Amcor Ltd v Comptroller-General of Customs

[1987] FCA 354

Re: AMCOR LIMITED (formerly known as APM Limited)
And: COMPTROLLER-GENERAL OF CUSTOMS; KENNETH OLLIFFE and RUSSELL ADRIAN
SHAKESPEAR
No. ACT G25 of 1986
Administrative Law

COURT

IN THE FEDERAL COURT OF AUSTRALIA

AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY
GENERAL DIVISION
Neaves J.

CATCHWORDS

Administrative Law - judicial review - Customs - Application for Commercial Tariff Concession Order - Paper making machines - Whether goods serving similar functions produced or capable of being produced in Australia - Whether decision-maker failed to consider whether significant cross-elasticity of demand between goods - Whether decision-maker failed to consider whether order for goods to be produced in Australia would be accepted "in the normal course of business".

Administrative Decisions (Judicial Review) Act 1977 (Cth), s.5

Customs Act 1901 (Cth), ss.269B, 269C

HEARING

CANBERRA

#DATE 10:7:1987

Counsel for the applicant: Dr P. Buchanan, Q.C. and Mr E.J. Cooper

Solicitors for the applicant: Arthur Robinson & Hedderwicks

Counsel for the respondents: Mr R.R. Tracey

Solicitor for the respondents: Australian Government Solicitor

ORDER

The application be dismissed.

The applicant pay the respondents' costs of the application.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

Amcor Limited (formerly known as APM Limited) ("APM") seeks an order of review under the Administrative Decisions (Judicial Review) Act 1977 (Cth) ("the Judicial Review Act") in respect of the refusal of the respondents to make a Commercial Tariff Concession Order pursuant to Part XVA of the Customs Act 1901 (Cth) in respect of certain paper making machines.

1. Part XVA of the Customs Act comprises ss.269B to 269S inclusive. Sub-section 269G(1) provides that a person may make an application in writing to the Comptroller-General of Customs ("the Comptroller") for a concession order in respect of particular goods specified in the application. The expression "concession order" is defined in sub-s.269B(1) to mean a Commercial Tariff Concession Order provided for by s.269C. An application is to contain such particulars as are prescribed and is to be lodged with the Comptroller (sub-s.269G(2)). The required particulars are prescribed in sub-reg.181(1) of the Customs Regulations. They include -
   
   

. a description that adequately identifies the goods (par.(d));

. a description of the function that the goods normally serve (par.(j));

. the tariff classification that applies to the goods (par.(m)) and the rate of duty applicable (par.(n));

. details of communications between the applicant and each person with whom the applicant has communicated in writing for the purpose of determining whether the person produces, or is capable of producing, in Australia in the normal course of business, goods that serve the function described pursuant to the requirement in par.(j);

. the extent of any competition that would exist between the goods and similar goods that a person produces, or is capable of producing, in Australia in the normal course of business, if the goods were imported (par.(s)); and

. a description that the applicant considers would adequately identify the goods for the purposes of the making of a concession order (par.(u)).

1. Sub-section 269C(1) provides:
   
   

"(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 particular goods are goods to which a prescribed item specified in the order applies."

Sub-sections 269B(3), (4), (5), (6) and (7) provide:

"(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.

(5) 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 1/4 of the factory or works cost 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.

(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.

(7) For the purposes of this Part, a person shall be taken to be capable of producing goods in the normal course of business if, in the normal course of business, he is prepared to accept orders for the supply of such goods that have been, are being, or are to be, produced by him."

1. Section 269K, so far as material, provides:
   
   

"269K(1) Where the Comptroller decides not to make a concession order for which an application .... has been made .... he shall, in a prescribed manner, give the applicant notice, in writing of the decision.

(2) The giving of a notice under sub-section

(1) in respect of a concession order does not prevent the Comptroller giving further consideration to the application or applications for that concession order or reversing the decision by reason of which the notice was given."

1. On 13 November 1985 APM made application in writing to the Comptroller for a Commercial Tariff Concession Order. The application followed the placing by APM in February/March 1985 of an order with Voith S.A. Maqinas E. Equipamentos of Sao Paulo, Brazil, a wholly owned subsidiary of J.M. Voith GmbH of Germany, for the supply and delivery of a paper making machine having a wire width of 5.6 m. The machine was to be manufactured in Brazil for a total cost of $10,133,059.97. The machine is required by APM for making white papers for the office and computer papers market.

2. The application was made on a printed form identified by the letters and figure "CTC1". The application contained the following information:
   
   

"Precise Description of Goods to be Imported

Paper making machine of 5.6 m wire width

Suggested Commercial Tariff Concession Order Wording

Paper making machines having a wire width of 5.6 m or greater including initial spares but not including other parts or components when imported separately

Function that Goods are intended to Serve

For making white papers for the office and computer papers market

Other Functions Goods May Serve

Nil

Names of Australian Manufacturers Contacted

Johns Perry Industries Ltd. - Adelaide."

The application was accompanied by a letter dated 4 November 1985 signed by Mr Michael Haywood, a licensed Customs Agent and the General Manager of Brambles International Trade Consultants, a Division of Brambles International Freight Pty. Limited, who was acting on behalf of APM. It referred to discussions which APM had had with Johns Perry Industries Pty. Limited ("Johns Perry") and stated:

"This Company, whilst manufacturing certain components for paper making machines, do not manufacture paper making machines of the size required or of the same technology required by APM to manufacture a new range of paper products."

1. The application was considered by Mr Kenneth Olliffe, an officer of the Australian Customs Service and relevantly a delegate of the Comptroller. Mr Olliffe is the second respondent to this proceeding. By letter 13 February 1986 Mr Olliffe informed Mr Haywood as follows:
   
   

"I refer to an application for a Tariff Concession Order made on behalf of APM Ltd. in respect of paper making machines (your reference 1C-396).

I have carefully examined the material available in this matter.

It is claimed by your clients that no local manufacturer is able to supply a complete paper machine.

I believe it is correct to say that the only likely local manufacturer in this product area, Johns Perry Engineering, of Adelaide, has not previously supplied a complete machine, and similarly, that all componentry for such a machine is not capable of being manufactured locally.

However, the position, as conveyed by Johns Perry to you in its letter of 28 January 1986 accompanied by form CTC 2 in the affirmative, is that Johns Perry is prepared to accept orders for paper machines.

I have made enquiry and have also been given direct statements to this effect.

Providing the terms of section 269B of Part XVA of the Customs Act are met, the incorporation of overseas technology, expertise or componentry in a locally made machine does not disqualify its manufacturer from assistance provided by the Parliament.

My responsibilities in terms of the Tariff Concession provisions include that I be satisfied that goods serving similar functions are not capable of being produced in Australia. Having considered all of the information submitted, I advise that I am not satisfied that a prima facie case for concession has been established in these circumstances."

1. Having sent telex messages to Mr Haywood and APM on 3 March 1986 that the application for a concession order was refused, Mr Olliffe wrote to Mr Haywood on 4 March 1986 in the following terms:
   
   

"I refer again to your application for a Tariff Concession Order made on behalf APM Ltd. for paper making machines (your reference IC-396).

Further to my letter of 13 February 1986, I am informed by Johns Perry Engineering that, subsequent to your visit to the company on 19 February 1986, Johns Perry has maintained and will maintain its position in respect of preparedness to accept orders for the supply of goods serving similar functions to those for which you sought concessional admission.

For the reasons as conveyed to you in my letter referred to above and having regard to the continuing circumstances of this matter, I have no alternative but to confirm my telex advice to you dated 3 March 1986 and refuse your application in terms of S.269K of the Customs Act.

I have arranged for a copy of this advice to be supplied to Mr J. Barassi of APM Ltd."

1. A request was subsequently made on behalf of APM that the decision evidenced by Mr Olliffe's letters dated 13 February and 4 March 1986 be reviewed. That review was carried out by Mr Russell Adrian Shakespear, an officer of the Australian Customs Service senior to Mr Olliffe. Mr Shakespear is the third respondent to this proceeding.

2. Having carried out the review, Mr Shakespear concluded that the decision should not be altered. He wrote to Mr Haywood a letter dated 21 April 1986 in the following terms:
   
   

"I refer to your letter of 11 March on behalf of Australian Paper Mills requesting a review of a decision refusing an application for a tariff concession for a paper making machine having a wire-width of 5.6 m or greater. The review undertaken by the internal review group has now been completed.

I have examined all papers associated with this application and have carefully considered the points raised in your letter. I note your concern about the way the application has been handled and the impressions gained by you and your client during the early part of 1985 regarding Johns Perry's capacity to manufacture paper making machines.

Notwithstanding, the fundamental issue to be considered is whether at the time the application was lodged, goods serving similar functions were produced or were capable of being produced in Australia in the normal course of business. Might I say at this point that the goods with which I am concerned are paper making machines per se, which may incorporate components sourced overseas. The machines are not, for Tariff Concession purposes, being notionally divided.

I turn now to the matter of your appeal against the Delegate's decision not to approve your application for a Tariff Concession Order. That decision was made on the basis of the response by Johns Perry to your enquiry to that company, and the information and advice gained by the Delegate during a visit to Johns Perry's premises.

As you know, it is the applicant's responsibility to establish the case for a concession order. Where the applicant disagrees with a local manufacturer's claims, that local manufacturer should be re-approached, in writing, putting the reasons for the difference of opinion, and requesting a written response to the points raised. Copies of all outward correspondence and the originals of all responses are required to be produced in accordance with Customs Regulation 181(1)(q) and (r).

The Delegate's responsibilities, after all of this has transpired (with or without resolution) are, inter alia, to consider the evidence and make a decision in terms of the legislation. In this particular case, Johns Perry have claimed that they have sufficient resources, expertise and technical knowledge (including, if necessary access to the resources of Beloit International) to place them in a position to be able to accept orders for a paper making machine serving similar functions. Their preparedness to accept an order was said to have been advised you during discussions, and was later confirmed in writing in their letter to you dated 28 January 1986. Their capabilities were fully tested by Mr K. Olliffe of this office during an inspection of their manufacturing facilities on 20 November

1985. Mr Olliffe has reported that in his view the claims are totally justified. Further, Johns Perry have not resiled from their earlier position.

Against Johns Perry's claims and Mr Olliffe's findings I have weighed evidence presented by you in support of a concession. The evidence presented by you however consists largely of statements about a situation that was purported to exist when the overseas order was placed. (The precise date of order, has never been conveyed to this office).

You claim further that in a meeting with Johns Perry last year 'they stated that they could not make the 5.6 metre width and did not oppose a reference for complete goods ....'. You have submitted no evidence to support such a claim which contrasts directly with Johns Perry's statements to you in their letter and CTC2 form of 28 January.

However, as I have stated earlier, regardless of Johns Perry's perceived position in the market at the time the overseas order was placed the question to be considered is whether, at the time the application was lodged, that company was capable of producing goods serving similar functions in the normal course of business.

Having regard to the claims made by Johns Perry and the evidence gathered by this office regarding Johns Perry's manufacture, and bearing in mind their proven capacity, demonstrated over many years, to produce complex machinery to order, including for the paper making industry, I would have no justification in setting aside their claims. Accordingly I can only endorse the advice previously conveyed to you that a case for a Concession Order has not been established.

This now completes the internal review procedures available. However I should draw your attention to the appeal provisions contained in S 269 R of Part XVA of the Customs Act which states inter alia

'a person whose interests are affected by the making of the order, or the decision not to make the order as the case may be, may request the Minister, in writing, to refer to the Industries Assistance Commission (IAC) the question whether the order should have been made'.

It should be appreciated that the Minister is not required to comply with such a request nor is he obliged to accept the recommendations of the IAC should he refer the matter to it.

In regard to appeals, the IAC in Report No 305 to the Government on the Commercial By-law System recommended that the grounds for referring a review of a decision would be if:-

(a) the matter involves an important principle of wide application: and

(b) the applicant establishes an arguable case that the internal review process has been inadequate."

1. It is the decisions evidenced by the letters dated 13 February 1986, 4 March 1986 and 21 April 1986 that are the subject of the application for an order of review.

2. The respondents raised a preliminary question whether APM should be permitted to seek an order of review in respect of the decision taken by Mr Olliffe on the ground that that decision was no longer the operative decision adversely affecting the applicant's interests. It was submitted that Mr Olliffe's decision had been superceded by the decision, albeit to the same effect, made by Mr Shakespear in the exercise of the powers of internal review recognised by sub-s.269K(2) of the Customs Act. For APM it was submitted that Mr Olliffe's was the operative decision, Mr Shakespear not having made a fresh decision of his own but having done no more, so the argument ran, than fail to initiate steps that might lead to a reversal of the previous decision.

3. In the result, I have not found it necessary to reach a definitive conclusion on the point. However, I incline to the view that, for the purposes of the Judicial Review Act, Mr Shakespear is to be taken to have himself made a decision refusing the application for a Commercial Tariff Concession Order and that his is the operative decision.

4. The ground on which APM relies is that Mr Olliffe and Mr Shakespear failed to consider whether goods serving similar functions to the goods in respect of which the Commercial Tariff Concession Order was sought were capable of being produced in Australia by a person in the normal course of business. The decision-makers were said to have failed in two respects. First, it was submitted that there had been a failure to apply the test required by sub-s.269B(4) in that, in comparing the functions of the imported goods and those of the potential local product, there had been a failure to address the question whether, if both goods were readily available for sale throughout Australia, there would be significant cross-elasticity of demand between those goods. Secondly, it was submitted that there had been a failure to address the question whether, if Johns Perry were to accept an order for the supply of a paper making machine having a wire width of 5.6 m or greater, the acceptance of that order would be in the normal course of that company's business.

1. Before examining these submissions, reference should be made to the material which the decision-makers had before them and upon which the challenged decisions were taken.

2. I have already referred to the application and the letter dated 4 November 1985 which accompanied it. Prior to the application being made, certain correspondence had passed between Brambles International Trade Consultants ("Brambles") and Johns Perry. That correspondence consisted of a letter dated 1 August 1985 from Brambles to Johns Perry and a reply thereto dated 8 August 1985. The letter dated 1 August 1985 enclosed a schematic diagram, and provided limited technical details, of the machine which APM applicants required and asked Johns Perry to -
   
   

"assess and comment, from a practical and realistic standpoint in the market place, as to whether the importation of a complete paper making machine at concessional rates would be competitive or potentially competitive with paper making machines which may be manufactured in the normal course of business by your company."

Johns Perry was also asked to complete an enclosed departmental form identified as a form CTC2.

1. Johns Perry's reply dated 8 August 1985 was in the following terms:
   
   

"We have received your letter dated 1.8.85 and the attached machine layout drawing, and wish to make the following comments in relation to your application.

Johns Perry - Perry Engineering Division, as Beloit Corporation (U.S.A.) licensees and as machinery manufacturers (and designers) in our own right, have manufactured and continue to manufacture a large range of paper making machinery and equipment for use in the industry.

Various items of equipment depicted in the attached machine layout drawing are similar to items currently or previously made under licence to Beloit Corporation.

The current tariff concession order relating to 6m and greater machines, whilst still being valid, is by no means the current limitation of our manufacturing capability for some items of paper machine equipment.

With reference to Beloit Italia's (not Beloit Australia's) unsuccessful bid, we must state that carte blanche entry of Beloit equipment (should they have been successful) because of our close involvement with them would certainly not have been entertained and we would suggest that the duty level would have been commensurate with the amount of equipment capable of being made by Johns Perry - Perry Engineering Division. Our position with regard to tariff concession in the mechanical manufacturing field (in the paper or other industries) has always been and must continue to be one of consistency in our dealings with the Customs Department and be in accordance with our current capability.

In order not to disadvantage any application for tariff concession it would be desirable to know the full scope of equipment purchased by APM and an honest assessment made of the extent of Johns Perry - Perry Engineering capability in that scope, and in doing so successfully satisfy the parameters set out in the CTC2 form.

In the light of this situation we will await your response before completing the CTC2 form."

1. Mr Olliffe and Mr Shakespear also had before them a letter dated 22 November 1985 addressed to the Australian Customs Service by Mr J.C. Barassi, APM's General Manager - New Business. The letter read, in part:
   
   

"Complete Paper Machines of the size in question of 5.6 metres wire width or greater are not manufactured in Australia and the capability to manufacture an advanced technology fine paper machine as proposed by APM is also not available in Australia. This position is reflected in the current Tariff Concession Order for all papermaking machines 6 metres in wire width and greater.

I believe the supply of small, unsophisticated papermaking machines is within the capability of local manufacturers, however no local manufacturer is able to supply a complete machine regardless of size and certainly not large machines as proposed in our TCO application, nor machines of advanced technology.

In addition no manufacturer in Australia is able to offer a complete package, that is, the inclusion of associated process system design for a papermachine, nor able to provide overall performance guarantees for a complete paper machine project.

I consider that the importation of all paper machines 5.6 metres or wider at concessional rates of duty would not compete with any paper machines capable of being made in Australia."

1. On 20 November 1985 Mr Olliffe had visited the premises of Johns Perry and discussed the application for a Commercial Tariff Concession Order with Messrs R. King, F. Howlett and A. Jennings, senior officers of the company. A report of that visit, canvassing a number of relevant issues, was prepared. The following is an extract:
   
   

"With regard to paper machines in general, Johns Perry maintain that:

- they have not said that they will not or are not prepared to accept orders for paper making machines

- they have manufactured or refurbished a range of equipment used in paper manfr for a number of paper producers and in sizes in excess of 6 m wire width

- while in smaller wire widths there is more JPs (Johns Perry) can locally manufacture as distinct from units of say 5 m or greater; the issue remains one of preparedness to supply rather than totally manufacture

- paper equipment which would be locally manufactured were an order to be received, would consist of:

(1) Pulpers ie preparation equipment being agitators or refiners but not including screens or cleaning equipment

(2) Fourdrinier unit

(3) Press sections including suction rolls

(4) Felt/wire rolls

(5) All dryers, top and bottom

(6) Size presses

(7) Reels

(8) Calendar assembly but not including control crown or swimming rolls

(9) Electrical equipment on a subcontract basis eg ASEA or SIEMENS (with significant local content)

(10) Paper machine floor and structure."

There followed a reference to certain equipment for which there was no local manufacture and which would have to be imported. The report concluded:

"To sum up:

- Johns Perry, it seems to me at this stage, do have a capability in terms S269C(1)(b), at least in taking into account local content provisions of S.269B(5), (6) and (7).

- Johns Perry have indicated a preparedness to accept orders for complete paper making machines, albeit in conjunction with Beloit, USA from whom such technology is licensed.

- Johns Perry have undertaken to supply further data including photos of past production."

1. The correctness of the report concerning the components that could be manufactured by Johns Perry, though with some qualifications and additions, was confirmed by Johns Perry in a telex message dated 12 December 1985. On 13 December 1985 Johns Perry confirmed to Mr Olliffe that they, in conjunction with their technology partner Beloit International, would accept an order for the supply of a complete paper making machine.

2. There was also before the decision-makers a further letter, dated 28 January 1986, addressed by Johns Perry to Brambles in the following terms:
   
   

"We refer you to the above (earlier correspondence) and return herewith your above referenced CTC2 form dated 24.1.86, duly completed and signed.

In answering the questions on the CTC form, we draw your attention to the following most important comments:

1) In effecting our licence agreement with Beloit International, the Perry Engineering Division has manufactured, or is capable of manufacture of the following components of the paper making machines at our works here in Mile End, Adelaide.

a) Preparation equipment including pulpers, agitators, refiners and tankage.

b) Fourdrinier units, but excluding the headboxes.

c) Press sections including suction rolls and plain paper rolls.

d) Felt/wire rolls.

e) All paper dryers both top and bottom up to 4000mm face.

f) Size presses.

g) Reels and reel spools.

h) Calendar assembly, excluding control crown, chilled iron or swimming rolls.

j) Paper machine support structure and machine frames.

k) Doctor assemblies.

l) Felt and rope stretch guide equipment.

2) As we have advised you during discussions in our offices, we at Johns Perry would, in conjunction with our technology partner, Beloit International, accept an order for goods serving similar functions to those listed in (a) and (b) of CTC2.

3) Several components of a complete paper making machine are currently outside the manufacturing capability of the Johns Perry works at Mile End, Adelaide. These components are as follows:-

i) Headboxes.

ii) Calendar Rolls.

iii) Screens or screening equipment.

iv) Spray systems.

v) Winders.

vi) Electricals.

vii) Proprietary equipment such as valves, controllers, etc.

viii) Instrumentation.

If such items were included in an order that Johns Perry received in conjunction with its technology partner, Beloit International, such items would be supplied by sub-contracting."

The reference to the functions listed in (a) and (b) of CTC2 in sub-par.2 of the letter was a reference to the description of the goods to be imported and the suggested Commerical Tariff Concession Order wording as appearing on the front sheet of the form, those details being identical with those set out in APM's application and referred to above. The form CTC2 was completed by Johns Perry by answering the following four questions in the manner indicated:

Do you produce in Australia any goods serving similar functions to the goods listed at A and B on page 1? Yes

Do you accept or would you accept orders for production in Australia of any goods serving similar functions to those listed at A and B on page 1? Yes

Would a reduction of the Customs duty payable on the goods listed at A and B on page 1 have a substantially adverse effect on the market that is available to any goods produced in Australia by you? Yes

Do you know of any other Australian manufacturer of the goods listed at A and B on page 1 or any other goods that you consider may serve similar functions? No

1. Reference should also be made to a letter dated 13 February 1986 from Brambles to the Australian Customs Service. In that letter Brambles, while accepting that Johns Perry manufactured certain components of paper making machines and provided for the maintenance of such machines previously imported, challenged the view that Johns Perry could be regarded as a manufacturer of a complete paper making machine with a wire width of 5.6 m. Having made the point that what APM required was a machine of that size and type and that smaller width machines would not be considered, the letter said:
   
   

"As there is no choice for APM or other paper makers to consider the smaller machines there must therefore be a significant absence of cross elasticity of demand. With this absence it cannot be regarded that a smaller machine can be

(in) competition with a 5.6 metre machine.

....

As far as the aspect of serving a similar function is concerned, the comparison must revolve around what is practical and realistic in the market place and the key factor is competition or potential competition which exists between the imported and locally produced goods. There are no 5.6 metre width machines manufactured in Australia and there is no competition between the large and the small machines both serving different needs of the industry."

The letter was critical of the information made available by Johns Perry and asserted that, at a meeting in Adelaide, that company had "advised that they could not manufacture the size APM required". It was disputed that Johns Perry could accept orders for complete paper making machines, contending that any order would be accepted by Beloit International with Johns Perry being no more than a sub-contractor in respect of some components.

1. Following the receipt by Brambles of Mr Olliffe's letter dated 13 February 1986, the text of which is set out earlier in these reasons, a meeting took place on 19 February 1986 between representatives of Brambles and Johns Perry. Johns Perry maintained the position that it was prepared to accept orders for the supply of goods serving similar functions to those for which a Commercial Tariff Concession Order was sought by APM. Upon that information being conveyed to Mr Olliffe, he determined that the application should be refused. The letter dated 4 March 1986 to which reference has already been made was then sent.

2. For the purposes of the review by Mr Shakespear of Mr Olliffe's decision, Brambles were invited to submit any new evidence which would support the application for a concession order. In response to that request Mr Haywood called upon Mr Shakespear and presented a letter from Brambles dated 11 March 1986. The letter argued the case for the making of a concession order. The arguments were similar to those put to Mr Olliffe though the argument that Johns Perry were not capable of producing a complete machine "in the normal course of business" was elaborated at greater length than it previously had been. Johns Perry was described as "a known manufacturer of certain components for paper making machines and possible manufacturer of the small conventional paper making machines". It was contended that the manufacture of a complete machine embraces more than mechanical engineering skills and requires experienced paper making technological know how which, the writer said, he believed Johns Perry did not possess. The letter concluded:
   
   

"Finally the Tariff Concession criterion regarding manufacturing equipment capable of performing a similar function must be examined from a practical and realistic position in the market place. Anyone examining the market place when A.P.M. had to make their decision to purchase could not but find that Johns Perry were not offering paper making machines to the industry."

Mr Haywood also put oral submissions to Mr Shakespear. However, no new or additional factual material in support of the application was presented. Johns Perry provided some additional information, being information which it had supplied to APM at its request. The substance of that information was that a notional factory costing exercise had been completed for a machine which Johns Perry would produce on APM's order. According to Mr Olliffe, the information given was to the following effect;

"The results, with the main machine broken down into major components, range from 0% for the necessary imported components through 60% for the Fourdrinier unit up to 100% for stuff like end rollers, machine frame and storage. Even excluding further equipment that he could manufacture, the overall absolute minimum is 35%."

1. Mr Shakespear's decision was conveyed to Mr Haywood by letter dated 21 April 1986, the text of which has already been set out.

2. It is common ground that paper making machines having a wire width of 5.6 m or greater for use in making white papers for the office and computer papers market were not, at the date of the application for a Commercial Tariff Concession Order, being produced in Australia (sub-s.269(1)(a)). The question for the decision-makers was, therefore, whether they were satisfied, on the material before them, that goods serving similar functions to paper making machines of the above description were capable of being produced in Australia by any person in the normal course of business (sub-s.269C(1)(b)). The question concerning similarity of function which that provision of the Act poses is to be answered by reference to the criteria specified in sub-s.(3) or (4) of s.269B, namely identity of the goods (in the sense of mechanical or physical function) or, alternatively, significant cross-elasticity of demand between the goods (a market or economic test): Davies Craig Pty. Ltd. v. Comptroller-General of Customs (Davies J. - 19 August 1986 - unreported).

3. For the purposes of the present case sub-s.269B(4) is the relevant provision. Applying that provision, the decision-makers were bound to conclude that the goods specified in the application and the goods which could be produced by Johns Perry served similar functions unless they were 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.

4. It is important to recognise that a Commercial Tariff Concession Order applies in respect of all goods, by whomsoever imported, meeting the description of the goods specified in the order which are imported into Australia after the date specified in the order. It follows that, in the present case, the decision-makers were to answer the question posed by sub-s.269(1)(b) not in relation to the machine, with its particular features and characteristics, which APM was purchasing from Voith S.A. Maquinas E. Equipamentos and proposed to import into Australia, but in relation to a class of goods, namely paper making machines having a wire width of 5.6 m or greater and having the function specified in the application.

5. The decision-makers were, therefore, not bound to take into account such matters as the configuration of the machine being imported, the specifications in accordance with which it was to be constructed, technical data relating to its performance, its price, the warranties or performance guarantees (if any) which may have been given by the manufacturer, or the projected date of delivery of the imported machine. I should add that, if it be the position that the decision-makers were entitled to take those matters into account, APM is not in a position to complain that they failed to do so as APM took no steps to support its application with material pertinent to those matters.

1. An examination of Mr Olliffe's letters dated 13 February and 4 March 1986 informing APM of his decision discloses that, while the writer acknowledges that he is required to be satisfied, before making a concession order, that goods serving similar functions to those in respect of which the order is sought are not capable of being produced in Australia, there is no express reference to cross-elasticity of demand in respect of the goods in question. There is, however, a general reference to the necessity for the requirements of s.269B of the Customs Act to be met though, in its context, the reference would appear to be to provisions of that section other than sub-s.(4). That Mr Olliffe should have made no express reference to cross-elasticity of demand is understandable when one has regard to the arguments that were put to him on behalf of APM. The argument that was put on cross-elasticity of demand was confined to a contention that there would be no cross-elasticity of demand, and consequently no competition, between imported paper making machines having a wire width of 5.6 m or greater and having the function specified in the application and a locally produced machine having a lesser wire width. This argument reflected APM's contention that Johns Perry, while being capable of producing components for paper making machines and possibly of producing small, unsophisticated paper making machines, did not have the capability or the technological know how to manufacture a machine with a wire width of 5.6 m or greater. A machine of that dimension and function and the small conventional machines were said to serve different markets and not to be in competition with each other. Mr Olliffe's letters were obviously directed to those arguments. It is of significance that it was not contended on behalf of APM that there would be no cross-elasticity of demand between an imported paper making machine of the requisite dimensions and function and a similar machine locally produced.

2. An affidavit was sworn in this matter by Mr Olliffe on 7 October 1986. Paragraph 24 states that, before writing the letter dated 13 February 1986, he considered all of the material then available to him. The paragraph continues:
   
   

"Implicit in my consideration of the material was whether the goods to be imported had the potential to compete with goods capable of being produced in Australia by Johns Perry. I came to the view that in this matter a case for concessional admission had not been established."

1. In cross-examination, Mr Olliffe was asked what part of the statute he had in mind in undertaking the exercise referred to in par.24 of his affidavit. He replied:
   
   

"Well, certainly B and C because why I was looking at - what I had before me was an application for a concession for a class or kind of good. It was not just under consideration as a 5.6 metre wide machine for APM. It was whether the criteria could be met for a proposed concession reading simply, paper making machines."

The references to "B" and "C" are clearly references to ss.269B and 269C of the Customs Act. The following questions and answers followed:

"Q. You were concerned not only with the effect it would have on Amcor, but also the effect that it would have on the next person who wanted to bring in a machine that answered that description?

A. That is right and that is a consideration that I extend every day in my work.

Q. And what did you consider when you undertook the consideration of the material to determine the question whether the goods to be imported had the potential to compete with goods that could be made by Johns Perry?

A. Well, of course I was aware that we were in the general heavy engineering industry area, that we are talking about purpose built equipment, generally dealt with on a tender basis over a long period of time for a great deal of money. I had to consider whether the imported goods as applied for in the case of the APM application - and I had others - in relation to the APM application, would compete with any equipment which Johns Perry were capable of producing in terms of the tariff concession provisions.

Q. But compete in what terms - compete in what areas?

A. Well, in general terms, I suppose, when we look at B(3) and B(4) and we talk about cross-elasticity, what we are really saying in the legislation is competition and in this sort of one off speciality engineering area, an order placed overseas for this sort of equipment is an order or a sale that Johns Perry would not get.

Q. I did not understand that. But what were the areas in which Johns Perry were capable of competing?

A. In the general paper making machine area. We are only talking in TCO terms here. It might well be that commercially nobody in the Australian paper industry would bother to place with them an order, unfortunately.

Q. Well, when you talk about competing, there are a number of ways in which one can compete, are not there? You can compete in terms of price?

A. Right.

Q. You can compete in terms of the quality of the product that you can deliver. You can compete in terms of the warranties you are prepared to give?

A. Yes, certainly.

Q. Backup for breakdown and maintenance?

A. Yes, all those things.

Q. Well, what were the factors that you weighed here? Did you just think about competition as a general notion, did you?

A. Yes, and indeed a question of substitution.

Q. All right. Well, tell us about that?

A. In TCO terms, not in commercial terms; I must draw the distinction.

Q. Well, you stress that. What is substitution in TCO terms?

A. Simply as I alluded to earlier. If, indeed, an order for this equipment had in fact gone overseas to any one of the overseas suppliers that was it. Johns Perry were not going to get that order. They had lost a sale. They were never going to get that order; it had gone. So that the machine imported was a direct substitute for the machine that Johns Perry would have been prepared to supply .... I make no comment there about its suitability.

....

Q. That is the test you apply, is it?

A. I have to take into account the competition, or potential competition, in the Australian market for goods of that class or kind."

1. Counsel for APM, in his address, suggested that par.24 of Mr Olliffe's affidavit was "an ex post facto rationalisation of a process of decision which really had no regard at all to the potential to compete, with markets or with anything else" and submitted that the real process of reasoning was to be found in what was said in the letters dated 13 February and 4 March 1986. That suggestion was not put to Mr Olliffe in cross-examination and I reject it. I accept Mr Olliffe's evidence as establishing that, in reaching his decision, he took into account the matter to which he deposes in par.24 of his affidavit as amplified in his oral evidence.

2. Nor am I able to agree that Mr Olliffe failed to consider whether, if Johns Perry were to accept an order for a paper making machine having a wire width of 5.6 m, the acceptance of that order would have been "in the normal course of business". As appears from his report on his visit to the premises of Johns Perry on 20 November 1985, Mr Olliffe gained the impression that "the firm were more than competent engineers with a high capability in local manufacture of large and complex machinery". He also had information indicating the scope of the company's then recent achievements. Having regard to the nature of the material that was before him, I cannot believe that this question would have loomed large in his consideration of the matter but I am satisfied it was not ignored. The comment may also be made that it was not put to Mr Olliffe in cross-examination that, in reaching his decision, he had failed to consider this aspect of the matter. The argument put on behalf of APM that, because Johns Perry had not previously manufactured a paper making machine of the required dimensions, to embark on the manufacture of one would be otherwise than in the normal course of its business is, in my view, totally misconceived.

3. I turn to the decision made by Mr Shakespear evidenced by his letter dated 21 April 1986. There is nothing in that letter which supports APM's claim that Mr Shakespear failed to consider the appropriate questions. Some elaboration of his process of decision-making is contained in his affidavit sworn on 7 October 1986. He says (par.9):
   
   

"after considering all the evidence available on the file C85/35038, I concluded that a concession order could not be approved, as I was not satisfied in terms of S.269C(1) of the Customs Act, that goods serving similar functions were not capable of being produced in Australia in the normal course of business. Implicit in my reaching this conclusion was the recognition that as the machine, which was capable of being produced in Australia by Johns Perry, would be a substitute for the imported machine, potentially there would be direct competition and thus cross-elasticity of demand. Accordingly, the conditions imposed by S.269B(4) of the Customs Act could not be satisfied."

That statement was not qualified in any way in cross-examination. It has not been established to my satisfaction that Mr Shakespear failed to consider all the issues which the application for a concession order properly raised.

1. For the reasons set out above, the application is dismissed. The applicant must pay the respondents' costs of the application.