Audits & Penalties. Audits & Penalties Monitoring Powers - why we have a system using retrospective analysis –industry pressure –ACS incapacity to effectively

Audits

&

Penalties

Audits & Penalties

• Monitoring Powers - why we have a system using retrospective analysis

– industry pressure

– ACS incapacity to effectively check all imports

• Trade-offs?

– Post-entry audit

– Requirement to retain documents

Audits & Penalties

• Monitoring Powers and other Compliance Obligations

• Export Examination Powers

• Penalties & Strict Liability

• Infringement Notices & Guidelines

• Document and Record Retention

• Cargo Management Re-Engineering

• Based on the Kyoto Convention on Customs procedures

• New way for the ACS to aid Trade and augment compliance and Border Security

• Implemented by “Trade Modernisation” Legislation

• Improving and modernising the management of cargo in and out of Australia

Background

• Methods of improvement

– Legal foundation for an electronic business environment for cargo management

– Establish new “compliance management” “one size not fill all”

– Improving control over cargo and movement where fail to observe regulatory requirements

• Elements to CMR - IT changes, reporting obligations, audit powers and new penalties

Background

• IT Systems

– New IT Systems to replace COMPILE, EXIT, SCA, ACA

– Integrated Cargo System (ICS) and Customs Connect Facility (CCF)

– Web-based reporting system into “Customs Central”

• Migration to new IT for Exports

( Feb/March 2004) and Imports (July? 2004)

• Obligations to report all movements of cargo in/out Australia and within Australia

Monitoring Powers

and other

Compliance Obligations

To assess whether someone is complying with Customs-related law; or

whether a person’s record-keeping, accounting or computing or operating systems accurately record and generate information to enable compliance with a Customs-related law; or

the correctness of information communicated to Customs

Monitoring Powers & other Compliance

Obligations

Purpose of Monitoring Powers

• ‘Customs-related law’ means :

– the Customs Act and its regulations

– the Excise Act 1901 and its regulations

– any other Act or regulations that relate to: the importation or exportation of goods,

• where the importation or exportation is subject to:

– compliance with any condition or restriction, or

– is subject to any tax, duty, levy or charge

Section 4B


Obligations

What is ‘Customs-related law’?

The monitoring powers include the power to:

• search any premises (not just of importer/exporter)

• take photographs (including video recording) or make sketches, of premises or anything at premises

• inspect, examine, count, measure, weigh, gauge, test or analyse, and take samples of, anything in or on premises

• inspect any document or record in or on premises

• take extracts from, or make copies of, any document or record in or on premises

Section 214AB


Obligations

What are the monitoring powers?

The monitoring powers include the power to:

• take into or onto premises any equipment or material reasonably necessary for the purpose of exercising the above powers

• test and operate record-keeping, accounting, computing or other operating systems relevant to Customs

• operate equipment at premises for specified reasons

• operate facilities at the premises for specified purposes

• secure a thing that is believed on reasonable grounds to be evidence of the commission of an offence for 72 hours or until a warrant is obtained to seize the thing

Section 214AB


Obligations

What are the monitoring powers?

• A monitoring officer:– is an officer authorised by the CEO of Customs to enter

premises and exercise monitoring powers. – may be authorised only if the CEO is satisfied that the

officer is suitably qualified, because of their abilities and experience, to exercise these powers

– must be issued with identity cards and must produce their card to the occupier before entering premises or exercising any monitoring power

Section 214AC


Obligations

Who is a monitoring officer?


Obligations

Before entering premises and exercising powers,

the monitoring officer must

give the occupier of the premises written notice of their rights and obligations under monitoring powers

Section 214AE(2)

With the consent of the occupier S214AE

A monitoring officer:

– may enter the premises (but the occupier must give consent in writing)

– must tell the occupier that he/she can refuse consent

– must leave the premises if the consent is withdrawn by the occupier (but the occupier must withdraw the consent in writing)

– may ask for assistance (but the occupier is not obliged to comply)


Obligations

Exercise of monitoring powers - with consent vs under warrant

With a warrant - Sections 214AF and 214AG


– may enter the premises without the occupier’s consent (on production of the warrant)

– may require the occupier to provide reasonable assistance while the monitoring officer is on the premises

(Failure to provide this assistance is an offence)

– power to use force against things


Obligations

Exercise of monitoring powers - with consent vs under warrant


– may ask questions

• if either with consent or under warrant

S214AH– may ask for assistance

• reasonable assistance must be provided

S214AI


Obligations

Exercise of monitoring powers

Special powers for Dumping purposes

Export Examination Powers

• Key points

– The export examination powers allow Customs to enter premises and examine goods for export that are not yet under Customs control (that is, they have not been delivered to a place for export)

– The powers are exercisable before the goods become subject to the control of Customs and are conferred for the purpose of enabling officers to assess whether the goods meet the requirements of the Customs Act relating to exports

– The authorised officer must believe on reasonable grounds that there are or have been in the premises goods that the officer reasonably believes are intended for export

Section 122F

The New Export Examination Powers

Search premises for export goods and documents relating to them S122K

Examine export goods and take samples S122L

Examine, take extracts and make copies of documents relating to export goods S122M

Question the occupier about export goods and request that occupier to produce documents S122Q

Bring equipment to the premises S122P


What Customs CAN do with their export examination powers

Have just anyone conduct the examination - the person must be an authorised officer S122F

Enter without the authorised officer producing an identity card to the occupier S122H(6)

Enter without the written consent of the occupierS122F

Remain on the premises after the consent has been withdrawn (in writing)S122J


What Customs CANNOT do with their export examination powers

The responsibility for allowing the exercise of powers is

the “occupier” who is defined to be “a person who is

apparently in charge of the premises”

Section 122G


New Penalties

– Mostly strict liability

– S.33 - Moving controlled goods without authority

– S.113 - Failure to enter goods for export and

allowing loading/export without authority

– S243T - False or misleading statements leading to

loss of revenue

– S243U - False or misleading statements without

loss or revenue

Penalties & Strict Liability


Why has the new penalty scheme been introduced?

• Because the Australian Customs Service believes– there is a significant risk to revenue if

imported or exported goods are inaccurately reported; and

– there is a significant risk to the community if prohibited imports such as narcotics are not stopped at the border.

• Penalties are expressed as penalty units

– One penalty unit = $110 currently

(Section 8A Crimes Act)

– The range of penalties is 10 - 500 units or $1,100 - $55,000

– An infringement notice may be issued

(usually 20% of the penalty) Section 243X


How much are the new penalties?

• Level 1 Court proceedings where fault must be proved

– not strict liability - fault (intention) must be proved in court

• Level 2Court proceedings to prosecute strict liability

– where an infringement notice is considered inappropriate

– when an infringement notice has not been paid

• Level 3Infringement Notice issued by Customs

– only applies to some strict liability offences


What are the levels of the penalty scheme?

• A strict liability offence is one where the fault (intent) does not have to be proved

• The fact that the action occurred is sufficient to establish the offence

• NOT all offences are strict liability.

– The Customs Act is quite specific in each instance


So what IS a ‘strict liability’ offence?

There are five defences under the criminal code

1. Mistake of fact

2. Intervening conduct or event

3. Duress

4. Sudden or extraordinary emergency

5. Self-defence


Are there defences against strict liability?

1 Voluntary notification of false or misleading statements for Section 243T and 243U

2 Statements of uncertainty for Section 243T (“Amberline”)

Warning:

There is no ‘voluntary’ notification once a notice is given as to Monitoring Powers


Defences against strict liability under TML

Section 33

Moving, altering or interfering with goods subject to Customs control, without authority

– S.33 (1) - Intentionally moving, altering or interfering

• Offence committed by person who moves, alters or interferes with goods

• Fault based: maximum penalty = 500 penalty units


Which penalties started on 1 July, 2002?

Section 33


– S.33 (2) - Moving, altering or interfering

• Offence committed by person who moves, alters or interferes with goods

• Maximum penalty = 60 penalty units

• Infringement notice available



Section 33


– S. 33 (3) Moving, altering or interfering by an employee under direction

• Offence committed by employer



• Subject to a defence if due diligence can be demonstrated



Section 33


– S. 33 (5) Moving, altering or interfering by an employee under intentional direction

• Offence committed by person who directs or permits the action

• Fault-based: penalty = 500 penalty units



Section 33


– S. 33 (6) Moving, altering or interfering by an employee under direction

• Offence committed by person who directs or permits the action





Section 113

Entry of goods for export

– S.113 (1) Failure to enter goods for export and loading/exporting without authority to deal

• Offence committed by the owner of the goods





• Section 113 Reporting Examples

– $2,000 or more consignments. Applies to whole consignment not lines or types

– Goods shipped from one consignor (exporter) to consignee (importer) at same time as single consignment

– All goods from Customs warehouse

– All goods liable to Excise Duty

– Where any drawback or other permit required



• Section 113 - Requirements

– Not where under $2,000 except if specific permit required

– Owner Liable

– AHECC Manual for classification, other requirements

– Must get Entry/Authority



Who is the “owner”?

S. 4 states:

“in respect of goods includes any person (other than an officer of Customs) being or holding himself out to be the owner, importer, exporter, consignee, agent or person possessed of, or beneficially interested in, or having any control of, or power of disposition over the goods”.

• ACN 30/2000


Section 243T

False or misleading statements, resulting in loss of duty or payment of incorrect refund or drawback

– Offence committed by the owner of the goods

– Strict liability

– Infringement notice available

– Penalty (maximum that can be imposed by a court)

• the amount of the excess, or

• the refund that would not have been payable, or the amount of the excess, as the case may be, or

• the drawback that would not have been payable, or the amount of the excess, as the case may be



Section 243U

False or misleading statements, NOT resulting in loss of duty

– Aimed at Exports

– Offence committed by the person who made the statement or omitted the thing

– Strict liability

– Penalty (maximum that can be imposed by a court)

• 50 penalty units for each statement that is found by the Court to be false or misleading

– Infringement notice available


Which penalties start on 1 July, 2002?

Infringement Notices & Guidelines

The key elements of the process are:

1. Delegation

2. When an infringement notice CANNOT be served

3. Exception categories

4. The discretionary indicators

5. Timing

6. Matters to be included in an Infringement Notice

Infringement Notice & Guidelines

The proposed process for servinginfringement notices

1. Delegation

The preferred levels of Customs officer status that may issue an infringement notice:

SES Officers;

ACS “Level 5 Officers” with the primary responsibility for cargo management related issues; and

Regional Directors

whether the officer has satisfactorily completed a training course on the exercise of the powers under the Infringement Notice.

Important: These are not statutory or mandatory requirements



2. When an infringement notice CANNOT be served

• Section 243XA

There is no power to serve an infringement notice if, either :

On the information available to the decision-maker it is not possible to form a belief on reasonable grounds that an offence has been committed

or

The action in question falls within an exception category



3. The exception categories

(when an Infringement Notice cannot be served)

(a) Voluntary disclosure of false or misleading statements from the operations of section 243T and 243U





Relevant factors for voluntary disclosure

To whom the disclosure was made

Whether the disclosure was in writing

When the disclosure was made

Whether the person making the disclosure had been given notice of proposal to exercise monitoring powers under Section 214AD

Generally the exception should apply when ALL of the following exist:

• The disclosure that a statement was false or misleading was made in writing

• The matter to which the statement of disclosure was made to the officer to whom the false or misleading statement was made or another officer doing duty in relation to the matter in which the statement relates

• No notice of proposal to exercise monitoring powers had been given under Section 214AD during the time between making of the false or misleading statement of voluntary disclosure





b) Statements are made using the “Amberline” process (s.243T)

This exception will apply when ALL of the following exist:

• The uncertainty was identified by the person making the statement at the time the false and misleading statement was made

• The information included or omitted that might make the statement false or misleading in a material particular is identified

• The statement sets out reasons why the person is uncertain about the identified information or the reasons for the person’s uncertainty about the effect of omitting the information





c) Due diligence - employee moves goods without authority

• The employer can show that reasonable steps were taken to prevent the action by the employee

• Takes into account the degree of management control, management systems and responsibilities

• The exception is said to apply where the employer can demonstrate that it adequately managed, controlled or supervised the actions of the employee while the employee was working




(when an Infringement Notice cannot be served))

d) Statutory Moratorium

• Section 64AB - Late cargo reporting

• 6 months generally

• May be extended

• Pages 10/11 of Guidelines



3. The exception categories (when an Infringement Notice cannot be served)

e) Administrative moratorium

• Section 243U and Section 113

• 6 months moratorium

• However, this may not exclude the possibility of prosecution for any offence

• See Appendix B of Guidelines





f) Mistaken facts

• Reasonable mistaken belief

• No offence would be committed but for that belief

• Paragraph 3.2.5 of Guidelines




Paragraph 3.3 - The areas for consideration are: Significance of the breach Efforts/attempt to comply Reliance on Customs advice Reason beyond the person’s control




•Significance of Breach

– Paragraph 3.3.1 of the Guidelines sets outs indicators where no Notice.

– Relatively minor breach not affecting examination of goods or revenue

– Goods considered “low risk” for community/revenue protection objectives

– For Section 243T, duty lost <$1250

– For Section 243U<5 false or misleading particulars or omissions in the relevant statement.

– If part of more serious conduct, can lead to prosecution




•Efforts/attempts to comply

– Paragraph 3.3.2 of the Guidelines

– ACS encourages improvement, so indicators against

issuing Infringement Notices rewards efforts

– Persons appear to have made reasonable efforts to

comply

– Person sought ACS advice and acted in reliance on that

advice




•Reliance on Customs Advice

– Paragraph 3.3.3 of the Guidelines

– Reasons against serving an Infringement Notice

– Reliance on Customs written advice (includes website,

training material in green folders)

– Ability to detail oral advice

– Acted in accordance with advice

– No alteration to advice




•Reasons beyond person’s control

– Paragraph 3.3.4 of Guidelines

– Number of factors to consider against serving a Notice

– Not able to reasonably foresee or respond to acts of

third parties causing offence




•Reasons beyond person’s control (cont’d...)

– Adequate Business practices in place to warn third parties of need to

provide adequate/timely information

– Steps taken to minimize problems of false/misleading statements

– IT systems failure beyond control of person and no reasonable

means to avoid



When an Infringement Notice CAN be served

5. Timing

•12 months after offence or 12 months after the ACS

becomes aware of offence (Sections 243T, 243U and

234V) up to 4 years after offence arose. S243Y




Appeal against the issue of an infringement notice

• Only external appeal to Federal Court or Federal

Magistrates Court (ADJR)

• Apply in writing to the CEO to withdraw (S243ZA)

• Reviewed by separate officers to original delegate

• SES officers

• Regional Directors


Appeal against the issue of an infringement notice

• Person may seek withdrawal of infringement notice

• CEO may withdraw the notice• whether or not a representation is made

• Matters to consider

– Previous convictions

– Circumstances of offence

– Previous paid Infringement Notices

– Written representations

– Discretionary matters S243ZA

• Withdrawal of infringement notice does not preclude prosecution


• If:• the person pays the penalty imposed and

• any duties owing are paid

• the liability is discharged

• no further proceedings can be taken

• no conviction is recorded S243ZB

• Only one infringement notice per offence S243ZC

• CEO may extend period for payment S243ZE

Document

and

Record Retention

Documents

Customs use the term ‘Commercial Document’ which is defined in the Customs Act to mean documents prepared in the ordinary course of business for the purposes of a commercial transaction involving goods or their carriage but does not include electronic communications to or from Customs

Now applies to all goods exported even if no entry

Document & Record Retention

Some definitions of documents and records



• Cargo carriers and handlers to keep documents received as to their involvement

• Person causing or receiving export to retain

• Service providers acting as owner to keep for 5 years

• Such documents would include

– commercial invoices

– packing lists

– airway bills and bills of lading

– evidence of payment made or received (eg letter of credit; telegraphic transfers)

– original permits where applicable

– technical specs

– evidence on costs



Records

Examples of records of communications would be: Photocopies of commercial documents Electronically stored copies of documents &

communications to Customs Database of information received Detailed notes of instruction by phone




Who needs to keep what and for how long?

To be retained by:

Documents Records

Owners of imported or exported goods

Those who cause goods to be imported into / exported from Australia (including “agent”)

Those who receive goods that have been imported into / exported from Australia (including “agent”

• Communicators

Retention Period 5 years 1 year

• Documents may be kept at any place, including a place outside of Australia

• Documents may be kept in any form and stored in any way provided:

– they are able to be readily transformed into a document in English

– the Collector can determine whether goods have been properly described, properly valued or rated for duty

• You must be able to inform the authorised officer of the whereabouts of the documents

• You must be able to produce the documents within a specified period (not less than 14 days)


Other highlights on document andrecord retention

• The Customs Act confers the power on Customs officers to ask questions to require persons to answer these questions

• Customs also have the right to request people to produce documents and records

BUT

People do not have to incriminate themselves

Other Compliance Obligations

Failure to answer questions and produce documents

Questions???

Audits

Penalties

Questions:-

What to expect

Audits

Penalties