[2015] AATA 140
Division
GENERAL ADMINISTRATIVE DIVISION
File Number
2013/6657 and 2014/0317
Re
BASF Australia Ltd
APPLICANT
And
Chief Executive Officer of Customs
RESPONDENT
File Number
2014/0316
Re
Cognis Australia Pty Ltd
APPLICANT
And
Chief Executive Officer of Customs
RESPONDENT
DECISION
Tribunal
Deputy President S A Forgie
Date
12 March 2015
© Commonwealth of Australia 2015
Place
Melbourne
The Tribunal decides to:
affirm the reviewable decision of the respondent dated 15 November 2013 affirming
a decision dated 28 June 2013 which determined that the goods in question are
classified under subheading 2106.90.90 of Schedule 3 to the Customs Tariff Act
1995.
…[sgd] S A Forgie….
Deputy President
CATCHWORDS
CUSTOMS – tariff classification – Vegapure 95, Vegapure 95E, Vegapure 95FF – subject
goods – plant sterols - plant esters – whether vegetable oil or fraction of vegetable oil –
whether food – whether medicaments – whether put up in packings for retail sale – whether
mixtures of chemicals with foodstuffs or with other substances of nutritive value - decision
under review affirmed.
LEGISLATION
Acts Interpretation Act 1901; sections 15AA, 15AB
Customs Act 1901; sections 132, 132AA and Item 1, 167
Customs Tariff Act 1982
Customs Tariff Act 1995; Schedules 2, 3; Chapter 5; sections 3, 6, 7, 9, 10, 15, 16
Food Act 1984 (Vic); section 3
Food Standards Australia and New Zealand Act 1991; section 3
Imported Food Act 1992
Therapeutic Goods Act 1989
Therapeutic Goods Regulations 1990
Australia and New Zealand Food Standards Code; standard 2.4.1
CASES
Australian Gas Light Co v Valuer-General (1940) 40 AR (NSW) 126
Chief Executive Officer of Customs v Biocontrol Ltd [2006] FCA 107; (2006) 150 FCR 64;
89 ALR 551; 89 ALD 551
Chinese Food & Wine Supplies Pty Ltd v Collector of Customs (Vic) (1987) 72 ALR 591
Page 2 of 80
Collector of Customs v Agfa Gevaert Ltd [1996] HCA 36; (1996) 186 CLR 389; 141 ALR
59; 35 ATR 249; 43 ALD 193; 24 AAR 282; 71 ALJR 123
Collector of Customs v Bell Basic Industries [1988] FCA 371; (1988) 20 FCR 146; 83 ALR
251; 20 FLR 146; 9 AAR 382; 16 ALD 506
Collector of Customs v Chemark Services Pty Ltd [1993] FCA 291; (1993) 42 FCR 585; 114
ALR 531; 17 AAR 424
Collector of Customs v Savage River Mines (1988) 79 ALR 258
Damjanovic & Sons Pty Ltd v The Commonwealth [1968] HCA 42; (1968) 117 CLR 390
Gardner Smith v Collector of Customs Victoria (1986) 66 ALR 377
Liebert Corporation Australia Pty Ltd v Collector of Customs (1996) 23 AAR 287
Maunsell v Olins [1975] AC 373
McNamara v Consumer Trader and Tenancy Tribunal [2005] HCA 55; (2005) 221 CLR
646; 221 ALR 285; 79 ALJR 1789
Pepsi Seven-Up Bottlers v Commissioner of Taxation [1995] FCA 1655; (1995) 62 FCR
289; 132 ALR 632; 31 ATR 445
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR
355; 72 ALJR 841; 153 ALR 490
Re Bayer Australia Ltd and Collector of Customs (NSW) [1985] AATA 21; (1985) 7 ALN
N84
Re Forever Living Products Australia Pty Ltd and Collector of Customs (1986) 9 ALD 271
Re Sumitomo Australia Ltd and Collector of Customs [1991] AATA 323
Re Tridon Pty Ltd and Collector of Customs [1982] AATA 119; (1982) 4 ALD 615
Re Trustee for the Kurowski Family Trust and Chief Executive Officer of Customs [2010]
AATA 974; (2010) 118 ALD 688
Times Consultants Pty Ltd v Collector of Customs (QLD) (1987) 16 FCR 449; 76 ALR 313
Vernon-Carus Australia Pty Ltd v Collector of Customs [1995] FCA 1283; (1995) 21 AAR
450
OTHER MATERIALS
Academic Press Dictionary of Science and Technology; edited by Christopher Morris; 1991;
Academic Press Inc; San Diego
Bailey’s Industrial Oil and Fat Products 4th edition, (ed. D Swern), John Wiley & Sons,
New York, USA, 1979, vol 1
Bailey’s Industrial Oil and Fat Products Volume 5, 6th edition, editor F. Shahidi, John
Wiley & Sons, New Jersey, USA, 2005
Chambers 21st Century Dictionary, 1999, reprinted 2004, Chambers
Collins English Dictionary – Complete and Unabridged 2012 Digital Edition; William
Collins & Sons Ltd
Encyclopedia Britannica, online
Macquarie Dictionary, revised 3rd edition, 2001, The Macquarie Library Pty Ltd
Phytosterols, phytostanols and their esters, Chemical and Technical Assessment, prepared
by Richard Cantrill PhD, reviewed by Yoko Kawamura Phd for the 69th JECFA
Oils and Fats Glossary prepared by the Federation of Oils, Seeds and Fats Association
Shorter Oxford Dictionary, 5th edition, 2002, Oxford University Press
Page 3 of 80
International Convention on the Harmonized Commodity Description and Coding System
REASONS FOR DECISION
1.
Cognis Australia Pty Ltd (Cognis) was part of the Cognis group of companies. It was a
leading manufacturer and supplier of specialty chemicals and nutritional and healthcare
ingredients. It pioneered the development and commercial application of plant sterol1
products used to reduce cholesterol absorption by humans and became a major supplier of
plant sterols and plant sterol esters2 to the food and dietary supplement industries
worldwide. Cognis imported a range of plant sterol products under the brands of
“Generolester” and “Vegapure”. The range included Vegapure 95, Vegapure 95E,
Vegapure 95FF and Generolester GM (the subject goods).
2.
Cognis’s work continued after its parent company was acquired by the parent company of
BASF Australia Pty Ltd (BASF) in December 2010. Before the end of 2011, the work
previously undertaken by Cognis was undertaken by BASF, which has now assumed the
role of being a major worldwide supplier of plant sterols and plant esters. BASF continues
to import and distribute Vegapure 95E and Vegapure 95FF products but has discontinued
the distribution of Generolester GM and Vegapure 95. Despite the discontinuance of two of
the products, the issues in this case continue to revolve around all four Products in relation
to which, until 2011, Cognis or, after that date, BASF, entered for home consumption and
paid duty under protest in the period 14 July 2009 to 20 June 2013.
1
In general terms, a “sterol” is a reference to “… any of a group of colourless waxy solid STEROID alcohols
that are found in plants, animals and fungi, eg cholesterol. …”. In biochemistry, a steroid is a reference to “…
any of a large group of fat-soluble organic compounds, such as sterols, some sex hormones, bile acids, etc that
have complex molecular structure (17 carbon atom, four-linked ring system), and which are important both
physiologically and pharmacologically. …”: Chambers 21st Century Dictionary, 1999, reprinted 2004,
Chambers (Chambers) “Phytosterols and phytostanols are a large group of compounds that are found
exclusively in plants. They are structurally related to cholesterol but differ from cholesterol in the structure of
the side chain. They consist of a steroid skeleton with a hydroxyl group attached to the C-3 atom of the A-ring
and an aliphatic side chain attached to the C-17 atom of the D-ring. Sterols have a double bond, typically
between C-5 and C-6 of the sterol moiety, whereas this bond is saturated in phytostanols …”: Phytosterols,
phytostanols and their esters, Chemical and Technical Assessment, prepared by Richard Cantrill PhD,
reviewed by Yoko Kawamura Phd for the 69th JECFA at 1; Exhibit 4; Annexure H
2
An “ester” is a reference to “The chemical reaction product of an alcohol and an acid.”: Oils and Fats
Glossary prepared by the Federation of Oils, Seeds and Fats Associations (FOSFA)
Page 4 of 80
3.
When entering the subject goods for products for home consumption, Cognis and BASF
classified the Products to heading 1516 of Chapter 15 of Schedule 3 of the Customs Tariff
Act 1995 (CT Act). That heading reads:
“ANIMAL OR VEGETABLE FATS AND OILS AND THEIR FRACTIONS, PARTLY
OR WHOLLY HYDROGENATED, INTER-ESTERIFIED, RE-ESTERIFIED OR
ELAIDINISED, WHETHER OR NOT REFINED, BUT NOT FURTHER
PREPARED”
On 18 December 2012, BASF’s customs brokers submitted an application to the Chief
Executive Officer of Customs (CEO) for a Tariff Advice for Vegapure 95FF and Vegapure
95E. On 28 June 2013, the CEO decided that the Products were correctly classified to
subheading 2106.90.90. He affirmed that decision on 15 November 2013. That subheading
reads:
“2106
FOOD PREPARATIONS NOT ELSEWHERE SPECIFIED OR
INCLUDED:
…
2106.90.90
4.
--- Other”
The issue in this case turns on the correct classification of the Products for their
classification determines the rate of duty that is payable. I have decided that the goods are
properly classified as food preparations under Heading 2106.90.90 and have affirmed the
CEO’s decision.
LEGISLATIVE FRAMEWORK
5.
Duties of customs are imposed by the CT Act on, among others, goods imported into
Australia on or after 1 July 1996.3 In the case of the subject goods under consideration, the
rate of that duty was the rate payable at the time of their entry and it had to be paid at that
time.4 The rate is worked out by reference to the general rate set out in the third column of
the tariff classification under which the subject goods are classified.5 Cognis or BASF duly
paid it but under protest under s 167 of the Customs Act 1901 (Customs Act) between
14 July 2009 and 20 June 2013.
3
CT Act; s 15(a)
Customs Act 1901; ss 132(1) and 132AA; Item 1
5
CT Act; s 16(1)(a)
4
Page 5 of 80
6.
The reference to the tariff classification under which particular goods are classified is a
reference to the heading or subheading under which the goods are classified.6 Headings are
set out in Schedule 3 to the CT Act.7 Those headings and sub-headings are grouped together
in various Chapters and Chapters are further grouped into Sections. Sections and Chapters
may begin with Notes and there may be Additional Notes. Once goods have been classified
by reference to a particular heading or subheading, the rate of duty is found in the third
column of that heading.8 The rate of duty might be specified as “Free” or as a percentage of
the value of the goods or of a specified, part, component or ingredient of those goods.9
7.
In prescribing tariff classifications, the CT Act gives effect to the International Convention
on the Harmonized Commodity Description and Coding System done at Brussels on 14 June
198310 (Harmonized System).11 It came into force in Australia on 1 January 1988.
8.
Schedule 2 of the CT Act sets out the General Rules for the Interpretation of the
Harmonized System which is provided for by the Convention and so for the interpretation of
Schedule 3 (Interpretation Rules).12 Except in relation to passages described as “Additional
Notes”, the text of the Interpretation Rules is based on the Harmonized System.13 Those
Interpretation Rules “… must be used for working out the tariff classification under which
goods are classified.”14
9.
In so far as they are relevant, they are:
6
“1.
The titles of Sections, Chapters and sub-Chapters are provided for ease of
reference only; for legal purposes, classification shall be determined
according to the terms of the headings and any relative Section or Chapter
Notes and, provided such headings or Notes do not otherwise require,
according to the following provisions:
2.
…
CT Act; s 6(b)
CT Act; s 3(1)
8
CT Act; s 6(a)
9
CT Act; ss 10 and 9
10
ATS 1988 No 30
11
Noted in Note 1 to s 7 of the CT Act; s 3(1)
12
CT Act, s 7(1)
13
Noted in Note to Schedule 2 of the CT Act
14
CT Act, s 7(1)
7
Page 6 of 80
3.
10.
When, by application of Rule 2(b) or for any other reason, goods are, prima
facie, classifiable under two or more headings, classification shall be effected
as follows:
(a)
The heading which provides the most specific description shall be
preferred to headings providing a more general description. However,
when two or more headings each refer to part only of the materials or
substances contained in mixed or composite goods or to part only of the
items in a set put up for retail sale, those headings are to be regarded
as equally specific in relation to those goods, even if one of them gives
a more complete or precise description of the goods.
(b)
Mixtures, composite goods consisting of different materials or made of
different components, and goods put up in sets for retail sale, which
cannot be classified by reference to 3(a), shall be classified as if they
consisted of the material or component which gives them their essential
character, insofar as this criterion is applicable.
(c)
When goods cannot be classified by reference to 3(a) or 3(b), they shall
be classified under the heading which occurs last in numerical order
among those which equally merit consideration.
4.
Goods which cannot be classified in accordance with the above Rules shall be
classified under the heading appropriate to the goods to which they are most
akin.
5.
…
6
For legal purposes, the classification of goods in the subheadings of a heading
shall be determined according to the terms of those subheadings and any
related Subheading Notes and, mutatis mutandis, to the above Rules, on the
understanding that only the subheadings at the same level are comparable.
For the purposes of this Rule the relative Section and Chapter Notes also
apply, unless the context otherwise requires.”
The appropriate procedure to follow when a heading or Note does “otherwise require” is
found in Liebert Corporation Australia Pty Ltd v Collector of Customs15 (Liebert). The
respondent had classified the goods under subheading 8504.40.00 within Chapter 85 but the
applicant contended that they should have been classified under subheading 9032.89.90
within Chapter 90. Chapter 85 fell within Section XVI and Chapter 90 within
Section XVIII. The Note 1(m) to Section XVI provided that “This section does not cover …
Articles of Chapter 90”. The Full Court of the Federal Court said:
“
It follows that the appropriate procedure for determining the proper
classification of goods that might seem to fall within any of the subheadings in
Section XVI and Ch 90 is first, to determine whether the goods can be classified
15
Page 7 of 80
(1996) 23 AAR 287; Wilcox, O’Connor and Drummond JJ
under any of the headings in Ch 90. If they can be, they are to be so classified and it
is irrelevant that the goods might also fall within the terms of any of the headings in
any of the Chapters of Section XVI or that they might be more appropriately
classified under Section XVI than Ch 90. The goods may be classified under
Section XVI only if none of the headings in Ch 90 is applicable.”16
11.
The World Customs Organisation (WCO) maintains Harmonised System Explanatory Notes
(HSEN). The relevance of the HSEN, and their predecessor the Brussels Notes,17 in
interpreting Schedules 2 and 3 of the CT Act was considered in Gardner Smith v Collector
of Customs Victoria18 (Gardner Smith). The Full Court found that the provisions of s 15(1)
of the Acts Interpretation Act 1901 (AI Act) could be relied upon in the interpretation of the
Schedule 3 to the Customs Tariff Act 1982.19 Section 15AB(1) of the AI Act then provided,
as it does now, that:
“Subject to subsection (3), in the interpretation of a provision of an Act, if any
material not forming part of the Act is capable of assisting in the ascertainment of
the meaning of the provision, consideration may be given to that material:
(a)
to confirm that the meaning of the provision is the ordinary meaning
conveyed by the text of the provision taking into account its context in the Act
and the purpose or object underlying the Act; or
(b)
to determine the meaning of the provision when –
(i)
the provision is ambiguous or obscure; or
(ii)
the ordinary meaning conveyed by the text of the provision taking into
account its context in the Act and the purpose or object underlying
the Act leads to a result that is manifestly absurd or is unreasonable.”
PRINCIPLES OF CLASSIFICATION
General classification principles
12.
In their majority judgment in Times Consultants Pty Ltd v Collector of Customs (QLD)20
(Times Consultants), Morling and Wilcox JJ established that the first step in the proper
16
(1996) 23 AAR 287 at 289-290
The Brussels Notes were explanatory notes prepared by the Nomenclature Committee established by the
Convention on Nomenclature for the Classification of Goods in Customs Tariffs (Convention). That
Convention was ratified by Australia and generally incorporated in its domestic law in the form of the Customs
Tariff Act 1982.
18
(1986) 66 ALR 377; Keely, Neaves and Wilcox JJ
19
(1986) 66 ALR 377 at 383-384. After reviewing the authorities, a similar conclusion was reached by Young
J in Chief Executive Officer of Customs v Biocontrol Ltd [2006] FCA 107; (2006) 150 FCR 64; 89 ALD 551 at
[39]; 77; 562
20
(1987) 16 FCR 449; 76 ALR 313 Morling and Wilcox JJ; Fox J dissenting
17
Page 8 of 80
classification of particular goods is to identify them. The second step is to construe the tariff
classifications to determine to which tariff classification the subject goods should be
classified. Having said that there are two steps does not determine the order in which those
steps are taken for taking one may well inform how the other is taken. As the Full Court of
the Federal Court said in Collector of Customs v Savage River Mines21 (Savage River
Mines):
“
The provisions of Sch 3 to the Customs Tariff Act 1982 are part of the Act
itself – s 13(2) of the Acts Interpretation Act 1901. Their operation in a particular
case involves a process of statutory construction and the application of the statute
properly construed to the facts of the case. A court or tribunal charged with
determining whether goods are within a given item, sub-item or paragraph of the
Schedule may properly first construe the relevant categories and then classify the
subject goods by reference to them.”22
Identification of the goods
13.
The overlap between the two steps is evident in the second and third principles identified by
the Tribunal in Re Tridon Pty Ltd and Collector of Customs23 (Tridon) as relevant in
carrying out the task of identifying the goods to be classified. Referring to various
authorities, the Tribunal in Tridon identified eight principles as relevant to the task:
21
“(i)
Identification must be objective, having regard to the characteristics which
the goods, on informed inspection, present ...;
(ii)
The identification of goods cannot be controlled by the descriptions of goods
adopted in the nomenclature of the Tariff ...;
(iii)
Nevertheless in identifying goods it is necessary to be aware of the structure
of the nomenclature, the basis on which goods are classified and the
characteristics of goods which may be relevant to the frequently complex task
of classification ...;
(iv)
In the identification of goods, knowledge of how those who trade in the goods
describe them will usually be relevant, but not necessarily conclusive ...;
(v)
All the descriptive terms, both specific and generic, by which the goods may
fairly be identified may be relevant to the classification of the goods within
the Tariff ...;
(1988) 79 ALR 258; Fox, Davies and French JJ
(1988) 79 ALR 258 at 264-265 Since the Full Court decided the case, the AI Act has been amended and s13
repealed and substituted but the effect is the same. Schedules are part of the Act but, rather than being deemed
to be so by s 13(2) in 1988, they are now part of the Act under s 13(1) of the AI Act because “All material
from and including the first section of the Act to the end of … the last Schedule to the Act … is part of the Act.”
23
[1982] AATA 119; (1982) 4 ALD 615 at 620, Mr Hall, then Senior Member, and Mr Wickens and
Mr Prowse, Members
22
Page 9 of 80
14.
(vi)
Descriptive terms may be of varying degrees of specificity (eg windscreen
wiper blade refills, parts for a windscreen wiper or parts for a motor
vehicle). Generic descriptions may be by reference to the materials or
substances from which the goods are manufactured ...;
(vii)
Identification will frequently extend to characterisation of goods by reference
to their design features cf Re Virgo Manufacturing Co Pty Ltd and Collector
of Customs (Vic) (1981) 3 ALN No 15, or by reference to their suitability for
a particular use where those characteristics emerge from informed
inspection of the goods as imported ... . The extent to which these
characteristics may be relevant to the ultimate classification of the goods and
whether evidence of the use to which goods are put after importation is
relevant, will depend upon the language of the Tariff Nomenclature ...;
(viii)
Composite goods, notwithstanding that they have components which are
separately identifiable, may nevertheless be identifiable in combination as a
new entity if the identity of the separate units is subordinated to the identity
of the combination ...”24
Principle (iii) in Tridon was developed further by Northrop J in Vernon-Carus Australia Pty
Ltd and Another v Collector of Customs:25
“… In performing the task of identifying goods for classification, it is essential to
have regard to the relevant classification heading. Some heading classifications
make specific reference to form or purpose. Where this is so, a ‘practical wharfside’ task, may not be appropriate. Evidence may need to be received relating to the
form or purpose of the goods. In cases of this kind, the heading will need to be
construed properly in order to determine what evidence is relevant to identify the
goods. …”26
15.
Certain matters have been identified as not relevant in the task of identifying goods. They
are set out in the following passages:
(1)
24
“
It must always be remembered that the classification of goods for
tariff purposes is a practical ‘wharf-side’ task. Upon some occasions it will
be necessary for the classifier to obtain information to enable identification
of the goods but it is entirely inappropriate that he or she should enter into
inquiries upon matters such as cost, commercial advantage or purchaser
preference … It ought normally be possible to classify goods merely by
looking at them and by considering their nature and function which they
were designed to serve. In the case of goods made up in sets, it may be that
there is no single essential character; in which case r 3(1)(b) will be
[1982] AATA 119; (1982) 4 ALD 615 at[15]; 620-621 (citations omitted)
[1995] FCA 1283; (1995) 21 AAR 450; Northrop and Jenkinson JJ; Branson J dissenting
26
[1995] FCA 1283; (1995) 21 AAR 450 at [20]; 455-456
25
Page 10 of 80
inapplicable and reference will need to be made to the arbitrary rule
contained in r 3(1)(c).”27 (emphasis added)
(2)
16.
“
Whether the goods in suit properly fall within Item 30.03 of the
Customs tariff is determined by an objective test not by the intention of the
manufacturer in China or of the exporter or the importer. The test is applied
at the port of entry of the goods and at the time of entry. …”28
Although classification is applied at the port of entry of the goods and at the time of that
entry, there may be cases in which a visual inspection of the goods and their packaging is
not enough to disclose their essential characteristics to enable a judgment to be made about
their correct classification. This was the situation in Chinese Food & Wine Supplies Pty Ltd
v Collector of Customs (Vic)29 (Chinese Food & Wine). The Full Court of the Federal Court
was concerned with the classification of certain liquid as either a medicament under
Item 30.03 of Schedule 3 to the CT Act or as alcoholic beverages under 22.09.91.
Lockhart J, with whom Woodward and Ryan JJ agreed, said:
“… But visual inspection will not necessarily provide the answer in each case. Tests
may have to be carried out and inquiries made to ascertain the relevant
characteristics of the goods. In the present case, samples were taken and sent for
chemical analysis. As the tribunal noted, the paucity of the information contained in
the labelling of the goods necessitated further inquiries being made in respect of
them.
The critical elements upon which the tribunal relied, namely, the labelling
and general presentation of the goods as imported into Australia, the analysis of the
liquid contained in the bottles, the contents of the sale catalogue issued with the title
‘Wines’ on its cover with both kinds of goods included in it and the display of those
kinds of goods in the liquor section of a supermarket in Hong Kong are in my view
all relevant matters which the tribunal was entitled to consider …”30
THE FOUR HEADINGS IN ISSUE
17.
Together with their relevant Sections and Notes, the headings in issue are:
(1)
Heading 1516
(a)
27
Heading 1516 and its subheadings read:
Times Consultants Pty Ltd v Collector of Customs (Qld) (1987) 16 FCR 449; 76 ALR 313 at 463; 328 per
Morling and Wilcox JJ; Fox J dissenting
28
Chinese Food & Wine Supplies Pty Ltd v Collector of Customs (Vic) (1987) 72 ALR 591; at 599 per
Lockhart J with whom Woodward and Ryan JJ agreed and see also Times Consultants (1987) 16 FCR 449; 76
ALR 313 at 327; 462
29
(1987) 72 ALR 591
30
(1987) 72 ALR 591 at 599
Page 11 of 80
“1516
ANIMAL OR VEGETABLE FATS AND OILS AND THEIR
FRACTIONS, PARTLY OR WHOLLY HYDROGENATED,
INTER-ESTERIFIED, RE-ESTERIFIED OR ELAIDINISED,
WHETHER OR NOT REFINED, BUT NOT FURTHER
PREPARED:
1516.10.00
-Animal fats and oils and their fractions
Free
1516.20.00
-Vegetable fats and oils and their fractions
Free”
(b)
Although the Section description is given only for guidance, I note that
Heading 1516 comes within “Section III – Animal or vegetable fats and oils
and their cleavage products; prepared edible fats; animal or vegetable
waxes” and “Chapter 15 – Animal or vegetable fats and oils and their
cleavage products; prepared edible fats; animal or vegetable waxes”
(c)
There are four Notes to Chapter 15 but only Notes 1(e) has relevance:
“1. -
This Chapter does not cover:
(a)-(d) …;
(e)
Fatty acids, prepared waxes, medicaments, paints, varnishes,
soap, perfumery, cosmetic or toilet preparations, sulphonated
oils or other goods of Section VI; or
(f)
…
2.-4.- …”
(2)
Heading 2106
(a)
Heading 2106 and its subheadings read:
“2106
FOOD PREPARATIONS NOT ELSEWHERE SPECIFIED OR
INCLUDED:
2106.10
-Protein concentrates and textured protein substances:
2106.10.10
---Protein concentrates
2106.10.20
---Textured protein substances
2106.90
-Other:
2106.90.20
Page 12 of 80
Free
5%
DCS:4%
DCT: 5%
5%
(a)
compound alcoholic preparations of a kind
used for the manufacture of beverages;
(b)
food preparations of flour or meal;
(c)
hydrolysed protein
---Preparation for oral consumption, such as tablets
and chewing gum containing nicotine, intended to
assist smokers to stop smoking”
DCS:4%
DCT:5%
Free
(b)
(3)
Heading 2106 comes within Chapter 21 in Section IV. There is only one
Note to Section IV referring to the meaning of “pellets”. It is not relevant.
The Notes and Additional Note to Chapter 21 are not relevant in this case.
Heading 3004
(a)
(b)
Heading 3004 and its subheadings read:
“3004
MEDICAMENTS (EXCLUDING GOODS OF 3002, 3005 OR
3006) CONSISTING OF MIXED OR UNMIXED PRODUCTS
FOR THEIR THERAPEUTIC OR PROPHYLACTIC USES,
PUT UP IN MEASURED DOSES (INCLUDING THOSE IN
THE FORM OF TRANSDERMAL ADMINISTRATION
SYSTEMS) OR IN FORMS OR PACKINGS FOR RETAIL
SALE:
3004.10.00
-Containing penicillins or derivatives thereof, with a
penicillanic acid structure, or steptomycins or their
derivatives
Free
3004.20.00
-Containing other antibiotics
Free
3004.3
-Containing hormones or other products of 2937
but not containing antibiotics:
3004.31.00
-- Containing insulin
Free
3004.32.00
--Containing adrenal corticosteroid hormones,
their derivatives or structural analogues
Free
3004.39.00
--Other
Free
3004.40.00
-Containing alkaloids or derivatives thereof but not
containing hormones, other products of 2937 or
antibiotics
Free
3004.50.00
-Other medicaments containing vitamins or other
products of 2936
Free
3004.90.00
-Other
Heading 3004 comes within Chapter 30 in Section VI of Schedule 3 to the
CT Act. Note 2 of the Notes to Section VI is relevant. It is subject to Note 1
but that Note has no application as it refers to goods answering a description
in headings 2843, 2844, 2845, 2846 and 2852. None of the goods in this case
answers any of the descriptions in those headings. In so far as it refers to
headings relevant in this case, Note 2 goes on to read:
“… goods classifiable in 3004 …. by reason of being put up in
measured doses or for retail sale are to be classified in those
headings and in no other heading of this Schedule.”
(c)
Page 13 of 80
Free”
Chapter 30 has both Notes and an Additional Note. Only Note 1(a) has
relevance. It reads:
“This Chapter does not cover:
(a) Foods or beverages (such as dietetic, diabetic or fortified foods,
food supplements, tonic beverages and mineral waters), other
than nutritional preparations for intravenous administration
(Section IV)”.
(4)
Heading 3824
(a)
Page 14 of 80
Heading 3824 and the first of its sub-headings read:
“3824
PREPARED BINDERS FOR FOUNDRY MOULDS OR
CORES; CHEMICAL PRODUCTS AND PREPARATIONS
OF THE CHEMICAL OR ALLIED INDUSTRIES
(INCLUDING THOSE CONSISTING OF MIXTURES OF
NATURAL PRODUCTS), NOT ELSEWHERE SPECIFIED
OR INCLUDED:
Free
3824.10.00
-Prepared binders for foundry moulds or cores
Free
3824.30.00
-Non-agglomerated metal carbides mixed together
or with metallic binders
Free
3824.40.00
-Prepared additives for cements, mortars or concretes
3824.50.00
-Non-refractory mortars and concretes
Free
3824.60.00
-Sorbitol other than that of 2905.44.00
Free
3824.7
-Mixtures containing halogenated derivatives of
methane, ethane or propane:
3824.71.00
--Containing chlorofluorocarbons (CFCs),
whether or not containing hydrochlorofluorocarbons
(HCFCs), perfluorocarbons (PFCs) or
hydrofluorocarbons (HFCs)
Free
3824.72.00
--Containing bromochlorodifluoromethane,
bromotrifluoromethane or dibromotetrafluoroethanes
Free
3824.73
--Containing hydrobromofluorocarbons (HBFCs):
3824.73.10
---Containing perhalogenated derivatives containing
two or more halogens
3824.73.90
---Other
3824.74
…
…
3824.90.40
…”
5%
Free
5%
THE WITNESSES
18.
Three witnesses were called on behalf of BASF and Cognis to give evidence. They were:
(1)
Mr Steven Frandsen
Mr Frandsen, who has a degree in Chemical Engineering, has worked for
food, or food ingredient companies, during his professional life but never
with a vegetable oil company. He has been BASF’s Head of Global Product
Lines: Natural Vitamin E and Sterols since 2011. He was previously
employed by Cognis in various roles between 1992 and 2011. Those roles
included his being Plant Engineer at the Vitamin E and Sterols Plant, the
Strategic Raw Materials Purchaser and the Business Director, Nutrition and
Health. In that last position, Mr Frandsen was responsible for the Vitamin E
and Sterols Global Product Lines and Business.31
(2)
Dr Hilary Glover
Dr Glover’s qualifications include a PhD in Molecular Biology/Biochemistry
and a BSc (Hons 1) in Molecular Biology/Biochemistry.
She has held the position of BASF’s Research and Development Manager
since June 2014. Between 2012 and 2014, she was its ANZ Industry
Manager Complementary Medicine and R&D Project Team Leader. Before
its purchase by BASF, Dr Glover had been employed by Cognis between
2006 and 2012 in a similar position being ANZ Market Segment Manager
Nutrition & Health, Key Global Account Manager (Natural Vitamins) and
R&D Project Team Leader.
Dr Glover is not a chemical engineer and did not purport to have any
expertise in the technical details of the production processes for plant sterols
but was generally familiar with the steps in their production.32
(3)
Professor Peter Clifton
Professor Clifton’s qualifications include an MBBS, B Med Sci and a PhD.
He is a Fellow of the Royal Australasian College of Physicians and is
currently the Professor of Nutrition at the University of South Australia.
Professor Clifton’s research activities are mainly focused on clinical trials in
his areas of interest including the effect of plant sterols and stanols,
administered in various forms of food, on LDL cholesterol in human
volunteers. He has co-authored nine papers on that subject and been the lead
author on three of those papers. A tenth paper he authored alone.33
19.
One witness was called on behalf of the CEO. He was:
31
Exhibit D at [1]
Exhibit E at [1]-[3]
33
Exhibit G at [1]-[2]
32
Page 15 of 80
Dr Brad Mulroney
Dr Mulroney’s qualifications include a PhD in Chemistry and a BSc(Hons) in
Chemistry.
Dr Mulroney has been employed by Peerless Foods in two periods. Peerless Foods
manufactures fat and oil products, including retail, food service, bakery and
industrial products. In the main, Peerless Foods deals with sunflower, canola, palm,
tullow, kernel, coconut and cotton oils. There are edible oils that may, or may not,
be sold in edible form. Others are regarded as inedible but have other applications.
It also manufactures Tablelands margarine that contains vegetable oils, water and
phytosterol esters. The first period was between 1998 and 2005 when Dr Mulroney
worked in various technical roles. Since 2006, he has been its Product Research and
Innovations Manager.
Between January 2005 and April 2006, Dr Mulroney worked for Goodman Fielder
Commercial as its Technical Manager and Product Development Technologist.34
IDENTIFICATION OF THE SUBJECT GOODS
20.
On the basis of the evidence of Dr Glover, I find that each of the subject goods comprises a
mixture of plant sterols. Consistently with her evidence and from my own examination, I
find that each has the appearance of a yellow and viscous oily liquid, verging on a paste, at
room temperature.
21.
Again on the basis of the evidence of Dr Glover and on the Data Sheets annexed to her
statement, I find that all of the subject goods share very similar chemical profiles and
physical properties. Vegapure 95 and Generolester GM are the same product packaged
under different names. Vegapure 95E and Vegapure 95FF have slightly different
stanol/sterol profiles from each other and from Vegapure 95 and Generolester GM. Despite
those differences, each of the subject goods consists, by volume of approximately 99% plant
sterol esters with small amounts of free plant sterols and a maximum of 0.2% of
antioxidants being mixed tocopherols and ascorbylpalmitate.
22.
On the basis of Dr Glover’s evidence, I find that the reasons for the small variations lie in
the plant species from which they are prepared. Vegapure 95FF sterols are sourced from
plants – primarily soy - that, potentially, have been genetically modified while those in
34
Page 16 of 80
Exhibit 4 at 1
Vegapure 95E are sourced from non-genetically modified plants – primarily pine wood and
rapeseed in an approximate ratio of 3:1.35
23.
Samples of each of the subject goods other than Vegapure 95 were admitted in evidence.
Each sample is packaged in an aluminium cylinder and weighs either 500g in the case of the
Vegapure products or approximately double that weight in the case of Generolester GM. On
the basis of the evidence of Dr Glover, I find that the subject goods are not imported in the
sample containers but in much larger containers being either 25kg or 180kg drums, 900kg
Intermediate Bulk Containers or 20 metric tonne ISO tanks.36 Regardless of the size of
those larger containers, each was labelled with the product name, a list of ingredients and
one of the following statements:
(1)
“Restricted use in food. Not for retail sale.”; or
(2)
“For food and dietary supplement use only. For use in foodstuff, not for
retail.”37
The goods are imported to sell to dietary supplement manufacturers, Dr Glover said.
CONSIDERATION: the order
24.
The order in which I consider each of the headings is determined in the first instance by
Note 2 of the Notes to Section VI in Chapter 30 which requires that goods classifiable in
heading 3004 by reason of their being put in measured doses or for retail sale are to be
classified only in that heading and no other in Schedule 3. It is also determined by Note 1(a)
of the Notes to Chapter 30. Reading them together, I must proceed in the following way:
(1)
First decide whether the subject goods are:
(a)
35
“Foods or beverages (such as dietetic, diabetic or fortified foods,
food supplements, tonic beverages and mineral waters), other than
nutritional preparations for intravenous administration (Section IV)”.
(i)
There is no suggestion that the subject goods are nutritional
preparations for intravenous administration.
(ii)
Therefore, the question is whether they are foods or
beverages. If they are, they cannot be classified under any
Exhibit E at [24]
Exhibit E; Annexures G and H
37
Exhibit E; Annexure H
36
Page 17 of 80
heading within Chapter 30 for that is the effect of Note 1(a) of
the Notes to that Chapter;
(2)
If the subject goods are not foods or beverages, decide:
(a)
(b)
whether the subject goods come within heading 3004 and so are:
(i)
“medicaments (excluding goods of 3002, 3005 or 3006)”;
(ii)
“consisting of mixed or unmixed products for therapeutic or
prophylactic uses”;
(iii)
“put up in measured doses … or in forms of packings for retail
sale”; and
if they do, decide that the subject goods come within heading 3004
and may not be classified to any other heading in Schedule 3
regardless of whether or not they meet the descriptions in those
headings.
(i)
(3)
This is reinforced in the case of heading 1516 by Note 1(e) to
Chapter 15 specifying that the Chapter does not cover goods
of Section VI, which includes heading 3004 in Chapter 30 and
heading 3803 in Chapter 38;
If the subject goods are not classifiable to heading 3004, consider each of the
remaining headings in issue and the relevant Notes and Interpretative Rules.
ARE THE SUBJECT GOODS FOODS?
The submissions
25.
On behalf of BASF and Cognis, Mr Slonim of counsel submitted that a food is a substance
that would be eaten by a reasonable person for the purpose of sustenance. A product that
supplements the content of food for a purpose other than sustenance is not a food. He relied
on the conclusion reached by the Tribunal in Re Trustee for the Kurowski Family Trust and
Chief Executive Officer of Customs38 (Kurowski). That Tribunal had considered the
classification of effervescent vitamin tablets and Mr Slonim drew an analogy between them
and plant sterols. He submitted that, like the effervescent vitamin tablets, the plant sterols
are not a food ingredient or a food supplement because they are not necessary for the
production of the food in which they are mixed and nor do they form part of the food per se.
The sole function of the food is as a medium for delivering the sterols to the target site so
that they can carry out their therapeutic action. Furthermore, they are not a food supplement
because their purpose is to reinforce the quantity and effect of the sterols that are ingested as
38
[2010] AATA 974; (2010) 118 ALD 688 at [23]-[25]; 692; Deputy President Handley and Dr Schafer,
Member
Page 18 of 80
part of everyday food consumption, and they should therefore be identified as sterol
supplements.
26.
Mr Slonim also rejected any suggestion that regard should be had to any legislation
regulating food in the search for the meaning of “food”. He pointed out that legislation such
as the Food Act 1984 (Vic) (Food Act), which has been enacted uniformly by the various
States and Territories, has a regulatory basis and purpose different from that of the CT Act.
The same is true of the Imported Food Act 1992 (IF Act), the Australia and New Zealand
Food Standards Code (Food Standards Code) and the Therapeutic Goods Act 1989.
27.
On behalf of the CEO, Mr Northcote submitted that the evidence of Professor Clifton
supported a finding that food includes edible substances used in food eaten by humans. That
would include substances such as pepper, spices and flour that are generally not eaten alone
but are used in food that is eaten. Plant sterols are also food supplements. When consumed
by humans, plant sterols can reduce their cholesterol absorption.
What is the relevance of unrelated enactments?
28.
The Tribunal in Kurowski was reassured that its finding that effervescent vitamin tablets
were not food by the fact that they were listed as complementary medicines under the
Therapeutic Goods Regulations 1990 (TG Regulations). It noted:
“… that while the classification attributed to a product in a statutory scheme is not
definitive of meaning, it is, nevertheless, an indication of meaning and it would be
anomalous if a product is classified according to a specific meaning under one
statutory scheme and according to a different meaning under another statutory
scheme unless there is good reason for doing so.”39
29.
It seems to me that, implicit in this passage, is a proposition that, unless it indicates
otherwise, Parliament will attribute the same meaning to each and every word it uses across
all of the legislation it enacts. If I am correct in thinking that, I am unable to agree with it.
It is a proposition that is at odds with the principles and rules of statutory interpretation. I
will begin with s 15AA of the AI Act which provides:
39
Page 19 of 80
[2010] AATA 974; (2010) 118 ALD 688 at [25]; 692
“In interpreting a provision of an Act, the interpretation that would best achieve the
purpose or object of the Act (whether or not that purpose or object is expressly
stated in the Act) is to be preferred to each other interpretation.”
30.
The purpose or object of Acts necessarily differ from each other and, as was said in
McNamara v Consumer Trader and Tenancy Tribunal:40
“… It would be an error to treat what was said in construing one statute as
necessarily controlling the construction of another; the judicial task in statutory
construction differs from that in distilling the common law from past decisions ….”41
31.
The relevance of the reference to the common law and the difference in the process of
reasoning is illustrated by a passage from the judgment of Windeyer J in Damjanovic &
Sons Pty Ltd v The Commonwealth42 (Damjanovic):
“… Analogy – not in the strict mathematical sense, but in the sense of resemblance
of facts – has long had a great place in our system of law. It is at the base of the
method of precedent in the common law. … [R]easoning by analogy is a rather
different process in the development of the common law from its use in the
interpretation and application of a statute or of the Constitution. Sir Owen Dixon, in
an extra-judicial address he delivered in 1933 (reprinted in Jesting Pilate (1965),
p. 13), said of the common law that
‘it has undergone a continuous growth and expansion accomplished by
continual deduction and induction. By deduction, a new application is given
to an existing principle; many single instances having been thus produced, in
course of time a new or developed principle is discerned in them and
expounded. By this process of imperfect induction, the secondary principle is
established as part of the doctrine of the common law, and plays its part in
turn in the production of still more doctrine’.
This, I would respectfully say, is a wholly apt description of the processes of the
common law. It points I think the contrast with expositions of the effect of statutes
and codes. The process is then one of deduction and subsumption, rather than of
imperfect induction. The words of the enactment provide the major premise. The
result is not, or ought not to be, the establishment of any secondary principle
embodied in new words, but at most the provision of an illustration of the effect in a
new setting of the original principle expressed in the original words.”43
40
[2005] HCA 55; (2005) 221 CLR 646; 221 ALR 285; 79 ALJR 1789; Gleeson CJ, McHugh, Gummow,
Hayne and Heydon JJ; Callinan J dissenting
41
[2005] HCA 55; (2005) 221 CLR 246; 221 ALR 285; 79 ALJR 1789 at [40]; 661; 1798 per McHugh,
Gummow and Heydon JJ, with whom Gleeson CJ and Hayne J agreed
42
[1968] HCA 42; (1968) 117 CLR 390; Barwick CJ, McTiernan, Kitto, Taylor, Menzies and Windeyer JJ
43
[1968] HCA 42; (1968) 117 CLR 390 at 408-409
Page 20 of 80
32.
Returning to the various legislation regulating food, the purpose lying behind each
enactment differs one from another and from those lying behind the CT Act. Although their
purpose sections are not definitive of scope of their purposes and objects, they give an
indication of the very different matters that they seek to regulate. I will refer to only two:
(1)
Food Standards Australia and New Zealand Act 1991 (FSANZ Act)
authorising the Australia and New Zealand Food Standards Code (FSANZ
Code):
“The object of this Act is to ensure a high standard of public health
protection throughout Australia and New Zealand by means of the
establishment and operation of a joint body to be known as Food Standards
Australia New Zealand to achieve the following goals:
(2)
(a)
a high degree of consumer confidence in the quality and safety of
food produced, processed, sold or exported from Australia and New
Zealand;
(b)
an effective, transparent and accountable regulatory framework
within which the food industry can work efficiently;
(c)
the provision of adequate information relating to food to enable
consumers to make informed choices;
(d)
the establishment of common rules for both countries and the
promotion of consistency between domestic and international food
regulatory measures without reducing the safeguards applying to
public health and consumer protection.”44
Food Act 1984 (Vic):
“The objects of this Act include the following—
33.
(a)
to ensure food for sale is both safe and suitable for human
consumption;
(b)
to prevent misleading conduct in connection with the sale of food;
(c)
to provide for the application in Victoria of the Food Standards
Code.”45
In contrast to these objects are those of the CT Act. They are “… to impose duties of
Customs …”.46 The CT Act imposes those duties according to a system of classifications
that has been developed by international agreement. By their enactment in Schedule 3, they
have become part of Australia’s domestic law but that does not alter the fact that they have
been adopted as part of an international agreement to adopt a harmonious system of
44
FSANZ Act; s 3
Food Act; s 3
46
CT Act; Long Title
45
Page 21 of 80
classification for the purpose of the imposition of customs duties. That provides a very
different background for a consideration of the meaning of “food” from that provided in
legislation regulating food safety and quality and ensuring that consumers are able to make
informed choices about what it is that they eat. It is so different that I do not think that the
way in which Parliament has chosen to define “food” in those enactments or the way in
which it might have been interpreted in those enactments gives me any guidance or comfort
in interpreting it in the context of the CT Act.
What is the meaning of “food” in the CT Act?
34.
I will begin with the passage from Kurowski in which the Tribunal considered the meaning
of the word “food” in the context of the CT Act. It had heard evidence from a pharmacist
and regulatory affairs consultant that the effervescent vitamin tablets were presented in
tablet form and packaged with health-related claims of a kind not permitted for food. The
information provided on their packaging was consistent with the requirements imposed on
therapeutic goods and did not meet the food labelling requirements of the Australian Food
Standards Code. The Tribunal also heard evidence from a nutritionist to the effect that a
vitamin supplement could be accurately described as either a dietary supplement or a food
supplement.
35.
It went on to consider what was meant by “food” and whether the effervescent vitamin
tablets came within that description:
“
We note that ‘food’ is defined in the Macquarie Dictionary in terms of ‘what
is eaten, or taken into the body, for nourishment’. ‘Nourishment’ is that which
sustains. A ‘supplement’ is ‘something added to complete a thing, supply a
deficiency, or reinforce or extend a whole’. ‘Diet’ is ‘food considered in terms of its
qualities, composition, and its effects on health’. ‘Dietary’ means ‘relating to diet’.
A ‘vitamin’ is defined as:
… any of a group of food factors essential in small quantities to maintain life, but
not themselves employing energy. The absence of any one of them results in a
characteristic deficiency disease.
In the tribunal’s view, these definitions indicate that ‘vitamins’ do not fall
within the ordinary meaning of the word ‘food’. Vitamins are certainly contained in
food and a vitamin supplement could be said to reinforce the quantity of vitamins
taken into the body as part of everyday food consumption. However, we are not
satisfied that products such as the goods, containing specific vitamins, should be
identified as food, or food supplements. This is not how such products would be
identified by the reasonable person. As Mr Milsom said, such a person would not
Page 22 of 80
eat vitamin tablets as food for the purpose of sustenance, but rather to supplement
the vitamin content of food eaten. As he also pointed out, products of this kind which
are sold in tablet form with a recommended unit dosage and with health-related
claims would not ordinarily be thought of as food.”47
36.
When words are used in their ordinary English meanings rather than in technical or trade
meanings and there is no suggestion that their meaning has changed over the course of a
particular period in question, it is not appropriate to have regard to evidence directed to their
meaning.48 There has been no suggestion from the parties or that appears inherent in
Schedule 3 to the CT Act that the word “food” has any trade or technical meaning. In so far
as they are relevant, the ordinary meanings of the word include:
“… 1 a substance taken in by a living organism that provides it with energy and
materials for growth, maintenance and repair of tissues. 2 solid as distinct from
liquid nourishment □ food and drink. …”49
When read with the meanings of the words “nourishment”, “nourish” and “nutriment”, the
word “food” is defined in similar terms in the Macquarie Dictionary.50 Those definitions
read, in so far as they are relevant:
“food … 1. what is eaten, or taken into the body, for nourishment. 2. more or less
solid nourishment (as opposed to drink). …”
“nourishment …1. that which nourishes; food, nutriment, or sustenance …”
“nourish … 1. To sustain with food or nutriment; supply with what is necessary for
maintaining life. …”
“nutriment … 1. any matter that, taken into a living organism, serves to sustain it in
its existence, promoting growth, replacing loss, and providing energy. …”
37.
When they are analysed, the Macquarie Dictionary and Chambers both define “food” in
very similar terms. Their only real difference is one of form with Chambers stating
succinctly what is drawn from the Macquarie Dictionary when regard is had to the meaning
of the words used to define “food”. Therefore, it seems to me that, when used in its ordinary
sense in relation to people, the word “food” means “… a substance taken in … that provides
energy and materials for growth, maintenance and repair of tissues …” but is not taken in
47
[2010] AATA 974; (2010) 118 ALD 688 at [22]-[23]; 691-692
Pepsi Seven-Up Bottlers Perth Pty Ltd v Commissioner of Taxation [1995] FCA 1655; (1995) 62 FCR 289;
132 ALR 632; 31 ATR 445; 95 ATC 4746 at [32]-[34]; 639; 296-297; 452; 4,752 per Hill J
49
Chambers
50
Macquarie Dictionary, revised 3rd edition, 2001, The Macquarie Library Pty Ltd
48
Page 23 of 80
the form of liquid nourishment. Apart from not being in the form of liquid nourishment,
there is nothing in that definition that suggests the form in which the substance be taken in.
So, for example, flour would be regarded as a food just as burghul would be. One is a finely
processed version of wheat grain and the other a much less processed version. One has to be
mixed or combined with other ingredients in a certain way to become a food that is palatable
e.g. a pastry made with flour, shortening and water. The other may be combined with other
ingredients but it may also be eaten alone as a cereal.
38.
Is there a role for the introduction of what a “reasonable person” would consider to be food?
The Tribunal in Kurowski thought that there was but I have concerns about it. My first
concern arises from the fact that the headings in Schedule 3 do not introduce that concept.
They are descriptions. My second concern arises from the fact that the headings in
Schedule 3 to the CT Act reflect classifications agreed upon internationally as part of a
harmonised scheme. A person does not have to travel beyond the Asia Pacific region in
which Australia is located to know that what is regarded and sold as food in other countries
may not be regarded as such in Australia. That is so even though it would be acknowledged
that items consumed in other countries provide a source of nutrients, (such as protein)
providing energy and materials for growth, maintenance and repair of tissues that would not
currently be regarded as food by many Australians. Given that the classifications are
included in Australian domestic law, would the reasonable person be expected to know that
many products or life forms are consumed by people even though other people may not be
aware of it or find their consumption distasteful or even unimaginable? It is true that
Australia’s quarantine laws might not permit some of these products to enter the country but
the quarantine laws are not determinative of the question which is only asked if the products
are permitted entry into Australia and their tariff classification becomes relevant.
39.
Issues of this sort lead me to think that the introduction of the reasonable person may be
adding an element that has not been provided by Parliament. That does not mean that the
fact that an item or product is, or is not, consumed is irrelevant. It does remain relevant as is
the reason for its being consumed. There will be some items and products that are clearly
eaten and known to be eaten but others may have to be the subject of evidence. The fact that
they may be eaten alone or only after having been mixed or combined with other ingredients
is not relevant if they have the attributes of food that I have identified.
Page 24 of 80
What is a “food supplement”?
40.
The expression “food supplement” is not defined or referred to in either Dictionary but both
define the word “supplement” in similar terms. I will refer to that in Chambers:
“supplement … 1 something that is added to make something else complete or that
makes up a deficiency □ vitamin supplement …”
41.
The word “food” is used as an adjective in the expression “food supplement”. Its use in that
way suggests that a “food supplement” is a substance that provides energy and materials for
growth, maintenance and repair of tissues. The word “supplement” in that expression
suggests that it is something in addition to what might otherwise be present in the food, or
combination of foods, consumed by a person and so in that person’s diet.
The evidence
42.
I have summarised the evidence on this issue in the following passage. Except where I
indicate otherwise, it is drawn from the written and oral evidence of Professor Clifton:
(1)
Sterols are found in all plant cell walls.
(2)
LDL cholesterol in humans is cholesterol contained in low density
lipoprotein (LDL) in human blood. There is a widely documented and
accepted association between high levels of LDL cholesterol and heart
disease.
(3)
Plant sterols are used to lower LDL cholesterol in humans. Dr Glover said
that phytosterols, and so plant sterols and stanols, are equivalent in their
activity whether they are in their free or esterified form. Where they differ is
in their solubility in the intestine with sterol esters being the more soluble and
so the more efficacious.
Mr Frandsen also explained that the particle size of a free sterol is larger than
those of sterol esters. One consequence of that is that they give a gritty
texture when added to food products. Another is that they do not travel to the
interfaces in the intestine. It passes, instead, through the digestive system
and are largely excreted without blocking the sites where cholesterol
typically enters the human body.
Both Professor Clifton and Dr Glover explained how plant sterols (to use a
general term) work in the body. They give consistent accounts but I have
adopted the language used by Professor Clifton.
Plant sterols lower cholesterol by reason of their interaction with micelles, or
certain molecular aggregates, that exist in the body. One of the tasks
Page 25 of 80
assigned to micelles is to carry cholesterol to the surface of the small
intestine for absorption. As plant sterols and cholesterol have similar
structures, micelles will also carry them to the surface of the small intestine
for absorption. That means that, if plant sterols are present in the body as
well as cholesterol, the micelles will carry less cholesterol because they must
now carry both plant sterols and cholesterol and their carrying capacity does
not alter.
The outcome is that there is less cholesterol on the surface of the micelles to
be absorbed through the small intestine and into the rest of the body. The
cholesterol that are displaced by the plant sterols and never make the journey
to the small intestine are excreted in the faeces together with most of the
plant sterols, which are poorly absorbed by the body.
(4)
When taken as a dose and depending on the size of that dose, their ingestion
can reduce cholesterol absorption by as much as 50 to 85%. When added to
foods such as margarine, yoghurt and milk, a person may reduce LDL
cholesterol absorption by 7.7 to 10%. The effectiveness of plant sterols
depends on the food to which they are added so that they are less effective
when added to solids such as bread and breakfast cereals than when they are
added to spreads and dairy products. Whether people take plant sterols in
capsule form or in food is a matter of personal preference.
(5)
While a sterol ester provides some calories – in the form of the ester part of
the chain to the extent of some 40% of their weight –, they are added to food
for health benefits in the same way that soluble fibre might be added.
Professor Clifton agreed with the following passage:
“
The IFT [Institute of Food Technologists] Expert Panel agrees
that stanol/sterol esters are components of food that provide health
benefits in the same way that dietary fiber is viewed as providing
health benefits. The beneficial effects of fiber are based on their
physical and psychological effects in the gastrointestinal tract. From
the standpoint of nutrient requirements, humans do not require
dietary fiber; nevertheless dietary fiber provides benefits of gut
motility and cholesterol binding. The cholesterol-lowering effects of
the sterol/stanol esters similarly bind cholesterol in the gut to prevent
their reabsorption.”51
51
(6)
Professor Clifton agreed with Mr Northcote’s proposition that the amount of
plant sterols that can be added to spreads under the FSANZ Code is 8 grams
sterol equivalent per 100 grams.
(7)
Dr Glover said that the subject goods are predominantly phytosterol esters
meaning that they will be ingested in that form. That may come about in the
food industry by having been incorporated in food such as margarines,
yoghurts and so on. In the dietary supplement industry, it comes about by
being encapsulated and taken with food. Blackmore’s Heart Health product
called “Cholesterol Health”, for example, is in capsule form with each
IFT Expert Report Functional Foods: Opportunities and Challenges at 28; Respondent’s List of Authorities
and Legal Materials; Tab 15 at 262 and see also Transcript at 68
Page 26 of 80
capsule containing 1 gram of “Vegetable oil phytosterol esters (plant
sterols)” and 1.5mg of natural betacarotene.52 The label contains a statement
that “Blackmores Cholesterol Health® provides a relevant dose of plant
sterols, which may assist in management of healthy cholesterol levels by
reducing cholesterol absorption & re-absorption.”
(8)
The Food and Drug Administration (FDA) in the United States of America
permits edible oil spreads or margarines to contain some 8 grams of plant
sterol equivalents per 100 grams. As the sterol part of a plant sterol makes
upon only 60% or so of its weight and the remaining 40% is the fatty acid,
that means that, in order for each 100 grams of edible oil spreads and
margarines to contain 8 grams of plant sterol equivalents, it will contain
13 grams of sterol esters.53
(9)
Professor Clifton agreed with Mr Northcote in cross-examination, that the
sterol esters are a very significant ingredient in those spreads and margarines.
He also agreed that it is a specially prepared food ingredient and a food
supplement. Dr Mulroney said that the sterol portion is the biologically
active constituent and the fatty acid stabilises it.
Are the subject goods “food” or a “food supplement”?
43.
On the basis of this evidence, I am satisfied that the subject goods are not food but that they
are food supplements. They comprise plant sterols which occur naturally in plant food
consumed by humans although they occur in that plant food in far less concentrated forms
than those in the subject goods. When consumed in plant food, I find on the basis of the
evidence of Professor Clifton and Dr Glover that plant sterols lower cholesterol levels in the
human body. Lowering cholesterol levels in LDL assists in lowering the risk of heart
disease as it has been accepted that there is an association between high levels of LDL
cholesterol and heart disease. Plant sterols, therefore, have a role in assisting the human
body to maintain its proper functioning.
44.
Again on the basis of the evidence of Professor Clifton and Dr Glover, I am satisfied that
this role remains the same whether the plant sterols are consumed in their natural form
through plant foods or as a concentrated form mixed or combined with other ingredients to
make edible oil spreads or margarines that are eaten by humans. In their concentrated form,
40% by weight of a plant sterol provides calories to fuel a human body. The other benefit to
52
Exhibit F
That information is consistent with that appearing on the Nutrition Information on the Nuttelex Pulse and
Flora pro►activ packs of edible oil spreads: Exhibits H and 3. Dr Mulroney gave a similar explanation at
Transcript at 77
53
Page 27 of 80
the human body comes from their displacing LDL cholesterol on the micelles so that a
reduced level of LDL cholesterol is taken to the intestine to be absorbed in the rest of the
body. That has a beneficial effect in maintaining the human heart in working order.
45.
These qualities do not lead me to conclude that the subject goods are a food as such.
Although plant sterols provide both energy and materials for maintenance and repair, they
do not have that other quality of being something that might be regarded as a substance that
would be consumed. That remains the case even when it is known that plant sterols occur
naturally in the plants that humans eat. The plant sterols that are the subject goods do not
come in their original form and so hidden as one of the constituents found in plant material.
They come instead in large containers in the form of a yellow and viscous oily liquid
verging on a paste. On the evidence that I have, they are nutriments but they do not have
that other quality of being something that a person would think to eat on its own be it by the
spoonful or the bowlful or otherwise or that a person would buy to mix or combine with
other ingredients to make another item of food. By way of comparison, a person might not
think to eat a spoon or bowlful of flour, ground from any grain, or spices but would
recognise the flour or spices as a food in the sense that they will be used as ingredients to
prepare something that will be eaten.
46.
My view takes the subject goods outside the meaning of “food” but not necessarily outside
that of “food supplement”. On the evidence, I find that the subject goods are a concentrated
form of a particular component of a food that is already consumed as part of the diet of
every person who eats plants. The subject goods are consumed to increase the amount of
that component that would otherwise be consumed and so increase the effect that their
consumption has on the body. They are consumed for that reason and the fact that they are
consumed is apparent from their presence in margarine and dairy products that are bought
by consumers for their consumption.
47.
A point is made of their presence on the packaging of the two oil spreads admitted in
evidence. Flora pro►activ states that it is a “spread, with plant sterols”, that it “actively
lowers cholesterol absorption” and that its claim is “clinically proven”. On one end of the
package, it is stated:
Page 28 of 80
“Flora pro►activ contains plant sterols that are clinically proven to actively lower
cholesterol absorption by up to 10% in three weeks as part of a healthy lifestyle.”
At the other end of the package is the statement:
“For optimal results, 25mg of Flora pro►activ spread containing 2g of plant sterols
should be consumed per day. Consuming more than 3g of plant sterols per day does
not provide additional benefits. Use as part of a healthy diet, which is low in
saturated fat and high in fruit and vegetables. If you are on a cholesterol lowering
medication you should follow your doctor’s advice while using Flora pro►activ
spread. …”54
48.
Nuttelex makes similar statements on its packaging. I think that an inference can be drawn
from these statements and from the clinical evidence that is otherwise available that those
who consume either product may do so in the hope that they will obtain the assistance of
plant sterols present in quantities additional to those available in a normal diet and relevant
in lowering cholesterol absorption. That clinical evidence, referred to by Professor Clifton
and Dr Glover, points to their hope not being misplaced as there is sound evidence that there
will be a reduction in cholesterol absorption.
49.
It is true that the subject goods are not required as an ingredient to make any other product
to which they are added but they do add to the nutriments that are otherwise present in the
food, or combination of foods, consumed by a person and so in that person’s diet. Those
nutriments take the form of plant sterols that provide both energy and a means of
maintaining a person’s health and well-being by lowering cholesterol. That is one aspect of
what is provided by food generally. It follows that I am satisfied that the subject goods are
food supplements.
50.
Before leaving this point, Mr Slonim drew my attention to the case of Kurowski and
submitted that, like the effervescent vitamin tablets considered in that case, the plant sterols
are not a food ingredient or a food supplement because they are not necessary for the
production of the food in which they are mixed and nor do they form part of food per se.
Mr Slonim is correct in saying that they are not necessary for the production of the food. It
could be thought that an edible oil is merely a vehicle for taking the plant sterols to the body
just as, presumably, the agents with which the vitamins are mixed in the tablet are a vehicle.
54
Page 29 of 80
Exhibit 3
Unquestioningly, margarine would still be margarine without the addition of the subject
goods. It seems to me that the two cannot be compared given the form in which each is
presented on their entry for home consumption. The effervescent vitamin tablets entered as
tablets and to be consumed as tablets. They were not entered for incorporation in food in
any manner. Had the subject goods been entered in the form of capsules, it might have been
possible to draw an analogy with the effervescent vitamin tablets but they were not entered
in that form and I do not think that the analogy can be drawn.
51.
The conclusion that I have come to that that the subject goods are food supplements means
that they cannot be classified to any heading under Chapter 30. In particular, that means that
they cannot be classified under heading 3004.
HEADING 3004
52.
Should I be incorrect in my conclusion that the subject goods cannot be classified to
Chapter 30 and so to heading 3004, I have considered whether they can be so classified.
That raises the three issues I have identified above: are they “medicaments (excluding goods
of 3002, 3005 or 3006)”; do they consist of “mixed or unmixed products for therapeutic or
prophylactic uses”; and are they “put up in measured doses … or in forms of packings for
retail sale”.
The submissions
53.
Mr Slonim submitted that, if the subject goods consist of products (mixed or unmixed) for
therapeutic or prophylactic uses, they are medicaments for the purposes of heading 3004.
The fact that they are incorporated into spreads and beverages does not detract from their
therapeutic and prophylactic uses. Those uses are as inhibitors of cholesterol absorption and
uptake. Relying on Kurowski, Mr Slonim submitted that a test for determining whether
imported goods are medicaments for therapeutic or prophylactic purposes is whether the
importer or seller makes bona fide claims regarding the therapeutic properties for the goods
and consumers purchase the goods for those purposes.
Page 30 of 80
54.
Mr Slonim also relied on a decision of the Tribunal in Re Forever Living Products Australia
Pty Ltd and Collector of Customs55 (Forever Living) for the proposition that medicaments
should not be confined to those that fall within the description according to Western
medicine. Whether there are reasonable grounds to believe that an importer has a bona fide
belief that the goods have a therapeutic quality as a complementary medicine, are suitable
for use as medicaments is a relevant factor in deciding whether they come under
heading 3004.
55.
As to whether the subject goods had been put up in measured doses or in forms or packings
for retail sale, Mr Slonim relied on the case of Collector of Customs v Chemark Services Pty
Ltd56 (Chemark) to support his submission that, in the context of a retail sale, the sale is to
the persons who will use or consume the goods as distinct from resellers or those who may
repackage and sell them in that different packaging. Size, quantity, packaging and labelling
is not relevant when characterising the level of the sale of goods. The heading requires that
the goods are sold to the user as imported.
56.
Mr Northcote contended that Mr Slonim had attempted to define a “medicament” by
reference to the words that followed in heading 3004. That is incorrect, Mr Northcote
continued, because the words that follow represent additional requirements but, if the
subject goods are not medicaments at all, the heading does not apply. He submitted that
there is no evidence to suggest that the subject goods are used in Australia to cure or heal
any condition. Furthermore, they are not for therapeutic or prophylactic uses since they are
not put to either or both of those uses. In the form in which they are imported, most of the
subject goods find their way into food and only some 1.5% of the total is used in the
manufacture of capsules. In so far as the subject goods are used in the manufacture of those
capsules, that is not a therapeutic or prophylactic use because there can be no such use until
the capsules are consumed by humans.
57.
Mr Northcote agreed that it is not necessary to have scientific proof that a substance can
effectively treat disease for it to be regarded as being a medicament for therapeutic uses. He
did not agree, though, with views expressed in that case to the effect that the subjective
55
56
Page 31 of 80
(1986) 9 ALD 271; Senior Member McMahon and Mr Horrigan and Mr Stevens, Members
[1993] FCA 291; (1993) 42 FCR 585; 114 ALR 531; 17 AAR 424; Spender, Einfeld and Lee JJ
intention of the importer is a relevant factor. He supported his submission in that regard by
reference to Chinese Food & Wine.
“Medicaments … consisting of mixed or unmixed products for therapeutic or
prophylactic use”
58.
The ordinary meanings of the word “medicament” are given in Chambers and Macquarie as,
respectively:
“medicament … a medicine …”;57 and
(“medicine … noun … 1 a any substance used to treat or prevent a disease or
illness, especially one taken internally. …”58)
“medicament … a curative or healing substance. …”59
59.
The ordinary meanings of the words “therapeutic” and “prophylactic” are also found in the
two dictionaries and are in similar terms. I will begin with those given in Chambers
followed by those given in the Macquarie for the circumstances in which the words are used
as adjectives as they are in heading 3004 where they qualify the word “uses”:
“therapeutic … 1 belonging or relating to, concerning, or contributing to, the
healing and curing of disease. 2 bringing a feeling of general well-being. …”
“prophylactic … guarding against or tending to prevent disease or other mishap
…”60
“therapeutic … relating to the treating or curing of disease; curative. …”
“prophylactic … 1. defending or protecting from disease, as a drug. 2. Preventative;
preservative; protective. …”61
60.
Returning to heading 3004, the goods must be a “medicament” in the sense of a medicine or
a substance used to treat or prevent a disease or illness or to guard against or tending to
prevent disease. If they meet that description, they must consist of products for use in
treating, curing or preventing disease.
57
Chambers
Chambers
59
Macquarie
60
Chambers
61
The Macquarie
58
Page 32 of 80
61.
The way in which the task of deciding whether goods meet a description of this sort was set
out by Lockhart J, with whom Woodward and Ryan JJ agreed, in Chinese Food & Wine in
the context of Item 30.03 as it then appeared in Schedule 2 and related to medicaments.
Note 1(1) to Chapter 30 provided that:
“In 30.03, ‘medicaments’ means goods (other than dieteric, diabetic or fortified
foods, tonic beverages, spa water or similar foods or beverages) that are –
(a)
(b)
62.
goods comprising 2 or more constituents that have been mixed or
compounded together for a therapeutic or prophylactic use; or
unmixed goods suitable for such use that have been put up in measured doses
or in forms or in packs of a kind sold by retail for therapeutic or prophylactic
purposes.”
The case turned, in part, on the constituents and their relevance, as opposed to that of the
resulting product, in being medicaments. It also turned on whether the goods were
medicaments and Lockhart J said of the task in deciding whether they were or were not was
to be approached in this way:
“
Whether the goods in suit properly fall within Item 30.03 of the Customs
tariff is determined by an objective test not by the intentions of the manufacturer in
China or of the exporter or importer. The test is applied at the port of entry of the
goods and at the time of entry. The characteristics of the goods, their get-up, colour,
decoration, labelling and packaging are all relevant considerations. In some cases,
a visual inspection of the goods and their packaging will disclose characteristics of
the goods and enable a judgment to be made as to whether they are for therapeutic
or prophylactic use. But visual inspection will not necessarily provide the answer in
each case. Tests may have to be carried out and inquiries made to ascertain the
relevant characteristics of the goods. In the present case, samples were taken and
sent for chemical analysis. …”62
This passage does not support the conclusion reached by the Tribunal in Forever Living that
the belief of the importer is relevant in characterising the goods as medicaments or not.
“Products put up in measured doses … or in forms or packings for retail sale”
63.
I do not think that there is any basis for saying that the subject goods are put up in measured
doses and I did not understand Mr Slonim to be suggesting that they are. What he focused
upon were whether they had been put up in forms of packings for retail sale. This was an
issue considered by the Full Court of the Federal Court under heading 3808. It had done so
62
Page 33 of 80
(1987) 72 ALR 591 at 599
in Chemark. The goods in question in that case comprised metham sodium, a chemical
herbicide used by professional horticulturists and had been entered into Australia in eighty
250kg drums. In considering whether the goods came within heading 3808, the Full Court
said that, whether they had been put:
“… up in a form or packing for retail sale means simply to present it in a form or
packing for retail sale. I can find nothing to suggest that the expression has any
particular or technical meaning in relation to chemicals.”63
64.
The expression “retail sale” was, however, in a different category and the Full Court
concluded:
“
The weight of authority seems to us to support a conclusion that the words
‘retail sale’ have generally acquired a specialised meaning of a sale to an ultimate
consumer. We do not think that the usage of the term limits such consumers to
ordinary members of the public. The fact that in the present case almost all of the
goods imported by the respondent were directly sold to professional horticulturists
and not to ordinary gardeners as ultimate consumers is, in our opinion, irrelevant.
Professionals can still be regarded as ultimate consumers. … [S]ize or quantity of
the sale cannot in our view be determinative.”64
65.
The presence or absence of labelling that complied with Australian law did not affect the
question of whether or not that metham sodium had been “… put up in forms or packings for
retail sale …”. A label did not modify or enhance the metham sodium and, if it were
permitted to have any relevance to the question:
“… importers would be able to escape the duty prescribed by heading 3808 simply
by instructing foreign manufacturers not to attach labels to chemicals put up for
retail sale which are bound for Australia.”65
The evidence
66.
Dr Glover said that plant sterols or phytosterols are used in the dietary supplement industry
where the concentrated product is presented in gel cap form.66 Added to that concentrated
form of plant sterols or phytosterols are carotenoids derived from algae. Carotenoids are
added as some clinical trials had demonstrated that plus levels of carotenoids are depleted by
63
[1993] FCA 291; (1993) 42 FCR 585; 114 ALR 531; 17 AAR 424 at [10]; 588; 535; 427
[1993] FCA 291; (1993) 42 FCR 585; 114 ALR 531; 17 AAR 424 at [24]-[35]; 591; 537; 430
65
[1993] FCA 291; (1993) 42 FCR 585; 114 ALR 531; 17 AAR 424 at [28]; 591; 538; 430-431
66
Exhibit E at [21]
64
Page 34 of 80
a very small amount.67 An example is provided by Blackmore’s product called “Cholesterol
Health” but that is only of a number of products of a similar type.68 A bottle of the product
was admitted in evidence. Its label states that it “reduces cholesterol absorption”, “Provides
a relevant dose of plant sterols”, “May help maintain healthy cholesterol levels” and “May
help improve LDL:HDL cholesterol ratio”.69 After advising users of the product to take one
tablet twice daily with main meals or as professionally prescribed and advising of those for
whom it was not suitable, the label continues:
“… There is no benefit from taking more than 3g/day of phytosterols from all
sources. Blood cholesterol levels should be regularly checked. This product is not
for the treatment of high cholesterol. See your healthcare professional to find out if
this product is suitable for you.”70
67.
Dr Glover said that none of the subject goods were sold by Cognis or BASF for the purpose
of being on-sold to third parties in their existing containers and packaging. She was
unaware that any third parties had in fact on-sold it. Approximately 1.5% of the subject
goods sold by Cognis and BASF were sold to dietary supplement manufacturers and the
remaining 98.5% sold to food manufacturers. There is a historical reason for that disparity,
Dr Glover said, and it lies in the fact that the Food Standards Australia New Zealand
(FSANZ) approved the use of sterol esters well before the Therapeutic Goods Authority
(TGA) did.71 She explained that Cognis and BASF had obtained approval from the TGA for
phytosterols as a listable product. That means that the claim can be made that they “may
assist in the reduction of cholesterol absorption”. In order to make the stronger claim that
they “will lower cholesterol”, the phytosterols had to be a registered product but it is not.
68.
Professor Clifton said that, as a physician, he is familiar with the way in which medicines
are ordinarily sold in Australia at the retail level. He said that a packet of Panadol with
Optizorb formulation containing 20 tablets was typical of the way in which medicines are
put up for retail sale. It has indications of dosage rates on the pack, what the tablets are
taken with and so on.72 Professor Clifton agreed that the subject goods were not in a form
ready for retail sale but would be when they were added to a food product. He agreed that
67
Exhibit E at [33(b)] and transcript at 41
Exhibit E at [33(b)] and Annexure J
69
Exhibit F
70
Exhibit F
71
Transcript at 53 and 55
72
Exhibit 2
68
Page 35 of 80
the food product would be covered by regulations different from those regulating the
production and sale of the Panadol tablets. The labelling would be different.
Consideration
69.
Although I understand that I am required to classify the subject goods and not the products
in which they are later incorporated by Australian manufacturers, I will start with the
qualities of plant sterols both alone and in the goods in which they are incorporated.
70.
On the basis of the evidence that I have from Dr Glover, I am satisfied that approximately
98.5% of the subject goods are sold by Cognis and BASF to food manufacturers and the
remaining 1.5% or so to dietary supplement manufacturers. I am also satisfied that, as I
have found earlier, the subject goods are entered into Australia in various sizes of drums and
containers with the smallest weighing 25 kilograms, the midsize 180 kilograms and the
largest weighing 900 kilograms.
71.
On the basis of the evidence of both Dr Glover and Professor Clifton, I am satisfied that
plant sterols, by whatever description, can have a beneficial effect on the human body by
reducing the level of LDL cholesterol that is absorbed into the body through the intestine. I
also accept the evidence of Professor Clifton that there is a widely documented and accepted
association between high levels of LDL cholesterol and heart disease.
72.
It is one thing, however, to say that there is an accepted association between the two and
another to say that a substance that is directed to reducing LDL cholesterol is a substance
that is a medicine or a curative or healing substance and so a medicament. Although I
understand that I must classify the subject goods and not the products into which they are
later incorporated in Australia, I note that no claim is made for any of the products that plant
sterols will cure or heal high levels of LDL cholesterol if high levels were to be regarded as
a disease. Indeed, the Blackmore’s Cholesterol Health capsules specifically say that they
are not for the treatment of high cholesterol. At their highest, on the evidence that I have,
the plant sterols will lower cholesterol absorption but will neither cure nor heal any
condition. Whether they lower the level of LDL cholesterol to a point where it can be said
to be preventative of heart disease is not a claim that is made.
Page 36 of 80
73.
The highest claim that is made on any product is made on the Flora pro►activ that it
“actively lowers cholesterol absorption” and that its claim is “clinically proven” although
that made on the Nuttelex Pulse is not far behind. The claims made on the Blackmore’s
Cholesterol Health capsules are more guarded. They are to the effect that the capsules
provide a relevant dose of plant sterols that “may help maintain healthy cholesterol levels”
and “may help improve LDL:HDL cholesterol ratios”. Further information provided on the
label states that the product is not for the treatment of high cholesterol.
74.
In view of the findings that I have made, I am not satisfied that they can be regarded as
medicaments for they do not have the quality of a medicine or of a curative or healing
substance. They do not cure or heal any condition, for lowering LDL cholesterol is not
curing or healing any condition. If I am taking too narrow a view of the meaning of
“medicament” and should broaden it in view of the reference to medicaments consisting of
mixed or unmixed products for their therapeutic or prophylactic uses, I would not change
my conclusion. The word “therapeutic” covers much of the same ground as “medicament”
and, in so far as it has a wider meaning of bringing about a feeling of general well-being, I
have no evidence on that aspect on which to make a finding. As to whether the subject
goods have prophylactic effects, I am again not satisfied that they guard against or tend to
prevent disease. While there is evidence that they lower LDL cholesterol and that high
levels of LDL cholesterol have an association with heart disease, there is no evidence that
the consumption of plant sterols of the sort comprising the subject goods tends to prevent
heart disease.
75.
As I said earlier, I am not classifying the margarines and capsules that contain plant sterols
of the sort comprising the subject goods but the subject goods themselves. I think it is also
important not to unpick heading 3004 to the extent that it becomes just a series of words and
there is no sense of the whole. The heading must be read as a whole. When I do that, it
seems to me that it contemplates goods that are medicaments that will be used for
therapeutic or prophylactic purposes and that will be presented either in measured doses or
in forms or packings for retail sale for those uses. It does not contemplate that there will be
intermediate steps that change the form of the goods or make them more palatable.
Page 37 of 80
76.
The subject goods are a yellow and viscous oily liquid, verging on a paste, that looks
nothing like the spreads in which that liquid will later be incorporated or the capsules that
will be made. They are contained in packings for sale to the end users being the
manufacturers of food or of dietary supplements. Those sales are retail sales for those
manufacturers are the end users of the plant sterols in the form in which they comprise the
subject goods. That conclusion is consistent with the understanding of the Full Court of the
Federal Court in Chemark.
77.
The manufacturers will sell their products to others but they will not sell plant sterols in the
form in which they are imported. In relation to food, those sales will lead to retail sales to
the ultimate consumers of the food but they will be retail sales of a product different from
the subject goods. In relation to the capsules, the plant sterols may have added betacarotene
as in the case of Blackmore’s Cholesterol Health capsules or they may not. If they do not,
where they differ from the subject goods is in the packings in which they are presented for
retail sale. They are presented in measured doses, in the form of capsules, appropriate for
human consumption. They will not be in the packings in which they were imported.
78.
In summary, whether or not plant sterols are medicaments, the subject goods were entered in
packings for retail sale but that retail sale was not made to those who, by consuming them,
would put them to therapeutic or prophylactic uses. The retail sale was to those who would
put them to other uses or put them in a different form and on-sell the resulting products.
Therefore, I am not satisfied that the subject goods come within heading 3004.
HEADING 1516
The submissions
79.
I will only give a broad outline of the submissions made on behalf of the parties. Beginning
with Cognis and BASF, Mr Slonim submitted that, when construing Heading 1516, I should
start with the presumption that words are to be given their ordinary meaning. Phytosterols
are an unsaponifiable constituent of crude vegetable oil. Sterols can be extracted directly
from the crude oil or from Vegetable Oil Distillate (VOD), which is one of the products
from the refinement of crude oil. The other is refined edible oil. The ordinary meanings of
the word “fraction” include “a part as distinct from the whole of anything; a piece broken; a
Page 38 of 80
fragment or a bit” and “a component of a chemical mixture, especially when it has been
separated from the mixture”. Sterols are universally recognised as a component of
vegetable oil. Therefore, they are a fraction of vegetable oil as the word “fraction” is
ordinarily used. There is no trade usage established by the evidence. Instead, each of the
witnesses other than Dr Mulroney gave evidence that the word encompasses any substance
that can be separated from a mixture irrespective of its complexity. Heading 1516 is not
confined to any understanding of the word that may exist in the edible oils industry. The
fact that sterols are also described as fractions of the unsaponifiable fraction of vegetable
oils, as are other components such as tocopherols, supports the general use of the word
“fractions” to describe any component that can be separated from a mixture by chemical or
physical means.
80.
Mr Slonim also submitted that, were the word “fractions” to apply only to those fractions
that themselves consist predominantly of triglycerides, there would be no need to include the
words “and their fractions” in Heading 1516. Relying on the joint judgment of McHugh,
Gummow, Kirby and Hayne JJ in Project Blue Sky Inc v Australian Broadcasting
Authority,73 Mr Slonim submitted that it is a fundamental principle of statutory
interpretation that every effort must be made to give meaning to each word in a provision
and that sense is to be made of it as a whole.
81.
The ordinary meanings of the words “vegetable oil” and “oil” and the structure of Section II
of Schedule 3 support the contention that trees are regarded as vegetable products for the
purpose of the tariff classification. Tall oil is recognised by the fats and oils industry as one
of the established categories of vegetable oil. Bailey’s Industrial Oil and Fat Products74
(Bailey’s) is “the Bible” of that industry and it includes Tall Oil in Table 7.1 of Chapter 6.
That table sets out fats and oils and their characteristics. Tall oil is described in that table as
“Tall oil vegetable, general”.75 It is also included in a list entitled “The Major Vegetable
Oils and Fats”.76 This shows that not all vegetable oils have to contain triacyl-glycerols i.e.
triglycerides. Professor Clifton gave evidence that there are hundreds of products that are
derived from vegetables that do not contain triglycerides and that are called vegetable fats.
73
[1998] HCA 28; (1998) 194 CLR 355; 72 ALJR 841; 153 ALR 490
Volume 5, 6th edition, editor F. Shahidi, John Wiley & Sons, New Jersey, USA, 2005
75
Exhibit I at 110
76
Exhibit I at 247-248
74
Page 39 of 80
Sterols are vegetable fats. Dr Mulroney’s evidence supported the contention that the subject
goods appear to be partially re-esterified.
82.
Mr Northcote submitted Heading 1516 needs to be construed as a whole in the context of
Chapter 15 and the overall tariff structure as well as in a manner that is likely to accord with
the understanding of persons who trade in vegetable fats and oils. When this is done, it
leads to the conclusion that the heading as a whole applies only to products which are
themselves animal or vegetable fats and oils and which have been subjected to, or obtained
by, the particular processes described; hydrogenated, inter-esterified, re-esterified or
elaidinised. The subject goods are not such a product since they are not a vegetable fat or
oil.
83.
An interpretation of “vegetable fats and oils” as materials obtained from plants and
consisting predominantly of triglycerides with minor amounts of other matter, including
sterols and sterol esters, is supported by the evidence of Dr Mulroney and of Professor
Clifton. It is also supported by the understanding conveyed by the HSENs. The subject
goods consist almost entirely of plant sterol esters, which are not triglycerides or glycerides,
of fatty acids and so are not vegetable fats or oils.
84.
The contention that Tall Oil is a vegetable oil, Mr Northcote submitted, is based on a single
reference in Bailey’s and should not be accepted. Dr Mulroney, Mr Frandsen and Dr Glover
all gave evidence that Tall Oil is not a vegetable oil. To accept it as a vegetable oil properly
classified under heading 1516 of Chapter 15 would be inconsistent with its classification
under Heading 3803 in Chapter 38. If classified to that heading it would come within the
description “goods of Section VI” and Chapter 15 does not apply to such goods. Therefore,
Note 1(e) to Chapter 15 would not permit Tall Oil to be classified to a heading coming
within Chapter 15.
85.
The meaning of the word “fractions” is not merely a question of evidence but of statutory
construction. The question is not, Mr Northcote submitted, whether there is some ordinary
or trade meaning of “fraction” that may extend to a VOD or to sterols but whether the word
“fractions”, properly construed in its context, does extend to them. Citing, among others,
Page 40 of 80
Collector of Customs v Bell Basic Industries,77 he submitted that the choice of meaning may
not lie starkly between an ordinary meaning and a trade meaning but some other artificially
extended or limited meaning. Heading 1516 is a composite phrase not itself having a trade
meaning but including terms that do. The terms “hydrogenated”, “inter-estified”, “reesterified” and “elaidinised” are trade or technical terms and so it is likely that the term
“fractions” is also intended to have a technical or trade meaning. These are relevant
considerations in giving the word “fraction” its correct “register” of meaning.78 Relevant
evidence of a trade meaning must come from the fats and oils industry, including those who
trade in fats and oils. Relevant evidence is found in that of Dr Mulroney and in the written
material to which I will refer. Confirmation that “fractions” is intended to have the meaning
of a product that results from the process of fractionation that continues to consist of
triglycerides comes from the HSENs, Mr Northcote submitted. Fractions are not non-oil
materials extracted from the oil as a by-product of refining oils.
Schedule 3 Notes and HSEN
86.
Note 1(e) to Chapter 15, in which heading 1516 is located, provides that the Chapter does
not apply to “… goods of Section VI”. Chapter 30, in which both headings 3004 and 3803
are located, comes within Section VI. I have already found that the subject goods do not
come within heading 3004 but I have yet to consider heading 3803. That heading reads:
“TALL OIL, WHETHER OR NOT REFINED
87.
Free”
Note 1(e) to Chapter 15 in Schedule 3 matches Note 1(e) to the HSEN but the HSEN goes
on to give a more expansive passage on animal or vegetable fats or oils under the heading
“GENERAL”. Paragraph (A) of that passage is concerned with those substances covered by
the Chapter. It reads, in part:
“With the exception of sperm oil and jojoba oil, animal or vegetable fats and oils
are esters of glycerol with fatty acids (such as palmitic, stearic and oleic acids).
This may be either solid or fluid, but are all lighter than water. On fairly long
exposure to air they become rancid due to hydrolysis and oxidation. When heated
they decompose, giving off an acrid irritant odour. They are all insoluble in water,
but completely soluble in diethyl ether, carbon disulphide, carbon tetrachloride,
benzene, etc. Castor oil is soluble in alcohol but the other animal or vegetable fats
77
78
Page 41 of 80
[1988] FCA 371; (1988) 20 FCR 146; 83 ALR 251; 9 AAR 382 at [16]; 156; 261; 392
As to “register”, see [142]-[144] below.
and oils are only slightly soluble in alcohol. They all leave a persistent greasy stain
on paper.
The esters forming triglyceride fats can be broken up (saponification) by the action
of superheated steam, dilute acids, enzymes or catalysts, giving glycerol and fatty
acids, or by the action of alkalis, which give glycerol and the alkali salts of fatty
acids (soaps).
Headings 15.04 and 15.06 to 15.15 also cover fractions of the fats and oils
mentioned in those headings, provided they are not more specifically described
elsewhere in the Nomenclature (e.g. spermaceti, heading 15.21). The main methods
for fractionation are as follows:
(a)
dry fractionation which includes pressing, decantation, winterisation and
filtration;
(b)
solvent fractionation; and
(c)
fractionation with the assistance of a surface-active agent.
Fractionation does not cause any changes in the chemical structure of the fats or
oils.”79
The dictionary definitions of terms
88.
I will return to the ordinary meanings of words used in Heading 1516 but, in order to put the
evidence in context, will set out some of the meanings of the expression “vegetable oil” and
other terms. I will begin with the expression “vegetable oil”:
“… any of the various oils obtained from plants, used especially in cooking and
cosmetics.”80
“… any of a group of oils which are obtained from plants or their seeds or fruits,
usually consisting of esters of fatty acids and glycerol.”81
“… any oil, often edible, that is extracted from the seeds, fruit or nuts of a plant;
used in foods as drying oils in paints, as rubber softening agents, and as pesticide
carriers.”82
89.
The Oils and Fats Glossary prepared by the Federation of Oils, Seeds and Fats Associations
(FOSFA) has the following entry:
79
Respondent’s List of Authorities and Legal Materials; Tab 2; III-15-2 - III-15-3
Chambers
81
Macquarie and see also Collins English Dictionary – Complete and Unabridged 2012 Digital Edition;
William Collins & Sons Ltd
82
Academic Press Dictionary of Science and Technology; edited by Christopher Morris; 1991; Academic Press
Inc; San Diego
80
Page 42 of 80
“GLYCERIDES (TRIACYLGYCEROLS): Natural fats and oils are mixtures of
triglycerides. The esters of fatty acids combined with glycerol are often referred to
as ‘triglyceride’. … In general solid fats contain a relatively high proportion of the
saturated fatty acids and oils contain higher proportions of unsaturated or shorter
chain fatty acids.”83
90.
The meanings of the word “fraction” vary according to the context in which they are used. I
will first set out its ordinary meanings as they appear in Chambers and in the Macquarie:
“… 1 math an expression that indicates one or more equal parts of a whole, usually
represented by a pair of numbers separated by horizontal or diagonal line, where
the upper number (the NUMERATOR) represents the number of parts selected and
the lower number (the DENOMINATOR) the total number of parts. Compare
INTEGER. 2 a portion; a small part of something. … 4 chem a group of chemical
compounds whose boiling points fall within a very narrow range, the components of
which can be separated by FRACTIONAL DISTILLATION. …”84
“… 1. Mathematics a. one or more parts of a unit or whole number; the ratio
between any two numbers. b. a ratio of algebraic quantities analogous to the
arithmetical vulgar fraction and similarly expressed. 2. a part as distinct from the
whole of anything: only a fraction of the population is literate. 3. a piece broken off;
fragment or bit. … 7. Chemistry a component of a chemical mixture, especially when
it has been separated from the mixture. …”85
91.
Meanings given to the verb “fractionate” or the noun “fractionation” include:
“fractionate … 1 to break something up into smaller units. 2 to separate the
components (of a liquid) by distillation, particularly FRACTIONAL DISTILLATION.
…”86
“fractionate … 1. to separate (a mixture) into its components, or into portions
having different properties, as by distillation, crystallisation, or chromatography;
subject to fractional distillation, crystallisation, or the like. 2. to obtain by such a
process. …”87
“FRACTIONATION: Fractionation involves the separation of an oil or fat into two
or more fractions. The oil is cooled under controlled conditions and the fractions
separated by filtration or centrifugation. Fractionation of a fat is made possible by
83
Exhibit 5; Tab 7 at 31
Chambers
85
Macquarie
86
Chambers
87
Macquarie
84
Page 43 of 80
the solubility differences of the component triglycerides arising from the structural
differences of their fatty acids, chain length, degree and type of unsaturation.”88
“Fractionation · The process of separating fats and oils by differences in melt points
or volatility.”89
92.
Heading 1516 refers to the animal or vegetable fats and oils and their fractions being partly
or wholly hydrogenated, inter-estified, re-esterified or elaidinised. The ordinary meanings
of those descriptions or alternative forms of the words from which they are derived are:
HYDROGENATE
“hydrogenate .. to undergo or cause to undergo hydrogenation.”90
“hydrogenate … to combine or treat with hydrogen: to hydrogenate vegetable oil to
fat. …”91
“HYDROGENATION: Each double bond in an unsaturated fatty acid chain can
react with two hydrogen atoms to become saturated. The chemical reaction is
known as hydrogenation and is achieved by reacting the oil with gaseous hydrogen
at elevated temperature and pressure in the presence of a catalyst. Hydrogenation
of oils and fats is often referred to as ‘hardening’.”92
“Hydrogenation · The process of adding hydrogen atoms to the carbon-to-carbon
double bonds in unsaturated fatty acids. This process results in higher melt points,
higher solid fat content and longer shelf life without rancidity in fat-containing
products.”93
INTER-ESTIFICATION
“INTERESTIFICATION: Interestification modifies the natural distribution of the
fatty acids in fats and oils. By the use of a catalyst the combined fatty acids are
induced to become detached from their original glycerol molecule and reattached in
a random manner (random interestification). A modification of this process is to
lower the temperature until some of the newly formed high melting glycerides
crystallise out (direct interestification). The processes result in a different
triglyceride composition which, in turn, leads to physical properties different from
the native fats and oils. The products may be more useful for making margarine,
vanaspati and shortening.”94
88
FOSFA; Glossary; website; Exhibit 5; Tab 7 at 30
American Oil Chemists Society (AOCS); AOCS Resource Directory; Glossary: Exhibit 5; Tab 8 at 41
90
Chambers
91
Macquarie
92
FOSFA; Glossary; website; Exhibit 5; Tab 7 at 31
93
AOCS Resource Directory; Glossary: Exhibit 5; Tab 8 at 41
94
FOSFA; Glossary; website: Exhibit 5; Tab 7 at 32
89
Page 44 of 80
The evidence
A.
93.
Manufacture of subject goods
At Annexure F to her statement, Dr Glover attached charts setting out the manufacturing
processes of each of the subject goods. The chart for Vegapure 95 is the simplest:
Sunflower Fatty Acid
Vegetable oil based Sterols
↓
↓
Esterification
↓
Raffination
↓
Distillation
↓
Drumming
↓
Vegapure 95
94.
This process converts the sterol esters into free sterols and tocopherol esters into free
tocopherols. The conversion is required because they can only be separated and purified in
their free forms.
95.
The manufacturing process for Vegapure 95FF, Vegapure 95E and Generolester GM are
similar although Vegapure 95E begins with sunflower fatty acids and non-GM Plant Sterols,
which are primarily derived from wood and rape, and the others with sunflower fatty acids
and plant sterols, which are mainly derived from soy. I will set out the processes for
Vegapure 95FF:
Sunflower fatty acids
and
Plant Sterols
(primarily soy)
→
Esterification
→
Water
→
Fatty acids
“solvent free process”
↓
Refining
↓
Distillation
↓
Deodorization
↓
Page 45 of 80
Tocopherol-rich extract
L-Ascorbyl palmitate
(antioxidant)
↓
↓
→
Drumming
↓
Vegapure 95 FF
B.
96.
Fats and oils
Dr Mulroney said that a generally accepted definition of fats and oils is given by NOV
Sonntag in Structure and Composition of Fats and Oils:
“Fats and oils … are water-insoluble, hydrophobic substances of vegetable, land
animal, or marine animal origin which consist predominantly of glyceryl esters of
fatty acids, so-called triglycerides. …”95
Vegetable fats and oils are a subset of fats and oils and are derived from plant sources such
as canola, cottonseed, soyabean, palm and so on.
97.
Dr Mulroney noted that FSANZ Standard 2.4.1 defined edible oils in slightly wider terms to
take account of diglycerides that are often present, in relatively small amounts, in vegetable
fats and oils. Standard 2.4.1 states:
“Edible oils means triglycerides, diglycerides, or both the triglycerides and
diglycerides of fatty acids of plant or animal origin, including acquatic plants and
acquatic animals.”
98.
Standard 2.4.1 of the FSANZ Code also provides that edible oils may contain incidental
amounts of materials that are not fats and oils in their own right.96 Sterols and sterol esters
are minor components of that sort and are not themselves regarded as vegetable fats or oils.
Sterols have no fatty acid in their structure and fall into the category of unsaponifiable
constituents, or unsaponifiable matter. Sterol esters are esters of fatty acids but are not
glycerides and so not vegetable fats or oils.
95
Included in Bailey’s Industrial Oil and Fat Products 4th edition, (ed. D Swern), John Wiley & Sons, New
York, USA, 1979, vol 1 at 1 and Exhibit 4; Annexure C (citation omitted)
96
Standard 2.4.1 in the FSANZ Code states: “Edible oils may contain incidental amounts of free fatty acids,
unsaponifiable constituents and other lipids including naturally occurring gums, waxes and phosphatides.”
Page 46 of 80
99.
Dr Mulroney said that he was not aware of vegetable oils’ being classified in more than one
way. Sometimes they are simply represented as “vegetable oils” and, in some cases, by
reference to their fatty acid content or composition. In the industry, but not in the market,
there are lauric oils, palmitic oils and so on but that is “casual terminology”.97 Mr Slonim
referred to a passage from a Chapter by Frank D Gunstone in Bailey’s. The Chapter is
entitled “Vegetable Oils”.98 Section 4 of the Chapter is headed “Classification of Vegetable
Oils”. Dr Mulroney agreed that the author had first classified the oils by reference to the
crop from which they had come. It was a classification adopted by many commodity
traders. Another classification is by reference to the fatty acid composition. The list of
natural fatty acids exceeds 1,000 but commercial interest is limited to approximately 20,
[4.2] of the Chapter states. It continues:
“… Ignoring the lipid membrane, rich in α-linolenic acid and present in all green
tissue, the three dominant acids in the plant kingdom are palmitic, oleic, and
linoleic, sometimes accompanied by stearic acid and by linolenic acid. Others,
occurring in specialty oils, including myristic, lauric, erucic, hexadecenoic,
petrolelinic, γ-linolenic acid, eleostearic and isomers, ricinoleic, and vermolic …”99
100.
Table 2(a) sets out various oils by source and by typical fatty acid composition of the sort
identified in the previous passage. Each fatty acid has its own characteristics rendering
them suitable for different purposes. Some of those purposes are for use in edible products
and others have industrial applications.
101.
Dr Mulroney explained that a triglyceride has three fatty acids. It has a small head, which is
the glycerol, with three tails, which are fatty acids. In each case, the glycerol head is joined
to the fatty acid by an ester bond. A sterol ester has a large head with one tail. The two are
joined by an ester bond. In the food industry, it is the tails that contain the fatty parts and
that would have nutritional property but he cannot sell fatty acids as food. Dr Mulroney
agreed that the head can come in all sizes. It may be in the form of a glycerol, a
polyglycerol, a polyacylglycerol, a polyricinoleic acid and so on. Some heads are extremely
large. What is chosen depends upon the physical properties that are required. Each time a
head is joined to a tail, that is an esterification. If a link is made between a fatty acid and an
97
Transcript at 104
Published Online, 15 July 2005, 6th edition, John Wiley & Sons Pty Ltd, Volume 1; Exhibit I at 239
99
Exhibit I at 242
98
Page 47 of 80
alcohol group, that is an esterification reaction. Dr Mulroney agreed that the ester bond
takes the form of a hydroxyl group but he did not agree with Mr Slonim’s proposition that
anything in the hydroxyl group can be esterified to a fatty acid. He took as an example,
sodium hydroxide. It has an hydroxyl group but it cannot be esterified to a fatty acid.
Esterification is between an acyl alcohol and a fatty acid.
102.
Dr Mulroney agreed with Mr Slonim that the food industry wants to maximise its
production of triglycerides. When the crude oil comes in to a manufacturer, it contains fatty
acids. Caustic is introduced to react with those fatty acids to form a soap. They are washed
out of the oil. In doing this, there is no intention to break any ester bonds because there is
no intention to increase the amount of free fatty acids. To increase the level of free fatty
acids would be to degrade the oil. The soap is acidified to convert them back into free fatty
acids for sale as VOD. They are not re-esterified by his company, Dr Mulroney said as it is
not commercially viable. Those who esterify free fatty acids are the oleo chemical
manufacturers. Re-esterification may occur in the edible oils industry but Dr Mulroney was
not aware that it was done on a large scale in commercial premises.
103.
In his statement, Dr Mulroney had said:
“Re-esterified vegetable oil is a term used within the edible oils industry to refer to
vegetable oil obtained by the esterification of plant-derived fatty acids onto glycerol
… Examples of such processes are described by Sonntag … and Bhattacharyya ….
Although vegetable fats and oils are predominantly obtained as triglycerides directly
from the source, it is possible to take fatty acids from plant sources and re-attach (or
re-esterify) them back onto glycerol. The resulting material has a predominantly
triglyceride structure, like traditional vegetable oil, but is derived synthetically using
either chemical or enzymatic reaction to facilitate the esterification.
In Annexure F of Dr Glover’s statement and Annexure B and paragraph 15-19 of
Mr Frandsen’s statement the esterification of free sterols to fatty acids and
subsequent refining is described. This process results in a material consisting
predominantly of sterol esters. The sterol esters are not glycerides. I do not
consider that this material would be described as, or recognised as, vegetable oil. In
my opinion, this material is not vegetable oil, or re-esterified vegetable oil.
Furthermore, I do not consider this material to be a re-esterified fraction of a
vegetable oil.
In paragraphs 2 and 6 of Mr Frandsen’s statement sterols are described as
occurring in nature, and in the vegetable oil distillate, as approximately 50% free
Page 48 of 80
sterols and 50% sterol esters. As a result the sterol esters produced appear to be
partially re-esterified.”100
104.
Dr Mulroney said that the difference between “esterification” and “re-esterification” is that
the latter implies that something was esterified earlier. As far as he is aware, there is no
special meaning given to the word “re-esterification” in the industry but it is not a common
process. Mr Slonim asked Dr Mulroney to think of a bucket of fatty acids, some
unsaponifiables, a few bits and pieces, some colour bodies and asked him whether he would
have a deconstructed vegetable oil. Essentially, Dr Mulroney said, he would have its
primary components but he would have to reconstruct it and that would be quite difficult.
He agreed with Mr Slonim that he would have to re-esterify the fatty acids by adding
glycerol but did not agree that re-esterification would leave him with a substance having a
fairly similar chemical profile to a crude oil. Nothing is that simple in the industry, he said,
and it would not be the same thing.
105.
Dr Glover agreed that the predominant component of vegetable oils is triglycerides.101 A
substance that contains no esters or fatty acids would not be a vegetable oil. In her
statement, Dr Glover had said in describing the manufacture of the subject goods that, by
“…. way of summary, in producing each of the products, vegetable oil-based free sterols
(whether derived from soy or pine/rapeseed) are re-esterified through the addition of
sunflower oil-based fatty acids, following which further raffination/refinement occurs.”102
In answer to Mr Northcote, she confirmed that she had included sterols derived from pine as
vegetable oil based free sterols. She could not answer whether tall oil, which contains no
glycerides, would be a vegetable oil. It is not her area of expertise in terms of the pine oil,
Dr Glover said, and she is not familiar with it. She did not know but said that one reason
was its name and:
“… I mean it’s an oil from pine and pine is a vegetable and part of the plant
kingdom so I would say it’s a vegetable oil.”103
100
Exhibit 4 at 3
Transcript at 46
102
Exhibit E at [30]
103
Transcript at 47
101
Page 49 of 80
Dr Glover was clear that a substance that contained no glycerides and no fatty acids would
not be an oil. She was less sure whether a substance that contained no glycerides would not
be an oil.
106.
Mr Northcote drew Dr Glover’s attention to a definition of the expression “Tall Oil” from
The Macquarie Dictionary Online:
“… a resinous secondary product resulting from the manufacture of chemical wood
pulp, used in making soaps, etc. [Swedish tallӧl pine beer]”
He also took her to a publication entitled “Chemical Processes in New Zealand” and
published by the New Zealand Institute of Chemistry. The Chapter on tall oil production
and processing begins with a statement that:
“Tall oil is a mixture of mainly acidic compounds found, like turpentine, in pine trees
and obtained as a by-product of the pulp and paper industry. It is used as a resin in
many different industries, including mining, paper manufacture, paint manufacture
and synthetic rubber manufacture.
…
Tall oil, also known as ‘tallol’ or ‘liquid resin’, has three major components: resin
acids, fatty acids and unsaponifiables (also known as ‘neutral compounds’). A
typical composition of tall oil from the Kinleith Mill in Tokoroa is 49% resin acids,
32% fatty acids and 19% unsaponifiables.”104
107.
In light of this information, Dr Glover agreed that tall oil is not a vegetable oil. She further
agreed that, as a matter of logic, tall oil pitch could not be a fraction of vegetable oil and that
any sterols obtained from tall oil pitch could not be a fraction of vegetable oil. In reexamination, Dr Glover explained her reasons in the following exchange with Mr Slonim:
“And you agreed that tall oil can’t be a vegetable oil. Why?--- This is – this is – I
guess, because if we are looking at what is fat in an oil, then we are looking for a
glyceride which has fatty acids esterified to it, so we are looking at a mono-tri, mono
or diglyceride. And my understanding of tall oil is that they – that the tall oil itself
has a considerable degree of fatty acids in it, but they are not necessarily complex
with glycerol.”105
108.
Dr Glover agreed with Mr Slonim that oleic acid, palmitic acid and linoleic acid are kinds of
fatty acids that would be expected to be found in vegetable oil. In response to
104
105
Page 50 of 80
Exhibt 5 at 45-46
Transcript at 56
Mr Northcote’s question whether a substance that comprised only fatty acids found in
vegetable oil would be vegetable oil, she replied that it would be a component of vegetable
oil. That would be so if that is where the fatty acids came from and, to her mind, that would
be where they would have come from.
109.
In his statement, Professor Clifton said that vegetable oils are predominantly, but not solely,
comprised of triglycerides extracted from plants. They may also contain proteins,
phospholipids and sterols.106 In cross-examination, he explained that it is common to talk
about triglyceride as a vegetable oil but there are hundreds of different kinds of fat.
Something that came from a vegetable and was not a triglyceride could still be a fat. In
common parlance, that fat would not be called a vegetable oil but a fat, a vegetable fat or a
vegetable-derived fat. Generally, Professor Clifton said, a substance would be described by
what it is: a phospholipid, a sphinglipid, a sterol or cholesterol or whatever.107
C.
110.
Production of sterol esters
Chapter 6 of Risk Assessment Report A1024 prepared by FSANZ begins with a description
of the way in which plant sterols are produced from vegetable oil and from Tall Oil:
“6.1.1 Production from vegetable oil
Commercially, plant sterols are isolated from vegetable oils, such as soybean oil,
rapeseed (canola) oil, sunflower oil or corn oil. These vegetable oils normally
undergo a series of refining steps to remove unwanted constituents and to improve
their quality and shelf lives. The last step in the oil purification process is
deodorisation which produces a distillate known as the “vegetable oil deodorised
distillate (VOD)” (EFSA, 2007).
The VOD is the starting material for the extraction of plant sterols which are
subjected to a series of distillation, filtration and crystallisation steps to remove
unwanted by-products including fatty acids, di- and triglycerides, waxes, fatty acid
esters and others.
Phytosterol esters are esters of fatty acids and are usually produced by esterifying
phytosterol and phytostanols with long chain fatty acids from vegetable oils to
improve their solubility in food products that have fat components.
6.1.2
Production from tall oil
Plant sterols can also be isolated from a by-product of the wood pulp manufacture
from pine trees (Pinus sp.). Crude tall oil is a by-product of the wood pulping
process. Phytosterols are concentrated in the residue after the crude tall oil is
106
107
Page 51 of 80
Exhibit G at [3]
Transcript at 62
distilled into different fractions. This residue, called tall oil pitch, contains up to 515% phytosterols (JECFA 2008).
The tall oil pitch is saponified with caustic soda to hydrolyse the phytosterol esters.
The mixture is then neutralised with mineral acid and the aqueous phase removed.
The phytosterol fraction is recovered by distillation of the residual pitch in a number
of steps. Finally, the phytosterols are purified via solvent re-crystallisation (JECFA
2008).”108
111.
In his statement, Mr Frandsen said that it would be ideal if manufacturers could use sterol
esters that have been obtained directly from a natural source. It is not, however, cost
effective to separate or extract sterol esters directly from raw materials and purify them
while managing not to break the ester bonds and cause the sterols not to separate into
various fractions and render them useless. Instead, manufacturers have developed a process
whereby sterol esters are reduced to free esters which are then purified and re-esterified to
produce sterol esters. Neither BASF, nor Cognis before it, has been involved in the
processes leading to the extraction of VOD. They have bought that product from oil
manufacturers.
112.
Mr Frandsen described the process by which edible vegetable oils are obtained from soft
seeds. Soft seeds include canola, corn, cotton and sunflower seeds. Hard seeds include
palm and coconut. They require a different processing method and are not used in the
production of sterols. The process begins by crushing vegetable oil seeds such as canola or
soya to produce crude vegetable oil. That crude vegetable oil contains impurities and
compounds giving it unpleasant odours and colour. The crude vegetable oil is deodorised
and refined by distillation in a process known as “raffination”. VOD is a product of that
distillation. It is composed of:
(1)
Tocopherols
(Vitamin E family of compounds)
approximately 10%;
(2)
Free sterols and sterol esters
approximately 14-15% in an average ratio of 50:50; and
(3)
108
Page 52 of 80
Fatty acids
approximately 75%.
Risk Assessment Report A1024 at 22; Exhibit 5 at 92
113.
114.
The VOD then undergoes a series of processes for the purpose of:
(1)
extraction of sterols from VOD;
(2)
re-esterification of the extracted sterols; and
(3)
refinement of the mixture of crude sterol esters.
In so far as extraction of sterols from the VOD are concerned, there are three processes:
(1)
Saponification
This process converts the sterol esters into free sterols and tocopherol esters
into free tocopherols. The conversion is required because they can only be
separated and purified in their free forms.
(2)
Solvent-Extraction
A counter current solvent process extracts tocopherols from sterols in the
VOD while the fatty acids pass through the solvent.
(3)
Solvent-Crystallisation
The sterols are crystallised out of the solution and separated from the crude
tocopherols. This process is undertaken twice with approximately 85% of
the sterols crystallised out of the solution on the first, or crude, crystallisation
and approximately 98-99% on the second.109
115.
When the VOD is obtained from wood based materials, Mr Frandsen said, the processes are
similar but distillation is generally used rather than solvent extraction.110 In his oral
evidence, Mr Frandsen said that the distillate obtained from wood based products is known
as tall oil pitch (TOP). Both TOP and VOD contain approximately 15% free sterols in a
combination of free sterols and sterol esters. The first process of saponification is required
in order to break the ester double bonds and obtain free sterols.111
116.
At the end of these three steps, a manufacturer has vegetable oil based sterols.112 They then
undergo a process of esterification, which is the second of the steps referred to in [93]-[95]
above. That means that the free sterols are linked to fatty acid molecules by way of an ester
bond to produce sterol esters. As the process of esterification is imperfect, manufacturers
use an excess of free fatty acids to maximise the esterification and so the yield of sterol
esters. The product that results from this process is known as “crude oil esters”.
109
The crude tocopherols are used in manufacturing processes unrelated to the matters in this case.
Exhibit D at [14]
111
Transcript at 18-19
112
Exhibit D; Annexure B
110
Page 53 of 80
117.
Mr Frandsen said that his company does sell some free sterol products to, for the most part,
pharmaceutical companies. Some food companies do purchase them, though, and then
homogenise them into the size they prefer. Free sterols take the form of powder at room
temperature. The amount of free sterol sales is relatively small when compared with sales of
esters.
118.
Crude oil esters can be incorporated into food ingredients such as crude vegetable oils.
Once incorporated, the product is deodorised before being used in spreads or margarines.
Alternatively, the crude sterol esters may be refined so that they may be incorporated
directly into finished food products. The subject goods are crude sterol esters that have
undergone that further refinement.
119.
The steps involved in that further refinement are raffination, filtration and distillation to
remove the excess fatty acids that have not linked to sterols during the esterification process.
Deodorisation also occurs to remove colour bodies which are dark impurities. At this stage,
anti-oxidants may be added to increase the shelf-life of the sterol mixture. A typical antioxidant is a mixed tocopherol, which is also derived from VOD. Sterols from vegetable
crops such as soy beans contain natural antioxidants but those from wood sources do not and
so require their addition during the deodorisation process.
120.
Dr Mulroney also gave evidence about the production of VOD. It is obtained as a byproduct of a process of deodorisation. The process of deodorisation is a steam distillation
process designed to remove volatile odour compounds and free fatty acids113 from the oil so
that a relatively bland and odourless product remains. It is the last step in the production of
edible vegetable oil which will begin with degumming, neutralisation and bleaching.
D.
121.
Fractions of vegetable oils
Mr Frandsen said that the word “fraction” does not have an industry meaning in the context
of vegetable fats and oils. Companies do not buy or trade vegetable oil fractions as such.
They buy, instead, specific products such as crude vegetable oil, refined vegetable oil,
113
“… The bound fatty acids in monoglycerides, diglycerides and triglycerides may be broken down into free
acids by chemical or enzymatic hydrolysis. Such acids are referred to as ‘free fatty acids’. …”: FOSFA;
Glossary; website. “Free fatty acids”: Exhibt 5; Tab 7 at 30
Page 54 of 80
tocopherols and sterols. He said that it was not necessary to have a fractionation process to
obtain a fraction. To suggest otherwise did not accord with general common sense because
fractions total the whole.
122.
In his world, Mr Frandsen said, there is no sense in fractionating triglycerides. Fractionation
has its place in the chemical world but not in the vegetable oil world. In cross-examination,
Mr Frandsen said that there is no point in fractionating something that had very similar
vapour pressure curves. Later, he said that Divisions of Cognis and BASF other than his
Division did purchase vegetable oils that they fractionated to make specific C8s, C10s, C9s,
C15s and C16 fractions to give specific fatty acid compositions for individual components
to be used in the cosmetic industry or to make some other chemicals. The sterols that are
produced by his Division are not produced by a fractionation process.
123.
Mr Northcote asked Mr Frandsen whether sterols produced by his Division come within that
part of the definition of “fraction” in the Oxford Dictionary of English, 3rd edition, Online
when it states that, in its chemical sense, it means “Each of the portions into which a mixture
may be separated according to physical property, such as the boiling point or solubility.”
Mr Frandsen said that the sterols come off the VOD in the process of distillation. Therefore,
within the terms of that definition, they could be regarded as a fraction of the vegetable oil
as they are a fraction of VOD and VOD is a fraction of the vegetable oil. Mr Frandsen went
on to acknowledge that the VOD had undergone a chemical process when it underwent
saponification. That process involves breaking a bond in the sterol ester and breaking bonds
in the tocopherol ester to convert them to free tocopherols.
124.
Also in cross-examination, Mr Frandsen acknowledged that Dr Mulroney referred to
vegetable oil fractions in his statement but noted that Dr Mulroney had been referring
specifically to fractions of palm oil. In dealing with sterols and tocopherols, though, he was
speaking of soft seeds. It is his understanding that the soft seeds end of the industry does
not deal in fractions whereas the hardened oils end does. Whether the industry deals in
fractions depends on whether the soft and hard seeds industries are one or two. In his
industry, he purchases VOD and he sells sterols and sterol esters. They are not referred to as
fractions of vegetable oil.
Page 55 of 80
125.
In his statement, Dr Mulroney referred to the dictionary definitions of the word “fraction”
referred to in the Statement of Facts and Contentions by Cognis and BASF as “small pieces”
and the like. He said that, using that definition, VOD and free sterols obtained from
vegetable oil sources would both be considered to be fractions of vegetable oil. Within the
edible oils industry, however, fractions are generally understood to be oils derived from the
process of fractionation.
126.
Dr Mulroney said that VOD is not regarded as a fraction of vegetable oil and that the
process by which it is obtained is a process entirely separate from that of fractionation. In
the edible oils industry, however, fractions are generally understood to be oils derived from
the process of fractionation. Fractionation refers to the process of the separation of
triglyceride fractions by cooling, filtration or centrifugation. He is not aware of any other
wider meaning of the term “fractionation” outside the edible oil industry. Fractions are not
understood to be VOD or free sterols but the high and low melting points of vegetable fats
and oils. That which melts at the high temperature is known as the stearine or stearin and
that at the low temperature as the olein. Each of these fractions can then be further
fractionated. Dr Mulroney used palm stearine and palm olein, which are fractions of palm
oil, as examples. Double fractionation of palm stearine leads to palm stearine and palm
mid-fraction (PMF). In the case of palm olein, further fractionation leads to super olein and
soft PMF. Each fraction has different characteristics suiting it to a particular application
more so than other fractions. Dr Mulroney said that Peerless Foods does not make hard
PMF and probably does not make cocoa butter replacer fats used in the confectionary
industry. He was aware that there is a range of fat fractionation technologies that are
specifically targeted for particular markets.
127.
The process of fractionation may take various forms such as dry fractionation, in which the
stearine is separated from the olein, or detergent or solvent fractionation where a detergent
or solvent is used to assist with the separation process. Fractionation may involve first
cooling the vegetable fat or oil to a specific temperature allowing a portion of the fat to
crystallise. Once crystallised, it is separate from that part of the oil remaining in liquid
form. Separation may be undertaken by filtration or by some other method such as
centrifugation. That process is known as “winterising”. Sunflower oil is the most
commonly winterised oil but cotton seed oil is also winterised and some companies are
Page 56 of 80
winterising canola oil, Dr Mulroney said. Fractionation does not cause changes to the
chemical structure of fats and oils. Each fraction consists predominantly of triglycerides and
is itself a vegetable fat or oil.
128.
Dr Mulroney agreed with the statement that appears in the promotional material distributed
by Desmet Ballestra to the effect that there are three principal modification techniques.
They are described in the following passage from its publication subtitled “Science behind
Technology”:
“In their native form, most edible oils have only limited application in food products.
They are therefore often modified, chemically and/or physically, in order to alter
their textural properties.
In the industry, 3 principal modification processes are used:
►
Fractionation will separate the fat into a more solid and a more liquid
fraction;
►
Interestification imposes a redistribution of the fatty acids over the
triglyceride which allows to chemically ‘blend’ properties of different oil;
►
Hydrogenation will saturate the double bonds in the fat, leading to a much
harder fat.
….”114
The publication goes on to describe various forms of each process.
129.
Dr Mulroney also said that free sterols obtained from VOD by saponification, solvent
extraction and solvent crystallisation are not regarded as fractions of vegetable oils within
the edible oils industry. That follows from the fact that those free sterols were not obtained
by the process of fractionation he had described.
130.
Annexure I to Dr Mulroney’s statement is an extract from a Chapter entitled
“Deodorisation” and written by De Greyt and Kellens from Bailey’s.115 Mr Slonim drew his
attention to parts of the following passage in which it is written:
“
Sterols are quantitatively the most important components of the
unsaponifiable fraction of vegetable oils and animal fats …
…
114
115
Page 57 of 80
Exhibit 5; Tab 16 at 305
Volume 5, 6th edition, editor F. Shahidi, John Wiley & Sons, New Jersey, USA, 2005
Free sterols are slightly less volatile than tocopherols …. Deodorization of
soybean oil under varying process conditions (temperature 220-260°C, low pressure:
1.5 mbar and 1.5% steam) resulted in a 10-35% reduction of the total sterol content
…. This sterol reduction is totally attributable to the free sterol fraction because
esterified sterols are not volatile under the conditions prevailing inside the
deodorizer. In the case of steam refining, an increase of the steryl ester content can
sometimes be observed, probably because of a heat-promoted esterification reaction
between free sterols and fatty acids …”116
Dr Mulroney agreed with Mr Slonim that the authors used the term in relation to
“unsaponifiables” and to sterols as a fraction of a fraction in the sense that it is a fraction of
the total sterols.
131.
Mr Slonim also drew Dr Mulroney’s attention to an extract from Bailey’s. I will set out the
sentences preceding the passage to which Mr Slonim referred as well as the passage:
“
Sterols
The sterols are crystalline, neutral, unsaponifiable alcohols of
high melting points with properties resembling those of cholesterol. The sterols
comprise the bulk of the unsaponifiable matter in many fats and oils. For example, it
has been shown that the 1.6-2.7% of unsaponifiable matter in wheat germ oil
consists of 70—85% sterols …. Although the data included in Table 1.14 are more
that 25 years old, the listing of the sterol content of a number of crude fats and oils is
still useful. Though accumulated from a large number of sources …, this
information is valid today when considered in the light of the separation methods
employed and the analytical techniques used. A few early investigators measured oil
unsaponifiables and attributed the amount to be all due to sterol content; these
values are obviously too high. Others separated sterols by fractional crystallization
methods; generally values obtained by these techniques tend to be low. On the basis
of current knowledge, the data in Table 1.14 … are still representative, although for
a few oils they are more likely a minimum range than a maximum.”117
Dr Mulroney agreed with Mr Slonim that fractional crystallisation is a form of separation by
means of crystallisation. Outside the edible oil industry, it is regarded as a form of
fractionisation in a chemical sense.
132.
Mr Slonim referred to the Chapter written by Sonntag entitled “Structure and Composition
of Fats and Oils” in Bailey’s from which Dr Mulroney had taken his definition of fats and
oils. He pointed to Table 1.17 entitled “Sterol fractions of vegetable oil saponifiables (% of
116
117
Page 58 of 80
Exhibit 4; Annexure I at 355; [3.3.2]
Volume 2, 4th edition, editor D. Swern, John Wiley & Sons, New York, USA, 1979 at 53; Exhibit I at 38
oil) (301)”118 Table 1.17 named 18 oils, many, but not all, of which are edible oils. It then
set out the Neutralized Unsaponifiables, Sterols, Number of Components and the Relative
Retention Volume. In order to understand the table, it is necessary to go back to the text
where it is explained that:
“Using TLC, Jacini and co-workers … separated the sterols from the
unsaponifiables of 18 vegetable oils. Three sterols, β-sitosterol, stigmasterol, and
campesterol, were found in all the oils. An unknown sterol was found in varying
amounts in the oils of palm, palm kernel and sunflower. This unknown sterol and
brassicasterol were found in rapeseed oil in addition to the three sterols that were
common to all the oils studied. Sterol content and distributions for the oils are
summarized in Table 1.17.”119
133.
Dr Mulroney confirmed that Sonntag had described the sterols as fractions of vegetable oil
saponifiables. Mr Slonim then asked him whether that meant that sterols can be referred to
as fractions of vegetable oils. Dr Mulroney replied that the answer depended on the
definition adopted. Mr Slonim then drew his attention to Table 1.19 from Bailey’s. It is
headed “Percent distribution of individual sterols in sterol fractions from 16 common
vegetable oils (literature data)”.120 Dr Mulroney agreed with Mr Slonim that the reference
is to sterols as a fraction of vegetable oil but, as he had said, whether they are described as
fractions depends upon the definition.
134.
Mr Slonim referred to a paper entitled “Minor Components in Vegetable Oil Methyl Esters I:
Sterols in Rape Seed Oil Methyl Ester”121 and, in particular, to the passages reading:
“… The concentration and composition of the total sterols in the fraction of
unsaponifiables were determined in several RME [rape seed oil methyl ester]
samples of different origin by the usual procedure of saponification and isolation of
the sterol fraction, followed by gas chromotographic analysis. …122
118
Included in Bailey’s Industrial Oil and Fat Products 4th edition, (ed. D Swern), John Wiley & Sons, New
York, USA, 1979, vol 1 at 59; Exhibit I at 41
119
Exhibit I at 41
120
Exhibit I at 43. The text at 41 explains the Table: “Using TLD, Itoh, Tamura and Matsumoto … were able
to separate unsaponifiables of 19 vegetable oils into sterols, triterpene alchohols, hydro-carbons, and others.
Their data for sterols are given in Table 1.18 and can be compared with the results of other similar
investigations, shown in Table 1.19. These workers … were also able to separate from the complex mixtures a
4 methylsterol, presumably cycloeucalenol, whose presence was indicated in most oils. Gramisterol,
obtusifoliol, andcitrostadienol were found to be present in all 19 oils studied. Table 1.20 summarized the
data.”: Exhibit I at 41.
121
Christina Plank and Eberhard Lorbeer, Institute of Organic Chemistry, University of Vienna, Austria, 1994;
Fat Scie. Technol. 96. Jahrgang Nr. 10 1994; Exhibit I at 276
122
Exhibit I at 276
Page 59 of 80
“Isolation and Gas Chromatographic Analysis of the Sterol Fraction from Saponified
Rape Seed Oil Methyl Ester
…
The composition of the sterol fraction and the concentrations of the sterols in
RME were determined by quantitative gas chromatographic analysis. Quantitation
was based on the internal standard betulinol, assuming response factors of 1 for all
sterols in accordance with the standard method …. The total sterol content and the
absolute concentrations of the individual sterols in six RME specimens are given in
Tab. 2. β-Sitosterol (0.33-0.41%), campesterol (0.27-0.30%), and brassicasterol
(0.06-0.08%) represent the main components. The total sterol content (i.e. the sum
of the contents of the individual sterols) ranges from 0.70% to 0.81%.
The composition of the sterol fraction was calculated by relating the
concentrations of the individual sterols to the total content as 100%. The results for
the composition of the sterol fraction and the content of sterols in the unsaponifiable
matter are given in Tab. 3 for six RME specimens of different origin. The average
composition of the sterols was 0.4% cholesterol, 9.0% brassicasterol, 37.7%
campesterol, 0.4% stigmasterol, 49.0% β-sitosterol, 2.8% ∆5-avenasterol, and 0.5%
∆7-stigmasterol. Sterol fractions are on average 63% of the RME unsaponifiables.
Both, the results for the sterol content and for the sterol profile in rape seed
oil methyl ester, are in good agreement with literature on data on rape seed oil …
excepting the rather high content of campesterol and the relatively low content of βsitosterol. Variations between the results obtained for the individual RME
specimens can be explained by the different origin of the starting oils and differences
in refining and transesterification processes.”123
Dr Mulroney agreed that each of these passages contained examples of the use of the term
“fractions”, in relation to sterols, as part of another product.
135.
Mr Slonim turned Dr Mulroney’s attention to a paper entitled “Free and Esterified Sterol
Distribution in Four Romanian Vegetable Oil[s]” by Francise Vasile Dulf and others.124
The Abstract of the paper begins with a statement that:
“The unsaponifiable lipid fraction of plant-based foods is a potential source
of bioactive components such as phytosterols, triterpenoids, carotenoids,
tocopherols and various hydrocarbons. The free and esterified sterol concentrations
in four Romanian edible oils (corn germ, wheat germ, sweet almond and grape seed
oil) were determined, including individual values for β-sitosterol, campersterol,
stigmasterol, ∆5-avenasterol, sitostanol, campestanol and cholesterol. Free and
esterified sterols were separated by solid-phase extraction (SPE), saponified, and
analyzed as trimethylsilyl ether derivatives using gas-chromatography (GC) with
flame ionization detector (FID). Differences in total sterol content and the
123
124
Page 60 of 80
Exhibit I at 279-280
Not. Bot. Hort.Agrobot. Cluj 38 (2) 2010, Special Issue at 91-97; Exhibit I at 288
proportion of esterified (ES) and free sterols (FS) were evident for studied oil
samples. … The analyses of these components provide rich information about the
identity and quality of vegetable oils. …”125
136.
Dr Mulroney agreed with Mr Slonim that the Abstract had referred to the unsaponifiable
lipid fraction and so to the unsaponifiable component of vegetable oil. After reading the
following passage, he also agreed with Mr Slonim that there is a widespread use of the term
“fraction” by people who work with vegetable oils when referring to sterols and
unsaponifiables:
“
The sterol ester fractions were transesterified to fatty acid methyl esters
(FAMEs) and sterols (Christie, 1982). The free sterol fraction was subjected also to
transesterifcation to degrade the diacylglycerols and the residual triacylglycerols,
co-eluted with free sterols. The dried organic phases which were obtained after
transesterifcation were fractionated again by column chromatography. The FAMEs
were eluted with petroleum ether: diethyl ether = 90:10(v/v) solvent mixtures and
the free sterols were eluted with petroleum ether: diethyl ether = 50:50(v/v). After
the fractions were collected, the solvent mixtures were evaporated. The sterols from
each fraction were derivatized in the same way like for the total sterols and
submitted to GC analysis too.”126
His acknowledgement that people who work with vegetable oils refer to both sterols and
unsaponifiables did not change his view that those who work in edible oils understand
fractionation to mean fractions that come from the process of fractionation.
137.
When Mr Slonim asked Dr Glover whether the word “fractions” refers only to the products
of fractionation, she replied that:
“Fractionation is simply the separation of any complex mixture into its component
parts. It may not be actually purified down to individual molecules, but it would
certainly be enriching and it can be done by many different methods. It can be just
simply separating on molecular weights, it could be separating by ionic charges, it
could be separating on solubilities; there are so many different ways in which, as a
scientist, you could fractionate complex mixtures ---“127
125
Exhibit I at 288
Exhibit I at 290 The context of this passage is found in the preceding paragraphs, which explain the process
by which a sample was prepared for sterol analysis. Four edible seed/kernel oils had been purchased from a
local health food store. The unsaponifiables (containing the total sterols) had been extracted first with
petroleum ether and then with diethyl ether. The sterols were derivatized with trimethylsilyl
trifluoroacetamide containing 1% trimethylchlorosilane in pyridine. Free and esterified sterols were separated
by solid phase extraction and they were then themselves separated by various eluting solvent mixtures.
127
Transcript at 44
126
Page 61 of 80
138.
In response to Mr Northcote, Dr Glover said that this was what she and other scientists with
whom she has worked would understand by fractions. In the case of vegetable oil, it could
apply to any chemical of any kind extracted from it. There might, however, be a point at
which it might be said that specific molecules were being purified but the purification would
occur using fractionation.
139.
Professor Clifton said that, when a component of vegetable oil is separated from the base
oil, whether by distillation or other chemical or mechanical means, the separated component
can be considered a fraction of the base oil. He explained in giving evidence that crushing
oil seeds leads to a very complex material of which plant sterols are but one. If the plant
sterols are separated from the rest, a fraction of the original component is separated. A
protein or phosopholipid could be separated and would be just as much a fraction of the
original crush as plant sterols. In cross-examination, he said that he had not worked in the
oil industry although he had worked with it. He acknowledged that the process of
fractionation described by Dr Mulroney might be how it is done in the industry, although he
was not aware of it, and then added:
“But in terms of if you gave me a base oil and I took something, a component, 1 per
cent of it, I’d be taking a fraction of that. So that, to my mind, would be a fraction
even if that’s not what is used in the fat and oil industry.”128
Professor Clifton agreed with Mr Northcote that, applying his understanding of “fraction”,
there would be hundreds of potential fractions of vegetable oil. Sterols extracted from
vegetable oil would be fractions no matter how they were obtained or how small. He would
apply that reasoning to any one of the hundreds of different chemical compounds in
vegetable oil including dozens of different fatty acids, the many different tocopherols and, if
it were part of the original press, water.
E.
140.
Esterification
In his statement, Dr Mulroney said:
“Re-esterified vegetable oil is a term used within the edible oils industry to refer to
vegetable oil obtained by the esterification of plant-derived fatty acids onto glycerol
…. Examples of such processes are described by Sonntag … and Bhattacharyya ….
Although vegetable fats and oils are predominantly obtained as triglycerides directly
128
Page 62 of 80
Transcript at 63
from the source, it is possible to take fatty acids from plant sources and re-attach (or
re-esterify) them back onto glycerol. The resulting material has a predominantly
triglyceride structure, like traditional vegetable oil, but is derived synthetically using
either a chemical or enzymatic reaction to facilitate the esterification.”129
141.
Dr Glover said she is familiar with esterification, which is a step in the production of
Vegapure 95F from, predominantly, VOD. In that process, sunflower fatty acids are
combined with phytosterol to form sterol ester.
Consideration
A.
142.
Further principles of statutory interpretation
As Mr Northcote submitted, the starting point is with the words of Heading 1516 itself. At
[12]-[16] above, I have set out the general principles from cases such as Savage River Mines
regarding the application of the rules of statutory interpretation to tariff classifications in
Schedule 3 as well as other relevant authorities. The High Court in Collector of Customs v
Agfa Gevaert Ltd130 (Agfa-Gevaert) said that the speech of Lord Simon of Glaisdale in
Maunsell v Olins131 is a useful starting point in determining the construction of instruments.
His Lordship said:
“Statutory language, like all language, is capable of an almost infinite gradation of
‘register’ – ie. it will be used at the semantic level appropriate to the subject matter
to the audience addressed (the man in the street, lawyers, merchants, etc). It is the
duty of a court of construction to tune in to such register and so to interpret the
statutory language as to give to it the primary meaning which is appropriate in that
register (unless it is clear that some other meaning must be given in order to carry
out the statutory purpose or to avoid injustice, anomaly, absurdity or contradiction).
In other words, statutory language must always be given presumptively the most
natural and ordinary meaning which is appropriate in the circumstances.”132
143.
The High Court continued:
“
When construing revenue statutes that utilise trade or technical terms,
therefore, the law generally favours interpretation of the terms as they are
understood in the trade to which the statute applies. In Herbert Adams Pty Ltd v
Federal Commissioner of Taxation …, Dixon J said: ‘A revenue law directed to
129
Exhibit 4 at 3
[1996] HCA 36; (1996) 186 CLR 389; 141 ALR 59; 35 ATR 249; 43 ALD 193; 24 AAR 282; 71 ALJR
123; Brennan CJ, Dawson, Toohey, Gaudron and McHugh JJ
131
[1975] AC 373
132
[1975] AC 373 at 391 and cited at [1996] HCA 36; (1996) 186 CLR 389; 141 ALR 59; 35 ATR 249; 43
ALD 193; 24 AAR 282; 71 ALJR 123 at 398; 65-66; 255; 199; 289; 128
130
Page 63 of 80
commerce usually employs the descriptions and adopts the meanings in use among
those who exercise the trade concerned.’ The courts have also said that it may be
less difficult to establish a trade meaning which extends the ordinary meaning of an
expression than one which limits the ordinary meaning in a specialised way. …
However, the ‘presumption’ in favour of trade meaning in revenue statutes does not
deny the possibility that words used in a revenue statute directed to commerce are to
be understood in their ordinary meaning …”133
144.
The High Court was concerned with the construction of Customs Tariff Concession Orders
(CTCOs). Those CTCOs were addressed to a subject and an audience concerned with
photographic film, the High Court said and noted that:
“… That being so, a court or tribunal should strive to give the CTCOs the meaning
that that audience would give them.
Trade meaning and ordinary meaning do not necessarily stand at opposite
extremities of the interpretative register. Professor Glanville Williams has described
the distinction between primary (ordinary) meaning and secondary (trade) meaning
as the distinction between, on the one hand, the ‘most obvious or central meaning’ of
words, and on the other hand, ‘a meaning that can be coaxed out of the words by
argument’ [Glanville Williams, ‘The Meaning of Literal Interpretation – I’ (1981)
131 New Law Journal 1128 at 1129]. Similarly, Professor Driedger describes this
distinction as being that between ‘ “the first blush” grammatical and ordinary sense
... [and] the “less” grammatical and “less” ordinary meaning’ [Driedger, ‘Statutes:
The Mischievous Literal Golden Rule’ (1981) 59 Canadian Bar Review 780 at 785786. See also Cross on Statutory Interpretation (3rd ed, 1995), pp 72-92.] Given
this lack of necessary dissimilarity, there appears to be little reason for a rigid rule
that disallows recourse to the trade meaning of a word that forms part of a
composite phrase.
No doubt there are cases where a court or tribunal must interpret a
composite phrase by reference to the ordinary meaning of the words taken as a
whole without recourse to the trade meaning that one or more of its words may have.
Much depends on the subject matter and context of the phrase. In the area of
statutory interpretation and construction, courts must be wary of propounding rigid
rules. Even the use of general rules carries dangers in this area because of the
tendency for such rules to be given an inflexible application. [Cooper Brookes
(Wollongong) (1981) 147 CLR 297 at 320] Nevertheless, when construing a
composite phrase which does not have a trade meaning, it will ordinarily make sense
for a court or tribunal to take notice of the trade meaning of a word or words within
that expression, provided such an interpretation does not lead to a result which is
absurd [See Bennion, Statutory Interpretation (2nd ed, 1992) op cit n 19, at pp 679710] in the sense that the result may be unworkable or impracticable, [See R v
Camphill Deputy Governor [1985] QB 735 at 751; Sheffield Council v Yorkshire
Water Ltd [1991] 1 WLR 58 at 72; [1991] 2 All ER 280 at 292] inconvenient, [See
133
[1996] HCA 36; (1996) 186 CLR 389; 141 ALR 59; 35 ATR 249; 43 ALD 193; 24 AAR 282; 71 ALJR 123
at 398-399; 66; 255; 199; 289; 128 (citations omitted)
Page 64 of 80
Shannon Realities v St Michel (Ville de) [1924] AC 185 at 192-193; Income Tax
Commissioners for City of London v Gibbs [1942] AC 402 at 414; Jones v Director
of Public Prosecutions [1962] AC 635 at 662; Lawrence Chemical Co v Rubinstein
[1982] 1 WLR 284 at 291; [1982] 1 All ER 653 at 658] anomalous or illogical, [See
Qantas Airways Ltd v Aravco Ltd (1996) 185 CLR 43 at 52, per Brennan CJ,
Gaudron, McHugh and Gummow JJ; Tolley v Morris [1979] 1 WLR 592 at 601;
[1979] 2 All ER 561 at 569; Customs and Excise Commissioners v Hedon Alpha Ltd
[1981] QB 818 at 826] futile or pointless, [See Bishop v Deakin [1936] Ch 409 at
413-414; Kammins Co v Zenith Investments [1971] AC 850 at 860] or artificial.
[See R v Cash [1985] QB 801 at 806] Consideration of the trade meaning of
individual words in such cases is more likely than not to lead to the interpretation
that the makers of the instrument had in mind.
Further, contrary to Agfa’s submission, using the trade meaning of
individual words in a composite phrase having no special meaning as a whole does
not involve a failure to construe the phrase ‘as a whole’. It simply does not follow,
as a matter of logic or common-sense, that the division of a composite expression
into parts which are interpreted by reference to their trade meaning, ordinary
meaning or a combination thereof necessarily means that a court or tribunal has
failed to construe an expression by reference to its meaning as a whole.”134
145.
Evidence of the meaning of a technical term can be given in certain circumstances. They
were summarised by Hill J in Pepsi Seven-Up Bottlers v Commissioner of Taxation:135
“ The general principle and apparent exceptions can be expressed in the following
propositions which, to some extent, overlap. In construing a statute, evidence may be
given of the meaning and usage of a word in a trade:
134
(1)
where it is clear that a word in the statute is used in a specialised or trade sense
and that usage differs from the ordinary English usage of the word (the courts
will be more ready to conclude that the word is used in a specialised or trade
usage where the statute to be construed is a revenue law directed to commerce);
(2)
where the word is used in a specialised or trade sense in the statute, the word
has an accepted trade usage and it is necessary to determine whether that trade
usage differs from the ordinary English usage;
(3)
where the word is used in a specialised or trade sense in the statute and it is
necessary to determine whether there is an accepted trade usage as a
preliminary to showing that that usage differs from the ordinary English usage;
(4)
where the word used in the statute is directed to a particular trade and there has
not been occasion for a widespread adoption by the general public of the word
or a particular denotation of the word;
[1996] HCA 36; (1996) 186 CLR 389; 141 ALR 59; 35 ATR 49; 43 ALD 193; 24 AAR 282; 71 ALJR 123
at 401-402; 67-68; 257-258; 201; 291-292; 129
135
[1995] FCA 1655; (1995) 62 FCR 289; 132 ALR 632; 31 ATR 445
Page 65 of 80
146.
(5)
where the trade usage assists in supplying the context or background of
surrounding circumstances necessary to the construction of a word used in the
statute;
(6)
where the trade usage may assist the court by way of background to determine
whether the word used in the statute is used in a specialised or trade usage or in
accordance with ordinary English usage.”136
The general rule as to whether evidence may be admitted to establish the ordinary meaning
of a word or phrase is that it may not be admitted. As Jordan CJ explained in Australian
Gas Light Co v Valuer-General:137
“The question what is the meaning of an ordinary English word or phrase as used in
the statute is one of fact not of law … The question is to be resolved by the relevant
tribunal itself, by considering the word in its context with the assistance of
dictionaries and other books, and not by expert evidence … although evidence is
receivable as to the meaning of technical terms … and the meaning of a technical
legal term is a question of law …”138
B.
147.
Interpretation of Heading 1516
Heading 1516 does not have a meaning as such. It is, instead, made up of a series of words,
some of which appear to have a technical meaning. They are words such as
“hydrogenated”, “inter-esterified”, “re-esterified” and “elaidinised”. Expressions such as
“vegetable fats and oils” or “animal … fats and oils” do not immediately present themselves
as having either a technical or ordinary meaning. Animal fats and oils have no relevance in
this case but I will start with the ordinary meaning of the word “vegetable” for it is plant
sterols and stanols, and not cholesterol found in animals, that is under consideration. The
ordinary meaning of the word “vegetable”, when used as an adjective, as it is here, is “for,
relating to, or composed of vegetables.”139 Those of the word “vegetable” include:
“… 1a a plant or any of its parts, other than fruits and seeds, that is used for food, eg
roots, tubers, stems or leaves; b the edible part of such a plant. …”140
148.
The first of the ordinary meanings of the word “plant” is broad enough to include a tree but
the second is not:
136
[1995] FCA 1655; (1995) 62 FCR 289; 132 ALR 632 at [41]; 298-299; 641
(1940) 40 SR (NSW) 126
138
(1940) 40 SR (NSW) 126 at 137
139
Chambers
140
Chambers
137
Page 66 of 80
“… 1 any living organism that is capable of manufacturing carbohydrates by the
process of photosynthesis and that typically possesses cell walls containing
cellulose. 2 a relatively small organism of this type, eg a herb or shrub as opposed
to a tree. …”141
149.
The ordinary meanings of the word “oil” include:
“… 1 any greasy, viscous and usually flammable substance, liquid at room
temperature (20°C) and insoluble in water but soluble in organic compounds, that is
derived from animals, plants or mineral deposits, or manufactured artificially, and
used as a fuel, lubricant or food. …”142
150.
It is apparent from the ordinary meanings of the words that an argument might be made that
a vegetable oil may not be an oil derived from seeds or fruit of a plant but only the
remaining parts of a plant. It may also be argued that an oil derived from trees might be
considered to be oil derived from plants and so from vegetables i.e. vegetable oil. That
argument would depend upon reading Heading 1516 in isolation from its context comprised
first of Chapter 15 and then of the wider context of Schedule 3.
151.
Taking its narrower context first, I note that there are thirteen headings referring to
particular types of fats and oils “and their fractions”. They do so using one of three formats.
Heading 1504 is indicative of the first format, which is adopted also in Headings 1506,
1507, 1508, 1509, 1510, 1511, 1512, 1513, 1514 and 1515. Heading 1504 reads:
“FATS AND OILS AND THEIR FRACTIONS, OF FISH OR MARINE MAMMALS,
WHETHER OR NOT REFINED, BUT NOT CHEMICALLY MODIFIED …”
Heading 1517 represents the second format:
“MARGARINE; EDIBLE MIXTURES OR PREPARATIONS OF ANIMAL OR
VEGETABLE FATS OR OILS OR OF FRACTIONS OF DIFFERENT FATS OR
OILS OF THIS CHAPTER, OTHER THAN EDIBLE FATS OR OILS OR THEIR
FRACTIONS OF 1516 …”
The third is found in Heading 1518:
“ANIMAL OR VEGETABLE FATS AND OILS AND THEIR FRACTIONS, BOILED,
OXIDISED, DEHYDRATED, SULPHURISED, BLOWN, POLYMERISED BY HEAT
IN VACUUM OR IN INERT GAS OR OTHERWISE CHEMICALLY MODIFIED,
141
142
Page 67 of 80
Chambers
Chambers
EXCLUDING THOSE OF 1516; INEDIBLE MIXTURES OR PREPARATIONS OF
ANIMAL OR VEGETABLE FATS OR OILS OR OF FRACTIONS OF DIFFERENT
FATS OR OILS OF THIS CHAPTER, NOT ELSEWHERE SPECIFIED OR
INCLUDED …”
152.
Mention should also be made of Headings 1520, 1521 and 1522, which are not framed in
terms of vegetable fats and oils and their fractions as such but in terms of substances:
1520: “GLYCEROL, CRUDE: GLYCEROL WATERS AND GLYCEROL LYES”
1521: “VEGETABLE WAXES (OTHER THAN TRIGLYCERIDES), BEESWAX,
OTHER INSECT WAXES AND SPERMACETI, WHETHER OR NOT
REFINED OR COLOURED …”
1522: “DEGRAS; RESIDUES RESULTING FROM THE TREATMENT OF FATTY
SUBSTANCES OR ANIMAL OR VEGETABLE WAXES”
153.
In the wider context is found Note 1(e) to Chapter 15. I have already mentioned it in the
context of Heading 3004. Note 1(e) specifies that the Chapter does not cover “Fatty acids,
… or other goods of Section VI.” That Section also includes Headings 3803, 3823, 3824 and
3825 in Chapter 38. They provide:
3803: “TALL OIL, WHETHER OR NOT REFINED”
3823: “INDUSTRIAL MONOCARBOXYLIC FATTY ACIDS; ACID OILS FROM
REFINING; INDUSTRIAL FATTY ALCOHOLS …”
3824: “PREPARED BINDERS FOR FOUNDRY MOULDS OR CORES;
CHEMICAL PRODUCTS AND PREPARATIONS OF THE CHEMICAL OR
ALLIED INDUSTRIES (INCLUDING THOSE CONSISTING OF MIXTURES
OF NATURAL PRODUCTS), NOT ELSEWHERE SPECIFIED OR
INCLUDED …”
3825: “RESIDUAL PRODUCTS OF THE CHEMICAL OR ALLIED INDUSTRIES,
NOT ELSEWHERE SPECIFIED OR INCLUDED; MUNICIPAL WASTE;
SEWAGE SLUDGE; OTHER WASTES SPECIFIED IN NOTE 6 TO THIS
CHAPTER …”
154.
The wording of Note 1(e) does not necessarily lead to the conclusion that a particular oil
would, or would not be classifiable to Heading 1516 in its absence. Stating that particular
goods of Section VI are not covered by Chapter 15 does not lead to the conclusion that a
particular oil is not regarded as a vegetable oil. It may be a vegetable oil but simply not
covered by Chapter 15 or it may not be regarded as a vegetable oil. In view of that
uncertainty, I can turn to the HSEN where I find that it is provided that “With the exception
of sperm oil and jojoba oil, animal or vegetable fats and oils are esters of glycerol with
Page 68 of 80
fatty acids (such as palmitic, stearic and oleic acids).” As I am concerned with neither
sperm oil or jojoba oil, it follows that I am required to interpret “animal or vegetable fats or
oils” to mean oils containing esters of glycerol with fatty acids such as palmitic stearic and
oleic acids. If they do not contain those esters of glycerol with fatty acids, they will not be
animal or vegetable fats or oils of the sort covered by Chapter 15.
155.
I have some reservations regarding Mr Slonim’s argument that a “fraction”, in ordinary use,
can refer to an ingredient that makes up a whole. Certainly, it can refer to a portion or small
part of something but, arguably, the portion or small part is still recognisable as a portion or
part of the whole of which it is a part or portion. The example given in the Macquarie
illustrates that point. The fraction of the population that is literate is still identifiable as
being part of the population. When a “fraction” is described in that same dictionary as “a
piece broken off; fragment or bit”, it is a piece of the whole that is broken off and that is a
fragment or bit. It would be identifiable as a piece that was part of the whole and
identifiable as being part of a whole. When a person says that he or she will have “just a
fraction more” be it of food or drink, the request is for another piece, but a small piece or
fragment, of the whole. It is not a request for the egg, butter, flour and so on that might have
gone towards making that cake or of the water, carbohydrates, organic acids and so on that
make up the wine the person might have enjoyed. The meaning given in chemistry to the
word “fraction” is different and is recognised in the dictionaries to refer to the components
of chemical compounds that can be separated by fractionation. In that sense, the fraction is
not necessarily identifiable as part of a whole or, at least, of a particular whole. A particular
triglyceride separated from fat or oil by fractionation from a fat or oil from one plant source
is not distinguishable from that same triglyceride separated from the fat or oil of another
plant.
156.
Heading 1516 itself does not give any clear indication of which meaning is intended but, as I
have said, it must be considered in its context. The opening words of Heading 1517 might
be thought to suggest that the reference to “fractions” is a reference to those fractions that
are edible when it refers to margarine and edible mixtures or preparations of animal or
vegetable fats or oils. The concluding words, however, refer to fractions of different fats or
oils of Chapter 15. Among those fats or oils are vegetable waxes, beeswax and other insect
waxes. They do not suggest themselves as edible.
Page 69 of 80
157.
An understanding of the word “fraction” that includes any component that can be separated
from an animal or vegetable oil would be to draw into the compass of the word any
component at all (including a sterol, flavour component or impurity) that can be separated
from the oil in addition to any triglyceride. I have turned to HSEN Note (A) to see whether
I should understand the word in this wider sense or whether it has a narrower sense.
158.
I have set out the relevant part of HSEN Note (A) at [87] above. The passage begins with a
specific reference to Headings 1504 and 1506 to 1515. When considering those headings,
the Note states that fractions of the fats and oils they describe are covered provided they are
not more specifically described elsewhere in the Nomenclature. Spermaceti, which is
specifically referred to in Heading 1521,143 is given as an example. Spermaceti comes from
a whale and was formerly used for making candles, soap, cosmetics and the like.144 It was
obtained in this way:
“The fluid contained in the spermaceti organ of the whale’s head was removed to
obtain crude sperm oil. The spermaceti was separated from the oil by chilling in a
process whalers called wintering; it congealed as a white crystalline, waxy solid.
Chemically, pure spermaceti consists principally of cetyl palmitate and other esters
of fatty acids with fatty alcohols and melts at about 44 °C (111 °F). …”145
159.
In the chemical sense, spermaceti is a fraction of sperm oil as it has been obtained by a
process of fractionation. The Note recognises winterisation as a means of fractionation as
did Dr Mulroney. The example of spermaceti suggests that a “fraction” is intended to have
its chemical meaning and not simply a component or ingredient in a fat or oil. This
suggestion is reinforced by the fact that the Note goes on to describe the main methods of
fractionation. It does not purport to limit the methods of fractionation to those it describes
but there is a proviso. That proviso comes in the last sentence to the Note when it states that
“Fractionation does not cause any changes in the chemical structure of the fats or oils.”
There is nothing in the Note to suggest that this meaning of the word “fraction” is limited to
its use in Headings 1504 and 1506 to 1515. The reference to them is for the specific
purpose I have described and, therefore, I have concluded that the word “fraction”, when
143
“VEGETABLE WAXES (OTHER THAN TRIGLYCERIDES), BEESWAX, OTHER INSECT WAXES AND
SPERMACETI, WHETHER OR NOT REFINED OR COLOURED …”
144
Chambers
145
Encyclopaedia Britannica, online
Page 70 of 80
used in headings in Chapter 15, is a reference to a fraction in the chemical sense. That is, it
is a reference to separation of a fat or oil by one of the three means described in the Note
and without any change in the chemical structure of the fats or oils.
160.
The words “PARTLY OR WHOLLY HYDROGENATED, INTER-ESTERIFIED, REESTERIFIED OR ELAIDINISED …” are not a reference to the means by which the fractions
have been obtained. They are a reference to the processes that have been applied to the fats
and oils and, if fractions are involved, to those fractions. So too is the reference to the fats
or oils or their fractions being “refined”. That is a reference to the refinement of the fats and
oils or of their fractions. It is not a reference to the manner in which fractions are obtained.
Mr Frandsen referred to the process of refinement as “raffination”. It is a process to which
crude vegetable oil is subjected to remove impurities and compounds giving it unpleasant
odours and colour. Refinement has no relevance in determining whether a substance is an
animal or vegetable fat or oil or one of their fractions.
161.
C.
Application of interpretation
C.1
Tall Oil and subject goods, Vegapure 95E
On the basis of the evidence that I have, I find that, while Tall Oil does contain fatty acids,
as well as resin acids and unsaponifiables, it does not contain esters of glycerol. Its
constituents were set out in “Chemical Processes in New Zealand” published by the New
Zealand Institute of Chemistry. In light of those constituents, Dr Glover accepted that Tall
Oil is not a vegetable oil. In making this finding, I understand that Bailey’s describes Tall
Oil as a vegetable oil but, although that is recognised as a seminal work on the subject of
fats and oils in the industry, there is no suggestion in the extracts that I have been given that
it is written on the basis that “vegetable fats and oils are esters of glycerol with fatty acids
…”. That is the description of vegetable fats and oils that has been prescribed by Parliament
and I am bound by it. I cannot cast it aside because it is not an accepted definition in the fats
and oils industry or because Tall Oil is regarded as a vegetable oil in that industry.
162.
Having found that Tall Oil is not a vegetable oil, I am not satisfied that anything derived
from it is a fraction of a vegetable oil. That is so regardless of the meaning to be given to
the word “fraction”. Heading 1516 refers to “VEGETABLE FATS AND OILS AND THEIR
Page 71 of 80
FRACTIONS …”. Even if a very broad view were to be taken of the word, the sterols that
are derived from it are not derived from a vegetable oil. It makes no difference that they
have the same chemical structure as those derived from a vegetable oil. The reference is to
vegetable fats and oils and their fractions; not to fractions that happen to match those of
vegetable fats and oils.
163.
In view of this, I have concluded that Vegapure 95E, which is comprised of plant sterol
esters derived primarily from wood sources is not classifiable under Heading 1516.
C.2
164.
Plant sterol esters and the subject goods Vegapure 95, Vegapure 95FF and
Generolester GM
On the basis of the evidence given by Mr Frandsen, I find that the plant sterol esters
comprising the subject goods have been obtained by processes other than those of
fractionation. They have been obtained by processes involving, among other processes,
esterification. That is a process that causes a change in chemical structure. More
specifically, it leaves a product that does not possess the chemical structure of a vegetable
fat or oil for it does not contain triglycerides. Therefore, I am not satisfied that the plant
sterol esters are fractions of vegetable oils and so are not classifiable under Heading 1516.
HEADING 1517
165.
Mr Northcote included Heading 1517 for completeness while acknowledging that Cognis
and BASF had not relied upon it. I have already touched upon this heading at [151] and at
[156] above. The subject goods do not come within that heading for they are neither
vegetable fats or oils nor fractions of vegetable fats or oils. They must meet that description
before meeting the description of being “edible mixtures or preparations” of them.
HEADING 2106
166.
Page 72 of 80
I have set out the terms of Heading 2106 at [3] above but will set it out in full:
“2106
FOOD PREPARATIONS NOT ELSEWHERE SPECIFIED OR
INCLUDED:
2106.10
-Protein concentrates and textured protein substances:
2106.10.10
---Protein concentrates
2106.10.20
---Textured protein substances
Free
5%
DCS:4%
DCT:5%
2106.90
-Other
2106.90.10
---Goods, as follows:
compound alcoholic preparations of a kind used
for the manufacture of beverages;
(b)
food preparations of flour or meal;
(c)
hydrolised protein
2106.90.20
--- Preparations for oral consumption, such as tablets
and chewing gum containing nicotine, intended to
assist smokers to stop smoking
2196.90.90
---Other
5%
DCS:4%
DCT:5%
Free
5%
DCS Free
…”
The submissions
167.
Mr Slonim submitted, on behalf of Cognis and BASF, that a product that supplements food
for a purpose other than sustenance, is not a food. The subject goods are food additives or
supplements, which are added to foods or which are enclosed in gel capsules to be taken as a
dietary supplement to reduce cholesterol uptake. Relying on Re Bayer Australia Ltd and
Collector of Customs (NSW)146 (Bayer) and Chemark, Mr Slonim submitted that a “food
preparation” has to be something prepared, manufactured or compounded and does not
cover a product of an intermediate nature not presented in a form ready to be marketed for
consumption as a food. The subject goods are not presented in that way and so do not come
within the heading.
168.
On behalf of the CEO, Mr Northcote submitted that Heading 2106 should not be interpreted
too narrowly. It is a residual heading in the sense that it will not apply if the subject goods
are classifiable under Headings 3004, 1516 or 1517. I have already decided that they are not
classifiable under those headings. Given the range of goods referred to in the sub-headings
of Heading 2106, it is clear that it is intended to cover a broad range of goods.
146
Page 73 of 80
[1985] AATA 21; (1985) 7 ALN N84; Deputy Present Todd, Dr Howell and Mr Taylor, Members
Consideration
169.
The ordinary meanings of the word “preparation”, when used as a noun, include:
“… 4 a medicine, cosmetic or other such prepared substance.”147
“… 6. Something prepared, manufactured, or compounded. …”148
“… 5 a A specially prepared or made up substance, as a medicine, foodstuff, etc
…”149
170.
I have looked to the meaning of the word “preparation” as it has been considered in Bayer
and Chemark, to which I have been referred. Each of those cases considered it in the
context of what is now Heading 3808 although it was Heading 38.11 in Bayer. That
heading reads:
“INSECTICIDES, RODENTICIDES, FUNGICIDES, HERBICIDES, ANTISPROUTING PRODUCTS AND PLANT-GROWTH REGULATORS,
DISINFECTANTS AND SIMILAR PRODUCTS, PUT UP IN FORMS OR
PACKINGS FOR RETAIL SALE OR AS PREPARATIONS OR ARTICLES (FOR
EXAMPLE, SULPHUR-TREATED BANDS, WICKS AND CANDLES, AND FLYPAPERS) …”
171.
In Bayer, the Tribunal had said:
“15. For ‘preparation’ the Macquarie Dictionary gives as one meaning:
‘Something prepared, manufactured or compounded’. In one sense the goods as
imported could be said to fall within this meaning. But having regard to our
construction of the sub-item, what we have to construe is a total expression, namely
‘put up as a preparation’. So regarded, that expression is not in our opinion apt to
cover a product of an intermediate nature not presented in a form ready to be
marketed. The whole tenor of the sub-item, with its references to retail packs and to
completed articles, accords with this view. …”150
172.
This was adopted by the Tribunal in Re Sumitomo Australia Ltd and Collector of
Customs,151 which together with Bayer, was referred to by the Full Court of the Federal
Court in Chemark. It adopted a definition that:
“
A preparation is a presentation of a substance which is ready to be used for a
particular application or purpose.”152
147
Chambers
Macquarie
149
Shorter Oxford English Dictionary, 5th edition, 2002, Oxford University Press
150
[1985] AATA 21; (1985) 7 ALN N84 at [15]
151
[1991] AATA 323; Deputy President Johnston, Associate Professor Fayle and Associate Professor Hotop
148
Page 74 of 80
In that case, the goods under consideration were metham sodium entered in eighty 250kg
drums. Metham sodium is a chemical herbicide used by professional horticulturists. The
Full Court decided:
“35. In our respectful opinion this is the correct interpretation of the word
‘preparation’ in heading 3808. In order to satisfy this definition in the present case,
it was necessary that the metham sodium be ready to be used as one or more of the
products referred to in heading 3808, viz. insecticides, rodenticides, fungicides,
herbicides, anti-sprouting products and plant-growth regulators, disinfectants and
similar products. The evidence before the Tribunal was that the metham sodium
could be used in its imported form by an end user, such as a farmer, as a herbicide,
fungicide or any similar type of purpose (appeal book pp 64 and 74). The Tribunal
thus found as a fact:
There is no doubt that the chemical was manufactured for the purpose of
use as a fumigant in horticulture. As imported, it was not a product of an
intermediate nature. It had a specific use and it was intended to be used precisely in
the state in which it was imported.
36.
This finding is one of fact, against which there can be no appeal. The
learned primary Judge was therefore correct in holding that the metham sodium
imported by the respondent was put up as a preparation.”153
173.
It seems to me that simply to adopt the meaning of “preparation” given in relation to
Heading 3808 would be to ignore the differences in context between that heading and
Heading 2106. Heading 3808 contemplates that goods of a certain description will be put up
in forms or packings for retail sale or as preparations or articles such as sulphur-treated
bands, wicks and candles, and fly-papers. The examples given of preparations or articles are
those of goods ready for use. The reference to goods put up in forms or packings for retail
sale also suggests that they are ready for use. In light of that, it is not surprising that both
the Tribunal and the Federal Court considered a preparation a product ready to be used by an
end user, such as a farmer, as an insecticide, rodenticide, fungicide, herbicide, anti-sprouting
product and plant-growth regulator, disinfectant or similar product.
174.
It does not necessarily follow that, in the context of Heading 2106, a food preparation must
be a food ready for consumption by a person. Heading 2106 refers simply to a “food
preparation”. It makes no reference to a food preparation put up in forms or packings for
152
153
Page 75 of 80
[1993] FCA 291; (1993) 42 FCR 585; 114 ALR 531; 17 AAR 424 at [34]; 593; 539; 432
[1993] FCA 291; (1993) 42 FCR 585; 114 ALR 531; 17 AAR 424 at [35]; 593; 539; 432
retail sale. Unlike Heading 3808, it does not give as examples of food preparations only
those preparations that would be regarded as food ready for use in the sense of ready for
immediate consumption. Instead, Heading 3808 includes protein concentrates and textured
protein substances or hydrolised protein within its sub-headings as well as food preparations
or flour or meal that would not generally be consumed on their own without some
preparation or as an ingredient in another food preparation. Compound alcoholic beverages
referred to in sub-heading 2106.90.10(a) are described as being for use in the manufacture of
beverages. That suggests that they are not intended for consumption in that form.
175.
It seems to me that the word “food” must be considered against this background. As with
the expression “food additive”, it is used as an adjective in the expression “food
preparation”. It should have no different meaning and I adopt my earlier views i.e. that a
“food” is a substance that provides energy and materials for growth, maintenance and repair
of tissues. That it qualifies the word “preparation” suggests that it is something that
provides energy and materials for growth, maintenance and repair of tissues but that it is
something that has been made or got ready in some way, manufactured or compounded.
176.
The subject goods do not meet the description of “food”. I have already found that they are
not food but food supplements. When consumed, they lower cholesterol levels in the human
body and so have a role in assisting the human body to maintain its proper functioning.154
That is enough to conclude that they are not a “food preparation”.
177.
There is a further reason why the subject goods do not meet that description. That is that
they have not been compounded in the sense of being combined with other substances to
make a preparation. It is difficult to say that they have been manufactured but it can be said
they have been prepared. They have been prepared because they have been put in a form,
and so made ready, for incorporation in or with another product, or with other products. It
follows that I am satisfied that the subject goods are a food preparation classifiable under
Heading 2106. As they do not fall within any of the specific sub-headings, I am also
satisfied that they should be classified to Sub-heading 2106.90.90-Other.
154
Page 76 of 80
See [25]-[51] above
HEADING 3824
178.
I have set out the terms of Heading 3824 and several of its sub-headings at [17] above. I
will repeat only the heading here:
“3824 PREPARED BINDERS FOR FOUNDRY MOULDS OR CORES;
CHEMICAL PRODUCTS AND PREPARATIONS OF THE CHEMICAL OR ALLIED
INDUSTRIES (INCLUDING THOSE CONSISTING OF MIXTURES OF NATURAL
PRODUCTS), NOT ELSEWHERE SPECIFIED OR INCLUDED:
The submissions
179.
Mr Slonim submitted that the subject goods fall within the broad and somewhat generic
scope of Heading 3824 on the basis that they are preparations of the chemical or allied
industries. Mr Northcote did not disagree with that description but submitted that, although
the subject goods are “of a kind used in the preparation of foodstuffs”, they may not be
“mixtures of chemicals with foodstuffs or other substances of nutritive value”. That may be
so because they are solely foodstuffs and not a mixture of chemicals with foodstuffs.
180.
Mr Northocote also submitted that the subject goods would not be classified under Heading
3824 if they are excluded by the terms of Note 1 to Chapter 38 and are not elsewhere
specified or excluded. He referred to Note 1 on two bases. First, it needs to be considered
to determine whether it excludes the subject goods from the scope of Chapter 38. He
thought that it might not. Second, it may be useful as an indication that foodstuffs should
not be regarded as chemicals, goods of nutritive value should generally be classified under
Heading 2106 and goods within that heading should not be classified under Chapter 38.
Consideration
181.
Note 1 to Chapter 38 reads, in part:
“This Chapter does not cover:
(a)
Separate chemically defined elements or compounds with the exception of the
following:
(1)-(5) …
Page 77 of 80
(b)
Mixtures of chemicals with foodstuffs or other substances with nutritive
value, of a kind used in the preparation of human foodstuffs (generally
2106);
(c)
…
182.
(d)
Medicaments (3003 or 3004); or
(e)
…”
Although not referred to by either party, I note for completeness the terms of Heading 3824:
“3824 includes the following goods which are not to be classified in any other
heading of this Schedule:
183.
(a)
Cultured crystals (other than optical elements) weighing not less than 2.5g
each, of magnesium oxide or of the halides of the alkali or alkaline-earth
metals;
(b)
Fusel oil; Dippel’s oil;
(c)
Ink removers put up in packings for retail sale;
(d)
Stencil correctors, other correcting fluids and correction tapes (other than
those of 9612), put up in packings for retail sale; and
(e)
Ceramic firing testers, fusible (for example Seger cones).”
While there is no doubt that the subject goods are chemicals, the whole flavour of
Chapter 38 is that of chemicals for industrial purposes or purposes other than that of human
consumption. It is emphasised by Note 3 which requires certain identified goods that bear
no relationship to food to be classified under Heading 3824. It is further emphasised by the
exclusion of medicaments coming within Headings 3003 or 3004 and by the exclusion of
chemicals (mixed with foodstuffs or other substances of a nutritive value) of a kind used in
the preparation of human foodstuffs. As Note 1(b) states, the latter will generally be
classified under Heading 2106.
184.
I agree with Mr Northcote that Note 1(b) does not exclude the subject goods from the scope
of Chapter 38 because, while they are chemicals, they cannot be described as either mixtures
of chemicals with foodstuffs or with other substances of nutritive value. They contain a
maximum of 0.2% of antioxidants being mixed tocopherols and ascorbylpalmitate but the
remainder is made up of 99% plant sterol esters and minor amounts of free plant sterols. It
cannot be said that the presence of 0.2% of antioxidants in a substance made up of 99% of
plant sterol esters and minor amounts of free plant sterols is a mixture in the sense of “a
blend of ingredients prepared for a particular purpose …”.155 The particular purpose is
clearly for addition to other foodstuffs to lower cholesterol absorption. The evidence that I
155
Page 78 of 80
Chambers
have does not address the question whether antioxidants are either foodstuffs or substances
with nutritive value rather than simply “… a substance, especially an additive in foods …
that slows down the oxidation of other substances …”.156
185.
I do not consider that I need to pursue this issue for, even if I were to decide that the subject
goods were not excluded by Note 1(b) from Chapter 38 and that they came within Heading
3824, I would consider that Heading 2106 provides a more specific description of them. It
does so because of the findings that I have made regarding their being food preparations.
There is no doubt that the subject goods are chemical preparations of the chemical or allied
industries but, as is clear from its sub-headings in Heading 3824, that is a broad and generic
description of many goods intended for a variety of purposes, of which food might be one.
A more specific description of them is one that assumes their chemistry but which describes
them by reference to their use i.e. to be combined with other edible products and consumed.
That is the description in Heading 2106. Having found that it is the more specific
description, I am required to classify the subject goods within it by Rule 3(a) of the
Interpretation Rules. Putting aside situations when two or more headings refer to a part only
of the materials contained in mixed or composite goods, which is not the case here, it
provides that:
“When … goods are, prima facie, classifiable under two or more headings,
classification shall be effected as follows:
(a)
The heading which provides the most specific description shall be preferred
to headings providing a more general description. ..”
DECISION
186.
For the reasons I have given, I have decided to affirm the decision of the respondent dated
15 November 2013 to classify the subject goods to Heading 2106.90.90.
156
Page 79 of 80
Chambers
I certify that the one hundred and eighty six preceding paragraphs are a
true copy of the reasons for the decision herein of
Deputy President S A Forgie,
Signed:
Page 80 of 80
……[sgd]...........................................
Associate
Dates of Hearing
12 and 13 November2014
Date of Decision
12 March 2015
Counsel for the Applicant
Mr Jonathan Slonim
Solicitor for the Applicant
Mr Jacob Uljans
Hall & Wilcox
Solicitor for the Respondent
Mr Roger Northcote
Chief Executive Officer of Customs, Legal Support