United

Importing compliance 'holes' potentially cost Australian government 'millions of dollars'

Latest News
Thursday, 18 May 2017

The latest Australian Border Force (ABF) Goods Compliance Update  indicates 'holes' in importing regulations and follow-up compliance audits potnentially cost the Australian government millions of dollars. 

Peter McRae, chief executive of Platinum Freight Management and a Customs specialist, studied the report alongside the 2015-16 ABF annual report and identified a "lack of compliance testing which, coupled with poor regulation measures, make the perfect breeding ground for fraud".

 

In an attempt to stamp out fraud, McRae has called for improved import audits before goods are released from Customs' control.*

“If regulation and compliance testing were up to scratch, (treasurer) Scott Morrison might find the money for his budget that he so desperately needs,” said McRae.

"Page 28 of the ABF Goods Compliance Update states that only 2445 Cargo Reports were examined during 1 July 2016 and 28 February 2017 as a result of the Compliance Monitoring Program (CMP), which focused on cargo reporting accuracy.

"Of the 2445 cargo report audits undertaken, the ABF found three per cent of errors and only three errors in relation to value of goods imported. This equates to an average of 306 checks per month.

"Cargo reports are filed for every import entering Australia prior to the goods arriving in Australia. Each is submitted by the cargo reporter for an airline, freight forwarder or shipping line to ABF and contains fields such as weight, consignor, consignee, a description of the goods and their value. This declared value determines whether a package will be released (if under A$1000) or held for a Customs entry. Each cargo reporter has authority to tick a box in the Integrated Cargo System (ICS) to say that the goods are under A$1000, which means it will not incur GST, duty or Import Processing Charges (IPC).

"However, the 2015-16 ABF annual report states that a total of 38 million cargo reports were submitted to ABF (3.1 million sea cargo reports and 34.9 million air cargo reports), which equates to 3.1 million cargo reports per month."

McRae said: “Comparing reports, it doesn’t take a genius to see that only hundreds of audits are being carried out on millions of imports landing each month. This shows the enormous opportunity for abuse of the system – and the very high chance importers have of getting away with it. The Australian government is asleep at the wheel. 

“Underestimating value of goods declared might just be small petty fraud, saving shady importers hundreds of dollars on a single import, but when multiplied over a year, Australia’s revenue loss from under- or uncharged duty and GST is likely to be in the high millions.”

Audits of cargo reports occur after the cargo has been delivered to the importer. Regulations currently allow audits to take place up to five years after the import.

“How can ABF be sure of the accuracy of the cargo reports when they haven’t sighted the goods inside the package and the person who filed the report for the importer isn’t trained or licensed by Customs authorities?” said McRae.

"Furthermore, failure to adequately certify and regulate cargo reporters could be considered another critical problem with compliance. While import declarations must be filed by trained and licensed Customs Brokers working for or on behalf of importers, cargo reports can be filed by Cargo reporters who are untrained, unlicensed employees of airlines and freighting firms.

“Customs compliance needs to be separated from organisational KPIs,” McRae stated, adding he sees it as 'a broken link'.

“Cargo reporters working for airlines and freighting companies can be operating under KPI stress that promotes a speedy delivery of goods through the borders at a low cost to the client [the importer]. Really, this role should be promoting accurate information to assist the correct assessment of duty and GST owed. Regulating the job would improve this,” added McRae.

McRae called for the ABF to assess externally and internally more packages that are being claimed as worth less than the A$1000 threshold. He also wants licensed, autonomous personnel to issue Cargo reports.

“The ABF must install regulation to ensure adequately-trained and licensed brokers handle all reporting in importing, and then partner with them to improve compliance measures and auditing. Only then will this country’s enormous problem with petty fraud reduce and the correct collection of GST, Duty and Import Processing Charges (IPC) be applied.”

*The next AirCargo Asia-Pacific e-zine will carry any response from the ABF/Customs to McRae's claims.

 

HACTL
Cathay Cargo
United

Importing compliance 'holes' potentially cost Australian government 'millions of dollars'

Latest News
Thursday, 18 May 2017

The latest Australian Border Force (ABF) Goods Compliance Update  indicates 'holes' in importing regulations and follow-up compliance audits potnentially cost the Australian government millions of dollars. 

Peter McRae, chief executive of Platinum Freight Management and a Customs specialist, studied the report alongside the 2015-16 ABF annual report and identified a "lack of compliance testing which, coupled with poor regulation measures, make the perfect breeding ground for fraud".

 

In an attempt to stamp out fraud, McRae has called for improved import audits before goods are released from Customs' control.*

“If regulation and compliance testing were up to scratch, (treasurer) Scott Morrison might find the money for his budget that he so desperately needs,” said McRae.

"Page 28 of the ABF Goods Compliance Update states that only 2445 Cargo Reports were examined during 1 July 2016 and 28 February 2017 as a result of the Compliance Monitoring Program (CMP), which focused on cargo reporting accuracy.

"Of the 2445 cargo report audits undertaken, the ABF found three per cent of errors and only three errors in relation to value of goods imported. This equates to an average of 306 checks per month.

"Cargo reports are filed for every import entering Australia prior to the goods arriving in Australia. Each is submitted by the cargo reporter for an airline, freight forwarder or shipping line to ABF and contains fields such as weight, consignor, consignee, a description of the goods and their value. This declared value determines whether a package will be released (if under A$1000) or held for a Customs entry. Each cargo reporter has authority to tick a box in the Integrated Cargo System (ICS) to say that the goods are under A$1000, which means it will not incur GST, duty or Import Processing Charges (IPC).

"However, the 2015-16 ABF annual report states that a total of 38 million cargo reports were submitted to ABF (3.1 million sea cargo reports and 34.9 million air cargo reports), which equates to 3.1 million cargo reports per month."

McRae said: “Comparing reports, it doesn’t take a genius to see that only hundreds of audits are being carried out on millions of imports landing each month. This shows the enormous opportunity for abuse of the system – and the very high chance importers have of getting away with it. The Australian government is asleep at the wheel. 

“Underestimating value of goods declared might just be small petty fraud, saving shady importers hundreds of dollars on a single import, but when multiplied over a year, Australia’s revenue loss from under- or uncharged duty and GST is likely to be in the high millions.”

Audits of cargo reports occur after the cargo has been delivered to the importer. Regulations currently allow audits to take place up to five years after the import.

“How can ABF be sure of the accuracy of the cargo reports when they haven’t sighted the goods inside the package and the person who filed the report for the importer isn’t trained or licensed by Customs authorities?” said McRae.

"Furthermore, failure to adequately certify and regulate cargo reporters could be considered another critical problem with compliance. While import declarations must be filed by trained and licensed Customs Brokers working for or on behalf of importers, cargo reports can be filed by Cargo reporters who are untrained, unlicensed employees of airlines and freighting firms.

“Customs compliance needs to be separated from organisational KPIs,” McRae stated, adding he sees it as 'a broken link'.

“Cargo reporters working for airlines and freighting companies can be operating under KPI stress that promotes a speedy delivery of goods through the borders at a low cost to the client [the importer]. Really, this role should be promoting accurate information to assist the correct assessment of duty and GST owed. Regulating the job would improve this,” added McRae.

McRae called for the ABF to assess externally and internally more packages that are being claimed as worth less than the A$1000 threshold. He also wants licensed, autonomous personnel to issue Cargo reports.

“The ABF must install regulation to ensure adequately-trained and licensed brokers handle all reporting in importing, and then partner with them to improve compliance measures and auditing. Only then will this country’s enormous problem with petty fraud reduce and the correct collection of GST, Duty and Import Processing Charges (IPC) be applied.”

*The next AirCargo Asia-Pacific e-zine will carry any response from the ABF/Customs to McRae's claims.

 

HACTL
Cathay Cargo
HACTL
Cathay Cargo