Customs and Excise Amendment Bill (No 2) — In Committee 
Text is incorporated into the Bound Volume 
Customs and Excise Amendment Bill (No 2) — In Committee 
[Sitting date: 27 February 2007. Volume:637;Page:7709. Text is incorporated into the Bound Volume.] 
Customs and Excise Amendment Bill (No 2) 
In Committee 
Part 1 Main amendments to principal Act 
SHANE ARDERN (National—Taranaki-King Country) 
: 
 I rise on behalf of the National Party to support the Customs and Excise Amendment Bill (No 2) in the Committee stage. Basically the National Party is in full agreement with the proposal put forward in this legislation. The purpose of the bill is to strengthen New Zealand’s border security by clarifying the Customs Service border-management role and improving its ability to work cooperatively with other agencies at our border. The bill amends the Customs and Excise Act 1996 to ensure that individuals and items arriving in or departing from New Zealand are unable to slip through border processes without proper scrutiny. 
I do so with some reservations. The reservations are in the area of whether this Government—a Labour Government that is I have to say typical of most socialist Governments around the world—has missed an opportunity. 
Tonight in the Committee stage I particularly want to highlight new section 175C “Seizure and detention of goods suspected to be certain risk goods or evidence of commission of certain offences” inserted by clause 15. It states: “(1) A Customs officer may seize and detain goods or documents that are presented or located in the course of exercising any power of inspection search or examination under this Act if he or she has cause to suspect on reasonable grounds that the goods—(a) are risk goods (within the meaning of the Biosecurity Act 1993) for which no biosecurity clearance has been given under that Act;”. It is that point that I think this Government could have taken full advantage of but once again it has failed to do so. 
There is a lot of anecdotal evidence. People regularly come to me as an Opposition spokesman from within these organisations and state that there is a massive advance in technology around the world particularly—but not just—in the US as a result of attempts to not only stop drug trafficking but also eliminate terrorist acts. The opportunity provided by that technology is being missed. There are pieces of equipment that have the ability to detect biomass down to the size of a matchstick. The reason why New Zealand does not have that is not because of cost and not because the equipment is expensive but because we do not have the personnel to then inspect that biomass once it has been detected. Given that we have had 229 new biosecurity incursions in the last 5 years clearly there is an opportunity here for more synergy between the Customs Service and Biosecurity New Zealand in that regard. 
In the second reading of this bill the very honourable member Dianne Yates—who is sitting in the House tonight and I welcome her back here—said that there were no extra taxes in this bill and that I should read it. Well when I made the comments that triggered her response I had. If the member believes that that is the case I suspect that she has not seen in the index of rates and excise duty on alcohol and tobacco the ability now to inflation-proof that tax based on the consumer price index adjustment every year and that she has not seen the provision which I think was very good work on the part of the Foreign Affairs Defence and Trade Committee where the increase in taxation has been harmonised with the excise duty. 
I say to the member that she should go back to some of her constituents—good Labour-voting people who enjoy having the odd tipple or the odd dram here and there or the odd wee drink—and ask them whether they think that is fair. I bet they do not know that tonight we are passing legislation without any reference back to Parliament that will automatically increase the tax on the little bit of enjoyment left in their lives. So I ask her to look at that. 
I also bring to the Committee’s attention the ability under this legislation to increase surveillance in the area of importation of drugs or of the components that make up methamphetamine and other such P drugs which have become almost an epidemic in this country. The increase in that area has been my notes tell me sixteenfold in recent times and that is an indictment also on this Government. 
KEITH LOCKE (Green) 
: 
 On behalf of the Green Party I will deal with a different provision in the bill. It is to do with the export of strategic goods—goods that could be used for a military purpose. It is good that the bill elaborates further on these exports compared with the previous legislation because we do not want to be in the business of exporting components of nuclear weapons biological or chemical weapons or weaponry that may be used by people who in terms of the Ministry of Foreign Affairs and Trade’s criteria are in violation of international humanitarian law or who may use the arms to contribute to regional conflict. That is another aspect of the regulations that are separate from this bill. 
This bill lays down a set of criteria that exporters have to go through. There are huge volumes on bits and pieces of equipment that one is not allowed to export. As I indicated one has to take into account the country that something is going to as well as the nature of the export. There has been quite a debate over the export by Rakon of oscillators that could be nuclear-hardened or shock-hardened specifically for military purposes. That activity was funded by Rockwell Collins which is a military corporation. 
That debate took place about a year ago but even before that there was another good illustration. Oscmar International based in Auckland was producing a particular harness called the Manworn Laser Detection Harness. The firm was exporting that around the world. One of its contracts was with the Israeli Defence Force. In answer to a written question from myself to the then Minister of Foreign Affairs and Trade it was admitted that the ministry turned down the export licence for Oscmar International to export the harness to Israel. It was turned down in March 2004 and the declining of the application was confirmed in June 2004. 
Where this bill is a bit relevant to that is that it appears from reports that once the application was turned down and the company could not export the laser harness itself it then through computer technology emails and putting things on disks and whatnot transferred that technology to San Diego and Mexico where other affiliates of the company existed. I presume that the harness was then done up and exported from there to Israel because as everyone knows America is the main supplier of military weaponry to Israel. This bill refers a lot to electronic goods as well so under this bill it would be an offence for Oscmar to do that. So the bill is helping in that respect. 
There is another problem in this export area. It has come up also in the discussions the Green Party has had led by our co-leader Russel Norman on whether the Superannuation Fund should be put into firms that produce cluster bombs or bits of nuclear weapons. One reply when we brought that up was that big companies like Boeing produce all types of equipment some for civilian purposes some for military purposes and that we should not knock them for doing the military stuff. 
I think that that was part of the debate over Rakon too. Rakon was saying that it was producing oscillators for civilian purposes as well but the counter-argument which I think would be covered by this bill was that the oscillators were being specifically produced to military specifications—and Rakon was producing equipment to military specifications and being funded in the tens of thousands of dollars to do so by Rockwell Collins. Hopefully the bill covers that situation and the export would be prevented. 
There is also another question that is always very debatable when we talk about the destination of equipment and that is whether the country concerned is violating international humanitarian law in terms of what the Government calls the criteria for assessment of export applications. I would say—and it relates to the debate we have been having over the last day in Parliament—that the United States is violating international humanitarian law and that we should be very cautious about what military equipment we export to it. 
TIM GROSER (National) 
: 
 I will take a brief call on Part 1 and essentially address the same issue that Mr Locke has just addressed. It is a fairly technical point of course but it relates to an issue of great concern on the part of all political parties I am sure in this Parliament and in most countries in the world. That is the issue of the misuse of dual-use technology for weapons of mass destruction or for military purposes that probably no New Zealander would want to see associated with us. We have had prohibited export regimes for a number of years and I think the Foreign Affairs Defence and Trade Committee in looking at this bill was trying just to fine-tune that regime in line with modern realities. 
Various international agreements are in place: the Wassenaar arrangement covers conventional arms and duel-use technology there are the Nuclear Suppliers Group and the Missile Technology Control Regime and no doubt there are several others that I cannot think of off the top of my head at this point. So there is a fairly elaborated international regime. The fact that we are very small I do not think obviates the need for New Zealand to play its part in that because quite assuredly although probably no companies in this country are capable of producing the finished article there are certainly companies in our country that whether or not they intend it produce the componentry of commodities used in the production of these devices. 
We have had as the centrepiece of this for a number of years the Strategic Goods List. We have had procedures that have worked tolerably well I suppose up until now but that obviously need to be updated in the light of current requirements. The standard procedure if I understand it correctly is that these goods are prohibited unless otherwise permitted. So it is a “prohibition with exceptions” approach to ensure that people with legitimate trading interests as often will be the case with dual-use technology exports are not prevented from building up their own export industries and providing jobs and employment for New Zealanders. 
The general feeling in the select committee hearings was that the procedures lacked a certain flexibility. The select committee looked at the proposals and came to a consensus I think that made some sense for us. Obviously this is a shifting target. What is deemed to be an undesirable good today can change very rapidly tomorrow. To bring it down to the retail level for example we have seen that in respect of the types of devices that people can bring on to aircraft. So this has to be a procedure that is flexible that takes account of modern intelligence and that can respond very quickly to a change in international circumstances. As a previous speaker pointed out the criteria are generally the end use the destination and the taking into account of all these factors rather than technical characteristics of the good per se. Obviously a certain subjective element must inevitably come into this but I think the legislation before the Committee is a reasonable compromise in trying to balance the needs of legitimate exporters with the very important broader political and strategic objectives for which this legislation is designed. 
Some of the submitters were concerned quite reasonably about the transparency of the rules and about ensuring that exporters of dual-use technology were not caught out. What we have here in terms of an Order in Council gives the authorities—in this case it will be exercised formally by the Governor-General acting on the recommendation of the Secretary of Foreign Affairs and Trade—a sensible and efficient way through this. The prohibition will of course come into effect when the determination is made by the authorities but we have concentrated on some improved notification procedures to ensure that legitimate exporters are aware of the arrangements and that their interests can be accommodated. 
To sum up I have focused on one aspect of Part 1. It is a very technical point but it has become of increasing concern to the international community in which we try to play our part. I think we have arrived at a fair and balanced solution. 
JOHN HAYES (National—Wairarapa) 
: 
 I rise to support this bill because it will provide more effective and integrated border management for our country. In rising I commend the head of the Customs Service Martyn Dunne for his leadership in this exercise and generally for the outstanding results he delivers from his department. It is a particularly important department and it has direct relevance to the people in my electorate in the Wairarapa. 
The work of the department impacts on trade flows and the movement of people. Having been associated with issues around the illegal movement of people I would just like to comment on a couple of elements of the bill. One of the changes introduced through the bill will require that people arriving in or departing from New Zealand are not allowed to use any sort of electronic communication equipment in a customs area. That means that people will not be able to get on the phone or use computers BlackBerries or other things to coordinate excuses for activities that customs people might want to ask about. 
The other issue is that under this bill people will now be able to be detained by customs officers for up to 4 hours when either departing from or arriving in New Zealand. That is particularly important. People may come in and the person at the border may say: “I think you have got an infectious disease.” and that provision gives time for a doctor to be brought in to check people out. It also gives the border control people an opportunity to check police records to determine whether warrants are out on a person who is at the border. It also enables checks to be made on whether people have been endangering or threatening to endanger the life health or safety of a person or group of persons. We can think about the relevance of this when we think of some French travellers who may have been detained for rather longer at our border in relation to the  
Rainbow Warrior 
 affair. Giving this extra power to customs officers is I think a very good lesson that has come from that process. 
Just to comment quickly on other elements of this new bill I think it is really important that we have clarified the opportunity for the Customs Service to interdict vessels that are between 12 and 24 miles offshore. At the moment the law is unclear. I think it is particularly important that we do clarify that. If a boatload of illegal immigrants is coming into this country the further from our border we can deal with them the better. I wholly support that provision being included under section 32C inserted by clause 6. 
Search warrants may now be exercised by a customs officer to immediately detain and search a person for dangerous items. That is particularly important in cases where people have things hidden from view. I also think it is important too for the Customs Service to be able to retain or seize unlawful travel documents and goods. People test our borders every day and it is in the interests of the whole community that we keep people under decent control and at a distance—so that in the case of some people we can recover documents that may have been flushed down toilets on aeroplanes when people arrive at our border and demand to be treated as refugees. 
I come back to another issue. The department is engaged in the collection of a tax which is a quite normal thing on the part of a Labour Government. In this case it is an excise tax. Although I personally would like us to be rid of this arrangement which handicaps people like winegrowers in my electorate it is inevitable that we at least have to do the best we can by the department. From the point of view of this bill we are now going to shift the collection date from March to July. That means the Customs Service has a bit more time to get its paperwork in place. When this tax is levied on hard-working people in this country it is levied automatically on the basis of inflation-rate adjustments so we are giving the department more time to process cost of living orders and exchange rates in relation to the excise tax that is collected upfront from our winegrowers. I think that is a useful development even if we are unable to get rid of the tax completely. 
I now come back to the issue of export regulations which my colleague Mr Locke has raised this evening. A balance has to be drawn. Mr Locke’s comments take me back to a period when I recall having to write to one Maire Leadbetter on behalf of our Ministers. She assailed the Government and wound up its process over many years trying to prohibit the export of a New Zealand - made product called the Mere Mortar Calculator. This was an entire exercise in trying to be obstructive from the point of view of a company earning foreign exchange. More important the calculator enabled one to lob a mortar shell far more precisely than by any other mechanism. If one was trying to protect human life in a difficult situation one could use the Mere Mortar Calculator to target buildings or other pieces of capital infrastructure and avoid hitting populations indiscriminately. I personally felt that this was a very good product that needed to be protected and I can assure Mr Locke that the product was marketed and that New Zealand earned foreign exchange as a result of it. 
Finally I confirm that National fully supports this bill. I think that the Customs Service amongst most of those agencies that report to the Foreign Affairs Defence and Trade Committee gives better value per dollar of taxpayer money spent than any of the other agencies with which we engage. It is a $100 million department; it sticks within its budget; it does not ask for outrageous increases; and it is constantly innovative. It works very closely with the World Customs Organization which has 169 or 170 members. The department is really well led good legislation is promoted and it is a pleasure to deal with. I reiterate our support on that basis. 
The question was put that the amendments set out on Supplementary Order Paper 90 in the name of the Hon Nanaia Mahuta to Part 1 be agreed to. 
Amendments agreed to. 
Part 1 as amended agreed to. 
Part 2 agreed to.  
Clause 1 agreed to.  
Clause 2 agreed to.  
Clause 3 agreed to.  
Bill to be reported with amendment presently. 
House resumed. 
The Chairperson reported the Injury Prevention Rehabilitation and Compensation Amendment Bill with amendment and the Customs and Excise Amendment Bill (No 2) with amendment. 
Report adopted.