ITW Australia Pty Ltd and Comptroller-General of Customs
[2017] AATA 787
•30 May 2017
ITW Australia Pty Ltd and Comptroller-General of Customs [2017] AATA 787 (30 May 2017)
DivisionGENERAL DIVISION
File Number 2015/6726
ReITW Australia Pty Ltd
APPLICANT
AndComptroller-General of Customs
RESPONDENT
AndSignode Packaging Group Australia Pty Ltd
OTHER PARTY
DECISION
TribunalEgon Fice, Senior Member
Date30 May 2017
PlaceMelbourne
The Tribunal affirms the decision under review.
....................................[sgd]....................................
Egon Fice, Senior Member
CUSTOMS - classification of goods under Customs Tariff Act - polyethylene terephthalate resin - whether goods eligible for concessional rate of tariff under by-law - whether goods are used in the manufacture of fibres or yarn - decision affirmed
Legislation
Customs Tariff Act 1995 sch 3 ch 39 heading 3907.60.00, chs 54, 55 sch 4 items 32, 38 (amended), 48
Customs Act 1901 ss 167, 271, 272, 273GA
Legislation Act 2003 ss 2, 13Chief Executive Officer of Customs, By-law No. 0618799, 11 December 2006, para 3
Chief Executive Officer of Customs, By-law No. 1303874, 25 February 2013, para 3Cases
Voxson Sales Pty Ltd v Collector of Customs (1993) 19 AAR 129
Diethelm Manufacturing Pty Ltd v Commissioner of Taxation (1993) 44 FCR 450
Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389REASONS FOR DECISION
Egon Fice, Senior Member
30 May 2017
ITW Australia Pty Ltd (ITW) imported polyethylene terephthalate (PET) resin between March 2011 and April 2013 which it used to manufacture a form of plastic strapping. In or about 2014, the Signode Packaging Group Australia Pty Ltd (Signode) acquired, amongst other things, all of ITW’s relevant liabilities arising from its importation of PET resin and is, accordingly, a party whose interests are affected by the decision which is the subject of review by this Tribunal.
In a letter dated 14 May 2012 Tradewin, ITW’s customs broker, notified the Australian Customs and Border Protection Service that its client may have inadvertently underpaid import duties in relation to the importation of PET resin. Tradewin said the matter was being investigated and it would advise Customs when an outcome had been reached. It requested that the notice be treated as voluntary disclosure.
On or about 17 May 2012 Tradewin wrote to the Comptroller-General of Customs (Customs) regarding the possibility of, in effect, re-entering the shipments of PET resin under what was then item 38 of Schedule 4 to the Customs Tariff Act 1995 (the Tariff Act). Schedule 4 of the Tariff Act deals with concessional rates of tariff. Item 38 provided:
38 Goods classified under 3907.60.00, 3907.70.00, 3907.9 or 3908 of Schedule 3, as prescribed by by-law Free
The relevant by-law in this case is By-law No. 0618799, which was made on 11 December 2006 and came into effect on 2 January 2007. Relevantly, it provided:
3. Item 38 in Part III of Schedule 4 to the Customs Tariff Act 1995 applies to goods classified under 3907.60.00, 3907.70.00, 3907.9 or 3908 in Schedule 3 to the Customs Tariff Act 1995, being polyamides and polyesters, uncompounded, for use in the manufacture of fibres or yarns, UNDER SECURITY.
I should explain what is meant by the expression UNDER SECURITY used in By-law No. 0618799. Section 42 of the Customs Act 1901 (the Customs Act) provides:
The Commonwealth shall have the right to require and take securities for compliance with this Act, for compliance with conditions or requirements to which the importation or exportation of goods is subject and generally for the protection of the revenue, and pending the giving of the required security in relation to any goods subject to customs control, an officer of Customs may refuse to deliver the goods or to give any authority to deal with the goods.
The Customs Tariff Amendment (Schedule 4) Act 2012 amended and repealed Schedule 4 to the Tariff Act with Item 48 succeeding Item 38. By-law No. 0618799 was replaced on 25 February 2013 by By-law No. 1303874, which retained the same description of its classification and use. By-law No. 1303874 took effect from 1 March 2013.
In a letter dated 20 November 2014 Customs informed ITW that it had been selected for a compliance activity. The letter explained that the purpose of compliance activities was to assess whether a person was complying with a Customs-related law; and whether the information communicated by a person to Customs and Border Protection was correct. Attached to that letter was a notice requiring ITW to produce commercial documents relevant to 40 import declarations previously lodged with Customs.
The response to Customs’ letter of 20 November 2014 was provided by Signode in a letter dated 15 December 2014. Signode informed Customs that the assets and liabilities of ITW were transferred to Signode as part of the sale and purchase agreement. Signode noted that there were potentially inadvertent administrative errors which needed to be brought to Customs’ attention. Regardless, Signode was of the view that the errors did not result in a short-payment of import duty and/or import GST as it considered the goods to be eligible for concessional duty rates under Schedule 4 of the Tariff Act.
On 18 March 2015 Customs informed Signode that it had completed its assessment of Signode’s imports. Tradewin had imported PET classified to Heading 3907.60.00 of the Tariff Act and had claimed a tariff concession under Tariff Concession Order (TCO) 0507317. On 23 December 2014 the General Manager of Tradewin informed Customs that 15 import declaration lines did not meet the terms of the TCO but he was of the view that the PET was eligible to claim a By-law.
Customs determined:
The PET entered on the thirty one (31) declaration lines in Attachment 1 have an intrinsic viscosity of 0.80+/-0.02 d dl/g and therefore do not meet the requirements of TCO 0507317. In addition, as advised by NTAC [National Trade Advice Centre] By-law Item 38 (now By-law Item 48) of Schedule 4 of the Customs Tariff Act 1995 does not apply. Duty and GST is therefore due and payable.
Customs enclosed, with its determination, a demand for payment of $208,260.07 Customs duty and $14,783.66 GST owing to the Commonwealth. That demand was split between ITW and Signode. In its decision, Customs noted that the Signode had sought an internal review of the decision made by NTAC and therefore the demand was held in abeyance.
On 4 November 2015 a NTAC Review Officer, having conducted an internal review, made the following decision:
Based on the information provided to me and my interpretation of the criteria and conditions contained in by-law 1303874 for item 48, the imported goods are not eligible for by-law 1303874 as they do not comply with the requirement that they are for use in the manufacture of fibres or yarns.
The Review Officer’s reasons for coming to this conclusion may be summarised as follows:
·the product is manufactured with the express purpose of being used by others as strapping to constrain goods
·a more specific description is provided by the term polyester (PET) strapping as opposed to being a polyester filament
·to comply with the condition of for use in the manufacture of fibres or yarns, the raw material would have to undergo a process to produce products that would be described as polyester fibres or polyester yarns
·according to Signode, the PET resin undergoes a number of processes and stages including: melting, extrusion, rolling, stretching, quenching, heating and annealing producing a product which is then marketed and designed to be used as a highly technical polyester strapping
·the method of production for making polyester strapping differs from the production of man-made fibres or yarns using PET or polyester raw material
·polymer fibre and filament production involves spinning which produces a short (staple) or a continuous length known as a filament and the staple fibres are then further processed into yarn, fabric or a garment
What followed on 27 November 2015 was a final demand for unpaid customs duty and indirect tax. That letter of demand also stated that Signode had the option of paying the customs duties under protest enabling it to access a review by the Administrative Appeals Tribunal. On 15 December 2015 ITW paid under protest line 1 of Import Declaration AA4GFX9HK.
Section 167 of the Customs Act provides that where a dispute arises as to the amount or rate of duty payable in respect of any goods, the owner of the goods may pay under protest the sum demanded by the Collector. Section 273GA of the Customs Act provides for review of decisions by the Administrative Appeals Tribunal as follows:
(2)Where dispute referred to in subsection 167 (1) has arisen and the owner of the goods has, in accordance with that subsection, paid under protest the sum demanded by the Collector, an application may be made to the Tribunal for review of the decision to make that demand and any other decision forming part of the process of making, or leading up to the making of, that first-mentioned decision.
ITW lodged an application seeking review of Customs’ decision to demand payment of duty on 22 December 2015. Signode was joined as a party to the proceeding on 18 February 2016.
There are three issues which I must determine. The first is whether the PET imported by ITW was for use in the manufacture of fibres or yarns. If I find the answer to that issue is in the affirmative, I need to determine whether the provision of security is a precondition to the operation of By-law No. 0618799. If I find that to be the case, because the PET resin in question has already been entered for home consumption and the time for giving and taking security has passed, I must also consider whether an importer who has already entered goods can amend the relevant import entry and claim that intended use By-law retrospectively.
IDENTIFICATION OF THE GOODS
I had in evidence a sample of granulated PET in the form in which it was imported by ITW. If it were required to be classified under the Tariff Act, there was no dispute that the correct heading would be 3907.60.00. That heading refers to Poly (ethylene terephthalate). To fall within Item 38 of By-law No. 0618799 and subsequently Item 48 of By-law No. 1303874, it must first fulfil the description of its use in the manufacture of fibres or yarns.
Mr R Northcote, Principle Lawyer from Director Customs Law and Prosecutions, Legal Services Division of the Department of Immigration and Border Protection, while accepting this was not a tariff classification case, submitted that the first task was to determine whether the goods produced by Signode from the PET granules should be objectively identified as fibres or yarns. The second step was to consider whether the goods produced by Signode met the statutory description of fibres or yarns found in the Tariff Act.
Mr J Slonim of counsel, who appeared on behalf of ITW and Signode, did not expressly refer to the usual requirement in a classification case, which is to first identify goods. In fact, other than properly interpreting the By-law, Mr Slonim submitted that there were no other criteria which could assist in determining the correct nature of the imported goods. He submitted that By-law No. 0618799 did not refer to the methods of manufacture or processes; the end product that may be produced from further processing of the fibres or yarn; or the purpose for which the products were manufactured or sold or their commercial appellations. Furthermore, the By-law did not refer to or impose limitations as to the size, weight, length or width or other dimensions of the manufactured fibres or yarns.
While I accept the submissions made by Mr Slonim regarding what is stated in the By-law, it seems to me to be inevitable that I need to examine the products produced by ITW/Signode in order to determine whether they in fact meet the statutory description. However, unlike a classification case, I accept it is not necessary and probably incorrect to make any statement regarding the identification of the products produced prior to conducting the statutory construction exercise. It seems to me that the purpose of the identification process, commonly referred to as a wharfside inspection, in classification cases is necessary in order to identify all possible Headings in the Tariff Act which may be applicable. That process seems to me to be unnecessary in this case and may lead to forming an erroneous preliminary view. This matter does not involve the classification of the imported goods but rather, the intended use of the imported product.
PROPER CONSTRUCTION OF BY-LAW NO. 0618799
Mr Slonim submitted that a By-law was a form of delegated legislation and accordingly must be interpreted in accordance with the rules of statutory construction. The definition of legislative instrument is found in s. 8 of the Legislation Act 2003 (the Legislation Act). Relevantly, it provides:
(2)If a primary law gives power to do something by legislative instrument, then:
(a)if the thing is done, it must be done by instrument; and
(b)that instrument is a legislative instrument.
The enabling provision is found in ss. 271 and 272 of the Customs Act. Section 13 of the Legislation Act deals with the construction of legislative instruments. Relevantly, it provides:
(1)If enabling legislation confers on a person the power to make a legislative instrument or notifiable instrument, then, unless the contrary intention appears:
(a)the Acts Interpretation Act 1901 applies to any instrument so made as if it were an Act and as if each provision of the instrument were a section of an Act; and
(b)expressions used in any instrument so made have the same meaning as in the enabling legislation as in force from time to time; and
(c)any instrument so made is to be read and construed subject to the enabling legislation as in force from time to time, and so as not to exceed the power of the person to make the instrument.
Section 272 of the Customs Act provides that the Comptroller-General of Customs may specify in a By-law made for the purposes of an item, or a proposed item, of a Customs Tariff that is expressed to apply to the identified goods, certain matters. It follows that the meaning given to the words fibres or yarns in the By-law must be consistent with that which is given to goods set out in the Tariff Act.
Mr Slonim referred to the decision of the Federal Court of Australia (Spender J) in Voxson Sales Pty Ltd v Collector of Customs (1993) 19 AAR 129 which involved the importation of a cellular mobile telephone and the application of a TCO. The question his Honour was required to resolve was whether the cellular mobile telephone fell within the terms of the TCO in question. On the question of construction of the terms of the TCO, his Honour said, at 137:
On the question then “does the cellular mobile telephone fall within the terms of the TCO as properly construed”, the principles of construction have long been settled. One applies the ordinary rules of construction, and if notwithstanding this doubt still remains as to the meaning of the words to be interpreted, one resolves that doubt in favour of the taxpayer. In determining the meaning of the words, one gives them their ordinary meaning unless it is proved that they have acquired some generalised secondary meaning through trade usage in commerce. If so, that meaning is to be preferred:…
It was accepted that words in a statute are to be given their ordinary meanings, taking into account the context in which they appear in the legislation, unless they are defined by that legislation. Furthermore, as Mr Slonim submitted, words are to be given their current meaning unless the statue provides otherwise. He also submitted that exemptions in revenue statutes that have the purpose of encouraging, rewarding or protecting some class of activity are to be given a liberal construction. He referred to the decision of the Full Court of the Federal Court of Australia (French, Hill and Whitlam JJ) in Diethelm Manufacturing Pty Ltd v Commission of Taxation (1993) 44 FCR 450 where French J said, at 457:
On the other hand an exemption which exists for the purpose of encouraging, rewarding or protecting some class of activity is not to be given a narrow application. The liberal construction of provisions of Customs and Excise legislation allowing rebates on duties and excise payable in respect of fuel used in mining operations is one application of that general proposition:…
The construction of a revenue statute requires at the outset a consideration of whether or not its words are used in their natural and ordinary meaning, or in some commercial sense, or perhaps, between those poles, some extension or limitation of the ordinary or commercial meaning.… On the other hand, the inclination to adopt commercial construction must not be taken to exclude the possibility that the words of a relevant statute may bear their ordinary and natural meaning…
The High Court of Australia (Brennan CJ, Dawson, Toohey, Gaudron and McHugh JJ) in Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389 said the following about the use of trade or technical terms, at 398 – 399:
When construing revenue statutes that utilise trade or technical terms, therefore, the law generally favours interpretation of the terms as they are understood in the trade to which the statute applies. In Herbert Adams Pty Ltd v Federal Commissioner of Taxation, Dixon J said: “A revenue law directed to commerce usually employs the descriptions and adopts the meanings in use among those who exercise the trade concerned.”
The courts have also said that it may be less difficult to establish a trade meaning which extends the ordinary meaning of an expression than one which limits the ordinary meaning in a specialised way. However, the “presumption” in favour of trade meaning in revenue statutes does not deny the possibility that words used in a revenue statute directed to commerce are to be understood in their ordinary meaning. [footnotes omitted]
The use to which the PET was put by ITW/Signode was described in the witness statement of Mr Andrew Dallison, the Managing Director (Australia & New Zealand) of the Signode Packaging Group Australia Pty Ltd. He said that PET filament was manufactured from the PET resin imported by Signode. Mr Dallison also described the filament produced as a monofilament. He said the finished monofilament was sold to the packing industry for use as strapping. The strapping produced by Signode came in a wide variety of dimensions and strengths.
Although Mr Slonim submitted that the By-law in question did not refer to methods of manufacture or process, Mr Dallas did describe the production process in his witness statement. He said:
The PET resin is mixed with minor additives, heated and extruded through a die to produce a monofilament which is then drawn, stretched and heated several times to lengthen and strengthen the monofilament and remove stresses. Stresses are created by drawing (stretching) the monofilament under high tension which also reduces the width and thickness of the strand (or filament). If these stresses are not relieved, the filament strands will try to revert back to the pre-drawn state, i.e. shrink in length, which is not desirable. The strands are therefore heat annealed to “relax” or release these stresses in order to permanently impart the tensile strength to the monofilament, permanently fix the dimensions and align the polymer molecules in a linear direction.
In my opinion, the terms fibre and yarn should be given their ordinary meaning having regard to the context in which those words appear in the Tariff Act. They are not trade or technical terms.
THE MEANING OF THE TERM FIBRE
It seems to me that I should first examine the ordinary meaning of the word fibre. Although this is not an exercise in splitting hairs over which definition or definitions ought to be adopted, there are some variations which need to be stated even if not serious contenders. That is because, contextually, the most appropriate definitions will be those which are not inconsistent with the descriptions set out in Chapters 54 and 55 of the Tariff Act, which refer to Man-made filaments; strip and the like of man-made textile materials and Man-made staple fibres respectively and, possibly, the Explanatory Notes to the Harmonized Commodity Description and Coding System (HSEN) published by the World Customs Organisation.
The Angus & Robertson Dictionary and Thesaurus relevantly defines fibre as: 1. A natural or synthetic filament that may be spun into yarn, such as cotton or nylon.… 3. A long fine continuous thread or filament. The Shorter Oxford English Dictionary defines fibre as: 5. A thread or filament forming part of the textile. The Macquarie Dictionary defines fibre as: noun 1. A fine thread-like piece, as of cotton, the jute, or asbestos. 2. A slender filament. 3. Filaments collectively. Chambers 21st Century Dictionary defines fibre as: 1 a fine thread or thread-like cell of a natural or artificial substance, e.g. cellulose, nylon.
Taking the common elements from those definitions, it seems reasonable to conclude that a fibre is a fine threadlike natural or synthetic substance or filament. The dictionaries I have consulted are almost universal in their description of the word filament. It is described as a slender threadlike body or fibre. Similarly, the word monofilament is universally described as a single strand of man-made or synthetic fibre.
The Tariff Act, at Chapter 54, distinguishes man-made filaments from strip and the like of man-made textile materials. In fact the Notes to Chapter 54 relevantly state:
Strip and the like of 5404 or 5405.00.00 are not considered to be man-made fibres.
Throughout Schedule 3 of the Tariff Act, the expression, man-made fibres, means staple fibres (that is, short fibres) and filaments of organic polymers produced by manufacturing processes. When one goes to the Chapter 54 Headings, further limitations are imposed on the filaments which fall within those headings. Both synthetic and artificial monofilament must be of more than 67 decitex (which is a measure commonly used in Europe calculated by the weight in grams of 10 km of yarn) and no cross-sectional dimension must exceed 1 mm. Strips of synthetic textile materials must not have a width exceeding 5 mm. I note that the smallest piece of man-made synthetic material produced by Signode appears to be 6 mm wide.
While I accept that the product produced by Signode from its imported PET does not readily fall within the heading textiles and textile articles which are the subject of Section XI of the Tariff Act, the fact that item 38 of the By-law deals with the manufacture of a product which fits the description fibre or yarn strongly suggests that the product which satisfies that description will fall within the general heading of a textile or textile article. Furthermore, I had in evidence advertising material which Signode has on its online store. Essentially, the products it manufactures are described in that material as plastic strapping.
If it is necessary, the Macquarie Dictionary defines strap as: noun 1. A narrow strip of flexible material, especially leather, for fastening or holding things together, etc. The examples of the product I had in evidence strongly fit that definition in that they appear to be a strip of flexible material.
THE MEANING OF THE TERM YARN
The Macquarie Dictionary defines the word yarn as: noun 1. Thread made by twisting fibres, as nylon, cotton or wool, and used for knitting and weaving. 2. The thread, in the form of a loosely twisted aggregate of fibres, as of hemp, of which rope is made (rope yarn). Chambers 21st Century Dictionary defines yarn as: noun 1 thread spun from wool, cotton, etc. The Australian Concise Oxford Dictionary defines yarn as: 1 any spun thread, ESP. For knitting, weaving, rope-making, etc. I also had in evidence an online dictionary described as fabricdictionary.com. It describes yarn as follows:
A generic term for a continuous strand spun from a group of natural or synthetic staple fibres (short lengths of fibres), filaments (long lengths), or other materials twisted or laid together for use in weaving, knitting, or some other method of intertwining to form textile fabrics.
In his written submissions, Mr Slonim said there were two principal forms of yarn, spun yarn and filament yarn. He said this information was taken from a Wikipedia entry accessed on 31 March 2016. It said:
22. Filament yarn is a continual strand or fibre of synthetic material which can be twisted or braided, or used as a single strand for industrial applications, the processing and use being determined in part by the thickness of the monofilament. Monofilament yarn is a continuous single strand which is used in many applications such as fishing line, washing line, fences, brushes, tennis strings, ropes, nets and geotextiles and can also be further processed to produce strapping and other products.
With respect to Mr Slonim, my examination of the current Wikipedia entry discloses the following statement:
Filament yarn consists of filament fibres (very long continuous fibres) either twisted together or only grouped together. Thicker monofilament is typically used for industrial purposes rather than fabric production or decoration. Silk is a natural filament, and synthetic filament yarns are used to produce silk like effects.
A search of the revision log of the Wikipedia page in question, including the historical record of the page as it appeared on 31 March 2016 is consistent with how it currently appears.
While I have no doubt that monofilament fibres may be used in the production of monofilament yarns, the monofilament fibres made using polyester (PET) polymers are of a relatively small diameter and are produced through a dual process of melt spinning and drawing (see extract from Shreeji Plastomech Pvt. Ltd). I had in evidence an extract from an article produced by the Comité International de la Rayonne et des Fibres Synthétiques (CIRFS), also known as the European Man-Made Fibres Association, dealing specifically with polyester. It describes various forms of production of polyester fibres. It also notes that fully oriented yarns are produced by fibres drawn on a spinning machine.
I had in evidence an article downloaded from the website madehow.com, which describes the manufacture of filament yarn. It describes the process in five steps including polymerization, drying, melt spinning, drawing the fibre and winding. The process of melt spinning is described as follows:
Polymer chips are melted at 500-518°F (260-270°C) to form a syrup-like solution. The solution is put in a metal container called a spinneret and forced through its tiny holes, which are usually round, that may be pentagonal or any other shape to produce special fibres. The number of holes in the spinneret determines the size of the yarn, as emerging fibres are brought together to form a single strand.
In another article tendered by Mr Northcote, which is taken from Encyclopaedia Britannica, the process of making polymer fibre is described in the following way:
Polymer that is to be converted into fibre must first be converted to a liquid or semiliquid state, either by being dissolved in a solvent or by being heated until molten. This process frees the long molecules from close association with one another, allowing them to move independently. The resulting liquid is extruded through small holes in a device known as a spinnerette, emerging as fine jets of liquid that harden to form solid rods with all the superficial characteristics of a very long fibre, or filament. This extrusion of liquid fibre-forming polymer, followed by hardening to form filaments, is called spinning (a term that is actually more properly used in connection with textile manufacturing). Several spinning techniques are used in the production of man-made fibre, including solutions spinning (wet or dry), melt spinning, gels spinning (a variant on solutions spinning), and emulsion spinning (another variation of solution spinning).
After the polymer is converted into fibre, the fibre being in a filament or staple form, to convert that product into yarn, like natural fibres, they need to be spun. This is described in the Encyclopaedia Britannica article in the following way:
Spinning is the process of drawing out and imparting twist to a mass of fibres. Filament yarns generally require less twist than staple. A fairly high degree of twist produces strong yarns; low twist produces softer, more lustrous yarn; and tight twist produces crêpe yarns. Two or more single strands of yarn may be twisted together, forming ply yarn.
From the descriptions provided regarding the process of manufacturing polymer fibres and the subsequent manufacture of yarn, it is clear that the polymer first needs to be extruded such that what is produced are spaghetti-like filaments which remain flexible. Those strands are then drawn out and twisted so as to create a filament yarn. That yarn may then be weaved to form a textile. As an extract from the Encyclopaedia Britannica states, a textile is any filament, fibre or yarn that can be made into fabric or cloth, and the resulting material itself. It then describes the process of producing yarn as follows:
Yarn is a strand composed of fibres, filaments (individual fibres of extreme length), or other materials, natural or man-made, suitable for use in the construction of interlaced fabrics, such as woven or knitted types. The strand may consist of a number of fibres twisted together; a number of filaments grouped together but not twisted; a number of filaments twisted together; a single filament, called a monofilament, either with or without twist; or one or more strips made by dividing a sheet of material, such as paper or metal foil, and either twisted or untwisted. The properties of the yarn employed greatly influences the appearance, texture, and performance of the completed fabric.
THE NATURE OF PRODUCTS PRODUCED BY SIGNODE
The products produced by Signode are set out on its website. Customs has downloaded that information and it was taken into evidence. Under the heading About Us-Signode Australia & New Zealand is a photograph of its manufacturing plant at Derrimut in Victoria, describing it as Signode Plastic Strapping and another photograph of its manufacturing plant in Kurri Kurri in New South Wales which is described as Signode Steel Strap. The Menu Page lists items of strapping, both plastic and steel, and various dispensers and tools for dealing with that strapping. It also lists what I would describe as consumables which are various items used for packaging. It has an Online Store which sets out in some detail the nature of plastic strapping which it manufactures. It describes itself in this way:
Signode Australia & NZ is Australia’s only manufacturer of Polyester (PET) plastic strapping & the industry leading provider of quality Polypropylene (PP) plastic strapping.
Signode Australia & NZ provides a complete range of plastic strapping products which are suitable for use in a variety of industrial light weight and heavy duty applications including the securing of corrugated, beverage, construction, timber, Hague, of wool, cotton, cartons and PVC pipe loads.
Signode’s Polyester plastic strapping is manufactured at its Derrimut, Vic site. Signode Australia & NZ also provides a comprehensive range of Polypropylene (VP) plastic strapping solutions and supports these products with a complete range of strapping dispensers, strapping handtools, strapping seals as well as semi-automatic and fully automatic strapping machines all of which are available directly through Signode Australia and NZ.
I had in evidence a list of PET products produced by Signode which included their width, thickness and length. The smallest of those products is an item described under the heading SIMA PET LINE which is 6 mm wide x 0.45 mm thick x 7300 mm in length. I was also provided with samples of the straps manufactured by Signode including its smallest product. Its appearance is that of a flat strip of plastic (polyester) which is appropriately described as plastic strapping.
Mr Slonim submitted that the process used by Signode to produce the strapping product commenced with the extrusion of PET to produce monofilament. With respect to Mr Slonim, while that is what Mr Dallison said in his witness statement, the product produced (which I had in evidence and which I understood to be the end product) cannot be properly described as a monofilament. A filament is properly described as a slender thread-like body. The extruded material produced by the process described by Mr Dallison does not even resemble that description.
While I accept Mr Slonim’s submission that the manufacturing process is not necessarily conclusive of the nature of the product produced, unless that process produces a fine thread-like product, the product cannot be properly described as a filament or monofilament. In fact the literature which I had in evidence describes the process of producing fibres by melting the polythene chips in a device called a spinnerette. The material is forced out of very tiny holes in that drum like device resulting in very fine strands of polythene, properly described as filament or fibre. That product is then further drawn, annealed and cured to stabilise its molecular structure.
The smallest extrusion produced by Signode is some 6 mm wide. It follows that the product so produced cannot properly be described as a fibre. It is either a strap or a strip, perhaps dependent upon its thickness and flexibility. Also, it cannot properly be described as a yarn, a description which requires the threads to be spun or twisted together which is then woven to produce a textile.
Although Mr Slonim submitted that there was no evidence to support Customs’ submission that fibres and yarns should be limited to their usage in the textile industry, respectfully, I disagree. Chapters 54 and 55 of the Tariff Act deal extensively with man-made filaments, man-made strips used in man-made textile materials and man-made staple fibres. In fact Section XI is concerned with textile and textile articles. However, Mr Slonim submitted that Item 48 set out in Schedule 4 of the Tariff Act deals with: Other inputs to manufacture including chemicals, plastics and paper. Accordingly, if the purpose of the By-law was to provide a measure of protection for the textile industry, it should have been made under Item 32 which deals with: Goods that are textiles, clothing and footwear.
However that submission ignores the words of each of the Item headings in question. In fact one needs to go back to the general heading which precedes both of those items to properly understand the context in which they appear. Schedule 4 has the general heading Goods that are textiles, clothing or footwear which immediately precedes the Item 32 heading. Likewise, the heading which precedes Items 45 and following, including Item 48, refers to Goods relating to manufacturing.
The PET granules, which are used in the manufacture of Signode’s product, are polyesters which would be classified under Chapter 39 of the Tariff Act. To fall under Item 48, the goods manufactured from the PET granules must be fibre or yarn. The PET granules are not themselves goods which are textiles, clothing or footwear used in the production of textiles, clothing or footwear. A cursory glance at those items listed under Item 32 discloses that they are fabrics used in the manufacture of other products. They are the goods so described and not goods which can be described as inputs to manufacturing fibres or yarns.
Even if I am wrong in my analysis of the Headings which precede the Items in Schedule 4 the Tariff Act, paragraph 3 of By-law No. 1303874 links the PET granules (polyester) with Chapter 39 of the Tariff Act. Note 2 under Chapter 39 sets out items which are not covered under that Chapter. Note 2(p) specifically refers to Goods of Section XI (textiles and textile articles). It follows, in my opinion, that the use of PET granules, which fall within Chapter 39, in the manufacture of man-made fabric or yarn, results in the manufactured product being correctly classified to Chapter 54 or Chapter 55 of the Tariff Act which deal with textiles and textile articles. Furthermore, the Notes to Section XI state that the section does not cover:
(g)Monofilament of which any cross-sectional dimension exceeds 1 mm or strip or the like (for example, artificial straw) of an apparent width exceeding 5 mm, of plastics (chapter 39), or plaits or fabrics or other basketware or wickerwork of such monofilament strip (Chapter 46);… [Polyester is frequently referred to simply as plastic]
The analysis I have undertaken above leads me to find that PET granules used by Signode in the manufacture of its strapping do not fall within By-law No. 0618799 or By-law No. 1303874. Signode does not manufacture fibres or yarns from that product.
Given the conclusion I have reached regarding the application of By-law No. 1303874, it is unnecessary for me to determine the second issue, that is, whether security could be provided retrospectively.
CONCLUSION
I have found that the PET granules used by ITW/Signode in the manufacture of its product described as Plastic Strapping were not imported for use in the manufacture of fibres or yarns. Accordingly, By-law 1303874 does not apply to the PET granules. The decision made by NTAC on 4 November 2015 was the correct decision. I affirm that decision.
I certify that the preceding 57 (fifty-seven) paragraphs are a true copy of the reasons for the decision herein of Egon Fice, Senior Member
...................................[sgd].....................................
Associate
Dated 30 May 2017
Date of hearing: 16 October 2016 Counsel for the Applicant
and Other Party:Mr J Sloanim Solicitors for the Applicant
and Other Party:Baker & McKenzie Advocate for the Respondent: Mr R Northcote Solicitors for the Respondent: Legal Division, Department of Immigration and Border Protection
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