Senator MURRAY (11:48 AM) —We are dealing here with the Customs Legislation Amendment and Repeal (International Trade Modernisation) Bill 2001 and related bills. These bills have long been in gestation—over the period of both the Labor and coalition governments' tenure—and have been subject to reasonably thorough consultation and have been through Senate committee review. There is broad industry support for these bills.

The bills seek to modernise Customs' interaction with import and export activity and to increase their capacity to target tax avoiders and unlawful activity. As stated in the second reading speech, the package of bills attempts to achieve modernisation through four key strategies: establishing a legislative framework for mandatory electronic reporting of cargo movements, providing for compliance management that avoids a `one size fits all approach' to the multiple industry sectors which Customs affects, improving controls over cargo and cargo movements, and introducing new cost recovery arrangements to support the changes to cargo processing.

The legislation introduces a new regime for the operations of the Australian Customs Service and related activities. The legislation introduces improved IT processes. It also increases the number of offences under the legislation and makes a number of those strict liability offences. That is a matter which has caused us some concern. The government's stated intentions are also: to complement other initiatives under the Tough on Drugs strategy by improving border surveillance, to enhance the system of reporting to Customs by introducing electronic business management, and to improve cargo control where there has been a failure to meet regulatory requirements.

This package of Customs legislation relates to one of the most important aspects of a national government's responsibility to its people: the defence of its nation's borders. Given we live on the earth's largest island, that responsibility presents an even greater challenge than might be the case for other countries. While this responsibility obviously extends to a whole range of government agencies, in peacetime the role fulfilled by the Australian Customs Service is perhaps even more important than that of the military. This is because of the nature of the activities it monitors.

The role which Customs fulfils involves the supervision of activities which potentially represent a much more subtle but a much more dangerous invasion of our borders. Customs responsibilities are more important because they are exercised every day at a wide range of locations with a large number of industry partners—over 95,000 such partners a year, in fact. Much has been made in recent years of these responsibilities, in particular with regard to the fight against the illegal drugs in our community. In my reference to the dangers that invade our borders, people would obviously have picked up drugs as being a key part of the danger.

It is a campaign that, while sometimes overstated, still remains an important element of the harm minimisation approach that Australia has adopted with regard to drugs. Illicit drugs, however, are by no means the only goods that we are concerned to prevent from entering our country. Illegal firearms, other weapons and harmful and dangerous substances also have the potential to cause serious harm to Australians, to our industries, to our society and to our economy. The role of Customs in preventing the entry into this country of these types of goods or problems is, for that reason, very important.

Customs has for decades fulfilled this role effectively—some would argue not effectively enough. But there is always much more to be done: sometimes it is a question of culture; sometimes it is a question of legislation, which these bills seek to improve; sometimes it is a question of resources; and sometimes it is a question of political will. But, overall, Customs has attempted to fulfil the role effectively. However, the legislation we are considering today is an attempt by the coalition government to further improve and make more effective the exercise of a customs role.

As the explanatory memorandum states, the aim of this package of bills is to support the modernisation of Customs' processes by: establishing a legislative framework for mandatory electronic reporting of cargo movements, and that gives the opportunity for the speed of access and understanding as to what is going on; providing for compliance management that recognises that the current `one size fits all' approach is no longer appropriate to the many industry sectors which deal with Customs, and that allows for some discretion and flexibility in contractual arrangements; improving controls over cargo and cargo movement—that is probably the most critical element of all; and introducing new cost recovery arrangements to support the changes to cargo processing.

While its main aim is to introduce improved cargo movement and management, the test with this legislation is for the Senate to assess whether it will meet the needs overall of enhancing the protection of our community. The task comes down to balancing the interests of our community generally with those of the people involved in importing and exporting goods to and from Australia. That balance is best represented in this legislation through the introduction of what is known as the accredited client program. The supporters of this program believe it will allow streamlined processing by Customs for those clients who can demonstrate that they are able to provide accurate information to Customs regarding their transactions—in other words, those with a good history will be allowed as much freedom as possible to get on with their business.

It is a positive step in that those companies who put an effort into the provision of precise information and whose behaviour profile is a good one will be rewarded for such efforts. It is highly likely that such companies will benefit significantly from the ability to retrospectively account for their imports in a periodic declaration, rather than the current system which requires that documentation be lodged prior to their goods being released by Customs. One of our concerns, however, is the timing of the lodgment of such declarations. Despite the concern of some in the industry, the Democrats are persuaded that this program is unlikely to disadvantage small clients or those who have not participated in the pilot program.

The `apply and be assessed' nature of this program will mean that access to it is balanced between those importers and exporters who do a large amount of trading and have a developed relationship with Customs and those who do a small amount of trading but, nonetheless, can demonstrate that they meet the criteria to become part of the program. It will be no news to the Senate to recognise the 80:20 principle is at play yet again in this industry where a small number do the vast bulk of the business. Underlying this trust based client accreditation program is the enforcement `stick' in this legislation—that of strict liability offences and increased penalties.

My own minority report to the Senate Legal and Constitutional Legislation Committee's inquiry into this bill shows that I have consistently been concerned at the significant increase in strict liability offences in legislation. But we have to recognise that we do have a system whereby there are three grades of liability: absolute, strict and fault liability. If we accept that those three grades are there, then we have to determine that there are circumstances in which we will agree that they should be present. Customs legislation is one area where, in our view, strict liability provisions are properly present; the issue, of course, is in which provisions. We felt that the government bills had clearly gone too far and, accordingly, we will be moving amendments to excise a number of strict liability provisions.

The original bill obviously represented a desire for the wholesale implementation of a strict liability regime in the customs environment without sufficient thought given to a more effective, targeted use of such a penalty system. I do not quite think they were trying it on but they were certainly going too far. We were able to, we think, persuade the government that some of the strict liability offences proposed in the bill might not be as important or necessary as previously thought. We will be interested to see in the debate if they accept our position on that basis. We have agreed that we should support those provisions in the bill which are either a transition from the current legislation or essential to protect the integrity of the revenue base or those that support community protection objectives.

I should make the point that we have seen large numbers of bills coming through the Senate which have had strict liability provisions attached to them, because the model criminal code now requires that we, as legislators, should be explicit about whether something is a fault liability, a strict liability or an absolute liability. That clarification has been coming through. By and large—in fact, I do not recall any occasion when it has not happened, but I might have missed it—the Senate has taken the view that those strict liability provisions that are transitions from current legislation should be allowed through. So we have kept to that principle. We have also had to take a view on those others that are in the bill which are there, in the terms of the government's explanatory memorandum, to protect the integrity of the revenue base or to support community protection objectives.

When considering this legislation and listening to what witnesses before the committee inquiry had to say, I was particularly concerned to have those provisions relating to an alleged breach of administrative procedures removed from the ambit of strict liability provisions. Today I will move those amendments to remove from the strict liability regime provisions relating to: failure to keep or produce records or commercial documents; failure to answer some questions; failure to communicate with or make electronic payments to Customs after information systems failure; and failure to report about stores, prohibited goods as well as a number of other areas. We believe these amendments should strike a better balance between the need for enhanced customs compliance through a strict liability regime and the need to apply penalties appropriate to the type and significance of the offence committed. We would welcome both the government and the opposition's support for our position, but I am sure there will be a debate concerning it.

There are a number of other important aspects of the bills that are being introduced to facilitate cargo management and border control which are being considered today. These aspects include new export control measures, enhanced electronic communication mechanisms, replacement monitoring powers, duty payments and repayments, and document retention requirements. The Democrats support these measures as complementary to the major changes being proposed in the bills.

I must make one comment on the new export control measures. As I indicated in the Democrats' supplementary remarks to the report of the Senate Legal and Constitutional Legislation Committee on this legislation, I am very concerned about the level of goods allegedly being diverted into the domestic market from export cargo facilities. As I have already outlined, it appears that the level of forgone revenue for whisky alone could be around $25 million per annum. The Democrats are seriously concerned that such a high level of apparent revenue seepage has not apparently provoked a serious investigation from the government either through Customs or through the Taxation Office. It would appear that at least some sort of analysis of the veracity of the claims represented by the submission from the United Distillers and Vintners Australia and Ernst and Young to the committee's inquiry into the bills is warranted. I have put a set of questions on notice concerning these matters. I think Customs' coverage of those matters during the inquiry was weak, and I would expect a far fuller response on that issue to be forthcoming.

I am again calling on the government to consider the prevalence of these sorts of activities and to assess the impact on forgone revenue, as well as with regard to effective cargo management and monitoring. At the least, I would hope that the review of this legislation, which is another committee recommendation strongly supported by the Democrats, contains some detail in relation to these claims and the impact of the new legislation on this issue. In making that remark, I note that people such as UDV and Ernst and Young believe that the legislation will in fact tighten up a number of the areas that they are concerned about.

A further three amendments will be proposed by the Democrats, with the aim of enhancing the smooth implementation of the bills and the practical operation of the Customs system. Another of the concerns that I raised in our supplementary remarks was one that relates to the personal carriage of over-the-counter or prescription pharmaceuticals by airline crew and passengers. It appeared from the bills that these would have had to be reported to Customs for every journey, which clearly would be an unreasonable burden. I suspect it is an unintended consequence, and we will be seeking to have the provision modified in order to make the system work as it should.

With regard to the new section relating to the power of Customs officers to seek answers to questions when they are executing a warrant issued under the provisions of the bills, we are seeking to ensure that the most appropriate person within the company answers those questions, if they are available—and I stress `if they are available'. It is obviously the intention of the bills that in serious matters Customs must be able to get answers to questions which could affect the immediacy of the matter, and in a serious way. The Democrats do not believe that it is appropriate, for instance, for a junior staff person to be questioned by Customs officers when the most suitable person to answer questions in those circumstances might be a more senior person available. Our amendments in this area seek to address this issue and place the obligation to answer questions about a company's affairs with those in the position with the responsibility to answer them. However, we recognise that in their absence questions will have to be answered on the spot by whomever is present and available.

Our final amendment of the three that I mentioned will seek to change the date on which periodic declarations are to be lodged with Customs. There was support in the committee's inquiry, most specifically from the Australian Importers and Exporters Association, for an alignment of the reporting dates for the ATO's business activity statement and the periodic declarations required of accredited clients by Customs. This is an area of some contestability because the Australian Bureau of Statistics are very tough about the dates they want material by and seem to have great influence with the Treasurer. I think these matters need to be resolved. They obviously cannot be resolved in the short time frame available to us and, therefore, they will need to be addressed by further consultation between industry and Customs and the ABS. The principle should be absolutely clear. As far as possible, reporting dates required by legislation of businesses should be coordinated such that they are consistent, and in this case they are not.

The Democrat amendment will allow the minister, by regulation, to alter the reporting date. Frankly, it would have been more satisfying to be prescriptive about it, but we do not think the time available allows that. So should the minister, after consultation, consider that a better alignment of the reporting date is possible and achievable, we would expect the needs of industry and government to be met by doing that. I hope the government will agree to consider that issue favourably. We will obviously discuss further amendments as they arise on the floor of the chamber. I must say that I am pleased that the government has accepted the final recommendation of the legislation committee report. I am pleased that it has reiterated its intention in the chamber to review the legislation within three years of its royal assent. I am pleased that it has taken notice of the Scrutiny of Bills Committee's recommendation. That is very important to us.

In closing my second reading contribution, I turn to the opposition's proposed second reading amendment, which was circulated just prior to my rising to my feet. From a quick glance, I need to dissect some of its elements. It asks that the Senate condemn the government for introducing important legislation without conducting adequate consultation with industry. I am not sure that that is an accurate statement. As I said, and as I heard Senator Bolkus say, the legislation has been in gestation for 10 years, over the passage of two governments. It seems to me from the evidence we got that the consultation was reasonable. Whether it was adequate, I am not in a position to judge, but I did not hear anybody squealing that they had been affected by consultation. There is also the question of what `adequate consultation with industry' means. I have found throughout this debate a conflict between service providers, or people who think service providers are part of industry, and industry itself. To me, this is all about import and export, which is industry. Whilst service providers, customs agents and others are important, they are service providers and not the main proponents.

I have covered item 2 in my speech. On item (b), it is a failing to present such a reference without its being previously tabled and opened to consultation. We are not necessarily opposed to reviews of IT processes of this kind, but this is not the occasion to rush it through when I have had literally a few minutes to glance at it as it comes up. I say to Labor that if you want to resurrect—

Senator Bolkus —We have been talking to you about it for 10 days.

Senator MURRAY —I have not seen your item (b).

Senator Bolkus —We have been talking to your office about it for 10 days.

Senator MURRAY —You may have been talking to my office, but I had not seen it until it came through today. I am more than happy to discuss item (b) at some other time. We will oppose the amendment. (Time expired)