Another trip around the nation for IFCBAA CPD forums

A version of this article was first published by The DCN in October 2022.

Andrew Hudson, Partner in our Customs and Trade practice, discusses the judgements and legal developments addressed at the recent International Forwarders and Customs Brokers Association of Australia (IFCBAA) continuing professional development (CPD) forums.

Recently, Andrew Hudson, presented at the IFCBAA CPD forums held across Australia. In addition to IFCBAA members, there were various government agencies in attendance including the Australian Border Force (ABF), the Department of Agriculture, Fisheries and Forestry (DAFF) and the Anti-Dumping Commission (ADC).

Andrew’s presentations covered various various topics and legal developments, including consideration of several new judgements by the Administrative Appeals Tribunal (AAT) and the Federal Court of Australia (Federal Court), developments in Australia’s free trade agreements (FTA) and other industry-related issues both here and overseas.

Dumping and countervailing duties

With ‘general’ rates of tariffs being reduced through FTAs and other means, the significant levels of duties now imposed are in relation to dumping and countervailing measures.

Following investigations by the ADC, the relevant minister decides the imposition of the measures and the duties are collected by the ABF. The ABF also undertakes extensive compliance activities at various supply chain stages, including pre-and post-transaction reviews and intervention during the import of goods. The ABF often redlines the imports of goods it believes to be subject to measures and requires payment of the relevant duties before the goods can be released into home consumption.

At the conference, some recent decisions in the AAT related to Solu¹, Paracella², Solar Juice³ and CMS Electracom⁴ (the last two conducted by Rigby Cooke Lawyers) were considered at length. While each deserved careful consideration before deciding whether goods are liable to measures, some key issues arose as set out below.

• While referencing the Dumping Commodities Register (DCR) is helpful in determining whether goods are subject to duties, to be certain, reference needs to be made to the final ministerial decision in the relevant anti-dumping notice and the final report from the ADC.
• Reference to ‘tariff classifications’ of the goods under consideration (GUC) in the DCR may not, on their own, determine liability to the duties. The goods needed to be analysed in more detail in the context of the words of the ministerial decision, Anti-Dumping Notice and other ADC reports.
• The measures may not only apply to the GUC but also to ‘like goods’ if the minister’s decision was also to apply the measures to ‘like goods’. The issue of ‘like goods’ has regularly been an issue in considering which goods are subject to the original investigation.
• The ‘tariff precedent’ issued by the ABF, specifically as to what is a kit in relation to aluminium extrusions, was held in Solar Juice to only be the opinion of the ABF and not binding in any form, even though it is often relied upon by the ABF.

These decisions highlight that a difficult and complex area is perhaps even more challenging for importers and their service providers. Errors or uncertainties could lead to intervention on imports, post-import demands for duties and even the imposition of infringement notices or penalties. The absence of an administrative arrangement exacerbates the risks to rule on the application of measures.

The introduction of such a ruling system was part of a reform package proposed by industry several years ago. While it was not legislated in the previous two parliaments, it is now being considered by the new minister for Industry, Science and Resources.

Tariff Concession Orders

Tariff Concession Orders (TCO) may be granted to allow duty-free entry of goods on the basis that there are no ‘substitutable’ goods produced or capable of being produced in Australia. To secure the TCO benefits, imported goods must meet both the tariff classification set out in the TCO and the TCO’s words exactly. In Clover Pipelines⁵, the AAT declined to allow imported products the benefit of a TCO as they did not exactly meet the words of the TCO even though they were the product of the same raw material (epoxy resin).

The term ‘substitutable’ was also subject to further consideration by the Full Federal Court in Alstom⁶. They believed that the AAT had not properly applied the test for whether Australian-produced trains were ‘substitutable’ for imported driverless trains.

The Full Federal Court (for the second time) remitted the decision back to the AAT for determination (for the third time) with specific directions as to how the test of substitutability was to be applied. This required a test determining whether the locally made goods are reasonably capable of being put to one of the uses of the imported goods.

Duty drawbacks

A duty drawback is the repayment of the customs duty paid on the import of goods which are exported. That process requires compliance with the terms of the Customs Act 1901 (Act), the Customs (International Obligations) Regulation 2015 (Regulation) and the Australian Customs Notice (ACN) No. 2020/44. In the decision of the AAT in Philip Morris⁷, the AAT agreed with the ABF that the applicant had not complied with those requirements and the duty drawback application was not granted on certain goods exported.

The ABF has recently initiated a review of the relevant provisions of the Act, the regulation and the ACN. The proposed review will be of interest to those using duty drawbacks, and to importers of alcohol who then export that alcohol with the pre-export notification requirements in relation to the export of tobacco being imposed on those exporting alcohol. There is also the proposal to include the provisions of the ACN within the regulation.

Liability under sections 35A and 36 of the Customs Act 1901

There have been several significant decisions in which parties were held liable for customs duty which would have been payable on goods placed ‘under customs control’ if those goods are subsequently not accounted for or produced when required under section 35A of the Act. On most occasions, this relates to goods which have been placed in licensed premises and are removed from those premises without approval of the ABF (for example, by theft).

There is a provision for similar penalties under section 36 of the Act for failure to account for the goods. There are also similar provisions on liability for excise duty on goods subject to excise duty which cannot be produced on demand, although excise is payable to the Commissioner of Taxation (effectively the Australian Taxation Office).

The previous significant decisions include extending liability to persons, not just companies deemed to be in possession, custody or control of the goods. Further, many decisions have held that liability under these provisions is almost absolute with no apparent defences to liability.

However, the Full Federal Court in Hurley recently held that the operator of a licensed premises (in possession, custody or control of goods) was not liable under section 35A of the Act as the goods had been moved under a ‘periodic settlement permission’ to a retail premises (under section 71E of the Act) where duty was not payable until a later date.

The decision held because the goods were not ‘under customs control’ as defined in the Act, and section 35A of the Act had no application. The Full Federal Court overturned decisions in favour of the ‘collector of customs’ (effectively the ABF) at the AAT and a single judge of the Federal Court. I understand that the Commonwealth is seeking special leave for the case to be heard before the High Court.

Consequences for industry

The combined effect of these decisions is to emphasise that dealing with the liability to duties (whether general duties, dumping and countervailing duties or amounts equivalent to duties) and the ability to exclude duties (through TCO) or have them repaid (through duty drawback) is extremely complicated.

The need to manage risks is even higher when you add the possibility of penalties or infringement notices and intervention by the ABF or the ATO at any stage in the movement of goods.

For advice on all aspects of Australian and international trade and customs obligations, please contact our Customs & Trade team.

References
1. Solu Pty Ltd and Comptroller-General of Customs [2019] AATA 2584
2. Paracella Pty Ltd ATF The Kelvin Flintoff Family Trust and Comptroller-General of Customs [2021] AATA 1988
3. Solar Juice Pty Ltd and Comptroller-General of Customs [2022] AATA 550
4. Electracom Pty Ltd and Comptroller-General of Customs [2022] AATA 2539
5. Clover Pipelines Pty Ltd and Comptroller-General of Customs [2022] AATA 1332
6. Comptroller-General of Customs v Alstom Transport Australia Pty Ltd [2022] FCAFC 109
7. Philip Morris Limited and Comptroller-General of Customs [2022] AATA 548