Government proposals to further tighten controls on licensed customs brokers

The types of controls imposed on those in the supply chain who are licensed by the Australian Border Force (ABF) or other government agencies is a contentious topic. There has been extensive commentary on the obligations imposed, and the significant increase in obligations imposed, on licensed customs brokers (LCBs).

A recent article published by Rigby Cooke Lawyers, discusses the additional licence conditions imposed on those operating licensed premises, such as warehouses and bonds, as described in the Australian Customs Notice 20022/46. The additional licence conditions were reportedly intended to deal with concerns that ‘trusted insiders’ at those premises were associated with criminal operations. It is apparent that these additional conditions have created difficulties for operators of licensed premises especially in terms of securing, passing on and protecting personal information of those working in such premises.

The attention of the ABF has now turned to the position of LCBs. The ABF has circulated a series of proposed additional conditions for LCBs for consideration and comments by interested parties. In general terms, the additional conditions appear to be intended to enhance controls on the operation of LCBs and fall into two categories: one being amendments to current additional conditions imposed pursuant to section 183CGA of the Customs Act 1901 (Act); and the second being suggested new additional conditions.

Proposed amendments to the current additional conditions

The material circulated by the ABF invites for comments on the existing additional conditions and the proposed amendments to those existing additional conditions. In terms of the proposed amendments, the ABF has sought comments on additional conditions 2, 4 and 8 as follows:

• A proposed amendment to additional condition 2 is to reduce the time for the holder of a corporate customs broker licence to advise on changes to directors, officers, shareholders or members of the company.
• Additional condition 4 is the condition which obliges a LCB who becomes aware that information provided to the ABF is false, misleading, or incomplete, to advise the ABF in writing ‘as soon as practicable’ of that issue. The proposed amendment would require notification ‘as soon as practicable’ within 24 hours of becoming aware of the issue.
• Additional condition 8 currently requires an LCB to hold suitable professional indemnity insurance. The ABF has now proposed that LCBs should also hold suitable public liability insurance.

Comments on the proposed amendments to the current additional conditions

The rationale for the proposed amendment to additional condition 8 could be attributed to the possibility the ABF is concerned that LCBs have insurance to rebuild or replace damaged or destroyed premises and equipment. In any event, most LCBs would occupy premises under lease or other arrangement obliging them to hold public liability insurance, and most would otherwise hold public liability insurance as a matter of prudent practice. An area of main concern is the inclusion of additional conditions of the maximum 24-hour period to notify the ABF of any issue, such as that contemplated by the amended additional condition 4.

Andrew Hudson, Customs & Trade Partner, recalls several matters which triggered both additional conditional 4 and a need for voluntary disclosure by LCBs, their importer and exporter clients. He explains that in his experience, 24 hours is insufficient and would most likely effectively also require voluntary disclosure within 24 hours. LCBs often need to engage with lawyers on disclosure requirements, advise clients, and engage with professional indemnity insurers as to the need to disclose under the terms of the LCB’s insurance policy. It may be plausible that the ABF would like clarity around the timing on the disclosure requirements, however a specific time limit is unwarranted. It remains uncertain whether there have been issues around delays in reporting by LCBs, which have meant that the current additional condition 4 is unfit for purpose.

Proposed new additional conditions

The ABF has proposed 10 new additional conditions and invited suggestions from industry as to which may be more useful.

The 10 new additional conditions are set out below:

1.  A customs broker must undertake due diligence and take reasonable steps to ensure all information declared/provided to the ABF is accurate and correct. This includes, but not limited to, information related to classification and valuation, and confirming that goods meet all conditions of any concessions prior to claiming a concession.

2.  A customs broker must undertake due diligence and take reasonable steps to verify the identity of their client. At a minimum, a customs broker must obtain and retain two forms of identification, including a government issued identity document that contains a colour photo.

3.  A customs broker must not disclose the operational details of container holds. This includes details that are assumed or deduced via the knowledge or experience of the customs broker in relation to x-ray holds, ABF examinations etc.

4.  The licensee must comply with the terms and conditions of accessing the Department of Home Affair’s Integrated Cargo System (ICS) at all times.

5.  A customs broker must not modify/alter documents related to a customs declaration without authority, a legitimate reason for doing so, or without explicit authority from an officer of the ABF.

6.  Mimic the ‘fit and proper persons’ licence condition placed on Depots and Warehouses; for full details please refer to ACN 2022-46. For these purposes:

“All staff who work in the ‘operations of a brokerage’ must be fit and proper. Within seven days of commencing to participate in any of the operations of the licensed place, employees must complete a Declaration that:

a)    the person has not been convicted of an offence against a law of the Commonwealth, or of a State of Territory, or of any other country or part of a country;

b)    the person has not been refused a transport security identification card (as defined in section 4 of the Customs Act 1901), or has had such a card suspended or cancelled;

c)    if the person is not an Australian citizen, the person has not breached any condition of their visa to reside in Australia; and the person is not an unlawful non-citizen.”

7.  A company or a natural person who hold a customs brokers licence must comply with all acts and laws; including but not limited to; the Customs Act (1901); Customs Regulation (2015), Biosecurity Act (2015).

8.  The holder of a customs broker licence must act in a manner that demonstrates exemplary professional conduct, including honesty, integrity, and transparency.

9.  The holder of a customs broker licence must have a risk management plan in place to identify potential border risks in line with the continuing professional development training and take appropriate measures to mitigate them as part of doing business.

10.  The holder of a customs broker licence must be in possession of all documents required, as per the relevant and applicable legislation and any other Australian border agency import conditions, prior to lodgement of a declaration to the ABF.

Commentary on proposed new additional conditions

Broadly speaking, most of the proposed new additional conditions reflect conduct which would be expected of a LCB, and which already takes place with the LCBs. It is understandable why they may be seen as desirable, especially when expectations of those in the private supply chain have already been raised in respect of those operating in premises licensed by the ABF. Andrew Hudson has spoken at length on expectations on LCBs at International Forwarders & Customs Brokers Association of Australia (IFCBAA) CPD sessions and other events. He sights the proposed new additional conditions aimed at addressing possible lack of clarity in the obligations of an LCB.

There are potential problems with seeking to codify such conditions, as the proposed terminology is quite vague. If there are to be additional new conditions, then it is important for all parties to be clear on the exact nature of the associated requirements. The additional new conditions would affect LCBs, their businesses and practices, their engagement with clients and the risks covered by insurers. They could also add to the costs of the LCBs in providing their services which would need to be borne by the client, which could create issues when those costs are already contracted and set.

The following observations on the proposed new additional conditions have been made:

• While the general nature of the proposed new additional condition 1 is not unreasonable, the exact requirements are an issue. For example, what is expected by the ABF in terms of ‘due diligence’ and reasonable steps from the LCB as in the new additional condition 1? In most cases, the fees charged by LCBs are relatively inexpensive when compared to freight charges. Further, clients expect documents to be lodged urgently. Will the LCBs now need to adopt a new practice regime which includes more time and fees from their clients before lodging declarations? Will the ABF support such proposals by LCBs?
• The proposed new additional 2 shares the same uncertainty issue. It requires an LCB to undertake ‘due diligence and reasonable steps to verify the identity of their client’, and at the minimum provide two forms of identification, including a government issued identity document which contains a colour photo. Will that minimum requirement be enough alone? There is also the practical issue that the clients of LCBs are often overseas corporations – will that require the LCB to independently verify the information (for example, through a lawyer or overseas association), or can it rely on its own inquiries? What will be required from those overseas clients to satisfy the requirements?
• The proposed third new additional condition is consistent with existing legislative requirements not to pass on information from the ICS and other systems. However, it does appear to be inconsistent with the separate proposal that trusted trader service providers would be able to pass on details of container holds.
• The proposed fourth and fifth new additional conditions appear to be largely non-controversial. That said, the fifth new additional condition appears to require an ‘authority’ to be in place before amending certain documents. Presumably that means an ‘authority to act’ under the Customs Act 1901 must be in place. That suggests the LCB must have an authority already in place and cannot rely on an ‘authority to act’ which is only provided later when the ABF undertakes any audit activity. That would be contrary to previous ABF directions that an ‘authority to act’ can be provided at any time in any way. It is overdue for the ABF to adopt a revised approach that an ‘authority to act’ should be provided before an LCB acts for a party.
• There is some significance to the proposed new additional condition 6. It is consistent with the new requirements imposed on those operating premises licensed by the ABF. It would suggest that the ‘fit and proper’ requirements be extended to all of those in the operations of a brokerage. Presumably, this should be extended to the offshore compliers of declarations used by many LCBs and to freight forwarders working with LCBs who are otherwise not licensed or controlled by LCBs.
• The proposed new additional condition 7 does come within the category of the blindingly obvious, but the proposed new additional conditions 8 and 9 create a degree of uncertainty which needs to be considered at length before being imposed on LCBs. What is required for a ‘risk management plan’ in relation to CPD requirements, as set out in proposed new additional condition 9? Does that require ongoing internal review and action by the LCB? Further, the proposed new additional conditional 8 appears to set a very high standard but which is largely subjective. Andrew Hudson comments that he has not dealt with LCBs whose conduct may fall short of the expectations, and that those expectations would be different depending on those who are conducting the business. Additionally, there is a reference to ‘integrity’ – is that intended to be the same as expectations of ethical behaviour or intended to be the same?  Finally, what is required of ‘transparency’ – is that to clients or to the ABF or other agencies?
• The proposed new additional condition 10 does raise the question whether there is an obligation to hold all such documents in an original form and whether an obligation exists to hold the original documents before reporting to the ABF or other agencies.

In summary, all in the Customs & Trade, and logistics industries are aware of the concerns of the ABF and other border agencies for service providers in the supply chain to be beyond reproach, and to act in a manner consistent to usual expectations. However, it is imperative to have further extensive, detailed engagement with those in the industries before the additional conditions are imposed.

Contact us

To discuss issues relating to additional licence conditions and the proposed amendments to those existing additional conditions, or assistance in addressing any current trade or supply chain issues your business is facing, please contact our Customs & Trade team.