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Customs Amendment (Australian Trusted Trader Programme) Bill 2015



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ISSN 1328-8091

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BILLS DIGEST NO. 125, 2014-15 18 JUNE 2015

Customs Amendment (Australian Trusted Trader Programme) Bill 2015 Tarek Dale Economics Section

Juli Tomaras Law and Bills Digest Section

Contents

The Bills Digest at a glance ................................................... 2

Purpose of the Bill ............................................................... 3

Structure of the Bill ............................................................. 3

Background ......................................................................... 3

Trade facilitation...................................................................... 4

Australia’s role in securing the ATF ....................................... 4

Committee consideration .................................................... 5

Senate Legal and Constitutional Affairs Committee................ 5

Senate Standing Committee for the Scrutiny of Bills .............. 5

Policy position of non-government parties/independents ..... 5

Position of major interest groups ......................................... 5

Australian Chamber of Commerce and Industry ..................... 5

Australian Federation of International Forwarders................. 5

Export Council of Australia ...................................................... 5

Financial implications .......................................................... 6

Statement of Compatibility with Human Rights .................... 6

Key issues and provisions..................................................... 6

Trusted trader agreements ..................................................... 6

Regulatory impact ................................................................... 6

Key provisions .......................................................................... 7

Other provisions .................................................................. 8

Concluding comments ......................................................... 8

Date introduced: 3 June 2015

House: House of Representatives

Portfolio: Immigration and Border Protection

Commencement: Schedule 1 commences on the later of 1 July 2015 or the day after Royal Assent. (The commencement provision for Part 2 of Schedule 1 refers to the Australian Border Force Act 2015, which commences on 1 July 2015).

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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The Bills Digest at a glance The Bill allows the Comptroller-General of Customs (CGC) to establish, through legislative instrument, the ‘Trusted Trader Programme’ (the programme) as a trade facilitation measure. Under the programme, the CGC may specify, through legislative instrument, how ‘trusted trader agreements’ can be used to meet current import and export requirements legislated under the Customs Act 1901.1

In simple terms, the programme reduces the entities and transactions that require compliance monitoring removing ‘accredited entities’ from traditional transaction-based border risk assessment, thereby reducing ‘regulatory and administrative burden through simplified procedures (such as streamlined reporting arrangements) and [providing] client service managers as a single point of reference in dealing with ACBPS [the then Australian Customs and Borders Protection Service]’.2 The programme aims to enhance the competitiveness of Australian businesses by decreasing ‘the time-to-availability of their goods, offering trusted traders opportunities for marketing and reputational benefits’.3

The Bill provides significant flexibility for the CGC to establish the programme through legislative instrument; little detail about the programme is included in the Bill itself.

While the programme may reduce regulatory requirements for some participants, no regulatory impact statement is included with the Bill’s Explanatory Memorandum, making it difficult to evaluate the exact regulatory impact.

1. Customs Act 1901 (Cth), accessed 15 June 2015. 2. Australian Customs and Border Protection, ‘Panel session: Trusted Trader Program’, Industry Summit 2014, Customs website, July 2014, accessed 9 June 2015. 3. Ibid.

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Purpose of the Bill The purpose of the Customs Amendment (Australian Trusted Trader Programme) Bill 2015 (the Bill) is to amend the Customs Act 19014 (Cth) to establish the legislative framework for the Australian Trusted Trader Programme (the programme) as a trade facilitation measure. The details of the programme will largely be set through legislative instrument, based on provisions in the current Bill.

Structure of the Bill Part 1 of the Bill establishes the programme. Part 2 of the Bill makes a consequential amendment to the Australian Border Force Bill 2015 to specify that the Comptroller-General of Customs may not delegate the ability to make rules by legislative instrument in relation to trusted trader agreements.

Background In its 2013 publication, Blueprint for reform 2013-2018, the then Australian Customs and Border Protection Service (ACBPS) identified work in ‘Facilitating trusted trade’ and ‘Connected cargo systems’ as ‘key areas of focus to transform our trade and goods approach’.5

The ACBPS established an industry advisory group in 2014 in relation to developing the programme. The terms of reference for that group outlined the fundamental challenge which the programme seeks to address:

Sea and air cargo volumes are rapidly increasing, with forecasts of future growth of 85 per cent in air freight and 20 per cent in containerised sea cargo by 2016-17. The Australian Customs and Border Protection Service’s (ACBPS) current transaction based control model is unsustainable in the face of industry’s requests for differentiated approaches to border clearance based on risk.

ACBPS is developing a Trusted Trader Programme (the Programme) to enhance the competitiveness of Australia’s traders and better align Australia with international standards and evolving models of trade. ACBPS’ focus is to alleviate unnecessary administrative and regulatory burden while also meeting the demands placed on ACBPS by increased trade flows and a growing array of border risks.

6

Meetings were ongoing between August 2014 to at least February 2015, and included discussion over a range of technical issues.7

In a speech in May 2015, the Assistant Minister for Immigration and Border Protection stated:

… the intention is to build a trusted trader programme that provides for an easily understood and simplified border clearance process. The long-term ambition here, after significant research and engagement with stakeholders, is to be able to provide traders that have strong security and integrity practices with expedited border clearance. Trusted, compliant traders could look forward to priority service and increased certainty that will enable better supply chain management and cost savings. This approach will encourage legitimate trade and support economic growth, while also allowing Customs and Border Protection to redirect resources to areas of high risk to ensure a stable, secure border.

8

Subsequently, the Minister announced in a budget press release that:

A total of $5.6 million has been allocated to start a pilot phase of a Trusted Trader Programme. The pilot will start with four industry partners focusing on seaborne container exports and rapidly expand over the year to imports and air cargo involving around 40 Australian exporters and importers and their supply chains.

4. Customs Act 1901, accessed 15 June 2015. 5. Australian Customs and Border Protection Service (ACBPS), Blueprint for reform: 2013-2018, ACBPS, Canberra, July 2013, p. 36, accessed 18 June 2015. 6. ACBPS, Trusted Trader Programme Industry Advisory Group - terms of reference, Canberra, 15 July 2014, accessed 4 June 2015. 7. ACBPS, ‘Trusted trader industry advisory group: agendas’, ACBPS website; ACBPS, ‘Trusted trader industry advisory group: previous discussion

papers’, ACBPS website, both accessed 4 June 2015. 8. M Cash (Assistant Minister for Immigration and Border Protection), Address to the World Customs Organisation IT Conference, Brisbane, speech, 5 May 2014, pp. 4-5, accessed 18 June 2015.

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Faster clearance of low risk cargo for traders with a history of high trade compliance and commitment to supply chain security will again enable border officers to focus on high risk consignments. 9

Trade facilitation The programme is what is known as a ‘trade facilitation’ measure. According to the Department of Foreign Affairs and Trade:

Trade facilitation refers to the simplification and harmonisation of international trade procedures to assist the movement of goods. Customs, licensing and transit formalities involve complicated administrative processes and burdensome documentation requirements. Businesses can suffer significant costs as the result of complicated or unnecessary, procedures.

10

Informed by the potential benefits of reducing red tape barriers to international trade (improving trade and economic growth) World Trade Organisation (WTO) Members (including Australia) concluded the Agreement on Trade Facilitation (ATF) at the ninth Ministerial Conference on 7 December 2013.11 The ATF contains ‘provisions for expediting the movement, release and clearance of goods, including goods in transit. It also sets out measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues’.12

The Department of Foreign Affairs and Trade notes that:

At a WTO General Council meeting on 27 November 2014, WTO Members agreed to adopt the Protocol to implement the ATF. The ATF will now formally enter into force after it has been accepted by two thirds of WTO Members. 13

Australia formally accepted the ATF on 4 June 2015 and tabled the Agreement in Parliament on 18 June 2014 following the recommendation of the Parliamentary Joint Standing Committee on Treaties that binding treaty action be taken.14

The programme is intended to be consistent with trade facilitation measures outlined in the WTO’s ATF:

The programme will have an exports focused element based on the Authorised Economic Operator (AEO) concept, a key feature of the World Customs Organization’s Framework of Standards to Secure and Facilitate Global Trade (SAFE Framework). 15

Australia’s role in securing the ATF According to the DFAT website:

Australian negotiators, led by DFAT representatives at Australia's WTO mission in Geneva, played a pivotal role in securing the successful conclusion of this agreement after almost 10 years of negotiations. Australia played a particularly important role in co-sponsoring and pushing for obligations to provide advance rulings and to prioritise the clearance of perishable goods. Implementation of these obligations by WTO Members will provide significant benefits to Australian exporters.

Two-thirds of the expected benefits of the Agreement are anticipated to flow towards developing countries. The full implementation of the agreement by developing countries will boost economic growth and create millions of jobs. Australia is working to assist developing countries to implement the agreement. 16

9. P Dutton (Minister for Immigration and Border Protection), Benefits for consumers, travellers and industry from red tape cuts and new technology, media release, 12 May 2015, accessed 18 June 2015. 10. Department of Foreign Affairs and Trade (DFAT), ‘Trade and investment topics: Agreement on Trade Facilitation’, DFAT website, accessed 15 June 2015. 11. World Trade Organisation (WTO), ‘Agreement on Trade Facilitation’, WTO website, 7 December 2013, accessed 17 June 2015. 12. WTO, ‘Trade facilitation’, WTO website, accessed 15 June 2015. 13. Department of Foreign Affairs and Trade (DFAT), ‘Trade and investment topics: Agreement on Trade Facilitation’, op. cit. 14. Parliamentary Joint Standing Committee on Treaties, Report 147, Treaties tabled on 18 June, 24 November, 2 December 2014 and 25 February

2015, ‘Chapter 2: World Trade Organization (WTO) Agreement on Trade Facilitation’, Canberra, March 2015, accessed 15 June 2015. 15. Australian Customs and Border Protection, ‘Panel session: Trusted Trader Program’, op. cit.

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Committee consideration Senate Legal and Constitutional Affairs Committee The Bill was referred to the Senate Legal and Constitutional Affairs Committee for inquiry and report by 15 June 2015.17 However the Committee resolved ‘not to conduct an inquiry’, because:

… the Bill is uncontroversial and … the details of the programme will be in subordinate legislation available to the Parliament for its consideration … and given the time critical nature of the Bill … 18

Senate Standing Committee for the Scrutiny of Bills The Senate Standing Committee for the Scrutiny of Bills sought ‘detailed justification’ from the Minister as to why the key elements of the programme are not set out in the Bill, rather than being left to legislative instruments.19

Policy position of non-government parties/independents The Australian Labor Party supports the Bill.20 Other non-government members have not commented on the Bill at the time of writing.

Position of major interest groups Australian Chamber of Commerce and Industry The Australian Chamber of Commerce and Industry (ACCI) indicated that it was supportive of developing the programme. In a press release in October 2014 the ACCI Director of Trade and International Affairs, Bryan Clark, stated:

… the Government’s announcements in relation to the development of a Trusted Trader scheme are welcomed. Such schemes improve the process of border crossing and reduce the 'hay stack' within which Customs officials need to look for the compliance and security 'needles'. ACCI looks forward to working with Customs in the development of this scheme.

21

Australian Federation of International Forwarders The Australian Federation of International Forwarders supports the pilot of the programme, and has stated that:

AFIF welcomes the Pilot trial to test and refine the processes of the TTP scheme before full implementation and will continue to engage with ACBPS and keep members informed of progress. 22

Export Council of Australia The Export Council of Australia has recommended the adoption of a trusted trader programme, stating in its Trade Policy Recommendations 2014/15 that Government should:

Adopt measures to support trade facilitation advancements and the Trusted Trader Programme (TTP), including the allocation of the appropriate resources necessary to develop and implement TTP within the specified timeframe. This should include an educational outreach campaign to all parties in the supply chain. 23

16. Department of Foreign Affairs and Trade (DFAT), ‘Trade and investment topics: Agreement on Trade Facilitation’, op. cit. 17. Parliament of Australia, ‘Customs Amendment (Australian Trusted Trader Programme) Bill 2015 homepage’, Australian Parliament website, accessed 4 June 2015. 18. I Macdonald (Chair of the Legal and Constitutional Affairs Legislation Committee), Letter to S Parry (President of the Senate), 11 June 2015,

accessed 17 June 2015. 19. Senate Standing Committee for the Scrutiny of Bills, Alert Digest No. 6 of 2015, The Senate, Canberra, 17 June 2015, p. 18, accessed 18 June 2015. 20. M Thistlewaite, ‘Second reading speech: Customs Amendment (Australian Trusted Trader Programme) Bill 2015’, House of Representatives,

Debates, 16 June 2015, p. 50, accessed 18 June 2015. 21. Australian Chamber of Commerce and Industry (ACCI), Improving Australian global competitiveness, media release, 14 October 2014, accessed 18 June 2015. 22. Australian Federation of International Forwarders (AFIF), ‘Weekly news highlights and activities update’, AFIF website, 6 February 2015,

accessed 4 June 2015.

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Financial implications The Explanatory Memorandum to the Bill states that the Bill has ‘no financial impact’.24 However, in a media release on 12 May 2015 the Minister for Immigration and Border Protection, Peter Dutton stated:

A total of $5.6 million has been allocated to start a pilot phase of a Trusted Trader Programme. 25

Statement of Compatibility with Human Rights As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011, 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 discussion of human rights in the Explanatory Memorandum includes consideration of the rights to equality and non-discrimination, privacy and a fair and public hearing, but concludes that ‘the Bill is compatible with human rights’.26

At the time of writing this Digest, the Parliamentary Joint Committee on Human Rights had not considered the Bill.27

Key issues and provisions Trusted trader agreements The Bill amends the Customs Act 1901 in order to allow the Comptroller-General of Customs (CGC) to enter into a ‘trusted trader agreement’ (TTA).

A TTA is initially established as an ‘interim’ TTA. Once the CGC is satisfied that an entity meets qualification criteria (set out in rules), then the CGC may ‘vary’ the TTA. ‘Varying’ the TTA confers ‘ongoing trusted trader’ status on the entity, which can then satisfy obligations imposed under the Customs Act through the TTA.

In simple terms, the programme reduces the entities and transactions that require compliance monitoring removing ‘accredited entities’ from traditional transaction-based border risk assessment, thereby reducing ‘regulatory and administrative burden through simplified procedures (such as streamlined reporting arrangements) and [providing] client service managers as a single point of reference in dealing with ACBPS’.28 The programme aims to enhance the competitiveness of Australian businesses by decreasing ‘the time-to- availability of their goods, offering trusted traders opportunities for marketing and reputational benefits’.29

Regulatory impact The overall impact of the Bill appears intended to reduce regulatory requirements. The Explanatory Memorandum states:

… there may be some additional business costs associated with meeting the qualification criteria. In return for meeting the qualification criteria, entities participating in the Australian Trusted Trader Programme will benefit from reduced regulatory burden and streamlined customs processes. The benefits available to participants will be structured to promote best practice management of supply chain security and trade compliance.

30

Although it appears likely that the programme will have some impact on regulatory requirements, no regulatory impact statement is included in the Explanatory Memorandum. It is therefore difficult to evaluate the extent to

23. Export Council of Australia (ECA), Trade policy recommendations 2014/15, ECA, 10 November 2014, p. 4, accessed 18 June 2015. 24. Explanatory Memorandum, Customs Amendment (Australian Trusted Trader Programme) Bill 2015, p. 3, accessed 18 June 2015. 25. P Dutton (Minister for Immigration and Border Protection), Benefits for consumers, travellers and industry from red tape cuts and new technology, op. cit.

26. The Statement of Compatibility with Human Rights can be found at pages 5-8 of the Explanatory Memorandum to the Bill. 27. Parliamentary Joint Committee on Human Rights, Committee Reports, The Senate, Canberra, accessed 18 June 2015. 28. Australian Customs and Border Protection, ‘Panel session: Trusted Trader Program’, op. cit. 29. Ibid.

30. Explanatory Memorandum, Customs Amendment (Australian Trusted Trader Programme) Bill 2015, op. cit., p. 10.

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which the programme is expected to reduce regulatory requirements, and whether it will result in a net reduction in regulatory requirements for the relevant entities.

Commenting on early announcements, KPMG Customs and Excise Specialist Leonie Ferretter stated:

The question remains as to whether these benefits [of the Trusted Trader Programme] will eventuate. Over the past two decades there has already been significant reduction in cargo clearance times. Furthermore, the current timeframes for customs rulings has increased from 28 days to over 45 days. 31

Key provisions Schedule 1—Australian Trusted Trader Programme

Item 1 inserts two new definitions into subsection 4(1) of the Customs Act, including for the term ‘trusted trader agreement’. This is an agreement (the terms of which may vary from time to time) entered into under proposed section 176A by an entity and the CGC.

The significance of the trusted trader agreement is that for any level of accreditation as a trusted trader, an entity will need to enter into an agreement with Customs regarding the terms of that accreditation.

Division 1A of Part IV of the Customs Act sets out requirements relating to the importation of goods. Item 2 inserts into this part of the Customs Act proposed section 49C. Proposed section 49C specifies that obligations under Part IV of the Act may be satisfied in accordance with a TTA, except for requirements in relation to prohibited imports. Thus the entity is released from obligations they would otherwise have to comply with under Part IV and will not be in breach of the Act if the obligation is:

• of a kind prescribed by the rules dealing with TTAs under proposed Part XA

• specified in those rules as an obligation from which an entity may be released and

• specified in a TTA between the CGC and the entity.

Item 3 inserts proposed Division 1AAA into Part VI of the Customs Act, which deals with the requirements relating to the export of goods. This amendment basically mirrors the amendments made by proposed section 49C, effectively allowing for requirements under Part VI relating to exportation of goods to be satisfied in accordance with a TTA, except for requirements in relation to prohibited exports.

Item 4 inserts proposed Part XA into the Customs Act. Proposed Part XA sets out the framework for the Australian Trusted Trader Programme. Specifically:

• proposed section 176 enables the CGC to establish the programme

• proposed section 176A allows the CGC to enter into a TTA with an entity that nominates itself to participate in the programme, where the CGC ‘considers that it is reasonably likely that the entity will satisfy the qualification criteria set out in the rules’.32 The TTA confers ‘interim trusted trader status’

• proposed section 176B sets out the self-nomination process, which may be completed either in writing or electronically

• proposed section 177 specifies that where a TTA exists and the CGC ‘is satisfied that the entity satisfies the qualification criteria set out in the rules’, then the CGC may ‘vary’ the TTA.33 If a TTA is ‘varied’, it provides ‘ongoing trusted trader status’, and the benefits as specified by the CGC.34 In effect, this means that after an interim TTA is entered, where the CGC is satisfied that qualification criteria have been met, then the CGC can vary the TTA to allow the entity to meet obligations under the Customs Act through the TTA. The heading to proposed Subdivision B of Part XA (which contains section 177) provides that the validation of the qualification criteria will be ‘based on physical inspection and audit’.35

31. L Ferretter, ‘Are you a customs trusted trader?’, KPMG website, 1 August 2014, accessed 15 June 2015. 32. Proposed paragraph 176A(1)(b). 33. Proposed paragraphs 177(1)(b) and 177(2)(a). 34. Proposed subsection 177(5). 35. Section 13 of the Acts Interpretation Act 1901 (accessed 18 June 2015) provides that headings are part of an Act. This means that headings

can be used in interpreting an Act.

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• proposed sections 178-178A specify that TTAs may be subject to conditions in both the TTA and rules, and that the CGC may ‘vary, suspend or terminate’ a TTA if the CGC reasonably believes that the entity has not complied with a condition36

• proposed section 178B requires the CGC to maintain a register of TTAs that is publicly available and

• proposed section 179 allows the CGC, by legislative instrument, to prescribe rules for a wide range of issues relating to TTAs, including qualification criteria, conditions, the benefits available under TTAs, and a number of other details.

Section 273 of the Customs Act lists the decisions that may be reviewed by the Administrative Appeals Tribunal (AAT). Item 5 inserts proposed paragraphs 273GA(1)(jc) to (je), which provides that the following decisions by the CGC are reviewable by the AAT:

• a decision to refuse to enter into a TTA

• a decision to refuse to ‘vary’ a TTA or

• a decision to ‘vary, suspend or terminate’ a TTA.

Other provisions Part 2 amends the Australian Border Force Act 2015 to specify that the CGC may not delegate the CGC’s power under proposed section 179 of the Bill (to make a range of rules by legislative instrument in relation to TTAs).

Concluding comments The Bill provides a framework for a proposed ‘trusted trader’ programme. It does this by allowing the Comptroller-General of Customs to specify through legislative instrument a framework for exemptions from current requirements in the Customs Act.

Members of Parliament may wish to consider whether this broad power strikes an appropriate balance between providing flexibility for the regulator during a pilot phase, and allowing for Parliamentary scrutiny of changes to Australia’s legislated import and export requirements.

While the programme may reduce regulatory requirements for some participants, no regulatory impact statement is included with the Bill’s Explanatory Memorandum, making it difficult to evaluate the exact impact.

36. Proposed subsection 178A(1).

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