Chemark Services Pty Ltd v Collector of Customs
[1992] FCA 331
•29 MAY 1992
Re: CHEMARK SERVICES PTY LTD.
And: COLLECTOR OF CUSTOMS
No. V G87 of 1991
FED No. 331
Customs and Excise - Statutes
COURT
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Ryan J.(1)
CATCHWORDS
Customs and Excise - Appeal from AAT - Customs duties - Goods capable of more than one description - 250 kg drums of metham sodium - whether classifiable under sub-heading 2930.20.00 or sub-heading 3808.90.00 of Schedule 3 to the Customs Tariff Act 1987 - whether chemical 'put up in forms or packings for retail sale' - meaning of 'put up' - meaning of 'retail sale' - whether label is part of 'form or packing' - policy underlying heading 3808 - meaning of 'preparation' - whether meaning of heading 3808 ambiguous or obscure.
Customs and Excise - Powers of officers - role of customs tariff classifier - whether classifier entitled to enquire about intentions of importer - relevance of end use to which imported goods will be put - general approach to classification - whether classifier entitled to enquire about usual circumstances in which goods sold - relevance of evidence of how same goods sold in other countries.
Statutes - Interpretation - General rules of construction - 'put up' - 'retail sale' - whether retail sale is sale to ultimate consumer - whether retail sale is sale of goods in small quantities - meaning of 'ultimate consumer' - characteristics of retail sale - 'preparation'.
Statutes - Interpretation - Consideration of extrinsic materials - Explanatory Notes to the International Convention on the Harmonized Commodity Description and Codings System - s.15AB Acts Interpretation Act 1901 - difference between use of materials to 'confirm' or 'determine' meaning of provision - whether heading 3808 of Schedule 3, Customs Tariff Act 1987 'ambiguous or obscure'.
Chandler and Co v Collector of Customs (1907) 4 CLR 1719.
Whitton v Falkiner (1915) 20 CLR 118.
Re Gissing and the Collector of Customs (1977) 14 AAR 555.
Collector of Customs v Savage River Mines (1988) 79 ALR 258.
Re Sidney Cooke Ltd v Collector of Customs (1984) 2 AAR 178.
Chappell and Co Ltd v Nestle Co Ltd (1960) AC 87.
Wright v Edwards (1961) SASR 267.
Dolton Bournes and Dolton Ltd v Osmond (1955) 1 WLR 621.
Re Bayer Australia Ltd and Collector of Customs, NSW (AAT Decision 2004, 31 January 1985).
Gardner Smith Pty Ltd v Collector of Customs (Vic) (1986) 66 ALR 377.
Customs Tariff Act 1987: Schedule 3, headings 2930, 3808.
Acts Interpretation Act 1901: s.15AB(1)(a), (1)(b).
HEARING
MELBOURNE
#DATE 29:5:1992
Solicitor for the applicant: Mr J. Slonim
Solicitors for the applicant: Wisewoulds
Counsel for the respondent: Mr H. Jolson
Solicitors for the respondent: Australian Government Solicitor Solicitor
ORDER
THE COURT ORDERS THAT:
1. The application be allowed.
2. The decision of the Tribunal be set aside.
3. The goods the subject matter of the application be classified under sub-heading 2930.20.00 of Schedule 3 to the Customs Tariff Act 1987.
4. The respondent pay the applicant's costs of the application, including any reserved costs, such costs to be taxed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
This is an application by way of appeal from a decision of Deputy President Thompson of the General Administrative Division of the Administrative Appeals Tribunal. It raises issues relating to the interpretation of heading 3808 of Schedule 3 to the Customs Tariff Act 1987 ("the Act").
Both parties accept the findings of fact of the learned deputy president and it is convenient to summarise those findings here.
In July 1990, the applicant imported into Australia some 80 drums each containing 250 kg (206 litres) of the chemical known as metham sodium. Metham sodium has two alternative chemical names, sodium methyldithiocarbamate and sodium methylcarbamodithioate. In solid form it occurs as crystals which tend to decompose fairly quickly. In order to stabilize the chemical, it was imported by the applicant as an aqueous solution of an optimal concentration. Metham sodium is a dithiocarbamate, which is a sub-set of organo-sulphuric compounds. It is a fumigant which has the properties of an insecticide, a fungicide, a herbicide and a nematocide, and is used by professional horticulturalists. Depending on the particular purpose of the application of the chemical, one 250 kilogram drum is generally sufficient to treat from one-fifth of a hectare to one hectare of land.
On the evidence before the Tribunal, approximately 93% of the metham sodium imported by the applicant was sold to wholesalers. The remaining 7% was sold directly by the applicant to end-users, after there had been attached to the container, as required by Victorian law, a label outlining various safety details and instructions for use. The evidence accepted by the Deputy President was that metham sodium is sold in Australia only in 250 kg drums.
The appearance of the drums as imported by the applicant was described in the Tribunal's reasons in the following terms:
"Inspection of the sample drum tendered in evidence disclosed that it bore no markings but that it had attached to it a label of which the most striking features were the words and number "METHAM-SODIUM 51" and a diagonal cross. Below the words and number in smaller type were the words, number and letters "SODIUM N-METHYLDITHIOCARBAMATE 510 gr/1". In very much smaller type alongside the cross were the words:-
"Harmful if swallowed
Irritating to skin
Keep out of reach of children
Keep away from food drink and animal feeding stuff" Below those words there were words in three other languages, apparently having the same meaning in those languages, in the same size of type. Below the cross and the words was what appeared to be a representation of a head of wheat with another diagonal cross superimposed on it. The label contained no directions for use of the chemical in the drum. The top of the drum had a removable bung in a hole through which the drum could be filled and a smaller hole with a spout apparently for pouring the liquid out of the drum in a more controlled manner than would be possible if it had to be poured out of the larger hole."
The dispute between the parties centres on whether the drums as imported should have been classified under sub-heading 3808.90.00 or sub-heading 2930.20.00 of Schedule 3 to the Act. Heading 3808 provides:
"3808 INSECTICIDES, RODENTICIDES, FUNGICIDES, HERBICIDES, ANTI-SPROUTING PRODUCTS AND PLANT-GROWTH REGULATIONS, REGULATORS, DISINFECTANTS AND SIMILAR PRODUCTS, PUT UP IN FORMS OR PACKINGS FOR RETAIL SALE OR AS PREPARATIONS OR ARTICLES (FOR EXAMPLE, SULPHUR-TREATED BANDS, WICKS AND CANDLES AND FLY-PAPERS): 3808.10 - Insecticides:
3808.10.10 --- Goods, as follows: Free
(a) camphor;
(b) fly-papers;
(c) mosquito spirals and coils 3808.10.90 --- Other
20% DC:15% From 1 January 1989 17.5% DC:12.5% From 1 January 1990 15% DC:10% 3808.20.00 - Fungicides
15% DC:10% 3808.30.00 - Herbicides, anti-sprouting products 20% and plant-growth regulators
DC:15% From 1 January 1989 17.5% DC:12.5% From 1 January 1990 15% DC:10% 3808.40.00 - Disinfectants 20% DC:15% From 1 January 1989 17.5% DC:12.5% From 1 January 1990 15% DC:10% 3808.90.00 - Other
15% DC:10%"
Heading 2930, which was substituted by an amendment to the Act in 1989, provides:
"2930 ORGANO-SULPHUR COMPOUNDS:
2930.10.00- Dithiocarbonates (xanthates) Free 2930.20.00- Thiocarbamates and dithiocarbamates Free 2930.30.00- Thiuram mono-, di- or tetrasulphides Free 2930.40.00- Methionine Free 2930.90.00- Other Free"
Note 2 to Section VI of Schedule 3 to the Act ("note 2"), provides:
"Subject to Note 1 above, goods classifiable in 3004, 3005, 3006, 3212, 3303.00.00, 3304, 3305, 3306, 3307, 3506, 3707 or 3808 by reason of being put up in measured doses or for retail sale are to be classified in those headings and in no other heading of this Schedule."
It is clear that, but for note 2, the drums imported by the applicant could properly have been classified under sub-heading 2930.20.00 and consequently imported free of duty. The respondent, however, evidently considered that the drums satisfied the description of "insecticides, rodenticides, fungicides, herbicides, anti-sprouting products and plant-growth regulators, disinfectants and similar products, put up in forms or packings for retail sale or as preparations..." and classified them under sub-heading 3808.40.00 which attracts, for relevant purposes, a rate of duty of 15%. The respondent took the view that note 2 had the effect of making this classification mandatory.
The learned Deputy President agreed with the broad classification of the drums by the respondent, although he found that the appropriate sub-heading was 3808.90.00, which also attracts a 15% rate of duty.
Before the Court, Mr Slonim, who appeared for the applicant, contended that there had been an error in classifying the drums under sub-heading 3808.90.00 on the grounds that the drums could not be said to be "put up in forms or packings for retail sale" and further or alternatively that metham sodium is not "a preparation".
The Tribunal's Reasons:It was found that although metham sodium is imported into Australia in 250 kg drums as an aqueous solution for purposes of chemical stability, it is ultimately sold without further dilution to horticulturalists in the same drums in which it is imported, with a label added to those drums which are sold directly to end-users. As a result, the Deputy President found that the chemical is imported "in the form in which it will be sold by retail". He went on to find that the metham sodium was "put up as a preparation" because it had been deliberately and specifically diluted before importation to the concentration in which it was marketed. In response to Mr Slonim's submission that the drums as imported were not put up in a packing for retail sale because the law required them to bear a label before they could be sold by retail, the Deputy President found (para 15):
"If, as I believe, the word (packing) means, in the context, something in which another thing is packed, that thing in the present case is the drum. The label is something which is attached to the packing rather than part of the packing. I find, therefore, that the chemical in the drums in which it is imported is put up in packing for retail sale."
The findings summarised above are challenged by the applicant. Also challenged are the Tribunal's observations on the role of the customs tariff classifier, which are substantially contained in paras 13 and 14 of the reasons:
"13.... Where a heading requires a classifier to decide whether or not the subject goods are put up in a form or packing for retail sale, he needs to be informed as to the circumstances in which such goods are sold by retail and, if he has to decide whether or not goods are put up as preparations, he needs to know whether anything needs to be done to them before they can be used by the end user. To suggest, as Mr Slonim appeared to do, that a classifier must ignore such information and do his work, in effect, wearing a mental blindfold is, in my view, totally to misunderstand the purpose of the tariff legislation and its proper administration.
14. On the evidence which was presented at the hearing I am satisfied that a properly informed classifier would be aware that the chemical in the drums as imported was in the form in which it would be sold by retail and that one of the reasons why it was put up in that form was so that it could be sold by retail to the end user. Similarly, I am satisfied that he would be aware that it was imported in the drums in which it would be sold by retail and further that it was put up in those drums for retail sale because each such drum contained a quantity which suited the purpose for which the end users bought the chemical."
Finally, the applicant challenges the Deputy President's findings on the use to which the Explanatory Notes to the International Convention on the Harmonized Commodity Description and Codings System can be put as an aid to the interpretation of heading 3808. Full reference to the notes will be made later in these reasons. Mr Slonim contends that the notes support his application and that the deputy president erred in concluding that they did not assist in determining the meaning of heading 3808.
The Role of the Customs Tariff Classifier:It was submitted on behalf of the applicant that the Deputy President erred in his description of the correct approach to classification of imported goods by emphasizing the end use to which the chemicals were to be put. It was contended that this approach is revealed in the extract from paras 13 and 14 of the Deputy President's reasons, which I have reproduced above.
The role of the customs tariff classifier was considered by the High Court in Chandler and Co v Collector of Customs (1907) 4 CLR 1719 which concerned the importation of certain pictures. One of the issues in the case was whether the pictures could be described as paper "for advertising purposes" within the meaning of either Item 122 or 123 of Schedule Division XIII of the Customs Tariff 1902. The pictures as imported bore nothing to indicate that they were to be used for the purpose of advertising, although, after importation, the purchasers of the pictures apparently used them as the basis for advertisements. A majority of the High Court held that it was appropriate to consider the use to which the pictures were ultimately to be put in deciding the appropriate classification. The approach taken by the majority is illustrated in the following passage from the judgment of O'Connor J (at 1736):
"In numerous instances throughout the Tariff "for" is used to convey the idea "used for". It seems to be necessary that that word should be supplied here, and I can see no other word that could be supplied. The expression must therefore be read "used for advertising purposes." In order to bring goods under the Item it is unnecessary to show that they have advertisements on them when imported. If they are printed or lithographed on some manufacture of paper, and are used for advertising purposes, they are subject to taxation."
See also Collector of Customs v Savage River Mines (1988) 79 ALR 258 at 265-266.
In Whitton v Falkiner (1915) 20 CLR 118 the goods to be classified were vehicle chassis imported for use in a road train. The issue was whether the chassis could be described as "chassis of motor cars, lorries or waggons". A majority found that they could not be so described. Isaacs J at 128 noted:
"Unaltered, these chassis, and each and every of them, are not constructed or specially adapted for the purpose of carrying motor cars, lorries or waggons, as those terms are ordinarily understood, or any other vehicles except the vehicles with which they were actually imported, and for these they are specially adapted. It is probably true that by means of some alterations, more or less extensive and costly, but in any case substantial, these chassis could be converted into chassis the purpose of which might be rightly said to be or include the suggested purpose, but as they stand on importation it is not the case, and that is the determining factor."
Higgins J at 131 agreed, and added:
"I quite agree - we all agree - with the view that the actual intention of the importer as to the use to which he will put the chassis is irrelevant; and that we are simply to look at the character of the chassis as it stands, and to consider the purpose only so far as it indicates the character."
See also Blackwood Hodge (Australia) Pty Ltd v Collector of Customs (NSW) (1980) 47 FLR 131 at 155 per Sheppard J; Chinese Food and Wine Supplies Pty Ltd v Collector of Customs (Vic) (1987) 72 ALR 591 at 599 per Lockhart J; Times Consultants v Collector of Customs (Q'land) (1987) 76 ALR 313 at 327, 328 per Morling and Wilcox JJ.
It is clear from this brief survey of the authorities that the general approach to classification of goods for customs tariff purposes is an objective one, based on the state or condition of the goods as imported. It is generally impermissible to have regard to the importer's intention for the ultimate use of the goods, unless the description of goods in a classification heading requires it. This is a sound rule designed to promote consistency of tariff application. Goods may sometimes have a wide range of uses once imported. The customs tariff classifier cannot be required to undertake an examination of all the possible, probable or intended uses of imported goods. The classifier's task is objectively to identify goods and then to match this identification with a heading in Schedule 3 to the Act; (see Re Gissing and the Collector of Customs (1977) 14 AAR 555; Collector of Customs v Savage River Mines, (supra) at 264-265).
Heading 3808 does not, in my view, authorize the customs tariff classifier to enquire as to the importer's intention in bringing goods described in that heading into this country. The language of the heading is not to be equated with the items under consideration in Chandler's case. No express or necessarily implied reference is made to the purposes of importation in heading 3808. It would be impermissible, therefore, for a customs tariff classifier to investigate the uses to which the applicant intended to put the metham sodium as imported.
It does not follow from what I have just said that it is not appropriate to consider how goods are likely to be used after importation as part of the process of identification or classification of goods. When a customs tariff classifier is presented, as in this case, with drums of a chemical identified only by its chemical name, it is quite proper for the classifier to ask what functions the chemical serves and what type of person uses it. I do not understand Mr Slonim to have argued to the contrary. He did argue, however, that it would be improper for a classifier to enquire as to the form or packing in which the imported chemical will ultimately be sold and whether the chemical will be further diluted or otherwise modified before sale. With respect, I do not agree that this necessarily amounts to an improper chain of enquiry. After identifying metham sodium as an insecticide, fungicide, herbicide and nematocide, and a dithiocarbamate, the classifier was required by the language of heading 3808 to turn his or her mind to whether or not the chemical was "put up in a form or packing for retail sale or as a preparation". Without considering this question the classifier could not have reached a conclusion as to which of headings 3808 or 2930 was applicable to the applicant's goods.
As Mr Jolson, who appeared for the respondent, pointed out, it would be quite artificial for the customs tariff classifier to determine whether or not goods are in a form or packing for retail sale or constitute a preparation, without enquiring as to how the goods are in fact sold in this country. It was, in my view, quite appropriate for the classifier to make enquiries about the form of packing in which metham sodium is sold in Australia and the concentration in which it is sold. Such enquiries do not contravene the injunction against considering the subjective intentions of the importer. They constitute the proper means for a classifier who is unfamiliar with metham sodium to reach an objective judgment about the form or packing of the 250 kg drums with which he or she has been presented and the concentration of the chemical contained within those drums.
Mr Slonim placed some emphasis upon the fact that metham sodium is sold in other countries in smaller containers which are obviously of a size that would ultimately be sold by retail. This fact, in my opinion, is not to the point: many goods are sold by retail in large quantities. The appropriate enquiry, which is that identified by the deputy president, is how metham sodium is sold in this country.
I can therefore discern no error in the deputy president's observations on the role of the customs tariff classifier. I do not understand him to have embarked on the prohibited chain of enquiry which takes into account the subjective intentions of the importer.
"Put up in forms or packings for retail sale":Having concluded that it was open to the Tribunal to have regard to the circumstances in which metham sodium is sold in this country, it remains to be considered whether, by virtue of having been shipped in the 250 kg drums in which the chemical was imported, the metham sodium can be said to have been put up in a form or packing for retail sale, and whether the metham sodium can properly be described as a preparation.
It is trite law that words in a statute are to be given their ordinary and natural meaning unless that meaning leads to an absurdity, or some repugnance or inconsistency with the rest of the Act: Grey v Pearson (1857) 6 HLC 61 at 106; 10 ER 1216 at 1234 per Lord Wensleydale; Australian Boot Trade Employees' Federation v Whybrow and Co (1930) 11 CLR 311 at 341-2 per Higgins J; Broken Hill South Ltd v Commissioner of Taxation (NSW) (1937) 56 CLR 337 at 371 per Dixon J. This "golden rule" assumes that Parliament has expressed its intention through the words it has used in an enactment, and that the ordinary or natural meaning of the words must be given effect, even if the result is "inconvenient or impolitic or improbable" (Amalgamated Society of Engineers v Adelaide Steamship Co Ltd (1920) 28 CLR 129 at 161-2 per Higgins J).
That these principles apply to customs tariff legislation is beyond doubt: Merkel v Wollaston (1906) 4 CLR 141 at 147 per Griffith C.J. Counsel for the respondent provided a dictionary definition of the expression "put up" which included "offer for sale or competition; pack up in parcel or receptacle" (Australian Concise Oxford Dictionary (7th ed., 1987)). I am satisfied that this definition represents the ordinary meaning of the expression "put up" in the context of heading 3808. To put metham sodium up in a form or packing for retail sale means simply to present it in a form or packing for retail sale. I can find nothing to suggest that the expression has any particular technical meaning in relation to chemicals.
Somewhat more difficult is the meaning of the expression "retail sale". The Shorter Oxford English Dictionary defines "retail" as a substantive as "the sale of commodities in small quantities". The Macquarie Dictionary gives the noun a slightly different emphasis: "the sale of commodities to household or ultimate consumers, usu. in small quantities (opposed to wholesale)". This latter definition was expressly applied by the Administrative Appeals Tribunal in Re Sidney Cooke Ltd v Collector of Customs (1984) 2 AAR 178 at 182.
An analysis of the case law on the meaning of the word "retail" reveals a division as to what constitutes the primary criterion of a sale by retail. In Chappell and Co Ltd v Nestle Co Ltd (1960) AC 87, Viscount Simonds observed at 102:
"It is a sale to a consuming member of the public and I know of no other factor which distinguishes a retail sale from other sales. Put negatively, it is not a sale wholesale to a purchaser who proposes himself to sell it retail."
A similar preference for what I shall call the "ultimate consumer" criterion can be found in Plummer and Adams v Needham (1954) 56 WALR 1 at 5-6 per Dwyer C.J., at 15-16 per Virtue J; Treacher and Co Ltd v Treacher (1874) WN 4; Phillips v Parnaby (1934) 2 KB 299 at 304 per Lord Hewart C.J.; Provident Life Assurance Co Ltd v Official Assignee (1963) NZLR 961 at 965 per North P and Turner J.
Other cases have emphasized the quantity of goods sold as the relevent criterion to consider in determining whether or not a sale is by retail. For example, in Wright v Edwards (1961) SASR 267 Napier C.J. stated at 282:
"... I think that the natural meaning of "retail" is "sale of commodities in small quantities." From time to time, a retailer may, no doubt, enter into executory contracts to sell, but, in the natural meaning of the word, I think that it imports "sale and delivery"."
For my part, I have some difficulty in treating the ultimate consumer criterion as the sole determinant of whether a sale is by retail. In the course of argument, I postulated the case of a farmer who purchases a large quantity of fuel for the purpose of storing it in a tank on the farm. Such a sale is a sale to the ultimate consumer in the sense that the fuel will be used only by the farmer who purchased it. However, it does not sit comfortably with the ordinary notion of a sale by retail which comprehends, in my view, the sale of a quantity of goods readily and ordinarly consumable by a member of the general public.
I derive some support for this view from Dolton Bournes and Dolton Ltd v Osmond (1955) 1 WLR 621, which concerned whether or not a timberyard which sold the overwhelming part of its stock to professional builders was a "retail shop". The Court of Appeal, led by Evershed MR, held that it was not. His Lordship said at 629:
"... to my mind the vital facts found in this case include (and I put it in the forefront among them) the statement which may be extracted from the facts set out in the case, that to any appreciable extent members of the public (as ordinarily understood) are not invited, are not encouraged, to come to these premises, and do not in fact resort to them, except to a negligible extent. I am not thereby saying that builders are not "members of the public"; not doubt they are; but when Lord Dunedin spoke, in the case I have cited, of members of the public resorting or being invited to resort to a place, he meant to refer, I think, to what one might call the ordinary man in the street - that all and sundry were invited to come."
Although the builders purchasing timber from the yard in Dolton Bournes and Dolton were, in a sense, the ultimate consumers of the timber, it seems discordant with ordinary usage to refer to sales of timber to builders as sales by retail. Yet such a reference would be entailed by an acceptance of the ultimate consumer criterion as the sole test.
In my view, the meaning of the expression "retail sale" depends on both the quantity of the goods involved and the nature of the purchaser of the goods. A retail sale is thus a sale usually possessing both of the following characteristics:
1. It is a sale to an ultimate consumer and not to a wholesaler or other person, including a retailer, who acquires the goods for resale.
2. It is a sale of goods in a quantity not larger than is necessary immediately or shortly to satisfy the requirements of what Lord Evershed MR in Dolton Bournes and Dolton's case (supra) called "the ordinary man in the street." The size or bulk of an article of the goods may be large or small according to the nature of the goods. Thus, a single motor car, although a large item, is all that is ordinarily required for the use of the motorist who purchases it and can, conformably with accepted usage, be the subject of a retail sale.
I should not be taken, in proposing that twofold test, to have identified the only characteristics of a sale by retail or to have denied the possibility that sales possessing both of the characteristics which I have identified do not constitute sales by retail.
Turning to the present case, heading 3808 applies to goods "put up in forms or packings for retail sale", not to goods actually sold by retail. As a consequence, the fact that 93% of the metham sodium imported by the applicant was actually sold to wholesalers is irrelevant. Indeed, it would be inconsistent with everything that I have said about the role of the customs tariff classifier to hold otherwise. As a result, the issue which arises on the facts of this case is whether or not the metham sodium imported by the applicant was presented in forms or packings containing a quantity of chemical suitable for use by, and unexceptionally used by, ordinary members of the public.
Viewed in this way, I have concluded that the customs tariff classifier and the learned Deputy President erred in finding that the chemical imported by the applicant was put up in forms or packings for retail sale. A properly informed customs tariff classifier, making all appropriate enquiries, would have discovered that metham sodium, although only imported into this country in 250 kg drums, and purchased in that form by ultimate users of it, is not unexceptionally purchased by ordinary members of the public. It would have been found that it is a specialized product used overwhelmingly by professional horticulturalists. It is not sold in a quantity suitable for use by, for example, home gardeners, and nor is it unexceptionally purchased by home gardeners.
The chemical was not, therefore, put up in a form or packing for retail sale and should not have been classified under sub-heading 3808.90.00. Although this conclusion is sufficient to require that the appeal be allowed, I turn now to consider the other matters which were argued on this application.
The relevance of the absence of a label on the drums as imported:It was a primary contention of Mr Slonim that the drums as imported could not be said to be in a form or packing for retail sale because they could not as a matter of law be sold by retail in the condition in which they were imported. It is common ground that Victorian legislation requires a label to be affixed to the drums outlining safety information and directions for use before sale by retail is lawful.
The presence or absence of a label is not, in my opinion, relevant to the interpretation of heading 3808. The heading needs to be read as a whole. Each word in the heading derives meaning from the context in which it appears. Heading 3808 is plainly intended, in my view, to apply to goods which enter this country in the form in which they will ultimately be sold by retail. Where the goods are subsequently to be modified or enhanced, they are clearly not in a form or packing for retail sale when imported.
In this case, however, the only change to be made to the drums imported by the applicant before sale to the ultimate user was the addition of a label. The metham sodium itself was not modified or enhanced in any way. The clear policy of the Act, as I have identified it, cannot be defeated by importers who make no modification or enhancement to goods which they import beyond the addition of a statutorily required label. If it were otherwise, importers would be able to escape the duty prescribed by heading 3808 simply by instructing foreign manufacturers not to attach labels to chemicals put up for retail sale which are bound for Australia. The state of completeness of the packing in which the goods are imported is not generally determinative of the real question, which is whether the goods within the packing are "put up for retail sale", a matter which depends on the nature and quantity of the goods in issue.
The Deputy President defined the word "packing" in the extract from para 15 reproduced above by reference to the context of heading 3808. I agree that the packing in this case is the drum in which the chemical was contained. This interpretation does not, in my view, strain the ordinary meaning of the word and is in accordance with the policy of the Act.
"Put up as a preparation":It was also contended on behalf of the applicant that the Deputy President had erred when he found that the metham sodium constituted a preparation. The deputy president's reasons were based on the following passage from Re Bayer Australia Ltd and Collector of Customs, NSW (AAT decision 2004, 31 January 1985) (para 15):
"For "preparation" the Macquarie Dictionary gives as one meaning: "Something prepared, manufactured or compounded". In one sense the goods as imported could be said to fall within this meaning. But having regard to our construction of the sub-item, what we have to construe is a total expression, namely "put up as a preparation". So regarded, that expression is not in our opinion apt to cover a product of an intermediate nature not presented in a form ready to be marketed. The whole tenor of the sub-item, with its references to retail packs and to completed articles, accords with this view."
The Tribunal's comments in Bayer were directed to Item 38.11 of Schedule 3 to the Customs Tariff Act 1982, which was materially identical to heading 3808 of Schedule 3 to the present Act.
Mr Slonim submitted that the metham sodium in this case was prepared solely for the purpose of stability during its transportation to Australia and that, depending on the particular application, it may well require further dilution before it can be used by horticulturists. As a result, it was contended, the chemical was a product of an intermediate nature.
Mr Jolson, on the other hand, argued that the Tribunal identified the correct definition of "preparation" in Bayer's case, and that the metham sodium imported by the applicant in this case was in the form in which it was ultimately sold and in a form appropriate for use.
Within the context of heading 3808, and bearing in mind the purpose underlying that heading as I have identified it, I am persuaded that the Tribunal correctly defined the word in the extract from Bayer's case which I have quoted. A preparation is a presentation of a substance which is ready to be used for a particular application or purpose. In this case, the metham sodium was imported by the applicant in the concentration in which it was ultimately sold. Fortuitously, perhaps, this concentration was an optimal one both for purposes of transportation and application by consumers. Had the chemical as imported been of no possible use to consumers without further dilution or modification, it clearly would not have been "put up as a preparation". I find myself therefore in agreement with the conclusion reached by the Deputy President that the metham sodium imported by the applicant was put up as a preparation.
The use of extrinsic materials as aids to interpretation:Finally, it was urged on behalf of the applicant that assistance in the interpretation of heading 3808 and note 2 could be derived from the Explanatory Notes to the International Convention on the Harmonized Commodity Description and Codings System done at Brussels on 14 June 1983 ("the Brussels notes"). The Act is based on the Convention but the Brussels notes are not incorporated into the legislation.
The note relating to heading 3808, so far as it is relevant, elaborates on the meaning of the words "packings", "forms" and "preparations". It reads:
"(Products of the type mentioned in heading 3808) are classified here in the following cases only:
(1) When they are put up in packings (such as metal containers or paperboard cartons) for retail sale as disinfectants, insecticides, etc., or in such forms (e.g., in balls, strings of balls, tablets or plates) that there can be no doubt that they will normally be sold by retail....
(2) When they have the character of preparations, whatever the presentation (e.g., as liquids, washes or powders). These preparations consist of suspensions or dispersions of the active product in water or in other liquids (e.g., a dispersion of DDT (1,1,1-trichloro-2,2-bis(p- chlorophenyl)ethane) in water), or of other mixtures. Solutions of active products in solvents other than water are also included here (e.g. solutions of pyrethrum extract (other than standardised pyrethrum extract), or copper naphthenate in a mineral oil).
Intermediate preparations, requiring further compounding to produce the ready-for-use insecticides, fungicides, disinfectants, etc., are also classified here, provided they already possess insecticidal, fungicidal, etc., properties."
Mr Slonim contended that this note assists his case. He submitted, first, that there must be some doubt as to whether the drums as imported would normally be sold by retail, and that as a consequence heading 3808, which according to the explanatory note requires that "there can be no doubt", was inapplicable. Secondly, he argued that since the note states that preparations are suspensions or dispersions of active products in water and solutions of active products in solvents other than water, solutions of active products in water are by application not preparations. The metham sodium imported by the applicant was concededly a solution of an active product in water.
Extrinsic materials may be used as aids to legislative interpretation in the circumstances outlined in s.15AB of the Acts Interpretation Act (1901), which provides, so far as is relevant:
"(1) Subject to subsection (3), in the interpretation of a provision of an Act, if any material not forming part of the Act is capable of assisting in the ascertainment of the meaning of the provision, consideration may be given to that material:
(a) to confirm that the meaning of the provision is the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or object underlying the Act; or
(b) to determine the meaning of the provision when:
(i) the provision is ambiguous or obscure; or
(ii) the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or object underlying the Act leads to a result that is manifestly absurd or is unreasonable."
In Gardner Smith Pty Ltd v The Collector of Customs (Vic) (1986) 66 ALR 377, a Full Court of this Court considered the circumstances in which it was permissible to have regard to the Brussels notes in construing a tariff classification. At 383:
"The argument that the Tribunal was in error in giving consideration to the explanatory notes was based on the applicant's contention that the words "or otherwise modified" in item 15.08 were not ambiguous or obscure nor, if given their ordinary meaning, would it lead to a result that was manifestly absurd or unreasonable. But it is plain that, to limit the use of extrinsic material to such circumstances - circumstances obviously referable to para 1(b) of s.15AB of the Acts Interpretation Act 1901 - is to deprive para 1(a) of that section of any operation. Even if it could properly be said that the Tribunal was in error in regarding the meaning of "modified" in item 15.08 as obscure - a proposition which it is difficult to accept having regard to the arguments presented - it would not follow that the court should intervene. It would, as we think, have been open to the Tribunal to consider the explanatory notes in order to confirm the meaning which, on the other material available to it, it considered the expression bore having regard to its context in the Tariff Act."
It seems to me that s.15AB(1)(a) does, as the Full Court in Gardner Smith pointed out, permit recourse to extrinsic materials in circumstances other than those described in s.15AB(1)(b). However, material looked at under the licence granted by that paragraph may only be used to confirm that words are to be given their ordinary meaning. If the extrinsic materials looked at contradict or modify the ordinary meaning of the text of the legislative provision, the material cannot, for that reason alone, be used to determine the correct interpretation to be given to the text. Extrinsic materials can only determine legislative meaning in the circumstances described in s.15AB(1)(b), namely when a provision is ambiguous or obscure or leads to a manifestly absurd or unreasonable result.
If materials examined under s.15AB(1)(a) do contradict or modify the ordinary meaning of the text of the legislative provision, they may, of course, reveal an ambiguity or obscurity in the text, or throw light on the purpose or object underlying the Act. When that occurs, the materials can in turn be used to determine the meaning of the provision under s.15AB(1)(b). Where, however, the ordinary meaning of the words in an Act is clear, being neither ambiguous or obscure, nor tending to a manifestly absurd or unreasonable result, extrinsic materials which contradict or modify the meaning of the text cannot be used to override that ordinary meaning.
For the reasons already given, I am of the opinion that the ordinary meanings of the words in heading 3808 are, with the exception of the word "retail", capable of being clearly identified. With that exception, none of the words, in my view, is ambiguous or obscure. As the Brussels notes do not purport to provide assistance in the meaning of the word "retail", they are therefore only available for consideration within the bounds of s.15AB(1)(a).
Having considered the relevant note on this basis, I am of the view that it does not reveal any ambiguity or obscurity in the text of heading 3808 which would allow me to use it in the way contemplated by s.15AB(1)(b). Moreover, the note does not give me any reason to doubt that the policy underlying the heading is as I have identified it. I indicate parenthetically that I regard the words in the Brussels notes, "that there can be no doubt that they will normally be sold by retail" as qualifying only "such forms" and not the word "packings". The latter word is clearly qualified by the examples "such as metal containers or paperboard cartons and by the phrase "for retail sale". In conclusion, therefore, I am of the view that the Brussels notes are of no assistance in the interpretation of heading 3808.
Even if the Brussels notes did reveal some ambiguity or obscurity in the words of heading 3808, I do not agree that they irresistibly lead to an interpretation in the applicant's favour. As I have already pointed out, it was quite proper for the customs tariff classifier to make enquiries about the way in which metham sodium is sold in this country. Such enquiries, in my view, would have led properly to the conclusion that there is "no doubt" that metham sodium is normally sold in this country in the type of drums imported by the applicant. It is the meaning of the word "retail" which has caused the problem in this case, not the meaning of the words "form" or "packing". Furthermore, in the absence of some expert evidence to explain why solutions of active products in water are not expressly mentioned in the definition of "preparation" in the Brussels notes, I agree with the learned Deputy President that it is not a necessary implication from those notes that solutions of active products in water are not preparations.
In conclusion, although I respectfully agree with the reasons of the learned Deputy President in all respects except for the connotation given to the expression "retail sale", that difference alone is sufficient, for the reasons outlined, to require that this appeal be allowed. The applicant's drums were improperly classified under sub-heading 3808.90.00 because they were not "put up in forms or packings for retail sale". They should have been classified under sub-heading 2930.20.00. The respondent should pay the applicant's costs of this appeal.
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