Solu Pty Ltd and Chief Executive Officer of Customs
[2015] AATA 953
•11 December 2015
[2015] AATA 953
Division
GENERAL DIVISION
File Number(s)
2014/0549-0551; 2014/1055; 2014/3295-3304
Re
Solu Pty Ltd
APPLICANT
And
Chief Executive Officer of Customs
RESPONDENT
DECISION
Tribunal Professor R Deutsch, Deputy President
Date 11 December 2015 Place Sydney The decisions under review are affirmed.
........................................................................
Professor R Deutsch, Deputy President
CATCHWORDS
CUSTOMS AND EXCISE – customs duty – duty paid under protest – identification issue – classification of goods – whether aluminium profiles or articles suitable for furniture – decisions affirmed
LEGISLATION
Customs Tariff Act 1995 (Cth) Schedule 2, Schedule 3
CASES
Chinese Food and Wine Supplies v Collector of Customs(1987) 72 ALR 591
Deputy Commissioner of Taxation v Polaroid Australia Pty Ltd (1972) 46 ALJR 32
Re Epson Australia Pty Ltd and Chief Executive Officer of Customs [2004] AATA 324
Re Greig Novelties Pty Limited v Chief Executive Officer of Customs [1996] AATA 355
Re Gissing and Collector of Customs (1977) 1 ALD 144
Re National Panasonic (Australia) Pty Ltd and the Collector of Customs (NSW) [1985] AATA 132
Re Tridon Pty Limited v Collector of Customs (1982) 4 ALD 615
Re Tubemakers of Australia Pty Ltd and B.T.M. Agencies and Collector of Customs [1980] AATA 64
Times Consultants v Collector of Customs (Qld) (1987) 76 ALR 313
Veron-Carus Australia Pty Ltd and Thomas Creevey and Associates v Collector of Customs [1995] FCA 1283SECONDARY MATERIALS
Explanatory Notes to General Rules for the Interpretation of the Harmonized System
Macquarie Dictionary (6th ed, Macquarie Library, 2013)
REASONS FOR DECISION
Professor R Deutsch, Deputy President
11 December 2015
INTRODUCTION
Solu Pty Limited (“the Applicant”) is a company that imports aluminium products for use in kitchen and other types of cabinetry. Broadly, it designs its own product which is manufactured offshore and then imported and used in its own business and sold to other cabinet makers.
On six separate occasions between July 2010 and January 2014, the Applicant imported shipments of a variety of goods. The goods can best be described as falling into nine categories as follows.
·Category 1 Shadow Line Profile Handles
·Category 2 Aluminium Rail
·Category 3 Bold Line Profile Handles
·Category 4 Slim Line Profile Handles
·Category 5 CD Racks
·Category 6 DVD Racks
·Category 7 Cabinet Finger Recess
·Category 8 Aluminium Edge Profiles
·Category 9 Floating Shelf Mounting Track
The Applicant and the Respondent are in disagreement about two matters, namely:
(a)What is the proper classification of those goods for the purposes of Schedule 3 to the Customs Tariff Act 1995 (Cth) (the Act) (“the Schedule 3 Issue”)?
The possibilities recognised by the parties are:
·Tariff Sub-Heading 8302.42.00 being Base Metals Mountings Fittings suitable for furniture;
·Tariff Sub-Heading 8302.50.00 being Hat-racks, hat-pegs, brackets and similar fixtures;
·Tariff Heading 9403.90.00 being Furniture Parts;
·Tariff Sub-Heading 7604.29.00 being Aluminium Profiles-Other; and
·Tariff Sub-Heading 7604.21.00 being Aluminium Profiles- Hollow profiles.
(b)If the correct classification is Tariff Sub-Heading 8302.42.00, whether either one of two Tariff Concession Orders (TCOs), namely TCO 0312463 or TCO 0823641, applies (“the TCO Issue”)?
THE BROAD POSITIONS ADOPTED BY THE PARTIES
In relation to the Schedule 3 Issue:
·The Applicant’s primary argument is that the goods in Categories 1 to 8 should be classified to Tariff Sub-Heading 8302.42.00 and that the goods in Category 9, being the Floating Shelf Mounting Racks should be classified to Tariff Sub-Heading 8302.50.00.
·The Applicant’s second argument is in the alternative and is to the effect that all the subject goods should be classified to Tariff Sub-Heading 9403.90.00 as Furniture Parts. The Respondent rejects this argument in respect of all the goods in all the Categories.
·The Respondent’s argument is that the goods in Categories 1 to 6 should be classified to Tariff Sub-Heading 7604.29.00 and that the goods in Categories 7, 8 and 9 should be classified to Tariff Sub-Heading 7604.21.00.
In relation to the TCO Issue, if the correct classification was to Tariff Heading 8302.42.00:
·the Applicant contends that either TCO 0312463 or 0823641 applies; and
·the Respondent contends that neither of the nominated TCOs applies.
THE APPROACH TAKEN BY THE TRIBUNAL
The disputes now take the form of a variety of applications which have been put to the Tribunal. The applications are all in respect of imported goods where the duty demanded by the Respondent has been paid under protest by the Applicant and the Applicant has made a claim for a refund of duty.
Due to the combined effect of the Section and Chapter Notes of the Act, the Tribunal will consider the three Headings in the following order:
(a)8302
(b)9403
(c)7604
This methodology is effectively dictated by the following considerations:
·Note 1(d) to Chapter 94 excludes from Chapter 94 “Parts for general use” as defined in Note 2 to Section XV. “Parts for general use” in that Note includes Articles of 8302. Thus, it is clear that any goods classified under 8302 cannot be classified under 9403.
·Note 2 to Section XV (which includes Chapters 76 and 83) also provides that “… the articles of Chapters 82 and 83 are excluded from Chapters 72 and 76”. Thus, it is clear that any goods classified under 8302 cannot be classified under 7604.
·Note 1(k) to Section XV excludes from that Section “Articles of Chapter 94”. Thus, it is clear that goods classifiable under 9403 cannot be classified under 7604.
THE RELEVANT LEGISLATION
The Act imposes customs duty on all goods imported into Australia.
The amount of the duty to be paid is determined under Schedule 3 to the Act.
Schedule 3 contains a series of Sections with each Section divided into a series of Chapters.
Within each Chapter there are a series of Headings and under each Heading there are a number of Sub-Headings. It is these Headings or Sub-Headings that become known as Tariff Headings or Tariff Sub-Headings.
Every good imported into Australia falls into a particular Tariff Sub-Heading and particular consequences follow from that classification.
Thus, in respect of any good the correct Section, Chapter, Heading and Sub-Heading needs to be identified and then the rate specifically mentioned for that Sub-Heading is to apply.
The parties have agreed that the applicable Sections in respect of all the goods is either:
·Section XV (Base metals and articles of base metal); or
·Section XX (Miscellaneous manufactured articles).
The three competing Chapters are 83, 94 and 76 sequentially headed as follows:
·Chapter 83 Miscellaneous articles of base metal;
·Chapter 94 Furniture; bedding, mattresses, mattress supports, cushions and similar stuffed furnishings; lamps and lighting fittings, not elsewhere specified or included; illuminated signs, illuminated name-plates and the like; prefabricated buildings; and
·Chapter 76 Aluminium and articles thereof. .
Chapters 76 and 83 are in Section XV while chapter 94 is in Section XX.
The arguments in the present case come down to a choice between three Sub-Headings namely – 8302, 9403 and 7604.
The Applicant primarily contends that either Heading 8302 or 9403 applies while the Respondent contends that Heading 7604 applies.
It is necessary and desirable to set out the key parts of those three Sub-Headings. They are set out in numerical order.
7604 ALUMINIUM BARS RODS AND PROFILES …
7604.2 -Of aluminium alloys:
7604.21.00 -- Hollow profiles
7604.29.00 --Other
8302 BASE METAL MOUNTINGS, FITTINGS AND SIMILAR ARTICLES SUITABLE FOR FURNITURE DOORS, STAIRCASES, WINDOWS, BLINDS, COACHWORK, SADDLERY, TRUNKS, CHESTS, CASKETS OR THE LIKE BASE METAL HATRACKS, HATPEGS, BRACKETS AND SIMILAR FIXTURES;CASTORS WITH MOUNTINGS OF BASE METAL;AUTOMATIC DOOR CLOSERS OF BASE METAL:
8302.10.00 -Hinges
8302.20.00 -Castors
8302.30.00 -Other mountings fittings and similar articles suitable for motor vehicles
8302.4 -Other mountings, fittings and similar articles
8302.41.00 --Suitable for buildings
8302.42.00 --Other, suitable for furniture
8302.49.00 --Other
8302.50.00 -Hat-racks, hat-pegs, brackets, and similar fixtures
8302.60.00 -Automatic door closers
9403 OTHER FURNITURE AND PARTS THEREOF …
9403.90.00 -Parts
The General Rules for the Interpretation of Schedule 3 are set out in Schedule 2 to the Act and relevantly provide as follows:
1. 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 and Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions:
2. (a) Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this Rule), presented unassembled or disassembled.
(b) Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shall be according to the principles of Rule 3.
3. When by application of Rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows:
(a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.
(b)Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.
(c)When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.
…
6. For legal purposes, the classification of goods in the subheadings of a heading shall be determined according to the terms of those subheadings and any related Subheading Notes and, mutatis mutandis, to the above Rules, on the understanding that only subheadings at the same level are comparable. For the purposes of this Rule the relative Section and Chapter Notes also apply, unless the context otherwise requires.
THE MATERIAL PROVIDED TO THE TRIBUNAL
The Tribunal was helpfully provided with samples within each of the designated categories and with a video which purported to show some of the uses to which the various goods were put.
Some samples were provided to the Tribunal in cut down sizes.
In respect of the Floating Shelf Mounting Track, the Tribunal was also provided with the brackets that are used to secure the Track to the wall.
The video presentation centred largely on categories 3, 7, 8 and 9.
THE APPROACH TO APPLYING THE LEGISLATION
It has been well established by case law that tariff classification involves two steps.
The first step is to objectively identify the goods in their condition as imported – in other words as they would appear to an informed observer (the identification issue).
The second step is to match that identification to a classification in Schedule 3 of the Act (the classification issue). (Re Tridon Pty Limited v Collector of Customs (1982) 4 ALD 615 at 620-622; Chinese Food and Wine Supplies v Collector of Customs (1987) 72 ALR 591 at 599.)
THE IDENTIFICATION ISSUE AND ITS APPLICATION TO THE FACTS
The first task is what has been described as a ‘practical wharf side task’ which requires the identification of the goods in their condition as imported. (Re Gissing and Collector of Customs (1977) 1 ALD 144.)
This leads to a number of basic points which have been made in a number of cases and which can be usefully summarised as follows.
(a)The identification is made by reference to the characteristics which the goods present and not by reference to the intentions of the importer or the supplier. (Chinese Food and Wine Supplies at 599; Times Consultants v Collector of Customs (Qld) (1987) 76 ALR 313 at 327 ; Greig Novelties Pty Limited v Chief Executive Officer of Customs (1996) AATA 355.)
(b)In undertaking such a ‘wharf side task’, an informed visual inspection of their state at the time of importation is appropriate.
(c)The get-up, colour, decoration, labelling and packaging of the goods may be and often is relevant. (Chinese Food and Wine at 599.)
(d)Identification will frequently extend to characterisation of goods by reference to their design features or by reference to their suitability for a particular use where those characteristics emerge from an informed inspection of the goods as imported. (Re Tridon at 620.)
(e)The manner in which the goods are described are also said to be relevant considerations. (Re Gissing and Collector of Customs (1977) 1 ALD 144 at 146.)
(f)However, the naming of the goods needs to be approached with caution as the naming is not an essential step in the process of identification. In particular, how the manufacturer or importer might choose to advertise or market the goods is largely irrelevant. (Mercator Lighting v CEO of Customs [2014] AATA 694 at [65].)
This must be so as otherwise manufacturers and importers could determine the classification of goods by deliberately describing goods to fall within a preferred tariff heading.
(g)In carrying out the identification task the terms of the Sections, Chapters and Headings in Schedule 3 should not be used to control the identification but it will usually be necessary to be aware of the structure of the Schedule so as to be able to identify the characteristics of the goods that may be relevant to the classification” (Re Tridon at 620). This point is also made by Northrop J in Veron-Carus Australia Pty Ltd and Thomas Creevey and Associates v Collector of Customs (1995) FCA 1283 at [20] where he comments that:
In performing the task of identifying goods for classification, it is essential to have regard to the relevant classification heading. Some heading classifications make specific reference to a form or to a purpose. Where this is so, a “practical wharf-side” task, may not be appropriate. Evidence may need to be received relating to the form or purpose of the goods. In cases of this kind, the heading will need to be construed properly in order to determine what evidence is relevant to identify the goods. This is such a case where purpose forms an essential part of the classification.
The Nature of the Goods
In examining the goods or viewing them on the video, it is clear that each of these goods as imported is an aluminium product and the evidence indicates that each is made by way of an extrusion process.
In almost every case, after importation the goods are cut to smaller lengths as required by the user.
In broad terms there are nine different categories of goods and in some cases there are numerous products in each category carrying different Product Codes. The nine categories can be found in the Solu Product Catalogue for 2011 which formed part the evidence provided by the Applicant.
In that Product Catalogue:
·the first five categories appear under the broad umbrella heading “Handle Free Solutions”;
·the next category appears under the heading “Aluminium Glass Door and Edge Profiles”; and
·the final three categories appear under the heading “Miscellaneous”.
Detail regarding each of the nine categories is provided below.
Category 1 Shadow Line Handle Profiles
·The subject goods appear in the Solu Product Catalogue for 2011 (which formed part the evidence provided by the Applicant) under the heading “Handle Free Solutions”.
·They are sold by the Applicant under the trade name Solu Furniture Hardware.
·They are extruded aluminium made of alloyed aluminium and are imported in lengths of 3600mm and would be cut to length by the user.
·The goods do not include any fittings screws end caps clips or fastening devices.
·They are imported for subsequent inclusion in a Shadowline kit with other items that are not imported with the profile.
·They are used mainly in the manufacture of kitchen cabinetry but have other potential uses in home and office interiors and general building applications.
Category 2 Cabinet Finger Recess
·The subject goods appear in the Solu Product Catalogue for 2011 under the heading “Handle Free Solutions”.
·They are sold by the Applicant under the trade name Solu Furniture Hardware.
·They are extruded aluminium made of alloyed aluminium and are imported in lengths of 2400 or 3000mm and would be cut to length by the user.
·They are used mainly in the manufacture of kitchen cabinetry, furniture and home fittings, shop and office fittings such as partitioning systems and numerous other uses such as for interiors for home and office, door systems and general building applications.
Category 3 Aluminium Rail
·The subject goods appear in the Solu Product Catalogue for 2011 under the heading “Handle Free Solutions”.
·They are sold by the Applicant under the trade name Solu Furniture Hardware.
·They are extruded aluminium made of alloyed aluminium and are imported in lengths of 3600mm and would be cut to length by the user.
·The goods do not include any fittings screws end caps clips or fastening devices.
·The goods are designed as supports for use in the construction of floor standing cabinets.
·They are used mainly in the manufacture of kitchen cabinetry furniture, shop and home and office fittings.
Category 4 Bold Line Pro Handle
·The subject goods appear in the Solu Product Catalogue for 2011 under the heading “Handle Free Solutions”.
·They are extruded aluminium made of alloyed aluminium and are imported in lengths of 2400mm and would be cut to length by the user.
·The goods are sold by the Applicant as is for use in the construction of kitchen cabinetry and other possible uses.
Category 5 Slim Line Pro Handle
·The subject goods appear in the Solu Product Catalogue for 2011 under the heading “Handle Free Solutions”.
·They are sold by the Applicant under the trade name Solu Furniture Hardware.
·They are extruded aluminium made of alloyed aluminium and are imported in lengths of 2400mm and would be cut to length by the user.
·The goods are sold by the Applicant as is for use in the construction of kitchen cabinetry and other possible uses.
Category 6 Aluminium Edge Profiles
·The subject goods appear in the Solu Product Catalogue for 2011 under the heading “Aluminium Glass Door and Edge Profiles”.
·They are sold by the Applicant under the trade name Solu Furniture Hardware.
·They are extruded aluminium made of alloyed aluminium and are imported in lengths of 3000 or 3600mm and would be cut to length by the user.
·The goods are sold by the Applicant as is for use in the construction of kitchen cabinetry and other possible uses.
Category 7 and 8 CD Racks and DVD Racks
·The subject goods appear in the Solu Product Catalogue for 2011 under the heading “Miscellaneous”.
·They are sold by the Applicant under the trade name Solu Furniture Hardware.
·They are extruded aluminium made of alloyed aluminium and are imported in lengths of 2400mm and would be cut to length by the user.
·The goods are by the end user in the manufacture of furniture optical disk storage in furniture and carpentry and home, shop and office fittings and for numerous other possible uses.
Category 9 Floating Shelf Mounting Track
·The subject goods appear in the Solu Product Catalogue for 2011 under the heading Miscellaneous and the sub-category Shelf Supports.
·They are sold by the Applicant under the trade name Solu Furniture Hardware.
·They are extruded aluminium made of alloyed aluminium and are imported in lengths of 2400 or 3600mm and would be cut to length by the user.
·The goods do not include any fittings screws end caps clips or fastening devices.
·The goods have an enclosed void.
·They are used in the manufacture of fixed shelving, and shop and office fittings.
Conclusions Regarding the Identification of the Goods
Applying the principles outlined above the Tribunal concludes that:
·Using a ‘wharf side test’ as an informed observer, the goods in question have the appearance of items of aluminium;
·Viewed objectively and having regard to the possible classifications set out in the Schedule none of the goods bear any direct resemblance to or correlation with furniture or even furniture parts (Chinese Food and Wine);
·The goods as imported do not appear to have any particular suitability for furniture;
·The Floating Shelf Mounting Track does not include any fittings screws end caps clips or fastening devices. As an informed observer it is impossible to recognise the Floating Shelf Mounting Track as a “hat rack, hat-peg, bracket or similar fixture”
·The fact that the video indicates that their intended use is in furniture does not in and of itself make the goods furniture or furniture parts.
·The fact that the brochure refers to furniture and furniture parts in some instances is not decisive or even persuasive in determining the identification. Its description is relevant (Re Gissing) but must be approached with caution (Mercator Lighting).
THE CLASSIFICATION ISSUE
Are the goods “Base Metal Mountings Fittings and Similar Articles Suitable for Furniture” within Heading 8302?
Heading 8302 covers various mountings and fittings including certain parts of furniture such as handles.
If the goods are classified under Heading 8302 by virtue of Note 2 to Section XV they are excluded from both Chapters 76 and 94.
The Applicant contends that:
·the goods (with the exception of the “Floating Shelf Mounting Track”) should be classified under Sub-Heading 8302.42.00 – — Other, suitable for furniture; and
·the “Floating Shelf Mounting Track” should be classified under Sub-Heading 8302.50.00 – Hat-racks, hat-pegs, brackets and similar fixtures.
Mountings and fittings are relevantly defined by the Macquarie Dictionary as follows:
…
Mounting: something that serves as a mount, support, setting, or the like…
...
Fitting: anything provided as equipment, parts, accessories, etc….
The Explanatory Notes to General Rules for the Interpretation of the Harmonized System provide assistance in considering Heading 8302 as follows:
This heading covers general purpose classes of base metal accessory fittings and mountings, such as are used largely on furniture, doors, windows, coachwork, etc. Goods within such general classes remain in this heading even if they are designed for particular uses (e.g., door handles or hinges for automobiles). The heading does not, however, extend to goods forming an essential part of the structure of the article, such as window frames or swivel devices for revolving chairs.
(…)
E) Mountings, fittings and similar articles suitable for furniture
This group includes:
(1) Protective studs (with one or more points) for legs of furniture, etc.; metal decorative fittings; shelf adjusters for book-cases, etc.; fittings for cupboards, bedsteads, etc.; keyhole plates.
(2) Corner braces, reinforcing plates, angles, etc.
(3) Catches (including ball spring catches), bolts, fasteners, latches, etc. (other than key-operated bolts of heading 83.01).
(4) Hasps and staples for chests, etc.
(5) Handles and knobs, including those for locks or latches.
The critical issue here is one of classification.
In the view of the Tribunal, having regard to:
·the content of the relevant sub-heading;
·the relevant definitions and guidance provided in the Explanatory Notes; and
·the nature of the subject goods at the time of importation,
it is not possible to classify the subject goods as falling within Heading 8302.
For similar reasons that the subject goods are not furniture parts, they are not, in their condition as imported, fittings or mountings of heading 8302. They may be manufactured into such items. In other words, as imported, the subject goods are materials that may be used to make fittings and mountings of an indeterminate number but they are not, as imported, such items.
Is the Floating Shelf Mounting Track properly classified as a Bracket or Similar Fixture?
The Applicant contends that the “Floating Shelf Mounting Track” is classified to 8302.50.00 – Hat-racks, hat-pegs, brackets and similar fixtures.
Again the Explanatory Notes to General Rules for the Interpretation of the Harmonized System provide some assistance as follows:
(G) Hat-racks, hat-pegs, brackets (fixed, hinged or toothed, etc.) and similar fixtures such as coat racks, towel racks, dish-cloth racks, brush racks, key racks.
Coat racks, etc., having the character of furniture, such as coat racks incorporating a shelf, are classified in Chapter 94.
This good presents as an aluminium profile without any fittings screws end caps clips or fastening devices. It may be used or cut to length as required by the end user in the manufacture of fixed shelving and shop and office fittings
Having examined the sample provided and applying the relevant tests, the Tribunal concludes that it cannot be concluded that the Floating Shelf Mounting Track, as imported, can be classified as mountings or fittings or brackets or similar fixtures. Again, that may be one of their intended uses but as imported they do not fit within those product descriptions.
Are the goods properly classified as “Furniture Parts” within Chapter 94?
If the goods are furniture parts within Heading 9403, it is clear they are excluded from Chapter 76 and Chapter 83 by Section XV Note 1 (k).
Whether an item is a furniture part is a complex question that often depends on degree and context.
There are a number of arguments that can arise in this context.
The Deconstruction Argument
First, the word "part" normally connotes something which is a constituent or component of a whole entity. (Tubemakers of Australia Pty Ltd and B.T.M. Agencies and Collector of Customs [1980] AATA 64.)
As noted in Epson Australia Pty Ltd and Chief Executive Officer of Customs [2004] AATA 324 at [24]:
The Macquarie Dictionary describes a part as some but not all of a thing. However, Customs referred me to Waterscheid Australia Pty Ltd v Collector of Customs (1988) 7 AAR 555 (at 564) where Davies J in the Federal Court (following Gibbs J in the Polaroid case) [16], that the proper test in relation to the word "part" is "something which with others makes up a whole.
In the simplest test, when a complete good is disassembled into its components, those components are the parts.
Thus, if there is an import of parts into Australia and those parts were then used, as imported, to construct a cabinet, it would be expected that if the now constructed cabinet were deconstructed we would again have the imported parts that were originally imported.
Following that line of logic, the subject goods cannot constitute parts in that sense since after importation they need to be further worked either by further manufacturing or preparation before being a used in the construction of any piece of furniture. Such further work would include processes such as:
·Cutting to length;
·Cutting on an angle; and/or
·Drilling for fitting with screws.
Thus, in this case, the subject goods go through a variety of different possible processes before they are ready to be used as components in a greater whole.
If the greater whole were to be deconstructed, the components would not be broadly the same as the components that were originally imported.
Thus, in this sense, the subject goods are not, in their condition as imported, “furniture parts” They need to be further manufactured or prepared before being a particular identifiable part of any piece of furniture, such as being cut to length, cut on an angle or drilled for fitting with screws.
The Use for Manufacturing Other Goods Argument
Secondly, it can be argued that a good is not a furniture part if the goods are materials for use in manufacturing other goods.
The Respondent contends that there are two means of distinguishing “materials” that are used in the manufacture of other goods from “parts of a good”.
·First, a distinction is to be drawn between, on the one hand, a material that is used in the manufacture of another good where the original good is substantially transformed or worked before it is incorporated into the whole and, on the other hand, a good which while incorporated into a whole is largely not transformed or worked before incorporation.
·Secondly, a distinction is to be drawn between, on the one hand, something which is incorporated in its entirety into the whole on a fixed numerical basis and, on the other hand, something which can be used for making multiple goods. The former is more likely to be a furniture part but the latter is merely a material used in the completion of another product.
Thus, the key issue is the presence or absence of a definite numerical relationship to a finished good at any one point in time.
In combining these distinctions one might also conclude, perhaps more controversially, that a material which does not require substantial transformation but which can be used in making multiple goods can be characterised as a ‘dedicated material’ but not as a ‘part’.
Looking at the first distinction, in the normal course of events, if you take something like a kitchen cabinet apart, you will not find a 3.6 m metal strip. In other words, the original has been worked before incorporation and has thus morphed into something else as a result of being integrated into the whole.
To put it another way, materials that are used in the manufacture of another good effectively “disappear” into and become that other good.
Parts on the other hand, when the completed good is disassembled, retain their character as a complete good in their own right. (Deputy Commissioner of Taxation v Polaroid Australia Pty Ltd (1972) 46 ALJR 32.)
In relation to the second basis of distinction, the need for a numerical relationship between the parts and the parent good, or between the accessories and the parent good, was raised by the Administrative Appeals Tribunal in Re National Panasonic (Australia) Pty Ltd and the Collector of Customs (NSW) [1985] AATA 132 at [23]:
Finally, we consider that there is some further support for our conclusion in the consideration that there would seem to be implicit in the meaning of both "part" and "accessory" that there is a recognized, predetermined and relatively fixed numerical relationship between the necessary number or numbers of part or accessory, on the one hand, and the equipment or other principal operating unit with which a particular part or accessory is intended to be used at any one time, on the other.” (emphasis added)
The Applicant has sought to compare the goods in question in this case to the tubes in the decision of this Tribunal in Re Tubemakers of Australia Pty Ltd and BTM Agencies and Collector of Taxes (1980) AATA 64. That case involved the importation of certain products related to bicycles. However, it seems clear that the products in question in Tubemakers being certain tubes were in a fixed relationship to each bicycle in question in that case – one tube set to one bicycle with each individual tube in the set being a particular fixed component.
In contrast in this case, the subject profiles in this matter do not demonstrate a fixed numerical relationship to a finished good.
Each tube in Tubemakers was identifiable as a single unfinished part. The case involved the importation of what was described as a “Reynolds 531 set” which was described as follows:
The Reynolds 531 set (Exhibit A) consisted of the three major frame components, namely the top tube, the main tube (also described in an Advertising Brochure – Exhibit T19 – as the "Bottom Tube") and the seat tube into which the seat assembly fits; the head tube which is the small piece of tubing that joins the top and main tubes together; the tapering rear stays (described in the Brochure as "seat stays") that run from the seat to the back wheel; the two front fork blades which, as imported, are tapered and raked at a slight angle; the rear chain stays (also called "rear fork blades") that connect the centre bracket unit which carries the pedals to the rear wheel and which, as imported, are fluted or indented to allow clearance for the rear wheel: the steering tube which connects to the front fork crown linking the fork blades into a set of forks; and the bridge strutting for the brake. Of these components the top tube and the main tube were double butted (i.e butted at both ends), whilst the seat tube and steering column were single butted, in addition, the ends of the front fork blades, the rear stays and the chain stays were "domed and slotted", a feature which Mr Bundy said was usual in bicycle manufacture and which was designed to allow an inside and outside fitting to the component which is attached to the ends of the fork blades or stays. This method of fitting gives added strength.
Significantly, the goods imported in Tubemakers were not tubes to be cut into a variable number of parts. The only cutting required was to fine-tune the part to the intended rider’s body size:
In both sets the tubing was supplied in lengths slightly longer than were likely to be required, leaving the manufacturer of the frame to cut and mitre the tubing as needed to meet the specifications to which the individualised frame was to be made.
This is clearly in marked contrast to the subject goods involved in this case. The goods here lack a fixed relationship as a specific part for a particular good.
This is a discernibly distinguishable situation to that which prevailed in Tubemakers where was said before there was a clear fixed relationship between a specific part (the tube) in respect of a specific good (the bike). In other words, the goods here can be, and are, cut and shaped to form part of any of a number of different possible applications.
For example, a 3600mm “Shadow Line Handle Profile” could conceivably be used in the manufacture of one custom sized drawer or anywhere up to twelve drawers for standard cabinets (Standard width dimensions for floor cabinets in Australia are 300mm, 450mm, 600mm, 750mm, 900mm, 1050mm and 1200mm). In other words, a single profile strip could and often would, in normal use, be used to manufacture anywhere from 1 to 12 different drawers.
Differences between handles that are parts and materials for making handles are illustrated in the Solu catalogue by the way they are sold as either units or by lengths.
The first “Boldline Profile Handle" listed is 2460.38.010 which is imported in 2400mm lengths with 20 pieces to the carton. With cutting, this could be used to make top finger access edges in the manufacture of eighty doors for various 600mm cabinets or could be used for the manufacture of a variety of combinations of doors, drawers or other items where the user wishes to incorporate an edge for fingers to pull or push. It is clearly designed and intended to be sold to manufacturers for the manufacture of other goods.
Thus, the “Boldline Profile Handle”, in particular, is identified as a profile shape suitable for manufacture into furniture parts.
While the parts manufactured from the profiles shapes may be intended to be an alternative to handles and suitable for furniture, the items being imported are not handles. Rather, handles are produced from the imported good.
Witness evidence
Two witnesses were called upon to provide evidence to the Tribunal.
The first was Mr Andrew Li, the managing director of the Applicant and the principal person involved with the operation of the Applicant. He provided a written statement dated 27 August 2014 and gave evidence at the hearing.
Most significantly he provided certain background information about the products in question and demonstrated the use to which the products can be put.
His evidence was broadly to the effect that the various goods almost invariably end up one way or another as part of a completed furniture unit. More specifically he expressed the view that apart from the Mounting Track and the CD/DVD Racks the goods can be described either as “parts for furniture and as base metal mountings or fittings for furniture”: Para 19(j) Witness Statement or simply “parts for furniture and as mountings or fittings for furniture: Para 23(e).
The Mounting Track he considered to be a part of a bracket for a wall shelf (para 22(h) and the CD and DVD Racks as “mountings or fittings for furniture”: para 25(f).
Nothing in the video that was provided as part of the Applicant’s evidence contradicted anything that Mr Li put to the Tribunal.
His evidence and the video certainly suggest that the Applicant (in the form of Mr Li) in particular viewed the bulk of the subject goods as being furniture or at the very least furniture parts,
The Respondent’s witness was provided so as to give an independent view as to the nature of the goods. This evidence was provided to the Tribunal initially in the form of a witness statement provided by Mr Richard Michael, the General Manager Operations at Capral Limited. Mr Michael also made himself available at the hearing and was examined and cross-examined at the hearing.
Mr Michael has almost 30 years’ experience in the aluminium industry and has held his current position with Capral for the last three years.
Mr Michael explained to the Tribunal that his company is in competition with the Applicant and that Capral had lodged an anti-dumping complaint in relation to aluminium extrusions exported to Australia from China.
The Tribunal queried the Respondent’s representative as to why the expert views of someone who is unlikely to be viewed as truly independent were sought and it was explained to the Tribunal that the possible experts in the field who would be available was extremely limited. Mr Michael was well versed in the area and was available to provide evidence.
After hearing from the Respondent’s representative and having heard from the witness, the Tribunal accepts that the Respondent had used its best endeavours to find an appropriate witness and that notwithstanding the matters mentioned above, Mr Michael was able to exercise independent and unbiased judgment in relation to the matters at hand.
Most importantly Mr Michael confirmed in his statement that in his view all the goods in question:
·“Are of types which serve needs e.g. edging, common across a range of goods”; and
·“Would not simply be used “as is” but would need to be changed by being further worked (e.g. cut, drilled, machined) so as to make any of the furniture products shown in the photographs in (the Applicant’s) catalogue”: Witness Statement of Richard Michael dated 16 February 2015 para 13.
Mr Michael also added that:
I have been asked if the extrusions are a specific part of an identifiable good. In my opinion the goods are not a part of an identifiable good but something that is made into parts to be used in making something. For example each extrusion could be cut to make multiple parts of the same type for a good or goods or that individual extrusion could be cut to make different parts for different goods. A simple analogy would be a plank of timber that needs to be cut to length and can be used to make a window frame or a number of window frames or a joist. The same piece of wood could be used to make multiple copies of the same good or different goods. The same applies to the extrusions.
Having regard to the Tribunal’s comments above and the views expressed by the witness Mr Richard Michael, the Tribunal concludes that the subject goods, as imported, are not identifiable as parts of another identified good, but are materials that are used in the construction of an unidentified number of items to be incorporated into not only “furniture” but an indeterminate number and type of other goods.
The views expressed by Mr Li that the goods in question were in the view of the Applicant furniture parts or a bracket for a wall shelf or a mounting or fitting for furniture was clearly relevant (Re Gissing) but in no way determinative (Mercator Lighting) especially having regard to the nature of the goods as at the time of importation.
Are the goods “unfinished parts”?
Interpretive Rule 2(a) of Schedule 2 of the Act includes a provision for unfinished goods:
Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished article has the essential character of the complete or finished article.
While an unfinished part may demonstrate the essential character of a part, a material which can be used in making an indeterminate range of goods does not have the essential character of a part of a particular good.
Therefore, it must follow that as the Tribunal is of the view that all of the items in question are not furniture parts when they are in an unfinished state, the unfinished good cannot be an unfinished furniture part.
Are the goods properly classified as “Aluminium Profiles” within Heading 7604?
For the purpose of Chapter 76, profiles are legally defined by Note 1 (b) to Chapter 76 which provides as follows:
Notes
1.- In this Chapter the following have the meanings hereby assigned to them:
…
(b) Profiles
Rolled, extruded, drawn, forged or formed products, coiled or not, of a uniform cross-section along their whole length, which do not conform to any of the definitions of bars, rods, wire, plates, sheets, strip, foil, tubes or pipes. “Profiles” also covers cast or sintered products, of the same forms, which have been subsequently worked after production (otherwise than by simple trimming or de-scaling), provided that they have not thereby assumed the character of articles or products of other headings.
Focussing on the highlighted part of the definition referred to above, the goods meet the definition of a profile as they are:
·extruded;
·of a uniform cross-section; and
·do not conform to any of the definitions of bars, rods, wire, plates, sheets, strip, foil, tubes or pipes.
The Respondent contends and the Tribunal agrees that the goods as imported are profile shapes of aluminium alloy.
CONCLUSIONS
All of the subject goods are correctly classified under heading 7604, as they are “aluminium profiles”. Neither sub-heading 8302.42.00 nor sub-heading 9403.90.00 describes the subject goods at all as the goods are neither “parts” of furniture nor fittings for furniture.
Accordingly, it is unnecessary for the Tribunal to consider whether the TCO’s apply to any of the goods in question as Tariff Heading 8302 was not enlivened.
The Tribunal confirms that:
(a)for those goods for which a payment under protest has been paid the correct amount of duty was paid ; and
(b)for those goods for which an application for a refund has been made, the Applicant is not eligible for a refund of duty.
DECISION
The decisions under review are affirmed.
I certify that the preceding 111 (one hundred and eleven) paragraphs are a true copy of the reasons for the decision herein of Professor R Deutsch, Deputy President .............................[sgd]...........................................
Associate
Dated 11 December 2015
Date(s) of hearing 1 April 2015, 10 April 2015 Date final submissions received 31 August 2015 Advocate for the Applicant JJ Lawson Customs & Freight Brokers Pty Ltd Solicitors for the Respondent In house
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