June 2022 Update - The below post relates to a 2020 case. While the content of this post is still relevant, it must be read subject to the update at the end of the post.
Customs famously went to the High Court arguing that the interpretation of the Australian tariff classification legislation should be interpreted consistently with the French version of the harmonised system for tariff classification. The High Court agreed, but Customs still lost that case. Now in an ironic twist, the Administrative Appeals Tribunal has relied on the French translation of the HS code to find against Customs in a classification case concerning steel pipes. The change in tariff classification would mean that the importer would not have to pay dumping duty on the pipes.
In Smoothflow Australia Pty Ltd and Comptroller-General of Customs [2020] AATA 1890 the issue was whether steel pipes imported for building fire sprinkler systems should be classified to 7306 (general steel pipes) or 7308 (structures and parts of structures). The relevant pipes were 5.8 metres in length and had printed on them information showing that the goods met standards applying to pipes used in fire protection systems. The Tribunal found that the goods would be put to use in fire sprinkler systems in buildings.
Customs assessed the goods to heading 7306. If correct, the ABF argued that the goods were subject to dumping duties applying to hollow structural sections. The same duties did not apply to goods classified to heading 7308.
The English wording of heading 7308 included the following "Structures … and parts of structures … of steel; … tubes and the like, prepared for use in structures of iron or steel". However, the French version of the heading translated to "…tubes and similar … steel, prepared for use in the construction industry".
Following the High Court decision in Pharma-Care, the Tribunal felt that it had to interpret the Australian wording in a way that was harmonious with the French wording. The AAT interpreted the Australian wording as not requiring the pipes be used in the structure, but merely in connection with the structure.
The AAT also found that pipes of 7308 do not need to necessarily for part of the structure or structures involved.
The AAT found that the pipes were at the time of importation prepared for use in connection with the building of structures. It was relevant that the pipes complied with the mandatory standards for the relevant buildings.
Interestingly, Customs argued that the interpretation went against the explanatory notes. However, the Tribunal said that the explanatory notes could only be used where the headings were unclear. In this case the Tribunal said that the heading was not unclear and the explanatory notes could not be used to create uncertainty.
Ultimately, the pipe could fit into either heading 7306 or heading 7308. The Tribunal applied the interpretation rules and classified to pipes to 7308 being the more specific of the two headings. The heading was held to be more specific as it applied to pipes prepared for a particular purpose, not merely "pipe".
This case shows the practical implications of the approach adopted by Customs in the Pharma-Care case. It was easily foreseeable that arguing that the interpretation of Australian legislation should be influenced by the French text would lead to uncertainty. This recent case shows that tariff classification will now involve consideration of both the English and French text of the tariff headings and relevant section/chapter notes. This will create additional administrative burden for both the ABF and customs brokers at a time when the Government is trying to lower the regulatory burden of international trade.
This decision is particularly important for importers that have been subject to a large dumping duty demand on steel pipes and tubes (HSS) to be used in the building industry. Following this decision, there may now be grounds to argue that the dumping duty was incorrectly claimed.
2022 update - Following this case 2 important developments occurred. Firstly, legislative change was introduced to limit the circumstances where steel pipe and tube will be classified as part of a building structure. This legislation needs to be considered for importations after March 2021. Secondly, in March 2022 an Administrative Appeals Tribunal decision held that for dumping duties applying to aluminium extrusions, the tariff classification of the import was irrelevant. There are arguments both for and against this finding. Additionally, it is unclear whether the finding will be limited to aluminium extrusions or all dumping duty. Advice should be sought on the extent to which the tariff classification of your product impacts any dumping duty payable.