Leonie Ferretter and Melissa McCosker discuss a recent Federal Court ruling regarding who legally owns goods for the purposes of duty drawback claims.
The Federal Court recently ruled in favour of the Customs, determining that the legal owner of goods for duty drawback claims are the customers which had purchased the goods from Duty Free Sydney Pty Ltd (“DFS”), not DFS itself.
Duty drawbacks allow exporters, who are the legal owner of the exported goods, to claim back import duty when those goods had been previously imported and have not been used or, they have been consumed in the production of the exported goods.
The key issue in dispute was whether DFS, or its customer, was the legal owner of the goods at the time of export.
Justice Burley held the regulations must be interpreted to mean that the legal owner reflects a narrow application of those able to make claims for duty drawbacks. It was held that ownership passes to the traveller at the point of sale, and no terms and conditions in the contract of sale alter the transfer of title.
The case provides precedent for the interpretation of “legal owner” for duty drawbacks purposes. It also has application for exports using terms of trade where the purchaser takes title to the goods in Australia – for example, ex-works transactions. The case puts business on notice that terms of trade and contractual arrangements for exports should be considered carefully, particularly where duty drawbacks are relied upon as a mechanism to provide competitive pricing. Where an exporter that was not the importer wishes to claim a duty drawback, additional complexities around the provision of import paperwork come into play and importers need to carefully consider what, if any, paperwork they will provide to an exporter to substantiate a drawback claim.
© 2018 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.