A version of this article was first published by The DCN in October 2023.
All members of the Australian supply chain are subject to compliance activity by the Australian Border Force (ABF) and other agencies. On many occasions, after a compliance assessment is completed, the ABF will conclude with details of errors and/or duties due to be paid along with reference that an infringement notice (or notices) may also be issued, inviting the recipient to provide reasons why such a notice should not be issued.
The ability of the ABF to issue infringement notices as opposed to taking court action for alleged breaches of the Customs Act 1901 (the Act) has been present in the Act for just over 20 years. Its inclusion was a deliberate effort to enhance the compliance work of the ABF and the issue of notices (according to a guide) has been included for use by other agencies in their compliance work.
However, what has now become an increasing issue is the ‘corporate multiplier’ which is imposed by the ABF to the quantum of penalties issued against companies pursuant to section 243X of the Act. This multiplies the infringement notice penalty up to five times that which would be payable by an individual alleged to have committed the same offence.
Rationale for the corporate multiplier
The note to paragraph 243X (2) (b) of the Act states that the rationale for the corporate multiplier is as follows:
“Because of subsection 4B(3) of the Crimes Act 1914 (Crimes Act), the maximum penalty that may be specified in accordance with paragraph (a) in an infringement notice given to a body corporate may be 5 times greater than the maximum penalty that may be specified in accordance with that paragraph in an infringement notice given to an individual.”
Subsection 243X (3) states that the “multiplier effect” in subsection 243X (2) (b) does not apply where the penalty is determined by reference to the amount of duty which would have been paid or the value of relevant goods and it is possible to determine the amount of that value.
Concerns regarding the corporate multiplier
Andrew Hudson, Customs & Trade Partner, was a member of the advisory committee of the Australian Law Reform Commission (ALRC). Andrew assisted the ALRC with its discussion paper and Final Report 95 of 2002, entitled ‘Federal Civil and Administrative Penalties in Australia’, in response to a referral to the ALRC by the (then) Federal Attorney-General of 21 January 2000.
Andrew was also involved in the development of legislation before Federal Parliament which introduced several strict liability provisions and the Infringement Notice Scheme (INS) into the Act as an alternative to pursuing court proceedings for alleged breaches of the Act. That involvement included work on the development of the guide for the INS and educating the border clearance industry on the implementation of the new strict liability provisions and the INS.
The original guide was subsequently replaced by the current version due to the belief that the original guide had been too restrictive. Suffice to say, numbers of infringement notices soon increased as did the revenues collected, as is recorded in the ABF’s goods compliance updates.
Andrew has also acted for several parties subject to compliance action by the ABF, including the use of the INS. Based on all this experience, several parties approached Andrew to express concerns regarding the adverse impact of the corporate multiplier.
Concerns in focus
There appears to be something of a disconnect between the provisions of the Act and the provisions of the Crimes Act. Subsection 243X (3) of the Act refers to subsection 4B (3) of the Crimes Act to support the application of the corporate multiplier. However, subsection 4B (3) of the Crimes Act only applies to bodies corporate which are convicted of an offence against the Commonwealth. A company receiving an infringement notice has not been convicted of any offence and has received the infringement notice in lieu of prosecution. Further, the payment of the amount in an infringement notice means that liability for the alleged contravention is discharged, no proceedings may be brought, and the party is considered not to have admitted guilt or liability and is not regarded as having been convicted of an offence (see section 107 of the Regulatory Powers (Standard Provisions) Act 2014). Given those provisions, it seems inappropriate to align liability for a conviction in a court with a choice to voluntarily make payment of an amount to the ABF under the INS. Ultimately, it would be counterproductive to the intent of the INS to serve as an alternative to prosecution.
Also, there are inconsistencies in the issue of infringement notices across agencies. The Biosecurity Act does not appear to consistently provide for such a multiplier effect although it appears in Therapeutic Goods Administration (TGA) legislation.
And, even if the retention of the corporate multiplier in the INS was to be retained, the ability to impose up to five times the liability of an individual seems to be a blunt instrument where an SME could face the same penalty as a multi-national for similar alleged breaches of the Act. Ten thousand dollars for an SME is more than significant, but for a multi–national, is very little. On that basis, the guidelines for the INS could be amended to provide a sliding scale of liabilities depending on the size of the corporation. A potential source of comparison could be the reference to the ATO’s significant global entities – penalties.
The ABF website provides that the ABF would not normally impose a ‘five times’ corporate multiplier but would commence at ‘three times’ the liability for a company. Again, this appears to be a somewhat blunt instrument given that the effect of a ‘three times’ multiplier would be more significant for an SME, compared to a multi-national where some form of scale depending on the size of the corporation would be more appropriate.
When considering the risks associated with numbers of reports lodged with the ABF, the larger operators in the border clearance space lodge significant numbers of such reports, creating a potentially higher degree of risk. That would support the approach that such larger operators should bear increased liabilities.
The quantum of amounts payable under the INS are increasing on a regular basis for all parties. Several affected parties hold professional indemnity insurance to cover liabilities such as under the INS. These premiums will continue to increase to cover increased liabilities.
Given the concerns on the corporate multiplier, it is recommended to revisit the concept of a corporate multiplier and how it may be applied by the ABF and whether it remains a suitable approach, also considering the rationale for infringement notices more broadly.
It would also be recommended, if the corporate multiplier is to remain, whether an alternative arrangement could be entered into for assessing appropriate liability for the impositions of liabilities on companies that consider the ability of the company to pay the amount claimed.
And finally, that the ABF provide further information on the reasons for the issue of infringement notices and the quantum of the amounts requested.
While the parties would not be identified, it would be more than useful to know of the background to the issue of the infringement notices, so that compliance responses by industry can be better focussed on issues causing the issue of the infringement notices.
It would also be of assistance if industry could understand whether the parties the subject of the infringement notices were importers, exporters, licensed customs brokers, freight forwarders, operators of licensed premises or others.
If you would like to discuss any aspects of the corporate multiplier for infringement notices issued by the ABF, or assistance in addressing any current trade or supply chain issues your business is facing, please contact a member of our Customs & Trade team.
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