Customs and Excise Amendment Bill (No 3)

Hon RICK BARKER (Minister of Internal Affairs) Link to this

I move, That the Customs and Excise Amendment Bill (No 3) be now read a second time. This bill was introduced into Parliament in December 2007, and it has three purposes: to reform the statutory appeal review rights and the forfeiture and seizure regime in the Customs and Excise Act, to provide greater flexibility for the Customs Service to deal with ad hoc arrivals and departures of craft, and to give the service better control over illegal tobacco manufacturing operations.

The matter of appeal rights arose as a result of a Law Commission report on the forfeiture regime in the Customs and Excise Act. The Government has agreed to reform the appeal rights available, to allow the owners of goods that have been seized the right to be able to reclaim the goods in a much less complicated way. The Law Commission concluded that it should be possible to challenge the seizure, by an initial internal review process, which would involve little or no expense to the challenger and should be accomplished without delay. To give effect to this, the appeal rights in the Act are being repealed by this bill, and are being replaced with a Customs Service internal review process. Applicants who are dissatisfied with decisions resulting from an internal review will be able to appeal those decisions to the Customs Appeal Authority.

In relation to ad hoc arrivals and departures, I tell the House that all arriving craft and those departing New Zealand are required to do so at a nominated customs place. There is currently very limited power to make exceptions, and this bill will allow that flexibility to be there. On the matter of tobacco, I can say that in a recent case the court determined that the amount of tobacco a person could hold for personal use was quite substantial. The argument at the select committee was whether this new determination should be done through statute or by delegated legislation. The select committee gave this matter careful consideration, and the Minister of Customs also discussed the matter with the Law Commission. The happy result was the acceptance of the recommendation of the majority of the committee, that the personal use exemption should be moved from delegated legislation into primary legislation, and clause 6A gives effect to this decision. On behalf of the Minister of Customs, I commend the bill to the House.

SHANE ARDERN (National—Taranaki-King Country) Link to this

Madam Assistant Speaker, given your opening comments at the beginning of Parliament today that you wanted both humorous and erudite speeches, I respect your call! I start off by saying that the National Party supports this Customs and Excise Amendment Bill (No 3), for a range of reasons that I am sure will be covered in the speeches following. First of all, as the Minister just said, the bill does three things. Forfeiture and seizure regulations will be amended, as per the recommendations by the Law Commission and others, and there will be an ability to appeal to the High Court, and to the appeal authority within the Customs Service if something is seen to be less than acceptable by someone who may be before that authority.

The second thing, which I guess is probably the most important, but which I am sure will not get the most debate, is the ad hoc arrivals and departures. I think most people accept that something needed to be done in this regard, because the Customs Service was left in a bit of a legislative vacuum with regard to the situation prior to the proposal today. Obviously, with increasing air travel, large airliners, and sometimes an inability for customs to cater for three or four planes—747s—arriving all in one go, the ability, ad hoc as it were, to shift them in adverse weather conditions to somewhere like Ōhākea or Palmerston North, for example, if the jet is of a size that can land in those places, is clearly sensible. The concern I have about that, of course, is whether the resourcing for biosecurity as well as for customs will ever be big enough in those destinations, in that ad hoc circumstance, to be able to cope with the volume that will suddenly be placed on facilities that are not normally required to carry out that efficient service.

So that is yet to be tested. I know that the Foreign Affairs, Defence and Trade Committee put some time into that. I was not a member of the select committee, but I know that my National colleagues on the committee certainly scrutinised these things closely. So that is yet to be tested; I am not very anxious about it at this stage but it is an area that needs to be signalled as potentially of concern.

The third area of amendment that the Minister touched on was the tighter control of exemptions for tobacco growing for personal use. I notice that the select committee members clearly did not entirely agree on this. In fact, there was quite an unusual circumstance whereby on one of the Government’s select committees—a committee chaired by a Government member—the Labour members put in a minority report. That is not the norm, as I understand it, in a committee where the Government has a majority. For Government members to be putting in a minority report is quite an unusual circumstance. The only thing I can draw from that—and I am sure my colleagues who will follow will enlighten us as to how it came about—is that the agreed figure of 15 kilograms of tobacco per person that is allowed to be cultivated is about the consumption of some of the members on the committee in a week.

So they clearly were not happy with that, and the Labour members felt strongly about it, and wanted that amount to be much higher— otherwise there would not have been a minority report from the Government on that. It is interesting, and I will be interested to hear the debate from the Government members, of course, who will take a call, and explain how they ended up with the Labour Party members having a minority report on that matter.

I noticed that the Green Party also had a minority review about the exemption of 15 kilograms for personal use. I would probably guess that they were not keen on that quantity. I would give the Green Party the benefit of the doubt, and suggest that it was probably trying to get the amount down rather than up. Clearly the Government was not—it was trying to get it higher. I am sure the National members brought some sensible sort of consideration to that.

My colleague John Hayes points out to me that the committee is chaired by the very capable Martin Gallagher from Hamilton. Dr Wayne Mapp is the deputy chair, and Taito Philip Field, I am sure, was rational at all times. Tim Groser, of course, would have been completely against tobacco growth, and would have opposed it at every opportunity. John Hayes, my good colleague from the Wairarapa, is another person whom I know is an ardent protester against the use of tobacco. The only person whom I could see who buckled must have been the Hon Murray McCully, and that would have brought about the exemption of the quantity of 15 kilograms.

Going back to the original bill, the weakness that was uncovered, I guess, in the forfeiture and seizure regulations by the Law Commission, is one that has been around for some time. I understand, based on some of the research I did prior to the debate, that there have been some substantial examples of people who have felt that they have not been given a fair deal. But on the whole, the Customs Service—and we must remember that the Customs Service in New Zealand is the oldest Government department—has a very proud record. It does not often feature in the media. It does not have a high profile, which in itself says it is doing a good job.

It is the oldest department. It was the first Government department set up more or less as a gatherer of taxes that was handed over to the Inland Revenue Department. The Customs Service is one of our most important departments in terms of maintaining the integrity of our sovereign nation. Some of the new technologies that are being developed for this department are very exciting, particularly in the wake of the 9/11 event in the USA around terrorist activity. They are developed not only in the US, I hasten to add, but also in Europe and other places. They show some exciting opportunity not only for customs but also for biosecurity. I hope that going forward, the Government will have the wisdom to adopt that latest technology, and I also sincerely hope that there is an opportunity to explore further synergy between the Customs Service and Biosecurity New Zealand at our borders so we can accommodate, particularly the ad hoc arrivals, but not just the ad hoc arrivals but also the increasing volume of passenger flow with tourism and trade that we as a nation are experiencing.

I want to give the Customs Service a bit of a bouquet because I have met with a number of its people. In fact, I recently attended a ceremony here in Parliament where the Prime Minister presented a number of people with 50-year service medals, which is not very common, I have to say, in most Government departments. Its staff turnover is one of the lower percentages in Government departments, but there has been a concern around that—there has been a bit of a flight of institutional knowledge in recent times. Attracting and maintaining the institutional knowledge and also the expertise that is needed to run a department such as the Customs Service is absolutely essential not only for the safety of our revenue, but also for our integrity and safety.

So I close by saying that the Customs Service, in general, does a very good job. It is more or less apolitical. I doubt that we would ever get much debate in Parliament between parties as to whether the approach being taken is the right one. I wish I could say that with Biosecurity New Zealand; we cannot, but maybe we will achieve that one day. At this point in time the Customs Service is one of those departments that does a very good job.

MARTIN GALLAGHER (Labour—Hamilton West) Link to this

As chair of the Foreign Affairs, Defence and Trade Committee, let me thank all members of the committee for their sterling work on the Customs and Excise Amendment Bill (No 3). We acknowledge that in the spirit of a true MMP committee in Parliament there was a variety of views. But in essence, I think previous speakers have certainly outlined the context of this bill.

I just want to make the point that the bill replaces a dual system with an internal review process with a right of appeal and a Customs Appeal Authority, and, hopefully, this creates a cheap and expeditious review process.

In a sense this bill is something of a technical bill, but I have to say, to be honest, that I was a little surprised in terms of the time that we took on it, but it was time well spent. Hopefully this will be a good law. I compliment the Minister, the Hon Nanaia Mahuta, and her officials and thank them for all their wonderful advice. This was a very, very interesting bill. I was delighted to be on the select committee when we considered it.

TIM GROSER (National) Link to this

A former member of the House who actually rose to the top of the greasy pole and became Prime Minister, albeit very briefly, once told me that one of the interesting things about coming into this House is that it is like entering into a giant postgraduate training institution, because whether or not a member likes it, one is forced to address a whole range of issues that one would never in any other occupation ever have to deal with. Although there is always a concern for any member of Parliament about being once-over-lightly, the reality is that one gains over a period of years considerable knowledge. One offshoot of that is that one drills down into any technical bill, and I would argue that a bill with a title the Customs and Excise Amendment Bill (No 3)—eye-glazing-over material, it cannot get more technical than this—is a beautiful example of the point that was made to me a few years ago. Behind this bill there are some really important things, but one has to drill right into it. I will start by making that point in respect of the whole treatment of what is actually called “chop chop”, which is home-grown tobacco. To understand what the actual issue is here is, I think, an interesting illustration of this former member’s point.

This issue is actually about organised crime. We start off with a health policy objective and so we have extremely high excise taxes on tobacco, as you know, Madam Assistant Speaker. There was a landmark World Bank study that we came across in the course of our examination of this legislation, written in 1999, which from memory stated something like: “All the evidence around the world tells you that the most effective measure you can take against smoking is to raise the price.” If one raises the price by 10 percent, the literature suggests there is a 4 percent reduction in usage. This country and many other countries have extraordinarily high excise taxes on cigarettes for, I would argue, health policy reasons. I personally do not believe that revenue is the leitmotif of this policy; I think it is a genuine effort by Governments around the world, including various New Zealand Governments, to deal with the shocking health implications of smoking. However, as soon as one has done that one increases a massive incentive to arbitrage the difference between the low cost of manufacturing a cigarette—or producing a cigarette—and the retail price. This is one of the chief sources of finance for organised crime around the world.

So behind this so-called incredibly technical and, one might say, almost boring bill are issues like organised crime. Tobacco smuggling is a huge issue. According to British authorities, it is a larger source of finance for organised crime in the UK than narcotics. In Quebec, 60 percent of cigarettes sold are estimated to have been smuggled. In New York there are huge State taxes on top of federal taxes, and we were shown an estimate whereby one trailer truckload of contraband cigarettes taken into New York and sold through legal, for the most part, outlets is worth about a million dollars. It is also related to terrorism. When the federal authorities broke into the apartment of the first bombers of the World Trade Center, they found a whole stack of counterfeit cigarette stamps showing that the excise had been paid. By the nature of our job as members of this House, we are forced to get into issues that we would, frankly, never want to get into, and what we find behind them are issues like this.

Our concern was primarily gangs in New Zealand, and since the question has been raised as to the personal exemption on home-grown tobacco, I will just explain what I took to be the committee’s view. The difference between the overall view of the committee and the minority view is not a large issue in terms of the underlying problem. It simply is that one set of people in the select committee working to exactly the same script wanted to leave it to regulations. We in the National Party, as a matter of principle, do not like so much discretion being left to officials. We prefer the House to state its view. So the reason why we came up with a firm figure is an issue of principle about how law is made. We just do not like ambiguity in things that affect the lives of our citizens, and we do not like changes to be made that people are not happy with, and consultation with officials instead of the bill coming back to the House. That is the reason, but that point of principle is not really an issue of any substantive policy difference among the members of the select committee.

I have to say that the limit on home-grown tobacco—“chop chop” is apparently what it is called; I had never heard the term before—provoked a lot of discussion. First of all there was an enormous amount of confusion. I do not think we were terribly convinced by one of the submitters because of the conflict of interest between that submitter’s interests and our view about what matters in the community, but I will not go into that. There was a huge amount of confusion over whether the measurement should be of dry or green matter and how many cigarettes one person could smoke in a day. But fundamentally we have come up with quite a high personal exemption use. It is the same as Canada’s, so it is not extraordinary in any sense. The logic behind it is this. We felt strongly that we want our customs and police authorities to concentrate on real criminals. If we have a very low level of exemption, the law has to be administered to some halfwit out there who has just gone a gram or two over. We did not want the good men and women who carry out such tough services on behalf of us all to be, frankly, wasting their time with trivial matters of this nature. So we have gone for a relatively high personal exemption, precisely to allow the authorities conducting our business on our behalf to concentrate on the real problem, which is organised crime.

There is potentially an enormous amount of money to be made out of organised crime. We find as we go through the bill that there are some very tight definitions around the manufacturing and growing process. I do not have the precise clause in front of me but it is a concept that it must be grown on a property one lives in; people cannot start up some little semi-garden plot and start to farm it. It has to be manufactured in one’s own home, and it has to be absolutely for one’s own personal use. There are a few issues around that. We understand that we will never have a watertight situation. In the case of somebody who rolls his or her own tobacco and gives it to a mate, we could probably argue about whether that was within the law, but the whole philosophy of the members of the committee was that actually this is a huge and serious problem. It is not out of control in New Zealand as it is in many other countries, where it is linked literally into terrorism and massive and vicious organised crimes. There has been testimony on homicides, murders, and witness intimidation that we can find right throughout the literature on this subject, but in New Zealand the issue is gangs and we want to be sure that we are not wasting the time of the authorities but are focusing on the real target.

That is a first introduction to the bill. I think it is good legislation. Like the select committee chairman, I think the members worked very, very well together, and I think we have something that is worth putting into law.

JOHN HAYES (National—Wairarapa) Link to this

I rise in support of the Customs and Excise Amendment Bill (No 3), and I invite members of the House to have a good look at it. This bill is a good bill. It is good, well-written legislation, in contrast to the emissions trading scheme legislation and the affordable homes legislation. If anybody in the House looks at the documents on the Table, he or she will see that a huge number of changes and additions have been made to those bills. This legislation is substantial, common-sense legislation. It is not theatre without substance, which the affordable homes legislation we have just passed is, and which the emissions trading legislation is. This bill reflects the substantive work of this House, and I am in absolute support of it.

The legislation comes from a department that is very well run. One of the pieces of education for me over my 3 years in this Parliament has been to see chief executives and their teams come to select committees to contribute to, and interact with, them. Martyn Dunne, the Chief Executive of the Customs Service and the Comptroller of Customs, stands out head and shoulders. He has a good team, and the department is very well led, to the point where during this Parliament our committee has not gone through a questions and answers process with the Customs Service, because we have such confidence in the administration of that department.

This legislation makes, effectively, three changes to our existing law. The first is to adopt a more pragmatic regime in respect of the forfeiture and seizure regime contained in the Act. This has application in my electorate. For example, a woman recently moved from Switzerland to New Zealand, there was a mix-up in the rules, and she ended up with all her household effects being seized. It was a nightmare to unlock the arrangements, because of the complications of the law that she had to operate under at that time. I got involved and we managed to get a good, common-sense solution. Those sorts of bureaucratic inanities are removed by this legislation, and I support totally that element of it.

The second part of the bill gives the management of the Customs Service more flexibility to deal with ad hoc arrivals in, and departures from, New Zealand. The bill talks about “craft”. “Craft” could be aircraft, or yachts or small boats. It makes eminent sense, for example, to allow the Comptroller of Customs to decide whether to send someone to Milford Sound so that a man rowing here from Australia can clear customs there rather than being required to paddle up to Picton or to Westport—if they are authorised Customs Service ports. The provision would work in the same way for yachties up in Northland. Let us say a yachtie wants to head out to Tonga from Houhora; Customs Service officials could be sent up there to clear a yacht or a cruise ship, if that would make sense. What we are doing here is putting common sense into the hands of the Comptroller of Customs, and that is an extremely good thing to do.

The third element of this legislation is that—as my colleagues have said—it regulates the amount of tobacco, or “chop chop”, that can be grown for personal consumption. There is an issue that has not been discussed in the House this morning, and that is that the Customs Service collects excise tax from tobacco. Because the rules have been a bit loose, some people operating in the top of the South Island—not in my electorate—said that they could grow tobacco for personal consumption, and they were growing tobacco in quite significant volumes. The Customs Service took a case against some growers, and it lost because of the inadequacy of the law. So I think our select committee has been perfectly sensible in deciding what quantity of tobacco meets the needs of personal consumption.

The first two changes, as I have said, are rooted in absolute common sense and pragmatism, and I think they represent good, simplified law that is not in the nanny-State mould of the Real Estate Agents Bill, which we were debating yesterday afternoon, or the emissions trading scheme bill, or, as I have already said, the bill we were just dealing with—

PETER BROWN (Deputy Leader—NZ First) Link to this

I sensed the member John Hayes’ relief when his 10 minutes came to an end. He struggled through those 10 minutes, and I have to say to the honourable member that we suffered the pain, also. It was a relief to us when he finished.

This bill is a tidy-up bill. To my mind it does three things. It updates the penalties and procedures around offences and seizures, and New Zealand First members think that is a good thing and eminently sensible.

It provides for an individual—[Interruption] I think the Berocca is kicking in over there. I sense the Berocca is kicking in. The bill provides for individuals to grow and cultivate tobacco for their own private, individual use—provided that they grow it on their own land, and provided that they manufacture the tobacco, into whatever form they want, in their own house. Those are the two provisos—and, of course, they have to be over 18.

I was interested in the Greens’ minority report; it intrigued me. It states: “The Green Party member opposed writing into the legislation a limit of 15 kilograms for the personal use exemption as evidence received suggested that such a high limit was not appropriate.” I wonder what those members would have said if it were cannabis—an illegal drug. They do not mind growing and smoking cannabis, but they have an objection to some old veteran growing a bit of tobacco, putting it in his pipe, sitting on his porch, and enjoying watching the All Blacks win against whomever they are playing. We think that amount is a good insertion in this bill.

I am particularly keen on the insertion that provides for craft—sea craft, aircraft—that, in extraordinary circumstances, arrive in a place that is not controlled by the Customs Service. I think it is a good move. It is a sensible move. There are three provisos. The bill allows sea craft or aircraft to arrive as a result of a statutory obligation or navigation requirement, and that is a good move. I can remember that when I was a chief officer at sea our ship carried a little amount of explosives—and I am not talking in respect of this country. When we arrived at the place we were taking them to, we declared that we had explosives—a dangerous commodity. We were totally upfront—as we New Zealand First people normally are about things. We arrived at this particular port, and we declared that we had explosives on board. A little bit of panic resulted and we had to berth away from the mainstream berths. That was a genuine circumstance.

Shane Ardern referred to aircraft, and I thought he made a very good point. I will not go over it. The bill allows for the result of a mishap—something happening on board either an aircraft or sea craft—or bad weather. Ships have to pull into all sorts of places in bad weather; I can tell members that it is sometimes pretty rugged.

Finally, it allows for craft authorised by the Chief Executive of the Customs Service, for whatever reason. I listened to Shane Ardern, and he made a very good point: can our border control officials and individuals cope with such circumstances? This bill at least provides a midway step. It compels the chief executive to consult before he or she gives an authority for a craft to berth wherever it needs to berth. The chief executive has to consult the Ministry of Agriculture and Forestry, the Ministry of Health, and the New Zealand Police. If it is an aircraft, the chief executive has to consult the Civil Aviation Authority, and if it is a sea craft, Maritime New Zealand. I think that is a step in the right direction; it recognises that other Government departments may need to be involved, and that they need to be consulted.

I will stop where I began by saying that this bill is a very good bill. It is very sensible. It is tidy-up legislation, and New Zealand First supports it.

CHRIS TREMAIN (Junior Whip—National) Link to this

I raise a point of order, Madam Speaker. It is a point of clarification. Voting on amendments is normally done in the Committee stage.