Administrative Decisions (Judicial Review) Act 1977 (Cth)

Customs Act 1901 (Cth) Part XVA

Amcor Ltd v. Comptroller-General of Customs and Others (1988) 79 ALR 221

Davies Craig Pty Limited v. Comptroller-General of Customs (1986) 68 ALR 105.

Solicitor for the respondent: Australian Government Solicitor

The subject decision of the third respondent, made on 8 January 1988, be set aside and remitted to the first respondent for consideration according to law.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.6

This is an application under the Administrative Decisions (Judicial Review) Act 1977 (Cth) ("the ADJR Act") for orders of review with respect to decisions taken under Part XVA of the Customs Act 1901 (Cth)("the Act"). One decision was taken by the second respondent, a delegate of the first respondent, the Comptroller-General of Customs, on 24 June 1987. Mr Walker refused to make the commercial tariff concession order sought by the applicant Corinthian Industries (Syd) Pty Ltd ("Corinthian"). That decision of Mr Walker was reviewed by the third respondent, Mr R.J. Mitchell, also a delegate of the Comptroller-General of Customs, on 8 January 1988. Mr Mitchell also decided that a concession order should be refused. In this application, the parties are agreed that Mr Mitchell's decision should be accepted as the presently effective decision. I agree with that view for both decisions refused a concession order and Mr Mitchell's decision was made at the higher level. See Amcor Ltd v. Comptroller-General of Customs and Others (1988) 79 ALR 221 at p 226.

2. The applicant, Corinthian, sought a concession order with respect to die formed fibreboard door skins which it imported at the time from Masonite Corp. of the United States but subsequently acquired from other producers. Corinthian is a large producer in Australia of decorative doors for use in the doorways of homes. The goods it was importing, decorative door skins, were the outer panels for doors. The imported door skins were unusual. They were formed in a die which so pressed and formed the fibreboard that, when painted, the door gave the appearance of a traditional moulded door. The imported door skins were thus novel articles useful for the manufacture of doors. They were not manufactured in Australia. The reason why was not given in evidence but I assume it to be that the cost of the dies and the other costs of manufacture were not justified having regard to the limited size of the Australian market.

3. Part XVA of the Act was introduced into the Act in 1983 to replace the previous by-law concession system which incorporated a concept of suitable equivalence. That concept was found difficult to apply. The new part was introduced with the intent that it should operate having regard to the straightforward tests which it enunciated. Relevant provisions in the legislation read:-

"269B.(1) In this Part, unless the contrary

intention appears -

...

'particular goods' includes goods included in

a particular class or kind of goods;

...

(3) For the purposes of this Part, identical

goods shall be taken to serve similar

functions.

(4) Without limiting sub-section (3), for the

purposes of this Part, goods shall be taken to

serve similar functions to other goods unless

the Comptroller is satisfied that, if both

goods were readily available for sale

throughout Australia, there would be no

significant part of Australia in which there

would be significant cross-elasticity of

demand between the goods.

...

(7) For the purposes of this Part, a person

shall be taken to be capable of producing

goods in the normal course of business if, in

the normal course of business, he is prepared

to accept orders for the supply of such goods

that have been, are being, or are to be,

produced by him.

...

269C.(1) Subject to this Part, where the

Comptroller, after considering an application

under section 269G for the making of an order

under this section in respect of particular

goods, is satisfied that -

(a) goods serving similar functions to the

particular goods are not produced in

Australia; and

(b) goods serving similar functions to the

particular goods are not capable of being

produced in Australia by any person in

the normal course of business,

the Comptroller shall make a written order,

declaring that the particular goods are goods

to which a prescribed item specified in the

order applies.

...

269G.(1) A person may make an application in

writing to the Comptroller for a concession

order in respect of particular goods specified

in the application.

(2) An application -

(a) shall contain such particulars as are

prescribed; and

(b) shall be lodged with the Comptroller -

(i) in a prescribed manner;

(ii) on a day other than a Sunday,

a Saturday or a prescribed

holiday; and

(iii) at a time that is between

prescribed hours.

...

269L. The Comptroller shall not make a

concession order (not being an order dealt

with in a report by the Industries Assistance

Commission or the Temporary Assistance

Authority or an order under sub-section

269P(10)) unless he has -

(a) published in the Gazette a notice -

(i) stating that an application

for the order has been made;

(ii) specifying the particular

goods to which the application

relates; and

(iii) inviting any persons who

consider that there are

reasons why the order should

not be made to submit, in a

manner specified in the

notice, particulars, in

writing, of these reasons to

the Comptroller within 28 days

after the date of the

publication of the notice; and

(b) considered any relevant particulars

submitted in response to the invitation

referred to in sub-paragraph (a)(iii)."

4. Before turning to particular aspects of the legislation and to the facts of the case, it is convenient for me to make some general observations regarding the interpretation of these provisions. I do so particularly as some of my comments in Davies Craig Pty Limited v. Comptroller-General of Customs (1986) 68 ALR 105, appear to have been misunderstood.

5. Sections 269B and 269C of the Act are not ambiguous. They should be applied having regard to the words used, not according to some background philosophy. The Minister's Second Reading Speech is entirely confirmatory of that point. A concession order may be made only when the Comptroller or his delegate is satisfied that goods serving similar functions to the particular goods are not produced in Australia and are not capable of being produced in Australia by any person in the normal course of business.

6. A determination of similar function is governed entirely by the provisions of s.269B(3) and (4). Notwithstanding the Davies Craig judgment, it was again argued for the respondents in the present case that a determination as to function requires the decision-maker to look to ordinary commercial concepts of function. Perhaps that was not precisely how the argument was put but that was the effect of it. Such an approach is not correct. One does not look at ordinary commercial concepts of function, or to past concepts of suitable equivalence. Part XVA specifies its own tests.

7. Section 269B(3) provides that "identical goods shall be taken to serve similar functions." That says and means that, if goods are identical, they are deemed to serve similar functions. It appears from some of the material before the Court and from submissions put by counsel that the Comptroller and his delegates interpret this provision as meaning that, if goods are identical in their manufacture or makeup or if goods are identical in function, they are to be deemed to serve similar functions. But s.269B(3) refers to "identical goods". Identity of an element such as function is not sufficient. The provision does not apply unless the goods are identical.

8. It is not useful for the purposes of this case to attempt to expound on the circumstances required to make goods identical. It is sufficient for present purposes that the word "identical" is an ordinary word of the English language, as is the word "goods". The provision will apply when goods satisfy the ordinary conception of identical goods and will not apply if the goods are not identical in this sense.

9. If goods are not identical, then s.269B(4) applies. That sub-section provides that goods shall be taken to serve similar functions to other goods unless the Comptroller is satisfied that, if both goods were readily available for sale throughout Australia, there would be no significant part of Australia in which there would be significant cross-elasticity of demand between the goods. The prescribed test does not involve a determination as to function. No doubt function, as that term is understood in ordinary parlance, is a relevant factor in a determination of cross-elasticity of demand between goods. If goods serve entirely different functions, there is presumably no cross-elasticity of demand between them. Nevertheless, the test prescribed is not a test of function but a test of cross-elasticity of demand.

10. Mr C.J. Stevens, of counsel, who appeared for the respondents, submitted that, so read, the provisions of s.269B(3) would be otiose, for there would necessarily be cross-elasticity of demand between identical goods. However, the tests are clear and, as I read them, Parliament has in mind that if goods are identical then they are to be taken to serve similar functions and it is unnecessary to consider whether or not there is any significant cross-elasticity of demand between them. If they are not identical, then it is necessary to examine the question of cross-elasticity of demand.

11. In my reasons in Davies Craig, cited above, at p 114, I said:-

"In my opinion, s 269B(4) is explicit and

clear. It provides that goods shall be taken

to serve similar functions unless the

Comptroller is satisfied that, if the goods

were readily available for sale throughout

Australia, there would be no significant part

of Australia in which there would be

significant cross-elasticity of demand between

the goods.

That provision and s 269B(3), with respect to

identical goods, are provisions which were

intended by Parliament entirely to govern the

question of similar function. Identical goods

are deemed to have a similar function. If

goods are not identical, the question is to be

determined by reference to cross-elasticity of

demand.

In other words, I am of the view that

Parliament intended by the definitions in s

269B(3) and (4) to cover the field.

Mechanical or physical function is covered by

s 269B(3), which requires identity. If there

is not identity in this sense, the issue is to

be decided by reference to the requirement of

'significant cross-elasticity of demand

between the goods', which is a market or

economic test and not a mechanical or physical

test, though the mechanical or physical

function of the goods would be a relevant

matter to be considered."

By the sentence "Mechanical or physical function is governed by s 269B(3), which requires identity" I did not intend to convey that the word "identical" in s.269B(3) would be satisfied by any identity other than identity of the goods.

12. In Amcor Limited v. Comptroller-General of Customs and Others, cited above, at p 233, Davies, Morling and Gummow JJ. cited part of that passage. Mr Stevens submitted that other portions of what was said in Davies Craig were deliberately omitted for their Honours intended to express a different view of the effect of ss.269B(3) and 269B(4). However, nothing in Amcor Limited v. Comptroller-General of Customs and Others should be read as stating or inferring that tests other than those specified by the Parliament in Part XVA are to be applied. The whole of the judgment in Amcor's case is to the contrary.

13. Section 269G provides that a person may make an application for a concession order in respect of "particular goods specified in the application". The definition of "particular goods" in s.269B(1) makes it clear that the application need not refer to specific goods but may refer to goods included in a particular class or kind of goods.

14. Sub-section 269C(3) provides that the reference to particular goods in paras. (a) and (b) of s.269C(1) includes a reference to goods included in a class or kind of the particular goods. Thus, in determining whether goods serving similar functions are produced in Australia or are capable of being produced in Australia in the ordinary course of business, it is sufficient that goods serving similar functions as a class or kind of the particular goods serve are produced in Australia or are capable of being produced in Australia in the normal course of business.

15. Save in this respect, the ambit of "the particular goods" does not alter. Mr Stevens submitted that the several references in s.269C(1) to "particular goods" altered according to the part which the reference plays in the sub-section. He submitted that in the opening words of the sub-section, the term refers to the particular goods specified in the application for a concession order. That is correct. Mr Stevens submitted that in paras (a) and (b) the reference to "particular goods" in a reference to the class or kind or genus of goods to which the particular goods specified in the application might belong. Mr Stevens referred to the definition "particular goods" in s.269B(1). However, that definition has the opposite effect. It makes it clear, not only that the particular goods may be specified by reference to a class or kind but also that the particular goods may be goods included in a particular class or kind of goods, not all the goods making up the goods of that class or kind.

16. Mr Stevens submitted that the concluding words of the sub-section confer a power upon the Comptroller and his delegates to determine and to specify what are the particular goods for the purposes of s.269C. Mr Stevens referred to the regulations which require an applicant, in his application, to set out three descriptions of the relevant goods, a description that adequately identifies the goods (regulation 181(1)(d)), a decription of the goods for the purposes of the concession order sought (regulation 181(1)(u)) and a description of the function which the goods serve (regulation 181(1)(j) & (k)). He submitted that, having regard to those descriptions and other matters within his knowledge, the Comptroller or his delegate could describe the particular goods as he wished. Notwithstanding these matters, s.269C(1) does not confer upon the Comptroller and his delegates the wide discretion for which Mr Stevens contended.

17. No doubt, the decision-maker must be satisfied that the specified procedures, including the notification of interested persons, have been complied with and that the circumstances set out in paras (a) and (b) are met. The Comptroller and his delegates may also have an implied power to reject an application where the application is improper in that the description of the particular goods is misleading or deceptive so that the concession order could not be fairly be acted on by importers. However, the particular goods which are the subject of s.269C are the particular goods specified by an applicant in his application for a concession order. Section 269G provides that the application is to specify the particular goods in respect of which a concession order is sought. Section 269C(1) refers to the Comptroller's consideration of "an application under s.269G for the making of an order under this section in respect of particular goods". The particular goods there referred to and which are referred to on three further occasions in the sub-section are the particular goods specified in the application.

18. Corinthian's application for a concession order was lodged on or about 29 October 1985. It described the goods to be imported as:-

"Colonial style die formed and embossed door

facings made from hardboard having a nominal

thickness of 3.175mm."

It gave the following suggested concession order wording:-

"Facings, door, incorporating not less than two

die formed feature panels in concave and/or

convex detail, without joints, with the

principal field outlines having a profile

formed depth of not less than 4mm, made from

fibre building board having a nominal

thickness of 3mm."

The function that the goods were intended to serve was stated as:-

"For use in the manufacture of Colonial style

interior doors."

Attached to the applications were the completed forms which had been sent to interested local manufacturers for their response. In many of these forms the applicant had given a slightly different description. In a number of them, the description of the goods to be imported was:-

"Facings, door, being goods made from fibre

building board having a nominal thickness of

3.175mm die formed panels and the facing

service embossed to give a wood grain

appearance."

In those cases, the suggested concession order wording was "as above" and the function that the goods were intended to serve was "decorative door facings."

19. Subsequently, after correspondence with the Comptroller-General's office, the applicant in a letter dated 17 September 1987 proposed the following wording for the concession order:-

"facings, door, incorporating not less than two

die formed feature panels in concave and/or

convex detail without joints with a principle

(sic) field outlines having a profile formed

depth of not less than 4mm, made from fibre

building board having a nominal thickness of

3mm."

In confirming this description, the applicant was then making it clear that it wished to import die formed door facings, not only in the Colonial style but also in other styles.

20. Mr Mitchell made his decision on 8 January 1988 and on that day wrote to the applicant stating, inter alia:-

"I note that in your original application you

have sought a concession for door facings for

internal doors, being of 'colonial' design,

whereas you now seek a concession (your

submission of 17 September) for door facings

incorporating die formed panels of any design.

However, importantly you have approached local

manufacturers on the basis of these Colonial

door facings only. Local manufacturers were

not asked to consider a concession for any

type of facing."

It may have been a ground for refusing a concession order that the suggested description of the goods did not make reference to "Colonial style", a feature which had been prominent in the forms sent out to local manufacturers for their comment. It may be that the suggested wording of the concession order did not sufficiently match the description of the goods upon which local manufacturers had been asked to report. I do not determine this point but merely indicate that this is the type of matter which the Comptroller and his delegates must consider.

21. However, the decision itself was not made on this ground and no reference is made to it either in the formal statement of reasons which has been provided under s.13 of the Administrative Decisions (Judicial Review) Act 1977 or in the affidavit filed in these proceedings in which Mr Mitchell has stated the reasons for his decision.

22. On 24 June 1987, Mr Walker had written to the applicant stating the following views:-

"(a) The physical function of the particular

goods is to provide the face on both

sides of doors;

(b) The pressings described in the proposed

TCO wording are decorative;

(c) All door skins have an identity of

physical function;

(d) The class or kind of goods is

"door skins";

(e) The marketplace for the door skins is the

door manufacturing market;

(f) The marketplace for the doors made from

the Colonist skins is the domestic door

market;

(g) door skins having an identity of physical

function to the particular goods are made

in Australia;

(h) Identical goods, i.e., door skins are

made in Australia."

It will be seen that Mr Walker took the view that the particular goods in respect of which a concession order was sought were door skins and that, as door skins were manufactured in Australia, no concession order could issue.

23. Mr Mitchell took the same view. In his letter of 8 January 1988, Mr Mitchell said:-

"I agree with the delegate's conclusions in

this case as outlined in his letter of 24

June:

- the physical function of the particular

goods is to provide the face on both

sides of doors

- the pressings described in the proposed

TCO wording are purely decorative

- the class or kind of goods is door skins

(facings)

- the market place for these door facings

is the door manufacturing market

- door facings having an identify of

physical function to the particular goods

are made in Australia - D & R Henderson.

I am not satisfied that the imported product

could not compete in the same market (ie door

facings) as the goods produced locally, for

example by CSR and D & R Henderson."

"... in addition I was not satisfied that

identical goods to the particular goods were

not produced in Australia."

Mr Mitchell's oral evidence was to the same effect.

24. The following paragraphs of Mr Mitchell's affidavit are illuminating:-

"20. I refer to annexures 'KJI 19' and 'KJI

20' to the affidavit of Kevin John INGERSOLE

filed herein and say that I consider the term

'identical' in section 269B(3) of the Customs

Act 1901 requires me to consider identity of

mechanical or physical function. In this

regard I refer to paragraph 7, 8 and 10 of

this my affidavit.

21. I refer to annexure 'KJI 19' to the

affidavit of Kevin John INGERSOLE filed herein

at page 6 of the letter of 17 September 1987

and say that door skins serve the function of

providing the face on both sides of doors."

25. It will be seen that a test of function, as enunciated by Mr Walker and Mr Mitchell, found its way into the decision-making process. A concession order was refused because the goods were door facings and therefore served the same purpose as door facings manufactured in Australia and also because, being door facings, they were necessarily identical with goods produced in Australia and also because, being door facings, they were competitive with door facings produced in Australia.

26. This line of reasoning rejected the applicant's description of the goods and settled upon a description of the goods as "door skins (facings)". Once this step was taken, the application necessarily failed, for those goods are produced in Australia in very great numbers.

27. However, the applicant had not sought a concession order for "door skins (facings)". What it wished to import was an article not made in Australia, namely, a die formed door facing. This article was a useful article of commerce, for it provided a relatively inexpensive means of giving a moulded appearance to a door.

28. The article which the applicant wished to import and for which it sought a concession order was a distinct article of commerce manufactured by a means of manufacture not currently available in Australia. It was that article that constituted the particular goods in respect of which the concession order was sought. The suggested wording for the concession order described those goods and it has not been suggested in these proceedings that the suggested wording was inaccurate or misleading or unworkable. The Comptroller and his delegates were bound to adopt that wording if it accurately described goods which were not produced in Australia.

29. Mr Stevens submitted that an importer ought not to be allowed to insert trivial or decorative details into a description of goods so as to avoid the intent of Part XVA. There may well be a point at which mere colour or decoration or other trivial addition is an irrelevant matter which it would be improper to insert in a concession order. But, as I have said, it is for an applicant to advise what are the goods which he wishes to import and for the Comptroller and his delegates to determine whether those goods are identical with goods produced or capable of being produced in Australia or would have a cross-elasticity of demand with goods produced or capable of being produced in Australia. If a suggested description of goods for a concession order is an accurate and proper description of the goods sought to be imported, then those are the tests to be applied to the goods as described.

30. Mr Stevens submitted that the pressings on the fibreboard door skins provided a mere decorative effect and were irrelevant. But they were not irrelevant. What was sought to be imported was a useful article produced by a means which was not available in Australia. It was an article in its own right, readily identifiable as such by importers and manufacturers.

31. It follows that Mr Mitchell was in error in failing to ask himself the correct questions, namely whether the die formed door skins sought to be imported by the applicant were identical with or had a cross-elasticity of demand with any goods produced in Australia or capable of being produced in Australia by any person in the normal course of business. These questions were not asked for the simple reason that Mr Mitchell considered the particular goods to be "door skins (facings)". That was not the description of goods put forward by the applicant or an accurate or proper description of the goods sought to be imported, for Corinthian did not wish to import or to have a concession order with respect to all the goods of that class or kind but simply with respect to die formed door skins as described by it.

32. An objection to the making of a concession order came from D. & R. Henderson Pty Ltd. A letter dated 13 October 1987 from that company to the applicant, stated:-

"We acknowledge receipt of your letter of

October 7th last regarding our objection to

your requested TCO for primecoated or

prefinished 'Die Formed Door Skins'.

The sample submitted is a primecoated (or

prefinished) sheet of thin fibreboard, which

also has a die formed design incorporated.

As you are aware we are manufacturers of

primecoated and prefinished panels and these

finished panels being used for a variety of

uses including door manufacturing, furniture

fronts, cupboard backs etc. Our prefinishing

processes are carried out on a variety of

substrates, some of which are made in

Australia (by ourselves and by others) and

some being from overseas suppliers.

The panel which you submitted to us can

certainly substitute for wholly Australian

made panels in a 'door skin' use. Further,

the panel will also certainly substitute for

other wholly Australian made products,

currently being supplied by us into other

industries e.g. Furniture manufacturing."

Mr Stevens submitted that D. & R. Henderson was making the point that it produced identical goods. I do not read its communications in this way. A sample of the D. & R. Henderson fibreboard is in evidence. The coloured surface has a slight ripple effect and it appears from that letter of 13 October 1987 that that effect may have been produced by the use of die. However, Henderson's panel is a flat panel and does not meet the description of and is not identical with the goods which Corinthian imported.

33. It is difficult to determine whether there was any error in the approach to the term "identical goods" in Mr Mitchell's decision save that, having considered that the goods were "door skins (facings)", Mr Mitchell necessarily concluded that identical goods were produced in Australia. However, paragraphs 20 and 21 of Mr Mitchell's affidavit suggest that Mr Mitchell did not examine the question of the identity of the goods themselves but examined the question of the identity of function which the goods served. This was a wrong approach for s.269B(3) is concerned only with identical goods. It deems them to serve similar functions. It does not so deem goods that are not identical.

34. There were like errors in some of the consideration given to the matter at an earlier time. Thus, an internal memorandum of 5 November 1987 states this under the heading "identical goods":-

"Delegate initially agreed that identical goods

were not made locally but shifted from that

position following Davies Craig.

I believe that the scheme of Part XVA is that

as outlined in the Ministers 2nd Reading

Speech and that is that the fundamental issue

to be considered is whether competition exists

between the local and imported goods.

Therefore do not believe that S.269B3 can be

considered without reference to competition

and consequently I do not agree with the

delegates conclusion (folio 149) that

similarity of function alone is a proper basis

for refusal."

These comments were incorrect insofar as they suggest that s.269B(3) specifies any test other than that of the identity of the goods or that that sub-section requires any additional test such as cross-elasticity of demand to be considered.

35. There was evidence before Mr Mitchell tending to show that there would be significant cross-elasticity of demand between the particular goods in respect of which the applicant sought a concession order and goods produced in Australia. D. & R. Henderson put that view and the applicant itself gave relevant figures in the letter dated 24 October 1985. The applicants informed the Comptroller-General that:-

"It is estimated that Corinthian has 50% of

the door market in Australia. On that basis,

the total requirement for hardboard skins is

500,000 square metres per month or 6,000,000

square metres per annum. Those figures

translate into 143,000 doors per month and

1,716,000 doors per annum. The Colonist

doorskin requirement as a percentage of the

total hardboard skins usage is 1.4%.

Total door production in Australia of all

types is estimated at 245,000 doors per month

or 2,940,000 annually. In percentage terms,

Corinthian Colonial doors amount to less than

1% of the market share for locally made doors.

Imports also have a market share that

increases the total numbers, thus reducing the

percentage share for colonial doors."

Those figures suggest that 48,000 of the die formed door skins were used annually by the applicant. From this information alone, an inference could have been drawn that the applicant was using the die formed door skins not to meet a special order or a particular limited need but in the general course of its business. If so, an inference may have been open that the door skins were competitive with other door skins and that demand was responsive to price.

36. On the other hand, Mr A.J.L. Bannon, counsel for Corinthian, submitted that there must be significant cross-elasticity and he pointed to the fact that no manufacturer other than D. & R. Henderson objected to the making of a concession order. He submitted that the effect of the importation upon D. & R. Henderson would be minimal and he pointed to a report by two academics on the subject of cross-elasticity in the door market. All these were matters for the decision-maker and I make no comment upon them.

37. There is one matter solely upon which I should comment. Mr Bannon submitted that the question to be asked was whether the reduction in duty occasioned by a concession order would increase the demand for the particular goods to a significant extent. He submitted that the question of significant cross-elasticity was to be determined in the context that a concession order would reduce the duty and therefore the cost of the goods. I see no reason to read down the legislation in this way. Of course, price is relevant and a reduction in cost because of a reduction in duty is a relevant matter to take into account. But the fact that the reduction in duty may be relatively small does not foreclose the issue. If there would be significant cross-elasticity of demand between the goods imported and goods produced in Australia or capable of being produced in Australia in the normal course of business, then that is sufficient. Thus, if the particular goods now being imported by Corinthian have significant cross-elasticity of demand with other goods produced in Australia, that is sufficient and the fact that any reduction in duty will increase the demand to only a small extent will not matter.

38. The material before the Court shows that Mr Mitchell came to the view that door facings would compete with the goods produced by CSR and D. & R. Henderson. However, as I have said, this was not the question to be asked. I am not satisfied that Mr Mitchell squarely faced up to the question as to whether the die formed door skins, in respect of which Corinthian sought a concession order, would have significant cross-elasticity of demand with goods produced in Australia.

39. In the light of all these matters, the application must succeed. The decision of Mr Mitchell will be set aside and the matter will be remitted to the Comptroller-General for consideration according to law. The applicant's costs of the proceedings should be paid by the first-named respondent.