Lloyds List Australia - Relying on a customer tariff database

Source: https://www.lloydslistaustralia.com.au/lla/authors/paul-zalai/BLOG-205-Relying-on-a-customer-tariff-database-548314.html

Photo: Jim Wilson

When does the issue arise?

The issue we are considering in this document is when an importer provides you with a database of their products and a corresponding tariff classification which the customs broker is instructed to use.  The customs broker will be expected to use the tariff classification without independently determining the tariff classification.

This request most often comes from multinationals that have developed a global tariff classification database.  This database may be informed by decisions from Customs authorities around the world.

The second scenario is where a customer changes customs brokers and requests that you use the tariff classification database developed by the previous customs broker.

Legal risks if the classification is wrong

A statement is being made every time a classification is communicated to the ABF.  If that statement is incorrect, the customs broker has potentially breached sections 243T or 243U of the Customs Act 1901.  These are strict liability offences and the customs broker's liability will not depend on whether the mistake was intentional or the quality of the database provided to the customs broker.

The penalties begin at warnings, are often infringement notices and can, in very serious cases, result in prosecutions against the customs broker or importer.

For serious matters, there is also the possibility that the ABF will refer the matter to the National Customs Broker Licencing Advisory Committee (NCBLAC).  In this context it should be remembered that a key task expected of licensed customs brokers is the tariff classification of goods. 

Can the risks be completely managed?

The customs broker and importer can agree that the customs broker will not be liable to the importer if the classification is incorrect.  The importer may even agree to indemnify the customs broker for any loss it suffers from relying on the tariff database.  However, these agreements (if enforceable), will not alter the liability of the customs broker under the Act if the tariff classification is incorrect.  Further, the contractual agreement will be unlikely to provide any protection from any adverse consequences from a NCBLAC investigation.

What about the defence of reasonable mistake of fact?

Customs brokers who make a false statement (such as tariff classification) to the ABF could avoid liability if the mistake was based on a reasonable mistake of fact held by the customs broker.  An example would be when the customs broker was informed that the goods were made of plastic and it turned out that they were made of rubber.  If this mistake was reasonable, the customs broker may not be liable under section 243T or 243U of the Act.

However, relying on a tariff classification provided by the importer that turns out to be incorrect is not a mistake for fact.  Tariff classification may be based on facts, but the actual tariff classification is a matter of law.  The reasonable mistake of fact defence does not apply.

Each customs broker will make their own decision as to whether to rely on a customs tariff database provided by the client.  While commercial considerations are important, it is also important that customs brokers consider their obligations under the Act and as part of being licensed customs brokers.  The latter two factors will be the focus of the ABF.

Paul Zalai – FTA