Nordland Papier AG v Anti‑Dumping Authority

Normal value; arms length transactions 17 The only domestic sales which may be used to ascertain normal value are sales "that are arms length transactions" (s 269TAC(1)). Section 269TAA(1), though it does not define the expression "arms length transactions", provides that certain sales and purchases are not to be treated as arms length transactions: "269TAA.(1) For the purposes of this Part, a purchase or sale of goods shall not be treated as an arms length transaction if: (a) there is any consideration payable for or in respect of the goods other than their price; or (b) the price is influenced by a commercial or other relationship between the buyer, or an associate of the buyer, and the seller, or an associate of the seller; or (c) in the opinion of the Minister the buyer, or an associate of the buyer, will, directly or indirectly, be reimbursed, be compensated or otherwise receive a benefit for, or in respect of, the whole or any part of the price." 18 The other subsections of s 269TAA elaborate subs (1) in certain respects, notably by providing, in subs (4), an exhaustive definition of "associate", but a decision in this case does not require consideration of any of the elaborations. 19 In the ordinary sense of the term, a transaction of a kind described in any of the paragraphs of s 269TAA(1) might, or might not, be an arms length transaction. Even paragraph (b), which comes closest to the ordinary concept of "arms length transaction", is not, I think, an exception: the fact that there is a commercial relationship between buyer and seller which influences price does not necessarily result in the purchase or sale being other than an arms length transaction in the ordinary sense. However that may be, the effect of each of the three paragraphs is that, for the purpose of ascertaining normal value, any sale or purchase described by any of the three paragraphs of subs (1) is deemed not to be an arms length transaction. 20 The controversy in this case concerns par (c). The Authority proceeded (and thus the Minister proceeded also) on the understanding that par (c) had the result that if sales were made on terms, or subject to an understanding, that the buyer would receive payment of a rebate (calculated, for example, by reference to quantities of goods purchased over a period) the sales were not arms length transactions. That was so because such a rebate, unlike a discount (the commercial effect of which was similar - perhaps indistinguishable), involved a repayment by seller to buyer of a proportion of the price already paid by the buyer for goods previously bought: even if the repayment was effected by offset against the price of goods bought later. Such a repayment, however effected, was a reimbursement: a reimbursement of part of the price paid; or, if not strictly to be regarded as a reimbursement of "part of the price", nevertheless it was a reimbursement relating to the price and thus "in respect of" the price. Because Nordland's sales to domestic customers were made on a basis which allowed the purchaser a volume rebate (of the kind I have described) the result was that its domestic sales could not be regarded as arms length transactions and, therefore, could not be used in order to ascertain normal value. 21 Nordland attacked that reasoning principally on the footing that both principle and authority required that the word "price" be taken to mean the ultimate, or nett, monetary obligation incurred by the buyer as consideration for the purchase of the goods. On that footing, price was to be ascertained taking rebates into account, so that the payment of a rebate was not to be regarded as a repayment or reimbursement of any part of the price. That argument was supported by reference to the scheme of the legislation and to the treaty obligations to which the legislation was intended to give effect. 22 The first step in the argument is straightforward and, in my view, correct. The word "price" is not specifically defined for the purposes of s 269TAA. In those circumstances its meaning is to be sought in "the ordinary parlance of commercial life" (Toyota Motor Sales Australia Ltd v Collector of Customs (1991) 28 FCR 27 at 29). As it happens, there is considerable recent authority in this Court on the question whether rebates of various kinds, including rebates paid in cash by seller to buyer, are to be regarded, in the ordinary parlance of commercial life, as a component of price. In addition to Toyota, questions of that kind have been considered by the Full Court in Queensland Independent Wholesalers Ltd v Commissioner of Taxation (1991) 29 FCR 312 and Hyundai Automotive Distributors Australia Pty Ltd v Chief Executive Officer Australian Customs Service [1998] FCA 297; those decisions were considered and applied by Sackville J in Colgate Palmolive Pty Ltd v Commissioner of Taxation (1998) 98 ATC 4748. In Toyota, at 29, the Court formulated the question to be decided as whether "in the ordinary parlance of commercial life the reimbursements can fairly be said to be rebates of, or decreases in, the prices of the relevant vehicles accruing to Toyota Australia by reason of faults or defects in those vehicles." In Queensland Independent Wholesalers at 322 the question was framed in terms of whether the rebate in question "does effect a reduction in the sale price as a matter of commercial reality" and the Court concluded that that test was met in circumstances where the rebate was payable in cash, having regard to quantities purchased over a particular period. Hyundai like Toyota, had to do with a "rebate" in respect of the cost of repairing defects in vehicles purchased under an importation agreement. The Court, at 12, 13, said this: "Toyota makes it clear, however, that the question of whether a payment by the Manufacturer to the importer of a vehicle is a rebate of or a decrease in the price will be resolved having regard to the collateral [sc contractual?] arrangement between the parties. The initial purchase and sale agreement, and any variation thereto, will be very important to, if not determinative of, the question. Rebates affecting price, such as volume rebates, promotional rebates and the like may involve other considerations. The present question is whether, on the facts before the Tribunal, a reimbursement of expenditure effected to remedy defects on goods observable at the time of delivery, although before entry into home consumption, involves either a decrease in the price, or a rebate of the price accruing to Hyundai. Both "price" and "rebate" are ordinary English words, although the former may be thought to have a definite legal connotation. "Price" in its ordinary meaning is concerned with the amount which a vendor obtains from a purchaser under a contract of sale … . That amount will usually be ascertained by reference to the contractual obligations of the parties, including any variations of those obligations. The word "rebate" has, as Helsham CJ in Eq said in Brookton Co‑operative Society Ltd v Federal Commissioner of Taxation (1977) 16 ALR 93 at 111, in comments unaffected by the subsequent appeals in that case: "a notion of something paid by way of reduction or return or refund upon what has previously been paid or contributed, a deduction or discount referable to what has been paid." The Macquarie Dictionary, to which the learned Deputy President referred, states that a "rebate" is a return of part of an original amount paid, inter alia, for merchandise, a discount allowed or a deduction. This imports the same notion as that adopted by Helsham CJ in Eq. The customs duty regime operates in international commerce. So it may be expected that its terms, particularly "rebate" are to be construed, as the Full Court said in Toyota, by reference to "the ordinary parlance of commercial life." But that is no warrant to give anything but the natural and commercial meaning to the expression. The contractual documents admit of no conclusion other than that there was neither a reduction in nor a rebate of the price paid for the vehicles and there was no evidence to the contrary. Hyundai had contracted to pay a price for a vehicle. The goods were defective and were restored by Hyundai to merchantable quality. Hyundai was reimbursed for the cost of remedying the defects. The price in no way varied; there was no rebate of it given by the Manufacturer. In the result, for the price initially agreed, Hyundai obtained the vehicle in good condition. The Manufacturer merely paid an amount to ensure that its contractual obligation to sell the goods at that price and in merchantable condition was satisfied. If one views the transactions other than in a customs setting, that is to say in ordinary commercial life, it would occur to nobody, we think, to say that there has been a rebate or decrease in the price. The Manufacturer's payments concerned something other than price." 23 Colgate Palmolive is of particular significance because the statutory phrase to be applied (in the Sales Tax Assessment Act 1992 (Cth), sch 1, Table 1) was "the price … for which the goods were sold", the word "price" not being specially defined. Sackville J, after considering the earlier cases at some length, held that the "price … for which the goods were sold" was to be ascertained taking account of a number of rebates and allowances, particularly a volume rebate apparently similar to the rebate allowed by Nordland in its domestic sales. 24 All the earlier decisions arose in statutory contexts different from the present and in some of the cases there were particular statutory definitions to be taken into account. But the observations which I have quoted have a more general application; and, particularly, there is nothing in the statutory context which might suggest that I should give to "price" in the present context a meaning different from that given it by Sackville J in Colgate Palmolive. Accordingly, the "price" to which s 269TAA(1)(c) refers is to be ascertained in accordance with the principles considered and applied in Colgate Palmolive. 25 That, however, is only the first step. The second, and in my view much more difficult, question is whether a rebate, for example a volume rebate, paid by a seller to a buyer having regard to quantities of products bought from one by the other over a period, is to be regarded as a reimbursement, compensation or a benefit "for, or in respect of, the whole or any part of the price". The respondents submitted that it did not matter if "price" was to be given its ordinary meaning or if, giving it that meaning, price was an amount nett of rebates of the kind in question. The words "in respect of" were among the broadest which could be used to denote a relationship between one subject matter and another (see Trustees Executors & Agency Co Ltd v Reilly [1941] VLR 110 at 111; Powers v Maher (1959) 103 CLR 478 at 484, 485; State Government Insurance Office (Qld) v Crittenden (1966) 117 CLR 412 at 416 and Frost v Collector of Customs (1985) 9 FCR 174); and, even if a particular rebate was to be regarded as a component of price, nevertheless if the rebate was properly to be regarded as a reimbursement, compensation or a benefit it clearly bore a relationship to price within the ambit of the expression "in respect of". The matter could be tested, it was said, by considering a simple example: where a price is payable by instalments, the payment of any one instalment, though obviously a payment of "part of the price", could properly be described as a payment "in respect of" the price. 26 Oral argument concentrated on the word "reimbursement". But if the respondents are right in submitting that a rebate, which is a component of the price and is paid by the seller to the buyer, is a reimbursement in respect of all or part of the price, then it is not easy to see why the written submission of the Authority and the Minister (adopted by Australian Paper) is not correct as well: that such a rebate is also properly to be described as compensation for, or in respect of, the price and a benefit in respect of the price. Certainly a rebate may be said to fall within the ordinary understanding of "benefit"; and since a volume rebate is calculated having regard to quantities purchased, it is not far fetched to regard it as a form of compensation for purchasing particular quantities of goods and outlaying the price of them. That, however, demonstrates, it seems to me, what is at least a practical difficulty with the position taken by the respondents. It was not suggested that the allowance of a discount, as opposed to a rebate, had the result that a purchase for sale fell within s 269TAA(1)(c). Nor did the Authority proceed on that view. To the contrary, in the Report at 23 the Authority said this: "It is important to differentiate between a discount and a rebate. A discount is typically reflected in the invoice price charged to the customer (e.g. the invoice specifies that a price, lower than the established list price, is payable). This usually reflects the fact that the customer is purchasing large quantities of the goods. In these circumstances, the customer pays the discounted price and that is the end to the financial transaction between the party [sic] in respect of that sale. In contrast, a seller may pay a rebate to the buyer if the buyer meets criteria such as the purchase of a minimum quantity of the goods. In this case the buyer pays the invoice price and later (usually at the end of the financial year) receives a payment from the seller which is frequently expressed as a percentage of the purchase price." 27 If it is true, however, that the receipt of a rebate is receipt of a benefit in respect of the price, why is that not equally true of a discount? The reason, it might be said, is that if a discount is a benefit, nevertheless the buyer does not "receive" a benefit because as a matter of fact the buyer receives nothing: all that happens is that the price which the buyer has to pay is less than it might otherwise be. But to say that, in my view, is to insist simultaneously upon a wide construction of "in respect of" and a very narrow one of "receipt". 28 The anti‑dumping provisions are intended to give effect to Australia's obligations under Article VI of the General Agreement on Tariffs and Trade 1994 and the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (the Marrakesh Agreement). It is true, as counsel for the Authority and the Minister submitted, that the introduction in s 269TAC(1) of the concept of "arms length transactions" is not to be found in the letter of those international instruments. Plainly enough, it is an elaboration of, and may to some extent go beyond, the requirements of Article 2.3 of the Marrakesh Agreement: "In cases where there is no export price or where it appears to the authorities concerned that the export price is unreliable because of association or a compensatory agreement between the exporter and the importer or a third party, the export price may be constructed on the basis of the price at which the imported products are first resold to an independent buyer, or if the products are not resold to an independent buyer, or not resold in the condition as imported, on such reasonable basis as the authorities may determine." 29 In that Article there is to be found, I think, at least the genesis of par (b) and par (c) of s 269TAA(1). Unless the words of par (c) clearly require another construction, authority supports the proposition that the paragraphs should be construed consistently with the terms of the international instruments: ICI Australia Operations Pty Ltd v Fraser (1991) 34 FCR 564 at 569, 570; Rocklea Spinning Mills Pty Ltd v Anti‑Dumping Authority (1995) 56 FCR 406 at 417. The introductory words of the paragraph ("in the opinion of the Minister") and the words "directly or indirectly" provide, in my view, a further clue. What is sought to be encompassed, I think, is a series of circumstances where price, ascertained in accordance with ordinary principles, is an unreliable indicator because there is an arrangement between the parties under which price is set at a particular level but the buyer, having agreed to pay the price so established, is to receive some offsetting compensation or benefit or is (directly or indirectly) to receive reimbursement of all or some of the price. The paragraph, strikingly, is not drawn as one intended to operate mechanically having regard to the form of a transaction; it is broadly drawn and is directed to substance, the substance being derived from Article 2.3 of the Marrakesh Agreement. 30 Construed in that light, a rebate, even if paid in cash by the seller to the buyer, of a kind which on the ordinary understanding of "price" is to be taken into account in ascertaining price, is not to be regarded as reimbursement, compensation or a benefit "for, or in respect of, the whole or any part of the price". It is simply part of the process by which the price is established and settled between buyer and seller. The words "in respect of", in the composite phrase "for, or in respect, of" are to be construed in the light of their context (see North Sydney Municipal Council v PD Mayoh Pty Ltd (1988) 14 NSWLR 740 at 745, 746; L Vogel & Son Pty Ltd v Anderson (1968) 120 CLR 157 at 162 (cf at 169)). 31 The Customs Legislation (Anti‑dumping Amendments) Act (1998) (Cth) made, among other things, some significant amendments to the Customs Act, which took effect a few days after this case was heard. Particularly, amendments were made to s 269TAA and s 269TAC. A new subsection was inserted in s 269TAA as follows: "(1A) For the purposes of paragraph (1)(c), the Minister must not hold the opinion referred to in that paragraph because of a reimbursement in respect of the purchase or sale if the Minister is of the opinion that the purchase or sale will remain an arms length transaction in spite of the payment of that reimbursement, having regard to any or all of the following matters: (a) any agreement, or established trading practices, in relation to the seller and the buyer, in respect of the reimbursement; (b) the period for which such an agreement or practice has been in force; (c) whether or not the amount of the reimbursement is quantifiable at the time of the purchase or sale." 32 A new subsection has been inserted, as well, in s 269TAC: "(1A) For the purposes of subsection (1), the reference in that subsection to the price paid or payable for like goods is a reference to that price after deducting any amount that is determined by the Minister to be a reimbursement of the kind referred to in subsection 269TAA(1A) in respect of the sales." 33 The explanatory memorandum, on which counsel for Australian Paper placed some reliance, may perhaps be described as typically cryptic. Referring to the new s 269TAA(1A), the memorandum states as its purpose: "… to allow transactions affected by reimbursements between non‑related parties that are normal business practice in many industries and markets to be treated as being at arms length." 34 The Report reveals that the Authority relied on advice from the Attorney‑General's Department to the effect that rebates of the kind here in question were to be regarded as "reimbursements … in respect of … the price" with the result, accordingly, that the presence of such a rebate denied to a purchase or sale the character of an arms length transaction. No doubt it may be assumed that that view played at least some part in prompting the amendment, so that the amendment is directed, at least in part, to rebates such as those allowed by Nordland to its domestic customers. The effect of the view which I have expressed is that the amendment is, to that extent, otiose. I say "to that extent", because the amendment is quite broadly drawn and may well have an operation extending beyond such rebates. There is no doubt that "the view taken by Parliament as to the legal meaning of a doubtful enactment may be treated as persuasive though not binding authority" (Kalwy v Secretary, Department of Social Security (1992) 38 FCR 295 at 299, citing Grain Elevators Board of Victoria v Shire of Dunmunkle (1946) 73 CLR 70 at 86 per Dixon J). The cases make it clear, however, that the principle is to be applied with caution. There at least two reasons for that. An amendment may be thought desirable not because of evident necessity but to resolve a possible doubt (see, e.g, Interlego AG v Croner Trading Pty Ltd (1992) 39 FCR 348 at 382 per Gummow J, citing Re Samuel [1913] AC 514 at 526); additionally, while an amendment may indicate the view of the Parliament at the time the amendment is made, it is by no means necessarily a reliable indicator of the intention of Parliament at the time of the original enactment (Callow v Commissioner of Taxation (1997) 73 FCR 421 at 426; Interlego at 382). 35 For the reasons I have given, I am satisfied that the view on which the Authority proceeded was incorrect. It does not follow that the amendment is otiose; no doubt it does follow that its operation will be narrower than those who drew it may have expected. It is, perhaps, worth pointing out also that if both the view on which the Authority proceeded was correct and my comments about benefits in respect of the price are correct as well, then there was a problem with the legislation more extensive than that seen by those on whose advice the Authority relied and which would not be fully cured by the amendment.

Conclusion 36 Accordingly, Nordland's application succeeds. In the circumstances it is unnecessary to consider the other grounds on which Nordland sought review of the two decisions and counsel for Nordland requested that, should I be in his favour on the construction point, I should not proceed to consider the other grounds. The decisions of the Authority and the Minister should be set aside and the subject matter of the decisions should be remitted for determination according to law. An order granting an extension of time for filing the application with respect to the decision of the Authority should be made: time should be extended to 3 August 1998. Nordland should have its costs of the application. 37 Because, given the effect of the amending legislation on the position of the Authority, there may be a question about the appropriate terms of the order remitting the subject matter of the decisions, I propose to make no formal orders now save to direct Nordland to file and serve within fourteen days of delivery of this judgment short minutes of orders appropriate to give effect to these reasons. The matter can then be set down by arrangement with my associate for any necessary argument as to the form of the orders necessary to dispose of the matter, and for the making of those orders. I certify that the preceding thirty seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lehane.

Associate: Dated: 14 January 1999 Counsel for the Applicant: S. J. Gageler

Solicitor for the Applicant: Deacons Graham & James

Counsel for the First and Second Respondents: C. P. Comans with D. D. Knoll

Solicitor for the First and Second Respondents: Australian Government Solicitor

Counsel for the Third Respondent: M. R. Speakman

Solicitor for the Third Respondent: C. G. Gillis & Co

Date of Hearing: 17 December 1998

Date of Judgment: 14 January 1999