Salesa JennyCUSTOMS AND EXCISE (TOBACCO) AMENDMENT BILLFirst ReadingHon JENNY SALESA (Minister of Customs): I move That the Customs and Excise (Tobacco) Amendment Bill be now read a first time.The purpose of this bill is to combat tobacco smuggling and to secure Crown revenue collected from excise on tobacco. Governments of all stripes have used excise on tobacco as one tool to tackle the negative health impacts and costs of tobacco consumption on individuals and our society. This is significant at approximately $2 billion in tobacco excise being collected in 2019-2020. But smuggled tobacco is part of an increasing black market to evade excise and current smuggling patterns are undermining the effectiveness of border controls. This bill will combat tobacco smuggling through imposing import controls over tobacco products over tobacco leaf and refuse. It will require anyone importing these goods to hold a permit and will provide for an expedited and cost-efficient seizure and disposal process for tobacco imported illegally without a permit.Tobacco smuggling has become increasingly problematic in Aotearoa New Zealand. Interceptions of smuggled cigarettes at the border have increased by 352 percent between 2015 and 2019. Interceptions in 2018 were 53 percent higher than in 2017. In the last 12 months customs has seized illicit tobacco products representing $10.8 million in excise tax forgone. Customs also suspects that tobacco leaf being imported legitimately through the international mail service being operated by New Zealand Post is later being manufactured illegally in New Zealand without a licence in order to avoid paying excise on tobacco leaf. This has increased from 150 kilograms in 2016 to 5000 kilograms in 2019. Based on these numbers about $5 million in excise and further GST was lost in 2019 alone. Lost revenue not only affects the Government's ability to support and provide services to New Zealanders; it also undermines law and order objectives and effectiveness as well as that of the Government's Smokefree 2025 goal which is aimed at saving lives.Both the smuggling of tobacco products and importation of tobacco leaf have grown rapidly over the last 12 months to 18 months and there is no reason to think that this will not continue. Organised crime is involved often using the same techniques as in illegal drug smuggling. Large amounts of money are being laundered.While some very large shipments of smuggled tobacco have been intercepted in sea cargo tobacco is also being smuggled through multiple postal items. This technique requires a different response the response that this bill contains. The existing border controls and processing system and its legislative framework are not designed for the high volumes of illicit tobacco that are now being seen especially in our international mail centre. Customs does not receive information about international mail in advance of importation so it cannot undertake the risk assessments prior to these goods arriving as it can with goods being imported through other pathways such as courier. It ties up significant staffing resources and forces customs to store consignments it knows will never be able to be claimed and to chase payment from professional smugglers who are never going to pay even if they could be identified.In the middle of a global pandemic when the brave men and women of the New Zealand Customs Service are required at the border to keep New Zealanders safe it is wrong to be diverting precious staffing resources to process illegal cigarettes that will never be claimed. For example 2086 packages of cigarettes were intercepted in the mail stream in two weeks—two weeks—during August 2019. Customs officers were required to spend 90 days of their time to carry out administration to record to legally seize to store and eventually to destroy these goods. This reduces the staffing resources available to locate and seize illegal drugs like meth and other prohibited items hidden in international mail and it significantly delays the passage of legitimate goods through the international mail centre.If customs stops the goods it makes financial sense for the importer to abandon the importation and try again at another time or through another channel. Losing a $2 pack of cigarettes means nothing to many of these importers but wastes the valuable time of our customs officers. This bill will change that. Anyone importing tobacco or tobacco leaf will first need to get a permit. This will provide customs with advanced information to assess the bona fides of importers and to support follow-up revenue. Permits will not be available for imports through the international mail service. Tobacco must be imported using a freight forwarder the fast freight courier system or bulk sea cargo. This aims to shut down the widespread use of international mail to smuggle tobacco and evade excise. Combined with the simplified seizure process this will enable customs to deal much more effectively and efficiently with any tobacco that continues to be posted. Knowing any imports of tobacco products tobacco leaf and tobacco refuse identified in the mail will be seized and destroyed will deter the importation through that route. In the unlikely event though of imported tobacco products and leaf and refuse being seized and destroyed in error—for example when the person had a valid permit to import—the importer will be entitled to compensation for the customs value of the goods.With this bill having highlighted how tobacco imports are undermining the system it is very important to take urgent and swift action so that there is a limited opportunity for it to get worse especially in relation to tobacco leaf. Given the involvement of organised crime money laundering and circumventing the smoke-free controls urgent action is required. This bill is not about making the system harder for compliant importers or legal purchasers of cigarettes.For our people who are smokers—and I do encourage you to seek help to quit—and normally buy your cigarettes from a dairy or service station nothing will change for you. No one buying legitimate products will see any change as the permit system will have no impact on the availability or price of legal tobacco products. Also it is important to note that international passengers bringing tobacco in with them will not be affected as the current passenger duty-free concession is unaffected by this bill.Customs officials have worked hard to ensure established compliant importers will be transferred to the new system with no disruption to their business and for there to be no impact to smokers of legitimate imported product. For established importers there will be no change at all for the next year. Customs will issue them with a multi-use permit lasting for a year or until their manufacturing licence needs to be renewed. For those importers seeking a permit the process will be simple quick and free of charge—I repeat: the permit is free. I am confident that this bill will achieve its objective: deterring smuggling and protecting Crown revenue. A similar system has been introduced in Australia and it is proving to be very successful. I ask Parliament to support this bill. It will come into force on 1 July and it will deter tobacco smuggling without imposing undue and unfair costs on our legitimate importers. I am pleased to commend this bill to the House. Thank you Mr Speaker.