Restrictions around ‘digital strip searches’ have been introduced to better protect individual privacy
Modernising our customs and excise laws – By Chris Dann and Laura Braid
Over the past five years, the NZ government has been working to develop new law to replace the outdated Customs and Excise Act 1996. The new act received royal assent on 29 March 2018 and will come into force on 1 October this year.
Importantly, the new legislation does not substantially alter our customs and excise laws. The focus has largely been on modernising the language and structure of the act. Parts of the existing act range from 50 to 100 years old, and numerous amendments have been made to it over the years (as legislators have tried to keep pace with change) resulting in what is viewed as an unduly prescriptive and complex hotchpotch.
The new act also introduces a number of changes designed to give importers and exporters greater certainty and flexibility, and to protect individual privacy. Below is a brief outline of the main changes we will see in October.
Valuation of importsImporters will be able to declare a ‘provisional value’ where the final value of the imported goods is not known until after the goods arrive in New Zealand. The act also enables Customs to issue binding rulings on the valuation of imported goods and creates a new simpler appeals process for duty assessments.
When excise is payableAll domestically manufactured and imported tobacco, fuel and alcohol are subject to excise duty. The new act clarifies that excise duty arises when the goods are manufactured or imported, and that the duty becomes payable when the goods are removed for home consumption. This reflects the overarching policy that revenue should be collected at the earliest point in the supply chain.
A new excise collection point has also been introduced for fuel. Currently, excise on fuel is collected either when the fuel is imported into New Zealand or at the Marsden Point refinery. It has been recognised by policymakers that another point of manufacture which should attract excise duty is the blending of fuels at tank farms.
Fuel companies often add their slops of leftover fuel (which would otherwise need to be disposed of) to tank farms throughout New Zealand. This increases the volume of fuel that leaves the farm for the petrol station. The new act will require excise to be paid on this additional volume (if no excise or a lower excise has previously been paid on the slops). A formula for determining the additional volume is to be set by regulation.
Greater information sharingThe new act will also facilitate greater information sharing between Customs and government agencies. Customs collects high volumes of information about the people and goods moving in and out of New Zealand.
Under the existing act, information can be disclosed to other border agencies for border management purposes, and anything outside these purposes must be addressed on a case-by-case basis under the Privacy Act or Official Information Act.
New provisions have been introduced which will allow information to be disclosed to any government agency for a purpose relating to that government agency’s functions. Many government agencies have an increasing demand for information to be provided on a regular ongoing basis, and it is hoped that this will prevent businesses from having to provide the same information to government multiple times.
To ensure information is protected, agreements must be made between ministers. Before entering into an agreement, ministers must be satisfied that disclosure is necessary and that there are adequate safeguards in place to protect privacy. Ministers must also consult the Privacy Commissioner. All agreements are to be published and must be reviewed every three years.
Exporters and importers will now be able to seek authorisation to store the records required by the act offshore or in the cloud, rather than just in New Zealand as currently.
Sanctions rebalancedA new infringement notice scheme is to be set by regulations for minor offending, which will replace a number of petty offences. While the regulations are yet to be issued, we can expect this scheme to mirror that of the infringement scheme that is currently used by the Ministry of Primary Industries, where fines of up to $5000 are issued by way of an infringement notice (and offences are of strict liability, meaning intention is irrelevant).
Administrative penalties will be extended to exporters (rather than just applying to importers) to encourage all persons to take reasonable care when providing information to Customs.
A new compensation and penalties regime replaces the current requirement for additional duty in the event of late payment. Late-payment penalties will be set at specific rates to avoid debt being incurred that is disproportionate to the offending.
Power to examine electronic devicesRestrictions around ‘digital strip searches’ – where Customs may ask for your password or passcode to an electronic device so that digital information such as text messages, social media accounts and photos can be searched – have been introduced to better protect individual privacy.
A two-stage search threshold will apply to Customs’ existing power to search electronic devices. To carry out an initial search of an electronic device, Customs officers must have ‘reasonable cause to suspect’ the person in possession of the device is, or is about to be, involved in the commission of an offence. An initial search allows for the device to be searched manually, or using software that scans for objectionable images. However, Customs cannot keep any information acquired from the initial search unless there is evidence of offending.
A full search can be conducted if Customs officers have ‘reasonable cause to believe’ the device contains evidential material about offending. A full search means the device can be searched using any technology, and any information acquired from the search may be copied or the device may be detained.
All persons subject to having their device searched have a duty to assist Customs (for example, by providing access passwords). Failure to do so may result in a fine of up to $5000. There are also a number of complaint mechanisms available if people believe they have been unfairly searched.
Guidelines and regulations to comeNZ Customs has promised guidance and information resources to help understand the changes. We also expect new regulations and rules to be issued prior to commencement, so there is plenty more to come.
In the meantime, NZ Customs has advised that all main cargo reporting and clearance messages must be submitted in WCO3 format from 1 July, except for the Inward Cargo Report (ICR) which will follow later in the year.
Chris Dann heads the transport and logistics team, which includes Laura Braid, for law firm Anthony Harper; the team is one of the few in New Zealand with strength and experience along all facets of the supply chain; for further information, visit www.anthonyharper.co.nz