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Aviation Transport Security Amendment (Cargo) Bill 2015



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ISSN 1328-8091

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BILLS DIGEST NO. 38, 2015-16 4 NOVEMBER 2015

Aviation Transport Security Amendment (Cargo) Bill 2015 Cat Barker Foreign Affairs, Defence and Security Section

Contents

Purpose of the Bill ............................................................... 2

Background ......................................................................... 2

Australian air freight to the US ................................................ 3

Options considered in the Regulation Impact Statement ....... 3

Committee consideration .................................................... 4

Policy position of non-government parties/independents ..... 4

Position of major interest groups ......................................... 4

Financial implications .......................................................... 4

Statement of Compatibility with Human Rights .................... 4

Key issues and provisions..................................................... 5

Known consignors as a new category of aviation industry participant ............................................................................... 5

Enabling the Regulations to establish a known consignor scheme .................................................................................... 5

Other amendments to the regulation making power under section 44C .................................................................... 5

Increasing the range of matters that may be included in notices made by the Secretary ................................................ 6

Other provisions .................................................................. 6

Date introduced: 17 September 2015

House: House of Representatives

Portfolio: Infrastructure and Regional Development

Commencement: A day fixed by Proclamation, or six months after Royal Assent, whichever is sooner.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website.

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Purpose of the Bill The purpose of the Aviation Transport Security Amendment (Cargo) Bill 2015 (the Bill) is to amend the Aviation Transport Security Act 2004 (the Act) to introduce an additional type of industry participant referred to as a ‘known consignor’ and allow a broader range of matters to be set out in the Aviation Transport Security Regulations 2005 (the Regulations).1

A known consignor scheme, the detail of which would be set out in the Regulations, would provide an alternative means of compliance with clearance requirements for air cargo, under which the sender or originator would be responsible for preventing unlawful interference with goods up to the point at which they are taken onto an aircraft.

Background The Act establishes a regulatory regime to ‘safeguard against unlawful interference’ with aviation and implement Australia’s obligations under the Convention on International Civil Aviation (known as the Chicago Convention), including as it was amended in the wake of the events of 11 September 2001.2 The Act and Regulations impose different requirements on a range of ‘aviation industry participants’.3 Currently, supply chain security for air cargo as provided under the Act and Regulations is administered through two schemes:

• the Regulated Air Cargo Agent Scheme, which applies to businesses that make arrangements with airlines for carriage of air cargo, or that operate a site for the purpose of storage, handling, examination or processing of air cargo and

• the Accredited Air Cargo Agent Scheme, which applies to businesses that provide road transport of cargo that will later be carried by air.4

Under both schemes, agents are responsible for, and must take certain steps to ensure, the security of all cargo from the time they receive it until it leaves their possession.5

The current regulatory framework meets Australia’s international obligations. However, the United States has changed the security requirements for US-bound air cargo. In particular, all air cargo travelling to the US on passenger aircraft must be examined at deconsolidated or ‘piece’ level—that is, each individual box, carton or other item. This has been a general requirement under US law since 2012, but Australian carriers have been operating under an exemption, under which Australian screening requirements were recognised as adequate. 6 The Regulation Impact Statement (RIS) indicates that at present, most air cargo for export is examined at Cargo Terminal Operator facilities at airports on an ‘as presented’ basis, which in practice often means examination of already consolidated cargo (such as at container or pallet level).7

Following a review of security arrangements for incoming air cargo in late 2014, the US Transport Security Administration (TSA) advised Australia in early 2015 that the existing arrangement would not continue. The TSA has since agreed to extend recognition of Australian screening requirements to the end of July 2017, subject to development of a detailed implementation plan.8

The Bill, along with changes foreshadowed to the Regulations, is the Government’s preferred method of ensuring compliance with the amended requirements for US-bound air cargo, an important component of which

1. Aviation Transport Security Act 2004 and Aviation Transport Security Regulations 2005; both accessed 13 October 2015. 2. Aviation Transport Security Act 2004, section 3; Convention on International Civil Aviation, opened for signature 7 December 1944, [1957] ATS 5 (entered into force for Australia 4 April 1947), accessed 13 October 2015; J Anderson, ‘Second reading speech: Aviation Transport Security Bill 2003’, House of Representatives, Debates, 27 March 2003, pp. 13,749-50, accessed 13 October 2015.

3. This term is currently defined to include airport and aircraft operators, regulated and accredited air cargo agents, persons who occupy or control an area of an airport, certain persons performing security functions, Airservices Australia, and contractors to a person in any of those categories: Aviation Transport Security Act 2004, section 9.

4. Department of Infrastructure and Regional Development (DIRD), ‘Regulated Air Cargo Agent (RACA) scheme’ and ‘The Accredited Air Cargo Agent (AACA) scheme’, DIRD website, both accessed 13 October 2015. 5. Ibid.

6. DIRD, ‘Regulation impact statement—Part 1: Enhancing US-bound air cargo security’ (RIS Part 1), Explanatory Memorandum, Aviation Transport Security Amendment (Cargo) Bill 2015, pp. 19-20, accessed 12 October 2015. 7. Ibid., p. 17. See further DIRD, Maintaining acceptance of Australian air cargo (May 2015 discussion paper), DIRD, May 2015, pp. 16-17, accessed 4 November 2015. 8. RIS Part 1, pp. 19-20.

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is the establishment of a known consignor scheme.9 While it will be a matter for the Regulations rather than the Act, at this stage the Government is proposing the amended arrangements apply only in relation to US-bound air cargo.10 The Government intends the amendments in the Bill and those foreshadowed to the Regulations will both commence in July 2016.11

Australian air freight to the US The Department of Infrastructure and Regional Development (the Department) sent a discussion paper to stakeholders in May 2015 that provided information about air cargo sent to the US.12 Based on customs data, which the Department acknowledges does not provide a comprehensive picture, during 2014:

• 25 per cent of all Australian exporters sent air cargo to the US

• 10.6 per cent of Australian exporters exported only to the US (that year) and

• almost 18,000 tonnes of air cargo was sent to the US, valued at nearly $4.8 billion.13

The majority of Australia’s export air cargo is carried on passenger aircraft.14 The Government has assessed that businesses exporting certain products would face significant difficulties finding an alternative means of export to the US.15

Options considered in the Regulation Impact Statement The Regulation Impact Statement (RIS) for the Bill outlines four options for dealing with the changes to requirements for Australian air cargo being taken to the US.

Option 1 is to maintain the status quo. The Government does not consider this a viable option. Given the US will not accept Australian cargo unless the methods, techniques and equipment used for piece level examination are approved, prescribed and overseen by the Government, it considers ‘it is questionable whether many exporters will be able to continue to export to the US at all’ if the current situation was maintained.16

Option 2 is to require piece level examination of all US-bound air cargo. The Government considers this option would have adverse impacts on trade, including significant delays and disproportionate impacts on particular sectors, such as perishable exports.17

Option 3 is the Government’s preferred option, and the one that would be facilitated by the Bill. It would introduce piece level examination alongside a known consignor scheme for US-bound air cargo:

… It would allow industry participants choice in how they meet the TSA's requirements by stipulating that 'piece level' examination could be achieved either by having cargo submitted for enhanced piece level examination at a specified regulated freight forwarder, or by originating from another kind of regulated business - a Known Consignor (emphasis added).

18

Option 4 is to introduce piece level examination alongside a known consignor scheme for all export air cargo.19

The RIS notes that option 3 is preferred by representatives of smaller exporters because those not exporting to the US will not be subject to increased costs, while option 4 is preferred by ‘some industry participants (particularly large freight forwarders)’, which consider option 3 may not allow for economies of scale, and anticipate difficulties separating US-bound and other air cargo.20 It concludes:

9. Ibid., pp. 14-16. 10. Ibid., pp. 25-26. 11. Ibid., p. 13. 12. DIRD, May 2015 discussion paper, op. cit. 13. Ibid., pp. 3, 13-17. 14. RIS Part 1, op. cit., p. 17. 15. Ibid., p. 18. 16. Ibid., p. 21. See further pp. 23-24. 17. Ibid., pp. 22, 24-25. 18. Ibid., p. 15. See further pp. 25-26. 19. Ibid., pp. 15, 26. 20. Ibid., p. 22.

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… current tight timelines and [option 4’s] potential impact on non-US exporters would not allow efficient implementation in the short term. The preferred option (Option 3) could be expanded to include all export air cargo in future as necessary. 21

While the RIS provides some analysis and justification for the Government’s approach, it does not include full costings and a cost/benefit analysis for the above options. It states those details will be included in the RIS for amendments to the Regulations because they will ‘continue to evolve’ throughout development of the scheme and further consultation with industry.22 The Department expects the results of detailed costings and cost/benefit analysis to support the Government’s preferred option.23

Committee consideration The Senate Standing Committee for Selection of Bills recommended the Bill not be referred to a committee for inquiry and report.24

The Senate Standing Committee for the Scrutiny of Bills sought the Minister’s advice on whether proposed subsection 44C(3A) could be more narrowly drafted.25 The Committee’s concern is outlined in the ‘Key issues and provisions’ section of this Digest.

Policy position of non-government parties/independents Non-government parties and independents did not appear to have commented publicly on the Bill as at the time of publication of this Bills Digest.

Position of major interest groups Major interest groups did not seem to have commented publicly on the Bill as at the time of publication of this Bills Digest. The Freight & Trade Alliance appears to support a known consignor scheme, while information about the proposed scheme on the Export Council of Australia’s and Australian Federation of International Forwarders’ websites appears neutral.26 Interest groups may not be inclined to comment in detail while they are still engaged in consultations led by the Department on the details of the proposed scheme.

The Department has been consulting industry stakeholders such as exporters and freight forwarders, including through release of discussion papers in May and October 2015 and workshops held in June and July 2015.27 The May discussion paper indicated submissions in response would be treated as public documents and may be posted to the Department’s website, except where a submitter has asked for a submission to remain confidential.28 No submissions had been posted on the Department’s website as at the time of publication of this Digest.

Financial implications The Explanatory Memorandum states that there will be no financial impact to the Commonwealth resulting from the Bill.29

Statement of Compatibility with Human Rights As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible because it does

21. Ibid.

22. Ibid., p. 13. 23. Ibid., p. 28. 24. Senate Standing Committee for Selection of Bills, Report, 13, 2015, The Senate, 15 October 2015, accessed 19 October 2015. 25. Senate Standing Committee for the Scrutiny of Bills, Alert digest, 11, 2015, The Senate, 14 October 2015, p. 1, accessed 19 October 2015. 26. P Zalai, ‘Australian exporters to set a global benchmark in transport security’, Freight &Trade Alliance website, 4 July 2015; Export Council of

Australia, ‘Important update: agreement established to strengthen US-bound air cargo security’, Export Council of Australia website, 26 July 2015; Australian Federation of International Forwarders, ‘Weekly news highlights & activities update—October 8’, Australian Federation of International Forwarders website, 8 October 2015; all accessed 21 October 2015. 27. RIS Part 1, op. cit., p. 27; DIRD, Maintaining US acceptance of Australian air cargo: Regulatory changes: Discussion paper, October 2015, accessed 4 November 2015. 28. DIRD, May 2015 discussion paper, op. cit., p. 10. 29. Explanatory Memorandum, op. cit., p. 2.

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not raise any human rights issues.30 The Parliamentary Joint Committee on Human Rights reached the same conclusion.31

Key issues and provisions Known consignors as a new category of aviation industry participant Section 9 of the Act includes definitions of terms used throughout the Act. Item 2 will insert a definition of ‘known consignor’ into section 9 and provide that it means a person approved as a known consignor in accordance with regulations made under section 44C. Item 1 will amend the definition of ‘aviation industry participant’ to include known consignors in that definition. The definition of aviation industry participant is fundamental to the operation of the aviation security regime established by the Act and Regulations, which operate by imposing obligations and responsibilities on all participants and different categories of participants.

Enabling the Regulations to establish a known consignor scheme While the Act establishes the broad parameters of Australia’s aviation transport security regime, much of the detail of the scheme is contained in the Regulations. Section 44C of the Act sets out matters that may be provided for in the Regulations in relation to examination and clearance of cargo, for the purposes of safeguarding against unlawful interference with aviation. Included among these matters are the establishment of the schemes that currently apply to regulated air cargo agents and accredited air cargo agents.32 The amendments described below will enable an equivalent regulatory framework to apply to the proposed known consignor scheme.

Item 7 will insert proposed paragraph 44C(1)(aa) to allow the Regulations to establish a known consignor scheme, under which certain persons that carry on a business that includes handling, or making arrangements for transport, of cargo may be approved as known consignors. This is the key amendment in the Bill, as it provides the authority required for details of the Government’s proposed known consignor scheme to be included in the Regulations.

Items 10, 11, 13-19 and 21 include complementary amendments to subsections 44C(1) and (2). Those subsections currently set out particular matters the Regulations may deal with in relation to regulated air cargo agents and accredited air cargo agents. Items 10, 11 and 13-19 will amend those subsections so that the Regulations may also specify how those matters are to be dealt with in relation to known consignors. The matters include, for example, conditions that must be complied with, training requirements for employees, and examination and clearance requirements. Item 21 will include as an additional matter the application and approval process that will apply to the known consignor scheme.

Other amendments to the regulation making power under section 44C Without limiting the regulation-making power in subsection 44C(1), subsection 44C(2) provides further detail on some of the matters the Regulations may cover. Item 20 will insert proposed paragraphs 44C(2)(ga) and (gb) to make it clear the Regulations may provide for how cargo is to be handled in order to receive clearance for the purposes of being taken onto an aircraft, and to maintain its status as cleared after receiving clearance.33 This may include methods, techniques or equipment to be used. These amendments will allow the Regulations to specify these matters both in relation to:

• the proposed known consignor scheme, under which cargo will be cleared earlier in the supply chain and

• alternative means of complying with requirements for US-bound cargo, including through enhanced piece level examination at a specified regulated freight forwarder. Cargo Terminal Operators have been able to accept air cargo cleared by an Enhanced Air Cargo Examination provider at facilities outside an airport and load it onto aircraft without further examination since July 2015.34

30. The Statement of Compatibility with Human Rights can be found at page 3 of the Explanatory Memorandum to the Bill. 31. Parliamentary Joint Committee on Human Rights, Twenty-ninth report of the 44th Parliament, 13 October 2015, p. 1, accessed 19 October 2015. 32. Aviation Transport Security Act, paragraphs 44C(1)(b) and (c). 33. ‘Receives clearance’ and ‘cleared’ are defined in section 44B of the Act, as amended by item 6 of the Bill. 34. For information on Enhanced Air Cargo Examination, see DIRD, ‘Strengthening US-bound air cargo security’, 20 October 2015, and

‘Factsheet—Enhanced Air Cargo Examination’, 7 August 2015, DIRD website, both accessed 21 October 2015.

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Item 23 will insert an ‘avoidance of doubt’ provision. Proposed subsection 44C(3A) will make it clear that regulations or other legislative instruments dealing with examination of cargo may provide for, or require, cargo to be opened, deconsolidated or unpacked, whether or not the owner or anyone else has consented. This will be particularly relevant to US-bound cargo not originating from a known consignor, where such steps will be required in order to satisfy the US requirement for piece-level examination. The Scrutiny of Bills Committee noted that the Explanatory Memorandum states that the purpose of examination is to detect explosives, and that the proposed subsection is intended to displace common law principles or fundamental rights that might otherwise apply to the opening of cargo.35 The Committee sought the Minister’s advice on whether the power to make legislative instruments authorising the opening, deconsolidation or unpacking of cargo could be expressly limited to the purpose of detecting explosives.36

Increasing the range of matters that may be included in notices made by the Secretary Subsection 44C(3) allows regulations made under certain paragraphs of subsection 44C(2) to provide that some or all of the matters set out in those paragraphs are instead to be specified in written notices made by the Secretary of the department administering the Act. A notice may impose restrictions on persons or classes of persons to whom it may be given. Currently, the matters are:

• the examination of cargo

• the procedures for dealing with examined cargo

• the methods, techniques and equipment to be used for examination and

• the circumstances in which cargo may receive clearance.

Item 22 would amend subsection 44C(3) to also include:

• the places where examination is to be conducted

• the things to be detected by examination

• the procedures for dealing with things detected by examination

• the supervision and control measures for dealing with cargo that has received clearance

• how cargo is to be handled in order to receive clearance (proposed paragraph 44C(2)(ga)) and

• how cargo is to be handled to maintain its status as cleared after receiving clearance (proposed paragraph 44C(2)(gb)).

The Explanatory Memorandum states that the ability to specify matters in notices instead of the Regulations ‘allows for a greater degree of flexibility to respond to things such as changes in technology’.37 It appears at least some of these notices would not be legislative instruments, meaning this amendment may further reduce Parliamentary scrutiny of the above matters.38 However, as noted in the Explanatory Memorandum to the Bill that initially introduced subsection 44C(3), publication of some of the information that might be included in such notices could compromise aviation security.39

Other provisions Section 9 contains definitions of ‘regulated air cargo agent’ and ‘accredited cargo agent’ for the purposes of the Act. Item 2 will amend this section to provide that a ‘regulated agent’ means a regulated air cargo agent or an accredited cargo agent. Item 1 will make a consequential amendment to the definition of aviation industry

35. Senate Standing Committee for the Scrutiny of Bills, Alert digest, op. cit. Note the Explanatory Memorandum (p. 10) incorrectly refers to subregulation 44B(2) instead of subregulation 4.41B(2) as the provision that stipulates the purpose of examination. 36. Ibid.

37. Explanatory Memorandum, op. cit., p. 9. 38. The Explanatory Memorandum for the Bill does not address the issue of whether or not the Secretary’s notices are legislative instruments. Nor do the Explanatory Memorandum to the Bill that inserted subsection 44C(3) or the Explanatory Statement relevant to regulation 4.41J: Explanatory Memorandum, Aviation Transport Security Amendment Bill 2006, p. 24, accessed 20 October 2015; Explanatory Statement,

Aviation Transport Security Amendment Regulation 2012 (No. 3), accessed 4 November 2015. A range of factors determine whether or not something is a legislative instrument: Legislative Instruments Act 2003, accessed 23 October 2015 (see in particular sections 5-8). 39. Explanatory Memorandum, Aviation Transport Security Amendment Bill 2006, op. cit., p. 24.

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participant. Items 10, 11, and 13-19 include consequential amendments to section 44C of the Act. These changes will simplify references to those participants.

Section 44B of the Act outlines when cargo is taken to have received clearance, and when it is taken to be cleared, for the purposes of being taken onto an aircraft. Item 6 will repeal and replace subsections 44B(2) and (3). The proposed known consignor scheme will provide for examination and clearance earlier in the supply chain, in conjunction with obligations to ensure the security of cargo up to the point at which it is taken onto an aircraft. This amendment will take account of that, and proposed paragraphs 44C(2)(ga) and (gb), by clarifying which aspects of the Regulations must be complied with in different circumstances.

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