Further tightening of the regime for licensed customs brokers

A version of this article was first published in the print edition of The DCN for July 2024.

In our latest Customs & Trade alert, Andrew Hudson summarises some of the relevant provisions to effect changes for licensed customs brokers.

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Over time the Australian Border Force (ABF) and its predecessor agencies have closely monitored the operations of those it licences in the supply chain, including licensed customs brokers (LCBs) and operators of licensed warehouses and depots.

Following recent concerns with increased levels of smuggled and prohibited imports, the ABF has been engaging with industry regarding further additional conditions to be added to the licences of LCBs to start on 1 July 2024, as well as proposed changes to the statutory regime under which LCBs operate.

Some of the relevant provisions to effect these changes have been summarised below, taken from the associated material issued by the ABF.

Rationale for changes

According to the ABF, following operations Ironside and Jardena, the ABF wants to change arrangements of LCBs as ‘trusted insiders within the supply chain’ in four main ways.

The first is to enable the ABF to conduct ‘fit and proper person’ checks on entities occupying trusted positions within the supply chain in a timely manner and take action as required. This includes those filling key roles such as those who occupy traditional classifier and compiler type roles, although those terms are not defined.

The second relates to a provision where a brokerage may be required to submit a staff list to the ABF detailing all persons who participate in the operations of the customs broker.

The third relates to the reinforcement of mandatory continuing professional development (CPD) for customs brokers, and the fourth, is updates to notification timeframes and references to the ABF.

This now means that each LCB licence will have 19 additional conditions (plus notes). Additional conditions (AC) nine to 19 are new. These largely apply to those ‘participating in the operations of a customs brokerage’ – a term which is defined in more detail in note two to the additional conditions.

Background to changes

Again, according to the relevant material issued by the ABF, the changes need to be considered in the following context.

• The additional conditions having been added to depot and warehouse licences (see Australian Customs Notice No. 2022/46).
• The need for additional focus on trusted insiders and transparency as to those operating in the supply chain at licensed premises.
• They will be affected by one set of proposed additional conditions and obligations being imposed on the licences for LCBs and changes to the statutory regime under which they operate.
• One set to be imposed from 1 July 2024 by way of additional conditions. These are generally to be in the form of additional conditions as included in licence renewals sent to LCBs for on 1 July 2024 with final versions of the conditions to be disclosed in an Australian Customs Notice from the ABF closer to 1 July 2024. It is somewhat disappointing that the additional conditions sent with the licence renewals are not the final version so LCBs will need to review the conditions again in the Australian Customs Notice which is to come.
• A second set of changes have been circulated by the ABF in a document entitled Modernising and Strengthening Customs Licensing by way of proposed amendments to the Customs Act 1901 and the Customs Licensing Charges Act 1997. These regulatory changes are intended to implement the Review of Customs Licensing Regimes Final Report (May 2017) and to be consistent to Simplified Trade System reforms.

Changes by way of additional conditions to have effect on 1 July 2024

The additional conditions expressly recognise that a person participating in the operations of a customs broker could be offshore and that they need to be subject to the same identification as Australians and must be fit and proper. This is contrary to the United States (US) practice which does not allow offshore operations by LCBs.

For fit-and-proper tests, there will be a question as to whether the relevant person has been convicted of a prescribed offence in Australia or an equivalent offence in another country or part of a country. Note two describes who participates in the operations of a customs broker.

Other fit-and-proper tests include whether a person has been denied a Transport Security Card or had such a card suspended or cancelled and whether a non-Australian citizen has breached any conditions of their visa.

A corporate LCB must not let any unlawful non-citizen take part in the operations of the customs broker. Final additional conditions are to be issued by an Australian Customs Notice by 1 July 2024.

New additional conditions

Below is a summary of important new additional conditions.

• An LCB must be in Australia when lodging a Full Import Declaration (AC 7). The industry proposal to allow limited overseas lodgement was rejected.
• The requirement for an LCB to hold professional indemnity (PI) coverage and produce within 14 days of request (AC 8).
• An obligation to provide a list of persons participating in the operations of an LCB within seven days of ABF request (AC 9).
• An obligation on an LCB to ensure that a person who is not fit and proper or is an unlawful non-citizen does not participate in the operations of a customs broker (AC 10 and AC 11).
• An obligation on an LCB to notify the ABF if a not ‘fit and proper event’ arises in relation to a person in its operations (AC 12).
• A general obligation to cooperate and provide information if requested by the ABF (AC 13) relevant to determine if persons in operations of an LCB are fit and proper. AC 13 also identifies relevant information required to be provided.
• AC 14 requires an ABF B1555 form (Consent Form – Fit and Proper Checks) to be completed within 90 days from 1 July 2024 for those persons in operations of an LCB or within seven days of others coming into operations of an LCB. This includes an obligation to provide statutory declarations explaining events which may make a person not fit and proper.
• AC 15 includes similar obligations and timings on the provision of completed ABF form B1538i. Proof of identity documents are required to be legible in English or with attested English translation.
• AC 16 requires an LCB to hold a completed B1555 form and identity documents for five years.
• AC 17 requires an LCB to produce a National Police Check and Right to Work Check in relation to any person within 14 days of ABF request.
• AC 18 requires the production of a B1555 form and identity documents within seven days of ABF request.
• From AC 19 – if persons fail obligations, then they cannot work in operations.

Issues to note

There are also important issues arising from the new additional conditions.

• What are identification documents for those operating offshore? The ABF has said it will issue a new ABF form B1538i.
• What is the overseas equivalent of an Australian prescribed offence, and how do you establish a conviction has occurred? This is important as conviction of a prescribed offence renders a person not fit and proper.
• Questions on the reliability of standards of prosecutions overseas which may limit those who would be considered not fit and proper overseas.
• The need to review the terms of employment of all current brokerage employees.
• The need to provide documents within timeframes and then keep them for relevant periods.
• The need for cybersecurity and document insurance in case ‘hackers’ access the relevant documents which now need to be held by an LCB.
• That documents can be kept virtually.
• The need to review operational insurance to cover new obligations.

Proposed amendments to legislation from the 2017 reforms

These are to be affected by legislation amendments rather than additional conditions. We have yet to see the proposed legislative changes, but they have been summarised by the ABF as follows.

• Consistent with the ABF commitment to the Simplified Trade System.
• Fourteen proposed reforms.
• Many relate to the electronic service of documents.
• Allows for choice on how to notify of cancellation of licences.
• For some events, no need to ask party to meet a licence condition before going to the National Customs Brokers Licensing Advisory Committee (NCBLAC) against that party.
• For some events, no need to go to NCBLAC at all before terminating a licence (insolvency, conviction of prescribed offence).
• What is the overseas equivalent of an Australian prescribed offence, and how do you establish a conviction has occurred?
• Questions on the reliability of standards of prosecutions overseas.
• Need to secure documents within timeframes and keep them for relevant periods.
• Need cybersecurity and document insurance.
• Can documents be kept virtually?

Some specific amendments

Amendment six is to broaden the category of those who can be nominees so that nominees don’t need to be employees. This will also allow ‘contractors’ to be nominees even though this has been happening for some time, contrary to the Act.

Amendment eight relates to the fit-and-proper test and its application to all those who would participate in the operations of licence applicant or licence holder. It aligns with the obligations of licence holders at licensed premises.

Amendment nine is expressed to be ‘strengthening integrity controls’. It allows the Comptroller General of Customs to refuse a licence or cancel a licence if evidence suggests that the applicant has inadequate experience, processes, or governance to comply with the act. This will allow the ABF to secure all necessary documents and documents including the movement of goods. It also empowers the imposition of directions to those in licensed premises to change arrangements.

Recommendation on specific amendments

While there is no timetable for these specific amendments, the following are useful considerations:

• Read all proposed amendments and consider business changes.
• Look for legislation being introduced to Parliament.
• Review internal practices – nominees as contractors?
• Changes to insurance – will contractor nominees be covered?
• Need to review terms of employment of everyone for new obligations including allowing the retention of documents.
• Will documents be held in original form or electronic form?
• Review operational insurance to cover new obligations.
• Attention to new forms of notifications provided by the ABF.

Conclusions

It is unfortunate that the final additional conditions to come into effect on 1 July 2024 haven’t been released, and no further details have been provided on when new legislative changes will be implemented as proposed by the ABF following a review in 2017.

However, there is additional information to be considered and to form the basis of a review of operations, employment terms and insurance requirements. Following a recent International Forwarders & Customs Brokers Association of Australia (IFCBAA) webinar, we will continue to provide more details and recommendations.

Update to developments described above

This article was written before the changes referred to above were finalised. The inclusion of new additional conditions to a customs broker’s licence was confirmed in the publication of Australian Customs Notice 2024/19.

The new legislation to implement the proposed regulatory reform was introduced into the Federal Parliament on Wednesday 26 June, 2024.

Available on the Parliament of Australia website, the bills and related explanatory memoranda are as follows:

• Customs Amendment (Strengthening and Modernising Licensing and Other Measures) Bill 2024
• Customs Licensing Charges Amendment Bill 2024

In both cases, the final material is substantially similar to the provisions on which the article is based.

In July and August, Andrew will be discussing the new ACs and the new legislation in the IFCBAA CPD Forums around Australia.

Contact us

If you are an individual or Australian business and would like to discuss how the new changes for licensed customs brokers could affect your business, please contact a member of our Customs & Trade team.