Brand Developers Aust Pty Ltd v Chief Executive Officer of Customs - [2015] AATA 215

[2015] AATA 215

DivisionGENERAL ADMINISTRATIVE DIVISION
File Number 2014/4531
ReBrand Developers Aust Pty Ltd
APPLICANT

And Chief Executive Officer of Customs
RESPONDENT

DECISION
TribunalDeputy President S A Forgie
Date10 April 2015
PlaceMelbourne

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

CATCHWORDS

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

LEGISLATION

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

ACI Pet Operations Pty Ltd v Comptroller of Customs [1990] FCA 398; (1990) 26 FCR 531
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27; 260 ALR 1; 83 ALJR 1152; 73 ATR 256; [2009] ATC 20-134
Amcor Ltd v Comptroller-General of Customs and Others (1988) 79 ALR 221
Collector of Customs v Agfa-Gevaert Ltd [1996] HCA 36; (1996) 186 CLR 389; 141 ALR 59; 43 ALD 193; 24 AAR 282; 71 ALJR 123
Comptroller-General of Customs v ACI Pet Operations Pty Ltd (1994) 49 FCR 56; 121 ALR 347; 32 ALD 48
Corinthian Industries (Syd) Pty Ltd v Comptroller-General of Customs and Others [1989] FCA 100; (1989) 86 ALR 387
Davies Craig Pty Ltd v Comptroller – General of Customs (1986) 68 ALR 105
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355; 72 ALJR 841; 153 ALR 490
Re Australian Plastic Products Pty Ltd and Chief Executive Officer of Customs [1998] AATA 433
Re Cameron Australasia Pty Ltd and Chief Executive Officer of Customs [2012] AATA 865
Re Downer EDI Rail Pty Limited and Chief Executive Officer of Customs and United Group Rail Services Limited [2010] AATA 866; (2010) 118 ALD 454
Re Greig Novelties Pty Ltd and Chief Executive Officer of Customs [1996] AATA 355
Re Klockner Moeller Pty Ltd and Collector of Customs [1989] AATA 283
Re Pioneer Electronics Australia Pty Ltd and Collector of Customs and Kenwood Electronics Australia Pty Ltd Decision Nos. 6611 and 6614; 31 January 1991
Re Robert Bosch Australia Pty Ltd and Collector of Customs [1986] AATA 250
Re Sheldon & Hammond Pty Ltd and Chief Executive Officer of Customs [2007] AATA 1929; (2007) 67 ATR 731
Re SMS Autoparts Pty Ltd and Chief Executive Officer of Customs [1996] AATA 158; (1996) 41 ALD 615; 23 AAR 44
Re STI Tyres as Trustee for On Track Tyre Trust and Chief Executive Officer of Customs [2009] AATA 877; (2009) 112 ALD 381
Re Toro Australia Group Sales Pty Ltd and Chief Executive Officer of Customs [2014] AATA 187
Re Tridon Pty Ltd and Collector of Customs [1982] AATA 119; (1982) 4 ALD 615
Re Zoratto Enterprises Pty Ltd and Collector of Customs [1991] AATA 210
Times Consultants Pty Ltd and Collector of Customs (QLD) (1987) 16 FCR 449; 76 ALR 313
Voxson Sales Pty Ltd v Collector of Customs [1993] FCA 609; (1993) 19 AAR 129
OTHER MATERIAL

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

REASONS FOR DECISION

The applicant, Brand Developers Aust Pty Ltd (Brand Developers) imports hand operated food processors and markets them under the name of “Genius Nicer Dicer Plus” (Nicer Dicer) (subject goods). Each Nicer Dicer comes packaged in a box containing 13 pieces. The parties agree, as do I, that the Nicer Dicer is classified to subheading 8210.00.00 of Schedule 3 to the Customs Tariff Act 1995 (CT Act). Their disagreement comes about regarding the decision made by the delegate of the respondent, the Chief Executive Officer of Customs (CEO), that the subject goods are not eligible for entry for home consumption at a concessional rate of duty under Tariff Concession Order (TCO) 9107322.
At the heart of the disagreement lies the fact that, among the 13 pieces, are a “Y” shaped vegetable peeler, a “Fresh-keeping lid for container”, an “Attachable container with measurements” and a recipe book.[1] Their point of difference lies in whether these four features disentitle the subject goods from the benefit of TCO 9107322. As Mr Slonim summarised the issue on behalf of Brand Developers, do the subject goods have to meet the description in TCO 9107322 in each and every respect. He submitted that they did not and, on behalf of the CEO, Mr Millea submitted that they did.

[1] As described on the box in which the subject goods are packaged.

I have decided that the plastic lid and the Y peeler take the goods outside the description of those in TCO 9107322 and they are not eligible for entry at a concessional rate of duty. Therefore, I have affirmed the decision of the CEO dated 8 August 2014.[2]
[2] Documents lodged under s 37 of the Administrative Appeals Tribunal Act 1975 (T documents); T7 at 79-88

BACKGROUND

On 17 July 2013,[3] Brand Developer’s representative, Clemenger International Freight Pty Ltd (CIFPL), lodged Tariff Advice Application (TA) 20769900 with supporting illustrative descriptive material. It did so in respect of the Nicer Dicer imported by Brand Developers. The Nicer Dicer was described as a:
[3] T documents; T3 at 19
“… 13 piece Set said to contain the following:
1 x removable top part with self-cleaning function
1 x cutting base
1 x attachable container with measurements
1 x fresh-keeping lid for container
1 x dual blade for cutting 6mmx6mm OR 12mmx12mm cubes
1 x dual blade for cutting 6mmx36mm OR 18mmx18mm cubes
1 x dual wedging blade
1 x plug-in cutting stamp
1 x partial blade cover
1 x slicer with blade protector
1 x food holder
1 x grater with protective cover
1 x perfect peeler
Includes recipe book.”[4]

[4] T documents; T3 at 20-21

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

[5] T documents; T3 at 21

CIFPL initially claimed that the Nicer Dicer should be classified under Heading 8214.90.00 in Schedule 3 of the CT Act but later agreed with the decision made by a delegate of the CEO on 6 September 2013 and affirmed on 27 February 2014 that the Nicer Dicer is properly classified to Heading 8210.00.00. That Heading reads:
“HAND-OPERATED MECHANICAL APPLIANCES, WEIGHING             5%
10 kg OR LESS, USED IN THE PREPARATION, CONDITIONING           DCS:4%
OR SERVING OF FOOD OR DRINK  DCT:5%”

In classifying the Nicer Dicer to this heading, the delegate relied on Rules 3(b) and 6 of the General Interpretation Rules for the Interpretation of the Harmonized System set out in Schedule 2 of the CT Act.[6] Those rules must be used for working out the tariff classification under which goods are classified (Interpretation Rules).[7]
[6] CT Act; s 3(1)
[7] CT Act; s 7(1)

On 19 September 2013, an officer of Australian Customs and Border Protection Service decided that the Nicer Dicer was not eligible for the benefit of TCO 9107322 due to the inclusion of the “Y” shaped vegetable peeler in the set.[8] That decision was affirmed on 27 February 2014.[9] The terms of that TCO are:
[8] T documents; T4C at 39-44
[9] T documents; T7 at 79-88
“PROCESSORS, food, hand operated, having ALL of the following functions:
(a)chopping;
(b)crushing;
(c)grating;
(d)rasping;
(e)slicing
but NOT including pepper or salt grinding mills
Stated Use: Processing and preparing food”[10]

TCO 9107322 is keyed to Heading 8210.00.00.

[10] T documents; T8 at 89

A few months later, CIFPL lodged a further version of an Import Declaration and claimed a refund of duty on the ground that the Nicer Dicer is covered by TCO 9107322.[11] A delegate of the CEO refused the application for refund on 8 August 2014.[12]
[11] T documents; T11 at 106-111
[12] T documents; T16 at 133-134

TARIFF CLASSIFICATION ORDERS
Legislative scheme

The import of goods into Australia and their export is regulated by the Customs Act1901 (Customs Act). Part VIII provides for the payment and computation of any duty payable on those goods. If the rate of duty has varied, generally the rate is that in force when the goods entered Australia for home consumption.[13] Duty is payable at that time of entry.[14]

[13] Customs Act, s 132(1)

[14] Customs Act, s 132AA(1), item 1

The rate of duty payable in respect of goods is not dealt with in the Customs Act but in the CT Act. Although there are qualifications and exceptions, usually duty in respect of goods is worked out by reference to the general rate set out in the third column of the tariff classification under which the goods are classified.[15] For most purposes, those classifications are set out in Schedule 3 of the CT Act or, in relation to goods that originated in a number of specified countries, under Schedules 5, 6 and 7.

[15] CT Act, s 16(1)(a). Qualifications and exceptions are set out in the remaining provisions of s 16 and in ss 17, 18, 20 and 22.

The CT Act provides for concessional duty. In broad terms, s 18 of the CT Act provides for the duty that is to be paid on goods to which an item in Schedule 4 prima facie applies. An assessment is then made of the duty payable under that item. If it is less than it would be if, apart from s 18, it were payable under Schedules 3, 5, 6, 7 or 8, the item under Schedule 4 applies.[16] The amount of duty payable in respect of goods under an item in Schedule 4 is an amount worked out by first deciding whether the goods are goods of one of the originating countries named in s 18(2)(a).[17] If they are not, the amount is calculated by reference to the general rate set out in the third column of the relevant item.[18] If they are, regard is had to s 18(2)(b) to (n) for the rate. In some instances, the concessional rate of duty is “Free” and, in others, a reduced rate is specified.

[16] CT Act; s 18(1)

[17] CT Act; s 18(2)(b)

[18] CT Act; s 18(2)(a)

The item that is relevant in this case is Item 50 of Schedule 4. It provides that, unless goods are classified under subheadings 3817.00.10 or 3819.00.00 of Schedule 3, a rate of “Free” applies to “Goods that a Tariff Concession Order declares are goods to which this item applies”. As the subject goods are classified under heading 8210.00.00, the subheadings that are excluded from that rate are not relevant in this case.

Features of the legislative scheme

I have set out the processes leading to the making of a TCO and the relevant provisions of the Customs Act in Attachment A below. Without repeating those processes or provisions, I note that:
(1)an application for a TCO is made in respect of specific goods which are fully described in that application;[19]
[19] Customs Act; s 269F(3)(a)
(2)in order to make a TCO, the CEO must be satisfied that the application meets the core criteria.[20]
[20] Customs Act; s 269P(1) and (3)
(a)the application meets the core criteria if, on the day it was made, no substitutable goods were produced in Australia in the ordinary course of business;[21]
[21] Customs Act; s 269C
(i)the corollary is that no substitutable goods will have been produced in Australia if there were no goods produced in Australia that were put, or were capable of being put, to a use that corresponds with a use (including a design use) to which the goods the subject of the application for the TCO can be put;[22]
[22] Customs Act; s 269B(1)
(3)the terms used mean:
(a)“substitutable goods” are:
“… in respect of goods the subject of a TCO application or of a TCO, … goods produced in Australia that are put, or are capable of being put, to a use that corresponds with a use (including a design use) to which the goods the subject of the application or of the TCO can be put.”[23]
[23] Customs Act; s 269B(1)
(b)Goods “are taken to be produced in Australia” if they are wholly or partly manufactured in Australia and if they meet the factory and works costs specified in s 269D(1)(b).
(c)Goods that are substitutable goods in relation to goods the subject of a TCO application are taken to have been produced in the ordinary course of business if:
(i)they have been produced in Australia in the 2 year period before the application, have been produced and held in stock in Australia, or produced on an intermittent basis in the previous 5 years and a producer is prepared to accept an order to supply them;[24] or
(ii)they are made-to-order capital equipment and are taken to have been produced in Australia in the meaning of s 269E(2);
(3)When made, a TCO must include:
(a)a description of the goods that are the subject of that order; and
(b)a reference to the tariff classification that, in the CEO’s opinion, applies to the goods.[25]

[24] Customs Act; s 269E(1)

[25] Customs Act; s 269P(4)(a)

This outline of the process leading to the making of a TCO underlines the links:
(1)between the goods described in a TCO application and the TCO – they are one and the same;
(2)between the goods and the core criteria – the goods described in the TCO application must meet the core criteria meaning that there must be no substitutable goods produced in Australia in the ordinary course of business on the day on which the TCO application was made; and
(3)between the goods described in the TCO and the tariff classification – the goods described in the TCO must either be those described in the tariff classification or a sub-set of them.

INTERPRETING AND APPLYING A TCO

Keying the goods to the relevant tariff classification

In Voxson Sales Pty Ltd v Collector of Customs[26] (Voxson), Spender J noted that:
“ The fundamental requirement is that, before goods can fit within a particular TCO they must be within the tariff classification to which that TCO is keyed. …”[27]

The relevant tariff classification has been agreed upon between the parties but, for completeness, I will outline the approach to be taken to identifying that tariff classification.
[26] [1993] FCA 609; (1993) 19 AAR 129
[27] Voxson Sales Pty Ltd v Collector of Customs [1993] FCA 609; (1993) 19 AAR 129 at 135 per Spender J. His Honour was referring to r 181(1)(d) of the Customs Regulations which previously prescribed that this information had to be given by an applicant for a TCO. At that time, the application was made under s 269G and s 269G(2)(a) prescribed particulars that had to be given in the TCO application. Since the repeal and substitution of Part XVA by s 10 of the Customs Legislation (Tariff Concessions and Anti-Dumping) Amendment Act 1992 (Act No 89 of 1992) (CL Amendment Act), the requirements have been included within s 269P. Section 10 commenced operation on 1 November 1992, which was a day fixed by Proclamation: CL Amendment Act; s 2(2).

In their majority judgment in Times Consultants Pty Ltd v Collector of Customs (QLD)[28] (Times Consultants), Morling and Wilcox JJ established that the first step in the proper classification of particular goods is to identify them. The second step is to construe the tariff classifications to determine to which tariff classification the subject goods should be classified. Having said that there are two steps does not determine the order in which those steps are taken for taking one may well inform how the other is taken.

[28] (1987) 16 FCR 449; 76 ALR 313 Morling and Wilcox JJ; Fox J dissenting

The overlap between the two steps is evident in the second and third principles identified by a differently constituted Tribunal in the following passage from Re Tridon Pty Ltd and Collector of Customs[29] (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:
[29] [1982] AATA 119; (1982) 4 ALD 615; 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 ...”[30]

[30] [1982] AATA 119; (1982) 4 ALD 615 at [15]; 620-621 (citations omitted)

I also note that classification is undertaken according to the General Interpretation Rules for the Interpretation of the Harmonized System set out in Schedule 2 of the CT Act.[31] Those rules must be used for working out the tariff classification under which goods are classified (Interpretation Rules).[32]
[31] CT Act; s 3(1)
[32] CT Act; s 7(1)

Interpretation of a TCO
A.A species of delegated legislation

In Collector of Customs v Agfa-Gevaert Ltd[33] (Agfa-Gevaert) the High Court described TCOs “… as a species of delegated legislation.”[34] On that basis, the High Court continued, the general principles of statutory interpretation apply to its interpretation. It then went on to address those principles:
[33] [1996] HCA 36; (1996) 186 CLR 389; 141 ALR 59; 43 ALD 193; 24 AAR 282; 71 ALJR 123; Brennan CJ, Dawson, Toohey, Gaudron and McHugh JJ
[34] [1996] HCA 36; (1996) 186 CLR 389; 141 ALR 59; 43 ALD 193; 24 AAR 282; 71 ALJR 123 at 398; 65; 199; 288; 128
“… The general principles relating to the interpretation of Acts of Parliament are equally applicable to the interpretation of delegated legislation …. To use the words of Dixon J, ‘subordinate or delegated legislation ... [stands] on the same ground as an Act of Parliament and [is] governed by the same rules of construction’ … [King Gee Clothing Co Pty Ltd v The Commonwealth [1945] HCA 23; (1945) 71 CLR 184 at 195].
Because the CTCOs are governed by the rules of statutory construction, the speech of Lord Simon of Glaisdale in Maunsell v Olins … [[1975] AC 373 at 391] is a useful starting point in determining the construction of the instruments. His Lordship said:
Statutory language, like all language, is capable of an almost infinite gradation of ‘register’ - ie, it will be used at the semantic level appropriate to the subject matter and to the audience addressed (the man in the street, lawyers, merchants, etc). It is the duty of a court of construction to tune in to such register and so to interpret the statutory language as to give to it the primary meaning which is appropriate in that register (unless it is clear that some other meaning must be given in order to carry out the statutory purpose or to avoid injustice, anomaly, absurdity or contradiction). In other words, statutory language must always be given presumptively the most natural and ordinary meaning which is appropriate in the circumstances.
When construing revenue statutes that utilise trade or technical terms, therefore, the law generally favours interpretation of the terms as they are understood in the trade to which the statute applies. In Herbert Adams Pty Ltd v FCT, … Dixon J said:
A revenue law directed to commerce usually employs the descriptions and adopts the meanings in use among those who exercise the trade concerned.
The courts have also said that it may be less difficult to establish a trade meaning which extends the ordinary meaning of an expression than one which limits the ordinary meaning in a specialised way. … However, the ‘presumption’ in favour of a trade meaning in revenue statutes does not deny the possibility that words used in a revenue statute directed to commerce are to be understood in their ordinary meaning. …”[35]
[35] [1996] HCA 36; (1996) 186 CLR 389; (1996) 141 ALR 59; (1996) 71 ALJR 123 at 398; 65-66; 128 (citations omitted)

When Agfa-Gevaert was decided, s 46 of the Acts Interpretation Act 1901 (AI Act) applied to instruments made under authority conferred by an Act. It provided that, unless the contrary intention appeared, expressions and the like used in any instrument had the same meaning as in the Act, the AI Act applied to any instrument as if it were an Act and an instrument was not to exceed the power of the authority given to make it.[36] The High Court did not address the specific question whether the interpretation of an instrument was to be limited by the terms of the AI Act and, in particular, those of ss 15AA and 15AB relating to purpose or object and to the use of extrinsic material respectively.

[36] AI Act; s 46(1)

Specific provision is now made for the interpretation of such delegate legislation under the Legislative Instruments Act 2003 (LI Act). Section 13(1) of that legislation provides that the AI Act applies to any legislative instrument as if it were an Act of Parliament and each of its provisions were a section of an Act. Interpretation of expressions it uses are linked back to those in the enabling legislation[37] and “any legislative instrument so made is to be read and construed subject to the enabling legislation as in force from time to time, and so as not to exceed the power of the rule-maker.”[38]

[37] LI Act; s 13(1)(b)

[38] LI Act; s 13(1)(c)

A TCO is a written instrument that is of a legislative character and that has been made in the exercise of a power delegated by Parliament.[39] Furthermore, a TCO alters the content of the law and so affects the obligations[40] otherwise imposed upon the importer of goods covered by the TCO to pay duty. The power to make a TCO of the sort in this case[41] is given to the CEO by s 269P of the Customs Act. The CEO may exercise that power after receiving an application for a TCO under Part XVA and that application has been processed in the manner required by that Part. A TCO does not come within those instruments declared by s 7 of the LI Act not to be legislative instruments. It is, therefore, subject to the LI Act.

[39] LI Act; s 5(1)

[40] LI Act; s 5(2)

[41] That is, it is a TCO in respect of goods other than those sent out of Australia for repair. A TCO in respect of goods sent out of Australia for repair may be made by the CEO under s 269Q of the Customs Act.

As is apparent from the passage I have set out from the judgment of the majority in Agfa-Gevaert, the rules of statutory interpretation extend beyond the AI Act to those under the general law. Does s 13(1) of the LI Act limit the application of those rules in any way? If they were to do so, that would mean that I would, for example, not have regard to the general law relating to the meaning of trade and technical terms. I would have regard only to s 15AA relating to the objects of a legislative instrument and not to the broader expressions of similar principles in cases such as Project Blue Sky Inc v Australian Broadcasting Authority[42] (Project Blue Sky) in which McHugh, Gummow, Kirby and Hayne JJ said in their joint judgment:
“ The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute ... The meaning of the provision must be determined ‘by reference to the language of the instrument as a whole’ ... In Commissioner for Railways (NSW) v Agalianos ..., Dixon CJ pointed out that ‘the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed’. Thus, the process of construction must always begin by examining the context of the provision that is being construed ...
A legislative instrument must be construed on the prima facie basis that its provisions are intended to give effect to harmonious goals ...”[43]

[42] [1998] HCA 28; (1998) 194 CLR 355; 72 ALJR 841; 153 ALR 490; McHugh, Gummow, Kirby and Hayne JJ; Brennan CJ dissenting

[43] [1998] HCA 28; (1998) 194 CLR 355; 72 ALJR 841; 153 ALR 490 at [69]- [70]; 381-382; 855; 509

Project Blue Sky was decided in 1998 and so before the enactment of the LI Act but while s 46 of the AI Act was in operation. The terms of s 46(1) mirror those of s 13(1) in their substance; only the form is a little different. Agfa-Gavaert had been decided only two years earlier. While only one Judge was common to both cases, McHugh J, it is difficult to imagine that both Courts would not have been familiar with s 46 of the AI Act. The Court in Agfa-Gavaert was certainly aware of the status of a TCO as delegated legislation and applied general rules of statutory interpretation without question. That must be taken as indicative of the present position under the LI Act given that there has been no substantive change in the provisions between s 46(1) of the AI Act and s 13(1) of the LI Act. The AI Act applies to a legislative instrument as if it were an Act and so too do the general rules of statutory interpretation.
B.The object of making a TCO
Writing in the same vein as the majority in Project Blue Sky, those delivering the majority judgment in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue[44] (Alcan) said:
“ This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself …. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text …. The language which has actually been employed in the text of the legislation is the surest guide to legislative intention …. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision …, in particular the mischief … it is seeking to remedy.”[45]

[44] [2009] HCA 41; (2009) 239 CLR 27; 260 ALR 1; 83 ALJR 1152; 73 ATR 256; [2009] ATC 20-134; French CJ, Hayne, Heydon, Crennan and Kiefel JJ

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

Their Honours were concerned with the interpretation of an Act of the Northern Territory and not with a legislative instrument. While the principles remain the same, interpretation of a legislative instrument requires me to have regard not only to the text of that instrument and the particular context of that text but also to the wider text of the Act under which the instrument was made. Apart from any common law principles to that effect, s 13(1)(c) of the LI Act requires that, unless there is a contrary intention, “any legislative instrument so made is to be read and construed subject to the enabling legislation as in force from time to time …”. That draws into consideration not only the particular purpose of the legislative instrument but the broader purpose of the enabling legislation in conferring power to make instruments of that kind.

The provisions of the Customs Act relating to TCOs necessarily alleviate the imposition of duties that would otherwise be imposed according to the relevant tariff classification under the CT Act. It is clear from the core criteria that must be met by an application for a TCO that it will only be granted if, in summary, Australia does not produce goods that are put, or capable of being put, to the same use as those being imported. The TCO regime is clearly intended to provide some protection to the Australian manufacturing industry. That this is so is underlined by the comment made by the then Minister for Small Business, Construction and Customs, the Hon Mr Beddall, when giving the Second Reading Speech on the Customs Legislation (Tariff Concessions and Anti-Dumping) Amendment Bill 1992: “… The objective of the system is to ensure that industry is not taxed by the tariff where it is serving no protective function. …”.[46]
[46]Hansard, House of Representatives, 7 May 1992 at 2665

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

Although they will be relevant in classifying the subject goods under the appropriate tariff classification in Schedule 3 to the CT Act, the Interpretation Rules have no place in interpreting a TCO. They apply only to the interpretation of a tariff classification under Schedule 3 of the CT Act. That is made clear by s 7(1) of the CT Act.

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

On their first reading, the cases to which I have been referred by the parties appear to answer the question I have posed in contradictory fashions. Some would seem to answer it by suggesting that, provided the goods under consideration come within the relevant tariff classification keyed to a TCO under consideration and provided those goods meet the description of the goods given in a TCO, it is of no consequence that they may do more. They will still be regarded as having the benefit of the TCO. There are other cases, however, that conclude that the goods must not only be appropriately classified within the tariff classification keyed to the TCO but must meet the description precisely in order to have its benefit. If the goods have features beyond those described, they may not have the benefit of the TCO and will not be permitted concessional entry into Australia. Finally, there is a third group of cases that does not answer the broader question either way. I have summarised the essential findings and reasoning in each case at [89]-[141] of Attachment B below.

In the first group of cases supporting a broader interpretation of TCOs, but decided under a different statutory regime, are:
(1)Re Robert Bosch Australia Pty Ltd and Collector of Customs[47] (Robert Bosch):
“ … Certainly the gun does more than blow air, for it heats air as well, but blow air it does and we can see nothing in the wording of the Order to indicate that it was intended that an article which does precisely what the Order says should be excluded because it does more. …”[48]

(2)Re Klockner Moeller Pty Ltd and Collector of Customs[49] (Klockner Moeller):
The subject goods were “Motor starters suitable for use with three-phase motors are also suitable for use with single-phase motors. …”[50]. The (Commercial Tariff Concession Order) CTCO described only those suitable for single-phase motors. In the absence of any words of limitation in the CTCO, the Tribunal adopted the approach in Robert Bosch to the effect that goods are not excluded from a CTCO because they can do more than those described in the CTCO.

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

In the second group of cases supporting a narrower view and requiring the subject goods to fit the description given in the TCO precisely and without additional features are:
(1)Re Greig Novelties Pty Ltd and Chief Executive Officer of Customs[51] (Greig Novelties):
[51] [1996] AATA 355
The goods did not come within the description of those in the TCO because they were not stuffed. Stuffing was an essential characteristic of the TCO.

(2)Re Australian Plastic Products Pty Ltd and Chief Executive Officer of Customs[52] (Australian Plastic Products):
[52] [1998] AATA 433; Senior Member Ettinger and Rear Admiral Horton AO RAN (Rtd)
The length of sheeting was ten metres less than the specified length of sheeting. “… [T]o be able to take advantage of a TCO, the products must precisely meet the criteria …”.[53]
[53] [1998] AATA 433; N97/843 at [38]

(3)Re Sheldon & Hammond Pty Ltd and Chief Executive Officer of Customs[54] (Sheldon & Hammond):
[54] [2007] AATA 1929; (2007) 67 ATR 731; Senior Member Allen
The goods were more than glass jars described in the TCO as the jars were held in a frame making them a spice rack.

(4)Re Cameron Australasia Pty Ltd and Chief Executive Officer of Customs[55] (Cameron):
Umbilicals wound on reels took the subject goods outside a TCO referring only to umbilicals.

(5)Re Toro Australia Group Sales Pty Ltd and Chief Executive Officer of Customs[56](Toro)
“… To say that the goods fit the description precisely does not permit a finding that in addition to the description set out in the TCO, the goods have other characteristics or components. To fit the description precisely means that the goods have no more or no less of the characteristics set out in the description. …”[57]

[55] [2012] AATA 865; Senior Member Ettinger
[56] [2014] AATA 187
[57] [2014] AATA 187 at [50]

The second group of cases can be further subdivided by reference to whether the goods were more than, less than or different from, the goods as described in the relevant TCO. When that is done, the grouping becomes:
(1)Subject goods less than those described in relevant TCO:
(a)Greig Novelties:
The goods were not stuffed. Stuffing was an essential characteristic of the TCO.
(b)Australian Plastic Products:
The length of sheeting was ten metres less than the length of sheeting specified in the TCO.

(2)Subject goods more than those described in relevant TCO:
(a)Cameron:
The reels on which the umbilicals were wound were not mentioned in the description of goods in the TCO.

(b)Toro:
The fittings on the hoses were not part of the description in the relevant TCOs.

(3) Subject goods different from those described in TCO:
(a)Sheldon & Hammond:
Glass jars in a frame made a spice rack not jars within the meaning of the TCO.

On the facts as they found them, the question did not need to be answered in the third group as the subject goods were found either to meet the TCO precisely (Pioneer Electronics and Zoratto) or not to meet it at all (STI Tyres):
(1)Re Pioneer Electronics Australia Pty Ltd and Collector of Customs and Kenwood Electronics Australia Pty Ltd[58] (Pioneer Electronics):
[58] Decision Nos. 6611 and 6614; 31 January 1991 Deputy President Thompson and Mr Argent and Mr Woodard, Members
The subject goods met the description of “cassette decks” in the TCO at the relevant time because the term “cassette decks” had come to include features beyond the deck even though that might not have been the case when the TCO was drafted.

(2)Re Zoratto Enterprises Pty Ltd and Collector of Customs[59] (Zoratto):
Goods must comply with the specifications within a TCO but there was no discussion by the Tribunal as to whether they are restricted to those specifications.

(3)Re STI Tyres as Trustee for On Track Tyre Trust and Chief Executive Officer of Customs[60] (STI Tyres):
The subject goods did not come within the description of the goods in the TCO.

[59] [1991] AATA 210
[60] [2009] AATA 877; (2009) 112 ALD 381; Deputy President McDonald and Mr Fice, Member

When categorised in this way, it becomes apparent that Pioneer Electronics, Zoratto and STI Tyres do not assist either Mr Slonim or Mr Millea in his submissions. Rather, each case showed the process of first identifying the goods and then deciding whether they were goods that the relevant TCO declared to be goods to which Item 50 of Schedule 4 applied. That is the question that has to be asked under s 18(1) of the CT Act. Each case decided either that, in the case of Pioneer Electronics, that they were those goods without further features or, in the case of STI Tyres, that they were not. The reasons for the decision in Zoratto are a little less clear but it seems to me that the Tribunal found that the goods under consideration met the description in the TCO without enhancement.

To my mind, the cases of Greig Novelties, Australian Plastic Products do not support Mr Slonim’s submission that the subject goods may have features in addition to those specified in the relevant TCO. In each case, the subject goods did not have the features specified in the description in the TCO let alone features in addition to them. Sheldon & Hammond and STI Tyres do not assist either for they cannot be taken to support principles beyond those based on the findings of fact made by the Tribunal. In each case, the Tribunal found that the subject goods were goods quite different from those in the relevant TCO. Even Sheldon & Hammond, which might be thought to be a case in which goods came within the TCO but simply had an additional feature, is not a case that assists Mr Slonim’s submission. It does not assist it because, although the jars alone came within the TCO, setting those jars in a frame did not make them jars with an additional feature. When the two were put together, they became a spice rack and the goods had nothing to do with the jars described in the TCO. For similar reasons, STI Tyres does not assist Mr Slonim’s submission. The tyres that comprised the subject goods did not meet the description of the tyres described in the TCO once the TCO had been interpreted. Pioneer Electronics is consistent with the approach in each of these cases for it interpreted the TCO and characterised the subject goods.

Robert Bosch and Klockner Moeller do appear to support Mr Slonim’s submission at first sight. On reflection, though, I do not think that their principles, developed as they were in the context of Part XVA before its repeal and replacement by the current scheme on 1 November 1992, can be transferred to the application of TCOs under Part XVA in its current form. I will spend a moment exploring the previous scheme.

The scheme under which Robert Bosch and Klockner Moeller were decided required a TCO to be made only if “goods serving similar functions” to those for which the TCO was sought were not produced in Australia or were not capable of being produced in Australia in the ordinary course of business. That was provided for in s 269C as it was then drafted. Sections 269B(3) and (4) explained that what was meant by the expression “similar functions”. If goods are identical, they were taken to serve similar functions. In Davies Craig Pty Ltd v Comptroller-General of Customs[61] (Davies Craig), Davies J said that mechanical or physical function was covered by s 269(b)(3). That required identity. If there was no identity in that sense, the issue was decided by reference to the requirement of a “significant cross-elasticity of demand between the goods”. That was, Davies J continued, a market or economic test. It was not a mechanical or physical function test although the mechanical or physical function of the goods would be a relevant matter to be considered.[62]

[61] (1986) 68 ALR 105

[62] (1986) 68 ALR 105 at 114

The test of significant cross-elasticity of demand between goods was considered by Foster J in ACI Pet Operations Pty Ltd v Comptroller of Customs.[63] PVC and PET were found not to be identical goods. Therefore, the second ground of the similar function test rose for consideration. Foster J said:
“54. In the first place the Comptroller is required to be satisfied as to the existence of a negative. Although questions of onus of proof are not to be regarded as having the significance in areas of administrative decision that they have in curial decision, nevertheless, it is of some assistance in the focusing of thought to regard the section as broadly requiring the applicant for a CTCO to satisfy the Comptroller on the balance of probabilities of the negative requirements of the section. If this is not achieved, then, by force of the section, the goods in respect of which the CTCO is sought shall be taken to serve similar functions to the relevant ‘other goods’ (or, perhaps, vice versa) with the result that the applicant cannot satisfy the requirements of s 269C(1).
55.      Secondly, the Comptroller is required to be satisfied of what is put as a purely hypothetical situation, namely that the ‘goods’ and the ‘other goods’ be both readily available for sale throughout Australia. There is no requirement that this state of fact be established. Quite the reverse: if the factual situation were that one or both of the goods were not so readily available, it would make no difference in the application of the section. The Comptroller (through his delegate) is required to envisage, when applying the section, the posited situation of ready availability.
56.      Thirdly, what meaning is to be given to the words ‘readily available for sale throughout Australia’? In the first place, the phrase ‘readily available for sale’ must be read in the context of the later requirement to consider ‘cross-elasticity of demand’. In these circumstances I am satisfied that ‘ready availability’ does not import any consideration as to price. It contemplates no more than that the relevant goods be in a position to be purchased, irrespective of whether they are for sale at a generally acceptable or at a prohibitive price. This part of the section is satisfied if the ‘goods’ and the ‘other goods’ be present at relevant points of sale in sufficient quantity or amount to answer consumer demand based upon need alone. There must be no scarcity of the ‘goods’ or ‘other goods’.
57.      In the second place, the phrase ‘throughout Australia’ may be productive of difficulty. It is to be noted that the legislature has used the word ‘throughout’ rather than the word ‘in’. In doing so it has introduced the concept of nationwide availability of the relevant goods at the point of time when the test of cross-elasticity of demand is to be applied. The way in which this criterion can be, or can be envisaged to be satisfied will no doubt vary in accordance with the nature of the goods and the potential consumer. For instance, some consumer goods of domestic utility might not be so available unless offered for sale in most corner stores throughout urban and rural Australia. In the case of goods which are (as in the present case) materials required for large scale manufacture of products to be purchased by the end user, different considerations, no doubt, apply. Here the purchasers are necessarily far more specialised and less numerous. The section would doubtless be answered by the contemplation of a situation in which all such manufacturers, wherever they might be in Australia, could have their needs satisfied by purchasing the relevant goods from a central point or central points of sale in Australia. Even so, considerations not related to the basic price of the competing goods may, perhaps, come into the assessment of ready availability. Significantly large freight or handling costs might arguably influence availability where the putative intending purchaser was geographically remote from an envisaged point of sale. I mention these matters as illustrative of difficulties which may be involved in the application of the section, not as necessarily arising in the present case.”[64]

[63] [1990] FCA 398; (1990) 26 FCR 531 An appeal from his Honour’s judgment was dismissed; see below.

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

It is apparent from a comparison between the cross-elasticity of demand test and the test of substitutable goods under the current scheme that the former test incorporates various assumptions whereas the current scheme requires reference to the actual state of affairs. As the Minister said in introducing the amendments leading to the insertion of a new Part XVA in 1993, “… The objective of the system is to ensure that industry is not taxed by the tariff where it is serving no protective function. …”.[65] Given the very different scheme under which they were decided, the principles on which the cases of Robert Bosch and Klockner Moeller were decided cannot be taken to apply under Part XVA as it is currently drafted.

[65] See [27] above

The cases of Toro and Cameron run counter to Mr Slonim’s submission. On their face, they might appear to be consistent with each other in deciding that the subject goods were not entitled to the benefit of the TCO because they had features in addition to those referred to in the relevant TCO and could not be said to be goods declared by that TCO to be goods to which Item 50 of Schedule 4 applied. There is a difference, though, and it relates to packaging. No mention is made in Toro to packaging but there is mention in Toro that the hoses were garden hoses. The description in the reasons for decision is consistent with their being garden hoses:
“ I had in evidence samples of the hoses with fittings attached. The Jackaroo, Tricoflex, Superflex, Armourflex and Spectrum 12 mm hoses are fitted with a 12 mm hose connector at each end with one removable tap adapter fitted to the end of the hose which connects to the tap. The tap adapter screws into that connector allowing it to be fitted to 2 different diameter taps. The two hose connectors are crimped to the ends of the hoses and are not readily removable unless the hose is cut. The Spectrum range of hoses also comes in an 18 mm size hose with two 18 mm hose connectors and one tap adapter. However, the 18 mm hose connectors are not crimped to the hose but slide onto the hose and are secured by a screw-on collar. They are readily removable. The Premium and Marine hoses are both 12 mm hoses fitted with two hose connectors and one tap adapter. The only difference between those hoses is that the fittings on the Premium hose are made of brass, both fittings being crimped on to the ends of that hose, while those on the Marine hose are made of nickel plated brass, one being crimped on to the end and the other fixed by some means which is not apparent due to a plastic cover over that section of the hose. It appears to be permanently fixed. Each of the hoses is 15 m in length.”[66]

[66] [2014] AATA 187 at [17]

It would be reasonable to assume from this description that each of the hoses would have been packaged in some way simply for ease of transport, storage and, in a retail setting, display. Common experience suggests that packaging might have been made of cardboard or could simply have been a couple of ties with or without a cardboard insert. No mention was made of any packaging as part of the subject goods just as none was made in the case I am considering. Mention was made of packaging in Sheldon & Hammond but in the sense that it was the “container in which the subject goods were contained”.[67] No suggestion was made in the case that the container was ever part of the subject goods. It seems to me that none is ever made because it is implicit that goods may need to be packaged in some way in order to enable them to be transported, stored and, if available for sale, displayed. The jars and frame that made up the spice rack in Sheldon & Hammond had to be confined in some way if they were to reach their ultimate destination. So too with the hoses in Toro if they were to arrive in something other than in a tangle. In this case, the Nicer Dicer is packaged in a cardboard box but there was no suggestion by either party that the box is part of the subject goods. It is merely a vessel to ensure that they reach their intended destination in mint condition and most efficiently.

[67] [2007] AATA 1929; (2007) 67 ATR 731 at [8]; 733

In light of the view that seems to have been taken of packaging in other cases, I have struggled with the Tribunal’s decision in Cameron. Umbilicals have to be moved. The evidence before the Tribunal was that:
“ Umbilicals are transported/imported/stored/installed using various types of reels. … The type of reels used depends on the specific characteristics of the umbilical (length, diameter, allowable bend radius, total weight) in order to ensure the umbilical is not damaged during reel-in/reel-out, transport, storage and installation. For installation it may be required to transfer the umbilical from the transport reel to another reel or device.
The reels are not installed with the umbilicals. Following the umbilical installation the reels are either scrapped, stored or returned to the manufacturer. [Emphasis added]”[68]

[68] [2012] AATA 865 at [45]

It seems to me that Cameron, can be taken to support Mr Millea’s submission that goods should match the description in the relevant TCO precisely and have no further feature. That aside, it should not be taken as authority for the proposition that the packaging or means by which goods are transported should be regarded as part of the goods and the whole matched against the description. That runs counter to the basis on which the TCO scheme operates with its focus on the subject goods. It runs counter to the practical needs associated with the transport of goods.

Having analysed the cases, it seems to me that the cases decided under Part XVA in its current form do not support a submission that goods may come within a TCO when they have features over and above those that bring them within that TCO. The propositions that they do support are twofold. First, the goods must be characterised and classified under a tariff heading. They must then be considered in order to determine whether they can be said to be goods declared by a TCO, which is keyed to the tariff heading under which they are classified, to be goods to which Item 50 of Schedule 4 applies. Given the strict regime under which TCOs are made and given the purpose of the TCO system to ensure that industry is not taxed by the tariff where it is serving no protective function, it seems to me that the goods must meet those described in the relevant TCO precisely.

THE NICER DICER AND TCO 9107322

I have already mentioned that the parties have agreed that the Nicer Dicer is correctly classified to subheading 8210.00.00 of Schedule 3 to the CT Act. Putting aside for the moment the Y peeler, the plastic lid, the plastic box and the recipe book, I find that, the Nicer Dicer meets the description of the goods specified in TCO 9107322. It is a hand operated food processor that chops, crushes, grates, rasps and slices but is not a pepper or salt grinding mill. Its stated use is for processing and preparing food. Again putting the four contentious items to one side, the Nicer Dicer is no more and no less than the goods described in the TCO.

Beginning with the recipe book, I will now consider each of the items said to take the Nicer Dicer outside the terms of TCO. The first is the booklet described as a “Recipe Book” included in the box in which the Nicer Dicer is packaged.

The box in which the Nicer Dicer is placed has a number of photographs of the fruit and vegetables cut into different shapes and sizes. It advises how the Nicer Dicer can be cleaned under running water or in the dishwasher. Pages 1 to 9 of the 41 page “Recipe Book” contain information relating to the way the Nicer Dicer is to be used and cleaned and for what fruit and vegetables each cutter is suited. The remaining pages contain recipes advising which cutting insert to use when cutting the relevant fruit or vegetables for the recipe. The recipes illustrate the way in which a Nicer Dicer is to be used and it remains a booklet in the nature of an instruction book rather than a recipe book.

An instruction booklet is in much the same position as packaging. It is something that relates to the way in which the goods can, may or should be used. Whether or not an individual looks at the instruction booklet before using the goods is often questionable but it does not change the character of an instruction book. It is often a necessary accompaniment to goods so that they can be effectively and safely used in the same way as packaging is often necessary to get the goods safely and efficiently to the place where they are to be used. Neither should be regarded as part of the subject goods for the purposes of deciding whether or not goods come within a TCO or not.

I turn now to the plastic box. The description on the cardboard box describes it as an “Attachable container with measurements” but the container that is included in the box has no measurements on it. Despite that, it can still be described as a “container” but I do not find that is its primary use. Its primary use is as a base for what is described on the box as “the removable top part”. The removable top part comprises two parts that are hinged at one end. The various blades that form part of the goods are fitted into the bottom of the two parts. The base of that bottom part fits exactly over the lip of the plastic box. The top part of the two hinged parts acts as a lid but also has two ridged pieces, one of which is fixed and the other removable. Those two ridged pieces hold in place the fruit or vegetables as pressure is placed on that hinged lid to bring the top and bottom parts together and so force the fruit and vegetables through the cutters. Once they are through the cutters, they fall into the plastic box. While it is true that, theoretically, the removable top part could be placed over a bowl of some sort, the plastic box is clearly custom made for the purpose. It provides a firm and stable base while pressure is exerted to cut the fruit and vegetables. I am satisfied that it is clearly intended to be an integral part of the goods. Together, the removable top part, the plastic box and the various blades make up the goods that make it a hand operated food processor that chops, crushes, grates, rasps and slices but not a pepper or salt mill. They fall precisely within the description of goods in TCO 9107322.

The lid and the Y peeler are different matters. They fall outside the goods that meet the description in the TCO. It could be said that the Y peeler will often be used to peel fruit or vegetables before they are processed in the hand operated processor but that does not make it part of those goods. It is separate from it. So too is the lid. If used, it makes the plastic box a storage box and no longer the base for the removable top part. The lid has no role to play in the operation of the Nicer Dicer and falls outside the goods described in the TCO.

For these reasons, I have decided that, the addition of the Y peeler and of the plastic lid take the subject goods beyond those described in TCO 9107322. Therefore, Brand Development cannot have the advantage of the concessional rate of duty and I affirm the CEO’s decision to that effect.

TARIFF CONCESSION ORDERS: current provisions

A TCO is made not under the CT Act but under the Customs Act. Section 269F(1) provides that a person may apply to the CEO for a TCO in respect of goods. The manner in which that application is made and processed is the subject of Part XVA of the Customs Act. It has been in force since 1 November 1992 when it was inserted by the CL Amendment Act.

Applying for a TCO

Section 269F(1) of the Customs Act provides that a person may apply to the CEO for a TCO in respect of goods. I will set the section out in full:
“(1) A person may apply to the CEO for a tariff concession order in respect of goods.
(2)An application must:
(a)be in writing; and
(b)be in an approved form; and
(c)contain such information as the form requires; and
(d)be signed in the manner indicated in the form.
(3)Without limiting the generality of paragraph (2)(c), a TCO application must contain:
(a)a full description of the goods to which the application relates; and
(b)a statement of the tariff classification that, in the opinion of the applicant, applies to the goods; and
(c)if the applicant is not proposing to make use of the TCO to import the goods to which the application relates into Australia on the applicant’s own behalf – the identity of the importer for whom the applicant is acting; and
(d)particulars of all inquiries made by the applicant (including inquiries of prescribed organisations) to assist in establishing that there were reasonable grounds for believing that, on the day on which the application was lodged, there were no producers in Australia of substitutable goods.
(4)A TCO application may be lodged with Customs:
(a)by leaving it at a place that has been allocated for lodgement of TCO applications in Customs House in Canberra; or
(b)by posting it by prepaid post to a postal address specified in the approved form; or
(c)by sending it by electronic facsimile to a facsimile number specified in the approved form;
and the application is taken to have been lodged when the application, or a facsimile of the application, is first received by an officer of Customs.
(5)The day on which an application is taken to have been lodged must be recorded on the application.”

In addition to complying with the requirements of s 269F with regard to the contents and lodgement of an application, an applicant for a TCO has a further obligation. It is imposed by s 269FA, which provides:
“It is the responsibility of an applicant for a TCO to establish, to the satisfaction of the CEO, that, on the basis of:
(a)all information that the applicant has, or can reasonably be expected to have; and
(b)all inquiries that the applicant has made, or can reasonably be expected to make;
there are reasonable grounds for asserting that the application meets the core criteria.”

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

The CEO will not make a TCO unless the application for it meets the core criteria. That is the effect of s 269P, which is found in Part XVA of the Customs Act. Section 269C sets out what is required in order to meet the core criteria:
“For the purposes of this Part, a TCO application is taken to meet the core criteria if, on the day on which the application was lodged, no substitutable goods were produced in Australia in the ordinary course of business.”

I will now set out the provisions that expand upon the three sub-criteria that must be met on the day the application was lodged: i.e. there were (1) no substitutable goods; (2) produced in Australia; (3) in the ordinary course of business.
B.Substitutable goods

The expression “substitutable goods” is defined in s 269B(1):
“.. in respect of goods the subject of a TCO application or of a TCO, means goods produced in Australia that are put, or are capable of being put, to a use that corresponds with a use (including a design use) to which the goods the subject of the application or of the TCO can be put.”
C.Goods produced in Australia

Section 269D sets out the meaning of the expression “goods produced in Australia”.[69] The general principles are set out in s 269D(1):
“For the purposes of this Part, goods, other than unmanufactured raw products, are taken to be produced in Australia if:
(a)the goods are wholly or partly manufactured in Australia; and
(b)not less than ¼ of the factory or works costs of the goods is represented by the sum of:
(i)the value of Australian labour; and
(ii)the value of Australian materials; and
(iii)the factory overhead expenses incurred in Australia in respect of the goods.”
[69] Customs Act; s 269B(1)

C.1“Partly manufactured in Australia”

For the purposes of Part XVA of the Customs Act:
“… goods are to be taken to have been partly manufactured in Australia if at least one substantial process in the manufacture of the goods was carried out in Australia.”[70]
[70] Customs Act; s 269D(2)

The expression “substantial process in the manufacture of the goods” is explained in s 269D(3) but that provision does not limit its meaning. Section 269D(3) provides:
“Without limiting the meaning of the expression substantial process in the manufacture of the goods, any of the following operations or any combination of those operations does not constitute such a process:
(a)operations to preserve goods during transportation or storage;
(b)operations to improve the packing or labelling or marketable quality of goods;
(c)operations to prepare goods for shipment;
(d)simple assembly operations;
(e)operations to mix goods where the resulting product does not have different properties from those of the goods that have been mixed.”

C.2 Calculating costs, value and expenses

The CEO may publish directions in the Gazette that the way the factory or works cost of goods, value of Australian labour, Australian material or factory overhead expenses incurred in Australia in respect of goods are to be determined in a specified manner.[71]
[71] Customs Act; s 269D(4) and see also s 269D(5) providing, in effect, that they are to be interpreted by reference to those rules applicable to regulations. Since the repeal of s 48 of the AI Act, the interpretation of regulations has been determined according to the Legislative Instruments Act 2003. Section 13(1)(a) of that legislation provides that the AI Act applies to their interpretation as if they were an Act.

D.“in the ordinary course of business”

Section 269E provides for the circumstances in which goods, which are the subject of a TCO application, are taken to be produced in Australia in the ordinary course of business for the purposes of Part XVA other than those in s 269Q.[72] Those circumstances vary according to whether the goods are made-to-order capital equipment but I will set out only that provision relating to goods other than made-to-order capital equipment. Section 269E(1) provides:
“For the purposes of this Part, other than section 269Q, goods (other than made-to-order capital equipment) that are substitutable goods in relation to goods the subject of a TCO application are taken to be produced in Australia in the ordinary course of business if:
(a)they have been produced in Australia in the 2 years before the application was lodged; or
(b)they have been produced, and are held in stock, in Australia; or
(c)they are produced in Australia on an intermittent basis and have been so produced in the 5 years before the application was lodged;
and a producer in Australia is prepared to accept an order to supply them.”
[72] Section 269Q is concerned with goods requiring repair and that is not relevant in this case.

CEO required to screen application

The CEO must decide whether the application has been validly made within 28 days of its being lodged. That requires the CEO to be satisfied that the applicant for the TCO has satisfied ss 269F and 269FA of the Customs Act.[73] It also requires the CEO to satisfy himself that “… he … is not aware of any producer in Australia of substitutable goods”.[74] If, within the 28 day time period, the CEO neither accepts nor rejects the application, it is taken to have been validly made.[75]
[73] Customs Act; s 269H(1)(a)
[74] Customs Act; s 269H(1)(b)
[75] Customs Act’ s 269H(2)

Section 269HA provides a further ground on which the CEO may reject an application and it is a ground that is not limited to the first 28 days after lodgement. The CEO must not make a TCO in respect of goods if he is satisfied under s 269SJ(1) that the goods the subject of the TCO are:
“…
(aa)described in terms other than generic terms; or
(a)described in terms of their intended use; or
(b)declared by regulations to be goods to which a TCO should not extend.”

Processing a valid application

Under s 269K(1) of the Customs Act, the CEO is required to publish a notice in the Gazette as soon as practicable after receiving a valid application. Among the information he is required to publish, the CEO must describe the goods to which the application relates and include a reference to the customs tariff classification that, in his opinion, applies to the goods. The CEO must also invite persons to lodge a submission within 50 days of the gazettal if they consider there are reasons why the TCO should not be made. The submission must comply with ss 269K(2) and (3) of the Customs Act and be lodged with the CEO. Under s 269K(4), if a person lodges a submission more than 50 days after the gazettal day without being invited to do so by the CEO under s 269M, the CEO must not take the submission into account in determining whether to make a TCO.

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

The CEO may invite third persons to take part in the process in two separate ways. The first is provided for in s 269M(1) when he considers that a person may object to the making of a TCO. It provides:
“If the CEO considers that, in relation to a particular TCO application, a person may have reason to oppose the making of the TCO to which the application relates, he or she may, by notice in writing, invite the person to lodge a written submission with the CEO within a period specified in the notice ending not later than 150 days after the gazettal day.”

The submission must comply with the requirements to s 269M(2) and be lodged in the same manner as is specified in relation to the application for a TCO. Once lodged, it is taken to have been lodged on the same day as that TCO application.[76]

[76] Customs Act; s 269M(3)

The second way the CEO may invite third persons to participate is provided for in s 269M(4):
“If the CEO considers that, in relation to a particular TCO application, any person (including the applicant or a person who has lodged a submission with the CEO) may be able to supply information or produce a document or material relevant to the consideration of the application, the CEO may, by notice in writing, request the supply of the information in writing or the production of the document or material within a period specified in the notice and ending not later than 150 days after the gazettal day.”

If a person receives an invitation or a request to supply information but fails to respond within the time period but does so at a later time, “… the CEO must not take that submission, information, document or material into account in determining whether to make a TCO.”[77]
[77] Customs Act; s 269M(5)

The time within which the invitation or request must be issued and responded to is 150 days from the day on which the CEO published a notice in respect of the application in the Gazette under s 269K(1) of the Customs Act. The CEO has the same period of time to give a copy of all, or part of, the TCO:
“… application to a prescribed organisation with a view to obtaining the advice of the organisation in relation to the question whether there are producers in Australia of substitutable goods.”[78]

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

Making a standard TCO

[78] Customs Act; s 269M(6)

[79] Customs Act; s 269M(6)

A.Deciding a TCO

Section 269P(1) sets out the steps the CEO must follow once he has accepted the TCO application as a valid application. The CEO has to decide:
“… not later than 150 days after the gazettal day, whether or not he or she is satisfied, having regard to:
(a)the application; and
(b)all submissions lodged with the CEO before the last day for submissions; and
(c)all information supplied and documents and material produced to the CEO in accordance with a notice under subsection 269M(4); and
(d)any inquiries by the CEO;
that the application meets the core criteria.”

70. Once satisfied that the application meets the core criteria, the CEO:
“… must make a written order declaring that the goods that are the subject of the TCO application are goods to which a prescribed item in the order applies.”[80]

[80] Customs Act; s 269P(3)

Section 269P(4) provides that:
“The TCO must include:
(a)a description of the goods the subject of the order including a reference to the Customs tariff classification that, in the opinion of the CEO, applies to the goods; and
(b)a statement of the day on which the TCO is to be taken to have come into force; and
(c)if subsection 269SA(1) applies in relation to the TCO – a statement of the day on which it ceases to be in force.”

B.CEO’s failure to make a decision

If the CEO does not make a decision in respect of a TCO application within 150 days of the gazettal day, the CEO is taken to have decided that he is not satisfied that the application meets the core criteria.[81]
[81] Customs Act; s 269P(2)

C.CEO decides TCO application meets core criteria

If the CEO decides that a TCO application meets the core criteria, he must first make a written order declaring that the goods that are the subject of that application are goods to which an item in Schedule 4 of the CT Act provides.[82] The TCO must include a description of the goods including a reference to the customs tariff as declared by the CEO. In addition, it must include a statement of the day on which it is taken to have come into force or, if s 269SA applies, the date it came into force and then ceased to be in force.[83]
[82] Customs Act; s 269P(3) when read with 269B(1)
[83] Customs Act; s 269P(4). Section 269SA(1) provides that, if the CEO is satisfied that substitutable goods commenced to be produced between the date the application for the TCO was lodged and the date of the decision on that application, and that he would not have been satisfied that the application met the core criteria had production commenced on lodgement day, the TCO continues in force only until substitutable goods commenced production.

Operation of a TCO

In the case of a single application for a TCO and the core criteria having been met throughout the period from the date on which the application was lodged and the date the TCO was made, the TCO comes into force on the day the TCO was lodged.[84] If there is more than one application, the day the TCO comes into operation is the day on which the earliest application was lodged.[85]
[84] Customs Act; s 269S(1)(a)
[85] Customs Act; s 269S(1)(b)

In most cases, a TCO applies to goods that are the subject of the TCO when they were or are first entered for home consumption on or after the day on which the TCO is taken to have come into force.[86]
[86] Customs Act; s 269S(2) A qualification is found in s 269SG in relation to the effect of revocation of a TCO on goods in transit and capital equipment on order.

Revocation of a TCO

Revocation of a TCO may come about either through the means of an application by a person claiming to be a producer of substitutable goods in relation to the goods covered by the TCO on a particular day or at the initiative of the CEO. Both begin with a belief that, if the TCO were not in force on that particular day and the application for the TCO had been made on that day, the TCO would not have been made.

The first means is provided for under s 269SB. The application is based on the producer’s being of the view that, if the TCO were not in force on a particular day and had an application for that TCO been lodged on that day, the TCO would not have been made.[87] The producer must provide the information required and follow the procedures set out in s 269SB. Section 269SF provides for the CEO to gather his own information but it must be in writing.[88] The CEO’s authority is found in s 269SF(1):
“If the CEO considers that, in relation to a request for revocation of a TCO, any person (including the person who made the request) may be able to supply information or produce a document or material relevant to the consideration of the request, the CEO may, by notice in writing, request the supply of the information or the production of the document or material within a period specified in the notice and ending not later than 60 days after receiving the request.”

If a person refuses or fails to supply information or produce a document or material within the period as requested but does so after that period, the CEO must not take it into account in determining whether to revoke a TCO.[89]

[87] Customs Act; s 269SB(1)

[88] Customs Act; s 269SF(2)

[89] Customs Act; s 269SF(3)

The CEO’s obligation to make a decision on the request for revocation of a TCO is set out in s 269SC(1):
“Not later than 60 days after lodgement of a request for revocation of a TCO, and after having regard to the request and to any other information, document or material given to the CEO under section 269SF, the CEO must decide whether or not he or she is satisfied:
(a)that, on the day of lodgement of the request, the person requesting the revocation of the TCO is a producer in Australia of goods that are substitutable goods the subject of the order; and
(b)that, if the TCO were not in force on that day but that day were the day on which the application for that TCO was lodged, the CEO would not have made the TCO.”

If it is the CEO who has the requisite belief, he may publish a notice in the Gazette declaring his intention, subject to s 269SD(1AB), to revoke the TCO from a particular day and inviting any person who might be affected by the revocation to give him a written submission within 28 days.[90] The CEO has 60 days from the date of the publication of the notice within which to make a decision. He must do so:
“… after consideration of the matters raised in any submissions made in response to the invitation and of any other relevant matters:
(a)decide whether or not he or she is satisfied of the matters referred to in paragraph (1AA)(b); and
(b)if the CEO is so satisfied – make an order revoking the TCO with effect from the intended revocation day.”[91]
[90] Customs Act; ss 269SD(1AA)
[91] Customs Act; s 269SD(1AB)

The remaining provisions in s 269SD go on to make provision for variations of the decisions the CEO might make.
Limit on CEO’s power to make a TCO

Section 269SJ(1) provides that the CEO must not make a TCO in respect of goods described in terms other than generic terms, described in terms of their intended end use or declared by regulations to be goods to which a TCO should not extend.

TARIFF CONCESSION ORDERS: provisions before 1992 amendment by CL Act

Part XVA was originally inserted in the Customs Act by s 5 of the Customs Amendment Act 1983 with effect from 1 July 1983.[92] It provided for applications for TCOs,[93] notice that was required to be given of those applications and the way in which they were processed. Although they differ from the current procedures to some extent, those differences are not relevant in this context and I will not set them out. Where the relevant differences lie are in the provisions relating to the circumstances in which a TCO might be made. Under the previous provisions, TCOs were made by the Minister and not by the CEO.

[92] Customs Amendment Act 1983; s 2

[93] TCOs were then called “Commercial Tariff Concession Orders” but I will continue to refer to them as “TCOs”.

In his Second Reading Speech relating to the Customs Amendment Bill 1982 in the Senate, the then Minister for Industry and Commerce, Senator Button, referred to the report of the Industries Assistance Commission dated 2 July 1982. The new tariff concession system introduced by that Bill was largely based on the Commission’s recommendations. Although there were one or two qualifications to it, Senator Button explained how the system was intended to work in the majority of situations:
“ In broad terms the Government has adopted a new criterion which will provide that commercial tariff concessions will be issued where the Minister is satisfied that no goods serving similar functions are produced or are capable of being produced in the normal course of business in Australia.
The key words in this criterion are ‘serving similar functions’ and new section 269B(4) provides an interpretation of them. The test will be the degree of elasticity of demand between the imported and Australian produced goods. In practical terms, this means that these tariff concessions will be decided by determining the effect that a reduced rate of duty will have on competition or potential competition between the local and imported goods. This will be based on a practical and realistic assessment of the market situation. The onus will be on the applicant for a tariff concession to identify the goods involved, the market for the goods and the degree of competition or potential competition between the imported goods and Australian-made goods.”[94]
[94] Hansard, Senate, 24 May 1983 at 715

Minister’s power to make TCO

Section 269C of the then Part XVA provided:
“(1) Subject to this Part, where the Comptroller, after considering an application under section 269G for the making of an order under this section in respect of particular goods, is satisfied that:
(a)goods serving similar functions to the particular goods are not produced in Australia; and
(b)goods serving similar functions to the particular goods are not capable of being produced in Australia by any person in the normal course of business,
the Comptroller shall make a written order, to be known as a Commercial Tariff Concession Order, declaring that the goods are goods to which that particular item applies.
(1A)-(2) …
(3)A reference in paragraph (1)(a) or (b) to ‘the particular goods’ shall, in the case of particular goods of which there are classes or kinds, be read as including a reference to goods included in a class or kind of the particular goods.”

“particular goods”

In Part XVA, unless the contrary intention appears, the expression “particular goods” was defined in s 269B(1) in inclusive terms: it “… includes goods included in a particular class or kind of goods”.[95]
[95] Customs Act; s 269B(1)

“similar functions”

Sections 269B(3) and (4) were concerned with what is meant by the expression “similar functions”:
“(3) For the purposes of this Part, identical goods shall be taken to serve similar functions.
(4)Without limiting sub-section (3), for the purposes of this Part, goods shall be taken to serve similar functions to other goods unless the Comptroller is satisfied that, if both goods were readily available for sale throughout Australia, there would be no significant part of Australia in which there would be significant cross-elasticity of demand between the goods.”

“produced in Australia”

Sections 269B(5) and (6) expanded on the meaning of the expression “produced in Australia”, which then appeared in s 269C(1)(a) and (b). Section 269B(5) provides that:
“For the purposes of this Part, goods, other than unmanufactured raw products, shall not be taken to have been produced in Australia unless –
(a)the goods were wholly or partly manufactured in Australia; and
(b)not less than ¼ of the factory or work costs of the goods is represented by the sum of -
(i)the value of labour of Australia;
(ii)the value of materials of Australia; and
(iii)the factory overhead expenses incurred in Australia in respect of the goods.”

The expression “partly manufactured”, used in s 269B(5), was amplified in s 269B(6):
“For the purposes of this Part, goods shall not be taken to have been partly manufactured in Australia unless at least one substantial process in the manufacture of the goods was carried out in Australia.”

“ordinary course of business”

Section 269C(1)(b) required that goods serving similar functions to the particular goods that were the subject of a TCO application were not capable of being produced in Australia by any person in the normal course of business. Section 269B(7) was relevant in considering whether that criterion had been met. It provided:
“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.”

SUMMARY OF PREVIOUS CASES

In this section of my reasons, I will summarise the cases to which Mr Slonim and Mr Millea referred me. In doing so, I have separated them into those decided before Part XVA was repealed and substituted by the CL Amendment Act with effect from 1 November 1992 and those that were decided after that date. The reason for my doing so lies in the differences between the terms of Part XVA before it was repealed and replaced by the CL Amendment Act with effect from 1 November 1992 and after. I will begin with a summary of the principles developed in the Federal Court in relation to the making of TCOs under Part XVA as it was enacted at the relevant time

Part XVA before 1 November 1992

A. Making TCOs

A number of principles can be drawn from previous Federal Court authorities with regard to the making of TCOs. I will begin with the judgment of Davies J in Corinthian Industries (Syd) Pty Ltd v Comptroller-General of Customs and Others,[96] in which Davies J described the general approach to be adopted in making a TCO:
“… Sections 269B and 269C of the Act are not ambiguous. They should be applied having regard to the words used, not according to some background philosophy. … A concession order may be made only when the Comptroller or his delegate is satisfied that goods serving similar functions to the particular goods are not produced in Australia and are not capable of being produced in Australia by any person in the normal course of business.”[97]

[96][1989] FCA 100; (1989) 86 ALR 387

[97] [1989] FCA 100; (1989) 86 ALR 387 at [5]; 390

In Davies Craig, Davies J set out the interplay between ss 269B(3) and (4) in identifying “goods serving similar functions”:
“… I am of the view that Parliament intended by the definitions in s 269B(3) and (4) to cover the field. Mechanical or physical function is covered by s 269B(3), which requires identity. If there is not identity in this sense, the issue is to be decided by reference to the requirement of ‘significant cross-elasticity of demand between the goods’, which is a market or economic test and not a mechanical or physical test, though the mechanical or physical function of the goods would be a relevant matter to be considered.”[98]

[98] (1986) 68 ALR 105 at 114 approved in Amcor Ltd v Comptroller-General of Customs and Others (1988) 79 ALR 221 at 233

In Amcor Ltd v Comptroller-General of Customs and Others,[99] the Full Court of the Federal Court considered an application for a TCO by Amcor Ltd (Amcor) for:
[99] (1988) 79 ALR 221; Davies, Morling and Gummow JJ
“paper-making machines having a wire width of 5.6m or greater including initial spares, but not including other parts or components when imported separately.”

The function the goods were intended to serve was:
“for making white papers for the office and computer papers market.”

If the TCO were made, the rate of duty would have been 2%. If it were not, the rate was 15% generally but only 10% in the particular case as the goods were to be imported from Brazil.[100]
[100] (1988) 79 ALR 221 at 223

Had the goods had a different wire-width, they would have come within the terms of an existing TCO and Amcor would not have needed to apply for a further TCO. Before the application had been made, a letter had already been sent to Johns Perry, which was a heavy engineer manufacturer. That letter asked Johns Perry whether the importation of a complete paper-making machine at concessional rates would be competitive or potentially competitive with paper-making machines which it might manufacture in the normal course of business. Johns Perry replied that it either produced, or accepted orders for the production, in Australia of goods serving similar functions.

It was agreed that the goods in issue were correctly classified on entry under sub-heading 7323.93.00 in Schedule 3 to the CT Act. The Tribunal set out the heading:
“7323 TABLE, KITCHEN OR OTHER HOUSEHOLD ARTICLES AND PARTS THEREOF, OF IRON OR STEEL; IRON OR STEEL WOOL; POT SCOURERS AND SCOURING OR POLISHING PADS, GLOVES AND THE LIKE, OF IRON OR STEEL:
323.9Other:
7323.93.00--Of stainless steel”.

The Tribunal rejected the submission made on behalf of the Collector of Customs that the TCO was limited to domestic food containers when it referred to “CONTAINERS AND LIDS, food service …”. The submission was based on the heading to which the CTCO was keyed. When used in the heading, the Tribunal decided, the word “household” referred to the articles themselves rather than limiting the sub-heading to articles used in a domestic setting.[118]

[118] [1991] AATA 210 at [18]

Turning to the CTCO, Senior Member Hallowes considered a submission that the fact that the subject goods had features or functions not described in the CTCO did not exclude them from the benefit of that CTCO. She said that:
“… The subject goods must however fall within the wording of the CTCO to obtain the benefit, although I am satisfied, that the subject goods have no additional design features as was the case in Re Robert Bosch Australia Pty Ltd.”[119]

A little later, Senior Member Hallowes said she had “… no hesitation in accepting that, in order to be goods identified in the CTCO, goods must comply with the specifications therein. …”.[120]A little later, she added “… Subject goods must comply with the whole of the specification.”[121] She did not address the question answered in Robert Bosch to the effect that the subject goods could have additional features beyond those in the CTCO.
B.5Voxson Sales Pty Ltd v Collector of Customs[122]

[119] [1991] AATA 210 at [15]
[120] [1991] AATA 210 at [19]
[121] [1991] AATA 210 at [20]
[122] [1993] FCA 609; (1993) 19 AAR 129; Spender J

In Voxson, Spender J considered whether a VoxsonCellvox 2002 hand held portable (Cellvox) was within TCO 8906970. The Cellvox is a single hand held unit. Its specifications indicated that it had a frequency range in the transmit mode from 824.04 to 848.97 MHZ and in the receive mode from 869.04 to 893.97 MHZ. The RF power output was 0.6 watt, which was 50 Ohms and the battery voltage was 7.5 volts. The dimensions of the unit are 200 x 57 x 43.5 millimetres and it weighs 650 grams. Both parties accepted that the Cellvox was a “cellular mobile telephone” and that cellular mobile telephones are properly classified under Heading 8525.20 of Schedule 3 to the CT Act. Heading 8525 is in the following terms:
“TRANSMISSION APPARATUS FOR RADIO-TELEPHONY, RADIO-TELEGRAPHY, RADIO-BROADCASTING OR TELEVISION, WHETHER OR NOT INCORPORATING RECEPTION APPARATUS OR SOUND RECORDING OR REPRODUCING APPARATUS; TELEVISION CAMERAS:”

Heading 8525.10.00 is “Transmission apparatus” and the heading within which it was agreed the Cellvox came was 8525.20.00: “Transmission apparatus incorporating reception apparatus”. TCO 8906970 was made in the following terms:
“8525.20 TELEPHONE HANDSETS, cordless with 50 dialling facility, battery (DC) operated, approved for use with telecom lines, designed to operate in conjunction with mains (AC) powered radio frequency base units
Op. 25.8.89”

In the course of his judgment, Spender J said:
“ … It is fallacious to say that because the Cellvox is within 8525.20 and the TCO is keyed to that heading, the Cellvox is within the TCO. The items covered by a TCO generally constitute a subset of the items with which the keyed heading deals, although the possibility exists that the set of the goods within the description of the TCO might consist of precisely the same goods as the set of the goods within the keyed heading. It is a matter for determination whether, as a matter of fact on the proper construction of the TCO, the Cellvox falls within it. …”[123]

Part XVA after 1 November 1992

A.Making and revoking TCOs
[123] [1993] FCA 609; (1993) 19 AAR 129 at [60]; 140

A.1 Making TCOs

In Re SMS Autoparts Pty Ltd and Chief Executive Officer of Customs,[124] Deputy President McMahon considered whether an application had satisfied the requirements of s 269F(3)(a) of the Customs Act i.e. “a full description of the goods to which the application relates”. In finding that the description given by the applicant was inadequate, Deputy President McMahon said:
“… A full description must be an objective description and must be such as to enable those who import, or who supervise the importation, to identify the goods by an informed inspection. …”[125]

[124] [1996] AATA 158; (1996) 41 ALD 615; 23 AAR 44; Deputy President McMahon

[125] [1996] AATA 158; (1996) 41 ALD 615; 23 AAR 44 at [20]; 619; 48

Earlier in the proceedings, he had said of the diesel engine parts under consideration and the description of them given in the TCO application:
“ The description adopted by the applicant may currently be clear to traders in diesel engine parts. The description may serve as a convenient shorthand method of describing the goods for trading purposes. In my view, however, it is not a proper description for statutory purposes.
Again, applying the wharf-side test, it should be possible for any officer charged with the administration of the Act, or for any importer relying upon the proposed TCO, to decide, on an objective inspection, whether or not cylinder heads fall within the description in the TCO, a description of which the applicant is the sole author. In my view, a full description for TCO purposes must offer this ease of objective identification. This is the reason for the requirement in the statute.
The description chosen by the applicant does not meet this criterion. The reference to what are apparently brand names and model numbers are references to a current situation. Models may, and almost certainly will, change throughout the indefinite life of the TCO. What might be a sufficient trade description at this stage may prove to be incomprehensible in later years. More importantly, however, a description by reference to brand names and model numbers does not permit a decision to be made on a wharf-side inspection as to whether any particular cylinder heads fall within the terms of the TCO. It would be necessary, for example, for a customs officer to obtain the Toyota manual for model H diesel engines, to compare the imported cylinder head with those described in the manual, to measure and chart the imported heads and to ascertain whether they fell within the exceptions proposed in the TCO. A full description of the goods is intended to obviate such procedures. A full description is required in order to make the TCO system practical and workable.
A full description is required for purposes of certainty of administration and for purposes of notification to other importers who may take advantage of the TCO. Part XVA of the Act is replete with references to ‘goods’. It depends for its operation upon a clear statement of the unique identity of the goods referred to in the TCOs.”[126]
[126] [1996] AATA 158; (1996) 41 ALD 615; 23 AAR 44 at [13]-[16]; 618; 47-48

A.2Revoking TCOs

In Re Downer EDI Rail Pty Limited and Chief Executive Officer of Customs and United Group Rail Services Limited (Downer EDI Rail),[127] the Tribunal reviewed a decision by the CEO to revoke a TCO that had been made following an application by Downer EDI Rail and was expressed in the following terms:
[127] [2010] AATA 866; (2010) 118 ALD 454; Hon B Tamberlin QC, Deputy President and Senior Member Ettinger
“TRAINS, PASSENGER, electric, double deck, comprising BOTH of the following:
(a)minimum of one driver trailer car without driver cab module;
(b)NOT greater than six passenger cars.”

The TCO was keyed to heading 8603.10.00 in Schedule 3 to the CT Act:
“8603 SELF-PROPELLED RAILWAY … COACHES …
8603.10.00Powered from an external source of electricity.”

The CEO’s revocation of the TCO followed an application by United Group Rail Services Limited (UGRS) that it produced, in the ordinary course of business, substitutable goods. Downer EDI Rail conceded that, if UGRS produced substitutable goods, it did so in the ordinary course of business. The Tribunal considered the definition of the expression “substitutable goods” and made the following observations about it:
“ Turning first to the language used, the definition of ‘substitutable goods’ contains no reference or requirement to the use the goods the subject of the TCO can presently or immediately be put. The reference is rather to uses to which the goods are in fact put or are capable of being put and to a use that corresponds with a use to which the goods the subject of the application TCO can be put. The word ‘can’ draws attention to the future or potential use or range of uses of the goods of United.
The language of the definition is broad because it refers to uses to which the goods are ‘capable’ of being put. It also refers to a use that ‘corresponds’ with a use to which the goods the subject of the application can be put. Furthermore, the reference to the inclusion of a ‘design use’ indicates a broader concept of use than a use to which the goods are in fact being put at any particular point in time. Put another way, there is nothing in the definition which limits the use to an immediate or present use at the time of importation.”[128]

[128] [2010] AATA 866; (2010) 118 ALD 454 at [27]-[28]; 459

Downer EDI Rail submitted that the train sets that were the subject of the TCO could not be said to be passenger trains because they could not be used immediately for that purpose. The train sets lacked motor power and self-propulsion. The ultimate use of those train sets, submitted Downer EDI Rail, was as components in a further manufacturing process that would produce passenger trains. UGRS produces passenger trains in Australia ready for immediate use. It does not produce incomplete passenger train sets that are the subject of the TCO. Therefore, the goods produced by UGRS are not substitutable goods for the goods described in the TCO.

The Tribunal did not accept Downer EDI Rail’s submission and concluded that, having regard to the nature and characteristics of the TCO goods, the need for an interpretation of “substitutable goods” that has regard to the purposive approach and ordinary usage of language, the goods manufactured in Australia by URGS corresponded with a use, including a design use, to which the TCO goods could be put. Therefore, it affirmed the CEO’s decision to revoke that TCO. In the course of its reasons, the Tribunal came to the following conclusions:
(1)“… [W]e consider that the reference to the expression ‘corresponds with a use’ is pertinent in this case because in our view the ‘use’ of the TCO train sets, although incomplete, which contain everything except the driver’s cab module are capable of use which is conformable to, congruous with or in harmony with use as a completed passenger train. There is no requirement in the concept of ‘correspond’ that the goods should be identical or exactly limited in use or exactly the same use. It is common ground that evidentiary questions of fact and degree are significant in determining the issue.”[129]
(2)“ The concepts of ‘design use’, corresponding use, and capacity to use all point to a liberal approach to the interpretative exercise.”[130]
(3)“ As a matter of fact and degree we consider that the extent, scale and characteristics of the TCO goods point to the conclusion that a use to which the TCO goods can be put is use as a passenger train. Such use corresponds to a use to which the United Goods can be put. …”[131]
(4)“[U]nder s 15AA of the Acts Interpretation Act 1901 (Interpretation Act) the Tribunal is required to favour a construction that would promote the purpose or object underlying the Act. The purpose of the TCO scheme is to remove the cost of customs duty where the imposition of duty serves no protective function for Australian industry or, in the words of Drummond J in Seguin Moreau, Australia v Chief Executive Officer of Customs (1997) 77 FCR 410 …, ‘the object of Part XVA of the Act continues to be to protect all Australian-made goods from competition of any significance from imported goods’. The narrow approach advanced by Downer does not give sufficient effect to this purpose: see Second Reading Speech to the Customs Legislation (Tariff Concessions and Anti-Dumping) Amendment Bill 1992, Senate Hansard 28 May 1992 at pages 2858 and 2859.
It is unlikely, in our view, that Parliament would have intended that where there is an Australian manufacturer of complete passenger train sets a TCO could properly be granted for ‘almost complete’ passenger trains. This consequence points away from the interpretation suggested on behalf of Downer in this case although in each case the degree to which the TCO goods are completed is a relevant consideration.”[132]
[129] [2010] AATA 866; (2010) 118 ALD 454 at [34]; 461
[130] [2010] AATA 866; (2010) 118 ALD 454 at [35]; 461
[131] [2010] AATA 866; (2010) 118 ALD 454 at [37]; 461
[132] [2010] AATA 866; (2010) 118 ALD 454 at [40]-[41]; 462

B.A selection of cases considering whether goods within terms of TCOs

B.1Re Greig Novelties Pty Ltd and Chief Executive Officer of Customs[133]
[133] [1996] AATA 355

In Greig Novelties, Deputy President Chappell considered certain goods that, the parties agreed, were properly classified to heading 9503.41.00:
“TOYS, representing animals or non human creatures, stuffed, but NOT including:
(a)stuffed toys indigenous to Australia;
(b) bears having a height in excess of 15cm and below 79cm”.[134]

[134] [1996] AATA 355 at [1]

The goods under consideration were described as comprising “… a knitted pile, unfilled toy animal skin depicting a horse with an unfinished opening in the fabric at the rear of the skin. …”.[135] The filling would be inserted through the hole when the goods arrived in Australia. TCO 9310554 read:
“TOYS, representing animals or non human creatures, stuffed, but NOT including plastic ducks OR turtles OR whales OR fish OR non toxic foam toys OR balloons”.[136]

The goods did not come within the description of those in the TCO because they were not stuffed. That is an essential characteristic of the TCO, Deputy President Chappell concluded. Therefore, the goods did not fall within the TCO and they were not entitled to concessional entry.
B.2Re Australian Plastic Products Pty Ltd and Chief Executive Officer of Customs[137]

[135] [1996] AATA 355 at [7]
[136] [1996] AATA 355 at [8]
[137] [1998] AATA 433; Senior Member Ettinger and Rear Admiral Horton AO RAN (Rtd)

In Re Australian Plastic Products Pty Ltd and Chief Executive Officer of Customs (Australian Plastic Products), the Tribunal reviewed the CEO’s decision refusing refund applications made on the basis that TCO 9508968 did not permit the import of rolls of polyvinyl chloride (PVC) sheeting at a reduced rate of duty. TCO 9508968 read:
“SHEETING, opaque polyvinyl chloride, having ALL of the following:
(a)thickness 0.225mm;
(b)width 330mm to 340mm (both inclusive);
(c)hardness 35PHR;
(d)in rolls of 500 metres (+ or – 5% variance)
(e)in the following colours:
(i)brilliant white;
(ii)red;
(iii)blue;
(iv)black;
(v)grey
…”

The CEO agreed that the goods, which were imported in rolls 400 metres in length, met all of the criteria in the TCO other than (d): “in rolls of 500 metres (+ or – 5% variance)”. The applicant contended that the length of the rolls was immaterial to the manufacturing process. The Tribunal did not accept that contention concluding that:
“… to be able to take advantage of a TCO, the products must precisely meet the criteria, and that the onus lies on the applicant to clearly identify the goods.
The Tribunal accepts the Applicant’s argument that the length of the rolls was changed without its knowledge. That is regrettable, but given the very precise requirements of the TCO, the application must fail.”[138]

B.3Sheldon & Hammond Pty Ltd and Chief Executive Officer of Customs[139]
[138] [1998] AATA 433; N97/843 at [38]-[39]
[139] [2007] AATA 1929; (2007) 67 ATR 731; Senior Member Allen

In ReSheldon & Hammond Pty Ltd and Chief Executive Officer of Customs (Sheldon & Hammond), Senior Member Allen found that the goods in issue were glass jars held in a frame constructed of stainless steel, wood or wood and metal. The packaging in which the goods were presented described them as a “spice rack” and he found that was an accurate description. There was no dispute between the parties that the goods were classified to subheading 7013.39.00, which reads:
“7013 GLASSWARE OF A KIND USED FOR TABLE, KITCHEN, TOILET, OFFICE, INDOOR DECORATION OR SIMILAR PURPOSES (OTHER THAN 7010 OR 7018):
7013.3-glassware of a type used for table (other than drinking glasses) or kitchen purposes other than of glass – ceramics;
7.13.39.00-- other”

TCO 0103991 read:
“GLASSWARE, being ANY of the following:
(a)jugs;
(b)dishes;
(c)bowls;
(d)ice buckets;
(e)wine coolers;
(f)trays;
(g)decanters;
(h)jars;
(i)cocktail shakers;
(j)cocktail mixers;
(k)plates;
…”

Senior Member Allen decided that it was not possible to bring spice racks within the TCO:
“ I do not accept the Applicant’s submission that the subject goods are simply glass jars with something else (mainly the frames) incidental to their function. The frames are an integral part of the goods and indeed, give to the goods their character, namely that of being spice racks.”[140]

B.4Re STI Tyres as Trustee for On Track Tyre Trust and Chief Executive Officer of Customs[141]

[140] [2007] AATA 1929; (2007) 67 ATR 731 at [12]; 733
[141] [2009] AATA 877; (2009) 112 ALD 381; Deputy President McDonald and Mr Fice, Member

STI Tyres imported Maxxis brand tyres for use on four wheel drive and off-road vehicles. It claimed the benefit of TCO 9613014 written in the following terms:
“TYRES, OFF-ROAD, MOTOR CAR CIRCUIT OR DRAG RACING, pneumatic, with tyre marking having reference to the following features:
(a)section width;
(b)outside diameter;
(c)type of tyre;
(d)rim diameter”

STI Tyres submitted that the TCO applied to “off-road tyres, motorcar circuit tyres and drag racing tyres”. The CEO submitted that it did not apply to “off-road tyres” saying that the tyres covered by the TCO were limited to tyres used in motor car circuit and drag racing when those events were conducted at off-road sites. The Tribunal found that the goods in issue are not those ordinarily used on passenger motor vehicles. They are “taller tyres” and would not fit the wheel arch of those vehicles. Rather, they are designed for use in four-wheel drive vehicles which have additional space in their wheel arches allowing for greater suspension travel. In the majority of the 26 tyres in issue, their construction is more robust and the side wall tread ply rating is greater than that found on tyres for a passenger motor vehicle.

The Tribunal found that the structure of the TCO did not make clear whether the expression “OFF-ROAD” was a reference to a discrete group of motor car tyres having nothing to do with any form of motor vehicle racing or whether the expression was related to motor vehicle racing. It turned to the stated use set out in the gazetted notice of the TCO:
“Use on vehicles engaged in motor car circuit or drag racing.”
The ordinary meaning of the expression “off-road” the Tribunal adopted was that of “not on public roads”. It concluded that the TCO referred to tyres designed specifically for motor circuit racing and drag racing which is conducted off public roads. That construction, the Tribunal found, was consistent with the evidence to the effect that, during the relevant period, there had been Australian manufacturers producing in Australia tyres that were suitable to be fitted to a wide range of four-wheel drive vehicles and Sport Utility Vehicles.

B.5Re Cameron Australasia Pty Ltd and Chief Executive Officer of Customs[142]

[142] [2012] AATA 865; Senior Member Ettinger

The goods in issue in Re Cameron Australasia Pty Ltd and Chief Executive Officer of Customs (Cameron) were described as umbilicals wound on reelers for use in the underwater and oil industry. The issue was whether they came within one or other of two CTOs. The first, TCO 0210565, was keyed to heading 3917.39.30[143] and read:
[143] “3917 TUBES, PIPES AND HOSES, AND FITTINGS THEREFOR (FOR EXAMPLE, JOINTS, ELBOWS, FLANGES), OF PLASTICS:
3917.3-Other tubes, pipes and hoses:
3917.30-Other
3917.39.90-Other”
“UMBILICALS, HYDRAULIC, GAS, being EITHER of the following:
(a)onshore;
(b) subsea.”

The second, TCO 0614492, was keyed to heading 8544.42.29,[144] and read:
“CABLES, ELECTRO-HYDRAULIC UMBILICAL, SUBSEA OIL AND GAS SERVICE”

[144] “8544 INSULATED (INCLUDING ENAMELLED OR ANODISED) WIRE; CABLE (INCLUDING CO-AXIAL CABLE) AND OTHER INSULATED ELECTRIC CONDUCTORS, WHETHER OR NOT FITTED WITH CONNECTORS; OPTICAL FIBRE CABLES, MADE UP OF INDIVIDUALLY SHEATHED FIBRES, WHETHER OR NOT ASSEMBLED WITH ELECTRICAL CONDUCTORS OR FITTED WITH CONNECTORS
8544.4-Other electrical conductors, for a voltage not exceeding 1000V
8544.42--Fitted with connectors
8544.42.29---Other”

The applicant had submitted that, because the CEO had accepted that the classification of the goods under one or other of the two headings, he had accepted that the term “umbilical” was inclusive of a set. That set comprises the umbilical, which itself consists of a number of hoses and/or conduits contained in an outer sheath, and a reel for its transport, protection and deployment. The CEO had submitted that the words of the two TCOs did not include a reel. Therefore, the goods could not come within either on a practical wharf side test. Having regard to the evidence, the Tribunal concluded that the word “umbilical” is not understood as a reference to an umbilical with a reel or reeler.

The Tribunal said that it preferred the CEO’s argument:
“… in regard to combinations or sets, and additional features. This is a case like Re Sheldon & Hammond Pty Ltd and Chief Executive Officer of Customs (2007) 67 ATR 731; [2007] AATA 1929 where there is an additional good, in Sheldon & Hammond being the metal or wooden spice rack, and in this case, being the reel around which the umbilical is wound.”[145]

B.6Re Toro Australia Group Sales Pty Ltd and Chief Executive Officer of Customs[146]

[145] [2012] AATA 865 at [51]
[146] [2014] AATA 187

In Re Toro Australia Group Sales Pty Ltd and Chief Executive Officer of Customs (Toro), Senior Member Fice considered various hoses, some of which had plastic fittings and others with metal fittings. It was agreed between the parties that the hoses were made of PVC, had polyester reinforcing and were flexible. They also agreed that they were properly classified to heading 3917.39.90 of Schedule 3 to the CT Act as did the Tribunal. The relevant headings read:
“3917 TUBES, PIPES AND HOSES, AND FITTINGS THEREFOR (FOR EXAMPLE, JOINTS, ELBOWS, FLANGES), OF PLASTICS:
…
3917.3-Other tubes, pipes and hoses:
…
3917.30-Other
…
3917.39.90-Other”

The TCO in issue, TCO 0804831, reads:
“HOSE AND/OR TUBING, polyvinyl chloride, polyester reinforced, flexible”

The applicant submitted that the addition of plastic or metal connector fittings did not change the essential character of the products. It accepted that the imported goods must meet precisely the criteria set out in the TCO and submitted that they did for the goods remained “hoses” within the meaning of the TCO. The applicant did not submit that the word had any trade or technical meaning and the Tribunal found that the evidence did not establish any trade or technical meaning narrower than its ordinary meaning. That was the first of the questions that the Tribunal set itself.

The second question was whether the goods precisely met the criteria set out in the TCO regardless of the fact that there is no reference in the TCO to fittings or hose connectors. It decided that they did not and so could not have the benefit of the TCO. In reaching that conclusion, Senior Member Fice answered the second question he had posed in this way:
“Finally, both parties agreed that it has been frequently stated in cases dealing with TCOs that the goods must precisely fit the description set out in the TCO. To say that goods fit the description precisely does not permit a finding that in addition to the description set out in the TCO, the goods have other characteristics or components. To fit the description precisely means that the goods have no more or no less of the characteristics set out in the description. It is of no assistance to Toro to point to heading 3917 and claim that fittings are intended to be included under that heading and hence they must fit the description in the TCO because, generically, a hose or tubing may come with or without fittings. As I have already said, the goods in question are composite goods or are a set put up for retail sale. While for classification purposes they may be classified by the material or component which gives them there [sic] essential character, that does not apply to a TCO. As Spender J said in Voxson, it is not uncommon for the TCO to refer simply to a subset of the goods referred to in the keyed heading.”[147]

[147] [2014] AATA 187 at [50]

Senior Member Fice went on to explain the rationale for this approach:
“ The reason for that and for the particularity with which the goods are described for the purposes of the TCO appears to be that it can only apply where, on the day on which the application for the TCO was lodged, no substitutable goods were produced in Australia. The process of granting a TCO application involves publication of the application in the Government Gazette which must invite any persons who consider there are reasons why the TCO should not be made to lodge a submission with the Chief Executive Officer of Customs within a specified time (Customs Act, s 269K). If there were manufacturers of hose fittings in Australia at the time the application was lodged, the notice in the Gazette would not have alerted those manufacturers that the TCO applied to hose fittings. Given the different nature of the fittings and their material composition, the reader of the TCO in question could not possibly have assumed that plastic or metal tap fittings were included. That, in my opinion, is a very compelling reason why a TCO must describe the goods with clear and full particulars. It does so in the case in question. Fittings are not included in the description under TCO 0804831. They cannot be the subject of the TCO.”[148]
[148] [2014] AATA 187 at [51]

I certify that the one hundred and forty one 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  9 December 2014
Date of Decision  10 April 2015
Counsel for the Applicant  Mr Jonathon Slonim
Representative for the Applicant           Ms Christine Kontos
Clemenger International Freight Pty Ltd

Solicitor for the Respondent Mr James Millea
Legal Services Branch, Chief Executive Officer of Customs