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DEFINITION OF "MANUFACTURER" FOR TARIFF CONCESSION PURPOSES

The Tariff Concession system under the Customs Act provides that where no substitutable goods are produced in Australia in the ordinary course of business an importer is entitled to obtain a Tariff Concession Order. This allows for duty free entry.

For goods to be regarded as having been manufactured in Australia there needs to be at least one substantial process in the manufacture of the goods that is carried out in Australia. Section 269D provides various definitions in respect of this issue. The case of Kenso Marketing and CEO of Customs and Nufarm 99 ALD 680 considered the issue of whether certain operations undertaken by the local manufacturer, Nufarm, was to be considered a manufacturer or whether it fell within the exclusion of “operations to mixing goods where the resulting product does not have different properties from those of the goods that have been mixed”.

The evidence showed that the relevant herbicide manufactured by Nufarm was manufactured in a two stage process. It was only when the initial product, Glyphosate Acid was mixed with other products that the product became usable as a herbicide. The Tribunal held that the final product, ie, the herbicide was quite a different product from that of the original Glyphosate Acid. It held that the process undertaken by Nufarm was therefore one of “manufacture” within the meaning of Section 269D of the Customs Act.

In so deciding the Tribunal held that whether a process is a substantial manufacturing process is not to be determined having regards solely to consideration of size, scale, sophistication and cost, although these are factors to which regard can properly be had. The question of whether a process is substantial depends on the significance or importance of its contribution of a product. In this case, the chemical conversion of a Glyphosate Acid, and its consequences of the production of the effective herbicide were sufficient to enable it to qualify as “substantial” in the manufacture of the relevant herbicide.

This issue has not been dealt with previously by the cases and accordingly is welcomed as providing some guidelines.

 

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