Australia: Federal Court of Australia sets the test for substitutable goods under the Customs Act 1901

Last Updated: 18 January 2012
Article by Ben Allen and Lynn Nguyen

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.


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.


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:

  1. What are the tco goods?
  2. to what use or to what uses are they put or can they be put?
  3. What are the goods claimed to be substitutable?
  4. to what use or to what uses are they put or are they capable of being put?
  5. 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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Ben Allen
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