Annual Customs Brokers and Freight Forwarders (CBAFF) Conference

Greetings and thank you for inviting me to speak here today. 

The Government has worked hard this term to maintain forward momentum in the trade sector.

Border services that are not seamless cost industry money and impact on national economies. Evidence shows that inefficient border processes can be a significant barrier to trade.

Facilitating trade efficiency is important for both the New Zealand economy and for the success of your businesses. We are, after all, an export driven economy and customs administrations are in a unique position to help reinvigorate world trade.

To meet these challenges customs administrations need to be agile enough to take hold of opportunities presented by the changing environment. Technology developments are a good example.

Joint Border Management System and Trade Single Window

New Zealandis making the most of advances in technology to make Customs more effective. We are increasingly using IT systems to support border processes. You would have heard yesterday from my officials regarding the Trade Single Window and the Joint Border Management System. We call this TSW and JBMS.

The Joint Border Management System/Trade Single Window, SmartGate, and the progress in trade discussions lately are all tremendously important in making the border a more efficient, effective, and productive environment. And in times of fiscal constraint and tight budgets, productivity, efficiency, and effectiveness are all critical.

Funding has been approved for developing the first tranche of the Joint Border Management System. This will replace the two outdated IT systems used by Customs and MAF Biosecurity with an advanced system offering more streamlined and efficient processing for traders and for the border agencies.

While I can’t discuss anything about next week’s budget, I will say that once fully implemented, JBMS promises high value returns for this country in terms of helping Customs and MAF facilitate legitimate trade more effectively.

So I make no apology in supporting Customs and MAF as they seek to move to boost the penalty regimes so that there are real disincentives to lodging inaccurate data.

The Government is committed to facilitating trade and reducing compliance costs to you, but also through this new system Government are making an investment in helping grow the economy.

I am also mindful that as a professional body you have taken steps to ensure your membership are well versed in these developments and I thank you for that.

De minimis

I announced in March that the de minimis – the amount of duty that need not be collected – would remain at $60 for the foreseeable future.

The de minimis will next be reviewed when these standards have been decided and the flow on impacts on revenue collection processes and costs become apparent. This is expected by mid 2012.

SmartGate

This year we have continued to find better ways to facilitate trade and travel. In the Australian market, SmartGate is part of moving trans-Tasman travel closer to the “near domestic” experience sought by both the New Zealand and Australian governments.

SmartGate has been an unqualified success and the uptake at New Zealand airports has been well ahead of expectations.

Auckland, Wellington, and Christchurch are now open for arrivals. Auckland departures started late last year with Wellington starting departures next month and Christchurch soon after.

And from June, Australia Customs and New Zealand Customs will conduct a trial involving the integration of the two country’s SmartGate systems — New Zealand’s departures and Australia’s arrivals at Gold Coast Airport.

SmartGate has been so successful that just last week we celebrated our one millionth passenger using the system.

Australia relations – Closer Economic Relations

Our relationship with our counterparts across the ditch is also exemplary in terms of the first example of New Zealand signing a free trade agreement – CER: Closer Economic Relations.

As you will be aware, free trade agreements save New Zealand businesses real money in tariff reduction and allow traders to price their goods more competitively with a better access to markets.

Customs is steadfast in continuing work with government and industry  on both sides of the Tasman – particularly with the Australia-New Zealand Leadership Forum – to keep ahead of the developing needs of trade and tourism.

Australiais still a critical market for New Zealand business and through initiatives like Smartgate the Government continues to work towards a single economic market.

To be a globally competitive economy, New Zealand needs to sell more of its goods to the world, access a wider range of markets and continue to be efficient and innovative.

The prospects for growth in exports are good. Commodity prices and demand for New Zealand goods are high. New technology means New Zealand’s distance from the world is being overcome.

The government is also opening new markets through free trade agreements, and working through those agreements to reduce costs to business.

Free Trade agreements

Free trade agreements save New Zealand businesses real money in tariff reductions and allow traders to price their goods more competitively with better access to markets.

They also give New Zealand investors and businesses access to those same markets to build demand for our goods and set up deals for New Zealand exports.

New Zealandnow has a range of FTAs with major markets such as China, ASEAN and Hong Kong.

Exporters are already taking advantage of these agreements. The New Zealand China FTA was signed two years ago. In those two years, New Zealand’s exports to China have almost doubled, with every major export sector benefiting.

We now trade with China in 6 hours the same amount as we traded in a whole year in 1972, when diplomatic relations were established.

China and Australia are not our only major trading partners. ASEAN, for example, is a market of 600 million people with a growing middle class wanting the high quality food that we produce. New Zealand now trades almost as much with ASEAN as we do with Europe – a far cry from our reliance upon the UK market many years ago.

Further markets will be opened up in the future. New Zealand is currently negotiating different FTAs with Korea, India, the Gulf States, and Russia.

We are also a key player in the development of a regional Asia Pacific Free Trade Agreement – the Trans-Pacific Partnership, which will cover 9 countries, including the United States.

For a small country, with a small population, FTAs are critical to maintain our competitiveness with other exporting countries.

A recent ANZ study on FTAs found that New Zealand agricultural exporters paidnearly $1.5 billion of tariffs on $18.5 billion worth of exports in 2010. This is effectively an 8 percent reduction in revenue and an even larger hit to farmer and grower profits.

That same study estimated that if all of these FTAs are successfully negotiated, New Zealand will have free access to a market of over half the world’s population, and accounting for close to half of global GDP.

This is why we also need to focus on using FTAs to reduce compliance costs to business such as customs paperwork and transaction times in overseas markets. We want these agreements to reduce tariffs but also support efficient, integrated global supply chains and modern business practice.

FTAs have to recognise that many businesses now operate their supply chains across different countries. Many products are made from inputs from across the globe. We want FTAs to be future-focused,   fully support e-commerce and paperless trading and to create the best possible trading environment for New Zealand companies to grow.

A number of you will have worked with Customs agencies in developing economies and you will be fully aware there is scope for improvement.  You will be aware that there is sometimes too much focus on compliance, revenue collection and paper-based approaches.

This is why we continue to work closely with Customs agencies in China and elsewhere. New Zealandand China are different in many ways. China is the second largest economy in the world – and China Customs has 50,000 customs staff and 580 offices – compared with 1200 customs staff at 16 air and sea ports in New Zealand.

There is a big challenge for us in making the major economic powers listen to New Zealand.

What we do know, is that the relatively small volumes of trade and low risk nature of New Zealand goods makes New Zealand an ideal partner for China and other larger traders like the USA with which to test new ways of doing business.

We see FTAs as living agreements, as do our FTA partners. For example, China Customs is committed to working with New Zealand to enhance the trade environment under the FTA. A group of Chinese Customs officials will be visiting New Zealand shortly for discussions on the FTA, and they are committed to working with us for the benefit of both our countries.

Facilitation while managing risk

It’s not all about facilitation though, we also need to manage risk.

We know that making border processes consistent and efficient translates into greater efficiency in your supply chains. To make border clearance more efficient, Customs administrations have to get really good at singling out goods that are high risk so that they can let those that aren’t move through the supply chain as quickly as possible.

One risk that continues to be high on Customs’ radar is the trafficking of ‘P’ and the ingredients used to make it.

In 2010, New Zealand Customs seized almost one tonneof the ingredients, or precursors, used to make ‘P’, much of which originated in China.

I’m pleased to note that China Customs has agreed to work with New Zealand to disrupt the criminal networks that are operating between New Zealand and China, and stem the flow of precursors coming to New Zealand.

This kind of international cooperation has become standard for customs administrations. Customs agencies can help facilitate trade by being on the same page and be working together – and we are.

United States and Secure Exports

An excellent example of this is our relationship with the United States.

In March this year, I announced improvements to the existing Mutual Recognition Arrangement between New Zealand Customs and U.S. Customs and Border Protection to provide high quality, tangible benefits for local exporters.

The changes will improve the processing of shipments byexporters who are members of New Zealand Customs’ Secure Exports Scheme (SES). Many of you I know are aware of its benefits.

Under the existing Mutual Recognition Arrangement, SES goods are already assessed as low risk. However, this improvement means that SES goods are now 3.5 times less likely to be examined for security purposes by U.S. Customs.

SES members should generally have greater certainty about the movement of their goods through the United States border and quicker access to the United States market; also a higher priority in times of crisis and trade recovery.

The benefits that SES gives New Zealand exporters in the US market put us in a unique position. No other scheme has such a high level of recognition in the States.

It is an excellent demonstration of how industry can benefit from joining with customs administrations to secure international supply chains.

I would ask you do whatever you can to encourage your major clients to explore with Customs the opportunity to join the SES scheme, the true benefit to New Zealand will be in times of disruption, should such an event occur it will be too late to look to join.

There are Customs managers here who can provide you with additional detail should you wish.

Conclusion

We are making great progress. It’s been a successful year and there is great prospect for traders with the initiatives we are working on.

Thank you.