Cody v Datacraft (Australia) Pty Ltd
[1989] FCA 314
•14 JUNE 1989
Re: BRIAN LEO CODY (COLLECTOR OF CUSTOMS)
And: DATACRAFT (AUSTRALIA) PTY LTD (TRADING AS DATACRAFT DIRECT MARKETING)
No. VG327 of 1988
FED No. 314
Customs and Excise
COURT
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Northrop(1), Keely(1) and Burchett(2) JJ.
CATCHWORDS
Customs and Excise - Customs duty - Tariff classification Interpretative rules of construction - Approach to construction - Relevance of use of product in categorisation - relevance of foreign decisions affecting tariff provisions.
Customs Tariff Act 1982 schedules 2 and 3, s.17, s.18, s.19
Customs Act 1901 s.167, s.273GA(2)
Administrative Appeals Act 1975 s.44
HEARING
MELBOURNE
#DATE 14:6:1989
Counsel for the Applicant: H. Jolson
Solicitor for the Applicant: Australian Government Solicitor
Counsel for the Respondent: G. Wicks
Solicitor for the Respondent: R. Chessari
ORDER
Th appeal be dismissed with costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
In May 1987, the respondent imported into Australia goods which can be described as black switch boxes designed for use with automatic data processing machines. The applicant decided that item 85.19 in Schedule 3 to the Customs Tariff Act 1982 ("the Tariff Act") applied to the subject goods and demanded payment of duty be made accordingly at the rate of 25%; see sub-item 85.19.9. Pursuant to s.167 of the Customs Act 1901 the respondent paid the duty under protest claiming that item 84.55 applied to the subject goods and that duty should be determined at the rate of 2%; see sub-item 84.55.9. The respondent, as applicant, sought a review under s.273GA(2) of the Customs Act by the Administrative Appeals Tribunal of the decision of the applicant. In the exercise of the powers conferred upon it, the Tribunal made a decision setting aside the decision of the applicant and decided further that:-
"(a) the sub-item in Schedule 3 to the Customs Tariff
Act 1982 which applied to the subject goods at the time of their importation into Australia was sub-item 84.55.9; and
(b) that the amount of duty paid in excess of the
amount which was properly payable is to be refunded to the applicant (the respondent to this appeal)."
The applicant appeals to this Court from the decision of the Tribunal pursuant to s.44 of the Administrative Appeals Act 1975. The questions of law raised by the appeal can be stated as follows:-
1. whether it was open to the Tribunal to find as a
matter of law, that item 84.55 provided a more specific description than that provided in item 85.19 of the subject goods within the terms of Rule 3(1)(a) of the Rules for the Interpretation of Schedule 3 to the Customs Tariff Act 1982;
2. did the Tribunal err in its application of
Interpretative Rule 3(1)(a) of the Rules for the Interpretation of Schedule 3 to the Customs Tariff Act 1982.
The substance of the appeal is on the question whether the subject goods fell to duty under item 84.55 of Schedule 3 or under item 85.19. The Tribunal found that they came within each item and in determining the question applied Interpretive Rule 3(1)(a) of the Rules for the Interpretation of Schedule 3 as set out in Schedule 2 of the Tariff Act. The applicant is challenging the correctness of the application of that interpretive rule.
Section 18 of the Tariff Act imposes duties of customs on goods imported into Australia. Under s.19, the amount of duty to be paid is ascertained by reference to the rate of duty set out in Column 3 in the tariff classification in Schedule 3 that applies to the goods imported. In many cases, it is a difficult task to determine the tariff classification within which imported goods fall. In some cases, as in the present appeal, the imported goods may fall within two tariff classifications. To assist in the resolution of these problems the Tariff Act contains what are described as Rules for the Interpretation of Schedule 3. These interpretive rules are contained in Schedule 2 of the Tariff Act. Under s.17 of the Tariff Act these rules have effect for the purpose of ascertaining the matters specified in s.17. One of the matters specified is ascertaining "within which item or items any goods fall and, if the goods fall within 2 or more items, which one of those items applies to the goods".
The subject goods are electrical switches designed for use with automatic data processing machines. They are designed to be used to conduct very low voltage currents and to connect parts of the data processing machines to printers. The applicant concedes that the subject goods fall within item 84.55 but says that they fall within item 85.19 also and thus interpretive rule 3(1)(a) is to be applied. The parts of that rule relevant for present purposes are:-
"3(1) Where, for any reason, goods fall within 2 or
more items, ... the item, ... that applies to the goods shall, ... be ascertained in accordance with the following principles:
(a) If one of the items, ... provides a more
specific description of the goods than any other of the items, ... that first mentioned item ... applies to the goods.
(b) If
(i) the item, ... that applies to the goods cannot be ascertained in accordance with paragraph (a):
(ii) the goods are
(A) ...
(B) composite goods ... made up of different components; or
(C) ...; and
(iii) one ... component gives to the goods their essential character,
the goods shall be taken to consist of that ... component.
(c) If the item ... that applies to the goods cannot
be ascertained in accordance with paragraph (a) or paragraph (b) the item, ... that applies to the goods is that item ... that occurs last in Schedule 3 among those items, ... which equally merit consideration when determining the item, ... that applies to the goods."
Interpretive rule 3(1)(b) has no application to the facts found by the Tribunal. If the applicant succeeds, however, counsel for the respondent would seek an order that the matter be remitted to the Tribunal to make further findings to enable this rule to be applied. In the event, it is not necessary to consider this aspect any further. Interpretive rule 3(1)(c) is the precept of despair and in the present case would have the effect of making the subject goods fall within item 85.19. Counsel for the applicant did not seek the application of interpretive rule 3(1)(c).
Item 84.55 relates to the following goods:-
"84.55 * PARTS AND ACCESSORIES (OTHER THAN COVERS,
CARRYING CASES AND THE LIKE) OF A KIND USED SOLELY OR PRINCIPALLY WITH MACHINES OF A KIND FALLING WITHIN 84.51, 84.52, 84.53 OR 84.54:"
Automatic data processing machines come within item 84.53 and the respondent contends that the subject goods are accessories of a kind used solely or principally with automatic data processing machines and thus come within item 84.55.
Item 85.19 relates to the following goods:-
"85.19 * ELECTRICAL APPARATUS FOR MAKING AND
BREAKING ELECTRICAL CIRCUITS, FOR THE PROTECTION OF ELECTRICAL CIRCUITS, OR FOR MAKING CONNECTIONS TO OR IN ELECTRICAL CIRCUITS (INCLUDING SWITCHES, RELAYS, FUSES, LIGHTNING ARRESTERS, SURGE SUPPRESSORS, PLUGS, LAMP-HOLDERS AND JUNCTION BOXES); RESISTORS, FIXED OR VARIABLE (INCLUDING POTENTIOMETERS), OTHER THAN HEATING RESISTORS; PRINTED CIRCUITS; SWITCHBOARDS (OTHER THAN TELEPHONE SWITCHBOARDS) AND CONTROL PANELS:"
In its extended form, item 85.19 is to be read as follows:-
1. Electrical apparatus
(a) for making and breaking electrical circuits,
(b) for the protection of electrical circuits, or
(c) for making connections to or in electrical circuits (including switches, relays, fuses, lightning arresters, surge suppressors, plugs, lamp-holders and junction boxes;
2. Resistors, fixed or variable (including potentiometers), other than heating resistors;
3. Printed circuits;
4. Switchboards (other than telephone switchboards); and
5. Control panels.
In determining problems of the kind raised by this appeal, it is necessary to identify the goods and apply the tariff to the goods as identified; see, for example, Collector of Customs v Savage River Mines (1988) 79 ALR 258. In the present case the Tribunal identified each of the subject goods as being an electrical apparatus for making and breaking electrical circuits and thus each came within item 85.19. The Tribunal found also each of the subject goods was designed specifically for use with automatic data processing machines and constituted an accessory of a kind used solely or principally with automatic data processing machines and thus each came within item 84.55.
The Tribunal then applied interpretive rule 3(1)(a) and concluded that the degree of specificity of the description of the subject goods by item 84.55 was greater than the degree of specificity of the description of the subject goods of item 85.19. On this aspect the Tribunal said:-
"21. Rule 3(1)(a) requires examination of the terms
of the items of Schedule 3 and the degree of
specificity with which they describe the subject
goods as identified. Each of the subject goods in
this case performs a switching function by making and
breaking electrical circuits. It performs its
function in respect of electric current transmitted
between an automatic data processing machine and a
printer. To describe it as electrical apparatus for
making and breaking electrical circuits is to state
its function in very broad terms. To describe it
additionally as a switch is to state its function in
more specific, but still fairly general, terms; the
context in which it performs that function is not
stated. To describe it as an accessory of a kind
used solely or principally with machines of a kind
falling within item 84.53 is to state the context in
which it is used; its function is not stated.
22. The task of deciding whether or not either
description is a more specific description of the
subject goods than the other is made difficult by the
fact that one description is in terms of function and
the other in terms of context. However, I am
satisfied that the degree of specificity of the
description by item 84.55 is greater than that of the
description by item 85.19."Counsel for the applicant contended that a description "an electrical apparatus for making and breaking electrical circuits" or "an electrical apparatus for making connections to or in electrical circuits" is a description by name of a switch and that the black switch box was such an electrical apparatus. He contended further that a description "an accessory of a kind used solely or principally with automatic processing machines" is a description by class. He contended this was a general description and that in order to gain a better understanding of the description it is necessary to ask a further question such as "what type of accessory". The answer would be a switch for making and breaking electrical circuits and that this description is more specific than accessory. It should be noted that conversely the description of an article as a switch of itself is not specific. It is necessary to ask what type of switch or for what purpose is the switch needed in order to identify the switch sought.
In support of these contentions counsel took the words "a more specific description" and contrasted them with the words "specifically described" as construed in Carpenter v Dean (1889) 23 QB 566. In that case the Court of Appeal had to consider the application of the words "specifically described" appearing in a bill of sale and referring to chattels referred to in a schedule annexed to the bill. Under the relevant legislation, to be effective the changes effected by the bill had to be "specifically described". At p 572 Cotton L.J. said that this meant that the changes had to be "described in such a way as to enable articles comprised in the bill of sale to be identified, and not to leave any doubt whatsoever about their identity.". If anything, that case is the reverse of the present case. Here descriptions are given by the items and attempts must be made to determine which item gives the more specific description of identified goods.
Counsel for the respondent contrasted the word "specific" with the word "general". He referred to the meanings given to the words "specific" and "description" in the Shorter Oxford English Dictionary. The word "specific", when used as an adjective, has the meaning of having a special determining quality. The word "description" has the meaning of the combination of qualities or features that makes out or describes a particular class. He then contended that a switch is a broad description of the function of the subject goods and that the context in which that function is performed, as an accessory to automatic data processing machines, enables a more specific description of that entity. He denied this was a choice between function or context. On this reasoning he contended that item 84.55 contained a more specific description of the subject goods.
There is much force in each of these contentions. In the context of interpretive rule 3(1)(a), the question to be decided is which item provides "a more specific description" of the subject goods. It is not appropriate to take each word separately, give a meaning to that word, and apply the result of three separate words. The words constitute a composite phrase and must be construed and applied accordingly. Nevertheless, it is helpful to note the meaning to be given to each of the words. The word "more" has many different meanings but in the context of interpretive rule 3(1)(a) it is appropriate to adopt the meaning "Qualifying a predicate or a predicative adjunct as being more applicable in a greater degree than another". Here the predicate or predicative adjunct is constituted by item 84.55 and item 85.19. Here it is necessary to determine which item has the more specific determining qualities or features describing the subject goods.
Automatic data processing machines normally rely upon electricity to enable them to function. On the basis that they would include electrical apparatus for making and breaking electrical circuits, electrical apparatus for making connections to or in electrical circuits, printed circuits and control panels, automatic data processing machines could come within item 85.19. At the same time, item 84.53 applies to automatic data processing machines. This is a specific description of goods and in the context of the Tariff Act it would be a bold contention to assert that an automatic data processing machine was made liable to duty under item 85.19; in fact this contention was not made. Item 84.55 relies upon the specific description of goods coming within item 84.53. Thus item 84.55 applies to accessories of a kind used solely or principally with, among others, automatic data processing machines. It is true that the subject goods come within the description contained in item 85.19 as well as automatic data processing machines come within the description contained in item 85.19. The specific descriptions contained in item 84.53 makes that item applicable to automatic data processing machines. Similarly the specific descriptions contained in item 84.55 makes that item applicable to the subject goods. It is immaterial whether a distinction is drawn between "function" and "context". What is of importance is that item 84.53 describes a particular type of electrical apparatus and item 84.55 describes a particular type of electrical apparatus by reference to item 84.53. On the finding that the subject goods are accessories of a kind used solely or principally with automatic data processing machines, it is correct to say that item 84.55 provides a more specific description of the subject goods than item 85.19.
The appeal should be dismissed with costs.
JUDGE2
The question raised by this appeal is whether the Administrative Appeals Tribunal correctly applied rule 3(1)(a) of the rules for the interpretation of schedule 3 of the Customs Tariff Act 1982, which are contained in schedule 2 of that Act. The facts having been fully found, this is a question of law: Peacock v. Zyfert (1983) 48 ALR 549; Rheem Australia Ltd v. Collector of Customs (NSW) (1988) 78 ALR 285 at 293, 306.
The goods in question are black metal boxes containing printed circuits specifically designed for the purpose of linking two computers with a printer, or two printers with a computer, in such a way as to permit the selection of alternative combinations of the machines. In other words, what is involved is a complex switch made to meet very particular requirements. Among these requirements, is the ability to carry an extremely low electric current, about one thousandth of an amp. The device is clearly a switch, but a specialised one. The Tribunal held:
"It is not a switch having a general use for making and breaking connections in electrical circuits. It is designed specifically for use with machines that transmit and receive electric current of very low power; its capabilities are limited accordingly. I am satisfied that the sole or principal use of each of the subject goods is with automatic data processing machines. So I identify it as an electric switch for use with automatic data processing machines."
Chapter 84 of schedule 3, which includes various machines and types of apparatus and their parts, both electrical and of other kinds, contains the following item, the reference number of which is 84.55:
"PARTS AND ACCESSORIES (OTHER THAN COVERS, CARRYING CASES AND THE LIKE) OF A KIND USED SOLELY OR PRINCIPALLY WITH MACHINES OF A KIND FALLING WITHIN 84.51, 84.52, 84.53 OR 84.54."
The items referred to include typewriters, calculating machines, automatic data processing machines and units thereof, various similar machines, and "other office machines". There is, in note 3 of the chapter notes, a specific definition of "automatic data processing machine" as used in item 84.53.
Chapter 85, which includes various electrical machines and types of electrical apparatus and their parts, contains the following item, the reference number of which is 84.19:
"ELECTRICAL APPARATUS FOR MAKING AND BREAKING ELECTRICAL CIRCUITS, FOR THE PROTECTION OF ELECTRICAL CIRCUITS, OR FOR MAKING CONNECTIONS TO OR IN ELECTRICAL CIRCUITS (INCLUDING SWITCHES, RELAYS, FUSES, LIGHTNING ARRESTERS, SURGE SUPPRESSORS, PLUGS, LAMP-HOLDERS AND JUNCTION BOXES); RESISTORS, FIXED OR VARIABLE (INCLUDING POTENTIOMETERS), OTHER THAN HEATING RESISTORS; PRINTED CIRCUITS; SWITCHBOARDS (OTHER THAN TELEPHONE SWITCHBOARDS) AND CONTROL PANELS."
The Administrative Appeals Tribunal found that the subject goods (the device is called, appropriately enough, a "black box") fell within both of these items. As regards item 84.55, on the application of the test stated by Gibbs J. in Deputy Commissioner of Taxation v. Polaroid Australia Pty Ltd (1971) 46 ALJR 32 at 35, the black box was an adjunct auxiliary to an automatic data processing machine, being an additional part of its equipment, and was thus truly described as an accessory. It was also of a kind used solely or principally with such a machine. As regards item 84.19, it was properly described as a switch.
Where two items in schedule 3 describe particular goods, as well as in certain other cases, s.17 of the Act provides that the rules of interpretation contained in schedule 2 shall have effect for the purpose of ascertaining which of the items applies. The rule here in question is rule 3(1)(a), which relevantly provides:
"Where, for any reason, goods fall within 2 or more items, ... the item, ... that applies to the goods shall, subject to sub-rule (3), be ascertained in accordance with the following principles:
(a) If one of the items, ... provides a more specific description of the goods than any other of the items, ... that first-mentioned item, ... applies to the goods."
It is not suggested that sub-rule (3) has any application to the present case.
The Administrative Appeals Tribunal, applying rule 3(1)(a), reached the conclusion that the item which provided a more specific description of the black boxes was item 84.55, in accordance with which they could be described as accessories (other than covers, carrying cases and the like) of a kind used solely or principally with automatic data processing machines. It is the correctness of this conclusion which is now in issue.
The first thing to notice about rule 3(1)(a) is that it will not always solve a problem of this kind. There are cases in which there is no rational basis for regarding one item as providing a more specific description of particular goods than is provided by another item: Rheem Australia Ltd v. Collector of Customs (NSW) (supra). In those cases it is necessary to resort to paragraph (b) or even paragraph (c) for a solution.
The goods having been identified for what they are (see Re Gissing and Collector of Customs (1977) 14 ALR 555 at 556, but see also Collector of Customs v. Savage River Mines (1988) 79 ALR 258 at 265), and having been found to fall within more than one item, what rule 3(1)(a) requires is a comparison between the items to see which provides a more (or the most) specific description of those goods. Sometimes the answer will be plain, but in other cases the comparison may involve difficulties. In the present case, the black boxes, being specialised adjuncts of a particular type of machine, a computer, in connection with which they perform the function of a switch, are described by the two items from very different points of view. The one item describes them by reference to the machine whose purposes they subserve; the other by reference to the general nature of the function they perform. The lack of a common basis resists comparison.
The question how specific a description is can only be answered by considering the extent to which the description reduces the area within which the thing described is to be identified. That depends very much on the range of things from which it is to be distinguished. For example, to describe a man seen in George Street Sydney as a Caucasian would not be to give a specific description of him; the same description might identify precisely a single individual if applied to a man seen crossing a section of the Kalahari desert.
One way of narrowing the area of choice, which is adopted in the drafting of some tariff provisions, is to refer to the use of an article. In the United States and Canada, a doctrine has been developed according to which, other things being equal, a description by reference to use is regarded as more specific than a description simply by the name of a category of thing. The doctrine is stated in Sturm on Customs Law and Administration (1980) at 469, citing Novelty Import Co., Inc., et al. v. United States 55 Cust Ct 169, CD 2570 (1965), appeal dismissed 53 CCPA 155 (1966), in the following terms:
"As between an eo nomine enumeration and an equally applicable enumeration by use, the use provision is generally (but not always) held to be the more specific."
In the same work at 470-471, authority is cited for the general proposition that
"a designation by specific use prevails over a designation of general character without special limitations as to use or other qualifications, a classification by composition, and an eo nomine designation, unless there is a clear legislative intent to the contrary."
See also United States v. Siemens America, Inc. (1981) 653 F 2D 471 at 477-478; Amersham Corporation v. United States (1983) 564 F Supp 813 at 824-825; and the Canadian case J.H. Ryder Machinery Company Ltd v. The Deputy Minister of National Revenue for Customs and Excise (1952) 1 TBR 69; and see United States v. Electrolux Corporation (1959) 46 CCPA 143, where the origin of the rule was attributed in part to the decision of the Supreme Court of the United States in Fink v. United States (1898) 170 US 584. There, a chemical salt, used as a medicine, was held more specifically described as a medicinal preparation than as a chemical salt.
There are obvious reasons, where authority is lacking in Australia, favouring reliance on overseas authorities concerning the application of nomenclature which is based on an international convention. Cf. Re Gissing (supra). But the doctrine I have been discussing sheds little light on the present case, since each of the descriptions in question relates to an aspect of the use of the product.
I do not think any universal rule can be laid down with respect to the effect of the inclusion in the expression of a tariff item of a word such as "accessory". Some accessories, though intended to be accessory to some other thing, are not really specific to it, and may be used with many different things. On the other hand, the black boxes have a highly specialised function, tying them very exactly to use with automatic data processing machines. They may be contrasted with the carpets for motor cars referred to in note IV(b) (in relation to the rule of specificity) of the Explanatory Notes to the Brussels Nomenclature. A carpet can go in many places; and use in a motor car, without more, will hardly differentiate it from other carpets. However, even car mats, when designed to fit a particular make of car, have been treated by the Administrative Appeals Tribunal as more specifically described by a sub-item referring to "accessories for motor vehicles" than by one referring to "mats": Re Gefo Australia Pty Ltd and Collector of Customs (1987) 12 ALD 295, a decision expressly approved by Davies J. in Walterscheid Australia Pty Ltd v. Collector of Customs (unreported, 5 February 1988).
In my opinion, a description of the black boxes as switches gives only a very general idea of the nature of the function which they perform; for, matching the vast number of electrical devices in the modern world, there is a great variety of switches of quite different types and different degrees of sophistication and specialisation. To describe the black boxes as accessories of computers is at least to narrow them down to the adjuncts of a special and identifiable type of machine. I think, in the case of an accessory which is tailor made for use with a particular machine, so that it cannot be used otherwise, this should be regarded as a quite specific description. Unless it is so regarded, there will be difficulty in seeing how item 84.55 could ever have application to accessories; for every accessory is likely to be described in some other item of schedule 3 by some description referring to its nature or function. I think the words in parentheses, "other than covers, carrying cases and the like", were inserted in item 84.55 in order to exclude accessories of a kind which obviously would not be appropriately identified, for tariff purposes, with that to which they were accessory. In a practical sense, considered as items of commerce, what gives these goods their identity is their function as adjuncts of computers. They are so specialised to serve that function that to describe them simply as switches would convey a quite inadequate impression of them.
For these reasons, the appeal should be dismissed with costs.
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