Inglewood Olive Processors Limited v Chief Executive Officer of Customs - [2004] FCA 1659 - FCA 2004 case summary — Zoe

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Inglewood Olive Processors Limited v Chief Executive Officer of Customs

[2004] FCA 1659

Federal Court of Australia|2004-12-15|Before: Stone J

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Court

Federal Court of Australia

Decision date

2004-12-15

Before

Stone J

Source

Original judgment source is linked above.

Judgment (46 paragraphs)

[1]

Introduction 1 On 17 September 2004 the applicant applied to this Court for review of decisions made by the Chief Executive Officer of Customs ('CEO') and the Trade Measures Review Officer ('Review Officer') pursuant to the Customs Act 1901 (Cth) ('Customs Act'). The application for review is brought under s 5(1) of the Administrative Decisions (Judicial Review) Act 1977 (Cth) ('ADJR Act') and s 39B(1) of the Judiciary Act 1903 (Cth) ('Judiciary Act'). Unless otherwise indicated, references to statutory provisions in these reasons are to provisions of the Customs Act. 2 On 13 October 2003, the applicant requested that the Minister for Justice and Customs ('Minister') publish dumping and countervailing duty notices in respect of olive oil exported to Australia from Greece, Italy and Spain, being extra virgin and blended olive oil for retail sale in specified volumes ('European olive oil'); s 269TB(1). The applicant claimed that a countervailable subsidy was received in respect of the European olive oil and that this had an effect on the price of olive oil through the production stage and resulted in the European olive oil having a lower price in Australia. 3 The CEO commenced an investigation into the applicant's complaint but terminated it on 24 May 2004. On 8 June 2004 the applicant applied to the Review Officer for review of the CEO's decision to terminate the investigation. On 23 August 2004 the Review Officer affirmed the CEO's decision. The applicant has confined its application for review in this Court to the decision to terminate the investigation.

[2]

[8]

Procedures for dealing with an application for a countervailing duty notice 6 Once an application for a countervailing duty notice made under s 269TB is received, the procedures that must be followed, in so far as is relevant to the present application, provide: · The CEO must make a preliminary assessment of the application and, within 20 days of receiving it, decide if there appear to be reasonable grounds, inter alia, for the publication of a countervailing duty notice. If not satisfied on this point the CEO must reject the application; s 269TC(1). · If the CEO decides not to reject the application, public notice of it must be given and a copy of the application provided to certain interested persons; ss 269TC(4) and (7). The date specified in the public notice becomes the 'date of initiation' of the investigation; s 269TC(4)(bf). · Not less than 60 days after the initiation of an investigation, if satisfied that there are sufficient grounds for publishing a dumping or countervailing duty notice, the CEO may make a preliminary affirmative determination to that effect; s 269TD. No preliminary affirmative determination was made in respect of the application under consideration here. · The CEO must, within 110 days after the date of initiation (or any such longer period as the Minister allows) place on the public record a 'statement of essential facts' on which the CEO intends to base a recommendation to the Minister in relation to the application; s 269TDAA(1). · In formulating the statement of essential facts, the CEO must have regard to the application concerned, any submissions concerning publication of the notice that are received by Customs within 40 days after the date of initiation of the investigation and any other matters the CEO considers relevant. The CEO is not obliged to have regard to any submissions received out of time if it would prevent the timely placement of the statement of essential facts on the public record; ss 269TDAA(1), (2) and (3). · The CEO must terminate an investigation in respect of an application for a countervailing duty notice if, inter alia, during the investigation he is satisfied that there has been no countervailable subsidisation of the relevant goods or any countervailable subsidisation is negligible or the volume of subsidised goods is negligible; ss 269TDA(2) and (7). · The CEO must make a report to the Minister generally within 155 days of the investigation being initiated. · After holding the investigation the CEO must give the Minister a report in respect of the goods that are the subject of the application, making recommendations as to the outcome of the application; s 269TEA.

[30]

The Review Officer's decision 14 On 8 June 2004 the applicant lodged an application with the Review Officer for review of the CEO's decision to terminate the investigation. As stated above, the application was confined to the issue of the alleged subsidisation of the European olive oil. The Review Officer accepted that the production aid was not a subsidy because it did not confer a benefit in respect of European olive oil and affirmed the CEO's decision. In their written submissions, the respondents provided a summary of the Review Officer's relevant findings. I gratefully adopt that summary which is as follows: (a) The [Review Officer] could only have regard to the information that was before the CEO when the CEO made the reviewable decision ("the available evidence"). (b) The subject goods are packaged olive oil in containers of various sizes up to 4 litres for retail sale. Bulk olive oil was excluded from the application. (c) The production aid (although it is calculated on the basis of olive oil produced from the olives grown) was paid to olive growers and not to producers or exporters of the subject goods. (d) The CEO must terminate an investigation under s 269TDA of the Act where it is found that there is no or negligible subsidisation and that contrary to the applicant's contentions the CEO's decision to terminate the investigation was not wrong in law. (e) Processes take place between the harvesting of olives and the production of packaged olive oil. Those processes include washing, pressing, heating, decantation, centrifugation or filtration, refining, blending and packaging. (f) On the available evidence, the industry in Spain, Italy and Greece was characterised by large numbers of independent growers, mills and other processing and distribution facilities. (g) The EU was a significant importer of live oil from non-EU countries such as Tunisia and Turkey. A large proportion of these imports was blended with EU production and sold domestically or re-exported. (h) The opinions (both economic and legal) referred to by the applicant in support of its claims are based on questionable assumptions and are highly qualified. (i) The available evidence supports the proposition that production aid paid to olive growers did not confer a benefit in respect of the subject goods. (j) On the available evidence, the [Review Officer] considered that market forces dictated the price of each transaction in the supply chain for olive oil - prices appear very much to be competitively determined and not driven by the payment of production aid in Greece, Italy and Spain (which seems to be internalised by the olive growers). (k) The [Review Officer] agreed with the CEO in rejecting the applicant's claim that there was ample evidence to establish that the benefit of production aid paid to olive producers passed through to the olive oil exported to Australia from Greece, Italy and Spain. Rather, the [Review Officer] considered that the available evidence suggested that there was no benefit conferred on the export of olive oil to Australia from Greece, Italy and Spain by the payment of production aid to olive growers in those countries. (l) The [Review Officer] was not satisfied that production aid paid to olive growers in Greece, Italy and Spain conferred a benefit in respect of the subject goods.'

[33]

The applicant submitted that the terms of s 269TACC(3) make it clear that only the Minister (or his delegate under s 9) may make a determination as to benefit under this section and that a determination of benefit is an essential precondition to the CEO's termination of an investigation under s 269TDA(2)(b)(i). There is no suggestion by either party that any relevant delegation was made in this case. 19 Section 269TE provides that, in relation to specified decisions under the Customs Act, the CEO is to have regard to the same considerations as the Minister. The applicant submits that the list of specified decisions is an exhaustive list and neither the CEO nor the Review Officer is entitled to make any other decision vested in the Minister short of a delegation under s 9. The applicant therefore submitted that in the absence of an express power vested in the first respondent to determine the question of benefit under s 269TACC(3), the first respondent was not authorised by the Customs Act to make such a determination. 20 The applicant's chain of reasoning starts with the undoubtedly correct proposition that unless the production aid is a subsidy it cannot be a countervailing subsidy; s 269TAAC. For the production aid to be a subsidy within the definition in s 269T(1) it must confer a benefit in relation to the goods that are exported to Australia, in this case the European olive oil. Section 269TACC(3) provides that, with the exception of a financial contribution falling within s 269TACC(2), whether the alleged subsidy confers such a benefit is to be determined by the Minister. From this the applicant concludes that the CEO has no power to determine if the production aid, or presumably any alleged subsidy that does not fall within s s 269TACC(2), is a subsidy. 21 It would follow from this analysis that the CEO's power to terminate an investigation under s 269TDA(2)(b) without recourse to the Minister does not extend to any situation where the only essential element of a countervailing subsidy that is in issue is the presence or absence of a benefit. The CEO would, for instance, have power to terminate an investigation irrespective of the question of benefit if he was satisfied that any subsidy that might exist was an excluded subsidy or not a specific subsidy. 22 This analysis fails to take account of the structure of the Customs Act summarised in [5] and [6] above and the distinction that is drawn between the investigative role of the CEO and the determinative role of the Minister. Division 2 of the Customs Act gives the CEO the power to conduct investigations into claims made by applicants for countervailing and dumping duty notices. Division 3 reserves certain matters for the determination of the Minister. Those matters only come before the Minister once the CEO has completed the investigation and has provided a report to the Minster in accordance with s 269TEA, including the recommendations referred to in ss 269TEA(1)(c), (d) and (e). 23 In the course of exercising powers conferred in Division 2, including formulating the recommendations required in the CEO's report to the Minister, the CEO may be required to determine matters ordinarily required under the Customs Act to be determined by the Minister. Section 269TE(2) recognises this possibility and requires that where this is so the CEO must determine the matter, '(a) in like manner as if he or she were the Minister; and (b) having regard to the considerations to which the Minister would be required to have regard if the Minister were determining the matter.' 24 Contrary to the applicant's submissions (see [17] above) this section does not involve a grant of power to the CEO. Rather, as the respondents submitted, it constrains powers that are conferred elsewhere in Division 2. In their written submissions the respondents gave the following example: '[U]nder s 269TC(1), the CEO is required to form a view as to whether he is satisfied that there appear to be reasonable grounds for the publication of a dumping duty notice or a countervailing duty notice in respect of the goods the subject of an application under s 269TB. In so doing, the CEO is required by s 269C(1) (and not s 269TE) to consider matters that would ordinarily be determined by the Minister (such as normal values, export prices, non-injurious price, whether there is dumping, whether there is a benefit conferred by a subsidy etc). The CEO in undertaking this task is making something of a preliminary assessment on issues that will ultimately need to be determined by the Minister before a dumping duty notice or countervailing duty notice could be published. It is in this context that s 269TE operates to constrain the CEO to consider matters in like manner as if he were the Minister.'

[34]

Another example is the CEO's power to make a preliminary affirmative determination under s 269TD. In my view the fact that s 269TE does not mention s 269TDA does not have the significance that the applicant would attach to the omission. Nevertheless the issue of the CEO's power under s 269TDA requires further consideration. 25 The applicant contended that the power under s 269TACC to determine benefit was granted solely to the Minister because of the particular sensitivity that exists internationally with respect to indirect subsidies. This may well be true but the fact that it is for the Minister ultimately to determine if there is a benefit, and consequently whether countervailing duties should be imposed, is not inconsistent with the CEO making a determination for the purpose of exercising his powers under Division 2. The applicant's interpretation, which would seem to envisage a preliminary reference of the issue of benefit to the Minister, would make the legislative scheme largely unworkable. The Customs Act does not provide for any such reference and the process would not be consistent with the tight timetable that is provided in s 269TC and which is required under Australia's international obligations under the GATT treaties; see, for instance, article 11.9 of the Agreement on Subsidies and Countervailing Measures. It would be surprising if the legislature had intended the Minister to determine the question of benefit for the purpose of terminating an investigation but had not provided for the question to be referred to the Minister. The omission would be all the more striking in the context of a statutory scheme that provides a tightly structured process and timetable for dealing with applications made under s 269TC. 26 In Pilkington (Australia) Pty Ltd v Minister for Justice and Customs [2002] FCA 770 Moore J commented on circumstances in which Customs had taken a similar approach to that advocated by the applicant. At [13] of his reasons, his Honour said: 'On 15 March 2000, Customs placed on the public record a report of its investigation of allegations of dumping by Asahimas. The report concluded that Asahimas had not dumped the glass. On 23 March 2000, Customs requested that the Minister make a direction and determinations that would allow the Chief Executive Officer to terminate the investigation as far as it related to exports by Asahimas. One part of the request was that the Minister determine under s 269TACB(1) that glass had not been dumped by Asahimas. This was apparently viewed as a precondition to the exercise of the power of the Chief Executive Officer under s 269TDA to terminate the investigation as it related to Asahimas. Why this view was taken is not clear. The power to terminate is conferred on the Chief Executive Officer and s 269TDA does not condition the exercise of the power. It appears to me that it is, at this point, for the Chief Executive Officer to decide to terminate because the goods had not been dumped. Section 269TDA, in terms, depends on the opinion of the Chief Executive Officer and not the opinion or a determination of the Minister. The directions and determinations recommended by Customs were still under consideration by the Minister on 10 May 2000.' 27 As the respondents acknowledged, unlike other powers, the power in s 269TDA is not step preliminary to the Minister's ultimate decision. Terminating an investigation results in the application never being considered by the Minister. Terminating an investigation pursuant to s 269TDA(2)(b) because the CEO is satisfied that there is no countervailing subsidy because there is no benefit necessarily involves a final decision (subject to review by the Review Officer) on this point. Although the CEO's exercise of his power under s 269TDA is not constrained by s 269TE, it does not follow that the CEO would not have regard to the same considerations as the Minister in determining the issue of benefit under s 269TACC(3). Moreover, the terms of s 269TDA(2) are such that the CEO's power is only exercisable in a clear case. The CEO must be positively satisfied as to the absence of a countervailable subsidy. 28 This interpretation is consistent with the structure of the Customs Act that gives the CEO responsibility for all the preliminary and investigatory steps and the Minister the final responsibility for decisions resulting in the anti-dumping measures. It should also be noted that the applicant's submission in relation to s 269TE could not, in any event, be applied to the decision of the Review Officer because s 269ZZ requires the Review Officer to determine any matter ordinarily required to be determined by the Minister, without exception, in the same manner and having regard to the same considerations. For these reasons the applicant's challenge to the jurisdiction of the respondents must be rejected.

[35]

The question under s 269TDA(2)(b)(i) 29 In the alternative to its claim that the respondents lacked jurisdiction to determine the question of benefit, the applicant submitted that the respondents erred in failing to address the correct question. The applicant referred to various passages within the Customs Report where the question of benefit was addressed and where it is stated that Customs has formed a view or a degree of satisfaction in relation to the issue; see for instance the passage quoted in [12] above. The applicant submits that, even assuming the CEO had jurisdiction to address the issue, the correct question is not whether the CEO is satisfied but whether the Minister could be satisfied. In particular the applicant submitted that before terminating the investigation pursuant to s 269TDA(2) the CEO would need to be satisfied that the Minister could not have reasonably determined that the production aid in the present matter conferred a benefit within the meaning of s 269TACC(3). 30 The applicant contended that any other conclusion would mean that as long as the CEO was satisfied as to the non-existence of a benefit, he would be obliged to terminate the investigation under s 269TDA(2). This, according to the applicant, is inconsistent with the provisions of s 269TACC(3); for instance the arguments for and against there being a benefit might be finally balanced such that the Minister could come to a conclusion contrary to that of the CEO but that opportunity would be denied if the CEO operated on his own state of satisfaction rather than that of the Minister. 31 This claim is premised on the view I have rejected above, namely that only the Minister can determine the issue of benefit for the purpose of s 269TDA(2) and therefore the CEO can only decide the issue if he or she is standing in the Minister's shoes. I do not accept this analysis. Once it is accepted that the CEO has independent powers of decision under Division 2 of the Customs Act there is no basis for this submission. 32 The applicant further submitted that the CEO misconceived the question to be answered when considering whether to terminate the investigation under s 269TDA(2)(b)(i). That section requires the CEO to terminate the investigation if he is satisfied that 'no countervailable subsidy has been received' in respect of the relevant goods. The applicant argued that this is not the same as the absence of satisfaction that a countervailable subsidy has been received. By way of comparison the applicant referred to s 269TJ which provides that where the Minister is satisfied, inter alia, that a countervailable subsidy has been received the Minister may, by public notice, make certain declarations not presently relevant. 33 Commenting on the difference in language between s 269TJ and s 269TDA(2) Mr Hutley submitted that while an absence of satisfaction that such a subsidy has been received would require the Minister not to issue a notice under ss 269TJ, the identical state of mind on the part of the CEO would not entitle the CEO to terminate an investigation under s 269TDA. The applicant contended that the approach adopted in the Customs Act to the question of countervailable subsidies is such that only if the Minister is satisfied that there is a countervailable subsidy can a countervailing duty be imposed and only where the CEO is positively satisfied that there is no countervailable subsidy must the investigation be terminated under s 269TDA(2)(b)(i). In other words, the investigation is not to be terminated pre-emptively where minds might differ. The applicant submitted that the CEO's finding that he was not satisfied that the production aid conferred a benefit on the exporter was not an affirmative finding that there had been no countervailable subsidy and therefore the CEO was in error in terminating the investigation. 34 In relation to the applicant's claim that the CEO misconceived the issue arising under s 269TDA(2)(b)(i), I note that the obligation to terminate under that section arises if the CEO is satisfied that, 'no countervailable subsidy' has been received in respect of the relevant goods. The Customs Report states its conclusion in relation to the issue of benefit arising from the production aid as follows: 'Customs is not satisfied that production aid confers a benefit on the exporter and, for that reason, it considers that the subject production aid is not a countervailable subsidy.'

[36]

35 I am conscious of the need not to be overly critical of the way in which administrative decision makers express their reasons for decision. There is, however, a considerable difference between: (a) being satisfied that there is no benefit (and hence 'no countervailable subsidy'); and (b) not being satisfied that there is a benefit. It is only in the case of (a) that s 269TDA(2)(b)(i) provides that the CEO must terminate the investigation. If the correct criterion was that in (b) ie not being satisfied that there is a benefit, the investigation might be terminated even though the CEO is not satisfied that there is no benefit. This is not what the section provides. The difference is fundamental and not a matter of form that can be overlooked. I am satisfied that the applicant's submission of error on the part of the CEO is correct. 36 The applicant claims that the Review Officer made the same error as the CEO stating: 'The fundamental question to be answered in this case is whether production aid paid to olive growers confers a benefit on the export to Australia of olive oil from Greece, Italy and Spain. The Review Officer considers that there is insufficient information available to categorically and definitely determine this issue beyond all reasonable doubt - in fact the Review Officer doubts that it is indeed possible to do so given that there are more than two million olive growers in the EU and more than eleven thousand olive oil processing and packing plants in Greece, Italy and Spain alone. The Review Officer is confined to studying the available information which is restricted to the information that was available to Customs at the time Customs made its termination decision. In the first instance, based on detailed and exhaustive study of all the available information, the Review Officer is convinced that there is absolutely no evidence at all (other than mere assertion and allegation) that production aid paid to olive growers does confer a benefit on the export of olive oil to Australia from Greece, Italy and Spain.' [emphasis added] 37 Although in the earlier part of this passage the Review Officer appears to be applying the same erroneous test as the CEO, the latter part which I have emphasised is a clear statement that the Review Officer is satisfied that there is no benefit. This being so, the Review Officer's refusal to revoke the CEO's decision on this basis is correct. As set above at [8], pursuant to s 269ZZV the decision of the Review Officer in effect substitutes for that of the CEO.

[40]

Error in relation to the 'pass through' test 42 The applicant submitted that both the respondents erred in considering that it was necessary to apply a 'pass through' test. It was argued that the production aid was granted for the European olive oil, the product exported to Australia, not an upstream product. Consequently, no examination of pass through was required. This submission involves a challenge to the findings of fact made by the CEO and confirmed by the Review Officer. It does not involve any allegation of reviewable error and therefore must be rejected. 43 In the alterative, the applicant was of the view that the approach taken with respect to the pass through test was in error. The applicant contended that the Customs Act is concerned with whether a benefit is conferred in relation to the goods, not the exporter. The applicant referred to the statement in the Customs Report that: 'a benefit must be conferred on a recipient - a legal entity. A benefit is not conferred on a product'. This, on the applicant's argument, failed to address the requirements of ss 269T, 269T(2AC) and 269TACC which all refer to benefit being conferred in relation to those goods, being the goods exported, in this case the European olive oil. 44 This submission was developed in some detail in the applicant's written submissions. It is not necessary for me to summarise the whole of the argument. It is sufficient to note that, once the CEO decided, as he was entitled to do, that the production aid was not paid in relation to the European olive oil, it was necessary for him to consider if, nonetheless, it conferred a benefit in relation to the European olive oil. In other words whether the benefit of the subsidy 'passed through' to the European olive oil. 45 According to the applicant the benefit conferred in relation to exported goods may involve benefits being conferred on a person, or number of persons in the chain of production and distribution. For the purposes of the Customs Act, where a benefit is conferred at any stage throughout the production or distribution and that benefit materially affects the price or quantity of the goods exported to Australia, then there will be a subsidy. Customs however, rejected the submission that the benefit of the production aid materially affected the price or quantity of European olive oil exported to Australia. The Customs Report stated: 'Customs is satisfied that, after the sale by the olive grower, market forces drive the price of each transaction in the selling chain in a (generally) non-vertically integrated industry. The pass through of the benefit of the subsidy from the recipient to the exporter has not been established.'

[41]

It was open to the CEO to make such findings and no reviewable error has been identified in relation to them. 46 Having considered the factors discussed in the Customs Report, the Review Officer came to the same conclusion as the CEO. Moreover, the Review Officer took the matter further and also considered what would be the effect of the production aid being withdrawn. In relation to this issue the Review Officer observed: 'As discussed earlier, it appears to the Review Officer that competition and market forces determine input prices and that olive producers in the EU are price takers in that they cannot influence prevailing market price. Also, producers in both the EU and the rest of the world face the same underlying market price. Under such circumstances, it seems likely that, if production aid to olive growers were withdrawn, market forces of supply and demand would still determine prevailing prices and the net effect of withdrawal of production aid would be likely to be a reduction in olive growers' incomes in the EU and possibly some related contraction in supply. Given the substantial competition in the market from both EU and non-EU olive producers, it seems likely that prevailing market prices would still be determined by the mechanics of supply and demand … and not by reference to the amount of production aid withdrawn.' 47 The applicant submitted, however, that in applying the pass through test the respondents failed to recognise that subsidisation may affect the price of the exported goods by decreasing the world price without necessarily directly benefiting the exporter. Having accepted the evidence that the production aid provides a stimulus to production which has resulted in a world olive oil price that is at least 17 per cent below the price that would hold in the absence of intervention, the applicant argued that it was then open to the CEO to find that a benefit was conferred on the goods exported to Australia in the form of increased production and lower prices. 48 While it may have been open to the CEO to make the finding suggested by the applicant, it was by no means required. The findings made by the CEO and the Review Officer were made after consideration of the evidence and, again, no reviewable error has been identified.

Inglewood Olive Processors Limited v Chief Executive Officer of Customs

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