Opinion Number. 718

Subject

CUSTOMS DUTY ENTITLEMENT TO DRAWBACK: OWNER AT TIME OF SHIPMENT: CONSIDERATION OF VARIOUS TRANSACTIONS IN WHICH DEPARTMENT OF DEFENCE PURCHASED GOODS FOR SHIPMENT BEYOND AUSTRALIA

Author
Key Legislation

CUSTOMS ACT 1901, ss. 4, 173

Date
Client
The Auditor-General

In connection with the payment of drawback on goods purchased by the Department of Defence for shipment outside Australia, the Auditor-General in April last wrote to the Treasurer in the following terms:

I have the honour to bring under your notice the question of drawback on goods purchased in the Commonwealth for supplies to troopships, such supplies to be delivered on board, or upon the wharf.

In a large number of instances drawback has been claimed by and paid to the persons who delivered the goods, or it has been paid to their agents upon such persons or agents completing the export entry forms, drawback debentures and other forms provided for by the Customs Regulations.

These claims describe the persons claiming as the 'owners' or 'agents' duly authorised by the owners, and under the provisions of section 173 of the Customs Act 1901, the Customs Department has acknowledged and paid the drawbacks. The question submitted is whether the Department of Defence was not the 'owner' of these goods as being 'possessed of, or beneficially interested in, or having any control of, or power of disposition over the goods' as set out in the interpretation section No. 4 of the Customs Act.

For your information the cases referred to in the accompanying memorandum addressed to me by the Audit Inspector of Stores are quoted as examples of payments and claims for drawback.

Forms of Export Entry for Drawback and of Drawback Debenture showing declarations required, together with form of Drawback Despatch Note and Notice of Intention to Pack are also attached. The matter was referred to the Comptroller-General of Customs, who advised as follows:

The sale of foodstuffs for ships' stores or for export is usually on the basis of a free-on-board price, and, as in such cases the seller's ownership in the goods continues until they are actually delivered on board, there is nothing irregular in his claiming and obtaining any drawback that may be payable on their exportation. As regards the particular goods dealt with in the Auditor-General's report, there is nothing to show whether they were purchased at an f.o.b. price or not. If otherwise, e.g. for delivery at the Barracks, and the drawback was claimed by the sellers without the knowledge or consent of the Defence Department, there would appear to be a prima facie case against them for a breach of the Customs Act in having falsely declared to the ownership of the goods at the time of shipment.

From a minute by the Inspector of Stores it appears that the goods were purchased by the Department of Defence to be delivered f.o.b.. Drawback was, however, paid in some instances, to the persons from whom the contractor obtained the goods.

The Auditor-General forwards the file for my information, and for advice as to whether any further action in connection with his letter (above referred to) to the Treasurer is necessary.

From the further information and documents now supplied, the following appear to be the details regarding the various shipments referred to by the Auditor-General:

  1. Shipment of jam per s.s. Berrima
  2. Goods were purchased by Defence Department from Arthur Kidman for delivery f.o.b.

    The goods were supplied by H. Jones & Company Sydney Limited, who made out the export entry forms and declared that they were the exporters of the goods. The declaration was made on 17 August 1914.

    The goods were received on board on 18 August. The vessel cleared from Sydney on 18 August and left port on the following day.

    The drawback debenture dated 29 September 1914 was made out in the name of H. Jones & Company Sydney Limited as owners and the agents for that Company declare that the owners were at the time of entry and shipping entitled to the drawback thereon.

    Drawback to the extent of £29.5.10 was paid to H. Jones & Company Sydney Limited on 25 November 1914.

  3. Shipment of onions per s.s. Berrima
  4. Goods were purchased by Defence Department from Arthur Kidman for delivery f.o.b.

    The goods were purchased by Kidman from T. McHugh Ltd, who made out the export entry forms and declared by their authorised agent that they were the owners of the goods. The declaration was made on 18 August 1914.

    The goods were received on board on 18 August. The vessel cleared from Sydney on 18 August and left port on the following day.

    The drawback debenture dated 21 August 1914 was made out in the name of T. McHugh Ltd and the agents for that Company declared that the owners were at the time of entry and shipping entitled to the drawback thereon.

    Drawback debenture for the sum of £7.12.0 paid to T. McHugh Ltd on 4 November 1914.

  5. Shipment of jam per s.s. Eastern

Commonwealth had contract with A. Kidman for jam delivered f.o.b. Sydney.

Kidman purchased jam from Peacock Jam Co. Ltd who placed it on board.

Export entries made by Peacock Jam Co. Ltd on 20 January 1915, the agent of the Company declaring that the Company were the owners of the goods.

It is not clear when the goods were shipped, but apparently they were shipped on or before 23 January 1915.

Vessel cleared 25 January and sailed same day.

It is understood that drawback has been claimed by the Peacock Jam Co. Ltd, but has not yet been paid.

It is not stated definitely in either the Customs Act or the forms under the Act, who is the person entitled to drawback, but the export entry forms appear to imply that the person who is the owner at the time of shipment is the person so entitled. Then section 173 of the Act provides that:

The person claiming drawback on any goods shall make a declaration upon the debenture that the goods have been exported and have not been re-landed and are not intended to be re-landed and that such person at the time of shipping was entitled to the drawback, and the name of such person shall be stated in the debenture, and the receipt of such person on the debenture countersigned by the holder of such debenture if the same shall have been transferred in the meantime shall be a sufficient discharge for such drawback.

The matter, therefore, then turns on the question as to who was the person entitled to the drawback at the time of shipping.

On a careful consideration of all the facts, I am of opinion that in the absence of any stipulation between the Defence Department and Kidman as to who was entitled to the drawback, and assuming that Kidman's contracts with the persons named above provided for delivery f.o.b., the person who supplied the goods to Kidman, and placed them aboard the vessel is the person entitled to the drawback.

I think, therefore, that the drawback has rightly been paid to, or is rightly payable to, Jones & Co. Sydney Ltd, T. McHugh Ltd, and the Peacock Jam Co. Ltd.(1)

[Vol. 14, p. 365]

(1)This opinion was published in Commonwealth of Australia, Perl Papers 1914-1917,Vol. III,p.1838.