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Broad brush approach on substitutability for Tariff Concessions

Approach on substitutability for Tariff Concessions

Leonie Ferretter and Daniel Rae discuss an AAT decision which serves as a reminder that the making of a tariff concession order is not a given.

Leonie Ferretter

Partner, Regional ASPAC Leader – Trade & Customs

KPMG Australia


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Freight train at dusk

The Administrative Appeals Tribunal (AAT) affirmed, in a decision given on 17 June, the denial of a tariff concession order (TCO) for an importer of driverless passenger trains, ruling that substitutable goods, in the form of driven passenger trains are produced in Australia.

Substitutable goods are defined in section 269B of the Customs Act 1901 (Cth) (Customs Act) as:

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.

In Alstom Transport Australia Pty Ltd and Comptroller-General of Customs [2019] AATA 1308, the importer argued that the driverless trains operate on a specialised rail network developed exclusively for driverless trains, and cannot be used on a driven passenger train rail network, therefore the driven and driverless trains are not capable of being put to the same use.

AAT decision

However, the AAT found that the correspondence of one of a number of uses, rather than the precise use, is sufficient when establishing substitutability, and that “as a vehicle for the transportation of persons by rail,” the use of the driven passenger trains correspond to that of driverless passenger trains.

Importers are reminded that whether imported goods, intended to be covered by a TCO, and locally manufactured goods compete in any market is irrelevant when determining substitutability for TCO purposes.

In the event the AAT’s interpretation goes unchallenged, or is upheld on appeal, importers applying for TCOs are advised to take a wide view of substitutability when conducting research on local production.

The decision serves as a reminder that the making of a TCO is not a given, particularly when local manufacturers object on the basis they produce substitutable goods in Australia.

The decision also presents local manufacturers with greater scope to object to the making of TCOs, applying for the revocation of existing TCOs where they produce goods that are capable of being put to a broad corresponding use.

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