Church & Dwight (Australia) Pty Ltd and Comptroller-General of Customs
[2019] AATA 29
•17 January 2019
Church & Dwight (Australia) Pty Ltd and Comptroller-General of Customs [2019] AATA 29 (17 January 2019)
Division:GENERAL DIVISION
File Number(s): 2017/3350
Re:Church & Dwight (Australia) Pty Ltd
APPLICANT
AndComptroller-General of Customs
RESPONDENT
DECISION
Tribunal:Deputy President Rayment QC
Date:17 January 2019
Place:Sydney
The reviewable decision is affirmed.
...........................[sgd]..........................
Deputy President Rayment QC
CATCHWORDS
CUSTOMS – classification of goods – Curash baby wipes – whether goods impregnated with detergent for the purposes of the Customs Tariff Act 1995 (Cth) – whether goods are medicaments and intended for therapeutic or prophylactic use – statutory construction – ordinary meaning of “detergent” applied – decision under review affirmed
LEGISLATION
Acts Interpretation Act 1901 (Cth)
Customs Tariff Act 1995 (Cth), Sch 3CASES
Azizi and Minister for Home Affairs [2018] AATA 2561
Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389
Comptroller-General of Customs v Pharm-A-Care Laboratories Pty Ltd [2018] FCAFC 237
D&R Henderson (Manufacturing) Pty Ltd v Collector of Customs for the State of NSW (1974) 48 ALJR 132
NSW Associated Blue-Metal Quarries Ltd v Federal Commissioner of Taxation [1956] HCA 80; (1956) 94 CLR 509
Re Gissing and Collector of Customs (1977) 1 ALD 144
Re Tridon Pty Ltd and Collector of Customs (1982) 4 ALD 615
Whitton v Falkiner [1915] HCA 38; (1915) 20 CLR 118SECONDARY MATERIALS
A D McNaught and A Wilkinson, IUPAC Compendium of Chemical Terminology (the “Gold Book”) (Blackwell Scientific Publications, Oxford, 2nd ed, 1997)
D H Everett, ‘Manual of Symbols and Terminology for Physicochemical Quantities and Units, Appendix II: Definitions, Terminology and Symbols in Colloid and Surface Chemistry’ (1972) 31(4) Pure and Applied Chemistry 577- 638
Macquarie Dictionary (2019) < Dictionary (2019) < Dictionary (2019) < FOR DECISION
Deputy President Rayment QC
17 January 2019
BACKGROUND
Curash baby-wipes imported by the applicant from Taiwan have been assessed to duty by the respondent. The applicant has paid the claimed duty under protest and brought these proceedings to have the liability of the goods determined by this Tribunal.
The identity of the goods in their condition as imported is the starting point in resolving questions of Tariff classification: Re Gissing and Collector of Customs (1977) 1 ALD 144 at 146. Identification is concerned with goods, not the naming or description of them, and they are not identified by reference to the use to which the goods may be put in the future, though their present suitability for that use may be a relevant factor.
A useful (non-exhaustive) summary of principles relevant to the question of identification of the goods is set out in the Full Tribunal decision in Re Tridon Pty Ltd and Collector of Customs (1982) 4 ALD 615 at 620–621 (paragraph 15). Those principles include that identification must be objective, having regard to the characteristics which the goods, on informed inspection present. In the identification of the goods, knowledge of how those who trade in the goods describe them will usually be relevant, but not necessarily conclusive. All of 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.
The goods comprise baby wipes put up in packs of 80 for retail sale. Each wipe comprises a non-woven consisting of a pharmaceutical grade non-woven material being a blend of rayon (65%) and PET (35%) made from the same material used in facial masks and other wipes used in hospitals and an impregnated chemical solution comprising various constituent ingredients. The baby wipes are wet to the touch. The water content of the ingredients is not less than 95% in the case of each of the four categories of goods imported. Those four categories are fragrance free wipes, vitamin E wipes, soothing wipes and water wipes. Water wipes contain 99% water in the impregnated solutions.
The ingredients of the impregnated chemical solutions are established by evidence which is not in dispute. One issue in the case is whether the goods are impregnated with detergent and the parties agree that polysorbate 20 is present in the fragrance free wipes and the water wipes in a concentration of 0.125%, and that polysorbate 80 is present in the vitamin E wipes and the soothing wipes in concentrations of 0.30%. The respondent asserts and the applicant denies that as a consequence of the presence of the sorbates, the baby wipes contain detergent. Each of those concentrations is greater than the critical micelle concentrations, which for polysorbate 20 is 0.006% and for polysorbate 80 is 0.0014%. The presence of concentrations of polysorbates greater than the critical micelle amounts becomes relevant for the purposes of evidence given before the Tribunal by Emeritus Professor D.B. Hibbert, discussed below. Part of the controversy between the parties is whether the polysorbates are present as detergents or as emulsifiers and solubilisers, as will be discussed below.
Another issue which was the subject of evidence in the case is whether the goods are medicaments and whether they have prophylactic or therapeutic properties. Each of the baby wipes contain caprylyl glycol (a skin conditioning agent which also has the function of an anti-microbial agent), and phenoxyethanol (which has anti-microbial and antiseptic properties). Those ingredients are relied upon by the applicant to suggest that the goods are medicaments, together with the fact that the baby wipes have the ability to reduce the amount of microbial contamination with regular use between nappy changes, and the fact that wipes aid in the removal of urinary and faecal contamination of the skin at the time of their use, and after their use. This issue will not arise for decision because of the way in which I have disposed of the “detergent” issue to which I have referred in [5].
THE STATUTORY CATEGORIES
The respondent decided that the baby wipes are assessable to Customs duty under heading 3401 and subheading 3401.1 or subheading 3401.11.00 under the Customs Tariff Act1995 (Cth).
Heading 3401 is in the following terms:
SOAP; ORGANIC SURFACE-ACTIVE PRODUCTS AND PREPARATIONS FOR USE AS SOAP, IN THE FORM OF BARS, CAKES, MOULDED PIECES OR SHAPES, WHETHER OR NOT CONTAINING SOAP; ORGANIC SURFACE-ACTIVE PRODUCTS AND PREPARATIONS FOR WASHING THE SKIN, IN THE FORM OF LIQUID OR CREAM AND PUT UP FOR RETAIL SALE, WHETHER OR NOT CONTAINING SOAP; PAPER, WADDING, FELT AND NONWOVENS, IMPREGNATED, COATED OR COVERED WITH SOAP OR DETERGENT.
Subheading 3401.1 is in the following terms:
Soap and organic surface-active products and preparations, in the form of bars, cakes, moulded pieces or shapes, and paper, wadding, felt and nonwovens, impregnated, coated or covered with soap or detergent.
Subheading 3401.11.00 is in the following terms:
For toilet use (including medicated products).
The proper procedure is to enquire whether the goods fall within any heading, and then to check that the goods fall within one or other of the subheadings. The respondent’s challenged assessments in this case involve a change for the assessment historically made by the respondent in respect of other importations made by the applicant, which has broadly accorded with the primary contention now made by the applicant, that the goods are liable to duty under heading 3004.
The respondent contends, in the alternative, that the goods are liable to duty at the same rate under heading 3304 or heading 3307. Those three contentions are the primary contentions of the respondent.
If the respondent is wrong in its primary contentions, then it denies the various headings relied upon by the applicant and asserts that the goods fall within heading 3402, heading 6307 or heading 5603.
The applicant contends that the goods are liable to duty under heading 3004, or heading 3003 and that in any such case, as goods imported from Taiwan they are free of duty if liable to duty under any of those headings.
If the respondent is right in any of its primary contentions, that the goods are liable to duty under headings 3401, heading 3004 or heading 3307, then the case asserted by the applicant will fail because the three headings asserted by the respondent in its primary contentions prevail over those asserted by the applicant. As is common ground between the parties, this is because of the effect of chapter note 1(e) and 1(f) to Chapter 30. So far as relevant Note 1 to Chapter 30 provides that:
This Chapter does not cover:
(e) Preparations of 3303.00.00 to 3307, even if they have therapeutic or prophylactic properties;
(f) Soap or other products of 3401 containing added medicaments;
As between the primary contentions of the respondent, the first to be considered is heading 3401 since note 1 to Chapter 33 so far as relevant provides that:
This Chapter does not cover:
(b) Soap or other products of 3401;
Other notes to Chapter 33 affect headings 3304 and 3307 and those notes will be referred to below.
Heading 3401 (of Schedule 3 of the Customs Tariff Act 1995)
The baby wipes are non-wovens impregnated with certain substances, and the main dispute about the application of heading 3401 or its subheadings is whether those substances include detergent. The expression “impregnated” and its difference from the word “coated” in relation to paper was discussed by Mason J in D&R Henderson (Manufacturing) Pty Ltd v Collector of Customs for the State of NSW (1974) 48 ALJR 132 at 133-135. However, neither party sought to submit that the non-wovens in the baby wipes were not impregnated with the relevant substances even though the quantities involved were quite small, and I am content to proceed on the same basis.
The parties have called specialist chemists before me. No trade meaning for the word “detergent” is contended for by either party and in the resolution of the issues arising in the case, I must decide whether the goods are impregnated with detergent in the ordinary sense of that English word. In a case concerned with the meaning of an early form of the tariff, Whitton v Falkiner (1915) 20 CLR 118 at 127, Isaacs J said that evidence as to what witnesses said they “would” call the article in question was inadmissible. “It is not for a witness, but for the Court, to say whether the articles should be properly included under the statutory designation. It is not a matter of scientific or trade opinion whether they ought to be so included. Trade usage and commercial appellation are matters of actual fact, and the evidence properly admissible on such a head is as to what merchants and others did at the date of the Act in fact call such articles.”He added that the language of a Tariff Act, like that of every other Act, is to be taken in its ordinary signification, unless some secondary meaning is proved, and that in a Customs Act, the only appropriate secondary meaning is that of commerce. In this case, as I have said, no secondary meaning is contended for by either party.
In this field, as in other cases of statutory construction, appeals to common sense are appropriate. See Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389 at [400]-[402].
The substances in question are polysorbates. Two of the baby wipe products include polysorbate 20 and the other two products include polysorbate 80. Both polysorbates are surfactants, or surface active agents.
The dispute between the parties is that the respondent contends, with the support of Emeritus Professor D.B. Hibbert, that the polysorbates are detergents, whereas the applicant, with the support of Dr Wynn-Hatton contends that their function in relation to the baby-wipes is not one of detergency, and that the role they play in the products is that of emulsifiers, solubilisers and dispersers of the other ingredients present in the baby-wipes; he says that they have been selected for those purposes and for their low skin irritancy. Dr Wynn-Hatton practises as a consultant in the fields of domestic, industrial, healthcare, cosmetic and pharmaceutical chemicals and manufacturing.
EVIDENCE BEFORE THE TRIBUNAL
Emeritus Professor D.B. Hibbert
Professor Hibbert was Professor of Analytical Chemistry within the Faculty of Science at the University of New South Wales. He is currently President of the Royal Society of New South Wales, and (apart from other distinguished qualifications) from January 2018 has been the secretary of the International Union of Pure and Applied Chemistry (IUPAC) Interdivisional Committee for Terminology Nomenclature and Symbols, which is responsible within IUPAC for reviewing and publishing terminological material. He described IUPAC as the authoritative source of definitions in chemistry. Professor Hibbert claimed no practical experience with the industrial applications of polysorbates.
The IUPAC defines “detergent” as follows:
A surfactant (or a mixture containing one or more surfactants) having cleaning properties in dilute solutions (soaps are surfactants and detergents).
Other IUPAC definitions include:
“Emulsifier”:
A surfactant which when present in small amounts facilitates the formation of an emulsion, or enhances its colloidal stability by decreasing either or both of the rates of aggregation and coalescence.
“Surfactant (surface active agent)”:
A substance which lowers the surface tension of the medium in which it is dissolved, and/or the interfacial tension with other phases, and, accordingly, is positively adsorbed at the liquid/vapour and/or at other interfaces.
Professor Hibbert stated that polysorbates do have cleaning properties in dilute solutions and therefore are detergents. His evidence was based upon the IUPAC definition and the fact that the particular surfactants have cleaning properties in dilute solutions. He nevertheless accepted that many other detergents are more efficient and cheaper than polysorbate 20 and 80. His report also indicates that polysorbates 20 and 80 have properties that allow for different uses, including emulsifying fats which allows cleaning them from water. He said that these properties also give polysorbates ‘cleaning properties’ and so fulfil the definition of detergent. He was not asked whether the polysorbates in the baby wipes met the IUPAC definition of an emulsifier, but I do not take the Professor to have denied that they do so. He agreed with Dr Wynn-Hatton that the cleaning or washing function of the products arises mostly from the wipe material and water, and that the addition of the polysorbates will also add to the washing action by reducing surface tension. He added that the small percentages of polysorbates, while greater than their critical micelle concentrations which are required for removing fatty molecules from water, would not allow a great extent of solubilising to occur.
Professor Hibbert gave oral evidence before me. He explained that the mere presence of polysorbate 20 or 80 in a preparation would not show that the preparation contained a detergent because the quantity of the polysorbate might not be enough to enable a micelle to be formed, and unless a micelle were formed the necessary cleaning properties in dilute solutions would not be present. Similarly, he explained that if the polysorbate were mixed with certain other things, such as cement, the result would not be a detergent because a solid substance would be the result.
Professor Hibbert was asked whether any substance including polysorbate 20 above its critical micelle concentration includes a detergent. He replied in the affirmative, because the detergency properties of polysorbate 20 are irrespective of the final medium in which it finds itself. And he said that since ice cream include some polysorbate, if one assumed that that it was present above critical micelle concentration, then the ice cream includes a detergent.
He also accepted that because the amount of polysorbates present was very small in the baby wipes, the amount of detergency would be limited.
The IUPAC definitions are subject to very rigorous peer review processes, involving not just three reviewers, as would be more normal with a refereed article but 14 reviewers, followed by 6 months exposure on the website before adoption.
Dr Wynn-Hatton
Dr Wynn-Hatton on the other hand stressed the limited detergency effects of the polysorbates, and said that the role played by the polysorbates was as an emulsifying agent rather than as a cleaning agent. For himself he would describe the polysorbates as emulsifiers rather than as detergents. He said that if they were present as detergents, they would need to be present in concentrations of 10% or more rather than at less than one half of one percent. He explained that surfactants can perform a number of functions.
Moreover, he said, in the concentrations present in the baby wipes, they have low skin irritancy, which would not be the case if they were in concentrations of 10% or more. Low skin irritancy is obviously a necessary quality of baby wipes. He explained that surfactants have two common structural elements that consist of a hydrophobic (or water repelling) end joined to a hydrophilic (or water attracting) end, and are used for a variety of consumer and industrial applications, the consumer applications being as detergents, dishwashing agents, cleaning agents, and personal products. Industrial applications include their use within foodstuffs, pharmaceuticals, plant production, agriculture, textiles and fibres, the chemical and plastic industries, paints and lacquers and many other fields.
Dr Wynn-Hatton explained that polysorbate 20 and polysorbate 80 are different versions of the same kind of non-ionic (that is, possessing neither a positive nor a negative charge) surfactant. Polysorbates are described as typically used as oil in water emulsifiers and solubilisers for products meant for treatment of skin as they are extremely mild to the skin and eyes, and as pharmaceutical emulsifiers.
In his oral evidence Dr Wynn-Hatton explained that polysorbate 80 is used in ice cream to allow the water to blend with the fats from the milk, and thus to act as an emulsifier.
In cross-examination by Mr Northcote for the respondent upon some remarks made in his report, Dr Wynn-Hatton gave some evidence about the way in which he as an industrial chemist used the word “detergent” and indicated that he would not apply the word to anything used to clean the skin, such as shampoo. He instanced the time when he was working for Bristol Myers, which made a lot of shampoos and conditioners. He described his usage of the word “detergent” in that context as “technical”. Mr Northcote drew his attention to a medical dictionary definition which defined detergents as “substances which clean the skin’s surfaces”. Dr Wynn-Hatton commented that such a definition may be appropriate to those from a medical background.
APPROACH TO CONSTRUCTION
I do not regard either the evidence given by Dr Wynn-Hatton as to his own usage of the word “detergent” or what is stated in the medical dictionary as determinative of the question of construction before the Tribunal, which is about the ordinary English meaning of the word in question. As to what is suggested in the medical dictionary, it seems clear that in ordinary usage, a cleaning material used on floors would naturally be described as a detergent, and that is enough to show that the medical dictionary definition will not assist.
A scientific understanding of the nature of detergents ought, in my opinion, to be treated as relevant to the construction of “detergent” as an ordinary English word because in at least one of its ordinary meanings, it conveys a scientific usage. As Isaacs J said, the matter is one for the Court itself, or one would say for a decision-maker including this Tribunal. As Kitto J remarked in NSW Associated Blue-Metal Quarries Ltd v Federal Commissioner of Taxation [1956] HCA 80; (1956) 94 CLR 509 at 514, when discussing the meaning to be given to “mining operations” in a taxation statute, which was to be construed in its ordinary English sense, “in the end the conclusion must depend on one’s own understanding of the sense in which words are currently used”. Kitto J rejected a suggestion that the getting of blue-metal by open excavation was a “mining operation” on the ground that it was an unnatural and inapt use of language, although he stated that he did not go so far as to say that a view favourable to the appellant could not reasonably be held.
The correct approach in a court and in this Tribunal to the construction of an ordinary English word was recently summarised in the Full Federal Court decision in Comptroller-General of Customs v Pharm-A-Care Laboratories Pty Ltd [2018] FCAFC 237 at [24], [26] and [35].
I have been referred to general dictionary definitions of the word “detergent”. The Macquarie Online Dictionary defines it as follows when used as a noun:
(a)any cleaning agent, including soap.
(b)one of a group of synthetic, organic cleaning agents with surface-active properties; it may be cationic, anionic, or non-ionic.
Meaning (b) in the Macquarie Dictionary has similarities with the IUPAC definition, and is consistent with the view that in at least one of its meanings, scientific usage is intended. That is my own understanding of the ordinary English meaning of the word “detergent”. As observed in [32] above, it has, in one of its senses a scientific dimension.
The Oxford Online Dictionary defines “detergent” as:
A water-soluble cleansing agent which combines with impurities and dirt to make them more soluble, and differs from soap in not forming a scum with the salts in hard water.
Insofar as this definition distinguishes detergents from soaps, it may be compared with the terms of heading 3401 of the Tariff, which treats detergents and soaps, and requires their assimilation for duty purposes.
The Merriam-Webster Online Dictionary (an American publication) defines “detergent” as:
A cleaning agent such as:
(a)SOAP;
(b)any numerous synthetic water-soluble or liquid organic preparations that are chemically different from soaps but are able to emulsify oils, hold dirt in suspension, and act as wetting agents;
(c)an oil-soluble substance that holds insoluble foreign matter in suspension and is used in lubricating oils and dry cleaning solvents.
Meaning (b) in the Merriam-Webster publication is consistent with evidence given by Professor Hibbert in these proceedings suggesting a connection between detergents and emulsifiers. It also involves that the word “detergent” has, as one of its meanings, a scientific dimension.
One principal point made by Dr Wynn-Hatton is that the detergent (that is, cleaning) effects of the polysorbates in the baby wipes are very small and their emulsifying effects are dominant. That would suggest that one should determine whether a surfactant has a dominant effect as a cleaner or an emulsifier, in answering whether or not it is a detergent. By contrast, as I have said, Professor Hibbert suggests a connection between emulsifiers and detergents to which a test of dominance of the one over the other is inappropriate.
Insofar as the question is a scientific one, the evidence of Professor Hibbert, which in turn has regard to the IUPAC definition, satisfies me that the polysorbates are detergents in the baby-wipes. The evidence of Dr Wynn-Hatton as a practising industrial professional chemist seems to me to be a less reliable basis on which to make findings.
Another way of considering the question arising in this case is to ask: Is this substance a cleaning agent? I do not regard that question as one which would exclude a limited cleaning property. On that basis, the polysorbates are properly regarded as detergents. They are also emulsifiers, which does not in my opinion entail that they are not cleaning agents.
CONCLUSION
I conclude that the goods are within heading 3401. It follows that they are also within subheading 3401.1 which effectively repeats those parts of the heading which are critical to the answer I have given to the question of the applicability of the heading. Whether or not, as I doubt, they are also within subheading 3401.11.00 does not arise for determination. It follows that the reviewable decision must be affirmed.
The applicant has requested that I make material findings or fact or law or findings of mixed fact and law on all issues which have been the subject of evidence and submissions before me. The finding I have made on the “detergent” issue is sufficient to dispose of these proceedings, and in my opinion what I have already written answers the obligations of the Tribunal to give reasons for its decision.
I have considered whether it would be necessary or desirable to refer to issues which would, for me, have arisen if I had been of a different opinion on the issue already dealt with. Both parties put matter to me on the multiplicity of other issues that were argued many such submissions which were worthy of serious consideration. I have decided that what has already been written, if correct, suffices to dispose of the proceedings; if as a result of proceedings in the court, whether on appeal or by way of judicial review, these reasons are found to be incorrect, it is better that issues which then arise for determination in this Tribunal be dealt with untrammelled by what would be regarded in a court as non-binding obiter dicta. In part I have in mind that decisions of this Tribunal normally have normative effect (see Azizi and Minister for Home Affairs [2018] AATA 2561). That makes it undesirable that issues which do not actually arise for determination in the proceedings should be the subject of published comment, especially when there may be no occasion for them to be reviewed in the Court.
DECISION
Accordingly, the reviewable decision will be affirmed for reasons already stated.
I certify that the preceding 46 (forty-six) paragraphs are a true copy of the reasons for the decision herein of Deputy President Rayment QC
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Associate
Dated: 17 January 2019
Dates of hearing: 3, 4, 5 and 22 October 2018 Counsel for the Applicant: Mr J Potts SC Solicitors for the Applicant: Ms E Cheesman, Clayton Utz Solicitors for the Respondent: Mr R Northcote, Department of Home Affairs
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