the idea was to cap it at three months. That will give us and industry enough time to work out who is serious about this sort of activity with Customs and then get on with the process of allocating the money.

Senator LUDWIG —Do you know how much will be allocated to each person holding a digital certificate?

Mr Burns —That very much is a function of the arithmetic. The amount of money in the fund is going up because of interest over time. It all depends how many shares or entities we have in the arithmetic at the end of the three-month process. We do not think it is going to be a lot of money.

Senator LUDWIG —So it would not be worth anybody's while to obtain a digital certificate and undertake 12-odd transactions in the first three months to obtain a share in the proceeds?

Mr Burns —No. We have discussed this with industry, and we are satisfied that no entity would plan their business on the basis that they are going to get a share of this fund. It is not going to be enough money to decide whether you have one digital certificate or 25 digital certificates.

Senator LUDWIG —Has industry agreed to this proposal? Or is it more than a proposal—is this what is going to happen?

Mr Burns —Industry has been very much part of the development of the proposal. We have put it to CNCC on a number of occasions. I think the criticism on the last occasion was that we just have not signed off on it as a committee. So CNCC will be asked to do that next time it meets, which is next month.

Senator LUDWIG —If it is before the reporting date for questions in estimates, can you let us know whether or not it has been signed off?

Mr Burns —Certainly.

Senator LUDWIG —Was consideration given to funding training or any other purposes?

Mr Burns —Before we got to this final proposal there were a number of other mechanisms that we investigated. One of the things that we did was to invite industry to submit expressions of interest as to how they, industry, might disburse the funds consistent with the sort of manner in which the funds had been used over the last 10 years. We went through a process of inviting those expressions of interest. There were about 13, as I recall. A committee that I chaired had a look at those, although we did not go into them in any detail. The committee was comprised of not only Customs people but industry people, and we also had a probity auditor on the committee. The general outcome very clearly—in fact the consensus of that group—was that whilst a number of the concepts and expressions of interest were good ideas they were mainly commercially based, likely to be developed as part of industry reaction to the ICS anyway and proprietary concepts, and therefore should be funded by industry. Therefore the concept was that there should be no CADF funding for those. In that particular process were some proposals that had to do with training and various other schemes that, as I say, were generally considered to be proprietary.

Senator LUDWIG —Has industry abandoned the threat of legal action challenging the status of the funds?

Mr Burns —I have had some discussion with various CNCC members at various times about whether there would be any legal action taken against Customs. Suffice to say that we did not head down this track without clear legal advice from the Office of General Counsel that what we were proposing was appropriate. The point of issue is who owns the funds.

Senator LUDWIG —As always!

Mr Burns —Yes. We had clear legal advice that the CEO is responsible for the administration of the funds under the FMA. Since we have, if you like, enunciated the eligibility criteria in the proposal to allocate the funds, which we have always developed with industry, I get the impression that that is not much dissimilar to the way in which those who were suggesting legal action were going to do it anyway. I think they are just biding their time waiting to see what happens in the CNCC.

Senator LUDWIG —They can always reserve their right in respect of those matters, anyway. Are there any legal challenges on foot at the moment in relation to CADF 1 or 2?

Mr Burns —No.

Senator LUDWIG —I turn to Tullamarine. One of last year's budget initiatives was a reallocation of $3.85 million from Customs to the department of transport to upgrade screening infrastructure at Tullamarine airport. Has Customs kept itself informed about how the money has been spent over the past year? If so, are you able to articulate what it has been spent on?

Ms Batman —Yes. We have been involved in the working group at Melbourne airport that is working through the infrastructure changes. A lot of that work is currently under way. I think the part that is in the Customs example is due to be finished in the next month or so. I can get you some details about the exact expenditure and the various components of that if you want them, but I do not have them with me.

Senator LUDWIG —I am happy for you to take that on notice.

Ms Batman —I will take that on notice.

Senator LUDWIG —Will that include the money earmarked for the new mail screening facility at Tullamarine airport?

Ms Batman —No.

Senator LUDWIG —That is a separate issue, is it?

Ms Batman —Yes, it is a separate issue.

Senator LUDWIG —How much was earmarked for that? I am still happy for you to take it on notice if you want to.

Ms Batman —The amount for the airport terminal infrastructure works was $3.85 million.

Senator LUDWIG —That was spent on the facility in the financial year?

Ms Batman —Yes, and there was a similar contribution from AQIS.

Senator LUDWIG —Has that been finalised—that mail screening?

Ms Batman —No, that was in the airport terminal—the mail centre. I will leave my colleague to provide advice on the mail centre.

Mr Woodward —If I could start on a preliminary basis, when we were talking earlier about IQI funding, I said that there was funding made available for a number of particular activities. One of them was in relation to changes to Australia Post facilities to better enable the proper synchronisation of Customs, Quarantine and Australia Post activities in each of those mail handling facilities. Sydney and Melbourne were flagged as areas requiring particular changes.

Senator LUDWIG —I have seen Sydney.

Mr Woodward —The sum involved was $49.4 million for new infrastructure at international mail centres and ongoing costs for Australia Post to allow greater scrutiny of incoming mail and other articles. If my recollection is right, there may have been a few problems in Melbourne flowing from government requirements in relation to selection of contractors for the construction of facilities. That particular impediment has not been overcome.

Senator LUDWIG —You might want to take it on notice. How long has this been going on for?

Mr Woodward —It was provided with the other funds a couple of years ago.

Senator LUDWIG —This is the one that is still ongoing. I think I have asked about this. It should have been finished by now, surely.

Mr Woodward —It is not in our hands.

Senator LUDWIG —Whose hands is it in? Should I go to another committee and ask the question?

Mr Woodward —It is an Australia Post facility. We have an interest—I stress that we have an interest—but the requirements are government requirements put forward on the basis of submission via the Minister for Employment and Workplace Relations. We are not—

Senator LUDWIG —This is ringing a bell now. Minister, you might like to talk to one of your comrades about this. This has been going on for some time now. Without mentioning the member's name, it seems to be a sticking point that he has in relation to the construction of the facility. It has not been constructed yet, has it?

Mr Woodward —There has been planning work undertaken.

Senator LUDWIG —Yes. There is money earmarked.

Mr Woodward —But I am not sure that any of the potential successful contractors have satisfied the government requirements.

Senator LUDWIG —And while this goes on, you have existing Customs employees in the current facility in Melbourne that, in my understanding, is long past its use-by date.

Mr Woodward —There are improvements that ought to be made there and in Sydney. I stress that, if my understanding is wrong, we will correct it, but that is my recollection of where we are at.

Senator LUDWIG —Minister, have you seen the Sydney facilities where Customs are located?

Senator Ellison —Yes, I have.

Senator LUDWIG —In the mail centre.

Senator Ellison —Yes. That is the one I have been to.

Senator LUDWIG —Have you seen the one in Melbourne?

Senator Ellison —No, I do not think I have seen the one in Melbourne.

Senator LUDWIG —I have not either but I have seen the one in Sydney.

Senator Ellison —I have seen the one in Sydney.

Senator LUDWIG —Is it similar to the one in Melbourne?

Mr Woodward —My biased assessment is that Sydney is worse than Melbourne but I am sure others would have a different view.

Senator LUDWIG —Sydney was not particularly good. Minister, is there anything you can do to resolve this? If you go and stand with the Customs people on the floor in Sydney you will get an appreciation that it is not a conducive work environment. It could be a lot better. I suspect they could also feel a lot more satisfied that the issue that is stopping the development is not money. Apparently the money is there, isn't it?

Mr Woodward —As I understand it, that is certainly the case in Melbourne. I think it is more complex in relation to Sydney. I am going very much from recollection. I think it is probably best if we give you the answer with regard to both Sydney and Melbourne—

Senator LUDWIG —I am not trying to lead you into error. I am happy for you to correct the record.

Senator Ellison —We will take that on notice and I will convey your questions to the appropriate minister.

Senator LUDWIG —Thank you, Minister. We might finalise on that point.

CHAIR —Thank you very much. I should note that the committee is very grateful to Senator Ludwig for his very efficient work in this area. We have had a very productive day: two-thirds of the Attorney General's and other estimates. I thank Mr Woodward and his officers. As I indicated last night, the committee will not be commencing the Department of Immigration and Multicultural and Indigenous Affairs portfolio estimates today. We will begin those at 9 a.m. tomorrow morning. We will resume in this room. Minister, I thank you, the officers of the Attorney-General's Department and Mr Cornall for your assistance. As you know, questions were taken on notice for return by 16 July 2004. We are always ready, willing and able to take those answers earlier but as soon as possible would be appreciated. Thank you very much.

Senator Ellison —Thank you. We will endeavour to get those answers in on time.

CHAIR —Thank you.

Committee adjourned at 5.42 p.m.