The Department of Immigration and Border Protection has issued a notice warning when it will collect customs duty from entities other than importers.
Brokers, in particular, will need to be careful that they are not contributing to a non-payment or underpayment of customs duty. The Department has flagged that, if it cannot collect the outstanding customs duty from the importer, it will look to issue a demand to any other party whose conduct has contributed to the non-payment or underpayment.
Who is liable for customs duty and import GST?
Under the customs legislation, the ‘owner’ is responsible for the payment of import duty. ‘Owner’ is broadly defined:
Owner in respect of goods includes any person (other than an officer of Customs) being or holding himself or herself 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.
The definition is very wide. It will frequently extend to buyers, either as the actual owner (if title to the goods has passed), importer or consignee. It will also extend to brokers. Nothing has changed in this respect.
If the importer does not pay the customs duty, do other parties get any protection from DIBP Notice 2017/16?
The short answer is no.
The exporter and importer will generally agree, either by a specific clause in the contract or by the use of incoterms, which party is liable to pay customs duty.
However, that contract does not affect the powers of the Department under the legislation. This means that:
- each person who falls within the definition of ‘owner’ is jointly and severally liable to pay the customs duty;
- if one party pays the customs duty, all of the other parties stop being liable; and
- if the customs duty is unpaid, the Department has an obligation to collect the debt from anyone else who meets the definition of ‘owner’.
If there are many other businesses liable as ‘owners’, who will the Department chase first?
As the definition of ‘owner’ will capture many entities in the supply chain, the notice sets out general principles on who may be sent the demand for the unpaid duty if the importer fails to pay.
This includes a broad position that:
DIBP will consider the facts of each matter carefully before determining which party to issue the demand on. The involvement and actions of parties, in relation to the goods, will be assessed based on the relevant circumstances and facts. DIBP may ask questions and request further information or documentation from parties to assist in clarifying the scope and degree of their involvement in the importation of the goods.
The Department then states that a relevant consideration will be whether any party’s conduct contributed to the non-payment or underpayment of customs duty – brokers will need to be particularly careful.
How can I protect myself when I am not supposed to pay customs duty under the contract?
If you are involved in the supply chain of the imported goods, you will probably fall within the definition of ‘owner’. The legislation is broadly drafted, so there is little that can be done about that.
Your options are therefore to have:
- a clause in your contract that makes it clear that the importer is responsible for the payment of the customs duty;
- an indemnity that if the importer fails to pay the customs duty, the party giving the indemnity compensates you for any loss (including the Department recovering customs duty from you); and
Keep in mind that an indemnity is only as good as the person who is giving it. If the importer has not paid customs duty because it is insolvent, then an indemnity from the importer is not going to help you if or when the Department demands that you pay the customs duty. You should therefore be careful in deciding who will give the indemnity, as well as the scope of the indemnity.