customs brokers and forwarders council of australia inc ......voxson sales pty ltd v collector of...

© Commonwealth of Australia 2015

[2015] AATA 215

Division GENERAL ADMINISTRATIVE DIVISION

File Number 2014/4531

Re Brand Developers Aust Pty Ltd

APPLICANT

And Chief Executive Officer of Customs

RESPONDENT

DECISION

Tribunal Deputy President S A Forgie

Date 10 April 2015

Place Melbourne

of 60

The Tribunal decides to affirm the decision of the Chief Executive Officer of Customs dated 8 August 2014 refusing to refund customs duty paid under protest when entering Genius Nicer Dicer Plus food processors for home consumption under Import Declaration ACF643LPN.

…[sgd] S A Forgie……..

Deputy President

CATCHWORDS

CUSTOMS DUTY – whether eligible for concessional rate – whether description of TCO to be met precisely – whether goods may have additional features outside the description of the TCO – precise description of TCO to be met – “Y-shaped” vegetable peeler and lid each takes goods outside of description of TCO but booklet and packaging do not – decision affirmed

LEGISLATION Acts Interpretation Act 1901; sections 15AA, 15AB, 46 Customs Act 1901; sections 132, 132AA, 269B, 269C, 269D, 269F, 269FA, 269H, 269K, 269P, 269Q, 269S, 269SA, 269SB, 269SC, 269SD, 269SF, 269SJ, Part VIII, Part XVA Customs Amendment Act 1983; sections 2, 5 Customs Legislation (Tariff Concessions and Anti-Dumping) Amendment Act 1992; sections 2, 10 Customs Tariff Act 1995; sections 3, 7, 16, 17, 18, 20, 22, 269B, 269C, 269E, 269F, 269M, 269P; Schedule 2, Schedule 3; Heading 8210.00.00, Schedules 5, 6, 7 Legislative Instruments Act 2003; sections 5, 13

CASES ACI Pet Operations Pty Ltd v Comptroller of Customs [1990] FCA 398; (1990) 26 FCR 531 Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27; 260 ALR 1; 83 ALJR 1152; 73 ATR 256; [2009] ATC 20-134 Amcor Ltd v Comptroller-General of Customs and Others (1988) 79 ALR 221 Collector of Customs v Agfa-Gevaert Ltd [1996] HCA 36; (1996) 186 CLR 389; 141 ALR 59; 43 ALD 193; 24 AAR 282; 71 ALJR 123 Comptroller-General of Customs v ACI Pet Operations Pty Ltd (1994) 49 FCR 56; 121 ALR 347; 32 ALD 48 Corinthian Industries (Syd) Pty Ltd v Comptroller-General of Customs and Others [1989] FCA 100; (1989) 86 ALR 387 Davies Craig Pty Ltd v Comptroller – General of Customs (1986) 68 ALR 105

of 60

Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355; 72 ALJR 841; 153 ALR 490 Re Australian Plastic Products Pty Ltd and Chief Executive Officer of Customs [1998] AATA 433 Re Cameron Australasia Pty Ltd and Chief Executive Officer of Customs [2012] AATA 865 Re Downer EDI Rail Pty Limited and Chief Executive Officer of Customs and United Group Rail Services Limited [2010] AATA 866; (2010) 118 ALD 454 Re Greig Novelties Pty Ltd and Chief Executive Officer of Customs [1996] AATA 355 Re Klockner Moeller Pty Ltd and Collector of Customs [1989] AATA 283 Re Pioneer Electronics Australia Pty Ltd and Collector of Customs and Kenwood Electronics Australia Pty Ltd Decision Nos. 6611 and 6614; 31 January 1991 Re Robert Bosch Australia Pty Ltd and Collector of Customs [1986] AATA 250 Re Sheldon & Hammond Pty Ltd and Chief Executive Officer of Customs [2007] AATA 1929; (2007) 67 ATR 731 Re SMS Autoparts Pty Ltd and Chief Executive Officer of Customs [1996] AATA 158; (1996) 41 ALD 615; 23 AAR 44 Re STI Tyres as Trustee for On Track Tyre Trust and Chief Executive Officer of Customs [2009] AATA 877; (2009) 112 ALD 381 Re Toro Australia Group Sales Pty Ltd and Chief Executive Officer of Customs [2014] AATA 187 Re Tridon Pty Ltd and Collector of Customs [1982] AATA 119; (1982) 4 ALD 615 Re Zoratto Enterprises Pty Ltd and Collector of Customs [1991] AATA 210 Times Consultants Pty Ltd and Collector of Customs (QLD) (1987) 16 FCR 449; 76 ALR 313 Voxson Sales Pty Ltd v Collector of Customs [1993] FCA 609; (1993) 19 AAR 129

OTHER MATERIAL Customs Amendment Bill 1982, Second Reading Speech, Hansard, Senate, 24 May 1983 Customs Legislation (Tariff Concessions and Anti-Dumping) Amendment Bill 1992; Second Reading Speech, Hansard, House of Representatives, 7 May 1992

REASONS FOR DECISION

1. The applicant, Brand Developers Aust Pty Ltd (Brand Developers) imports hand operated

food processors and markets them under the name of “Genius Nicer Dicer Plus” (Nicer

Dicer) (subject goods). Each Nicer Dicer comes packaged in a box containing 13 pieces.

The parties agree, as do I, that the Nicer Dicer is classified to subheading 8210.00.00 of

Schedule 3 to the Customs Tariff Act 1995 (CT Act). Their disagreement comes about

regarding the decision made by the delegate of the respondent, the Chief Executive Officer

of Customs (CEO), that the subject goods are not eligible for entry for home consumption at

a concessional rate of duty under Tariff Concession Order (TCO) 9107322.

of 60

2. At the heart of the disagreement lies the fact that, among the 13 pieces, are a “Y” shaped

vegetable peeler, a “Fresh-keeping lid for container”, an “Attachable container with

measurements” and a recipe book.1 Their point of difference lies in whether these four

features disentitle the subject goods from the benefit of TCO 9107322. As Mr Slonim

summarised the issue on behalf of Brand Developers, do the subject goods have to meet the

description in TCO 9107322 in each and every respect. He submitted that they did not and,

on behalf of the CEO, Mr Millea submitted that they did.

3. I have decided that the plastic lid and the Y peeler take the goods outside the description of

those in TCO 9107322 and they are not eligible for entry at a concessional rate of duty.

Therefore, I have affirmed the decision of the CEO dated 8 August 2014.2

BACKGROUND

4. On 17 July 2013,3 Brand Developer’s representative, Clemenger International Freight Pty

Ltd (CIFPL), lodged Tariff Advice Application (TA) 20769900 with supporting illustrative

descriptive material. It did so in respect of the Nicer Dicer imported by Brand Developers.

The Nicer Dicer was described as a:

“… 13 piece Set said to contain the following:

1 x removable top part with self-cleaning function

1 x cutting base

1 x attachable container with measurements

1 x fresh-keeping lid for container

1 x dual blade for cutting 6mmx6mm OR 12mmx12mm cubes

1 x dual blade for cutting 6mmx36mm OR 18mmx18mm cubes

1 x dual wedging blade

1 x plug-in cutting stamp

1 x partial blade cover

1 x slicer with blade protector

1 x food holder

1 x grater with protective cover

1 As described on the box in which the subject goods are packaged. 2 Documents lodged under s 37 of the Administrative Appeals Tribunal Act 1975 (T documents); T7 at 79-88 3 T documents; T3 at 19

of 60

1 x perfect peeler

Includes recipe book.”4

5. CIFPL went on to describe its functions:

“Genius Nicer Dicer Plus 13 set. You can chop, slice, dice, cut, julienne, cube, wedge, quarter, grate and much more. There are 5 blades, each made of ultrasharp stainless steel. Just press down the lid and they’ll easily cut through virtually any food. Each blade gives you a choice of different cutting sizes: cut into segments of 4 or 8, cube food in 3 different sizes.”5

6. CIFPL initially claimed that the Nicer Dicer should be classified under Heading 8214.90.00

in Schedule 3 of the CT Act but later agreed with the decision made by a delegate of the

CEO on 6 September 2013 and affirmed on 27 February 2014 that the Nicer Dicer is

properly classified to Heading 8210.00.00. That Heading reads:

“HAND-OPERATED MECHANICAL APPLIANCES, WEIGHING 5% 10 kg OR LESS, USED IN THE PREPARATION, CONDITIONING DCS:4% OR SERVING OF FOOD OR DRINK DCT:5%”

In classifying the Nicer Dicer to this heading, the delegate relied on Rules 3(b) and 6 of the

General Interpretation Rules for the Interpretation of the Harmonized System set out in

Schedule 2 of the CT Act.6 Those rules must be used for working out the tariff classification

under which goods are classified (Interpretation Rules).7

7. On 19 September 2013, an officer of Australian Customs and Border Protection Service

decided that the Nicer Dicer was not eligible for the benefit of TCO 9107322 due to the

inclusion of the “Y” shaped vegetable peeler in the set.8 That decision was affirmed on

27 February 2014.9 The terms of that TCO are:

“PROCESSORS, food, hand operated, having ALL of the following functions: (a) chopping; (b) crushing; (c) grating;

4 T documents; T3 at 20-21 5 T documents; T3 at 21 6 CT Act; s 3(1) 7 CT Act; s 7(1) 8 T documents; T4C at 39-44 9 T documents; T7 at 79-88

of 60

(d) rasping; (e) slicing but NOT including pepper or salt grinding mills Stated Use: Processing and preparing food”10

TCO 9107322 is keyed to Heading 8210.00.00.

8. A few months later, CIFPL lodged a further version of an Import Declaration and claimed a

refund of duty on the ground that the Nicer Dicer is covered by TCO 9107322.11 A delegate

of the CEO refused the application for refund on 8 August 2014.12

TARIFF CLASSIFICATION ORDERS Legislative scheme

9. The import of goods into Australia and their export is regulated by the Customs Act 1901

(Customs Act). Part VIII provides for the payment and computation of any duty payable on

those goods. If the rate of duty has varied, generally the rate is that in force when the goods

entered Australia for home consumption.13 Duty is payable at that time of entry.14

10. The rate of duty payable in respect of goods is not dealt with in the Customs Act but in the

CT Act. Although there are qualifications and exceptions, usually duty in respect of goods

is worked out by reference to the general rate set out in the third column of the tariff

classification under which the goods are classified.15 For most purposes, those

classifications are set out in Schedule 3 of the CT Act or, in relation to goods that originated

in a number of specified countries, under Schedules 5, 6 and 7.

11. The CT Act provides for concessional duty. In broad terms, s 18 of the CT Act provides for

the duty that is to be paid on goods to which an item in Schedule 4 prima facie applies. An

assessment is then made of the duty payable under that item. If it is less than it would be if,

apart from s 18, it were payable under Schedules 3, 5, 6, 7 or 8, the item under Schedule 4

10 T documents; T8 at 89 11 T documents; T11 at 106-111 12 T documents; T16 at 133-134 13 Customs Act, s 132(1) 14 Customs Act, s 132AA(1), item 1 15 CT Act, s 16(1)(a). Qualifications and exceptions are set out in the remaining provisions of s 16 and in ss 17, 18, 20 and 22.

of 60

applies.16 The amount of duty payable in respect of goods under an item in Schedule 4 is an

amount worked out by first deciding whether the goods are goods of one of the originating

countries named in s 18(2)(a).17 If they are not, the amount is calculated by reference to the

general rate set out in the third column of the relevant item.18 If they are, regard is had to

s 18(2)(b) to (n) for the rate. In some instances, the concessional rate of duty is “Free” and,

in others, a reduced rate is specified.

12. The item that is relevant in this case is Item 50 of Schedule 4. It provides that, unless goods

are classified under subheadings 3817.00.10 or 3819.00.00 of Schedule 3, a rate of “Free”

applies to “Goods that a Tariff Concession Order declares are goods to which this item

applies”. As the subject goods are classified under heading 8210.00.00, the subheadings

that are excluded from that rate are not relevant in this case.

Features of the legislative scheme

13. I have set out the processes leading to the making of a TCO and the relevant provisions of

the Customs Act in Attachment A below. Without repeating those processes or provisions, I

note that:

(1) an application for a TCO is made in respect of specific goods which are fully described in that application;19

(2) in order to make a TCO, the CEO must be satisfied that the application meets the core criteria.20

(a) the application meets the core criteria if, on the day it was made, no substitutable goods were produced in Australia in the ordinary course of business;21

(i) the corollary is that no substitutable goods will have been produced in Australia if there were no goods produced in Australia that were put, or were capable of being put, to a use that corresponds with a use (including a design use) to which the goods the subject of the application for the TCO can be put;22

(3) the terms used mean:

(a) “substitutable goods” are:

16 CT Act; s 18(1) 17 CT Act; s 18(2)(b) 18 CT Act; s 18(2)(a) 19 Customs Act; s 269F(3)(a) 20 Customs Act; s 269P(1) and (3) 21 Customs Act; s 269C 22 Customs Act; s 269B(1)

of 60

“… in respect of goods the subject of a TCO application or of a TCO, … goods produced in Australia that are put, or are capable of being put, to a use that corresponds with a use (including a design use) to which the goods the subject of the application or of the TCO can be put.”23

(b) Goods “are taken to be produced in Australia” if they are wholly or partly manufactured in Australia and if they meet the factory and works costs specified in s 269D(1)(b).

(c) Goods that are substitutable goods in relation to goods the subject of a TCO application are taken to have been produced in the ordinary course of business if:

(i) they have been produced in Australia in the 2 year period before the application, have been produced and held in stock in Australia, or produced on an intermittent basis in the previous 5 years and a producer is prepared to accept an order to supply them;24 or

(ii) they are made-to-order capital equipment and are taken to have been produced in Australia in the meaning of s 269E(2);

(3) When made, a TCO must include:

(a) a description of the goods that are the subject of that order; and

(b) a reference to the tariff classification that, in the CEO’s opinion, applies to the goods.25

14. This outline of the process leading to the making of a TCO underlines the links:

(1) between the goods described in a TCO application and the TCO – they are one and the same;

(2) between the goods and the core criteria – the goods described in the TCO application must meet the core criteria meaning that there must be no substitutable goods produced in Australia in the ordinary course of business on the day on which the TCO application was made; and

(3) between the goods described in the TCO and the tariff classification – the goods described in the TCO must either be those described in the tariff classification or a sub-set of them.

23 Customs Act; s 269B(1) 24 Customs Act; s 269E(1) 25 Customs Act; s 269P(4)(a)

of 60

INTERPRETING AND APPLYING A TCO

Keying the goods to the relevant tariff classification

15. In Voxson Sales Pty Ltd v Collector of Customs26 (Voxson), Spender J noted that:

“ The fundamental requirement is that, before goods can fit within a particular TCO they must be within the tariff classification to which that TCO is keyed. …”27

The relevant tariff classification has been agreed upon between the parties but, for

completeness, I will outline the approach to be taken to identifying that tariff classification.

16. In their majority judgment in Times Consultants Pty Ltd v Collector of Customs (QLD)28

(Times Consultants), Morling and Wilcox JJ established that the first step in the proper

classification of particular goods is to identify them. The second step is to construe the tariff

classifications to determine to which tariff classification the subject goods should be

classified. Having said that there are two steps does not determine the order in which those

steps are taken for taking one may well inform how the other is taken.

17. The overlap between the two steps is evident in the second and third principles identified by

a differently constituted Tribunal in the following passage from Re Tridon Pty Ltd and

Collector of Customs29 (Tridon) as relevant in carrying out the task of identifying the goods

to be classified. Referring to various authorities, the Tribunal in Tridon identified eight

principles as relevant to the task:

“(i) Identification must be objective, having regard to the characteristics which the goods, on informed inspection, present ...;

(ii) The identification of goods cannot be controlled by the descriptions of goods adopted in the nomenclature of the Tariff ...;

(iii) Nevertheless in identifying goods it is necessary to be aware of the structure of the nomenclature, the basis on which goods are classified and the

26 [1993] FCA 609; (1993) 19 AAR 129 27 Voxson Sales Pty Ltd v Collector of Customs [1993] FCA 609; (1993) 19 AAR 129 at 135 per Spender J. His Honour was referring to r 181(1)(d) of the Customs Regulations which previously prescribed that this information had to be given by an applicant for a TCO. At that time, the application was made under s 269G and s 269G(2)(a) prescribed particulars that had to be given in the TCO application. Since the repeal and substitution of Part XVA by s 10 of the Customs Legislation (Tariff Concessions and Anti-Dumping) Amendment Act 1992 (Act No 89 of 1992) (CL Amendment Act), the requirements have been included within s 269P. Section 10 commenced operation on 1 November 1992, which was a day fixed by Proclamation: CL Amendment Act; s 2(2). 28 (1987) 16 FCR 449; 76 ALR 313 Morling and Wilcox JJ; Fox J dissenting 29 [1982] AATA 119; (1982) 4 ALD 615; Mr Hall, then Senior Member, and Mr Wickens and Mr Prowse, Members

of 60

characteristics of goods which may be relevant to the frequently complex task of classification ...;

(iv) In the identification of goods, knowledge of how those who trade in the goods describe them will usually be relevant, but not necessarily conclusive ...;

(v) All the descriptive terms, both specific and generic, by which the goods may fairly be identified may be relevant to the classification of the goods within the Tariff ...;

(vi) Descriptive terms may be of varying degrees of specificity (eg windscreen wiper blade refills, parts for a windscreen wiper or parts for a motor vehicle). Generic descriptions may be by reference to the materials or substances from which the goods are manufactured ...;

(vii) Identification will frequently extend to characterisation of goods by reference to their design features cf Re Virgo Manufacturing Co Pty Ltd and Collector of Customs (Vic) (1981) 3 ALN No 15, or by reference to their suitability for a particular use where those characteristics emerge from informed inspection of the goods as imported ... . The extent to which these characteristics may be relevant to the ultimate classification of the goods and whether evidence of the use to which goods are put after importation is relevant, will depend upon the language of the Tariff Nomenclature ...;

(viii) Composite goods, notwithstanding that they have components which are separately identifiable, may nevertheless be identifiable in combination as a new entity if the identity of the separate units is subordinated to the identity of the combination ...”30

18. I also note that classification is undertaken according to the General Interpretation Rules for

the Interpretation of the Harmonized System set out in Schedule 2 of the CT Act.31 Those

rules must be used for working out the tariff classification under which goods are classified

(Interpretation Rules).32

Interpretation of a TCO A. A species of delegated legislation

19. In Collector of Customs v Agfa-Gevaert Ltd33 (Agfa-Gevaert) the High Court described

TCOs “… as a species of delegated legislation.”34 On that basis, the High Court continued,

30 [1982] AATA 119; (1982) 4 ALD 615 at [15]; 620-621 (citations omitted) 31 CT Act; s 3(1) 32 CT Act; s 7(1) 33 [1996] HCA 36; (1996) 186 CLR 389; 141 ALR 59; 43 ALD 193; 24 AAR 282; 71 ALJR 123; Brennan CJ, Dawson, Toohey, Gaudron and McHugh JJ 34 [1996] HCA 36; (1996) 186 CLR 389; 141 ALR 59; 43 ALD 193; 24 AAR 282; 71 ALJR 123 at 398; 65; 199; 288; 128

of 60

the general principles of statutory interpretation apply to its interpretation. It then went on

to address those principles:

“… The general principles relating to the interpretation of Acts of Parliament are equally applicable to the interpretation of delegated legislation …. To use the words of Dixon J, ‘subordinate or delegated legislation ... [stands] on the same ground as an Act of Parliament and [is] governed by the same rules of construction’ … [King Gee Clothing Co Pty Ltd v The Commonwealth [1945] HCA 23; (1945) 71 CLR 184 at 195].

Because the CTCOs are governed by the rules of statutory construction, the speech of Lord Simon of Glaisdale in Maunsell v Olins … [[1975] AC 373 at 391] is a useful starting point in determining the construction of the instruments. His Lordship said:

Statutory language, like all language, is capable of an almost infinite gradation of ‘register’ - ie, it will be used at the semantic level appropriate to the subject matter and to the audience addressed (the man in the street, lawyers, merchants, etc). It is the duty of a court of construction to tune in to such register and so to interpret the statutory language as to give to it the primary meaning which is appropriate in that register (unless it is clear that some other meaning must be given in order to carry out the statutory purpose or to avoid injustice, anomaly, absurdity or contradiction). In other words, statutory language must always be given presumptively the most natural and ordinary meaning which is appropriate in the circumstances.

When construing revenue statutes that utilise trade or technical terms, therefore, the law generally favours interpretation of the terms as they are understood in the trade to which the statute applies. In Herbert Adams Pty Ltd v FCT, … Dixon J said:

A revenue law directed to commerce usually employs the descriptions and adopts the meanings in use among those who exercise the trade concerned.

The courts have also said that it may be less difficult to establish a trade meaning

which extends the ordinary meaning of an expression than one which limits the ordinary meaning in a specialised way. … However, the ‘presumption’ in favour of a trade meaning in revenue statutes does not deny the possibility that words used in a revenue statute directed to commerce are to be understood in their ordinary meaning. …”35

20. When Agfa-Gevaert was decided, s 46 of the Acts Interpretation Act 1901 (AI Act) applied

to instruments made under authority conferred by an Act. It provided that, unless the

contrary intention appeared, expressions and the like used in any instrument had the same

meaning as in the Act, the AI Act applied to any instrument as if it were an Act and an

35 [1996] HCA 36; (1996) 186 CLR 389; (1996) 141 ALR 59; (1996) 71 ALJR 123 at 398; 65-66; 128 (citations omitted)

of 60

instrument was not to exceed the power of the authority given to make it.36 The High Court

did not address the specific question whether the interpretation of an instrument was to be

limited by the terms of the AI Act and, in particular, those of ss 15AA and 15AB relating to

purpose or object and to the use of extrinsic material respectively.

21. Specific provision is now made for the interpretation of such delegate legislation under the

Legislative Instruments Act 2003 (LI Act). Section 13(1) of that legislation provides that the

AI Act applies to any legislative instrument as if it were an Act of Parliament and each of its

provisions were a section of an Act. Interpretation of expressions it uses are linked back to

those in the enabling legislation37 and “any legislative instrument so made is to be read and

construed subject to the enabling legislation as in force from time to time, and so as not to

exceed the power of the rule-maker.”38

22. A TCO is a written instrument that is of a legislative character and that has been made in the

exercise of a power delegated by Parliament.39 Furthermore, a TCO alters the content of the

law and so affects the obligations40 otherwise imposed upon the importer of goods covered

by the TCO to pay duty. The power to make a TCO of the sort in this case41 is given to the

CEO by s 269P of the Customs Act. The CEO may exercise that power after receiving an

application for a TCO under Part XVA and that application has been processed in the

manner required by that Part. A TCO does not come within those instruments declared by

s 7 of the LI Act not to be legislative instruments. It is, therefore, subject to the LI Act.

23. As is apparent from the passage I have set out from the judgment of the majority in Agfa-

Gevaert, the rules of statutory interpretation extend beyond the AI Act to those under the

general law. Does s 13(1) of the LI Act limit the application of those rules in any way? If

they were to do so, that would mean that I would, for example, not have regard to the

general law relating to the meaning of trade and technical terms. I would have regard only

to s 15AA relating to the objects of a legislative instrument and not to the broader

expressions of similar principles in cases such as Project Blue Sky Inc v Australian

36 AI Act; s 46(1) 37 LI Act; s 13(1)(b) 38 LI Act; s 13(1)(c) 39 LI Act; s 5(1) 40 LI Act; s 5(2) 41 That is, it is a TCO in respect of goods other than those sent out of Australia for repair. A TCO in respect of goods sent out of Australia for repair may be made by the CEO under s 269Q of the Customs Act.

of 60

Broadcasting Authority42 (Project Blue Sky) in which McHugh, Gummow, Kirby and

Hayne JJ said in their joint judgment:

“ The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute ... The meaning of the provision must be determined ‘by reference to the language of the instrument as a whole’ ... In Commissioner for Railways (NSW) v Agalianos ..., Dixon CJ pointed out that ‘the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed’. Thus, the process of construction must always begin by examining the context of the provision that is being construed ... A legislative instrument must be construed on the prima facie basis that its provisions are intended to give effect to harmonious goals ...”43

24. Project Blue Sky was decided in 1998 and so before the enactment of the LI Act but while

s 46 of the AI Act was in operation. The terms of s 46(1) mirror those of s 13(1) in their

substance; only the form is a little different. Agfa-Gavaert had been decided only two years

earlier. While only one Judge was common to both cases, McHugh J, it is difficult to

imagine that both Courts would not have been familiar with s 46 of the AI Act. The Court

in Agfa-Gavaert was certainly aware of the status of a TCO as delegated legislation and

applied general rules of statutory interpretation without question. That must be taken as

indicative of the present position under the LI Act given that there has been no substantive

change in the provisions between s 46(1) of the AI Act and s 13(1) of the LI Act. The

AI Act applies to a legislative instrument as if it were an Act and so too do the general rules

of statutory interpretation.

B. The object of making a TCO

25. Writing in the same vein as the majority in Project Blue Sky, those delivering the majority

judgment in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue44 (Alcan)

said:

“ This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself …. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text …. The language which has actually been employed in the text

42 [1998] HCA 28; (1998) 194 CLR 355; 72 ALJR 841; 153 ALR 490; McHugh, Gummow, Kirby and Hayne JJ; Brennan CJ dissenting 43 [1998] HCA 28; (1998) 194 CLR 355; 72 ALJR 841; 153 ALR 490 at [69]- [70]; 381-382; 855; 509 44 [2009] HCA 41; (2009) 239 CLR 27; 260 ALR 1; 83 ALJR 1152; 73 ATR 256; [2009] ATC 20-134; French CJ, Hayne, Heydon, Crennan and Kiefel JJ

of 60

of the legislation is the surest guide to legislative intention …. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision …, in particular the mischief … it is seeking to remedy.”45

26. Their Honours were concerned with the interpretation of an Act of the Northern Territory

and not with a legislative instrument. While the principles remain the same, interpretation

of a legislative instrument requires me to have regard not only to the text of that instrument

and the particular context of that text but also to the wider text of the Act under which the

instrument was made. Apart from any common law principles to that effect, s 13(1)(c) of

the LI Act requires that, unless there is a contrary intention, “any legislative instrument so

made is to be read and construed subject to the enabling legislation as in force from time to

time …”. That draws into consideration not only the particular purpose of the legislative

instrument but the broader purpose of the enabling legislation in conferring power to make

instruments of that kind.

27. The provisions of the Customs Act relating to TCOs necessarily alleviate the imposition of

duties that would otherwise be imposed according to the relevant tariff classification under

the CT Act. It is clear from the core criteria that must be met by an application for a TCO

that it will only be granted if, in summary, Australia does not produce goods that are put, or

capable of being put, to the same use as those being imported. The TCO regime is clearly

intended to provide some protection to the Australian manufacturing industry. That this is

so is underlined by the comment made by the then Minister for Small Business,

Construction and Customs, the Hon Mr Beddall, when giving the Second Reading Speech

on the Customs Legislation (Tariff Concessions and Anti-Dumping) Amendment Bill 1992:

“… The objective of the system is to ensure that industry is not taxed by the tariff where it is

serving no protective function. …”.46

C. The Interpretation Rules have no place in interpreting a TCO

28. Although they will be relevant in classifying the subject goods under the appropriate tariff

classification in Schedule 3 to the CT Act, the Interpretation Rules have no place in

interpreting a TCO. They apply only to the interpretation of a tariff classification under

Schedule 3 of the CT Act. That is made clear by s 7(1) of the CT Act.

45 [2009] HCA 41; (2009) 239 CLR 27; 260 ALR 1; 83 ALJR 1152; 73 ATR 256; [2009] ATC 20-134 at [47]; 46-47; 16-17; 1165; 10165 per Hayne, Heydon, Crennan and Kiefel JJ (citations omitted) 46 Hansard, House of Representatives, 7 May 1992 at 2665

of 60

Application of the TCO: must the goods match the description in the TCO precisely?

29. On their first reading, the cases to which I have been referred by the parties appear to answer

the question I have posed in contradictory fashions. Some would seem to answer it by

suggesting that, provided the goods under consideration come within the relevant tariff

classification keyed to a TCO under consideration and provided those goods meet the

description of the goods given in a TCO, it is of no consequence that they may do more.

They will still be regarded as having the benefit of the TCO. There are other cases,

however, that conclude that the goods must not only be appropriately classified within the

tariff classification keyed to the TCO but must meet the description precisely in order to

have its benefit. If the goods have features beyond those described, they may not have the

benefit of the TCO and will not be permitted concessional entry into Australia. Finally,

there is a third group of cases that does not answer the broader question either way. I have

summarised the essential findings and reasoning in each case at [89]-[141] of Attachment B

below.

30. In the first group of cases supporting a broader interpretation of TCOs, but decided under a

different statutory regime, are:

(1) Re Robert Bosch Australia Pty Ltd and Collector of Customs47 (Robert Bosch): “ … Certainly the gun does more than blow air, for it heats air as well, but blow air it does and we can see nothing in the wording of the Order to indicate that it was intended that an article which does precisely what the Order says should be excluded because it does more. …”48

(2) Re Klockner Moeller Pty Ltd and Collector of Customs49 (Klockner Moeller):

The subject goods were “Motor starters suitable for use with three-phase motors are also suitable for use with single-phase motors. …”50. The (Commercial Tariff Concession Order) CTCO described only those suitable for single-phase motors. In the absence of any words of limitation in the CTCO, the Tribunal adopted the approach in Robert Bosch to the effect that goods are not excluded from a CTCO because they can do more than those described in the CTCO.

47 [1986] AATA 250; Deputy President Todd and Mr Wilson and Mr Cohn, Members 48 [1986] AATA 250 at [22] 49 [1989] AATA 283; Senior Member Balmford and Mr Conn and Mr Wilson, Members 50 [1989] AATA 283 at [20]

of 60

31. In the second group of cases supporting a narrower view and requiring the subject goods to

fit the description given in the TCO precisely and without additional features are:

(1) Re Greig Novelties Pty Ltd and Chief Executive Officer of Customs51 (Greig Novelties): The goods did not come within the description of those in the TCO because they were not stuffed. Stuffing was an essential characteristic of the TCO.

(2) Re Australian Plastic Products Pty Ltd and Chief Executive Officer of

Customs52 (Australian Plastic Products): The length of sheeting was ten metres less than the specified length of sheeting. “… [T]o be able to take advantage of a TCO, the products must precisely meet the criteria …”.53

(3) Re Sheldon & Hammond Pty Ltd and Chief Executive Officer of Customs54

(Sheldon & Hammond): The goods were more than glass jars described in the TCO as the jars were held in a frame making them a spice rack.

(4) Re Cameron Australasia Pty Ltd and Chief Executive Officer of Customs55

(Cameron): Umbilicals wound on reels took the subject goods outside a TCO referring only to umbilicals.

(5) Re Toro Australia Group Sales Pty Ltd and Chief Executive Officer of

Customs56(Toro) “… To say that the goods fit the description precisely does not permit a finding that in addition to the description set out in the TCO, the goods have other characteristics or components. To fit the description precisely means that the goods have no more or no less of the characteristics set out in the description. …”57

32. The second group of cases can be further subdivided by reference to whether the goods were

more than, less than or different from, the goods as described in the relevant TCO. When

that is done, the grouping becomes:

(1) Subject goods less than those described in relevant TCO:

51 [1996] AATA 355 52 [1998] AATA 433; Senior Member Ettinger and Rear Admiral Horton AO RAN (Rtd) 53 [1998] AATA 433; N97/843 at [38] 54 [2007] AATA 1929; (2007) 67 ATR 731; Senior Member Allen 55 [2012] AATA 865; Senior Member Ettinger 56 [2014] AATA 187 57 [2014] AATA 187 at [50]

of 60

(a) Greig Novelties: The goods were not stuffed. Stuffing was an essential characteristic of the TCO.

(b) Australian Plastic Products: The length of sheeting was ten metres less than the length of sheeting specified in the TCO.

(2) Subject goods more than those described in relevant TCO:

(a) Cameron: The reels on which the umbilicals were wound were not mentioned in the description of goods in the TCO.

(b) Toro:

The fittings on the hoses were not part of the description in the relevant TCOs.

(3) Subject goods different from those described in TCO:

(a) Sheldon & Hammond: Glass jars in a frame made a spice rack not jars within the meaning of the TCO.

33. On the facts as they found them, the question did not need to be answered in the third group

as the subject goods were found either to meet the TCO precisely (Pioneer Electronics and

Zoratto) or not to meet it at all (STI Tyres):

(1) Re Pioneer Electronics Australia Pty Ltd and Collector of Customs and Kenwood Electronics Australia Pty Ltd58 (Pioneer Electronics): The subject goods met the description of “cassette decks” in the TCO at the relevant time because the term “cassette decks” had come to include features beyond the deck even though that might not have been the case when the TCO was drafted.

(2) Re Zoratto Enterprises Pty Ltd and Collector of Customs59 (Zoratto):

Goods must comply with the specifications within a TCO but there was no discussion by the Tribunal as to whether they are restricted to those specifications.

58 Decision Nos. 6611 and 6614; 31 January 1991 Deputy President Thompson and Mr Argent and Mr Woodard, Members 59 [1991] AATA 210

of 60

(3) Re STI Tyres as Trustee for On Track Tyre Trust and Chief Executive Officer of Customs60 (STI Tyres): The subject goods did not come within the description of the goods in the TCO.

34. When categorised in this way, it becomes apparent that Pioneer Electronics, Zoratto and

STI Tyres do not assist either Mr Slonim or Mr Millea in his submissions. Rather, each case

showed the process of first identifying the goods and then deciding whether they were goods

that the relevant TCO declared to be goods to which Item 50 of Schedule 4 applied. That is

the question that has to be asked under s 18(1) of the CT Act. Each case decided either that,

in the case of Pioneer Electronics, that they were those goods without further features or, in

the case of STI Tyres, that they were not. The reasons for the decision in Zoratto are a little

less clear but it seems to me that the Tribunal found that the goods under consideration met

the description in the TCO without enhancement.

35. To my mind, the cases of Greig Novelties, Australian Plastic Products do not support

Mr Slonim’s submission that the subject goods may have features in addition to those

specified in the relevant TCO. In each case, the subject goods did not have the features

specified in the description in the TCO let alone features in addition to them. Sheldon &

Hammond and STI Tyres do not assist either for they cannot be taken to support principles

beyond those based on the findings of fact made by the Tribunal. In each case, the Tribunal

found that the subject goods were goods quite different from those in the relevant TCO.

Even Sheldon & Hammond, which might be thought to be a case in which goods came

within the TCO but simply had an additional feature, is not a case that assists Mr Slonim’s

submission. It does not assist it because, although the jars alone came within the TCO,

setting those jars in a frame did not make them jars with an additional feature. When the

two were put together, they became a spice rack and the goods had nothing to do with the

jars described in the TCO. For similar reasons, STI Tyres does not assist Mr Slonim’s

submission. The tyres that comprised the subject goods did not meet the description of the

tyres described in the TCO once the TCO had been interpreted. Pioneer Electronics is

consistent with the approach in each of these cases for it interpreted the TCO and

characterised the subject goods.

60 [2009] AATA 877; (2009) 112 ALD 381; Deputy President McDonald and Mr Fice, Member

of 60

36. Robert Bosch and Klockner Moeller do appear to support Mr Slonim’s submission at first

sight. On reflection, though, I do not think that their principles, developed as they were in

the context of Part XVA before its repeal and replacement by the current scheme on

1 November 1992, can be transferred to the application of TCOs under Part XVA in its

current form. I will spend a moment exploring the previous scheme.

37. The scheme under which Robert Bosch and Klockner Moeller were decided required a TCO

to be made only if “goods serving similar functions” to those for which the TCO was sought

were not produced in Australia or were not capable of being produced in Australia in the

ordinary course of business. That was provided for in s 269C as it was then drafted.

Sections 269B(3) and (4) explained that what was meant by the expression “similar

functions”. If goods are identical, they were taken to serve similar functions. In Davies

Craig Pty Ltd v Comptroller-General of Customs61 (Davies Craig), Davies J said that

mechanical or physical function was covered by s 269(b)(3). That required identity. If there

was no identity in that sense, the issue was decided by reference to the requirement of a

“significant cross-elasticity of demand between the goods”. That was, Davies J continued, a

market or economic test. It was not a mechanical or physical function test although the

mechanical or physical function of the goods would be a relevant matter to be considered.62

38. The test of significant cross-elasticity of demand between goods was considered by Foster J

in ACI Pet Operations Pty Ltd v Comptroller of Customs.63 PVC and PET were found not

to be identical goods. Therefore, the second ground of the similar function test rose for

consideration. Foster J said:

“54. In the first place the Comptroller is required to be satisfied as to the existence of a negative. Although questions of onus of proof are not to be regarded as having the significance in areas of administrative decision that they have in curial decision, nevertheless, it is of some assistance in the focusing of thought to regard the section as broadly requiring the applicant for a CTCO to satisfy the Comptroller on the balance of probabilities of the negative requirements of the section. If this is not achieved, then, by force of the section, the goods in respect of which the CTCO is sought shall be taken to serve similar functions to the relevant ‘other goods’ (or, perhaps, vice versa) with the result that the applicant cannot satisfy the requirements of s 269C(1).

61 (1986) 68 ALR 105 62 (1986) 68 ALR 105 at 114 63 [1990] FCA 398; (1990) 26 FCR 531 An appeal from his Honour’s judgment was dismissed; see FN102 below.

of 60

55. Secondly, the Comptroller is required to be satisfied of what is put as a purely hypothetical situation, namely that the ‘goods’ and the ‘other goods’ be both readily available for sale throughout Australia. There is no requirement that this state of fact be established. Quite the reverse: if the factual situation were that one or both of the goods were not so readily available, it would make no difference in the application of the section. The Comptroller (through his delegate) is required to envisage, when applying the section, the posited situation of ready availability. 56. Thirdly, what meaning is to be given to the words ‘readily available for sale throughout Australia’? In the first place, the phrase ‘readily available for sale’ must be read in the context of the later requirement to consider ‘cross-elasticity of demand’. In these circumstances I am satisfied that ‘ready availability’ does not import any consideration as to price. It contemplates no more than that the relevant goods be in a position to be purchased, irrespective of whether they are for sale at a generally acceptable or at a prohibitive price. This part of the section is satisfied if the ‘goods’ and the ‘other goods’ be present at relevant points of sale in sufficient quantity or amount to answer consumer demand based upon need alone. There must be no scarcity of the ‘goods’ or ‘other goods’. 57. In the second place, the phrase ‘throughout Australia’ may be productive of difficulty. It is to be noted that the legislature has used the word ‘throughout’ rather than the word ‘in’. In doing so it has introduced the concept of nationwide availability of the relevant goods at the point of time when the test of cross-elasticity of demand is to be applied. The way in which this criterion can be, or can be envisaged to be satisfied will no doubt vary in accordance with the nature of the goods and the potential consumer. For instance, some consumer goods of domestic utility might not be so available unless offered for sale in most corner stores throughout urban and rural Australia. In the case of goods which are (as in the present case) materials required for large scale manufacture of products to be purchased by the end user, different considerations, no doubt, apply. Here the purchasers are necessarily far more specialised and less numerous. The section would doubtless be answered by the contemplation of a situation in which all such manufacturers, wherever they might be in Australia, could have their needs satisfied by purchasing the relevant goods from a central point or central points of sale in Australia. Even so, considerations not related to the basic price of the competing goods may, perhaps, come into the assessment of ready availability. Significantly large freight or handling costs might arguably influence availability where the putative intending purchaser was geographically remote from an envisaged point of sale. I mention these matters as illustrative of difficulties which may be involved in the application of the section, not as necessarily arising in the present case.”64

39. It is apparent from a comparison between the cross-elasticity of demand test and the test of

substitutable goods under the current scheme that the former test incorporates various

assumptions whereas the current scheme requires reference to the actual state of affairs. As

the Minister said in introducing the amendments leading to the insertion of a new Part XVA

in 1993, “… The objective of the system is to ensure that industry is not taxed by the tariff

64 [1990] FCA 398; (1990) 26 FCR 531 at 549-550

of 60

where it is serving no protective function. …”.65 Given the very different scheme under

which they were decided, the principles on which the cases of Robert Bosch and Klockner

Moeller were decided cannot be taken to apply under Part XVA as it is currently drafted.

40. The cases of Toro and Cameron run counter to Mr Slonim’s submission. On their face, they

might appear to be consistent with each other in deciding that the subject goods were not

entitled to the benefit of the TCO because they had features in addition to those referred to

in the relevant TCO and could not be said to be goods declared by that TCO to be goods to

which Item 50 of Schedule 4 applied. There is a difference, though, and it relates to

packaging. No mention is made in Toro to packaging but there is mention in Toro that the

hoses were garden hoses. The description in the reasons for decision is consistent with their

being garden hoses:

“ I had in evidence samples of the hoses with fittings attached. The Jackaroo, Tricoflex, Superflex, Armourflex and Spectrum 12 mm hoses are fitted with a 12 mm hose connector at each end with one removable tap adapter fitted to the end of the hose which connects to the tap. The tap adapter screws into that connector allowing it to be fitted to 2 different diameter taps. The two hose connectors are crimped to the ends of the hoses and are not readily removable unless the hose is cut. The Spectrum range of hoses also comes in an 18 mm size hose with two 18 mm hose connectors and one tap adapter. However, the 18 mm hose connectors are not crimped to the hose but slide onto the hose and are secured by a screw-on collar. They are readily removable. The Premium and Marine hoses are both 12 mm hoses fitted with two hose connectors and one tap adapter. The only difference between those hoses is that the fittings on the Premium hose are made of brass, both fittings being crimped on to the ends of that hose, while those on the Marine hose are made of nickel plated brass, one being crimped on to the end and the other fixed by some means which is not apparent due to a plastic cover over that section of the hose. It appears to be permanently fixed. Each of the hoses is 15 m in length.”66

41. It would be reasonable to assume from this description that each of the hoses would have

been packaged in some way simply for ease of transport, storage and, in a retail setting,

display. Common experience suggests that packaging might have been made of cardboard

or could simply have been a couple of ties with or without a cardboard insert. No mention

was made of any packaging as part of the subject goods just as none was made in the case I

am considering. Mention was made of packaging in Sheldon & Hammond but in the sense

that it was the “container in which the subject goods were contained”.67 No suggestion was

65 See [27] above 66 [2014] AATA 187 at [17] 67 [2007] AATA 1929; (2007) 67 ATR 731 at [8]; 733

of 60

made in the case that the container was ever part of the subject goods. It seems to me that

none is ever made because it is implicit that goods may need to be packaged in some way in

order to enable them to be transported, stored and, if available for sale, displayed. The jars

and frame that made up the spice rack in Sheldon & Hammond had to be confined in some

way if they were to reach their ultimate destination. So too with the hoses in Toro if they

were to arrive in something other than in a tangle. In this case, the Nicer Dicer is packaged

in a cardboard box but there was no suggestion by either party that the box is part of the

subject goods. It is merely a vessel to ensure that they reach their intended destination in

mint condition and most efficiently.

42. In light of the view that seems to have been taken of packaging in other cases, I have

struggled with the Tribunal’s decision in Cameron. Umbilicals have to be moved. The

evidence before the Tribunal was that:

“ Umbilicals are transported/imported/stored/installed using various types of reels. … The type of reels used depends on the specific characteristics of the umbilical (length, diameter, allowable bend radius, total weight) in order to ensure the umbilical is not damaged during reel-in/reel-out, transport, storage and installation. For installation it may be required to transfer the umbilical from the transport reel to another reel or device. The reels are not installed with the umbilicals. Following the umbilical installation the reels are either scrapped, stored or returned to the manufacturer. [Emphasis added]”68

43. It seems to me that Cameron, can be taken to support Mr Millea’s submission that goods

should match the description in the relevant TCO precisely and have no further feature.

That aside, it should not be taken as authority for the proposition that the packaging or

means by which goods are transported should be regarded as part of the goods and the whole

matched against the description. That runs counter to the basis on which the TCO scheme

operates with its focus on the subject goods. It runs counter to the practical needs associated

with the transport of goods.

44. Having analysed the cases, it seems to me that the cases decided under Part XVA in its

current form do not support a submission that goods may come within a TCO when they

have features over and above those that bring them within that TCO. The propositions that

they do support are twofold. First, the goods must be characterised and classified under a

68 [2012] AATA 865 at [45]

of 60

tariff heading. They must then be considered in order to determine whether they can be said

to be goods declared by a TCO, which is keyed to the tariff heading under which they are

classified, to be goods to which Item 50 of Schedule 4 applies. Given the strict regime

under which TCOs are made and given the purpose of the TCO system to ensure that

industry is not taxed by the tariff where it is serving no protective function, it seems to me

that the goods must meet those described in the relevant TCO precisely.

THE NICER DICER AND TCO 9107322

45. I have already mentioned that the parties have agreed that the Nicer Dicer is correctly

classified to subheading 8210.00.00 of Schedule 3 to the CT Act. Putting aside for the

moment the Y peeler, the plastic lid, the plastic box and the recipe book, I find that, the

Nicer Dicer meets the description of the goods specified in TCO 9107322. It is a hand

operated food processor that chops, crushes, grates, rasps and slices but is not a pepper or

salt grinding mill. Its stated use is for processing and preparing food. Again putting the

four contentious items to one side, the Nicer Dicer is no more and no less than the goods

described in the TCO.

46. Beginning with the recipe book, I will now consider each of the items said to take the Nicer

Dicer outside the terms of TCO. The first is the booklet described as a “Recipe Book”

included in the box in which the Nicer Dicer is packaged.

47. The box in which the Nicer Dicer is placed has a number of photographs of the fruit and

vegetables cut into different shapes and sizes. It advises how the Nicer Dicer can be cleaned

under running water or in the dishwasher. Pages 1 to 9 of the 41 page “Recipe Book”

contain information relating to the way the Nicer Dicer is to be used and cleaned and for

what fruit and vegetables each cutter is suited. The remaining pages contain recipes

advising which cutting insert to use when cutting the relevant fruit or vegetables for the

recipe. The recipes illustrate the way in which a Nicer Dicer is to be used and it remains a

booklet in the nature of an instruction book rather than a recipe book.

48. An instruction booklet is in much the same position as packaging. It is something that

relates to the way in which the goods can, may or should be used. Whether or not an

individual looks at the instruction booklet before using the goods is often questionable but it

does not change the character of an instruction book. It is often a necessary accompaniment

of 60

to goods so that they can be effectively and safely used in the same way as packaging is

often necessary to get the goods safely and efficiently to the place where they are to be used.

Neither should be regarded as part of the subject goods for the purposes of deciding whether

or not goods come within a TCO or not.

49. I turn now to the plastic box. The description on the cardboard box describes it as an

“Attachable container with measurements” but the container that is included in the box has

no measurements on it. Despite that, it can still be described as a “container” but I do not

find that is its primary use. Its primary use is as a base for what is described on the box as

“the removable top part”. The removable top part comprises two parts that are hinged at

one end. The various blades that form part of the goods are fitted into the bottom of the two

parts. The base of that bottom part fits exactly over the lip of the plastic box. The top part

of the two hinged parts acts as a lid but also has two ridged pieces, one of which is fixed and

the other removable. Those two ridged pieces hold in place the fruit or vegetables as

pressure is placed on that hinged lid to bring the top and bottom parts together and so force

the fruit and vegetables through the cutters. Once they are through the cutters, they fall into

the plastic box. While it is true that, theoretically, the removable top part could be placed

over a bowl of some sort, the plastic box is clearly custom made for the purpose. It provides

a firm and stable base while pressure is exerted to cut the fruit and vegetables. I am satisfied

that it is clearly intended to be an integral part of the goods. Together, the removable top

part, the plastic box and the various blades make up the goods that make it a hand operated

food processor that chops, crushes, grates, rasps and slices but not a pepper or salt mill.

They fall precisely within the description of goods in TCO 9107322.

50. The lid and the Y peeler are different matters. They fall outside the goods that meet the

description in the TCO. It could be said that the Y peeler will often be used to peel fruit or

vegetables before they are processed in the hand operated processor but that does not make

it part of those goods. It is separate from it. So too is the lid. If used, it makes the plastic

box a storage box and no longer the base for the removable top part. The lid has no role to

play in the operation of the Nicer Dicer and falls outside the goods described in the TCO.

51. For these reasons, I have decided that, the addition of the Y peeler and of the plastic lid take

the subject goods beyond those described in TCO 9107322. Therefore, Brand Development

of 60

cannot have the advantage of the concessional rate of duty and I affirm the CEO’s decision

to that effect.

ATTACHMENT A

Page 26 of 60

TARIFF CONCESSION ORDERS: current provisions 52. A TCO is made not under the CT Act but under the Customs Act. Section 269F(1) provides

that a person may apply to the CEO for a TCO in respect of goods. The manner in which

that application is made and processed is the subject of Part XVA of the Customs Act. It

has been in force since 1 November 1992 when it was inserted by the CL Amendment Act.

Applying for a TCO

53. Section 269F(1) of the Customs Act provides that a person may apply to the CEO for a TCO

in respect of goods. I will set the section out in full:

“(1) A person may apply to the CEO for a tariff concession order in respect of goods.

(2) An application must: (a) be in writing; and (b) be in an approved form; and (c) contain such information as the form requires; and (d) be signed in the manner indicated in the form.

(3) Without limiting the generality of paragraph (2)(c), a TCO application must contain: (a) a full description of the goods to which the application relates; and (b) a statement of the tariff classification that, in the opinion of the

applicant, applies to the goods; and (c) if the applicant is not proposing to make use of the TCO to import the

goods to which the application relates into Australia on the applicant’s own behalf – the identity of the importer for whom the applicant is acting; and

(d) particulars of all inquiries made by the applicant (including inquiries of prescribed organisations) to assist in establishing that there were reasonable grounds for believing that, on the day on which the application was lodged, there were no producers in Australia of substitutable goods.

(4) A TCO application may be lodged with Customs: (a) by leaving it at a place that has been allocated for lodgement of TCO

applications in Customs House in Canberra; or (b) by posting it by prepaid post to a postal address specified in the

approved form; or

of 60

(c) by sending it by electronic facsimile to a facsimile number specified in the approved form;

and the application is taken to have been lodged when the application, or a facsimile of the application, is first received by an officer of Customs.

(5) The day on which an application is taken to have been lodged must be recorded on the application.”

54. In addition to complying with the requirements of s 269F with regard to the contents and

lodgement of an application, an applicant for a TCO has a further obligation. It is imposed

by s 269FA, which provides:

“It is the responsibility of an applicant for a TCO to establish, to the satisfaction of the CEO, that, on the basis of: (a) all information that the applicant has, or can reasonably be expected to

have; and (b) all inquiries that the applicant has made, or can reasonably be expected to

make; there are reasonable grounds for asserting that the application meets the core criteria.”

Criteria for determining whether a TCO will be made A. Core criteria

55. The CEO will not make a TCO unless the application for it meets the core criteria. That is

the effect of s 269P, which is found in Part XVA of the Customs Act. Section 269C sets out

what is required in order to meet the core criteria:

“For the purposes of this Part, a TCO application is taken to meet the core criteria if, on the day on which the application was lodged, no substitutable goods were produced in Australia in the ordinary course of business.”

I will now set out the provisions that expand upon the three sub-criteria that must be met on

the day the application was lodged: i.e. there were (1) no substitutable goods; (2) produced

in Australia; (3) in the ordinary course of business.

B. Substitutable goods

56. The expression “substitutable goods” is defined in s 269B(1):

“.. in respect of goods the subject of a TCO application or of a TCO, means goods produced in Australia that are put, or are capable of being put, to a use that

of 60

corresponds with a use (including a design use) to which the goods the subject of the application or of the TCO can be put.”

C. Goods produced in Australia

57. Section 269D sets out the meaning of the expression “goods produced in Australia”.69 The

general principles are set out in s 269D(1):

“For the purposes of this Part, goods, other than unmanufactured raw products, are taken to be produced in Australia if: (a) the goods are wholly or partly manufactured in Australia; and (b) not less than ¼ of the factory or works costs of the goods is represented by

the sum of: (i) the value of Australian labour; and (ii) the value of Australian materials; and (iii) the factory overhead expenses incurred in Australia in respect of the

goods.”

C.1 “Partly manufactured in Australia” 58. For the purposes of Part XVA of the Customs Act:

“… goods are to be taken to have been partly manufactured in Australia if at least one substantial process in the manufacture of the goods was carried out in Australia.”70

59. The expression “substantial process in the manufacture of the goods” is explained in

s 269D(3) but that provision does not limit its meaning. Section 269D(3) provides:

“Without limiting the meaning of the expression substantial process in the manufacture of the goods, any of the following operations or any combination of those operations does not constitute such a process: (a) operations to preserve goods during transportation or storage; (b) operations to improve the packing or labelling or marketable quality of

goods; (c) operations to prepare goods for shipment; (d) simple assembly operations; (e) operations to mix goods where the resulting product does not have different

properties from those of the goods that have been mixed.”

69 Customs Act; s 269B(1) 70 Customs Act; s 269D(2)

of 60

C.2 Calculating costs, value and expenses 60. The CEO may publish directions in the Gazette that the way the factory or works cost of

goods, value of Australian labour, Australian material or factory overhead expenses incurred

in Australia in respect of goods are to be determined in a specified manner.71

D. “in the ordinary course of business”

61. Section 269E provides for the circumstances in which goods, which are the subject of a

TCO application, are taken to be produced in Australia in the ordinary course of business for

the purposes of Part XVA other than those in s 269Q.72 Those circumstances vary according

to whether the goods are made-to-order capital equipment but I will set out only that

provision relating to goods other than made-to-order capital equipment. Section 269E(1)

provides:

“For the purposes of this Part, other than section 269Q, goods (other than made-to-order capital equipment) that are substitutable goods in relation to goods the subject of a TCO application are taken to be produced in Australia in the ordinary course of business if: (a) they have been produced in Australia in the 2 years before the application

was lodged; or (b) they have been produced, and are held in stock, in Australia; or (c) they are produced in Australia on an intermittent basis and have been so

produced in the 5 years before the application was lodged; and a producer in Australia is prepared to accept an order to supply them.”

CEO required to screen application

62. The CEO must decide whether the application has been validly made within 28 days of its

being lodged. That requires the CEO to be satisfied that the applicant for the TCO has

satisfied ss 269F and 269FA of the Customs Act.73 It also requires the CEO to satisfy

himself that “… he … is not aware of any producer in Australia of substitutable goods”.74

71 Customs Act; s 269D(4) and see also s 269D(5) providing, in effect, that they are to be interpreted by reference to those rules applicable to regulations. Since the repeal of s 48 of the AI Act, the interpretation of regulations has been determined according to the Legislative Instruments Act 2003. Section 13(1)(a) of that legislation provides that the AI Act applies to their interpretation as if they were an Act. 72 Section 269Q is concerned with goods requiring repair and that is not relevant in this case. 73 Customs Act; s 269H(1)(a) 74 Customs Act; s 269H(1)(b)

of 60

If, within the 28 day time period, the CEO neither accepts nor rejects the application, it is

taken to have been validly made.75

63. Section 269HA provides a further ground on which the CEO may reject an application and it

is a ground that is not limited to the first 28 days after lodgement. The CEO must not make

a TCO in respect of goods if he is satisfied under s 269SJ(1) that the goods the subject of the

TCO are:

“… (aa) described in terms other than generic terms; or (a) described in terms of their intended use; or (b) declared by regulations to be goods to which a TCO should not extend.”

Processing a valid application

64. Under s 269K(1) of the Customs Act, the CEO is required to publish a notice in the Gazette

as soon as practicable after receiving a valid application. Among the information he is

required to publish, the CEO must describe the goods to which the application relates and

include a reference to the customs tariff classification that, in his opinion, applies to the

goods. The CEO must also invite persons to lodge a submission within 50 days of the

gazettal if they consider there are reasons why the TCO should not be made. The

submission must comply with ss 269K(2) and (3) of the Customs Act and be lodged with the

CEO. Under s 269K(4), if a person lodges a submission more than 50 days after the gazettal

day without being invited to do so by the CEO under s 269M, the CEO must not take the

submission into account in determining whether to make a TCO.

CEO may invite submissions or seek other information, documents or material

65. The CEO may invite third persons to take part in the process in two separate ways. The first

is provided for in s 269M(1) when he considers that a person may object to the making of a

TCO. It provides:

“If the CEO considers that, in relation to a particular TCO application, a person may have reason to oppose the making of the TCO to which the application relates, he or she may, by notice in writing, invite the person to lodge a written submission with the CEO within a period specified in the notice ending not later than 150 days after the gazettal day.”

75 Customs Act’ s 269H(2)

of 60

The submission must comply with the requirements to s 269M(2) and be lodged in the same

manner as is specified in relation to the application for a TCO. Once lodged, it is taken to

have been lodged on the same day as that TCO application.76

66. The second way the CEO may invite third persons to participate is provided for in

s 269M(4):

“If the CEO considers that, in relation to a particular TCO application, any person (including the applicant or a person who has lodged a submission with the CEO) may be able to supply information or produce a document or material relevant to the consideration of the application, the CEO may, by notice in writing, request the supply of the information in writing or the production of the document or material within a period specified in the notice and ending not later than 150 days after the gazettal day.”

67. If a person receives an invitation or a request to supply information but fails to respond

within the time period but does so at a later time, “… the CEO must not take that

submission, information, document or material into account in determining whether to make

a TCO.”77

68. The time within which the invitation or request must be issued and responded to is 150 days

from the day on which the CEO published a notice in respect of the application in the

Gazette under s 269K(1) of the Customs Act. The CEO has the same period of time to give

a copy of all, or part of, the TCO:

“… application to a prescribed organisation with a view to obtaining the advice of the organisation in relation to the question whether there are producers in Australia of substitutable goods.”78

The CEO may take that course “… for the purpose of dealing with a TCO application …”.79

76 Customs Act; s 269M(3) 77 Customs Act; s 269M(5) 78 Customs Act; s 269M(6) 79 Customs Act; s 269M(6)

of 60

Making a standard TCO

A. Deciding a TCO 69. Section 269P(1) sets out the steps the CEO must follow once he has accepted the TCO

application as a valid application. The CEO has to decide:

“… not later than 150 days after the gazettal day, whether or not he or she is satisfied, having regard to: (a) the application; and (b) all submissions lodged with the CEO before the last day for submissions; and (c) all information supplied and documents and material produced to the CEO in

accordance with a notice under subsection 269M(4); and (d) any inquiries by the CEO; that the application meets the core criteria.”

70. Once satisfied that the application meets the core criteria, the CEO:

“… must make a written order declaring that the goods that are the subject of the TCO application are goods to which a prescribed item in the order applies.”80

71. Section 269P(4) provides that:

“The TCO must include: (a) a description of the goods the subject of the order including a reference to

the Customs tariff classification that, in the opinion of the CEO, applies to the goods; and

(b) a statement of the day on which the TCO is to be taken to have come into force; and

(c) if subsection 269SA(1) applies in relation to the TCO – a statement of the day on which it ceases to be in force.”

B. CEO’s failure to make a decision

72. If the CEO does not make a decision in respect of a TCO application within 150 days of the

gazettal day, the CEO is taken to have decided that he is not satisfied that the application

meets the core criteria.81

80 Customs Act; s 269P(3) 81 Customs Act; s 269P(2)

of 60

C. CEO decides TCO application meets core criteria 73. If the CEO decides that a TCO application meets the core criteria, he must first make a

written order declaring that the goods that are the subject of that application are goods to

which an item in Schedule 4 of the CT Act provides.82 The TCO must include a description

of the goods including a reference to the customs tariff as declared by the CEO. In addition,

it must include a statement of the day on which it is taken to have come into force or, if

s 269SA applies, the date it came into force and then ceased to be in force.83

Operation of a TCO

74. In the case of a single application for a TCO and the core criteria having been met

throughout the period from the date on which the application was lodged and the date the

TCO was made, the TCO comes into force on the day the TCO was lodged.84 If there is

more than one application, the day the TCO comes into operation is the day on which the

earliest application was lodged.85

75. In most cases, a TCO applies to goods that are the subject of the TCO when they were or are

first entered for home consumption on or after the day on which the TCO is taken to have

come into force.86

Revocation of a TCO

76. Revocation of a TCO may come about either through the means of an application by a

person claiming to be a producer of substitutable goods in relation to the goods covered by

the TCO on a particular day or at the initiative of the CEO. Both begin with a belief that, if

the TCO were not in force on that particular day and the application for the TCO had been

made on that day, the TCO would not have been made.

82 Customs Act; s 269P(3) when read with 269B(1) 83 Customs Act; s 269P(4). Section 269SA(1) provides that, if the CEO is satisfied that substitutable goods commenced to be produced between the date the application for the TCO was lodged and the date of the decision on that application, and that he would not have been satisfied that the application met the core criteria had production commenced on lodgement day, the TCO continues in force only until substitutable goods commenced production. 84 Customs Act; s 269S(1)(a) 85 Customs Act; s 269S(1)(b) 86 Customs Act; s 269S(2) A qualification is found in s 269SG in relation to the effect of revocation of a TCO on goods in transit and capital equipment on order.

of 60

77. The first means is provided for under s 269SB. The application is based on the producer’s

being of the view that, if the TCO were not in force on a particular day and had an

application for that TCO been lodged on that day, the TCO would not have been made.87

The producer must provide the information required and follow the procedures set out in s

269SB. Section 269SF provides for the CEO to gather his own information but it must be in

writing.88 The CEO’s authority is found in s 269SF(1):

“If the CEO considers that, in relation to a request for revocation of a TCO, any person (including the person who made the request) may be able to supply information or produce a document or material relevant to the consideration of the request, the CEO may, by notice in writing, request the supply of the information or the production of the document or material within a period specified in the notice and ending not later than 60 days after receiving the request.”

If a person refuses or fails to supply information or produce a document or material within

the period as requested but does so after that period, the CEO must not take it into account

in determining whether to revoke a TCO.89

78. The CEO’s obligation to make a decision on the request for revocation of a TCO is set out in

s 269SC(1):

“Not later than 60 days after lodgement of a request for revocation of a TCO, and after having regard to the request and to any other information, document or material given to the CEO under section 269SF, the CEO must decide whether or not he or she is satisfied: (a) that, on the day of lodgement of the request, the person requesting the

revocation of the TCO is a producer in Australia of goods that are substitutable goods the subject of the order; and

(b) that, if the TCO were not in force on that day but that day were the day on which the application for that TCO was lodged, the CEO would not have made the TCO.”

79. If it is the CEO who has the requisite belief, he may publish a notice in the Gazette declaring

his intention, subject to s 269SD(1AB), to revoke the TCO from a particular day and

inviting any person who might be affected by the revocation to give him a written

87 Customs Act; s 269SB(1) 88 Customs Act; s 269SF(2) 89 Customs Act; s 269SF(3)

of 60

submission within 28 days.90 The CEO has 60 days from the date of the publication of the

notice within which to make a decision. He must do so:

“… after consideration of the matters raised in any submissions made in response to the invitation and of any other relevant matters:

(a) decide whether or not he or she is satisfied of the matters referred to in paragraph (1AA)(b); and

(b) if the CEO is so satisfied – make an order revoking the TCO with effect from the intended revocation day.”91

The remaining provisions in s 269SD go on to make provision for variations of the decisions

the CEO might make.

Limit on CEO’s power to make a TCO

80. Section 269SJ(1) provides that the CEO must not make a TCO in respect of goods described

in terms other than generic terms, described in terms of their intended end use or declared by

regulations to be goods to which a TCO should not extend.

TARIFF CONCESSION ORDERS: provisions before 1992 amendment by CL Act

81. Part XVA was originally inserted in the Customs Act by s 5 of the Customs Amendment Act

1983 with effect from 1 July 1983.92 It provided for applications for TCOs,93 notice that

was required to be given of those applications and the way in which they were processed.

Although they differ from the current procedures to some extent, those differences are not

relevant in this context and I will not set them out. Where the relevant differences lie are in

the provisions relating to the circumstances in which a TCO might be made. Under the

previous provisions, TCOs were made by the Minister and not by the CEO.

82. In his Second Reading Speech relating to the Customs Amendment Bill 1982 in the Senate,

the then Minister for Industry and Commerce, Senator Button, referred to the report of the

Industries Assistance Commission dated 2 July 1982. The new tariff concession system

introduced by that Bill was largely based on the Commission’s recommendations. Although

90 Customs Act; ss 269SD(1AA) 91 Customs Act; s 269SD(1AB) 92 Customs Amendment Act 1983; s 2 93 TCOs were then called “Commercial Tariff Concession Orders” but I will continue to refer to them as “TCOs”.

of 60

there were one or two qualifications to it, Senator Button explained how the system was

intended to work in the majority of situations:

“ In broad terms the Government has adopted a new criterion which will provide that commercial tariff concessions will be issued where the Minister is satisfied that no goods serving similar functions are produced or are capable of being produced in the normal course of business in Australia. The key words in this criterion are ‘serving similar functions’ and new section 269B(4) provides an interpretation of them. The test will be the degree of elasticity of demand between the imported and Australian produced goods. In practical terms, this means that these tariff concessions will be decided by determining the effect that a reduced rate of duty will have on competition or potential competition between the local and imported goods. This will be based on a practical and realistic assessment of the market situation. The onus will be on the applicant for a tariff concession to identify the goods involved, the market for the goods and the degree of competition or potential competition between the imported goods and Australian-made goods.”94

Minister’s power to make TCO

83. Section 269C of the then Part XVA provided:

“(1) Subject to this Part, where the Comptroller, after considering an application under section 269G for the making of an order under this section in respect of particular goods, is satisfied that: (a) goods serving similar functions to the particular goods are not

produced in Australia; and (b) goods serving similar functions to the particular goods are not

capable of being produced in Australia by any person in the normal course of business,

the Comptroller shall make a written order, to be known as a Commercial Tariff Concession Order, declaring that the goods are goods to which that particular item applies.

(1A)-(2) … (3) A reference in paragraph (1)(a) or (b) to ‘the particular goods’ shall, in the

case of particular goods of which there are classes or kinds, be read as including a reference to goods included in a class or kind of the particular goods.”

94 Hansard, Senate, 24 May 1983 at 715

of 60

“particular goods”

84. In Part XVA, unless the contrary intention appears, the expression “particular goods” was

defined in s 269B(1) in inclusive terms: it “… includes goods included in a particular class

or kind of goods”.95

“similar functions”

85. Sections 269B(3) and (4) were concerned with what is meant by the expression “similar

functions”:

“(3) For the purposes of this Part, identical goods shall be taken to serve similar functions.

(4) Without limiting sub-section (3), for the purposes of this Part, goods shall be taken to serve similar functions to other goods unless the Comptroller is satisfied that, if both goods were readily available for sale throughout Australia, there would be no significant part of Australia in which there would be significant cross-elasticity of demand between the goods.”

“produced in Australia”

86. Sections 269B(5) and (6) expanded on the meaning of the expression “produced in

Australia”, which then appeared in s 269C(1)(a) and (b). Section 269B(5) provides that:

“For the purposes of this Part, goods, other than unmanufactured raw products, shall not be taken to have been produced in Australia unless – (a) the goods were wholly or partly manufactured in Australia; and (b) not less than ¼ of the factory or work costs of the goods is represented by the

sum of - (i) the value of labour of Australia; (ii) the value of materials of Australia; and (iii) the factory overhead expenses incurred in Australia in respect of the

goods.” 87. The expression “partly manufactured”, used in s 269B(5), was amplified in s 269B(6):

“For the purposes of this Part, goods shall not be taken to have been partly manufactured in Australia unless at least one substantial process in the manufacture of the goods was carried out in Australia.”

95 Customs Act; s 269B(1)

of 60

“ordinary course of business” 88. Section 269C(1)(b) required that goods serving similar functions to the particular goods that

were the subject of a TCO application were not capable of being produced in Australia by

any person in the normal course of business. Section 269B(7) was relevant in considering

whether