Collector of Customs v Chemark Services P/L
[1993] FCA 394
•16 JUNE 1993
COLLECTOR OF CUSTOMS v. CHEMARK SERVICES PTY LTD
No. VG209 of 1992
FED No. 394
Number of pages - 10
Customs
(1993) 114 ALR 531
(1993) 17 AAR 424
(1993) 42 FCR 585
COURT
IN THE FULL COURT OF THE FEDERAL COURT OF AUSTRALIA
Spender(1), Einfeld(1) and Lee(1) JJ
CATCHWORDS
Customs - Tariff classification of 250kg drums of imported pesticide - percentage of imports sold to professional horticulturalists - put up in forms or packings for retail sale - whether retail sale connotes a sale to a consumer in a quantity not larger than necessary to satisfy ordinary members of the public - relevance of safety label - preparation
Words and Phrases - "put up" - "retail sale" - "preparation"
Customs Tariff Act 1987 s 10, Schedules 2 and 3
Merkel v Wollaston (1906) 4 CLR 141
Australian Boot Trade Employees' Federation v Whybrow and Co (1930) 11 CLR 311
Collector of Customs v Savage River Mines (1988) 79 ALR 258
Gissing and the Collector of Customs (1977) 14 AAR 555
Sidney Cooke Ltd v Collector of Customs (1984) 2 AAR 178
Treacher and Co Ltd v Treacher (1874) WN 4
Plummer and Adams v Needham (1954) 56 WALR 1
Provident Life Assurance Co Ltd v Official Assignee (1963) NZLR 961
Grey v Pearson (1857) 10 ER 1216
Phillips v Parnaby (1934) 2 KB 299
Dolton Bournes and Dolton Ltd v Osmond (1955) 1 WLR 621
Chappell and Co Ltd v Nestle Co Ltd (1960) AC 87
Bayer Australia Ltd and Collector of Customs, NSW (1985) 7 ALN 84
Sumito Australia Ltd v Collector of Customs (Administrative Appeals Tribunal Decision No W91/47, 18 December 1991)
HEARING
MELBOURNE, 14-15 October 1992
#DATE 16:6:1993, SYDNEY
Counsel and solicitor for appellant: Mr H. Jolson QC and Mr J.
Lenczner instructed by the Australian Government Solicitor
Solicitor for respondent: Mr J. Slonim of Wisewoulds,
Solicitors
ORDER
1. Appeal allowed.
2. Orders of the primary Judge made on 29 May 1992 set aside. In lieu thereof ordered that the application be dismissed.
3. Respondent to pay appellant's costs of this appeal and of the appeal to this Court from the Administrative Appeals Tribunal.
Note: Settlement and entry of orders are dealt with in accordance with Order 36 of the Federal Court Rules.
JUDGE1
SPENDER, EINFELD AND LEE JJ This appeal from a decision of a single judge of this Court raises issues relating to the interpretation of heading 3808 of Schedule 3 to the Customs Tariff Act 1987 (the Act). Both the Collector of Customs (the appellant) and Chemark Services Pty Ltd (the respondent) challenge aspects of the decision of the learned primary Judge. His Honour was himself hearing an appeal by the respondent from a determination of the Administrative Appeals Tribunal (the Tribunal).
On the hearing of this appeal, the following findings of fact by his Honour were accepted by the parties:
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 methylcarba-modithioate. 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 (i.e. Chemark) as an aqueous solution of an optimal concentration. Metham sodium is 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 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, the relevant difference for present purposes being whether they attracted customs duty. Heading 3808 provides:
3808 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 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% 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 inserted 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 states:
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 appeared to be accepted by the parties that, but for note 2, the drums imported by the respondent could have properly been classified under heading 2930.20.00 as an organo-sulphur compound and imported free of duty. The appellant, however, considered that the drums satisfied the description of "insecticides, rodenticides, rungicides, 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%. In the appellant's view, note 2 had the effect of making this classification mandatory.
On its review of the appellant's classification, the Tribunal agreed with the appellant's broad classification of the drums, although it decided that the appropriate subheading was 3808.90.00, which also attracts a 15% rate of duty. The Tribunal decided
... 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:
As imported, it was not a product of an intermediate nature. It had a specific use and it was intended to be used precisely in the state in which it was imported. Prima facie, therefore, it was put up as a preparation.
The respondent appealed from the decision of the Tribunal 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". Those grounds and others were again raised in this appeal. In addressing the issues raised, it is convenient generally to follow the approach used by his Honour.
The role of the Customs Tariff classifier
9. His Honour held that the classifier's task was objectively to identify goods and then to match this identification with a heading in Schedule 3 to the Act: Re Gissing and the Collector of Customs (1977) 14 AAR 555; Collector of Customs v Savage River Mines (1988) 79 ALR 258. Accordingly his Honour concluded that it was open to the Tribunal to have regard to the circumstances in which metham sodium is sold in this country. That finding is not challenged in this appeal.
Put up in forms or packings
10. 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). His Honour was satisfied that this definition represented the ordinary meaning of the expression as used in heading 3808, and held:
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.
This interpretation is not challenged on appeal.
Retail sale
12. On the meaning of the expression "retail sale", the primary Judge made an extensive review of authority. His Honour had, as he said, "some difficulty in treating the ultimate consumer criterion as the sole determinant of whether a sale is by retail". His Honour held:
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.
...
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.
His Honour thus based his decision that the goods were not destined for "retail sale" upon two factors:
1. the goods were not ordinarily sold to ordinary members of the public; and
2. the goods were imported for sale in larger quantities than were necessary or appropriate to satisfy the requirements of the ordinary member of the public or home gardener.
The appellant contended in this appeal that the learned primary Judge erred in his determination of the meaning of "retail sale" within the meaning of heading 3808. In particular the appellant submitted that his Honour erred in not determining that a retail sale is a sale to the end user, and in finding that retail sale connoted the idea of "the sale of goods in a quantity not larger than is necessary immediately or shortly to satisfy the requirements of ... the ordinary man in the street". The respondent submitted that the learned primary Judge was correct in defining the twofold test for determining whether a sale is retail.
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. These principles clearly apply to customs tariff legislation: Merkel v Wollaston (1906) 4 CLR 141 at 147 per Griffith CJ.
"Retail sale" has been defined as "the sale of commodities in small quantities": Oxford English Dictionary (2nd ed., 1989); and "the sale of commodities to household or ultimate consumers, usually in small quantities": Macquarie Dictionary (2nd ed., 1991).
In Plummer and Adams v Needham (1954) 56 WALR 1, Dwyer CJ stated at 5-6:
According to the Oxford Dictionary, retail is selling goods in small quantities; Webster's Dictionary gives an alternative meaning, viz. a sale directly to a consumer. That alternative has justification in the decision of the Court of Appeal in Phillips v Parnaby, in which case the goods consisted of one parcel of two tons of coal, not a small quantity. In my opinion, where the commodity is sold is, as in the case before us, a single unit and in the form in which it is commonly purchased by a buyer for his own use, its bulk and price are immaterial.
Similarly, Virtue J held at 15-16:
Some support for the appellants' interpretation of "sale by retail" as referring to a sale in small quantities may no doubt be derived from the etymology of the word and also from its primary meaning as given in the standard dictionaries. But the word has undoubtedly acquired a specialised meaning of sales to an ultimate consumer as opposed to sales to the trade for the purpose of resale.
In Chappell and Co Ltd v Nestl 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.
Similar support for this "ultimate consumer" test can be found in Treacher and Co Ltd v Treacher (1874) WN 4; Phillips v Parnaby (1934) 2 KB 299 at 304 per Lord Hewart CJ; Provident Life Assurance Co Ltd v Official Assignee (1963) NZLR 961 at 965 per North P and Turner J.
In determining his second characteristic of a retail sale, the learned primary Judge referred to two decisions which in his Honour's opinion placed emphasis on the quantity of the goods sold. The first of these, Dolton Bournes and Dolton Ltd v Osmond (1955) 1 WLR 621, 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"; no 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.
We do not apprehend his Lordship's dictum to have been grounded upon a requirement in every case that the consumer of a retail sale be an "ordinary man in the street". Rather it indicates that although this criterion will often be relevant, it is not a determinative factor for consideration. However, even if it can be read so strictly, we accept the appellant's submission that Dolton is distinguishable from the present circumstances in that it is concerned with the definition of retail premises not retail sale.
In reaching his conclusion, the learned primary Judge noted that the Tribunal in Re Sidney Cooke Ltd v Collector of Customs (1984) 2 AAR 178 had applied a meaning similar to the one favoured by his Honour himself. However, the Tribunal stated in that case at 182:
As the matter was not fully argued and as a finding on that question is not critical to our ultimate conclusion in this matter, we are prepared, for the purposes of these reasons, to assume, without deciding, that the requirements as to "put-up for sale by retail" are satisfied.
The weight of authority seems to us to support a conclusion that the words "retail sale" have generally acquired a specialised meaning of a sale to an ultimate consumer. We do not think that the usage of the term limits such consumers to ordinary members of the public. The fact that in the present case almost all of the goods imported by the respondent were directly sold to professional horticulturalists and not ordinary gardeners as ultimate consumers is in our opinion irrelevant. Professionals can still be described as ultimate consumers. Thus in our opinion the learned primary Judge erred in his interpretation of the meaning of "retail sale" within the meaning of heading 3808.
Likewise, although more often than not a retail sale will be both a sale to the ultimate consumer and a sale of goods in a quantity not larger than necessary to satisfy the ordinary non-professional purchaser, some sales in larger quantities will also be retail. Thus his Honour's second criterion of the size or quantity of the sale cannot in our view be determinative.
Relevance of label
26. Although not necessary to the conclusion he had reached, the primary Judge went on to consider the relevance of the absence of a label on the drums as imported, and whether the drums could be said to be in a form or packing for retail sale despite the absence of a label outlining safety information prior to retail sale as required by Victorian law. His Honour held that the presence or absence of a label was not relevant to the interpretation of heading 3808. In considering whether the goods were in the form in which they were to be ultimately sold by retail, his Honour held:
... 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.
The respondent contended in this appeal not only that the question of whether there was or was not a label on the drums of metham sodium is relevant to the interpretation of heading 3808, but that the absence of a label defeats the appellant's argument in this case. This is because there cannot be a lawful retail sale of drums that contravenes Victorian law by failing to have a required label affixed outlining safety information and directions for use.
We respectfully agree with and adopt the findings of his Honour that the presence or absence of a label is not relevant to the interpretation of heading 3808. The addition of the label did not modify or enhance the metham sodium in any way, and could not be said to affect the question of whether the drums were in a form or packing bound or intended for retail sale when imported. As stated by his Honour:
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 metham sodium was therefore put up in a form or packing for retail sale and was, as a result of Note 2, correctly classified under sub-heading 3808.90.00, which attracts a 15% rate of duty.
Put up as a preparation
30. It was also contended by the respondent that the learned primary Judge erred in failing to set aside the Tribunal's finding that the imported goods were "put up as a preparation" within the meaning of those words in heading 3808. His Honour held that the Tribunal had correctly defined the word "preparation" by reference to the following passage from Re Bayer Australia Ltd and Collector of Customs, NSW (1985) 7 ALN 84 (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 regards 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 (sic) 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 Act as it was in 1982, which was identical in material respects to heading 3808 of Schedule 3 to the present Act. His Honour held in this connection:
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 respondent submitted that the term "preparation" means a chemical mixture specifically made or compounded for a particular application rather than a mixture "ready for use", and referred to a number of other headings in Schedule 3 which stated a particular purpose for which a preparation was to be used. The respondent said 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 horticulturalists. As a result the respondent argued that the chemical was not a "preparation". The appellant on the other hand submitted that the correct definition of "preparation" is as given in Bayer and that the metham sodium was in the form in which it was ultimately sold and in a form appropriate for use.
"Preparation" has been defined as "a substance especially prepared or made up for its appropriate use or application": Oxford English Dictionary (2nd ed., 1987); "the state of being prepared; readiness": New Collins Concise Dictionary of the English Language; "something prepared, manufactured, or compounded": Macquarie Dictionary (2nd ed., 1991).
The only discussion of the meaning of the heading thus far has occurred in Bayer and in the Tribunal's decision in Sumito Australia Ltd v Collector of Customs (Deputy President P.W. Johnston, Associate Professor R.D. Fayle, Associate Professor S.D. Hotop) unreported 19 December 1991. In essence the test expounded in Bayer is that the product cannot be a preparation of an intermediate nature not presented in the form ready to be marketed. The learned primary Judge accepted this definition and held that:
A preparation is a presentation of a substance which is ready to be used for a particular application or purpose.
In our respectful opinion this is the correct interpretation of the word "preparation" in heading 3808. In order to satisfy this definition in the present case, it was necessary that the metham sodium be ready to be used as one or more of the products referred to in heading 3808, viz. insecticides, rodenticides, fungicides, herbicides, anti-sprouting products and plant-growth regulators, disinfectants and similar products. The evidence before the Tribunal was that the metham sodium could be used in its imported form by an end user, such as a farmer, as a herbicide, fungicide or any similar type of purpose (appeal book pp 64 and 74). The Tribunal thus found as a fact:
There is no doubt that the chemical was manufactured for the purpose of use as a fumigant in horticulture. As imported, it was not a product of an intermediate nature. It had a specific use and it was intended to be used precisely in the state in which it was imported.
This finding is one of fact, against which there can be no appeal. The learned primary Judge was therefore correct in holding that the metham sodium imported by the respondent was put up as a preparation.
The disjunctive "or"
37. The final issue in the appeal, raised by the appellant in the course of argument, was that having made the finding that the metham sodium was "put up as a preparation", his Honour should have upheld the classification of the goods within heading 3808 on the basis that the goods were put up either for retail sale or as a preparation (emphasis added). The appellant submitted that the interpretation of retail sale was not determinative of classification and that his Honour wrongly ignored the disjunctive "or".
The respondent did not deny that the word "or" was disjunctive, but submitted that if there was no retail sale but the goods were a preparation, then Note 2 to the Schedule would have no application. Accordingly it argued that in such a case the goods are to be classified under the heading that most specifically describes them, in this case heading 2930.20 which refers to thiocarbamates and dithiocarbamates which are duty free.
Because we are of the opinion that these goods were for retail sale, it is not necessary to determine this matter here. However, we would have been inclined to accept the respondent's submission that the goods should be classified by reference to the heading that most specifically describes them: s. 10 and Schedule 2 of the Customs Tariff Act 1987. As the chemical description of the goods is more specific than the term insecticide, metham sodium would in such event be more accurately placed within heading 2930.20 and would consequently be free of duty.
We find that the respondent's drums were properly classified under heading 3808.90.00 as goods "put up in forms or packings for retail sale or as preparations". The appeal will be allowed. The respondent is to pay the appellant's costs of this appeal and of the appeal from the Tribunal.
8
4
0