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Under the Customs Act 1901 (Cth) (the Act), a person may
apply for a tariff concession order (TCO) for the duty-free
importation of goods where no substitutable goods are produced in
Australia. The decision process surrounding TCOs is therefore
important in the protection of local producers and manufacturers.
The recent Federal Court of Australia decision in Nufarm
Australia Ltd v Dow AgroSciences Australia Ltd (No 2) (2011) 123
ALD 21 (Nufarm v Dow) has confirmed that the correct approach
to assessing whether goods manufactured in Australia are
"substitutable goods" is a practical one based not on
science but on trade and commerce.
The statutory test under the act in relation to the granting of
tcos is set out in section 269c, which provides:
...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.
Section 269B(1) of the act defines "substitutable
goods" as:
...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.
Background
Dow agrosciences (dow) lodged an application for a tco for
imported herbicides identified as precursors Herbicide, the
ingredients of which contained not less than 96% trifluralin (tco
goods). nufarm australia ltd (nufarm) objected to dow's
application on the basis that nufarm locally produced substitutable
goods, namely trifluralin technical and 2, 4-dichlorophenoxyacetic
acid (2, 4-d acid). the chief executive officer of australian
customs and Border protection services (customs) decided not to
grant the tco on the basis of nufarm's objection.
On appeal by dow, customs' decision not to grant the tco
was overturned by the administrative appeals tribunal (aat). the
aat took a scientific approach and drew a distinction between the
trifluralin technical and 2, 4-d acid formulations in their means
of killing weeds. the aat reasoned that trifluralin technical
herbicides are pre-emergent herbicides applied to the soil prior to
planting, whereas 2, 4-d acid herbicides are post-emergent
herbicides applied directly to the weeds. the aat held that because
of their different properties, the goods were not
substitutable.
Nufarm appealed to the federal court of australia on the basis
that the aat applied the incorrect test in determining whether the
goods were substitutable. nufarm submitted that the aat should have
focused on the end result achieved by the goods and not the means
by which that use or result is achieved.
Judgment
Robertson J held that the aat had applied the incorrect test.
His Honour found that focusing on the manner in which the
herbicides operated does not establish that the goods are not
substitutable because such an assessment fails to consider the
corresponding use of the goods, namely, that they kill the same
weeds in the same crops. His Honour held that the failure by the
aat to ask itself the right question was confirmed by its failure
to address the issue of whether the same weeds in the same crops
were or could be killed or controlled by the goods in question or
their formulations.
Robertson J noted that the relevant statutory interpretive
standard is not science but trade and commerce. therefore, a
practical analysis, based on trade and commerce considerations as
opposed to scientific matters, would be:
What are the tco goods?
to what use or to what uses are they put or can they be
put?
What are the goods claimed to be substitutable?
to what use or to what uses are they put or are they capable of
being put?
are the uses in (2) and (4) or any of them corresponding
uses?
Robertson J further concluded that nufarm was denied procedural
fairness by the aat because the aat had failed to address one of
the bases for nufarm's case that 2, 4-d acid was a
substitutable good for the tco goods. His Honour found that the aat
had failed to deal with material that evidenced an overlap of the
goods in the case of sugarcane, stating that this confirmed the
aat's error in failing to deal properly with
nufarm's claim.
Robertson J ordered that the aat's decision and the tco
granted by customs be set aside. His Honour further ordered that
the entire case be remitted to the aat to be heard and decided
again.
The decision in Nufarm v Dow establishes a useful test
for assessing whether goods manufactured in australia are
substitutable goods. it is important to note that when making that
assessment, the proposed substitutable goods can have a number of
uses, only one of which is required to correspond with a use to
which the goods the subject of a tco application can be put.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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