Re Teac Australia Pty Ltd v Francis Ivor Kelly and Howard Garnier [1991] FCA 599 (4 December 1991)

FEDERAL COURT OF AUSTRALIA

Re: TEAC AUSTRALIA PTY. LTD.
And: FRANCIS IVOR KELLY and HOWARD GARNIER
No. G49 of 1991
FED No. 774
Customs and Excise

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Davies J.(1)

CATCHWORDS

Customs and Excise - review of decision to refuse a Tariff Concession Order - existence of a locally manufactured product - whether description of goods in application for the TCO was too wide - whether application bound to fail - whether TCO now sought in respect of goods not as described in the application.

Customs Act 1901 (Cth) - ss.269B, 269C, 269G

HEARING

SYDNEY 4:12:1991

Counsel for the Applicant : Mr J.J. Spigelman QC and

Mr N.J. Williams

Solicitors for the Applicant : Elsworthy Jones

Counsel for the Respondents : Mr A. Robertson and
Mr G. Elliott

Solicitor for the Respondents: Australian Government Solicitor

ORDER

The application be dismissed.

The Applicant pay the Respondents' costs of the application.

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

DECISION

These proceedings seek orders by way of judicial review. The applicant, TEAC Australia Pty Ltd ("TEAC") is an importer of automatic and semi-automatic turntables. The first respondent is the Comptroller-General of Customs and the second respondent is the Director of Tariff Concessions with the Australian Customs Service.

2. On 5 July 1985, TEAC lodged an application for a Commercial Tariff Concession Order ("TCO") with respect to automatic and semi-automatic turntables. That application resulted in the making, on 5 March 1987, of a TCO more restricted in scope than TEAC had sought. In 1990, on the application of another importer, a TCO issued in respect of automatic and semi-automatic turntables having a platter mass greater than 750 grams. That TCO was effective from 27 February 1990. TEAC alleged that its application of 5 July 1985 had not been fully dealt with and remained alive and that, it having been accepted that a TCO should issue in respect to turntables having a platter mass greater than 750 grams, such a TCO should issue on its application with effect from 5 July 1985.

3. Part XVA, which now provides for the making of Commercial Tariff Concession Orders, was introduced into the Customs Act 1901 (Cth) by Act No. 19 of 1983. There have since been some minor amendments but it is sufficient for present purposes if I use Reprint No. 8 which was printed as at 31 July 1991. The principal basis upon which a TCO may be granted is set out in s.269C(1) which provides:-

"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."

This provision is expanded by s.269B which provides, inter alia:-

"(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 subsection (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."

Moreover, s.269C(3) provides:-

"A reference in paragraph (1) (a) or (b) to `the
particular goods' shall, in the case of
particular goods of which there are classes or
kinds, be read as including a reference to goods
included in a class or kind of the particular goods."

4. It should be noted that the description of the particular goods is crucial for it is by reference to that description that the test of identical goods in s.269B(3) and the test of similar function and cross-elasticity of demand in s.269B(4) are to be tested. Once a TCO is made, the order applies to all goods answering the description by whomsoever they may be imported. A TCO is not limited to the goods of a particular importer.

5. Section 269G(1) provides:-

"A person may make an application in writing to
the Comptroller for a concession order in
respect of particular goods specified in the application."

Note that the application must specify by description the goods in respect of which the TCO is sought. Regulation 181 of the Customs Regulations further provides that an application shall contain the following particulars, inter alia:-

"...
(d) a description that adequately identifies
the goods including the tariff
classification that applies to those
goods;
(e) where a document describes or illustrates
the goods - that document;
(f) where it is reasonable to describe the
goods by reference to a sample - a fair
sample of the goods;
(g) where in the normal course of business the
goods are described by reference to their
chemical composition - a description of
that composition;
(h) where in the normal course of business the
goods are described by reference to
technical data - those data;
(j) a description of the function that the
goods normally serve;
(k) a description of any other function that
the goods serve or may reasonably be
employed or adapted to serve;
...
(s) where the application is for an order
provided for by subsection 269C(1) of the
Act - the extent of any competition that
would exist between the goods and similar
goods that a person produces, or is
capable of producing, in Australia in the
normal course of business, if the goods
were imported;
... ."

When an application has been lodged, the Comptroller-General of Customs will investigate the matter to ascertain whether identical goods are produced in Australia or whether goods serving similar functions and in respect of which there would be a significant cross-elasticity of demand with the particular goods are produced in Australia or are capable of being produced in Australia by any person in the normal course of business.

6. If the Comptroller-General is satisfied that a TCO should be granted, he will under s.269L publish in the Government Gazette a notice stating that an application for the order has been made, specifying the particular goods to which the application relates and inviting reasons why the order should not be made. If the Comptroller-General, having considered any response, is still of the view that a TCO should be made, he will then make a concession order and publish it in the Gazette. Under s.269N, the day on which the TCO will be effective will be specified in the TCO and will be a day before the day on which the application for the TCO was made.

7. Between the time of the making of the application and the final making of a TCO, the Comptroller-General may consider for himself what is an appropriate description of the goods in respect of which the TCO should be made. But in his consideration of the matter, the Comptroller-General should not lose sight of the description of the goods proposed in the original application; for the making of the TCO arises out of the lodgment of an application which specifies the goods in respect of which the TCO is sought. See Corinthian Industries (Syd) Pty Ltd v. Comptroller-General of Customs (1989) 86 ALR 387 at 392-6.

8. On 5 July 1985, TEAC gave notice under s.269H that it proposed to make an application for a concession order in respect of particular goods. As this notice was not a formal application under s.269G, it merely described the goods as "semi-automatic and automatic turntables falling within Tariff Item 92.11". A formal application was subsequently lodged on 9 August 1985 in which the goods were specified as "semi-automatic and automatic turntables" and the function was described in these terms:-

"The above goods will be used to play records".

That application and indeed the earlier notice were accompanied by CTC 2 forms which had been sent by TEAC to 4 Australian manufacturers who, it was considered, might manufacture or be capable of manufacturing goods serving a similar function. Two of these manufacturers responded that they did not manufacture such goods in Australia. Another of the manufacturers we need not be concerned about for the manufacturer appears to have gone out of business at about that time. However, JH Reproducers Co. (later called and to which I shall refer as "High Fidelity Products") responded that they manufactured high fidelity turntables in Australia and that they had done so for 25 years.

9. High Fidelity Products did indeed manufacture turntables in Australia and, much to the sorrow of TEAC and its advisers, it continued to do so. Unfortunately, TEAC and its advisers seem never to have faced up to the fact that a TCO could not have been granted for the goods described in TEAC's application.

10. Voluminous correspondence ensued over many years. TEAC and its advisers kept putting the view that the turntables which TEAC intended to import were produced for the mass market whereas the turntables produced by High Fidelity Products were of high quality, high fidelity turntables. TEAC and its advisers said that the two types of turntables were sold in basically a different market, that the sales of High Fidelity Products were small whereas sales by TEAC were substantial. By way of example, I extract the following comments from letters from TEAC's agents that passed:-

"we submit that there is no discernible
cross-elasticity of demand or interaction between the
two product groups which could be influenced by
a movement in tariffs.
...
Whilst we agree in principle that the local
equipment performed the same function as the
imported goods, the evidence suggests that there
is little if any competition between the two types.
...
We therefore contend that the evidence submitted
to date (and again summarised below) indicates a
complete absence of any demand
cross-elasticities between the local and imported products."

11. This view was repeated by TEAC and its advisers over many years. What was never appreciated was that the TCO had been sought in respect of "automatic and semi-automatic turntables". As such goods were produced in Australia, the application was hopeless when it was lodged and it continued to be so as High Fidelity Products produced turntables in Australia.

12. Ultimately, Mr V.F. Harris of High Fidelity Products who, over the period, continued to emphasise whenever asked that his business manufactured and sold turntables in Australia and that his business would be adversely affected if the TCO was granted as sought, on 5 September 1986, in response to a further approach from TEAC's accountants, responded:-

"I have no objection to the importation, under
concessional duty rates of those `TEAC' turntables
which are operated by a twelve volt D.C. power supply."

13. There was then further correspondence and negotiation. Ultimately, on 5 March 1987, effective from 5 July 1985, a TCO was made in these terms:-

"92.11 TURNTABLES, audio, semi-automatic and
automatic, having ALL of the following:
(a) turntable speeds of 33 1/3 r/min
and 45 r/min only;
(b) wow and flutter greater than 0.06%
(WRMS);
(c) operated ONLY by an external 12 V
DC power supply
Op. 5.7.85 - TC 8533687"

That TCO was treated by the Comptroller-General as finalising the application of which notice was given on 5 July 1985.

14. Subsequently, on 22 November 1989, a TCO was made for a wider range of DC powered turntables and as TCO 8533687 was redundant it was revoked.

15. TEAC and its agents continued to press the Comptroller-General and Mr Harris seeking a further TCO. I shall return to that correspondence shortly. In the meantime, Sanyo Aust. Pty Ltd approached Mr Harris and, on 17 April 1990, Mr Harris wrote to the Secretary of Sanyo to say that he had never manufactured turntables having a platter mass less than 750 grams. He was content that a TCO should issue in respect thereof. Subsequently, a TCO was made on Sanyo's application with respect to the following goods:-

"92.11 TURNTABLES, audio, semi-automatic and
automatic, having all of the following:
(a) turntable speeds 33 1/3 r/min
and 45 r/min only;
(b) wow and flutter of 0.055% or
greater;
(c) a platter mass, complete with any
mat supplied, not exceeding 750 grams
(File C85/33687 folios 215 to 216)."

Subsequently, TC 9002717 issued which omitted paragraphs (a) and (b). The difference was not a matter of great moment to Mr Harris as wow and flutter are difficult to measure and tend to be affected by the weight of the platter.

16. I return now to TEAC's application.

17. In the middle of 1987, TEAC sought a review of the decision to refuse a TCO for AC powered automatic and semi-automatic turntables. The Australian Customs Service sought more information by letter of 31 March 1988. The Acting Director of the Administration and Review section wrote to TEAC's agents affirming the stance previously taken. The letter repeated the point that, "It is clear to me that the goods covered by your client's application are in fact identical to the locally manufactured turntables and that they perform the same mechanical or physical function" and "I am not satisfied that the imported turntables are not in direct competition with the turntables as manufactured by High Fidelity Products." The letter concluded: "This now completes the internal review procedures available." However, the letter went on to say that TEAC could request the Minister to refer the matter to the Industries Assistance Commission under s.269R of the Act.

18. On 25 August 1988, TEAC's agents lodged an appeal. However, on 21 September 1988, the Manager of Tariff Concession and Quotas wrote to TEAC's agents to say that:- "I do not consider there are sufficient grounds to recommend that the Minister refer this matter to the IAC." That letter and other correspondence was sent to the Minister for information. On 8 March 1989, TEAC's agents wrote to the Comptroller-General to say that TEAC was still considering its position.

19. On 10 July 1989, TEAC wrote to the Tariff Concession and Quota Branch to say that "the turntables produced by High Fidelity Products are in no sense identical to those we import." Even after all this time, there was still not a realisation that the application for the TCO was in respect of "automatic and semi-automatic turntables".

20. On 18 July 1989, TEAC's agents wrote to the Tariff Concession and Quota Branch stating inter alia:-

"A completed CTC 2 form signed by Victor Francis
Harris confirming that turntables, as detailed
below, have not been produced by his company
since 5th July 1985.
`TURNTABLES, audio, semi-automatic and
automatic, having all of the following:
(a) Turntable speeds of 33 1/3 R/Min
and 45 R/Min;
(b) Wow and Flutter of 0.055% or greater.'
Evidence from two importers of these turntables
confirming that the goods as described in the
suggested CTCO wording are not produced in Australia.
We request that the application be advertised in
the Gazette for a Tariff Concession Order."

21. However, a minute by an officer of Customs, Mr P.J. Maher, dated 14 August 1989, indicated that he contacted Mr Harris and that:-

"He advised me Mr Greenaway (TEAC's agent) had visited
him and discussed a change to para (b) of TC 8533687
to read `0.055% WRMS or greater'.
It was his understanding that they were only
discussing DC turntables which is why he signed the
form CTC2 at folio 205.
He still maintains that his turntables (which have wow
and flutter not exceeding 0.02% WRMS (- thus more
Hi-Fi) compete with AC turntables which would be covered
by the wording at folio 205."

22. On 14 August 1989, Mr Maher of Customs wrote to TEAC's agents advising of this fact and advising that "Any request for tariff concession on turntables not already covered by TCO must be accompanied by a new application." On 30 August 1989, TEAC's agents wrote to say that it was intended to have the matter referred to the review group.

23. On 8 November 1989, Mr Harris of High Fidelity Products wrote to Mr Maher:-

"On the matter of Greenaway's application, there has
been some confusion. I have no objection to duty
concessions being applied to the particular model
turntable, which is the subject of their application.
When you queried the removal of the separate D.C.
power supply condition I was alarmed, thinking that I
was losing protection against other better quality
turntables. After consideration however I came to the
conclusion that the clause gives little protection and
only that by accident.
Clause (c) in TC 8533687 needs replacing with one
which will distinguish between high and low quality
turntables. The only feature that appears
consistently in high quality and is absent in low
quality units, is high platter mass. It is extremely
difficult to achieve high performance with a light
platter. Therefore a limit on platter mass should
give me protection based on quality for the first
time. At the same time the present clause (c) could
be abolished, saving a lot of unnecessary applications
and correspondence
Making use of a platter-mass criterion, TC8533687
could read:-
TURNTABLES, audio, semi-automatic and automatic,
having all of the following;
(a) turntable speeds of 33 1/3 r/m and 45 r/m only.
(b) wow and flutter of 0.055% WRMS or greater.
(c) a platter mass, complete with any mat supplied,
not exceeding 750 grams."

24. On 15 December 1989, the agent of TEAC wrote to the Tariff Concession and Quota Branch referring to this letter and stating:-

"It substantiates the view I have put to you over a
considerable period of time.
Accordingly, I would be grateful if you will process
this application in accordance with the legislation."

That was responded to by a letter from Mr Maher dated 28 December 1989 which read:-

"No application has been lodged in respect of
the particular goods described by High Fidelity
Products in the last paragraph of its letter
dated 8th November 1989.
Consideration may be given to the granting of a
tariff concession order in the terms proposed
only upon lodgment of an application in the
prescribed manner."

25. On 27 April 1990, TEAC's agents wrote again to Mr Maher stating:-

"Mr Harris has further considered his position
in relation to the proposed TCO. I now enclose
for your information and action a CTC2 form
signed by Mr. Harris in relation to the wording
employed in the original TCO application -
namely,
`Semi Automatic and Automatic Turntables'
You will notice that Mr. Harris has answered
`NO' to each of the four questions.
As this CTC2 form complies with the requirements
of the Act and is in the same terms as the
original Notice of Intention dated 5.7.1985, it
does not require any action to be taken under
ACN90/5.
Accordingly, we would ask you to proceed to
gazette a concession order with the suggested
wording, effective from 5.7.1985."

26. That letter was not entirely accurate. TEAC's agents had again sent to High Fidelity Products a CTC 2 which set out the suggested wording in the old terms "semi-automatic and automatic turntables". Mr Harris had ticked "no" in each of the respective boxes but had also attached the note that:-

"THESE GOODS AS LISTED ON PAGE 1, HAVE NOT BEEN
PRODUCED BY HIGH FIDELITY PRODUCTS SINCE
5.7.1985, EXCEPT FOR GOODS IN RESPECT OF WOW and
FLUTTER LESS THAN 0.055%WRMS."

27. On 8 May 1990, the Director of Tariff Concessions wrote to TEAC's agents stating inter alia:-

"The original application for semi-automatic and
automatic turntables lodged on 5/7/85 on behalf
of TEAC was dealt with to finality in two parts,
viz,
. a TCO was made on 5/3/87 for certain
DC powered turntables (8533687
refers)
. on 24/4/87 the application in
respect of the element relating to
AC powered turntables was refused -
it was later reviewed and the
refusal re-affirmed
On 22.11.89, as a result of a different
application, a TCO was made for a wider range of
DC powered turntables and consequently, TCO
8533687 became redundant and was revoked.
Having regard to the above events it is clear
that there is currently no application lodged
for semi-automatic and automatic turntables.
Therefore, regardless of the current stance of
High Fidelity Products concerning the wording of
the CTC2 you have attached, no consideration can
be given to making a TCO for these goods until
an application for their concessional entry is
lodged.
In this regard, it may be helpful for you and
your client to be aware that, as a result of a
separate application, a TCO will soon be made
for `audio turntables having a platter mass not
exceeding 750 grams' which would appear to cover
at least part if not all the particular goods of
interest to you. This TCO will have an
operative date of 27/2/90 ref. 9002717."

On 19 June 1990, TEAC's agents responded:-

"I consider that there are no goods serving
similar functions produced in Australia as those
goods covered by these applications for tariff
concessions."

28. An application was lodged with this Court on 11 February 1991 and was subsequently amended. TEAC seeks orders of review with respect to several aspects of the above which are alleged to constitute reviewable decisions and reviewable conduct. The allegations are founded on the contention that from 5 July 1985 there was actively before the Comptroller-General an application which covered the whole range of automatic and semi-automatic turntables and that, until the totality of that application is dealt with, TEAC can insist that any goods which, from time to time, can be identified as falling within the description sought and which otherwise satisfy the requirements for a TCO, may be claimed. In my opinion, that approach is incorrect.

29. An application for a TCO must specify the particular goods in respect of which the TCO is sought. If an applicant claims too wide a class of goods, the application is liable to fail. TEAC's application was bound to fail for goods of the description were produced in Australia. It is a pity that the officers of the Tariff Concession and Quota branch dealt with the matter in a considerate manner. TEAC should have been told in clear terms in 1985 that its application was too wide and must fail and that TEAC should start again. But that did not happen and, as the years passed, there were correspondence, discussions, recriminations and so on, all to no avail, because TEAC had not lodged an application for a TCO in respect of particular goods which had, in law, any prospect of success.

30. The application lodged in 1985 was not an application for turntables having a platter mass less than 750 grams. There was nothing in that application which said anything whatever about platter mass. What is sought now is not a TCO substantially as described in the application lodged in 1985, it is a TCO in respect of goods differently described.

31. I agree with the view put on behalf of the Comptroller-General that the application lodged in 1985 has long since ceased to have any life.

32. In the circumstances, I shall dismiss the application with costs.