Customs broker legal obligations

April 2015

Topics

1. Obligations and laws of agency and

contract

2. Negligence

3. Customs Act and broker licencing

requirements

4. Australian Consumer Law

5. Risk mitigation

To whom do you owe obligations

Client

• who is the client

• multi-nationals

• freight forwarder

Australian Customs

Some third parties who will rely on your advice

Obligations and laws of agency and contract

1

Agency

• When will an agency relationship arise?

• Where a principal authorises a person to act on behalf of the principal

and create legal relations between the principal and a third party or to

make representations on behalf of a principal

• Extent of authority

– Actual authority

» Express authority - orally or in writing (T&Cs)

» Implied authority - arising from expressly authorised conduct that is

necessary or which ordinarily follows when exercising that express

authority

– Apparent or ostensible authority

» Authority as it appears to others

– To avoid doubt – set scope of your authority in your T&Cs

Contract – Implied terms

• Terms of a contract between an agent and principal

– Implied terms

» Duty of agent to follow principal's instructions/act within authority

» Duty to exercise care, skill and diligence

» Duty to avoid conflict of interest and duty not to profit from position

» Duty to keep accounts and records

» Right of reimbursement and indemnity

» Confidentiality

» Any terms that give effect to the intention of the parties and those that

arising from custom or trade usage that are not expressly included

Contract – express terms

– Express terms ordinarily included

» Scope of authority

» Client’s acceptance of the T&Cs

» Liability and indemnities

» Client’s warranties

– Unfair terms

Liability

Consequences for breach of contract as an agent:

• Damages

Factors relevant to liability

• Contractual limitations and indemnities in your T&Cs

• Causation

• Remoteness

• Mitigation

• Misrepresentation

Hypothetical

You specialise in imports of chemicals.

• A new client engages your services and asks what concessions your

other clients (their competitors) use.

– How do you respond?

Negligence

2

Negligence

Brokers owe a duty of care to a

client when providing specialist

advice and services to avoid

causing the client to suffer loss

Negligence

How may a broker be negligent?

• brokers owe a duty of care to a client when providing specialist advice

and services to avoid causing the client to suffer loss;

• the broker breaches that duty of care;

• the client suffers loss; and

• that loss was reasonably foreseeable by the broker

When is it breached?

• there is a special relationship of proximity (e.g. via a contract);

• the broker provides specialist advice or has special means to acquire

knowledge; and

• it was reasonable for the other person to rely or act on the information

given

To whom is it owed – the client and third parties

Liability

Consequences of acting negligently

• Claim in damages

Factors relevant to liability

• Contractual limitations and indemnities

• Acting in a manner widely accepted by brokers in Australia

• Lack of proximity

• Client or third party’s reliance on your advice was unreasonable

• Contributory negligence

• Voluntary assumption of risk

Hypothetical

You discover that you have been mistakenly claiming a TCO for a

client’s goods.

• Your client is required to pay back the outstanding duty and, as the

goods have been on sold, they are unable to pass on the expense to

their customers.

• Have you breached your duty of care?

– Is there a sufficient causal link between your duty to the client and

the loss? Is it too remote?

– What obligations under the Customs Act have you potentially

breached and what action do you need to take?

– What if the client does not wish to report the underpaid duty to

Customs

Hypothetical

You are processing an import of goods that are similar but not

identical to goods that are covered by a tariff precedent specifying

eligibility for a TCO.

• Do you

– advise your client to seek a TA?

– classify the goods according to the precedent without obtaining a

TA?

– other action?

• Does your answer depend on how much duty is payable

Customs Act liabilities

3

Customs Act

Broker’s liability overview

• deemed owner

• personally liable in some instances

• liability relates to role as broker/holder of a licence

Strict liability offences

• example of false or misleading statement (243T and 243U)

– not only the importer with full liability - whoever made or caused the

statement to be made

– be aware of ACN 2014/53 regarding identity theft

• failure to account for goods under Customs control (36(2))

• Maintaining documents (240AB)

Offences requiring intent

Offences that require intent

• Smuggling – 233

– smuggling

– prohibited imports and exports

• Customs offences - 234

– evading duty

– obtaining drawback, refund, rebate or remission which is not payable

– false statements

• Goods under customs control – 36(1)

• Aiding and abetting – 236

Hypotheticals

An “employee” of a client (with whom you have never dealt) calls

you instructing you to enter an upcoming shipment.

• Do you action their request?

• If no, how do you respond/what questions do you ask/documentation

you would require before you were to action their instructions?

Broker Licencing requirements

A breach of a licence condition is a strict liability offence (s183CGC)

• Mandatory disclosure

– Must disclose false, misleading or incomplete information provided to

Customs

– Applies to information provided by other brokers

– Applies where the impact is “material”

– Information must be disclosed as soon as practicable

– Disclosure can be by way of amending the entry

– Conflicts with the requirement to maintain confidentiality

Hypothetical

You obtain a new client who has transferred from another broker.

• You assess their first import and classify the goods to a heading that

attracts a rate of 5% duty.

• You discover that the former broker classified the goods to a heading

that has a duty rate of 0, which in your opinion was incorrect.

– What action do you take?

» To meet your duty to your client?

» To meet your Customs obligations?

– Would your answer change if your classification was different but

also attracted a duty rate of 0%?

Broker Licencing – other requirements

Must ensure “Consent to Obtain Personal Information” completed on

request

• Must not allow Customs' systems or information to be used for

unauthorised purposes or to assist aid, facilitate or participate in any

unlawful or illegal activity

• Must undertake CPD

– failure to complete points must be notify to Customs with an

explanation of why

– New CPD structure – see ACN 2014/48

• Must ensure that all persons who participate in the work of the broker

are fit and proper persons

• Must report within 30 days of certain events occurring

Consequences

• Warnings and education (considered in issuing infringement notices)

• Infringement notices

• Increased penalties and offences under the INS 1 February 2014

– See 2014 INS Guide

• Revocation of licence

• Prosecution

• Timeframes

Defences/how to protect yourself and your client

• Voluntary disclosure of false or misleading information given to Customs

• Mistake of fact:

– Individual – mistake must be reasonable

– Corporation – due diligence requirement

• Are the elements of the offence made out:

– Example – Refunds application outside of 4 year period

Australian Consumer Law

4

Australian Consumer Law - Guarantees

• Apply to all services under $40,000

• Guarantees for the supply of services:

– rendered with due care and skill

– reasonably fit for purpose

– reasonably expected to achieve a known result

– supplied in a reasonable time (where not agreed/fixed)

• Any term that restricts the above guarantee will be void

Australian consumer law - offences

It is an offence to:

• Make false or misleading representations about your services

• Engage in conduct which under all the circumstances is unconscionable

• Engage in misleading or deceptive conduct or conduct that is likely to

mislead or deceive

Unfair terms will be void

• relates to clients who are using your services predominantly for

personal, domestic or household use

• Soon to expand to small businesses

Risk mitigation

5

Risk mitigation

• Insurance

• Create clear and effective T&Cs to protect yourself and your business

– scope of authority

– limit liability

– indemnities

– allow disclosure of confidential information to Customs

• Rely on written instructions

• Internal due diligence

• Education – yourself and your employees

• External due diligence – use judgement and ask questions

Questions

30

CONTACT Russell Wiese

T: 03 8602 9231

E: rwiese@hunthunt.com.au

Lynne Grant

T: 03 8602 9246

E: lgrant@hunthunt.com.au