Tariff concession orders – are your goods actually covered?

Tariff concession orders (TCOs) allow goods to be imported without customs duty where there are no local manufacturers producing substitutable goods.

Problems often arise where opinions differ about the correct classification of the goods. The recent AAT decision in National Oilwell v Comptroller-General of Customs highlights the risks facing importers.

What happened in National Oilwell v Comptroller-General of Customs?

You might have sympathy for the importer, given the circumstances.

The goods were ‘pony rods’, also referred to as short ‘sucker rods’ – basically a component of an oil well pump.

The sequence of events was as follows.

1. On 11 February 2009, an application for a TCO was made under tariff item 8413.91.10.
2. There then appears to have been some internal consideration by Customs about whether 8413.91.10 or 8413.91.90 was the correct tariff item. The AAT referred to a Customs’ minute paper but did not discuss its contents.
3. However, on 25 February 2009, the original application for the TCO was withdrawn and was re-listed under tariff item 8413.91.90. Customs subsequently approved the TCO under that tariff item.
   While not in the evidence, it is easy to imagine that Customs communicated its view that it wouldn’t approve a TCO under 8413.91.10 but would approve a TCO under 8413.91.90.
4. From 2009 to early 2014, goods were imported duty-free under 8413.91.90 quoting the approved TCO.
5. On 28 January 2014, Customs issued a tariff advice, stating that the correct tariff item was actually 8413.91.10 – the one that was the subject of the first (withdrawn) TCO application.

The effect of Customs’ position

Customs’ tariff advice on 28 January 2014 meant that the previous imports of the pony-rods were not duty-free. This was because the TCO could not apply to goods imported under a different tariff item, regardless of whether the description matched.

Customs assessed the imports for duty.

National Oilwell applied for a corresponding refund of duty on the basis that there was a TCO in force (or taken to have been in force) at the time the goods were imported.

In its decision, the AAT commented that:

1. ‘Before goods can fit within a particular TCO they must be within the tariff classification to which the TCO is keyed’ – Voxson Sales Pty Ltd and Collector of Customs [1993] FCA 609.
2. ‘In order to fall within a tariff concession order, the goods must “precisely” meet the description of that order’ – Becker Vale Pty Ltd v Chief Executive Officer of Customs [2015] FCA 525.

There was no question that the description of the goods in the TCO matched the actual goods precisely. However, the AAT held that the TCO could not be applied to the imported goods – because the TCO was keyed to 8413.91.90 and the goods were properly imported under 8413.91.10.

On that basis, the AAT concluded that the TCO did not apply, and the imported goods were dutiable.

What steps could the importer have taken to protect itself?

After receiving the tariff advice on 28 January 2014:

• a new TCO was granted for the goods under the correct tariff item – 8413.91.10 – and the goods imported from that date were not dutiable;
• National Oilwell applied for a further tariff advice requesting confirmation that the goods were covered by the TCO; and
• Customs provided this confirmation in a second tariff advice.

Unfortunately these steps were too late for the goods that had already been imported.

With the benefit of hindsight, these steps should have been taken in 2009. Assuming Customs indicated in February 2009 that the correct tariff item was 8413.91.90 and not 8413.91.10 (as the importer had concluded in their application), the importer should have asked Customs for a tariff advice.

Customs treats a tariff advice as binding for 5 years, unless it voids it earlier.

Please contact a member of our team if you would like to discuss.