A Tale of a Penalty

I had a discussion with a colleague last week as to a penalty notice his firm had received. In brief, the company’s clients include a freight forwarder. That company and/or the freight forwarder believed there to be a “conflict of interest” in the broker contacting the importer directly, and accordingly all queries as to imports had to go through the forwarder. Oh, dangerous move you say – and I wholeheartedly agree – but we must also acknowledge that it happens.

In this scenario the broker requested confirmation of the application of a particular TCO from the importer via the forwarder. That confirmation was provided together with a written assurance from that importer, as requested by the broker, that if the TCO did not apply to these goods in any future consignment the broker would be notified.

All was happy and content in this little scenario for some time. The broker did the work and got paid. The forwarder moved the goods and got paid and the importer saved the customs duty otherwise payable. Then, one unhappy day, the importer wrote to the forwarder and advised that for various reasons the next consignment of the subject goods would not be eligible for the TCO. I understand that this wasn’t identifiable from the consignment documents. There was just something that made the TCO in this circumstance not appropriate.

This is when the nice story above turns into a nightmare for the broker. This is because the staff member in the forwarder’s office that was responsible for this importers happiness and well-being was on holidays. And no-one checked his email. But they did forward the documents for customs clearance.

The customs broker prepared and lodged an import declaration for the goods in accordance with the existing written instructions from the importer that the TCO applied. You’ve all guessed what happened next - The consignment went red line on lodgement. The broker requested additional IDM to lodge with the red line…. And then the forwarder checked his emails.

To be fair to the forwarder he wrote to the broker and accepted responsibility for the error.

A penalty notice was later issued. Not to the forwarder, but the broker. This seemed a bit unfair given the broker had requested and received written notice that the TCO applied and had never been provided correspondence that excluded this one consignment. He therefore appealed.  This appeal was rejected on the basis that it was the broker that was authorised to act on behalf of the owner and it was therefore their responsibility to provide accurate information to the ABF. Cross reference was made to s.243T and the Infringement Scheme Guidelines of 2014.

An infringement (or penalty) notice is a notice that may be served in lieu of prosecuting the offence in court, where the CEO (or his delegate) has reasonable grounds to believe that the person has committed an offence. It is an administrative way of addressing a regulatory breach. The decision whether to serve an infringement notice is made by the CEO or his delegate after having regard to the Guidelines, but the 2014 version of this document is very vague.

The matters to be considered before serving an infringement notice were specified in the 2010 INS Guidelines as seriousness of the breach, compliance history, reliance on Customs advice, efforts/attempt to comply, administrative moratorium and a reason beyond the person’s control. The current Guidelines contain no such requirements.

In the circumstances I consider not to remit the whole or even part of the penalty imposed on the broker to be particularly harsh, especially as the company is well respected and not prone to errors. The lesson, however, to be learned for any brokerage clearing for freight forwarders without direct access to the importer is that they place themselves at risk of penalty. The same may also be said of the few companies that do not allow their brokers to talk to clients but instead insist on funnelling all queries through “customer service” or similar staff. It is a dangerous game when the person passing the message doesn’t understand or places his own interpretation or words in a message.

The scenarios above are a commercial decision, but not one I would make or support. Nevertheless, the imposition of a penalty on the broker when the forwarder clearly identified it was their error seems a harsh reaction in an organisation that claims they prefer a softly softly approach to those attempting to comply.