Grundfos Pumps Pty Ltd v Collector of Customs
[1996] FCA 462
•7 JUNE 1996
CATCHWORDS
CUSTOMS - customs tariff - classification of goods for tariff purposes - principles upon which goods classified - pump - determination of essential character of goods - whether an automatic regulating or controlling instrument - binding decision of Full Court
Customs Tariff Act 1987 (Cth): Schedule 3 Headings 8413 and 9032
Byrne v Australian Airlines Ltd (1994) 47 FCR 300
Collector of Customs v Savage River Mines Ltd (1988) 79 ALR 258
Re Gissing v Collector of Customs (1977) 14 ALR 555
Liebert Corporation Australia Pty Ltd v Collector of Customs (unreported, Full Court, 1 November 1993)
Rheem Australia Ltd v Collector of Customs (NSW) (1988) 78 ALR 285
Times Consultants Pty Ltd v Collector of Customs (Qld) (1987) 76 ALR 313
Grundfos Pumps Pty Ltd v Collector of Customs
(No. SG 99 of 1994)
Judge: Heerey J
Date: 7 June 1996
Place: Melbourne
IN THE FEDERAL COURT OF AUSTRALIA )
)
VICTORIA DISTRICT REGISTRY ) No. SG 99 of 1994
)
GENERAL DIVISION )
B E T W E E N:
GRUNDFOS PUMPS PTY LTD
Applicant
- and -
COLLECTOR OF CUSTOMS
Respondent
JUDGE: Heerey J
DATE: 7 June 1996
PLACE: Melbourne
MINUTES OF ORDERS
The Court orders that:
The application is dismissed.
The applicant pay the respondent's costs, including reserved costs.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules
IN THE FEDERAL COURT OF AUSTRALIA )
)
VICTORIA DISTRICT REGISTRY ) No. SG 99 of 1994
)
GENERAL DIVISION )
B E T W E E N:
GRUNDFOS PUMPS PTY LTD
Applicant
- and -
COLLECTOR OF CUSTOMS
Respondent
JUDGE: Heerey J
DATE: 7 June 1996
PLACE: Melbourne
REASONS FOR JUDGMENT
This appeal from the Administrative Appeals Tribunal is concerned with a question of classification under the Customs Tariff Act 1987 (Cth). The applicant claims that the goods in question should have been classified to heading 9032.89.90 as follows:
AUTOMATIC REGULATING OR CONTROLLING INSTRUMENTS AND APPARATUS:
9032.8 - Other instruments and apparatus
9032.89 -- Other
9032.89.90--- Other
The classification which the Tribunal confirmed was heading 8413.70.90 as follows:
8413 PUMPS FOR LIQUIDS, WHETHER OR NOT FITTED WITH A MEASURING DEVICE; LIQUID ELEVATORS:
8413.70 - Other centrifugal pumps:
8413.70.90 -- Other
The Tribunal accepted the following statement of agreed facts as
to the goods:
*The unit is properly identified as electrically powered centrifugal pump with an automatic "floating level switch" or a controlling device attached.
*The unit operates as follows:
(a)in the usual case the unit is submerged in a confined area- see Figure 2 of T15 at 65
(b)the switch for the unit (the thing that "automatically" activates the unit) is the so called "float switch" which protrudes from the uppermost surface of the steel casing and is attached to the pump by means of a cable
(c)the float switch consists of a micro-switch assembly encased in a moulded plastic shell
(d)when water flows into the confined area, the unit "float switch" floats upward, rolling a metal ball onto the micro switch. This starts the impellers contained in the unit
(e)impellers are blades which create a centrifugal force, forcing the water through stainless steel unit and out via a hose attached at the top of the unit
(f)water can be pumped out to a pre-determined level. How this can be done is conveniently explained at T66.
Figure 2 referred to above is as follows:
The goods are a cylindrical shaped object weighing about 8kg. I was told that the dimensions were approximately 500 mm in height and 200 mm in diameter. The Tribunal made the following identification, which the parties accepted as correct:
... the Tribunal finds that the goods are objectively identified as an electrically powered centrifugal pump with an automatic floating level switch attached. The Tribunal further finds that the characteristics of the subject goods are such that they are suitable for use in draining water from buildings, cellars, sumps and septic tanks. The goods can also be used in fountains on a continuous basis or can be used to transfer liquid or circulate liquid on a continuous basis from one tank to another. The goods themselves fall to be described in the simplest of terms as a pump.
The notes to section XVI, which includes heading 8413, provide that:
This section does not cover:
...
(m) Articles of Chapter 90.
Chapter 90 includes heading 9032. It was accepted by both parties, correctly in my opinion, that if the goods come within Chapter 90 they are to be classified there even if there are other headings in the Tariff that may contain a more appropriate description of the goods: see Liebert Corporation Australia Pty Ltd v Collector of Customs, unreported, Full Court, 1 November 1993 at 5-6. Accordingly the Tribunal was not concerned with a question of available classification under two or more headings: See Schedule 2 rule 3. If the applicant succeeds in its argument that the goods are classifiable under heading 9032.89.90, that is the end of the matter.
The effect of the Tribunal's decision is that the rate of duty applicable is 12 per cent. If the applicant succeeds, the rate of duty is free.
The Tribunal's Decision
After reviewing the evidence and submissions, the Tribunal considered at some length the requirement of 9032 that the goods be "automatic". It accepted that the requirements of a manual operation to activate an automatic function did not mean that the goods ceased to be automatic. That question is no longer in issue.
The Tribunal rejected a number of the applicants's arguments, some of which were not advanced on the appeal and to which I shall not refer. Both before the Tribunal and in this Court the applicant relied on two notes to Chapter 90. The first was note 1(f) which provides:
This Chapter does not cover:
(f) pumps incorporating measuring devices, of 8413.
The second was note 6(a) which provides:
9032 applies only to:
(a)Instruments and apparatus for automatically controlling the flow, level, pressure or other variables of liquids or gases, or for automatically controlling temperature, whether or not their operation depends on an electrical phenomenon which varies according to the factor to be automatically controlled.
The Tribunal found the decision of the Full Court in Liebert to be determinative. That case also concerned sub-heading 9032.89.90, the goods in question being an uninterruptable power
system. The Full Court held that all the items under sub-heading 9032.89 applied to devices "that perform a regulatory or controlling function within systems or other devices of which they are but component parts". In the present case the Tribunal held that the goods in question did not satisfy that requirement and accordingly could not be classified within 9032.89.90. There being no other available classification within heading 9032, the appeal failed.
Conclusion
Counsel for the applicant contended, correctly in my view, that the Tribunal had to move in a descending order through the various levels of headings and sub-headings in 9032. As the Full Court said in Collector of Customs v Savage River Mines (1988) 79 ALR 258 at 265:
The arrangement of a Schedule into items, sub-items and paragraphs, discloses a hierarchy of classifications. Sub-rules (3), (4) and (5) of r 1 of the Interpretive Rules show the process of construction at any given level of classification is not to be affected by what is to be found at any lower level. What is in a sub-item cannot affect the application of an item. What is in a paragraph cannot affect the application of a sub-item.
Similarly in Rheem Australia Ltd v Collector of Customs (NSW) (1988) 78 ALR 285 at 297, Burchett J, after referring to the rules just mentioned, said:
In other words, the reader is commanded to stop at the level of specificity at which the problem is encountered, and not seek enlightenment from the more detailed sub-divisions which follow. These rules do not work in reverse. It is clear from the terms of r 1(2), and is indeed implicit in the limited ban imposed by sub-rules (3), (4) and (5), that regard is to be had to the terms of other provisions at the same level of specificity or at an earlier and more general level.
The passages just quoted were referring to the 1982 Act, but mutatis mutandis the principles stated are still applicable.
Counsel for the applicant contended, again correctly in my view, that the first step in classification was to decide whether the goods fell within heading 9032. If there was an affirmative answer to that enquiry, the goods had to come somewhere within the sub-headings under 9032 and the only available item was 9032.89.90. There may be ground for thinking the Tribunal did not adopt this approach. As I read its reasons, the Tribunal tacitly assumed that the goods fell within the heading 9032 but applied the reasoning of Liebert and held that the "component part" requirement applied. The Tribunal, as it were, passed through the gateway of heading 9032 and the further gateway of 9032.89 but found all the gates beyond were closed.
While I agree that the Tribunal should have considered first whether heading 9032 applied, I conclude that the answer to that enquiry to be the opposite to that for which the applicant contends. This was "a practical `wharf-side' task": Times Consultants Pty Ltd v Collector of Customs (Qld) (1987) 76 ALR 313 at 328. In the Tribunal's reasons the following summary of the respondent's case was noted:
It was the respondent's case that similarly a cellar drainage pump, identified thus, which was designed to pump liquids, could not be prima facie classifiable to Chapter 90. That is, the purpose or function of the subject goods is to pump liquids and the fact that the goods may have a feature which permits the pump to be turned on automatically is an extra feature which does not detract from the principal purpose and function of the goods which is to pump liquids from an environment. It was the case of the respondent that an incidental purpose or function cannot
govern the classification of goods.
In my opinion that contention is unanswerable. The goods were, and it is conceded properly identified as, a pump. They were not an automatic regulating or controlling instrument or apparatus.
The applicant's argument was that the float switch could be pre-set so that the goods ceased operation when the liquid reached a desired level. Hence, so the argument went, the goods operated to regulate and control the liquid.
I accept the possibility that a hypothetical user might have such an objective in mind, but goods "are not identified by reference to the use to which (they) may be put in the future, though their present suitability for that use may be a relevant factor": Re Gissing v Collector of Customs (1977) 14 ALR 555 at 557, Times Consultants Pty Ltd v Collector of Customs (1987) 76 ALR 313 at 327. The goods were identified as a pump, that is to say a mechanical device for moving liquid or gas from one place to another, and were designed to perform that function.
In any event, I am bound by the decision of the Full Court in Liebert. Its reasoning is not in my view distinguishable. Counsel for the applicant argued that it was inconsistent with the descending hierarchy approach discussed in Rheem and Savage River Mines. However, it is not appropriate for me as a single judge to canvass the correctness or otherwise of the Full Court's decision, as I was invited to do by counsel for the applicant.
A Full Court sitting on appeal from my judgment could decline to follow Liebert. As to the circumstances in which a Full Court should depart from a previous decision of another Full Court, see Byrne v Australian Airlines Ltd (1994) 47 FCR 300 at 304-305 per Black CJ and the cases there cited. While the law does not prohibit a single judge commenting on the correctness of a decision of a higher Court which is directly in point, and examples of this can be found in the cases (e.g. Young v Tout (1933) 50 WN (NSW) 234), it is a rare occurrence and in my respectful opinion, usually something to be avoided. A binding decision of a higher court is the law which a judge must apply and in this respect is no different from an Act of Parliament.
Note 1(f) does not in my opinion assist the applicant. If anything, it discloses an intention that pumps of whatever kind should not come within Chapter 90, even if they happen to incorporate a measuring device and thus might otherwise have been thought to fall within the heading of Chapter 90 (optical, photographic, cinematographic, measuring, checking, precision, medical and surgical instruments and apparatus; parts and accessories thereof).
Nor is note 6(a) of any assistance. It is restrictive, not expansive, of the reach of heading 9032. What might otherwise be an automatic regulating or controlling instrument apparatus will be excluded if it is not "for" (i.e. designed to fulfil the function of) automatically controlling the flow level, pressure or other variables of liquids or gasses, or for automatically
controlling temperature. Being identified as a pump, the goods in question are not any sort of automatically regulating or controlling instrument or apparatus.
The application will be dismissed with costs, including reserved costs.
I certify that this and the preceding eight (8) pages are a true copy of the reasons for judgment of his Honour Justice Heerey.
Dated:
Associate
Appearances
Counsel for the applicant: Mr K H Bell
Solicitor for the applicant: Slonims
Counsel for the respondent: Mr J Lenczner
Solicitor for the respondent: Australian Government
Solicitor
Date of hearing: 27 May 1996
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