Print & Pack Australia Pty Ltd and CEO of Customs
[2001] AATA 151
•28 February 2001
DECISION AND REASONS FOR DECISION [2001] AATA 151
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N2000/559
GENERAL ADMINISTRATIVE DIVISION )
Re PRINT & PACK AUSTRALIA PTY LTD
Applicant
And CHIEF EXECUTIVE OFFICER OF CUSTOMS
Respondent
DECISION
Tribunal Senior Member M D Allen
Date28 February 2001
PlaceSydney
Decision The decision under review is affirmed.
(Sgd) M D ALLEN
..............................................
Senior Member
CATCHWORDS
CUSTOMS TARIFF - Classification of goods. Effect of chapter notes. Goods part of a printing press line but imported separately. That the goods themselves had no individual function not determinative. Primacy of chapter notes.
Customs Tariff Act 1995 - Schedule 2, Schedule 3, Section XVI and Chapter 84
Chinese Food and Wine Supplies Pty Ltd v Collector of Customs (Vic) 72 ALR 591
Collector of Customs v Chemark Services Pty Ltd 114 ALR 531
Times Consultants Pty Ltd v Collector of Customs (Qld) 76 ALR 313
Liebert Corporation Australia Pty Ltd v Collector of Customs 23 AAR 287
Re Currency Handling Systems (Australia) Pty Ltd and Collector of Customs (unreported Tribunal Decision No 10051 of 1979)
Sharp Corporation of Australia Pty Ltd v Collector of Customs 22 AAR 35
REASONS FOR DECISION
28 February 2001 Senior Member M D Allen
By application lodged 11 April 2000 the Applicant sought review of a decision by the Respondent to refuse to refund duty paid under protest in respect of certain goods imported by the Applicant.
Prior to the decision under review the Applicant, through its Customs Agent, had lodged an application for a Tariff Advice for goods described as "Webline Drier for Offset Printing Line". The said goods were classified by the Respondent to tariff subheading 8419.39.00. At all material times the Applicant has contended that the said goods should be classified to tariff subheading 8443.60.00.
In Schedule 3 to the Customs Tariff Act 1995 the following headings and subheadings appear in chapter 84, namely:
"8419MACHINERY, PLANT OR LABORATORY
EQUIPMENT, WHETHER OR NOT
ELECTRICALLY HEATED, FOR THE
TREATMENT OF MATERIALS BY A PROCESS
INVOLVING A CHANGE OF TEMPERATURE
SUCH AS HEATING, COOKING, ROASTING,
DISTILLING, RECTIFYING, STERILISING,
PASTEURISING, STEAMING, DRYING,
EVAPORATING, VAPORISING, CONDENSING
OR COOLING, OTHER THAN MACHINERY OR
PLANT OF A KIND USED FOR DOMESTIC
PURPOSES; INSTANTANEOUS OR STORAGE
WATER HEATERS, NON-ELECTRIC:
…
8419.3-Dryers:
…
8419.39.00--Other
…
8443PRINTING MACHINERY, INCLUDING INK-JET
PRINTING MACHINES, OTHER THAN THOSE
OF 8471; MACHINES FOR USES ANCILLARY
TO PRINTING:
…
8443.60.00-Machines for uses ancillary to printing"
The first duty of the classifier is to objectively identify the goods in their condition as imported – cf Chinese Food and Wine Supplies Pty Ltd v Collector of Customs (Vic) 72 ALR 591; Collector of Customs v Chemark Services Pty Ltd 114 ALR 531. Further, as was pointed out by the Federal Court in Times Consultants Pty Ltd v Collector of Customs (Qld) 76 ALR 313 at 327, it is not the purpose of the importer of the goods which determines identification but:
"Regard must be had to the characteristics of the goods themselves, as they would present themselves to an informed observer:"
Notwithstanding that in Times Consultants supra it was said that the classification of goods for tariff purposes is a practical wharf-side test, as was pointed out in Chinese Food and Wine Supplies Pty Ltd supra, the characteristics of the goods, their get-up, colour, decoration, labelling and packaging are all relevant considerations and tests may have to be carried out and enquiries made to ascertain the relevant characteristics of the goods.
Mr Robert Partridge is the Technical Services Manager of the Applicant company. In evidence he stated that the business of the Applicant is the supply and servicing of capital equipment for the printing industry. The goods in question are part of a printing press line used to print commercial magazines and booklets. The rest of the capital equipment constituting the printing press line is imported direct from its manufacturer, Man Roland in Germany. The particular goods, however, being part of the printing press line are manufactured in the United States of America and were, in the instant cases, imported direct rather than via Germany.
A more complete description of the task performed by the subject goods is contained in Exhibit A1, the Applicant's Statement of Facts and Contentions. That document reads inter alia:
"Categories of web offset printing press lines are, (a) newspaper printing, using cold set inks, and not requiring a dryer, printed on natural paper, which has a different absorption rate to that of (b) commercial printing (books, catalogues, advertising, magazines etc, using heat set inks, and dryers 'so called'. which are printed on coated paper, and (c) label and packaging industry printing, which normally uses UV inks and dryers.
All elements of a web press line are designed to be compatible and interactive with the main function of the press line, that of printing.
A web line uses the same physical characteristics as a sheet fed press, the difference being instead of single sheets, a web or reel of paper is fed through print units, and (where required) dryers, chill rollers, folders etc, this enables faster press speeds. Most important is the simultaneous application of wet ink onto both sides of the paper. A web press line prints on both sides of the web, through a series of printing units.
Printing Inks used in the offset printing industry consist of at least two components; the two basic ones are pigments and resin vehicles (carrier), other elements may be drying agents to accelerate the drying process.
The composition and type of manufacture of the resin carrier determine the quality of the printing ink. It is only by using a resin carrier that the colour pigments can be transported and affixed permanently to the substrate during the printing process.
Offset printing ink must be waterproof, as the printing plate must be moistened every time before it is inked up.
To ensure that the pigment is uniformly fixed to the web or substrate during the print run and that the colour and print register are consistent with the desired quality, the solvent in the carrier (resin vehicle) must be removed (suspended in air), at a rate consistent with the speed of the press line. For safety reasons, this air must then be conditioned (scrubbed) to prevent the accumulation of explosive gases, any residual gases are evacuated through an air pollution control device, (either dryer integrated or free standing), the web must be supported, and tension maintained, whilst conveying the web through the 'dryer' at speeds up to 50 ft/sec.
SUBJECT GOODS
The MEGTEC so-called 'dryers' which are identified as an integral part of a commercial web offset printing line, do this. They are specifically designed for, connected to and controlled by the web printing press control centre."
Exhibits R1 and R2 are manufacturer's brochures describing the said goods. In cross-examination Mr Partridge agreed that the description of the goods in the brochures was accurate. Exhibit R1, for example states, regarding three of the imported goods (of which the others by a slightly different model are similar):
"DUAL-DRYTM Air Bars
MEGTEC's innovative DUAL-DRY air bar system meets the drying needs of the fastest high-speed presses. At the same time, the system offers the web control and stability to run a wide variety of stock weights, web widths, ink coverages and tensions. …"
Likewise Mr Partridge agreed that the following description was accurate:
"The DUAL-DRY III flotation dryer is designed for the world's fastest heatset web printing lines. … Three-zone design delivers rapid heat-up, optimal solvent removal and precise cooling to eliminate chill roll marking."
Likewise, Exhibit R2 describes the remaining goods as an "Integrated Dryer and Emission Control".
The Applicant, as part of its case, relied upon the evidence of Mr Partridge that the subject goods only partially dried the printing ink and that full drying did not occur until the paper was transferred to the chill rollers. As put in Exhibit A1:
"At the time the web line is being processed through the 'dryer', it is still an incomplete printed article, requiring further treatment and processing prior to completion.
The printing ink is also reacting chemically to its ingredients and setting itself, so that when the web exits the 'dryer', the ink is in a semi viscous state prior to coming into contact with the chill rollers, where the ink is crystallized, given back some of its moisture, hardened and achieves its gloss."
At page 59 of the documents prepared for the Tribunal, pursuant to section 37 of the Administrative Appeals Tribunal Act 1975, (being part of Document T7), a letter from the manufacturer of the goods to the Applicant's Customs Agent reads in part:
"First, these dryers provide a means or support to also convey the paper web by use of air flotation. That is that the paper has been printed on both side and has wet ink on both sides when it enters the dryer. The dryer not only increases the paper web temperature but evacuates the hydrocarbon ink vapors simultaneously, while transporting or conveying or supporting the paper web until such that the ink may touch a supporting roll, without smearing.
…
These critical features provide a means of drying the ink on both sides of the paper simultaneously while conveying the paper to the chill rolls and into the folder …"
Having regard to how the goods are described in the various documents and in particular the manufacturer's letter quoted above and the task the said goods are designed to perform, I am positively satisfied that the correct description of the goods is that they are dryers. Even if, as argued by the Applicant, the ink on the paper is not fully dried by the said goods, the ink is certainly less fluid as a result of the application of heat.
The Applicant submitted that the ink was not dried by the process but "cured". The Oxford English Dictionary (1970 reprint) gives the following definition in the various meanings ascribed to the word "cure":
"7. To prepare for keeping, by salting, drying, etc …"
Cf the Macquarie Dictionary (Third Ed):
"cure … 9. to prepare (meat, fish, etc.) for preservation, by salting,drying, etc. 10. To prepare, preserve, or finish (a substance), as concrete, by a chemical or physical process."
In other words to "cure", the ink is consistent with the application of heat. Even if the latter meaning of the Macquarie Dictionary is accepted then the chemical process in the ink takes place because of the application of heat.
Note 2 to chapter 84 to the Third Schedule of the Customs Tariff Act 1995 reads:
"Subject to the operation of Note 3 to Section XVI, a machine or appliance which answers to a description in one or more of 8401 to 8424 and at the same time to a description in one or other of 8425 to 8480 is to be classified under the appropriate heading of the former group and not the latter. …"
The subject goods answer the description in 8419. That is to say they treat materials by a process "involving a change of temperature such as heating … drying, … or cooling" and are not used for domestic purposes. The subject goods also answer the description in 8443 as the process of drying ink is "ancillary to printing".
The effect of notes to the various chapters in the Third Schedule to the Customs Tariff Act 1995 was discussed by the Full Federal Court in Liebert Corporation Australia Pty Ltd v Collector of Customs 23 AAR 287. In that case notes to section XVI provided:
"1. This section does not cover:
…
(m) Articles of Chapter 90;
…"
At pp289-290 the Court said:
"It follows that the appropriate procedure for determining the proper classification of goods that might seem to fall within any of the subheadings in Section XVI and Ch 90 is first, to determine whether the goods can appropriately be classified under any of the headings in Ch 90. If they can be, they are to be so classified and it is irrelevant that the goods might also fall within the terms of any of the headings in any of the Chapters of Section XVI or that they might be more appropriately classified under Section XVI than Ch 90. The goods may be classified under Section XVI only if none of the headings in Ch 90 is applicable."
And pointed out that the Note was one that "otherwise requires" within Rule 1 of Schedule 2 to the Customs Tariff Act 1995.
Liebert Corporation supra makes it clear that the order of priority established by Note 2 to Chapter 84 must be applied and although the said goods are machines for uses ancillary to printing, they are also dryers and thus must be classified to tariff heading 8419 rather than 8443.
The Respondent, in written submissions, referred to the International Harmonised System Explanatory Notes. These notes can be used to resolve ambiguity (although not to create an ambiguity) and whilst in this matter I regard the chapter notes and tariff headings as being unambiguous, a reference to the said Explanatory Notes confirms the view I have taken respecting the classification of the subject goods.
A further submission advanced by the Applicant was that the subject goods had no independent use of their own but were part of a production line, namely, that of a printing press. Reference was made to Re Currency Handling Systems (Australia) Pty Ltd and Collector of Customs (unreported Tribunal Decision No 10051 of 1979).
In that case the goods in question were automatic telephone diallers. Their use, as set out in the Tribunal's decision, was as follows:
"The automatic dialler performs no function unless supported, firstly, by a triggering mechanism, secondly, by a power transformer and, most importantly, unless connected into the telephone system."
In dealing with submissions, the Tribunal then said:
"Mr Lee submitted that the classification of the goods fell to be determined according to sub-rule (1) of Rule 3 of the Rules for Interpretation of Schedule I of the Tariff. That rule provides in effect that where for any reason goods fall within two or more items, then if one of those items provides a more specific description of the goods than any other of the items, the first mentioned item applies to the goods (see rule 3 (1) (a)). …"
And continued:
"For the respondent Mr Towill submitted that the subject goods were 'electrical line telephonic apparatus' falling within Item 85.13. The subject goods, he submitted, serve no function whatsoever until they are connected to a telephone line and cannot function without the telephone system. The goods as imported, he submitted, were complete in themselves. Accordingly, interpretative rule 2 (1) (a) did not arise for consideration. We would agree that the goods are complete."
The interpretative rules referred to above were found as Part 1 of the first schedule to the Customs Tariff Act 1966 (Act No 1359 of 1965). They are to be found restated as Schedule 2 to the Customs Tariff Act 1995 which schedule is headed "General Rules for the Interpretation of Schedule 3".
In my opinion Re Currency Handling Systems supra can be distinguished as it refers to general interpretative rules where goods fall within two or more items – see, for example, Sharp Corporation of Australia Pty Ltd v Collector of Customs 22 AAR 35. It has nothing to say regarding the instant case where the question is the effect of chapter notes upon classification.
Likewise, I do not regard notes 3 and 4 to section XVI as having any application to this matter. The printing press line is not a composite machine, but a collection of machines, and it is difficult to regard the printing press line as a "machine" as opposed to what it in fact is, namely a series of machines each carrying out individual functions.
For the reasons above therefore the decision under review will be affirmed.
I certify that the 24 preceding paragraphs are a true copy of the reasons for the decision herein of:
Senior Member M D Allen
Signed: .....................................................................................
AssociateDate of Hearing 16 February 2001
Date of Decision 28 February 2001
Representative for the Applicant Mr A J Clarke,
A Hartrodt Australia Pty Ltd
Solicitor for the Respondent Mr R Northcote,
Australian Government Solicitor's Office
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