FTA interview with Michael Pezzullo CEO Australian Customs & Border Protection Service

Monday, October 21, 2013

Whilst chairing the 2013 AusIntermodal I had the opportunity to engage with Michael Pezzullo (CEO Australian Customs & Border Protection Service) who delivered a very interesting and thought provoking keynote address. In a follow up meeting in Canberra on 21 October 2013 I asked a series of questions to Michael. The responses are interesting setting the scene for major reforms.  



1. PAUL ZALAI - We have heard and read a lot about the Blueprint for Reform 2013 – 2018. What have been the main achievements during the first year of this initiative?


Efforts to realise the vision outlined in the Blueprint for Reform are happening in earnest across the agency. Main achievements include:


The formation of the Integrity, Assurance and Strategy Division including the appointment of a Special Integrity Advisor;


The implementation of enhanced integrity and anti-corruption measures including:

·        toughening our policy on carriage and use of personal mobile electronic devices across all sensitive operational areas;

·        drug and alcohol testing;

·        enhanced our organisational suitability checking processes to better detect and deal with officers with criminal associations; and

·        policy and practice around secondary (outside) employment.


The creation of a new strategic partnership with the Australian Federal Police (AFP) to deliver stronger operational coordination between the two agencies.


To manage the Reform process effectively, I have :

·        established a Reform Taskforce to coordinate and raise awareness of all the components of reform.

·        appointed Accenture to work with the Reform Taskforce to develop a program of work for the implementation of Reform. They along with a consortium of partners that includes Ernst and Young, ThinkPlace and St James Ethics Centre, will assist us to identify key strategies, opportunities, actions and interdependencies required to implement the transformation of the Service.

·        convened a Reform Advisory Group made up of officers from across the Service to provide me with advice about the design and development of the Reform initiatives.


Implemented an enhanced rewards and recognition framework to recognise:

·              Bravery;

·              Conspicuous Conduct;

·              Excellence;

·              Innovation; and

·              Health and Safety.


Commenced the Queensland Regional Command Pilot on 1 October 2013.



2. PAUL ZALAI - What are some of the challenges faced by the ACBPS in the following four years of the reform?

Global and domestic economic challenges include:

·        significant increases in trade and travel volumes;

·        increasingly complex global supply chains and travel routes;

·        greater geographical dispersion of entry and exit points in Australia;

·        increasing diversity of cross-border transactions of potential national security, criminal or economic concern; and

·        the increased number of entities using sophisticated means to exploit border vulnerabilities in order to:

o   import prohibited or regulated goods;

o   export controlled goods or equipment; and

o   move people in or out of Australia


The need to have improved border management in the dynamic and rapidly changing trade environment to;

·        foster legitimate trade and travel while remaining vigilant for national security, law enforcement and community protection purposes; and

·        apply border controls consistent with trade, revenue and industry policies objectives.


The need to be actively involved in the development of solutions to major strategic challenges associated with port and freight infrastructure.



3. PAUL ZALAI - Will we simply see scaling of systems and current processes to meet the projected increase in trade volumes or will we see alternate solutions?


We cannot hope to meet the challenges of the future by simply scaling operations to meet demand; that is not a viable or efficient solution.


We need to develop innovative ways of meeting future challenges. 

·        We will use the Reform process to provide the best possible support to legitimate traders. This means our future border systems and processes will need to be highly efficient and sophisticated, and geared to the reality of the modern global trading system.

·         'Shrinking the haystack' to ensure we focus our efforts on high risk activities.


Engaging with different sectors of the trading community and industry to understand their business models including emerging ones.



4. PAUL ZALAI - Are you looking at accessing alternate systems such as commercial "track and trace" functionality as a part of future strategies for risk assessment?


Yes. We are looking at a range of technologies that may support our shift to trusted trade approaches. They will allow the Service and partner agencies to redirect resources to areas of high risk.


We will be assessing the potential value of a range of trusted trade arrangements, including:

·        arrangements utilising trusted technologies;

·        approaches such as Public-to-Private (P2P) partnerships based on trust, clear accountabilities, shared responsibilities and, where appropriate, supported by trusted technology.

·        These technologies with include 'track and trace' technologies, which could provide significant benefits to consumers, business, the economy and government.

·        These trusted trade approaches could apply across all import streams (air, sea and international mail) and would need to be supported by regulatory and business process reform.



5. PAUL ZALAI - By the nature of current systems, ACBPS receive limited information about importers as many details are hidden behind intermediary service providers. Are we likely to see ACBPS focus more on an "entity based risk assessment" receiving EFT details and additional commercial information direct from importers?


There is more information available than ever before. This explosion of 'big data' will only increase. By improving our access and use of this information we will improve our capability to protect the community.


This may include exploring how we can connect our systems with the private sector (including importers) as well as improving our ability to share classified information with trusted partners.



6. PAUL ZALAI - As a part of the reforms we have heard about the "Trusted Trader" scheme. Is this simply another term for an Authorised Economic Operator (AEO) type concept?


No. The Service is not wedded to the classic AEO formula – we are focussed on how to create trusted relationships with traders and with operators in the supply chain – where the only override would be intelligence led alerts.


At the heart of this approach is a paradigm shift, where our relationship with traders is not simply governed by control-based regulation and we begin to move to a differentiated, trust-based regulatory framework.


Our primary aim is to focus effort on areas of high risk. The trusted trade concept is aimed at 'shrinking the haystack,' that is the volume of goods requiring scrutiny at the border, and will increase our ability to focus effort on high risk goods and entities.


The trusted trade concept will

·        focus on border risks, leveraging information and complementing programmes focussed on air cargo security risks; and

·        take into account existing global standards such as the World Customs Organization's SAFE Framework of Standards to Secure and Facilitate Global Trade. 



7. PAUL ZALAI - Can you point to any examples whereby ACBPS has worked with industry to develop a "whole of Government" regulatory framework to support an emerging business model?


The Service is well equipped to lead whole-of-government efforts at the border, whether it is in response to illegal foreign fishers, regulated goods or other border security matters.


We have recently worked closely with industry and other government agencies to develop appropriate 'whole of Government' regulatory framework to support an emerging business model has been in relation to a proposal for a Floating Logistics Hub in northwest Western Australia to address the significant shortfall in deep water port infrastructure to support major resource projects.


We are also working closely with Defence and industry to review and streamline regulatory requirements for the movement of goods under the Defence Trade Cooperation Treaty.


These are just two recent examples of the where the Service and stakeholders can work together to achieve desired outcomes. This is my expectation of how we will approach these shared challenges in the future.



8. PAUL ZALAI There is a clear industry agenda to increase the use of intermodal terminals to remove port congestion. What are the implications for ACBPS in dealing with this change in the supply chain?


It is clear that there are a number of drivers to this direction. As urban congestion increases, particularly in Sydney and Melbourne, the demand for intermodal terminals (combining road and rail transport) located alongside key industrial/warehousing precincts is increasing.


Intermodal hubs represent an innovative way of meeting future logistical challenges in both the air and sea environment. 


The Service will support innovative ways of doing business (including intermodal hubs) as we see substantial benefit for Australia's economic prosperity. 


We will continue to engage with industry to co-design solutions that will benefit industry and the community.


Intermodal hubs present risks and opportunities for both industry and government and we will need to continue to work together to ensure that our regulatory framework, policy settings, risk assessment and intervention activity are appropriate while also ensuring supply chain security.



9. PAUL ZALAI - What will be the underlying ACBPS compliance philosophy in years to come?


To address the significant effect that non-compliant trading can have on the economy and the safety of the community, we will continue to build on our recent efforts to target weaknesses in the border control framework.


We will provide our officers with the right powers, sanctions, technology and other tools to effectively identify and treat non-compliance and to encourage lasting behavioural change.


We will also work smarter, building stronger international and cross-agency connections to support our operational activities, including pursuing trade data exchanges with key trading partners.


We will also seek out opportunities to work more collaboratively with Australian industry stakeholders to respond to border threats.


However, change is not limited to the Service. As you are aware, there are challenges for all parties involved in supply chain and border logistics and we are committed to working with all parties to face these challenges together.



10. PAUL ZALAI - What is the likely lifespan of the Integrated Cargo System (ICS)?


Like any other system we are continually evaluating its performance to determine its fitness for purpose.


While I am not able to give a direct answer to that question, some of the approaches we are considering may explore alternative ways of obtaining the information required to manage the border risks and trade statistics.



11. PAUL ZALAI - How will ACBPS engage with stakeholders to disseminate information and to gain a wide representation of views during the upcoming years of reform?


I have established a Specialised Reform Taskforce which will be focussed on reforming how we do business with our customers and the channels through which we do business.


I also intend to soon establish a Trade and Customs Division and function within the Service, to grapple with and develop solutions to the challenges that I have outlined.


We will work with industry, the community and our partner government agencies to:

·        ensure the dissemination of relevant information; and

·        gain wide spread representation of views when tackling the full spectrum of challenges which lie ahead.


12. PAUL ZALAI - On behalf of FTA and our subscribers, thank you for taking the the time to participate in this interview. We look forward to working closely with you and your executive team in meeting the upcoming challenges.