One of the key elements of good regulation is to ensure that the regulation is transparent and known to those who it affects and must observe the regulation. This is the reason why there are procedures in place to ensure that proposed new regulation and changes to regulation are communicated to those affected well in advance to their introduction to allow for proper response to the implementation.
Although the notion that "Ignorance of law is no excuse" does exist, I think that it is accepted by all that reliance on that notion is not advisable and that it is in everyone's interests for law and regulation to be communicated and understood before it commences. After all, the aim of law and regulation is not to raise revenue from breaches of unknown law but to secure the aims of the law and regulation by their observance.
All that said, we live in a "second best" world where there is no such thing as perfection in anything so there can be times where there is a degree of uncertainty as to the regulation applying to those affected. A very real question which follows is how the regulator responds in those circumstances and the extent to which it adopts a benign approach to compliance.
Background to the current challenges
In our industry, there are regularly compromises to model regulation as law and practice change so quickly in nearly every aspect of border transactions, whether it be in the valuation or classification of goods, the licensing of service providers in the supply chain or the operation of the anti – dumping or countervailing regimes. In that context there are regularly cases in which there anticipated changes to the dates for new regulation arise and the new regulation has not quite been developed.
There are currently at least 2 cases where circumstances have meant that there is uncertainty for those in the supply chain reporting to Customs.
Future of the Customs Regulations
The first relates to the wholescale replacement of the Customs Regulation 1926 due to take effect on 1 April 2015. I have earlier reported on the circumstances requiring the need to replace the Regulations and the steps being taken by Customs to replace them with 2 separate sets of instruments being the Customs Regulation 2015 and the Customs (International Obligations) Regulation 2015. Customs released Exposure Drafts of the Regulation and many submitted comments, both as to the provisions and as to complementary practical provisions, including request that Customs rigorous compliance regime be relaxed so far as it related to precise compliance with the use of the new provisions.
Subsequently, Customs has not had the time or resources to respond to all the submissions and has not been able to share the terms of the final regulation until they has been formally adopted and approved. However this has created uncertainty as to the provisions having effect on 1 April 2015 and the terms to be used in reporting to Customs whether through the ICS or otherwise, especially in the area of applying for refunds where there has been a significant focus on compliance action.
Given the proximity to the "drop dead" date of 1 April 2015 for the Customs Regulations 1926, the CBFCA and its members and advisors raised the question as to how Customs would treat the transition between the regulations, especially in the context that the new provisions are not available and that under Customs regime, even the slightest error in reporting can attract a penalty – even if there is no consequential underpayment of customs duty.
In response to the representations, Customs forwarded an email to industry subscribers on 26 March 2015 which provides, in part that:
"More detailed information will be made available through an Australian Customs and Border Protection Notice (ACBPN) which will be released once the instruments are made and registered on the comlaw website (www.comlaw.gov.au). A fact sheet on refunds will also be made available at that time.
The ACBPN will provide more detail on the effects of these new regulations but it is important to note that each has detailed transitional provisions to ensure that things done under the 1926 Regulations, before those regulations were repealed, will continue to have effect (if there is a corresponding provision in the new regulation) as if it had been done under the new regulations. These provisions are important because they provide continuity between the 1926 Regulations and the new regulations, including the flexibility for updates to be made over time to relevant existing material such as forms which contain references to the 1926 Regulations.
We are currently reviewing this material and will be making the appropriate changes over time. However until such time, you should continue to use the available resources provided by us which may contain references to the 1926 Regulations."
I am not entirely convinced that this provides the level of comfort which industry would expect on the transition and the absence of the new provisions. There seems to be an expectation that industry will need to review the content of the Customs and comlaw websites and immediately change to the equivalent provisions of the new provisions. It also does not provide any degree of comfort that any failures to precisely comply with the transition in this stage should be relieved from liability from Customs strict compliance regime. Hopefully the future announcements from Customs will confirm that relief.
SPARTECA for TCF goods – the regulatory gap is wider
The other main example of the compliance vacuum relates to the operation of the "TCF" provisions of SPARTECA, one of the Trade Agreements between Australia and its South Pacific Island neighbours. The TCF provisions are especially important given the fact that Fiji maintains a TCF industry used by a number of importers and retailers. The relevant provisions of the TCF arrangements were to expire on 31 December 2014 with the intent that the SPARTECA countries be moved to "DCS" status by 1 January 2015. The Minister for Foreign Affairs suggested that all would be in order when she met with SPARTECA officials late in 2014. However the relevant legislation and regulations have yet to be promulgated with the effect that since 1 January 2015, there is the absence of regulation regarding the import of TCF goods from SPARTECA countries.
Unfortunately there has been no public official direction from DFAT or Customs as to how this should be handled by those importing TCF goods from SPARTECA countries pending the passage of new legislation or regulation. The general sense of unofficial direction has been to continue to use the expired provisions until the new "DCS" provisions are legislated and effected. Those using the provisions are encouraged to seek specific assurance from Customs as to the provisions to use and to also be alert to the commencement of new provisions – hopefully the officials in Government in Canberra get moving on the required legislative provisions.
Ultimately these 2 examples emphasise the importance of the regulators being provided with adequate resources to ensure that there are no gaps in regulation – and that industry which uses that regulation is actively informed of the transitional arrangements and is not punished for failures for exact compliance in the regulatory regime. However these are only 2 examples. We can only hope that there are no such regulatory gaps in the future and that there is no undue reliance on members of industry to action and secure their own protections.