Administrative Appeals Tribunal again makes it harder to obtain tariff concession orders

Administrative Appeals Tribunal again makes it harder to obtain tariff concession orders

In a recent case the Administrative Appeals Tribunal (AAT) found that a tariff concession order should not be made for imported driverless trains and in circumstances where driver operated trains were produced in Australia. The decision reflects the difficult of proving local goods and imported goods do not have overlapping uses despite the fact that commercially they do not compete.

The Decision

In Alstom Transport Australia Pty Ltd and Comptroller-General of Customs [2019] AATA 1308 the AAT was asked to review a decision by Comptroller-General of Customs to not make a tariff concession order (TCO) sought by Alstom that covered certain driverless trains. If made, a TCO would reduce the duty payable on the Indian made trains from 5% to 0%.

A TCO will only be made if on the date of the application it is shown that no substitutable goods were produced in Australian in the ordinary course of business. Customs did not make the TCO as it was satisfied that EDI Downer manufactured driver operated passenger trains in Australia.

The key issue considered by the AAT was whether driverless trains and driver operated trains were substitutable. Under the Customs Act, 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 TCO application can be put

Identifying the use of the goods

Alstom argued that the use of the TCO goods should be narrowed to the transport of passengers on a driverless metropolitan train line system and that no trains in Australia could be put to this use. Customs argued that the use of the imported goods was wider, being the transport of passengers by train. Whether the train was manned or driverless did not alter this use but rather looked to how the use was performed.

Essentially, the Tribunal had to determine the degree of specificity with which to identify “use”.

The Tribunal referred to past case law and dismissed considerations of how a use was performed. The Tribunal considered the most important use of the goods to be the transport of passengers by train. Other issues were seen as selling points rather than a description of use.

The Tribunal upheld the decision to not make the TCO.

Use does not even need to overlap

In a part of the judgment that will be welcomed by Australian manufacturers, the AAT said it is not necessary to find uses that are precisely applicable to the local goods and the imported goods. Rather, the uses need merely “correspond”. While it wasn’t definitively ruled on, it was suggested that even if the defined use was as a driverless train, this use corresponded to the use of the locally made goods, being manned trains. Essentially, the AAT is saying that it doesn’t matter if the locally made goods cannot be put to the same use as the imported goods, provided the uses “correspond”. The Tribunal did not elaborate on when uses that do not overlap, nevertheless “correspond”. Often the term means something less than identical, but rather “similar” or “closely matches”.


Automated goods

It should be assumed that an automated version of a good will be seen as substitutable for a version of the good operated by a human (and vice versa). The fact that a good incorporates artificial intelligence or robotics will not mean that its use will be confined to performing a task by the use of AI or robotics.

TCO System

Over time the Courts have removed from the review of “substitutable goods” any consideration of cost, quality, effectiveness or how a use is performed. The only way of giving the test, and the TCO system generally, some practical purpose was to require “use” to be defined with some level of precision.

The AAT advocated that use itself cannot include the method of performing the use. It could be asked whether the use in this case should merely have been “movement of passengers” without reference to the means of moving the passengers (by train). Would the TCO have been able to be defeated by a local manufacturer of buses? While they do a poor job of it, when a train line is down, the phrase “buses replacing trains” is used. The only difference between buses and trains is the means and efficiency of transporting people.

This would be an unexpected outcome, but one made possible by the interpretation adopted by the Court.

The decision may be appealed. If it is not, it should be expected that it will be rare that a TCO will be made if there is any opposition from an Australian manufacturer. It can also be expected that Australian manufacturers may lodge revocation application in respect of goods which were not previously considered substitutable.

Please contact Russell Wiese if you would like to discuss how this decision applies to your imports.

This article was originally published on the Freight & Trade Alliance website.