By Stephen Tully -
Snapshot
- A two-stage decision-making process applies when customs duties are imposed on imported goods.
- Firstly, goods are objectively identified by reference to their characteristics.
- Secondly, a ‘wharf-side’ test is applied where goods are matched against the ordinary colloquial meaning of descriptions found in Customs Tariff Act 1995 (Cth) Schedule 3.
The apparently innocuous differences between goods can raise tricky questions of interpretation with significant financial consequences for clients.
This note considers the process for properly identifying and classifying imported goods under the Customs Tariff Act 1995 (Cth) (the Act) by reference to an illustrative decision from the Administrative Appeals Tribunal about dumplings.
Identifying and classifying goods against a tariff
All imported goods are subject to assessment for duty, which is a process determined by the tariff classification. Part II of the Act provides for the imposition of customs duties. These duties are generally imposed on all goods imported into Australia for home consumption (s 15).
If the goods are not produced or manufactured by a particular country, the duty payable is worked out against a general rate set out in the tariff classification for that specific item. The tariff classification is a heading or subheading appearing in Schedule 3 of the Act (ss 3, 6) which is derived from the International Convention on the Harmonized Commodity Description and Coding System [1988] ATS 30. Schedule 2 specifies general rules for interpreting Schedule 3 which are used to work out the tariff classification for each good (s 7(1)). A two stage process is applied:
Goods are identified in their imported condition. This process is objective, having regard to their characteristics, without regard to how they are described in the nomenclature of a tariff (Gissing and Collector of Customs (1978) 1 ALD 144, 146);
Classification then involves the practical ‘wharf-side’ task of looking at the goods and assessing the nature and function which they are designed to serve
(Times Consultants Pty Ltd v Collector of Customs (Queensland) (1987) 16 FCR 449, 463).
Additional principles include the following:
- identifying a good requires an informed inspection which characterises it by reference to design features and suitability for a particular use;
- the knowledge of how goods are described in the trade is usually relevant but not necessarily conclusive;
- descriptive terms have varying degrees of specificity (eg windscreen wiper blade refills). Generic descriptions can refer either to the materials or substances used in a good’s construction or the manufacturing method (Re Tridon Pty Ltd v Collector of Customs (1982) 4 ALD 615, at [15]).
In Herbert Adams Pty Ltd v Federal Commissioner of Taxation (1932) 47 CLR 222, the applicant argued that sponges were free of sales tax because they were not cakes. In rejecting that argument, Starke J considered that words of common speech were to be interpreted according to their ordinary meaning or what meaning they bore in ordinary colloquial speech.
