Customs case law update · Customs case law update April 2020. Topics 1. TCOs - Substitutable goods...
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Customs case law update April 2020
Transcript of Customs case law update · Customs case law update April 2020. Topics 1. TCOs - Substitutable goods...
Customs case law update
April 2020
Topics
1. TCOs - Substitutable goods
2. Classification - Vitagummies
3. COVID-19 issues
What’s keeping you awake at night
What is the biggest COVID-19 impact on your business:
a) cash flow concerns
b) difficulty obtaining documentation
c) reduced airfreight
d) reduced volumes
e) managing health concerns
f) employment issues
g) other
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Tariff Concession Orders
Driverless trains vs manned trains
TCO core criteria - For the purposes of this Part, a TCO
application is taken to meet the core criteria if, on the day on which
the application was lodged, no substitutable goods were produced
in Australia in the ordinary course of business.
Substitutable goods - in respect of goods the subject of a TCO
application or of a TCO, means goods produced in Australia that are
put, or are capable of being put, to a use that corresponds with a
use (including a design use) to which the goods the subject of
the application or of the TCO can be put.
Issues
• Customs rejected TCO application
• TCO covered “TRAINS, driverless” with various features
• EDI Downer and Alstom manufactured manned passenger trains
in Australia
• Key issue – what is the use of the goods:
• transport of passengers;
• transport of passengers by train;
• transport of passengers by electric train;
• transport of passengers by unmanned electric train
• transport of passengers by unmanned electric train on the Sydney
rail system
Use
• Customs – use is different from the means by which that use is
achieved
• Applicant - Should use be limited to a common environment or
context
• Issue - Degree of specificity of use
Findings at the AAT
Core criteria not satisfied – corresponding use
• Reference to “design use” suggests a wide approach
• Issues of frequency, efficiency are mere selling points – do not
describe the use
• Use does not need to precisely overlap – the use need only
correspond – uses correspond even if manned and driverless
were different uses
• Use need only be reasonable – not a reference to sensible
commercial uses
• The legislation makes no reference to context or environment
Full Federal Court
• AAT decision set aside
• Both interpretation of “use” were reasonable
• “use” should be most influenced by the description of the goods
in the TCO
• The TCO wasn’t sought in respect of just any “passenger train”
• The TCO covered a particular type of passenger train with limited
uses
• The goal of the test is not to identify a broad category of goods,
but rather the actual goods described in the TCO
New AAT hearing
• The matter has been sent back to the ATT to be reheard
• The AAT now needs to consider the uses of the particular train
detailed in the TCO application and compare this to the uses of
the locally made goods
• May need to be a new hearing
You be the judge
Do you agree with the Full Federal Court decision:
a) Yes
b) No
c) Only partially
New TCO applications
• A wide description will result in a wide range of uses
• The more specific the description, the narrower range of uses
• However:
• too specific a description will mean that the TCO description is not
generic;
• you cannot describe goods by their end use
• the imported goods will need to meet all the TCO requirements
• Expect Customs to be harder on the generic descriptions test
Opportunity for importers
• Look at TCO applications that have previously been rejected
• Could a narrower TCO be made under the new test
• Consider – Alston v Comptroller General of Customs considered
whether one type of electric passenger train was substitutable for
Australian made electric passenger trains
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Tariff Classification
Pharm-A-Care Laboratories
• Products considered:
• VitgaGummies and Nature’s Way – pastilles not tablets
• Weight loss gummies – do not contain vitamins but contain garcinia
cambogia
• Pastilles contain sucrose, glucose syrup, gelatin, flavours and other substances
• Vitamins are listed on the Australian Register of Therapeutic Goods – weight
loss gummies were not
• Goods arrive in bulk and bottled and labeled for sale after import
Pharm-A-Care Laboratories
• The goods were identified by the AAT as vitamin preparations
and garcinia preparations respectively
• Classification options:
• 3004 Medicaments
• Notes – this chapter does not cover food or beverages (such as
dietetic, diabetic or fortified foods, food supplements, tonic
beverages and mineral waters)…
• 2106 Food preparations not elsewhere specified or included
• 1704 Sugar confectionary (including white chocolate), not containing
Cocoa
• ATT and Full Federal Court ruled that the goods were not food or
beverages or a food supplement
Key issues before the High Court
1. Reference to French version of the HS Code
2. Identification of goods
3. Reference to essential character when classifying goods
4. Reference to headings and subheadings in chapter notes
5. Use of interpretative rules
Interpreting the notes
Note 1(a) to chapter 30 provides:
1. This Chapter does not cover:
(a) Foods or beverages (such as dietetic, diabetic or fortified foods, food
supplements, tonic beverages and mineral waters) other than nutritional
for intravenous administration) (section IV)
The French version does not contain the words “Food or beverages
Customs say note 1(a) is unclear and to resolve the ambiguity
reference should be made to the “equally authentic” French version
The French version prevails
• The High Court agreed with Customs and interpreted the English
version so it matched the French
• Where a convention is transposed into legislation – the
transposed text in the legislation should have the same meaning
as in the treaty
• Every effort should be made to find a meaning of the English text
that works in harmony with the French text
• This principle applies where legislation to “transposed” – most
conventions are not merely transposed
The French version prevails
The wording the note is completely changed
(a) Foods or beverages (such as dietetic, diabetic or fortified foods, food
supplements, tonic beverages and mineral waters) other than nutritional for
intravenous administration) (section IV)
Changed to
(a) Foods or beverages (such as dietetic, diabetic or fortified foods, food
supplements, tonic beverages and mineral waters) other than nutritional for
intravenous administration) (section IV)
• No general exclusion of food or beverages
• Must be one of the listed categories
Guidance in notes
1. This Chapter does not cover:
(a) Foods or beverages (such as dietetic, diabetic or fortified foods, food
supplements, tonic beverages and mineral waters) other than nutritional
for intravenous administration) (section IV)
• What is the effect of the words “(section IV)”
• Customs say a guidance note of no legal effect
• Full Court said it limited the words “Food or beverages’ to only
food and beverages of Section IV (chapters 16 – 24)
• High Court – just a drafting convention – not of legal effect
Not a major point in this case – but major
implications for the industry
Identification of goods
• Traditional approach upheld
• 2 stage approach – identify and classify
• Identification was of the goods as a whole, not of their individual
ingredients – this approach was different to the approach
advocated by Customs
• Once identified classification was according to rule 1
• The chapter notes expand the headings and the scope of rule 1
• In this way, IR 2 -5 are subordinate to the chapter notes
• For example, if a note limits a heading from applying, you cannot
use note 3(b) to overcome this
Customs wins the battle but loses the war
• Customs convinced the Court the Chapter note was incorrectly
interpreted
• However, the High Court held that the AAT nevertheless reached
the correct decision
• The question became – were the vitagummies a food supplement
• The AAT had considered this question and said no
• Identification as a food supplement was a question of fact – not
subject to appeal
• Had the AAT asked the correct question it would have come to
the same answer
Implications – what is covered
MEDICAMENTS … CONSISTING OF MIXED OR UNMIXED PRODUCTS FOR
THERAPEUTIC OR PROPHYLACTIC USES, PUT UP IN MEASURED DOSES
(INCLUDING THOSE IN THE FORM OF TRANSDERMAL ADMINISTRATION
SYSTEMS) OR IN FORMS OR PACKINGS FOR RETAIL SALE
• Certainty regarding vitamins
• Uncertainty regarding edible
cosmetic products
• Uncertainty regarding foods and
beverages that have a
therapeutic purpose
• Interpretative rules:
• 3(a) – most specific
description
• 3(b) – mixtures – essential
character
• 3(c) – whichever comes last
Questions
• Can it be identified as a food?
• Garcina was not
• Can it be identified as a
medicament?
• If both a medicament and a food:
• is it a food supplement etc
• If chapter 17 or 18 food, chapter 30
goods excluded
• If neither food or medicament –
most akin
Next steps
• Refund applications for vitamins
• Court questioned finding about whether vitamins had a
therapeutic purpose – But Customs had not raised this
• Legislative change
• When do brokers consider the French version of the tariff?
• Need a practice note from Customs – When will ABF officers
have regard to the French version
English or French
Do you believe that Customs was right to argue for an interpretation
of the English text that was in harmony with the French version:
a) Oui (yes)
b) Non (no)
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Issues for customs brokers
Cash is king
Submission by FTA
Prohibited exports
Restrictions apply to the following:
• any of the following equipment that, when worn, is capable of
limiting the transmission of organisms to humans:
– disposable face masks
– disposable gloves
– disposable gowns
– goggles, glasses or eye visors.
• any of the following disinfectant products:
– alcohol wipes
– hand sanitizer.
Exceptions
• A person departing Australia takes with them a reasonable
quantity of such items for personal use
• Exported by a person to a relative of the person, for the relative’s
personal use, and the exportation is not by international mail.
• Export is by a humanitarian organisation, and the export is not by
international post; or
• Export of such items if manufactured by the exporter, and the
export is not by international post.
• Export of such items is a person’s normal business (registered
under the GST Act and has an ABN) , and the export is not by
international post
Exceptions – further explanation
• All exports by post are prohibited
• Capable of limiting the transmission of organisms to humans
• “Capable” – not focusing on intended us
• “Limiting” – does not have to be the best product
• goggles, glasses or eye visors – not limited to disposable products
• Normal business:
• history of exporting similar goods
• what evidence do you have
• Intercompany transfers
• Humanitarian – Due diligence
Prohibited imports
Therapeutic goods
• Strict requirements for TGA goods
• The presentation and claims made regarding face masks and gowns will
determine how these products are regulated by the TGA
• Face masks and gowns which are non-sterile and designed as safety or
protective apparel for use in the home or for recreational or occupational use (for
example, nursing) are excluded from regulation by the TGA under the Act.
• Face masks or gowns which are presented or claimed to be for therapeutic use,
such as being labelled for surgical use, or to reduce or prevent the transmission
of disease or micro-organisms such as bacteria or viruses, meet the definition of
a medical device and are regulated by the TGA under the Act
Cash pressures
• Cash flow issues might result in client pressure to:
• claim concessions
• claim refunds
• adopt aggressive classification positions
• When audited in 2024 there will be no allowance for COVID-19
• Holding onto client refunds:
• This is treated extremely seriously
• Loss of license
• Fines/Jail
• Services you no longer need:
• Offshoring
• IT
• Hire/Rent agreements
Clients who cannot pay
• Limitation on legal rights to recover
• statutory demands
• Courts inefficient or ineffective
• Liens
• Cancellation of credit terms
• You can request prepayment
Pricing
• COVID-19 surcharges
• Can charge what you like
• Cannot mislead
• Increased costs – airfreight
• Need to make the customer aware
• Currency
• Be careful with costs/payments in a foreign currency
