Issue
Is a product that is based on ethylene glycol and used as a coolant in the radiator of motor vehicles, a synthetic equivalent of a petroleum based oil for the purposes of subitem 15.1 in the Schedule to the Excise Tariff Act 1921 (Schedule)?
Decision
No. A product that is based on ethylene glycol and used as coolant in the radiators of motor vehicles, is not a synthetic equivalent of a petroleum based oil for the purposes of item 15.1 in the Schedule.
Facts
An entity manufactures at a chemical plant, a product which is used as a coolant in the radiator of light and heavy duty motor vehicles.
The coolant is derived from ethylene in a process that converts ethylene to ethylene oxide which can then be reacted with water to produce ethylene glycol. The ethylene glycol is then distilled off during a purification process. Ethylene glycol is not a petroleum based oil.
The coolant generally consists of 90 to 95 per cent ethylene glycol and 4 to 7 per cent corrosion inhibitors, the remainder being water. The ethylene glycol based coolant is biodegradable and is essentially a single use product.
After its service life of one to five 5 years it is discharged from the vehicle as waste and disposed of in accordance with local state and municipal disposal requirements.
Reasons for Decision
Subitem 15.1 of the Schedule applies to 'petroleum-based oils (including lubricant/fluid/oil products) and their synthetic equivalents but not greases'. The Prefatory Notes to the Schedule give the meaning of 'lubricant/fluid/oil products' and includes heat transfer oils.
The Excise Tariff Act does not define the meaning of 'synthetic equivalent'. Therefore the term takes on its ordinary meaning.
The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW (the Dictionary) relevantly defines the term 'synthetic' as '2 denoting or relating to chemical compounds, resins rubbers, etc., formed by chemical reaction in a laboratory or chemical plant, as opposed to those of natural origin'.
Ethylene glycol is produced from ethylene via the intermediate ethylene oxide. Ethylene oxide reacts with water to produce ethylene glycol. As ethylene glycol is produced by a process of a chemical reaction to ethylene in a laboratory or at a chemical plant, ethylene glycol is therefore a synthetic product.
The Dictionary relevant defines 'equivalent' as '2 corresponding in position, function, etc.'.
The cooling system in liquid cooled motor vehicle removes heat from the engine by circulating liquid through the pipes and passageways in the engine. As the liquid passes through the hot engine it absorbs heat, cooling the engine. After the liquid leaves the engine it passes through the radiator where the heat is transferred from the liquid to the air which is blown through the radiator. An ethylene glycol based liquid is commonly used as the liquid to transfer the heat. Therefore an ethylene glycol based liquid that is used in the cooling system of a motor vehicle is a synthetic heat transfer liquid.
Some engines use oil as the means of cooling the engine. In these engines the lubricating oil of the engine is circulated around the heated parts of the engine and is then cooled. Ethylene glycol is not used as a substitute for oil to transfer heat in an oil cooled engine.
Petroleum-based oils have not been, nor are they currently used, as the liquid to transfer heat in a liquid cooled engine, nor has, or is, an ethylene glycol based liquid used as the oil to transfer the heat in an oil cooled engine.
Hence an ethylene glycol based coolant is not corresponding in function to a petroleum-based heat transfer oil.
Therefore, a product that is based on ethylene glycol and used as coolant in the radiators of motor vehicles is not a synthetic equivalent of a petroleum based oil for the purposes of subitem 15.1 in the Schedule.