JUDGMENT No. 20% SE. CATCHWORDS CUSTOMS AND EXCISE - customs tariff - programmable controllers - construction of Schedule 3 - use of term in various industries - whether trade meaning established - use of extrinsic material to ascertain ordinary meaning - appropriate relief in Federal Court. HR_ Products Pty Ltd v Collector of Customs (1990) 20 A.L.D.Austra Ltd v Collector of Customs (Full Court, 14 May 1992, unreported) v Comptroller-General of Customs (1991) 32 F.C.R. 112 Agfa-Gevaert Ltd v Collector of Customs (Full Court, 16 September 1994, unreported) Ei TY Dp! MITED v COLLECTOR OF CUSTOMS No. NG962 of 1993 20 SEP 1994 BEFORE: GUMMOW J. FEDERAL COURT OF PLACE: SYDNEY. AUSTRALIA DATE: 20 SEPTEMBER 1994. IN THE FEDERAL COURT OF AUSTRALIA ) NEW SOUTH WALES DISTRICT REGISTRY ) No. NG962 of 1993 GENERAL DIVISION ) On appeal from the General Administrative Division of the Administrative Appeals Tribunal constituted by Messrs M.D. Allen (Senior Member), D.D. Coffey and I.R. Way. BETWEEN: RITY PRODUCT Applicant AND: COLLECTOR OF CUSTOMS Respondent BEFORE: GUMMOW J. PLACE: SYDNEY. DATE: 20 SEPTEMBER 1994. MINUTE OF ORDERS THE COURT ORDERS THAT: (1) The decision of the Administrative Appeals Tribunal dated 8 November 1993 be set aside. (2) The matter be remitted to the Administrative Appeals Tribunal to be heard and determined according to law and conformably with the reasons for judgment of this Court. (3) The respondent pay the costs of the applicant. Note: Settlement and entry of Orders is dealt with by Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA ) NEW SOUTH WALES DISTRICT REGISTRY ) No. NG962 of 1993 GENERAL DIVISION ) On appeal from the General Administrative Division of the Administrative Appeals Tribunal constituted by Messrs M.D. Allen (Senior Member), D.D. Coffey and I.R. Way. BETWEEN: NESS SECURITY PRODUCTS PTY LIMITED Applicant AND: iT F T Respondent BEFORE: GUMMOW J. PLACE: SYDNEY. DATE: 20 SEPTEMBER 1994. REASONS FOR JUDGMENT This is an appeal within the original jurisdiction of the Court, brought on a question of law pursuant to s. 44 of the Administrative Appeals Tribunal Act 1975 ("the AAT Act"). The Administrative Appeals Tribunal ("the AAT") affirmed on 8 November 1993 the decision under review. Broadly, the matter turns upon the true construction of the words "programmable controllers" as they appear in heading 8538 in Schedule 3 to the Customs Tariff Act 1987. 2. If the Court sets aside the decision of the AAT, the parties are not agreed as to what then would be the correct Classification of the goods in question. This is because that classification would depend upon the determination of further factual issues. In those circumstances, the parties accept that the appropriate course would be for the matter to be remitted to the AAT. The applicant ("Ness") is a related company of Westinghouse Brake & Signal Corporation. Ness receives bounty payable under the Bounty (Computers) Act 1984. Ness sells a range of security equipment identified as the "5000 Series". The goods the subject of the present dispute form part of the equipment for the 8 Zone Control Panel. The whole unit is described by Ness as a "control communicator" for use in domestic and light industrial security systems. It has "outputs" which may be connected to sirens, strobe lights and the like. The "outputs" are activated by "inputs" from the 8 zones. The equipment comprises elements with which the present dispute is not concerned, namely the battery, battery charger and other miscellaneous parts. In its publicity material, Ness describes the zones as "fully programmable". As a noun, "program" is defined in the second edition of the Macquarie Dictionary as: 3. "[A] sequence of instructions in a computer language which will cause a computer to perform a desired operation or series of operations." and as a verb: "[TJo organise and arrange (data etc.) relevant to a problem so that it can be solved by a computer." The subject goods were imported in two shipments. Shipment 1, from Carlee Electronics Pte Ltd, Singapore, comprised loaded printed circuit boards (PCB's) dedicated to specific tasks and designed for mounting in control boxes for alarm systems. The goods imported in shipment 2, from Wise Industrial Co. Limited, Hong Kong, were plastic housings designed to house equipment forming part of the control system. Goods in this shipment described as "plastic control box top lid" house the PCB's imported in shipment 1. Ness claimed that the goods were correctly classified to sub- heading 8538.10.10 which has a rate of duty of Free. However, they were entered as classified to 8538.90.90 (Shipment 1) and 8538.10.90 (Shipment 2) thereby in each case attracting a rate of duty of 16%. This was on the footing that goods of Singapore and Hong Kong origin are eligible for Developing Country preferential rates of duty. Both shipments were entered in June 1990. Duty was paid under protest pursuant to 8s. 167 of the Customs Act 1901. On 28 June 1990, Ness applied to the AAT for review of the decision of the Collector of Customs, and on 17 September 1990, Mr P.T. Rowley, Chief Inspector Tariff, Australian 4. Customs Service, New South Wales, furnished, pursuant to s. 37 of the AAT Act, a clearly expressed statement of findings on material questions of fact and reasons for decision. Appendix 1 to that document sets out in convenient form the relevant provisions of Schedule 3 as they stood at the critical time. That appendix is produced as a Schedule to these reasons. The nature of the dispute appears from paras. 11-15 of the 8. 37 statement. These read as follows: "11. Having recourse to Note 2 of Section XVI, it is agreed between the applicant's representative and the [Australian Customs Service ('ACS')] that the subject goods are dedicated parts for incorporation into goods which, if imported would fall to be classified within 8537. It is further agreed that the subject goods fall to be classified within 8538. 12. What is in dispute is the subheading within 8538 that the subject fall to be classified. It is the contention of the applicant's representative that all the goods the subject of this dispute are classified to 8538.10.10 as parts for programmable controllers. The ACS is of the opinion that the goods imported in Shipment 1 are classified to 8538.90.90 as parts for controllers and the goods imported in Shipment 2 are classified to 8538.10.90 as parts for control panels. 13. To be classified to 8538.10.10 the subject goods must be identified as parts for programmable controllers. IDM provided by the applicant or its representative indicates that the subject goods are parts for a '5000 Series' control panel. If the '5000 Series' control panel can be identified as a programmable controller falling to 8538.10.10 then the subject goods, being dedicated parts for that control panel also fall to be classified to 8538.10.10. 14. To be identified as programmable controllers goods need not only to be programmed but also must be able to be re-programmed by the end 5. user. A programmable controller has, in addition to a set of residual operating instructions inserted by the manufacturer of the goods which cannot be changed, a 'user program' which can be varied or changed. [he ability for an end-user to change the user program (logic) is an essential feature of a ab rocess Ww = r 8 t into a mach t enable it to operate in a particular mode is ¢ ' nt ' programming control. 15. The '''5000 Series' control panel has_ the essential characteristics of a programmable controller. However, on the evidence Vv ogic i t control CG} & ot ide ro ab. soi xib a cludes thi , ' ontr bein ide ro ab lier a sub: t [Emphasis supplied] Before the AAT, the leading technical witness for Ness was Dr Robert Radzyner. In cross-examination, paras. 14 and 15 of the s. 37 statement were put to him. As to para. 14, he agreed that susceptibility to re-programming by the end user was a criterion for classification of goods as a programmable controller. The witness said: "The ability for an end user to change the user program logic is an essential feature of a programmable controller, I'm happy to accept that." However, Dr Radzyner disagreed with the conclusion in para. 15 that on the evidence available the logic in the control panel was dedicated and this lack of flexibility precluded 6. identification of the panel as a programmable controller. In a written report, Dr Radzyner had said: "Normally, there are several levels of programmed operation in programmable processors, in particular: . code pertaining to the intrinsic operation of the processor (e.g., operating system, microinstructions ) . code for the execution of basic routines that are common to a wide range of operations for the specific field of application (e.g., cutting circular arcs in digitally/numerically controlled machine tools, generating relay ladder operations in PLC's, setting up condition and timing operators in security control units) . code for the execution of user programmed tasks. The last mentioned of these sets of code resides in reprogrammable memory, accessible to the operator for the storage of user/task program code. In contrast, the first two categories of code normally reside in permanent non-volatile memory, i.e. ROM, @.g. mask programmed ROM, set up as part of the microcomputer or memory circuit manufacturing process. It is conventional in a programmable controller to provide these three levels of program code. Moreover, application specific devices would tend in the current state of the art to constitute the rule rather than the exception. The middle level of code in the device constitutes a set of subroutines that simplify the user programming tasks. User programming may be carried out by a variety of means, such as hand-held keypads or keyboard terminals, personal computers, bar- code operated devices, and so on. Nowadays, in most moderately sophisticated systems, a programming 'shell' is provided to insulate the user from the tedium of the machine 'coding' process. For example, the user programming interface may be graphical, based on 'object- 7. oriented' manipulations, with 'icons', within the so-called 'windows' environment, operated with a 'mouse'. Once the programming has been completed, the code is 'down-loaded' to the controller." In his application of this reasoning and classification system to the Ness Equipment, Dr Radzyner reached a result which differed from that expressed in para. 15 of the s. 37 statement. He expounded upon that difference in his oral evidence. For example, he said: "Going on to para. 15, Mr Rowley states that the 5000 series control panel has the essential characteristics of a programmable controller, however, on the evidence available the logic in the control panel is dedicated and cannot be considered to be programmable and this is where I am at difference with Mr Rowley, I believe he has made ane error. He simply doesn't understand that the Ness 5000 machines have alterable logic. The logic as I gave numerous examples earlier on . . ., the logic is definitely alterable by the user by the installer maintenance personnel. Therefore his interpretation that it is capable only of receiving data is an error. . ." Evidence was called by the Collector from a number of witnesses who, in essence, agreed with the "three level" classification of Dr Radzyner. However, there was a conflict as to the applicability of the third level to the equipment in question. For example, there is the following passage in the cross-examination of Mr Stephen Parker: "Well, the evidence was that there is a part of the memory which is programmed by the installer and there is another part of the EE Prom in which the end user inserts instructions with the object of getting the system to perform a particular response function in relation to a particular input? - Yes. Now, if your proposition is correct, and this is the question that I am putting to you, why would it be necessary to have within the system a part of the memory that is programmed by the installer? - Well, yes, I agree with the point that the installer would have a better technical understanding than the end-user would. But in either case I would not call any of those programming. The installer would set the zones and the time delays and the things like that. All the end user does, the final level of programming as you call it, is deciding whether we are going to ring another. If they are going out to a restaurant, well, ring the restaurant in case the burglar alarm goes off, or visit relatives or whatever. You can set the unit to then ring the particular number you want to or perhaps to disarm and arm it, things like that. I do not see how that could be called programming." Nevertheless, the AAT, in its reasons, accepted the evidence of Dr Radzyner, as it was open for it to do. It set out an extract from the passage from his report which I have reproduced above. It concluded that in view of the evidence placed before it, there were these three levels of programming, and that the Ness 5000 unit had_ the characteristic of only being able to be programmed in the third code or level. It will be recalled that Dr Radzyner had agreed with the proposition in para. 14 of the s. 37 statement that in order to be identified as a programmable controller equipment need not only be programmed but also must be susceptible of re- 9. programming by the end user, the ability for the end user to change the user programme being an essential feature of a programmable controller. In para. 15, it had been said that on the evidence available, the logic was dedicated and thus could not be considered to be programmable. The consequence of accepting Dr Radzyner's evidence was that, as a matter of fact, the objection in para. 15 no longer held good. At first blush, one would expect this to have led to the setting aside of the decision under review. However, the AAT reached the opposite result. That was the outcome of a combination of factors. It was held that whilst the Ness 5000 equipment had the third level of programming, the term "programmable controller" in headings 8537 and 8538 "is intended to encompass controllers with two levels of programming or more". That was said to be so because to those in the "process control industry" the term "programmable controller" had a specific meaning. This was said to be one which did not treat the equipment remaining as "programmable" unless, even after installation, it was re- programmable not only at the third level but at the second level. The AAT stated: "[A]s understood by those in the process control industry 'programmable' controllers' have specific meaning. To those in that industry the controller in the Ness 5000 was once a programmable controller but when installed in the unit it is not. It has been pre-programmed and cannot now perform the second level of programming as defined by Dr Radzyner without major surgery for which it was not intended. We conclude this from _ the 10. evidence of nearly all the Respondent's witnesses." In his report Dr Radzyner had described the expression "programmable controller" as a generic term and referred to different meanings given it in different industries. He said: "The term 'programmable controller' is a generic term used to describe a wide variety of control apparatus used in a number of different industries. Within the machine tool industry, for example, the term is used to describe goods more accurately referred to as 'numerical controllers', 'computer-numeric controllers', ''CNCs' or 'computer controllers'. Within the process control industry, the term is used to describe apparatus more accurately referred to as 'programmable logic controllers'. In the electronic security industry, a programmable controller is usually referred to as a 'control communicator'. In every case, the apparatus referred to as a 'programmable controller' is a control device designed and manufactured for the performance of a specific function or range of specific functions within the industry in which it is used. Programability implies that @ user/human operator can alter the automatic sequence of operations to generate different sets of actions or responses or outcomes in the equipment under its control, according to a particular set of requirements." The Tribunal found that in "the electronica security industry" the term "programmable controller", "is not commonly used". It found that it was used in the "process control industry". It then clarified the meaning of the term in the process control industry by reference to the classification in terme of levels of programming put forward by Dr Radzyner. In the process control industry, a device complying with the 11. description "programmable controller" required two levels of programming, whereas, as the Tribunal found, only the third level was available with the Ness 5000. Whether the term "programmable controller" as used in Schedule 3 had a special commercial or trade usage rather than its ordinary natural sense was a question of law. Whether there was such a special usage was a fact to be proved by evidence. However, if the expression is not uniformly understood at the date of the enactment of the provision in a specialised sense in the relevant trade, then, as a matter of law, the special meaning has not been established. It follows that the expression can only bear its ordinary meaning. The point was made by Lee J. in HR Products Pty Ltd v Collector of Customs (1990) 20 A.L.D. 340 at 341-342, 353-355, and is further considered in the judgments in Agfa-Gevaert Ltd v Collector of Customs (Full Court, 16 September 1994, unreported). The relevant items in the Schedule are drawn in such a way as to encompass goods for use in a number of different industries. Hence the force of the term "generic expression" by Dr Radzyner. What was at stake before the AAT was the construction of the expression "programmable controller" as used in legislation having an operation beyond that which was the immediate concern of Ness, as regards its Ness 5000 Series. It was, in my view, an error of law on the part of the AAT to determine the matter on the footing that the 12. expression bore a particular meaning in what it identified as "the process control industry". Implicit in the findings of the AAT is that outside this particular industry there was no such particular meaning in common use. Dr Radzyner's view, as set out above, was that the term was a generic one and was employed in different senses to describe a wide variety of control apparatus used in a number of different industries. There was thus no "relevant trade" in the necessarily broad sense in which the AAT found any uniform understanding of the meaning of "programmable controller". There being no proper finding as to a special or trade usage, the task of the Tribunal was to determine whether on any ordinary meaning available upon the material before it the Ness equipment answered the statutory description. The question then becomes, on an "appeal" to this Court under s. 44 of the AAT Act, whether, on the material before the Tribunal, only one answer to that question is possible. If only one such answer were possible, then it would be unnecessary to remit the matter to the AAT to resolve the issue. Is this is a case in which only one decision in law is open on the facts which have been found, or on facts which are not in dispute? That is how the matter was put by the Full Court, in a comparable situation: Australian Trade Commission v Richard Shrapnel Consulting Services Pty Ltd (1988) 22 P.C.R. 145 at 148. 13. In order to answer that question, it is necessary first to construe the relevant expression as it appears in the Schedule. In that regard, the Tribunal had regard to the following statement in the Brussels Explanatory Notes: "Programmable Controllers {are] digital apparatus using a programmable memory for the storage of instructions for implementing specific functions such as logic, sequencing, timing, counting and arithmetic, to control, through digital or analogue' input/output modules, various types of machines." Counsel for the Collector submitted that in law it had not been open to the AAT to have had regard to this extrinsic material. But counsel properly referred me to Toyota Tsusho Australia Pty Ltd v The Collector of Customs (Full Court, 14 May 1992, unreported). This strongly supports the view that it was open for the Tribunal to take the course it did. This is a different case from that with which the Pull Court was concerned in Barry R. Liggins pty Ltd v Comptroller-General of Customs (1991) 32 F.C.R. 112 at 118-120. There what was at issue was the meaning of the simple terms "barbed wire" and "twisted hoop". The AAT also set out what it regarded as definitions to similar effect in a technical encyclopaedia and by the National Electrical Manufacturers Association. The AAT found that given what it described as the broadness of such a definition, and based on definitions 14. alone, the Ness 5000 was a programmable controller (paras. 21, 22). It concluded that the witnesses called by the Collector generally appeared to agree. These were findings of fact which were open to it. The AAT fell into error in going on to hold that because the Ness 5000 performs the functions of a programmable controller in a more restricted form than that accepted in the process control industry, the case sought to be made out by Ness must fail. The effect of the decision of the AAT was to affirm the ruling that the printed circuit board assemblies and plastic covers were dutiable by virtue of classification within sub- headings 8538.90.90 and 8538.10.90 respectively. The decision of the AAT should be set aside. However, in order for Ness to make good its case for free entry, it would have to bring the goods within 8538.10.10. To do so requires not only a favourable conclusion as to the meaning of the phrase "programmable controllers". As I have indicated above, Ness already has that finding by the AAT. However, sub-heading 8538.10 embraces "boards, panels, consoles, desks, cabinets and other bases for the goods of 8537, not equipped with their apparatus .. .". Counsel for the Collector pointed out that it will be necessary for Ness to demonstrate that in addition to being for programmable controllers, the goods had these characteristics. There is no finding to that effect. Hence the agreement between counsel to which I referred earlier in these reasons, namely that if the decision of the 15. AAT is to be set aside, the matter must be remitted to it for determination of the correct classification of the goods according to law. The respondent must pay the costs of the applicant. It will be for the President of the AAT to determine whether, in the light of these reasons, it is more appropriate that the hearing by the AAT on the remitter be by a differently constituted body. I certify that this and the preceding fourteen (14) pages are a true copy of the reasons for judgment of the Honourable Mr Justice Gummow. Associate: Ca Date: 20 September 1994. Counsel and solicitors for the applicant: Mr V.R.W. Gray instructed by Barwick Dechnicz & Boitano. Counsel and solicitors for the respondent: Mr J.S. Hilton §.C. instructed by the Australian Government Solicitor. Date of hearing: 25 August 1994, Date of judgment: 20 September 1994. THE SCHEDULE 1. At the dates of entry for home consumption of the subject goods subheading 8538.10.10 was applicable to: "8358 PARTS SUITABLE FOR USE SOLELY OR PRINCIPALLY WITH THE APPARATUS OF 8535, 8536 OR 8537: 8538.10 + Boarda, panels, consoles, desks, cabinets and other bases for the goods of 8537, not equipped with their apparatus: 8538.10.10 ~ - - For programmable controllers" and a rate of duty of Free was prescribed therein. 2. At the dates of entry for home consumption of the subject goods subheading 8538.10.90 was applicable to: . "8358 PARTS SUITABLE FOR USE SOLELY OR PRINCIPALLY WITH THE APPARATUS OF 8535, 8536 OR 8537: 8538.10 ~ Boards, panels, consoles, desks, cabinets and other bases for the geods of 8537, not equipped with their apparatus: woceee caceee 8538.10.90 - = - Other" and a rate of duty of 16% was prescribed therein for goods of Singapore and Hong Kong origin eligible for Developing Country preferential rates of duty. 3. At the dates of entry for home consumption of the subject goods subheading 8538.90.90 was applicable to: "8538 - PARTS SUITABLE FOR USE SOLELY OR PRINCIPALLY WITH THE APPARATUS OF 8535, 8536 OR 8537: 8538.90 ~ Other: 8538.90.90 - - - Other" and a rate of duty of 16% was prescribed therein for goods of Singapore and Hong Kong origin eligible for Developing Country preferential rates of duty. 4. At the dates of entry for home consumption of the subject goods 8535 read: . "8535 ELECTRICAL APPARATUS FOR SWITCHING OR PROTECTING ELECTRICAL CIRCUITS, OR FOR MAKING CONNECTIONS TO OR IN ELECTRICAL CIRCUITS (FOR EXAMPLE, SWITCHES, FUSES, LIGHTNING ARRESTERS, VOLTAGE LIMITERS, SURGE SUPPRESSORS, PLUGS, JUNCTION BOXES), FOR A VOLTAGE EXCEEDING 1 000 VOLTS: ° Ss. At the dates of entry for home consumption of the subject goods 6536 read: "8536 ELECTRICAL APPARATUS FOR SWITCHING OR PROTECTING ELECTRICAL CIRCUITS, OR FOR MAKING CONNECTIONS TO OR IN ELECTRICAL CIRCUITS (FOR EXAMPLE, SWITCHES, FUSES, LIGHTNING ARRESTERS, VOLTAGE LIMITERS, SURGE SUPPRESSORS, PLUGS, JUNCTION BOXES), FOR A VOLTAGE NOT EXCEEDING 1 000 VOLTS:" 6. At the dates of entry for home consumption of the subject goods 8537 read: "8537 BOARDS, PANELS (INCLUDING NUMERICAL CONTROL PANELS), CONSOLES, DESKS, TWO OR MORE APPARATUSOF 8535 OR 8536, FOR ELECTRICAL CONTROL OR THE DISTRIBUTION OF ELECTRICITY, INCLUDING THOSE INCORPORATING INSTRUMENTS OR APPARATUS OF CHAPTER 90, OTHER THAN SWITCHING APPARATUS OF 8517:"° 7. At the dates of entry for home consumption of the subject goods Note 2 to Section XVI read: "2.- Subject to Note 1 to this Section, Note 1 to Chapter 84 and to Note 1 to Chapter 85, parts of machines (not being parts of the articles of 0484, 8544, 8545,8546 or 8547) are to be classified according to the following rules: (a) Parts which are goods included in any of the headings of Chapters 84 or 85 (other than 8485 and 6548.00.00 are in all cases to be classified in their respective headings; {b) Other parte, if suitable for use solely or principally with a particular kind of . ¢ or with a nusber of machines of the ewame heading (including a machine of 8479 or 8543) are to be classified with the machines of that kind. However, parts which are equally suitable for use principally with the of 8517 and 6525 to 8528 are to be classified in 8517; (c} All other parts are to be classified in #485 or 85486.00.00.°. .