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Import News: Customs Court Cases

Import News from the Importers Institute
19 August 2002 - Customs Court Cases

The High Court in Auckland and Wellington recently ruled on two cases of valuation and tariff classification of interest to importers.

Nike NZ Ltd, High Court, Auckland, Williams J, 27 May 2002. Valuation, buying commission, royalties.

Nike NZ orders goods from Nike Inc, which selects a manufacturer and employs a third company, Nissho Iwai, to arrange finance and export documentation. Nike NZ pays a royalty to Nike Inc as well as a buying agents' commission of 7%, and a fee (of .75% or 1%) to Nissho Iwai. Customs ruled that all three payments were part of the Customs value of the goods and were subject to import duty. Judge Barber, sitting as the Customs Appeal Authority agreed with Customs. The importer appealed to the High Court.

Williams J in the High Court found that the royalty was dutiable, but the other two commissions were not. Customs argued that Nike Inc should not be regarded as an agent of Nike NZ, since the New Zealand importer is subordinate to Nike Inc, its parent company. This view is consistent with accepted wisdom in the trade (see but was rejected by the Court: "Whilst control of, or independence of, one party by another is regarded as a criterion by which these matters are judged, in this Court's view a distinction should be kept in mind between the roles of buyer, agent and financier regulated by contracts on the one hand and the roles of shareholder and financier which are regulated by different legal concepts on the other."

Customs is likely to appeal this judgement to the Court of Appeal. We will keep Importers Institute members informed.

* * *

Prairie AG Import Ltd, High Court, Wellington, Ronald Young J, 24 May 2002. Tariff classification.

Prairie AG classified grain augers as "grain storage bins and silos, including grain handling equipment" in heading 84.36. Customs classified the same goods as "other lifting, handling, loading and un-loading machinery" in heading 84.28. The importer appealed to the Customs Appeal Authority (CAA). The CAA agreed with the importer and reversed the Customs classification. Customs then appealed to the High Court. Judge Ronald Young agreed with Customs and reversed the CAA's decision.

The main issue here was similar to that of the Court of Appeal Rakaia case ( The Court found that the CAA had compared a four digit heading (loading/unloading machinery) with a ten digit statistical heading (grain handling equipment). This is a cardinal sin of tariff classification, known as "reading down the page" and is not a valid way of identifying goods for tariff classification purposes.


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