Terry Brown of New Zealand Customs said "We're not aware of any other country that has legislated for the potential of a penalty to be applied if people do not divulge their passwords."
Speaking in an interview with TVNZ, Brown said, "I personally have an e-device and it maintains all my records - banking data, et cetera, et cetera - so we understand the importance and significance of it."
Council for Civil Liberties issued a statement about their concerns over the new powers of search, calling it a "grave invasion of privacy."
"Modern smartphones contain a large amount of highly sensitive private information including emails, letters, medical records, personal photos, and very personal photos," said Thomas Beagle, spokesperson for the CCL.
"The reality of this law is that it gives Customs the power to take and force the unlock of peoples smartphones without justification or appeal," he said.
It's already turning off some prospective visitors to the country.
Twitter is filling up with angry messages from would be travellers.
"Well won't be going to New Zealand now," wrote twitter user Dewayne Smith.
"Why should I travel there?" asked Latim Latim, "There are over 190 countries to go to and they won't need to check my cellphone."
In other amendments to the Act Customs officers were given new powers to "prohibit the use of electronic communication devices in areas where people are arriving or departing New Zealand."
Last year, Customs searched 540 devices coming into New Zealand Airports.
