ICB Medical Distributors Pty Ltd and Chief Executive Officer of Customs
[2007] AATA 1105
•9 March 2007
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2007] AATA 1105
ADMINISTRATIVE APPEALS TRIBUNAL )
)Nos. N2005/1161; N2006/769
GENERAL ADMINISTRATIVE DIVISION ) Re ICB MEDICAL DISTRIBUTORS
PTY LTDApplicant
And
CHIEF EXECUTIVE OFFICER OF CUSTOMS
Respondent
DECISION
Tribunal Senior Member M D Allen Date9 March 2007
PlaceSydney
Decision The decisions under review are set aside and these matters remitted to the Respondent with the direction that the subject goods are to be classified to Tariff sub-heading 9021.10.90.
(Sgd) M.D. ALLEN
...........................................
Senior Member
CATCHWORDS
CUSTOMS TARIFF – whether subject goods classified to Tariff heading 6406 or 9021 – Tribunal satisfied that the subject goods are orthopaedic appliances being orthotic inserts and are correctly classified to Tariff sub-heading 90.21.10.90 --- Other – decisions under review set aside and the matters remitted to the Respondent with the direction that the subject goods are to be classified to Tariff sub-heading 9021.10.90
Customs Tariff Act 1995 – Schedule 2, Schedule 3
Chinese Food and Wine Supplies Pty Ltd v Collector of Customs (Vic) (1987) 72 ALR 591
Collector of Customs v Chemark Services Pty Ltd (1993) 42 FCR 585
Times Consultants Pty Ltd v Collector of Customs (Qld) (1987) 16 FLR 449
J.S. Levy Corporation Pty Ltd v Collector of Customs unreported Tribunal Decision No. 101
J.S. Levy Corporation Pty Ltd v Collector of Customs unreported Tribunal Decision No. 1415
Corporate Affairs Commission (South Australia) and Anor v Australian Central Credit Union (1985) 157 CLR 201
Barry R. Liggins v Collector of Customs (1991) 103 ALR 565
Pacific Hydro Limited and Ors v Office of the Renewable Energy Regulator [2006] FCAFC 39
REASONS FOR DECISION
9 March 2007 Senior Member M D Allen 1. By the current applications before the Tribunal, the Applicant sought review of decisions to classify goods to Tariff heading 6406 in the 3rd Schedule to the Customs Tariff Act 1995 (as amended), whereas the Applicant’s case is that the correct Tariff heading is 9021.
2. The goods themselves are described as:-
i.the “ICB Orthotics” branded range of shoe inserts sold to medical practitioners, made of single or dual density closed cell EVA foam, various lengths (2/3, 3/4 and full), and up to seven standard sizes (eg Small Junior, Junior, X-Small, Small, Medium, Large and X-Large); and
ii.the “Pedistep” branded retail range of shoe inserts, made of single density EVA foam, in various lengths (2/3, 3/4 and full) and a range of standard sizes.
3. The said goods are subject to a patent as an “orthotic insert” and have been included in the Australian Register of Therapeutic Goods. There was no challenge to the Tribunal’s jurisdiction to undertake the review.
4. The first duty of the classifier of goods for Customs Tariff purposes is to objectively identify the goods in their condition as imported. See Chinese Food and Wines Supplies Pty Ltd v Collector of Customs (Vic) (1987) 72ALR 591; Collector of Customs v Chemark Services Pty Ltd (1993) 42 FCR 585. As stated in Times Consultants Pty Ltd v Collector of Customs (Qld) (1987) 16 FCR 449, the classification of goods for tariff purposes is a practical wharf-side test, and the importers intended use for the goods is generally not determinative of their classification.
5. The only general rule of interpretation pursuant to Schedule 2 of the Customs Tariff Act applicable to these proceedings is Rule 1 which reads:
“The titles of Sections, Chapters and sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions …”
6. The possible headings in the 3rd Schedule to the Customs Tariff Act to which the goods might be classified are 6406 and 9021 which read:
6406PARTS OF FOOTWEAR (INCLUDING UPPERS WHETHER OR NOT ATTACHED TO SOLES OTHER THAN OUTER SOLES); REMOVALABLE INSOLES, HEEL CUSHIONS AND SIMILAR ARTICLES; GAITERS, LEGGINGS AND SIMILAR ARTICLES, AND PARTS THEREOF:
9021ORTHOPAEDIC APPLIANCES, INCLUDING CRUTCHES, SURGICAL BELTS AND TRUSSES; SPLINTS AND OTHER FRACTURE APPLIANCES; ARTIFICIAL PARTS OF THE BODY; HEARING AIDS AND OTHER APPLIANCES WHICH ARE WORN OR CARRIED, OR IMPLANTED IN THE BODY, TO COMPENSATE FOR A DEFECT OR DISABILITY.
7. Evidence as to the goods, their manufacture and use was given by Mr Kielt, the Managing Director of the Applicant Company. Examples of the subject goods were also taken in as exhibits.
8. Generally speaking, the subject goods can be described as devices made of Ethylene Vinyl Acetate (EVA), with a contour which supports the foot of the wearer and prevents any excessive movement of the foot either inwards (pronation) or outwards (supination) when walking or running. They are inserted into the shoe or boot. The goods come in various sizes in order to fit shoe sizes and type and also to adjust for the wearer’s weight. In the case of goods supplied to medical practitioners, ie the ICB Orthotics brand, they can be further customised by applying heat to the goods so as to mould them to the patient’s foot.
9. Annexure “7” to Mr Kielt’s statement is a technical dossier regarding the goods. It states under the heading ICB Device Design, “The core brief of the design team was to develop a range of pre-fabricated orthotics, capable of treating a variety of bio-mechanical anomalies that present themselves in clinical practice.”
10. The subject goods are manufactured in Taiwan. Following manufacture they are packed in pairs (left and right fitting) and labelled according to size. They are received by the Applicant Company in this configuration.
11. I am satisfied that when the 3rd Schedule to the Tariff Act refers to “orthopaedic appliances” no technical use of the words is intended. As the Tribunal pointed out in J.S. Levy Corporation Pty Ltd and Collector of Customs (unreported Tribunal Decision No. 101; dated 8 September 1978), after an exhausting review of the evidence and various medical dictionaries, “… as a matter of ordinary English, the expression “orthopaedic appliance” embraces a device or apparatus used in the practice of orthopaedics as a means to an end in the treatment of persons suffering from bodily deformities.” Cf the Oxford English Dictionary (1982) ed, “relating to or concerned with the cure of deformities in children or of bodily deformities in general.”
12. The Tariff heading referred to by the Tribunal in J.S. Levy Corporation Pty Ltd supra, was different in terms to, although the precursor of, the Tariff headings in questions here, but I consider the Tribunal’s examination and explanation of the term “orthopaedic appliance” on all fours with the question here.
13. As I understand the submissions of the solicitor for the Respondent, no question arises regarding the subject goods being recognised as “orthotics”. In any event, given the definition of “orthosis” and “orthotic” in the Oxford English Dictionary (1982 ed), I have no doubts that the concession was properly made. Those particular definitions read :
“orthosis … An artificial external device, as a brace or splint, which may be powered or unpowered and which prevents or assists relative movement in the limbs or the spine … So ortho.tic, serving as an orthosis; of or employing an orthosis or orthoses; orthotics, the application of orthoses.”
14. Note 6 to Chapter 90 contains a definition of “orthopaedic appliances” for the purposes of Tariff heading 9021. It reads :
“For the purposes of 9021, “orthopaedic appliances” means appliances for:
a.preventing or correcting bodily deformities; or
b.supporting or holding parts of the body following an illness, operation or injury.
Orthopaedic appliances include footwear and special insoles designed to correct orthopaedic conditions, provided that they are either (1) made to measure or (2) mass-produced, presently singly and not in pairs and designed to fit either foot equally.”
15. There was no real evidence before me as to the aetiology of the conditions the subject goods are designed to treat or correct. In his statement Mr Kielt said:
“ICB companies offer various products or services aiming at treating pathological conditions of the lower limb caused through structural dysfunction of the foot and leg … In the cases of these types of devices the primary goal in the use of the orthotic is to support or balance the foot in order to eliminate the need for the foot to compensate for a structural deformity of misalignment. In this sense the device is both correcting and controlling …”
and no issue was taken with these statements.
16. To say that a condition is “pathological” means that it is caused by disease. Cf Blakiston’s Gould Medical Dictionary 4th edition:
“Pathologic – 1 Of or pertaining to pathology
2 Pertaining to or caused by disease”“Pathology – 1 The branch of biological science which deals with the nature of disease, through study of its causes, its process, and its effects together with the associated alterations of structure and functions …”
17. Although, as stated above, there was a lack of specific evidence, I am prepared to draw the inference that the subject goods will correct structural dysfunctions caused by illness, operation or injury, as well as purely constitutional conditions. In any event, the subject goods are clearly designed to correct bodily deformities, that is to say, the dysfunction of gait.
18. The second part of the definition in Note 6 states that orthopaedic appliances “include …” The word include (or includes) is generally used by a draftsman to extend a definition. For example, Bennion, “Statutory Interpretation”, 4th edition, at p489 refers to an “enlarging definition” stating :
“The typical form of an enlarging definition is ‘T includes X’. This is taken to signify ‘T means a combination of the ordinary meaning of T plus the ordinary meaning of X.’ In other words the mention of X does not affect the application of the enactment to T in its ordinary meaning.”
Cf the discussion in Pearce and Geddes, “Statutory Interpretation in Australia”, 6th ed, paras 6.56 to 6.59 inclusive.
19. To my mind, Note 6 is an example of what Pearce and Geddes refer to in para 6.59, as the inclusive form being used to avoid possible uncertainly by expressly providing for the inclusion of particular borderline cases.
20. Therefore, Note 6 has the effect of including special insoles as orthopaedic appliances but restricting the inclusion to those that are either:
(1)made to measure or
(2) mass-produced, presented singly and not in pairs and designed to fit either foot equally.
21. The subject goods at their time of importation were presented as a pair, namely left and right foot, in the one plastic container. They were not designed to fit either foot equally but manufactured specifically to fit either the right or left foot.
22. Neither were the subject goods made to measure. The term “made to measure” was considered by the Tribunal in J.S. Levy Corporation Pty Limited v Collector of Customs (unreported Tribunal Decision No. 1415; 10 February 1984), where at para 22 the Tribunal said:
“It follows that it is unnecessary for us to consider the argument that the subject footwear was ‘made to measure for a specific disorder’. Our opinion on the matter is however, so clear that we consider that we should express it. It is that none of the subject footwear could at the point of importation be said to have been made to measure at all. It is made with additions and alterations in contemplation, or with a view to future addition of sections or paths that are themselves made to measure, but the shoes themselves as imported cannot be said to be made to measure.”
Similar comments apply to the subject goods.
23. An example of orthotics made to measure was given by Mr Kielt. In his evidence and at Annexure 13 of his Affidavit, reference is made to taking an impression of a patient’s foot in what is termed a ”foam box” whilst under weight, then a plaster cast is taken from the foam box impression and an orthotic fabricated to conform to that cast and the prescription of the orthopaedist.
24. However, the Applicant submitted that the subject goods were not insoles. The ordinary meaning of the “insole” is given by the Oxford English Dictionary (1970 Reprint) as :
“Insole … a The inner sole of a shoe or boot.
b. A flat piece of warm or waterproof material laid inside the shoe.”
25. At Annexure 17 of Mr Kielt’s Affidavit, an extract from the catalogue of a supplier of what one termed “physical therapy supplies”, draws a distinction between orthotics and shoe insoles.
26. A more technical discussion is given at Annexure 20 of Mr Kielt’s Affidavit. This is a paper entitled “The History of Shoes; Shoemaking”, by one Cameron Kippen of Curtain University of Technology, Perth, W.A. In that paper Kippen states:
“In-sole (inner sole)
A layer of material shaped to the bottom of the last and sandwiched between the outsole (or midsole) and the sole of the foot inside the shoe. The in-sole covers the join between the upper and the sole in most methods of construction and provides attachment for the upper toe box linings and welting. This provides a platform upon which the foot can operate and separates the upper from the lower. The in-sole board is necessary in shoes that are constructed using cemented or Good Year welt techniques because it is the attachment for upper and lower components. The majority of in-sole boards are made of cellulose and are treated with additives to inhibit bacterial growth. Athletic shoe wear will often have a sock line, a piece of material placed over the top of the in-sole board (glued in position or removable).”
27. In his Affidavit Mr Kielt said:
“117.… Other than lining a shoe, the only other clinical function an insole could have could be in its ability to absorb shock. Example of such special insoles including silicone based products such as those on pages 67 and 68 of Annexure 16. Whilst they may absorb shock, and thereby assist in the severity of symptoms, they do not operate to correct the pathology causing the symptoms …”
No evidence was called to rebut Mr Kielt’s statements nor was any expert evidence called by the Respondent to dispute the Applicant’s evidence as to what is an “insole”.
28. I find that the subject goods are more properly defined as orthotics, ie an artificial external device, such as a brace or splint, which prevents or assists relative movement in the limbs (OED 1982 ed). The goods are more than “insoles”, as that term is commonly understood. The best description of the subject goods is that they are orthotic inserts (compare for example the patent which uses this term). Likewise, the Respondent’s Statement of Facts and Contentions refers to the subject goods as being “shoe inserts”. This being so, they are orthopaedic appliances for correcting bodily deformities.
29. The relevant sub-headings under heading 9021 are:
9021.10.10 --- Footwear and special insoles made to measure Free
for a specific orthopaedic disorder9021.10.20 --- Footwear, NSA, excluding parts, designed to 15%
correct orthopaedic conditions DC:10%
From 1 January 2005 10%
DC:5%
From 1 January 2010 5%
9021.10.30 --- Special insoles, NSA, excluding parts, designed 10%
To correct orthopaedic conditions DC:5%
From 1 January 2005 7.5%
DC:2.5%
From 1 January 2010 5%
9021.10.4 --- Parts for goods of 9021.10.20 or 9021.10.30:
9021.10.41 --- Of metal 5%
9021.10.49 --- Other 10%
DC:5%
DCS:5%
DCT:10%
From 1 January 2005 7.5%
DC:2.5%
DCS:5%
DCT:7.5%
From 1 January 2010 5%
9021.10.90 --- Other Free
30. Quite clearly, the subject goods are not special insoles, nor are they made to measure. They are not footwear, nor are they insoles, special or otherwise. The only sub-heading that encompasses the said goods is 9021.10.90 --- Other.
31. Reference was made by the Respondent to the Harmonised System Explanatory Notes (often referred to as the Brussels Notes), as being acceptable extrinsic aids for construing the headings in the Tariff Act Schedule 3, in the interest of international uniformity. This submission is indisputably correct, but some caution is required as the Brussels Notes are a secondary guide only, and cannot displace the plain words of the statute. See Beaumont J in Barry R. Liggins, the Collector of Customs (1991) 103 ALR 565, at 571-573 and the authorities therein quoted. That is not to say, however, that an ambiguity must first be found before recourse can be had to the Brussels Notes. See Pacific Hydro Limited & Ors v Office of the Renewable Energy Regulator [2006] FCAFC 39, at para 25.
32. Volume 5 of the Brussels Notes contains the commentary on Chapter 90, heading 90.21, referring to “Orthopaedic Appliances”. A reading of the notes makes it clear that Note 6 to Chapter 90 of the Tariff is a direct transposition of the same note from the Harmonised System. The Notes specifically exclude from the heading of orthopaedic appliances, mass produced footwear with an arched inner sole, but the subject goods are not footwear. Apart from this, the Brussels Notes do not assist in the question before me.
33. I am satisfied that the subject goods are orthopaedic appliances being orthotic inserts and they are correctly classified to Tariff sub-heading 90.21.10.90 --- Other.
34. The decisions under review will be set aside and these matters remitted to the Respondent with the direction that the subject goods are to be classified to Tariff sub-heading 9021.10.90
I certify that the 34 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member M D Allen
Signed:
[Amanda Aitken].....................................................................................
Associate
Date/s of Hearing 16 February 2007
Date of Decision 9 March 2007
Solicitor for the Applicant John V Law & Co Consultants
Solicitor for the Respondent Australian Government Solicitor
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