BARTIER PERRY acted for John Deere Ltd in its successful defence of an appeal against a decision that may require Australian Customs to pay back duty it has collected from several importers.
The law firm said the case may also affect Customs’ collection of duty when other free trade agreements came into force.
The case, Chief Executive Officer of Customs v John Deere Ltd, involved a dispute between importers and the Australian Customs Service over whether full customs duty was payable on goods originating in the US, which had been warehoused in Australia before the Australia-US Free Trade Agreement (AUSFTA) came into force.
From 1 January 2005, the AUSFTA gave preferential duty rates for goods imported into Australia that had been manufactured in the US.
In the case of John Deere — a US-based manufacturer of agricultural and industrial machinery — the 5 per cent duty the company would have incurred was completely abolished under the agreement.
As a result, many importers, including John Deere, put goods that had arrived in Australian ports before 1 January last year in bonded warehouses, then “imported” them for “home consumption” after that date. The action was based on an interpretation of the AUSFTA and s 132 of the Customs Act.
Oliver Shtein, a Bartier Perry partner advising John Deere’s counsel in the Federal Court case, said there are several other importers affected by the case, primarily in the vehicle industry and possibly also the textile industries.
“With a high rate of duty item, particularly motor vehicles, and if you import a high volume of goods, that’s quite a lot of duty. So they put them in a warehouse, and you only have to pay duty on them when you bring them out of the warehouse,” he said.
Shtein said this was, and remains the case, according to s 132 of the Customs Act.
“The same implications apply under the Thai-Australia free trade agreement because Customs took the same misguided approach in relation to the introduction of that one,” he said.
“Unless they change the legislation, whenever they negotiate a free trade agreement, this issue will arise again.”
Customs itself took the view that the goods had already been imported, even though they hadn’t been distributed to the intended recipients, and charged duty based on the pre-January 2005 rate.
This was accepted “under protest” by the importers, but they took their claim to the Administrative Appeals Tribunal, which upheld the importers interpretation of the law.
Customs lost an appeal of this decision in the Federal Court late last month. Should the agency not pursue an appeal, it is likely they will have to repay the duty they have collected to the affected importers.
Although Justice Jessup ruled in John Deere’s favour, he said the goods had to have been warehoused “forthwith”.
Therefore, the judge said he was concerned that the AAT’s decision “is broader than would be justified” by his judgments, and he set aside the Tribunal’s decision and sent it back to the AAT for re-determination.
The Australian Government Solicitor advised counsel for Australian Customs in the case.