Tomy (UK) Ltd v HM Revenue & Customs

For customs classification under the Combined Nomenclature, separate transmission and reception units do not fall under heading 8525 merely because they operate together. Note 4 of Section XVI applies only where the components together contribute to a clearly defined function covered by one heading. A combined device must integrate transmission and reception, with transmission predominant. Explanatory notes cannot enlarge the ordinary meaning of a tariff heading. A portable receiver is for calling, alerting or paging only where that is its specific or very purpose. A baby monitor that receives a baby’s cry, even if it triggers sound or light and prompts the carer to act, is not for alerting because the cry is not intended to communicate through the receiver. The monitors therefore fall under CN code 8527 90 98. An ECJ reference is unnecessary where the answer is acte clair.

Tomy imported one-way baby monitors from China. HMRC classified them under CN code 8527 90 98, attracting 9.3% duty. Tomy contended for CN code 8527 90 92 and argued that Commission Regulation (EC) 305/2001 was invalid or inapplicable.

The VAT and Duties Tribunal upheld HMRC’s classification. On appeal, Sir Andrew Morritt, the Chancellor, held that heading 8525 did not apply and that the monitors fell under 8527 90 98: [2007] EWHC 1889 (Ch). Tomy renewed its application for permission to bring a second appeal. The central questions were whether Note 4 of Section XVI applied, whether the monitors were portable receivers for alerting, and whether a reference to the ECJ was required.

Lady Justice Arden gave the judgment. Lord Justice Mummery and Mr Justice Lewison agreed. The renewed application for permission to bring a second appeal was refused because the proposed grounds had no real prospect of success.

1. Applicable heading. Note 4 of Section XVI of Annex I to the Combined Nomenclature (CN) applies only where separate components contribute together to a clearly defined function covered by one heading. Heading 8525 does not cover every combination of transmission and reception equipment. The combined device must integrate both functions, with transmission as the predominant element. Here the baby and parent units were separate transmission and reception devices, so Note 4 did not apply and heading 8525 was unavailable.
2. Explanatory notes. The explanatory notes could not extend the meaning of the tariff heading. Each heading had to be given its normal meaning and proper weight. The court relied on Holz Geenen GmbH v Oberfinanzdirektion Munchen Case C-309/98 and Kawasaki Motors Europe NV v Inspecteur van de Belastingdienst/Douane District Rotterdam Case C-15/05.
3. Meaning of for alerting. The court applied Shimadzu Europa GmbH v Oberfinanzdirektion Berlin C-218/89 [1990] ECR I-4391. The expression for calling, alerting or paging focuses on the specific or very purpose of the apparatus, not merely its effect. The baby’s cry triggered the monitor, but was not made to communicate with the carer through the receiver. The monitors were therefore listening devices, not receivers for alerting.
4. Light-only operation, voice activation, temperature signals and preset sound thresholds did not alter that conclusion. They showed only the circumstances in which monitoring information was received, rather than establishing that the apparatus was for alerting.
5. ECJ reference and validity. The answer was not open to real doubt and was therefore acte clair. The validity of Commission Regulation (EC) 305/2001 did not need to be referred to the ECJ because HMRC’s classification remained correct under the Combined Nomenclature itself. The monitors consequently fell under CN code 8527 90 98 and attracted the applicable customs duty.

• Court of Appeal (Civil Division): On 14 October 2008, refused the renewed application for permission to bring a second appeal.
• High Court (Chancery Division): Sir Andrew Morritt, the Chancellor, dismissed Tomy’s appeal from the VAT and Duties Tribunal and held that the monitors fell under CN code 8527 90 98: [2007] EWHC 1889 (Ch).
• VAT and Duties Tribunal: The tribunal upheld HMRC’s classification under CN code 8527 90 98. Its decision was released on 19 December 2006.