Sunday 21st Jan, 2018

INDUSTRY OPINION: Customs infringement notices – Are penalties too high?

Photo: Shutterstock
Photo: Shutterstock

Russell Wiese*

AN INFRINGEMENT notice is meant to be a lighter penalty than if the matter was prosecuted and a penalty was imposed by the Courts. However, infringement notice penalties are fixed at 25% of the maximum penalty a Court could impose and this can result in penalties higher than what a Court would impose.This unintended outcome was demonstrated in a recent decision regarding prohibited imports.

Nguyen v Comptroller-General of Customs [2018] WASC 341

Nguyen was a pharmacist who was also the owner of a business known as “Cloud 9 Smoke Shop & Accessories”. In 2014 Nguyen ordered and received three parcels containing glass ice pipes. For two consignments the goods were labelled as “glass container samples” and had a declared value of less than $50. The third consignment had a correct description and customs value. All three consignments were prohibited imports as ice pipes are a device that is capable of being used for administering methyl amphetamine.

The Court received evidence that Nguyen changed the consignment address to his pharmacy as the shop name (Cloud 9 Smoke Shop) would increase the chance of an inspection. The Court also stated that it was naïve to the extreme to suggest that a pharmacist did not know how the pipes would be used.

In circumstances where there was a deliberate breach of the law relating to products designed to administer illicit drugs, a heavy penalty could be expected. The penalty imposed was a fine of $60,000 which is about 12% of the maximum penalty that could have been imposed. In reviewing the penalty the Supreme Court of Western Australia said the penalty was at the higher end, but not manifestly excessive.

In the judgement the following examples of penalties handed down in other cases were provided:

  • Importing 12 ice pipes, an electronic shock device and making a false statement to Customs – $8,000;
  • Five counts of importing steroids – $8000;
  • Smuggling 15kg of tobacco leaf – $5000 (plus payment of underpaid duty);
  • Importing four tons of Kava – $897K (of a maximum of $8 million).

Ultimately the Supreme Court upheld the original penalty of $60,000 plus costs.

Penalties imposed are a fraction of the maximum

It is important to appreciate that the above case dealt with deliberately deceptive conduct and yet the penalty imposed was 12% of the maximum penalty. The cases referred to within the judgment show regular penalties of about 10% of the maximum penalty for deliberate breaches of the Customs Act.

The Court noted that you cannot simply look only at the maximum penalty. It was said that “any assessment of the seriousness of these offences by reference to the maximum penalty needs to take into account the range of conduct that the offence encompasses”. This is an acknowledgement that types of breaches covered by a particular provision could include the innocent importation of a good for which a permit could have been obtained to the smuggling of a commercial quantity of an illegal drug. The range of penalties also has to encompass various levels of intent, from innocent mistake to deliberate evasion.

The problem with the infringement notice scheme

This is where the infringement notice scheme falls down. Penalties are set at 25% of the maximum penalty for individuals, and multiplied by three for companies. The same penalty is imposed for the most minor breach as for more serious breaches.

Similarly, the same penalty is handed out where there has been no intention to breach the law as when there has been a deliberate false statement made.

On top of this, penalties are issued without the Australian Border Force having to prove a breach of the Customs Act.

In 2016/17 the Australian Border Force reported that it issued about 540 infringement notices for a value of $4.8m – about $9000 per infringement notice.

Just as the Courts recognise that a maximum penalty is in place for the most serious breaches, so too should the ABF with infringement notices. While the legislation sets out the maximum amount of an infringement notice, the scheme will be more effective if the ABF allows for minor penalties to be issued for minor offences. As it currently stands, the penalty issued by the ABF could well be a much higher than the penalty a Court would issue.

Hunt & Hunt Lawyers’ Customs and Global team are affiliated with Freight & Trade Alliance (FTA). Contact Russell Wiese (03 8602 9231, rwiese@huntvic.com.au) or Lynne Grant (03 8602 9246, lgrant@huntvic.com.au) if you would like to discuss infringement notices.

* Russell Wiese is a customs and global trade partner at Hunt & Hunt Lawyers

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