Toyota Material Handling Australia and Chief Executive Officer of Customs and Crown Equipment Pty Ltd (Party Joined) [2008] AATA 1108 (12 December 2008)

Last Updated: 12 December 2008

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2008] AATA 1108

ADMINISTRATIVE APPEALS TRIBUNAL )

) No: 2007/00862007/3187

GENERAL ADMINISTRATIVE DIVISION		)
	Re		Toyota Material Handling Australia

Applicant

And

Chief Executive Officer of Customs

Respondent
And Crown Equipment Pty Ltd

Party Joined

DECISION

Tribunal

Senior Member M D Allen

Date 12 December 2008

Place Sydney

Decision

The Decision in Matter No. 2007/0086 is Set Aside and is Remitted to the Respondent with the direction that Tariff Concession Order Number 0308934 is to be reinstated as from the date of revocation. The Decision in Matter No. 2007/3187 with respect to proposed Tariff Concession Order Number 0613256 is Affirmed, but with liberty to apply.

...................[sgd]...........................
M D Allen
Senior Member

HEADNOTES

CUSTOMS: Revocation of Tariff Concession Order and refusal to grant Tariff Concession Order – Claim that Party Joined Walker Stackers substitutable goods in respect of Applicant’s Reach Trucks and Counterbalanced Forklifts – Test for substitutable goods.

...

LEGISLATION

Customs Act 1901; s 269B, 269C

...

CASE LAW

Seguin Moreau Australia v Chief Executive Officer of Customs and Ors (1997) 77 FCR 410

Riverwood Cartons Pty Ltd v Chief Executive Officer of Customs [1997] FCA 817; (1997) 77 FCR 493

REASONS FOR DECISION

Senior Member M D Allen

1. These proceedings relate to two Applications for Review lodged by the Applicant. For convenience both Applications were heard jointly, the Party Joined being made a party to the proceedings by Direction of the Tribunal.
2. Matter No. 2007/0086 relates to the revocation of a Tariff Concession Order (“TCO”) numbered 0308934 by the Respondent at the request of the Party Joined. It was alleged by Crown Equipment Pty Ltd (“Crown”) that it manufactured in Australia in the ordinary course of business substitutable goods. The TCO read:

“ FORKLIFT TRUCKS, single OR double pantograpgh reach, rider standing, battery powered, as defined AS 2359, comprising ALL of the following:
(a) rated load capacity exceeding 1250kg for double reach and 1500kg for single reach at a lift height exceeding 5300mm;
(b) load capacity NOT greater than 2100kg at 600mm load centre;
(c) operator positioned at right angles OR facing the direction of travel;
(d) hydraulically operated steering;
(e) operator protection overhead guard;
(f) travel speed at rated maximum lift height greater than 3km/h;
(g) electric drive motor output greater than 0.8Kw”

3. Matter No. 2007/3187 relates to the Decision by the Respondent upon internal review at the instigation of the Party Joined to refuse to make a TCO, numbered 0613256, in the following terms:

“ TRUCKS, FORKLIFT, counter balanced, operator seated, having ALL of the following:
(a) powered by internal combustion engine;
(b) load capacity NOT less than 900kg and NOT greater than 1500kg at 600mm load centre
(c) overhead guard complying with Australian Standard 2359.7(AS2359.7)”

Again the objection made by the Party Joined, in this case to the making of the TCO, was that it made substitutable goods in Australia in the ordinary course of business.

4. Although the decision in respect of Matter No. 2007/0086 is the revocation of a TCO whereas the decision in respect of Matter No. 2007/3187 is the refusal to make a TCO, the ultimate question to be resolved by the Tribunal was the same, both decisions being whether or not substitutable goods were produced in Australia in the ordinary course of business by the Party Joined. That question is also referred to as the “core criteria” under s.269C of the Customs Act 1901.
5. In respect of Matter No. 2007/0086 the relevant date upon which the above question is required to be asked is the day of lodgement of the request by the Party Joined with the Respondent to revoke TCO No. 0308934, namely 28 August 2006. In respect of Matter No. 2007/3187 the relevant date is the day on which the Application for the TCO was lodged by the Applicant with the Respondent, namely 7 August 2006.
6. The issues in these proceedings can be further confined given the Applicants concession that the Party Joined meets the second and third limbs of the core criteria, by producing goods in Australia in the ordinary course of business. Therefore the sole focus for the Tribunal was on the first limb of the core criteria, namely “substitutable goods”.

7. As pointed out by Mr. Komora, the solicitor for the Respondent, the definition of “substitutable goods” in the form as it currently appears under Part XVA of the Customs Act 1901 today can be traced to the passing of the Customs Legislation (Tariff Concessions and Anti-Dumping) Amendment Act 1992.

8. The definition of “substitutable goods” as inserted into the Customs Act 1901 by the 1992 amending Act was further amended by the Customs Amendment Act 1996. The amended definition followed the 1995 report by the Australian Customs Service entitled ‘Evaluation of the Tariff Concession Scheme’. Recommendation 4 of that report reads:

“ The definition of ‘substitutable goods’ be clarified to refer to those goods falling within the same genus or type.”

9. The Customs Amendment Act 1996 amended the definition of “substitutable goods” so that it now reads:

“Substitutable goods, in respect of goods the subject of a TCO application or of a TCO, means goods produced in Australia that are put, or are capable of being put, to a use that corresponds with a use (including a design use) to which the goods the subject of the application or of the TCO can be put.”

10. Section 269C of the Customs Act 1901 was repealed and a new section 269C inserted which read:
“For the purposes of this Part, a TCO application is taken to meet the core criteria if, on the day in which the application was lodged, no substitutable goods were produced in Australia in the ordinary course of business.”

11. The previous s269C in reference to the interpretation of core criteria also included a market test which was removed from consideration by the 1996 amendment. Cases decided on the pre amendment definition are therefore to be approached with that caveat in mind.
12. Notwithstanding the amendment, the statement by Drummond J in Seguin Moreau Australia v Chief Executive Officer of Customs and Others (1997) 77 FCR 410 at 416 is still applicable namely;
“...the expression “substitutable goods” in s269C(b) is given a precise meaning by its definition in s269B(1): goods produced in Australia will be “substitutable goods” in respect of the goods the subject of a TCO application only if the goods produced in Australia are, at the relevant date, put to a particular use and that use corresponds with a use to which the goods the subject of the application for the TCO “can be put”, that is, are in fact put or are capable of being put.”

Compare page 415 where His Honour explained the “substitutable goods” test in the following terms:
“The ordinary meaning of the words of s269C(b) read with the definition of “substitutable goods” is that, if there is identified a single Australian operation producing goods (A) and a TCO is sought in respect of the importation of goods (B), if goods (B) are in fact put to the same use as goods (A) or are capable of being put to that same use, the TCO must be refused, if removal of duty on goods (B) would have a significant adverse affect on the Australian manufacturer’s trade in goods (A). This is so whether or not goods (A) are the only locally made goods in fact likely to suffer from import competition”.

13. Although the Australian goods and the imported goods may have more than one use, it is sufficient to state that substitutable goods exist if only one of the uses coincide. See Goldberg J in Riverwood Cartons Pty Ltd v Chief Executive Officer of Customs [1997] FCA 817; (1997) 77 FCR 493 at 497.
14. All that is required to find that substitutable goods exist is that the goods are put to the same use. Thus issues such as price (re Lego Australia Pty Ltd and Comptroller General of Customs and Anor (unreported AAT decision no.10591, 11 December 1995), quality (re Vulcan Australia Pty Ltd and Comptroller General of Customs [1994] AATA 150; (1994) 20 AAR 116) and superior operation (re Nordson Australia Pty Ltd and Chief Executive Officer of Customs and Anor (unreported AAT decision No.13036, 1 July 1998) are irrelevant.
15. The goods the subject of the TCO can be described as follows:
i). As to revoked TCO No. 0308934, they are standing rider operated battery powered forklift trucks (known as single or double pantograph reach trucks). During the Hearing they were collectively referred to as “Reach Trucks”. They are designed to operate at high travel speed and high lift speed to maximum heights of 5.359m and above. To operate a reach truck a certificate of competency is required.
ii). As to proposed TCO No. 0613256, the goods are seated rider operator powered steered counterbalanced forklift with an internal combustion engine powered by either petrol, LPG or diesel. They have a maximum load lift capacity of 1500kg at a 600mm load centre and although not specified, the maximum lift height would be in the vicinity of 5.7m. In evidence they were generally referred to as “Counterbalanced Trucks”.
16. The Party Joined claimed that it manufactured in Australia substitutable goods in the form of its “Walker Stacker” which is a pedestrian operated battery powered forklift. The maximum lift weight is up to 1800kg with a maximum lift height of 5.7 metres.
17. In addition to the evidence of use given by the witnesses in this matter, I was materially assisted by demonstrations of the use of the equipment which was arranged by the Applicant.

18. The Party Joined had some criticism of the these demonstrations, for example the samples of Walker Stacker used were obsolete models, however overall the demonstrations accomplished their purpose in instilling an appreciation of the types of use to which the various equipments are put.

19. I agree with the submissions by the Party Joined that the uses of all 3 pieces of equipment are essentially the same, namely they are all used to lift goods (usually but not always palletised) from a stationary position (such as a truck or loading dock) to move those goods to another location (often at some height, such as in racking in a warehouse) to place them there and then to retrieve them as required.

20. As put by the Party Joined in submissions, the various pieces of machinery subject to these proceedings can all be properly described as material handling equipment.
20. That is not to say, however, that they all perform the same function. Indeed this matter was in essence a debate regarding the substitutability of various equipment for various tasks.
21. Mr. Palmer is the Product Safety Standards and Engineering Manager of the Applicant company. In addition he is a member of or chairs various industry associations. His evidence can be summed up by stating that he maintains that the 3 equipments under review all have different applications namely:
a) A reach truck is typically used in medium to high intensity warehouses and distribution centres.
b) A counterbalanced truck is typically used in outdoor operations covering longer distances and uneven terrain and ramps.
c) A walker stacker is typically used in small areas of low intensity.

22. Cross examined Mr. Palmer conceded that he had seen counterbalanced trucks used when walker stackers could have been used and vice versa.
23. This concession by Mr. Palmer is confirmed by the DVD introduced into evidence through the Party Joined witness Mr. Mihaljevic. However, as pointed out by Mr. Palmer in re examination, this is often a matter of cost and the purchase of second hand equipment.
24. I find that that the realities of the uses was indicated by Industrial Engineer and Designer Mr. Ballantyne in his evidence and in particular his diagram that became Exhibit A3. He pointed out that counterbalanced trucks are used to unload goods from a hardstanding in front of a warehouse and to transport them to be dropped at the entrance to or just inside the warehouse. If stacking is required, reach trucks are then used to carry out this task.
25. Central to Mr. Ballantyne’s evidence was the requirement for speed of operation. Thus high intensity warehouse activities would mandate the use of counterbalanced trucks and / or reach trucks in preference to walker stackers.
26. A comparison of relative speeds of operation illustrates that a walker stacker has a speed of 5.1 kph with a lift speed of 0.28 metres per second compared to 12 kph and 0.66 metres per second for the reach truck and 19.5 kph and lift speed of 0.66 metres per second for the counterbalanced truck. An illustration of the requirement for high speed operations was at the DHL warehouse during the demonstration referred to above.
27. Cross examined by the Party Joined Mr. Ballantyne did concede walker stackers had the capacity to stack to a height (he nominated 6 metres). He was further questioned on this point and the following exchange took place:
“Question: The walkie stackers could operate in an environment where, speed aside, I wont bring speed into it, that they could operate in an environment where the lift height requirements are only 6 metres or a bit less and where pallet weights are around about 5,6 or 7000kgs?
Answer: Yes they could. I mean theoretically they could, but they wouldn’t meet the efficiency requirements or the justification requirements.”

28. A further issue that arose in the evidence of both Mr. Palmer and Mr. Ballantyne was the suitability of an internal combustion counterbalanced truck for internal operations. As pointed out by Mr. Palmer and corroborated by Mr. Ballantyne internal combustion engines are not suitable for use inside buildings because of the risk of fumes to worker safety and the further risk of contamination of goods.

29. There are of course exceptions where warehouses etcetera are well ventilated. An example being Sydney Markets which consists of open sided sheds.
30. Mr. Walsh is the Director of Operations for the Party Joined. In evidence in chief he stated that the walker stacker range in general is designed for small business. The product that was designed meets a truck in the front of the building, removes that load and places it within the building. This is where the ability to place goods into racks comes in.
31. Another factor which influences the type of equipment purchased is the width of the aisles in the warehouse.
32. Cross examined, Mr. Walsh made the following points:
    1. In terms of use, height (of lift) is critical.
    2. In comparing corresponding uses a consideration was “does the equipment have its own particular use”, cf a high lift straddle container mover to a counterbalanced forklift.
    3. The use of electric motors as opposed to internal combustion motors really depends upon the application (of the equipment).
    4. Distance (to be traversed) is a consideration in some applications.
    5. Not only is speed over the ground relevant but so also is lift speed.
    6. Aisle width can limit the equipment use, for example, it can exclude forklifts.
33. Further cross examined, Mr. Walsh agreed that there is more to the use (of the equipment) then simply the unloading of trucks or containers and stacking them at various heights. His statement to that effect was focused at small business operations rather than at what he termed “the extreme end”, ie very high lift height and high intensity applications.
34. It was specifically put to Mr. Walsh that the walker stacker would be used in a small business application where low intensity work was required. Although conceding this was the case in the general broader application, he refused to concede as to specifics stating “ in the precise application by application I don’t”.
35. The other witness to give evidence on behalf of the Party Joined was Mr. Mihaljevic. There was nothing in the evidence of Mr. Mihaljevic that added or subtracted to the other evidence before me.
36. Exhibit A5 is a comparison of the uses for the 3 types of equipment under consideration. From this document it can be deduced that walker stackers are suitable for use in the following circumstances namely:
    1. Low intensity operations
    2. A low lift height is required
    3. Short travel distances
    4. Indoors or predominantly indoors and not outdoors in wet weather
    5. Traverses flat and level surfaces
37. Other material regarding walker stackers is that they are preferable in confined areas, they are designed to travel short distances and to operate in areas with limited space (cf Crown’s WR Series Operator and Maintenance Manual at page 7). Further the walker stacker is popular in small business operations. These forklifts are however, limited in lift capacity and lift height, see Appendix: Logistic Equipment in Australia in A Guidebook of Industrial Traffic Management and Forklift Safety, Larrson et al; Accident Research Centre, Monash University Victoria 2003 at page 49.
38. The Applicant in Exhibit A5 submitted that reach trucks have the following uses namely:
    1. In high intensity operations
    2. Lift heights typically at least 5300mm and beyond up to 11.3 metres
    3. Indoors
    4. Traversing flat or level surfaces
39. Other material on reach trucks before me stated that they are much more limited in the types of operating surface they can be used upon and retained capacities at heights of 10 metres and beyond which were quite staggering ( see again the Appendix in A Guidebook of Industrial Traffic Management and Forklift Safety at page 48, which document is annexed to the statement of Mr. Palmer; Exhibit A2)
40. In Exhibit A5 it is submitted that the uses of a counterbalance forklift predominantly are:
    1. In high intensity operations
    2. Outdoors (although I note indoor use is appropriate if good flow through ventilation is available)
    3. Traversing uneven terrain
    4. To a lift height of up to 7 metres.
41. Exhibit PJ5 is a graph which shows the rack height compared to uplift weight of the Crown walker stacker model WR3040 to the Toyota Raymond 35TT reach truck. It demonstrates that theoretically there is an area of overlap in the uses of the 2 pieces of equipment, so far as weight and lift height are concerned.
42. As pointed out in Seguin Moreau Australia supra at p 413, the issue for the Tribunal in that matter was more than deciding between containers for wine but that the Tribunal was correct in identifying a specific use, in that case the use of French oak as opposed to American oak for wine barrels.
43. I am satisfied that the limitations of walker stackers, particularly as to speed of operations and lift height, as opposed to reach trucks is significant enough to enable me to say that they do not have a corresponding use such as to find that the Australian made goods are substitutable.
44. Different considerations apply with regard to the walker stackers and the counterbalanced forklifts. There are uses, specifically indoor materials handling and operating on loading docks to either unload and then stack goods or to load goods where walker stackers and counterbalanced forklifts are put to the same use.
45. I regard outdoor operations as different and I find that over distances and uneven terrain walker stackers would not be used, but the TCO goods would be if equipped with pneumatic tyres. However, the proposed TCO did not go into this detail.
46. The Decision in Matter No. 2007/0086 is Set Aside and is remitted to the Respondent with the Direction that Tariff Concession No. 0308934 is to be reinstated as from the date of revocation.
47. The Decision in Matter No.2007/3197 with respect to proposed Tariff Concession No. 0613256 is affirmed, but with liberty to apply.
    

I certify that the 47 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member M D Allen

Signed: ........[sgd]........................................................................

M. Corcoran

Associate

Date/s of Hearing 10, 12, 13 ,14 November and 3 December 2008

Date of Decision 12 December 2008

Solicitor for the Applicant Mr. O. Shtein, Bartier Perry

Solicitor for the Respondent Mr. G. Komora, Australian Government Solicitor

Solicitor for the Party Joined Mr. J. Scarcella, Crown Equipment Pty Ltd
Agent for the Party Joined Mr. M Watson, Michael J.M Watson and Co