The objective of the audit was to assess the administrative effectiveness of Customs' Container Examination Facilities. Particular emphasis was given to the following areas: target selection processes; target development strategies; intervention processes; and facilities operation.



The maritime transport sector contributes over $180 billion annually to Australia's economy. Seventy-four per cent of Australian exports and imports are moved by ship and, by 2010, container movements are expected to grow by 45 per cent.1

Following recent terrorist attacks, there is increased global awareness and concern about border security. It is internationally recognised that the maritime sector could be a target and/or vehicle for terrorism.2 The Government recently announced several major maritime security initiatives. Included in these initiatives was a $75.4 million maritime security funding package for the Australian Customs Service (Customs), the regulatory agency with primary responsibility for protecting Australia's borders.

Customs plays a vital role in preventing illegal and harmful goods from entering Australia. To strengthen its border protection capability, Customs established Container Examination Facilities (CEFs) in Melbourne, Sydney, Brisbane and Fremantle as part of a more comprehensive and integrated approach to sea cargo examination in Australia's major ports. Together, these ports cover around 94 per cent of imported sea cargo containers.

Role of CEFs in border protection

Prior to the introduction of the Container X-ray Strategy, Customs examined approximately 11 000 containers each year.3 The establishment of the CEFs has allowed Customs to significantly increase this number. A national inspection target of 80 600 containers per year (approximately 5 per cent of loaded sea cargo importations) was set.4 This target was increased to 100 880 containers in July 2004, as part of the Government's enhanced maritime security arrangements.5

The CEFs integrate container x-ray technology with physical examination and a range of other technologies such as pallet and mobile x-ray units, ionscan technology and radiation and chemical warfare agent detectors. The facilities were designed to address the full range of Customs risks, including counter terrorism. The explicit aims of the CEFs are to:

  • prevent the flow of illicit drugs, weapons and other harmful goods into Australia;
  • minimise losses to revenue from smuggling and other forms of revenue evasion in sea cargo; 
  •  protect legitimate industry from non-compliant importers and exporters through detection and deterrence; and 
  •  improve the security of sea cargo trade in Australia, ensuring Australian business benefits through facilitation in key markets.

Maritime environment

The CEFs operate within Australia's complex maritime environment. Stevedores generally operate 24 hours a day, seven days a week for ship discharge and loading. Considerable logistical planning is required to maintain CEF throughput. Selecting and transporting containers to and from the CEFs has a substantial impact on the sea cargo logistics chain. The stakeholders impacted by the establishment of the CEFs are extensive and include industry (freight companies – road and rail; stevedores; consolidators; importers; exporters; and brokers) as well as State and Commonwealth government authorities involved in border protection.

Audit objective and scope

The objective of the audit was to assess the administrative effectiveness of Customs' CEFs. Particular emphasis was given to the following areas:

  • target selection processes;
  • target development strategies;
  • intervention processes; and
  • facilities operation.

In undertaking this audit, the ANAO recognises that some of the processes associated with selecting containers will change with the planned introduction of the Integrated Cargo System (ICS) in 2005. ICS is the information technology component of the Cargo Management Re-engineering project. It will be a single electronic reporting system, replacing four existing transaction-processing systems. Any suggestions for improvement have taken these new arrangements into consideration.

Audit findings and overall conclusion Target Selection-Chapter 2

Target selection is the day-to-day operation of screening cargo data for indicators of risk. Cargo reports are assessed by Target Selection Officers (TSOs), using a combination of risk indicators and system profiles6 , to determine whether the cargo will be released immediately or referred to the CEF for further examination. The ANAO found that Customs has effective systems and processes for risk assessing and targeting sea cargo consignments and these have been implemented across all regions.

Selecting targets for the CEFs

TSOs are required to select sufficient containers to ensure that CEF inspection targets are achieved. The ANAO reviewed the number of cargo reports targeted for each CEF since it opened until 1 September 2004. We found that none of the regions selected sufficient containers to enable the CEFs to meet their inspection targets, particularly Sydney and Fremantle who selected 90 per cent and 87 per cent respectively. The ANAO considers that this is an area that needs to be monitored closely by Customs, particularly as the CEFs' inspection targets have recently increased.

Logistical coordination of targets

The logistical coordination of selected containers is the responsibility of the Target Selection Coordinator (TSC) in each region. This position involves, amongst other things, ensuring a continuous flow of containers to the CEF and maintaining a sufficient number of selections to meet the CEF's daily throughput targets. However, the responsibilities associated with the position are not clearly defined between the Profiling & Alerts (P&A) group and the CEF and have been interpreted differently across the regions. There is also no training or guidelines for this specialist position.

Logistical coordination support system

It would appear that Customs had little understanding of the complex and time consuming nature of the logistical task. The Victorian TSC developed a database (SCATHING) to provide an electronic solution for managing the logistical coordination process. The volume of cargo being selected by Victoria and New South Wales on a daily basis meant that it was not possible to manage this process manually. Queensland and Western Australia prefer not to use this database, mainly because they are smaller regions and it is not tailored to their requirements.

Customs' IT service provider does not support the SCATHING database. There is no documentation or corporate knowledge to allow any modifications to the database because the officer who developed it is on long term sick leave. The information in SCATHING is also available in the Examination Data Management (EXAMS) system.7 The ANAO considers that Customs should adopt a consistent national approach to logistical coordination and use the EXAMS system rather than the unsupported SCATHING database or the spreadsheets used by Queensland and Western Australia.

Target Development-Chapter 3

Target development and risk profiling are interdependent and effective risk profiling requires high quality and current intelligence. The ANAO considers that Customs' intelligence framework is comprehensive, well structured and generally well implemented, although more effective communication strategies could be adopted in some regions. Customs has also developed and implemented strategies and protocols for sharing information and intelligence with other law enforcement agencies. The ANAO considers Customs' intelligence capability effectively supports its target development and risk profiling activities.

Operational intelligence

Prior to the establishment of its CEF, Western Australia completed a systematic analysis of sea cargo containers being discharged into Fremantle. The other CEF regions have not completed an operational assessment of their sea cargo environments. Although we appreciate the resource implications of undertaking such an assessment, particularly in the larger ports, we consider there would be benefits for target development and selection processes in doing so. The assessments would provide a sound basis for developing, reviewing and refining regional risk profiles and target development strategies for sea cargo discharging into these ports.

National country of origin profiles

A system profile review was undertaken by Customs between February 2003 and March 2004. The review team evaluating the national country of origin profiles currently in the Sea Cargo Automation system, recommended further examination of these profiles. Customs recognises the limitations of its current approach to country of origin profiling and is considering alternative approaches to risk-rating and targeting countries of origin. Customs' draft National Cargo Targeting Strategy recommended that an expert panel review this data and other evidence and re-evaluate the true risk ratings for all major countries. The ANAO fully supports these recommendations. However, to date this panel has not been convened or a review initiated.

Intervention Processes-Chapter 4

The establishment of the CEFs has enabled Customs to significantly increase its intervention capability. As previously advised, the Government has increased funding to allow the CEFs to inspect 100 880 containers annually and physically examine 10 per cent of these containers. The ANAO found that Customs has well defined and documented processes for inspecting and physically examining containers. These processes are understood by all CEF staff and contractors and have been implemented by all regions.

Physical examinations

The ANAO sought to determine if each CEF had physically examined 10 per cent of inspected containers. Our analysis indicates that none of the regions achieved this target for the period from opening until 1 September 2004. As all priority one containers require a physical examination, we also analysed the EXAMS data by priority rating for the same period. We found that none of the regions examined all priority one containers. In particular, Brisbane and Melbourne examined around 60 per cent and 72 per cent, respectively. The ANAO suggests that Customs regularly monitor the physical examination of priority one containers to ensure that they are being completed. We also consider that the target of 10 per cent should be regularly reviewed to ensure its continued relevance.

Recording inspections and examinations

All regions raised concerns regarding the EXAMS system data entry requirements, the difficulties associated with accessing, extracting and analysing examinations results data and the integrity of the data. To overcome the perceived inadequacies of this system, Sydney, Brisbane and Fremantle CEFs developed local databases to record examination information, throughput statistics and container turnaround times.

The ANAO compared EXAMS data generated through the Corporate Research Environment (CRE)8 in Central Office with data provided by the regions for the period 1 March 2004 to 31 August 2004. The ANAO was unable to reconcile the data sets for the number of containers selected.9 Our analysis, and subsequent discussions with the regions, has demonstrated that there are no clear search parameters or common system business rules that the regions can use to generate CEF reports. It has also highlighted that there are no reports in CRE that are specific to the CEFs.

Inspections and physical examinations data

The ANAO compared inspections and physical examinations data from the EXAMS system with each region's local database for the same six-month period. We found that there were considerable differences between the data sets for Brisbane and Fremantle.10  We were also unable to validate the EXAMS data for ‘positive finds' with the regional databases. To determine a reasonably accurate representation of the number of positive finds, each region provided the ANAO with a spreadsheet giving a description of the find and/or referral.11

Positive finds

Our analysis has highlighted that there are inconsistencies in how a positive find is being recorded. As a consequence, incorrect and inaccurate data is being recorded in the EXAMS system. For example, the regions consider all referrals to other areas to be positive finds, regardless of whether there is a positive or negative outcome or the record has been completed. The EXAMS system only records a find when the outcome is positive and the record has been completed by the CEF or relevant area. An analysis of the EXAMS system showed that, in late August 2004, approximately 5 000 records had not been completed.

Customs currently has significant data integrity problems in this area and is unable to accurately assess or report the performance of the CEFs. If inspection and examination information is to be captured correctly and consistently across regions, Customs needs to develop guidelines that clearly articulate what constitutes a positive find, how positive finds are to be recorded and treated in the EXAMS system and who is responsible for completing the record.

Monitoring and reporting performance outcomes

Performance information should enable Customs to assess the effectiveness and impact of its container x-ray strategy. It should also allow managers to monitor progress, prioritise direction and resources, give feedback to staff and provide assurance to Government that stated objectives are being achieved. The current performance measures do not enable Customs to assess the operational effectiveness of the CEFs. In December 2003, Customs commenced a Performance Measurement Project and is currently reviewing performance measures across its outputs. The ANAO considers that the performance measures relating to the CEFs should be reviewed as part of this project.

Facilities Operation-Chapter 5

CEF inspection targets

As previously stated, a national target of 80 600 containers per annum was initially determined for the CEFs when all were fully operational. The ANAO reviewed the inspection targets achieved by each CEF from when it became operational until 1 September 2004. We found that none of the CEFs have achieved their inspection targets. The CEF managers highlighted several factors that would impact on achieving these targets, including insufficient containers being selected. However, the ANAO was advised that, on occasions, the CEFs have requested the TSOs to reduce the number of containers being selected, as they were experiencing difficulties in managing the throughput of the containers already selected.

We also analysed, for the same period, the number of selections cancelled. This analysis highlighted that selected containers were cancelled despite the number of selections being below inspection targets. In particular, Fremantle and Brisbane cancelled around 6 per cent and 5 per cent respectively of the total number of selections.

Industry liaison

Customs recognises the importance of liaising with industry and, as part of the Container Examination Project, consulted widely with industry groups prior to the CEFs opening. Ongoing industry consultation and feedback is maintained through Customs participation in various industry consultative forums in each region. Customs' recent Post Implementation Review (PIR) recommended developing, in consultation with peak industry bodies, a communication strategy. The ANAO supports this initiative.

Storage charges

As part of the PIR, Customs also asked industry to provide comments on the operational business processes of the CEFs. One of the issues raised was storage charges. The Container Terminal Operators provide free storage for containers for 72 hours (three days) from when the container has been declared available and storage charges apply to containers not collected after this time. If containers take longer than three days to go through the CEF, storage charges will apply. Part of the Government's strategy to strengthen maritime security involves extending the hours of operation of all CEFs to include an eight-hour shift on Saturday and to increase the Brisbane CEF's hours of operation to two shifts Monday to Friday. The ANAO considers that the extension of CEF operating hours should help to alleviate some of industry's concerns relating to storage charges.

Customs' management of CEF contracts

In all regions, Customs has negotiated contracts with a number of service providers for logistics services (container handling, transport and unpack/repack services). Customs also has in place a maintenance contract for the three east coast container x ray machines.

The maintenance contract was finalised with the manufacturer in April 2004, on completion of the 12 month warranty period.12 The contract is for a fixed price, with engineers located on-site at all CEFs. All CEF managers advised the ANAO that they are satisfied with the service provided by the contractor and any equipment failure is repaired immediately.

Customs advised that, overall, performance against the logistics services contracts is reasonably effective. However, it is recognised that performance and, particularly some key performance indicators, could be improved. There are also a number of operational issues within the contracts that must be resolved. Of major concern are the following areas: development of logistics plans; physical segregation and prioritisation of selected containers; and priority access for the transport services contractor.

It is a requirement of the container handling and transport services contracts that logistics plans are developed in consultation with Customs. To date, no plans have been developed or signed off by all parties for any of the CEF ports. In the ANAO's view, a number of the problems associated with the logistical arrangements for segregating, prioritising and transporting containers would be identified and addressed as part of the process of developing a logistics plan for each port.

Monitoring performance

The ANAO found a number of deficiencies in Customs monitoring of performance against requirements outlined in the logistic services contracts. Customs' recent PIR recommended a review of the contracts associated with logistics services be undertaken. The ANAO fully supports this recommendation. However, we also consider the review should be more comprehensive and include an assessment of risks, evaluation of existing specifications and performance measures and the development of a standardised reporting regime.

Overall conclusion

Overall, the ANAO concluded that Customs' CEFs are administratively effective. We found that Customs has implemented effective systems and processes for target selection and development. Its intervention capability has also increased significantly with the establishment and ongoing operation of the facilities. However, we have identified a number of areas where improvements could be made to strengthen administration and improve the operational effectiveness of the CEFs. These include:

  • adopting a national and consistent approach to the logistical coordination process, including clearly defining the roles and responsibilities of the target selection coordinator's position and providing training for this position;
  • completing an operational assessment of sea cargo imports and exports being discharged in CEF ports;
  • reviewing the risk profiles of origin countries to strengthen high-risk country identification;
  • developing common system business rules and reporting parameters for the EXAMS system;
  • developing and implementing guidelines that clearly articulate what constitutes a positive find at the CEF, how this information is to be recorded and treated in the EXAMS system and who is responsible for completing records;
  • developing performance measures and targets specific to the CEFs to assess the operational effectiveness of Customs' container x-ray strategy;
  • developing logistics plans in all CEF ports to address problems associated with segregating, prioritising and transporting selected containers to and from the CEFs; and
  • undertaking a comprehensive review of logistics services (container handling, transport and unpack/repack) contracts.


The ANAO has made eight recommendations aimed at improving the administrative effectiveness of the CEFs.

Agency response

Customs welcomes the report and has agreed with all the recommendations. The audit has already been of considerable benefit. Action to implement the recommendations is already underway and Customs is sure this will facilitate further improvements in CEF performance


1 Office of Transport Security, Department of Transport and Regional Services, Maritime Risk Context Statement, December 2003, p. 4.

2 ibid.

3 Approximately 3 000 containers were for border protection purposes and the other 8 000 containers as part of commercial compliance activities.

4 This annual inspection target included 26 000 containers in Sydney and Melbourne, 13 000 in Fremantle and 15 600 in Brisbane.

5 This will increase annual inspections to 28 600 in Sydney, Brisbane and Melbourne and 15 080 in Fremantle, approximately 7 per cent of loaded sea cargo importations.

6 A profile is one or a cluster of risk indicators (such as the origin of the consignment, the port of loading or concealment potential of the cargo) that, when grouped together, present the characteristics of a high risk consignment.

7 The TSO creates an examination record in the EXAMS system, which is the interface between the P&A area and the CEFs.

8 The Corporate Research Environment (CRE) has been established to provide Customs with an integrated analytical facility, supporting a wide variety of data sources and users.

9 The differences ranged from 1 571 containers in Melbourne to two containers in Fremantle.

10 The differences between the local database and the EXAMS system for x-ray inspections were 120 for Brisbane and 154 for Fremantle and for physical examinations 37 for Brisbane and 25 for Fremantle. The differences for Sydney were negligible.

11 For Melbourne and Sydney this data was available from when the CEF opened. For Brisbane and Fremantle the data was only available from when their databases became operational.

12 The 12-month warranty period for the Fremantle container x ray machine expired in November 2004 and Customs advised that it was in the process of negotiating a maintenance contract with the manufacturer.