Kenso Marketing (M) Sdn Bhd v Chief Executive Officer of Customs

The case Kenso Marketing (M) Sdn Bhd v Chief Executive Officer of Customs involved a dispute over whether a herbicide was produced in Australia for the purposes of certain legislation. The Tribunal was tasked with determining whether the herbicide, produced by Nufarm, was made in Australia, specifically whether the substantial process of manufacture was carried out in Australia and if the "factory or work costs" qualified as costs of manufacture. This case was ultimately decided in the Federal Court of Australia.

The central legal issues the court had to decide were whether a substantial process of manufacture was carried out in Australia and if the value of the Australian component of factory or work costs satisfied the statutory requirements. The parties agreed that these questions should be addressed in a specific order. The first issue was whether the chemical processes undertaken by Nufarm constituted a substantial process of manufacture as required by the relevant section of the legislation. The second issue was whether the value of the Australian component of factory or work costs met the statutory criteria.

The court determined that both issues were to be answered in the affirmative. It found that Nufarm’s two-step process, involving the animation of glyphosate acid and the formulation with a surfactant, was necessary to make the glyphosate acid suitable for use as a herbicide. This process was deemed substantial because it converted the glyphosate acid into a usable product, Roundup, which had practical utility as a herbicide. The court dismissed Kenso’s argument that glyphosate acid itself was as much a herbicide as the final product, Roundup. The court reasoned that without the animation and formulation processes, glyphosate acid could not effectively kill weeds, and thus, it could not be legitimately termed a herbicide. The second issue regarding the factory or work costs was also resolved in favour of Nufarm, satisfying the statutory criteria.

ORDERS:
1. Both appeals be dismissed with costs.