Asia Pacific Aircraft Storage Pty Ltd and Australian Trade Commission
[2014] AATA 835
•6 November 2014
[2014] AATA 835
Division GENERAL ADMINISTRATIVE DIVISION File Number
2014/2075
Re
Asia Pacific Aircraft Storage Pty Ltd
APPLICANT
And
Australian Trade Commission
RESPONDENT
DECISION
Tribunal Deputy President I R Molloy
Date 6 November 2014 Place Brisbane The Tribunal affirms the decision under review.
...............................[Sgd]........................................
Deputy President I R Molloy
CATCHWORDS
EXPORT MARKET DEVELOPMENT GRANTS – Australian exporters – Grants assisting international promotion of products – Eligible products and services – Eligible tourism and non-tourism services – Service relating to protection operation or maintenance of assets – Assets held in Australia – Decision under review affirmed.
LEGISLATION
Export Market Development Grants Act 1997 (Cth), ss 4, 107
Export Market Development Grants Regulations 2008 (SLI No. 140 of 2008) (Cth), ss 6.2, 2.1, Schedule 2
SECONDARY MATERIALS
EMDG Administrative Guidelines
REASONS FOR DECISION
Deputy President I R Molloy
6 November 2014
INTRODUCTION
The applicant (“APAS”) has established a business based at Alice Springs offering short and long-term storage of aircraft. Its intended customers are aircraft operators in the Asia/Pacific region.
The Export Market Development Grants Act 1997 (Cth) (“the Act”) provides for an assistance scheme under which small and medium Australian exporters may apply for and receive grants to assist them in respect of particular expenses incurred in promoting their products overseas.
This is an application for review of a decision of the respondent (“Austrade”) dated
2 April 2014 affirming a determination that APAS is not entitled to a grant pursuant to
s 107(b) the Act.
A requirement for a grant is that the applicant has incurred eligible expenses in a particular year in relation to “eligible products”.[1] “Eligible products” are defined to include “eligible services”, which in turn are defined to encompass “eligible non-tourism services” and “eligible tourism services”.[2]
[1] Subsection 4(b) of the Act.
[2] Section 107 of the Act.
A “non-tourism service” is defined in s 107 of the Act as follows:
“Non-tourism service” means a service other than:
(a) a tourism service; or
(b) a service specified in the regulations.
There is no dispute that the service provided by APAS is not a “tourism service”.
Section 6.2 of the Export Market Development Grants Regulations 2008 (SLI No. 140 of 2008) (Cth) (“Regulations”) specifies that the services contained in Schedule 2 are not non-tourism services. Relevantly, Schedule 2 provides:
1 Services that are not non-tourism services
Each of the following is a service other than a non-tourism service:
…
(d) a service relating to the protection, operation or maintenance of assets held in Australia.
ISSUES
In broad terms the issue is whether the service provided by APAS falls within
Schedule 2.1(d) of the Regulations and therefore is not a “non-tourism service”.
Austrade submits that the service that APAS provides relates to each of the protection, operation and maintenance of aircraft at its facility, and that the aircraft are assets held in Australia within Schedule 2.1(d) of the Regulations.
APAS does not dispute that for the purpose of Schedule 2.1(d) the assets are the aircraft, but does dispute that it is providing a service as envisaged by that provision, or that the aircraft are held in Australia within the meaning of that term.
APAS’s service
APAS promotes its facility as providing a dry, arid, low humidity environment ideal for preservation of aircraft.[3]
[3] T1, page 22.
It describes itself as providing a wide range of services including aircraft storage, aircraft storage maintenance, aircraft part-out, and aircraft disassembly/recycling.[4] Parting-out is the removal of components from aircraft.
[4] T1, page 18, paragraph 10.
APAS says aircraft are positioned (typically for an undetermined period of time) during which time the manufacturer (e.g. Boeing or Airbus) requires certain checks to be undertaken.[5]
[5] Applicant’s Statement of Facts, Issues and Contentions dated 15 August 2014, paragraph 21(k).
Checks are undertaken by a related company, Aerotech Aviation Pty Ltd (“Aerotech”), which has approval from the Australian Civil Aviation Safety Authority to provide aircraft maintenance services at the Alice Springs location.
APAS says its storage program includes “checks to hold the stored aircraft in an airworthy state until they are ultimately re-activated or parted-out.” However, if an aircraft is to be parted-out, then checks may not be required.
APAS has a standard form of agreement, described as a Master Aircraft Storage Agreement (“Storage Agreement”), to which it attaches a Schedule specific to the customer.[6]
[6] Exhibit 8.
The Storage Agreement is expressed to be between APAS, Aerotech, and the customer. Under the Storage Agreement the customer engages APAS to provide services in respect of its aircraft. The services are expressed to include aircraft parking storage, aircraft induction, and aircraft storage maintenance.
The Storage Agreement recites that APAS has retained Aerotech to provide certified aircraft maintenance services. The customer agrees to APAS retaining Aerotech and other third party subcontractors to provide services to the customer. APAS remains jointly and severally liable with the subcontractors for the subcontracted services performed.
Under the Storage Agreement the customer shall pay APAS the fees in respect of the services provided. There is no provision for the customer to pay Aerotech or any other subcontractors. The evidence is there is an arrangement for APAS to remit funds to Aerotech but that arrangement is not governed by any agreement between the companies.
Photographs of APAS’s facility depict aircraft stored in the open. In at least one case parts of the engines, the wheels, and some other exterior areas of the aircraft, have been wrapped or covered.[7]
[7] Exhibit 10.
A photograph of an interior shows the passenger cabin draped in plastic. Clearly these measures are a form of protection against the elements such as sand or dust.
Relating to the protection, operation or maintenance
As to the provision of a service relating to the protection of the aircraft, APAS says the climatic conditions of Alice Springs, described as ideal for the preservation of aircraft, are part of the natural environment. They should not be seen as a service provided by the company.
However APAS has chosen Alice Springs as the location for its facility. The opportunity to benefit from the hot, arid conditions, conducive to preserving its customers’ aircraft, is therefore part of the service APAS provides.
APAS says the protective coverings, seen in the photographs, are applied by Aerotech. In my view it is irrelevant that a related company, or a subcontractor, actually carries out the task. It is obviously part of the service that APAS provides to its customers.
The same may be said in respect of the maintenance performed by Aerotech, or by any subcontractor, in respect of customer aircraft stored at the APAS facility.
APAS says traditional maintenance involves rapid provision of services prior to an item being returned to its normal intended operation or purpose. That may be so. However maintenance necessary or appropriate to an aircraft in storage is still maintenance.
APAS relies on the EMDG Administrative Guidelines, in particular, 4.2.6:
The rationale for these service suppliers being ineligible is that they generally compete with other Australian service providers for export business rather than with foreign suppliers.
APAS says that it does not compete with any other Australian service providers because none exist. Consequently the exceptions in Schedule 2 of the Regulations should not apply.
The rationale referred to in the Guidelines is a generalization. Some of the exclusions in Schedule 2 are plainly included for other reasons. Moreover, if a service falls within Schedule 2, then the Regulations cannot be ignored because the service provider has no current Australian competition.
APAS also submits that its utilization of overseas Austrade offices through formal service agreements is evidence that its services are not caught by Schedule 2.1(d). I reject that as irrelevant.
In general the service that APAS provides is to ensure that its customers’ aircraft remain in a condition that permits them to be returned to operation or parted-out.
The term “relating to” used in Schedule 2.1(d) of the Regulations has a wide meaning.
In my view APAS is providing a service relating to the protection, operation or maintenance of aircraft at its facility at Alice Springs.
Assets held in Australia
Each of the parties referred to the Administrative Guidelines and to the Regulations. In relation to Schedule 2.1(d), the Guidelines provide at 4.2.6(e) and 4.2.6(d), respectively:
4.2.6…
e)…
This exclusion applies to services supplied to foreign resident clients for providing any services in relation to any assets held in Australia.
d)…
The word “held” limits the exclusion to assets held in Australia on an ongoing basis rather than to assets brought to Australia for one-off or short term reasons, e.g. this exclusion will not apply to:
— foreign-owned assets brought to Australia just for repair;
— management and insurance arrangements for works of art that are sent to Australia for exhibition.
Austrade submits the very service of storing aircraft at APAS’s facility, “typically for an undetermined period of time”, satisfies the requirement that the service is provided in respect of assets held in Australia.
APAS disputes that. It submits that the significant value of an aircraft (often $5 million to $40 million) must be taken into account. Furthermore a period of many months is short-term given the typical life of such an asset.
As the Guidelines indicate, the purpose for which assets are brought to Australia, and the time it is intended that they should remain in the country are relevant.
I accept that the nature of the assets is also relevant to the enquiry, and this may include their value and overall or remaining life-span.
In my view the aircraft at APAS’s facility in respect of which its service is provided are held in Australia.
CONCLUSION
The decision under review is affirmed.
I certify that the preceding 40 (forty) paragraphs are a true copy of the reasons for the decision herein of Deputy President I R Molloy. .............................[Sgd]...........................................
Associate
Dated 6 November 2014
Date of hearing 2 October 2014 Applicant In person Solicitors for the Respondent Lenny Leerdam, DLA PIPER AUSTRALIA
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