INTERVIEW: CBFCA members and others in industry and government face many new challenges - Morris

AirCargo archive stories #239

Wednesday, 04 November 2015

Here, in a wide-ranging Q&A session, chief executive Steve Morris lays out his concerns for today and his aspirations for the future.

AirCargo Asia-Pacific: Technology has seen many associations struggle to retain their members. How is CBFCA doing?
Steve Morris: We have just completed our membership renewal process and are very happy with the numbers.

The small number that decided not to renew decided discretionary spending did not include association membership  and that is perhaps a short-sighted approach  with the higher levels of regulatory intervention where associations deliver on that compliance need.

However, the majority of members including the  larger multinationals see the benefit  industry associations bring to their compliance position and  they  value membership.  Also, our professional development program has generated new members from individual brokers. We are in budget for memberships and very pleased with membership support and numbers.

How many attendees were at the national conference?
The national conference was held at the Sheraton in the Park Sydney.
We had extremely good support from industry in terms of sponsorship and strong membership turnout, with 250 attending all events.
Our last three national conferences - the Gold Coast, Yarra Valley in Melbourne and  now Sydney – all have been very well supported. What is particularly pleasing is the support from companies  in the industry. . They  are service providers  who  believe in supporting the association and its role in improving conditions and understanding of the role of forwarding and  Customs brokering. Feedback from the conference was  positive  from  speaker presentations, format and location.
 
What were the key developments at the national conference?
Major issues to come out of the event included the interface with  the Australian Border Force, ,trade facilitation and biosecurity. Australian needs to facilitate trade across borders.

Look at where we sit today in the OECD and the World Bank Logistics Performance Index.
In many ways we have slipped down the rankings and others have passed us on trade performance.

We need to strive for  better trade facilitation, both imports and exports, because to remain competitive, we must be among the best in class and ensure we minimise  the cost of border intervention. At present, the government’s cost recovery program is taking close to A$750 million from importers in so-called user fees, a tax by another name.
 
While goods may not attract a fiscal charge (ie, duty) they  still pick up significant costs in these regulatory charges. Are the services for the costs  efficient or effective?.  Well at this time regulators cannot  deliver on advance rulings out of the ATF or  from the bilateral or multi trade negotiations in the stipulated time frames.

For example, today the tariff advice turn around is at 65 days for a ruling, but it can be  even longer. That’s no good if a firm is trying to work with clients to get things across a border in a timely manner and requires a ruling to confirm the classification so that it doesn’t run  into issues with  strict liability offences in the infringement notice scheme.

Industry is under pressure to reduce its costs in relation to trade – clients  demand lower costs - however, we are still stuck with the regulator’s price structure  with no equated service delivery and it’s not helping.

We also had issues with the Department of Immigration and Border Protection in its restructure because it’s struggling to get  its policy into place. The Australian Border Force is  in industry’s opinion making compliance judgements without an in-depth understanding of trade or the key issues of Customs law.

A lot of experienced people have left or retired from the DIBP and those that remain have not had the time to gain that same level of understanding of the law, policy and process. We already have had talks highlighting  issues with the minister, the commissioner for Customs and the secretary of the Department of Agriculture and Water Resources.

What is CBFCA’s take on the initial 12-member approval of the Trans Pacific Partnership deal?
We represent service providers in  international trade and logistics and so we look at how the TPP will affect service deliveries.
There are key issues in the TPP such as Certificates of Origin and supply chain security similar to the  Australia and China on the China Free Trade Agreement.
These need to be finalised and understood by all.

Will the TPP provide significant benefits to Australia? Will there be increased trade (remembering service delivery is in the agreement)?
I am  yet to be convinced the TPP is the best trade deal in the world. Are we better off with bilaterals like the China Australia Free Trade Agreement and the Korea Free Trade Agreement or the TPP?  We will see. Regardless, TPP is a government policy decision and minister Robb spoke  eloquently  on how he perceives the outcome of TPP. On balance though, the TPP is all about increasing trade and as service providers  to that trade we hope that Australia and industry are beneficiaries of the outcomes and economic trade benefits claimed.
However, we know a lot of this trade will go through large multi-nationals  And as far as CBFCA members  (75 per cent of which are classified as small businesses), will they experience an increase in revenue and opportunity? We’ll see.  

What is the CBFCA view on the China FTA? Is it the solution promised by the politicians or just a sellout of Australia? I note the MUA expressed concerned that the Port of Darwin is to be owned and managed by a Chinese company.
I believe Australia will benefit from the trade deal with China because China is one of our key trading partners. We have a very close relationship with China on trade, whereas the TPP probably  has a bigger political influence  than trade. Will China look at the TPP and ask if it is an attempt to limit China’s trade influence? I am not sure.

One issue in the China Free Trade Agreement is trans-shipment of cargo over Hong Kong, which could  see such consignments lose their China  origin status.  From a logistics and political  point of view  a message is being sent  to  Hong Kong  to remind it where the real power lies. The issue has been raised by all parties but China  has yet to amend this aspect  and will, I believe, stick with its decision. It’s been an issue with New Zealand.  Also, as to its agreement.

In the past Hong Kong was seen as the gateway to China, but this is  now changing rapidly  As to the Darwin port issue this remains what people see as an interesting commercial decision  and I would see the sovereignty aspect as being not an issue for the Australian Navy.  Authorities in Darwin said there were no strategic concerns.

Will new prime minister Turnbull deliver a more stable and prosperous Australia?
The change in leadership has been positive for Australia and its overseas trading partners. Previous prime minsters both Liberal and Labour have had problems projecting the “right” image. Turnbull appears to me to be very capable.  He has a refreshing philosophy on progress and how we must change to accommodate new trends

Regulatory bodies of governments - both federal and state - often refer to “stakeholder engagement”. Has the process of “consultation” improved?
I have found so-called stakeholder engagement with governments tends to be cyclical. It also comes down to who is in charge and responsible for management. If the person at the top has a particular feel for the role and can imbue that into  staff then progress is possible.

Consultation is all about listening to industry, analysing the input and  then reaching a determined course of action. It does not necessarily mean adopting all the suggestions but the keys of  listen, hear, understand are at times missing.

Some consultation is there, but I would like to see more positive moves on deliverables being integrated into the decision process.
 
The Australian economy has been in choppy waters this year and appears to have been helped to a great extent by lower energy costs. Do you see an improvement any time soon?
Talking to people in shipping and stevedoring, they say the box reports are up on last year. It does seem to be more consistent and we seem to have avoided the peaks and troughs. This is possibly because the consumer market no longer has specific  Christmas sales, there are sales throughout the year. So consumer aspects have changed.  

We came late into the effects from  2008 Global Financial Crisis (GFC) and  at that time the is industry sector restructured,  particularly its human resources,  to ensure business continuity.

With the  second downturn,  industry coped because it had already prepared for in the aftermath of  2008. The industry appears to have remained constant - however fewer people are  becoming licensed Customs brokers.

Indeed, many Customs brokers have retired, or will retire in the near future (and many are working later  in life to recover the  lost superannuation of 2008 and beyond). The bell curve  of age  in this industry has moved up from 45/57 years to now more like 50/62, which blocks young people  entering the workforce in the capacity of a licensed Customs broker.

It is also becoming  more  regulated,  with complex Free Trade Agreements,biosecurity requirements and the impact of  strict liability offences.
It remains to be seen how dramatic the changes will be to the Customs broker/international freight forwarding industry in a few years – say from about 2018 to 2023.  
 
In the near future the DIDP will issue the Terms of Reference for its review of licensing including  Customs brokers licences, depot licences and warehouse licences. This  ToR will have  interesting implications for  industry  The  CBFCA did not endorse all the findings in the original Review Of Licensing Review and paper, however it  believed it was timely to look at licensing for Customs brokers for  the future.

The industry is  facing  transition in terms of age and client expectations.  Are we  heading for major change? It is going to be very hard for the smaller enterprise to compete? Will SMEs will struggle? Will medium sized businesses with around 15-40 staff  prosper by taking work lost from the small operators? All of this is what we will need to contend with in the short to medium term and with the impact of e-commerce which challenges existing business, consumer, trade and service provider models.

The Australian Border Force (ABF) has attracted criticism from some quarters for significantly ramping up its powers in line with a claimed greater threat to national security. Is the power justified?

ABF officially came into operation 01 July 2015 and as such it  is a work in progress.

We do see some issues that need to be addressed in terms of its compliance monitoring in relation to trade. The commissioner spoke at the CBFCA national Conference  on how he perceives his administration should work with the trade.
 
His philosophy was that the ABF policy  will  work effectively with those genuine businesses that can be trusted;  those that are recidivists  and  in the margins... well,  the ABF will take a very different view.
There are some areas  in the DIBP/ABF  where performance improvement is needed, such as  in the tariff concession and tariff advice ruling areas, but performance is mixed;  it is difficult melding different thoughts and cultures and  getting the concept  right.

FIATA recently concluded its World Congress in Taipei. CBFCA appears to be closer to the world body. You have retained the chair of the Customs Affairs Institute. What are your aims and objectives during your next term?
My  key message and focus in 2016 as Chair  of CAI is  about having  FIATA members participate in national committees on trade facilitation; we need to be  in the lead  of that process rather than mere bystanders.

We also have some interesting challenges ahead, particularly on the air cargo side as to future pre-loading advice similar to the UCBP Importer Security Filing Requirements.  All these changes could improve border protection from a Customs and bio-security point  of view. My aim as chair will be to ‘up tempo’ people’s attention on trade facilitation and work with our members to achieve  better facilitation and more cost efficient and cost effective processes.

A lot of  FIATA members  deal with  their Customs administrations to the detriment of dealing with their Foreign Affairs and Trade departments  where they need  to have an interface to better understand how to improve trade. By improving trade we will improve economies and make better fiscal returns .

In terms of FIATA itself, director general  Marco Sorgetti, myself and two other FIATA members of the Extended Board  have been tasked with looking at the future of FIATA through an internal review that was approved by the FIATA presidency, the Extended Board and the members.

Like everything in life  while we believe FIATA is performing well, the question is could it do it better?  The CBFCA has a strong interest  in what FIATA can deliver for its member associations.  We note and applaud the work of the other Australian member of FIATA  and its work on  FIATA committees  such as the Airfreight Institute