CUSTOMS DUTY – baby alarms – whether Regulation No.305/2001 classifying similar products under heading 8527 90 98 applies – yes – whether Reference should be made on the validity of the Regulation – no – if wrong, same conclusion reached on classification as the Regulation
LONDON TRIBUNAL CENTRE
TOMY (UK) LIMITED Appellant
- and -
THE COMMISSIONERS FOR HER MAJESTY'S
REVENUE AND CUSTOMS Respondents
Tribunal: DR JOHN F AVERY JONES CBE (Chairman)
CATHERINE FARQUHARSON ACA
Sitting in public in London on 16 and 17 November 2006
Paul Lasok QC, counsel, instructed by Hassan Khan & Co. solicitors, for the Appellant
Ian Hutton, counsel, instructed by the Acting Solicitor for HM Revenue and Customs, for the Respondents
© CROWN COPYRIGHT 2006
"8525 Transmission apparatus for radio-telephony, radio-telegraphy, radio-broadcasting or television, whether or not incorporating reception apparatus or sound recording or reproducing apparatus; television cameras; still image video cameras and other video camera recorders; digital cameras;
8525 10 - Transmission apparatus…
8525 20 - Transmission apparatus incorporating reception apparatus….
8527 Reception apparatus for radio-telephony, radio-telegraphy or radio-broadcasting, whether or not combined, in the same housing, with sound recording or reproducing apparatus or a clock:…
8527 90 - Other apparatus:…
- - Other
8527 90 92 - - - Portable receivers for calling, alerting or paging
8527 90 98 - - - Other"
"Where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or 85, then the whole falls to be classified in the heading appropriate to that function."
"These subheadings include apparatus consisting of all the elements required for transmission and reception, on one cabinet or housing. Such is the case, for example, with walkie-talkies, which contain the batteries or accumulators required for their operation, or with transmitter-receiver apparatus, the power supply unit of which would be separate and connected to the apparatus by cable only.
These subheadings also include units in which the transmitter and receiver elements are located in different furniture units or housing, provided they constitute a functional unit. In order to be regarded as constituting a functional unit, transmitter and receiver apparatus must be installed near each other (for example, in the same premises or on the same vehicle) and have certain elements in common, such as the aerial."
"1. The titles of sections, chapters and sub-chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes and, provided such heading or notes do not otherwise require, according to the following provisions.
(a) the heading which provides the most specific description shall be preferred to heading providing a more general description….
(b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character in so far as this criterion is applicable.
(c) when goods cannot be classified by reference to 3(a) or (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.
- For legal purposes, the classification of goods in the subheadings of a heading shall be determined according to the terms of those subheadings and any related subheading notes and mutatis mutandis to the above rules, on the understanding that only subheadings at the same level are comparable. For the purposes of this rule the relative section and chapter notes also apply, unless the context otherwise requires."
"A product described as a baby-monitoring device, put up in a set for retail sale, consisting of
- a transmitter for radio telephony, with a built-in microphone
- a portable receiver for radio-telephony combined with a loudspeaker in a housing
- two mains adaptors
Both the transmitter and the receiver can operate using either batteries or mains adaptors
The device serves to transmit noises made by a baby in the vicinity of the transmitter and is used to monitor babies with a range of roughly 300 metres."
"Classification is determined by the provisions of General Rules 1, 3(c) and 6 for the interpretation of the Combined Nomenclature, and the wording of CN codes 8527, 8527 90 and 9527 90 98. Neither the transmitter nor the receiver gives the product its essential character.
(1) The Products comprise three models of baby monitor, the Walkabout Classic, the Walkabout Digital and the Walkabout Premier, to which we shall refer as the Classic, Digital and Premier. All three comprise a baby unit that contains a microphone which picks up the baby's sound and transmits it by radio-telephony to a parent unit that receives the radio signals and reproduces them via a built-in loudspeaker. All three also have a bar graph visual display with increasing numbers of lights illuminating as the volume of the sound increases, the first five lights being green and the last three red, which can be used at the same time as, or instead of the sound. The lights might typically be used if the parents were watching television and might not hear the sound. The Products can be set to output sound only or sound plus lights; on the Classic the sound can be muted so that only the lights show, and the Digital and Premier have a volume control. All three enable two different channels to be selected with a view to minimise interference from other similar products in the vicinity. Both units of all the Products have an on/off switch with a light showing when it is on. The parent unit is portable. Both units may be used with batteries or from the mains.
(2) The Classic model transmits the sound continuously (but the sound can be muted). The Digital and Premier Products have voice activation ("VOX") under which nothing is transmitted until the sound reaches one of two pre-determined settings of 55 and 65 dBA, after which it transmits the sound continuously so long as the sound continues. At the higher setting the baby will be crying loudly before transmission of sound begins.
(3) The Digital and Premier Products have the following additional features: a night light on the baby unit; detection that the baby unit is transmitting; a temperature display of the temperature in the baby's room which is displayed either digitally on the Premier Product or on the moving light display for the Digital Product (including an alarm if the temperature falls outside set limits); a battery low signal for each unit (with different alarm signals depending on which unit has the low battery); and an identifying code setting enabling 16 different combinations to be set to match the other unit so that the parent unit does not receive transmission from another unit in the vicinity set to the same channel. Each of these features give a different signal so that the nature of the problem can be identified. The temperature and low battery signals operate by telemetric signals, by which signals pass between the units but are inaudible. The Premier has a compact parent unit which can be separated from the rest of the parent unit and carried by the parent. When this is removed only the sound can be used as the lights are on the remainder of the unit.
(4) Papers obtained from the Commission show that the Goods contained an "LED monitor" on each unit, which may either refer to an on/off light or to a visual display. There is a description of the goods that the Italian authorities classified which did have a visual display similar to the Products. Papers show that at the 210th Customs Code Committee meeting baby monitors were discussed and a majority of states favoured classification under heading 8525. Customs had no papers on subsequent meetings of the Customs Code Committee at which the Regulation was approved as their records had been destroyed by fire. On the second day of the hearing Mr Gaikwad produced notes which he still had on his computer of the 217th meeting that he attended on behalf of the UK which show that there was a difference in view about classification between Germany and Italy, and the conclusion was that a draft Regulation would classify them under heading 8527 and the CNEN for heading 8525 20 10 to 8525 20 99 (see paragraph 5 above) would be looked at to see if it needed deleting. Mr Gaikwad did not attend the 236th meeting at which the Regulation was approved but he produced an email note received from the UK delegate who attended which showed that Germany had issued a BTI classifying one-way baby monitors under 8527 and Italy under 8525. The Regulation was adopted with three countries opposing it. The note states that "Regulation text was amended to remove reference to Notes 3 and 4 to Section XVI." The notes also show that at the same meeting two-way baby monitors were classified in 8525 without any state objecting. Since Mr Gaikwad received this note in his official capacity as a policy adviser at Customs we accept this record of what was decided at the meeting.
"alert signal, alerting signal A transmission signal designed to gain the attention of an administrator or user…On telephone networks, alert signals are often used to indicate an incoming call.
calling The act or process of contacting another party or entity across some type of communications medium, or at some distance, with the intention of establishing a link between humans and/or devices."
He also produced the following extracts from Hargrave's Communications Dictionary: by Frank Hargrave:
"alert An indication of a change of state from a normal to an alarm conditon (or to a normal state from an alarm state)….
call (1) The action performed by the calling party in establishing a connection to a destination party…."
(1) The Regulation is invalid because
(a) Section Note 4 applies to the goods and requires classification under heading 8525 because that heading covers the combined function of transmitting and receiving. It does not mandate classification under heading 8527 because that is limited to receiving.
(b) No reason is given for how the Commission got to GIR 3 since Note 4 applied. If the Commission ignored it the Regulation would be invalid for that reason. If they took Note 4 into account they must have misconstrued it and the Regulation is invalid on that ground. The absence of reasoning is sufficient justification for the Regulation to be invalid, see Sony Computer Entertainment Europe Ltd v Commission Case T-243/01 where the European Court said at :
"Furthermore, the obligation to state reasons which is incumbent on the defendant when it adopts a tariff classification regulation requires the Commission to state clearly the legal basis for the classification, in order to inform the persons concerned of the justification for the measure adopted and to enable the Community Court to exercise its powers of review (see, to that effect, Joined Cases C-63/90 and C-67/90 Portugal and Spain v Council  ECR I-5073, paragraph 16; Case C-353/92 Greece v Council  ECR I-3411, paragraph 19; and Joined Cases C-9/95, C-23/95 and C-156/95 Belgium and Germany v Commission  ECR I-645, paragraph 44). A simple reference to general rule 1 did not fulfil that obligation."
(2) The Tribunal should refer the validity of the Regulation (and the classification) to the European Court of Justice.
(3) Subject to that, if the Commission were justified in ignoring Note 4, he accepts the classification under heading 8527.
(4) On the subheading, the Products were for calling, alerting or paging. Parents did not own the Products in order to listen continuously to the baby's sounds; they owned them so as to be alerted to the baby crying.
(1) The Regulation was valid and applied the correct methodology. The Commission was under no obligation to explain why Note 4 was not applied. The obvious reason was that the Goods fulfilled two separate functions which are dealt with by two different headings in Chapter 85. No reference to the European Court was necessary or appropriate.
(2) The Regulation clearly applied to the Products. One should not expect a Regulation to deal with every minor feature that may be incorporated in a particular Product.
(3) On the subheading, the Products were not solely for calling, alerting or paging; they were to transmit the baby's sounds continuously, or in the case of the Digital and Premier Products when the sounds exceeded the chosen setting. They are a communication system.
(1) The Regulation classifies Goods that are essentially the same as the Products.
(2) There is no sufficient reason to doubt the validity of the Regulation that would warrant a reference to the European Court.
(3) Accordingly the Regulation classifies the Products under heading 8527 90 98.
(4) If were are wrong about (1) so that the Regulation is inapplicable we would, by the Chairman's casting vote, classify the Products under heading 8527 90 98.
JOHN F AVERY JONES
RELEASE DATE: 19 December 2006