The Commissioners for HMRC v O'Neill Wetsuits Limited

For customs classification, the tariff headings and applicable Section and Chapter Notes must be applied hierarchically before resort is made to the essential-character rule. Neoprene panels covered with knitted textile on both faces are treated as rubberised textile fabrics under heading 5906. Panels covered on one face only remain within heading 4015 where the textile serves merely as reinforcement. Where a garment contains both types of panel, Rule 3(b) requires classification by the component giving the garment its essential character. The predominant double-sided panels therefore led to classification under heading 6113.

HMRC appealed against the decision of the First-tier Tribunal in O’Neill Wetsuits Ltd v HMRC, [2024] UKFTT 001071 (TC). The FTT had classified the respondent’s wetsuits under heading 4015 in Chapter 40 as apparel made of vulcanised rubber. The wetsuits consisted principally of neoprene panels covered with knitted textile on both faces, together with a smaller number of panels covered on one face only.

The Upper Tribunal considered whether the textile layers were present merely for reinforcement, how the HSEN to heading 4008 interacted with headings 4015 and 5906, and how Rule 3(b) applied to the composite garment.

1. Appeal allowed. The FTT had made an error of law in finding that the textile layers were present merely for reinforcement. That conclusion was unsupported by evidence and contrary to the common position that the inner textile layer also provided comfort ([46]).
2. The GIRs operate hierarchically. The terms of the headings and the relevant Section and Chapter Notes must be applied before Rule 3(b). Resort to Rule 3(b) does not permit the tariff headings and Notes to be ignored ([47]–[48], [54], [81]).
3. The definition of “rubberised textile fabrics” in Note 5 to Chapter 59 governs heading 5906. Both double-sided and single-sided panels fell within the description of textile fabrics coated, covered or laminated with rubber. The HSEN to heading 4008 showed that textile on both faces was treated as serving a function beyond mere reinforcement. Double-sided panels were therefore within Section XI and heading 5906; single-sided panels were excluded from heading 5906 because the textile was treated as merely reinforcing ([57]–[64]).
4. The three categories in the HSEN to heading 4015 were mutually exclusive. Double-sided panels fell within Item (2), but were excluded because they fell within Section XI. They could not then be classified under Item (3) merely because rubber supplied the garment’s insulation. The FTT therefore erred in relying on Item (3) ([65]–[73]).
5. The wetsuits were composite goods containing double-sided panels classifiable under heading 6113 and single-sided panels classifiable under heading 4015. Under Rule 3(b), the predominant double-sided panels gave the wetsuits their essential character by quantity, weight and their role in the garment. The correct classification was heading 6113 0010 00 ([74]–[84]).
6. The Upper Tribunal set aside the FTT Decision and remade it. O’Neill’s appeal against HMRC’s classification was dismissed ([89]–[94]).

• Upper Tribunal (Tax and Chancery Chamber): Appeal from the FTT allowed. The decision in O’Neill Wetsuits Ltd v HMRC, [2024] UKFTT 001071 (TC), was set aside and remade.
• First-tier Tribunal (Tax Chamber): O’Neill’s appeal was allowed and the wetsuits were classified under heading 4015.