BACKGROUND
The Australian Customs and Border Protection Service (Customs & Border Protection) brought to the attention of the National Customs Brokers Licensing Advisory Committee (NCBLAC) a detailed compliance report. During October 2012, a delegate of the CEO of Customs & Border Protection made a decision (after receiving a report from NCBLAC) to cancel the corporate license of the customs brokerage subject to the report. This decision was given stay upon payment of a bond (for EFT re-instatement) and an expeditious review of the decision to be completed by the Administrative Appeals Tribunal (AAT).
By way of background, the customs brokerage was subject to audit with a series of classification errors, however none resulted in revenue adjustments. Further audit activity identified that containers had been moved (presumably underbond) and delivered direct to importers without payment of duty. There was also a claim of failure to remit client funds for the payment of duty within a reasonable period of time. These events occurred after EFT payments by the customs brokerage were dishonoured, resulting in Customs & Border Protection removing the customs brokerage's entitlement to pay EFT. In excess of $30K of Infringement Notices was paid by the customs brokerage.
The AAT heard the case and provided a decision on 27 February 2013 (refer attached).
THE AAT DECISION
The AAT noted the breaches but countered this by stating "cancellation of a customs broker's licence, particularly when the licensee is an established business employing staff, is a serious measure". The AAT also focussed on dictionary definitions and legal precedents in supporting its revocation of the Customs & Border Protection decision. Given the seriousness of cancellation of customs brokerage license, the AAT was of the view that there must be cogent evidence that there is a significant risk of future breach.
The AAT concluded that a reprimand is necessary to protect revenue and / or ensure compliance by the customs brokerage stating the following:
"First, a formal reprimand provides a clear message to the applicant that its conduct fell below the standards expected of an entity granted the privileges and rights to be a licence holder. Secondly, but perhaps more importantly, a reprimand establishes guidelines for other licensed customs brokers about the type of conduct that will attract regulatory intervention and, if repeated and systemic, may lead to cancellation or suspension."
FTA LEGAL COMMENTARY
FTA's Compliance and Litigation Counsel John Law, warns "customs brokers would be unwise to expect that this decision is authority for the proposition that they will only be given a slap on the wrist if they (a) deliver cargo without authority and (b) do not pay the duty on goods for several months after delivering cargo, as was the case here.
"Decisions are made on the basis of the facts in each case, so other customs brokers should not expect that they will necessarily achieve the same very favourable outcome achieved here, if they engage in this style of behaviour.
It will be interesting to see whether Customs & Border Protection believe they have identified errors of law in the decision and take an appeal to the Federal Court.
The introduction of a trust facility for this broker may be the thin end of the wedge, with the regulation of customs brokers possibly moving towards the imposition of trust accounts on customs brokers at some time in the future.
Considering the nature of a customs broker's business operations, the onerous responsibilities imposed on trust accounts would have a devastating impact on the ability of many customs brokerages to operate and survive.
Customs brokers should "watch this space" with interest and as always, those who operate within the law have nothing to be concerned about."
FTA FOLLOW-UP INVESTIGATION
Following on from our initial article and media commentary, FTA has been in contact with representatives from the customs brokerage and their legal counsel to gain an insight on some key issues from their perspective.
In relation to the audit in question, Customs & Border Protection stated in its report to the NCBLAC that thirteen errors had been detected in the import declarations examined. Most of the errors were allegedly tariff classification related and had no revenue implications. The customs broker who prepared the import declarations in question conceded to Customs & Border Protection in his response to the audit report that errors had been made.
In evidence given during the AAT hearing and an earlier hearing on 8 May 2012 conducted by the NCBLAC, the customs broker claims that he in fact disagreed with the opinions expressed by the Customs & Border Protection officers on the classification issues which arose during the audit. He explained that, because the errors noted had no revenue implications, and that because he felt that customs brokers have no right of appeal against what they regard as errors by Customs & Border Protection, he felt compelled to concede error on his part so as to dispose of each matter.
The customs broker claims that neither Customs & Border Protection nor the NCBLAC considered that the classification errors by themselves warranted any adverse action against either the company or the customs broker personally, but the issue was nevertheless raised and taken into consideration in deciding whether the company's customs brokerage licence should be cancelled.
This element of the case highlights that a difference of opinion between Customs & Border Protection and a customs broker may result in an "error" and maybe taken into account if a review is later conducted into the capacity of the customs brokerage to conduct business efficiently complying with all legal obligations arising from statutory duty. This highlights the need for customs brokers not to underestimate the significance of audit activity and to ensure that they are satisfied with the outcomes are a fair and accurate reflection of performance.
Paul Zalai - FTA