WHEN CAN YOU USE A TARIFF CONCESSION ORDER
While much of Australia's imports are covered by free trade agreements (FTA), there is still a very high use of other concessions, such as tariff concession orders (TCOs). Importers may use TCOs over FTAs where the goods are not covered by an FTA (the UK and EU for example), the goods do not qualify for the benefit of an FTA (such as a supplier not providing a certificate of origin) or the parties want to avoid the cost of complying with an FTA.
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It is important to appreciate that the Australian Border Force (ABF) will audit TCO use, perhaps more so than FTA use. Importers should carefully consider whether a TCO applies at the very earliest stages, rather than once an ABF audit commences.
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There are two important issues, the classification of the imported goods and the wording of the TCO.
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Tariff classification
When a TCO is made it is attached to a particular tariff classification. For a good to receive duty-free entry under the TCO, the good must first be classified to the tariff classification to which the TCO is keyed. The good must then also come within the description of goods contained within that TCO. It can happen that a TCO is attached to a particular tariff classification, and then at a later point in time, it is determined that the TCO should have been classified to another tariff classification. This can occur in a number of ways. For example, if a party seeks a duty refund based on the application of a TCO and the refund department denies the refund as it believes that the goods are not classified to the same classification as the TCO – despite being the very goods described in the TCO. A change in the ABF position is not that uncommon as the tariff classification of the goods may not be contentious at the time of granting the TCO. However, the ABF will pay more attention to tariff classification in a refund or audit context.
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In such circumstances, the ABF has the power under the Customs Act to revoke the original TCO and issue a new TCO under the alternative, correct tariff classification. While this may seem to fix the problem, usually the ABF only re-issues the TCO with a prospective operation. The old TCO remains attached to the incorrect tariff classification.
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Why is this a problem? Because goods entered prior to the re-issue of the new TCO must be correctly classified and the old TCO is still attached to the incorrect classification. This can result in a claim for repayment of duty avoided by previously using the TCO.
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Fitting within the TCO goods description
An issue that has regularly come up in the context of TCO interpretation is whether goods precisely meet the TCO wording. It is important that the imported goods do no more, or no less, than the goods described in the TCO wording.
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Where the importer was the party that originally applied for the TCO, there is a greater chance that the goods will precisely meet the terms of the TCO. However, TCOs can be used by any importer and it is often the case that importers are seeking to have their goods fit within the terms of a TCO not drafted with their particular goods in mind.
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If the TCO specifies a requirement and the imported good does not meet that requirement, the TCO will not apply.
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The harder issue is where the goods come with features or accessories not described in the TCO. If those accessories are very common, it may be taken that the TCO wording covers those accessories. For instances, a TCO specifying a television would now also include a remote control. It is almost impossible to obtain a new television without a remote control.
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However, if the imported good was a television with a built-in DVD player, there would be a good argument that the TCO did not apply.
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In reviewing imports against the terms of a TCO, ask whether all elements of the imported good are listed and if not, are they otherwise essential to the operation of the principal good?
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Unless the inclusion of the object is so obvious that it goes without saying (packaging, a manual), obtaining a ruling or new TCO is recommended.
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Close attention should be paid where imported goods have changed over time or where additional items are included for promotional purposes.
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TCO use is an area that the ABF strictly audits. Our lawyers assist importers with reviewing TCO use before, during and after an ABF audit. We can assist with obtaining rulings, responding to audit reports and where necessary, disputing the ABF's decisions in the Administrative Appeals Tribunal.