CLAIMS FOR DRAWBACK
When it comes to paying duty, the Department wants to treat anyone that has ever had any connection with the goods as an "owner" and liable for duty. However, when the roles are reversed and the claim concerns a drawback of duty, the Department has obtained a Tribunal ruling that there can only be one owner and it is the legal owner at the time of export.
Recent Tribunal Decision In DFS Australia Pty Limited and Comptroller-General of Customs (click here to access the case) the AAT had to consider whether a duty free store was able to claim a drawback of duty in circumstances where it imported the goods, sold them in their stores to tourists and the tourists were the exporter of the goods.
The Department argued that the duty free store was not eligible to receive the duty drawback as the claim had to be made by the person who is the legal owner of the goods at the time the goods are exported.
Those familiar with the definition of "owner" in the Customs Act and how that definition was applied inStudio Fashion Australia case would expect the arguments of the Department to fail. The Tribunal inStudio Fashion Australia held that the definition of owner was very wide and included multiple parties such as the consignee under a DDP transaction.
However, the regulations governing applications for drawback do not use the wide definition of "owner" from the Customs Act. Rather, the wording used in the relevant regulations is "…the person who is the legal owner of the goods at the time the goods are exported…". This wording has the following impact:There can only be one entity that can claim a drawback of duty. This is as the words "the person" are used. This was taken to mean that there could not be multiple owners.The generally wide definition of "owner" is narrowed to "the legal owner at the time of export". This brings into account notions of legal title to goods.
Taking into account this wording, the Tribunal found that only the customer who purchased the goods could be the legal owner at the time of export and was the person entitled to make a claim for duty drawback.
Implications Exporters seeking a drawback of duty need to ensure that they are in fact the legal owner of the goods at the time of export. In some cases this will be clear. However, in others it will require a close review of the contract terms. Incoterms will not determine when ownership passes. It will be passed on what the parties have decided. nevertheless, special attention should be paid to ales of EXW terms.
If the goods are financed or the sales contract contained a retention of title clause, there may be difficulties determining who is the legal owner at the time of export.
If claiming drawback is important (as it would be for duty free stores) you may need to consider restructuring your transactions to pass title after the goods have been exported.
Alternatively, where it is applicable, the importing party may wish to consider the Tradex Scheme which does not require the party claiming the concession to be the exporter of the goods.
Ultimately this case is another example that close attention needs to be paid to the words of the legislation and regulations. In this instance, the word "owner" had a very different meaning when used in the context of duty collection and drawback of duty.
Please contact us if you have any questions.
Russell Wiese
Partner
T +61 3 8602 9231
F +61 3 8602 9299
E RWiese@hunthunt.com.au
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