Clover Pipelines Pty Ltd and Comptroller-General of Customs
[2022] AATA 1332
•24 May 2022
Clover Pipelines Pty Ltd and Comptroller-General of Customs [2022] AATA 1332 (24 May 2022)
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s):2019/5637 & 2019/5638
Re:Clover Pipelines Pty Ltd
APPLICANT
AndComptroller-General of Customs
RESPONDENT
DECISION
Tribunal:Senior Member A Poljak
Date:24 May 2022
Place:Sydney
The decision under review is affirmed.
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Senior Member A Poljak
CATCHWORDS
HOME AFFAIRS – Customs – Tariff Concession Order (TCO) – whether the subject goods meet the terms of the relevant TCOs – relevant law and material considered – decision under review affirmed.
CASES
Brand Developers Aust Pty Ltd and Chief Executive Officer of Customs [2015] AATA 215
Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389REASONS FOR DECISION
Senior Member A Poljak
24 May 2022
These proceedings concern the application of certain Tariff Concession Orders (TCO) to goods being continuous filament wound glass reinforced polyester jacking pipe and continuous filament wound glass reinforced polyester pipe (Pipes) and continuous filament wound glass reinforced pipe fittings (Fittings).
Clover Pipelines Pty Ltd, the applicant, claims the Pipes are classified to tariff subheading 3917.29.00 and are eligible for Tariff Concession Order (TCO) 0516757. The applicant claims the Fittings are classified to tariff subheading 3917.40.00 and are eligible for TCO 0108274.
TCO 0516757 provides “PIPES, EPOXY RESIN, GLASS FIBRE REINFORCED”.
TCO 0108274 provides:
FITTINGS, PIPE, epoxy, fibreglass reinforced, being ANY of the following:
(a) couplings;
(b) elbows;
(c) tees;
(d) reducing tees;
(e) reducers;
(f) flanges;
(g) nipplesIt is not in dispute that the goods are appropriately classified under tariff heading 3917.29.00 (for the Pipes) and 3917.40.00 (for the Fittings) respectively. However, the respondent contends that the Pipes and the Fittings fall outside the relevant TCOs, which refer to “epoxy resin” and “epoxy” respectively, because they are made from unsaturated polyester (UP) resin pipe, not epoxy, and do not precisely fit the description in the TCOs.
Consideration
The composition of the goods is not in dispute. The Fittings and Pipes are glass reinforced polyester (GRP) based on vinylester resin. Vinylester resin is a common name for a series of unsaturated resins that are prepared by the reaction of a monofunctional unsaturated acid, typically methacrylic acid, with epoxy resin.
Mr Rohan McLellan, Managing Director of the applicant, provided a statement in these proceedings dated 31 March 2020. He states that the disputed goods are GRP, “a plastic with a matrix of reinforced fibres and fine materials including sand, glass fibre and thermosetting resins.” Mr McLellan correctly identifies epoxy resin and vinylester resin as different substances and states that the disputed goods are coated by vinylester resin, which “is a form of resin which is produced through the reaction of unsaturated carboxylic acid, such as methacrylic or acrylic acid and an epoxy resin. As such, vinyl-ester resins are derivatives of epoxy resins.” He states, GRP pipes have overlapping uses with pipes described as glass reinforced epoxy pipes (GRE). This overlap is possible as result of the shared characteristics of the GRE and GRP pipes. Mr McLellan explains that “vinylester resin has the same appearance, handling properties and curing characteristics as conventional polyester resins however, the corrosion resistance and mechanical properties of vinylester resin are significantly better”. He states that “Vinylester resins are also stronger and more resistant that conventional polyester resins”. He states further, “As vinylester resins are more resistant to corrosion and less prone to water damage they are often used on products which are likely to be exposed to water or other liquids.”
The applicant contends that the TCOs apply to the Fittings and Pipes as they are based on vinylester resin, which is prepared from the reaction of monofunctional unsaturated acid with an epoxy resin. They are thus made from epoxy resin, reacted with another substance to produce vinylester resin.
The applicant contends that the goods do not need to meet the description literally; the goods must meet the description of the relevant TCO precisely upon the proper interpretation of the TCO. The applicant submits that goods that contain a resin derived from epoxy resin meet the TCO description because they do contain epoxy resin. That the epoxy resin has been reacted with something else does not change that epoxy resin was introduced at some earlier stage in the production process. The applicant contends that this is not inconsistent with the language of the TCOs. That is especially the case with TCO 0108274, which refers generally to “epoxy”.
There are three main types of resins used in the production of both parts and moulds: polyester, vinylester, and epoxy. The Superlit Vinylester Information Sheet states that the “appearance, handling properties, and curing characteristics of vinyl ester resins are the same as conventional polyester resins. However, the corrosion resistance and mechanical properties of vinyl ester composites are much improved over standard polyester resin composites”. It further states:
Vinyl ester resins are similar in their molecular structure to polyesters, but differ primarily in the location of their reactive sites, these being positioned only at the ends of the molecular chains. As the whole length of the molecular chain is available to absorb shock loadings this makes vinyl ester resins tougher and more resilient than polyesters. The vinyl ester molecule also features fewer ester groups. These ester groups are susceptible to water degradation by hydrolysis which means that vinyl esters exhibit better resistance to water and many other chemicals than their polyester counterparts, and are frequently found in applications such as pipelines and chemical storage tanks.
The starting material for a vinyl ester matrix is an unsaturated vinyl ester resin produced by the reaction of an unsaturated carboxylic acid, such as methacrylic or acrylic acid, and an epoxy resin.
It is not in dispute that the Pipes and Fittings are both made from fiberglass reinforced vinylester resin and that despite vinylester resin being derived from epoxy resin, vinylester resin does not have the same uses as epoxy resin. They are different plastic materials that have different molecular structures and characteristics. In other words, despite epoxy resin being used as a step in preparing vinylester resin, the Fittings and Pipes do not contain any epoxy resin at all, but a different plastic derived from epoxy resin.
Where imported goods either do not have features which are specified and required in the description in the TCO or are different to the TCO goods, the imported goods do not meet the terms of the TCO; see Brand Developers Aust Pty Ltd and Chief Executive Officer of Customs [2015] AATA 215 at [35]. The TCOs, that they only apply to pipes and pipe fittings made of fibreglass reinforced epoxy resin is the logical and ordinary meaning which is appropriate in the circumstances. It is contrary to common sense and logic to apply the TCOs broadly to include goods that were derived from epoxy resin; see Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389 at 400 and 402.
As imported, the subject goods lack an essential requirement of the TCO description, being epoxy resin, and are different goods in that the subject goods are coated with a different substance, being vinylester resin.
The disputed goods are not made of glass fibre reinforced epoxy resin, nor do they contain any epoxy resin. The subject goods do not meet each of the terms of the TCOs and therefore neither TCO applies to the Fittings and Pipes. The TCOs do not apply to goods made of a different plastic derived from epoxy resin, which has a different chemical composition and different physical properties.
Decision
The decision under review is affirmed.
I certify that the preceding 15 (fifteen) paragraphs are a true copy of the reasons for the decision herein of Senior Member A Poljak
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Associate
Dated: 24 May 2022
Date(s) of hearing: 3 September 2021 Counsel for the Applicant: Mr C Tran Solicitor for the Applicant: Ms H Walker, Rigby Cooke Lawyers Solicitor for the Respondent: Mr J Millea, Department of Home Affairs
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