Some readers would be aware of extensive recent litigation on
the availability of tariff concession orders
("TCOs") in relation to
"reach" and "lift" trucks which litigation has
had broader consequences for the law relating to the grant of
Most recently, there have been issues associated with an
application for TCOs by Toyota Material Handling Australia Pty Ltd
("Toyota"). At first instance, the
Australian Customs and Border Protection Service
("Customs") rejected the application for
TCOs. Toyota appealed to the AAT which overturned the decision and
directed Customs to issue TCOs for the trucks the subject of the
TCO application. However, Customs appealed the AAT decision to the
Federal Court of Australia.
In this case, the parties agreed that the appeal should be heard
by a Full Bench of the Federal Court rather than a single judge as
both parties indicated that they were likely to appeal in any event
from a decision of a single judge.
Following arguments before the Full Federal Court in February
2012, the Full Federal Court finally issued its judgment on 29 May
In its reasons for judgment, the Full Federal Court ruled that
the AAT had applied an incorrect test in relation to the element of
"substitutability". Applying what the Federal Court
determined to be the correct test, it found that the goods
manufactured by an Australian manufacturer were, in fact,
substitutable to the goods subject of the TCO application by
Toyota. Accordingly, it found that Customs was correct in its
original determination not to the grant TCOs. As a result, the
Federal Court directed Customs to revoke the TCOs with effect from
the date at which they had been reinstated.
The decision has certain wider consequences:
The Full Federal Court said that the test applied by the AAT
was incorrect and that in considering the test for
"substitutability" there should be recourse to the
specific words of the section.
It is irrelevant if the TCO goods have functions in excess of
the goods manufactured in Australia. As long as the Australian
industry produces goods which have the same or corresponding
capacities to those the subject of the TCO application, then the
Australian industry produces a substitutable good and a TCO should
not be granted. In this case, Toyota argued that the TCO goods
actually had capacities over and above those of the goods produced
by the Australian industry. However, the Full Federal Court found
that to be irrelevant and the real question was dictated by the
actual activities contemplated for the goods the subject of the TCO
application and not additional capacities or qualities.
Notwithstanding its comments that the parties should have
recourse to the specific sections of the Act, the Full Federal
Court added a concept of "reasonableness" as to whether
the Australian goods are substitutable to the goods the subject of
the TCO application. The Full Federal Court referred to a
hypothetical example of shovels and spoons. The Court said that in
an application in a TCO for shovels, where the Australian industry
manufactured spoons then there was an argument that spoons and
shovels did both move earth and the spoons were substitutable.
However, the Full Federal Court held it was not reasonable to argue
that spoons were substitutable for shovels given the significant
disparity in their use and capacity. Accordingly, this would
suggest that a test may be as to whether the goods manufactured by
the Australian industry are "reasonably substitutable"
for those the subject of the TCO application.
Although it was not required to do so, the Full Federal Court
did make the observation that if it had been called upon to rule on
the description of the goods in the TCO application it may have
found that the description of the goods was not generic (as
required by the Act) but included inappropriate reference to
representative examples of the TCO goods. The Full Federal Court
said it believed that the AAT had erred in considering a
representative sample of the TCO goods. The Full Federal Court
indicated that a TCO should not be made in other than generic
Those who had been using the TCO which arose from the earlier
AAT decision should no longer be using that TCO in making Import
Declarations and entering goods on a duty free basis.
Customs will no doubt be reviewing the use of the TCOs
considered in this matter and having revoked those TCOs will be
making demands on those importers who had used the TCOs to have the
import duty repaid.
Customs will presumably take into account the comments of the
Full Federal Court in considering the grant of future TCOs and
whether past TCOs have been validly granted.
As always we would be pleased to provide further assistance
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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