Border Processing (Trade Single Window and Duties) Bill — In CommitteeText is incorporated into the Bound VolumeBorder Processing (Trade Single Window and Duties) Bill — In Committee[Sitting date: 11 March 2014. Volume:697;Page:16519. Text is incorporated into the Bound Volume.]Border Processing (Trade Single Window and Duties) BillIn CommitteeTIM MACINDOE (Junior Whip—National):I seek leave for all parts of the Border Processing (Trade Single Window and Duties) Bill to be taken as one debatable question.The CHAIRPERSON (Eric Roy): One debate and questions separately. Leave is sought for that purpose. Is there anyone opposed to that course of action? There appears not. Leave is granted.Parts 1 and 2 schedules 1 and 2 and clauses 1 and 2Hon MAURICE WILLIAMSON (Minister of Customs):I will take only a very brief call at the beginning of this because I am forever hopeful that this will be one of those bills going through the House that most people will not be discussing at their breakfast table tomorrow morning.Hon Members: No no!Hon MAURICE WILLIAMSON: Well methinks my colleagues give this too high a level rating. I think that people will probably be more likely to be discussing the flag than they are likely to be discussing this bill tomorrow. It is trying to bring the customs and the biosecurity systems into the modern era. As most members know there is a major big development of computer systems going on called the Joint Border Management System. The Trade Single Window part of that is almost complete; there are a few more modules to finalise that are in the testing phase. What the Trade Single Window will do is allow for both exporters and importers to be able to work with one screen and file their documents electronically. Those documents will then populate all of the databases in the network that are required—a food safety database or a biosecurity database or whatever.Currently the Customs and Excise Act 1996—again this will not be a surprise to members because I think the internet was actually declared as only 22 or 23 years old yesterday—Tim Macindoe: Twenty-five yesterday.Hon MAURICE WILLIAMSON: Twenty-five yesterday—OK that is all right. We did not get it in Parliament till about 1993 or 1994. When the 1996 Customs and Excise Act was going we still had green pixilated screens and dot matrix printers so what this bill is to do is to bring the legislation into the modern era.I will not go through it all unless members are quite concerned about specifics. It includes technicalities about giving the Chief Executive of the Customs Service the right to cancel registration of users because a new registration system will be required so that users can identify themselves from remote locations and do their transactions. There is quite a lot to this bill in terms of technical and basically computer-based systems but in the end I think it can be summarised as just bringing the Trade Single Window bit of the Joint Border Management System into this legislation so that it can be done. I understand that when we get to the end of the third reading we will split it so that people will be able to follow the two bills. I will wait to see what members have got to ask.Hon PHIL GOFF (Labour—Mt Roskill):As Labour has previously mentioned this Border Processing (Trade Single Window and Duties) Bill is a bill that had its origins at the time of the last Labour Government. Therefore it is the intention of the Labour Party to support the bill. I think the reasons for that are important. This bill is about facilitating the movement of goods across the border. To have an efficient system is obviously to the benefit of the economy it is to the benefit of the consumer and it helps New Zealand to become more internationally competitive. So for all of those reasons we are in favour of the concept of this bill.It deals also with the Biosecurity Act and we have raised concerns that although this bill probably cannot deal with the other problems of biosecurity there are significant problems in biosecurity. We are a country that is dependent on our trade. An outbreak of foot-and-mouth disease would just destroy our economy. It would make the global financial crisis look like a minor technicality. Although this bill may facilitate the transfer of information about biosecurity it does not solve the problems of the growing concern about incursions into New Zealand like we have seen most recently with Psa. So we have questions about whether the system is adequate to deal with that.The concerns I have are not about the concept of this scheme; they are about the implementation of the scheme. And I do have some questions that I hope the Minister of Customs will address. This scheme with its single portal relies on an information technology system. It replaces the current system of providing information about movements across the border and it integrates the border clearance processes. It is a good thing to have the Customs Service and the Ministry for Primary Industries working as one on that.We heard during the discussion of the bill in the Foreign Affairs Defence and Trade Committee that tranche one of this bill has already been put in place and we actually had the opportunity to go down to look at the operation of the scheme down on the Wellington waterfront. But I have some concerns about the reports that I am hearing about how well that system is working and I would like the Minister to reassure the Committee that the problems that have occurred are being properly dealt with are manageable and are not seriously undermining the system. So what I would like the Minister to do if I set out the questions very clearly is to respond as he normally does. He is one of the few Ministers in the House who does respond when in the chair. Most of them sit there like stuffed dummies and ignore the debate but this Minister actually does make an effort. So I am putting the questions—serious questions—and I am putting them in a way that the Minister can provide information to the Committee on which it can make its decisions.So the first question is a general question: what difficulties have there been with the technology in the implementation phase of tranche one? Secondly how big have those problems been? Are they minor technical difficulties which is usually the answer that we get when there is talk about significant problems of implementation? What have been the consequences of the glitches in the technology system? What is being done to address those problems? I imagine that the Customs Service and the Ministry for Primary Industries will be looking at how to address those problems. Have those problems been resolved? Which problems are still outstanding? And what additional costs have been incurred because of the implementation problems? I hope that I have not run through those too quickly but I notice that the officials are taking notes and the Minister will be fully briefed to answer those questions.Those questions are important because we have seen before efforts to introduce new technology that frankly have been disastrous. You and I Minister were I think both in the House at the time the INCIS system was being introduced. Interestingly INCIS was a project that involved the same technology company IBM that we are involving with the single portal here. We know from INCIS that we poured $100 million into it and in the end the system had to be scrapped. I do not believe that the problems faced in this area would be anything of that magnitude but I certainly need reassurance about it.I need reassurance also because a more contemporary information technology system that we have been working on is Novopay. Novopay of course has been a disaster and I would not want to see this replicated in the critical area of customs and goods going across the border. We had the original Minister in charge of Novopay Associate Minister of Education Craig Foss sacked. We had “Mr Fix-it” Steven Joyce brought in as Minister responsible for Novopay but “Mr Fix-it” has not fixed it and that is a real problem. I was at a school in my electorate just last week where they said that the problems are immense and they are not going away. I want to know that we are not being undermined in this very good concept of the Trade Single Window by a technology system that is having the same sort of difficulty. So I think it is really important Minister Williamson that you do take a call and you outline just what those difficulties have been and that you make sure that the Committee is well informed about how you have sought to resolve them.It is good to have the single portal because it means that business and industry can minimise their dealings with different departments—minimise the bureaucracy in dealing with arrival and departure requirements of customs and the Ministry for Primary Industries. I believe that the legislation does meet those needs. It provides the very basic things that need to be in place for this system to work—the registration of users of the Joint Border Management System. It sets out the forms and requirements of registration. It sets out the grounds on which the Minister can refuse to register somebody who wants to work through this system. Perhaps the Minister could explain to the Committee what the grounds might be for the Minister to determine whether a person may not be registered and use this system because that would have fundamental effects on their ability to import or export.The bill sets out consequential changes to offences. That is pretty straightforward. I think that what we are quite pleased about is that this bill is compatible with the World Customs Organization so it is part of globalisation and it means that New Zealand can work effectively with other systems around the world.The other point that I want to raise in this initial call is to do with biosecurity. As I mentioned before biosecurity although it is expensive is nowhere near as expensive as the costs of biosecurity not working. I am aware that there have been significant cutbacks in the last Budget. I think that about $6 million was cut out of it. I am aware that we cleaned out I think about 54—if I have got that figure right—biosecurity offices. I want to be sure that while we introduce this new system to facilitate going through the biosecurity process the system is adequate to provide the protection that New Zealand needs. I have been talking to kiwifruit farmers in the Bay of Plenty. They say that the costs of Psa coming into New Zealand run into hundreds of millions of dollars. I would hate to see us nickel-and-dime a system of biosecurity only to pay out far more money in terms of the disastrous consequences of the incursion of pests into New Zealand.Although our Trade Single Window is a symbol of globalisation another symbol of globalisation is that goods can move much more readily across our borders. We need to know that this system and the resources applied to the people who work in this system can ensure New Zealand’s security against an incursion of a pest or a disease. We saw quite recently the discovery of one fruit fly in Whangarei. We are always curious about how one fruit fly can arrive in the country. If there are two and one of them happens to be female then we have got a real problem. That is a discussion about the birds and the bees and I am sure the Minister is appreciative of that problem.These are significant problems; they are not theoretical problems. This bill relates to biosecurity and what the bill does is not bad. But we have to ask the question of whether we have sufficient resources behind the bill and behind the new system to ensure that it is a smooth system and also an effective system. The Minister has often spoken about when he comes through customs how good it is to go through SmartGate. I came back from the United States over Christmas and the system was very quick. Nobody checked my bags and that is because they probably thought I was a reputable person coming from a country that was not a problem. That might surprise the Minister too. I need some reassurance from the Minister on that point as well. But I would really like the Minister to focus in his answers on the IT problems.RICHARD PROSSER (NZ First):I am pleased to rise on behalf of New Zealand First to take a short call in this Committee of the whole House stage as we debate the Border Processing (Trade Single Window and Duties) Bill. Focusing on the Minister of Custom’s proposed amendments as set out on Supplementary Order Paper 419 I have to say that New Zealand First is pleasantly surprised and somewhat encouraged by the direction the Government appears to be taking with regard to biosecurity at least to the extent that it seems to be addressing it as far as this particular bill is concerned.At the second reading we expressed a concern that this Government might choose to follow a path that does not afford sufficient regard to the importance of biosecurity—or that it might not. There was perhaps some lack of clarity if not actual ambiguity as to the Government’s intentions or indeed the potential lack of them in so far as its intended way forward under the regime that the passing of this bill would bring about. We are pleased then and tentatively encouraged by the Minister’s desire to split this bill into two bills the Customs and Excise (Border Processing—Trade Single Window and Duties) Amendment Bill and the Biosecurity (Border Processing—Trade Single Window) Amendment Bill. This will afford greater attention to biosecurity and widen the ambit of the bill so as to secure consistency with other relevant pieces of legislation as they relate to the biosecurity agenda.The Minister’s Supplementary Order Paper still delays the implementation of the legislation for another 2 years which we do not necessarily see as being ideal. We understand that key stakeholders in industry and indeed the departments concerned will need sufficient time to familiarise themselves with the changes to procedure that this legislation when it becomes law will bring about. But we are duty-bound also to ask whether 1 year would not provide a sufficient period within which the stakeholders and interested parties could bring themselves up to speed. Two years may err on the side of caution and that may be no bad thing in some circumstances but again New Zealand First wonders whether it might not be advantageous to importers and exporters alike as well as of course the vital biosecurity considerations of many sectors to make the benefits of the Single Trade Window available to all those interests in 1 year rather than 2 years.The Minister’s Supplementary Order Paper brings the second of the two bills that this bill will become the Biosecurity (Border Processing—Trade Single Window) Amendment Bill into line with a number of important pieces of legislation: the Biosecurity Act 1993 the Agricultural Compounds and Veterinary Medicines Act 1997 the Animal Products Act 1999 and the Food Act 1981. We understand as I am sure the rest of this Committee understands that the Food Act itself is likely to be very much amended and in many regards superseded by the Food Bill which is currently before the Primary Production Committee. The Minister’s Supplementary Order Paper brings the new bill the Biosecurity (Border Processing—Trade Single Window and Duties) Amendment Act 2014 as it will become in line with the Food Act. The Supplementary Order Paper also aligns the bill with the Hazardous Substances and New Organisms Act 1996 and the Wine Act 2003. These are regarded as being eminently sensible additions.In closing I will reiterate that New Zealand First regards this Government’s track record on biosecurity as being nothing short of woeful. We are encouraged by the attention this Supplementary Order Paper appears to be bringing to it and we are happy to support both the Supplementary Order Paper itself and indeed the passage of the legislation through the House and on to the statute book. Thank you.DAVID SHEARER (Labour—Mt Albert):I will take just a 5-minute call in this debate on the Border Processing (Trade Single Window and Duties) Bill because I see that the Minister of Customs wants to respond to Phil Goff’s questions and I think that is only right. I want to reiterate what Phil Goff has already said which is that obviously we are supportive of the principle of the Trade Single Window. It is important for New Zealand to have this hub of information that will enable our importers our exporters and people moving across our borders to be able to access technology in a way that will make that movement more safe and better.But my questions are really about where Phil Goff was going before as well. I want to ask a couple of additional questions because the word that I am hearing out there is that the Trade Single Window has been successful but this has been the only successful part of the roll-out of this IT system. At the moment a lot of finger-pointing is going on between the Customs Service and IBM about how much it has been able to complete and how much it is going to cost to complete it. Right now there have also been accusations as I understand it of taking IBM to court. Obviously this is an election year and we do not want to see that happening so what is going on instead is that we are redefining success. Redefining success is a little bit like a cricket game where you go out there and you aim to hit 200 and when you come in and you have hit only 35 everybody says: “Well done. We were successful.”—except we were not successful. We did not get to where we wanted to go and instead we are accepting something that is way less than what we anticipated when we set out.My understanding of this system is that the Customs Service wanted to retire the old CusMod system and institute this new system. My understanding—and I would very much welcome the Minister’s reflections on and answers to this—is that instead of retiring it we have got some way down the road and that includes the Trade Single Window but we have not got to the point where we can say that the IBM-initiated system is going to be able to achieve what we set out in the beginning to achieve. Not only that but IBM is now saying to the Customs Service that it is going to cost tens of millions of dollars more to be able to complete that job.We have been reminded by Phil Goff about Novopay. We reflect back on the INCIS programme back in the 1990s. We now have a process in place called the Gateway process with the implementation and roll-out of these particular schemes. My understanding is that this has gone through some of that Gateway process but has not got through a lot of the others.So I am here alongside my colleague and I would like to know the answer to exactly what is going on with regard to the IT system. The concept in itself we are completely and utterly in support of. As Phil Goff said we initiated this process. We want to see it through because it will be helpful to all of those people who are involved in importing and exporting. We have seen that the submissions that we received—only a small number—have been very much in support of it. The issue here is that we are very unclear and would want to have much more clarity over where the Customs Service’s IT system is at at the moment and whether it will be able to achieve what the Government has said initially it will want to achieve or whether in fact it is redefining its success in a much smaller number of objectives. If that is the case—and I am not saying it is; I am waiting for Mr Williamson to respond to this—then we have wasted an enormous amount of money getting way less than we wanted to get which is very much reminiscent of Novopay and of INCIS.Hon MAURICE WILLIAMSON (Minister of Customs):I will take a brief call just to answer some of the issues that the Hon Phil Goff and David Shearer have raised. First of all I have got to be careful because a lot of what they raise is not actually part of this bill the Border Processing (Trade Single Window and Duties) Bill. This bill is about implementing the law around how people can be registered for systems and so on. This is not about the contractual obligations for implementing a computer system.But I do want to give those members some assurance along the way. First of all if you are going to start a comparison between the Joint Border Management System and Novopay my view is that the comparison that is best—for the audience out there—is building one huge big manufacturing processing plant compared with buying a carport because this is an enormous system across a whole range of Government agencies with moving parts and with functionality that will be rolled out in tranches and was always planned to and it will take some years as it already has done to get operational. I gave the Customs Service and in fact the whole implementation crew some very strict instructions that I would be allowed to give as Minister—because I cannot get involved in the contractual obligations; that is between the Ministry for Primary Industries and the suppliers—and one of the things I said and I think this was the case with Novopay was that I did not want to pull the plug on the old system until all of the functionality had been tried and trued and had been used for some time.That is still the case. CusMod still runs today. It still functions and some people are still on it but we are migrating people across quite rapidly. We have trialled some of the biggest of the cargo operations out there from Mondiale Freight Services to CargoWise and FedEx and so on which have been involved in trialling the Trade Single Window and they love it. So unlike other computer systems where you will hear from the users: “This is a dog and you shouldn’t have it and we don’t like it and it’s not working.” I challenge members of the Committee to find anybody who is involved in the use of it who does not like it and who does not love the speed that it processes at.But again if you are building some massive big warehouse operation you will know for sure before you start that there will be elements of it that do not quite work to start with. The big roller doors jam and need the motors changed or the conveyor belts are not fast enough or whatever—the temperature of the air conditioning. The same thing applies to this system. Because it is so big defects will by definition occur as you start to begin the testing phase of it. I have been around the computer industry long enough to know that that is always the case. When trialling big computer systems as I did in my job before I came here we always ran the duplicate system on another machine. If it was not working on the night we switched over we flicked back to the old one. So those are some assurances that members need.Yes there has been a little bit of creep in the budget but that is because we have sought two major modifications two variations on the contract of additional stuff. That is because if you are developing a system over the years that we are taking to develop this big system you know that your requirements when you set out will have changed over time. One of those is to bring us into line with the World Customs Organization WCO Data Model 3 and that was a variation of contract that we negotiated and so on.So let me give Phil Goff and other members of the Committee a little bit of surety here. The vast bulk of the system is working well. The defects are being managed and being identified as to what they are and are being fixed as we go to a point that I think is acceptable. There is a contractual obligation that was well negotiated at the beginning of this process between the suppliers and the Government agencies that contracted to it and people can be held to account for it. And no we are not scaling back expectations—no we are not. For a whole range of the facilities that are yet to come in tranche two we expect that the contract is well written and they will be delivered. There will be as always in any big process like this disputes about the minutiae. But it is not a Novopay. It is most certainly not an INCIS where the thick end of $100 million was delivered and nothing came back. This system is working well. I am happy to give members some names of a number of the cargo operations out there that love it. In fact I have been to dinner with a few of the chief executives and they are screaming about getting more of the tranches delivered quicker because they cannot wait to come into the new world. But I do not believe I need to carry too much of this debate because it is not part of the legislation.The second thing I think members raised was whether we are cutting back on biosecurity at the border. That is most certainly not part of this legislation and I suggest that members take that up with the Minister for Primary Industries by way of question time or the select committee and so on. Nothing about biosecurity staffing and operations at the border is to do with this legislation.STEFFAN BROWNING (Green):It is interesting to hear the Minister in the chair the Minister of Customs say that this is nothing to do with biosecurity and is nothing to do with the issues surrounding IBM and the roll-out of it; this is just the legislation the Border Processing (Trade Single Window and Duties) Bill. The legislation? Fine. We will be supporting the legislation. But what does that mean with biosecurity? What does that mean with the debacle that seems to be happening with the roll-out of it? These things do come into it and I will speak to both of them to some degree.It has been noted that the contract for $75.9 million in 2011 for the first phase is now expected to be over $200 million when subsequent phases are completed. There was a budget blow-out to $90 million in August 2013 for the partial system. There has been hold-up after hold-up as this has been rolled out and it is good that there has been a partial roll-out at least and the people have been able to test it but there is something else going on. The Minister might be able to tell us when we will hear about the level of mistake and error that has gone on to the point that we do effectively seem to have a type of Novopay situation. We know that you looked at it from that point of view to see whether there were many comparatives and it appears that there might be.The core of the system for smarter targeting of people and goods is still not in place. It is still not in place. It has been quite some time and we are not there. One million dollars per month in lost revenue was suggested at one crisis meeting. I do not think you can gloss over it Minister quite the way you do and expect us to just accept it like that. Sure there is no one single cause for delays. This integration with existing systems—there is always going to be some hiccups there and it be more complicated than expected. I think when something like this is being set up when something is being costed out there is normally a contingency level for those sorts of things. Something bigger has gone wrong and I think you need to be upfront and tell us to what degree that is as soon as possible.In terms of the biosecurity part of it this system ideally will enhance detection and risk management around biosecurity. We might be able to show up the likelihood of some biosecurity incursions but we are having them time and time again. I have spent a fair bit of money to check into one of the more recent ones—the theileria Ikeda strain that has come in. It is one of several that have come in with animals. This can be the only way. Either a tick was imported that was infected or a cattle beast was imported that was infected and has come through whatever systems. Another one that I mentioned last time I spoke on this issue here is horse herpes. There is a new aphis in willow and still the great white butterfly—there are tons of things. But not only did this Government let this Ikeda in but it then sat on its hands effectively and mapped Ikeda’s progress. Now even I who have a lot of optimism and understanding of these things and would think that we might be able to get rid of it give up on it too. This Government has allowed something in and to get away that is costing us millions in our dominant primary production and dairy sector. That is just one strain. There have been strains around for a long time but this strain is costing and it is costing dearly. One farmer said he lost over $80000 from the disease—a disease that is present in over 400 farms and they expect it to double by the end of the year.So is this system going to stop biosecurity incursions coming in? It is absolutely appalling what seems to be the case time and time again with the theileria which has moved through the country where we have had other systems. Novopay has crapped out. This system appears to be ineffective. We have had—Hon PHIL GOFF (Labour—Mt Roskill):I would like to go back to the questions that I asked the Minister in the chair the Minister of Customs because although I appreciate that he attempted to address some of them I think his answers have left more questions than I began with.The Minister said that the IT is sort of off to one side with regard to this legislation but that is not strictly true. This legislation the Border Processing (Trade Single Window and Duties) Bill implements the Trade Single Window. The success of the Trade Single Window depends on the IT system that operates it. So if the IT system is not working then we are legislating to implement something that is not going to succeed for New Zealand and may cost us.There are a lot of things out of what the Minister said that I think we need to ask more questions about. Minister you talked about contractual obligations and the implication of your comment about contractual obligations was that the party that we were contracting to has not met them. In fact you said that people can be held to account. I want to know the extent to which that party—I presume the Minister is talking about IBM—has not met the contractual obligations on it. The Minister said that yes there had been a little bit of creep in the budget. That is not an accounting term that I am aware of—“a little bit of creep”. Would the Minister quantify for us the cost that this system has gone up by and say whether further increases in costs are expected that were not anticipated at the beginning.Minister you also said that there are elements that did not quite work to start with. I would really like to know what those elements are. Are we talking about elements that are fundamental to the system? I know that the advantage we have in this instance is that the CusMod system was designed to keep going for 6 months—I think it was 6 months—as a parallel system in case it broke down and to that extent we are different from Novopay. It must be close to 6 months if not over 6 months since we implemented tranche one and therefore we should be talking about phasing out CusMod. Can the Minister tell us whether we are actually phasing it out or whether the problems are such that we are going to have to keep on implementing that dual system.The Minister also mentioned that there were two variations in the contract that were causing problems. Can you be more specific. What are those variations to the contract? Why are they needed? What is it costing the New Zealand taxpayer to have those variations? And in what respects is the system not delivering? Excuse my cynicism. Early on I started asking questions about INCIS. No not the thing that the ACT Party is crusading on but INCIS the police IT system. It has got nothing to do with the family. I started off asking questions about INCIS and the Minister of Police at the time gave me the very answers that I am hearing now. “No it is a small problem—minor. We’re going to just spend a bit more money do a bit more. We’re going to require IBM to do this.” The problem did not get resolved. It got bigger and bigger and bigger.I want to know more specifically what the dimensions of this problem are. I am glad we have had an acknowledgment from you Minister that there is a problem with the IT system. I have seen no press statements from the Government saying that there is a problem with the system. So I want to know if there are problems with the system why the Government has not been more up front about it because we are talking about taxpayer money. But for the fact that people in the Customs Service have talked to various people in the Opposition and said “Oh this is bad. This is not working the way it should.” we would not have had that information. That is not the way to explain that there is a problem. If there is a problem be up front honest and transparent about it. Tell us what the dimensions of that problem are. Tell us what the causes of that problem are. Tell us the extent to which you have been able to remedy that problem and the extent to which that problem is ongoing.They are all critical elements to our support for the introduction of this system which is meant to do a better job than before. If the IT system fails we will be back to where we were and we will have expended a lot of money. So let us be a little bit more specific than “a little bit of creep in the budget”. What has been the creep in the budget? What are the anticipated additional costs? Will IBM meet the contractual obligations on it? What is the Government intending to do if we do not do that?Hon MAURICE WILLIAMSON (Minister of Customs):I want to try to get this resolved because this is not the forum for the detailed questions about the contractual obligations. There will be select committee hearings on this which I am sure those members will want to have me at to ask me specific questions. This legislation the Border Processing (Trade Single Window and Duties) Bill does not include the contractual obligations for delivery.Let me just say to Mr Goff the previous speaker a couple of things. The original budget when first envisaged was around $76 million. The current expenditure looks to be around about $89 million. That is because of two quite significant changes in the requirements that we requested as part of the process. That is what I meant by “some creep”—some scope creep because over the years some new technologies like the World Customs Organization Data Model 3 come into play. I just want to repeat to the member that I have not said the system is in trouble. I have not said that there are problems with it other than those technicalities you get whenever you implement a brand new computer system including data problems and defects that need to be looked at and what is going on. All of those are being managed well.I repeat again: it is not like INCIS which never got started so do not start doing a comparison with INCIS. It never got started.Dr David Clark: Novopay—more like Novopay?Hon MAURICE WILLIAMSON: No it is not like Novopay at all because they pulled the pin on the dual service while it was not working. This is working fine and for me the real test out there is whether the users of the system are happy with it. If the member can—instead of going through some sneaky little gorse bush and saying he knows somebody in the Customs Service who reckons there are troubles—show me one company out there that has currently been migrated on to it that does not like it that is the real test. I mean if you take Novopay I can show you lots of teachers in my electorate who do not like what is going on. Show me one company that has migrated on to it that does not like what is currently operational. That is the test. Oh there is a lot of silence now—a lot of silence now. I would look forward to learning that company’s name.I am not even going to address the issues of the Green member Steffan Browning. I do not know what planet he is on but I did not even understand half of what he was talking about. If you think that some—what was it? “Tee-cha-lee-dee”? I do not know what it was but it was some tick on a horse that was called “tee-cha-lee-dee” and somehow that was my fault. I am sorry but different planet could not understand need to get an interpreter.Dr DAVID CLARK (Labour—Dunedin North):Thank you for this opportunity to speak. Labour supports the Border Processing (Trade Single Window and Duties) Bill. We should say there are plenty of reasons that we would want to support it. The general principle of supporting the Customs Service and other border agencies on the front line is something that is hard to disagree with.I want to pick up some of the points Mr Williamson raised and also Mr Goff before him. I too have had people express concerns to me about the customs system and its adaptability. I guess the test will come in the next days because this work is supposed to become available in early April. According to the regulatory impact statement here the 15-year-old system for customs and biosecurity has a process that is under way in terms of repairing things. If I can read it for the Minister in the chair the Minister of Customs “The [Joint Border Management System] has been approved to address these issues and will be delivered in two tranches.” as agreed in November 2009. Tranche one “is planned to be available by 1 April 2013”—ah this is a year ago as I read it more closely—“after pilot-testing.” So these things are supposed to already be in place. There has obviously been a bit of slippage since this regulatory impact statement was issued. So an update on time lines from the Minister would be appreciated because we are told that this legislation is enacting it but we are told in the regulatory impact statement that it was to have been implemented already. There are in there some references if the Minister refers back to some of the challenges that are being faced by those border agencies and the cost of upgrading the system. So I would welcome any further comment from the Minister on that.We know that there is under this Government this track record of IT systems that have not worked. We have seen the ACC privacy breaches. The Minister himself referred to Novopay. In the Inland Revenue Department—the agency with which I am most familiar—we have had $50 million spent in the last year on international consultants to get to an in principle agreement that there is a problem. It is the same problem that this Government was informed about when it took office 5 years ago. The department has known for years that it has been a problem. Why it needed to spend $50 million on international consultants to tell it that there was a problem and that it needed to spend some more money on consultants to develop some business cases to show how the problem should be addressed is beyond those of us on this side of the Chamber.IT systems are bugging this Government. This Government does have a track record with these kinds of privacy breaches. They are in the Inland Revenue Department as well. There have been stories each year about the number of privacy breaches. In fact the number of privacy breaches in the Inland Revenue Department has gone up nearly 400 percent in the last year. So to say there is not a concern here about technology beggars belief when Mr Goff has sources. I have also had the same concerns raised with me Mr Goff. I am more inclined to accept your view of events on these things than a member opposite representing a Government that has an appalling track record with the implementation of IT systems. So perhaps Mr Williamson can update us on the time line and the addressing of these issues because that will be of concern to New Zealanders who are worried about our borders.The cuts in biosecurity monitoring clearance and so on are putting our borders at risk. Other speakers have referred to some of the things that have happened as a consequence. Sophisticated computer software will enable border agencies to identify relationships between people and goods by linking travel and trade data and so on. We approve of the principle of it; it really is the implementation that is the thing in question and the time frames around that. But I guess the proof will be in the pudding.RINO TIRIKATENE (Labour—Te Tai Tonga):I know we have been at cross purposes with the Minister of Customs in relation to his reluctance to expand on contractual matters in relation to IBM but I think it is very clear that this legislation the Border Processing (Trade Single Window and Duties) Bill underpins the implementation of the Trade Single Window. If we look at clause 16 which replaces Part 11 of the principal Act it does talk about the Joint Border Management System being a computer system. That is defined in the Act as “designed” so it is a designed system that enables entities to transmit information and receive information through systems such as the Trade Single Window. Actually central to the bill I think is the fact that the system has been designed for and is the actual heart of the Joint Border Management System. It is absolutely on point for us on this side of the Chamber to be asking the Minister to provide a bit more information as to the contractual arrangements and the implementation of the Trade Single Window.If we look at the list of consultants who have been involved in this project it is the single biggest project that the Customs Service has undertaken for the past 3 years at least; 85-plus percent of all its consultants have been used on the system and some $40 million has been paid out to IBM to build this system let alone the literally numerous contractors who are invoicing eye-watering amounts amounting to tens of millions of dollars over the past couple of years to build this system. The Minister says there is a little more testing to be undertaken and we can understand that a computer system of this complexity and of this size covering multiple Government departments and different users is a big project—no doubt about that. But I believe that is why we need to have the confidence that this system is robust that it is actually performing to standards that the contractors are not just stringing the project out and that there is actually a tight governance of the project. I know that the Customs Service has been quite meticulous in terms of its governance its executive and involving senior management on the oversight of this project so it is perfectly on point for us to be asking the Minister these questions around the contractual arrangements which do underpin the actual legislation that we are discussing here in the Committee at the moment.I would like to also add something new to the debate to talk about another matter and I would welcome some input from the Minister. It is in relation to clause 15 and the de minimis thresholds. I know that the ability is being put in to the bill for regulations to I guess set whatever the threshold will be under which no duty will be collected. I know that for the Foreign Affairs Defence and Trade Committee—and I am not a member of the committee but I was fortunate enough to sit in on a couple of meetings and we did the field trip to the Customs Service offices to see the working demonstration—the de minimis threshold was an issue of great concern to everyone. We know that the New Zealand Retailers Association is advocating very strongly that there is unfairness in terms of collection. I am talking about the GST component but it all fits around online purchases and crossing of goods over the border which is a big issue.We all purchase goods online I would imagine. Online purchases are so pervasive these days and the use of the internet and the growth of online purchases are just going to get bigger and bigger. We know there is an issue around the de minimis threshold in terms of not only maybe forgone duty that could be collected but also lost GST that could also be collected and put into the Government coffers. The issue really is that according to the New Zealand Retailers Association there is unfairness towards the New Zealand retail sector. We know that it is struggling and that people are using online purchases practically daily but there seems to be a simple solution.I do a bit of purchasing online myself. Yes I am old-fashioned; I still get just CDs. I am not into digital music; I like the tactile CD. Unfortunately there are no more record stores so I cannot actually find what I want. The only way I can get it is overseas. As you click through to make any purchase these days you go through the PayPal sites or you go through using your credit card companies. It would be very simple I would imagine. It would be just an automatic little calculation that they would probably be able to do pretty easily it would seem to just add a GST component on that or automatically add an assessed duty amount. There are no qualms about it—if you really want the product you just click on that extra amount. It is all there in black and white it is all laid out for you and bingo there you go the GST is paid and duty collected. So I would just like to invite the Minister in the chair Maurice Williamson to shed some light on that for us because I know that under the bill there is provision for the de minimis amount to be set at any level.We know from the Retailers Association that in other countries such as Canada I believe and the UK—I may be wrong—the thresholds are very low. They are very low and are set around $27 equivalent to an online purchase. It would be good if the Minister could shed some light on that. We understand that there are some 50 million mail pieces that come across the conveyor belt every year. I can just see those little beagles—that was just for my colleague Ms Darien Fenton; she wanted me to mention the beagles—as they do their best on the conveyor belt to try to sniff out all the illicit materials or whatever they sniff for. A significant bulk of those 50 million items would be purchases under the de minimis or $400 amount. That is duty and GST as well that could be collected on some of those items and it just seems that it could be just a click away and a way of making it a bit more of a level playing field for the struggling retailers out there. So I just invite the Minister to shed a bit of light on that. Kia ora.Hon MAURICE WILLIAMSON (Minister of Customs):Again I am going to try to be very brief and cover a couple of issues that the member Rino Tirikatene just raised about GST. But first of all I will just go back and say to members that I think I have answered as fully as I am prepared to as part of the details of this legislation the Border Processing (Trade Single Window and Duties) Bill about the implementation of the Joint Border Management System. I am actually pleased with where it has got to so far I am pleased with the defects management I am pleased with the functionality we have got now.I know that we have slipped by a month or 2 months in the implementation of a couple of modules but in a project of this size that is something that is absolutely standard. Name any of the biggest commercial companies out there in the world that implement computer systems of this magnitude that do not see that happen. So this is not nuclear meltdown and this is not the end of the world. We are actually getting a damn good system to the users out there. But we have some shadowy name in a bush—and we cannot even get from the Opposition who it is—saying “I’ve heard that …”. I do not know whether the Opposition has got some Government Communications Security Bureau implant or something out there but I actually say that I do not respond to “I’ve heard from someone that….”. I am actually quite pleased with it.I will now talk about the GST issue and the threshold. This is probably going to be one of the most taxing issues—and I use those words guardedly—that this Parliament and this nation will always have to deal with. It is not as simple as the member makes out—that you just go to your form when you are buying goods and you click it. First of all you are buying from overseas websites. They are not going to have New Zealand GST if you are buying from Amazon for example. They are not going to say: “Oh you’re a New Zealander.”Dr David Clark: Why not?Hon MAURICE WILLIAMSON: Well because I do not think that international websites will give a damn about what New Zealanders are buying or not with regard to this. Secondly sometimes people’s credit cards are used while they are overseas so you cannot actually put the charge on to the credit card. If you happen to be in London and buy something and then get back to New Zealand you do not want to see that there is GST on it because you were actually there as opposed to buying it online.I am not saying to this Committee that there are not answers. What I am saying to the Committee is that they are very complicated issues that are going to tax us for some time with regard to the digital economy and the whole way in which people pay for things as bitcoin and its equivalents start to become the way of the future. All that this legislation is doing is allowing the Government to set whatever that de minimis threshold may be into the future. I can tell the member that there is a long way to go before there are any decisions about what that regime may look like—or if it is possible at all. I will repeat that: if it is possible at all because you may actually set up an account overseas with an offshore bank transfer your money into that account and then buy off that credit card and still not have any transactions out of a New Zealand bank account showing it.So I warn all members who think that this is simple. I know that the Minister of Revenue and the Minister of Finance would love to clip that GST ticket simplistically but the reason for the de minimis threshold is to say to ordinary New Zealanders that if they are bringing in something of a modest sum we do not want them to have to go out to DHL at the airport and pay $3.50 GST and $4.60 customs duty. So the reason for having that de minimis amount is to say that if it is below a certain amount we will let you off it altogether. All this legislation is doing—which is what we really should be concentrating on—is allowing those systems to set those targets in the future.DAVID SHEARER (Labour—Mt Albert):I just want to start off by saying that I appreciate the Minister of Customs answering the questions that we have raised on the Joint Border Management System and particularly on the IT component because as my colleagues have said the IT component is actually at the guts of what we are trying to talk about here in relation to the Border Processing (Trade Single Window and Duties) Bill. So if we do not talk about the IT component there is no other component in large effect. So I appreciate the Minister making an attempt to answer those questions but I do take real exception to his accusing us of being sneaky. I say that for two reasons. One is that I did not get this information from anybody within the New Zealand Customs Service; I got it out there in the wider IT industry where it is well known—Hon Maurice Williamson: Name them.DAVID SHEARER: —well I am not going to come on—that there are serious problems with this IT system. It is well known there that there are serious problems with this IT system. That is the first thing.The second thing is that we have just heard today—just here in this Chamber today—that there has been a 17 percent increase in the budget for this system. I have put it in written questions to you Minister. We have asked during the expenditure session of the select committee and not once did we get any information that there was going to be a 17 percent increase in the budget for the Trade Single Window system which you have been talking about. There was absolutely nothing. So do not come to us with this sneaky stuff. It is our job as the Opposition to understand what is going on.My question is whether—and it comes out in the questions that have not been answered today in the Chamber—there are going to be further delays from IBM into the future. What else is not going to happen as a result of the dispute that I understand is happening between IBM and the New Zealand Customs Service? Are further tranches going to be delayed? Are the expectations for this system going to be reduced as a result of the fact that IBM is not going to be able to meet that without extra cost and what other extra costs in addition to what has already been expended are going to be required? What you told us about Minister is what was needed in order to get the Trade Single Window through its legislative stages. That is only one part of the entire roll-out of the entire IT system within the Customs Service.I congratulate you on not closing down CusMod before the IT system has been established. But that is something that in a sense any brain-dead person frankly would be able to work out after the eventuality of Novopay. They closed down Datacom and then threw it over to Novopay and Novopay fell on its face.Keeping CusMod in place is fine but CusMod was always meant to be retired some time ago. It was meant to be retired. In fact what we have got now is a system that was started 2 years ago and is now 17 percent more expensive in just the area of the Trade Single Window. What we are looking at now is as I understand it a great deal more than that in order to be able to implement the system that was initially foreseen at the beginning of this project. What I want to know is whether there are any variations on the contract that was begun 2 years ago whether there are any changes in the parameters of what success might be—not just for the Trade Single Window but beyond that—whether there are any other little bits of creep that might be coming into the project and what additional costs beyond the Trade Single Window there are likely to be in order to roll out the system.I am afraid that what I am hearing both from obviously my colleagues but well beyond them is that there is a serious problem looming. It has been pushed under the carpet swept under the carpet so that it will not emerge before an election but we know how the public feels and how taxpayers feel about their money their taxes being wasted on IT systems that fall over. We might want to get all the bells and whistles and everything that we need to get and we all might want it to succeed perfectly well and it is obviously in all our own interests but this smells like there is something wrong. The Minister’s answers to questions and his selective answers to questions about one component of a much bigger system do not leave me with a great deal of confidence about the future of it.Hon PHIL GOFF (Labour—Mt Roskill):The Committee has discovered two things tonight. Firstly it has discovered that there has been a budget blowout from $76 million to $89 million. That is a 17 percent increase. I would like the Minister in the chair the Minister of Customs to tell the Committee whether he thinks that is the end of the cost increase. Is he prepared to guarantee to the Committee that this budget will not keep blowing out? It is a 17 percent increase Minister. When did you find out about that increase and why has it been only tonight that we have been able to extract that information from you?Hon Maurice Williamson: It’s been answered at the select committee.Hon PHIL GOFF: I was at the select committee. There was no talk there about an increase in the budget. There was no talk there about any problems. There was no talk there about the process having been delayed as you said a moment ago by a further 2 months. Why did it require us to extract this information now from you when in anybody’s terms a 17 percent blowout in the budget is significant? It is not minor.I want to pick up another point that the Minister made. He said that there were two significant changes in requirements that led to this. Actually I have a little bit of institutional memory Minister. I remember exactly those words being used in regard to INCIS. Why did INCIS costs go up and balloon and blow out and why did INCIS then fail? It was because the Government kept requiring of the system new things that it added on to the original requirements. And now you have come into the Chamber and said to us as I understand it—but correct me if I am wrong—that the Government has made two new significant requirements of the computer system which it did not require in the first instance. That is the path to IT failure. That is the path to a ballooning-out in the costs of any project. That is exactly how INCIS began and you are telling us that that is happening now.I do want to take exception to your comments about being sneaky. You know it is not sneaky for people to be up front and honest and tell us that there is a problem with the system—people in industry or people in the Customs Service. I will tell you what is sneaky. Sneaky is a Government that is not up front honest and transparent about the fact that it has got a major problem and you have got to extract the truth out as if you are pulling teeth one at a time in a very painful process—and we still have not got the truth.I want to know what those two significant changes in requirements were. Was that as a result of a failure of the Government to anticipate what was needed or was that a result of the failure of IBM to deliver what it promised? We are told that IBM has to meet its contractual obligations. They are the terms the Minister used. Using those terms implies immediately that IBM is failing to meet its contractual obligations.I think you have an obligation Minister to tell us why IBM is failing to meet its obligations. Look Hansard will show it. I took a note of the words the Minister used and they were: if they do not meet their contractual obligations then they will be able to be held to account. I am paraphrasing perhaps but that is the message that the Minister gave. So I want to know where the problems originated. Did they originate in the inability of the Government to get it right or in the incompetence of the Government or is it the failure of the IBM company to deliver what it promised to deliver? It is a fair enough question. It is pretty fundamental pretty basic and that is one question that the Minister should be able to give an answer to in the Committee tonight.I want to know what elements of the system are not working. The Minister has talked about “defects”—that was his word—in the system. What are those defects? What impact are they having on the ability of the system to deliver? Is it correct that CusMod was due to be retired by now but is still being kept going because the new IT system will not work on its own and cannot be relied on? That is another straightforward question Minister and it is one that the Committee deserves an answer to tonight. What are the defects? How much longer will we keep CusMod going? What is the final cost of the budget blowout going to be? Is the $89 million the full and final cost of this venture or will it go up each time we ask questions about it? Will there be ongoing problems? [Bell rung] Mr Chairman?The CHAIRPERSON (Lindsay Tisch): No the member has had four calls. I am going to call Paul Goldsmith.PAUL GOLDSMITH (National):I move That the question be now put.Dr DAVID CLARK (Labour—Dunedin North):I feel that the questions that Phil Goff has raised must surely need to be addressed by the Minister in the chair the Minister of Customs. Mr Goff has raised some serious issues in pointing out a 17 percent blowout in costs. The Minister has not addressed the question I raised about the regulatory impact statement and the fact that a 15-year-old system that is needing replacement and upgrading appears to be a year behind schedule. The Minister says that it is only a couple of months but the regulatory impact statement—and I am not clear as to when it was released because I cannot see that on the paper—indicates that the whole thing would have been live a year ago. That is not just a few months and if that is not sneaky nothing is. Twelve months is stretching “a few months” a long way.Mr Goff has raised a very serious issue about the blowout in costs and the fact that this was not raised in the Foreign Affairs Defence and Trade Committee. He has raised the issue about add-ons—adding on one part here one part there—and he points out quite rightly that that is how INCIS started. That is how INCIS started. We have seen it in the Inland Revenue Department. I have related the story of the $50 million that was spent last year on international consultants getting to a point where there was in principle agreement to proceed but the thing that I did not cover in my previous contribution was that there was another $23 million spent previously trying to get a student loan add-on off the ground that was cancelled and probably rightly so in that instance. The department realised that it was not going anywhere.But here again we have something that does seem to be on the roll and that does seem to be moving. The word that we are getting back is that it is not working properly and the Minister is trying to talk it down. He is fanning—he is fanning—but he is actually fanning the flames as he tries to blow things out of his way left right and centre. With a 17 percent increase in spending two new requirements sound like a growing problem not one that he is going to put out with a few kind words. I believe that to have any credibility the Minister must address the issue as to why this slippage has happened—this is significant slippage—and why the Government is not holding the contractors to account. If he says that a few months’ slippage is quite understandable I think that that is a pretty lax standard. The kinds of contracts that would be signed that said that a year’s slippage is acceptable would probably not be ones that the taxpayer would regard as sound or in their interests.This is a Government that is responsible for spending taxpayer money on systems that are put in place to serve the taxpayer and yet we hear story after story after story of the ACC spillages of private information. We had Ms Collins of “Ovida”—how do you say it—The CHAIRPERSON (Lindsay Tisch): Order!Hon Member: Oravida.Dr DAVID CLARK: —Oravida fame and you know the leaks out of her office—The CHAIRPERSON (Lindsay Tisch): Order!Dr DAVID CLARK: Well this is to the point Mr Chair—The CHAIRPERSON (Lindsay Tisch): No it is not.Dr DAVID CLARK: —because it is about privacy breaches which comes back to IT systems that are not up to the task which is a repeating issue under this Government and is the precise thing that we are dealing with in this bill. The Inland Revenue Department example is by no means an isolated one. The ACC ones and—The CHAIRPERSON (Lindsay Tisch): Order! Look I have mentioned to the member that this is not in the bill. You must confine your comments to the subject matter of the bill.Dr DAVID CLARK: Well I come back to the bill which talks about implementing a new computer system. That is important to the front-line border security of New Zealand. Novopay might not be the name of it. It might not bear a name like those other ones that I have previously mentioned whose names have become taboo words in this Chamber but it is a system that needs to work for taxpayers to have confidence in the Government’s ability to manage IT projects and the Government’s ability to implement this initiative. We on this side of the Chamber support the principle; we are just concerned that this Government has no track record on delivering it.We are also worried—certainly in the other areas that I dealt with but also here—about the job of the House. It is expensive to pass legislation through this House. All of the officials who sit here are paid reasonable salaries. All of the members of Parliament are paid reasonable salaries to get on and represent the people in the electorates who put them here. But it is not a good use of taxpayer money to have legislation returning to the House to be corrected because it has not been able to implement the things that the Government has sought to put through and that is a pattern again. Certainly in the student loan area which I mentioned earlier that has happened already—The CHAIRPERSON (Lindsay Tisch): Order! That is not part of the bill.Dr DAVID CLARK: —and if that were to happen here with border security it would become something that I think would be unacceptable to taxpayers.JAMI-LEE ROSS (Junior Whip—National):I move That the question be now put.A party votewas called for on the questionThat the question be now put.Ayes63New Zealand National 59; Māori Party 2; ACT New Zealand 1; United Future 1.Noes56New Zealand Labour 34; Green Party 14; New Zealand First 7; Mana 1.Motion agreed to.The result corrected after originally being announced as Ayes 64 Noes 56.Part 2 agreed to.Schedule 1 agreed to.Schedule 2 agreed to.Clause 1 agreed to.Clause 2 agreed to.The Committee divided the bill into the Customs and Excise (Border Processing—Trade Single Window and Duties) Amendment Bill and the Biosecurity (Border Processing—Trade Single Window) Amendment Billpursuant to Supplementary Order Paper 419.Bill to be reported without amendment presently.