BASF Australia Ltd and Chief Executive Officer of Customs
[2015] AATA 140
•12 March 2015
ADMINISTRATIVE APPEALS TRIBUNAL )
) 2013/6657
GENERAL ADMINISTRATIVE DIVISION ) 2014/0317Re:BASF AUSTRALIA LTD
Applicant
And:CHIEF EXECUTIVE OFFICER OF CUSTOMS
Respondent
ADMINISTRATIVE APPEALS TRIBUNAL )
) 2014/0316
GENERAL ADMINISTRATIVE DIVISION )Re:COGNIS AUSTRALIA PTY LTD
Applicant
And:CHIEF EXECUTIVE OFFICER OF CUSTOMS
Respondent
CORRIGENDUM TO DECISION [2015] AATA 140
The Tribunal amends its decision of 12 March 2015 as follows:
1. in [174], fourth sentence by deleting “3808” and inserting “2106”;
2. in [176], last sentence by deleting “not”; and
3. in [177], first sentence by deleting “not”.
_[sgd] S A Forgie_
Deputy President
[2015] AATA 140
DivisionGENERAL ADMINISTRATIVE DIVISION
File Number 2013/6657 and 2014/0317
ReBASF Australia Ltd
APPLICANT
And Chief Executive Officer of Customs
RESPONDENT
File Number 2014/0316
ReCognis Australia Pty Ltd
APPLICANT
And Chief Executive Officer of Customs
RESPONDENT
DECISION
Tribunal Deputy President S A Forgie
Date 12 March 2015
Place Melbourne
The Tribunal decides to:
affirm the reviewable decision of the respondent dated 15 November 2013 affirming a decision dated 28 June 2013 which determined that the goods in question are classified under subheading 2106.90.90 of Schedule 3 to the Customs Tariff Act 1995.
…[sgd] S A Forgie….
Deputy President
CATCHWORDS
CUSTOMS – tariff classification – Vegapure 95, Vegapure 95E, Vegapure 95FF – subject goods – plant sterols - plant esters – whether vegetable oil or fraction of vegetable oil – whether food – whether medicaments – whether put up in packings for retail sale – whether mixtures of chemicals with foodstuffs or with other substances of nutritive value - decision under review affirmed.
LEGISLATION
Acts Interpretation Act 1901; sections 15AA, 15AB
Customs Act 1901; sections 132, 132AA and Item 1, 167
Customs Tariff Act 1982
Customs Tariff Act 1995; Schedules 2, 3; Chapter 5; sections 3, 6, 7, 9, 10, 15, 16
Food Act 1984 (Vic); section 3
Food Standards Australia and New Zealand Act 1991; section 3
Imported Food Act 1992
Therapeutic Goods Act 1989Therapeutic Goods Regulations 1990
Australia and New Zealand Food Standards Code; standard 2.4.1
CASES
Australian Gas Light Co v Valuer-General (1940) 40 AR (NSW) 126
Chief Executive Officer of Customs v Biocontrol Ltd [2006] FCA 107; (2006) 150 FCR 64; 89 ALR 551; 89 ALD 551
Chinese Food & Wine Supplies Pty Ltd v Collector of Customs (Vic) (1987) 72 ALR 591
Collector of Customs v Agfa Gevaert Ltd [1996] HCA 36; (1996) 186 CLR 389; 141 ALR 59; 35 ATR 249; 43 ALD 193; 24 AAR 282; 71 ALJR 123
Collector of Customs v Bell Basic Industries [1988] FCA 371; (1988) 20 FCR 146; 83 ALR 251; 20 FLR 146; 9 AAR 382; 16 ALD 506
Collector of Customs v Chemark Services Pty Ltd [1993] FCA 291; (1993) 42 FCR 585; 114 ALR 531; 17 AAR 424
Collector of Customs v Savage River Mines (1988) 79 ALR 258
Damjanovic & Sons Pty Ltd v The Commonwealth [1968] HCA 42; (1968) 117 CLR 390
Gardner Smith v Collector of Customs Victoria (1986) 66 ALR 377
Liebert Corporation Australia Pty Ltd v Collector of Customs (1996) 23 AAR 287
Maunsell v Olins [1975] AC 373
McNamara v Consumer Trader and Tenancy Tribunal [2005] HCA 55; (2005) 221 CLR 646; 221 ALR 285; 79 ALJR 1789
Pepsi Seven-Up Bottlers v Commissioner of Taxation [1995] FCA 1655; (1995) 62 FCR 289; 132 ALR 632; 31 ATR 445
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355; 72 ALJR 841; 153 ALR 490
Re Bayer Australia Ltd and Collector of Customs (NSW) [1985] AATA 21; (1985) 7 ALN N84
Re Forever Living Products Australia Pty Ltd and Collector of Customs (1986) 9 ALD 271
Re Sumitomo Australia Ltd and Collector of Customs [1991] AATA 323
Re Tridon Pty Ltd and Collector of Customs [1982] AATA 119; (1982) 4 ALD 615
Re Trustee for the Kurowski Family Trust and Chief Executive Officer of Customs [2010] AATA 974; (2010) 118 ALD 688
Times Consultants Pty Ltd v Collector of Customs (QLD) (1987) 16 FCR 449; 76 ALR 313
Vernon-Carus Australia Pty Ltd v Collector of Customs [1995] FCA 1283; (1995) 21 AAR 450OTHER MATERIALS
Academic Press Dictionary of Science and Technology; edited by Christopher Morris; 1991; Academic Press Inc; San Diego
Bailey’s Industrial Oil and Fat Products 4th edition, (ed. D Swern), John Wiley & Sons, New York, USA, 1979, vol 1
Bailey’s Industrial Oil and Fat Products Volume 5, 6th edition, editor F. Shahidi, John Wiley & Sons, New Jersey, USA, 2005Chambers 21st Century Dictionary, 1999, reprinted 2004, Chambers
Collins English Dictionary – Complete and Unabridged 2012 Digital Edition; William Collins & Sons Ltd
Encyclopedia Britannica, online
Macquarie Dictionary, revised 3rd edition, 2001, The Macquarie Library Pty Ltd
Phytosterols, phytostanols and their esters, Chemical and Technical Assessment, prepared by Richard Cantrill PhD, reviewed by Yoko Kawamura Phd for the 69th JECFA
Oils and Fats Glossary prepared by the Federation of Oils, Seeds and Fats Association
Shorter Oxford Dictionary, 5th edition, 2002, Oxford University PressInternational Convention on the Harmonized Commodity Description and Coding System
REASONS FOR DECISION
Cognis Australia Pty Ltd (Cognis) was part of the Cognis group of companies. It was a leading manufacturer and supplier of specialty chemicals and nutritional and healthcare ingredients. It pioneered the development and commercial application of plant sterol[1] products used to reduce cholesterol absorption by humans and became a major supplier of plant sterols and plant sterol esters[2] to the food and dietary supplement industries worldwide. Cognis imported a range of plant sterol products under the brands of “Generolester” and “Vegapure”. The range included Vegapure 95, Vegapure 95E, Vegapure 95FF and Generolester GM (the subject goods).
[1] In general terms, a “sterol” is a reference to “… any of a group of colourless waxy solid STEROID alcohols that are found in plants, animals and fungi, eg cholesterol. …”. In biochemistry, a steroid is a reference to “… any of a large group of fat-soluble organic compounds, such as sterols, some sex hormones, bile acids, etc that have complex molecular structure (17 carbon atom, four-linked ring system), and which are important both physiologically and pharmacologically. …”: Chambers 21st Century Dictionary, 1999, reprinted 2004, Chambers (Chambers) “Phytosterols and phytostanols are a large group of compounds that are found exclusively in plants. They are structurally related to cholesterol but differ from cholesterol in the structure of the side chain. They consist of a steroid skeleton with a hydroxyl group attached to the C-3 atom of the A-ring and an aliphatic side chain attached to the C-17 atom of the D-ring. Sterols have a double bond, typically between C-5 and C-6 of the sterol moiety, whereas this bond is saturated in phytostanols …”: Phytosterols, phytostanols and their esters, Chemical and Technical Assessment, prepared by Richard Cantrill PhD, reviewed by Yoko Kawamura Phd for the 69th JECFA at 1; Exhibit 4; Annexure H
[2] An “ester” is a reference to “The chemical reaction product of an alcohol and an acid.”: Oils and Fats Glossary prepared by the Federation of Oils, Seeds and Fats Associations (FOSFA)
Cognis’s work continued after its parent company was acquired by the parent company of BASF Australia Pty Ltd (BASF) in December 2010. Before the end of 2011, the work previously undertaken by Cognis was undertaken by BASF, which has now assumed the role of being a major worldwide supplier of plant sterols and plant esters. BASF continues to import and distribute Vegapure 95E and Vegapure 95FF products but has discontinued the distribution of Generolester GM and Vegapure 95. Despite the discontinuance of two of the products, the issues in this case continue to revolve around all four Products in relation to which, until 2011, Cognis or, after that date, BASF, entered for home consumption and paid duty under protest in the period 14 July 2009 to 20 June 2013.
When entering the subject goods for products for home consumption, Cognis and BASF classified the Products to heading 1516 of Chapter 15 of Schedule 3 of the Customs Tariff Act 1995 (CT Act). That heading reads:
“ANIMAL OR VEGETABLE FATS AND OILS AND THEIR FRACTIONS, PARTLY OR WHOLLY HYDROGENATED, INTER-ESTERIFIED, RE-ESTERIFIED OR ELAIDINISED, WHETHER OR NOT REFINED, BUT NOT FURTHER PREPARED”
On 18 December 2012, BASF’s customs brokers submitted an application to the Chief Executive Officer of Customs (CEO) for a Tariff Advice for Vegapure 95FF and Vegapure 95E. On 28 June 2013, the CEO decided that the Products were correctly classified to subheading 2106.90.90. He affirmed that decision on 15 November 2013. That subheading reads:
“2106 FOOD PREPARATIONS NOT ELSEWHERE SPECIFIED OR INCLUDED:
…
2106.90.90--- Other”
The issue in this case turns on the correct classification of the Products for their classification determines the rate of duty that is payable. I have decided that the goods are properly classified as food preparations under Heading 2106.90.90 and have affirmed the CEO’s decision.
LEGISLATIVE FRAMEWORK
Duties of customs are imposed by the CT Act on, among others, goods imported into Australia on or after 1 July 1996.[3] In the case of the subject goods under consideration, the rate of that duty was the rate payable at the time of their entry and it had to be paid at that time.[4] The rate is worked out by reference to the general rate set out in the third column of the tariff classification under which the subject goods are classified.[5] Cognis or BASF duly paid it but under protest under s 167 of the Customs Act 1901 (Customs Act) between 14 July 2009 and 20 June 2013.
[3] CT Act; s 15(a)
[4] Customs Act 1901; ss 132(1) and 132AA; Item 1
[5] CT Act; s 16(1)(a)
The reference to the tariff classification under which particular goods are classified is a reference to the heading or subheading under which the goods are classified.[6] Headings are set out in Schedule 3 to the CT Act.[7] Those headings and sub-headings are grouped together in various Chapters and Chapters are further grouped into Sections. Sections and Chapters may begin with Notes and there may be Additional Notes. Once goods have been classified by reference to a particular heading or subheading, the rate of duty is found in the third column of that heading.[8] The rate of duty might be specified as “Free” or as a percentage of the value of the goods or of a specified, part, component or ingredient of those goods.[9]
[6] CT Act; s 6(b)
[7] CT Act; s 3(1)
[8] CT Act; s 6(a)
[9] CT Act; ss 10 and 9
In prescribing tariff classifications, the CT Act gives effect to the International Convention on the Harmonized Commodity Description and Coding System done at Brussels on 14 June 1983[10] (Harmonized System).[11] It came into force in Australia on 1 January 1988.
[10] ATS 1988 No 30
[11] Noted in Note 1 to s 7 of the CT Act; s 3(1)
Schedule 2 of the CT Act sets out the General Rules for the Interpretation of the Harmonized System which is provided for by the Convention and so for the interpretation of Schedule 3 (Interpretation Rules).[12] Except in relation to passages described as “Additional Notes”, the text of the Interpretation Rules is based on the Harmonized System.[13] Those Interpretation Rules “… must be used for working out the tariff classification under which goods are classified.”[14]
[12] CT Act, s 7(1)
[13] Noted in Note to Schedule 2 of the CT Act
[14] CT Act, s 7(1)
In so far as they are relevant, they are:
“1. The titles of Sections, Chapters and sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions:
2.…
3.When, by application of Rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows:
(a)The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.
(b)Mixtures, composite goods consisting of different materials or made of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.
(c)When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.
4.Goods which cannot be classified in accordance with the above Rules shall be classified under the heading appropriate to the goods to which they are most akin.
5.…
6For legal purposes, the classification of goods in the subheadings of a heading shall be determined according to the terms of those subheadings and any related Subheading Notes and, mutatis mutandis, to the above Rules, on the understanding that only the subheadings at the same level are comparable. For the purposes of this Rule the relative Section and Chapter Notes also apply, unless the context otherwise requires.”
The appropriate procedure to follow when a heading or Note does “otherwise require” is found in Liebert Corporation Australia Pty Ltd v Collector of Customs[15] (Liebert). The respondent had classified the goods under subheading 8504.40.00 within Chapter 85 but the applicant contended that they should have been classified under subheading 9032.89.90 within Chapter 90. Chapter 85 fell within Section XVI and Chapter 90 within Section XVIII. The Note 1(m) to Section XVI provided that “This section does not cover … Articles of Chapter 90”. The Full Court of the Federal Court said:
“ It follows that the appropriate procedure for determining the proper classification of goods that might seem to fall within any of the subheadings in Section XVI and Ch 90 is first, to determine whether the goods can be classified under any of the headings in Ch 90. If they can be, they are to be so classified and it is irrelevant that the goods might also fall within the terms of any of the headings in any of the Chapters of Section XVI or that they might be more appropriately classified under Section XVI than Ch 90. The goods may be classified under Section XVI only if none of the headings in Ch 90 is applicable.”[16]
[15] (1996) 23 AAR 287; Wilcox, O’Connor and Drummond JJ
[16] (1996) 23 AAR 287 at 289-290
The World Customs Organisation (WCO) maintains Harmonised System Explanatory Notes (HSEN). The relevance of the HSEN, and their predecessor the Brussels Notes,[17] in interpreting Schedules 2 and 3 of the CT Act was considered in Gardner Smith vCollector of Customs Victoria[18] (Gardner Smith). The Full Court found that the provisions of s 15(1) of the Acts Interpretation Act 1901 (AI Act) could be relied upon in the interpretation of the Schedule 3 to the Customs Tariff Act 1982.[19] Section 15AB(1) of the AI Act then provided, as it does now, that:
“Subject to subsection (3), in the interpretation of a provision of an Act, if any material not forming part of the Act is capable of assisting in the ascertainment of the meaning of the provision, consideration may be given to that material:
(a)to confirm that the meaning of the provision is the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or object underlying the Act; or
(b)to determine the meaning of the provision when –
(i)the provision is ambiguous or obscure; or
(ii)the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or object underlying the Act leads to a result that is manifestly absurd or is unreasonable.”
[17] The Brussels Notes were explanatory notes prepared by the Nomenclature Committee established by the Convention on Nomenclature for the Classification of Goods in Customs Tariffs (Convention). That Convention was ratified by Australia and generally incorporated in its domestic law in the form of the Customs Tariff Act 1982.
[18] (1986) 66 ALR 377; Keely, Neaves and Wilcox JJ
[19] (1986) 66 ALR 377 at 383-384. After reviewing the authorities, a similar conclusion was reached by Young J in Chief Executive Officer of Customs v Biocontrol Ltd [2006] FCA 107; (2006) 150 FCR 64; 89 ALD 551 at [39]; 77; 562
PRINCIPLES OF CLASSIFICATION
General classification principles
In their majority judgment in Times Consultants Pty Ltd v Collector of Customs (QLD)[20] (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. As the Full Court of the Federal Court said in Collector of Customs v Savage River Mines[21] (Savage River Mines):
“ The provisions of Sch 3 to the Customs Tariff Act 1982 are part of the Act itself – s 13(2) of the Acts Interpretation Act 1901. Their operation in a particular case involves a process of statutory construction and the application of the statute properly construed to the facts of the case. A court or tribunal charged with determining whether goods are within a given item, sub-item or paragraph of the Schedule may properly first construe the relevant categories and then classify the subject goods by reference to them.”[22]
[20] (1987) 16 FCR 449; 76 ALR 313 Morling and Wilcox JJ; Fox J dissenting
[21] (1988) 79 ALR 258; Fox, Davies and French JJ
[22] (1988) 79 ALR 258 at 264-265 Since the Full Court decided the case, the AI Act has been amended and s13 repealed and substituted but the effect is the same. Schedules are part of the Act but, rather than being deemed to be so by s 13(2) in 1988, they are now part of the Act under s 13(1) of the AI Act because “All material from and including the first section of the Act to the end of … the last Schedule to the Act … is part of the Act.”
Identification of the goods
The overlap between the two steps is evident in the second and third principles identified by the Tribunal in Re Tridon Pty Ltd and Collector of Customs[23] (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:
[23] [1982] AATA 119; (1982) 4 ALD 615 at 620, Mr Hall, then Senior Member, and Mr Wickens and Mr Prowse, Members
“(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 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 ...”[24]
[24] [1982] AATA 119; (1982) 4 ALD 615 at[15]; 620-621 (citations omitted)
Principle (iii) in Tridon was developed further by Northrop J in Vernon-Carus Australia Pty Ltd and Another v Collector of Customs:[25]
“… In performing the task of identifying goods for classification, it is essential to have regard to the relevant classification heading. Some heading classifications make specific reference to form or purpose. Where this is so, a ‘practical wharf-side’ task, may not be appropriate. Evidence may need to be received relating to the form or purpose of the goods. In cases of this kind, the heading will need to be construed properly in order to determine what evidence is relevant to identify the goods. …”[26]
[25] [1995] FCA 1283; (1995) 21 AAR 450; Northrop and Jenkinson JJ; Branson J dissenting
[26] [1995] FCA 1283; (1995) 21 AAR 450 at [20]; 455-456
Certain matters have been identified as not relevant in the task of identifying goods. They are set out in the following passages:
(1)“ It must always be remembered that the classification of goods for tariff purposes is a practical ‘wharf-side’ task. Upon some occasions it will be necessary for the classifier to obtain information to enable identification of the goods but it is entirely inappropriate that he or she should enter into inquiries upon matters such as cost, commercial advantage or purchaser preference … It ought normally be possible to classify goods merely by looking at them and by considering their nature and function which they were designed to serve. In the case of goods made up in sets, it may be that there is no single essential character; in which case r 3(1)(b) will be inapplicable and reference will need to be made to the arbitrary rule contained in r 3(1)(c).”[27] (emphasis added)
(2)“ Whether the goods in suit properly fall within Item 30.03 of the Customs tariff is determined by an objective test not by the intention of the manufacturer in China or of the exporter or the importer. The test is applied at the port of entry of the goods and at the time of entry. …”[28]
[27] Times Consultants Pty Ltd v Collector of Customs (Qld) (1987) 16 FCR 449; 76 ALR 313 at 463; 328 per Morling and Wilcox JJ; Fox J dissenting
[28] Chinese Food & Wine Supplies Pty Ltd v Collector of Customs (Vic) (1987) 72 ALR 591; at 599 per Lockhart J with whom Woodward and Ryan JJ agreed and see also Times Consultants (1987) 16 FCR 449; 76 ALR 313 at 327; 462
Although classification is applied at the port of entry of the goods and at the time of that entry, there may be cases in which a visual inspection of the goods and their packaging is not enough to disclose their essential characteristics to enable a judgment to be made about their correct classification. This was the situation in Chinese Food & Wine Supplies Pty Ltd v Collector of Customs (Vic)[29] (Chinese Food & Wine). The Full Court of the Federal Court was concerned with the classification of certain liquid as either a medicament under Item 30.03 of Schedule 3 to the CT Act or as alcoholic beverages under 22.09.91. Lockhart J, with whom Woodward and Ryan JJ agreed, said:
“… But visual inspection will not necessarily provide the answer in each case. Tests may have to be carried out and inquiries made to ascertain the relevant characteristics of the goods. In the present case, samples were taken and sent for chemical analysis. As the tribunal noted, the paucity of the information contained in the labelling of the goods necessitated further inquiries being made in respect of them.
The critical elements upon which the tribunal relied, namely, the labelling and general presentation of the goods as imported into Australia, the analysis of the liquid contained in the bottles, the contents of the sale catalogue issued with the title ‘Wines’ on its cover with both kinds of goods included in it and the display of those kinds of goods in the liquor section of a supermarket in Hong Kong are in my view all relevant matters which the tribunal was entitled to consider …”[30]
[29] (1987) 72 ALR 591
[30] (1987) 72 ALR 591 at 599
THE FOUR HEADINGS IN ISSUE
Together with their relevant Sections and Notes, the headings in issue are:
(1) Heading 1516
(a)Heading 1516 and its subheadings read:
“1516 ANIMAL OR VEGETABLE FATS AND OILS AND THEIR FRACTIONS, PARTLY OR WHOLLY HYDROGENATED, INTER-ESTERIFIED, RE-ESTERIFIED OR ELAIDINISED, WHETHER OR NOT REFINED, BUT NOT FURTHER PREPARED:
1516.10.00-Animal fats and oils and their fractions Free
1516.20.00-Vegetable fats and oils and their fractions Free”
(b)Although the Section description is given only for guidance, I note that Heading 1516 comes within “Section III – Animal or vegetable fats and oils and their cleavage products; prepared edible fats; animal or vegetable waxes” and “Chapter 15 – Animal or vegetable fats and oils and their cleavage products; prepared edible fats; animal or vegetable waxes”
(c)There are four Notes to Chapter 15 but only Notes 1(e) has relevance:
“1. - This Chapter does not cover:
(a)-(d)…;
(e)Fatty acids, prepared waxes, medicaments, paints, varnishes, soap, perfumery, cosmetic or toilet preparations, sulphonated oils or other goods of Section VI; or
(f)…
2.-4.-…”
(2)Heading 2106
(a)Heading 2106 and its subheadings read:
“2106 FOOD PREPARATIONS NOT ELSEWHERE SPECIFIED OR INCLUDED:
2106.10-Protein concentrates and textured protein substances:
2106.10.10---Protein concentrates Free
2106.10.20---Textured protein substances 5%
DCS:4%
DCT: 5%
2106.90-Other: 5%
(a)compound alcoholic preparations of a kind DCS:4%
used for the manufacture of beverages; DCT:5%(b)food preparations of flour or meal;
(c)hydrolysed protein
2106.90.20---Preparation for oral consumption, such as tablets Free
and chewing gum containing nicotine, intended to
assist smokers to stop smoking”
(b)Heading 2106 comes within Chapter 21 in Section IV. There is only one Note to Section IV referring to the meaning of “pellets”. It is not relevant. The Notes and Additional Note to Chapter 21 are not relevant in this case.
(3)Heading 3004
(a)Heading 3004 and its subheadings read:
“3004 MEDICAMENTS (EXCLUDING GOODS OF 3002, 3005 OR 3006) CONSISTING OF MIXED OR UNMIXED PRODUCTS FOR THEIR THERAPEUTIC OR PROPHYLACTIC USES, PUT UP IN MEASURED DOSES (INCLUDING THOSE IN THE FORM OF TRANSDERMAL ADMINISTRATION SYSTEMS) OR IN FORMS OR PACKINGS FOR RETAIL SALE:
3004.10.00-Containing penicillins or derivatives thereof, with a penicillanic acid structure, or steptomycins or their derivatives Free
3004.20.00-Containing other antibiotics Free
3004.3-Containing hormones or other products of 2937
but not containing antibiotics:3004.31.00-- Containing insulin Free
3004.32.00--Containing adrenal corticosteroid hormones, Free
their derivatives or structural analogues3004.39.00--Other Free
3004.40.00-Containing alkaloids or derivatives thereof but not Free
containing hormones, other products of 2937 or
antibiotics3004.50.00-Other medicaments containing vitamins or other Free
products of 29363004.90.00-Other Free”
(b)Heading 3004 comes
within Chapter 30 in Section VI of Schedule 3 to the CT Act. Note 2 of the Notes to Section VI is relevant. It is subject to Note 1 but that Note has no application as it refers to goods answering a description in headings 2843, 2844, 2845, 2846 and 2852. None of the goods in this case answers any of the descriptions in those headings. In so far as it refers to headings relevant in this case, Note 2 goes on to read:
“… goods classifiable in 3004 …. by reason of being put up in measured doses or for retail sale are to be classified in those headings and in no other heading of this Schedule.”
(c)Chapter 30 has both Notes and an Additional Note. Only Note 1(a) has relevance. It reads:
“This Chapter does not cover:
(a) Foods or beverages (such as dietetic, diabetic or fortified foods, food supplements, tonic beverages and mineral waters), other than nutritional preparations for intravenous administration (Section IV)”.
(4)Heading 3824
(a)Heading 3824 and the first of its sub-headings read:
“3824 PREPARED BINDERS FOR FOUNDRY MOULDS OR CORES; CHEMICAL PRODUCTS AND PREPARATIONS OF THE CHEMICAL OR ALLIED INDUSTRIES (INCLUDING THOSE CONSISTING OF MIXTURES OF NATURAL PRODUCTS), NOT ELSEWHERE SPECIFIED OR INCLUDED: Free
3824.10.00-Prepared binders for foundry moulds or cores Free
3824.30.00-Non-agglomerated metal carbides mixed together Free
or with metallic binders3824.40.00-Prepared additives for cements, mortars or concretes 5%
3824.50.00-Non-refractory mortars and concretes Free
3824.60.00-Sorbitol other than that of 2905.44.00 Free
3824.7-Mixtures containing halogenated derivatives of
methane, ethane or propane:3824.71.00--Containing chlorofluorocarbons (CFCs), Free
whether or not containing hydrochlorofluorocarbons (HCFCs), perfluorocarbons (PFCs) or
hydrofluorocarbons (HFCs)3824.72.00--Containing bromochlorodifluoromethane, Free
bromotrifluoromethane or dibromotetrafluoroethanes3824.73--Containing hydrobromofluorocarbons (HBFCs):
3824.73.10---Containing perhalogenated derivatives containing Free
two or more halogens3824.73.90---Other 5%
3824.74 …
…
3824.90.40 …”
THE WITNESSES
Three witnesses were called on behalf of BASF and Cognis to give evidence. They were:
(1)Mr Steven Frandsen
Mr Frandsen, who has a degree in Chemical Engineering, has worked for food, or food ingredient companies, during his professional life but never with a vegetable oil company. He has been BASF’s Head of Global Product Lines: Natural Vitamin E and Sterols since 2011. He was previously employed by Cognis in various roles between 1992 and 2011. Those roles included his being Plant Engineer at the Vitamin E and Sterols Plant, the Strategic Raw Materials Purchaser and the Business Director, Nutrition and Health. In that last position, Mr Frandsen was responsible for the Vitamin E and Sterols Global Product Lines and Business.[31]
[31] Exhibit D at [1]
(2)Dr Hilary Glover
Dr Glover’s qualifications include a PhD in Molecular Biology/Biochemistry and a BSc (Hons 1) in Molecular Biology/Biochemistry.
She has held the position of BASF’s Research and Development Manager since June 2014. Between 2012 and 2014, she was its ANZ Industry Manager Complementary Medicine and R&D Project Team Leader. Before its purchase by BASF, Dr Glover had been employed by Cognis between 2006 and 2012 in a similar position being ANZ Market Segment Manager Nutrition & Health, Key Global Account Manager (Natural Vitamins) and R&D Project Team Leader.
Dr Glover is not a chemical engineer and did not purport to have any expertise in the technical details of the production processes for plant sterols but was generally familiar with the steps in their production.[32]
(3)Professor Peter Clifton
Professor Clifton’s qualifications include an MBBS, B Med Sci and a PhD. He is a Fellow of the Royal Australasian College of Physicians and is currently the Professor of Nutrition at the University of South Australia.
Professor Clifton’s research activities are mainly focused on clinical trials in his areas of interest including the effect of plant sterols and stanols, administered in various forms of food, on LDL cholesterol in human volunteers. He has co-authored nine papers on that subject and been the lead author on three of those papers. A tenth paper he authored alone.[33]
[32] Exhibit E at [1]-[3]
[33] Exhibit G at [1]-[2]
One witness was called on behalf of the CEO. He was:
Dr Brad Mulroney
Dr Mulroney’s qualifications include a PhD in Chemistry and a BSc(Hons) in Chemistry.
Dr Mulroney has been employed by Peerless Foods in two periods. Peerless Foods manufactures fat and oil products, including retail, food service, bakery and industrial products. In the main, Peerless Foods deals with sunflower, canola, palm, tullow, kernel, coconut and cotton oils. There are edible oils that may, or may not, be sold in edible form. Others are regarded as inedible but have other applications. It also manufactures Tablelands margarine that contains vegetable oils, water and phytosterol esters. The first period was between 1998 and 2005 when Dr Mulroney worked in various technical roles. Since 2006, he has been its Product Research and Innovations Manager.
Between January 2005 and April 2006, Dr Mulroney worked for Goodman Fielder Commercial as its Technical Manager and Product Development Technologist.[34]
[34] Exhibit 4 at 1
IDENTIFICATION OF THE SUBJECT GOODS
On the basis of the evidence of Dr Glover, I find that each of the subject goods comprises a mixture of plant sterols. Consistently with her evidence and from my own examination, I find that each has the appearance of a yellow and viscous oily liquid, verging on a paste, at room temperature.
Again on the basis of the evidence of Dr Glover and on the Data Sheets annexed to her statement, I find that all of the subject goods share very similar chemical profiles and physical properties. Vegapure 95 and Generolester GM are the same product packaged under different names. Vegapure 95E and Vegapure 95FF have slightly different stanol/sterol profiles from each other and from Vegapure 95 and Generolester GM. Despite those differences, each of the subject goods consists, by volume of approximately 99% plant sterol esters with small amounts of free plant sterols and a maximum of 0.2% of antioxidants being mixed tocopherols and ascorbylpalmitate.
On the basis of Dr Glover’s evidence, I find that the reasons for the small variations lie in the plant species from which they are prepared. Vegapure 95FF sterols are sourced from plants – primarily soy - that, potentially, have been genetically modified while those in Vegapure 95E are sourced from non-genetically modified plants – primarily pine wood and rapeseed in an approximate ratio of 3:1.[35]
[35] Exhibit E at [24]
Samples of each of the subject goods other than Vegapure 95 were admitted in evidence. Each sample is packaged in an aluminium cylinder and weighs either 500g in the case of the Vegapure products or approximately double that weight in the case of Generolester GM. On the basis of the evidence of Dr Glover, I find that the subject goods are not imported in the sample containers but in much larger containers being either 25kg or 180kg drums, 900kg Intermediate Bulk Containers or 20 metric tonne ISO tanks.[36] Regardless of the size of those larger containers, each was labelled with the product name, a list of ingredients and one of the following statements:
(1)“Restricted use in food. Not for retail sale.”; or
(2)“For food and dietary supplement use only. For use in foodstuff, not for retail.”[37]
The goods are imported to sell to dietary supplement manufacturers, Dr Glover said.
[36] Exhibit E; Annexures G and H
[37] Exhibit E; Annexure H
CONSIDERATION: the order
The order in which I consider each of the headings is determined in the first instance by Note 2 of the Notes to Section VI in Chapter 30 which requires that goods classifiable in heading 3004 by reason of their being put in measured doses or for retail sale are to be classified only in that heading and no other in Schedule 3. It is also determined by Note 1(a) of the Notes to Chapter 30. Reading them together, I must proceed in the following way:
(1) First decide whether the subject goods are:
(a)“Foods or beverages (such as dietetic, diabetic or fortified foods, food supplements, tonic beverages and mineral waters), other than nutritional preparations for intravenous administration (Section IV)”.
(i)There is no suggestion that the subject goods are nutritional preparations for intravenous administration.
(ii)Therefore, the question is whether they are foods or beverages. If they are, they cannot be classified under any heading within Chapter 30 for that is the effect of Note 1(a) of the Notes to that Chapter;
(2) If the subject goods are not foods or beverages, decide:
(a)whether the subject goods come within heading 3004 and so are:
(i)“medicaments (excluding goods of 3002, 3005 or 3006)”;
(ii)“consisting of mixed or unmixed products for therapeutic or prophylactic uses”;
(iii)“put up in measured doses … or in forms of packings for retail sale”; and
(b)if they do, decide that the subject goods come within heading 3004 and may not be classified to any other heading in Schedule 3 regardless of whether or not they meet the descriptions in those headings.
(i)This is reinforced in the case of heading 1516 by Note 1(e) to Chapter 15 specifying that the Chapter does not cover goods of Section VI, which includes heading 3004 in Chapter 30 and heading 3803 in Chapter 38;
(3)If the subject goods are not classifiable to heading 3004, consider each of the remaining headings in issue and the relevant Notes and Interpretative Rules.
ARE THE SUBJECT GOODS FOODS?
The submissions
On behalf of BASF and Cognis, Mr Slonim of counsel submitted that a food is a substance that would be eaten by a reasonable person for the purpose of sustenance. A product that supplements the content of food for a purpose other than sustenance is not a food. He relied on the conclusion reached by the Tribunal in Re Trustee for the Kurowski Family Trust and Chief Executive Officer of Customs[38] (Kurowski). That Tribunal had considered the classification of effervescent vitamin tablets and Mr Slonim drew an analogy between them and plant sterols. He submitted that, like the effervescent vitamin tablets, the plant sterols are not a food ingredient or a food supplement because they are not necessary for the production of the food in which they are mixed and nor do they form part of the food per se. The sole function of the food is as a medium for delivering the sterols to the target site so that they can carry out their therapeutic action. Furthermore, they are not a food supplement because their purpose is to reinforce the quantity and effect of the sterols that are ingested as part of everyday food consumption, and they should therefore be identified as sterol supplements.
[38] [2010] AATA 974; (2010) 118 ALD 688 at [23]-[25]; 692; Deputy President Handley and Dr Schafer, Member
Mr Slonim also rejected any suggestion that regard should be had to any legislation regulating food in the search for the meaning of “food”. He pointed out that legislation such as the Food Act 1984 (Vic) (Food Act), which has been enacted uniformly by the various States and Territories, has a regulatory basis and purpose different from that of the CT Act. The same is true of the Imported Food Act 1992 (IF Act), the Australia and New Zealand Food Standards Code (Food Standards Code) and the Therapeutic Goods Act 1989.
On behalf of the CEO, Mr Northcote submitted that the evidence of Professor Clifton supported a finding that food includes edible substances used in food eaten by humans. That would include substances such as pepper, spices and flour that are generally not eaten alone but are used in food that is eaten. Plant sterols are also food supplements. When consumed by humans, plant sterols can reduce their cholesterol absorption.
What is the relevance of unrelated enactments?
The Tribunal in Kurowski was reassured that its finding that effervescent vitamin tablets were not food by the fact that they were listed as complementary medicines under the Therapeutic Goods Regulations 1990 (TG Regulations). It noted:
“… that while the classification attributed to a product in a statutory scheme is not definitive of meaning, it is, nevertheless, an indication of meaning and it would be anomalous if a product is classified according to a specific meaning under one statutory scheme and according to a different meaning under another statutory scheme unless there is good reason for doing so.”[39]
[39] [2010] AATA 974; (2010) 118 ALD 688 at [25]; 692
It seems to me that, implicit in this passage, is a proposition that, unless it indicates otherwise, Parliament will attribute the same meaning to each and every word it uses across all of the legislation it enacts. If I am correct in thinking that, I am unable to agree with it. It is a proposition that is at odds with the principles and rules of statutory interpretation. I will begin with s 15AA of the AI Act which provides:
“In interpreting a provision of an Act, the interpretation that would best achieve the purpose or object of the Act (whether or not that purpose or object is expressly stated in the Act) is to be preferred to each other interpretation.”
The purpose or object of Acts necessarily differ from each other and, as was said in McNamara v Consumer Trader and Tenancy Tribunal:[40]
“… It would be an error to treat what was said in construing one statute as necessarily controlling the construction of another; the judicial task in statutory construction differs from that in distilling the common law from past decisions ….”[41]
[40] [2005] HCA 55; (2005) 221 CLR 646; 221 ALR 285; 79 ALJR 1789; Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ; Callinan J dissenting
[41] [2005] HCA 55; (2005) 221 CLR 246; 221 ALR 285; 79 ALJR 1789 at [40]; 661; 1798 per McHugh, Gummow and Heydon JJ, with whom Gleeson CJ and Hayne J agreed
The relevance of the reference to the common law and the difference in the process of reasoning is illustrated by a passage from the judgment of Windeyer J in Damjanovic & Sons Pty Ltd v The Commonwealth[42] (Damjanovic):
“… Analogy – not in the strict mathematical sense, but in the sense of resemblance of facts – has long had a great place in our system of law. It is at the base of the method of precedent in the common law. … [R]easoning by analogy is a rather different process in the development of the common law from its use in the interpretation and application of a statute or of the Constitution. Sir Owen Dixon, in an extra-judicial address he delivered in 1933 (reprinted in Jesting Pilate (1965), p. 13), said of the common law that
‘it has undergone a continuous growth and expansion accomplished by continual deduction and induction. By deduction, a new application is given to an existing principle; many single instances having been thus produced, in course of time a new or developed principle is discerned in them and expounded. By this process of imperfect induction, the secondary principle is established as part of the doctrine of the common law, and plays its part in turn in the production of still more doctrine’.
This, I would respectfully say, is a wholly apt description of the processes of the common law. It points I think the contrast with expositions of the effect of statutes and codes. The process is then one of deduction and subsumption, rather than of imperfect induction. The words of the enactment provide the major premise. The result is not, or ought not to be, the establishment of any secondary principle embodied in new words, but at most the provision of an illustration of the effect in a new setting of the original principle expressed in the original words.”[43]
[42] [1968] HCA 42; (1968) 117 CLR 390; Barwick CJ, McTiernan, Kitto, Taylor, Menzies and Windeyer JJ
[43] [1968] HCA 42; (1968) 117 CLR 390 at 408-409
Returning to the various legislation regulating food, the purpose lying behind each enactment differs one from another and from those lying behind the CT Act. Although their purpose sections are not definitive of scope of their purposes and objects, they give an indication of the very different matters that they seek to regulate. I will refer to only two:
(1)Food Standards Australia and New Zealand Act 1991 (FSANZ Act) authorising the Australia and New Zealand Food Standards Code (FSANZ Code):
“The object of this Act is to ensure a high standard of public health protection throughout Australia and New Zealand by means of the establishment and operation of a joint body to be known as Food Standards Australia New Zealand to achieve the following goals:
(a) a high degree of consumer confidence in the quality and safety of food produced, processed, sold or exported from Australia and New Zealand;
(b) an effective, transparent and accountable regulatory framework within which the food industry can work efficiently;
(c) the provision of adequate information relating to food to enable consumers to make informed choices;
(d) the establishment of common rules for both countries and the promotion of consistency between domestic and international food regulatory measures without reducing the safeguards applying to public health and consumer protection.”[44]
(2)Food Act 1984 (Vic):
“The objects of this Act include the following—
(a) to ensure food for sale is both safe and suitable for human consumption;
(b) to prevent misleading conduct in connection with the sale of food;
(c) to provide for the application in Victoria of the Food Standards Code.”[45]
[44] FSANZ Act; s 3
[45] Food Act; s 3
In contrast to these objects are those of the CT Act. They are “… to impose duties of Customs …”.[46] The CT Act imposes those duties according to a system of classifications that has been developed by international agreement. By their enactment in Schedule 3, they have become part of Australia’s domestic law but that does not alter the fact that they have been adopted as part of an international agreement to adopt a harmonious system of classification for the purpose of the imposition of customs duties. That provides a very different background for a consideration of the meaning of “food” from that provided in legislation regulating food safety and quality and ensuring that consumers are able to make informed choices about what it is that they eat. It is so different that I do not think that the way in which Parliament has chosen to define “food” in those enactments or the way in which it might have been interpreted in those enactments gives me any guidance or comfort in interpreting it in the context of the CT Act.
[46] CT Act; Long Title
What is the meaning of “food” in the CT Act?
I will begin with the passage from Kurowski in which the Tribunal considered the meaning of the word “food” in the context of the CT Act. It had heard evidence from a pharmacist and regulatory affairs consultant that the effervescent vitamin tablets were presented in tablet form and packaged with health-related claims of a kind not permitted for food. The information provided on their packaging was consistent with the requirements imposed on therapeutic goods and did not meet the food labelling requirements of the Australian Food Standards Code. The Tribunal also heard evidence from a nutritionist to the effect that a vitamin supplement could be accurately described as either a dietary supplement or a food supplement.
It went on to consider what was meant by “food” and whether the effervescent vitamin tablets came within that description:
“ We note that ‘food’ is defined in the Macquarie Dictionary in terms of ‘what is eaten, or taken into the body, for nourishment’. ‘Nourishment’ is that which sustains. A ‘supplement’ is ‘something added to complete a thing, supply a deficiency, or reinforce or extend a whole’. ‘Diet’ is ‘food considered in terms of its qualities, composition, and its effects on health’. ‘Dietary’ means ‘relating to diet’. A ‘vitamin’ is defined as:
… any of a group of food factors essential in small quantities to maintain life, but not themselves employing energy. The absence of any one of them results in a characteristic deficiency disease.
In the tribunal’s view, these definitions indicate that ‘vitamins’ do not fall within the ordinary meaning of the word ‘food’. Vitamins are certainly contained in food and a vitamin supplement could be said to reinforce the quantity of vitamins taken into the body as part of everyday food consumption. However, we are not satisfied that products such as the goods, containing specific vitamins, should be identified as food, or food supplements. This is not how such products would be identified by the reasonable person. As Mr Milsom said, such a person would not eat vitamin tablets as food for the purpose of sustenance, but rather to supplement the vitamin content of food eaten. As he also pointed out, products of this kind which are sold in tablet form with a recommended unit dosage and with health-related claims would not ordinarily be thought of as food.”[47]
[47] [2010] AATA 974; (2010) 118 ALD 688 at [22]-[23]; 691-692
When words are used in their ordinary English meanings rather than in technical or trade meanings and there is no suggestion that their meaning has changed over the course of a particular period in question, it is not appropriate to have regard to evidence directed to their meaning.[48] There has been no suggestion from the parties or that appears inherent in Schedule 3 to the CT Act that the word “food” has any trade or technical meaning. In so far as they are relevant, the ordinary meanings of the word include:
[48] Pepsi Seven-Up Bottlers Perth Pty Ltd v Commissioner of Taxation [1995] FCA 1655; (1995) 62 FCR 289; 132 ALR 632; 31 ATR 445; 95 ATC 4746 at [32]-[34]; 639; 296-297; 452; 4,752 per Hill J
“… 1 a substance taken in by a living organism that provides it with energy and materials for growth, maintenance and repair of tissues. 2 solid as distinct from liquid nourishment □ food and drink. …”[49]
When read with the meanings of the words “nourishment”, “nourish” and “nutriment”, the word “food” is defined in similar terms in the Macquarie Dictionary.[50] Those definitions read, in so far as they are relevant:
“food … 1. what is eaten, or taken into the body, for nourishment. 2. more or less solid nourishment (as opposed to drink). …”
“nourishment …1. that which nourishes; food, nutriment, or sustenance …”
“nourish … 1. To sustain with food or nutriment; supply with what is necessary for maintaining life. …”
“nutriment … 1. any matter that, taken into a living organism, serves to sustain it in its existence, promoting growth, replacing loss, and providing energy. …”
[49] Chambers
[50] Macquarie Dictionary, revised 3rd edition, 2001, The Macquarie Library Pty Ltd
When they are analysed, the Macquarie Dictionary and Chambers both define “food” in very similar terms. Their only real difference is one of form with Chambers stating succinctly what is drawn from the Macquarie Dictionary when regard is had to the meaning of the words used to define “food”. Therefore, it seems to me that, when used in its ordinary sense in relation to people, the word “food” means “… a substance taken in … that provides energy and materials for growth, maintenance and repair of tissues …” but is not taken in the form of liquid nourishment. Apart from not being in the form of liquid nourishment, there is nothing in that definition that suggests the form in which the substance be taken in. So, for example, flour would be regarded as a food just as burghul would be. One is a finely processed version of wheat grain and the other a much less processed version. One has to be mixed or combined with other ingredients in a certain way to become a food that is palatable e.g. a pastry made with flour, shortening and water. The other may be combined with other ingredients but it may also be eaten alone as a cereal.
Is there a role for the introduction of what a “reasonable person” would consider to be food? The Tribunal in Kurowski thought that there was but I have concerns about it. My first concern arises from the fact that the headings in Schedule 3 do not introduce that concept. They are descriptions. My second concern arises from the fact that the headings in Schedule 3 to the CT Act reflect classifications agreed upon internationally as part of a harmonised scheme. A person does not have to travel beyond the Asia Pacific region in which Australia is located to know that what is regarded and sold as food in other countries may not be regarded as such in Australia. That is so even though it would be acknowledged that items consumed in other countries provide a source of nutrients, (such as protein) providing energy and materials for growth, maintenance and repair of tissues that would not currently be regarded as food by many Australians. Given that the classifications are included in Australian domestic law, would the reasonable person be expected to know that many products or life forms are consumed by people even though other people may not be aware of it or find their consumption distasteful or even unimaginable? It is true that Australia’s quarantine laws might not permit some of these products to enter the country but the quarantine laws are not determinative of the question which is only asked if the products are permitted entry into Australia and their tariff classification becomes relevant.
Issues of this sort lead me to think that the introduction of the reasonable person may be adding an element that has not been provided by Parliament. That does not mean that the fact that an item or product is, or is not, consumed is irrelevant. It does remain relevant as is the reason for its being consumed. There will be some items and products that are clearly eaten and known to be eaten but others may have to be the subject of evidence. The fact that they may be eaten alone or only after having been mixed or combined with other ingredients is not relevant if they have the attributes of food that I have identified.
What is a “food supplement”?
The expression “food supplement” is not defined or referred to in either Dictionary but both define the word “supplement” in similar terms. I will refer to that in Chambers:
“supplement … 1 something that is added to make something else complete or that makes up a deficiency □ vitamin supplement …”
The word “food” is used as an adjective in the expression “food supplement”. Its use in that way suggests that a “food supplement” is a substance that provides energy and materials for growth, maintenance and repair of tissues. The word “supplement” in that expression suggests that it is something in addition to what might otherwise be present in the food, or combination of foods, consumed by a person and so in that person’s diet.
The evidence
I have summarised the evidence on this issue in the following passage. Except where I indicate otherwise, it is drawn from the written and oral evidence of Professor Clifton:
(1)Sterols are found in all plant cell walls.
(2)LDL cholesterol in humans is cholesterol contained in low density lipoprotein (LDL) in human blood. There is a widely documented and accepted association between high levels of LDL cholesterol and heart disease.
(3)Plant sterols are used to lower LDL cholesterol in humans. Dr Glover said that phytosterols, and so plant sterols and stanols, are equivalent in their activity whether they are in their free or esterified form. Where they differ is in their solubility in the intestine with sterol esters being the more soluble and so the more efficacious.
Mr Frandsen also explained that the particle size of a free sterol is larger than those of sterol esters. One consequence of that is that they give a gritty texture when added to food products. Another is that they do not travel to the interfaces in the intestine. It passes, instead, through the digestive system and are largely excreted without blocking the sites where cholesterol typically enters the human body.
Both Professor Clifton and Dr Glover explained how plant sterols (to use a general term) work in the body. They give consistent accounts but I have adopted the language used by Professor Clifton.
Plant sterols lower cholesterol by reason of their interaction with micelles, or certain molecular aggregates, that exist in the body. One of the tasks assigned to micelles is to carry cholesterol to the surface of the small intestine for absorption. As plant sterols and cholesterol have similar structures, micelles will also carry them to the surface of the small intestine for absorption. That means that, if plant sterols are present in the body as well as cholesterol, the micelles will carry less cholesterol because they must now carry both plant sterols and cholesterol and their carrying capacity does not alter.
The outcome is that there is less cholesterol on the surface of the micelles to be absorbed through the small intestine and into the rest of the body. The cholesterol that are displaced by the plant sterols and never make the journey to the small intestine are excreted in the faeces together with most of the plant sterols, which are poorly absorbed by the body.
(4)When taken as a dose and depending on the size of that dose, their ingestion can reduce cholesterol absorption by as much as 50 to 85%. When added to foods such as margarine, yoghurt and milk, a person may reduce LDL cholesterol absorption by 7.7 to 10%. The effectiveness of plant sterols depends on the food to which they are added so that they are less effective when added to solids such as bread and breakfast cereals than when they are added to spreads and dairy products. Whether people take plant sterols in capsule form or in food is a matter of personal preference.
(5)While a sterol ester provides some calories – in the form of the ester part of the chain to the extent of some 40% of their weight –, they are added to food for health benefits in the same way that soluble fibre might be added. Professor Clifton agreed with the following passage:
“ The IFT [Institute of Food Technologists] Expert Panel agrees that stanol/sterol esters are components of food that provide health benefits in the same way that dietary fiber is viewed as providing health benefits. The beneficial effects of fiber are based on their physical and psychological effects in the gastrointestinal tract. From the standpoint of nutrient requirements, humans do not require dietary fiber; nevertheless dietary fiber provides benefits of gut motility and cholesterol binding. The cholesterol-lowering effects of the sterol/stanol esters similarly bind cholesterol in the gut to prevent their reabsorption.”[51]
(6)Professor Clifton agreed with Mr Northcote’s proposition that the amount of plant sterols that can be added to spreads under the FSANZ Code is 8 grams sterol equivalent per 100 grams.
(7)Dr Glover said that the subject goods are predominantly phytosterol esters meaning that they will be ingested in that form. That may come about in the food industry by having been incorporated in food such as margarines, yoghurts and so on. In the dietary supplement industry, it comes about by being encapsulated and taken with food. Blackmore’s Heart Health product called “Cholesterol Health”, for example, is in capsule form with each capsule containing 1 gram of “Vegetable oil phytosterol esters (plant sterols)” and 1.5mg of natural betacarotene.[52] The label contains a statement that “Blackmores Cholesterol Health® provides a relevant dose of plant sterols, which may assist in management of healthy cholesterol levels by reducing cholesterol absorption & re-absorption.”
(8)The Food and Drug Administration (FDA) in the United States of America permits edible oil spreads or margarines to contain some 8 grams of plant sterol equivalents per 100 grams. As the sterol part of a plant sterol makes upon only 60% or so of its weight and the remaining 40% is the fatty acid, that means that, in order for each 100 grams of edible oil spreads and margarines to contain 8 grams of plant sterol equivalents, it will contain 13 grams of sterol esters.[53]
(9)Professor Clifton agreed with Mr Northcote in cross-examination, that the sterol esters are a very significant ingredient in those spreads and margarines. He also agreed that it is a specially prepared food ingredient and a food supplement. Dr Mulroney said that the sterol portion is the biologically active constituent and the fatty acid stabilises it.
[51] IFT Expert Report Functional Foods: Opportunities and Challenges at 28; Respondent’s List of Authorities and Legal Materials; Tab 15 at 262 and see also Transcript at 68
[52] Exhibit F
[53] That information is consistent with that appearing on the Nutrition Information on the Nuttelex Pulse and Flora pro►activ packs of edible oil spreads: Exhibits H and 3. Dr Mulroney gave a similar explanation at Transcript at 77
I agree with Mr Northcote that Note 1(b) does not exclude the subject goods from the scope of Chapter 38 because, while they are chemicals, they cannot be described as either mixtures of chemicals with foodstuffs or with other substances of nutritive value. They contain a maximum of 0.2% of antioxidants being mixed tocopherols and ascorbylpalmitate but the remainder is made up of 99% plant sterol esters and minor amounts of free plant sterols. It cannot be said that the presence of 0.2% of antioxidants in a substance made up of 99% of plant sterol esters and minor amounts of free plant sterols is a mixture in the sense of “a blend of ingredients prepared for a particular purpose …”.[155] The particular purpose is clearly for addition to other foodstuffs to lower cholesterol absorption. The evidence that I have does not address the question whether antioxidants are either foodstuffs or substances with nutritive value rather than simply “… a substance, especially an additive in foods … that slows down the oxidation of other substances …”.[156]
[155] Chambers
[156] Chambers
I do not consider that I need to pursue this issue for, even if I were to decide that the subject goods were not excluded by Note 1(b) from Chapter 38 and that they came within Heading 3824, I would consider that Heading 2106 provides a more specific description of them. It does so because of the findings that I have made regarding their being food preparations. There is no doubt that the subject goods are chemical preparations of the chemical or allied industries but, as is clear from its sub-headings in Heading 3824, that is a broad and generic description of many goods intended for a variety of purposes, of which food might be one. A more specific description of them is one that assumes their chemistry but which describes them by reference to their use i.e. to be combined with other edible products and consumed. That is the description in Heading 2106. Having found that it is the more specific description, I am required to classify the subject goods within it by Rule 3(a) of the Interpretation Rules. Putting aside situations when two or more headings refer to a part only of the materials contained in mixed or composite goods, which is not the case here, it provides that:
“When … goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows:
(a)The heading which provides the most specific description shall be preferred to headings providing a more general description. ..”
DECISION
For the reasons I have given, I have decided to affirm the decision of the respondent dated 15 November 2013 to classify the subject goods to Heading 2106.90.90.
I certify that the one hundred and eighty six preceding paragraphs are a true copy of the reasons for the decision herein of
Deputy President S A Forgie,
Signed: ……[sgd]...........................................
Associate
Dates of Hearing 12 and 13 November2014
Date of Decision 12 March 2015
Counsel for the Applicant Mr Jonathan Slonim
Solicitor for the Applicant Mr Jacob Uljans
Hall & Wilcox
Solicitor for the Respondent Mr Roger Northcote
Chief Executive Officer of Customs, Legal Support
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