Tomy UK Ltd v HM Revenue & Customs

For tariff classification, goods must first be classified by the terms of the relevant headings and notes. Separate transmitting and receiving units do not have a combined function under Section XVI Note 4 where the transmission heading contemplates transmission apparatus incorporating reception apparatus.

The phrase “portable receivers for calling, alerting or paging” concerns the specific purpose of the apparatus, viewed in the context of reception apparatus. A monitor which receives and conveys sounds or signals from a transmitter is not within that description merely because the listener uses it to decide whether action is needed. Such one-way baby monitors therefore fall within CN code 8527 90 98.

Tomy appealed from the decision of the VAT and Duties Tribunal, released on 19 December 2006, concerning the classification of one-way baby monitors imported from China.

The monitors consisted of a baby unit transmitting sounds and a portable parent unit receiving and reproducing them. Tomy contended that they were either transmission apparatus under CN heading 8525 or portable receivers for calling, alerting or paging under CN code 8527 90 92. HMRC contended that they fell within CN code 8527 90 98 and attracted duty at 9.3 per cent.

The issues were whether heading 8525 applied, whether the Classification Regulation applied or was prima facie invalid, and which sub-heading governed the goods.

1. The appeal was dismissed. The monitors were properly classified under CN code 8527 90 98 and attracted customs duty at 9.3 per cent.

2. Section XVI Note 4 did not apply. Although the baby and parent units could be regarded as individual components of a machine or combination of machines, their claimed combined function of transmitting and receiving was not a clearly defined function covered by heading 8525. That heading contemplated transmission apparatus incorporating reception apparatus. Where it did not do so, heading 8525 could not provide the relevant function for Note 4.

3. The applicable heading was therefore 8527. The question whether the apparatus was a “receiver for calling, alerting or paging” depended on its specific or very purpose. Applying the reasoning in Shimadzu Europa GmbH v Oberfinanzdirektion Berlin [1990] ECR I-4391, the court rejected reliance on technical dictionary meanings.

4. The monitor’s purpose was to receive and convey the baby’s sound or related signals. The fact that a parent used the information to decide whether to take action did not make the apparatus a receiver for alerting. The baby unit could not call, page or alert in the sense contemplated by CN code 8527 90 92. The goods accordingly fell within the residual code 8527 90 98.

5. The Classification Regulation applied because the additional features of the monitors did not substantially negate, alter or qualify the essential characteristics of the goods described in its third item. There was no reason to refer the validity of the Regulation to the European Court of Justice. Any inadequacy in its stated reasons would not have justified a reference where the classification was legally correct and a reference could not affect the dispute.

• VAT and Duties Tribunal: dismissed Tomy’s appeal and classified the monitors under CN code 8527 90 98. The decision was released on 19 December 2006.
• High Court (Chancery Division): dismissed the appeal from the Tribunal and upheld the classification.