In the case that just won't go away, the Administrative Appeals Tribunal (AAT) in Sulo MGB Australia Pty Ltd v Comptroller General of Customs [2018] AATA 1324 has again ruled on the tariff classification of wheels for wheelie bins. Again the wheels were classified as part of a vehicle, but more interestingly the case also provided guidance on TCO wording and the use of HS notes when classifying goods.
Quick catch-up
This case concerns plastic wheels with a solid rubber tire moulded to the wheel. The wheel also has a spring-loaded steel pin inside the moulded plastic axle housing. The case was originally heard at the AAT with the AAT holding that wheelie bins were vehicles and the wheels were therefore part of a vehicle. This classification meant that the importer could use a tariff concession order.
Customs appealed to the Federal Court. On appeal Customs argued that the AAT made an error in not considering all potential classifications. In particular, Customs referenced heading 3924.90 which relates to household articles of plastic. The Federal Court was swayed by the fact that the harmonised system explanatory notes (HS Notes) to this heading referred to "dustbins". The Federal Court referred the matter back to the AAT for it to classify the goods taking into account all available headings.
An angry AAT
The AAT was not happy with the lawyers for Customs and the AAT's frustration is understandable. Customs argued at the Federal Court that the AAT had not properly considered heading 3924.90. The ATT said that this claim was factually incorrect and recited from the transcript of the first hearing where Customs itself raise heading 3924 and discarded it. The AAT seemed outraged that Customs could complain to the Federal Court about the AAT not considering a heading which neither party argued for and which Customs expressly discarded.
The AAT was also concerned that Customs argued to the Federal Court that the HS Notes suggested other headings needed to be considered, but when the case was originally argued at the AAT, Customs said the HS Notes had no application in this case.
It was clear that the AAT felt that Customs adopted one set of arguments in the AAT and then when it lost in the AAT, blamed the AAT for not considering arguments that were the opposite of what Customs had argued.
Use of the HS Notes to classify goods
Customs successfully argued in the Federal Court that the AAT should have had greater recourse to the HS Notes to resolve the classification issue. The AAT case provide guidance on how the AAT considers the HS Notes should be used. In issue was classification 3924.90 which deals with "Tableware, kitchenware, other household article and hygienic or toilet article of plastic; other".
The HS Notes gave the example of a dustbin as an item that fit within this heading.
The AAT made clear that the HS Notes are not part of the legislation and can only be used if the wording of the tariff is unclear. If there is no ambiguity in the heading, the HS Notes cannot be referenced to create ambiguity. The AAT said that in this case, Customs had taken a heading which was clear, referenced the HS Notes to try create ambiguity and then used those same notes to resolve the ambiguity.
The HS Notes have an important role to play where the words of the tariff are unclear. However, the notes themselves cannot be used as the source of uncertainty.
Classification of wheelie bins and their wheels
The AAT again considered the classification of wheelie bins and again classified them as other vehicles. After referencing the HS Notes the AAT formed the view that an item constructed for the purpose of transporting goods or people is a vehicle. The AAT felt that garbage was accumulated in bins for the purpose of transporting that garbage to a different location. This made the wheelie bins a vehicle.
The AAT considered reference to the HS Notes was appropriate for heading 8716 as the term "vehicle" was used in this heading in a manner that was ambiguous.
It seemed non-contentious that the wheels were parts of the wheelie bins. The wheels were specifically designed for the bins and had no other purpose.
Application of the tariff concession order
Once classification was settled, the AAT had to consider whether the goods fell within the terms of the TCO "Wheels, non-inflatable, rubber and/or plastic, having a diameter not exceeding 400 mm."
It is important to note that at the original hearing Customs agreed that the TCO did apply. By the time the matter was reheard in the AAT, Customs decided to argue that the TCO did not apply. It does seem that everybody finds it difficult to know whether a TCO does or does not apply.
Customs argued that while the good was a non-inflatable rubber and plastic wheel, it did not fit within the TCO because the good was not simply a wheel. Rather, it was a wheel with a stub axle inserted. In other words, the wheel did not fit the precise description of the TCO.
The AAT held that the TCO did apply. It held that neither the steel spring loaded pin nor the axel housing changed the generic description of the item. The good was a wheel because it was capable of being fixed to an axel around which it rotates thus enabling loads to be moved with limited friction and without lifting.
This judgment raises the question, does a good still fall within TCO wording if it has features or accessories not specifically listed in the TCO, provided that those features or accessories do not change the generic description of the good.
This case is bound to help importers seeking to use widely worded TCOs for goods that have features not specifically listed in the TCO.
However, the case also demonstrates how difficult classification and the application of TCOs can be. In this case Customs own solicitors changed their position on the classification of the goods and the application of the TCO at the Tribunal and Court review stage. What chance is there then for consistent and predictable decision making at the initial audit, tariff advice or internal review stage?
The uncertainty of this area also highlights the need for importers to apply for their own TCOs, obtain tariff advices and not to be afraid to challenge an ABF decision.
Please contact Russell Wiese (03 8602 9231, rwiese@huntvic.com.au) or Lynne Grant (03 8602 9246, lgrant@huntvic.com.au) if you would like to discuss reviewing a Customs decision on the classification of goods or application of a TC |
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