Customs will lose the automatic right to examine people's smartphones and other electronic devices at the border, under a government proposal.

A Cabinet minute suggested new legislation would only allow Customs officials to examine devices if they had "reasonable suspicions" they might contain evidence of criminal offending or other relevant evidence.

However, in a compromise, Customs officials would get a new power to demand passwords and encryption keys to devices and services once that statutory threshold for suspicion had been passed.

Customs Minister Nicky Wagner said she had asked officials to do more work on how such a regime would work and to report back prior to the introduction of a wider Customs bill to Parliament.

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The new legislation would let Customs concentrate on high-risk goods and travellers, and make life simpler for the vast majority of people, she said.

Privacy Commissioner John Edwards said he was pleased to have influenced the decision.

The Government said Customs currently had the automatic right to examine electronic devices and Customs argued last year that it should be given blanket authority to also demand people disclose passwords to those devices, and services on them, at the border.

Failing to do so without reasonable excuse should be an offence punishable by three months prison, Customs suggested.

But the request met with considerable opposition from the public and tourism agencies.

A Cabinet paper said the Justice Ministry, the Ministry of Business, Innovation and Employment and the Office of the Privacy Commissioner had raised "human rights" and privacy concerns over Customs' existing powers.

The Cabinet paper said Customs might want to access electronic devices to access documents, such as people's electronic tickets and travel itineraries, as well as to look for evidence of crimes such as drug dealing, the importation of objectionable material and to identify "terror suspects".

The requirement that a threshold must be met before Customs could examine devices would raise a new avenue for appeal for people who were found to have broken laws, the Cabinet documents acknowledged.

That was if they could argue Customs did not have sufficient grounds for their original suspicion before searching their device.