Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2013-2014-2015
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
AVIATION TRANSPORT SECURITY AMENDMENT (CARGO) BILL 2015
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Infrastructure and Regional Development,
the Hon Warren Truss MP)
AVIATION TRANSPORT SECURITY AMENDMENT (CARGO) BILL 2015
OUTLINE
The purpose of the Aviation Transport Security Amendment (Cargo) Bill 2015 (the Bill) is to
amend the Aviation Transport Security Act 2004 (the Act) to introduce a new aviation
industry participant - an air cargo Known Consignor, and to improve alignment with
international standards.
Most of the details of those new security measures will be in the Aviation Transport Security
Regulations 2005 (the Regulations); however, the amendments to the Act are necessary to
establish the framework for those regulatory changes.
The Act and the Regulations give effect to Australia's obligations under Annex 17 to the
Convention on International Civil Aviation (Chicago Convention) by establishing a
regulatory framework to safeguard against unlawful interference with aviation in Australia.
The Act achieves this purpose by imposing various obligations on persons engaged in civil
aviation-related activities, including activities related to the handling and transport of air
cargo.
Australia has had arrangements in place to regulate the security of air cargo through the
supply chain since 1996. Businesses handling or making arrangements for the transport of air
cargo were initially regulated under the Air Navigation Act 1920 as regulated agents. When
the Act commenced in 2005, those regulated agents became regulated air cargo agents. In
2006, a new type of an industry participant, the accredited air cargo agent, was established.
The accredited air cargo agent scheme was designed to provide a more flexible regulatory
framework for persons involved in handling or making arrangements for the transport of air
cargo.
International standards have been established to provide for assurance of air cargo security
measures directly by exporters under a Known Consignor framework.
The purpose of the known consignor concept is to place the emphasis for the practical
implementation of security controls on the actual shipper or originator of the goods and to
ensure the security of air cargo and mail as they move throughout the supply chain. This
requires goods to be produced, packaged, stored, transported and handled in a manner that
ensures their integrity and protects them from unauthorised interference from the point of
origin and throughout the secure supply chain.
International standards for secure transport of air cargo continue to evolve. There is a risk that
trade could be disrupted if air freight exported from Australia does not continue to meet these
evolving standards.
The amendments to the Act will ensure that Australia's air cargo security is aligned with
international standards. The amendments will also provide an effective and efficient means
for industry to achieve the required security outcome.
The amendments will:
(a) introduce two new categories of aviation industry participant: a known consignor
and a regulated agent;
(b) introduce definitions for a known consignor and regulated agent;
(c) clarify the definition of when cargo receives clearance for transportation on an
aircraft;
(d) create new heads of power to enable the Regulations to:
i. establish a scheme under which certain persons that carry on a business that
includes the handling, or making arrangements for the transport of cargo, are
approved as known consignors; and
ii. set out the method for approving a known consignor;
(e) introduce an avoidance of doubt provision to make it clear that regulations or
other legislative instruments dealing with examination of cargo may provide for
the cargo to be opened, deconsolidated or unpacked as a part of that examination
process;
(f) increase the number of matters that may be covered by a notice issued by the
Secretary;
(g) make any necessary amendments consequential on the above; and
(h) remove redundant provisions.
The amendments are consistent with the requirements of the Chicago Convention.
Financial impact statement
There will be no financial impact to the Commonwealth as a result of this Bill.
Regulation impact statement
A Regulation Impact Statement for streamlining the regulatory framework in relation to the
way cargo, which is to be transported by an aircraft, receives clearance and is cleared, has
been prepared. It is attached to this explanatory memorandum.
2
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Aviation Transport Security Amendment (Cargo) Bill 2015
This Bill is compatible with the human rights and freedoms recognised or declared in the
international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny)
Act 2011.
Overview of the Bill
The Aviation Transport Security Amendment (Cargo) Bill 2015 amends the Aviation
Transport Security Act 2004 to introduce a new aviation industry participant - an air cargo
Known Consignor, and to improve alignment with international standards.
The amendments will:
(i) introduce two new categories of aviation industry participant: a known consignor
and a regulated agent;
(j) introduce definitions for a known consignor and regulated agent;
(k) clarify the definition of when cargo receives clearance for transportation on an
aircraft;
(l) create new heads of power to enable the Regulations to:
iii. establish a scheme under which certain persons that carry on a business that
includes the handling, or making arrangements for the transport of cargo, are
approved as known consignors; and
iv. set out the method for approving a known consignor;
(m) introduce an avoidance of doubt provision to make it clear that regulations or
other legislative instruments dealing with examination of cargo may provide for
the cargo to be opened, deconsolidated or unpacked as a part of that examination
process;
(n) increase the number of matters that may be covered by a notice issued by the
Secretary;
(o) make any necessary amendments consequential on the above; and
(p) remove redundant provisions.
Human rights implications
This Bill does not engage any of the applicable rights or freedoms.
Conclusion
This Bill is compatible with human rights as it does not raise any human rights issues.
Minister for Infrastructure and Regional Development, the Hon Warren Truss MP
3
NOTES ON CLAUSES
Clause 1: Short Title
Clause 1 provides that this Act may be cited as the Aviation Transport Security Amendment
(Cargo) Act 2015.
Clause 2: Commencement
Clause 2 provides that the whole of the Act commences on a single day to be fixed by
Proclamation. However, if the provisions are not proclaimed to commence within 6 months
of the Act receiving the Royal Assent, the provisions will commence on the day after the end
of that 6 month period. Clause 2 also allows information about the date of the Royal Assent
and commencement to be added to the commencement table, but this information does not
form a part of the Act.
Clause 3: Schedules
Clause 3 outlines the effect of the Schedules to the Bill. The Aviation Transport Security Act
2004 (the Act) is amended as set out in the Schedule to the Bill. Any other item in the
Schedule has effect according to its terms.
Schedule 1 - Amendments
Aviation Transport Security Act 2004
Item 1 - Section 9 (paragraphs (c) and (ca) of the definition of aviation industry
participant)
Item 1 amends the definition of aviation industry participant in section 9 of the Act to
remove references to regulated air cargo agents and accredited air cargo agents and to replace
those references with references to the new concepts of a known consignor and a regulated
agent (see Item 2).
The aviation industry participant is a key concept underpinning the regulatory framework
established by the Act and the Regulations. For example, under section 69 of the Act an
aviation industry participant may be given a special security direction, under section 109 of
the Act the Secretary may require an aviation industry participant to provide security
compliance information, and under section 119 of the Act enforcement orders may be made
in relation to the activities of aviation industry participants.
As a result of the amendment to the definition of aviation industry participant, the obligations
and responsibilities of all aviation industry participants set out in the Act and the Regulations
will apply to known consignors and regulated agents.
Item 2 - Section 9
Item 2 amends section 9 of the Act to insert and define two new concepts: known consignor
and regulated agent.
4
A known consignor is defined a person approved as a known consignor in accordance with
regulations made under section 44C of the Act. As a result, there is a consequential
amendment to section 44C of the Act to establish the regulation making power (see Item 7).
A regulated agent is defined as a regulated air cargo agent and an accredited air cargo agent.
As such it is an umbrella term so that references to "accredited air cargo agent and regulated
air cargo agent" in various provisions of the Act may be replaced with a reference to a single
term thereby simplifying those provisions. As a result, there are a number of consequential
amendments (see, for example, Items 4 and 5) to other provision in the Act.
Item 3 - Subsection 20(4)
Subsection 20(4) of the Act allows transport security programs (TSPs) for certain aviation
industry participants to be extended. It applied to regulated air cargo agents who's TSP
would expire before 31 December 2012. The TSP will be taken to be in force until 31
December 2012 unless the TSP is either revised under subsections 22(4) or (4) of the Act, or
the TSP is cancelled under Part 2, Division 5 of the Act at an earlier date.
As subsection 20(4) of the Act is now spent, Item 3 will repeal the provision.
Items 4 and 5 - Section 44A
Section 44A of the Act sets out the simplified overview of Division 2A of Part 4 of the Act.
Items 4 and 5 will make two amendments to section 44A of the Act consequential on the
introduction of the known consignor regime and the umbrella term regulated agent.
Item 6 - Subsections 44B(2) and (3)
Item 6 repeals subsections 44B(2) and 44B(3) from the Act and substitutes two new
subsections.
Subsection 44B(2) of the Act sets out when cargo receives clearance for the purposes of
being able to be loaded onto an aircraft. Cargo receives clearance (for loading onto an
aircraft) in two situations:
The first situation is when, after the cargo has been examined, it is handled in
accordance with regulations made under section 44C of the Act. Those regulations
deal with how cargo that has been examined is to be handled in order to receive
clearance. For example, new paragraph 44C(2)(ga) of the Act will enable regulations
made under subsection 44C(1) of the Act to deal with how cargo is to be handled in
order to receive clearance (including methods, techniques or equipment to be used for
clearing cargo) (see Item 20). For example, there would be a requirement for cargo to
be handled and transferred between parties securely.
The second situation is when:
o the regulations made under section 44C provide (or the Secretary by written
notice provides) that the cargo may receive clearance without being examined;
and
o the cargo has been handled in accordance with regulations that have been
made under section 44C that deal with how cargo that has not been examined
is to be handled in order to receive clearance.
5
For example, cargo originating from a Known Consignor may not require further
examination, but would instead need to be kept in a secure supply chain until uplift on an
aircraft.
The concept of handled is not defined in the Act but has its ordinary meaning. For example,
it includes dealing with or treating cargo in a particular manner.
Subsection 44B(3) of the Act sets out what is meant by cargo having the status of being
cleared at a particular time for the purpose of its transportation by air. Cargo is cleared at a
particular time if the cargo has received clearance (as set out in subsection 44B(2)) and since
receiving that clearance the cargo has at all times been handled in accordance with the
regulations that deal with how cargo is to be handled after receiving clearance in order to
maintain its cleared states. For example, new paragraph 44C(2)(gb) of the Act will enable
regulations made under subsection 44C(1) of the Act to deal with how cargo is to be handled
after receiving clearance in order to maintain its status as cleared. For example, the security
of cargo will need to be confirmed and accounted for as it is transferred between parties in
the supply chain.
Item 7 - After paragraph 44C(1)(a)
Subsection 44C(1) of the Act sets out a number of matters that may be dealt with in the
Regulations, for the purpose of safeguarding against unlawful interference with aviation.
Item 7 will amend subsection 44C(1) of the Act by inserting a new regulation making power
(paragraph 44C(1)(aa)) so that the regulations may establish a scheme under which certain
persons that carry on a business that includes handling, or making arrangements for transport,
of cargo are approved as known consignors. This regulation making power is similar to that
which exists for designating regulated air cargo agents (paragraph 44C(1)(b) of the Act) and
accrediting accredited air cargo agents (paragraph 44C(1)(c) of the Act).
Item 8 - At the end of paragraph 44C(1)(b)
This item insert a note after paragraph 44C(1)(b) of the Act to refer to the fact that regulated
air cargo agents are a kind of regulated agent as defined in section 9 of the Act (see Item 2).
Item 9 - At the end of paragraph 44C(1)(c)
This item insert a note after paragraph 44C(1)(c) of the Act to refer to the fact that accredited
air cargo agents are a kind of regulated agent as defined in section 9 of the Act (see Item 2).
Item 10 - Subparagraph 44C(1)(d)(i)
Item 10 amends subparagraph 44C(1)(d)(i) of the Act by replacing a reference to "all
regulated air cargo agents, all accredited air cargo agents" with a reference to "all known
consignors, all regulated agents" consequential on the introduction of the known consignor
regime and the umbrella term regulated agent. The effect of the amendment to subparagraph
44C(1)(d)(i) of the Act is that, for the purposes of safeguarding against unlawful interference
with aviation, the regulations may prescribe conditions that must be complied with by all
known consignors, all regulated agents or all aircraft operators.
6
Item 11 - Subparagraphs 44C(1)(d)(ii) and 44C(1)(d)(iii)
Item 11 amends subparagraphs 44C(1)(d)(ii) and 44C(1)(d)(iii) of the Act by replacing
references to "regulated air cargo agents, accredited air cargo agents" with references to
"known consignors, regulated agents" consequential on the introduction of the known
consignor regime and the umbrella term regulated agent.
The effect of the amendment to subparagraph 44C(1)(d)(ii) of the Act is that, for the purposes
of safeguarding against unlawful interference with aviation, the regulations may prescribe
conditions that must be complied with by one or more specified classes of known consignors,
regulated agents or aircraft operators.
The effect of the amendment to subparagraph 44C(1)(d)(iii) of the Act is that, for the
purposes of safeguarding against unlawful interference with aviation, the regulations may
prescribe conditions that must be complied with by one or more specified known consignors,
regulated agents or aircraft operators.
Item 12 - Paragraph 44C(1)(e)
Item 12 repeals paragraph 44C(1)(e) of the Act. Paragraph 44C(1)(e) set out the requirement
for accredited air cargo agents to report aviation security incidents. While initially accredited
air cargo agents were not aviation industry participants, this was changed in 2011 (see Item 1
of Part 1 of Schedule 1 of the Aviation Transport Security Amendment (Air Cargo) Act 2011).
As all aviation industry participants are required to report aviation security incidents (see
subsection 102(4) of the Act which defines a person with incident reporting responsibilities)
the specific provision dealing with accredited air cargo agents is no longer required.
Item 13 - Paragraph 44C(1)(f)
Item 13 amends paragraph 44C(1)(f) of the Act by replacing references to "regulated air
cargo agents, and accredited air cargo agents" with references to "known consignors, and
regulated agents" consequential on the introduction of the known consignor regime and the
umbrella term regulated agent. The effect of the amendment to paragraph 44C(1)(f) of the
Act is that, for the purposes of safeguarding against unlawful interference with aviation, the
regulations may prohibit a person from carrying on a business to the extent that it consists of
handling cargo or making arrangements for the transport of cargo, unless the person is a
known consignor, a regulated agent or an aircraft operator.
Item 14 - Subparagraph 44C(1)(g)(i)
Item 14 amends subparagraph 44C(1)(g)(i) of the Act by replacing a reference to "all
regulated air cargo agents or all accredited air cargo agents" with a reference to "all known
consignors or all regulated agents" consequential on the introduction of the known consignor
regime and the umbrella term regulated agent. The effect of the amendment to
subparagraph 44C(1)(g)(i) of the Act is that, for the purposes of safeguarding against
unlawful interference with aviation, the regulations may prescribe training requirements for
employees of all known consignors or all regulated agents.
7
Item 15 - Subparagraphs 44C(1)(g)(ii) and (iii)
Item 15 amends subparagraphs 44C(1)(g)(ii) and 44C(1)(g)(iii) of the Act by replacing
references to "regulated air cargo agents or accredited air cargo agents" with references to
"known consignors or regulated agents" consequential on the introduction of the known
consignor regime and the umbrella term regulated agent. The effect of the amendment to
subparagraph 44C(1)(g)(ii) of the Act is that, for the purposes of safeguarding against
unlawful interference with aviation, the regulations may prescribe training requirements for
employees of one or more specified classes of known consignors or regulated agents. The
effect of the amendment to subparagraph 44C(1)(g)(iii) of the Act is that, for the purposes of
safeguarding against unlawful interference with aviation, the regulations may prescribe
training requirements for employees of one or more specified known consignors or regulated
agents.
Item 16 - Subparagraph 44C(2)(a)(i)
Item 16 amends subparagraph 44C(2)(a)(i) of the Act by replacing a reference "all regulated
air cargo agents, all accredited air cargo agents" with a reference to "all known consignors,
all regulated agents" consequential on the introduction of the known consignor regime and
the umbrella term regulated agent.
The effect of the amendment to subparagraph 44C(2)(a)(i) of the Act is that, for the purposes
of safeguarding against unlawful interference with aviation, the regulations made under
subsection 44C(1) may deal with the examination of cargo by all known consignors, all
regulated agents or all aircraft operators.
Item 17 - Subparagraphs 44C(2)(a)(ii) and (iii)
Item 17 amends subparagraphs 44C(2)(a)(ii) and 44C(2)(a)(iii) of the Act by replacing
references to "regulated air cargo agents, accredited air cargo agents" with references to
"known consignors, regulated agents" consequential on the introduction of the known
consignor regime and the umbrella term regulated agent. The effect of the amendment to
subparagraph 44C(2)(a)(ii) of the Act is that, for the purposes of safeguarding against
unlawful interference with aviation, the regulations made under subsection 44C(1) may deal
with the examination of cargo by one or more specified classes of known consignors,
regulated agents or aircraft operators. The effect of the amendment to subparagraph
44C(2)(a)(iii) of the Act is that, for the purposes of safeguarding against unlawful
interference with aviation, the regulations made under subsection 44C(1) may deal with the
examination of cargo by one or more specified known consignors, regulated agents or aircraft
operators.
Item 18 - Subparagraph 44C(2)(g)(i)
Item 18 amends subparagraph 44C(2)(g)(i) of the Act by replacing a reference "all regulated
air cargo agents, all accredited air cargo agents" with a reference to "all known consignors,
all regulated agents" consequential on the introduction of the known consignor regime and
the umbrella term regulated agent. The effect of the amendment to subparagraph
44C(2)(g)(i) is that, for the purposes of safeguarding against unlawful interference with
aviation, the regulations made under subsection 44C(1) may deal with the circumstances in
8
which cargo may receive clearance by all known consignors, all regulated agents or all
aircraft operators.
Item 19 - Subparagraphs 44C(2)(g)(ii) and 44C(2)(g)(iii)
Item 19 amends subparagraphs 44C(2)(g)(ii) and 44C(2)(g)(iii) of the Act by replacing
references to "regulated air cargo agents, accredited air cargo agents" with references to
"known consignors, regulated agents" consequential on the introduction of the known
consignor regime and the umbrella term regulated agent. The effect of the amendment to
subparagraph 44C(2)(g)(ii) of the Act is that, for the purposes of safeguarding against
unlawful interference with aviation, the regulations made under subsection 44C(1) may deal
with the circumstances in which cargo may receive clearance by one or more specified
classes of known consignors, regulated agents or aircraft operators. The effect of the
amendment to subparagraph 44C(2)(a)(iii) of the Act is that, for the purposes of safeguarding
against unlawful interference with aviation, the regulations made under subsection 44C(1)
may deal with the circumstances in which cargo may receive clearance by one or more
specified known consignors, regulated agents or aircraft operators.
Item 20 - After paragraph 44C(2)(g)
Item 20 inserts two new regulation making provisions into subsection 44C(2) of the Act.
Paragraph 44C(2)(ga) of the Act provides that regulations made under subsection 44C(1) of
the Act may deal with how cargo is to be handled (including methods, techniques or
equipment to be used) in order to receive clearance. Paragraph 44C(2)(gb) of the Act
provides that regulations made under 44C(1) of the Act may deal with how cargo is to be
handled (including methods, techniques or equipment to be used) after receiving clearance in
order to maintain its status as cleared. For example, the regulations may include
requirements for keeping cargo secure, and confirming and accounting for the security of
cargo as it is transferred between parties in the supply chain.
Item 21 - After paragraph 44C(2)(h)
Item 21 inserts a new regulation making provision into subsection 44C(2) of the Act.
Paragraph 44C(2)(h) of the Act provides that regulations made under subsection 44C(2) may
deal with the method for applying for approval as a known consignor and how such
application are to be dealt with.
Item 22 - Subsection 44C(3)
Item 22 amends subsection 44C(3) of the Act to increase the number of matters that the
regulations may provide may be specified in written notices made by the Secretary.
Currently subsection 44C(3) of the Act provides that regulations made under certain
paragraphs of subsection 44C(2) may provide that some or all of the matters set out in those
paragraphs may be specified in written notices made by the Secretary rather than in the
regulations themselves. This allows for a greater degree of flexibility to respond to things
such as changes in technology. The amendment to subsection 44C(3) of the Act will enable
written notices to deal with a wider range of matters that would otherwise be in the
regulations.
9
For example, the regulations may provide that the matters in the following paragraphs may
also be specified in written notices made by the Secretary:
paragraph 44(2)(c): the places where examination is to be conducted;
paragraph 44(2)(e): the things to be detected by examination;
paragraph 44(2)(f): the procedures for dealing with things detected by examination;
paragraph 44(2)(h): the supervision and control measures for dealing with cargo that
has received clearance; and
new paragraph 44C(2)(ga): how cargo is to be handled (including methods,
techniques or equipment to be used) in order to receive clearance (see Item 20); and
new paragraph 44C(2)(gb): how cargo is to be handled (including methods,
techniques and equipment to be used) after receiving clearance in order to maintain its
cleared status (see Item 20).
Item 23 - After subsection 44C(3)
Item 23 inserts a new provision in relation to what is meant by the examination of cargo.
Subsection 44C(3A) of the Act provides that, to avoid doubt, regulations or other legislative
instruments (such as a notice issued by the Secretary) dealing with the examination of cargo
may provide for, or require, cargo to be opened, deconsolidated or unpacked. The ability to
examine cargo in such as way exists whether or not the owner of the cargo, or any other
person, has consented.
The purpose of examining cargo is to detect explosives (see subregulation 44B(2) of the
Regulations). This effect of the amendments is that when cargo is examined to detect
explosives (that is, for example, the cargo is inspected or scrutinized), the cargo may be:
deconsolidated (that is, boxes or other items that are commonly secured to pallets with
shrink wrap and plastic strapping may be separated and regrouped);
opened (that is the packages such as boxes are opened); and
unpacked (that is, the items that are in the packages or boxes are removed from those
boxes).
Subsection 44C(3A) of the Act expressly evidences an intention to alter any common law
principles or fundamental rights that might otherwise exist in relation to the opening cargo.
10
Regulation Impact Statement - Part 1
Enhancing US-Bound Air Cargo Security
Type of submission Standard RIS Part 1
Date of submission August 2015
OBPR reference ID 19276
11
Contents
Explanation of RIS parts 1 and 2 ..................................................................................................................................................13
Legislative amendments .............................................................................................................................................................13
Regulatory costs and offsets ......................................................................................................................................................13
Executive summary ............................................................................................................................................................................14
Background............................................................................................................................................................................................16
The Office of Transport Security..............................................................................................................................................16
Australian air cargo security .....................................................................................................................................................16
Australia's international obligations......................................................................................................................................17
Trade context ...................................................................................................................................................................................17
Lead-in to current situation .......................................................................................................................................................18
Security risk assessment ........................................................................................................................................................18
Background to TSA security requirements ....................................................................................................................19
Overview of problem .........................................................................................................................................................................19
Objectives of Government action .................................................................................................................................................21
Policy options .......................................................................................................................................................................................21
Option 1 .........................................................................................................................................................................................21
Option 2 .........................................................................................................................................................................................22
Option 3 .........................................................................................................................................................................................22
Option 4 .........................................................................................................................................................................................22
Regulatory impacts of options 2-4 ..........................................................................................................................................23
Analysis of options .............................................................................................................................................................................23
Option 1--Status quo ....................................................................................................................................................................23
Option 2-- 100 per cent piece level examination .............................................................................................................24
Option 3-- introduction of piece level examination together with a Known Consignor scheme .................25
Option 4-- introduction of piece level examination together with a Known Consignor scheme for all
export air cargo ...............................................................................................................................................................................26
Consultation ..........................................................................................................................................................................................26
Communications and engagement plan ...............................................................................................................................26
Consultation activites to date....................................................................................................................................................27
Further planned consultation ...................................................................................................................................................28
Recommended option .......................................................................................................................................................................28
Implementation and evaluation....................................................................................................................................................28
12
Explanation of RIS parts 1 and 2
This Regulation Impact Statement will be submitted in two parts. Part 1 (herein) supports amendments
to the Aviation Transport Security Act 2004 (the Act); Part 2 will support amendments to the associated
Aviation Transport Security Regulations 2005 (the Regulations).
Legislative amendments
The Department of Infrastructure and Regional Development (the Department) has developed relevant
amendments to the Act, to give effect to Australia's international air cargo security obligations.
Draft legislative amendments are attached. It is intended that all enabling legislation (Act and Regulation
amendments) to give effect to the proposed air cargo security arrangements will commence in July 2016.
The Act is being amended to:
(a) insert a new definition for known consignor;
(b) create new heads of power to enable the Regulations to:
i. establish a scheme under which certain persons that carry on a business that includes the
handling, or making arrangements for the transport of cargo are approved as known
consignors;
ii. set out the method for approving a known consignor;
(c) insert a new definition for a regulated agent;
(d) replace references to regulated air cargo agent and accredited air cargo agent with references to a
regulated agent;
(e) amend the definition of aviation industry participant to include a regulated agent and a known
consignor;
(f) create a new head of power to enable the Regulations to prescribe the circumstances in which
cargo may be opened as a part of the examination process;
(g) increase the number of matters that the Regulations may provide may be covered by a notice
issued by the Secretary; and
(h) make any necessary amendments consequential on the above, and remove redundant provisions.
In parallel, the Department will continue to consult with relevant industry stakeholders on the
development of appropriate administrative systems, methods and guidance for relevant industry
participants.
Regulatory costs and offsets
Full costings and a cost benefit analysis for all options will be included in RIS Part 2, as they will continue
to evolve as Known Consignor regulations are developed and further industry consultation occurs. The
costs for Option 1 will provide baseline information, and Options 2-4 will be assessed in comparison to
baseline costs established for Option 1. It should be noted that the 'costs' calculated through the
Regulatory Burden Measure (RBM) process do not capture the economic impact on businesses who will
not be able to continue trading with the US.
A net benefit of implementing changes to the current regulatory regime (as outlined in Options 2-4) is to
buy Australia's export air cargo industry participants time to make the operational changes they will need
to make in order to continue exporting to the US.
13
Executive summary
Enhancing US-bound air cargo security
This proposal outlines options for Australia to meet the security requirements of the United States
Transportation Security Administration (TSA) for US-bound air cargo travelling on passenger aircraft, so
that trade can continue and business impacts are minimised.
RIS preferred option
Option 3 - Introduction of enhanced piece level examination together with a Known Consignor scheme
Key points from the RIS
The Office of Transport Security (OTS), a division of the Department of Infrastructure and Regional
Development, regulates Australia's air cargo security regime and ensures that exporters have access to
world markets by meeting international security obligations.
The United States Transportation Security Administration (TSA) recently re-evaluated Australia's
security arrangements for US-bound air cargo and advised that it will require 100 per cent of air cargo on
passenger aircraft travelling to the US to be examined at a deconsolidated ('piece') level.
Currently regulated Australian air cargo industry participants (freight logistics service providers and
cargo terminal operators) do not have the capacity, space or equipment to deconsolidate and examine air
cargo at a piece level.
In 2014, exporters sent almost 18,000 tonnes of cargo by air to the US, with a value of $4.8 billion.1
If no action is taken to meet the TSA's requirement, the Australian air cargo industry will be substantially
impacted, including air carriers, exporters, freight forwarders and ground transporters.
This proposal seeks to support industry by establishing a legal framework that allows air cargo supply
chain industry participants flexibility in how they meet the TSA's requirements. This in turn will ensure
that industry participants can continue to export air cargo to the US.
This Regulatory Impact Statement compares four options for responding to the TSA requirements:
Option 1 is no government intervention (i.e. maintain the status quo);
Option 2 is to introduce a requirement for piece level examination for all US-bound air cargo;
Option 3 is to introduce piece level examination together with a Known Consignor scheme for US-
bound air cargo only;
Option 4 is to introduce piece level examination together with a Known Consignor scheme for all
export air cargo.
Although all four options above will impose compliance costs on the air cargo export sector, the options
vary in how costs are distributed, and the degree to which individual businesses may be exposed to
market and legal risks.
Options 2-4 propose an increase in regulation, but it will be demonstrated that amending current
legislation to ensure a regulatory framework that meets the US' requirements - and international
standards - is a less onerous and costly approach. Each of these options provides a different method of
transitioning to the new required state (all US-bound air cargo is accepted for uplift).
Option 1 (status quo) is included here as an option, as it can be considered a 'non-regulatory' approach.
Maintaining the status quo would initially impact airlines, but the impact will be felt throughout the
1It is estimated that an additional 3000 tonnes is exported through express freight. As the goods are valued under
$2000 a total value is not recorded.
14
supply chain, as costs will be passed on to freight forwarders, who will then pass costs on to their
exporter customers.
However, Option 1 cannot be considered a viable option: even though the TSA directly regulates airlines
that fly into the US by issuing them with security programs, they will not accept any air cargo from
Australia if the methods, techniques and equipment used to examine it at a piece level are not approved,
prescribed and overseen by the Australian Government. This option is included primarily as a baseline for
comparing costs, benefits and impacts with Options 2-4.
Option 2 would require 100 per cent of US-bound air cargo to be examined at a piece level, using specific
methods and equipment. Although this option would meet the TSA's requirements, it is inflexible and
could result in severe imbalances in affected industry sectors. It could cause immense bottlenecks at the
airport, as most air cargo presented to on-airport cargo terminal operators tends to be highly
consolidated. Trade impacts would likely hit comparatively low value consolidated air cargo and cargo for
'just in time' markets the hardest, making many perishable exports uneconomic.
Option 3 is the preferred option. It would allow industry participants choice in how they meet the TSA's
requirements by stipulating that 'piece level' examination could be achieved either by having cargo
submitted for enhanced piece level examination at a specified regulated freight forwarder, or by
originating from another kind of regulated business - a Known Consignor. However, for businesses that
do not export to the US there would be no cost with this option. This option would also meet international
standards and provide a foundation should other countries impose similar conditions to the TSA's.
Option 4 resembles Option 3 in that it would balance piece level examination with a Known Consignor
scheme. However, this option would require all export air cargo, regardless of destination to be 'secure'.
This option is preferred by some industry participants (particularly large freight forwarders), as they
anticipate difficulty in separating out US-bound air cargo, and are concerned they will not be able to
achieve economies of scale. However, current tight timelines and this option's potential impact on non-US
exporters would not allow efficient implementation in the short term. The preferred option (Option 3)
could be expanded to include all export air cargo in future as necessary.
Benefits of preferred option
Benefits of the preferred option (Option 3) include the following:
This option provides industry participants with choices: a business can become a Known
Consignor, invest in examination capability or pay another business to examine export cargo.
This option provides a balance between US-bound air cargo being secured at source and being
examined further back in the supply chain. It is more likely to result in a continuation of trade to
the US, without heavily impacting industry sectors with relatively low value goods (e.g.
horticulture) or those with goods not easily examined (e.g. heavy machinery, electronics).
An exporter who chooses to become a Known Consignor will be able to have their export air cargo
loaded onto an aircraft without the need for examination, potentially saving them time and
money.
Provides flexibility by allowing businesses to make a commercial decision about whether to
screen all export air cargo or just US-bound air cargo.
A Known Consignor's recognised security measures may facilitate faster resumption for their
export air cargo if a security incident occurs.
Exporters who become Known Consignors may be able to increase business opportunities by
promoting their status as security-related businesses.
The approaches under this option also meet international standards providing a foundation
should other countries require the same standard as the US in the future.
Does not affect businesses that do not export to the US.
15
Regulatory costs and offsets
A Regulatory Burden Measure has been assessed for the options for Part 1 of the RIS (attached). Full
costings and a cost benefit analysis for all options will be included in RIS Part 2. The costs for Option 1
will provide baseline information, and options 2-4 will be assessed in comparison to baseline costs
established for Option 1.
Consultation
To date, information sessions and targeted consultation has been conducted with key industry
stakeholders. This includes site visits, targeted workshops and surveys which took place under the
previously proposed Securing the Air Cargo Supply Chain (SACSC) framework, which was to be
implemented in 2014. Recently, a series of two-hour workshops were conducted in Brisbane, Sydney and
Melbourne with approximately 200 freight forwarders and exporters, specifically to inform them about
the TSA requirements, and to gauge their responses. In addition, the Department also maintains regular
communication with the Cargo Working Group (CWG), whose members represents major industry
stakeholders including airlines, general and express freight forwarders, exporters and government
agencies.
Industry stakeholders consulted thus far indicate that many businesses will be able to implement the
proposed changes. However, industry participants have highlighted that increased cost structures and
extended lead times may have a negative impact on their ability to compete internationally.
Additional consultation and engagement is planned which will focus on obtaining industry views on
perceived impacts and costs associated with implementing the proposed Options.
Background
The Office of Transport Security
The Office of Transport Security (OTS) is a Division in the Department of Infrastructure and Regional
Development. We administer the Aviation Transport Security Act 2004 and the Maritime Transport and
Offshore Facilities Security Act 2003. The OTS is the security regulator of the Australian aviation, maritime
transport and offshore oil and gas industry through its administration of these two Acts and its advice to
the Australian Government on transport security policy and practice.
The entities we regulate include airlines, airports, ports, ships, off shore oil and gas facilities, issuing
bodies (for ASIC and MSIC identity cards), screening authorities and participants in the air cargo sector.
Australian air cargo security
In Australia, air cargo supply chain security is regulated under the Aviation Transport Security Act 2004
(the Act), and its accompanying Aviation Transport Security Regulations 2005 (the Regulations). These
were implemented to establish obligations to prevent acts of unlawful interference with aviation in
particular unlawful interference through acts of terrorism.
In the air cargo supply chain, OTS currently regulates freight forwarders, couriers and other similar
businesses through the Regulated Air Cargo Agent (RACA) and Accredited Air Cargo Agent (AACA)
schemes.
The Act and Regulations establish a minimum level of security requirements, and in particular, oblige
aviation industry participants to develop and comply with Transport Security Programs (TSPs) for RACAs
and standard security programs for AACAs.
16
Air Cargo Examination (ACE) and Enhanced Air Cargo Examination (EACE) notices sit under the Act and
Regulations, and are used to require specific industry participants to meet detailed requirements for the
examination of cargo, beyond what is stipulated by the Act, Regulations and security programs. Currently,
export air cargo undergoes examination at on-airport Cargo Terminal Operator (CTO) facilities on an 'as
presented' basis. In most cases, this is Electronic Trace Detection (ETD) examination of consolidated
cargo - where the cargo is already packed into an aircraft container or palletised.
Australia's international obligations
Australia is a signatory to the Convention on International Civil Aviation 1944 (the Chicago Convention).
The Chicago Convention is administered by the International Civil Aviation Organization (ICAO), of which
Australia is a member. Australia also participates in the ICAO Working Group on Air Cargo Security,
which has developed new international standards for air cargo supply chain security.
ICAO recommends that a State's regulatory program should include at a minimum:
a) an accreditation programme for regulated agents, known consignors and account consignors,
with thorough and objective entry requirements;
b) training for all staff involved in the handling and screening of cargo and mail for all entities
operating in the secure supply chain;
c) standards for security controls to be applied to consignments;
d) a regularly updated database or list of all known consignors and regulated agents that is shared
by all parties involved in the secure supply chain system; and
e) robust oversight and quality control activities (including verifiable audit trails) to ensure that
security controls are implemented effectively throughout the secure supply chain.2
The new standards represent an international response to the ongoing threat of terrorist attacks and the
need to strengthen the air cargo security framework, particularly since the air cargo security incident
originating from Yemen in October 2010.3
Trade context
As well as our international obligations, the Australian aviation security regime must also continue to
meet the increasingly complex requirements for air cargo initiated by key overseas trading partners to
ensure our continued access to those markets and maintain global competitiveness.
Air cargo is an important component of global trade and international civil aviation. Although
international airfreight represents less than 0.1 per cent of Australia's total merchandise trade by volume,
it makes up over 21 per cent of total trade by value.4 Air cargo transport will continue to be critical to the
functioning of the Australian and global economy for the foreseeable future. Australia's outbound
international airfreight increased by 3.9 per cent in FY 2014, and global air cargo trade is expected to
continue to grow at an annual rate of 4.1 per cent over the next five years.5
Australia's international air cargo sector reflects our unique geography and market. Unlike other
countries, the majority of Australia's international air cargo is carried on passenger aircraft. This reflects
the long distances between Australia and international ports and the quantity of high-value imports
shipped to Australia by air. The speed and availability of air freight capacity on passenger aircraft leaving
2 International Civil Aviation Organization (2014) Aviation Security Manual (Doc. 8973/9), section 13.5.
3 InOctober 2010 terrorists based in Yemen attempted to destroy aircraft by placing advanced explosive devices in
air cargo. This attack was foiled through intelligence activities but demonstrated that terrorist groups had
identified new vulnerabilities in the aviation security network.
4 Bureau of Transport and Regional Economics (2014) Freightline 1 - Australian freight transport overview, p.6.
5 International Air Transport Association (2014) Airline Industry forecast 2014-2018.
17
Australia is one of the main reasons it is the transport mode of choice for time-sensitive, high value and
perishable items, such as gold coins, seafood, fruit and vegetables.
Exporters have adapted to Australia's unique market environment by developing a number of niche
export markets. These include:
food products and other perishable goods;
just-in-time manufactured products for US supply chains (including IT and defence industries); and
heavy manufactured items for specialised industries such as mining.
These businesses would face significant difficulties in finding alternative export routes to the US. The
perishables and just-in-time manufacturers would not be able to service their customers' demands
through sea freight. Dedicated freighter aircraft are unlikely to provide a suitable alternative due to the
combination of low-cost cargo space on passenger aircraft and long flight sectors. Even if additional
capacity could be found, these exporters would be unable to adapt their operations to the additional costs
of freighter aircraft, as in many cases they would be paying to export with the cost of freight exceeding
their very low margins.
Lead-in to current situation
In anticipation of evolving international requirements, and following a number of aviation security
incidents internationally (e.g. shoe bomber/underpants bomber), the Australian Government announced
in February 2010 that it would establish a Regulated Shipper Scheme (RSS) and Enhanced Air Cargo
Examination (EACE). The new measures arising from the Government announcement, coupled with a
refinement of current arrangements, aimed to provide a strengthened air cargo security framework that
made better use of both Government and industry resources, while achieving the security outcome
expected by Government at the time.
Aviation security was considered one element of a broad, policy response to terrorism, set out in the then
Australian Government's 2010 Counter-Terrorism White Paper.6 The White Paper formed part of the
Australian Government's national security reform agenda.
The RSS and EACE measures were due to be implemented in July 2014. However, the change of
government in late 2013 meant that the proposed framework was not approved for implementation, and
the Deputy Prime Minister asked the Department to provide further options for improving the security of
export air cargo, in line with the new government's intention to cut red tape and reduce the regulatory
burden for individuals, businesses and community organisations.
Security risk assessment
In line with this redirection, in mid-2014 the Department prepared a Security Risk Assessment (SRA) for
export air cargo in consultation with Australian Government law enforcement and intelligence agencies
as well as key industry stakeholders.
The assessment found that an attack on the aviation sector could target aircraft, airports and passengers,
and would likely meet terrorists' objectives of mass casualties, spectacular media imagery, economic
disruption and public anxiety. In past attacks against the aviation sector overseas, terrorists have used a
variety of tactics including armed assault, improvised explosive devices (IEDs) and hijacking.
The mostly likely event involving air cargo would be the exploitation of the supply chain to insert an IED
into cargo to be uplifted by an aircraft (as opposed to attacking cargo transport infrastructure such as
warehouses and trucks).
6Commonwealth of Australia (2010) Counter-Terrorism White Paper Securing Australia/Protecting Our Community,
Department of Prime Minister and Cabinet.
18
Existing security measures promulgated through current regulatory requirements were assessed as
providing limited deterrence and detection value, and on their own were unlikely to prevent determined
and capable attackers from inserting an IED into air cargo. A greater deterrence value was provided by
the overall complexity of the air cargo supply chain, due to uncertainty for an attacker over:
whether and how cargo was examined;
whether cargo was consolidated; and
how and when cargo was transported to the aircraft and uplifted.
A number of attack scenarios were examined, and risk assessed. The majority were assessed as low risk.
Risk ratings for individual events ranged between:
implausible and significant when applied to passenger aircraft; and
implausible and moderate when applied to freighter aircraft.
The risk of facilitating an attack via insertion of an IED in perishable goods (e.g. meat, fruit vegetables) or
high value goods (e.g. precious metals, stones) was assessed as low or implausible, particularly where
exporters are also required to comply with regulatory obligations by other government departments, or
have implemented a range of security measures to prevent the theft and loss of high value cargo. These
regulatory obligations and controls include those for hygiene, food safety and quality control purposes.
Strict regulatory controls, along with tight theft prevention measures, were considered as potentially
achieving similar outcomes to those required under the Act.
In April 2015, the Australian Security Intelligence Organisation released an updated threat assessment
for the broad aviation sector. They assessed the air cargo threat to outbound international passenger
aircraft as Low. This finding underpins the Department's 2014 comprehensive security risk assessment of
the Australian air cargo supply chain.
Background to TSA security requirements
The United States 9/11 Act, passed in 2007 requires that all cargo transported on a passenger aircraft
domestically be screened for explosives. This means that every shipment of cargo carried on passenger
aircraft requires screening at piece level, which could include skids and pallets being taken apart,
screened and reconfigured. The legislation identifies the types of screening allowed, ranging from
physical inspection to various technologies. These requirements were extended to all international
inbound air cargo transported on passenger aircraft in 2010.
Prior to 2010, air carriers departing Australia direct to the United States were granted individual waivers
by the TSA against portions of their TSA issued Model Security Program. This allowed carriers to comply
with the Australian air cargo security framework rather than the more prescriptive air cargo
requirements in their TSA security programs. Australia was one of only a very small number of last point
of departure locations to which this applied.
Although the TSA formally accepted Australia's air cargo security arrangements in 2012, it also made
changes that year to the 9/11 Act to require 100 per cent screening of international inbound air cargo
transported on passenger aircraft.
Overview of problem
In late 2014, the United States Transport Security Administration (TSA) re-evaluated the security
arrangements for US-bound air cargo. A key recommendation from this re-evaluation is that US-bound air
cargo should undergo examination at a piece level, as opposed to the consolidated examination that
currently occurs at on-airport cargo handling facilities. In accordance with US Federal Legislation, the TSA
19
has advised that it will require 100 per cent of air cargo travelling to the US to be examined at a
deconsolidated level by physical or technological means by the exporter at source, or along the supply
chain by freight service providers. However, there was no indication that Australia's current export air
cargo security arrangements were considered unacceptable to the TSA until the results of their re-
evaluation were received in early 2015.
The TSA's recognition of current arrangements was due to expire on 30 April 2015. The TSA
subsequently gave Australian air carriers a further 90 days extension until 30 July 2015. In early July
2015, the US Government agreed to extend recognition of Australia's current air cargo security
arrangements for a period of two years, subject to the development of a detailed implementation plan.
Under this plan, all airlines carrying cargo to the US will be required to demonstrate active and aggressive
measures toward implementing 100 per cent piece level examination.
The TSA also gave airlines a further 90 day extension on their current arrangements, and have asked
them to submit a proposed amendment to the TSA's Standard Security Program describing how each
airline will implement air cargo security arrangements to meet the US Government's requirements, over
the two-year timeframe. Once approved, the amendments will provide the TSA with an enforceable
regulatory mechanism to ensure compliance.
After July 2017, the TSA will not allow airlines to carry air cargo into the US that has not been examined at
piece level.
If no action is taken to address the TSA's requirements, significant industry impact will result, affecting
air carriers, individual exporters, freight forwarders and transporters. In 2014, customs data show
approximately 25 per cent of all businesses who sent goods by air exported air cargo to the US in 2014, or
almost 10,000 exporters. This amounts to almost 18,000 tonnes of cargo, with a value of $4.8 billion. Of
this, over 85 per cent was transported on passenger aircraft. Approximately 1,500 of these businesses
sent goods worth more than $100,000 and 5,000 businesses sent more than $10,000 worth of goods.
In addition, the Department estimates that a further 3000 tonnes of cargo is sent to the US. This is
express freight that is typically small packages under 30 kg. This cargo is not included in the customs
data as cargo worth less than $2000 is excluded. The total value of this cargo is unknown.
The cargo exported to the US covers a wide range of industries and commodities and comes from small,
medium and large businesses with sophisticated security processes in place, but also from businesses
whose security practices are less sophisticated.
Current regulatory arrangements do not fully recognise embedded security measures which effectively
secure cargo from unlawful interference. Many businesses already have extensive security measures in
place to protect their goods, irrespective of the commodity or industry type, for a host of reasons
including: anti-theft; loss prevention; occupational health and safety; intellectual property; contractual
and other regulatory obligations (i.e., Biosecurity, Customs, Defence, and Therapeutic Goods
Administration). This is particularly evident in medium to large sized businesses. The failure to recognise
these security measures would result in the imposition of costly or impractical security measures and
potentially force viable businesses out of the US market.
There is currently little capacity for regulated freight service providers to conduct piece-level
examination. Most air cargo is consolidated well before it reaches the airport - in some cases at the
export facility. Deconsolidation is costly and time consuming, and in many cases, impractical due to the
nature of the goods (e.g. highly perishable agricultural or pharmaceutical products). Further, many CTOs
located on airports do not have the space to deconsolidate cargo.
It would not be possible to rely on 'the market' to self-correct this problem. Many businesses that export
by air operate on tight profit margins in a highly competitive international market, their key advantage
the capacity to access markets quickly due to cheap freight rates. Many regulated freight service
20
providers may simply not have the time, space or capability to examine US-bound cargo at a piece level,
and could therefore refuse to handle it. Where freight services providers did undertake piece level
examination, they would pass their costs on to their customers. This could force many exporters with
small margins out of sending goods to the US, as they would likely incur much higher security surcharges
than their competitors. Without regulatory intervention, business sustainability and in effect, market
competition, could be seriously impacted. Equally, the TSA expects government regulatory oversight.
Objectives of Government action
The rationale for government action is to support businesses involved in exporting air cargo to the US to
build piece level examination capability, either at source (by physical or technological means by the
exporter) or along the supply chain by freight service providers (again by physical or technological
means). It is critical that government regulatory settings are balanced so they meet security requirements
and ensure that Australian businesses can continue to trade in the global market.
There is precedent for this type of intervention, as other government agencies already regulate in the
export space. For example, the Department of Agriculture is responsible for regulating the export of
'prescribed goods', the purpose of which is to uphold domestic food safety standards and maintain export
market access by ensuring that Australian exports are compliant with the requirements of importing
countries, including for example, the United States Food and Drug Administration (FDA).
Policy options
Four policy options have been considered:
Option 1
This option represents the status quo - regulated businesses would continue to apply the current
regulatory requirements to export air cargo. The Australian Government would take no further action,
leaving it to industry to work out how they meet the TSA's requirements.
This option is included here, as it can be considered a 'non-regulatory' approach. However, it cannot be
considered a viable option, because even though the TSA directly regulates airlines that fly into the US by
issuing them with security programs, they will not accept any air cargo from Australia if the methods,
techniques and equipment used to examine it at a piece level are not approved, prescribed and overseen
by the Australian Government.
The Department recently issued EACE notices to key industry participants that require these participants
to examine cargo at piece-level by X-ray, Explosive Trace Detection (ETD) or physical examination. These
EACE notices meet the TSA requirements, and cover 15 per cent7 of all US-bound air cargo. However, the
status quo means that the remaining US bound air cargo does not meet TSA standards or current
international standards, as articulated by ICAO.
Under the status quo, it is questionable whether many exporters will be able to continue to export to the
US at all. In order to maintain market access, exporters to the US may, at a minimum, need to change:
the goods and services they currently offer and how they provide them; and
their current business models and operational processes.
There may also be impacts on US-based consumer demand for certain products, if their variety and
delivery are affected.
7 Draft internal report
21
This option is included primarily as a baseline for comparing costs, benefits and impacts. Options 2-4 can
be viewed as different approaches for transitioning to a new required state (all US-bound air cargo is
accepted for uplift).
Option 2
Under this option, the Australian Government would amend its current regulatory regime to introduce a
requirement for piece level examination using specific methods and equipment for all US-bound air
cargo.
This option would require 100 per cent of US-bound air cargo to be examined at a piece level, using
specific methods and equipment. Although it would meet the TSA's requirements, this option is inflexible
and could result in severe imbalances in affected industry sectors. It could cause immense bottlenecks at
the airport, as most air cargo presented to on-airport cargo terminal operators tends to be highly
consolidated. Trade impacts would include goods which do not lend themselves to available examination
techniques (including some heavy manufactures and fruit and vegetables) and also likely hit
comparatively low value consolidated air cargo and cargo for 'just in time' markets the hardest, making
many perishable exports uneconomic.
Option 3
Under this option the Australian Government would amend its current regulatory regime to introduce
enhanced piece level examination together with a Known Consignor scheme for US-bound air cargo only.
This is the preferred option. It would allow industry participants choice in how they meet the TSA's
requirements by stipulating that 'piece level' examination could be achieved either by having cargo
submitted for enhanced piece level examination at a specified regulated freight forwarder, or by
originating from another kind of regulated business - a Known Consignor. Representatives of smaller
exporters prefer this option as it will reduce the regulatory impact across the export industry - those who
do not export to the US will not be subject to the increased costs.
The approaches under this option also meet international standards providing a foundation should other
countries require the same standard as the US in the future.
Option 4
Under this option, enhanced piece level examination together with a Known Consignor scheme would be
put in place for 100 per cent of export air cargo.
This option resembles Option 3 in that it would balance piece level examination with a Known Consignor
scheme. However, it would require all export air cargo, regardless of destination to be 'secure'. This
option is preferred by some industry participants (particularly large freight forwarders), as they
anticipate difficulty in separating out US-bound air cargo, and are concerned they will not be able to
achieve economies of scale. It would also ensure that our regulatory framework is aligned with
international standards.
However, current tight timelines and this option's potential impact on non-US exporters would not allow
efficient implementation in the short term. The preferred option (Option 3) could be expanded to include
all export air cargo in future as necessary.
22
Regulatory impacts of options 2-4
Options 2-4 propose regulatory changes likely to impact businesses in the export air cargo supply chain.
These include:
The potential for price increases because of regulatory requirements (e.g. freight forwarders may
increase their handling and security charges; exporters may increase their prices for goods, both
exported and domestic) if their business costs increase.
There may be impacts on a business' ability to compete in the market because of:
o new regulations requiring exporters to comply with security obligations;
o associated administrative processes exporters will need to undergo to become accredited
Known Consignors;
o new obligations for regulated industry participants associated with examining US-bound air
cargo at a piece level; and
o associated administrative processes freight forwarders will need to undergo to become
accredited piece level examiners.
Analysis of options
Option 1--Status quo
Under this approach, the securing (or 'clearance') of cargo is provided by a Regulated Air Cargo Agent
(RACA) on the basis of either:
Regular Customer arrangements; or
'examination' of cargo in accordance with a Transport Security Program (TSP).
RACAs are able to clear cargo that has been consigned by a 'Regular Customer' without inspection or
examination requirements, as it is considered 'known' cargo. Regular Customers are unregulated entities
(usually exporters) that have a business relationship with RACAs. A RACA's obligations in relation to their
Regular Customers are articulated in their TSPs. A RACA's TSP must include (for international cargo):
a) procedures for maintaining and keeping secure a list of Regular Customers;
b) the form of an undertaking required from such a customer that they will take appropriate security
measures to prevent the unauthorised carriage of an explosive or an explosive device; and
c) the procedures for receiving cargo from such a customer, including procedures to identify people
who represent such a customer.
To become a Regular Customer a business must have previously been a Regular Customer of another
RACA, or have an established credit rating and have shipped three consignments without incident. They
must provide a security undertaking to the RACA once every two years.
Although Regular Customers have some security-related obligations as required by the RACA(s) they
engage with, they are not identified as Aviation Industry Participants for legislative purposes, and have
no security obligations to Government.
This option can be considered a 'non-regulatory' option, as it would maintain the current regulatory
regime, without extending regulatory reach to exporters, or adjusting current examination obligations to
accommodate piece-level examination. It would be up to individual air cargo supply chain businesses to
decide whether they wish to meet the TSA's requirements, and if so, how they would do so.
The TSA imposes requirements directly on airlines by means of a security program, which stipulates that
airlines cannot bring cargo into the US that has not been examined at a piece level. Requirements would
be passed down the supply chain, from airlines to their on-airport handling agents (CTOs), to off-airport
freight service providers, and ultimately, to exporters themselves. Because deconsolidation and piece
level examination will be too expensive and impractical for many businesses to implement, only a small
23
percentage of US-bound air cargo will be able to be appropriately examined. This means that the large
'tail' of businesses (largely the smaller and medium size businesses) would no longer be able to export to
the US.
Many businesses, such as those exporting high value cargo or a large quantity of cargo, or major
international freight companies, employ sophisticated security systems. For instance, regulated entities
moving high value air cargo, such as precious metals and pharmaceuticals, have advanced security
systems to prevent the theft or loss of their cargo by staff or visitors. Therefore, maintaining the status
quo would not provide an efficient mechanism for recognising cargo which is already secured from
unlawful interference. This could lead to the imposition of costly examination or require businesses to
forego potential market opportunities.
This is not considered a viable option, as the TSA will not accept any air cargo from Australia if the
methods, techniques and equipment used to examine at a piece level are not approved, prescribed and
overseen by the Australian Government. Because current regulatory requirements do not prescribe piece
level examination, many of the 10,000 businesses that export to the US by air, as well as all freight service
providers, CTOs and airlines that handle or carry US-bound air cargo would be impacted.
Option 2-- 100 per cent piece level examination
Under this option, the Australian Government would amend the current regulatory regime to introduce a
requirement for enhanced piece level examination using specific methods and equipment for all US-
bound air cargo.
This option is highly regulatory. It would require 100 per cent of US-bound air cargo to be examined at a
piece level, using specific methods and equipment. Although the scheme would be nominally voluntary
for off-airport freight forwarders, CTOs, operating as agents for airlines, would have a commercial
imperative to examine US-bound cargo at a piece level. Off-airport freight forwarders would be
encouraged to become piece level examiners, and would need to make the decision based on their
commercial context and those of their customers.
The inflexibility of this 'one size fits all' approach does not recognise the dynamic nature of the export air
cargo industry. A flexible approach is necessary to ensure all goods and sectors have a viable mechanism
for securing goods which are costly or impractical to examine.
It is estimated that Option 2 would lead to a significant proportion of goods being withdrawn from the US
market simply because the composition of the goods make piece level examination by technology or by
physical examination difficult, would damage the goods or the delay would lead to deterioration. For
example, heavy manufactured items and some fruit and vegetable product s may not be able to be
examined effectively under the prescribed examination arrangements.
The inflexible approach would also mean that highly regulated industries such as the pharmaceutical
industry would be disadvantaged. This is because they would have to undertake unnecessary and
impractical measures to examine goods which are already protected from unlawful interference. This
could mean a significant proportion of US-bound cargo would not be recognised for uplift despite already
meeting strict regulatory standards.
In addition, the Department undertook research which demonstrates that the impact of infrastructure
costs, deconsolidation costs, time delays and penalty costs are significant.8 The research noted that it was
not possible to quantify all of the costs associated with this option.
Overall, this is not a preferred option. Although it would meet the stated objective of screening all US-
bound air cargo at a piece level, it is inflexible and could result in severe imbalances in affected industry
8 Sapere (2012) Enhanced Air Cargo Examination Economic Impact Analysis
24
sectors. For example, CTOs would have no choice but to examine US-bound air cargo at a piece level. As
approximately 90 per cent of export air cargo received at a CTO is already consolidated, and CTOs have
little or no space to unpack, examine, then reconsolidate cargo, substantial bottlenecks and delays would
occur. Trade impacts would hit comparatively low value consolidated air cargo and cargo for just in time
markets the hardest, making many perishable exports uneconomic.
Option 3-- introduction of piece level examination together with a Known Consignor
scheme
Under this option, the Australian Government would amend the current regulatory regime to introduce
enhanced piece level examination together with a Known Consignor scheme for US-bound air cargo only.
This is the preferred option.
Under this option, the Department proposes to create a new regulated industry participant called a
Known Consignor. This participant will have mandated air cargo security obligations, and will be subject
to audit and compliance activity under the ATSA. This means that current regulation would be extended
to:
require that all US-bound air cargo be examined at a piece level, either by securing the cargo at
source (Known Consignor) or subjecting it to piece level examination with equipment and
processes approved by the Department; and
allow exporters of US-bound air cargo to become regulated entities under the Aviation Transport
Security Act 2004 (ATSA).
This option would meet the TSA's requirements by:
Implementing a Known Consignor scheme - overseen by the Department and with validation of
exporters before entry to the scheme. This would ensure cargo is secured from its source to the
aircraft (accepted by the TSA as piece level examination at source); and
Require piece level examination for US-bound air cargo dispatched by exporters who are not Known
Consigners. This would mean industry would need to establish screening facilities off-airport to
examine cargo that was not from a Known Consignor.
The proposed Known Consignor scheme will be optional. Exporters of US-bound air cargo may choose not
to become regulated industry participants under this scheme, however in that case, their US-bound air
cargo will be required to undergo piece level examination by a regulated freight forwarder, or their cargo
will not be able to be loaded on a US-bound aircraft.
This option would meet the stated objectives. It would provide industry participants with choices; either
become a Known Consignor, invest in examination capability or pay another business to examine export
cargo. For example, to be approved to secure US-bound air cargo as a Known Consignor, an exporter
would need to have appropriate security measures in place at their facilities to ensure cargo cannot be
tampered with before export and that that export cargo is securely transported to the aircraft. High level
security requirements would be set out in a standard security program with which for Known Consignors
must comply. Guidance would provide suggestions for meeting these requirements, allowing for a wide
variety of operating environments. Businesses could also choose to invest in examination capability off
airport, examining cargo and securing its transport to the aircraft or paying another business to examine
air cargo and transport it securely to the airport.
This option would provide a balance between US-bound air cargo being secured at source and being
examined further along the supply chain. It is more likely to result in a continuation of trade to the US,
without heavily impacting industry sectors with relatively low value goods (e.g. horticulture) or those
with goods not easily examined (e.g. heavy machinery, electronics, pharmaceuticals).
25
This option is preferred over option 4 as it allows businesses to make commercial decisions about
applying increased security measures for air cargo going to jurisdictions with a lower regulatory burden.
Further, many businesses that export are already required to comply with regulatory obligations by other
government departments, or have implemented a range of security measures to prevent the theft and loss
of high value cargo. The SRA concluded that these measures in many cases achieve an appropriate
security outcome. The flexibility inherent in the proposed Known Consignor scheme will mean that many
exporting businesses may already meet its requirements without (or with minor) changes.
Option 4-- introduction of piece level examination together with a Known Consignor
scheme for all export air cargo
This option is similar to the preferred option (Option 3 above), in that it would allow industry
participants to choose to become Known Consignors, or to have their export air cargo examined at a piece
level. However, this option would require 100 per cent of export air cargo, regardless of destination, to be
'secure', that is, all cargo would either originate from a Known Consignor or be examined at piece level
prior to uplift on an aircraft.
This option may disadvantage exporters to trade locations which do not currently require higher levels of
examination. This is particularly the case for Asia-bound exports which constitute a significant proportion
of Australia's export air cargo.
However, while we must focus on US-bound air cargo due to the TSA's requirements, there is a risk that if
the US removes its recognition of Australia's air cargo security arrangements, or if these arrangements
are otherwise called into doubt, other nations may also remove their recognition of Australia's air cargo
security arrangements. Of particular concern is that the European Union (EU) could respond by reviewing
Australia's current 'green' status, which allows Australian-based airlines to carry air cargo into the EU
without undergoing a validation process. Should this occur, a further 20,700 tonnes of air cargo worth
$6.3 billion would be at risk.
Other key international partners are adopting the approach outlined in this option, and it is supported by
(ICAO). Industry stakeholders have argued that introducing piece level examination and a Known
Consignor scheme only for US-bound air cargo could result in higher costs for industry, by not realising
the economy of scale that would be derived by putting the requirements in place for all export air cargo.
This may be the case for some businesses. However we consider, on balance, that requiring all exports to
meet the TSA requirements is likely to have a more significant, and detrimental, impact.
This option is not preferred, as current tight timelines and its impact on non-US exporters would not
allow efficient implementation. However, the preferred option (Option 3) would be acceptable to
Australia's international trading partners and could be expanded if and when necessary.
Consultation
Communications and engagement plan
The Department is developing a Communications and Engagement Plan to provide for efficient and
effective communications and engagement with industry. The aim of the plan is to:
assist the Department with the development of policy and regulatory arrangements for US-bound air
cargo;
meet Best Practice Regulation guidance, facilitating the approval of the Regulatory Impact Statement;
facilitate the collection of quantitative and qualitative data for policy analysis. This includes attitudes
and preferences, compliance attitudes, current industry practice, and pricing behaviour;
26
ensure industry are adequately informed about the proposed change; and
ensure industry attitudes are understood (by sector as far as possible), and that industry has
sufficient information to develop an informed opinion.
The consultation plan involves targeting a broad range of industry stakeholders, in terms of size, segment
of the supply chain, level of sophistication and location. Key industry associations, including the Export
Council of Australia and Australian Industry Group, have agreed to assist with identifying potential
impacts and costs to businesses, particularly SMEs.
The Department also maintains regular communication with the Cargo Working Group (CWG), whose
members represents major industry stakeholders including airlines, general and express freight
forwarders, exporters and government agencies.
It should also be noted that the major businesses that will be affected by the TSA's requirements (e.g.
Qantas Airlines, Virgin Australia and the Conference of Asia Pacific Express Carriers) support the
Department implementing regulatory changes to meet the TSA's requirements.
Consultation activities to date
The Department has been working closely with industry in the development of enhanced air cargo
security arrangements since 2012. It previously conducted extensive industry stakeholder consultations
to support the introduction of a Regulated Shipper Scheme (RSS) and Enhanced Air Cargo Examination
(EACE) in 2014. These consultations included the following:
Site visits to approximately 75 exporters across Australia, representing a range of commodity types,
locations, sizes and levels of sophistication. Although these site visits were specifically for developing
and implementing a Regulated Shipper Scheme under the Securing the Air Cargo Security Supply
Chain (SACSC) framework, much of the information gathered is relevant for Known Consignor.
Previous targeted workshops and consultations, including:
o 17 two-hour workshops held in eight cities (Sydney, Melbourne, Brisbane, Perth, Darwin,
Hobart, Adelaide and Cairns). A total of 124 people attended the workshops, representing a
range of exporters. Participant responses were included in a comprehensive final report.
o Follow-up workshops held six months later to provide stakeholders with more detail about
security requirements for RSS. Participant responses were included in a summary report.
Telephone and online surveys were also conducted to supplement the targeted workshops. 1,000
responses were collected from industry stakeholders, and a final report was written.
To augment this earlier consultation work, the Department conducted a series of two-hour workshops in
June-July this year with freight forwarders and exporters, specifically to inform them about the TSA
requirements, and to elicit their responses. A total of seven workshops were held in Brisbane, Sydney and
Melbourne, and approximately 200 people attended.
Other recent consultation activity has included:
dissemination of a discussion paper outlining the proposed approach, including a questionnaire
allowing stakeholders to give feedback;
engaging Ernst and Young to conduct a US-bound air cargo supply chain study based on industry
engagement; and
working with industry forums such as the:
o Cargo Working Group; and
o Aviation Security Advisory Forum.
Consultations with industry stakeholders have identified that many businesses will be well placed to
implement the proposed changes. However, industry participants have highlighted that increased cost
structures and extended lead times may have a negative impact on their ability to complete
27
internationally. With this in mind, the Department is committed to designing a scheme which is flexible
enough to reflect the operating environment of individual businesses. In addition, the Department is
working closely with other government agencies to minimise regulatory duplication where possible. To
this end, the department is working with the Department of Immigration and Border Protection
(Previously Australian Customs and Border Protection Service) and the Department of Agriculture.
The Department has worked closely with the TSA and other international trading partners to ensure that
the changes meet the TSA's requirements and international standards while remaining appropriate for
the Australian context.
Further planned consultation
A further phase of consultation will focus on eliciting information to support the development of a
cost/benefit analysis, an implementation plan and costings for the RIS Part 2. The Department will
conduct this consultation through:
Targeted workshops, face-to-face interviews, telephone interviews and online surveys with identified
industry stakeholders; and
Information sessions, participation in industry events and engagement with industry associations to
inform a broad range of stakeholders about the proposed options (changes).
Recommended option
We expect that the results of detailed costings and a cost benefit analysis will support the Department's
position that the preferred option (Option 3) provides the most effective, efficient and economical
solution to the stated problem. Although there will be some cost to industry, this option will allow
businesses more choice and flexibility in how they meet the obligations.
Implementation and evaluation
Implementation and evaluation will be included in RIS Part 2.
28