Interpretation of wording in Tariff Concession Orders
Following recent Federal Court / Administrative Appeals Tribunal decisions this notice reiterates how the Department of Home Affairs (the Department) interprets Tariff Concession Order (TCO) descriptions. The decisions in question are commonly known as ‘Becker Vale’ 'Toro' and 'Brand Developers'.
These decisions provide some guidance in relation to how a TCO description should be interpreted and applied. These decisions are consistent with the policy intent of the Tariff Concession System (TCS), which is a government programme that supports Australian producers.
A key conclusion in the Toro decision was that …'the goods must precisely fit the description set out in the TCO.' (para 50). The Brand Developers decision concluded that packaging and instructional booklets were not part of the good for the purpose of determining whether a good was described by the TCO. The Brand Developers decision did, however, confirm that the presence of other additional components or goods that were not described by the TCO wording rendered the use of that TCO inapplicable. The Federal Court in the Becker Vale decision approved the approach of the AAT decisions of Toro and Brand Developers that a TCO must precisely describe the goods.
It is not open to the Department to interpret the words of a TCO other than by applying the same principles of statutory construction that are used to interpret all other legislation. In this context, the Department cannot expand the meaning of the TCO by assuming there are implied inclusions that cover additional goods not mentioned in the TCO.
These principles do not mean that each and every component part, function or feature of a good must be listed in a TCO. It simply requires that any component parts, functions and features are encompassed by the description of the complete good as described by the particular TCO. If there is a component or item which is not encompassed by a good of the description in the TCO, then it should be expressly mentioned in the TCO in order for the goods to be covered.
For example, a TCO that has a description of “TELEVISION, colour” would include a television imported with a remote control and a detachable power cable, as those items are normal parts or features of a “television” and therefore need not be listed in the TCO description. Televisions shipped with a set-top box, however, would not be covered by the TCO as the set-top box is an additional good. Similarly, a television with an inbuilt disc player would not be covered by the TCO as a disc player is not a normal component of a television and hence the TCO description “TELEVISION, colour” does not apply. Such goods would be covered by a TCO description “TELEVISION, with a built-in disc player”.
Providing certainty to importers
The easiest and surest method for importers to be certain in respect of the duty rate applicable to particular goods is to apply for a Tariff Advice / Advance Ruling. A Tariff Advice is a binding private ruling by the Department that a particular tariff classification applies to a particular good. A Tariff Advice can state whether the goods are eligible to receive the benefit of a TCO. A Tariff Advice applies for five years.
If doubt exists as to the applicability of a TCO to any goods, it is open to an importer to apply for a TCO. A requirement of a TCO application is that it contains a full description of the goods to which the application relates. The onus for the provision of all the information that the application form requires, including full goods description, is on the importer or its representative.
Relevant legislation also allows for imported goods to be placed into bond (Nature 20 entry) while a TCO application is lodged. If the TCO is granted, its operative date will be the date the application was lodged.
If the imported goods are entered for home consumption (Nature 30 entry) on or after the date the TCO is operative, the TCO will apply.
Importers can also choose to use the 'amberline’ option when lodging the import declaration if there is doubt as to whether a TCO applies to the imported goods. An importer might also pay duty 'under protest' if it is of the view that a TCO applies and the Department holds a contrary view. Application can then be made for review of the matter by the Administrative Review Tribunal, within 6 months of the payment under protest.
Compliance approach
The Department through its operational arm, the Australian Border Force (ABF), will continue to undertake compliance activities in accordance with policy settings described above, to ensure TCOs are correctly used and in line with the intent of the TCS.
Where TCOs are wrongly claimed, appropriate treatments will be applied. Treatments can range from education and awareness for those genuinely trying to comply, demands for duty, the issue of infringement notices and prosecution for more serious and systemic breaches.
The Department and the ABF are committed to working with industry to increase industry understanding and awareness on the correct use of TCOs and to encourage higher levels of voluntary compliance.
