This article was first published in August 2020 by The Daily Cargo News.
In many countries, some participants in the private supply chain are licensed by government to undertake their roles.
This reflects the importance placed on those parties and the role they undertake as a “trusted” private sector member of the supply chain.
In the Australian context, border agencies such as the Australian Border Force (ABF), the Department of Agriculture Water and the Environment and the Department of Home Affairs all licence or approve parties to conduct certain activities.
For current purposes, this article is focused on the position of those licensed by the ABF including licenced customs brokers and those operating depot and warehouse premises where goods under customs control are held pending the payment of relevant duties, excise and GST and release of the relevant goods into “home consumption”.
My work has included acting for industry associations representing Licensed Customs Brokers (LCBs), owners of licensed premises and freight forwarders (another vital part of the supply chain but who are not licensed by a government agency) as well as acting directly for LCBs, whether holders of corporate or personal licences as well as those holding nominee licences enabling them to act for corporate LCBs.
That work has included assisting parties to secure or retain their licences, responding to inquiries by the ABF and otherwise working with the clients of LCBs in their various commercial activities.
In my view, those acting as LCBs and others licensed by the ABF have one of the most complicated and difficult roles in the supply chain.
They need to have significant technical and commercial expertise.
Their arrangements with their clients often require them to pay freight, duty, excise and other charges on behalf of clients in the hope that the clients will actually pay those charges and even if those amounts are reimbursed, there is a financial expense to cover those costs until
payment is made.
This creates a significant commercial and financial disadvantage for those LCBs who bear that liability on behalf of clients. In addition, the LCBs and others licensed by government agencies face significant and regular review by all border agencies.
In particular, the conditions included by all licence holders and the imposition of strict liability by government in a number of offences means that each time an LCB or other party makes a report to the ABF regarding the movement of goods that can lead to potential liability to penalties, infringement notices or actions to suspend or terminate the licences.
These liabilities even arise for inadvertent errors without the intent to do anything wrong. The licensed parties also can be held liable for any underpaid duties, excise or other charges even though they are not the purchaser of the goods.
The combination of liabilities, whether commercial, legal or financial ensure that LCBs and other licensed parties operate in an environment where there are significant exposures to risk with every report to the border agencies, even when they only have access to particular limited material provided by their clients.
These significant risks and errors do not provide a work environment which would be attractive to those seeking employment or deciding whether to remain in employment within the industry. I have been working for many years to try and reduce and manage those risks.
In a recent example, the Customs Brokers and Forwarders Council of Australia which has joined with Australian Federation of International Forwarders in the new entity known as the International Forwarders & Customs Brokers Association of Australia (IFCBAA) secured funding to investigate how blockchain technology and practices could be adopted to enable service providers to secure early access to comprehensive original documentation which would facilitate more accurate reporting of the movement of cargo and help with better levels of revenue recovery and regulatory compliance.
In more recent years, additional obligations have been imposed on those licensed by the border agencies. Some of those obligations included the need for LCBs to undertake continuing professional development and to also report any material error or omission of which the LCB becomes aware as soon as reasonably practical – even if it required the LCB to report errors or omissions of their clients.
Those new obligations have led to an enhanced level of review of the operations of those licensed parties by the ABF and by the National Customs Brokers Licensing Advisory Committee (NCBLAC) whose role is described at the ABF website1.
This review now includes a full audit of compliance with CPD requirements. Other reviews by the ABF and NCBLAC are reported from time to time and the most recent edition of the ABF’s Goods Compliance Update2 includes details of investigations into LCBs and other licensed parties and actions taken including suspension and cancellation of licences for various breaches of legislation, other regulation or licence conditions.
Regulation of LCBS
The international regulation of LCBs and other licensed parties is an important issue for the operation of the international supply chain and in the facilitation of the movement of trade being one of the aims of the Trade Facilitation Agreement established at the World Trade Organization (WTO).
The role of these licensed parties has been the subject of commentary among organisations such as the WTO and the World Customs Organisation and includes recognition of the benefits that can arise from a strong and constructive relationship between governments, their border agencies and those in the private sector who have been accredited by those parties.
The nature of the regulation in Australia has been an ongoing process, even since the significant reforms which lead to the imposition of revised conditions on those holding licences.
This includes the current review of all customs licensing arrangements that are described on the Home Affairs website3.
The review generally endorsed leaving the regime in the same form but included a number of recommendations as to reform which have now been actioned with the remainder due to be implemented in December 2020, although that timing may well change due to the impact of the COVID–19 pandemic.
One aspect of the proposed legislative reform is contained in the “Modernising and Strengthening Customs Licensing Bill” scheduled for introduction this year, probably in the spring session. I am aware the ABF is also working on other recommendations including streamlining of licence conditions between agencies such as the requirements to be “fit and proper” to hold a licence which currently differs between agencies which creates unnecessary duplication of regulations.
Areas of contention
There are other contentious issues that fall outside of the terms of the licensing review. One relates to the places in which an LCB can conduct their business. The legislation provides that it only can be while in the Commonwealth of Australia, precluding the lodging of import declarations “remotely” from outside the country. There has been some pressure to change that requirement but I think it remains an important control for the ABF and for government that LCBs are within the jurisdiction.
Short-term exceptions can be handled in appropriate cases, for example where there is only one LCB in a business who needs to be away for valid purposes.
A second concerns the need for anyone in the employ or management of the business of a LCB to be “fit and proper”. That leaves the question as to how the ABF can monitor that requirement when an LCB uses service providers overseas to compile reports or declarations to be lodged in Australia by the LCB.
A third area is the engagement of nominee LCBs. Amendments to the legislation were
made a number of years ago to allow nominee LCBs to work for more than one corporate LCB to facilitate the role of the “mobile” nominee LCB which is important in the absence of new entrants to the profession.
That is subject to the requirement that the nominee is an employee to facilitate the normal controls by the employer and liability of the employer for the acts of the nominee.
There seems to be a push to allow the nominee to be a contractor. My concern is that would be inconsistent to the regime of the Act and would potentially loosen control and liability that would not be a desired outcome in an environment that is otherwise so tightly controlled.
I believe the position of licensed parties to be vital in our supply chain but that steps need to be taken urgently to manage and balance obligations and liabilities.
For example, it seems unreasonable to make LCBs and other licensed parties liable for duty, excise and other charges which may be underpaid due to fraud or errors by others and it also seems to be unreasonable to continue to impose liability for offences on a strict liability basis.
These are only a couple of ideas which I have discussed at length in industry forums and would appreciate the opportunity to address these in a more comprehensive and detailed manner.
If you would like to further discuss, please contact our Customs and Trade team.
2. https://www.abf.gov.au/trade-and-goodscompliance-subsite/ComplianceNewsletters/goods-compliance-update-april-2020.pdf -(pages 15 and 16)
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