Three recent case decisions relating to customs, trade and tax you need to know about

24 October 2023

Three recent case decisions, two handed down by the Federal Court of Australia (Federal Court) and a third by the Administrative Appeals Tribunal (AAT), will be of interest to those who may deal with sanctions, GST exemptions and customs duty issues relating to proper tariff classification of imported goods.

In this Customs & Trade alert, we have summarised three recent cases and the decisions, highlighting the main takeaways from each case.

Alexander Abramov v Minister for Foreign Affairs (No 2) [2023] FCA 1099

Notwithstanding the prevalence of sanctions both domestically and internationally since the outbreak of the conflict in Ukraine in February 2022, until the publication of this judgement, there have been almost no cases relating to Australian sanctions.

Factual and legislative background

By way of background, the key pieces of legislation which enable the Australian federal government to impose sanctions are the Autonomous Sanctions Act 2011 (Act) and the Autonomous Sanctions Regulations 2011 (Sanctions Regulations). A previous article provides a more general introduction and overview of Australian sanctions legislation.

In the present case, Mr Abramov was a Russian national and had previously held certain positions as follows which attracted the attention of Australian sanctions regulators:

(a)  Mr Abramov previously served as the non-executive chairman of Evraz plc (Evraz), a very large multinational steel and coal-producing conglomerate incorporated in the United Kingdom and involved in the manufacture of steel products in Russia and Kazakhstan for use in those countries.

(b)  Mr Abramov served on the board of the Russian Skolkovo Institute for Science and Technology and the Russian Geographical Society.

Mr Abramov’s designations and subsequent legal challenge

In April 2022, as a result of having previously held these positions, Mr Abramov was made a ‘designated person’ subject to Australian targeted financial sanctions by way of a designation instrument made under the Act by the Minister for Foreign Affairs (Minister).

Under regulation 6 of the Sanctions Regulations, the Minister was required to be satisfied that Mr Abramov is, or has been, engaging in an activity or performing a function that is of economic or strategic significance to Russia, and that it was appropriate as a matter of discretion to designate him accordingly.

Following this designation, Mr Abramov instituted proceedings in the Federal Court for judicial review of the decision to list him as a ‘designated person’. He was seeking an order quashing the relevant item in the list of sanctioned individuals and entities, or alternatively, an order setting aside the decision to add his name to that list.

Mr Abramov’s solicitors also made an application to the Minister under regulation 11 of the Sanctions Regulations for revocation of his listing on the Russia and Ukraine List.

As a result of this revocation application, the Minister issued a revocation instrument on 16 September 2022, followed by a second designation instrument made immediately after the revocation on the same day. The new designation instrument relisted Mr Abramov as a ‘designated person’ based on the new information and submissions considered by the Minister.

Subsequent to the relisting, Mr Abramov filed an amended application on 4 October 2022, challenging both his first and second listing in the Russia and Ukraine List pursuant to the first designation instrument and the second designation instrument.

The judgement of Kenny J in this case extends well over 300 paragraphs and is outside the scope of this article to provide a detailed commentary on all aspects of the case. However, we will discuss the key issues identified and addressed by the Court and the determination made in relation to these items.

Key arguments by Mr Abramov

In his application, Mr Abramov asserted that the Minister’s satisfaction that he “is, or has been, engaging in an activity or preforming a function that is of economic or strategic significant to Russia” was “legally unreasonable, and/or irrational or illogical, and/or erroneous.” Mr Abramov raised the following grounds of review to challenge his listing as a ‘designated person’:

(a)  The Minister failed lawfully to form the requisite state of satisfaction on the basis of the evidence and other material placed before her in relation to Mr Abramov.

(b)  The Minister’s failure to consider whether to exercise her discretion to designate or declare Mr Abramov was an error of law and constituted a constructive failure to exercise jurisdiction.

(c)  The Minister failed to accord Mr Abramov procedural fairness.

Court’s decision and reasoning

It is interesting to note that Mr Abramov was successful in challenging the first designation instrument on the basis that the Minister’s failure to consider whether to exercise her discretion to designate him constituted a constructive failure to exercise jurisdiction. However, Kenny J held that the second designation instrument re-listing Mr Abramov was lawful and that he would therefore continue to be a ‘designated person’ for the purposes of the Australian sanctions regime.

The Court held that the Minister may declare and designate a person even though the person has ceased the relevant activity or function, as in the case of Mr Abramov, providing the Minister is satisfied that that activity or function is still of economic or strategic significance to Russia.

It was also noted by the Court that this is not limited to activities and functions of “importance” or necessarily “momentous” economic or strategic significance to Russia, and that it is a matter for the Minister to form the requisite satisfaction, subject to the requirement to do so in conformity with the standard of legal reasonableness adopted throughout the Australian judicial system.

It would be recommended for those who regularly deal with issues of sanctions law take the time to read this lengthy judgement which analyses various elements of the Act and the Sanctions Regulations in detail. It places a particular focus on the criteria which must be satisfied for an individual or entity to be the subject of Australian targeted financial sanctions.

Simplot Australia Pty Ltd v Commissioner of Taxation [2023] FCA 1115

The dispute in this case revolved around the GST status of six frozen food items sold by Simplot Australia Pty Ltd (Simplot) made up of vegetables, seasonings, and sometimes grains, pasta, or egg. The key question was whether these were taxable as ‘food marketed as a prepared meal, but not including soup.’

Factual and legislative background

Generally, food supplies are exempt from GST as per section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). However, ‘foods of a kind’ listed in Schedule 1 of the GST Act are not GST-free. These GST exemptions and the exclusions in Schedule 1 apply to the supply of both locally produced items as well as products imported to Australia from overseas. In the case of imported products, GST may be collected at the time of import or in some cases, deferred until a later date.

Specifically for the purposes of this case, the dispute revolved around foods of a kind ‘marketed as a prepared meal, excluding soup.’ The various frozen products sold by Simplot were characterised as a mix of vegetables, rice, couscous, quinoa, egg, and/or pasta. Some items came in dual 200g microwaveable bags within a 400g pack, while others had different packaging. Sold by manufacturers and retailers in the frozen vegetable aisle, the products were also advertised on Simplot’s website, emphasizing their health benefits and convenience.

The Court’s reasoning

The Court concluded that ‘food of a kind’ refers to a broader category of food rather than a specific item, with the definition not based on actual consumption but on how these foods are generally marketed. The court stated:

“The statutory question is not concerned with the intention of consumers or the aims of the supplier of the product but with a category of food that is of a kind marketed as a prepared meal.”

The Court held that the determinative factor in assessing whether the relevant item is ‘food of a kind’ not exempt from GST is the seller’s marketing practices, not consumption habits. In addition, the Court highlighted that mere labelling is not the sole determinant for GST classification, but rather that a comprehensive approach, considering factors like labelling, promotion, and advertising must be considered when making such a determination.

The judgement explored the modern consumer understanding of a ‘prepared meal’, emphasizing that conventional mealtimes aren’t the sole relevant criterion. The Court stated:

“The phrase “prepared meal” is an ordinary phrase of common usage intelligible by a lay person.”

The Court also refuted the argument that only foods in consumer-ready packaging are ‘prepared meals’. It was held that the term ‘prepared meal’ related to food items that an average Australian would categorise as such, irrespective of the manufacturer’s marketing nuances.

Given this perspective, the Court downplayed Simplot’s marketing efforts which attempted to classify the products as ‘side dishes’ rather than comprehensive meals. The judgement found that a company’s marketing strategies cannot be definitive in determining the characterisation of its own product, especially when the company would be aware of the potential GST consequences of such a characterisation.

In addition, the Court stated:

“There is no reason why a food may not be of a kind that is marketed as a meal component as well as being food of a kind that is marketed as a meal.”

The Court determined that ‘food of a kind’ needs an objective interpretation, while ‘prepared meal’ related to food products that the average person perceives as ready-to-eat. By this standard, all of Simplot’s products in question were deemed taxable as prepared meals in the modern Australian context.

Part of the Court’s reasoning for this decision is worth reading in full as follows:

“The SteamFresh Fried Rice product is a combination of foods in the form of vegetables, rice and egg. It is flavoured and seasoned. Although pre-packaged in packets that are suggested to serve two people, there is nothing inherent in each of the packets that does not make it suitable for consumption by an individual. Indeed the packaging recognises that there may be a desire to heat both packets at once. Although labelling and packaging has changed over time, the historical packaging represented the product in a bowl on its own.

A bowl of fried rice with vegetables, scrambled egg and flavouring, with or without added meat or seafood, is food of a kind marketed as a prepared meal. The size of the individual packets (including the fact that both packets can readily be heated together to increase portion size if so desired) is sufficiently substantial as to be regarded as food of a kind marketed as a prepared meal. As a matter of common experience in modern Australia, this product is food of a kind that is marketed as a prepared meal.”

Interestingly, the Court’s concluding comments in this judgement were somewhat critical of the drafting of the current version of the GST Act as containing:

“Arbitrary exemptions…not productive of cohesive outcomes.”

Further, the Court stated:

“The unsatisfactory position of having to determine whether to assign novel food products to a category drafted on the premise of unarticulated preconceptions and notions of a “prepared meal”.”

Key takeaway

As a result of this decision, it is recommended for those engaged in the food supply chain to make note of how the GST exemption provisions may not apply to certain packaged food products which would fall into the category of foods of a kind marketed as a ‘prepared meal’.

Direct Fire Supplies Pty Ltd and Comptroller-General of Customs [2023] AATA 2909 (13 September 2023)


In this case, Direct Fire Supplied Pty Ltd (Direct Fire) sought review in the AAT of two decisions by the Comptroller-General of Customs (Customs) to refuse applications for refunds of customs duty paid by Direct Fire in respect of steel pipes imported from China and Thailand.

The dispute between Direct Fire and Customs centred around the correct tariff classification for these pipes, with Customs’ preferred tariff classification resulting in amounts of customs duty being payable on the pipes. Direct Fire contended that the pipes were ‘line pipes of a kind used for oil and gas pipelines’ and therefore should be classified under tariff subheading 7306.19.00, thereby making the relevant imports duty-free.

While both parties agreed that the appropriate tariff heading was 7306, the appropriate subheading was in dispute where Customs maintained that the appropriate tariff subheading was 7306.30.00 being ‘other, welded, of circular cross-section, of iron or non-alloy steel’, rather than pipes used in oil and gas pipelines.

Principles of tariff classification

The Tribunal in its ruling reiterated the following principles of tariff classification identified which have been established in previous cases:

(a)  the goods should be identified in their condition as imported;

(b)  the identification of goods cannot be controlled by the descriptions of goods adopted in the tariff nomenclature;

(c)  in the identification of goods, knowledge of how those who trade in the goods describe them will usually be relevant, but not necessarily conclusive; and

(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.

Expert evidence and Direct Fire’s argument

The pipes were described as welded black steel pipes with a red-painted finish (from Thailand) and welded galvanized steel pipes (from China) which were imported for use in fire protection sprinkler systems.

An expert with significant experience regarding line pipes for oil and gas pipelines, provided evidence to the Tribunal. He explained that the term ‘line pipe’ refers to steel pipe used for oil or gas pipelines and stressed the importance of compliance with certain standards due to the hazardous nature of the fluids transported. The imported pipes did not meet these strict standards, lacking crucial micro-alloying elements.

Direct Fire attempted to argue that the phrase ‘of a kind used for’ should be interpreted broadly, emphasizing that the actual use of the imported pipes (for fire protection sprinkler systems) should not be the determining factor. It also argued that actual use should not dictate the classification and that the pipes should be seen as a broader genus that includes their kind.

The Tribunal’s decision

In its decision, the Tribunal leaned heavily on the expert’s point about the missing ‘very necessary’ micro alloying elements in the imported pipes. The Tribunal pointed out that these crucial elements—despite being present in minuscule amounts—are indispensable for a pipe to be suitable for oil and gas pipelines.

The lack of evidence indicating the presence of these micro alloying elements in the imported pipes significantly weakened Direct Fire’s argument about the pipes’ shared essential characteristics.

Based on the expert testimony and the evident disparities in the features of the imported pipes when compared with the typical makeup of pipes used in oil or gas pipelines, the AAT concluded that the imported pipes didn’t qualify as ‘line pipe of a kind used for oil and gas pipelines’.

Accordingly, the Tribunal ruled in favour of the Customs’ classification under tariff subheading 7306.30.00 and Direct Fire’s request for a refund of duty paid on the pipes was denied.

Importers of similar pipes and their Licensed Customs Brokers should be aware of this decision and ensure that such pipes are classified to subheading 7306.30.00 accordingly.

Contact us

If you would like to discuss any current trade or supply chain issues your business is facing, including GST exemptions, sanctions and customs duty issues relating to tariff classification of imported goods, please contact a member of our Customs & Trade team.

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