Freight & trade Alliance (FTA) has received the below commentary from Hunt & Hunt Lawyers in relation to a recent AAT case available at http://www.austlii.edu.au/au/cases/cth/AATA/2014/960.html
Commentary
The decision is important for vehicle component importers as it relates to when an item will be classified as part of a motor vehicle (and generally not subject to any TCOs) and when the item might be classified under another heading. The decision, Iljin Australia Pty Ltd v CEO of Customs concerned whether a motor vehicle wheel hub unit containing ball bearings should be classified under heading 8482 (ball bearings) and potentially be subject to TCOs, or be classified under heading 8708 (motor vehicle parts).
The importer argued that the goods were composite goods and could be classified under more than one heading. As such the goods should be classified according to element which gave the goods their essential character. The importer argued that this was the ball bearings.
Customs argued, and the AAT accepted, that the wheel hub unit was not a composite good and reference was not needed to essential character. The AAT found that while individual elements of the hub had discrete functions, those functions combined were directed at the same purpose and the individual elements were subordinate to the identity of the combined unit. When the good was viewed this way it could not be classified as a ball bearing. Rather, the ball bearing was merely one component of the good. If the good was not classified as a ball bearing, it was non-contentious that it should be classified under 8708.
Interestingly, Customs in support of its position referred to an existing tariff precedent. This is at odds with previous cases where Customs has sought to downplay the role of past tariff precedents so far as the AAT decision making process is concerned. Unsurprisingly, the AAT held that precedents only serve as a guide to importers and their agents with the classification of the goods and are not binding on the AAT.
Issues for importers
The particular TCOs in issue were 1028497 and 9705319. As a first step we recommend reviewing use of those TCOs over the past 4 years. If the imported goods are hubs or assemblies rather than bearings, the importer may need to review the use of the TCOs.
More generally, the case demonstrates the difficulty of classifying motor vehicle components. As components become more advanced and integrate other functions or elements they are more likely to be classified under 8708 than a more specific heading. A decision that may have been correct when the good was first imported may, following the evolution of the good, now be incorrect.
Given the hard line Customs is taking on classification, TCOs and refunds it is recommended that importers and their agents revisit classification decisions regarding vehicle components which have resulted in duty free entry.
Russell Wiese
Partner Hunt & Hunt Lawyers
Level 26, 385 Bourke Street, Melbourne, VIC 3000
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