Zhang (Migration)

Case •

[2024] AATA 2400

•

26 June 2024

Zhang (Migration) [2024] AATA 2400 (26 June 2024)

DECISION RECORD

DIVISION:Migration & Refugee Division

APPLICANTS:  Mrs Xiaomei Zhang
Mr Wei Chen
Mr Haozong Chen
Miss Shijia Chen

REPRESENTATIVE:  Mr Xiaoxiao Wang (MARN: 0848719)

CASE NUMBER:  2201066

HOME AFFAIRS REFERENCE(S):          BCC2020/265888

MEMBER:Robyn Anderson

DATE:26 June 2024

PLACE OF DECISION:  Melbourne

DECISION:The Tribunal remits the applications for reconsideration, with the direction that the first named applicant meets the following criteria for a Subclass 888 visa:

·cl 888.222 of Schedule 2 to the Regulations.

The Tribunal has no jurisdiction in relation to the second named applicant.

Statement made on 28 June 2024 at 4.45 pm.

CATCHWORDS

MIGRATION – Business Skills (Permanent) (Class EC) visa – Subclass 888 (Business Innovation) – ownership interest in a qualifying main business – no wine exports in part of the relevant period – continuing to actively operate – direct and continuous involvement in the management – China imposed anti-dumping duties on Australian wine – negotiations for diversifying export opportunities – limited customer base – decision under review remitted          

LEGISLATION

Migration Act 1958, ss 65, 134, 338, 347
Migration Regulations 1994, Schedule 2, cl 888.222; rr 1.03, 1.11

CASES

Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60
Shahpari and Ors v Minister for Immigration & Anor [2016] FCCA 513

STATEMENT OF DECISION AND REASONS

APPLICATION FOR REVIEW

  1. This is an application for review of a decision made by a delegate of the Minister for Home Affairs on 27 January 2022 to refuse to grant the visa applicants a Business Skills (Permanent) Subclass 888 visa under s 65 of the Migration Act 1958 (Cth) (the Act).

  2. The visa applicants applied for the visa on 2 February 2020. The delegate refused to grant the visa on the basis that the first named applicant (the applicant) did not meet the requirements under cl 888.222 of Schedule 2 to the Migration Regulations 1994 (Cth) (the Regulations). This requires that she had an ownership interest in at least one actively operating main business in Australia during the two years immediately before the application was made and that the same ownership interest in the same actively operating main business/es continues at the time of decision.

  3. While satisfied that the criteria under cl 888.222(1)(a) was met in respect of the time of application criteria, the delegate was not satisfied that the applicant continued to have an ownership interest in the nominated main business because there were essentially no sales recorded in the business activity statements for the period from 1 January 2021 to 30 September 2021, and a submission from the applicant on 2 January 2022, several weeks prior to the decision of 27 January 2022, confirmed that no wine had been exported since early 2021. Furthermore, no evidence was provided in relation to negotiations taking place in regard to other export products.

  4. The applicants applied to the Tribunal and the matter was constituted to a Tribunal Member on 10 April 2024. On 22 April 2024, the Tribunal wrote to the applicants to invite them to attend an in-person hearing on 30 May 2024 and to provide any further documents they intended to rely upon by 23 May 2024.

  5. In response, the Tribunal received submissions and evidence from the visa applicants on 22 May 2024. The applicants appeared before the Tribunal on 30 May 2024 and the first and second named applicants gave sworn oral evidence.

  6. The applicants were represented in relation to the review by their registered migration agent.

  7. On 30 May 2024, the Tribunal deferred making a decision in this matter to allow additional time for the applicants to provide further evidence in support of the nominated business in which the applicant has an ownership interest continuing to actively operate.

  8. The Tribunal received further submissions and evidence on 31 May 2024, 1 June 2024 and 11 June 2024.  On 27 June 2024, the applicants were invited to attend a second hearing on 28 June 2024.  The applicants participated via MS Teams audio and the applicant and the second named applicant gave oral evidence to the Tribunal on affirmation. Their representative joined part way through the hearing via telephone.

  9. In respect of the second named applicant, as discussed at hearing on 28 June 2024, the Tribunal does not have jurisdiction to review his application.  Review of a Subclass 888 Business innovation and Investment (Permanent) visa refusal where the visa application was lodged when the applicant was outside of the migration zone, yet the visa could be granted whether or not the applicant was in the migration zone, is a Part 5 reviewable decision (Subsection 338(7A) of the Act).  In accordance with subsection 347(3A) of the Act, in relation to a subsection 338(7A) Part 5 reviewable decision, a non-citizen, such as the second named applicant, must be in the migration zone at the time the Department decision was made and also at the time that the review was lodged with the Tribunal. The Department decision was made on 27 January 2022 and the application for review lodged with this Tribunal on the same day.  As the second named applicant departed Australia on 19 November 2019 and did not return until 15 May 2023, the Tribunal finds that it has no jurisdiction to review the refusal decision in relation to the second-named applicant.

  10. Following a discussion between the applicants and their representative during the hearing on 28 June 2024, the applicant told the Tribunal that she accepts that the jurisdictional issue explained by the Tribunal in relation to her husband, the second named applicant, was correct and to proceed to make a decision in respect of her and her two children, the third and fourth named applicants.

  11. For the following reasons, the Tribunal has concluded that the matter should be remitted for reconsideration in respect of the first, third and fourth named applicants.

    CONSIDERATION OF CLAIMS AND EVIDENCE

  12. According to Departmental records, the applicants were granted a Subclass 188 Provisional visa on 5 December 2016. The applicant told the Tribunal that at that time she and her husband were operating a glass business in China through an incorporated entity. They considered that Australia would provide a better environment for their children’s education. The applicants then visited Australia in January 2017 to explore the business environment.

  13. While the glass business continues to operate in China under the direction of her husband, the applicant and the children returned to Australia in July 2017, at which time Wei Hao Pty Ltd (the Business) was registered. The Subclass 888 application records the major business activity of the Business as ‘Export Australian wine and other products to China’.

  14. The issue in the present case is in relation to cl 888.222 of Schedule 2 to the Regulations. Clause 888.222(1)(a) requires the applicant to have had an ownership interest in at least one actively operating main business in Australia during the two years immediately before the application was made. Clause 888.222(1)(b) requires that the criterion in cl 888.222(1)(a) continues to be met at the time of decision. In this case cl 888.222(2) is not applicable.

  15. As the application was lodged on 2 February 2020, it is undisputed that the relevant two‑year period is 2 February 2018 to 1 February 2020 (the relevant period). It is also undisputed that the nominated main business is the Business.

  16. The Tribunal then turned its mind to whether the Business met the definition of ‘main business’.

  17. The meaning of ‘main business’ is set out in reg 1.11(1) of the Regulations. The four criteria are not mutually exclusive and must all be met before a business can be considered as a ‘main business’.

  18. The first of the criteria under reg 1.11(1)(a) requires that the applicant has or has had an ownership interest in the Business. Regulation 1.03 provides that ownership interest has the meaning given to it in s 134(10) of the Act. The definition of ownership interest in relation to a business, as relevantly defined in s 134(10) of the Act, means, amongst other things, ‘a shareholder in the company that carries on the business’.

  19. Current and historical extracts from ASIC confirm that the first named applicant has been the director, secretary and sole shareholder of the Business since incorporation on 7 July 2017. Therefore, the Tribunal is satisfied that the applicant had an ownership interest in the Business throughout the relevant period and continues to have an ownership interest in the Business. As such, the first criterion in reg 1.11(1)(a) is met during the relevant period and also continues to the present time.

  20. Secondly, the applicant must maintain or have maintained direct and continuous involvement in the management of the Business from day-to-day and in making decisions affecting the overall direction and performance of the Business.

  21. The applicant gave oral evidence that her understanding was that Chinese people were fond of Australian wines so she decided to commence business operations by trying to export Australian wine to China. She told the Tribunal that she would visit the wineries and attend wine expos and exhibitions in order to make connections and check the quality of the wines. She further stated that her husband would often accompany her on the winery visits when in Australia, as she did not drink and he knew more about the quality of the wine.

  22. The applicant gave oral evidence that after establishing a wine market she would contact potential customers in China. Once a customer declared their interest she would negotiate a price with the wine supplier and create a formal agreement. At this point she would negotiate a sales price with the customer, submit an order with the wine supplier and contact a logistics company in respect of shipping the product.

  23. In response to a question from the Tribunal, the applicant stated that she would prepare a written contract with each customer that set out the payment details. The required deposits varied per customer, followed by a further percentage payment when the goods reached the port in China and full payment upon receipt of the goods by the customer. The applicant confirmed that all sales monies were received via bank transfer and that she made all payments to suppliers by bank transfer also.

  24. According to records provided to the Department, it is evident that wine was exported to a variety of customers in China on a regular basis from late 2017 until September 2020. The COVID‑19 pandemic and associated lockdowns impacted significantly on the exporting of wine by the Business and also on the customer base in China. The applicant gave oral evidence that during lockdown she could only negotiate sales and purchases via email so she used only suppliers and customers that she had dealt with in the past. However, the biggest barrier to the Business came in early 2021 when the Ministry of Commerce in China imposed punitive anti-dumping duties on wine exported from Australia to China in retaliation to Australia’s support for a global inquiry into the origins of COVID-19.

  25. The applicant further stated that the Chinese government’s retaliation expanded to delaying the clearance of Australian wine at customs when it arrived at the ports in China. This resulted in final payments for wine being delayed. For example, the wine purchased from Australia Liquor Import and Export Distributor Pty Ltd by the Business in March 2020 was sold to two customers in March 2020 and June 2020. However, due to the delays at the Chinese port, final payments were not received by the Business until December 2021, as evidenced in the Business’s Commonwealth Bank of Australia (CBA) bank statements. It is noteworthy that the delegate found that the Business continued to actively operate until the last payment was received in February 2021 in respect of a sales order from 1 September 2020, ignoring the payment of December 2021.

  26. The applicant told the Tribunal that she was willing to seek out whatever products were available in Australia that her customers requested. In addition to wine exports, the Business also exported woollen quilts in mid-2018 and in excess of AUD100,000 of locomotive parts was exported to China throughout 2019 with negotiations continuing. Supporting documentation was provided. In addition, a letter to the first named applicant from the managing director of Dalian Railway Transportation Technology Co, Ltd, dated 10 January 2022, expressed gratitude for the assistance of the Business in exporting parts to allow completion of their project. The letter also stated that due to the COVID-19 pandemic, the optional order going forward must be put off.

  27. Following the imposition of the anti-dumping duties on Australian wine, the applicant stated that she actively sought out other export opportunities. As her husband was in the glass industry in China and she knew that Australia could provide good quality quartz sand, she sought out opportunities for export to China. Letters from the managers of Xinyi Glass and Hefei Sang Chen Glass Decoration Co Ltd in China, dated 8 May 2024 and 7 May 2024 respectively, both confirm that the initial discussion was with the second named applicant in August 2021, on behalf of the applicant. Emails between the applicant and suppliers and also to prospective customers in China were provided to the Tribunal discussing provision and shipping details from January 2022. Unfortunately, in January 2023 when the Business indicated a willingness to proceed, the supplier advised that all of the silica sand was committed to another customer, as confirmed in an email to the applicant from Mr Algie, Technical and Exploration Manager of Australian Silica Quartz Group Ltd.

  28. The applicant further stated that as the anti-dumping duties were not imposed on Australian spirits, she worked to build a relationship with GNT Fine Wines and Spirits to supply brandy and whisky to customers in China. A letter from Mr Zhang, general manager of GNT Fine Wines and Spirits, states that the contact with the applicant commenced at a wine tasting in late 2019. The relationship continued, albeit it was limited throughout COVID-19 lockdowns. The first orders were placed in March 2022. While it did not prove as popular as wine, the export of spirits has continued, and evidence of the past orders from February 2022 to the most recent order dated 23 March 2024 was before the Tribunal.

  29. In the meantime, China announced that from 29 March 2024 it would lift anti-dumping and anti‑subsidy tariffs on Australian wine. This opened the door for the applicant to resume the most popular export of the Business. Evidence of an agreement with VWine (Viners Australia Pty Ltd) in March 2024 and subsequent payment was before the Tribunal. In addition, evidence was also provided in relation to the applicant pursuing products for customers in China more recently, such as non-alcoholic sparkling wine and cat trees. Furthermore, the Business commenced the importing of goods from China and provided evidence of the sale of an imported iron door dated 11 October 2023.

  30. Evidence before the Tribunal supports that it was largely the applicant who was involved directly in the negotiations with both suppliers and customers throughout the relevant period and continuing to date. It is her signature on all of the relevant contracts and her name on all of the relevant tax returns of the Business. The CBA ‘Authority for Business Accounts’ form, dated 10 July 2017, records the applicant as the sole signatory. The applicant gave oral evidence at hearing that this has remained unchanged.

  31. While the Tribunal acknowledges the assistance of the second named applicant in wine selection and contact with some prospective customers in China, the Tribunal is satisfied that in all aspects of the Business the applicant has been the main person involved in the management of the Business from day-to-day and in making decisions affecting the overall direction and performance throughout the relevant period. The Tribunal accepts that although sales declined significantly throughout COVID-19 lockdowns and the period in which China imposed the anti-dumping duties on Australian wine, the applicant continued to seek out suppliers and to arrange export of products for her customers, exploring a variety of options. In more recent times, as the anti-dumping duties were removed, the applicant has immediately resumed the exporting of wine while also continuing to source products demanded by customers in China and on occasion in Australia. Therefore, the Tribunal is satisfied that the second criterion in reg 1.11(1)(b) is met in relation to the Business during the relevant period and also continues to the present time.

  32. Thirdly, the value of the applicant’s ownership interest, or the total value of the ownership interests of the applicant and the applicant’s spouse or de facto partner, in the Business must meet certain thresholds. As the Business is not operated by a publicly listed company, the required ownership interest must be at least 30% if the annual turnover is greater than or equal to AUD400,000 and at least 51% if the annual turnover is less than AUD400,000. As the Tribunal determined above that the applicant has always held 100% ownership interest in the Business, regardless of the turnover the third criterion in reg 1.11(1)(c) is met during the relevant period and continues to the present time.

  33. Finally, the Business must be a qualifying business. ‘Qualifying business’ is defined in reg 1.03 as an enterprise that is operated for the purpose of making a profit through the provision of goods, services or goods and services (other than the provision of rental property) to the public, and is not operated primarily or substantially for the purpose of speculative or passive investment.

  34. The departmental guidelines, PAM3 GenGuideM – Business Visas (PAM3), to which the Tribunal may have regard in appropriate cases, sets out detailed guidance as to the policy intention in respect of the meaning of ‘qualifying business’. While the Tribunal is not bound by policy, in Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60 the Full Federal Court held that a Tribunal should take into account relevant government policy which is not inconsistent with the provisions or objects of the legislation. It is also noteworthy that there is judicial authority to the effect that the policy guidelines in PAM3 cannot go beyond the wording of the legislation, even where they are favourable to an applicant. In this case the Tribunal considers the policy as a useful guide to applying the legislation.

  35. The applicant told the Tribunal that she does not publicly advertise. Rather, she relies on word-of-mouth from her core customer list, which is currently five or six regular customers. The applicant gave oral evidence that she is not related to any of those on her customer list. The evidence before the Tribunal indicates that the number of customers receiving goods from the Business between November 2017 and September 2020 exceeds six.

  36. As there is no definition of ‘the public’ in the Act or the Regulations, the word takes it usual meaning. This is not a technical term. The Oxford dictionary defines ‘the public’ as ordinary people in general; the community. At 3.9.3.5 of PAM3, it is suggested that if a business provides goods to more than one business or entity that is not otherwise related to the Business, then the Business is considered to provide goods to the public. The Tribunal is satisfied that the goods are not provided exclusively to family members or a single person/entity and finds that they are provided to the public.

  37. Based on the financial statements before the Tribunal, a net profit was made in each of the 12‑month periods ending 30 June 2018, 30 June 2019 and 30 June 2020. Due to the challenges discussed above, the Business recorded a small net loss in the 12-month periods ending 30 June 2021, 30 June 2022 and 30 June 2023. The business activity statements from 1 July 2023 record sales in the September 2023 quarter and the March 2024 quarter.

  1. At 3.9.3.2 of PAM3, it suggests that it is not necessary for a business to operate at a profit, only that it be operated for the purpose of making a profit. In the circumstances of this case, the Tribunal is satisfied that the Business is and has always been operating for the purpose of making a profit through the provision of goods and services to the public. Furthermore, there is no evidence to indicate that any part of the Business is operated for the purpose of speculative or passive investment. Therefore, the Tribunal finds that the Business is a qualifying business, thereby satisfying the criterion in reg 1.11(1)(d), both in the relevant period and also continuing to the present time.

  2. Accordingly, all four criteria under reg 1.11(1) are met. As no more than two qualifying businesses are being considered as a main business, the criterion under reg 1.11(2) is also met. Consequently, the Tribunal finds that the Business can be considered as a ‘main business’.

  3. Having found that the Business is a ‘main business’, the Tribunal has also found, as per paragraph 16 above, that the applicant has had an ownership interest in the Business during the relevant period and that the same ownership interest continues to the present time.

  4. The Tribunal must now be satisfied that the Business was actively operating throughout the relevant period and that it has continued to actively operate to the present time. According to PAM3, it is the policy intention that the Business have substantial ties to Australia.

  5. In respect of an actively operating business, the expression ‘actively operating’ is not defined in the Regulations or the Act. However, the case of Shahpari and Ors v Minister for Immigration & Anor [2016] FCCA 513 (Shahpari) provides some guidance, where the Court held that it was open to the Tribunal to find that the expression ‘actively operating’ involved a consideration of whether the business exhibited activity of a ‘repetitive, continuous and permanent character’ in which the business ‘actively sought to generate business, in fact generated trade and custom, and derived some financial gain for its activities in the relevant period’. It is noteworthy that these four conditions require a different consideration to that of ‘qualifying business’.

  6. In this case the operating entity is incorporated in Australia and the Australian Business Register continues to record the Business as being registered with an ABN and registered for GST. The Business has continued to lodge quarterly business activity statements, albeit not all of them reflect sales.

  7. During the relevant period the predominant export activity was wine, and documentation provided, including emails, supplier agreements and invoices, customer contracts and invoices, bank statements, financial statements, tax returns and business activity statements all support that this was so. Therefore, the Tribunal finds that the Business meets the criterion of cl 888.222(1(a)) of Schedule 2 to the Regulations within the relevant period. This finding is undisputed.

  8. In relation to the period commencing February 2020, as noted above, the sale of wine declined in line with COVID-19 lockdowns in Melbourne and in China. As noted above, the Business received payments for sales completed through lockdown as far out as December 2021. As soon as practicable, following the end of lockdowns in Melbourne, the applicant sought out new exporting opportunities, providing evidence of emails with suppliers in relation to a variety of products. While the effort in relation to the export of quartz sand did not develop into the business opportunity the applicant had hoped for, her efforts in relation to the export of spirits and the importing of materials for the construction industry, such as an iron door, did eventuate in sales for the Business. With the wine export industry opening up again, the applicant is hopeful that business operations will significantly improve, with shipments already on their way to customers in China.

  9. Considering the challenging period of COVID-19 and the period in which the anti‑dumping duties were imposed on Australian wines entering China, the Tribunal is satisfied that the Business still exhibited activity that was repetitive, continuous and permanent in character in respect of their exporting of products. The fact that there were some quarters that did not record sales throughout the challenging period does not translate into no business activity.

  10. In accordance with Shahpari, the Tribunal is satisfied that the applicant continued to seek to generate business as best she could in the circumstances and has now resumed export of what had always been the major export product of the Business, Australian wine. The applicant’s efforts in seeking to generate business have indeed resulted in generating actual trade and custom in the period from February 2020 to date, albeit the level of sales reduced. Going forward, the expectation is that with the resumption of wine exports the sales figures will also begin to increase. The Tribunal is satisfied that the applicant established a pattern of repetitive, continuous and permanent relationships with suppliers and customers that largely resulted in repetitive sales. Consequently, the Tribunal finds that the Business continues to be actively operating.

  11. As the Business continues to meet the main business criteria, the applicant retains an ownership interest and the Business continues to be actively operating, the Tribunal finds that the requirements under cl 888.222(1)(b) of Schedule 2 to the Regulations have also been met.

  12. Given the findings above that the applicant has met the requirements under cl 888.222 of Schedule 2 to the Regulations, the Tribunal considers that the appropriate course is to remit the matter to the Minister to consider the remaining criteria for the visa.

  13. The Tribunal finds that as the third and fourth named applicants applied on the basis of being family unit members of the first named applicant, their applications will be determined by reference to the outcome of the first named applicant’s application on remittal to the Department for reconsideration.

    DECISION

  14. The Tribunal remits the applications for reconsideration, with the direction that the first named applicant meets the following criteria for a Subclass 888 visa:

    ·cl 888.222 of Schedule 2 to the Regulations.

    The Tribunal has no jurisdiction in relation to the second named applicant.

    Robyn Anderson
    Member


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