In Mercator Lighting Pty Ltd v Chief Executive
Officer of Customs, the Administrative Appeals Tribunal
considered the proper customs classification of particular electric
ceiling fans with integrated lights.
The decision highlights how disputes can arise applying the
interpretation rules for the customs tariff.
Mercator Lighting paid duty (under protest) after importing
several electric ceiling fan models with integrated electric
Mercator Lighting argued that the goods should be classified under
the customs tariff heading for fans, with the consequence that the
goods would qualify for a tariff concession. On that basis, the
goods would not be subject to customs duty.
Customs, on the other hand, argued the goods were properly
categorised under the lights heading. This was a result of
Customs' view that, applying the cascading tie-breaker rules,
the essential character of the goods could not be determined, in
which case the later heading (lights) applied. The goods, if
classified under the lights heading, were subject to a rate of duty
Some additional context
Customs had previously accepted that similar imported goods had
been properly classified under the fans heading. The exporters from
China had classified the goods under the fans heading for Chinese
export purposes. Customs rulings made in the United States and New
Zealand had also classified similar goods under the fans heading,
although rulings in the European Union classified similar goods
under the lights heading.
Identifying the goods
To classify the goods, the Tribunal had to first identify the
goods. This is a 'practical "wharfside" task'.
Identifying the goods can be done 'merely by looking at them
and by considering their nature and the function which they were
designed to serve'. The 'characteristics of the goods
themselves, as they would present themselves to an informed
observer' are relevant.
The Tribunal declined to follow the comments in Tridon Pty
Ltd v Collector of Customs, where 'how those who trade in
the goods describe them' was considered relevant to identifying
The Tribunal identified the goods as a ceiling fan with an
integrated light, with a three-speed wall controller for the fan
and separate light switch on a single panel.
Applying the tie-breaker rules
The Tribunal initially found that, based on the relevant
headings in the customs tariff, the goods could be classified under
either the fans heading or the lights heading.
Rule 3 of the Interpretation Rules sets out three tie-breaker
tests, which must be applied in the order they appear.
The first tie-breaker test is to classify the goods to the
heading that provides the most specific description. However, where
goods are composite goods (such as an integrated light and fan),
the first tie-breaker deems each component to be regarded as
The second tie-breaker test is to classify the goods to the
heading that gives them their 'essential character'.
The third tie-breaker test is to classify the goods to the
heading that comes last in the customs tariff.
Mercator Lighting argued that the fan function gave the goods
their essential character. This was rejected by the Tribunal, who
drew support from the decision in Times Consultants
concluding that 'it may be that there is no single essential
character'. In those circumstances, the third tie-breaker would
This was the Tribunal's decision. It resulted in the goods
being classified under the lights heading, which came after the
fans heading in the customs tariff. The goods therefore attracted
The Tribunal commented that it was bound to review Customs'
decision on the goods that were imported and subject to the
dispute. It was not able to consider Customs' previous position
or the treatment of the goods in foreign jurisdictions. We also
assume the Tribunal did not draw a negative inference from the fact
the importer was named Mercator Lighting rather than Mercator
Lessons from the decision
Composite goods are more vulnerable to customs duty disputes.
Importers should be careful when adopting tariff classifications of
foreign jurisdictions and seek advice where the application of the
interpretation rules is not clear.
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2010, 2011 and 2012
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Finalist – ALB Australasian Law Awards 2008, 2010, 2011 and
2012 (Best Brisbane Firm)
Winner – BRW Client Choice Awards 2009 and 2010 - Best
Australian Law Firm (revenue less than $50m)
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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