Whaitiri MekaCUSTOMS AND EXCISE BILLSecond ReadingHon MEKA WHAITIRI (Minister of Customs): I move That the Customs and Excise Bill be now read a second time.This bill replaces the 1996 Customs and Excise Act which is over 20 years old and in some parts over 50 to 100 years old. The Act is out of step with modern business practices and has been amended many times to deal with changes in trade travel security and technology. This has increased its complexity. This bill carries over most of the provisions from the current Act; however its modern structure and drafting style make it easier to understand and use for both business and the Customs Service. It also aims to support economic growth by making it easier for traders to do business and by enabling businesses and customs to adapt quickly to future changes in technology and business practice.The bill provides transparent legislation that balances the protection of the nation with individual rights. It contributes to national security by enabling greater information-sharing between customs and other Government agencies—the disclosure of information on people and goods crossing the border for national security law enforcement and public health and safety purposes. Greater information disclosure also supports economic development and the implementation of Government policy—like free-trade agreements for example—through the sharing of information on exports or to maintain regulatory regimes by sharing information on imports.This increased availability of information is balanced by the specific protections and the standardisation of the process for information disclosure. Protections include consultation with the Privacy Commissioner.The bill is responding to businesses' requests by making it easier for traders to do business and interact with customs. The value of goods can change after the goods arrive in New Zealand and the current Act doesn't recognise this. The bill will allow traders to declare provisional values for imported goods which will be updated once final values are known. Importers will also be able to seek binding valuation rulings from customs to give them certainty about their duty liability before deciding to import goods.An administrative review process will allow people who are dissatisfied with the decisions of the Chief Executive of the Customs Service in respect of a duty assessment to appeal that decision directly to customs before or instead of making an appeal to the Customs Appeal Authority. This will provide a less formal lower-cost review process for duty assessments and will provide customers with an alternative or early option to resolve disputes.Businesses will be able to take advantage of modern and cost-effective methods of storing business records in the cloud and offshore reflecting today's business practices.Changes to the excise system will provide greater certainty around excise liability and protect Crown revenue. A new collection point for excise on fuel created by blending at tank farms will give greater clarity around when excise is due. The bill also clarifies when goods are subject to the control of customs. The potential risk of tobacco being diverted for elicit supply will be reduced by lowering the personal use allowance from 15 to 5 kilograms per annum and by providing that the curing of tobacco leaf is appropriately regulated as part of the manufacturing process.The bill confirms the majority of customs' existing powers while recognising privacy concerns. It provides greater scope and flexibility to address smuggling and national security. The bill restricts customs' powers to examine and access electronic devices streamlines the process to impose import and export controls and enables controlled deliveries across a wide range of goods to investigate smuggling.Most people who interact with customs comply with the rules. A range of penalties have been updated to be more consistent across imports and exports and compared to other legislation. The unduly punitive additional duty sanction and the grossly inefficient petty offences system will be replaced by a more proportionate compensatory interest and late payment penalty system and an infringement notice scheme.While the committee was overwhelmingly supportive of the bill there were a few matters on which it sought reassurances or further amendment. It has therefore recommended a number of changes to the bill all of which I heartily support. One area of focus for the committee was the proposed information disclosure regime and the committee sought the advice of the Privacy Commissioner. I appreciate the critical gaze that the committee brought to the information disclosure provisions and support its amendments to it. The protections applying to the disclosure of information are strengthened by limiting the grounds for disclosure of sensitive passenger information and by requiring disclosure agreements to be made by Ministers not chief executives and to be published. The bill makes it even clearer that liability for excise arises when goods are manufactured with payment due when they are released from customs' control for home consumption.The committee was supportive of the new provisional valuation mechanisms which in certain circumstances gives importers the ability to provide provisional values at the time of import and to correct them later. To ensure it uses it in appropriate circumstances the committee has amended the bill to require customs to consult the Inland Revenue Department on applications for provisional value relating to transfer pricing arrangements.The bill makes customs legislation more consistent with that of other agencies in respect of prosecuting powers and penalties. Changes made at select committee will further improve consistency. As well as being fairer the new compensatory interest and late payment system will be more consistent with the Inland Revenue Department's approach. Select committee changes also clarify that customs' approach to attempted offences should be in line with the Crimes Act and they align the limitation period for lowest- and highest-level offending with the Criminal Proceeds (Recovery) Act where possible. The limitation period will remain four years for all other offences. In addition the changes made by select committee extend the Search and Surveillance Act regime for protecting privileged information to full searches of electronic devices and they remove some Henry VIII" provisions identified by the Regulations Review Committee. I am pleased that the select committee recognised that customs is working to better support traders and businesses and that the bill is a key but not the only part of that effort. The select committee was positive about customs' intention to establish an advisory service for tax and trade matters to enable excise manufacturers and traders to seek specific advice from customs. This service will be aimed at providing greater certainty about how to meet border requirements. The committee wanted to make the work customs is undertaking to recognise trusted traders more visible. The bill was amended to require customs to report annually on initiatives to reduce compliance costs for highly compliant traders. The Government fully supports the bill as reported back from the select committee. I would like to signal that at the committee of the whole House I will be moving one or more Supplementary Order Papers to update the commencement provisions and make minor and technical drafting changes including to the transitional and savings provisions. I wish to thank the select committee for recognising the benefits the bill can bring for New Zealand and for taking the positive approach to resolving its concerns. I also wish to thank it for reporting back early. My thanks also go to the Privacy Commissioner whose significant involvement in the development of the bill and advice to the select committee enables me to give this House assurance that the bill balances the protection of New Zealand with the protection of personal privacy and I would like to thank the many businesses and industry organisations who submitted on the bill and provided substantial input into its development. Many of the changes made by the bill were recognised by New Zealand businesses as having the potential to lower costs and make it easier to do business. Indeed this close consultation with business has led to an exemplary bill that has widespread support. I am confident that the bill will go a long way towards ensuring that New Zealand operates a world-class efficient and cost-effective border management system. I conclude by noting that the select committee unanimously supported the provisions of the bill as reported back. I hope that this cross-party support will continue and that the bill can progress quickly through the House. I commend the bill to the House."