TCOs - is it still a "precisely fits" test

For the past 10 years there has been a view enforced by the Courts and the Australian Border Force that for a good to fit within the terms of a tariff concession order, the imported goods must precisely meet the terms of the TCO wording. A good that has additional features not described in the TCO is not covered by the TCO. However, a recent tribunal decision has described the ABF approach as incorrect and applied a wider test.

Traditional approach

A TCO is a concession that reduces the customs duty payable on goods from 5% to zero. To qualify for the use of the TCO, a good must both fit within the term of the TCO and be classified to the same tariff heading to which the TCO has been keyed.

For a number of years the ABF has applied this test very strictly. The ABF has held and enforced the view that TCO applicants must precisely describe the goods and once made, the presence of other additional components of imported goods that were not described in the TCO wording will render the use of the TCO inapplicable.

West-Trans Equipment and Comptroller-General of Customs

This approach was recently tested by the Administrative Reviews Tribunal in the decision of West-Trans Equipment and Comptroller-General of Customs (Taxation and business) [2025] ARTA 554. In this case the Tribunal had to consider whether a mechanical truck cover which had many components, such as a motor, tower section and control box together with a tarpaulin, was covered by a TCO which included the following:

Parts and Accessories, On-Road Trucks Having A Gross Vehicle Weight Not Less Than 7.5 Tonnes, being ANY of the following....”. The TCO then lists 136 items including coverings (ah),covers(ai),frames(bf),harnesses(bk),mountings(by), platforms(ch), reinforcements(cp), roofs(ct), scoops(cv), sheets(cx), straps(dp), sunroofs(ds), supports(dt), understructure(ea).

The imported goods were identified as a set, rather than by their individual components. Predictably, the ABF argued that the goods were more than a mere cover, having features such as a control box and motorised removal. As such, the imported goods did not precisely meet the requirements of the TCO.

The importer argued that the goods retained the essential character of a “cover” and that each element of the cover was described in the various items listed in the TCO.

“Precisely fits” test wrong

The Tribunal member rejected the ABF argument that the imported goods must precisely meet the terms of the TCO or that the TCO wording must be taken as a precise description of the goods intended to be covered by the TCO. The Tribunal member noted that the Customs Act only requires the TCO applicant to provide a “full description” of the goods to which the TCO applies. The Customs Act does not use the word “precisely”. The Tribunal held:

“To read into the phrase “a full description of the goods” the word “precisely” not only “departs from the natural and ordinary meaning of the terms of the provision in the context in which they appear” but is not consistent with the “purpose of all the provisions of the statute” and reads into the Customs Act words “which are not there”. As there is no clear necessity to read words into the Customs Act “it is the wrong thing to do”.

Ultimately, the Tribunal held that it is not appropriate to attribute a meaning of “precisely” or “precise” to the actual words used in the Customs Act.

The requirement on the TCO applicant was to provide a “full description” of the goods. This is an objective description of the goods that enable those who import to identify the goods by an informed inspection. It requires a detailed account of the goods, but does not require a perfectly accurate description that is identical in every single detail to the actual goods. The description of the goods in the TCO wording should be taken to be a “clear representation” of the goods, but not necessarily a “perfect representation” of the goods.

In this particular case, the Tribunal noted that the TCO uses the phrase “any of the following” and this is not a term that is intended to be read in a precise or narrow fashion. It was also relevant that the TCO was keyed to a heading requiring mechanical elements. In this sense, the TCO could not when referring to a “cover” have been referring a mere textile item.

Features of a wider tests

The new test put forward by the Tribunal had the following elements:

·       As TCOs confer duty relief, they should be construed beneficially in favour of the taxpayer (importer) rather than restrictively;

·       The wording of a TCO should be construed to give the most complete remedy which is consistent with the language used;

·       Where general language is used in a TCO, a narrow approach to the interpretation of that wording is not appropriate;

·       For the TCO in this case, it was sufficient if the goods in question have some connection with the heading;

·       The TCO should be given a meaning that a reasonable person would understand to have intended by the words used in their context

·       The correct question to ask is whether an additional features alter the essential character of the goods, not whether the goods meet those described in the TCO “precisely”

TCO applied to the imported goods

Ultimately, the Tribunal accepted that the “cover” described in the TCO must have meant a cover secured mechanically, given the keying of the TCO to a tariff heading covering mechanical items. The Tribunal believed that a person in the street seeing the goods on a truck would describe the goods as a cover. That description would not change if the person saw the goods opened or closed mechanically.

Ultimately, the TCO applied to truck covers and the essential character of the goods was found to be a truck cover. The TCO was held to apply.

Implications of a new TCO test

Given the significant departure from past caselaw and established ABF practice, the decision may be appealed. If it is not, and the decision stands, it represents a fundamental change to both applying for TCOs and interpreting the meaning of a TCO.

The test would move from a narrow “precisely fits” approach to a test that looks at whether the TCO goods have the essential character of the goods described in the TCO. If the decision stands, importers should review past instances where the ABF has denied the application of a TCO and consider new opportunities to apply existing TCOs.

Please contact us if you wish to discuss this decision further.