Wednesday, 7 February 2007
Customs Legislation Amendment (Border Compliance and Other Measures) Bill 2006
Consideration resumed from 6 February.
I move Democrat amendment (2) on sheet 5015 revised:
(2) Schedule 2, page 6 (after line 32), after item 4, insert:
4A After subsection 234A(1A)
(1AA) A decision by the Collector under this Act is subject to judicial review under the Administrative Decisions (Judicial Review) Act 1977.
Briefly, following on from the provision of a statement of reasons, the purpose of this amendment is that those reasons are subject to judicial review. I do not accept the real-time argument put forward by Customs as a good enough reason to deny people natural justice when they are being subjected to search and seizure conditions, as they are under these provisions. I do believe that there should always be a process of review for decisions which are made at the absolute discretion of any officer in any place.
Whilst Labor supports the ability for matters to be reviewed where appropriate and necessary, one of the difficulties with this amendment is that, unfortunately, it probably goes beyond what was considered in the committee as to how it would apply and obviously it goes beyond the ability for Customs to provide an answer. I wanted to ask one clarifying question as to whether this would apply to all decisions by the collector under the Customs Act or whether it would only apply to the section 234AA areas. It seems to state, ‘A decision by the collector under this act is subject to judicial review.’ If that were the intent then it goes beyond what the bill would otherwise seek to do. If you are now seeking that all collector’s decisions be subject to judicial review, that is a matter which, I would think, could be subject to greater scrutiny by the Senate Standing Committee on Legal and Constitutional Affairs. The collector makes a wide range of decisions, not just those in the section 234AA areas. I will not foreshadow it on your behalf but I suspect there are other ways to amend it to accord to your desire—if it were to be a more narrow application. I am not minded to make amendments on the run and so therefore I agree with the principle but, in this instance, I am not prepared to go the extra mile and agree with the amendment.
The shadow minister for justice and customs makes the right point, of course, which is that this is more broadly drafted and it is deliberately so. However, if the minister were to accept such a principle with respect just to subsection 234A(1A), I would be more than happy to move an amendment on the floor to this amendment to change it to ‘a decision by the collector under this act with respect to subsection 234A(1A) is subject to judicial review’. It is not my original intention but I would certainly accept a narrower approach.
However, I suspect, based on my experience of the government since they took control of the Senate, that they are not minded to have any amendment ever accepted which does not derive from the government. I think the government’s record so far, Minister Ellison, is that you have accepted about four or five amendments from non-government parties since you took control of the Senate, which reflects your view that all wisdom resides in the government. You might have what you consider to be valid reasons for rejecting this particular amendment in principle, so my sense of things is that you are likely to reject this anyway, but if you were minded to accept it more narrowly defined then I would so move. I gather from the remarks of the shadow minister that he would in fact welcome a more narrowly crafted amendment. I am not going to change it just yet, because if the minister were to reject either proposition then there is no point; but if he were so minded then I would indeed be prepared to accept a narrower casting.
I certainly take issue with one thing that Senator Murray has raised, and that is the notion of the government not accepting proposed amendments which do not originate from the government. I stand by my record as a minister who has looked closely at Senate committee recommendations and accepted them for legislative amendment where they were considered to be of value. I think that there have been many occasions in my ministerial responsibility where I have accepted the recommendations of Senate committees and then had them drafted in an appropriate form by way of amendment to government legislation. Of course, amendments from other parties in the chamber which do not necessarily reflect Senate committee recommendations are another issue. I think it is unfair to say that the government just does not accept any suggestions which are not of government origin. I look very closely at Senate committee recommendations and I think I have a strong record of taking them on board and putting them into government amendments.
In this case, I have outlined the reasons why the two recommendations cannot be accepted. Democrat amendment (2) is not considered appropriate because, under the Administrative Decisions (Judicial Review) Act 1977, all decisions of Customs are subject to judicial review unless specifically excluded. That means that these decisions are subject to the Administrative Decisions (Judicial Review) Act. There is nothing in this bill which excludes those decisions; they are subject to that review. I sought advice, especially in view of the proposed amendment, and I have been advised that that is the position. It is the view of the government that the very principle that Senator Murray is pursuing here is provided for in current law. That is why the government does not agree to the Democrat amendment either in its current form or in the other form that has been foreshadowed. But I remind the Senate that there have been many occasions over the years where I as a minister have accepted Senate committee recommendations which have been supported by other non-government senators and they have been put into government amendments to legislation.
I accept the minister’s rebuttal. I was referring to non-government amendments that are moved in the chamber as opposed to those suggested by committees. I acknowledge for the record that the minister has been responsive to committee recommendations. Of course, responsiveness to committee recommendations depends on both the minister responsible for particular bills and the chairs of particular committees. Not all ministers are responsive to committees and not all chairs of committees are proactive in making recommendations and in trying to insist that the government attend to them. This particular minister deserves credit for positive reaction on a number of occasions. I would point out that, as the minister well knows, the chair of the Senate Standing Committee on Legal and Constitutional Affairs is a member of the government, in the broad sense of the meaning, and so I was accurate in my overall remarks. However, that does not mean that I should be ungracious to either the minister or his department in reacting positively in their approach.
I based my remarks on the clear knowledge that literally hundreds of amendments which were passed in the Senate, which were not necessarily derived from committee findings and which were previously accepted by the government when it did not have control of the Senate, have not been overturned by the government since it took control of the Senate because they have been found to be workable and effective. In most cases, the amendments that were accepted by the government in the House of Representatives were, on reflection, regarded as valuable contributions to change.
I do not claim great virtue with respect to my particular amendment at this time, but I do want to make the point that it seems odd to me that when the government had the opportunity before the Senate was in its control to ask the Senate to not insist on amendments, and many amendments were not insisted on, it still nevertheless accepted hundreds and hundreds of amendments which are in law and they have not been overturned or subsequently done away with. That is because they have been found to be sensible and to have substance. I am quite prepared to give the minister credit and, indeed, give credit to the government chair of the legal and constitutional affairs committee but, nevertheless, I think my general point applies. However, I will not detain the Senate any further. It is quite apparent, shadow minister, that the minister will not accept this amendment in either form, so I think we should just move on.
I move Democrat amendment (6) on sheet 5015 revised:
(6) Schedule 5, item 1, page 12 (line 7 and 8), omit the definition of accredited client, substitute:
accredited client means a party involved in the international movement of goods in whatever function that has been approved by or on behalf of a national Customs administration as complying with World Customs Organization or equivalent supply chain security standards, including manufacturers, importers, exporters, brokers, carriers, consolidators, intermediaries, ports, airports, terminal operators, integrated operators, warehouses and distributors.
This amendment is to the definition of ‘accredited client’. I noted that the Senate Standing Committee on Legal and Constitutional Affairs did not choose to make a recommendation on the ACP or to take up the definitions proposed by those who made submissions to the committee. However, I think that the submissions had merit and the proposed amendment is designed with that in mind.
As the Law Council of Australia pointed out in its submission, the framework is intended to afford benefits to all interested parties in the supply chain, not simply those who have entered into an import information contract. This would extend to transport companies, customs brokers and freight forwarders. Therefore, I propose to extend the definition in the bill to cover all those other entities so they are able to take advantage of the Accredited Client Program.
Before I resume my chair, I would just like to remind the Senate that, although I have a long portfolio interest in Customs matters, as the minister and the shadow minister are aware, I have many other committee duties and, therefore, I am not a full member of the legal and constitutional committee. Neither am I able to attend all their committee hearings or meetings, as was the case with this bill. I probably do 50 or 60 inquiries a year through my other committees, and I work as hard as I can on those. In this case, although I was not able to attend the hearings, I have had regard to the submissions. We have made these amendments with those in mind.
Just so the record is plain on this, there was no criticism from the Labor Party about your attendance at committees and your diligent work on committees. I do understand that you have to spread yourself quite thinly with the workload that you have in the portfolios in your area. The comments I make do not go to a criticism of you not attending inquiries or you not being aware of the submissions or the reports. I think it is worth while putting that on the record.
We do understand the point that you make in relation to this issue. The Labor Party have had criticisms of the Accredited Client Program for some time now. We still think that the model that Customs has now is deficient. We have a difficulty with you trying to put a definition into this area. Labor cannot agree at this stage with changing the definition to rely on the World Customs Organisation as the benchmark for the Australian standard. These are standards promulgated by the World Customs Organisation. You cannot put them in and adopt them in a legislative framework. Certainly, if it were a treaty, we could ratify or sign the treaty and then implement it in domestic law. That is the usual way we would do those things. It would be unusual to use a World Customs Organisation framework of standards as a way of implementing a benchmark within our legislative framework.
The better way, and in fact what the government should be doing, would be to look at a whole framework, moving forward with the issues in World Customs Organisation standards and going through that process. What we really have instead is a model—that is, the Accredited Client Program—which is not complete. It seems that it is only half the program. In our view, you would need to fundamentally overhaul the current government’s direction in this area to be able to rely on your definition.
We intend to do that at some point. We will look forward to your support in this area. If you look at what the government are fundamentally doing, they are not implementing the Accredited Client Program in a holistic way. It is going to end up without the security components. In many instances, I suspect that not too many people are going to sign up to it. I wonder how successful it will be in the short term, but I do not want to second-guess what might happen to it. But, at this point in time, I do not think that expanding the ACP through the definition is a successful way of bringing about an accredited client program to meet all these things.
This is a matter that government should be pushing. The government should be developing a true accredited client program, with trade facilitation and trade security as the two sides of the one coin. They should then work with the clients to expand it to ensure that it has benefits for industry—the importers, the brokers and everyone else associated with the industry—and that Customs then obtains some benefit out of it. That is a program I think they thought they were developing; it is certainly not one that they have finally developed, especially when you look at the duty deferral issue.
Originally it was promised that we would have a duty deferral system. That fell over for a range of reasons I will come to shortly. We now have a system which I think adds red tape to the overall system. That is a roundabout way of saying that we are not going to support your amendment because it tries to do all of that. It tries to put a framework and an accredited client program in place that just does not exist. The government really needs to do the groundwork first before we will have a true accredited client program that will provide benefits to importers, exporters, brokers and Customs themselves.
I understand the principle; I understand the direction you are going in. I agree with the principle and I agree with the direction you are heading in. In this instance, it is putting in the provisions before the government has even got a system in place, unfortunately. Certainly we will be watching this from our perspective, and we intend to work towards an accredited client program that in fact will work.
We have here an amendment from the Democrats, in relation to the Accredited Client Program, which is somewhat different from what the opposition is proposing by way of duty deferral in subsequent amendments. Nonetheless, both the opposition and the Democrats have indicated that they believe the government’s Accredited Client Program is not adequate and that there should be changes to it.
I have outlined to the Senate the benefits, as we see them, of the Accredited Client Program and how we propose it will work. I would certainly say to the Senate and those here today that I am going to watch very closely how the Accredited Client Program works—in particular, the benefits it delivers to industry. I am very keen to get feedback from industry. I have met on several occasions with industry stakeholders in relation to this program. The government have made a decision in relation to this program and we are putting it forward in the form presented. I have outlined the benefits as we see them.
I will leave for a moment my comments about duty deferral and the opposition amendments. In relation to the Democrat amendment, can I point out that the program was designed to apply only to highly compliant companies whose internal systems and practices would be able to take advantage of streamlined import and export processing arrangements. On the face of it, that is fairly straightforward. The program will also apply only to goods that are considered low risk in terms of protection of revenue, border security and quarantine interests. Again, that is fairly straightforward. Entry into the Accredited Client Program is dependent upon the chief executive officer of Customs entering into an import or export information contract with a person upon being satisfied that the person meets the requirements of the business rules. There is some scrutiny by the CEO of Customs in relation to whether or not the company concerned is appropriate for this program. This sort of control ensures that only the most highly compliant companies will be accepted into the program. I think that is a fairly straightforward and sensible premise.
While this program has been designed to facilitate trade, the World Customs Organisation framework of standards to secure and facilitate global trade, which primarily addresses terrorist threats, will be incorporated into the Accredited Client Program business rules. We are taking note of the World Customs Organisation but we are still mindful of the threats posed at our border and we have to balance those against the facilitation of trade. We believe the proposed amendment by the Democrats to the definition of ‘accredited client’ undermines those requirements by allowing any foreign customs administration to decide if a company is an accredited client for the purposes of the Customs Act. This would take control of the Accredited Client Program out of the hands of the Australian Customs Service and the Australian government.
The amendment also proposes extending the participation of the Accredited Client Program to any party involved in the importing or exporting of goods. Again, we believe this would undermine the work of the Australian Customs Service by severely limiting its ability to risk-assess the information received with regard to goods and, if necessary, examine the goods while they are subject to the control of Customs. The government, therefore, cannot accept the proposed amendment to the definition of ‘accredited client’. We believe this amendment looks more at the supply chain security requirement of the World Customs Organisation. We believe it takes away from Customs the ability to address the border threat, which we have to balance against the facilitation of trade. We believe the definition as proposed by this amendment would therefore be too broad. We believe we have the balance right. We have carefully considered it and, on that basis, the government do not support the amendment.
There are a couple of matters I would like to deal with first by way of questions. Having heard what the minister has said today, I have waited for the most relevant area, the Accredited Client Program. But a couple of issues remain outstanding in respect of how the Accredited Client Program is now going to operate. In terms of the minister’s department—and I think the minister is aware of the debate—it hinges a lot on the Treasury costings that were originally done on duty deferral. The minister might recall that the figure was $89 million. In short, Treasury did not accept that that was reasonable and asked you, Minister, to come back with a different proposal. You subsequently came back with the current system. Minister, were Treasury’s costings accepted at face value by you or your department?
As I understand it, Customs and Treasury worked together on these figures. Customs provided information to Treasury and Treasury would have looked at those figures and then made an assessment. What I am saying is that I do not think this figure is disputed; it was arrived at by Customs and Treasury working together. It was not as if Treasury came to Customs and said, ‘This is what we believe the position to be.’ The figure was arrived at by the two working together.
Minister, as you would obviously be aware, I have been following this matter for some time in a series of exchanges between you and me in respect of the Treasury costings of the original Accredited Client Program. At budget estimates last year, you said:
I will be watching the answers more closely than anyone, I can tell you!
It is a given that you have been following the proceedings. I had the opportunity to go to those estimates hearings and to at least ask questions of Treasury—although maybe as an aside I can say I think I like legal and cons better! When I asked about Treasury’s costings as to the original proposal for full duty deferral, the response was that Treasury ‘would have costed a number of options around that’. Is it the case that there are other options that might have been costed? As far as I am aware, there were only two options. There was the latest one, which was the one we have now that did not apparently require a costing, as I am advised, and of course there was the original proposal, which required a costing. You have indicated that there was a costing in the order of $89 million. The question is whether there were in fact any alternative options canvassed at that time. If so, is the minister able to say what those other canvassed options were?
The written answer that ultimately came back from Treasury stated that the government ‘does not generally provide details of the costings of proposals that are not government policy and which may or may not have been considered in the policy development process’. It would be remiss of me not to add that. That is what the answer from Treasury was, because I asked them those questions as well. I have asked whether the full duty deferral was actually considered in the policy development process, because Treasury do not appear to be so sure. Therefore, what I am also concerned about, Minister, is how hard this has been pressed if Treasury’s answers seem so inconclusive, if I can put it in that way. They are two questions for which I seek answers.
As Senator Ludwig would know from extensive experience at estimates, we do not discuss the advice given by departments to ministers or the options which are considered other than those which are government policy. I am not going to go into the discussions between Treasury and Customs other than to say that this matter was considered carefully, there were views put, different considerations as put by various stakeholders were considered very closely and protection of revenue is of course an overriding factor. But I can say that you have the duty deferral which obviously was considered, you have the proposal that we have here, and no doubt there would have been other discussions. As for discussions of in fact doing nothing as an option, I am not going to go into all of the discussions between Treasury and Customs. What I can say is that the government has considered very carefully the proposals put by industry, and I think my previous remarks indicate my interest in this program. It will continue to be a close interest. I will be watching closely how it works. I have had many discussions with industry stakeholders and I am aware of the concerns, but I do not think I can take it much further than that. As to getting into explaining Treasury’s answers, I do not have responsibility for Treasury. I will take it on notice and see if Treasury wants to add anything further.
That is probably where I was heading. I have not been able to get much out of Treasury. Quite frankly, I am going to see if I can persist with them a little more. But ultimately it is your department that has responsibility for Customs and the duty deferral so I thought it would be worth while to at least give you the opportunity to explain why Treasury knocked back the duty deferral, the basis of the $89 million figure that they arrived at—how they arrived at the $89 million on the duty deferral system itself—and whether any other options were canvassed before coming up with the revised current system, which appears not to have been costed. That is the general thrust of the issue. I would have thought that it was a matter that you, Minister, would have wanted to find out about. You may already have done that but are unable to say, in which case, because I do not understand it, I will continue to press for clarity in this area. Is the minister aware of how many companies have expressed an interest in signing up to the Accredited Client Program at this point and have been able to meet the requirements or have indicated that they will be pursuing it?
During the second reading debate on this bill, Minister, you referred to a committee recommendation that ‘an independent cost-benefit analysis of the Accredited Client Program be undertaken which takes into account the removal of the duty deferral mechanism’ from the proposed program. You said:
It is considered a poor use of public money to fund a cost-benefit analysis of the revised Accredited Client Program when the outcome is already known ...
If that is the case, can the minister confirm the budget savings associated with moving from duty deferral to the revised program? What in fact are the savings to Customs when you move from duty deferral to the now revised proposal?
There is a reduced cost of compliance. We will take that on notice and assess that for you. The following 15 companies are specified for the purposes of subsection (2) in relation to the Accredited Client Program: Colorado, DuPont, Ericsson, Grocery Holdings, Kmart, Kodak, LiquorLAND, Mycar Automotive, Myer Stores, Nortel Networks, NS Komatsu, Officeworks Superstores, Panasonic Australia, Target Australia and Tyremaster. They are all pretty big companies and very much involved in importing. I would refer to that list. I will take on notice the question on compliance savings and get back to Senator Ludwig.
Is there a time line for when the Accredited Client Program is likely to be expanded? This was a matter canvassed in part earlier by Senator Murray implicitly in his amendment seeking to expand it to all brokers, importers and exporters. Is there a time line for when this scheme is likely to be expanded to include brokers, importers and exporters—more widely than the narrow group that has been read out?
There is no time line, to answer the question put by Senator Ludwig, but I think the pilot program that Customs is operating and the detail of that might be of interest. I will see if I can get something in the course of this committee stage and provide that to the Senate—if it does have some detail to it. It might be later, but we will try to do it as soon as we can.
This question goes to the cost-benefit analysis again. I know I have been pursuing it, but have others been raising that with Customs? Has the BPG itself or other interested parties sought a cost-benefit analysis of the current scheme to see what the savings or the costs or benefits might be? It is not about the cost benefit itself. I think you have given me an indication of what your answer is about that. This is about whether other groups have been raising it as well, such as the BPG, which you referred to earlier.
The advice I have seems to be at odds with what Senator Ludwig understands about the BPG—the Business Partner Group—raising this. Certainly no-one else has raised it. That is the advice I have. We will have to check whether the Business Partner Group has raised it with Customs, because my understanding is that it has not. I will check that, because Senator Ludwig understands it differently. Leaving that to one side, we understand that no-one else has raised it.
It was a question. I do not know whether the Business Partner Group have raised it or not. They would be the obvious group. I could surmise that they would be likely to raise it, but they may not have. Could you confirm whether or not they have raised it? Perhaps the way I constructed the question was a little poor or unclear.
We have moved from a full duty deferral scheme to a revised scheme; we have moved from one to the next. Will the minister write to Treasury to request the costings of the original proposal and the current proposal so that Australian business can understand what the benefit was, what the benefit now is and what, as the case may be, has not been able to be delivered?
That is the same question in a different form, and I said that we will be taking that on notice. Certainly we are going to do that. As to what I then do with the information—I am taking the question on notice and providing that answer, but I think it is fair to say that a number of companies—and I have just outlined them—are involved, and I want to see how this works. To start revisiting this so soon is indeed premature. I want to see how the program works and I want to assess it. As to whether or not I take the matter up with government, again that remains to be seen. Suffice to say I will be looking at the program and how it works and getting feedback from industry. As to the cost savings, I have covered that previously and we are giving that detail on notice.
by leave—As there is nothing more in that area that I can usefully explore, given the time available, I move opposition amendments (1) and (2) on sheet 5175:
(1) Schedule 5, item 2, page 12 (line 12), omit “15th”, substitute “7th”.
(2) Schedule 5, item 6, page 13 (lines 1 and 2), omit “accredited client monthly duty estimate,”.
Obviously, not everyone listening can see the explanatory memorandum for the Customs Legislation Amendment (Border Compliance and Other Measures) Bill 2006, but if they could they would look in horror at a map which provides for how the accredited client payment structure will in fact work. Attachment A gives a good indication of the confusing way in which industry will have to use the accredited client payment structure. On the 15th of the first month, you can lodge your RCR for each shipment—that is, the payment covering estimated duty of all imports for month 1. Then we move to the second month, when you can lodge your RCR for each shipment—so you can continue to do that work—and, when the 7th turns up, you can lodge your periodic declaration for month 1. So in the next month you lodge your periodic declaration. Then on the 15th—a short time later in that same month—you can reconcile payment of the estimate from month 1, plus or minus, as the case may be, payment of fees for the RCR and payment of fees for periodic declaration and then a payment covering estimated duty for all imports for month 2. By the time that business has got to month 3, they can continue to lodge their RCR for each shipment, and again on the 7th they lodge the periodic declaration for month 2. Then on the 15th they lodge the reconciliation payment estimate for month 2, plus or minus, and the payment of fees for the RCR, the payment of fees for periodic declaration and then a payment covering estimated duty for all imports for month 3. And so it goes on.
If that sounded confusing, it is. There is a simpler system and it is a duty deferral system. If the government is not prepared to provide for it, that is what these amendments seek to do. What this will mean for industry is that they will have a number of transactions, but those transactions will mean that they will have to not only lodge the RCR and then work out an estimate in the first month—so halfway through the month they have to provide at least a best guess of what the payments are going to be for the period from the 15th to the end of the month and pay that, so they have to make an up-front payment—but also in the next month continue their lodgement, as they would do. On the 7th they would lodge their declaration for month 1, because of course then they would have at least an idea of what it was, and then on the 15th, a short time later, they have to do a reconciliation to work out whether Customs owes them money or they owe Customs money. This would continue for each month.
I do not know of too many systems in business that use these types of systems that provide for guesstimates. It might be easy for some businesses—they could automate it and they could find that it may or may not work—but it would depend a lot on your seasonal variation, your high and low time and your historical data to be able to guesstimate, because the last thing you want to do is pay money that might be more than you need to pay at any particular time, because then it is not in your hands but in Customs’ hands. Of course, you then have to go through a reconciliation process with Customs, which may in fact be a simple process or sometimes it may be a little bit more complex. Looking at the system that they now have, I cannot see why you could not adopt a much simpler process. It would have been more beneficial to all if Customs and the minister had worked towards a simplified system rather than creating what can only be described as more red tape for industry—more processes and more transactions—which will, more likely, add to their cost structure. Of course, the short answer might be that it will all be automated and businesses will get used to it. I guess they do not have much choice in that instance but to get used to it, if they want their imports and exports dealt with. When you are dealing with a monopoly, I do not know whether that is a fair reply.
Hopefully the minister can support these amendments. I foreshadow that I will move amendments (3) and (4) but I will not talk to them now. They go to the same issue of creating a simpler duty deferral system, which the minister should have looked at in the first instance in order to try and ensure that result for business. Certainly, when business is operating in the usual way, there is usually provision of bills and a payment of those. Quite frankly, I admire the person who came up with such a strange system. It certainly took a bit of forethought to come up with a system whereby, halfway through the month, you have to guess what you will import and pay for it accordingly, when you do not know what it is. It might be on a ship yet to arrive here or it might not be. It might not have left the port if the port is not that far away. But, in any event, that is the system business is now going to have to work with. I do not agree with it and these amendments will seek to fix it.
I will make a few comments before the minister responds. My initial reaction to seeing these amendments was: what really hinges on the choice of a date in the eight days between the 7th and the 15th? Not much is affected by it. Incidentally, I do not really accept the idea that the particular dates affect revenue protection, provided reconciliations of payments are made monthly. I cannot see that those issues apply, so for me the key thing is: what is the simplest, easiest and most flexible system which suits both industry and Customs equally? I am quite attracted, of course, to the views of working groups with respect to this.
It seems to me that there are a couple of key matters. The first is that, from the perspective of business and industry operating efficiently and effectively, obviously the lodgement of the request for cargo release should occur at any time which suits the business concerned. That is what is meant—that the containers or whatever they might be are released and are able to move into general trade. Obviously, from the perspective of Customs, you have to have reconciliations and periodic declarations and so on, but my view is that all those should be done by a certain date and not necessarily on a certain date. I would have thought that is the most effective way. If the date chosen was the 7th or the 15th, as long as the lodgement of periodic declarations and reconciliation payments and so on occurred by those dates each month, I think that should be at the discretion of the business—provided, of course, it happens at least once a month.
If I understand the shadow minister’s proposal, it is essentially that there be two steps, not three. In other words, only one date is specified and that is the 7th; whereas the government’s proposal is that two dates are specified—both the 7th and 15th—for the lodgement of periodic declarations and the reconciliation payment. My common sense, as opposed to my detailed industry understanding, would suggest that it should simply happen by a certain date. I would not much mind if the government chose any date, but I do think that having two separate dates on which people must take certain administrative actions is unnecessarily restrictive.
That is my thinking with respect to this issue as it has been put to me. I would appreciate it if the minister would indicate whether he thinks the opposition has a point—that you should have just one specified date, namely the 7th, and not two. Secondly, my own question is whether it should occur ‘by’, not ‘on’, so that, provided it occurs once monthly, that is sufficient.
Section 71DF(b) does stipulate ‘not later than’. I will go back to taws; this has been in place so long. What happened was that the government did put in place a scheme. A bill passed through the parliament. We had a duty deferral system, which was effectively a trading account for 30 days—you get the bill and you pay it. I am sure Senator Murray is familiar with that in business: you get a bill, you have 30 days to pay it and you pay it within that period. It was simple for business to understand, when they could pay the relevant account no later than a certain date.
Now Treasury have effectively come back and said that that was not a flyer, so the minister had to jettison the scheme and come back with this one, which provides for a revenue neutral system, so to speak. In doing so, the government has had to split the way it will operate, so that in each month it is revenue neutral. Originally, you would pay your duty. In the first month you would know what your duty was and you would pay it in the next month—like the operation of any business, where you have a 30-day trading account. For instance, as a tradesperson you go to the hardware store and pick up your goods. A couple of days into the next month—maybe by the 7th—the hardware store sends you the bill and you pay it, so that it rolls through. Each tradesman, business or whatever effectively has a 30-day trading account. I am sure Senator Murray is familiar with that.
That was the scheme that was originally proposed. It came to this place and we looked at it. Treasury said that it would cost $89 million, and therefore they did not want to look at it. As far as I can see, the minister agreed that that system was not going to fly. We have a system now which tries to confine each month in isolation. If it sounds confusing, unfortunately it is. It is terribly confusing, and if I have misrepresented how the scheme works then I am happy for some of that confusion to be swept aside by the minister. It is confusing in the way it is written; it will be confusing in the way it operates, because what they are trying to do now is confine it to each month so you will pay everything within the month.
Let us use the tradesman analogy again. A house builder goes to the hardware store and says, ‘I need this material today,’ and the store provides the material on account. Halfway through the month, on the 15th, the hardware store says, ‘We need you to estimate what you are going to get from here for the next 15 days until the end of the month.’ The tradesman says, ‘I’m not sure what work I might have on or what material I might need.’ The hardware store wants him to guess it, reconcile it and pay it. So you do not end up having a 30-day trading account; you are effectively confining the payment to the month itself.
Businesses do not operate like that, in my understanding. You could have a system where each transaction gets paid for immediately—in a consumer context—but most businesses work on 30-day, 60-day or 90-day credit, depending on the industry and on the business. The system that this legislation will put in place is not even a hybrid; it just does not make sense. It is not explained very well in the EM and I do not know whether it is going to work very well in practice. It is trying to confine it all and businesses will have to guess what is likely to happen, use an estimate, and then reconcile it in the next month. There is provision for it to be done by no later than a certain date. They could do it earlier, but why would they in this instance, because they still have to do a reconciliation with Customs in the next month.
I hope I have been able to add a little to that issue. I will not say I have made it any clearer. For those who might be listening to this, Labor certainly do not agree with the scheme. We think it is going to add red-tape cost to business and will be a confusing and difficult scheme to operate.
My apologies, Minister, but I would suspect that you are caught between a rock and a hard place, because the Treasurer and the Treasury certainly outrank you. It seems to me that we are in the middle of a very strong campaign by business—and which is accepted by government—that regulation and red tape need to be regularised, harmonised, minimised and rationalised. This is a red-tape and regulatory system which seems to me to be designed to limit the cashflow costs to government of accepting a deferred payment system, which used to operate on a more flexible basis. If you spin that around as a policy issue, there is not only the policy issue with respect to trying to minimise red tape but there is also of course a general policy: if suppliers to government took the same view that they were carrying costs because government were paying after the event—in other words, they had to carry the cost of supplying goods and services—everything would move to a cash basis. The fact is that the government makes money from paying suppliers on 15 days, 30 days, 45 days or whatever the terms are. Equally, it costs the government money when it receives money later than it would expect.
I do not want to be overly determinative about exactly how this is organised, but it does seem to me that it is unnecessarily complicated and lacks flexibility and efficiency, which we should look for in modern processes. I suspect the minister is without power in this matter and has simply been told what to do by the Treasurer and Treasury. Maybe he can say otherwise—that he is independent of that and has taken his own view. This seems to me to be the wrong way to go. As a person with extensive business experience, I certainly would not like to have this kind of system imposed on me. I would prefer a flexible system which simply says, ‘By such and such a date every month, you must provide these things and allow me to find within my own business structure how I organise that requirement.’ That is as far as compliance should go. Frankly, when the sum at hand is just $89 million, in the context of the way our modern accounts operate, that is but a snip. And it is not at risk; it is simply deferred. It is not as if it is lost. I must say I am uncomfortable with what is being discussed here.
At the outset, to take up Senator Murray’s last point: Treasury has policy responsibility for deferral of duty. It is a matter which goes to revenue and it is a Treasury decision. That has been fairly clear from the start. Industry wanted duty deferral. We went through all the issues with industry. The issues raised by Treasury were put to industry. This proposal is a compromise on that, if you like. I would also remind the Senate that this is only for highly compliant importers. It is not for small to medium enterprises. It is not for your average tradesmen. It is not for your average business. I have outlined to the Senate the 15 businesses which are mentioned in the act. I am talking about Myers, Target and Kmart. These are very big entities indeed, which Customs will work with on a one-to-one basis to ensure that not only do they get streamlined importation of goods but also this payment system works for them.
Customs will sit down with each one of these companies, and estimates of duty will be reached. An agreement with the importers will be based on historical data from importations in the same period in previous years, with allowances for changes, peaks, seasonal adjustments and other things. The amendments require Customs and the accredited client to agree, in the import information contract, on the method of calculating the duty estimate. Provided that the importer complies with the methodology, then it will not matter if the estimate is inaccurate.
So what we have here is a very small group of importers—15 in number, and it could grow, but I do not see it growing greatly. Certainly one would expect it to relate to the larger importers in Australia. I think, and I am open to correction on this, around 20 importers account for 80 per cent of imports of goods into this country. So what you are talking about is really the very big end of town. Let us get that very clear. This is not something which is going to fall upon the vast business community of Australia. It is in relation to a very small group indeed, and there will be that one-to-one basis between Customs and these businesses—to such an extent that the CEO of Customs will agree with them in the contract as to the methodology of assessment of duty.
Senator Ludwig has outlined the situation in relation to manner of payment, and that has been an accurate reflection of how it works. Of course, you have to have a period, a point of lodgement, and that is the seventh day of each month. You consolidate your imports for the previous month. Then on the 15th, eight days later, an assessment is made.
For each import there is an RCR, a request for cargo release. Every one of them has to have that. It is a very much smaller compliance in that it accompanies the import at the time, it relates to more border security issues and the information sought is much less in that RCR. So the participating company lodges a request for cargo release for each shipment; it makes a mid-month payment of duty based on an estimate of anticipated imports in that month; it lodges a periodic declaration on a monthly basis; and, in the following month, it makes a payment, either more or less, to reconcile, according to whether that estimate was correct or not.
The methodology I have mentioned will be agreed with each one of these companies. Their size and number is such that Customs will be able to deal with their particular situation. The government sees, as far as the red-tape aspect is concerned, that we can accommodate, within reason, the various requirements of those companies.
I stress this is a system which will not apply across the board. In fact, it will apply to a few companies—15 at the moment. We hope it will grow over time; a figure in excess of 50 has been mentioned in the past. I think that, as people get the benefit from this program—and they should get the benefit—others will want to join. The benefit for these large importers is the streamlined importation of their goods.
So that is the accredited client program. We believe that, in the absence of a duty deferral program, this is a compromise which can offer benefits to industry. As I said earlier, I will be watching it very closely. I only have to look at the 15 companies that we have at the moment—hopefully that will grow—so we will be able to get a very good grasp on how it is operating for those companies.
To use the analogies of the average tradesman and the average businessman I think misses the point that we are dealing with this on a one-to-one basis. It was always intended that it would only relate to those highly compliant and high-volume importers. And of course the vast majority of Australia’s imported goods are handled by, really, a handful of companies. Then, after that, you get your small and medium enterprises which pick up a much smaller percentage of Australia’s imports. So this is not something which is going to widely affect the importing community. It is very much a focused program and we believe that we will be able to pick up any reasonable adjustments for those companies involved.
Minister, the Accredited Client Program as originally devised: was that open to all businesses, or was it only ever going to be for the big end of town—that is, when we had full duty deferral? I imagined that the Accredited Client Program was going to be available for those who could comply with the system. What you have now outlined is really a two-tiered system: the big end of town is going to get a streamlined system if they comply; the small to medium sized enterprises are not going to get access to this system. So what we now have is really a closed system, where the big end of town only is going to benefit. You might have small to medium sized enterprises that do want to and can comply and want to participate but, effectively, will not be able to, given the way the system is now going to be devised and the complexity that is going to surround the system where you have Customs entering into one-to-one relationships with the big end of town.
It does sound like the Howard government, quite frankly; it really does. I would have thought that the whole idea of an Accredited Client Program ultimately was to ensure that you would have a simple, easy system, a flexible system, for those who could comply to do two things: facilitate trade and secure the supply chain. And if they can meet the criteria they should be able to join in the system. But I will let the minister answer that shortly.
Another aspect worries me. You also indicated that the system will be that the accredited client will devise a system for the estimation jointly with Customs. Is that going to be a confidential agreement between the two, or are others going to understand how that estimation process is going to work? It could lead to favouritism by one against the other when you have those sorts of arrangements put in place. And, if it is, where are the safeguards?
Will it be transparent as to how those estimations work for one company and the next, or will that simply be confidential between the parties and they and Customs alone will know how that estimation will work? A lot will turn on how that estimation works: for instance, how much is being held in escrow by Customs on behalf of the client. Those types of arrangements can in fact mean quite a lot of money is involved in the scheme itself.
The way the Accredited Client Program has been described is that anyone is available to apply to be part of the program. But the commercial reality is that you will not get the benefit from it if you are a small importer, because you have to have the volume of importation to get the benefit out of the Accredited Client Program. We have never made any secret of that. We have said that if you have that volume and, of course, you are a client who has shown high compliance, you can get the streamlined importation. So anyone can apply, but you first have to show that you are highly compliant and then you have to make a decision as to whether you have sufficient volume of importation to benefit from becoming part of this program. There would really be nothing in it for a small importer, because they would not get the benefits of a large-scale importer.
This was always designed to accommodate highly compliant importers and those people who could economically benefit from the streamlined approach to high volume. It is more than open to small to medium enterprises to come to Customs—and many of them could be highly compliant—but with what they have to do in this program they would not get the economic benefit of a larger importer. It was always designed that way. It is a commercial decision for the importer as to whether or not it offers them that benefit. They will vote with their feet and say, ‘It is obviously of commercial benefit to me to participate in,’ or, ‘It is not of commercial benefit.’ You could have no better way of letting the market determine its own benefit.
The contract is commercial-in-confidence. We do not publish the details about our contracts with companies. I totally reject any allegation of favouritism. The Taxation Office enters into confidential arrangements with taxpayers. I think we can have every confidence that the tax office is always looking out for revenue and that Customs equally shares that responsibility and that any arrangement would be to the benefit of protecting revenue. I think Customs has a fine tradition in that regard and so does the Taxation Office. I hardly see a situation where that would be disadvantageous to the Australian taxpayer. But for commercial reasons obviously you would want to keep that confidential.
I stress again that the Accredited Client Program is open to anyone, but it is for that person to work out whether it is the program for them and whether it suits their needs. We always said that the benefit would be to the high-volume importer. By natural definition, if you are a high-volume importer you tend to be a larger company.
I have appreciated this interaction. I note, Minister, that yesterday in a Financial Review report the remark was made that companies most likely to join the new program appear to be of the view that something is better than nothing. You have indicated a few things. Firstly, you have indicated that this program is limited but may expand; secondly, you have indicated that it is voluntary; and, thirdly, you have indicated that you are not going to be shifting from the Treasury diktat. My own feeling with respect to these issues is that the government should be given the opportunity to be hoist with its own petard. In other words, if companies end up in a mess of unnecessary bureaucracy, red tape and systems, you as the government need to wear any opprobrium for that. You have consulted widely, you have chosen not to follow the wishes of the working group, you as the government have chosen this particular system and these particular dates and, frankly, I think you should be given the opportunity to put it in. If it works well, you can say, ‘See, no problem,’ and if it does not work well you will wear it. That is basically the view I will take on these amendments.
On sheet 5175, the opposition oppose schedule 5 in the following terms:
(4) Schedule 5, item 12, page 14 (line 27) to page 15 (line 7), section 71DGA TO BE OPPOSED .
I think we have said as much as we can on these issues. Quite reasonably, the debate has been on all of these amendments, although because of the way the committee works we have to move them separately.