Steve Hutchins (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Due to the need to expedite matters, I will speak briefly on these bills. In light of the stuff-ups that occurred last year with the introduction of computer technology on the waterfront, yet another new system is being foisted on industry with very little notice. I advise the Senate that I will certainly be keeping an eye on this system that is being introduced. Labor will make sure that, if any customs brokers or forwarders are unfairly or harshly criticised or victimised by the Customs Service, that will be taken up in the Senate. I seek leave to incorporate the rest of my speech.

Leave granted.

The speech read as follows—

I rise today to speak on the Customs Amendment (2007 Harmonised System Changes) Bill 2006.

I speak in support of this bill, but in doing so I want to point out a number of issues of concern.

This bill will allow the introduction of new or changed Tariff Concession Orders in line with changes to the international Harmonised Commodity Description and Coding System.

These HS Codes, are they are known, were developed by the World Customs Organisation and govern the classification of 5,000 different commodity groups. HS codes are used in 190 countries and over 98 per cent of international trade is classified using the system.

The changes to TCOs will occur on 1 January 2007. The old codes will be revoked, and at the same time new codes will be instated.

These are very significant changes. They will have the effect of replacing 700 TCOs with 1200 new codes, including changes to, and the introduction of some completely new, subheadings in the Customs Tariff.

The significance of the amendments to customs brokers and importers is that their databases of TCOs, precedents and advices will all be affected and some made completely redundant. The industry will need to review these databases and make the appropriate changes to them prior to 1 January 2007.

In the course of the Foreign Affairs, Defence and Trade Committee’s inquiry into this piece of legislation, there was a certain degree of concern expressed on behalf of industry by the Customs Committee of the Law Council of Australia. This concern spoke to the timing of the bill, the industry consultation process undertaken by Customs, and the liability for errors made by brokers and importers after the changes are made.

There are people in the industry asking why this bill took so long to come to Parliament. Customs, in cooperation with a number of other departments, has been drafting the tariff amendments since February and finalised them in mid-September. By the time this bill passes, the industry will have only two months to prepare before these changes take effect. These two months take in the busiest time for customs brokers and importers as they handle the Christmas rush in merchandise trade, and now they will be saddled with an extra administrative burden.

The further concern for industry, of course, then lies in the degree to which it will be held liable for mistakes made after 1 January. Customs has already notified industry that tariff advice will not be made available until after 1 January, meaning that brokers and forwarders will be flying blind until advice comes through. Customs has foreshadowed that there is scope for discretion in the issuing of infringement notices, and I hope that is extended appropriately to afford industry the necessary lee-way.

Given the pressures and possible financial burden on industry over these next two months, questions are also being asked about how far Customs has gone to make this transition as smooth as possible.

It would appear that Customs has consulted quite regularly and closely with relevant departments in the Government- DFAT; Industry, Tourism and Resources; Agriculture; the ABS; and Treasury. However there have been concerns about the depth of consultation with industry, which will ultimately bear the brunt of the changes on the frontline.

The Law Council’s submission states:

Accordingly, the Customs Committee is concerned that the current level of dissemination of information regarding the amendments may not be adequate. In addition to the information made available on Customs website and through various other Customs resources, the Customs Committee is of the view that Customs should undertake an exhaustive series of information sessions with industry (on a face-to-face and on-line basis) to discuss the impact of the bills

It is not an unreasonable expectation that front-line industry is involved in the consultation process. Up until now, this has predominantly taken the form of notices and drafts on Customs’ website. I understand that Customs proposes to hold information sessions in capital cities around the country following the passage of this bill, and I applaud that move. However I hope that it is not too little, too late. One of the criticisms levelled at Customs by industry is that consultation on a range of issues in the past has been insufficient. I quote again from the Law Council’s submission to the Senate inquiry:

The Customs Committee has regularly observed that Customs may not have consulted in as timely or broad a fashion as would be ideal in relation to significant proposed legislative changes.

The style de rigueur of Customs’ consultation has been very much a one-way process: Customs makes the decisions and subsequently notifies the stakeholders on the ground.

I noted that new Customs CEO Michael Carmody has also recognised the failings in the consultation processes undertaken by Customs in an Australian Financial Review profile of 10 October. He said:

I prefer engagement over consultation. It’s not hard to produce a long list of meetings to prove there was consultation but it’s how objectives are achieved that make the difference. Rather than going in with a prescription, engagement is about sharing development of how you are going to get there.

I welcome these sentiments, just as I am sure they are welcomed by many in the industry who have experienced Customs’ prescriptive methods of decision making.

However, I do not see that this was the case in the development of amendments to the Customs Tariff, and in fact it would appear that the paucity of genuine industry ‘engagement’, as Mr Carmody puts it, demonstrates that the consultation ethic the new CEO is seeking to instil has yet to filter through in any meaningful way to the organisation.

This pessimism is, I think, well-founded in the aftermath of last year’s ICS debacle.

If ever there was a case of a complete lack of Ministerial accountability for an out-and-out disaster, it would Minister Ellison’s botched handling of the introduction of the ICS.

We’ve just passed the one-year birthday for the ICS, introduced on 12 October 2005, and still there is no end in sight to the problems harassing brokers and forwarders trying to use this system.

We have a Government that has plunged $205 million into a system that, even a year after its go-live date, has yet to catch up with the rickety, 20-year old legacy system it replaced.

Customs is still manually pumping out workarounds and patches for the system, some of which are costing many freight forwarders time and money to implement.

The ICS was two years overdue at the time of its introduction, still managing to fail spectacularly and still being plagued by problems.

If we have a look at the damage to industry that was wreaked by the botched handling of the ICS, we already have a dollar value: $9 million. That is the figure that about 2000 freight forwarders and customs brokers are seeking to recoup just from the loss in productivity incurred in the subsequent months following the go-live date. Of this compensation, Customs has already payed out half a million dollars to 268 companies. There is speculation the larger losses being claimed will be sought in a class-action suit. Even the ABS, before it was persuaded to retract its comments, pinned a proportion of the November 2005 trade deficit on the bungled ICS implementation.

Most of the trouble was experienced in the lead-up to Christmas, and saw cargo piling up on the docks as the ICS failed. Industry was forced to pay extra staffing costs as people worked around the clock to get cargo moving, and faced additional costs for the extended storage time.

There should be a plate-load of humble pie being quaffed by Customs, and probably a resignation letter adorned with the signature of Minister Ellison after this affair. Instead we have had a very defiant Customs Service and equally defiant Minister refusing to acknowledge the damage done to the industry.

The Minister’s stewardship of this project fostered only delays and a lack of consultation with an industry that was wary of the complexities of the system and warned of the consequences of its implementation. Instead of engaging industry, the Minister bore down on the system developers and pressured them into going live despite having insufficient testing and training.

One of the freight-forwarding software developers, Richard White, said in the Australian newspaper on October 10 that although Customs and industry were working together now, many had characterised the go-live date as “the Twin Towers collapsing”.

Bob Wallace, chairman of the Customs Brokers and Forwarders Council of Australia, said in the same newspaper article:

We’re 12 months down the track and we’re still using work-arounds. We’re still 20 per cent down on productivity, but we’re making the cargo move by dealing with the process in place at the moment. Work-arounds will probably be in place for at lest another two years. Customs is telling us that, because of fundamental design problems, it’s not going to be easy to change them all.”

So in another words, Customs has told industry to suck it up, because the ICS is a dog. It is not good enough that our brokers and forwarders have to put up with everything they do taking 20 per cent longer. It is not good enough that this Government could not develop a world-class system on time that functions the way it should.

The Booz Allen Hamilton report into the ICS implementation shows how badly it was handled by the Minister and his department. It found that there was inadequate testing of the system before its go-live date; there was no identifiable budget for the entire process; there were quality problems with the software industry would be using; there was a lack of staged implementation; Customs’ help desk could not even handle the volume of inquiries; and importantly, there was inadequate training in the new system.

The report also found the ICS has not improved trade facilitation or border protection, and we all know that in fact, freight-forwarding productivity has gone backwards. The report notes, quite succinctly, that, “The events to date have left industry angry and disappointed”.

That anger and disappointment will not disappear quickly, particularly if industry is still being forced to use a system that doesn’t work the way it should.

From my perspective, industry is looking at another major change to their operations and they are wondering, quite reasonably, whether Minister Ellison and the Australian Customs Service he heads up are able to deliver the ‘seamless transition’ they promise.

Australian industry has placed Minister Ellison and Customs on notice. It will not tolerate another ICS-scale disaster.

Richard Colbeck (Tasmania, Liberal Party, Parliamentary Secretary to the Minister for Finance and Administration) Share this | Link to this | Hansard source

I thank Senator Hutchins and commend the bills to the Senate.

Question agreed to.

Bills read a second time.