Eberle v Chief Executive Officer of Customs [2004] FCA 989 (30 July 2004)

Last Updated: 30 July 2004

FEDERAL COURT OF AUSTRALIA

Eberle v Chief Executive Officer of Customs [2004] FCA 989

ADMINISTRATIVE LAW – quantification of customs duty – vehicle purchased in the United States of America – intent of purchaser to use vehicle in America before importing it into Australia – whether transaction value method or fall back value method should be used for determining customs duty – transaction value method to be used if sale of goods contract ‘contract of sale for importation’ – vehicle purchase contract not a ‘contract of sale for importation’ – appeal upheld



Administrative Appeals Tribunal Act 1975 (Cth) s 44
Customs Act 1901 (Cth) s 154(1), 159(2), 161, 161G, 161J
Customs and Excise Legislation Amendment Bill (No 2) 1987 (Cth)
Customs (Valuations) Amendment Act 1981 (Cth)
Customs Tariff Act 1965 (Cth)


Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade [1982] ATS 32 (entered into force in Australia 22 December 1982) Article I


Convention on Nomenclature for the Classification of Goods in Customs Tariffs [1973] ATS 18 (entered into force in Australia 18 July 1973)


D & R Henderson Pty Ltd v Collector of Customs (NSW) (1974) 48 ALJR 132 considered
Re Eberle and Chief Executive Officer of Customs (2003) 54 ATR 1078; [2003] AATA 1175 set aside
Re SRK and the Chief Executive Officer of Customs (1996) 42 ALD 395 cited





JOHN EBERLE v CHIEF EXECUTIVE OFFICER OF CUSTOMS
N 2504 OF 2003



HELY J
30 JULY 2004
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 2504 OF 2003

ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL

BETWEEN:	JOHN EBERLE APPELLANT
AND:	CHIEF EXECUTIVE OFFICER OF CUSTOMS RESPONDENT
JUDGE:	HELY J
DATE OF ORDER:	30 JULY 2004
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The appeal be upheld.

2. The decision of the Administrative Appeals Tribunal given on 21 November 2003 be set aside.

3. The respondent pay the appellant’s costs of the appeal.
4, Consideration of further relief be reserved.










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

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 2504 OF 2003

ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL

BETWEEN:	JOHN EBERLE APPELLANT
AND:	CHIEF EXECUTIVE OFFICER OF CUSTOMS RESPONDENT

JUDGE:	HELY J
DATE:	30 JULY 2004
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1 This is an appeal from a decision of the Administrative Appeals Tribunal (‘the AAT’) which involved the methodology of a customs valuation with respect to an imported motor vehicle. It is agreed that the issue for determination on the appeal involves a question of law, and the respondent does not question the competency of the appeal (see Administrative Appeals Tribunal Act 1975 (Cth) s 44).

2 The substantial matter in issue between the parties is whether the transaction value method provided in s 161 of the Customs Act 1901 (Cth) (‘the Act’), or the fall-back valuation method provided by s 161G of the Act, was the correct basis for determining the customs value of the vehicle. The respondent successfully argued before the AAT that the transaction value method was correct. The application of that method depends on whether the circumstances of the purchase of the vehicle come within the definition of ‘import sales transaction’ in s 154(1) of the Act.

3 The appellant purchased the vehicle in question on 16 March 1998 from ‘Chevrolet-Olds Buick, Inc’, a company located in the United States of America. The purchase price was USD 45,000. The contract of sale makes no reference to the vehicle being exported and there is no evidence that there was any other arrangement between the parties to that effect. Delivery of the vehicle to the appellant took place in America. The vehicle was kept in storage by the appellant in America for approximately three years before being shipped to Australia on 16 May 2001. The vehicle was not used in the United States between the time of purchase and the time of shipment to Australia.

4 The appellant claimed that he purchased the vehicle intending to use it when he and possibly other members of his family had the time to visit the United States, and that at the time of purchase he had no intention of importing it into Australia. He said that whether he would import it into Australia was something he decided later. However, the AAT did not accept the appellant’s evidence in this respect. The AAT found that the appellant’s intention at the time he purchased the vehicle was to use the vehicle in the United States and then import it into Australia as a used vehicle. The AAT found that as the intention of the appellant at the time of purchase was ultimately to import the vehicle into Australia, the transaction was an ‘import sales transaction’ within the meaning of that term in par (b) of the definition in subs 154(1) of the Act, and that pursuant to s 159(2) the customs value of the goods is their transaction value as per s 161.

5 Pursuant to s 161J of the Act in the application of the transaction value method, the respondent applied the ruling rate of exchange at the time of exportation of the vehicle (16 May 2001) to the purchase price of USD 45,000 that was paid by the appellant some three years earlier. The Australian dollar equivalent of the purchase price ascertained in that way was AUD 86,488.56. This amount caused duty, GST and other charges to amount to AUD 36,892.35.

6 The appellant contends that the customs value of the vehicle should be ascertained using the fall-back method of valuation, based upon a value specified by a vehicle assessor in Tasmania of AUD 23,000 which results in a customs value for the vehicle of AUD 19,338.55. If that method was applicable, the total amount payable would have been AUD 5,525.14. The respondent accepts that this value would be appropriate if the fall-back valuation method was applicable.

Relevant provisions of the Act

7 Section 159(1) of the Act provides that subject to any contrary intention, the value of imported goods for the purposes of imposing duty is their customs value, and the Collector shall determine that customs value in accordance with the section. The section then establishes an hierarchical system of valuation methodologies, starting with the requirement to consider the transaction value method before proceeding to consider a range of alternatives, the last of which is the fall-back method.

8 The transaction value is described in s 161 of the Act as follows:

‘(1) The transaction value of imported goods is an amount equal to the sum of their adjusted price in their import sales transaction and of their price related costs to the extent that those costs have not been taken into account in determining the price of the goods.’

The only part of that definition which is relevant for present purposes is the notion of an ‘import sales transaction’. The phrase ‘import sales transaction’ is defined in s 154(1) of the Act as follows:

‘import sales transaction, in relation to imported goods, means:

(a) where there was one, and only one, contract of sale for the importation of the goods into Australia entered into before they became subject to Customs control and it was also a contract for their exportation from a foreign country – that contract;
(b) where there was one, and only one, contract of sale for the importation of the goods into Australia entered into before they became subject to Customs control and it was not also a contract for their exportation from a foreign country – that contract;

(c) ...
and includes:
(d) ...

(e) any other contract, agreement or arrangement relating to the contract of sale referred to in paragraph (a), (b) or (c) that a collector determines is so closely connected with that contract and to the goods the subject of that contract that together they form a single transaction.’

(emphasis in original)

The AAT’s decision

9 The AAT concluded that the definition of import sales transaction in par (b) required a purposive approach to statutory interpretation, with the result that consideration must be given to the intention of the importer of the goods at the time of the overseas purchase. The AAT found as a fact that the intention of the appellant at the time of purchase included the later importation of the vehicle into Australia. There is no challenge (nor could there be) to the AAT’s factual finding as to the appellant’s intention at the time of purchase.

The extrinsic material and legislative history

10 The appellant submits that the phrase ‘contract of sale for the importation of the goods into Australia’ is a compound phrase which requires a characterisation of the contract in order to see whether it is a contract of that type, and that the subjective intentions of one of the contracting parties has no part to play in the determination of that question. There is a difference, in the appellant’s submission, between:

- a contract of sale for the importation of goods into Australia; and
- a contract of sale for the acquisition of goods by a person who subsequently imports those goods into Australia;

and that the one cannot be treated as if it were synonymous with the other.

11 The respondent directed my attention to the Replacement Explanatory Memorandum for the Customs and Excise Legislation Amendment Bill (No 2) 1987 (Cth) as a result of which the sections in question were inserted into Part VIII, Division 2 of the Act. The Explanatory Memorandum states (at p 4):

‘Clause 7 amends the Principal Act by repealing Division 2 of Part VIII and substituting a new division, containing sections 154 to 161L. The division is designed to give effect to Australia’s obligations under the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade (the GATT Valuation Agreement), to which Australia is a signatory.

The Agreement on implementing Article VII proceeds upon the basis that the value of imported goods for customs purposes should, as far as possible, be the price paid or payable under the actual import sales transaction. Provision is made in the Agreement for certain adjustments to the price in the determination of this transaction value.

Article VIII accords primacy to the price paid or payable for the goods under the actual transaction where that transaction has been dictated by "arms-length" commercial considerations. The Agreement implementing Article VII does not require effect to be given to the actual transaction where it has resulted from or been dictated in point of form by "other" considerations.

The focus of the redrafted Division is the rearrangement of the various provisions, to give primacy to the principal method employed in the valuation of goods (the transaction value), and to highlight the various types of costs, charges and agreements relating to the goods which will be included or excluded for the purposes of assessing the customs value of the goods in accordance with the relevant provisions of the GATT Valuation Agreement.’

12 The Explanatory Memorandum also discusses the definition of ‘import sales transaction’ in s 154 which is quoted above. The discussion is as follows (at p 11-12):

‘Import sales transaction is defined for the purpose of ascertaining which contracts are to be taken into account in determining the "price" paid under the Transaction Value method (s 161(1)).

paragraph (a) of the definition adheres closely to Article 1 of the GATT Valuation Agreement, which refers in this context to "goods when sold for export";

paragraph (b) of the definition applies to contracts of sale which involve the importation of goods into Australia, but which do not involve the exportation of goods from another country;

- the mischief to which paragraph (b) in the definition is specifically directed is an avoidance device whereby goods are effectively sold mid-voyage and ostensibly become goods which do not fall within the ambit of the existing provisions (ie it is claimed that those goods are not the subject of a contract of sale which provides for their exportation from another country);

...’

(emphasis in original)

13 The Explanatory Memorandum on page 12 refers to pars (d) and (e) in the definition. It states that the mischief to which pars (d) and (e) are directed is known as ‘transaction splitting’ under which the price truly paid for the goods is reduced or disguised.

14 Article I of the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade [1982] ATS 32 (entered into force in Australia 22 December 1982) (‘the GATT Valuation Agreement’) provides as follows:

‘The customs value of imported goods shall be the transaction value, that is the price actually paid or payable for the goods when sold for export to the country of importation ...’

15 In the respondent’s submission the phrase ‘contract of sale for the importation of goods’ which is used in the definition of ‘import sales transaction’ in s 154 is inherently ambiguous. It is the use of the word ‘for’ which in the respondent’s submission is vague and imprecise. Recourse may therefore be had to the Explanatory Memorandum, and to the GATT Valuation Agreement to determine the meaning of the provision. I agree with that submission.

16 The comparable provisions in the Act prior to 1987 were introduced in 1981, when the Customs (Valuations) Amendment Act 1981 (Cth) (‘the Amendment Act’) inserted a new Division 2 in Part VIII of the Act. The new Division provided for the valuation of imported goods in accordance with the GATT Valuation Agreement: see J Waineymer ‘The Customs (Valuations) Amendment Act 1981’, Australian Law Journal, Vol 56, June 1982, pp 308-310. Under that Act the ‘transaction value’ was also the primary valuation method which was anticipated to apply in the majority of transactions. ‘Transaction value’ was then defined in s 159(2) as being an amount equal to the price, as determined by the Collector, in accordance with the relevant transaction, subject to adjustments which are immaterial for present purposes. ‘Relevant transaction’, in relation to goods, was defined so as to mean:

‘(a) a contract for the sale of goods (not being a contract of sale that, in the opinion of a Collector, is a contract of sale on the domestic market of a country other than Australia) entered into before the goods become subject to Customs control; or

(b) ...’

17 Thus the primary method of valuation provided for by the Act as it stood after the 1981 amendments was not applicable where the only contract of sale prior to the importation of the goods was on the domestic market of a country other than Australia.

18 In the note earlier referred to attention was drawn to the fact that in a number of respects the Amendment Act diverged markedly from the GATT Valuation Agreement, whilst in others Parliament employed expressions that may or may not eventually be held to be synonymous with the expressions contained in the agreement. However, attention was directed by the note’s author to the decision of Mason J in D & R Henderson Pty Ltd v Collector of Customs (NSW) (1974) 48 ALJR 132. In that case, his Honour stated (at 135) that the general principle that if the language of a statute is ambiguous, it is permissible to refer to provisions of an international convention to which the statute is intended to give effect, is applicable in the context of the Customs Tariff Act 1965 (Cth) and the Convention on Nomenclature for the Classification of Goods in Customs Tariffs [1973] ATS 18 (entered into force in Australia 18 July 1973).

19 Consonant with the intent stated in the Explanatory -Memorandum, the current definition of ‘import sales transaction’ introduced by the 1987 amendments to the Act adheres more closely to Article I of the GATT Valuation Agreement than the definition of ‘relevant transaction’ introduced by the amendments to the Act in 1981.

The meaning of ‘import sales transaction’

20 Counsel for the respondent submitted that the transaction value method is intended to be the primary basis for valuation, and that the regime described in the Act requires that other methods are to be used only when the transaction value cannot be determined. The structure of the Act supports this submission, and it should be accepted. Furthermore, the Explanatory Memorandum states on p 29 that the transaction value is the most widely used method of valuation for imported goods, accounting for about 99 per cent of all commercial importations. It is therefore clear that the appropriate inference to draw from both the text of the Act and the accompanying Explanatory Memoranda is that the Act should be construed in a manner that promotes the transaction value method as the primary valuation method. Consequently, I also accept the submission of counsel for the respondent that the expression ‘contract of sale for importation of the goods’ must be assumed to have been intended to have a breadth necessary to apply in most cases, and should not be construed narrowly in a way which frustrates that purpose.

21 However, this interpretative preference cannot lend greater breadth to the provision than its text or purpose can support. The Explanatory Memorandum makes it plain that par (a) of the definition of ‘import sales transaction’ is intended to describe the same type of transaction as is described by the expression ‘goods when sold for export’. The Explanatory Memorandum also makes it plain that the mischief to which par (b) of the definition is directed is an avoidance device whereby goods are sold mid-voyage, although par (b) would not necessarily be confined to circumstances within the mischief if its language otherwise required. I note, however, that it is difficult to envisage other circumstances in which par (b) might otherwise apply. Even an F.O.B. contract for the export of goods would fall within par (a) of the definition, despite the fact that the purchaser may be responsible for making the shipping arrangements.

22 In the ordinary case, it is appropriate to use the sale price to determine the valuation of imported goods when the sale price is arrived at as part of an arms length transaction, because ordinarily the sale and importation of the goods take place at about the same time. However, in the present case an interval of three years passed between sale and import. The respondent nevertheless submitted that there is no logical reason why the purchase price paid for the vehicle should not be used for the valuation of the vehicle at the point of importation. This submission is contrary to the rationale for the use of the transaction value as the primary method of valuation. But in any event, even if accepted the proposition is of limited utility, as the question here is not one of logic, but rather one of construction.

Characterising the purchase contract

23 There is only one contract in the present case. In order to fall within the definition of ‘import sales transaction’ this contract must have been a contract for the importation of the vehicle into Australia. If this was the case, as the vehicle was purchased in the America the contract must also have been a contract for the exportation of the vehicle from America. Hence it is par (a) of the definition, rather than par (b), which is directly relevant.

24 Another way of stating this proposition is that if there is a contract within par (a) of the definition, then it is also correct to describe the goods the subject of that contract as being sold for export. Any textual difference between the language of the GATT Valuation Agreement and that of the definition therefore has no bearing on the outcome of the present case.

Was there a contract of sale for importation?

25 The phrase ‘contract of sale for’ invites consideration of the object or purpose of the contract in question. What is the end sought to be achieved by the contract? It may be apparent from the terms of the contract that it is one under which goods leave the exporter’s country destined for a buyer abroad, as was the case considered by Deputy President McMahon in Re SRK and the Chief Executive Officer of Customs (1996) 42 ALD 395. Or the end sought to be achieved by the sale contract may emerge from surrounding circumstances, as for example when the sale contract is intertwined with other arrangements designed to secure the export of the relevant goods.

26 In the language of the GATT Valuation Agreement, goods are not ‘sold for export’ unless that is the basis of the sale, or the end sought to be achieved by the contract. In either case there must be a consensus between buyer and seller that the goods are to be exported from one country and imported into another. There is an export sale when there is a contract under which goods leave one country destined for a buyer abroad. Contracts for sale of goods may be entered into on the domestic market of a country preparatory to the export of the goods, but they are no more than domestic sales, if is no part of the arrangement reached between buyer and seller that the goods will leave the country.

27 All that emerges here is that there was a contract for sale of a vehicle between an American vendor and an Australian purchaser which was completed in America when the vehicle was paid for and delivered in America. The fact that the purchaser intended to import the car into Australia after he finished using it in America does not transform what would otherwise be a domestic sale of goods contract into a ‘contract of sale for importation’. It was not suggested that there was any other factor which justifies such a transformation.

28 For these reasons the appeal should be upheld. The decision of the AAT is set aside. The respondent should pay the appellant’s costs of the appeal. Were it not for the concession referred to in [6] above, the matter would need to be remitted to the AAT for determination in accordance with the law. Having regard to that concession the parties should reach agreement on whether any further consequential relief should be awarded, bearing in mind that the matter before me is an appeal from a decision of the AAT, rather than proceedings for judicial review.

I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Hely.

Associate:

Dated: 30 July 2004

Counsel for the Appellant:	V Gray
Solicitor for the Appellant:	Rodda Castle & Co
Counsel for the Respondent:	P Hastings SC
Solicitor for the Respondent:	Australian Government Solicitor
Date of Hearing:	22 July 2004
Date of Judgment:	30 July 2004