Technifex Inc and CEO of Customs
[2001] AATA 536
•15 June 2001
DECISION AND REASONS FOR DECISION [2001] AATA 536
ADMINISTRATIVE APPEALS TRIBUNAL ) No N1999/1734
) N2000/926
GENERAL ADMINISTRATIVE DIVISION ) N2000/927
Re TECHNIFEX INC
Applicant
And CHIEF EXECUTIVE OFFICER OF CUSTOMS
Respondent
DECISION
Tribunal Senior Member M D Allen
Date15 June 2001
PlaceSydney
Decision The decision under review is set aside and this matter is remitted to the Respondent with the following DIRECTIONS, namely: 1. The goods imported by the Applicant are to be assessed for duty as per individual shipments and cannot be combined so as to constitute a single entity. 2. Of the goods imported some, but not all, will be suitable for use solely or principally with the "Titanic Experience". 3. The "Titanic Experience" is a fairground amusement and classifiable to Tariff heading 9508.00.00 in the Third Schedule to the Customs Tariff Act 1995. 4. Liberty to apply.
(Sgd) M D ALLEN
..............................................
Senior Member
CATCHWORDS
CUSTOMS TARIFF - Whether goods imported in separate shipments in different vessels can be classified as the one entity. Doctrine of entireties considered. Whether the goods as constructed constituted a fairground amusement or were designed for demonstrational purposes. Whether constituent parts of an apparatus not specifically fabricated can be classified as part of that apparatus.
Customs Tariff Act 1995 - Third Schedule, Headings 9023, 9508
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
Re Tridon Pty Ltd and Collector of Customs 4 ALD 615
Re Cemac Associated Ltd and Collector of Customs (NSW) 7 ALD 411
Re Progress Metal Works Pty Ltd and Collector of Customs 6 ALD 171
Re Landis & Gyr (Australia) Pty Limited and Collector of Customs, Victoria 6 ALN N82
MacFarlane v Burke ex parte Burke [1983] 2 QdR 584
Re O.R. Cormack Pty Limited and Collector of Customs (NSW) 6 ALN N15
Toyota Tsusho Australia Pty Ltd and Anor v Collector of Customs (unreported V G113 of 1991 Fed No 282)
REASONS FOR DECISION
15 June 2001 Senior Member M D Allen
The Fox Studio complex occupies the site of the former Sydney Royal Agricultural Society Showground at Moore Park, Sydney. The complex, as well as utilising former showground buildings as studios for the production of motion pictures and pre-recorded programmes for television, contains cinema theatres, restaurants, bars and retail outlets. On two days of the week there is what is termed a "farmers market" which sells agricultural produce, usually of a specialised nature, direct to the public. Entrance to the site is free and once at the site, the public can make such use of the various venues as they may feel inclined.
Part of the complex is known as the "Fox Studios Backlot". Originally admission to this area was by way of a fee but that has now been abolished and patrons can wander about the area but admission to five static and interactive displays is by admission charge. There is one admission charge which entitles admission to all five displays but no particular display can be entered by the payment of one charge specific to it.
One of the activities to which the admission ticket entitles patrons to enter is what is known as the "Titanic Experience". As part of the hearing in this matter I was able to visit the "Titanic Experience" and partake of the activity.
A description of the activity that takes place can be found at pages 70-72 inclusive of the documents prepared for the Tribunal pursuant to section 37 of the Administrative Appeals Tribunal Act 1975. Suffice it to say that the machinery of the "Titanic Experience" creates the illusion of a ship moving, striking an iceberg and then sinking whilst some passengers take to lifeboats while others are trapped below in the engine room.
The "Titanic Experience" consists of numerous items of machinery and prefabricated parts. Although some items used in its construction were sourced in Australia, the structure itself was designed and built in the United States. Having been built and then tested in the United States, the structure was disassembled and shipped to Australia.
The structure was not shipped to Australia in one shipment. As explained in Exhibit A3, the affidavit of Mr Michael Harvey, the Chief Financial Officer of Fox Studios Australia:
"7.The components, which were manufactured in the United States, were assembled and tested in the United States prior to disassembly and shipping to Australia. The Titanic, The Experience was tested to ensure it operated according to design specifications in the United States.
8.The complete The Titanic, The Experience was not imported in a single shipment because of the size of the various components making up The Titanic. In addition, it was to the benefit of Fox to have the various structures and items transported to the site in accordance with the detailed construction programme attaching to its construction. This was due to the lack of on site as well as timing our payments to Technifex Inc in the most advantageous way from a cash flow perspective.
9.Between 8 February 1999 and 22 July 1999, seventeen shipments of several hundred separate items were imported from the United States into Australia."
During submissions the Respondent queried whether the structure could have been shipped on the one vessel but I do not need to decide that. To my mind, to ship parts so as to keep pace with a construction schedule, as explained by Mr Harvey, makes sense.
The dispute between the parties to this review is that the Applicant claims the imported goods which make up the "Titanic Experience" should be classified to Tariff heading 9023 in the Third Schedule to the Customs Tariff Act 1995 whereas the Respondent claims the correct Tariff item is heading 9508.
Tariff heading 9023.00.00 reads:
"INSTRUMENTS, APPARATUS AND MODELS,
DESIGNED FOR DEMONSTRATIONAL PURPOSES
(FOR EXAMPLE, IN EDUCATION OR
EXHIBITIONS), UNSUITABLE FOR OTHER USES"
Whereas Note 1(k) to Chapter 90 of the Third Schedule reads:
"This Chapter does not cover:
(k) Articles of Chapter 95;"
Heading 9508.00.00 reads:
"ROUNDABOUTS, SWINGS, SHOOTING
GALLERIES AND OTHER FAIRGROUND
AMUSEMENTS; TRAVELLING CIRCUSES,
TRAVELLING MENAGERIES AND
TRAVELLING THEATRES"
Note 1(k) to Chapter 90 is a note that "otherwise requires" – see Liebert Corporation Australia Pty Ltd v Collector of Customs 23 AAR 287. In other words, only if the goods cannot be classified to heading 9508 can heading 9023 be considered.
Initially the Applicant's Customs Agent considered that the goods should be classified to Tariff heading 9508 and lodged an application for a Tariff Advice for goods described as "fairground assembly components". This application for a Tariff Advice was rejected by the Respondent on the bases that the goods were not a knocked down fairground amusement but a collection of components in various shipments having various classifications.
By letter dated 26 March 1999 the Applicant's agent advanced the submission that the goods were classifiable to Tariff heading 9023. That letter reads inter alia (T8 p73):
"We therefore submit that the goods are correctly identifiable to Tariff heading 9023.00.00
The goods are parts of a special effects exhibition to be constructed in Sydney. The purpose of the walk through exhibition is to demonstrate to patrons how special effects are used in the production of films."
Before me the Applicant contended that the goods were classifiable under heading 9023 in two ways, namely;
(a)because the goods imported constituted the complete exhibit "Titanic – The Experience", they are properly classifiable under heading 9023 as a single "entirety"; or
(b)secondly and alternatively, the representative goods selected by the parties (the aluminium structure and the ceiling panels) are properly classifiable under heading 9023.
The Applicant's primary submission was that the "doctrine of entireties" applied so that although the component parts of the structure that formed the "The Titanic, The Experience" were shipped in 17 separate shipments, the complete structure or machine could be classified to the one entity.
It is now well accepted that 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. In so doing, the classifier is entitled to have regard to the nature and function which the goods are designed to serve – see Liebert Corporation supra at p287. Further, as pointed out by the Tribunal in Re Tridon Pty Ltd and Collector of Customs 4 ALD 615 at p621:
"(viii) Composite goods, notwithstanding that they have components which are separately identifiable, may nevertheless be identifiable in combination as a new entity if the identity of the separate units is subordinated to the identity of the combination ..."
The history of the "doctrine of entireties" was discussed by the Tribunal in Re Cemac Associated Ltd and Collector of Customs (NSW) 7 ALD 411 commencing at page 418 para 27. More to the point, however, is the statement at page 420 paras 33 and 34, namely:
"33 At the time of the decision of the High Court in Whitton v Falkiner (1915) 20 CLR 118 the Customs Tariff 1908 was structured quite differently from either the Customs Tariff 1966 or the present Tariff Act (Customs Tariff Act 1982). In particular, it did not include the present Interpretative Rules or any other provision comparable to the present r 2(1)(b). In the absence of any statutory guidance by parliament, the American doctrine of entireties provided some judicial support for a principle of Tariff classification now expressly embodied in the Tariff Act itself.
34 In our view, r 2(1)(b) affirms the principle at the heart of the entireties doctrine, namely that where duty at a specified rate is imposed upon goods of a particular kind by an item of the Tariff, that duty cannot be avoided by importing such goods in an unassembled or disassembled state. Unless the terms of an item etc or of the notes to a Division or Chapter otherwise require (see r 1(2)), the unassembled components for goods of a particular kind are classified in the item appropriate to those components, if assembled, and duty at the same rate as for the assembled goods is payable accordingly."
Cemac Associated Ltd supra concerned the Customs Tariff Act 1982. Rule 2(a) in Schedule 2 to the Customs Tariff Act 1995 reads:
"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."
The rule is, however, silent as to goods imported in parts arriving separately in split consignments.
In Re Progress Metal Works Pty Ltd and Collector of Customs 6 ALD 171 at 180 para 34 the Tribunal (Deputy President Hall, Mrs Hallowes and Mr Sinclair, Members) said:
"34 By contrast, when the parts for complete goods have been imported by different vessels or by different aircraft the American Courts have consistently taken the view that the parts imported separately cannot be treated as an entirety (see US v Shoverling 146 US 76; 13 Sup Ct 24; cf Benrus Watch Co and Pomerance Co (Inc) v United States (1933) 21 CCPA 139; University of Chicago v United States (1939) 2 Cust Ct 358; James G Wiley v United States 56 Cust Ct 331, DC2645 (1966) and Trans-World Shipping Service Inc v United States (1967) 58 Cust Ct 120)."
The decision in Re Progress Metal Works Pty Ltd supra was followed by a Tribunal presided over by Davies J in Re Landis & Gyr (Australia) Pty Limited and Collector of Customs, Victoria 6 ALN N82. The Tribunal said:
"Goods which have come in one ship may be examined to ascertain whether they form an entirety while goods which have been imported separately, in different vessels or in different aircraft, cannot be treated as a collective whole. (Re Progress Metal Works Pty Limited and Collector of Customs (1984) 6 ALD 171 …)"
Given the authority of those cases and having particular regard to the status of the Tribunals which decided them, it seems clear that the doctrine of entireties and Rule 2(a) of the Second Schedule cannot be applied in this matter so as to classify the imported goods as a collective whole.
The particular goods in each of the several shipments must therefore be objectively identified and then classified.
Some of the subject goods may be regarded as having no particular association with the "Titanic Experience" even though imported to be used in its construction and use. There are no doubt many items, for example nuts, bolts, tubing etc which were simply purchased from stock suppliers and then used in construction. In addition, even if the Applicant's submission as to the correct Tariff heading, namely 9023, is accepted, Note 1 to Chapter 90 excludes certain goods from classification under Chapter 90. For example, 1(d) excludes "Glass mirrors, not optically worked, of 7009 …".
There are, however, other items which were specially fabricated for use in the "Titanic Experience". Two such items were referred to in the hearing and, pursuant to an earlier Direction of the Tribunal, were put up as representative items.
It seems clear to me that items such as the "aluminium structure" and "ceiling panels", more particularly described in the evidence of Mr Baird, were custom designed and fabricated for use in the "Titanic Experience" and could not be used for any other realistic purpose. The identity of such items is therefore subordinated to the entity as a whole.
There will therefore remain a question as to the identification and classification of numerous imported goods. Exhibit R4 is a schedule of imported items but the detailed task of identification and classification is one that must be remitted to the Respondent. In the event that there is disagreement between the parties, I will give liberty to apply generally so that disputed questions of identification and classification can be brought back before me.
The main submission of the Applicant was that the whole entity, namely the "Titanic Experience" was to be classified to Tariff heading 9023, being an apparatus designed for demonstrational purposes. It was submitted that the apparatus was used to demonstrate special effects used in the production of motion pictures.
At the outset let me say that I accept the Applicant's argument that simply because a device (for want of a better word) entertains, does not prevent it from being educational. If any support for this argument is required, it is to be found in Exhibit A7, the affidavit of Ms Cavallaro. Certainly it is well accepted that institutions such as the Powerhouse Museum in Sydney and what is now known as Questacon in Canberra (formerly the National Science and Technology Museum) have exhibits that both entertain and educate.
The "Titanic Experience" is co-located with other displays in the Fox Studios "Backlot". As stated earlier, no admission is now charged to enter the "Backlot" but a fee is charged to enter certain buildings situated at the "Backlot". Other buildings, for example a retail shop, are entered without payment. The buildings to which an entry fee is charged are set out in detail in the affidavit of Mr Payne, the General Manager Operations of Fox Studios Australia Ltd (Exhibit A5). They include an exhibition space featuring props, sets and costumes from motion pictures and the "Star Dressing Room" where the make-up artists' craft is demonstrated.
Paragraph 25 of Mr Payne's affidavit reads:
"Many school excursion groups, tourist groups and pensioner groups go through the Backlot exhibitions. Until February 2001, Fox Studios targeted through specific sales managers, school groups as part of an educational program, from both Japan and within Australia. Fox Studios sent literature to schools outlining the educational purpose of the Backlot."
As stated above, a description of what actually happens to a visitor or to the "Titanic Experience" is to be found at Document T8 at pages 70 to 72 inclusive of the section 37 documents.
A further description of the "Titanic Experience" is at page 44 of Exhibit 2 to Mr Payne's affidavit. In that publicity document it is stated:
"Gerard Howland said: 'I think it's the best attraction in the world. People will feel everything from euphoria to contained terror. We've used every neat trick known to film and theatre creators in terms of 'smoke and mirrors' to make you feel you're in this ship, in this environment, in this movie. There are the original props from the movie, fastidiously recrafted costumes created from the originals and direct links to the original ship itself. People will have a sense of the lengths a director and film crew go to to recreate the environments and situations they create for audiences.
…
Fox Studios Australia chief executive Kim Williams: 'Titanic – The Experience gives people a sense of the actual processes at work on a film. It is a startling piece of original creativity unique in the themed entertainment world, having a duration twice as long as comparable attractions and offering two entirely separate journeys for guests to experience. It is one of the centrepieces of the Fox Studios Backlot, and is already attracting widespread interest in global tourism markets.'"
Exhibit 4 to Mr Payne's affidavit is an "Educational Strategy" which was prepared for the Fox Studios prior to the opening of the Fox Studio complex. Whatever may be the educational values of the other exhibits at the Fox Studios Backlot, I regard it as significant that the educational strategy states at Exhibit 4 page 53:
"Titanic and Revisitation Incentives
Creating repeat visitation is a core focus of the education program. The issues that need to be addressed in this regard are how to keep school groups out of Titanic and should students receive a revisit incentive? To keep groups from visiting Titanic schools and teachers must be forewarned that this attraction is not included in the package. FSA can say that this is for safety reasons, but it will need to be clearly set out in all communications. Such a system would require operational support because individual students would have to be tagged and then checked at the ride. Practically this may be very difficult and expensive to police. If this system can be created then FSA should consider offering some sort of incentive to stimulate revisitation. Whatever format this takes it should be fairly subtle and made available with the kit itself."
In other words, whatever was to be the educational benefit of a visit to the Fox Studios Backlot, the "Titanic Experience" was not part of it.
When this factor is acknowledged along with the descriptions of the experience, it seems abundantly clear that the "Titanic Experience" is simply a sophisticated entertainment device.
One can add that if it were to demonstrate "special effects" as used in motion pictures, there is no explanation offered as to how the effects are contrived – except perhaps for a static model which is currently not on view to the public.
The Respondent's case is that the "Titanic Experience" is classified to Tariff heading 9508.00.00 being a fairground amusement.
The word "fair" is defined in the Oxford Dictionary in meaning 1. a. as:
"A periodical gathering of buyers and sellers, often with shows and entertainments, in a place and at a time ordained by charter or statute or by ancient custom. Frequently modified by prefixing other words, indicating the things sold, the time of year, or some special object for which the fair is held … More recently also … (a) an exhibition, especially one designed to publicize a particular product or the products of one industry, country, etc.; frequently with defining word pre-fixed; (b) = fun fair."
Fairs, in the sense of the original meaning of the word, can still be found in some of the less developed parts of Europe such as Western Ireland.
The popular meaning of the word "fair" or "fairground" has expanded to include a collection of amusements independent of any trading activity. Such "fairgrounds" are often seen at coastal resorts during the Christmas period or accompanying agricultural shows of which the Sydney Royal Easter Show or the Brisbane Exhibition are prime examples. See for example, meaning 1. In the Macquarie Dictionary Second Edition for the noun fair.
"an amusement show, originally as accompanying a sale of livestock; now usually travelling from place to place, having sideshows, merry-go-rounds, dodgems, etc."
That a word can take its meaning from contemporary circumstances was made clear in the judgment of Connolly J in MacFarlane v Burke ex parte Burke [1983] 2 QdR 584 at 589. The question in that case was whether a video tape was a "publication" for the purposes of the Vagrants Gaming and Other Offences Act 1931 (Qld). At p589 his Honour said:
"Whether video cassette tapes were within the contemplation of the draftsman when the definition of obscene publication was first inserted in the Act is really not to the point. The connotation of the word 'publication' may be fixed but its denotation will change with changing technologies – cf Lake Macquarie Shire Council v Aberdare County Council (1970) 123 CLR 327 at p331 per Barwick CJ."
To my mind it is not necessary to decide whether the Fox Studios Backlot or the Fox Studios Complex as a whole is a "fairground" although the latter is most certainly a place to which persons resort for entertainment. Part of that entertainment could be an undertaking of the "Titanic Experience".
In Re O.R. Cormack Pty Limited and Collector of Customs (NSW) 6 ALN N15 at N16 the Tribunal said:
"The Interpretation of the Tariff is not the place for technical legalism. It is an enactment used in commerce and should be interpreted in ways that will enable it to be understood and used from day to day by people in commerce without them having to have a lawyer by their side. The ordinary sense of language should be the guide to its interpretation. …"
Having regard to the precepts as stated above and the evidence in this matter, I am in no doubt that the "Titanic Experience" is a fairground amusement. That no educational use is envisaged is exemplified by its exclusion from educational tours and lack of explanation as to how the special effects operate.
To confirm my interpretation of the Tariff heading, recourse may be had to the Brussels Notes – see Toyota Tsusho Australia Pty Ltd and Anor v Collector of Customs (unreported V G113 of 1991 Fed No 282). The Note to heading 9023 reads:
"This heading covers a wide range of instruments, apparatus and models designed for demonstrational purposes (eg in schools, lecture rooms, exhibitions) and unsuitable for other uses."
I cannot conceive how the "Titanic Experience" can be equated with the Explanatory Notes. A proper example of the heading is the model of the "Titanic Experience" which was shown to me but is no longer on public display. Furthermore, the heading requires that the "apparatus" be "unsuitable for other uses". Even if the "Titanic Experience" was to be found to have an educational or demonstrational role, it is suitable for another use, namely pure entertainment.
That the "Titanic Experience" is static does not detract from its inclusion in heading 9508. Apart from the term "fairground" being, in its modern usage, able to encompass permanently sited amusements, the examples in the Brussels Notes to heading 9508 includes water-chutes which are not normally moveable. The words "travelling circuses" etc are separated from the words "other fairground amusements" by a semicolon and the aspect of being itinerant does not, in my opinion, qualify the earlier classes of roundabouts, swings, shooting galleries and other fairground amusements.
In this matter, therefore the decision under review will be set aside and this matter remitted to the Respondent with the following directions, namely:
(1)The goods imported by the Applicant are to be assessed for duty as per individual shipments and cannot be combined so as to constitute a single entity.
(2)Of the goods imported some, but not all, will be suitable for use solely or principally with the "Titanic Experience".
(3)The "Titanic Experience" is a fairground amusement and classifiable to Tariff heading 9508.00.00 in the Third Schedule to the Customs Tariff Act 1995.
(4)Liberty to apply.
I certify that the 44 preceding paragraphs are a true copy of the reasons for the decision herein of:
Senior Member M D Allen
Signed: Kwai-Ling Wong .....................................................................................
AssociateDates of Hearing 30 and 31 May 2001
Date of Decision 15 June 2001
Counsel for the Applicant Mr M J Leeming
Solicitor for the Applicant Mr Alan Bennett,
KPMG LegalSolicitor for the Respondent Mr R Northcote,
Customs Legal Unit,
Australian Government Solicitor
0
2
0