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Wednesday, 10 March 2004
Page: 26524

Mr PROSSER (10:07 AM) —The Customs Legislation Amendment (Application of International Trade Modernisation and Other Measures) Bill 2003 contains amendments to various Customs related statutes: the Customs Act 1901, the Customs Legislation Amendment and Repeal (International Trade Modernisation) Act 2001, the Customs Legislation Amendment Act (No. 1) 2002, the Import Processing Charges Amendment and Repeal Act 2002 and the Migration Act 1958.

This bill has several purposes in terms of implementing and dealing with the operations of these acts. The bill has no central theme. However, a significant part of the bill deals with the transitional arrangements that will occur during the ongoing program of international trade modernisation in Customs and the transition between the current Australian Customs Service electronic reporting systems and the new Integrated Cargo System. The overall aim is to create an integrated system to replace the several computer programs now in use.

This platform is referred to as the cargo management re-engineering project. This bill clarifies aspects of the major reform associated with new electronic communications arrangements aimed at facilitating the program of international trade modernisation in Customs and the Integrated Cargo System which this parliament has examined on several occasions since 2000.

The mandatory electronic reporting requirements of cargo movements and the demands of the modern competitive trade environment have created a significant challenge in terms of information technology systems required by Customs. A significant amount of time has been necessary to focus on the system's sophisticated functionality. It has ultimately been designed to process and collect some $6 billion annually. The current legislation provides for no overlap in the operation of the two systems and assumes the transition occurs immediately upon turning off the previous systems.

Consultation with industry has identified that the nature of the import business requires that there be a period of time for finalisation of import transactions commenced in the legacy system, as well as early access to the integrated cargo system, to allow compliance with reporting requirements. These amendments will ensure that importers can continue to operate during the transition without undue administrative burden or interruption to the flow of international trade.

The cargo management re-engineering project is being implemented in three stages. The first stage connected the new integrated cargo computer system, which handles risk assessment and reporting of imported and exported cargo, to the smaller number of express carriers. This stage served as a pilot to test some electronic reporting functions because of the large volumes of cargo and the limited number of express carriers. The first stage was successfully implemented in April 2003.

The second stage is to implement cargo integrated system export functions across the industry. Release of the Integrated Cargo System export software was due to be completed by 1 December 2003 but was delayed until early this year. Because the testing of components by the industry was delayed from May until August 2003, Customs will not cut over from the existing system until later this year.

The final stage of the cargo management re-engineering project is the implementation of Integrated Cargo System import functions. According to press reports, both industry and Customs agree that the import cargo declaration software is the most complex piece of the new system. This may be because there are many more categories of imports, they come from more sources than our exports and there will be more users of the import software. Testing of the imports system by industry will commence in the first half of this year.

The statutory cut-off date for the completion of the cargo management re-engineering project has already been extended to July 2005. The act currently sets out the computer systems that must be used to communicate with the Australian Customs Service. There are several systems specified. The international trade modernisation reforms, including those covered by the Customs Legislation Amendment and Repeal (International Trade Modernisation) Act 2001, will see the specific legislative references to computer systems replaced by notices in the Gazette.

The act also contains transitional provisions that need to be modified, including the replacement of provisions relating to the arrival of ships and aircraft and to cargo reporting. The transitional provisions need to take into account that there is a period when the unamended Customs Act will apply and when new provisions dealing with imports under the Customs Act, as amended by the Customs Legislation Amendment and Repeal (International Trade Modernisation) Act 2001, will commence. Broadly stated, there is an overlap during which both computer systems will have to be used leading up to the turn-off time of the current computer systems.

The bill also contains amendments which will deal with cargo reporting requirements. These amendments include allowing timing requirements in respect of outward manifests to be amended by regulation, and removing the requirement to pay a cargo report process charge in respect of in-transit cargo reports. The requirement to provide in-transit cargo reports was introduced by the Border Security Legislation Amendment Bill 2002, but it has always been the government's intention that there should be no financial impost on industry because of the new reporting requirements.

Division 2 of part VI of the Customs Act 1901 deals with the notification and clearance of goods for exporters. At present the provisions allow certain wharves used for bulk loading, such as the export of grain, to be exempted from the more detailed notification requirements. Some of these bulk-loading wharves are now expanding their operations to handle non-bulk exports. Item 14 will allow the exemption to be more specific—for example, on the basis of the nature of goods exported, such as bulk grain, rather than the bulk loading facility itself.

Schedule 1 deals with international trade modernisation import amendments and contains provisions relating to self-assessed clearance declarations and document retention and a number of minor amendments to the provisions of the Customs Act that will be inserted or amended by the Customs Legislation Amendment and Repeal (International Trade Modernisation) Act 2001. Information contained in the self-assessed clearance declaration enables the goods to be assessed by Customs and Quarantine for compliance with prohibitions and restrictions, and collection of duties and taxes where required. These amendments will provide certainty as to how electronic communications are processed and how the release of goods is communicated to the owner.

Section 68 of the Customs Act 1901 imposes an obligation to enter for customs purposes goods that are imported or intended to be imported that are on board a ship or aircraft that has commenced its journey to Australia—including, where applicable, the importation of a ship or aircraft itself. The requirement does not apply to personal items of the passengers or crew, containers, low-value items or certain goods that are exempted by regulations. However, section 71 of the Customs Act 1901 enables Customs to require the owners of such excluded goods to provide information. Where necessary, Customs may refuse entry of goods or, alternatively, authorise the entry, subject to any duty that is payable. This is the self-assessed clearance declaration procedure.

This legislation also contains amendments to enhance Customs' border controls. The first deals with a provision that will allow the minister to order the detention of certain imported goods that are subject to Customs (Prohibited Imports) Regulations 1956 where the minister considers that it is in the public interest to do so. The second set of amendments relate to maritime provisions to amend the definition of a commander in relation to Commonwealth ships and aircraft, under the provision that allows ships to be detained, to make it clear that those ships can travel on the high seas to reach the place where they have been taken. Amending the definition of `commander' will ensure vessels being used by Customs officers have the authority to detain and escort other vessels.

Under the Border Protection (Validation and Enforcement Powers) Act 2001, amendments were made to Customs legislation to the effect that a commander of a vessel in the service of the Commonwealth was defined to include a commissioned officer of the Australian Defence Force. This definition is being expanded by items 18 and 19 to include `the most senior officer of Customs'. This recognises that Customs officers may also be on a state water police vessel or a chartered civilian vessel, rather than on an official defence vessel or an Australian Customs vessel, and the Customs officer may need to make a request to board or, if necessary, chase another vessel.

Item 35 makes the same type of amendment in relation to the Migration Act 1958. Items 20 and 36, in relation to the Migration Act 1958, clarify that moving a detained vessel may require travel by that ship across the high seas to an Australian port for the purpose of an inquiry before a competent authority. These provisions are consistent with paragraph 7 of article 111 of the United Nations Convention on the Law of the Sea.

The proposed amendment to the Customs Act expands the definition of arrival in respect of ships and aircraft and clarifies where an officer may impound goods without the need for a seizure warrant. This does not increase Customs seizure powers; rather, it clarifies an ambiguity in the Customs Act. Schedule 2 caters for other amendments, wherein items 1 and 3 amend existing provisions to broaden their application. The effect of item 1 is to specify that a vessel has arrived when it is in port, rather than being limited, as at present, to when it has docked and unloaded passengers and/or cargo. Item 3 corrects a legislative amendment made in 2002. The correction will include the nonmovement of aircraft until the removal of cargo destined for that port of call has transpired.

This bill also clarifies the calculation of customs duty on alcoholic beverages. Division 1 of part VIII of the Customs Act 1901 deals with the computation of duties. Division 1A deals with rules of origin of goods in respect of which a preference applies. Item 17 will insert a new division 1AA after the existing division 1 to remedy a technical problem in calculating duty by reference to the percentage alcoholic content of the import. The problem arose when some cans of alcoholic beverage were imported and labelled as containing five per cent alcohol by volume, but the technical measure of the fluid in the can turned out to be 4.8 per cent. Proposed new sections 153AA to 153AD provide rules on how to calculate the rate of duty that should apply. These amendments are therefore necessary to clarify any ambiguity under the legislation. Finally, the bill contains three technical amendments that correct references to the goods and services tax, luxury car tax and wine tax legislation within the international trade modernisation legislation.

To demonstrate the increased complexity of the task facing the Australian Customs Service over time, I have researched the dollar value of imports over the periods 1988-99 and 2002-03. During that time, Australia's imports rose from some $47.039 billion to $115.445 billion—an increase of 145 per cent over 14 years, or an average of 6.6 per cent per annum. These figures, however, do not take account of fluctuations in the value of the Australian dollar or of other sources of changes in the prices of imports, some of which have been increased or decreased. Obviously over time, too, the composition of imports has altered with different source countries, different products and different relative weights.

I am further aware that the forms processed by Customs—each form being termed an entry—are perhaps the best representation of their workload over time. In 1985-86, 1.4 million import entries were processed; in 1992-93, 2.8 million import and export entries were processed; and in 2002-03, some 3.043 million import entries were processed. All this has led to Customs coping with an increased workload which has necessitated the change of systems, especially now, considering the examination requirements for containers.

The 1992-93 Customs annual report states that 735,680 containers were landed in Australia and 5,213 were examined. With new container X-ray facilities, it is expected that in the 2003-04 period sea cargo inspection rates will increase to around 80,000 a year, or five per cent of the total loaded import containers across the ports in which the facilities are installed. Obviously, the security stakes for Australia are now higher and examining containers is a far more complex activity than in the past. This represents an enormous task for the Australian Customs Service. Indeed, I agree with my parliamentary colleague Senator Chris Ellison, who reiterated last month to Emma Connors of the Australian Financial Review that the government's commitment to international trade modernisation and the cargo management reengineering project is one of the largest e-business undertakings currently under way in Australia. I commend the bill to the House.