As products evolve, tariff classification becomes
increasingly challenging. This is primarily due to modern products
being designed to be multi-functional.
Recently, a decision by the Australian Administrative Appeals
Tribunal demonstrated the difficulty of classifying a ceiling fan
which had an integrated light. The approach taken in his case
provides guidance for classifying all goods with multiple
CLASSIFING - ESSENTIAL CHARACTER
In Mercator Lighting Pty Ltd and CEO of Customs, the
Administrative Appeals Tribunal (AAT) considered whether a ceiling
fan with an integrated electric light should be classified as a fan
or as a light. If classified as a fan, a concession applied
providing duty free entry. If classified as a light, the goods
would attract 5% duty.
Where a good falls under two tariff headings the Customs
Tariff Act prescribes a set of rules to decide which single
classification should apply. In this case the AAT considered the
classification rule that composite goods shall be classified as if
they consist of the material or component which gives them their
essential character. If no essential character can be identified,
the goods will be classified under the tariff heading which
occurred last in numerical order.
The key question was whether the fan function or the light
function gives a ceiling fan with an integrated light its essential
The AAT decided that neither function gave the product its
essential character and classified the goods under the light
heading, which occurred later in numerical order to the fan
LESSONS FROM THE AAT REGARDING CLASSIFYING GOODS WITH MULTIPLE
For a component to give a product its essential character it
must have a dominating influence upon the essence of the
The question of what is the essential character of the goods is
one of "basic fact" and one should not look for
Where two distinct goods complement each other and are
combined, it will not ordinarily be the case that one article gives
the set its essential character
It is irrelevant how the individual components would operate
independently if they did not form part of the composite good
It is relevant to question whether there is one critical
function to which the other functions are ancillary. In this case
it was held that the light and fan functions were discrete and
Visual dominance of a component is not relevant – it is
necessary to consider their nature and function
The fact that the light was fitted to the fan did not diminish
the significance of the light function
The respective cost of the different functions is
Evidence as to why customers may buy separate goods as opposed
to composite goods is irrelevant
The structural dominance of one component over another would
only be relevant if that was evident from a wharf side review in
the products' state as imported.
LESSONS FROM THE AAT REGARDING CLASSIFICATION IN GENERAL
Classification is determined by an objective test, not the
intentions of the manufacturer, exporter, importer or particular
user of the goods
It should normally be possible to classify the goods merely by
looking at them and considering their nature and the functions the
goods were designed to serve
Regard must be paid to the characteristics of the goods as they
would present themselves to an informed observer at the time of
In identifying the goods for the purpose of classification, the
naming and description of the goods in advertising is of little
relevance – the key issue is the goods themselves
Export invoices indicating classification in the country of
export are irrelevant
The Australian Tribunal will not adopt a classification simply
on the basis of rulings in other jurisdictions (there were NZ and
US decisions classifying the same goods as fans)
Previous tariff advices provided by Australian Customs will not
influence the Tribunal.
AVOID THE PROBLEM – BE PROACTIVE
Classification of multifunction goods can be extremely
difficult. It is less problematic to obtain a binding tariff
advice/ruling from Customs and renewing that advice every 5 years.
With a ruling in place, Customs can only vary the classification in
respect to future imports, giving the importer certainty regarding
the past and time to obtain new concessions for future imports if
needed. In this case, if a concession had been obtained for the
product under the lighting classification, it is unlikely the
importer would have disputed the classification.
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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