Preparing for the near future for licensed customs brokers and freight forwarders

A version of this article was first published by The DCN in November 2022.

With 2022 almost at an end, there are already a few issues arising for licensed customs brokers and freight forwarders going into 2023.

Implementation of new free trade agreements

It increasing appears that two of our proposed free trade agreements (FTAs) are likely to come into effect on 1 January 2023, specifically the Australia–United Kingdom Free Trade Agreement (AUKFTA) and the Australia-India Economic Cooperation and Trade Agreement (AIECTA). The AIECTA is the precursor to a more comprehensive FTA with India, namely the Australia–India Comprehensive Economic Cooperation Agreement (AICECA).

With potential commencement date so close, service providers have significant work to ensure that they are aware of the terms of the AUKFTA and the AIECTA. These terms include the rules of origin before goods are entitled to preferential rates of duty under those FTAs, as well as other important requirements, such as documentary requirements to claim preference and the restrictions on how goods can be shipped to maintain their preferential status.

Rigby Cooke Lawyers’ Andrew Hudson has provided commentary on the terms of both the AUKFTA and the AIECTA at the International Forwarders & Customs Brokers Association of Australia (IFCBAA) Continuing Professional Development (CPD) Forums, the Food and Beverage Importers Association (FBIA) information session and for clients. Andrew is currently involved in preparing additional education and assistance for members of IFCBAA and the FBIA. With the purpose of providing more details on the operation of the FTAs, importers, exporters and their service providers can secure the benefit from the commencement. Rigby Cooke Lawyers is also working with the Department of Foreign Affairs and Trade (DFAT) and the Australian Border Force (ABF) in developing guides which will assist all those in the supply chain to properly use the FTAs.

In 2023, Australia will continue to negotiate further FTAs, including the AICECA. The other most significant deal is the proposed FTA with the European Union (EU), following New Zealand, which completed a deal with the EU earlier this year (see here). There are also some enhancements being considered for our existing FTAs, including an update to the Australia and New Zealand FTA (ASEAN) and the possibility of the UK and other countries being permitted to accede to the Comprehensive and Progressive Trans-Pacific Partnership Agreement (CPTPPA). With the CPTPPA, Chile (an original signatory) has just resolved to implement the CPTPPA.

Modern slavery and forced labour considerations for goods in the supply chain

While commentary on the rise of environmental, social and governance (ESG) issues in the supply chain has previously been provided (see here), the process has continued and been discussed at length at various IFCBAA CPD Forums. One of the issues most likely to impact those in the supply chain concerns the intervention against the movement of goods that are the product of modern slavery or forced labour (in part or whole). While Australia requires companies with a specific turnover to register a Modern Slavery Statement with the Commonwealth Government — identifying what steps are being taken to ensure that there is no modern slavery in its supply chain — there are no penalties for failing to do so. Commentary has suggested our provisions are inadequate. The proposed legislation introduced into the previous Parliament, which would have banned imports of goods that are the product of modern slavery and would enable the ABF to seize such goods, did not pass but is reportedly a focus of the new Government. Further, our existing legislation is currently subject to review, including questioning if supply chain reporting should include an obligation to report whether goods are the product of modern slavery or forced labour.

Elsewhere in the world, concerns on goods that are the product of modern slavery or forced labour in the supply chain have driven significant legislative and policy changes to stop such trade. The United States (US) and the EU have both passed or are considering legislation enabling the seizure of goods believed to be the product of forced labour. This includes recent US legislation establishing a rebuttable presumption that the importation of any goods, wares, articles and merchandise mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region of the People’s Republic of China, or produced by certain entities, is prohibited by Section 307 of the Tariff Act of 1930 and that such goods, wares, articles, and merchandise are not entitled to entry to the US. On the same topic, the United Nations released a report (see here) which included, in part, an assessment that over 50 million people worldwide are living in conditions of modern slavery.

Based on these developments and the current review of our modern slavery legislation, it may result in a recommendation that licensed customs brokers (LCBs) be obliged to complete a question on a Full Import Declaration confirming if the goods are the product (in part or whole) of modern slavery. The review would also recommend that the ABF be given the authority to seize goods at the border, which it believes are the product of modern slavery. Given Australia’s current relationship issues with China, the changes are not likely to include a specific focus on products from Uyghur as in the US legislation, and the questions will most likely to do with the nature of the production of the goods as opposed to their specific origin. A similar outcome could be achieved by adopting new ‘thematic’ sanctions banning the import of goods from any country that is the product of modern slavery.

The likely changes in Australia will mean that LCBs and freight forwarders will need to question clients about the source of the goods and how they were produced. Hopefully, the provisions to be introduced will also reflect that the service providers have no liability if the declarations are incorrect where they have relied on instructions from their clients.

Licensing of LCBs and others in the supply chain

As our recent article describes (see here), the ABF is proposing additional controls on people working in ‘licensed places’, which go beyond those in positions of authority. These necessary controls are based on criminal activity being identified in the supply chain. Given that approach, there may be grounds to extend controls and ‘fit and proper’ tests to those working with LCBs, whether as employees or contractors and whether those people lived and worked in Australia or overseas. Such new controls could be implemented on a ‘test’ basis through the Controlled Trials Bill if reintroduced into the current Parliament. The Controlled Trials Bill could also be used to test new regulations on the position of nominees of LCBs so that the nominees could be ‘contractors’ as well as employees of the LCB.

Introduction of the results of the trade modernisation agenda

As readers may be aware, several government agencies are working on different aspects of the broadly–based ‘Trade Modernisation’ agenda. This work includes work by the ABF, the Simplified Trade System Taskforce, the Department of Agriculture, Fisheries and Forestry, the Department of Finance and the Department of Industry, Science, Energy and Resources. This work has been proceeding for some time, and those in industry should expect to see results during 2023. Undoubtedly, LCBs and freight forwarders will be enlisted to test the reform proposals and assist in developing substantive and legislated change.

For advice on all aspects of Australian and international trade and customs obligations, please contact our Customs & Trade team.